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Wednesday, 19 August 2009

Why is Botswana so successful?

Nothing to do with "lack of aid", as our very informed readership knows. Rather as explained in this new paper its all down to fundamental causes that has a huge impacts on its governance structure by changing the incentives facing its current leaders. In short as I have previously noted, Botswana is successful because it built strong and accountable state institutions :

Three complementary factors have been important in Botswana’s success.

The first is that the independent state benefited from a long process of state and institution formation inherited from the Tswana states. This was crucial for developing checks and balances on politicians and dispute resolution and creating good governance. The integrative structure of Tswana states also limited regionalism and facilitated the emergence of a national identity. Decisions at the formation of the modern state in the 1960s built on this legacy.

The second is that by historical chance, the eight Tswana states ended up controlling a single independent nation so that their institutions could help to determine national institutions without coming into conflict with other sets of institutions or interests, as happened in most other SSA countries. Moreover, the comparative neglect of the colony by the British administration allowed these institutions not only to persist, but to develop further in marked contrast to other experiences with indirect rule.

Finally, elite interests were powerfully represented in early independence governments. Since elites were heavily invested in ranching, this led to a socially efficient development of the ranching industry and secure property rights which greatly facilitated the early growth of the economy.

In what sense, then, is Botswana a role model for country success?

On one hand it is a perfect model. It suggests that even starting form terrible initial conditions, adopting the type of economic policies advocated by mainstream economists and by the World Bank can be very successful. Even this is an interesting lesson given that so many detractors of the international financial institutions, like Easterly (2001) or Sachs (2005), claim that they have continuously promoted foolish policies. The evidence from Botswana suggests that had African countries done what was suggested, they would now all be a lot richer. Moreover, Botswana got richer slowly, step by step, it did not need a ‘big push’ just a cumulation of little sensible things. Importantly, the Botswanan experience is also one of orthodoxy. Other critics of international financial institutions, such as Hausmann and Rodrik (2006), claim that poor countries need to experiment with heterodox policies, such as subsidizing industry. But this is not what Botswana did. The experience of Botswana suggests the simple interpretation that contrary to the claims of those who praise heterodoxy, the real problem in Sub-Saharan Africa is that countries have not adopted the orthodox policies which have been recommended to them. This is why they have not grown. The issue is not finding the binding market failure, it is trying to achieve an institutional and political environment which is conducive to making socially desirable choices. Without solving these problems, promoting industrial policy will probably have the consequences we have already seen in Africa, of creating more opportunities for rent seeking and clientelism, and which were so devastatingly exposed by Killick (1978) in the case of Ghana. These are valuable lessons as economists and policymakers search for alternative paradigms in the post-Washington consensus world.

At another level of course, one could argue that Botswana is not such a good model. This is because, as is clear from my discussion, the reasons that Botswana was able to adopt these good policies are a complex outcome of history, institutional building and interests. The circumstances are very different in the Congo, or Sierra Leone, and this is why they have ignored the advice of economists or the World Bank. But we cannot change history or re-draw the boundaries of African states. Nor can we easily alter what interests do or do not have power through the political system. However, I do believe that there are some practical lessons that can be learned with respect to the development of state institutions. When the post-independence state was constructed in Botswana in the 1960s, it was done in the shadow of Tswana institutions of dispute resolution and consultation. Chiefs were not able to make arbitrary decisions concerning their tribes without consultation and it is clear that the members of the Legislative Council behaved in the same way. As laws were passed and decisions made, Masire and Khama would travel the country appearing before kgotlas to explain, discuss and justify decisions. As the national capital was constructed, new kgotlas were built to cement the old in the new. A series of decisions were made which helped to build the national state. A simple one was making Setswana and English the only languages that were taught in school.

Mineral rights were vested in the nation and not the tribe. Land laws were changed so that people could be allocated land outside their own tribal areas.These decisions, and many others like them, built the modern state and its institutions. This is why policy has been good and clientelism so scarce in Botswana. I have argued that the probable reason why these decisions were made in Botswana was because of the way they built on existing institutions. But this does not mean that such decisions cannot be made or encouraged elsewhere.
All the explanations of how Botswana developed are of course correct and are not under dispute, especially the "defensive modernisation" point. Something the Lozi's attempted only to be crushed by Kaunda - (see Chiefs in colonial Zambia, particularly the associated exchanges). Unfortunately, on the big question of "what lessons does Botswana hold for other countries", the author partly gets side tracked.

I can see the point the author is trying to make : its not a question of heterodoxy or orthodoxy policies but a proper institutional framework conducive to good policy choices. No arguments there. Where he misses the point is that he seems to fully equate a "proper institutional framework" with accepting the Washington Consensus policies. Zambia accepted all the Washington Consensus policies as advised by the IMF and World Bank and look where we are today. No, the lessons from Botswana surely is that institutions are context specific and where they are at ease with local conditions, it makes it easier to make policies work including some aspects of orthodoxy policies e.g. free markets and so forth.

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