Bucking the Global Trend: Africa’s Economic Growth

Europe’s economic funk continues. Japan’s aging society is struggling under a huge pile of public debt and slow GDP growth. Recovery in the United States is about what can be expected from a post-financial crisis expansionary cycle. And in China, Communist Party leaders are adjusting to much slower growth. In much of Africa, though, growth prospects are strong, if we can believe aid agencies such as the World Bank and USAID.

On April 15^th, the Washington-based World Bank issued a periodic check-up on Africa’s near-term growth prospects. Partly fueled by high commodity prices – especially for energy resources and minerals – continental growth is forecasted to be more than five percent per year over the period 2013-2015. The optimistic forecast also highlights the impact of increased consumer spending in many countries south of the Sahara, including places like Ethiopia, Angola, Ghana, and Mozambique. Indeed, many sub-Saharan states have seen above-average growth rates for more than a decade, leading to some reduction in still-high poverty rates. The diffusion of mobile phones and more predictable macro-economic conditions are key factors leading to better growth prospects.

USAID and the World Bank are probably right about continued high commodity prices. Even if some of this new African wealth is squandered through corruption, better terms of trade will lift many ordinary people out of poverty. A cautionary word is in order, though. Enclave-based development – especially if it involves oil or high-value minerals – can facilitate political instability and armed conflicts. Think diamonds in Sierra Leone and Angola, numerous precious resources in eastern Democratic Republic of Congo, and oil in Nigeria. In short, over-reliance on mineral and energy exports can lead to so-called “rentier states” (and failed states) that do not necessarily promote broad-based human development. Careful observers of the DRC and Nigeria know about the “resource curse” all too well.

So, boosting international trade between Africa and other continents is set to grow significantly in coming years. With luck and better governance, many states will avoid the worst excesses of the resource curse.

The perennial problem of limited inter-state trade in Africa also requires urgent attention. Vast distances, colonial legacies, poor governance, and under-investment in transportation infrastructure have all contributed to high costs of trade throughout much of the continent. As USAID indicates,

Trade among African countries makes up only 10 percent of the region’s total trade volume. In East Africa, it costs 50 percent more to move freight one kilometer than it does in the United States or Europe, and in landlocked countries transport costs can be as high as 75 percent of the value of the goods they are trying to export.

Like South Asia (India and its neighbors), Africa possesses huge potential for growth in intra-regional trade and investment. This potential will only increase if Africa’s middle classes continue to swell.

The economic news out of Africa is relatively good, particularly compared to the world as a whole. Still, it is worth remembering the continent’s patchwork pattern of progress on governance, peace, and economic reforms. The overall trend is clearly positive, but recent news out of the Central African Republic (CAR), Mali, and the DRC reminds us that progress is geographically uneven.

Black Gold: The Geopolitics of Oil

I recently read Oil: Money, Politics, and Power in the 21^st Century, a book by Tom Bower. Readers of this blog will find the book compelling for many reasons. Even so, Bower’s blind spot on climate change is a serious problem, and still symptomatic of the views of many of the world’s political and business leaders.

Oil – published in 2009 – provides a detailed account of the Western oil majors and their interactions with governments during the 1990s and 2000s. The book profiles a number of key industry executives – notably John Browne (former head of BP), and Lee Raymond (former head of ExxonMobil) – as it paints a nuanced picture of the risks and rewards of extracting “black gold.” Too often, ordinary consumers of oil do not comprehend the challenges associated with oil extraction, transportation, and refining. Companies often drill “dry wells” in the exploration process, which bring significant risk and cost to their operations. In many cases, host governments abandon negotiated contracts, leaving companies like Shell, Chevron, BP, and ExxonMobil in precarious financial situations. At the extreme, governments nationalize resources, as has happened in Russia, Venezuela, and the Middle Eastern states before them. Indeed, after the recent wave of energy nationalism, the Western oil majors (i.e. the world’s main privately held oil companies) now control a surprisingly small fraction of the world’s petroleum reserves.

Russia, more than any other state, has been closely associated with geopolitics and energy nationalism. The main architect of Russia’s energy geopolitics is Vladimir Putin. Photo credit: monkeyatlarge (via Flickr, Creative Commons license).

The most interesting geopolitical coverage in Bower’s excellent book is his discussion of Russia and the post-Soviet region. The book’s account of Russia’s wild 1990s period is stunning for its treatment of (oil) oligarchs such as Mikhail Khodorkovsky and Vladimir Potanin. As this and other cases from the book show, black gold has a way of undermining the rule of law and stimulating pervasive corruption. Bower also does an excellent job detailing the rise of Vladimir Putin and Russia’s resource nationalism. One compelling sub-theme related to Russia is the Clinton administration’s (1993-2001) aggressive efforts to channel Central Asian energy resources to the West, but not by way of Russia.

Now more than ever, the oil business is not for the faint of heart. Added to longstanding cycles of boom and bust are major geopolitical risks associated with unstable and uncooperative oil-producing states. And, critically, there is the core unresolved issue of climate change. Unfortunately, Bower mostly treats climate change as a difficult public relations issue for the oil companies. He seems to pat the companies on the back when they eventually concluded that they could not be both fossil fuel extractors and alternative energy leaders. That might be the right short-term business decision for these companies, but heavy global reliance on fossil fuels is not a wise path for our future. We must settle the climate change debate in the public arena, not in corporate boardrooms.

***  A new book by this blogger:  Failed States: Realities, Risks, and Responses

The Geopolitics of the Keystone XL Pipeline

Petroleum extraction from “tar sands” – in Alberta Province, Canada (pictured), or elsewhere – is not “clean energy” production. Photo credit: howlmontreal (via Flickr, Creative Commons license).

In the famous words of many politicians, “elections have consequences.” As U.S. President Barack Obama begins his second term in office, he will have a momentous choice to make on whether the proposed Keystone XL Pipeline – to connect Alberta’s huge tar sands deposits with the Gulf of Mexico – will move forward. And, given the recent indications of Obama’s new Secretary of State, a final decision on the pipeline’s fate is looming. There can be no doubt that a Mitt Romney administration would have quickly approved this massive infrastructure project on national security and economic grounds. Given Obama’s recent signals on climate change, though, approval of the Keystone project is in doubt.

Canada, of course, is lobbying hard for U.S. approval of the new pipeline. If connected with potential markets, the tar sands deposits in Alberta could place Canada on par with Saudi Arabia, in terms of fossil fuel exports. And as the energy geopolitics expert Michael Klare argues, the death of the Keystone XL Pipeline could be the death of the Canadian tar sands industry. That is not a minor diplomatic proposition, even among old allies.

The green coalition opposed to the pipeline is right to raise the long-term, global issues associated with climate change. For so many reasons, mobilizing action on climate change in America has been fraught with difficulties. It has now been over twenty years since the Rio Earth Summit placed a spotlight on the negative impacts of climate change. At some point – and soon – elected officials must show some true courage on these issues. Klare is right to identify the Keystone decision as a defining climate policy choice for Obama’s presidency.

So, here is a short list of other geopolitical relationships that Obama should weigh carefully in his decision:

1. Global food security is at stake. Modestly cheaper energy prices won’t matter much if they are overwhelmed by much more expensive food, caused by climate change. Nor should we overlook the destabilizing effects of higher food prices in weak and failed states.
2. The geopolitics of climate change is about much more than rising temperatures. One of the central risks of global climate change – already being observed – is restructured precipitation patterns. Though there has been too much hype to date about “water wars,” there are many plausible future scenarios under which states will go to war in a bid for fresh water.
3. Climate change – barring a reversal of our present global course – is likely to lead to more civil wars and regional conflicts around the world.

Mr. Obama (and Mr. Kerry), the ball is in your court.

Angola: Recovering from State Failure

President Jose Eduardo Dos Santos’ MPLA won another election in 2012, despite protests from the opposition about the conduct of the poll. Photo credit: Oscar Megia (via Flickr, Creative Commons license).

Forbes announced last week that the eldest daughter of Angolan President Jose Eduardo Dos Santos is Africa’s first female billionaire. Though much is unknown about  Isabel Dos Santos’ climb to this elite club, her status is indicative of the opportunities and challenges facing Angola.

For much of its history since independence in 1975, this African state has been wracked by armed conflict, grinding poverty, and bad governance. In short, Angola was a failed state for much of the not-too-distant past.

In the case of this lightly settled, oil-rich country, external factors were exceedingly important in Angola’s decay. The country suffered as the site of a proxy war between the Soviet Union and the United States, and involved other states like Cuba and South Africa. Prior to the Cold War meddling, the Portuguese – like the Belgians elsewhere in Africa – did a poor job preparing the colony for independence.

When the Portuguese left in relative haste, the Angolans initiated a 27-year civil war that also had significant connections with the global geopolitical struggle between Moscow and Washington. These dark decades can be summed up by a long list of depressing words and phrases: refugees, landmines, official thievery, food insecurity, bombed-out bridges, and empty schoolhouses.

After the death of rebel leader Jonas Savimbi in 2002, Angola’s fortunes have begun to improve. First and foremost, Angola has recorded a decade of peace. Economic growth has been impressive, even if concentrated in the export-oriented energy sector. Transportation has improved within the country, helping the country’s many small-scale farmers get their goods to markets. Many refugees have returned from neighboring countries.

Now, back to Africa’s first female billionaire. Here I provide an excerpt from the Forbes story, which includes a pertinent quote from the political scientist Peter Lewis:

How did a 40-year-old woman who started out with just one restaurant come into such a vast fortune? . . . “It’s clear through documented work that the ruling party and the President’s inner circle have a lot of business interests. The source of funds and corporate governance are very murky,” Lewis explained. “The central problem in Angola is the complete lack of transparency. We can’t trace the provenance of these funds.”

Lewis is careful to state that he cannot authoritatively comment on the particulars of Isabel Dos Santos’ wealth. The people who can comment on her wealth, likely do not intend to do so.

Even so, there are indicators that Angola’s ruling party has been somewhat less corrupt in recent years. New investments have flowed into the country. And, Angola has even remade itself as an immigration destination for financial crisis-weary Portuguese.

Yet, there are limits to the gains in governance. According to Freedom House, Angola remains an authoritarian state, despite holding elections. President Dos Santos has led the country since 1979, and looks set to do so for many more. The political opposition remains weak. And given the country’s continued reliance on oil exports (with the heavy involvement of the Chinese state), this is not a good mix for broad-based development. Angola is no longer a failed state, but its foundation for the future is uncertain at best.

Propaganda, Passports, and the Geopolitics of the South China Sea

This tiny island in the disputed area of the South China Sea is just large enough for an air landing strip. Photo credit: dokientrung (via Flickr, Creative Commons license).

Unfortunately for the world, the most intense maritime territorial disputes are in East and Southeast Asia. East Asia, of course, is one of the three main engines of the world economy. And, with the recent transition of top political leadership in China, tensions are again flaring in the South China Sea (and in China’s important neighbor, India).  Beijing’s neighbors are understandably protesting the propaganda map included in China’s newest passports.

The Chinese passport map is hardly a creative propaganda piece.** The visualization simply, but unequivocally, assigns Chinese sovereignty to the key disputed islands of the South China Sea. As with similar “sovereignty maps” from the Arab-Israeli conflict or other territorial disputes, the passport map attempts to silence debate about a disputed area. (The Chinese government map also lays claim to two areas disputed with India.)

Though this Chinese geopolitical propaganda is not novel, it is brash. Passports, after all, are key symbols of a state that circulate outside its territory. It is one thing to create such a map, but it is quite another to stick it in the face of your neighbors in a recurring and routine way.

The intense dispute about the islands and exclusive economic zones of maritime Southeast Asia are baldly pointing to the limitations of the United Nations Convention on the Law of the Sea (UNCLOS), which came into effect in 1994. Although UNCLOS has brought order to global maritime claims, the treaty cannot resolve fundamental issues of land disputes. With the recent controversy over these new passports, China and its neighbors do not appear to be on a quick path to resolution.

** For a classic work on cartography and propaganda, see Mark Monmonier’s How to Lie With Maps.

Hunger and State Failure

Last month, a coalition of organizations released the seventh annual Global Hunger Index report. The report is sobering reading, and highlights ongoing challenges of governance and environmental stresses. The report also includes a revealing summary map that details the most food insecure countries and regions.

What places top the list of the food insecure? The Global Hunger Index identifies three small countries as having the most intense problems:

1. Haiti
2. Burundi
3. Eritrea

Seventeen other countries are also in dire circumstances. Of those states, the main cluster is in Africa, particularly across the Sahel region. The African states include:  Sierra Leone, Niger, Chad, Central African Republic, Sudan, South Sudan, Ethiopia, Djibouti, Angola, Zambia, Mozambique, and Madagascar.

South Asia is the other large cluster of humanity of gravest concern. These states include: India, Nepal, Bhutan, and Bangladesh. (Yemen is the last of the 20.)

Finally, by way of the main summary findings, there are some important weak and failed states that have not yet been mentioned. The report did not classify the Democratic Republic of Congo, Somalia, Iraq, Afghanistan, and Myanmar (Burma), since no data were available for these countries. Limited access to basic data is a fundamental characteristic of weakly governed states. It is quite likely that most of these “no data” states would also be included in the list of most food insecure places, if reliable information were available.

I direct an emergency food pantry, and I have seen the face of hunger in my home area. The magnitude to the challenge is so much greater in places like Haiti and the Sahel. Even as many countries have seen gains over the last 30 years, the effects of climate change and rising energy prices are now significant stressors. Addressing ongoing global hunger issues will require more concerted local and global action.

Solyndra and Somalia

In the United States, energy policy, too, has become a hyper-partisan policy domain. If you’re a Republican, you love carbon-based fuels. If you’re a Democrat, you love wind turbines, solar panels, and biofuels. That, at least, is the caricature.

In late May, the Republican National Committee released a television advertisement that references the now-defunct solar energy company Solyndra. The company received a $500 million loan guarantee from the federal government and soon after went bankrupt. Is there a scandalous dimension to the Solyndra affair? Yes, it does seem as though there may have been improper political motivations in the loan approval.

The Republicans’ spotlight on Solyndra, however, is about more than possible political interference in bureaucratic workings. In highlighting the failure of an alternative energy company, this line of attack suggests that the time is still not right for alternative energy sources (other than nuclear power). But what about the party’s presidential nominee, Mitt Romney? On the candidate’s Web site, the message on energy policy is clear: what America particularly needs right now is more domestic production of oil and coal. Sadly, the “issues” menu on the site does not even have a category for the environment (or environmental issues), or climate change / global warming. The Massachusetts governor who once viewed climate change as a serious threat to the United States and the world is now deferring to the current consensus in his party.

Lest you think that this is an anti-Romney rant, let me insert a bit of personal context here. In fact, I am an undecided voter moving in the direction of the Romney-Ryan ticket. The Democrats are vulnerable on issues of fiscal responsibility, and unlike many voters, social issues like marriage and abortion matter to me as much as the economy.

Now, back to American energy policy and the title of this post. For different reasons, the Republican Party has walked away from the conservationist tradition of Theodore Roosevelt on climate change and energy policy. Instead of following the sensible position of party stalwarts like John McCain and John Warner – bolstered with the support of key business leaders – the party has basically embraced climate change denialism. Yes, the fossil fuel lobby is well-financed and powerful. But, the more important factor is grassroots opposition to climate change action.

This inaction is deeply unfortunate. Instead of a bipartisan politics of vision and action – which we could have – we have a country deeply divided on energy issues. The consequences of climate change are already apparent here in North America. Abroad, the effects of a warming planet will hit weak and failed states especially hard. It may be psychologically comforting to wish these relationships away, but it is intellectually and morally wrong. Drylands like Somalia, Pakistan, and Mali may become more arid in coming decades, adding to the immense challenges these countries already face. Food security crises may be particularly acute in regions such as Africa, the Middle East, and South Asia. And we could go on.

If Mitt is elected in November, Americans of all political persuasions should urge him and his party to lay aside the narrow focus on fossil fuels, and adopt an “all of the above” energy policy that puts us on a pathway to global leadership and environmental sustainability.

*** Did you like what you read here? You might be interested in the new book by this blog’s author, Failed States: Realities, Risks, and Responses.