Domestic Commodity Invitation: Fill & Download for Free

I disagree, fervently, with all your statements.Africa is not ‘endowed’ with rich natural resources. Rather, its low consumption and production create an artificial surplus of minerals which it sells abroad.In an urban society, nobody can starve because prostitution, for one, is always an option. Similarly, in the modern industrial world, you can always hawk minerals. However, if you were productive, you’d be using them.Although for younger generations, the literacy rate is much improved, no African country even scratches the top 30% for proxy measurements of human resources, whether patents, scientific citations or top universities. Young’uns, at least in my country where we have the most 'unicorns' on the continent, tend to go into a frenzy at every new funding announcement, but at the risk of being old Scrooge, context is everything.Old map, since then Nigeria has added three while some American unicorns are now public….The idea stands though.That said, despite the paucity of its mineral and human resources, Africa’s growth in the past decade and change has not been world-lagging.Africans must be clear-eyed and understand, precisely, the strengths and weaknesses of their national economies, and their role in the regional and global economies. Otherwise, you become the man who did not know when the rain started beating him.The first generations of leaders in independent Africa were often authoritarian, considered merit a slur and incredibly spend-thrift, but they had a social conscience. One major consequence of their actions was the rise in literacy rates.However, that expansion in social spending was built on fragile foundations: a commodities boom as Europe reconstructed and the Asian Tigers leapt and increased access to different international lenders and the international debt market.The boom cratered, the Soviet Union collapsed, Western lenders pushed austerity policies as a prerequisite for aid and the bill came due for African countries, many of whom could not pay. Those factors led to the collapse of the late 80s and 90s. Professionals fled abroad, and the continent’s image increasingly became that of drug-addled gun-toting ferals and eccentric Arab dictators.That image largely persists.Then came the 2000s and the 2010s.First, the professionals that fled abroad settled there and sent back remittances.Second, one of the greatest migratory waves in our continent’s recent history took tens of millions of rural Africans to the cities. Whether provincial, national or regional, the result was the same: their earnings improved.Third, International efforts to stem the flow of conflict minerals bore fruit, and war-profiteers found it increasingly harder to finance their extraction.Fourth, tottering regimes collapsed and, especially in East Africa, were replaced with Security States like those of the North Africans. That brought some stability.Fifth, there was an economic adjustment as technological leap-frogging created modern sectors that employed millions and created elements of a global middle-class. Think of the leap from scarce landlines to a surplus of mobile telephones.Finally, the rise of China, India and American bombs created the mother of all Commodities super-cycles.That brings us to now.In my view, the signal problem faced by all African economies is that they continue to rely excessively on rent inflows from abroad. Remittances, aid, mineral profits. They are all the same. To borrow from an American politician, ‘we’ didn’t build that.The reliance on rents has come at the expense of the development of national economies. In those economies, improvements in national competitiveness increase general productivity.For example, the Americans invented the iPhone and turned to East Asian suppliers for industrial components. Now East Asian companies are, without exception, the world’s leading producers of phone components. The USA is, by far, the world’s most dominant mineral producer, but its production has always been driven by the domestic demand created by world-beating corporations.In contrast, where are the positive effects from all the barrels of oil, cylinders of gas and bags of minerals that have been exported from the continent?Everybody talks about the ‘Dutch disease’, but care to guess who have one of the world’s leading gas companies?How many African countries can say the same about their commodities?Anyways, words are boring. Moving pictures are much better. I suggest you track down the Chinese drama Like a Falling River. Wealth in a modern industrial economy comes from nothing else but a steady commitment to continuous reform, increased access to credit, the provision of market incentives and the improvement of industrial inputs. The drama does an excellent job getting that across.Rather than the messianic pontification that discussions of African economies often invite, I would suggest that Africans, especially, adopt the stance of a diligent student trying to get to QED.African economies are merely a type of economy. One with a series of trade-offs, just like any other. Shifting to another model, from a rentier to a production economy, for example, merely involves inputting the proper variables and accepting the resulting trade-offs.The current rentier model has reached its limits. Additional reforms are necessary, but if you make the mistake of ignoring the progress made or are gas-lit into destroying your little foundations because it does not meet some utopian ideal, then be prepared to own your errors with your chest.

It is not a perfect metric, but take a look at the IMF’s 2018 rankings of countries based on their GDP per capita, in PPP terms. When you move away from the 15 or so African countries clustered at the bottom, you find that Rwanda (Africa) is ranked higher than Afghanistan (Asia). Morocco (Africa) is higher than India (Asia). South Africa (ha!) is ranked higher than Indonesia (ha! ha!). Mauritius (Africa) is ranked higher than China (Asia). As I have written before, the difference between Africa and Asia is that the former has more lower-income countries than the latter, while the latter has several high-income countries, at present lacked by the former. There is no African Qatar or Singapore, for example, and there are increasingly no Asian Burundis.When one looks at averages comparing ‘Africa’ and ‘Asian countries’, Africa's many low performers lower hers. For example, ‘Africa’s’ domestic savings rate is around 18% of GDP. The desired rate for investment is around 30%. Morocco is at 28%. The CAR is at 5%. Singapore, in contrast, is an outlier at 48%. Afghanistan meanwhile is at 4%. But as mentioned, fewer Asian countries look like Afghanistan, while many African countries look more like the CAR than Morocco. Of the ten countries that save the most, two are European, one is African and seven are Asian.The difference between the Asian and African economic path lies in their history and geography. The period, roughly between the 1600s and the present, for western Europe; and roughly the 1800s and the present, for the rest of the world, has been a time of previously unimaginable wealth creation. Even more unimaginable has been its relatively—in a historical sense— egalitarian dispersal. More people than ever are richer than ever.The primary cause for this egalitarian dispersal on an individual level, in a general sense, is every American’s favourite word: freedom. The global extirpation of legalised slavery and serfdom in the 19th century, in combination with the unlocking of new sources of energy, permitted even greater movement and production and thus, unlocked new horizons and sources of wealth for all, beyond expropriation and trade.Individual options for wealth creation are however entirely different from national options for wealth creation. I am probably missing out some, but I like to think of the national sources of wealth in today’s global economy in the following categories:High-tech manufacturing and Services provision: This is the most geographically restricted. On a regional level, the most dominant cores are the coastal USA+Texas; Northern Europe+France and Germany, maybe Northern Italy; The Asian Tigers+Japan and Israel.Outsourced Manufacturing and Services: Mexico, Eastern Europe, Southern China+ Bengaluru and Hyderabad; parts of the Philippines too.‘Our problem isn’t money but how to spend it’: Qatar, Brunei, Saudi Arabia, Russia, Australia, Canada. Despite the global diversity of mineral exporters, only 19 countries account for 75% of resource-intensive exports. Those are some of them.Regional services: Spain, the UAE, the UK.Low population+high Agro-goods exports: New Zealand and Denmark.A quick glance at the above and the areas of competitive weakness in African countries becomes obvious. High-tech manufacturing is clustered even within those aforementioned regions in cities. Those cities are the beneficiaries of a legacy of patents, education, reputation and research investments which are, in turn, a legacy of their host countries' early industrialisation and consequent global dominance.Above is the prototypical urban cluster, within, there is more dollar value than the entire annual GDP of the African continent.(Image Source)To combine profits and low prices for their increasingly enriched masses, the industrial pioneers took advantage of improved global transportation and communication (faster ships + containers + internet) to disperse their low level and intermediate manufacturing to low-income countries. So things like textiles, shoe and toy manufacturing, as well as the mechanical aspects of product assembly were ‘outsourced’. However, there was and is a limit to the ability of technology to overcome the primary constraint of distance. The old iron rule of trade: that you trade most with those closest to you, still holds. Hence the high-tech manufacturers outsourced to the regions closest to them. Japan looms large in the establishment of the industrial value chains of East Asia, as much as Germany does for Eastern Europe and the USA for North America. The final piece of the puzzle comes with the commodities boom. This was due to the manufacturing for the consuming rich masses of the west and the workers of the outsourced-to countries. As more oil and minerals were mined to keep the factories humming, mineral and agricultural product exporters earned more. Richer people burn more oil, wear more jewellery and eat more beef. This is the virtuous growth cycle of consumers 'all the way down' that powers the modern global economy.In the case of Africa; historically, it missed the first outsourcing phase due to either conflict, the policy choice for the pursuit of self-sufficiency or in the South African case, the global boycott due to apartheid. Geographically, African countries were further from the outsourcing countries than the regions industries eventually moved to. When the commodities boom kicked off, it raised the currency value and labour cost of the commodities exporters in Africa, further denting their competitiveness with Asia. Whereas the Asian worker was eight times cheaper at the start of the outsourcing phase, the workers in accessible African countries were only three-times cheaper than their Asian competitors. Ethiopia and Mauritius being noted exceptions to the rule of high African labour cost. Asian manufacturers, in contrast to Africa, were thus able to overtime build up capacity.There is often an emphasis on the supposed divergent responses to the low-equilibrium trap by ‘Asians’ and 'Africans'. Basically, although both cannibalised their agricultural exporters to attempt to create an industrial base, the Africans built for local consumption, while the Asians built for export. However, this is overly broad; the export-based model only describes the path of the Asian Tigers, their low populations forced them to adopt the export-driven model and to quest for inward investment from Japan and the West. The Asian countries with large populations like Malaysia, Indonesia, China and India, just like their African counterparts in Egypt, Algeria, Nigeria, South Africa and Ethiopia etc, went with the import-substitution model.The low-equilibrium trap was sprung thanks to foreign investments and the increased access by governments to global money markets. The key distinction between African and Asian producers thus comes down to the fact, that whereas distance dictates that the Asians have many increasingly richer Asians to produce for, Africans only have Africans, many of whom are poor. Even then, they still have to compete for their fare with Asian producers.(Image Source)The Asians combine global competitiveness and regional dominance, whereas, African countries can only boast of the former in a sliver of commodity exports and the latter is for now, negligible. There are exceptions, such as Morocco and Mauritius’s attachment to global manufacturing value chains, but for the majority of African countries, the above represents an adequate picture. It bears emphasising, however, that the picture on the ground is slightly less even than as presented above. As I mentioned initially, people today are richer than ever, Africans are not the exception. They have been beneficiaries of the commodities boom and the end of the Cold War and its proxy conflicts. International efforts to clamp down on drug, diamond and ivory smugglers have also been of immense aid, in eroding the scourge of war on the continent. That is the background to the emergence of the middle-class who were the focus of the ‘Africa Rising’ profiles of the 2010s. The problem for the richer African countries is the unequal distribution of wealth. Outside the glitz of the 1% and the upper-middle-class, you have a vast underclass of their service workers herded into the slums that ring the continent’s finest cities. Meanwhile, you have rural farmers increasingly at the mercy of criminal elements and left to deal with a changing climate alone.For the poorest African countries, usually landlocked, their problem is isolation, as well as the comparative poverty of their neighbours. For them, there is no equivalent to the rise of India or China, nor can they take advantage of their low incomes to invite global manufacturing. Even when they migrate to the richer African countries, they are met with violence by the vast underclass already existing in those countries. They perceive the new workers as threats to their livelihood.For the richer African countries, the solution is more people-centred domestic politics and increased economic integration with the richer West and Asia. For the poorer African countries, they face a hard ceiling. Their fortunes are hostage to the future of their richer, larger neighbours. It is a bit passé at this point, but a rising tide does lift all boats. It did and is for Asia, will it for Africa?If you read and liked this, consider supporting my Patreon account.

Thanks for the A2A!This question has been raised after Mr.Modi's recent visit to Bhutan. So let us first look into the details of this visit and then work backwards. (A lot of information being disseminated here have been picked up from the national tabloids and Wikipedia. So don't be annoyed if you find ideas to be copied)Mr.Modi made his first foreign visit as PM to Bhutan. This detail is quite significant because it shows that Bhutan is very high on the agenda of the new government. Now most people consider these visits to be friendly visits, but the one thing that I feel is true in International politics is that shrewd leaders don't make visits to break bread with their foreign counterparts, they do that to further their or their country's interests. Keeping this fact in mind and in general accepting that Mr.Modi is a shrewd man , we can infer that he was there on a mission. What I have been observing in Mr.Modi's posturing towards his foreign counterparts are his efforts to take leadership positions in the South Asian region. Inviting all his SAARC counterparts to his swearing-in ceremony and now making his first visit to Bhutan which is a SAARC country shows that Modi is readying his cards for a leadership role in the region. This could be done to undermine China which is actively trying to build relations with Bhutan. It should be understood in this context that both India and Bhutan share border disputes with China. Now Bhutan isn't the big guy who can get things done at International Conferences but sitting on the back of India, it could gain considerable weight. India on it's hand would gain traction as the "Champion of the small guy" which would be contrary to China's reputation. Plus Bhutan also has significant strategic value in Indo-China relations. Keeping Bhutanese leadership close will help India to pre-empt Chinese motives and if possible, effectively thwart them. Bhutan could be like our "little bird" in China's Camp. All this for strategic value but what about economic value?Well the answer to that is also positive. Bhutan may not be a major country for foreign trade but India is very important to Bhutan. India accounts for 98% of it's exports and 90% of it's imports. India has provided aid to Bhutan in form of stimulus packages and is operating 3 hydel power projects in the country. It is also constructing 3 more. Now most people would consider aid to be some kind of charity but it hardly is. India would either expect the money to be returned with interest or special privileges to Indian Companies in Bhutan. Now with these hydel power projects in Bhutan, India can import it's power at much cheaper rates than it could produce. Bhutan has significant hydel power resources in the form of untapped river-flow and can hardly use all of it for it's domestic use. India provides the capital to tap it and Bhutan provides the power.Another area where Bhutan can help us is curbing terrorism in North-East. Infact in 2003-2004, the Royal Bhutanese Army helped India purge many ULFA militants which were using Bhutan as a base for their nefarious designs on India.Mr.Modi also announced educational scholarships for meritorious Bhutanese children. Though a very subtle move, I can understand how this helps further India's position. Most people who study in a foreign country remain sympathetic to their land of education. So if sympathy towards India is ingrained in the minds of young Bhutanese children who will rise to leadership roles in their mother country, it will tilt their decisions in favor of India. It also helps India build goodwill in Bhutanese population.