Recently, I sat down with a Washington Post reporter and several CGD colleagues to discuss under-reported topics in globalization and development.
Inevitably
we came around to the topic of Chinese development and manufacturing,
and whether special conditions there (low wages, an undervalued
exchange rate, and so forth) are contributing to de-industrialization
elsewhere in the world. The impact of China on global manufacturing is
certainly no under-reported topic, but the discussion usually focuses
on the consequences for the US. One of my colleagues, Arvind Subramanian,
suggested that African textile and clothing firms have also taken a
real hit, and that the culprit could be Chinese exchange rates. Other
colleagues, like Vijaya Ramachandran and Kim Elliott, saw the decline as relatively mild and wondered, if Arvind is right, why we haven't seen more of a fall.
Of
course, the big fact that jumps out at you when you look at industrial
production in Africa is not the ups and downs, but just how little of
it there is. Rather than 'blame China' (regardless how well that blame
may or may not be deserved) I wonder whether there are other culprits
that account not just for the decline in, but the persistently low
level of, African industry. One
thing that has always struck me in the African countries I have worked
is that the real wages (i.e. wages adjusted for the cost of living) of
African formal sector workers seem to be incredibly high, at least
compared to that of workers in China or India. Given that firms in
China and India seem to be more productive than their African
counterparts, it creates a double disadvantage for African workers, and
raises the question of why the situation continues. Why don't
manufacturing wages fall in Africa, stimulating more jobs for more
people at wages still higher than those available in agriculture or
informal business? Why, when I run a survey in rural Uganda, do youth
with the same education and experience expect a wage three to four
times higher than the youth I worked with in India? I don't begrudge
anyone anywhere a living wage. It's the relative differential that
puzzles me, and that could be keeping Africa from doing business
globally.
There
are probably lots of plausible reasons. Perhaps we ought to consider
(and get data on) the informal sector in Africa, which could be larger
and have more moderate wages than the formal sector ones. It may be
that all my notions and data about African wages are erroneous. Another
possibility, however, is that the largest employers of skilled workers
in most African countries are international NGOs and the local
government. They are competing, in many cases, for the same pool of
skilled and semi-skilled workers as the manufacturers and service
sector firms. Neither the government nor the NGOs seem to set wages
according to the local market or local conditions, and it requires
little imagination to wonder whether they set their wages higher than
the market would normally do. Could the government and NGOs be
distorting local wage markets and pricing African industry out of the
world market? I don't know, but this is a question some economist ought
to start investigating.
I
have seen the mechanism at work on a small scale in Kitgum, the town
where much of my northern Uganda research was based. Large NGOs and UN
agencies have begun to drive up local wages as they offer salaries and
benefits many times in excess of the local norm. I don't know if firms
have been crowded out by this rise, but I have first hand experience
how smaller local NGOs (and research projects) cannot compete. I also
can't help but notice that the best and the brightest pursue degrees in
social work, not business. This is not necessarily a bad thing, but it
does not feel terribly sustainable. You can't build a national economy
on NGOs.
The Author is an Assistant Professor of
Political Science and Economics at Yale University. He publishes the
Chris Blattman blog. He has previously served in development work in Kenya and Uganda.
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I will turn the question the other way round. Why do you expect Africans to work for peanuts?
The minimum cost of living in Africa is high compared to those in Asia. In most countries where peace prevails, the living standards ( electricity, running water, television and car apart) are high. Africa is not overpopulated as those two countries you give as references - at least most own some piece of land where one can go and live comfortably even in a thatched house. I would not say the same for populations living in the the two giant countries. Travel by road in one of the two countries and you will realize that there is no space for forests. Almost every acre is occupied with settlements.
Most people have not realized that the quality and comfort of living in Africa is very high.
We in Africa cannot copy our Asian neighbors and level our living standards downwards.
This standard will go downwards if we keep selling our natural resources and companies at throw away prices. The money from the natural resources should be reinvested to improve the living standards of the locals - but not the global way as suggested in the text above.