Fuel protests in Nigeria

The Nigerian government ended the fuel subsidies on January 1. Prices were expected to rise from N65 to N140 per liter overnight. Protests have been ongoing since. Over dinner with friends, they were certain the money saved would just go to politicians. I asked them what the difference was between the money going to political fat cats and going to oil fat cats (and the fact is that there is less difference between the two than one might wish). To that there was less answer. I also overheard some weeks ago that this may in fact be part of reducing corruption as the oil companies have charged the government for importing their own oil.

From my vantage point in a housing compound removed from any main road in Yola, things have been very quiet. The rest of the country, not so much:

BBC's bullet points.

From Reuters, who puts the new price at N150:

Economists say the subsidy filled the fuel tanks of middle-class drivers at the expense of the poor, encouraged massive corruption and waste, and handed over billions of dollars of government cash to a cartel of wealthy fuel importers. ...
"Our struggle is not just against fuel subsidy, it is against bad governance. Jonathan has shown that he can't be trusted," Issa Aremu, vice president of the National Labour Congress, told demonstrators.
"He said he was engaging in dialogue and all of a sudden he went ahead and increased the price." ...
the funds are transferred to a special account in the central bank which would fund poverty alleviation programmes, Jonathan's statement said.

Nigeria's Daily Times has been keeping tallies on who is arrested and who released. 300 policemen have reportedly joined the protests. One person confirmed shot, another rumored.

Previous governments have also tried to end subsidies, but eventually backed down. I confess being divided. The "Economists" Reuterse cites and "The Economist" magazine make very good points. I'm rarely in favor of going cold turkey on policies of this magnitude, if the political process will allow it. It might provoke fewer riots to go more slowly, allowing the price of fuel to increase a certain percent every month for instance, but it puts up more and more opportunities for someone to block it and stop progress. UPDATE: Here is the World Bank arguing for phasing out fuel and utility subsidies in Angola.

The price of seeds (and everything else) in Africa

Good news: the prices of cereals, edible oils, sugar, and dairy products were down sharply in October, bringing FAO's food price index down to its lowest point for the year. Not that it's all that low, but it's something. However, peanut butter prices are up 40% in the US, but not abroad (so American expat families everywhere can breathe a sigh of relief). Since the US government shields peanut growers from the world market, the weather in Georgia and Alabama matters for the US price, but not the international price.

Swaziland's government has retracted its usual agricultural input subsidies: no more discount or free seeds, no more discount tractors (government was charging $17.30/hr rental; private cost is $26.60). The article also discusses how the feudal land tenure system makes things more difficult. One farmer laments:

“I live on the banks of a river [the Nkomati]. My maize crops could easily thrive if I had a simple pump and piping. What I harvest would pay for the loan, but I have no collateral because there is nothing to offer the bank" [because he does not own the land and so can't put that up as collateral.]

Roving Bandit notices the South Sudan National Bureau of Statistics report: annual inflation in South Sudan is up to 60% from September 2010 to September 2011. For the year, the biggest contributor is food prices that went up 64%. The price of furniture and furnishings went up far more (108%) as did alcohol (95%), but food carries a much larger weight (71/100) in the basket of goods than anything else. Food price increases have been very small this month, thankfully.

The unintended consequences of hyphens

The political economy of the Dodd-Frank bill (against conflict minerals, but actually destroying livelihoods and preventing good local governance):

What's even more frustrating is that members of Congress like Jim McDermott and their staffs seem to have taken Enough's word at face value, going so far as to let the advocacy organization choose most of the witnesses at hearings on the Dodd-Frank measure, which meant that any dissenting voices - Congolese or American - went mostly unheard. 
That's a terrible way to develop legislation. I realize that members of Congressional staffs are extremely busy dealing with hundreds of issues every day and that it saves time to let an advocacy organization plan most of the details of a hearing on one obscure topic, but there need to be a wider variety of voices on questions involving Africa - or any topic, for that matter. At the very least, I think it's reasonable to expect that people testifying before Congress on DRC actually speak French and spend regular, extended periods of time there. 
It is beyond frustrating to have watched this completely avoidable catastrophe unfold when it was so evident that Enough has misread the situation in DRC and that the legislators who listened to them were going to unintentionally create the disaster Aronson describes. 

Modigliani-Miller as done in the Ukraine:

people who import cars to Ukraine sometimes cut the car in two separate pieces and carry it through the customs this way. By doing this, they save a fortune on import tax. A car carried in two pieces is seen as spare parts and therefore is taxed at a much lower rate than a normal car.

Big Bag of Development: Good ideas and bad

What is rigorous impact evaluation and when is it not really needed? A Clemens video.

Unintended consequences: low flow toilets edition. Too little water per flush is ruining the sewer system.

Really bad idea: a tax on remittances to Mexico proposed in Texas. Remittances are one of the chief forms of aid, we know it gets to individuals, and it hurts legal immigrants who are making significant contributions to the country. We should be trying to reduce the costs of remittances, not increasing them. Here is an example of a business born from remittances, a group of women growing organic cacti commercially.  The effort is being credited with social transformation and significant public and private benefits.

Trust and development, Japan edition: why is there no looting

Hidden taxes: control of land prices as a means of lowering taxes in Hong Kong.

But this does not imply that the revenue system of Hong Kong creates `”huge distortions”. Quite the contrary. Taxes on land create almost no distortions because they have no effect on supply or demand.

The development of a low corruption pension system in Mexico City

The resource curse appears to be alive and well in Africa as the most resource rich countries fared worse than average from 1990-2008. 21 countries’ wealth grew faster than the global average and that growth has been associated with increasing human capital and institutional quality.

Catching Up: Their Riots

More evidence that the riots are not about food: “Since the fall of Mr Mubarak, numerous mini-revolutions have taken place across Egypt. Journalists have overthrown their editors, workers their union leaders, professors their university deans. Even the police have returned to the streets, striking to demand the removal of the senior officers they blame for their disgrace.” The Economist likens them to the 1960s youth revolutions in the West.

Rockwell at Mises addresses the indifference of a segment of the right wing toward the Middle East revolutions. Some right wingers are worried about loss of US influence, as Rockwell points out. I note that his reliance for evidence on Beck and Coulter, both of whom make their living as provocateurs, weakens his case somewhat. It would not have been hard to find neocons who are clear about their priorities and consistent. Many others on the right are worried about whether the revolutions will bring real and lasting freedom while still celebrating the steps that have been taken. Why should it be the case that someone who believes in both freedom and stability cannot worry when one or the other is threatened?

Speaking of freedom, what are the most important parts of governance? According to ngrams, freedom has beaten all other topics hands down for two centuries, though it peaked in the late 1960s. Corruption was a topic of greater interest in the 19^th century (#2) than the 20^th (#4). Participation and effectiveness took off in the early 20^th, but peaked in the 1980s. Transparency, accountability, and the rule of law, however, are the most neglected topics.

CGD proposes a way to nullify the resource curse in the new governments being formed by protest by giving cash grants to citizens and then taxing the money back. “There can be no meaningful representation without taxation. When governments have access to easy money, they have no need to tax and hence no incentive to foster conditions needed for growth and wealth creation. Worse, the surfeit of money gives governments the means to suppress dissent and buy-off political opposition.”

A little known fact about resource curses: “Russia overtook Saudi Arabia as the world’s biggest crude supplier in 2009; OPEC’s share of production has gone from around 51% in the mid-1970s to just over 40% now.”

The Lighter Side: Government Reform

Sometimes, the pessimist's glass is very full

But who will reform the reformers?

When we run out of theories, can we recycle the government?

Finally, one suggestion that would really change the system.

Obama Legislation Addresses Wrong Problem

I and others asked Texas in Africa for an opinion on the legislation Pres. Obama signed into law yesterday requiring firms to trace whether their mineral components were sourced from the Democratic Republic of Congo. Bottom lined:

Just about every local leader in the east will tell you that the mineral trade is not the cause of violence and that ending the trade is very unlikely to end most violence, especially given the absence of functioning political and security institutions. … The legislation is unlikely to do harm (until it causes some of the 1 million people who depend on the trade for their livelihood to become unemployed), so it's mostly just been a waste of time and energy

Full response below the fold.

WIDER Panel: Summing Up

Richard Jolly of City University of New York
Margaret Kakande of Uganda Finance Ministry
Per Pinstrup-Andersen of Cornell
Gita Sen of Indian Institute of Management

WIDER Panel: Africa and the Triple Crisis

Elizabeth Asiedu - FDI to the Rescue?
Fantu Cheru
Augustin Fosu
Steve Kayizzi-Mugerwa

New Wars vs. Old Wars?

Texas in Africa has a wonderful discussion of why the old wars/new wars dichotomy is false.

The idea behind that argument was, in Kalyvas' words, that, "...new wars are characteristically criminal, depoliticized, private, and predatory; old civil wars are considered idological, political, collective, and even noble." The "old" wars are, in this view, "political," while "new" civil wars are "criminal." ...

 Against this view:

What evidence is there that the Congo's armed groups enjoy living in miserable conditions in the forests, or that they only rape because terrorizing people is the goal? Did Gettleman look at the very real grievances over land rights, the dynamics of state weakness, or the questions of ethnicity and citizenship that affect the behavior of every single armed group in the eastern DRC? ...

Of course, anyone who seriously studies the region will tell you in a heartbeat that the Congo war is not now and never was a "resource war." It's a war in which resources fund part of the conflict, but no one is actually fighting for control of the resources as an ultimate goal. The patterns of violence and all available evidence do not support Gettleman's claim.  ...

By failing to dig a little deeper and understand what's actually behind all the violence - and by ignoring the fact that all the "old" civil wars, including those in France and the United States, were pretty nasty as well - Gettleman does his readers a great disservice. He treats Africans who engage in war as irrational savages who have an insatiable appetite for destructive violence. He never acknowledges that many wars throughout human history - especially those in which ethnic or religious identity was a key issue - involved horrific violence against civilians, caused lots of unnecessary deaths, and lasted for decades on end. Thirty Years' War, anyone?

Treating African conflicts as another manifestation of "the other" means that we never get the full picture. ... That a war does not make sense to an outsider does not mean it is pointless.

 Or, from the magnificent play, 1776, during the debate about whether to write The Declaration of Independence:

John Dickinson: Mr. Franklin, are you seriously suggested that we publish a paper to the world declaring that an illegal rebellion is, in fact, a legal one?

Ben Franklin: Why, Mr. Dickinson, I'm surprised at you. Rebellion is always legal in the first person, such as "our rebellion." It is only in the third person, "their rebellion" which is illegal.

Poverty reduction across Africa

Pinkovskiy and Sala-i-Martin deliver the good news:

for the period 1970‐2006. We show that: (1) African poverty is falling and is falling rapidly. (2) If present trends continue, the poverty Millennium Development Goal of halving the proportion of people with incomes less than one dollar a day will be achieved on time. (3) The growth spurt that began in 1995 decreased African income inequality instead of increasing it. (4) African poverty reduction is remarkably general: it cannot be explained by a large country, or even by a single set of countries possessing some beneficial geographical or historical characteristic. All classes of countries, including those with disadvantageous geography and history, experience reductions in poverty. In particular, poverty fell for both landlocked as well as coastal countries; for mineral‐rich as well as mineral‐poor countries; for countries with favorable or with unfavorable agriculture; for countries regardless of colonial origin; and for countries with below‐ or above-median slave exports per capita during the African slave trade

Hat tip: a last MR for the day

Follow up Edit: Ravallion's doubts about the result.

Problems with the Resource Curse Hypothesis

Easterly gives us reasons to be skeptical of the resource curse:

New research argues that empirical work on the Curse suffers from two interrelated problems. First, it uses dependence (the share of GDP from that resource) and calls it abundance (the stock of a resource in the ground). But dependence in turn depends on institutional quality—if you have sound institutions, natural resources take their place along other industries. If not, natural resources will by default constitute a large share of GDP because poor institutions stifle an advanced division of labor. When you look at cross-sectional data using dependence as a proxy for abundance, it will look like natural resources compromise institutional quality.

The other problem is that oil changes institutions, but there are several links in that causal chain from oil to growth. And how does it stand up to recent research?

• Christa Brunnschweiler and Erwin Bulte tackle the first problem. They find a positive correlation between resource abundance and both growth and institutional quality, and argue that it is conflict and poor institutional quality that lead to dependence.
• Stephen Haber and Victor Menaldo ... present evidence that even natural resource dependence does not undermine democratization.
• Romain Wacziarg corrects for both problems, testing for the effects of high oil prices on democracy using panel data. Again, there is no evidence for the Curse.

[Edit: I had posted this a while back and I'm not sure why it thinks I've posted it brand new.]