Order&Violence(PoliticalEconomyofDevelopment)

Week6:Theorigins&politicsoftoday’sweakstatesChrisBlattman

I.Areview

Weeks1and2

• Everydayliferequireseconomictransactionsandpoliticalbargaining

• Thesedealsaredifficulttomakebecausedifferentsideshavedifferentinformationandcan’tcrediblycommittodeals

• Societiescanfindcooperativewaystoreducethesetransactionscosts,butthisishardtosustaininlargegroups

• Solvingthecollectiveactionproblemtoprovidepublicgoodsisalsohard

• Failingtoreducebasictransactionscostsandprovidepublicgoodsleadstoverylowlevelsofeconomicdevelopment

• Thecostofnotsolvingpoliticalbargainsiscompetitionthatoftenturnsviolent

Week3

• Acentralizedpowerwiththeabilitytoenforcecontractsisonewaytoovercometheseproblems—thestate

• Astatecurbssomeformsofviolence,enforcesomecontracts,andprovidesomepublicgoods,loweringtransactioncosts

• Butformostofhistory,thepersonorgroupswhocontrolthisstatehasusedittoenrichthemselvesandtheirkin

• Thusstatesmakesocietiesricherandmorepowerfulintotal,butmostmembersofsocietyliveinsomeformofservitude

• Statesemergeformanyreasons,butaclimateandendowmentsthatcansustainlargedensepopulationsisamajordriverofprehistoricalstates(andsystemsofmanyneighboringstates)

Weeks2,3,4

• Oftenthereareseveralgroupsthatwieldpowerinsociety—military,material,ortheabilitytomobilize

• Wecancallthesegroupselites,andtherecanbeorderonlywhenelitesareabletostrikeabargaintocontrolthestateandsharetherentsamongthemselves

• Toentrenchpowerandrents,theseelitesdeveloprules,norms,andstructurestopreservethesebargains,andmaketheircommitmentsnottobeviolentmorecredible

• Theseinstitutionsarehardtochange,orpathdependent,inpartbecauseeliteswilltrytoprotecttheirinterests

• Anythingchangeinmilitary,material,ormobilizational powerchangesthebalanceofpowerandthreatenspastbargains

Weeks3,4,5

• Groupswhodevelopmilitary,material,ormobilizational powercanbargaintojointheelitecoalitioninpower(sometimesviolently)

• Historicallytheselargercoalitionshavehadsomecompetitiveadvantagesovertheirneighbors– Broad,stablebargainscanleadtomorepublicgoods,cangiveinsiders

incentivestoproducemoreoutput,taxsomeofthisoutput,andmobilizemorepowerfulmilitaries

• Thecoalitionsthatdosoareinagoodpositiontotakeoverweakerneighbors(whichmaybroadenthecoalitionfurther)

• Itisdifficulttoprotectthesegainswithoutexpandingtaxcapacity,professionalizingthebureaucracies,andpenetratingandcontrollingsociety:the“modernstate”

Weeks4,5

• Overtime,variousenvironments,choices,andchanceeventshaveledtodifferentdistributionsofpoweracrosssocieties– Differentsystemsofeconomicproductionleadtoanarroweror

broaderdistributionofresources(materialpower)– Technologicalandculturalinnovationandchangeshiftmilitaryand

mobilizational capacities

• Whencircumstancegrantsthemsuchpowers,broadswathesofsocietycancrediblythreatenexitorvoiceandsodemandconcessionsfromthestateandelitecoalitions

• Durablerules,informalandformal,areneededtomakethesenewbargainscredible,suchasconstitutionalgovernance(theruleoflaw)anddemocratization

Weeks3,4,5

• Societiesthathavedevelopedbroadercoalitions,andstableinstitutionstopreserveorder,havetendedtofosterinvestment,innovationandtrade,andhencepromotecommerceandindustry

• Thisisespeciallytruewhenstrongsocietiesarebalancedbystrongstatesthatcanprovidepublicgoods,solveproblemsofcollectiveactionandnegativeexternalities,raisetaxes,andordersocietyusingasetofknownandimpersonalrules

• Thesocietiesthathavedonethishavesomeadvantagesinsurvivalandincompetitionwithotherstates

Averycrudetypology,withmadeupdata

SocietyWeak Strong

Weak

Strong

US,WesternEurope

Liberia,SierraLeone

Brazil,Mexico

Guatemala,Afghanistan

Russia,China

StateGreece,Italy

Thenextfiveweeks

• Thenextfourweeks:Nowthatwehaveasenseofhowpoliticsisorganizedinmoststates,andpathsofpoliticaldevelopment,wewillstudymoderninterventions:– Structuraladjustment– Armedinterventions– Aid– Statebuilding– Democracypromotion

• Butfirst,thisweek:Afinalhistorylesson– Wehavelargelytalkedabouttherootforcesleadingtostateand

institutionaldevelopment– Butitisdifferenttobeafollowerthanaleaderinstatedevelopment– “Latedeveloping”societieshavebeenbuffetedbychangefromthe

“earlydeveloping”societies,onlysomeofitgood

Ourgoalistounderstandthedysfunctionandcrisisweobserveinsomanycountriesinthelate20th century

• Whydidpost-colonialgovernmentsrejectparliamentarydemocraciesandcentralizepower?

• Whydidtheydevelophighlycontrolled,state-ledsystemsofeconomiccontrolanddevelopment?

• Whywasthereamassiveeconomicandpoliticalcrisisinthe1980s?

• Were“neoliberalreforms”suchasstructuraladjustmentworsethanthedisease?

Week6objectives

• Onereasonsomanystatesandsocietieswereweakbythelate20th centurywasprofounddestabilizationbythefirst400yearsoftrueglobalization– Newtechnologies,theslavetrade,colonialism,etc…

• Colonialpoliciesendowedmanysocieiteswithastrongerstateandpublicgoodsthantheymightotherwisehavehad

• Butcolonialpolicyalsodidlittletostrengthensocietyorbroadenpowerinsociety

• Leavinginhaste,mostsocietiesnotonlyfacedpoliticalinstabilityafterdecolonization,butalsohighlyconcentratedpoliticalandmilitarypower

Week6objectives

• Likealllimitedaccessorders,thesenewregimesattemptedtocontroltheeconomyandextractrents

• Theresultwasmajorfiscalandmonetarycrisesinthe1980s

• Internationalfinancialinstitutionsdesignedandimposedreformsthatlargelyignoredthesepoliticalrealities:macroeconomicstabilizationandstructuraladjustment

• Asaresult,intheshorttermthesepolicieswereoftenpoorlyimplemented,reversed,orhijacked

• Intheend,however,controleconomieshaveprovenlessstableandprofitableforelites,andhardtomaintain,andsotoalargeextentamoderateversionofthe1980sreformagendawasaccomplishedinthelongerterm

II.Howimperialismshaped“latedeveloping”statesandsocieties

Whatisimperialism?

“Extendingthepoweranddominionofanationbydirectterritorialacquisitionsorbygainingindirectcontroloverthepoliticaloreconomiclifeofotherareas”

—Merriam-Websterdictionary

“Weakerpeoplestreatedaspossessionstobeeconomicallyexploited”

— EmilyGreeneBalch,1946Nobellecture

Societieswithsuperiormilitary,mobilizational,andmaterialpowerhavedominatedothersformillennia

MongolEmpire,1276 OttomanEmpire,1600

Japaneseempire,early20thcentury

Europeanimperialism1500-2000isprobablythemostextensiveandglobalexample

https://en.wikipedia.org/wiki/File:European_Empires.svg

Butthereareexamplesofimperialismthatweremoresuccessfulinthattheimperialpowersbuiltlastingnations

France China

Senex Map,1719

Imperialism:Twosidesofthecoin

• Ontheonehand– Buildbureaucraciesandstate

capacity– Endviolentinfighting– Introduceideasandtechnologies– Increasetradeandintegration– Investinpublicgoods

• Ontheother– Violentconquest– Extractresourcesandtribute– Reorganizesystemsofownership

andproduction– Controleconomies– Coerceandsubjugatepeople CecilRhodes

Today:HowglobalizationandWesternimperialismshapedorderandinstitutionsinlatedevelopingstates

1. Tradeandglobalizationdisruptedtraditionalorders

2. ThemixedeffectsofColonialism– Increasedstateorganizationandpublicgoods– Butpromotedhighlycentralizedpower– Overfrequentlyarbitraryandhard-to-governterritories– Anddepartedabruptly

3. ColdWarpoliticsinsulatedrulersfromtheruleoflawandaccountability

4. Introducedpromisingyetproblematicdevelopmentideologies

IwillfocusonimperialisminAfrica(butdrawparallelstoSouthAsiaandLatinAmerica)

HowglobalizationandWesternimperialismshapedorderandinstitutionsinlatedevelopingstates

1. Tradeandglobalizationdisruptedtraditionalorders

2. ThemixedeffectsofColonialism– Increasedstateorganizationandpublicgoods– Butpromotedhighlycentralizedpower– Overfrequentlyarbitraryandhard-to-governterritories– Anddepartedabruptly

3. ColdWarpoliticsinsulatedrulersfromtheruleoflawandaccountability

4. Introducedpromisingyetproblematicdevelopmentideologies

1500-1870:SteadyadvancesinEuropeanagriculture,weaponry,commerceandtransportdriveunprecedentedtrade,commerce,

andthe“firsteraofglobalization”

1870

Globalizationbringsprofoundeconomicchangeandwithitsocialupheavalandweakness

• Strongsocietieswithstrongsystemsofsocialcontrolandadaptedstrategiesforsurvivalfindthemselvesstrugglingtofindnewstrategiesandsystemsofcontrol

• Possibleimplications– Newsourcesofandclaimsto

power– Risinginequalityandsocial

stratification– Politicalupheavalandviolence

• WecanseeparallelstodayinthedisruptionofUSindustry

– Butnowimaginechangesmanytimesmorepowerful

1500-1870:TechnologicalchangeandEuropeanexpansiontransformedanddestabilizedtraditionalsocieties

• Newgoods

• Newlivelihoods

• Newtechnologies

• Newwarmachines

• Newdiseases

• Newgods

• Newinstitutions

• Newworldviews

• Newallies

Oneexample:Privatizationandconcentrationofland

• Landisthebasisofsocialorganization,politicalpower,andeconomicorganizationinagrariansocieties

• Europeansalmostneverencounteredsocietiesthatwereorganizedforthelarge-scaleproductionofthecommoditiesitdemanded

• Large-scalecashcropproductionrequired:– Newsystemsoftenure(privatization)andcontrol(concentration)

• Imperialpowerssoughtoutandempoweredfigures—landlords,taxcollectors,officials,etc.—whocouldguaranteegoodsortaxflows

AnexamplefromIndia:TheZamindari(Lakshmi&Iyer 2005)

• Tomaximizerevenues,Britainidentifiedandempoweredpeopleopportunistically

• Collectedlandrevenuesthroughcultivatorsinsomedistrictsandempoweredlandlords(Zamindari)inothers

• Wheretheyreinforcedanon-landlordsystem,wheatyieldis+23%andinfantmortality-40%today

• Lessons:– Disruptive,transformativenatureoflandand

taxpolicy– Unintended,unpredictablelongterm

consequences

Zamindar ofNattathi

TheAfricanslavetrade

• Oneofthemostprofoundsourcesofupheaval

Africa(likemanypartsoftheworld)hadknownaninternalandArabslavetradeforcenturies

ButthescaleanddepravityoftheAtlanticSlaveTradewoulddwarftheArabtradeafter1500

Arab/easternslavetrade:

• Est.7millionshipped

Atlanticslavetrade:

• Est.9-12millionshipped

• (RoughlyhalfbyPortugal)

(Numberkilledinraidsorbeforeshipmentunknown)

PrimarydestinationwasSouthAmerica&Caribbean,90%toworkonsugarplantations

Nunn, Nathan, and Leonard Wantchekon. 2008. "The Trans-Atlantic Slave Trade and the Evolution of Mistrust in Africa: An Empirical Investigation." Unpublished working paper, Harvard University and NYU.

Regions(i.e.ethnicgroups)mostaffectedbytheslavetrades

Atlantictrade Arabtrade

Diredemographicconsequences:

By1850,Africa’spopulationbelievedtobehalfofwhatitwouldhavebeenhadtheslave

tradesnottakenplace.

Manning,P.(1990).“SlaveryandAfricanLife:Occidental,oriental,andAfricanslavetrades,”p.171.

Theimpactofdepopulationanddestabilization:TheslavetradeanddevelopmentintheHerbst model

Lowpopulationdensity

Moreexpensiveforstatestocontrolterritory

Weakstates

Easeofconquest&currentinstitutionalquality

Currenteconomicperformanc

e

Ecologicalconditions

(soils&rains,disease,axes)

Fewnavigablerivers,wildvariationinclimate

Slavetradehalvespopulation(indensestareas)

Slavingcreatedmassdiorder?

Thegreatertheslavetrade,thelowerisincometoday…

…andthelessdevelopedthe19thcenturystate

Reducingtheriskofbias,theslavetradetookplaceindensest(likelythemostdeveloped)regionsofAfrica

Nunn, Nathan, and Leonard Wantchekon. 2008. "The Trans-Atlantic Slave Trade and the Evolution of Mistrust in Africa: An Empirical Investigation." Unpublished working paper, Harvard University and NYU.

Also,thegreatertheslavetrade,theloweraremodernlevelsoftrust(Nunn&Wantchekon)

“Therearemanytradersinallcornersofthecountry.Theybringruintothecountry.Everydaypeopleareenslavedandkidnapped,evennobles,evenmembersoftheking’sownfamily”— Affonso,KingofKongo,writingtothePortuguesekingin1526(Vansina 1966)

Internalwarfare,

raidingandkidnapping

Politicalinstability&

statecollapse

Easeofconquest&institutional

quality Currenteconomic

performance

Internationaldemandfor

slavesEthnic

fragmentation&mistrust

Lowlevelsoftrustand

cooperationtoday

NathanNunn(+manyhistorians):TheslavetradeunderminedAfricaninstitutions

HowglobalizationandWesternimperialismshapedorderandinstitutionsinlatedevelopingstates

1. Tradeandglobalizationdisruptedtraditionalorders

2. ThemixedeffectsofColonialism– Increasedstateorganizationandpublicinvestment– Butpromotedhighlycentralizedpower– Overfrequentlyarbitraryandhard-to-governterritories– Anddepartedabruptly

3. ColdWarpoliticsinsulatedrulersfromtheruleoflawandaccountability

4. Introducedpromisingyetproblematicdevelopmentideologies

Exploration,trade,conquest,andsettlementareinstigatedwiththeadventofoceangoingvesselsandwouldbedrivenbythe

opportunitytoproduceandtradenewcommodities

1554

Incontrast,EuropehadyettopenetrateandsettleAfrica

1805

Before19th century,EuropetreatedAfricamainlyasasupplyofslaves(andsometradegoods)andawaystationtoFarEast

• Relativelyfewstatestoconquerandrulethrough

• Morelimitedproductionandtradingopportunities

• LesshospitabletoEuropeanpeopleandagriculture– Diseases– Agriculturalsuitability– Preciousmetals

1867

Penetratingthecontinentwouldwaituntilthearrivalofsteamships,rifles,andquinineinthelate19th century

“Ourpolicymayforthepresentchieflyassumeanegativecharacter.SolongaswekeepotherEuropeannationsout,weneednotbeinahurrytogoin.”

- BritishViceConsuloftheOilRiversProtectorate(Nigeria)

Eventhen,colonialismwouldhavemoreofageo-strategicmotivethananeconomicone

ConferenceofBerlin(1884-85)Thecarvingupofthecontinent

Formalcolonialismwouldlastlessthanacentury

HowglobalizationandWesternimperialismshapedorderandinstitutionsinlatedevelopingstates

1. Tradeandglobalizationdisruptedtraditionalorders

2. ThemixedeffectsofColonialisma) Increasedstateorganizationandpublicinvestmentb) Butpromotedhighlycentralizedpowerc) Overfrequentlyarbitraryandhard-to-governterritoriesd) Anddepartedabruptly

3. ColdWarpoliticsinsulatedrulersfromtheruleoflawandaccountability

4. Introducedpromisingyetproblematicdevelopmentideologies

2(a)Colonialadministrationsformalizedbureaucraticstructuresandtaxcapacity(Huillery)

• InFrenchWestAfrica,Franceestablishedabroadsystemoflocaltaxationtodeliverlocalservicesandpublicgoods– 60%ofrevenuesfromheadtax,40%fromtrade&propertytax– Localbudgetscoverallnon-militaryexpenses,includingpublicworks

andhealth/educationexpenses– Centralgovernmentonlyused30%ofthecolony’sbudget,anddistrict

governmentsdisbursedtheother70%– Districtspendingoninfrastructure,healthandeducationindistricts

was25%ofcolonies’budgets

• Likemoststates,thisonewascoerciveandextractive– AfterIndependence,theFrenchhandedthesecoercivebureaucratic

andtaxstructuresdowntolargelydespoticregimes

• Nonetheless,thisbroughtapreviouslyunknownlevelofstatedevelopmentandintegration

Whileaccesstopublicservicesvaried,thecolonialstateincreasedhealthandeducationprovision

Teachersper100,000inhabitants,FrenchWestAfrica1910-1928

Medicalstaffper100,000inhabitants,FrenchWestAfrica1910-1928

Huillery,Elise.“HistoryMatters:TheLong-TermImpactofColonialPublicInvestmentsinFrenchWestAfrica.”AmericanEconomicJournal:AppliedEconomics1,no.2(2009):176–215.

Theseinvestmentsappeartohavepersistenteffectsonlevelsofdevelopmentandaccesstoservicestoday

Comparingneighboringdistrictswithsimilarcharacteristics

Huillery,Elise.“HistoryMatters:TheLong-TermImpactofColonialPublicInvestmentsinFrenchWestAfrica.”AmericanEconomicJournal:AppliedEconomics1,no.2(2009):176–215.

Infrastructurealsohadhuge,persistenteffects:e.g.Railroadconstruction

• BritishRajbuilta67,247kmlongrailroadnetwork

• Dramaticallyreducedthecostsoftrading

• Raisedcontemporaryrealincomesby16%

– UndoubtedlycontinuedtoraiseincomesafterIndependence

• Transportalsoenabledpoliticalcontrol

– BytheRaj– Butlateranational

democraticgovernment

EvolutionofIndia’srailroadnetwork,1860-1930

DavidDonaldson,RailroadsoftheRaj:EstimatingtheImpactofTransportationInfrastructureAmericanEconomicReview, forthcoming.

Thereisnonumbertwo,threeorfour…InCoted’Ivoirethereisonlyanumberone:that’smeandIdon’tsharemydecisions.

- Houphouet-Boigny,WA,8Aug1988

DemocracyisnotforAfrica.TherewasonlyoneAfricanchiefand[so]hereinZairewemustmakeunity.

- Mobutu,WSJ,14Oct1985

2(b):Colonialismanddespotism

ButtraditionalruleinAfricawasnotnecessarilyhereditary,despoticormale

AshantichiefinGhana

Infact,tribalgovernancewasoftenmuchmoreparticipatoryandopen

“Theelectionofchiefsfollowsapattern.Theseniorfemaleofthechieflylineagenominatesfromeligiblemales.Thisseniorfemalethenconsultstheelders,maleandfemale,ofthatline.Thefinalcandidateisthenselected.

Thatnominationisthensenttoacouncilofelders,whorepresentotherlineagesinthetownordistrict.TheEldersthenpresentthenominationtotheassembledpeople.

Iftheydisproveofthenominee,theprocessbeginsagain.Chosen,thenewchiefisenstooledbytheElders,whoadmonishhimwithexpectations.”

http://www.nathanielturner.com/ashantiempire.htm

Nonetheless,colonialauthoritiesfounditconvenienttoorganizepeoplesintoethnic/tribalgroupsandempower

thenearestthingtoaleader

• Oneargumentgivenwasthatthiswasanenlightenedanddeferentialrecognitionofnativecultureandselfrule

• Perhapsmoreimportantly,asingleconsistentstyleofauthoritarianrulewassimpler,cheaper,andeffective

• Thusthecolonialpowerrepeatedtheprocessthatstatesdoineverysociety,whetherathomeorinthecolonies:theyreorderedsocietiestomakethemmorelegibleandeasiertocontrol

Onesizefitsall?

• Pre-colonialsocialrelationsacrossAfricawerediverse

• Rulewasnotnecessarilylineage-basedorauthoritarian.– e.g.checksandbalances,

oftenbyeldersandheadsofkingroups

• Solution:Ifchieftainsdonotexist,createthem.

MahmoodMamdani on“Decentralizeddespotism”:Ethnicrulereinforcedethnicinstitutionsofccontrol

EthnicruleCurrenteconomic

performance

Needforacheapand‘politically

correct’meanstocolonize

“Decentralizeddespotism”

Centralizeddespotism

• Ethnicrule• Creationofa“NativeAuthority”

• Appointed• Inventedchiefswheretheydidnotexist

• Abilitytotax,forcelabor

• Fortifiedfromexternalthreats

• Accountableonlytocolonialauthoritiesabove

• Newnationalgovernmentstookoncolonialrole

• Appointedlocalleaders

• Commandstate

Alesina,Alberto,WilliamEasterly,andJanina Matuszeski.2006"ArtificialStates."NBERWorkingPaperNo.12328.

4(c)Arbitrary,artificialstates

80%ofnon-coastalAfricanbordersfollowlatitudinalandlongitudinallines

Territorial-statesnotnation-states?Dejurenotdefactostatehood

• Drawinglinesonmapscheaperthanwar,defense,andcontroloftheperiphery

• Politicalbordersdonotcoincidewiththedivisionofnationalitiesdesiredbythepeopleontheground– Gaveterritoriestoonegroupignoringtheclaimsofothergroups.– Drewboundarieslinessplitting“nations”(ethnic/linguisticgroups)into

differentcountries,frustratingnationalambitionsofsomegroups– Combinedintoasinglecountrygroupsthatwantedindependence.

• Colonialpowersonlytriedtorulein‘core’areas– Beyondthecore,weaksystemsofformalrule– Makehaveexplicitlyorimplicitlyplacethe“core”group

What’stheimpactof“Artificialborders”?(thoughbecareful:correlationdoesn’timplycausation)

Artificial borders

Conflict prone

Current economic

performance

Weak states, low population density, poor climates, low technology…

De jure not de facto control of

territory

No incentives for accountability &

services

+ International

order (borders are inviolable)

Alesina,Alberto,WilliamEasterly,andJanina Matuszeski.2006"ArtificialStates."NBERWorkingPaperNo.12328.

Finally,recallJeffreyHerbst:Somearbitrarybordersareworsethanothers

4(d)Abruptdepartures

LikeasuccubusAfricaweighsonEurope'srest.Oneofthenumerousmalaises(butperhapstheheaviest)whichnowburdentheoldcontinent.EachEuropeanpowerhashereitsobstacle…

—LeRire (18.iv.1896)

ColonieswerecommonlyviewedasaburdeninEurope

RatherthanrepressdomesticIndependencemovements,theBritishandFrenchmadeahastyexit

• In1950s,envisionedaslowtransitiontoself-ruleoverdecades– Begantoinstallparliamentarysystems

• Butcouldnotholdbacktideofindependence– Costsandrisksbegantoexceedbenefits– BritainandFrancedidnothavethestrengthtoholdtheempireand

rebuildafterWWII

• Advantages?– Avoideddevelopmentofbroad-based,militantnationalistmovements– Allowedthemtomaintaingoodrelationsandavoiddisorder

• Independence– British: casebycase,mainlybetween1957and1963– French:allatoncein1960(exceptGuineaandTogo)– PortugalandSouthernAfrica:chosetofightitout

Rapiddecolonization=EconomicandPoliticalimmaturity?

• Hadnotpermittedorenabledthedevelopmentofenoughhumancapitaltomanbureaucracies

• Onlyclosetotheendofthecolonialperioddidtheybegintostaffthebureaucracieswithlocals

• Colonialpowersmadeonlylimitedpublicinvestments

• Fewnationaltraditions,symbolsorconsciousness

• Parliamentarysystemshadlittlehistoryorpopularlegitimacy

• “Powerwaspersonalizedbecauseitwasneverproperlyinstitutionalized”(vandeWalle)

Likewise,theendofSpanishcolonialismintheAmericaswasabrupt

SpanishofficialssurrenderMadridtoNapoleon.Antoine-JeanGros,1810

Rapidandrelativelyunexpecteddecolonizationdestabilizedthepoliticalequilibrium

• Nationsfoughttoestablishinternationalborders

• Elitescompetedtocapturethenewrepublics,oftenviolently– Conservativesfoughttopreserve

theircoloniallimited-accessprivileges

– Liberalssoughttocommercialize,freemarketssomewhat,andextendsomeequality

• Weaksocietiesexcludedfrompower– Nominaldemocracieswithlimited

votingrights,nosecretballot

HowglobalizationandWesternimperialismshapedorderandinstitutionsinlatedevelopingstates

1. Tradeandglobalizationdisruptedtraditionalorders

2. ThemixedeffectsofColonialism– Increasedstateorganizationandpublicgoods– Butpromotedhighlycentralizedpower– Overfrequentlyarbitraryandhard-to-governterritories– Anddepartedabruptly

3. ColdWarpoliticsinsulatedrulersfromtheruleoflawandaccountability

4. Introducedpromisingyetproblematicdevelopmentideologies

HowtheColdWarshapedtheinternationalsystem:Freezinganunstablepoliticalequilibrium

• Smalltransgressionsthreatenedfragilepeace

• USandUSSRwantasystemthatcontainsconflictsintheperiphery– Fearisthatsmallwarsescalatetonuclearwar

• Developedrules,normsandinstitutionsthatwouldpreservepeace1. Non-interference

• Populationsthevictimsoftheirleader’scrueltyandincompetence

2. Territorialintegrity• Freesstatefromneedtocontrolperiphery

WesternpowersmoreinterestedinwinningColdWarthansustainablestatebuilding

(Theymaybethugs,butthey’reourthugs)

“Territorialstates”insulateAfricanleadersfromstate-buildingandpublicaccountability

RecallAlesina,Easterly&Matuszeski

Artificial borders

Fragmentation, conflict prone

Current economic

performance

De jure (but not de facto) control of territory

No incentives to provide

accountability & services

+ International

order (borders are inviolable)

HowglobalizationandWesternimperialismshapedorderandinstitutionsinlatedevelopingstates

1. Tradeandglobalizationdisruptedtraditionalorders

2. ThemixedeffectsofColonialism– Increasedstateorganizationandpublicgoods– Butpromotedhighlycentralizedpower– Overfrequentlyarbitraryandhard-to-governterritories– Anddepartedabruptly

3. ColdWarpoliticsinsulatedrulersfromtheruleoflawandaccountability

4. Introducedpromisingyetproblematicdevelopmentideologies

IdeologyisoneoftheWest’sgreatexports

Someexamples:

1. Liberalismanddemocratization– WewilltalkaboutthespreadofdemocraticnormsinWeek9

2. Freemarketeconomics– Wewilltalkaboutthe“neoliberal”agendalaterwhenwediscuss

structuraladjustment

3. 1950s,60s:Thedevelopmentalstate– Thebeliefthatplanned,centralizedinvestmentandeconomic

managementcoordinatedbythestatecanproducecatch-up

Thefinalwaveofdecolonizationcoincideswiththegreatestcrisisofconfidenceincapitalismanddemocracy,andtheglobalzenith

ofstate-leddevelopment

NobodyinEuropebelievesintheAmericanwayoflife--thatis,inprivateenterprise;orratherthosewho

believeinitareadefeatedparty--apartywhichseemstohavenomorefuture.

—BritishhistorianA.J.P.Taylor,1945

BeliefintheabilityofthemarkettocoordinateeconomicactivityisseverelyshakenbytheGreat

Depression

Meanwhile,plannedeconomiesandstate-leddevelopmentwonthewarfortheU.S.anddroverapid

Sovietmodernizationandcatch-up

IntheWest,thesearchfora“thirdway”

• Openedamiddlegroundbetweenfascist-styleregimentationandsocialist-stylenationalplanning.

• SocialdemocracyandthewelfarestateofferedEuropeandtheUSawaytosalvagethemarketeconomyandcapitalistorder

MostofourdevelopmentsofarhashadtobecarriedoutbytheGovernmentitself.Thereisnootherwayout…

We’lltransformtheGoldCoastintoaparadiseintenyears…

- KwameNkrumah,PresidentofGhana(1962)

Inmanydevelopingcountries,thisthirdwaytooktheformofadevelopmentalstate

III.Thepoliticsofmany“latedeveloping”states:survivalandcontrol

TheexampleofSub-SaharanAfrica

Ourgoalistounderstandthedysfunctionandcrisisweobserveinsomanycountriesinthelate20th century

• Whydidpost-colonialgovernmentsrejectparliamentarydemocraciesandcentralizepower?

• Whydidtheydevelophighlycontrolled,state-ledsystemsofeconomiccontrolanddevelopment?

• Whywasthereamassiveeconomicandpoliticalcrisisinthe1980s?

• Were“neoliberalreforms”suchasstructuraladjustmentworsethanthedisease?

Itisdifficulttoknowtheimpactofimperialism,sincethecounterfactualsareunclear.Butweakersocietiesand(insomecases)

strongerandmorecentralizedstatesisareasonableconclusion.

SocietyWeak Strong

Weak

Strong

State

Relativelystatelesssocieties

Pre-existingpolities

Itwasverydifficultforparliamentarydemocracytotakerootintheselimitedaccessorders

• TheBritishandFrenchmadesomeattempttobestowparliamentarydemocracyontheirwayout:– Parliamentarysystemsoutnumberedpresidentialsystems4to1atthe

timeofindependence– Severalcolonieshad2-3roundsofNationalAssemblyelectionsbefore

Independence,grantingsomefamiliaritywiththeinstitutions

• Butwithinadecade,allbut3Africannationswouldswitchtocentralizedpresidentialsystems– Botswana,Mauritius,SouthAfrica

• Statistideologiesanddisillusionmentwithcapitalismanddemocracyundoubtedlyplayedarole

• Butbasedoneverythingwehavelearnedaboutpolitics,shouldwebesurprisedaboutthecentralizationofpower?

Politicalcontrolrequiredeconomiccontrol

• Afreeeconomicorderthreatenseliterents

• Newstatesinthelate20thcenturydevelopedcontroleconomies:– Toachievedevelopmentgoals– Outofpoliticalexpediency

• It’sacommonmistaketoseecorruptionassimplypersonalenrichmentorthecentralizationofpowerassimplyego

• Control,distortion,corruption,andpatronagewerethepoliticalgluethatheldthesepolitiestogether– Patron-clienttiesareameansofcontrolinayoung,multi-ethnic,poorly

integratedterritory– Patronageisasubstituteforrepression,nation-building,andservice

delivery

Limitedaccessorderssoughttolimitaccess:Theysoughttocontroltheentireeconomyto:reducethreatstopower,distributerentstoelitecoalition,andpacifyurbanunrest

• Manipulatedmarkets– Erectedbarrierstoforeignfirms– Encouragedmonopolists– Nationalizationofbanks,resourceextraction,transport,etc.– Restrictedaccesstoforeignexchange

• Distortedprices– Subsidizedurbanfoodandfuel– Loweredpricestoruralproducers

• Usedstateresourcesaspatronage– Statebanks“lent”moneytoinsiders– Explosivegrowthofpublicsectorjobs

Thiscontrol,inefficiency,corruptionandpatronagewasagrowingfiscalstrain

• Socialspendingwasgrowingfasterthantaxplusaid

• Foodandpricesubsidiesweredrainingresources

• Theftandcorruptiondivertedfunds

• Statefirmswerelosingmoneyatincreasingrates

• Statebanksweregrowinginsolventfromunpaidloans

• Ruralproducerswerebecomingstifledbymarketingboards,andreducedoutput

• Foreigncurrencywasbeingsoldonblackmarketandgovernmenthadhardtimegettinghandsonit

OneresultwasgrowingandpersistentfiscaldeficitsExamples:Kenya,ZaireandTanzania

Fiscaldeficitsasa%ofGDPinAfrica

Persistentdeficitsmeanmountinglevelsofdebt(andgrowingdebtpayments)

Debt

Deficits (including interest payments)

Repayments of principal (minimal)

-.50

.51

1.5

2

Aver

age

GD

P pe

r cap

ita g

row

th

1960 1970 1980 1990 2000 2010

Year

Average African growth rates (unweighted) calculated using Penn World Tables data for all sub-Saharan African countries with populations greater than 1 million.

Fiscaldeficitsandagrowingdebtismanageablesolongastheeconomyisgrowing,butundereconomiccontrolgrowthground

toahaltthroughthe1970s

SSA average growth rate

Skyrocketinginflationratesillustratethelosingofeconomiccontrolasgovernmentsprintmoreandmoremoneytopaybills

InflationratesinAfrica

Now,introducevolatilityintothesystem:Commoditypricespikesinthelate1970s

020

040

060

0

Rea

l exp

ort p

rice

inde

x (2

000=

100)

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Year

Kenya Cote d'Ivoire Nigeria

Spikesareaboonifyouseethemasatemporarywindfall,butproblematicifyoudon’tknowtheyaretemporary

IMF’sactualversusforecastedcommodityprices:Copper

Result:AcrisisofdebtDozensofcountriesarefrozenoutofinternationalcreditmarkets

intheearly1980s

Debtservicepaymentsas%ofGDP

-.50

.51

1.5

2

Aver

age

GD

P pe

r cap

ita g

row

th

1960 1970 1980 1990 2000 2010

Year

Average African growth rates (unweighted) calculated using Penn World Tables data for all sub-Saharan African countries with populations greater than 1 million.

Ascountriesfaceeconomiccollapse,therestoftheworldconsidershowtorespondtostabilizethese

countriesandhelpreturnthemtogrowth

First SAP (Senegal)

SSA average growth rate

WeseeparallelsinLatinAmerica

19th century• Persistentmarketregulationand

monopolyprotection

• Dependenceonasmallnumberofexportproducts

• Hugepriceandsupplyshocks– Tobacco,coffee,rubber,guano

• Growinglevelsofdebt

• Defaultby1830s

20th century• Influencedbythesamepost-

WWIIintellectualandpoliticalenvironment

• Focusonindustrializationviaimportsubstitution

• Requiredextensivecontrolregimestomaintain

• Unequal,autocratic,repressiveregimespersistintolate20thcentury

V.Theinternationalresponse:Macroeconomicstabilizationand

StructuraladjustmentOurfirstlookatWesternintervention

Twointernationalfinancialinstitutionswereretooledtorespond,offeringcreditinreturnforreforms

WorldBankInternationalMonetaryFund

Eachplayedadifferentrole

“Macrostabilization”• Getdeficitsandinflationunder

control

• Stopprintingmoneytopayforthings

• Cutbacksinspending– Socialexpenditures– Publicsectorjob

• IMF:Shorttermloans

“Structuraladjustment”• Deepereconomicreform

programswithfundingfromtheWest

• Removepricecontrols

• Privatizestate-ownedbanksandcompanies

• Buildmarketinstitutions

• WorldBank:Longtermloans

Stabilizationandstructuraladjustmentwereinpartaresponsetopatrimonialpoliciesthatcrippledeconomies

Patrimonialpolicies:

Marketingboardsandpricecontrols

Seignioragespending

Pricesupportsandpork

Highpublicemployment

Overvaluedcurrency

Tradeprotection

Importbias

Nationalizationofindustry

Proposedreforms:

→ Priceandagriculturalmarketderegulation

→ Strictinflationtargets

→ Reduceexpenditures

→ Publicsectorretrenchment

→ Devaluation

→ Tradeliberalization

→ Exportbias

→ Privatizationofbanks,transport,mining,etc.

Membersoftheseinstitutionsoftenhadanideologicalagendaatoddswithlocalstatesandsocieties,especially

inAfrica

Theyappearmoreinterestedinfoistingonustheirownperceptionsandgoals.WhenitcomestoAfrica,theoutsidershavealwaysbehavedasiftheyknowbetterthanAfricanswhatisgoodforAfrica.

- Prof.AdebayoAdedeji

vandeWalle:Thesereformswereactuallyquiteslow,unevenlyimplemented,andoftenreversed

NicolasvandeWalle (2001).AfricanEconomiesandthePoliticsofPermanentCrisis,1979-1999.Cambridge,CambridgeUniversityPress.

Whywerethesereformspoorlyimplementedinthe1980s?

• Thisscaleofpublicsectorreformwasanalmostimpossibletask

• TheIFIsdidnotnecessarilyhavetherightanswer– Underestimatedtheroleforthestate– Tooktoomanylessonsfromalreadydevelopedcountries– Economistsdon’tknowhowtomanagebureaucraciesorreforms

• Manygovernmentsdifferedideologically– ASocialistinfluencepersistedinmanycountries– Fewgovernmentsownedtheplans

• PaternalismofIFIslookedsuspiciouslylikecolonialism

• Foreignaidhelpedtosustainpoorlymanagedbureaucraticstructuresandlessenedtheneedtoreformthem

• Perhapsmostofall:Openingupeconomythreatenedlimitedaccessorders

ReformisfundamentallypoliticalItthreatenedcontrolregimesandpowerstructures

• Reformcreateswinnersandlosers– Reductionofpoliticalcontrolà Fewerresourcesforpatrimonialism– Publicsectorretrenchmentà lostjobs– Removalofsubsidiesà hurtsurbanpoor– Endcurrencydistortionsà inefficientfirmsgobust

• Politicallyverydifficulttoeffectthesechanges– Couldalsodestabilizeafragilepoliticalequilibrium

• Rulingelitereactionstoprotecttheirinterests:– Cooperateintransferringthecostsandriskstothepoor– Blockorslowreformsthatthreatenthepatrimonialsystem– Createthefaçadeofarational-legalbureaucracyabovethissystem– Findpoliticaladvantageinreform:Privatizetocronies,centralizeand

reassertPresidentialcontrol,…

There’sareasonthatinthe1990sFergusoncalledtheWorldBanktheAnti-PoliticsMachine

• Failedtounderstandthepoliticallogicoftheeconomicsystems– Andabsenceofincentivesforreform

• Saweconomicsystemsasinefficientandirrational,andviewedfixingthemasatechnicalproblemnotapoliticalone

• Signsofnaiveté:– Viewstheproblemas“corruption”and

aproblemofpersonalgreed– Ignoreseffectsofreformofrelative

powerofgroupsinsocietyandriskofconflict

Nonetheless,areweallstructurallyadjustednow?

JohnWilliamson’scoretenetsofthe“WashingtonConsensus”

1. Balancebudget

2. Avoidbroadfood&fuelsubsidiesinfavoroftargetedprogramstopoor

3. Broadentaxbaseandhavemoderatemarginaltaxrates

4. Letthemarketdeterminetheinterestrate

5. Minimizeexchangeratedistortions

6. Havelowtomoderatetariffsandavoidquotas

7. Beopentoforeigninvestment

8. Avoidstateenterprises,especiallybanksandmanufacturers

9. Openindustriesuptocompetition

10. Enforcepropertyrights