Contrary to the image of African countries as static mono-exporters, it is unpredictable from one period to the next which will be the top exports in each country.
Consider this picture of Tanzania’s top exports in 1998 and 2007.
This is pattern of rapidly changing success is the norm across African countries. If you take the top 100 exports in each country in 1998 (or the first year in which data is available), its correlation with the rank of those same exports in 2008 is only .29.
Moreover, almost none of the changing success is explained by global commodity prices. In fact, there is little difference in the dynamic changeability of African commodity export performance and that of the continent’s non-commodity export performance. Nor is there any difference between how much global prices explain commodity exports (which is hardly at all) compared to non-commodity exports.
The usual stereotype of African exports as just given by a natural commodity or mineral endowment, with fluctuations mainly explained by global commodity prices, is just … wrong.
These findings were featured in a paper by Ariell Reshef (UVa) and myself in the National Bureau of Economic Research conference on African Development Success July 18-20 in Accra.
What does it all mean? Actually, the patterns in Africa were similar to those in non-African countries. In all cases, succeeding in exports requires aiming at a moving target. Who will do better under these conditions, state industrial policy planners or decentralized entrepreneurs with specialized knowledge of what is working and what is not in each sector?
9 Comments
Do you have statistics for Ethiopia?
I believe coffee is the main export commodity ever since (in amount and value).
How about predictable export demand patterns? For Ethiopia which aims at exporting electricity it is legitimately assumable that electricity demand will grow in the neighboring countries over the next 10 years.
Why would that be a volatile goal?
Thanks
Dear Prof. Easterly,
Your friend disagrees to a certain extent:
http://cafehayek.com/2010/07/exporting-trade-fallacies.html
However, it is truly ashaming that you title such a Tanzanian story a “success”, while remaining silent about the insane import and trade taxes (100% import duty on sugar? cement idem? Total export ban on milk?!! ) that the Tanzanian government enforces onto its poor citizens to line pockets the few crony businesspeople, while this government is dreaming of “self-sufficiency”, causing misery and death as ever before.
And it is not that you couldn’t be informed, for instance The Eastafrican is available online (which, by the way, runs a decent series of articles about your “malevolent dictator Kagame”: http://www.theeastafrican.co.ke/magazine/Breaking%20bread%20with%20the%20President/-/434746/955952/-/soscmnz/-/index.html )
But it is good to know that your papers got to pay you to meet your fellow out-of-touch burocrats in a talking shop in Accra.
Am confident that aid will now benefit the poor.
geckonomist,
thank you for the entertaining criticisms. You can make your critique even more devastating if it is somewhat related to the content of the piece you are criticizing, such as noticing that this piece was discussing relative performance of exports within each country (like Tanzania) and says nothing about overall success or failure of Tanzanian exports.
also it would help to identify correctly which out of touch group you are so wittily ridiculing. The conference involved out of touch academics, not out of touch bureaucrats. These two groups might be equally despicable to you, but in opposite ways.
Nothing to say other than ‘thanks’. That’s a really interesting post. Thanks
So, Tanzania looks to be quite a wealthy country as I see (according to African standards)
wondering if you have access to a similar chart showing exports from Congo as well as Uganda up to 2010 … given how much multinationals have moved in to buy up farming acres and transpose to use for alt-energy production to say nothing of the government’s selling off of land for oil exploration…
“almost none of the changing success is explained by global commodity prices”. Average gold prices in 1998 were around $300 per oz and around $650 in 2007. I guess that would be the almost part?
The Easterly paper was scholarly but the paper I found most interesting was
The Unofficial Economy in Africa (Kenya, Madagascar, Mauritius) Tables (Project 22)
RAFAEL LA PORTA, Dartmouth College and NBER
ANDREI SHLEIFER, Harvard University and NBER.
So often a major development plank (especially in WB projects) in African countries is formalization of the informal sector. This paper suggests that that rarely if ever works and that the formal sector (and profitable business that may export) doesn’t arise from informality. Interesting to me that so much effort is being directed so unprofitably. ” Just asking that aid benefit the poor” Maybe a rethink of formalization efforts is in order. It is always explained to me that formalization will build better business growth and opportunities but I see it more as a government revenue building exercise. And so too it seems do the targets of formalization. A paper I’d like to read is a cost benefit analysis of what is expended by donors and government to try to formalize businesses and what is accomplished by these efforts and expenditures.
The Easterly paper pretty clearly shows the primary export growth in Tanzania directly attributable to big formal companies in the gold and precious metals industry and linked to the rise in gold prices followed by rising demand for food.
Taking the top 100 exports from each country seems like an awfully large sample–why not the top 5? If the result is the same maybe that would strengthen your argument.
Regardless of whether this is true, I think the real question is what works best to promote exports? I would have like to see a more substantive response to the geckonomist’s point about restrictive Tanzanian export and trade taxes.
As well, your either-or throwaway at the end of your blog with the choice between decentralized entrepreneurs with specialized knowledge or state industrial policy planners seems very oversimplified. Something tells me true export success would rely to a great extent on both!
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