The original article that is reprinted here with permission from Sunny Nyemah on behalf of 'Business Index' appeared in Vol.1 No.07 Tuesday, March 25 - June 1, 2010. All rights reserved by 'Business Index'. 'Business Index' is available for purchase in Monrovia. Contact at businessindex@yahoo.com.
Preparing Goat Soup In Liberia
Liberians celebrate Independence Day on July 26. It is the biggest holiday in the country. Other holidays celebrated are New Year (January 1), Thanksgiving (the first Thursday in November) and Christmas (December 25).
Goat Soup, according to most people, is the national soup, served on important occasions. Coffee is also served after special meals. Some former Presidents birthdays are celebrated annually: J.J. Roberts (March 15) and William V.S. Tubman (November 29) are national holidays, while William R. Tolbert, Jr. (May 13), Samuel Doe (May 6), and Charles Taylor (January 29) birthdays are celebrated by families and admirers.
However, each county celebrates a president's birthday on a rotating basis, so that a county celebrates only one president's birthday a year. A county is lucky if it gets to celebrate the birthday of the current president because of the extra money and publicity that county receives for the festival.
Goat Soup
Ingredients
2 pounds goat meat (can substitute lamb or beef)
Hot peppers
2 medium onions, sliced
2 quarts water
3 tomatoes
8 ounces tomato paste
Salt, black pepper
Procedure
Cut up the meat into 2 [to] 3 inch pieces.
Marinate with peppers, salt, black pepper, add onion for about an hour.
Add water and boil until meat is tender.
Add tomatoes and paste and cook until tomatoes are soft.
Mealtime Customs
In Liberia, the table is set with turned over plates and glasses with a napkin on top, so that the guest may turn over the clean dishes for use. Those at the meal greet each other by shaking hands.
While shaking, they take the middle finger of the other person's right hand and snap it up and down. This tradition comes from the days of slavery, when the slave owner would break a slave's finger in order to establish ownership. The handshake (or "snapshake") celebrates Liberia's freedom from slavery.
The cook brings out all the food at once, and stays seated at the table during the entire meal. All dishes remain on the table until the end of the meal. Most Liberians will eat with their fingers, although American customs have brought utensils to the dining rooms of many city people.
A typical Liberian dinner consists of dumboy or fufu served with palm butter and palava sauce, meat stew, country chop (a mixture of meats, fish, and greens cooked in palm oil), jollof rice, and beef internal soup. Rice bread and sweet potato pone are served for dessert, and ginger beer is drunk throughout the meal. Coffee is served only on special occasions.
In the city of Monrovia, there are some modern restaurants, but in most towns there are small "cook shops" that offer stews and fufu. Most cooking is still done outside on a stone hearth.
Saturday, July 31, 2010
Wednesday, July 28, 2010
"Uh-oh. I hope this wasn't food aid."
I show Amos the peanut butter I purchased.
“Oh yes, I know this. They use it in refugee camps.”
“Refugee camps?”
“Yeah. You just open the packet and (slurp sound).”
“Uh-oh. I hope this wasn’t food aid.”
-
[1]
I was heading to waterside for some local peanut butter, but it was getting late. Part of basic safety and security protocol one learns in Peace Corps is that you avoid 5 things:
1. Unfamiliar or dangerous locations
2. Walking alone
3. Walking at night
4. Walking with visible valuables
5. Walking home drunk
I really wanted peanut butter but the trip would take me past sunset and then I would be walking alone at night. I decided to try the local stores instead.
Three shops said they had no peanut butter. One or two street vendors had jars of peanut butter, but the jars cost $3 and don’t work as well for peanut butter soup as the local peanut butter.
On my way out of the last shop, just as I had decided to walk home, a man called me back and said he knew someone who had peanut butter. He took me up the street to another street vendor and showed me a small foil packet of peanut butter. He asked for 25 Liberty, which is the right price for local peanut butter in that quantity. I happily made the purchase and walked home.
After showing the peanut butter to Amos I was concerned that I had accidentally purchased food aid.
In the office the next day, I overheard someone talking about a shipment of ‘plumpy-nut’ going to a refugee camp. I became far more concerned that I had purchased, and now eaten, food aid intended for malnourished children. I decided to look up ‘plumpy-nut’ online.
As it turns out ‘plumpy-nut’ is definitely a food aid product. Had I known at the time I wouldn’t have purchased it. It is very likely that I am now the unwitting end-user of a black market in food aid peanut butter.
-
[1] http://en.wikipedia.org/wiki/Plumpy%27nut, accessed on July 27, 2010.,
“Oh yes, I know this. They use it in refugee camps.”
“Refugee camps?”
“Yeah. You just open the packet and (slurp sound).”
“Uh-oh. I hope this wasn’t food aid.”
-
[1]
I was heading to waterside for some local peanut butter, but it was getting late. Part of basic safety and security protocol one learns in Peace Corps is that you avoid 5 things:
1. Unfamiliar or dangerous locations
2. Walking alone
3. Walking at night
4. Walking with visible valuables
5. Walking home drunk
I really wanted peanut butter but the trip would take me past sunset and then I would be walking alone at night. I decided to try the local stores instead.
Three shops said they had no peanut butter. One or two street vendors had jars of peanut butter, but the jars cost $3 and don’t work as well for peanut butter soup as the local peanut butter.
On my way out of the last shop, just as I had decided to walk home, a man called me back and said he knew someone who had peanut butter. He took me up the street to another street vendor and showed me a small foil packet of peanut butter. He asked for 25 Liberty, which is the right price for local peanut butter in that quantity. I happily made the purchase and walked home.
After showing the peanut butter to Amos I was concerned that I had accidentally purchased food aid.
In the office the next day, I overheard someone talking about a shipment of ‘plumpy-nut’ going to a refugee camp. I became far more concerned that I had purchased, and now eaten, food aid intended for malnourished children. I decided to look up ‘plumpy-nut’ online.
As it turns out ‘plumpy-nut’ is definitely a food aid product. Had I known at the time I wouldn’t have purchased it. It is very likely that I am now the unwitting end-user of a black market in food aid peanut butter.
-
[1] http://en.wikipedia.org/wiki/Plumpy%27nut, accessed on July 27, 2010.,
Sunday, July 25, 2010
Rock-Paper-Scissors Meets Freedom of the Press in Developing Democracies
Hi,
This marks the fourth installment of my series on problems facing international development as explained through game theory (with some artistic license on the idea of game theory). As always I must warn readers that this post is quite academic and not nearly as fun to read as the rest of the blog. If you found your way into this sentence by accident, I am kindly pointing out the exit.
In this post I will examine the complex inner workings of the children’s game Rock-Paper-Scissors and compare it to the fragile and necessary democratic government check and balance system supported by a free press. I will also cover the concept of zero-sum games.
The game Rock-Paper-Scissors is simple, elegant, a classic. Two players choose one of three options simultaneously. Rock, Paper or Scissors? That is the question. Rock defeats Scissors, Scissors defeats Paper, and Paper defeats Rock. If both players make the same choice the game is a tie.
Or to put it into a decision matrix:
It is no accident that Rock-Paper-Scissors ends up in almost every textbook on game theory. There is a surprising level of complexity at work here.
First, you must play the game with simultaneous moves; otherwise it doesn’t work. If the game is sequential, whoever plays first will lose. If I have to play first and I choose Scissors, then you choose Rock, you win. If I have to play first, you win. If you have to play first, I win.
Second, the game is a zero-sum game. When Player A wins a point it is the same as Player B losing a point. If you add +1 and –1 together you get zero. When you sum the scores from both players the total will be zero in a zero-sum game. The dangerous thing about zero-sum games is that you can only gain at the expense of the other player. In a zero-sum game you must become adversaries.
Third, the game rewards erratic behavior and punishes predictability. If you always play Rock, then I will know to play Scissors. If you never play Rock, then I will always play Scissors. I can never lose by playing Scissors (if you never play Rock, and Scissors vs. Scissors is a tie) and on occasion I will win against Paper.
Another beautiful thing about Rock-Paper-Scissors is that you cannot be ‘good’ at the game. You can be ‘bad’ at the game by being predictable, but you cannot be ‘good’ at the game. No amount of study will make you a better player.
Now here’s where I make a jump in logic. Let’s take Rock-Paper-Scissors and apply it to a social setting. Instead of Rock being a choice, Rock is now a person. Same with Paper and Scissors. They live in harmony because they have achieved a social equilibrium. No one can use their personal leverage without consequences. If Rock starts attacking Scissors, Scissors has no immediate way to retaliate. Scissors will have to start attacking Paper so that Paper will start attacking Rock. When everyone is attacking everyone there is no advantage to conflict, no one can gain, everyone loses. No one in this group can gain by conflict because everyone is vulnerable to someone either directly or indirectly.
Let’s go one step further and imagine that Scissors and Paper decide to work together. After all, Scissors and Paper are crafty (thank-you. arts and crafts puns, I'm here all week). Instead of a three-player game we now have a two-player game. Rock is alone and can only play Rock whereas Scissors and Paper are a team that can choose to play Scissors or Paper (they always play Paper).
Now the contest is unfair. The team of Paper and Scissors will always win against lowly Rock. Rock versus Paper, Paper wins (Scissors cheers). Now there is a way to benefit from conflict. The team of Paper and Scissors can defeat Rock and steal Rock’s property. But wait, once Rock is removed, what is to stop Scissors from attacking Paper?
We have veered into the very hypothetical and it’s time to come back out. The point I am trying to make is that a harmonious social system can be built on mutual accountability. Furthermore, someone defecting from the system in search of personal gain can threaten that harmony.
What does this have to do with freedom of the press in developing democracies? I’m getting to that but I need to make one more connection first.
The nature of a functioning democracy is one of checks and balances. It is simple and elegant. The Rock-Paper-Scissors society lives in harmony because of checks and balances. It is simple and elegant because everyone is accountable; no one can act with impunity. Now substitute Rock-Paper-Scissors for Business-Government-Citizens.
Government regulates Business. Business employs Citizens. Citizens elect Government. Simple, elegant. More than the simple one-way power dynamics, there is also a second set of feedback loops.
SO, now every part of society is accountable. Citizens can elect Government to regulate Business, but Citizens can also boycott Business. Business can choose to hire and fire Citizens and also lobby the Government. The Government can regulate Business and is also the body that polices the Citizens.
However, just like our Rock-Paper-Scissors society from before, no one group can defend itself if the other two team up. A Government-Business team will be able to control Citizens easily. A Business-Citizens team can control Government. A Citizens-Government team can control Business.
And with that last connection made, the frame-work to discuss freedom of the press in developing democracies is set.
-
Why is a free press so important to a developing democracy? Why does its absence create so many problems for international development?
Well, the delicate balance in the ‘democracy as Rock-Paper-Scissors’ model requires something I didn’t list earlier. Something is missing: information.
People need information to act upon their interests. Government naturally collects information by way of administering its duties. Business also naturally collects information because of how vital good information is to a competitive market system. The Citizens, however, are not cohesive and do not naturally gather information on their own.
Who steps in to correct this? A Free Press.
A Free Press is necessary to keep the balance. No one needs to be a villain to throw the system out of balance, a simple lack of information will accomplish as much harm. Without a free press to supply information the citizens become vulnerable and vulnerability creates the potential to gain from conflict.
Remember, government naturally collects information, business naturally collects information, but the citizens do not. Some system must be in place to supply the citizens with information.
Political parties can provide the role of information gathering but we need to respect the difference between opinion-based editorial content and fact-based journalism. If the best source of information in a country is opinion-based, then the political discourse in that country may become overly opinion-based. Information gathering by political entities is a band-aid solution, we need something better.
A Free Press is necessary to keep the balance between government, private business, and citizens. All policies concerning freedom of speech in developing democracies should err on the side of tolerance, if the goal of that policy is to encourage democracy.
One could argue that curtailing freedom of speech is necessary to creating stability, even in a democracy. My argument, to the contrary, is that by curtailing freedom of speech the resulting lack of information also creates instability by weakening the citizens. Moreover, once the delicate balance maintained by a Free Press is lost, regaining it will be difficult.
This marks the fourth installment of my series on problems facing international development as explained through game theory (with some artistic license on the idea of game theory). As always I must warn readers that this post is quite academic and not nearly as fun to read as the rest of the blog. If you found your way into this sentence by accident, I am kindly pointing out the exit.
In this post I will examine the complex inner workings of the children’s game Rock-Paper-Scissors and compare it to the fragile and necessary democratic government check and balance system supported by a free press. I will also cover the concept of zero-sum games.
The game Rock-Paper-Scissors is simple, elegant, a classic. Two players choose one of three options simultaneously. Rock, Paper or Scissors? That is the question. Rock defeats Scissors, Scissors defeats Paper, and Paper defeats Rock. If both players make the same choice the game is a tie.
Or to put it into a decision matrix:
It is no accident that Rock-Paper-Scissors ends up in almost every textbook on game theory. There is a surprising level of complexity at work here.
First, you must play the game with simultaneous moves; otherwise it doesn’t work. If the game is sequential, whoever plays first will lose. If I have to play first and I choose Scissors, then you choose Rock, you win. If I have to play first, you win. If you have to play first, I win.
Second, the game is a zero-sum game. When Player A wins a point it is the same as Player B losing a point. If you add +1 and –1 together you get zero. When you sum the scores from both players the total will be zero in a zero-sum game. The dangerous thing about zero-sum games is that you can only gain at the expense of the other player. In a zero-sum game you must become adversaries.
Third, the game rewards erratic behavior and punishes predictability. If you always play Rock, then I will know to play Scissors. If you never play Rock, then I will always play Scissors. I can never lose by playing Scissors (if you never play Rock, and Scissors vs. Scissors is a tie) and on occasion I will win against Paper.
Another beautiful thing about Rock-Paper-Scissors is that you cannot be ‘good’ at the game. You can be ‘bad’ at the game by being predictable, but you cannot be ‘good’ at the game. No amount of study will make you a better player.
Now here’s where I make a jump in logic. Let’s take Rock-Paper-Scissors and apply it to a social setting. Instead of Rock being a choice, Rock is now a person. Same with Paper and Scissors. They live in harmony because they have achieved a social equilibrium. No one can use their personal leverage without consequences. If Rock starts attacking Scissors, Scissors has no immediate way to retaliate. Scissors will have to start attacking Paper so that Paper will start attacking Rock. When everyone is attacking everyone there is no advantage to conflict, no one can gain, everyone loses. No one in this group can gain by conflict because everyone is vulnerable to someone either directly or indirectly.
Let’s go one step further and imagine that Scissors and Paper decide to work together. After all, Scissors and Paper are crafty (thank-you. arts and crafts puns, I'm here all week). Instead of a three-player game we now have a two-player game. Rock is alone and can only play Rock whereas Scissors and Paper are a team that can choose to play Scissors or Paper (they always play Paper).
Now the contest is unfair. The team of Paper and Scissors will always win against lowly Rock. Rock versus Paper, Paper wins (Scissors cheers). Now there is a way to benefit from conflict. The team of Paper and Scissors can defeat Rock and steal Rock’s property. But wait, once Rock is removed, what is to stop Scissors from attacking Paper?
We have veered into the very hypothetical and it’s time to come back out. The point I am trying to make is that a harmonious social system can be built on mutual accountability. Furthermore, someone defecting from the system in search of personal gain can threaten that harmony.
What does this have to do with freedom of the press in developing democracies? I’m getting to that but I need to make one more connection first.
The nature of a functioning democracy is one of checks and balances. It is simple and elegant. The Rock-Paper-Scissors society lives in harmony because of checks and balances. It is simple and elegant because everyone is accountable; no one can act with impunity. Now substitute Rock-Paper-Scissors for Business-Government-Citizens.
Government regulates Business. Business employs Citizens. Citizens elect Government. Simple, elegant. More than the simple one-way power dynamics, there is also a second set of feedback loops.
SO, now every part of society is accountable. Citizens can elect Government to regulate Business, but Citizens can also boycott Business. Business can choose to hire and fire Citizens and also lobby the Government. The Government can regulate Business and is also the body that polices the Citizens.
However, just like our Rock-Paper-Scissors society from before, no one group can defend itself if the other two team up. A Government-Business team will be able to control Citizens easily. A Business-Citizens team can control Government. A Citizens-Government team can control Business.
And with that last connection made, the frame-work to discuss freedom of the press in developing democracies is set.
-
Why is a free press so important to a developing democracy? Why does its absence create so many problems for international development?
Well, the delicate balance in the ‘democracy as Rock-Paper-Scissors’ model requires something I didn’t list earlier. Something is missing: information.
People need information to act upon their interests. Government naturally collects information by way of administering its duties. Business also naturally collects information because of how vital good information is to a competitive market system. The Citizens, however, are not cohesive and do not naturally gather information on their own.
Who steps in to correct this? A Free Press.
A Free Press is necessary to keep the balance. No one needs to be a villain to throw the system out of balance, a simple lack of information will accomplish as much harm. Without a free press to supply information the citizens become vulnerable and vulnerability creates the potential to gain from conflict.
Remember, government naturally collects information, business naturally collects information, but the citizens do not. Some system must be in place to supply the citizens with information.
Political parties can provide the role of information gathering but we need to respect the difference between opinion-based editorial content and fact-based journalism. If the best source of information in a country is opinion-based, then the political discourse in that country may become overly opinion-based. Information gathering by political entities is a band-aid solution, we need something better.
A Free Press is necessary to keep the balance between government, private business, and citizens. All policies concerning freedom of speech in developing democracies should err on the side of tolerance, if the goal of that policy is to encourage democracy.
One could argue that curtailing freedom of speech is necessary to creating stability, even in a democracy. My argument, to the contrary, is that by curtailing freedom of speech the resulting lack of information also creates instability by weakening the citizens. Moreover, once the delicate balance maintained by a Free Press is lost, regaining it will be difficult.
Friday, July 23, 2010
A Super Market Woman (Video)
Packed goods are synonymous with high quality in Liberia. This comes from two factors, safety and consistency.
The most pervasive example is safety. Bagged or bottled water means disease-free water. In a place where illnesses like dysentery are major killers, placing a high value on processed goods can save lives.
Consistency of quality helps consumers believe they will get what they expect. Packaged goods do not vary greatly from one purchase to the next. In contrast, the open-air markets have bulk goods with low prices, but unknown value. Half of the beans in a pound could be inedible. The buyer doesn't know which half. The good portion may be perfectly safe, but the cost is double what one initially expects. Contamination is uncommon, but far more likely than something from a western style factory. The risk factor also adds to the cost and lessens the appeal of the purchase.
While Liberian's place high value on packaged goods, few Liberians produce them. Jacqueline's Productions is one of the few and an example of a product that can work.
Jacqueline, the proprietor, started making snacks 2 years ago after a trip to Benin. She tasted a coconut and ginger snack and decided to make her own. After a lot of trial and error, she developed a few recipes and started selling in open-air markets. She's expanded to about 7 varieties of snacks and several local super markets distribute her snacks.
She wanted the quality of her product to be high, so she got help on the business end of her project. While she learned about bookkeeping and commercial kitchens, she also looked for commercial packing. She had to go to Togo to find it.
Jacqueline's Productions now has an industrial label with a bold logo and an ingredient list too. While Westerners expect this and laws mandate it, it is not a part of market culture in Liberia. Also, 50% of people in Liberia can't read, so text on packaging doesn't have much meaning to many. Machine packaging and labeling set Jacqueline apart and achieve the goal she set, to be professional.
Jacqueline's products could be exported to America and the western world. Legislation like The African Growth and Opportunity Act (AGOA) and Aid organizations, including USAID, are helping African businesses like Jacqueline's to do that. They reduce barriers to entering the market by providing technical assistance and access to capital. They also subsidize travel to trade shows and for trade missions. Trade shows aren't just for the biggest players in industry, small businesses like Jacqueline's can have their lives improved dramatically through the contacts they make at a show.
It's a complex process, but the potential rewards are worth the expense and while Liberia's packed good industry is just beginning, Jacqueline proves that it can work.
If any of you are in the Washington D.C. or Kansas City area in early August, check out the The African Growth and Opportunity Act Forum for more insight into African business.
Further reading:
Thursday, July 22, 2010
Cassava Leaf and the WorldCup Final
Tonight two things are afoot. First, we are learning to cook Cassava Leaf. Second, the final WorldCup match is on TV and a wager is riding on the outcome.
Amos tells us how to start the meal.
First we need to cook some chicken the same way we cook pepper soup, but with less water in the pot. Once the meat is boiled and seasoned we need to take a second pot filled with water and add the green mushy cassava leaf. We then will boil the cassava leaf until it no longer has ‘that smell’ and to me that smell is like freshly cut grass. The next step is to add palm oil, which is red in color, to the cassava leaf and boil for a few more minutes. The last step is to add the seasoned meat from the first pot into the second pot and continue cooking until it is the right consistency. This last step is a matter of feel, and accordingly we plan to leave that to Amos.
For a Cassava Leaf recipe follow this link:
African-Recipe-Secrets
All of this action is going on in the kitchen, but simultaneously Spain and the Netherlands are playing for the cup. The wager we have riding is that I believe the game will go to penalty kicks, and Andrew believes that this won’t happen. All shots on goal, on either side of the field, are now very tense. To every missed shot I reply, “good D, good D.”
We finish step one of the Cassava Leaf. Step one is very similar to Pepper Soup so it’s easy.
The first 90 minutes of the match are over, the score is zero to zero and we are moving into overtime. The wager still stands and I am now only 30 minutes away from winning the bet.
The grass smell subsides and the entire 250ml bottle of red palm oil is poured in. The chicken in the first pot is poured into the second pot. The first pot is rinsed out and now it is time for Andrew to make rice.
The first half-period of overtime ends. The score is zero to zero. I am now only 15 minutes of no goals away from winning the bet.
The rice is now finished. The Cassava Leaf is now finished. Amos is a good cook and we are eager to learn what we can. Andrew’s rice turns out well too. It’s time to eat.
We serve ourselves to Cassava Leaf and rice and sit down to watch the last 15 minutes of the match. With barely 6 minutes left to play, Spain manages to get a shot past the Netherlands’ goal-keeper. The match will not continue to penalty kicks. I lose the bet.
-
I had as much fun collecting the ingredients for this meal as I did learning it. I got to see the machine that grinds the cassava leaf. It’s a small motorized grinder with a feeder funnel at the top with a side chute. As new leaves are pushed into the top, the bottom-most leaves get pushed into the grinder and come out a wet green paste. The person operating the machine, a boy about 12 years old, seemed very good at his job. I had to wait in line to get my cassava leaf from him.
I also found out how difficult it can be to get palm oil if you don’t know where to go. I simply could not find any palm oil in the stores. I had to go to the open-air market on Benson street.
Amos tells us how to start the meal.
First we need to cook some chicken the same way we cook pepper soup, but with less water in the pot. Once the meat is boiled and seasoned we need to take a second pot filled with water and add the green mushy cassava leaf. We then will boil the cassava leaf until it no longer has ‘that smell’ and to me that smell is like freshly cut grass. The next step is to add palm oil, which is red in color, to the cassava leaf and boil for a few more minutes. The last step is to add the seasoned meat from the first pot into the second pot and continue cooking until it is the right consistency. This last step is a matter of feel, and accordingly we plan to leave that to Amos.
For a Cassava Leaf recipe follow this link:
African-Recipe-Secrets
All of this action is going on in the kitchen, but simultaneously Spain and the Netherlands are playing for the cup. The wager we have riding is that I believe the game will go to penalty kicks, and Andrew believes that this won’t happen. All shots on goal, on either side of the field, are now very tense. To every missed shot I reply, “good D, good D.”
We finish step one of the Cassava Leaf. Step one is very similar to Pepper Soup so it’s easy.
The first 90 minutes of the match are over, the score is zero to zero and we are moving into overtime. The wager still stands and I am now only 30 minutes away from winning the bet.
The grass smell subsides and the entire 250ml bottle of red palm oil is poured in. The chicken in the first pot is poured into the second pot. The first pot is rinsed out and now it is time for Andrew to make rice.
The first half-period of overtime ends. The score is zero to zero. I am now only 15 minutes of no goals away from winning the bet.
The rice is now finished. The Cassava Leaf is now finished. Amos is a good cook and we are eager to learn what we can. Andrew’s rice turns out well too. It’s time to eat.
We serve ourselves to Cassava Leaf and rice and sit down to watch the last 15 minutes of the match. With barely 6 minutes left to play, Spain manages to get a shot past the Netherlands’ goal-keeper. The match will not continue to penalty kicks. I lose the bet.
-
I had as much fun collecting the ingredients for this meal as I did learning it. I got to see the machine that grinds the cassava leaf. It’s a small motorized grinder with a feeder funnel at the top with a side chute. As new leaves are pushed into the top, the bottom-most leaves get pushed into the grinder and come out a wet green paste. The person operating the machine, a boy about 12 years old, seemed very good at his job. I had to wait in line to get my cassava leaf from him.
I also found out how difficult it can be to get palm oil if you don’t know where to go. I simply could not find any palm oil in the stores. I had to go to the open-air market on Benson street.
Tuesday, July 20, 2010
The Rubber Market
Liberia's export economy is dominated by rubber. The Firestone Natural Rubber Company along with a few other firms ships over $200M of goods from Liberia each year. Rubber exports accounted for 88% of Liberia's exports in 2008. In 2010, the volume of trade has increased over the previous year and the price on the world market has increased also. New plantations have come online this year to diversify the industry. These are great signs for Liberia because the rubber industry is country's largest private sector employer with 6,500 employees and vital to its economy.
Firestone not only employs many people, it provides services as well. The company has over 16,000 students enrolled in its primary and secondary schools. It also has 17 medical facilities and a retirement program. Nothing else that I've heard about in the private sector matches it.
While Firestone is the best show in town in dollar terms, it has been accused of human rights violations including using child labor. Stopfirestone.org prods the company to make improvements and the prodding has had some positive results. Firestone recently stopped workers from carrying latex on their shoulders. The activist group asked the plantation to end the practice in a January 2010 letter and 6 months later, the company has shifted its procedure.
It is good that Firestone is able to increase production, provide services for its employees and that a vocal group can criticize its practices and get results. Firestone's power could and would completely censor a group like Stopfirestone.org in many countries. Liberia is demanding respect for its citizens and economic reality. Business and fairness both seem to be making progress here.
Sources:
Monday, July 19, 2010
My Heinz Training Pays-Off
Siafa Hage, Special Assistant to the Minister for Policy and Aid Coordination, asked me if I was doing anything. At the time I had only time-variable work, work that needs done but in no specific order with no specific deadline, so I said no. Siafa then invited me to go on a site inspection.
We visited a work site for a public works style project, cleaning out a canal in Monrovia, one of the many projects all over Liberia under the program. I just watched and listened to Siafa as he explained to the workers that he was there to make sure they were getting paid as planned. We then drove to a nearby office and watched some of the workers walk in and receive their pay. It was a routine kind of visit just to make sure that policy was meeting action. You can write the nicest paycheck policy in the world, but if no one uses the policy in action it’s a very expensive piece of paper.
A few days later, after the site visit, Siafa asked me again if I was doing anything, again I said no. Apparently I had made a good enough of an impression that he asked me to help with an assignment. A press conference was coming up soon and they needed posters.
I was put on a three-person team tasked to create a series of slides. The slides would then be turned into posters. I read lots of files and prepared an accurate but simple presentation of the information within hours. It was fast-paced and team-oriented policy analysis. Here was something I had been training to do over the past year.
When I looked at the budget, the numbers ‘looked’ wrong. Specifically, the budget was actually better managed than it first appeared from the data. So this is weird on two levels. First of all it has been my experience that when you find something odd in a budget you need to revise your appraisal downward instead of upward. Second, that I had somehow gained the capacity to ‘look’ at numbers and understand them intuitively. This new-found ability I attribute solely to Heinz and the quantitative-skills training focus. I was an English major in undergrad after all.
The work I did was edited some and then transferred to vinyl banners for the press conference. Here are two pictures of me with my favorite poster from the set. In the first picture you can see the ocean behind me because the Ministry of Planning and Economic Affairs is practically on the beach. In the second picture you can see the entrance to the ministry.
I may have been overly sparse on details in this post for discretion sake. I apologize. The banner, however, was used in a press conference so I know it's fair game.
We visited a work site for a public works style project, cleaning out a canal in Monrovia, one of the many projects all over Liberia under the program. I just watched and listened to Siafa as he explained to the workers that he was there to make sure they were getting paid as planned. We then drove to a nearby office and watched some of the workers walk in and receive their pay. It was a routine kind of visit just to make sure that policy was meeting action. You can write the nicest paycheck policy in the world, but if no one uses the policy in action it’s a very expensive piece of paper.
A few days later, after the site visit, Siafa asked me again if I was doing anything, again I said no. Apparently I had made a good enough of an impression that he asked me to help with an assignment. A press conference was coming up soon and they needed posters.
I was put on a three-person team tasked to create a series of slides. The slides would then be turned into posters. I read lots of files and prepared an accurate but simple presentation of the information within hours. It was fast-paced and team-oriented policy analysis. Here was something I had been training to do over the past year.
When I looked at the budget, the numbers ‘looked’ wrong. Specifically, the budget was actually better managed than it first appeared from the data. So this is weird on two levels. First of all it has been my experience that when you find something odd in a budget you need to revise your appraisal downward instead of upward. Second, that I had somehow gained the capacity to ‘look’ at numbers and understand them intuitively. This new-found ability I attribute solely to Heinz and the quantitative-skills training focus. I was an English major in undergrad after all.
The work I did was edited some and then transferred to vinyl banners for the press conference. Here are two pictures of me with my favorite poster from the set. In the first picture you can see the ocean behind me because the Ministry of Planning and Economic Affairs is practically on the beach. In the second picture you can see the entrance to the ministry.
I may have been overly sparse on details in this post for discretion sake. I apologize. The banner, however, was used in a press conference so I know it's fair game.
The Cocoa Market
The Commodities Market
On July 6th, The Financial Times of London issued a report on cocoa, Liberia's second largest agricultural export. It reported that even though prices of the commodity were near a 30 year high, the supply of the crop should decrease partly because of poor farming practices in Côte d'Ivoire which produces 40% of the world's cocoa and on increased demand in North America. Prices of cocoa have already risen 150% in the past 3 years. The combination should make the market ripe for hedge funds to exploit.
On July 17th, The FT reported that a hedge fund had taken control of 7% of the world's stock of cocoa. While it didn't predict a new future price, the hedge fund surely thinks that it will make a substantial profit on the trade. The prices will be passed to consumers.
Potential for Liberia
Liberia should gain from the chocolate lovers misfortune. Liberia is next to Côte d'Ivoire. They share a border and soil that is excellent for growing cocoa trees. Another 30% of the world's cocoa grows in West Africa, but very little from Liberia. Liberia's cocoa exports were just $1,373,000 in 2010, well under potential capacity (Côte d'Ivoire exported over $1 billion in cocoa).
Like other agriculture, cocoa farms were abandoned during the war years. Human capital with cultivation knowledge fled as well. This places Liberia at a disadvantage compared to its neighbor but it is not as far behind as it seems. Because of Côte d'Ivoire poor farming practices, Côte d'Ivoire must replace most of its trees in current production. Also, Côte d'Ivoire's producers are usually very small and fragmented. This legacy and corruption in Côte d'Ivoire give Liberian producers room to reinvent the cultivation process in West Africa with economies of scale and transparency.
The war's destruction prompts many to speculate that Liberia should be 30 years ahead of its prewar condition. Few nations in West Africa are where they could have been. Furthermore, histories that come with legacies like corruption are hard to disrupt. Liberia has great opportunity to reinvent the system because it must start again. Cocoa is one example of opportunity. The prices are right and supported by geography. The market awaits its move.
Sources:
- Cocoa
Published: July 6 2010 09:45 | Last updated: July 6 2010 14:28
http://www.ft.com/cms/s/3/a9b9943a-88cd-11df-8925-00144feab49a.html - Hedge fund develops taste for chocolate assets
By Jack Farchy in London
Published: July 16 2010 22:33 | Last updated: July 16 2010 22:33
http://www.ft.com/cms/s/0/e50feefc-9120-11df-b297-00144feab49a.html - Falling cocoa yields in Ivory Coast
By Javier Blas
Published: May 28 2010 23:08 | Last updated: May 28 2010 23:08
http://www.ft.com/cms/s/2/28e00036-67a0-11df-a932-00144feab49a,dwp_uuid=a712eb94-dc2b-11da-890d-0000779e2340.html - Intensified Cocoa for Sustainable Development in Liberia
Dr. James Gockowski
Sustainable Tree Crops Program
http://trend.ag.utk.edu/international/IntensifiedCocoaSustainableDevelopmentLiberia.pdf - Liberia 2009 Balance of Payments
Saturday, July 17, 2010
Balance of Payments
A balance of payments is an economic statement that records the value of inflows to and outflows from a country. This includes the value of goods and services, incomes to be paid, money transfers and debt. Goods, such as lumber or rubber, and services, such as health care and education, are familiar to most. Money transfers include donor funding, remittances and debt are a bit more obscure.
In the United States, the terms balance of trade and trade deficit are often noted in media to track goods. These are a subset of the balance of payments. Economic powerhouses don't have to worry about things like debt in the same way that poorer countries do, so the broader statement is forgotten in common reports. But to a poor country like Liberia, things like money transfers really matter.
These things matter because Liberia and many countries like it don't produce enough goods and services to bring in enough income. So, most of the money that keeps the country going comes from outside of the country as foreign aid.
Foreign aid to Liberia totaled $1,317 Billion USD in 2008. The United Nations Mission in Liberia, UNMIL, contributed $646 M while other UN organizations gave $136 M. Individual foreign governments gave $263M and the European Union gave $77M. This is huge amount is not debt, but humanitarian gifts. The World Bank estimates its GDP to be only $830 M USD, so aid outstrips trade.
This money has been spent to stabilize the country. Much of it has helped to reestablish the government and to provide a military force that no local militias can match. Half of the vehicles on the streets are marked as a gift. Many new schools and hospital are gifts as well. The money has helped the country immensely.
The balance of trade report makes the plaques on buildings and donation decals on trucks make sense. It helps explain that there is enough money flowing in to make Monrovia rents like those in New York. Big organizations have a lot of weight and it seems to be necessary to pull a country out of conflict.
Friday, July 16, 2010
"Hey white man, you want to get by?"
“Hey white man, you want to get by?”
I don’t know how to respond for a few seconds. This is the first time in my life I have been called ‘white man’. Apparently my patient waiting has been misunderstood.
“NO. No, I want to buy some bread.”
“What kind of bread?” I can see now that his wheelbarrow of bread holds two varieties of bread.
“How much do they cost?”
“This one is 25 dollars. This one is 35 dollars.”
“35 Liberty?”
“Yeah, 35 Liberty.”
The 35 Liberty bread has the look of being fresh baked with a nice crust. In comparison the 25 Liberty bread looks like an over-sized hot dog bun.
“I’ll take one of those.”
He wraps the 35 Liberty bread in a piece of newspaper. Then places that into a thin plastic bag.
I take the bread home and it is delicious. Not much compares to warm fresh baked bread purchased from a wheelbarrow.
-
I have tried several times since that day to find that man again and purchase more of his bread. No luck.
When I visited the Chamber of Commerce in Monrovia to talk to someone about the current climate for business I learned that one reason so many vendors choose to be transient and sell their goods out of wheelbarrows is that they can avoid having to pay taxes and registration fees.
The cost to register as a business in Monrovia is $400 USD, just to be a petty trader.[1] Unless you know your business will make at least a $400 USD profit this year it really is the logical move to become a wheelbarrow business. The system creates incentives for businesses to remain informal, un-taxed, and uncountable for GDP.
Also, I want more of that bread.
-
[1] http://www.mof.gov.lr/doc/QBI-1%20FORM%20%20(QUARTERLY%20GROSS%20INCOME%20DECLARATION%20).pdf, accessed on July 8, 2010.
I don’t know how to respond for a few seconds. This is the first time in my life I have been called ‘white man’. Apparently my patient waiting has been misunderstood.
“NO. No, I want to buy some bread.”
“What kind of bread?” I can see now that his wheelbarrow of bread holds two varieties of bread.
“How much do they cost?”
“This one is 25 dollars. This one is 35 dollars.”
“35 Liberty?”
“Yeah, 35 Liberty.”
The 35 Liberty bread has the look of being fresh baked with a nice crust. In comparison the 25 Liberty bread looks like an over-sized hot dog bun.
“I’ll take one of those.”
He wraps the 35 Liberty bread in a piece of newspaper. Then places that into a thin plastic bag.
I take the bread home and it is delicious. Not much compares to warm fresh baked bread purchased from a wheelbarrow.
-
I have tried several times since that day to find that man again and purchase more of his bread. No luck.
When I visited the Chamber of Commerce in Monrovia to talk to someone about the current climate for business I learned that one reason so many vendors choose to be transient and sell their goods out of wheelbarrows is that they can avoid having to pay taxes and registration fees.
The cost to register as a business in Monrovia is $400 USD, just to be a petty trader.[1] Unless you know your business will make at least a $400 USD profit this year it really is the logical move to become a wheelbarrow business. The system creates incentives for businesses to remain informal, un-taxed, and uncountable for GDP.
Also, I want more of that bread.
-
[1] http://www.mof.gov.lr/doc/QBI-1%20FORM%20%20(QUARTERLY%20GROSS%20INCOME%20DECLARATION%20).pdf, accessed on July 8, 2010.
Tuesday, July 13, 2010
The Tragedy of the Commons Meets Post-Conflict Property Rights
Hi there,
This is the third installment of my series on explaining problems in international development through game theory. In this post I will explain my favorite concept from the world of economics, ‘The Tragedy of the Commons’, and how it relates to the very tricky subject of property rights in a post-conflict situation. I will also cover the difference between a sequential move game and a simultaneous move game.
As before, I am warning anyone new to the cmuinliberia2010 blog that this post represents some of the driest and most academic writing here and that if you want to read something ‘fun’ (or in the Victorian English ‘droll’) I suggest scrolling down past this post immediately.
Now then, The Tragedy of the Commons is about sheep and common grazing land. The commons is an area of grass that several sheep owning families all claim equal ownership over, it’s common land. All of the families have sheep and all of the families use the commons to feed their sheep.
Let’s imagine things are in equilibrium. All of the families are poor but happy (or not miserable anyway) and are kind of like serfs tied to their land. Nobody tries to sell more sheep than their neighbor. Nobody works harder than they have to because there’s no point, any extra profit would go to the landlord anyway. Suddenly, however, the serfs are all freed from their contracts to the landlord and now may reap the benefits of their labor by making money. The profit motive arises. But, even though the concepts of private ownership and profit motive have been introduced into this system the old system of common land persists. Now the system is in disequilibrium, the eloquent Tragedy of the Commons explains why.
(Paraphrasing) Each family has the ability to purchase more sheep, grow more sheep, and make more money. But the land has its limits; if every family starts grazing more sheep at the same time the land will become over-used. So the individual has a choice, to graze more sheep or to maintain the status quo of no new sheep. If the land is over-grazed there won’t be enough food for any of the sheep, the sheep die, all of the sheep herding families will become destitute. From freedom to destitution in two easy steps.
Or to put it into a decision matrix:
Clearly anyone can see that disaster awaits if everyone grazes more sheep. Because the danger is simple to see, theoretically we could avoid it in a sequential move game. But this is not a sequential move game, this is a simultaneous move game, and that makes a big difference. Let’s say the land can handle 10 sheep. 10 sheep = good, 11 sheep = death (to simplify things a bit I am replacing the gray area of destitution and ecological decay with death). In a sequential move game, when the move to graze the 10th sheep happens the next player would have a simple choice between the status quo of no new sheep or death. Remain at 10 sheep versus death.
Or to put it into a decision tree:
In a sequential move game the choice is simple. Once the land has reached capacity no one would start grazing new sheep (in theory). But that’s not the situation we are in. We are in a simultaneous move game where everyone decides at the same time what to do (think rock-paper-scissors) and has to trust each other not to over-graze the land, dooming the whole community. Ask yourself, how much do you trust your neighbors? Would you trust your neighbors not to endanger your life in exchange for wealth? I’m not just being cheeky; some of us really like our neighbors.
What the Tragedy of the Commons is telling us is that under certain circumstances people acting on their own best interests will ruin their own environment. If ‘everyone’ owns the land then it’s really the same as no one owning the land. When no one owns the land then no one protects the land, but everyone still has an incentive to use the land as heavily as they can. Ergo … death, decay, destitution.
So how do we escape the Tragedy of the Commons? That’s a question that truly depends on context. Some people suggest moving to a pure private ownership model because if someone owns the land then at least that person will have a reason to protect the land. Some people suggest abolishing the concept of private property altogether. Some people suggest a middle-ground between public and private such as a land co-operative or a profit sharing corporation or a rotational ownership system etc.
To me, however, trying to ‘solve’ the Tragedy of the Commons is silly. You apply insight from The Tragedy of the Commons to more realistic policy concerns; you don’t solve it. The real insight is that the policy combination of common goods with no ownership and no protection coupled with private ownership and profit motive leads to decay. To ‘solve’ a problem you need context. SO, here’s my problem, property rights in a post-conflict society.
-
Property rights in a post-conflict society are difficult to handle. Who is to say who really owns a piece of land? If you apply the historical concept - where ownership is based on who was living there first, how far back in time do you go? And what happens if someone else shows up 20 years later with proof of having owned the land earlier still? If they now own the land but you still own the house, what happens? How can you create stability in ownership by the historical concept when there’s always more of the past? Another tactic could be to auction the land, but that obviously favors the elite over those whose only possession was their land. A robust system of legal arbitration would be nice, but that seems like a luxury when your nation is rebuilding itself. Also, a rush to use a court system before it is transparent and accountable could lead to corruption very quickly.
When people build houses on public land during a war, what can you do? There is no law. Either everyone owns the land equally or no one owns it. Either way there are no police to enforce property rights or remove squatters. And then when the war ends, who owns the land? Who owns the land? From a technical standpoint the old government is dissolved as the peace process replaces it with the new government. How can the new government lay claim to public land from a dissolved former state? And where do the people go if you take their land? This isn’t just a technocratic problem of ownership; people’s lives are involved.
-
Well, if we go back to the concept of simultaneous moves versus sequential moves I think it may help. If we simultaneously grant ownership to everyone for the land they have now, right as the conflict ends, then people who stole property (land-grabbed etc.) during the conflict would prosper. If we simultaneously try to arbitrate all of the land disputes in the entire nation, thousands if not millions of court cases depending on the nation, even a vibrant and transparent court system wouldn’t work for that many cases. A simultaneous move to collectivize all of the land and abolish public property would be backsliding on reform and lead to a more severe Tragedy of the Commons scenario where no one owns anything, thus no one protects anything, and the entire system is doomed to decay. Frankly, a simultaneous move solution doesn’t seem possible.
But what about a sequential move? What about one house? Just one house. We could set up an entire court to handle the ownership arbitration of one house, and invite the press to see how the system works. It would be a long and messy process, it needs to be a long and messy process so the public can see it and understand it. Establishing the ownership of one house creates the boundary line for one plot of land, but also partially creates the property lines for their neighbors. The sequence moves forward and we arbitrate the ownership of the next house, then the next house, and so on.
The concept between public and private ownership is still on the table too. If a community decides that a co-op land agreement makes the most sense, the sequential court system provides an arena to handle that. I am not advocating public over private ownership or private over public ownership. I am advocating for a sequential court system when it comes to post-conflict property rights.
This is the third installment of my series on explaining problems in international development through game theory. In this post I will explain my favorite concept from the world of economics, ‘The Tragedy of the Commons’, and how it relates to the very tricky subject of property rights in a post-conflict situation. I will also cover the difference between a sequential move game and a simultaneous move game.
As before, I am warning anyone new to the cmuinliberia2010 blog that this post represents some of the driest and most academic writing here and that if you want to read something ‘fun’ (or in the Victorian English ‘droll’) I suggest scrolling down past this post immediately.
Now then, The Tragedy of the Commons is about sheep and common grazing land. The commons is an area of grass that several sheep owning families all claim equal ownership over, it’s common land. All of the families have sheep and all of the families use the commons to feed their sheep.
Let’s imagine things are in equilibrium. All of the families are poor but happy (or not miserable anyway) and are kind of like serfs tied to their land. Nobody tries to sell more sheep than their neighbor. Nobody works harder than they have to because there’s no point, any extra profit would go to the landlord anyway. Suddenly, however, the serfs are all freed from their contracts to the landlord and now may reap the benefits of their labor by making money. The profit motive arises. But, even though the concepts of private ownership and profit motive have been introduced into this system the old system of common land persists. Now the system is in disequilibrium, the eloquent Tragedy of the Commons explains why.
(Paraphrasing) Each family has the ability to purchase more sheep, grow more sheep, and make more money. But the land has its limits; if every family starts grazing more sheep at the same time the land will become over-used. So the individual has a choice, to graze more sheep or to maintain the status quo of no new sheep. If the land is over-grazed there won’t be enough food for any of the sheep, the sheep die, all of the sheep herding families will become destitute. From freedom to destitution in two easy steps.
Or to put it into a decision matrix:
Clearly anyone can see that disaster awaits if everyone grazes more sheep. Because the danger is simple to see, theoretically we could avoid it in a sequential move game. But this is not a sequential move game, this is a simultaneous move game, and that makes a big difference. Let’s say the land can handle 10 sheep. 10 sheep = good, 11 sheep = death (to simplify things a bit I am replacing the gray area of destitution and ecological decay with death). In a sequential move game, when the move to graze the 10th sheep happens the next player would have a simple choice between the status quo of no new sheep or death. Remain at 10 sheep versus death.
Or to put it into a decision tree:
In a sequential move game the choice is simple. Once the land has reached capacity no one would start grazing new sheep (in theory). But that’s not the situation we are in. We are in a simultaneous move game where everyone decides at the same time what to do (think rock-paper-scissors) and has to trust each other not to over-graze the land, dooming the whole community. Ask yourself, how much do you trust your neighbors? Would you trust your neighbors not to endanger your life in exchange for wealth? I’m not just being cheeky; some of us really like our neighbors.
What the Tragedy of the Commons is telling us is that under certain circumstances people acting on their own best interests will ruin their own environment. If ‘everyone’ owns the land then it’s really the same as no one owning the land. When no one owns the land then no one protects the land, but everyone still has an incentive to use the land as heavily as they can. Ergo … death, decay, destitution.
So how do we escape the Tragedy of the Commons? That’s a question that truly depends on context. Some people suggest moving to a pure private ownership model because if someone owns the land then at least that person will have a reason to protect the land. Some people suggest abolishing the concept of private property altogether. Some people suggest a middle-ground between public and private such as a land co-operative or a profit sharing corporation or a rotational ownership system etc.
To me, however, trying to ‘solve’ the Tragedy of the Commons is silly. You apply insight from The Tragedy of the Commons to more realistic policy concerns; you don’t solve it. The real insight is that the policy combination of common goods with no ownership and no protection coupled with private ownership and profit motive leads to decay. To ‘solve’ a problem you need context. SO, here’s my problem, property rights in a post-conflict society.
-
Property rights in a post-conflict society are difficult to handle. Who is to say who really owns a piece of land? If you apply the historical concept - where ownership is based on who was living there first, how far back in time do you go? And what happens if someone else shows up 20 years later with proof of having owned the land earlier still? If they now own the land but you still own the house, what happens? How can you create stability in ownership by the historical concept when there’s always more of the past? Another tactic could be to auction the land, but that obviously favors the elite over those whose only possession was their land. A robust system of legal arbitration would be nice, but that seems like a luxury when your nation is rebuilding itself. Also, a rush to use a court system before it is transparent and accountable could lead to corruption very quickly.
When people build houses on public land during a war, what can you do? There is no law. Either everyone owns the land equally or no one owns it. Either way there are no police to enforce property rights or remove squatters. And then when the war ends, who owns the land? Who owns the land? From a technical standpoint the old government is dissolved as the peace process replaces it with the new government. How can the new government lay claim to public land from a dissolved former state? And where do the people go if you take their land? This isn’t just a technocratic problem of ownership; people’s lives are involved.
-
Well, if we go back to the concept of simultaneous moves versus sequential moves I think it may help. If we simultaneously grant ownership to everyone for the land they have now, right as the conflict ends, then people who stole property (land-grabbed etc.) during the conflict would prosper. If we simultaneously try to arbitrate all of the land disputes in the entire nation, thousands if not millions of court cases depending on the nation, even a vibrant and transparent court system wouldn’t work for that many cases. A simultaneous move to collectivize all of the land and abolish public property would be backsliding on reform and lead to a more severe Tragedy of the Commons scenario where no one owns anything, thus no one protects anything, and the entire system is doomed to decay. Frankly, a simultaneous move solution doesn’t seem possible.
But what about a sequential move? What about one house? Just one house. We could set up an entire court to handle the ownership arbitration of one house, and invite the press to see how the system works. It would be a long and messy process, it needs to be a long and messy process so the public can see it and understand it. Establishing the ownership of one house creates the boundary line for one plot of land, but also partially creates the property lines for their neighbors. The sequence moves forward and we arbitrate the ownership of the next house, then the next house, and so on.
The concept between public and private ownership is still on the table too. If a community decides that a co-op land agreement makes the most sense, the sequential court system provides an arena to handle that. I am not advocating public over private ownership or private over public ownership. I am advocating for a sequential court system when it comes to post-conflict property rights.
Monday, July 12, 2010
Infrastructure
Liberia has an infrastructure deficit. It is being addressed with huge investments for its main port, major roads and in telecommunications.
The telecommunications market is robust and much further along than other infrastructure. 4 major companies offer services and they have very competitive pricing for basic service. For prepaid voice services, the cost of entry is low. You can purchase credit in $5 USD increments and a sim card only $5 USD as well. This is a few day's pay for many in Monrovia, but it also makes it well within reach of nearly all families in the city. Even in interior towns, the phone service is adequate. Calls to the US are $0.05 to $0.10 per minute. The rise of mobile voice communications has been a good first step in modernizing Liberia and a path that other infrastructure can follow.
Data services, the other half of modern telecom, is well behind its voice counterpart. This problem is commonly known as The Digital Divide. The January 2009 Report of the ICFA-SCIC Monitoring Working Group places Africa as 16 years behind North America in its Internet access. It also states that the gap is widening due to common problems of developing nations like protectionism, inadequate human capital and unreliable electricity. Finally, the last mile, or how individual users connect to the telecommunications system, is also a great hurdle. These problems are all common to Liberia, but the country has taken steps to remedy the issues.
Liberia's internet access is mostly through 2004 era mobile phone technology with slow speeds that remind me of late 1990s dial-up service. This connects to satellite service that is slow compared to land cables. The service is prohibitively expensive at $60 per month for basic service and doesn't include voice service. This is only enough for a single user, not enough to share. The speed increases if you are willing to pay $100 per month or more. This gets you speeds that should be similar to mobile internet speeds currently available in the US. This is considered business class service, but is insufficient for anyone who has experienced broadband service in a developed country.
This situation should improve by late 2012 when the ACE, Africa Coast to Europe, submarine cable comes online. It should reduce the cost and time it takes to send data from North America to Africa by more than half (Internet End-o-End Performance Monitoring). Liberia has signed an intent to be connected to the cable along with over a dozen other countries and will pay $25 million of the $700 million cost for the cable. This is one of several major submarine cable that will go online in the next two years. Although the ACE Liberia has purchased access, it must physically connect to the cable, a process that has not been resolved. So, while the African market should support a respectable profit over the next several years, Liberian could still be let out if its internal market isn't organized internally.
While this should end the frustration of Westerns adjusting to life in Liberia, it should allow Liberians to become more acquainted to modern western communication. Currently, Liberian university students don't have email accounts and lack computers. The Liberian government doesn't have standard email either. Even ministers list Yahoo.com accounts on their business cards. Less expensive access should allow these groups to afford service and offer it reliably thanks to the ACE cable.
The ACE cable appears to lessen the gap between Africa and The West, but The United States is already rolling out its next generation of technology. The gap extends beyond the physical technology to the innovation that comes from making productive use of it. Moving to a culture of producers instead of simply consumers is a great challenge. The first steps toward great advancement have been laid.
Resources:
- The future of African Telecom
African Undersea Cables - Internet End-to-End Performance Monitoring
- New E. Coast of Africa Fibre
- PingEr project
Saturday, July 10, 2010
"Do they have coffee in Liberia?"
“Do they have coffee in Liberia?” I ask at least three people in Washington DC.
H. John Heinz III College organized a day trip for the three of us to Washington DC so that we can do two things. First, we need to get our Visas from the Liberian embassy. Second, we need to talk to people about Liberia itself so we might know what to expect when we land, especially work wise.
Right now, In addition to large policy issues facing Liberia, I am very concerned about coffee. I need to know whether or not to pack my French press. The space in my suitcase is precious and I need to know if I can get local coffee beans, otherwise the press is useless.
From the day’s conversations I get the general feeling like there is coffee in Liberia and that yes packing my travel size French press is a good idea.
Back in Pittsburgh I pack my French press and hope for the best.
-
After we arrived in Liberia several people told us that there was no coffee. I spent my first days in Liberia believing that there was no coffee.
Then we met a guy who grows coffee. The problem was that he didn’t roast the coffee himself, he just sold the raw beans. We thought about asking him for some raw coffee beans and roasting them ourselves. Kenneth has a vague idea on how to roast coffee and I used to work as a Barrista, like all English majors before me, and theoretically we might have figured it out. Realistically though, we didn’t have the equipment or the time.
Dejected I gave up on coffee. This happened sometime during our first week in Liberia.
At the end of our first week we went to a supermarket called Abi Joudi and right there on one of the shelves was a local brand of roasted coffee grounds, ‘Liberian Express’, packaged in a simple brown paper bag. I brewed a cup in the morning.
I’m not exactly a coffee connoisseur, so I can’t tell you what the coffee tastes like in terms of Ethiopian versus Columbian. I can tell you that it’s good coffee for a good price from a local supplier being sold in the supermarket. This is very good news. The capacity for local production of coffee exists, so if the local demand for coffee goes up a local producer could benefit and create growth.
H. John Heinz III College organized a day trip for the three of us to Washington DC so that we can do two things. First, we need to get our Visas from the Liberian embassy. Second, we need to talk to people about Liberia itself so we might know what to expect when we land, especially work wise.
Right now, In addition to large policy issues facing Liberia, I am very concerned about coffee. I need to know whether or not to pack my French press. The space in my suitcase is precious and I need to know if I can get local coffee beans, otherwise the press is useless.
From the day’s conversations I get the general feeling like there is coffee in Liberia and that yes packing my travel size French press is a good idea.
Back in Pittsburgh I pack my French press and hope for the best.
-
After we arrived in Liberia several people told us that there was no coffee. I spent my first days in Liberia believing that there was no coffee.
Then we met a guy who grows coffee. The problem was that he didn’t roast the coffee himself, he just sold the raw beans. We thought about asking him for some raw coffee beans and roasting them ourselves. Kenneth has a vague idea on how to roast coffee and I used to work as a Barrista, like all English majors before me, and theoretically we might have figured it out. Realistically though, we didn’t have the equipment or the time.
Dejected I gave up on coffee. This happened sometime during our first week in Liberia.
At the end of our first week we went to a supermarket called Abi Joudi and right there on one of the shelves was a local brand of roasted coffee grounds, ‘Liberian Express’, packaged in a simple brown paper bag. I brewed a cup in the morning.
I’m not exactly a coffee connoisseur, so I can’t tell you what the coffee tastes like in terms of Ethiopian versus Columbian. I can tell you that it’s good coffee for a good price from a local supplier being sold in the supermarket. This is very good news. The capacity for local production of coffee exists, so if the local demand for coffee goes up a local producer could benefit and create growth.
Thursday, July 8, 2010
The American Tax
Americans are greatly appreciated in Liberia. There is much respect afforded us. We are perhaps seen as well educated, perhaps rich (at least in relative terms), and representing an established well-being, that can not be threatened or taken away, by civil conflict or war. We in a sense represent comfort and stability. And this is what Liberian’s widely want.
On arriving to Monrovia, I knew that I would stick out. As a white man descendant from English, Irish, Scottish and French, I knew by my appearance I would perhaps seem out of place in Africa.
Walking down the streets its true, I am usually the one that is approached by people. Most do not come out directly and ask for money, but stealing a page from Steven Covey’s book 7-Habits of highly effective people, and focus on building a relationship. It usually begins with introductions and handshake, and then they ask if I wouldn’t mind if they walk with me. And of course I don’t. It is great to hear their stories.
There are also many people on the streets selling goods – scratch cards, trinkets, pots and pans, shoes, produce etc.; and providing services – shining shoes, changing money etc. And there are well-established business houses usually called So and So’s Business Center. When entering contract with the proprietors of these businesses and requesting a price for a good are service, they most often pause and look at me. Seemingly calculating how much they could ask for, with out me just walking away.
The other day we walked down to the waterside market. Travis bought some snails; I procured a large pot to make chili for some of our Liberian friends. I thought I got a good price. I paid L$850 which is roughly US$12. I would have paid much more in the states even shopping at Walmart – or so I told myself. We got home and the girl that cleans, Travis and Kenneth’s apartment asked how much I paid. I told her. And I found out I overpaid. She said the pot would have cost her L$500 (US$7.5).
Being new to the area, I am not quite sure what the appropriate prices are, and I am easily swayed into thinking that I am paying what is a fair price; finding out later it is not. I usually check with Liberian’s whom I have known for a while. They recognize that I do indeed pay more than they would. But they also seem to think this is acceptable, if not the way it is supposed to be. I am calling this premium that I am asked to pay for goods and services the white man tax, but do to some comments by some friends of mine, it might be more accurate to call it the American Tax.
On arriving to Monrovia, I knew that I would stick out. As a white man descendant from English, Irish, Scottish and French, I knew by my appearance I would perhaps seem out of place in Africa.
Walking down the streets its true, I am usually the one that is approached by people. Most do not come out directly and ask for money, but stealing a page from Steven Covey’s book 7-Habits of highly effective people, and focus on building a relationship. It usually begins with introductions and handshake, and then they ask if I wouldn’t mind if they walk with me. And of course I don’t. It is great to hear their stories.
There are also many people on the streets selling goods – scratch cards, trinkets, pots and pans, shoes, produce etc.; and providing services – shining shoes, changing money etc. And there are well-established business houses usually called So and So’s Business Center. When entering contract with the proprietors of these businesses and requesting a price for a good are service, they most often pause and look at me. Seemingly calculating how much they could ask for, with out me just walking away.
The other day we walked down to the waterside market. Travis bought some snails; I procured a large pot to make chili for some of our Liberian friends. I thought I got a good price. I paid L$850 which is roughly US$12. I would have paid much more in the states even shopping at Walmart – or so I told myself. We got home and the girl that cleans, Travis and Kenneth’s apartment asked how much I paid. I told her. And I found out I overpaid. She said the pot would have cost her L$500 (US$7.5).
Being new to the area, I am not quite sure what the appropriate prices are, and I am easily swayed into thinking that I am paying what is a fair price; finding out later it is not. I usually check with Liberian’s whom I have known for a while. They recognize that I do indeed pay more than they would. But they also seem to think this is acceptable, if not the way it is supposed to be. I am calling this premium that I am asked to pay for goods and services the white man tax, but do to some comments by some friends of mine, it might be more accurate to call it the American Tax.
Wednesday, July 7, 2010
National Capacity Summit Banner as Metaphor
It was a privilege. I was invited to the National Capacity Development Summit on Tuesday the 22nd of June. The event was held in Monrovia's city hall. I helped out with a few tasks, took notes on the day’s events. I got to hear many top-ranking members of the government speak including the Vice President and the Chief Justice.
'National Capacity' is like human capital or work skills. A serious problem facing Liberia is a lack of skilled labor in important sectors, especially health and education. To remedy this the Ministry of Planning and Economic Affairs, working with others, spent 18 months interviewing people across Liberia to draft up a plan to increase National Capacity. The summit marked the end of the process and the public sharing of their findings in a document called the NCDS, National Capacity Development Strategy.
In the morning before the guests arrived, during setup, two men from the city hall work crew made an attempt to hang a large banner that read “National Capacity Development Summit”. The banner would’ve hung up on the back wall of the room providing a nice backdrop for the table of distinguished guests. After trying and failing to hang the banner for an hour, as the guests started to arrive, the two men decide to unhook the banner from the sagging side and tuck the banner around a corner and out of sight.
When the summit broke for lunch the two men who tried to hang the banner in the morning came back and succeeded. As a metaphor you can’t get much better.
Did they know how to hang a banner at the beginning of the summit? No. Did they get the job done on time? No. Did they keep trying until the job was done? Yes.
Two Liberian men developed the capacity to hang a banner during the National Capacity Development Summit.
'National Capacity' is like human capital or work skills. A serious problem facing Liberia is a lack of skilled labor in important sectors, especially health and education. To remedy this the Ministry of Planning and Economic Affairs, working with others, spent 18 months interviewing people across Liberia to draft up a plan to increase National Capacity. The summit marked the end of the process and the public sharing of their findings in a document called the NCDS, National Capacity Development Strategy.
In the morning before the guests arrived, during setup, two men from the city hall work crew made an attempt to hang a large banner that read “National Capacity Development Summit”. The banner would’ve hung up on the back wall of the room providing a nice backdrop for the table of distinguished guests. After trying and failing to hang the banner for an hour, as the guests started to arrive, the two men decide to unhook the banner from the sagging side and tuck the banner around a corner and out of sight.
When the summit broke for lunch the two men who tried to hang the banner in the morning came back and succeeded. As a metaphor you can’t get much better.
Did they know how to hang a banner at the beginning of the summit? No. Did they get the job done on time? No. Did they keep trying until the job was done? Yes.
Two Liberian men developed the capacity to hang a banner during the National Capacity Development Summit.
Sunday, July 4, 2010
Righting Liberia's ship. But will it ever sail?
When working on my project for the Ministry of Commerce, I found my self researching extensivley on Industrial Policy. A name that kept coming up was that of Dani Rodrik, a professor at the Kennedy School. Serendipitously I met a someone who attends the school and has taken a course with Dr. Rodrik on Industrial Policies. The other day we met for coffee; my intention was to pick her brain for every bit of wisdom. Being a student at Harvard, she is very bright, and made what I think was a very appropriate analogy - working in Liberia is like plugging the wholes in sinking ship, with few qualified hands on deck. This is something that I want to explore and further ask the question, will the ship ever sail?
I don't want to get lost in the analogy and not provide any analysis, but it is important to make a distinction. Liberia is no longer a "sinking" ship. As I have explored in my previous posts there was a time when Liberia was in a disastrous political, social and economic condition, but that time has largely passed. The holes have largely been plugged and the intention now (and has been for sometime) is to establish the framework that will hopefully patch the holes for good.
Is Liberia on a course of sustainable development? And, will it ever sail? Is what being done currently by the government and various aid agencies beneficial or is it patching wholes that will only become unpatched months or years from now.
There are an immense number of NGOs, volunteer and aid agencies, as well as the UNDP, providing the social services that the government or local agencies are unable to provide. Many of the most competent people in government, salaries' are being supplemented by these same organizations. The "hands on deck" who are largely patching the holes (policy wonks) and bailing the water (aid and social service providers) are largely foreign nationals and here for a short period of time. This is not to say that there are not locals serving in these roles as well, but the major thrust as I see it is coming from human capital imports from other countries.
I have been reading a book by Jane Jacobs, Cities and the Wealth of Nations. She argues that the path to economic development is through creating import-replacements. I would argue this holds true for the civil service. If the country largely depends on the expertise of others for long, the civil service will not be able to staff the framework that is being developed by the very competent leaders of the government with the help of the human capital imports.
The great news is that The Government is acutely aware of this issue. Travis just the other day attended an unveiling of the National Human Capacity Development Plan, by the Ministry of Planning and Economic Affairs. In this plan they lay out how they development of the civil service of Liberia, will occur and how staffing of the Ministries will occur moving forward.
I hope that this plan is successfully implemented, but I would look for much of it to be undertaken after the 2011 elections. Many in the ranks of the Government Ministries are hold overs, in place for political reasons and not necessarily for merit.
Once those "on deck" are more capable of implementing plans and taking note of the many reports that have been written, it is more likely that the "ship will sail"; and the government will more effectively establish an environment that is enabling and supportive of sustainable growth, instead of itself being a barrier.
I don't want to get lost in the analogy and not provide any analysis, but it is important to make a distinction. Liberia is no longer a "sinking" ship. As I have explored in my previous posts there was a time when Liberia was in a disastrous political, social and economic condition, but that time has largely passed. The holes have largely been plugged and the intention now (and has been for sometime) is to establish the framework that will hopefully patch the holes for good.
Is Liberia on a course of sustainable development? And, will it ever sail? Is what being done currently by the government and various aid agencies beneficial or is it patching wholes that will only become unpatched months or years from now.
There are an immense number of NGOs, volunteer and aid agencies, as well as the UNDP, providing the social services that the government or local agencies are unable to provide. Many of the most competent people in government, salaries' are being supplemented by these same organizations. The "hands on deck" who are largely patching the holes (policy wonks) and bailing the water (aid and social service providers) are largely foreign nationals and here for a short period of time. This is not to say that there are not locals serving in these roles as well, but the major thrust as I see it is coming from human capital imports from other countries.
I have been reading a book by Jane Jacobs, Cities and the Wealth of Nations. She argues that the path to economic development is through creating import-replacements. I would argue this holds true for the civil service. If the country largely depends on the expertise of others for long, the civil service will not be able to staff the framework that is being developed by the very competent leaders of the government with the help of the human capital imports.
The great news is that The Government is acutely aware of this issue. Travis just the other day attended an unveiling of the National Human Capacity Development Plan, by the Ministry of Planning and Economic Affairs. In this plan they lay out how they development of the civil service of Liberia, will occur and how staffing of the Ministries will occur moving forward.
I hope that this plan is successfully implemented, but I would look for much of it to be undertaken after the 2011 elections. Many in the ranks of the Government Ministries are hold overs, in place for political reasons and not necessarily for merit.
Once those "on deck" are more capable of implementing plans and taking note of the many reports that have been written, it is more likely that the "ship will sail"; and the government will more effectively establish an environment that is enabling and supportive of sustainable growth, instead of itself being a barrier.
Thursday, July 1, 2010
Minnesota in Liberia
I moved from Saint Paul, Minnesota to Pittsburgh to attend Carnegie Mellon one year ago today. It was a big step personally and a long distance to travel so that I could gain skills to make a better life for myself. The life I had was very good and Saint Paul is a great city, but my future was more important than my past. Although I only lived in Minnesota as an adult, it is home.
While I knew that The Twin Cities has a large Liberian population, I didn't realize the extent of its Liberian connection until getting to Liberia. I've met two deputy ministers who've called Minnesota home. I was very surprised when the minister who coordinated our arrival knew the organizations on my resume. They are not national organizations, so I don't expect people to be familiar with many of them. The minister took some pleasure in his full awareness. The conversation and familiarity were a welcomed start to my time here.
I've come across Minnesota connections both in my work and on the street. For work, I've spent a lot of time combing import data. One of the first example documents that I received cleared used clothing and other miscellaneous items for import. The seller lived in Brooklyn Park, Minnesota, a Minneapolis suburb and home to a sizable Liberian community. The document acquainted me with the import process and it alerted me to one of the by products of migration - cultural artifacts.
Dokoflag, the local term for second-hand clothing, is the best example because it is on every street of Monrovia. Today, as I entered the Ministry of Commerce, I met Gray. I introduced myself because he was wearing a t-shirt with Eagan CCM Squirt Hockey emblazoned on it. Eagan is a Twin Cities suburb. The day prior, I saw a man wearing an SEIU Local 284 t-shirt; it's a labor union with an office in South Saint Paul, just a few miles from Eagan. During my first week, I saw a man in a 2007 Twin Cities Marathon 10 Mile finisher shirt. I also own that t-shirt because I ran in that race and finished well. I'm sure the man in my t-shirt didn't participate.
Each example of dokoflag reminded me that as people flow out of a place, they keep many connections and send things back to their place of origin. Exchanges keep taking place. The path over which they travel seems to get more extensive. Sometimes, human capital returns and runs a ministry or even becomes president. Dokoflag is just the most tangible example.
Between meeting ministers and other government staff that have lived in Minnesota, seeing import documents with familiar suburbs and dokoflag, I'm reminded of Minnesota often. It is amusing to encounter unexpected connections a quarter of the world away. I escaped the state and now it chases me.
I'm tempted to find out the total value of imports by US State since I have access to the system. I'd like to compare the geographic distribution of Liberians to the import data. I'm sure that some expected patterns would emerge. Until then, my eyes are open for signs of home.
Today's temperatures:
| Monrovia | Minneapolis | |
| Temperature: | 28c | 29c |
More on dokoflag
The words and images on dokoflag lose much of their meaning outside of American culture. No one plays ice hockey in Monrovia, few are in labor unions and I don't think any organized race exists. The shirts just have to look nice enough to wear about town. Many dokoflag look new.
Dokoflay extends beyond t-shirts to any type of clothing. Sometimes its more Nordstrom Rack than Goodwill. Liberians buy dokoflag, so these may be second hand but they are not threadbare.
For more information on topics in this post:
Liberia's Balance of Trade including info on used clothing
Minneapolis Star Tribune: A People Torn: Liberians in Minnesota a multi-part report from 2007
The Tragedy of the Lemons Meets Aid NGOs
Hi again,
Here is the second installment of my series on game theory explanations for the difficulties facing international development work. I will be comparing Aid NGOs to the Tragedy of the Lemons while also introducing the concept of decision trees.
Two quick words of caution to the reader: First, this is dry-reading in comparison to the rest of the blog, so if you want fun please scroll down. Second, at no point should you mistake economics for a science. Science is a permanent search for temporary truth built on a rigorous process of empirical data collection and consensus by peer review. Economics uses sciences like math to further its cause, but economics remains to this day philosophy.
To begin, ‘The Tragedy of the Lemons’ is a well-known economics lesson about the importance of measuring the quality of goods. The first important thing to know about the Tragedy of the Lemons is that ‘lemon’ is slang for a used car in poor condition.
Okay. Imagine you want to buy a used car. You go to a used car dealer. You are presented with two used cars for sale but you cannot measure the value of either. These two cars look exactly the same. You also know that 1 of the 2 cars is a ‘lemon’ and the other is a quality ‘pre-owned’. You know that the ‘lemon’ is worth 500 dollars (an arbitrary number) and that the quality ‘pre-owned’ car is worth 5,000 dollars.
The essential choice in this situation is how much would you be willing to pay for an item that could be worth 500 dollars or 5,000 dollars. You have no way of knowing which car is which. Also, the seller is a decision maker. They choose which car to sell you given the offer you make, or if to sell to you at all.
If you offer the dealer $500 the only car they would sell you would be the lemon, because no seller will intentionally operate at a loss (in the realm of economics) and would not sell you a $5,000 car for only $500. They would lose $4,500.
Or, to put it into a decision matrix:
The Seller will do better by selling you a lemon in either situation, ($4,500 dollar loss versus fair deal, $4,500 gain versus fair deal). The rational choice is for the Seller to choose Lemon. The buyer will understand this and make their choice between the remaining two options ($4,500 loss versus fair deal). The rational choice is for the Buyer to offer $500.
Or, to put it into a decision tree:
First the Buyer decides between their two choices, then the Seller decides between their two choices. The outcome is the same as the decision matrix, but decision trees can be helpful as a visual alternative or when dealing with multiple decisions in a sequence. The important thing to learn about game theory here is that the order in which moves are made influences outcomes. The Seller having the final move gives the Seller an advantage.
Also keep in mind that the car seller is not a villain. They will sell you a $500 car for $5,000 out of pure economic interest, the same way that you would happily purchase a $5,000 car for only $500.
What is tragic about this situation is that when the only rational choice for both players is to buy and sell ‘lemons’ then the market for the superior good disappears. Yes, better cars exist, but who will buy them and who will sell them?
The nature of the game is tragic; it leads to a world of ‘lemons’.
In contrast to the lemon world is one where we have a mechanic who can tell the difference between lemons and pre-owneds (for a fee) and suddenly the economy all starts working again. Shirtsleeves are rolled up, roses blossom and all the world’s children prosper.
Or, to put it into a decision tree:
Basically, you must be able measure something that is valuable in order to promote its value. Otherwise you destroy the market for valuable goods and all of society suffers for the loss. Also, this measuring system can be its own business.
-
It is here that I make the argument that the Tragedy of the Lemons concept can be applied to Aid NGOs. Aid based Non-Governmental Organizations. Aid NGOs fit the Tragedy of the Lemons concept well because we all know what an Aid NGO looks like from the outside, yet there are little to no truly useful ways to measure the quality of an NGO (see what’s under the hood). They all attempt to do good things, but how can we know who is successful and who is a ‘lemon NGO’?
By comparison, for-profit business is easy to measure. Did you make money? Yes. How much money? This much. It’s right here on our audited statement. Did you help people? Yes, by providing goods and services people wanted. In the business world the non-performers are weeded out. On occasion the importance placed on profits over ethics will lead to bad business practices, but poor performance is never tolerated in business (in theory).
In contrast, we cannot measure the value of Aid NGOs against each other. This causes two very difficult problems for the international development community and developing countries. First, you can’t get rid of the ‘lemon NGOs’ without losing the valuable ones. Second, you can’t target more money to the better NGOs because you don’t know which are which.
Moreover, Aid NGO work that is poorly managed is worse than no aid at all because aid money can lead to inflation, market distortion, and lost opportunities to have spent the money on something more useful. Worse still, the loss of trust among the local community for unmet promises from the ‘lemon NGOs’ will make it more difficult for well-managed Aid NGOs to operate.
We have no way of knowing which NGOs are succeeding at their missions and which are simply causing inflation with their high salaries paid in foreign monies. Well-managed NGOs bring human development (safe water, access to food, human rights, etc.). Poorly managed NGOs create market bubbles in the countries that can least afford them. But, to backtrack from hyperbole, it’s not a bipolar system of good and bad. There is a spectrum that ranges from the truly wonderful to the truly incompetent, and not all NGOs are well paid.
-
The Tragedy of the Lemons is solved by a wonderful mechanic who simply knows what cars are worth. The mechanic tells you the value of a car, for a price. The mechanic runs a private business built to support the existence of another business. I propose that The Tragedy of the Lemons meets Aid NGOs can be fixed in the much the same manner.
If we can prioritize funds to better performing NGOs, if we can remove the ‘lemons’ from the system, then we may be able to preserve the most important aspect of development work, the local communities’ trust. To do this we need a series of measurements supported by a network of smaller private groups, much like a credit bureau supports banks. Private enterprise created to measure the effectiveness of Aid NGOs.
Here is the second installment of my series on game theory explanations for the difficulties facing international development work. I will be comparing Aid NGOs to the Tragedy of the Lemons while also introducing the concept of decision trees.
Two quick words of caution to the reader: First, this is dry-reading in comparison to the rest of the blog, so if you want fun please scroll down. Second, at no point should you mistake economics for a science. Science is a permanent search for temporary truth built on a rigorous process of empirical data collection and consensus by peer review. Economics uses sciences like math to further its cause, but economics remains to this day philosophy.
To begin, ‘The Tragedy of the Lemons’ is a well-known economics lesson about the importance of measuring the quality of goods. The first important thing to know about the Tragedy of the Lemons is that ‘lemon’ is slang for a used car in poor condition.
Okay. Imagine you want to buy a used car. You go to a used car dealer. You are presented with two used cars for sale but you cannot measure the value of either. These two cars look exactly the same. You also know that 1 of the 2 cars is a ‘lemon’ and the other is a quality ‘pre-owned’. You know that the ‘lemon’ is worth 500 dollars (an arbitrary number) and that the quality ‘pre-owned’ car is worth 5,000 dollars.
The essential choice in this situation is how much would you be willing to pay for an item that could be worth 500 dollars or 5,000 dollars. You have no way of knowing which car is which. Also, the seller is a decision maker. They choose which car to sell you given the offer you make, or if to sell to you at all.
If you offer the dealer $500 the only car they would sell you would be the lemon, because no seller will intentionally operate at a loss (in the realm of economics) and would not sell you a $5,000 car for only $500. They would lose $4,500.
Or, to put it into a decision matrix:
The Seller will do better by selling you a lemon in either situation, ($4,500 dollar loss versus fair deal, $4,500 gain versus fair deal). The rational choice is for the Seller to choose Lemon. The buyer will understand this and make their choice between the remaining two options ($4,500 loss versus fair deal). The rational choice is for the Buyer to offer $500.
Or, to put it into a decision tree:
First the Buyer decides between their two choices, then the Seller decides between their two choices. The outcome is the same as the decision matrix, but decision trees can be helpful as a visual alternative or when dealing with multiple decisions in a sequence. The important thing to learn about game theory here is that the order in which moves are made influences outcomes. The Seller having the final move gives the Seller an advantage.
Also keep in mind that the car seller is not a villain. They will sell you a $500 car for $5,000 out of pure economic interest, the same way that you would happily purchase a $5,000 car for only $500.
What is tragic about this situation is that when the only rational choice for both players is to buy and sell ‘lemons’ then the market for the superior good disappears. Yes, better cars exist, but who will buy them and who will sell them?
The nature of the game is tragic; it leads to a world of ‘lemons’.
In contrast to the lemon world is one where we have a mechanic who can tell the difference between lemons and pre-owneds (for a fee) and suddenly the economy all starts working again. Shirtsleeves are rolled up, roses blossom and all the world’s children prosper.
Or, to put it into a decision tree:
Basically, you must be able measure something that is valuable in order to promote its value. Otherwise you destroy the market for valuable goods and all of society suffers for the loss. Also, this measuring system can be its own business.
-
It is here that I make the argument that the Tragedy of the Lemons concept can be applied to Aid NGOs. Aid based Non-Governmental Organizations. Aid NGOs fit the Tragedy of the Lemons concept well because we all know what an Aid NGO looks like from the outside, yet there are little to no truly useful ways to measure the quality of an NGO (see what’s under the hood). They all attempt to do good things, but how can we know who is successful and who is a ‘lemon NGO’?
By comparison, for-profit business is easy to measure. Did you make money? Yes. How much money? This much. It’s right here on our audited statement. Did you help people? Yes, by providing goods and services people wanted. In the business world the non-performers are weeded out. On occasion the importance placed on profits over ethics will lead to bad business practices, but poor performance is never tolerated in business (in theory).
In contrast, we cannot measure the value of Aid NGOs against each other. This causes two very difficult problems for the international development community and developing countries. First, you can’t get rid of the ‘lemon NGOs’ without losing the valuable ones. Second, you can’t target more money to the better NGOs because you don’t know which are which.
Moreover, Aid NGO work that is poorly managed is worse than no aid at all because aid money can lead to inflation, market distortion, and lost opportunities to have spent the money on something more useful. Worse still, the loss of trust among the local community for unmet promises from the ‘lemon NGOs’ will make it more difficult for well-managed Aid NGOs to operate.
We have no way of knowing which NGOs are succeeding at their missions and which are simply causing inflation with their high salaries paid in foreign monies. Well-managed NGOs bring human development (safe water, access to food, human rights, etc.). Poorly managed NGOs create market bubbles in the countries that can least afford them. But, to backtrack from hyperbole, it’s not a bipolar system of good and bad. There is a spectrum that ranges from the truly wonderful to the truly incompetent, and not all NGOs are well paid.
-
The Tragedy of the Lemons is solved by a wonderful mechanic who simply knows what cars are worth. The mechanic tells you the value of a car, for a price. The mechanic runs a private business built to support the existence of another business. I propose that The Tragedy of the Lemons meets Aid NGOs can be fixed in the much the same manner.
If we can prioritize funds to better performing NGOs, if we can remove the ‘lemons’ from the system, then we may be able to preserve the most important aspect of development work, the local communities’ trust. To do this we need a series of measurements supported by a network of smaller private groups, much like a credit bureau supports banks. Private enterprise created to measure the effectiveness of Aid NGOs.
Subscribe to:
Comments (Atom)
