What Are The Rules Of Economic Growth? With Joe Studwell

How does population density effect the economic development of an entire continent? What about agricultural and manufacturing industrial policy? What lessons can we learn from the economic growth of Asia for understanding Africa?

Joe Studwell is a journalist and bestselling author known for his work on East Asian economic development. His 2014 book, How Asia Works, explores the different economic and political trajectories of Asian countries after WW2, and was named by Bill Gates as one of his Top 5 Books of the Year.

Joe is now working on a new book asking similar questions of economic development, this time exploring: How Africa Works, set for release early next year.

How Africa Works: Success and Failure on the World's Last Developmental Frontier by Joe Studwell - https://www.amazon.com/How-Africa-Works-author/dp/0802158439

SUPPORT ME - https://www.thetransformationofvalue.com/support

Episode Transcript

(00:00):
Population density is absolutelycritical to economic
development, and we don't tend to think like this.
And part of the reason is because for the last 250 years,
we've all had this Malthusian obsession that it's going to be
overpopulation that is going to bring the world to an end.

(00:20):
You know, that people that we'llbreed ourselves into extinction.
I mean, it's turning out actually the opposite.
Hello, I am Cody Allingham and this is The Transformation of
Value, a place for asking questions about freedom, money
and creativity. My guest today is Joe Studwell,
A journalist and best selling author known for his work on

(00:40):
East Asian economic development.His 2014 book How Asia Works,
explores the different economic and political trajectories of
Asian countries after World War 2 and was named by Bill Gates as
one of his top five books of theyear.
Joe is now working on a new bookasking similar questions of
economic development, this time exploring how Africa works, set

(01:03):
for release early next year. Joe, welcome to the show.
Hi, thank you for having me. Many years ago I I first read
How Asia Works while I was in Thailand actually shooting a
photo project. In that book, you identify
several major policy considerations for producing
economic transformation in developing countries, and I

(01:24):
thought we could start by recapping those key insights
that you uncovered, please, if that's all right.
Yeah, I I'm not sure how. Well, it's certainly not
original. I'm not sure how exciting the
insights are, but they're alwaysworth restating because people
tend to forget. Quite simple things sometimes.

(01:46):
So the first area of policy activity that I wrote about was
agriculture. And agriculture is always the
most important thing that governments can deal with in in
poor countries, developing countries, because it's what
most people do. Definitionally 75 or 80% of

(02:08):
people in poor countries and Asia was like this in the in the
50s, sixties Africa's like this.Today 75 or 80% of people in
poor countries work in agriculture.
So if you can move the needle inagriculture, you can get people
producing more efficiently, producing larger volumes, you'll
create increased incomes that spread across the vast majority

(02:31):
of the population. So that's where you start.
And then the second policy area that I wrote about and how Asia
works is manufacturing. And I explained that it's really
only manufacturing that can takepeople out of the rural economy
into the modern, if you like urban economy of industry and

(02:58):
and take large numbers of peopleand do it in a cost efficient
way, because manufacturing is anactivity where people can
generally learn on the job. I mean, you start everyone gets
into manufacturing with garmenting and then more
vertically integrated textiles and people come and start doing
jobs that they can learn to do in a few weeks and they can

(03:21):
upgrade their skills on the job.It's not like services were for
value added services. It's almost always the case that
you've got to have quite a lot of education before you can do
the job. So if you're going to be, I
don't know, a sound engineer or a software writer or something
like this, you can't turn up at a firm that writes software and

(03:46):
start doing, you know, one line on day one and then great, you
know, you've got to be able to do it.
It's a skill that you've got to have before you can do the job.
So it's, it's fundamentally different to manufacturing.
And for that reason, manufacturing has always been
extremely important to developing countries.
And also manufactured goods are much more readily traded in the

(04:09):
world. You know, manufacturers still
make up about 3/4 of all the goods and services traded in the
world. So services are just about 1/4,
although now we're starting to trade some more services because
with broadband Internet, you cando more things remotely.
But nonetheless, services remaina fraction of international

(04:33):
trade in, in, in manufacturers. So agriculture and then
manufacturing. And then the final area that I
wrote about is finance and how developing country governments
that are effective in creating high sustained rates of growth,
how they deal with finance. And here some of the policies

(04:53):
that I highlighted are controversial in the sense that
they are different to the policies that are pursued by
already rich countries. So, you know, if you take a
country like China as an example, China still maintains
capital control. So it still controls the flow of
capital in and out of of its economy and it very closely

(05:16):
controls the banking system. There are some quasi private
banks in China, but most of the banks are state owned.
And in fact, they are beginning to regain a bit of market share,
having lost a lot of market share.
And this allows a government like the government of China to
effectively to direct capital where it wants it to go.

(05:38):
And so when it has its priorities in agriculture and it
has its priorities in manufacturing, it can make sure
that the money goes where it wants.
And I'm sure you're aware that China has a huge push at the
moment to move into new areas ofvery value added manufacturing
that it hasn't done before. You know, much to the March to

(06:02):
the upset of in particular, the,the government in Washington,
DC. And this is, you know, at the
heart of some of the, of the, ofthe strains, the, the, the trade
strains between the between the two countries.
But developing countries have always tended to do this kind of
thing and use various tricks to make the financial system pay

(06:23):
its way. And obvious 1 is that countries
like China or before Japan and Taiwan and Korea pay ungenerous
interest rates in the banking system to save us more, somewhat
less generous than you would getin a free market economy.
And give the banks quite wide margins, which allows them to

(06:46):
lend to in particular manufacturing activities where
in some cases the loans don't get repaid, but they can
compensate because they have good, very good margins.
So the the profitability allows them to do what the government
wants them to do rather than what banks would do if they were

(07:10):
left to their own devices just to make as much money as
possible. So I pointed out that those are
the commonalities of the most successful East Asian developing
well. It's fascinating just on their
last point of the financial sector.
I, so I live in Japan and I've just been reading through quite

(07:34):
an interesting semi controversial book, Princess of
the yen, looking at the history of central banking in Japan.
And no doubt you would be aware of the history of window
guidance. And sort of not, not a, a, not a
planned economy per SE in the, in the sense that actual central
planning is taking place. But there is a degree of nudging

(07:57):
through through the apparatus ofthe central bank that happened
post war that certain industrieswere supported over others.
And this kind of feeds back intothis export discipline that you
write about and how Asia works. Sort of, you know, the the
famous examples in Japan being things like automobiles,
electronics being supported in that post war period, not in a

(08:19):
direct sense, but sort of in a roundabout way.
And that's it was very interesting to read about the
history of that. Yeah, absolutely.
I mean, I, I think developed countries always tend to assume
that what went on in their past is exactly what goes on today.
And of course, that's not true. So, you know, the United States

(08:40):
is essentially a free market Nation Today, but then it is the
technological leader of the world in many areas.
So competition, open competition, suits the United
States very well. But you know, if you go back to
the developmental area era of the United States and look at
how the US behaved, you'll find that in 1900, the US had the

(09:03):
highest average tariff in the world.
Yeah, it was running an average 40% tariff in 1900 because it
was protecting its, its infant industries against competition,
particularly from European manufacturers.
So I think that, you know, the lesson of development really is
that governments and and and andnations do what is appropriate

(09:28):
to the stage of development thatthey that they are at.
Yeah, well, that's not one-size-fits-all.
And I think almost you, you lookat say the growth of, of, of a
tree over time. You know, sometimes you do need
to put a fence up around it to stop it being grazed by animals.
And then once it is big enough, it's able to sort of grow on its
own. And I think this is a really

(09:48):
interesting take away again, My,my, my, my, my memories of
reading how Asia works in, you know, in a, in a cafe in, in
Thailand when I was there and seeing in a sense, Thailand is,
is a within Asia. It's seen as a middle power.
Yet still a lot of the manufacturing taking place there
is set up by overseas corporations.

(10:09):
There was a real estate bubble in 1997, this Asian financial
crisis, which was mixed all up together.
The, the development of somewhere like Thailand is
markedly different from somewhere like Japan or Taiwan,
which you, you write about and kind of trying to understand how
we arrived at that place. I was certainly very
illuminating for me. But now you, you've spent your

(10:31):
career looking at East Asia, which is very interesting, but
now Africa what, what, what prompted the, the, the move to
focus on African Development. Well, in a way, and I mean,
here's the, the, the name drop in the way Bill Gates did,
because I, I, after Gates liked the last book.
I met him in Seattle and we talked about East Asia.

(10:54):
We mainly talked about China for, for an hour or so.
But at the end of it, he said, you know, what I'd really like
to know is what you think about Africa, because that's where I'm
spending all my money. And I, I didn't think anything
of this really at the time because I, I don't know if I'd
been even to sub-Saharan Africa at that point.

(11:16):
So I didn't think much of it. But then the Ethiopian
government and shortly after theRwandan government said, will
you, will you come out and talk to us?
And I said, well, it's very kindof you to ask, but there's no
point because I don't know anything about Africa.
And they said, well, we don't want you to know.
You don't need to know anything about Africa.
We want to talk to you about East Asia and policy and and

(11:39):
discuss some of the sort of policy questions that were
confronting at the moment. And I went and I think in
Ethiopia in particular, and thisof course is before the recent
two year civil war. But leaving that aside, I was
amazed when I went to Ethiopia by how serious people were in

(12:02):
government and how well read they were and how much they knew
about East Asian development. And I came away and I, I still
think that of people, governmentpeople that I've met in any
country anywhere in the world, they were probably the best
informed on, on, you know, almost like academic questions

(12:24):
of, of development. I'm sure you know that the, the,
the government that came to power in 1991 in Ethiopia fought
a war of more than a decade against the Maoist Durg.
And because from around July in Ethiopia, you get very heavy

(12:45):
rains in the summer. There's a, there's a fighting
season. And then there's, when the, when
these rains come, you can't really fight because you can't,
most parts of the country, you can't move around.
And so they used to, they used to stop fighting and, and, and
read, read books about Korean exports.

(13:06):
Yeah, that's fascinating. And I mean, indeed, turning our
lens to Africa, there are 54 internationally recognized
states with about 1.5 billion people in total.
And one of the key differences you identify in the book
compared to East Asia is that Africa as a continent is a place

(13:27):
of much land but low population density, perhaps as the maybe
the first point of difference from which we can start looking
at development. And I thought maybe you could
tell me a little bit more about these unique conditions we see
within the continent overall. Obviously, it's a very diverse
place, but what are the differences that we must look at
to start with in terms of the African situation?

(13:49):
Yeah, the demographics is the big is the big difference.
And it's one that no one has really focused on really since
the 50s and 60s. There was academic work done in
the 50s and the 60s because Africa failed to fulfill the
expectations really of of some development economists after the
Second World War when it when itit, it didn't take off in the

(14:12):
way that the people thought thatit would on the basis of the
resources that there are in Africa.
And yeah, it didn't happen because there weren't enough
Africans is the main reason the population density is has been
so low. And that's had a huge limiting

(14:33):
effect on what, on what Africa'sbeen able to achieve because
without sufficient population density, you don't have markets.
Markets are critical for everything, but markets begin by
being critical for agriculture. And you need cities that provide
a lot of reliable sustained demand for agricultural surplus

(14:57):
from surrounding areas. And we're only beginning to see
this in in Africa now. So we didn't have that.
I mean, the reasons historicallywere that Africa had this
extraordinary disease burden. Above all.
It has diseases like sleeping sickness, which just aren't,

(15:20):
aren't present anywhere else in the world.
It has malaria, which is presentin other parts of the world, but
African malaria is, is more aggressive and African
mosquitoes are particularly fondof, of biting human beings
rather than animals and all sorts of other, you know,

(15:41):
hookworms and, you know, diseases that still affect
hundreds of millions of people. So all this contributed to this
very low population density. And as historically, the one in
particular, one animal, which isnot the animal that that people
would normally think of, they'd probably think of sort of lions
attacking people with the problem that caused the biggest

(16:01):
limitation to population growth in Africa historically was the
elephant, because elephants willeat pretty much anything that
human beings want to grow to eat.
And if you go back to 1800, there were 200 million elephants
in Africa. And unless you've got big guns,
you can't do anything to, you can't scare off an elephant.

(16:23):
If they want to eat your field of crops, they will eat your.
Fence won't stop them either. They.
Will stall them. Yeah, well, it's interesting
because a disease burden you mentioned as well, not just for
people, but also for livestock, you know, the Rhinder pest that
CT fly these these various diseases that made it incredibly
inhospitable for cattle and, and, and, and you know, these

(16:45):
domesticated animals to to be productive and also low quality
soils. In a lot of cases the, you know,
the ability to grow grass or or feed for animals maybe meant
that and perhaps growing practices as well and were in a
in a sense led to maybe more grazing broadly moving from

(17:06):
place to place once soils get depleted, etcetera.
So there's kind of less intensity.
And and what strikes me about this is actually a criticism of
American cities that is really interesting from an urban
planning perspective. Is that a kilometer of Rd.
How many people are, how many ratepayers are paying for that?
Because when it's a diverse spread out population, it's

(17:27):
actually, you know, it's, it's not paying for itself.
Whereas if you have a very dense, you know, somewhere like
Tokyo, Japanese city and Asian city, you know, there's a lot
more ratepayers, there's a lot more taxpayers per kilometer who
actually contributing to that piece of infrastructure.
So this low density, the economics can be quite clearly a
outlined there it seems. Exactly.
I mean, when you, when you startto look, you realize that you

(17:49):
need population density for all kinds of of reasons.
I mean, you say, you know, they're the often African soils
are lower quality. But actually you can work on
soil quality and you can work organic material into the soil,
but you need a lot of labour to do it.
You can't do it with big machines, you know.
So if you're in East Asian, you've got plenty of people you

(18:10):
can, you can upgrade soil quality in areas where it's
where it's not very good. Africa just hasn't had that
possibility. And then as you say, with
infrastructure, the unit cost ofinfrastructure depend
fundamentally on the density of population and number of people
that you've got. And I, you know, in the, in the
Africa book, I, I gave some examples to help people to

(18:34):
understand this. So obviously I'm British, so in
one one example I give is is howthe UK works fiscally.
So the UK is divided into regions by the Office of
National Statistics and in the UK we have only two areas that
produce a fiscal surplus in the whole country.

(18:55):
One is London and one is the southeast.
And unsurprisingly, these are the 2 most densely populated
parts of the country. Everywhere else produces A
fiscal deficit. So in some sense they're kind of
sponging off the Southeast and, and London in, in, in, in tax
terms. And if you look at just London,
just London accounts for 70% of EU KS, the whole of EU KS fiscal

(19:22):
surplus. Now overall there's a fiscal
deficit because the deficits arebigger than the surplus, but two
regions produces and you know, when you can look, you can dig
down into this and look and look, look further.
I mean, I don't, I don't know ifyou've been in London recently,
but last few years there was a new tube line open called the

(19:42):
Elizabeth Line and it's fantastic tube line.
It cost nearly £30 billion. It was the biggest
infrastructure project in Europe, but it was affordable
for London because one and a half million people live within
a 5 minute walk of a, of a, of astation on that line.

(20:05):
Nowhere else even in, even in, in, in in other cities.
No other city could pay for thatfor that tube line.
But once you've got the density of population, you can do it.
So for all sorts of reasons. Population density is absolutely
critical to economic development, and we don't tend

(20:28):
to think like this. And part of the reason is
because for the last 250 years, we've all had this Malthusian
obsession that it's going to be overpopulation that is going to
bring the world to an end. You know, that people that we'll
breed ourselves into extinction.I mean, it's turning out to be
actually, actually the opposite of reality, because I'm sure

(20:51):
you're aware that around the world, the great challenge now
is depopulation. It won't be many more years
before population is falling in the majority of the world's
countries. And Africa's Africa is the one
place on the planet where population is still rising
rapidly, and it needs to rise rapidly for another 70 years to

(21:16):
the end of this century in orderfor Africa to have what one
might call a normalized population density by global
standards. I mean, at the end of in 20-30,
at the end of this decade, the population density of Africa
will only be what it was in Asiain 1960.

(21:38):
It will only get to where Asia was at the beginning of
development or the end of this decade.
Yeah. Well, it's fascinating.
I mean, as I mentioned, I live in Japan and the, I mean the
population in absolute terms is decreasing here and I think over
half a million, you know, half amillion people less than last
year and according to the statistics.

(21:59):
And this is fascinating because the the opposite of that coming
back to the density question, you know, just near my house,
there's, there's fields which are perhaps one hectare or even
less than a hectare. And yet they are bulging with
all sorts of fruit and things been grown and it's incredibly
manicured and looked after and, and, and highly productive land.

(22:23):
And so it's a very interesting situation, right?
And so we've got this that this history of low density, though,
and it's, it's, it's got an impact though, because what that
meant as as you write, quote, the impact of sparse population
was that there that where political power did develop,
focused not on the control of land, but on control of people

(22:44):
and the domesticated animals. People were always the scarce
resource and most scarce resource in Africa.
And this presented some interesting outcomes.
When the colonial project began to take place, maps were drawn
where previously there were no maps.
There was a demarcation of territories in a very European
fashion. And this led to a lot of

(23:07):
challenges, right. So maybe you could elaborate
more on sort of that that role of low population density in the
beginning with with colonialism.Yeah.
Well, I think the, I mean the most obvious manifestation, as
you said, is that in Africa people didn't try to control
land, they tried to control people.

(23:29):
And what that meant historicallylong be before outsiders came to
engage in in slavery in Africa, Africans themselves were
enslaving other African people. So that that had a long history.
What really happened then with the arrival of, on the one hand,

(23:53):
Arabs from the Middle East and Europeans, was that they really
industrialized slavery. You know, so a lot of, a lot of
a lot of traditional slavery within Africa, which was very
widespread, tended to be what anthropologists described as

(24:14):
open systems, which meant that, you know, in the next, in the
second or third generation, slaves would often become
actually become part of the community that had enslaved
them. Whereas slavery run by
foreigners was closed slavery systems, as they're, as they're
called, and people who were enslaved remained slaves, and

(24:37):
then so did their kids and theirchildren as children.
So again, yeah, that all comes out of demographics.
And really as as as as a number of academics have observed over
the years, there was indigenous slavery before foreigners came
for slaves in Africa. But the reason that the export

(25:00):
of slaves became such a vast scale, over 20 million people in
in, in total, is that the slavesultimately were worth more in
the places that they were taken to, which was Latin America and
the, and the Caribbean principally.
And then of course to the MiddleEast and, and, and some parts of

(25:25):
East Africa, some plantations inEast Africa.
Yeah, they were more valuable inplaces with better growing,
plantation growing conditions, above all for sugar.
I mean, sugar was the number oneslavery crop.
Beyond, beyond slavery, the other demographic, the other low

(25:48):
demographic density impact, which remains very significant
today, is that Africa historically was always a place
where if two groups of people fell out, they they didn't often
end up in conflict because therewas always so much space that

(26:09):
they could move to another placeand set up without having to
have conflict. And this is part of the reason
why you ended up with this continent with, you know, well
over 1000 different ethnic groups, you know, whereas in

(26:29):
Europe and you know, the UK is the classic place, right?
So the, the, the English went and beat up on the Welsh and the
Scots and the Irish and dominated these groups.
And then everybody had to, to a significant extent, accommodate
English culture, you know, so the Scots were nominally still a

(26:51):
country, but the Scottish elite still had to, you know, meet the
expectations of the English court in terms of behaviour in
in Africa, you just didn't get this because people could remain
ethnically separate identities because there was the space for
them to do it. So whereas Europe you fight over

(27:13):
land and the dominant ethnicities force everybody else
to acculturate, in Africa you have this huge number of
ethnicities that remain in existence and today that this
sort of creates the problem thatafter independence, when when
states, new newly created statesare given their independence,

(27:36):
that in many cases these different ethnic groups struggle
to reach political accommodations and live and live
together peacefully. Yeah, that's fascinating.
I mean, there's a kind of decentralization that seems to
be historically here with these various tribes.
And, and this is perhaps the thing that we can look back in

(27:57):
later on in the conversation. But something I just wanted to
mention just with the, again, the the affect of low population
density is that we don't see thesame formation of governance
structures or even things such as modern concepts of money.
And in the same way, in a lot ofcases, people existed in lieu of
money. You know, this kind of, I mean,

(28:19):
historical betrothing of people and, and, and, and, and, and
through marriages and things. I'm, I'm sure that existed as
well. But even just the, the slave
trade as well that we talked about that acted in, in lieu of,
of, of, of currency that would otherwise be issued by some kind
of central state power through some sort of Kingdom.
And so the, the formation of, ofEuropean governance structures

(28:44):
over, over the, the centuries maybe isn't something that
happened in the same capacity inAfrica.
And then with the colonial project, we saw this low budget
colonialism that you write aboutwhere kind of the, in software
terms would call it maybe the minimum viable product.
You know, the MVP of what you could do to, to, to run a
country was, was ear dropped in and in these places, yet it

(29:06):
wasn't fully built out in the same way.
Somewhere like New Zealand, where I'm from, which had a
full, a full state built out. That didn't quite happen in the
same way, did it? No, it didn't.
And again, it's all the demographics.
So there's not enough people. So you don't really have a tax
base, so you're not getting an income to pay for a colonial

(29:31):
government operation. And, and, and if we just
obviously it wasn't just the UK that was a colonial power in
Africa. But if we think of the, of the
UK, you know, you have to remember that the, the, the UK
Treasury was always looking out for to, to, to avoid, you know,
the next drain on the UK exchequer.

(29:54):
So they're always saying, often saying please, let's not have
these colonies because they're just going to cost us money
because most of them did, but not really.
Oh, yeah. But if we have them, you know,
don't come to us for money, right?
You've got to make it pay its way.
And the only way you could make fiscal sense of most African

(30:15):
colonies was to bring in European mining companies for a
bit of extraction there, some plantation companies, and then
to operate the colony as cheaplyas possible.
And the way to operate a colony as cheaply as possible was to
work through the tribal chiefs, or at least the people who you

(30:40):
decided were the tribal chiefs. And in many African countries,
the colonists actually, you know, would find that there
wasn't a big chief in these tribes.
And so they would just say, right, well, you're the big
chief. You know, an example would be in
the Igbo in, in, in Nigeria, where they didn't have chiefs.

(31:01):
So the Brits said, right, well, we'll create these people called
Warren chiefs. And the Warren was a piece of
paper that said that you're the chief.
And you then you go off and stopbossing people around and you
back them up in the sense that you say, well, if you have
trouble, you can call us and we'll send some troops.
And we want you to do principally 2 things, collect us
some tax and get us some labour,you know, some forced labour

(31:26):
after the 1830s. Not you, you know, it wouldn't
be, wouldn't be officially slaves, but near enough slaves
because you need labour to sort of build roads and do all the
things that governments want to do.
So it was very, very limited governance kind of embedded,
embedded and not, you know, these tribal leaders in

(31:50):
traditional forms of rule that were really dreamt up by
colonial leaders rather than being an accurate representation
of how life went on before the the Europeans turned up.
And of course, that was a very, that was a very poor set of
cards for these countries to be holding in the late 50s and 60s

(32:13):
after independence. I mean, they just, they didn't
have experience of being nations.
They didn't have experience of projecting power really beyond
capital cities. I mean, most colonial
governments, like the African governments that preceded them
where states had developed a bit, were basically just the the
capital city and the area immediately surrounding it.

(32:36):
And then beyond that, you just had a list of, of, of chiefs who
who were supposed to bring you tax and workers.
Yeah. Well, it's fascinating.
I mean, you mentioned Nigeria. I mean, the other one that comes
to mind is Rwanda with the maybeyou can tell us a bit about
that, but the the anointing of acertain tribe as superior over

(32:58):
another and that eventually alsocausing issues, right?
Yeah. I mean, Rwanda was was quite
extreme in that you had, you hadtwo, two ethnic groups.
I mean, it's not even clear thatthey are really distinct
ethnically, but they were deemedto be distinct.

(33:20):
The Tutsi and the Hutu and the Tutsi had always operated as a
controlling, you know, minority controlling aristocracy of 10 to
15% of the population. And when the Belgians came in,
they, they decided that absolutely the Tutsi were
different and, you know, presented this hermetic thesis,

(33:44):
which from the Bible is one of the sons of Noah who is who
upsets Noah and then has turned black.
So they decided that the Tutsis were not like proper black
Africans. They were really black
Caucasians. But you know, in practical
terms, the kind of thing that they did which really embedded

(34:04):
the division in Rwandan societies, they gave everybody
a, an identity card which identified them as Tutsi or
Hutu. And this isn't unique to, to, to
Rwanda, where this division endsup in, well, in a number of
different cases of genocide, butobviously the best known one is
the 94 one where about 800,000 people died.

(34:28):
But it was a case in many, many a significant number of African
countries. And the people ended up with ID
cards with ethnicity on it. I mean, Ethiopia is another
case. It's changed in the last, well,
it changed actually after the, just before the civil war.
But you, you, you. You can imagine the the
potential for strife and conflict that is created

(34:53):
whenever when you go round with an ID card that says.
Yeah. Well, I mean even and I mean, of
course the other classic exampleis South Africa where, you know,
internal travel was restricted living arrangements and where
you could live, where you could go were restricted based on in
that sense a racial project. But coming back to the economic

(35:17):
base and this kind of formation of states again, one of the
innovations which I learned about reading your book was the
Hut tax and how that effectivelywas an attempt by colonial
governments to bring these African natives into the
economic system of the state. Where you had to pay tax for the
Hut and the dwelling that you were in as an attempt, perhaps

(35:40):
to bootstrap the, the monetary base of, of, of the colonial
government. But as, as you mentioned as
well, the this drain, which is interesting.
I don't know if I, I picked up on that then a net drain from
somewhere like the UK, from these colonial, these colonies.
It seems like, you know, economics plays a real critical
role here and, and what exactly gets funded and what sorts of

(36:03):
things can be built by the state.
And so that then flows down intoinfrastructure, education,
schools, all of that other stuffthat is traditionally provided
by the state. So there's kind of a maybe even
a bigger question here about like how do you bootstrap a
state in a sense? Yeah, and, and, and that's
extremely difficult when you don't have the population

(36:24):
density. And as you say, the hot taxes
that were introduced principallyby the British, but not only by
the British were an effort to respond to this.
Because you, what you got with very, very low population
density in Africa and almost no infrastructure is you just got
this incredibly low economic equilibrium where people had as

(36:44):
much land as they wanted. If your land became less
productive, you could move to new land, you know, if the
nutrients on your land were consumed and moved to some more
land, you know, often just with slash and burn agriculture.
And of course, you know, the Brits and everybody else turned
up. And I thought, well, you know,
this, this, what are we going todo?

(37:05):
We need labor to do stuff. And so hot taxes that were
conceptualized because they werepayable in cash.
So, you know, I think initially they thought, well, we, we can
let people pay with grain or other agricultural produce, but

(37:26):
then there is no, no, we don't want to do that because they
just will pay us with grain and we won't get any labour.
So if they're payable in cash, nobody has any cash.
All right, but we can issue cash.
But you can only earn cash by doing jobs, mostly.
The vast majority of the jobs were for colonial governments.

(37:47):
So if they wanted a road built or something like that, you do
that for two months, you get thecash and then you can pay your
heart tax. Yeah.
So it's kind of almost a bit of a charter list kind of approach
to, you know, demanding payment in, in, in the currency and
therefore people have to then find their way into their formal
economy and and earning that that that money issued by the

(38:07):
state. So that's really interesting.
So we've got this, you know, there's various situations and
perhaps some of it seems perhapsnegative towards development.
But what I do want to move into then is talk about the success
stories because you do identify 4 case studies in the book of
countries that have done relatively well in, in this

(38:27):
development project, including Botswana, Mauritius, Ethiopia
and Rwanda. Each perhaps not following the,
the, the, the, the outline of what worked for Asia, but
certainly have found parts that have worked and have taken them
in, in a good, in a good way. Perhaps we can talk a little bit
about those and what what workedwell and maybe what what didn't

(38:50):
work so well and these these four case studies that you
highlighted. Yeah.
I mean, there's a little bit of variation.
Botswana, which is a, a large country in the landlord country
in the South of Africa. Most of the money that paid for

(39:10):
Botswana's development came froma small number of of extremely
large diamond mines. However, the Botswana government
was very effective in managing that that resource and it was
also in its way effective in agriculture.

(39:34):
The government there did not do anything really effective for
smallholder agriculture. But what it did do is it
supported the development of large scale cattle herding owned
where the cattle are owned by largely by the the Botswana
aristocracy. And they negotiated very good

(39:57):
deals with the EU and other export recipients for that.
And then took money from these diamond mines which were
operated by De Beers. But then in joint ventures that
moved quite quickly to 5050, joint ventures took that money

(40:18):
and invested it. I would say more or less in the
way that the World Bank would have recommended them to invest
it. I mean, they built rows, they
built hospitals and they built schools.
They didn't run any effective industrial policy to develop
manufacturing, but they built aneffective civil service and they

(40:39):
ran a very clean government. The problem they face now is
that we have, I mean, they're being technologically disrupted
in the sense that we have the development now of synthetic
diamonds, which are creating a lot of concern about where,
where the market for real diamonds is going to go.

(41:02):
And just generally the the diamond market has, has not been
good. And they've ended up as an
incredibly unequal society. Because if you promote large
scale cattle herding and then you have, you know, an, an elite
that works for government and anelite that works managing these
diamond mines, you, you get to where they are in terms of

(41:25):
having, you know, a population that is 20% very comfortable and
80% very uncomfortable. I mean, they are one of the most
unequal societies on, on earth. But nonetheless, I mean, they,
they, you know, they had this resource with the diamonds and
they, they managed it very well.And they built a, a, a non

(41:48):
racial, as they always called it, a non racial society as a
South African neighbor. And they managed all of that
extremely well to through the apartheid era.
Mauritius then was the country which was the became the first
one really to sort of replicate the Asian model.

(42:10):
They were an island of sugar farming run by, by, by sugar
oligarchs. They, they thought in the
beginning, well, maybe we need to do a land reform and chop up
these sugar estates and just give them to smallholders.
But they decided in the end, no,we will give more support and

(42:35):
better terms, better refining terms to smallholders.
And what we'll do instead is we will tax the sugar oligarchs and
very heavily and we will create various fiscal incentives for
them to go into manufacturing. So Mauritius was the first
African country that had a clearmanufacturing plan and in a
decade from from the early 70s, they took unemployment and

(43:02):
Mauritius from about 25% to close to 0 because they they
developed a globally very competitive garmenting sector,
which subsequently vertically integrated.
I mean, I'm sure you know, the lowest value added bits is just
sewing clothes together. When it becomes more value added
and when you can respond more quickly to customer demands is

(43:25):
when you're also making the fabric that you're using.
So today they have large companies that are, that are
fully vertically integrated. And then they also, they
developed their services pretty effectively because they were
able to do various offshore things.
The finance they did pretty similarly to, to, to East Asian

(43:46):
countries. And I mean, they had one or two
ethnically Chinese people in Mauritius who are important in
in creating links with Taiwan and Hong Kong and helping
government to sort of understoodwhy things were done in a
certain way. Yeah, it's just I'm pulling on
that thread. Just the another piece of that
is the role of Indians and Chinese in Africa, which again

(44:12):
with a tribal culture with the African continent, in many cases
this was suppressed. But these people have also
proven to be key in connecting the African market with Asia and
other parts of the world. So maybe you could just talk a
little bit about that, that aspect.
Yeah, it's mainly Indian, well, also some Pakistani and some

(44:34):
very small numbers of Chinese. Then also kind of odd ethnic
groups like Lebanese and Greeks.And these are communities who
found like economic space, if you like, in the colonial era.
So the, you know, the colonists like the Brits would come and
they would do banking and they would do large scale mining

(44:57):
investments and they would do plantations.
But in among all this there, there were all kinds of of
opportunities and particularly opportunities to do commercial
activities in between the colonial and the local
populations. And what you've got to remember
in Africa is that unlike East Asia, including Southeast Asia

(45:23):
after the First World War, in inEast Asia, Southeast Asia after
the First World War, you start to have local entrepreneurs who
get significant amounts of capital.
They tend to do quite sort of basic manufacturing business,
but then they sort of move into a bit of banking and things.
And that's the beginning of all these people who will dominate

(45:47):
East Asian economies in the postindependence era in Africa.
You just don't you don't get that.
It's just on a on a completely different human resources level.
And again, the main reason demographics governments don't

(46:07):
have tax. So the the biggest manifestation
in many ways of, of colonial governments not having tax in
Africa is that until the 1950s, almost no colonial government
operates any schools of any description.
Yeah. So the only schools that operate

(46:27):
in Africa until the 1950's, the the the decolonization era, are
missionary schools, which are kind of very unpredictably
distributed. Well, and it's fascinating
because, yeah, because again, after that decolonization
project, a lot of these people who could be valuable on an

(46:49):
entrepreneurial level, you know,especially Indians, Pakistanis,
were often shunned or excluded from that.
And so there was kind of an unfortunate opportunity missed
there, right? Absolutely.
So after decolonization, you know, many of these groups were
very resented. I mean, the famous one is, is is

(47:09):
Asians in Uganda and Idi Amin kicked them all out.
But there was a lot of resentment against, against
Asian, Indian in particular groups in places like Kenya as
well. So that really ran through the
70s and the 80s, but I would sayfrom the 90s onwards that

(47:33):
African governments start to realize, well, actually these
people, they are actually Africans.
You know, they've been here for 123 generations or in some cases
a lot more. And they do contribute and can
contribute a lot to local economies.
So you you see them start to be politically accepted again and

(47:54):
that has gone forward. And at the same time from, you
know, in the last 20 years, you've begun to see the rise of
an African entrepreneurial classfor the first time.
And that I think is, is heavily,is heavily connected to the
implementation of, of education systems.

(48:17):
And then and then black Africansgoing offshore to study at, at
university and, and, and coming back, there's been a huge
change. I mean, it's one of those I, as
I write in the book, 1, you know, there are some successes
in Africa that are totally underrecognized or unrecognized by

(48:37):
outsiders. And one of them is the speed and
success with which African leaders built education systems
after independence. I mean, they had, they had
nothing. You take a country like Tanzania
and Tanzania has gone, you know,went in, in 30 in one generation

(48:58):
in 25 years went from 10% literacy to about 80% literacy.
You know, the World Bank actually did, You know, to be
fair to them, they did come out and say no part of the world has
has constructed an education, aneffective education system as
fast as Africa. Well, I'm coming back to some of

(49:18):
these. These models we can look at that
have had differing degrees of success.
Of course, Ethiopia, where this kind of conversation started,
where you were requested to comeand talk with these people.
Also a country that was never colonized in the same way as
much of the rest of Africa has always maintained a sort of
maybe a stronger sense of independence as a nation.

(49:41):
What, what, what, what was the situation in Ethiopia?
How did? How did that develop?
Well, Ethiopia, of course, as you say, is an empire, but it's
a very odd empire because it doesn't have a dominant ethnic
group. You know, it's like the UK and
the and, and the English and theScots and the Irish and the

(50:04):
Welsh are still sort of going atit in, in 2025.
You know, you have the, the Amhara who were the traditional
imperial group if you like. You have the, the Tigrayans who
really won the OR led the victory in the, in the war

(50:24):
against the Durg. And they see themselves in many
respects as the, as the traditional home of Ethiopian
identity, because it's the home of Aksum, where the, the Ark of
the Covenant is supposed to be kept in the, in, in the, in the
church there. Then you've got the, the Oramo,

(50:45):
who are the most numerous group and who produced the current
Prime Minister, largely because they hadn't had a Prime Minister
before, so it had to rotate. So you've got an empire without
a, without a clearly dominant ethnic group.
And that is always a very unstable situation to be in.

(51:07):
But after the victory against the Derg in 1991, you had you
had this remarkable leader, Melissa Naway, who was the guy
who led this campaign to and andthrough the Civil War had or
through the war against the Derghad LED this campaign that, you
know, once we win, we need to have a plan and a good plan.

(51:31):
And had, you know, begun to create this remarkably
intellectual revolutionary forceas it was in the beginning.
I mean, they cast off the Leninism once they were in
power, but they were always they're always a kind of a
revolutionary movement. And so they came into power with

(51:52):
a plan to begin with agriculture, which they did.
And you know, from the early 90suntil today, they quadrupled the
output of Ethiopian agriculture based on smallholder farming.
They had a very clear plan that they needed to have
manufacturing. So they've built a couple of

(52:13):
dozen industrial parks, quite a few of which have filled up with
Turkish and Indian and Chinese and other firms.
They knew that they needed to generate a lot of cheap
electricity to offer to industry, that this was a key
thing from East Asia. Cheap electricity, cheap,

(52:34):
reliable electricity is absolutely fundamental to
manufacturing success. So they built all sorts of hydro
projects, the biggest of which is the Grand Ethiopian
Renaissance Dam, which the WorldBank refused to finance because
it's on the Blue Nile, which goes into the White Nile and
then it goes to Egypt. And the Egyptians are absolutely

(52:55):
mad about it because they say that The Ethiopians are going
to, you know, when there's drought, The Ethiopians will
hang onto the water and then, you know, Egyptians will start.
I mean, it's, it's, I mean, I'vebeen, it's a huge, you know,
this huge dam, but it's got surface to air missile batteries
around it in case the Egyptians try to destroy it.

(53:19):
So they did this. And then with the with finance,
they did the the classic, the classic East Asian things with
finance by just making finance serve the purposes of
development rather than rather than push out consumer finance.
And it's all been extremely successful apart from ended up

(53:45):
with the Tigrayans. I mean, I would say the
Tigrayans starting, but you can argue it both ways.
They ended up with the Tigrayansstarting another civil war,
which went on for a couple of years.
And this is made, you know, and it was absolutely brutal war in

(54:05):
which hundreds of thousands of people died, which I describe in
some detail in the book. And this has made some people
very negative about the outlook for, for Ethiopian or LED a lot
of people to sort of say, you know, it looked like it was
going to be another miracle economy, but it's not.
Now I'm not so sure. And I, I, I remain quite

(54:28):
optimistic, not because I'm a huge fan of the current Prime
Minister, but because in my view, when you put down tracks,
policy tracks in development andpeople get used to them, even
huge political upsets, even something like a civil war, it's

(54:49):
very difficult to, to, to push an economy off the tracks once
it's, once it's running down them.
And I think that, you know, the commitment to smallholder
agriculture is very much embedded.
I think the commitment to manufacturing is there.
So we'll see. But I I personally continue to

(55:09):
feel quite optimistic about about Ethiopia.
That's interesting because I do want to in a, in a, in a bit,
come back to this idea of the importance of democracy in these
in these states with, with differing cultural demographics,
different tribal demographics. But perhaps the next one, final
one just to wrap up that piece around these success stories

(55:31):
would be Rwanda and of course Paul Kagame and and his his
regime there. Yet this big vision of the
Singapore of Central Africa. Perhaps you could just say speak
a little bit to what what you found in Rwanda.
Yeah. I mean, I think Rwanda is a very
interesting case. I met Kagame briefly and I mean,

(55:56):
he's not my type of leader. I don't think, you know, I
describe him in the book as as as brutal, but developmental.
And I think he's got an awful lot to I mean, I think he's
absolutely ruthless, I suppose, as as how I describe him.
But he is also developmental. He doesn't have the intellectual

(56:17):
reach of Melissa. Now we but he's very focused on
on getting things done. And the Singapore of Central
Africa plan sounds crazy becauseSingapore is a is an island
right in the sea and Rwanda's bang in the middle of Africa is
totally landlocked. But when you look at it and you

(56:37):
talk to people about what they're doing in Rwanda, you
begin to realize that it's not actually as crazy as you might
think. Because the distance to the
coast in any direction from Rwanda and, and the large area
around it means that the cost, the logistics cost of anything

(57:00):
coming in is very, very high. So you can, if you've got the
raw material inputs, you can manufacture stuff Rwanda and the
prices will be competitive even if you're not hugely efficient.
And then of course, you know what I mean.
Kagame would deny this, but I would say that what Kagame has
done with his involvement in theSecond Congo War is that he's

(57:23):
effectively carved off the eastern part of the Democratic
Republic of Congo to be actuallyhis hinterland.
And so Rwandans and Rwandan firms can mine goods and they
can sell goods into an area thatcontains, you know, back to

(57:44):
demographics and another 30 million people in terms of a
market, which is, you know, 2 1/2 times the size of the
Rwandan market. You know, he's also got
opportunities in Uganda, in Burundi, which is a much less
competently run country. So you kind of become Singapore
by virtue of your isolation. You know, all you have to do is

(58:05):
be more efficient than the than the countries that surround you.
And, and Rwanda is certainly doing that.
And, and oh, and he's doing all kinds of stuff.
I mean, you know, and he's got aa very nice sort of hotel
conference centre complex, you know, so, and all sorts of
people coming in and using this and they're very good at raising

(58:29):
money. I mean, they've raised money for
Scandinavia for a sort of tech hub, all, all kinds of stuff.
And, and he has, you know, and it's a it's a bit like Gaddafi,
but better. I mean, he he makes
extraordinary use of women in his administration.
I mean, there are more women than men.

(58:50):
They are extremely effective at the public relations that they
do. But they don't just do that, I
mean, in parliament and in the judiciary.
And they're incredibly loyal to him.
I mean, Rwanda already ranks, I can't remember, certainly in the
top five in the entire world forthe empowerment of women when

(59:10):
measured by their senior civil service, parliament, judiciary
status. Yeah.
So it's a very, it's a very interesting story.
But I mean, I don't sort of pullpunches on Rwanda because I
don't think that one should, Youknow, you have to consider the

(59:32):
developmental progress alongsidethe evidence of what Kagame has
been up to in Eastern DRC, how he how he treats political
challenges within Rwanda, the evidence of his involvement in
extrajudicial killings in other states around the world.

(59:54):
I mean, even in even in the UK we've had, we've had, we've had
people put under special protection because they're
considered potential hits. It's interesting because I
wanted to pull on that one because moving to the question
of democracy and dictatorships, right?

(01:00:14):
Of course, the analogy of Singapore is of course, Prime
Minister Lee Kuan Yew, who is very famous for leading
Singapore into its status today,but also in a sense could be
considered as a figure very strong.
I wouldn't go so far as to call him a dictator, certainly a
strong figure within the Singaporean government who

(01:00:37):
really didn't pull his punches either and was very ruthless in
many ways. And so there's kind of analogy
to Singapore is quite interesting.
And then of course, looking at Taiwan and Korea as well, which
for a very long time we're totalitarian and dictator states
under the command coming town inTaiwan.
And then the various families inSouth Korea, both of which I

(01:00:58):
think it was around about 1987 they started having elections.
But there was a strong, a long period of a very brutal martial
law, you know, repression, all sorts of things.
And yet these countries were able to move on from there.
And so, I mean, do you see any connections there perhaps in the
role of a strong man in that initial phase before then moving

(01:01:21):
into something a bit more democratic perhaps?
I think that's how Kagame thinks.
I mean, I think it's, you know, as part while a deluge.
So it's got to me more. I mean, I, I met him at the
point where he was still saying that he wasn't going to run for
a third term. And then of course, he just, he
just, he just did get a yeah. And they're funny things that

(01:01:43):
happened. I mean, I think I, I think I, I
wrote in the book about the election in which in some parts
of Rwanda there was so much ballot stuffing.
The, the, the, the votes for Kagame were actually like 110%
of the population. So I, I think, yeah, I think
that that that that is the case.And then the question is, you

(01:02:05):
know, what happens when he goes?I mean, he's not that old.
I don't forget his age now. He's not that old.
He's in, seems to be in, in, in good physical shape, although he
works extraordinarily hard. But I, you know, that it's the
old thing. I mean, the, the, the thing I
criticized Melizano in Ethiopia for in the book is, is too

(01:02:32):
strong a belief that if you justmake people rich, the ethnic
things will go away. I think, you know, I'm not
saying that there's no truth in that, that prosperity can't make
ethnic differences less important, but it's that it's,
it's a, it's a rather sort of Marxist line, you know, that

(01:02:56):
it's all about material well-being.
And I, I don't think it is. And in in Rwanda, you know, the
reality is that the Tutsis are back in power with Kagame, who's
an aristocrat on both sides of his of his family.
And the efforts that Kagame madeearly in his administration in

(01:03:18):
the late 90s to have Hutu front up in the top positions in
government. That's largely over now.
Those people have been gotten rid of, you know, So I don't
think for a moment that in a situation where 14% of the
population is seen to be bossingaround 86% of the population,

(01:03:40):
that there isn't still the possibility for very violent
ethnic strife. I mean, this isn't to say that
there are no who's who in his administration.
There are, but it's just more. It's more self evidently to than
it was at the beginning. Yeah.
I mean, I think overall, though,I mean, as, as you do right
quote, the real difference in Africa is that ethnic diversity

(01:04:03):
makes democracy the only viable mechanism to ensure political
stability. And this is the End Quote that
this is interesting because, youknow, again, we look at Japan or
Taiwan or South Korea, where there is a, for the most part, a
single language, a single, a major majority of, of an ethnic
group. And so in a sense, this is
playing on hard mode, having to make democracy work amongst

(01:04:27):
various different kinds of people who maybe have different
languages, different backgrounds.
And perhaps again, this is wherethe the role of the state is
important in terms of defining language, defining cultural
values. I mean, this is, you know,
nation building stuff. What is the national values of a
country and what do we and then the collective believe in?

(01:04:50):
Is, is, is is again something interesting to study.
How do you bootstrap that? What is the Rwandan identity
that can be talked about? What is the Ethiopian identity
that can be talked about in the collective?
And again, maybe somewhere like Singapore or or say even
Malaysia can be looked at as a place with a plurality, perhaps
problematic in its own ways withthe the different power given to

(01:05:17):
the different groups and that. But certainly Malaysia and
Singapore have have a plurality there that has been able to to
work quite well it seems. Yeah, well, Singapore's always
been very Chinese, hasn't it? So the Malay minority in
Singapore I think has always felt quite oppressed.
But I mean, going back to what you were saying about, about

(01:05:40):
democracy, I, I, I think it's important to recognize in Africa
that yes, democracy is, is relatively more present in
Africa than it was in Asia at the same stage of development.
And that is exactly as you say. It is for that reason that
democracy tends to be the only system that can take some of the

(01:06:02):
heat out of out of the ethnic division.
Because if, when you do have a dictatorship and it's a
dictatorship from a, from an ethnic group that represents 30%
telling the other 70% what to do.
It's not like when you have the Communist Party of China as a

(01:06:22):
dictatorship and it's, it's drawn from 95% of the
population. Yeah.
You know, in a country like China, you've only got 5% in
minorities. So that's, that's just a
difference in Africa. And then I think the question
is, you know, how good will Africa be at containing ethnic
difference as population densityincreases and populations rise?

(01:06:48):
Because people aren't very much being pushed up against each
other now. And if you look at a country
like Kenya, you get pretty regular violence there between
different ethnic groups, usuallyover land, because you know,
again, having talked earlier about a history of, of low
demographic density in parts of Africa, now you're starting to

(01:07:10):
get to quite significant demographic density.
And that in among poor people shows up usually more than
anything over over land issues. And I'm sure, I mean, like, for
instance, you will have followedwhat's been, you know, all the,
all, the, all the conflict in the Sahel, you know, the South
side of the Sahara, which is theSahel, you know, where

(01:07:32):
essentially you get a bit of a bit of grass and the odd tree
growing or whatever. And you get nomadic groups going
through that area. But with climate change and also
with rising population, these groups are increasingly in in in
conflict with with settled farmers further South now as

(01:07:53):
they as they push further South in pursuit of of food for their
animals. Yeah.
The other thing I just I wanted to dive into as well is coming
back to this, this third pillar of the financial economy, a, a
sort of a, a sense of protectionism around the banking
sector and and the way money works within a country.

(01:08:15):
And certainly what we saw with the decolonization, a rapid move
towards national currencies, a, a, a bootstrapping of central
banks and, and, and many former African colonies.
But yet also today we still see the, the lingering effects,
particularly from the Francophone and the Francophone

(01:08:36):
countries where you have a colonial Central African and
colonial Frank still in circulation.
This relationship to the former colonial powers and sort of a
perhaps a problematic a relationship to this is some
banking system. So perhaps at a high level, did
you find anything interesting oror what really stood out to you
when you looked at that? That way the banking system

(01:08:57):
evolved in the post colonial era?
No, I think that the, the, I think the finance side in Africa
is generally quite concerning from a, from a developmental
perspective, because there are not many countries like Ethiopia
where they've had the domestic wherewithal to decide what they

(01:09:18):
want to do with the banking system and the, and the broader
financial system. And do it.
Most countries have tended to simply follow the advice of the
World Bank and the InternationalMonetary Fund.
So they, they've got rid of capital controls, they've
privatized banks. The banks have often been

(01:09:39):
privatized to foreign banks. A lot of this happened in the
context of structural adjustmentprograms done by the IMF in the
1980s and the 1990s. You know, so it was done at the
time when the IMF was that it's kind of ideological extreme, if
you like. The IMF today is a much, much
less extreme on these questions than it was back in the 90s.

(01:10:03):
And it got large numbers of African countries to make these
changes, which has given them banking sectors which are
actually quite profitable because they push out consumer
finance, but they don't have capital controls, they don't
have development banks. They're not set up to do things
that will support the kind of strategies that were used in

(01:10:26):
East Asia, but also that have been used in the most successful
African countries, in Ethiopia, in Mauritius and in Botswana.
It's interesting that I mean, the, the, the image I have comes
to mind is again, you've got these, these small plants that
are growing and without a fence around them, they're just going
to get grazed and opening up, removing capital controls,

(01:10:49):
enabling foreign direct investment just like that.
And especially this, this in the80s and 90s as you write about
with the IMF, it sort of just opens up a market that isn't
really ready. And again, the if we come back
to East Asia in Japan and Taiwan, certainly very closed
off for a long time and and protectionist and, and really

(01:11:10):
trying to foster that internal capacity before gradually
opening up at a later date. And so it seemed as if that
project led to perhaps the, as you say this maybe focus on
consumer services, yet without an overarching national strategy
that's able to back it up. And I mean, that is, I mean, is

(01:11:30):
there a way out of that? I mean, can you put that genie
back in the bottle, do you think?
It's difficult, I mean, it's obviously very difficult to
reintroduce capital controls once you've got rid of them and
to but that you know, there are possibilities.
Rwanda got rid of its capital controls, but as we've said,
Rwanda wants to be the Singaporeof of Central Africa.

(01:11:51):
So Rwanda wants to have a, an open capital account so that if
you know who knows who someone doing some running a dodgy gold
mine in DRC wants to put their money in a Rwandan bank, they
can just shift it over from, from DRC.
So to them it makes sense. But it's, it's striking that

(01:12:11):
Rwanda has retained its Development Bank and is seeking
to, to expand that and to build its, its capital base.
So I mean, there are always things that you can, that you
can do, but more difficult, I think to reinstitute capital
controls once they've gone. Yeah, it's interesting.
And I mean, again, I do feel that there's perhaps a slightly

(01:12:32):
pessimistic tone overall from our conversation so far.
And there's, I mean, it's, I mean, it's such a complex thing
that I mean, again, we're talking about a continent here,
54 countries, each one with its own kind of story, its own
trajectory. Yet we do see these moments of
of hope perhaps. Certainly these four case
studies that you look at are very interesting.

(01:12:52):
And I wonder whether you're at ahigh level going through this
project of writing a book. I mean, what?
What is your overall sense? What have you come away
learning? What has left the most impact on
you? I think the demographic story,
because I hadn't, I'd never dealt with with sparsely
populated countries before. And yeah, so suddenly you

(01:13:13):
realize that you're confronted with a whole, a whole new game.
So I think that that was that was very interesting.
The other thing that interested me was that I thought that it
would perhaps be the case in Africa that I would see that a
different, that there was somehow a different set of
policies that were appropriate to rapid accumulation in Africa.
So I was surprised to come away with the view that actually what

(01:13:39):
was done in East Asia in terms of agriculture, in terms of
manufacturing, in terms of finance is all pretty much what
is also required in Africa and what has been proven to work in
the countries that have so far been more successful.
So I think, yeah, those would bethe two things.

(01:14:00):
Yeah. Well, I mean as, as you're
right, you know, to basically sum up what or what you've
observed, quote, a good Financial Policy is about
getting things done, not about ideology.
The primary objectives of development at this stage in
Africa are to support smallholder farming, to finance
infrastructure that supports agriculture and export
manufacturing, and to finance industrial projects that raise

(01:14:21):
the technological capacity of the economy and generate export
earnings. Sounds a lot like the trajectory
of East Asia as well. I mean, there's sort of, there's
something in there. I don't want to go so far as to
call it historical materialism, a sort of a, a natural course of
events. But it seems as if there is a
trajectory there that we can forthe most part paint a broad,
broad strokes that this is the way to move forward.

(01:14:44):
And it's, it's interesting to see the different ways that you
can approach that, right? And very different countries
again, from, you know, sub-Saharan Africa, you've got
the, the, the northern countriesall the way down to the South.
I mean, there's, there's, there's wide range of countries,
yet there's some, some importantpolicy considerations to bring
in there. The the final thing I just

(01:15:06):
wanted to dive into, I was just conscious of time, Joe, but the
hegemonic question and I think when I reflect back on on the
writing about East Asia and the role of the United States in all
of these countries that were successful.
What is it about a country having the interests of the
United States aligned with itself?
And is that something that you considered with this?

(01:15:28):
Book Well, I mean, I always say that the, you know, one of the,
the great rules of thumb in development is you never put
your finger in the eye of Uncle Sam, you know, because it makes
absolutely no sense to do so. It was one of the, you know, the
great tragedy of, of Egypt underNASA, where when they did have a

(01:15:51):
very clear developmental plan and a good plan really in the
50's, the NASA decided that he was more interested in being the
king of the Arabs and, and, and getting in a fight with the
United States and, and, and so that whole project ultimately
unravelled. I mean, the US is the biggest

(01:16:13):
market in the world. So you're going to, you know, if
you're developing, you're going to be seeking to export things.
The US is also, I mean it isn't right now, but it has been the
biggest provider of development aid and hopefully we'll go back
to being that since perhaps as the new hegemon.
For supporting these these African countries, yeah.

(01:16:35):
I mean again I write. Not a massive amount, but a fair
bit about China in the book. I mean, China's developed in on
the East Asian model. It's got huge manufacturing
capacity. It's now reached the point where
it needs new markets for a lot of manufacturing output.

(01:17:00):
And Africa is, I mean, is looking all over the world, but
Africa is perhaps the single biggest long term new market for
China. And China is also in terms of
its own development, it's cut the price of of almost
everything that it's got involved in by virtue of

(01:17:20):
operating at at massive scale. And so it's come to Africa and
it's offered, you know, people talk about, well, are they
taking kickbacks? I'm sure sometimes that people
are taking kickbacks. But more important is that China
has come back to has come to Africa with credit available.
It's not cheap credit, but it's available and offering, you

(01:17:43):
know, roads and hydro dams and bridges and other things and
railways and other things that people need at a much lower
price than any other contractor in the world is going to offer.
So in that respect, China is important.
Of course, it's also tending to sort of flood Africa with

(01:18:06):
consumer goods that Africa isn'tvery well organized to protect
itself against. But I don't particularly blame
the Chinese for that. That's, you know, what we we
need. We need Africa to get its its
act together and and have a moreeffective trade policy.
Yeah, Well, it's interesting. I mean just on that China note,
I mean the contracting. And the building of these roads

(01:18:29):
and infrastructure and in a lot of cases, and I think you, you
do identify one example where, you know, just the roading and
and having that knowledge in thecountry actually makes a big
difference. And when you're, you're kind of
paying for that to come in you, you again, you're, you get the
road, but you don't get the expertise or the, the workers or
any of the, the capital goods that you would get if you, if

(01:18:50):
you build it yourself, you know,by paying someone to do it.
Yeah, but it depends how you do it.
I mean, you know, some countries.
Allow the Chinese to come in andeven bring Chinese workers and
do the whole thing themselves. Other countries will require the
that it's a joint venture with alocal firm.
The only local workers are used apart from managers.

(01:19:12):
That's more like what Ethiopia does.
Or if you look at Rwanda, I mean, Rwandan firms that are
government and and military links now have learned
themselves to build roads prettysuccessfully.
And in part they've done that from working with Chinese firms
in the past. So I mean, again, I would, I

(01:19:34):
would tend to say that there's, you'll see a lot of variation
and and much of the variation isaccounted for the nature of the
African government you're dealing with.
Yeah, that's interesting. And I mean, yeah, certainly a
bit of knowledge transfer. Can help you know, people are
learning, learning what's going on.
But it's, it's all very fascinating.
And I think, I mean, you do, I think conclude the book on on a

(01:19:55):
quite a on a positive note. And off the back of these these
these case studies, you know, there, there is these a sense
that there is opportunity here, that this is the the world's
last great frontier. And that again, looking at Asia
in the 1950s, you know, it was maybe a very interesting and
opportune time to be doing something.
Is that perhaps the case for Africa in the twenty 20s?

(01:20:20):
And yeah, I think so. I mean, I do feel quite.
Optimistic and I think that there's, there's some solid
evidence to support that. I mean, Africa now has the
fastest rate of agricultural growth in the world, about four
4 1/2%. You know, this reflects
demographics, right? You've got all these cities now

(01:20:41):
all over Africa. I mean, 100 years ago the
biggest African cities had 20 or30,000 people in them.
Now they've got, you know, 20 million in a city like Lagos.
So this creates huge demand. We're seeing it most clearly in
agriculture. There's massive amounts of
processing that are going on around agriculture.

(01:21:04):
So agriculture used to produce raw food and people used to buy
raw food. Now people buy processed food
all over Africa. It varies a lot because it
depends on local tastes, you know, but in, in Ethiopia where
people used to buy teff flour and make angera, the pancakes
that are the basis of a lot of, of Ethiopian food.

(01:21:27):
Now you'll buy angera that's been, that's been, that's been
done for you. Or in Nigeria, you buy all kinds
of, you know, like Nigerian ready meals.
They don't look like what we think of as ready meals because
they don't try African tastes, but they are ready meals or baby
food. You get, you know, I mean, you
didn't used to get processed baby food in Africa.

(01:21:49):
Now, now, now you do. So all of this is going on and
some of the companies that make processed agricultural food are
becoming quite big already and some of them are and the bigger
ones are starting to operate across multiple countries.
So you get the beginnings of like sort of, you know, intra

(01:22:11):
Africa multinationals, you know,they won't be in 54 countries,
but they'll be, yeah, there's a good number that are in 5 or 10
countries and they're growing like that.
And then of course, they get they get more cash.
And when when you get cash, you see other opportunities outside
of what you do. And you think, oh, let's have a

(01:22:33):
go at like that. I mean, like in Tanzania,
there's a big, the biggest agricultural processing and
milling business in Tanzania is now in everything from like
soccer to TV stations. So, you know, the, the kind of
modernisation of the economy in Africa, it may be the, that it

(01:22:54):
grows out of agriculture to a more, an even more significant
extent than was the case in EastAsia.
But I mean, as I've written in the in the How Asia Works book,
I mean, it was extraordinary howmany big companies grew out of
village businesses, you know, I mean, something like Honda,
right, was, you know, there's your own workshop somewhere.

(01:23:16):
Yeah, there was like making 50CC.
Engines to put on. Bicycles to convert them to sort
of jury rigged motorbikes or like Great Wall, which is today
the biggest producer of four wheel drive vehicles in China.
That was that was an agricultural machinery repair
business in a in a village. Yeah.

(01:23:39):
You know, it's all very fascinating.
Certainly the book. How Africa Works coming out
early next year, I believe, right.
It's coming out in January. Yeah, yeah, I certainly can
recommend it to. Everyone who's interested.
In development and the development and the future of
Africa, I certainly found it to be riveting to read through it.
And I'd just like to finish herewith a quote on on Africa for

(01:24:04):
us, out for us outside of Africa.
If you live outside Africa, whether in the Americas, Europe
or Asia, Africa is going to be abigger part of your life in
trade, investment, tourism, literature and music.
African integration into the world system is beginning in a
way it did for Asia half a century ago.
If you, is there anywhere you want to send the listeners ajar?

(01:24:26):
Well, no, I mean I have a blog, but I haven't been putting
anything. On it for ages.
If anybody's writing a book and this book comes out, I will.
Yeah. No, no, that's all good.
And is there anything next to. I mean, you've got the.
Book launch coming up early nextyear, but what else is on your
radar? I'm I'm I'm contemplating.
Writing and a developmental history of the UK because I've

(01:24:49):
I've never written anything about my own country that would
be fascinating That's when you got somewhere like Manchester,
the world's. First industrial city.
It could be an interesting pieceof storytelling, I think.
Yeah, I think. I mean, I mean national decline
is the. Is the subject du jour in this
country. So it seems like a timely,

(01:25:11):
timely thing. Well, look, there's there was
actually there's a few other things I was interested in, but
just. Constant time, Joe.
We might wrap it up there. I'm very fascinating.
I mean, yeah, certainly can recommend the book to everyone.
But yeah, thank you so much for your time.
And yeah, well, I might leave itthere.
Thank you, Cody. Alright, thank you for
listening. I am Cody Allingham and that was
the. Transformation of value.

(01:25:32):
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