LAST week The Wall Street Journal pub-

lished an op-ed article by Carly Fiorina ti-

tled “Hillary Clinton Flunks Economics”,

ridiculing Ms Clinton’s assertions that the USeconomy does better under Democrats. “Ameri-

ca,” declared Ms Fiorina, “needs someone in the

WhiteHousewhoactuallyknowshowtheecono-my works”. Well, we can agree on that much.

Partisan positioning on the economy is actu-

ally quite strange. Republicans talk about eco-nomic growth all the time. They attack Demo-

crats for “job-killing” government regulations,

they promise great things if elected, they predi-cate their tax plans on the assumption that

growth will soar and raise revenues. Democrats

are far more cautious. Yet Ms Clinton is com-

pletely right about the record: Historically, theeconomy has indeed done better under Demo-

crats. This contrast raises two big questions.

First, why has the economy performed betterunder Democrats? Second, given that record,

why are Republicans so much more inclined

than Democrats to boast about their ability todeliver growth?

Before I get to those questions, let’s talk

about the facts.The arithmetic on partisan differences is ac-

tually stunning. Last year the economists Alan

Blinder and Mark Watson circulated a paper

comparingeconomicperformanceunderDemo-

craticandRepublicanpresidentssince1947.Un-der Democrats, the economy grew, on average,

4.35 per cent per year; under Republicans, only

2.54per cent. Over the whole period, the econo-my was in recession for 49 quarters; Democrats

held the White House during only eight of those

quarters.But isn’t the story different for the Obama

years? Not as much as you think. Yes, the recov-

ery from the Great Recession of 2007-2009 hasbeen sluggish. Even so, the Obama record com-

pares favourably on a number of indicators

with that of George W Bush. In particular, de-

spite all the talk about job-killing policies, pri-vate-sector employment is 8 million higher

than it was when Barack Obama took office,

twicethe jobgainsachievedunderhispredeces-sor before the recession struck.

Why is the Democratic record so much bet-

ter? The short answer is that we don’t know.Mr Blinder and Mr Watson look at a variety of

possibleexplanations,andfindallof themwant-

ing. There’s no indication that the Democraticadvantage can be explained by better monetary

and fiscal policies. Democrats seem, on aver-

age, to have had better luck than Republicans

on oil prices and technological progress. Over-

all, however, the pattern remains mysterious.CertainlynoDemocraticcandidatewouldbejus-

tified in promising dramatically higher growth

if elected. And in fact, Democrats never do.Republicans, however, always make such

claims:Everycandidatewitharealchanceofget-

ting the nomination is claiming that his tax planwould produce a huge growth surge – a claim

that has no basis in historical experience. Why?

Part of the answer is epistemic closure: Mod-ern conservatives generally live in a bubble into

which inconvenient facts can’t penetrate. One

constantly hears assertions that Ronald Reagan

achieved economic and job growth nevermatchedbeforeor since,whenthe reality is that

Bill Clinton surpassed him on both measures.

Right-wing news media trumpet the economicdisappointments of the Obama years, while

hardly ever mentioning the good news. So the

myth of conservative economic superioritygoes unchallenged. Beyond that, however, Re-

publicans need to promise economic miracles

as a way to sell policies that overwhelmingly fa-vour the donor class.

Itwouldbenice ifeven onemajorGOPcandi-date would come out against big tax cuts for the1 per cent. But none have, and all of the majorplayers have called for cuts that would subtracttrillions from revenue. To make up for this lostrevenue, it would be necessary to make sharpcuts inbigprogrammes– that is, inSocialSecuri-ty and/or Medicare.

But Americans overwhelmingly believe thatthe wealthy pay less than their fair share of tax-es, and even Republicans are closely divided onthe issue. And the public wants to see Social Se-curity expanded, not cut. So how can a politi-cian sell the tax-cut agenda? The answer is, bypromising those miracles, by insisting that taxcuts on high incomes would both pay for them-selves and produce wonderful economic gains.

Hence the asymmetry between the parties.Democratscanafford tobecautious intheireco-nomicpromisespreciselybecause theirpoliciescan be sold on their merits. Republicans mustsell an essentially unpopular agenda by confi-dentlydeclaringthat theyhavetheultimatereci-pe for prosperity– and hope thatnobody pointsout their historically poor track record.

And if someone does point to that record,youknowwhat they’lldo:Startyellingaboutme-dia bias. NYT

❚❚ THE BOTTOM LINE

Partisan growth gaps

WITH Africanow billed asone of themost promis-ing “new fron-tiers” of theglobal econo-my, South-

east Asian companies are positioning them-selves to playabigger role in the continent. Oneof the institutions that is helpingpave their wayis the Africa-South East Asia Chamber of Com-merce (Aseacc).

Operational since 2013, this newest busi-ness chamber in Singapore has 14 membersand counting.

“We have the big guys,” says the Chamber’sco-founder and chairman of its advisory boardPaulo Gomes, a Harvard-educated native ofGuineaBissau and former executive director for24 African countries at the World Bank.

Mr Gomes was recently in Singapore on athree-month stint as distinguished visitingfellow at the Centre for African Studies estab-lished by Nanyang Technological University(NTU) and the Singapore Business Federation.

He notes that the membership includes thelarge shipping company Pacific InternationalLines, commodity players Wilmar Internationaland Olam International, the water treatmentcompany Hyflux, and a clutch of large Africancompanies such as Ecobank (the leading pan-African bank), African Export-Import Bank andNSIA Insurance, one of Africa’s largest insur-ance groups.

The membership is set to expand, accordingto Mr Gomes. “We have a big group from Malay-sia who is also interested, as well as a fewcompanies from Indonesia, the MAC Groupfrom Tanzania – a large private-sector group –and others. We’ll be having our first AGM inAfrica in November.”

The Aseacc was born of an idea proposed atthe first Africa-South East Asia Business Forumin 2010. There was some debate about where inSouth-east Asia it should be based. “There waslots of lobbying from Malaysia and Indonesia toset it up in those countries,” says M Gomes. “Butwe, the founders, thoughtSingapore would be abetter place to do it.”

One reason was that they wanted to exposeAfrica’s business community to the “Singaporemodel”.

“Singaporehassucceeded inblendingthepri-vate sector and the public sector to transform acountry,” he points out. “We thought that modelis useful to learn from.

“We’re not saying it’s a perfect example; Sin-gapore is a different context and its model isnot easily replicable in many African countries.But many have large public sectors, and manyhave had to sell a lot of state enterprises be-cause they were inefficient.”

However, there are cases of state-ownedcompanies being run efficiently, according toMrGomes. “Ethiopiahasanumberofpublic-sec-tor enterprises and some are successful – likeEthiopian Airlines, which is the best African air-line. It is run like a Singapore GLC. There is nointerference by government, and it works. Andnow, that experience is being extended to otherAfrican countries.”

CHINA’S PRESENCE IN AFRICA“People talk a lot about China’s links with Afri-ca,” says Mr Gomes. “But South-east Asia hasbeenengaged withAfrica formanyyears – sincethe Bandung Conference of 1955.” Initially, theengagement was more political and not somuch focused on business. But subsequently,business activities have picked up.

In terms of trade, China is by far Africa’sbiggest partner, with two-way trade flows ap-proaching US$200 billion.

China is also big in terms of projects.

“China’s SOEs (state-owned enterprises) build,but they don’t invest so much,” explains MrGomes. “They get financing from China, theybuild a dam or they build a bridge, and thenthey leave.” Most of the equipment comes fromChinaaswell, so thereare fewspin-offs for localSMEs (small and medium enterprises).

But that said, Mr Gomes points out thatChina’s contribution to Africa’s developmenthas been enormous. “We have to be grateful forwhat China has done. We were really strugglingto find resources to finance infrastructure. Andhow can you develop a continent without infra-structure?”

Mr Gomes points out that some of whatChina has built has transformed entire coun-tries. “In Guinea-Conakry, they financed a damwhich is now operational. It supplies 260 mega-watts and it will provide 40 per cent of thecountry’s energy needs. In my country, Guinea-Bissau, we had only 10 megawatts of installedcapacity – probably even less than NTU. Be-cause of this dam, 40 per cent of GuineaBissau’s needs will also be met, and 15 per centof Gambia’s and 6 per cent of Senegal’s.”

However, when it comes to investment, Chi-na is not the biggest; it lags behind the UnitedStates, UK, France and South Africa. In recentyears, South-east Asia’s investments in Africahave also reached significant proportions. Forexample, Temasek-owned Pavilion Energy hasmajor investments in natural gas in Nigeria andTanzania; Singapore-listed Olam and Wilmarhave invested heavily in Gabon, Nigeria, Liberiaand Côte d'Ivoire, among others. Many Malay-sian companies also have large investments inAfrica.

THE SINGAPORE BRANDAmong South-east Asian countries, Singapore isconsidered the “best brand”, according to Mr

Gomes. “The Singapore brand is unique in Afri-ca,” he says. “And I think Singaporeans don't re-alise that enough. When you are a brand, it’s anasset.”

There isastrongconsciousnessofSingaporein Nigeria, the most populous African country.“Rwanda is also aligning itself with Singapore interms of its strategy. It even has an embassyhere.”

Some big opportunities for Singapore lie inurban development and planning. Mr Gomespoints out that Temasek-linked Surbana, whichspecialises inurbansolutions, isalreadydesign-ing master plans for cities in Rwanda, Burundiand Congo, and exploring opportunities in Sen-egal and Guinea-Bissau. “There are more than20 African mayors pressuring us to get Surbanato do their urban planning,” he says.

The needs are urgent, because Africa facesmajor challenges from both climate change andrural-to-urban migration. “No place in the worldwill be facing the challenge Africa will be facingin the next 10 years in dealing with the massivearrival of people in cities – not even China. So, ifyou don’t plan the cities, you’re going to have acatastrophic situation.”

Africa also faces challenges arising from thedownturn in commodity prices. “It’s going tohurt us,” says Mr Gomes. “But it’s a good lessonand it’s happening at the best moment. We can-not continue to design our budgets with suchhigh commodity price assumptions, as somecountries have done. So it’s a reality check. Wehavebeen talking inAfricaabout diversificationand industrialisation for the last 20 years. Butwe haven’t moved forcibly.”

Africamust do that,he adds. “About two mil-lionyoungpeopleamonthenter the labourmar-ket every month. How do we give them jobs?We can’t do it by exporting cocoa and cotton.”

And so, value-added manufacturing spellsanother opportunity, says Mr Gomes. SomeAfrican countries have already started to go be-yond exporting raw materials. “Côte d'Ivoire isthe number one producer of cocoa in the world.In the last three years, they have transformedabout 15 per cent of their cocoa production byadding value. They haven’t gone all the way tochocolate yet. But they’re making cocoa butter,cocoa-based liquor and moving into the supplychain. This creates jobs.”

There is thus a wealth of opportunities inAfrica forSouth-eastAsiancountries to tap.Andthey can go it alone, says Mr Gomes. They don’tnecessarily need hand-holding by countrieswhich may have a longer relationship with thecontinent.

“Doing business in Africa today doesn’t needa historical relationship,” he points out. “Youjust need to go with pragmatism. There is awhole new generation of people in Africa whohave been exposed to Asia, America and else-where and who would be more than happy toteam up with Singapore.”

For S-East Asia, Africaspells opportunitySingapore is considered the “best brand” in the continent, and some big opportunities for itlie in urban development and planning, says Aseacc’s co-founder. BY VIKRAM KHANNA

THE battles over the US budget betweenDemocratic President Barack Obama andcongressional Republicans that have dominatedthe legislative scene in Washington for close toeight years can be compared to a lousy televisionshow that for some reason keeps coming back fornew episodes and more seasons, until someonefinally says: “Enough! Let us make a deal.” That moment may have come last week as Mr Obama started

preparing for the last year of his presidency and against the back-drop of changes in the Republican leadership on Capitol Hill whenthe two sidesstruckabudgetdeal thatwould increasespending ondomestic and defence programmes over the next two years whilesuspending the debt limit into 2017.

The development came as somewhat of an anti-climax to thebudget fights of recent years that had taken the form of a classic“game of chicken” between the White House and the Republicanleaders,witheachsiderefusingtoyieldto theother’sdemandsandthreatening to drive the American economy over the cliff.

Some of the responsibility for the political polarisation and theensuing budgetary gridlock in Washington lay with the Republi-cans who ended up taking over both the House of Representativesand the Senate. Operating under the growing influence of mem-bersof theTeaParty, thepopulistwing of theGOP, theRepublicansrejected White House proposals for a “grand deal” on the budgetthat would have included both spending cuts and changes to thetax code.

Instead, the Republicans have threatened again and again notto pass the budgets by the required deadlines and risked the shut-ting down of the federal government, and even resorted to the useof the so-called “nuclear weapon”, in the form of the US govern-ment defaulting on its debt. This Republican brinkmanship strate-gy proved not only to be costly to American taxpayers and busi-nesses but also eroded the credit of the United States in the finan-cial markets and raised serious questions about the ability of Re-publican and Democratic leaders in Washington to put the Ameri-can financial house in order.

While the broad deal reached by both sides and which waspassed in the House by a 266-to-167 vote last Wednesday wouldavert pending US debt default, it is not clear whether it reflects agrowing consensus among Republicans and Democrats to work to-gether on the kind of grand deal that would lead eventually to a re-duction in the US deficits through cuts in spending on social-eco-nomic programmes (which Democrats oppose) and some tax in-creases (which Republicans reject).

Indeed, some sceptics would argue that it is nothing more thanan interim agreement that amounted to a ceasefire in the budgetwars, kicking the budgetary can to the new president. Others sug-gest that the electionof the young and energetic Republican Repre-sentative Paul Ryan as the new Speaker of the House would make itmorelikely that thenextpresident,whetheraDemocratoraRepub-lican, would be able to cooperate with Congress.

In any case, in addition to ending the government shutdownand default threat, the spending measures in the new deal providefor a fiscal stimulus that could help accelerate economic growthjust as the Federal Reserve is ending its monetary stimulus pro-gramme.

China’scontribution toAfrica’sdevelopment hasbeen enormousand, in recentyears, South-eastAsia’sinvestments inthe continenthave reachedsignificantproportions,says Mr Gomes(left)

By Paul Krugman

EDITORIAL

Has the AmericanBudget War trulyended or is itjust an armistice?

One constantly hearsassertions thatRonald Reaganachieved economicand job growth nevermatched before orsince, when thereality is that BillClinton surpassedhim on bothmeasures.

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“Doing business in Africatoday doesn’t need ahistorical relationship. Youjust need to go withpragmatism. There is awhole new generation ofpeople in Africa who havebeen exposed to Asia,America and elsewhere andwho would be more thanhappy to team up withSingapore.”Mr Gomes

24 | OPINIONThe Business Times | Tuesday, November 3, 2015