Bananas

Ever wondered why bananas are so cheap in Europe and North America, even though they are grown thousands of kilometres away. And why is there only a single variety on sale, while there are more than a thousand of them? This fascinating article in the NYT by Dan Koeppel, author of “Banana: The Fate of the Fruit That Changed the World”:

Lessons from Norway

What is the secret to economic development? According to the recently released Growth Report from a group of economists lead by Michael Spence, economies develop with the “right mix of ingredients“. William Easterly is predictably skeptical about any lesson that can be learnt from the past and drums up his usual claim that nothing is predictable. Indeed, who could have predicted that “South Korean entrepreneurs would create a carmaker (Hyundai) with greater market value than General Motors or Ford or that a schoolteacher named Dong Ying Hong, formerly earning $9 a month in Datang, China, would become a millionaire making socks“? Some lessons can be learnt from past successes and while some things are not predictable at an individual level, others are at a macro level. For instance, one can reasonably predict that, with its current policies, North Korea will never produce a Dong Ying Hong. The Growth Report does offer fascinating insights into the successes of 13 countries which have grown by more than 7% in the last 25 years. With the exceptions of Botswana and Oman, these high-growth economies are not particularly well-endowed in natural resources – they grew by acquiring ideas and technologies and know-how from the rest of the world. And the report identifies some countries which face more challenges than others in sustaining growth, among those are resource-rich countries. Thorvaldur Gylfason explains how Norway has avoided the resource curse:

China’s African Adventure

Trade between Africa and China grew from $10.6 billion to $73.3 billion between 2000 and 2007, making China Africa’s third largest trading partner behind the EU and the US, while the Chinese FDI stock in Africa has grown from $49 million in 1990 to $2.6 billion in 2006. This had prompted some to claim that China has become the dominant influence in Africa; some have gone further to call it the “second scramble for Africa.” In a recent NBER Working Paper, Canadian economists, Besada, Wang and Whalley have sought to put these figures into perspective: China still accounts for only 1.4% of total FDI inflows to Africa; and only 8.6% of African exports and 9.6% of African imports. But these figures are rising fast. They also advance some important factors behind this growth, not limiting themselves to the argument that it is all about securing oil and mineral resources. And, according to these authors, what makes the Chinese adventure in Africa unique is the fact that it is mostly commercial (the Chinese precept of not mixing business with politics), leading to “large and largely untied development finance for Africa (in contrast to the present conditional OECD flows) which impacts directly and positively on living standards.” Here are highlights of the paper: