How to Live Your Life

Randy Pausch, Professor of Computer Science at Carnegie Mellon University, died yesterday of pancreatic cancer at the age of 47. He inspired millions of people with his Last Lecture, “Achieving Your Childhood Dreams”.

What made Botswana grow?

How did the per capita GDP of the landlocked, resource-rich, sub-Saharan African country of Botswana grow by an average annual 7.2% between 1966-2006 (which is even higher than China’s 6.9%)? And why did other, apparently-similar countries in sub-Saharan Africa (eg. Congo) fail? According to Mr Caesar Lekoa, the Ambassador of Botswana to the US in a CATO Institute podcast, (pointer from Bayesian Heresy) the societal values of Botswana have been the foundations for the success of a country which, after Independence, had only 12 kms of paved roads and 22 university graduates. These values are (1) tolerance towards dissenting opinions (2) pragmatism in decision-making and (3) an innate sense of accountability by tribal leaders. The latter is in sharp contrast with Botswana’s neighbouring countries: the president of Botswana does not live in a mansion and does not fly in helicopters and he has even been seen doing his own shopping! These values, according to Mr Lekoa, are the reasons why Botswana chose a pluralistic democracy, chose to steer away from socialism and its leaders chose not to plunder the country’s resources in diamond. And these values predate the British colonization: “western institutions were new only in name, but not in practice.” Acemoglu, Johnson and Robinson in a 2002 paper on Botswana, agree: “despite adverse initial conditions, including minimal investment during the colonial period and high inequality, Botswana achieved rapid development … Why? First, Botswana possessed relatively inclusive pre-colonial institutions, placing constraints on political elites. Second, the effect of British colonialism on Botswana was minimal, and did not destroy these institutions.” But they also add. “Following independence, maintaining and strengthening institutions of private property were in the economic interests of the elite … [Also] Botswana is very rich in diamonds, which created enough rents that no group wanted to challenge the status quo at the expense of rocking the boat. Finally, this situation was reinforced by a number of critical decisions made by the post-independence leaders.” It seems that when the odds are stacked against oneself, a lot of conditions are need to be able to steer away from a poverty-trap: good initial institutions which go back well in time, a sufficient amount of resources and good leadership. Of course, if Economics could be done in a laboratory, we could alter each of these conditions to see which ones really matter. Perhaps Botswana would have grown even if it were not diamond-rich, or even if it didn’t have a democracy (like Singapore did). But this, obviously, we will never really know.

The Slow Road to Wealth

The French Ambassador to Madagascar, Mr Gildas Le Lidec, announced yesterday that he was being recalled home, only five months after being appointed. Was he bad in his job? He was flawless, according to French officials. But, in 2001, while he was in post in Kinsasha (Congo), Laurent-Désiré Kabila was assassinated, and, in 2002, he was ambassador in Abidjan (Ivory Coast) during the attempted coup on Laurent Gbagbo. His “evil eye” costs him the job; his attempts to meet the Malagasy President fell on deaf ears, who, worried for his life, demanded his recall. This story captures an important difference that exists between nations with GDP per head of $600 and those with $30,000: the generalised ‘backwardness’ in the former (even among their so-called ‘elites’) that prevents growth-enhancing behaviours and policies. Is the situation hopeless? For many economists (these poor chaps who have been unable to foretell the subprime, food, oil, etc crises!), the answer is no. Economic forces are stronger than any other, they would say. For some, a poor country like Madagascar should simply open its economy to trade, provide guarantees to foreign investors that the rule of law will be respected, balance its budget and avoid printing money to service its debt and good things will come. For others, a subtle mix of industrial policy, protectionism and undervalued real exchange rates as well as good institutions are required. Nevertheless, both groups would agree that economic development gradually dilutes backwardness, triggering a virtuous cycle. It is happening, if only imperceptibly. And slowly, the people of Madagascar will worry more about working to buy a fridge or a motorbike than about killing the aye-ayes due to their malefic powers. On the slow but inexorable road to wealth, they will be more demanding towards their policy-makers, will have less children (and spend more time and resources educating them) and will want laws that better protect property rights, prevent corruption and discrimination, all of which are essential to development. The question is how long will all this take?

Sea of Poppies

It started in 1834 when Great Britain called for contract labourers from India to work in the sugarcane fields in Mauritius, as slavery would be finally abolished in 1835. Until 1920, more than 500,000 of such workers, men and women will reach the shores of Mauritius and the overwhelming majority will stay on, even after the expiry of their contracts. Many of these workers spoke a language called Bhojpuri and came from specific regions of Bihar which happened to be producing India’s most successful export at the time, opium. In his recent novel entitled “Sea of Poppies“, Amitav Ghosh beautifully captures this part of History. The story is set in a ship called the Ibis, on its way to Mauritius, carrying sailors (the lascars), convicts and indentured labourers. As the story unfolds, the heroism of some of these people, farmers from the deep interior of India and culturally “afraid” of water, as well as the hardships that led them to leave India become clear. It is a voyage into the unknown by people of different religions and castes, each socially conditioned to believe that there is no way of organising a marriage, cooking spices or peeling a fruit other than their own! But they soon realise that their lives will never be the same again, as the journey dilutes all the boundaries that define each one of them. As one migrant puts it: “On a boat of pilgrims, no one can lose caste and everyone is the same. From now on and forever afterwards, we will all be ship-siblings – jahaz-bhais and jahaz bahens – to each other. There’ll be no differences between us.” But he was wrong. As everyone who knows Mauritius would agree, and as Amitav Ghosh himself puts it in an interview, caste and religion still matter economically and politically. An absolute must read!

The Tipping Point for Solar Energy?

It is puzzling how the very people who care about the environment are now lamenting over high oil prices. Surely, high oil prices have at least this virtue: at long last, clean energy sources are becoming economically viable. A fascinating read from McKinsey’s June Quarterly puts forward the following claim: “Within three to seven years, unsubsidized solar power could cost no more than electricity generated by fossil fuels. By 2020, global installed solar capacity could be 20 to 40 times its level today.” Economic forces, it seems, will do more good to the environment than all the good intentions of all the good Samaritans. Here are excerpts from the (gated) article: