The Next Factory of the World

Irene Yuan Sun.
China is now the biggest foreign player in Africa. It's Africa's largest trade partner, the largest infrastructure financier, and the fastest-growing source of foreign direct investment. Chinese entrepreneurs are flooding into the continent, investing in long-term assets such as factories and heavy equipment. Considering Africa's difficult history of colonialism, one might suspect that China's activity there is another instance of a foreign power exploiting resources. But as author Irene Yuan Sun vividly shows in this remarkable book, it is really a story about resilient Chinese entrepreneurs building in Africa what they so recently learned to build in China--a global manufacturing powerhouse. The fact that China sees Africa not for its poverty but for its potential wealth is a striking departure from the attitude of the West, particularly that of the United States. Despite fifty years of Western aid programs, Africa still has more people living in extreme poverty than any other region in the world.

Those who are serious about raising living standards across the continent know that another strategy is needed. Chinese investment gives rise to a tantalizing possibility: that Africa can industrialize in the coming generation. With a manufacturing-led transformation, Africa would be following in the footsteps of the United States in the nineteenth century, Japan in the early twentieth, and the Asian Tigers in the late twentieth. Many may consider this an old-fashioned way to develop, but as Sun argues, it's the only one that's proven to raise living standards across entire societies in a lasting way. And with every new Chinese factory boss setting up machinery and hiring African workers--and managers--that possibility becomes more real for Africa. With fascinating and moving human stories along with incisive business and economic analysis, "The Next Factory of the World" will make you rethink both China's role in the world and Africa's future in the globalized economy.

Africa Resest

Edited by Dr. Theodore Ahlers and Edited by Dr. Harinder S. Kohli.
This book assesses the challenges and provides concrete policy recommendations that can be taken by Africa's leaders and citizens in the key areas to reset their economic trajectory, achieve their desired convergence, and meet the aspirations of their people.
It combines analytical work from other regions, particularly from Asia and compares key indicators in key policy areas for Africa and Asia to draw lessons for the future.

Sustainable Development and Human Rights in Africa

Picard, Buss, Seybolt, and Lelei.
Many new development initiatives have been introduced in Africa over the past few decades. Each of these has been heralded as marking a new era in the continent’s development. However, many of these initiatives have failed to produce sustained results due to numerous challenges, including, most importantly, the lack of good governance. The Africa Progress Panel stated in 2011 that good governance is the key enabling factor for sustainable development. This book discusses the role good governance plays in achieving sustainable development and eradicating extreme poverty in Africa.

The contributed chapters in this book seek to broaden the policy debate and provide conversations about the sustainable development challenges facing African countries from multiple viewpoints and interdisciplinary perspectives―from academics, researchers, policymakers, and practitioners in the field. The book focuses on the governance perspectives of practitioners who deal with day-to-day realities on the ground, with the goal to use evidence-based information to make informed policies, programs, and strategies to move the continent toward achieving sustainable development.

This book tries to strike a balance between recognizing the need to bring politics back into development programs and understanding the limitations of political institutions in weak states. To that end, it looks at the challenges of development from the perspective of human security, with a focus on strengthening the human resource component of African economies in order to achieve better governance as part of a sustainable development process.

Solving the energy poverty problem in sub-Saharan Africa

John O. Ifediora.

Sub-Saharan Africa has the dubious distinction of having the lowest electricity generation capability, and its inhabitants suffer the most debilitating energy poverty in the world. Of the over one billion residents of the sub-continent, an estimated 631 million of them are without reliable access to electricity; millions more rely on solid biomass for cooking and generating light. To bridge the electricity gap, urban and rural areas are dotted by a variety of portable generators powered by fossil fuels, with attendant environmental and noise pollution. For the few connected to power grids, or have access to off-grid renewable power sources, the average annual consumption of electricity in the region is 489 Kilowatt hours per capita, which is approximately 5% of per capita consumption in the United States. With increasing urbanization and population growth, demand for electricity grew by 35% between 2000 and 2010; the International Energy Agency predicts that demand would continue to grow by 4% every year through 2040; at this date half a billion Africans are expected to remain without access to steady-state electricity unless corrective measures are taken.

That sub-Saharan Africa suffers from acute electricity shortage is common knowledge, but this need not be the case for a region incredibly rich in fossil fuels, and endowed with an abundance of renewable energy sources. More distressingly, however, is that electricity and how it is generated and distributed, except for renewable power, are old technologies readily accessed with relative facility. Put differently, if it is presented by a secondary school student as a science project it should deservedly not win any prize. Then what explains the demand-supply mismatch of this basic service in African countries?

The problem is simple enough, but the solution is not, for it implicates a host of policy-driven responses, a collective will to dedicate needed resources to the energy sector, and access to financing and modern technologies that enable efficient coupling of on-grid and off-grid infrastructure. Given the region’s vast fossil fuel reserves, and the abundance of renewable energy sources, it has the potential to generate up to 11,000 GW of electricity through a combination of solar power, wind energy, natural gas and hydroelectricity. Unlocking this potential is the proper domain of policymakers and invested interests in the private sector.

The Why Factor.
As is true with most development projects in sub-Saharan Africa, the absence of a national will to follow through with dedicated effort, and responsive institutional oversight afford, at the first instance, the primary source of the abysmal state of electricity generation and distribution in the continent. Poor planning and distortionary regulatory policies in the power industries have led to persistent electricity shortages that have retarded economic development across the region. In point of fact sub- Saharan Africa has far more energy resources to meet its current and future needs if judiciously managed. As of 2012, the International Energy Agency (IEA) estimates that the region has the capacity to generate approximately 11 gigawatts (GW) of electricity from different sources: Solar (10,000 GW), Geothermal (15 GW), Wind (109 GW), Hydroelectric (350 GW), Natural Gas (400 GW), and Coal (300 GW). This cumulative endowment of potential generation capacity is, however, not evenly spread across the sub-continent; many of the nation-states in the region are indeed resource-poor, and would require trans-national connectivity to meet their respective electricity requirement.

But real economic growth is always and everywhere positively related to industrialization and the ability to manufacture tangible products; it is thus impossible to envision a realistic pathway to development, growth and sustainable productivity in the region without a regime of steady-state supply of electricity.

Africa’s electricity generation capacity is seriously burdened by a host of factors, of which poor management of inherited centralized model of electricity supply, now discredited for its inefficiency, is the most obvious. In a centralized model, a government-run monopoly generates power and feeds it to a centralized national grid network from which electricity is distributed to end users. This has been the African experience. Coupled with incompetent leadership and corrupt practices, Africa’s utilities became a bastion of bloated monopolies without improper regulatory oversight, and unresponsive to the energy needs of consumers. Because they rely on costly fossil fuels such as oil and gas that are subject to price volatility, and consistently lost power from inefficient grids, power supply remains erratic; with high tariffs, and unpaid electric bills by institutional customers, the utilities soon became financially unstable. The ones that relied substantially on hydropower did not fare better due to climate change that gave rise to periodic lows and highs of water levels in the dams.

Calling in Market Forces.
In recognition of the problems and inefficiencies that accompany a centralized power supply system, African governments have grudgingly embraced privatization of their energy industries. But here again bad policies get in the way. Take the case of Nigeria. For over a decade, the government began the process of breaking-up the old centralized power supply network and relinquished two segments of the power supply chain to private investors. But it retained control of the national grid system which receives generated power, and then decides which of the privatized distribution companies would get the generated power, and how much. In this special Nigerian case, only the generating and distribution arms of the energy sector are privatized; the transmission segment is retained by the government.

This is problematic for two reasons; first, it leaves the heart of the power supply chain in the hands of an agency not driven by market incentives, and susceptible to politics and corrupt practices. Secondly it defeats the essence of privatization, which in the normal run of things, forces all invested interests in the industry to be efficient and attentive to consumer demands. The practical effect of this norm is that the transmission system which constitutes the national grid network has at its peak a limited capacity of approximately 6000MW; this means that even if the privatized generation segment manages to generate more than this level of power, the national grid is incapable of accommodating more; the rest goes to waste. A profit-driven entity would expand the grid capacity as a matter of course.

The awful result is that the expected benefit from privatizing Nigeria’s power sector did not materialize, and power supply to end users remain unchanged, and in many instances lower than pre-privatization era. A genuine privatization initiative would require the transmission segment to be in private hands.

Addressing Africa’s Energy Poverty.
To effectively address the shortfalls of Africa’s electricity generation, and debilitating energy poverty, a unified effort by policy makers and private sector actors is needed to marshal current scientific knowledge, technical expertise, and informed public policy on renewable energy. Such unified will of purpose, as it were, facilitates identification of areas of underinvestment at local, regional, and national levels, and more importantly, stress the importance of regulatory policies and institutional capacities in tackling the energy problem. The added benefit of this approach is that it enables the formulation of energy pathways in Africa that recognize long-run implications of current energy policy decisions, for they invariably have determinative impacts on future development strategies.

As sub-Saharan African utility firms embark on modernization and capacity enhancement, they have the option to stay with fossil fuel technology and boost supply with renewable sources of power; this is a more likely option but there are challenges that must be recognized. The volatility in oil and gas prices would not go away and would lead to more volatility in the energy system; it also allows more carbon emission into the environment. Renewables are intermittently available; solar power when sunshine is available, and wind power when there is adequate wind force to drive the turbines. A smart grid is thus necessary to bring these renewables on line when they are functional, and reduce the demand placed on gas and oil driven turbines.

A natural monopoly model to the rescue
One undeniable fact in the energy industry is that the fixed cost of generating power, storage and distribution is prohibitively high. And since this cost constitutes approximately 80% of the total cost of electricity (associated variable cost for gas, solar, wind, biomass to drive turbines are relatively low), the market for electricity does not lend itself favorably to market completion. Competition in this instance would lead to higher prices to consumers because all firms would be in competition for a given pool of consumers (the population of a geographic area is fixed at any given time). This would necessarily force them to produce at higher average costs (Average cost = total cost/customers; the larger the customer base the lower the average cost).

However, if one electricity company is given the exclusive right to service a particular area, subject to government oversight, it can profitably generate, store and distribute electricity to its robust customer base. This guarantees lower average cost, and such savings are passed on to consumers as lower prices for electricity. For maximum efficiency, each of these companies would be able to trade bulk electricity amongst themselves…..those with more power than needed for its customers would sell it to other firms operating in other parts of the country. Since operators of these firms are profit-driven, it is unlikely that they would allow their equipment to fall into disrepair; this would run contrary to their self-interest. It is in this special sense that these firms are referred to as natural monopolies, for their average cost of production falls continuously as their customer base rises.

This model of privatization where one firm has exclusive right to provide electricity to a geographic competence allows the firm the flexibility to seek efficient ways to generate and supply power; this is a superior model to the one currently adopted in parts of Africa. In Nigeria, as discussed earlier, generation and distribution of electricity are privatized while leaving the national grid network in the hands of the federal government. This, unfortunately, has done nothing to improve the power poverty in the country since those who control the national grid also determine which areas of the country receive electricity, and worse yet, there is no incentive to improve capacity and serviceability of the grid system. Privatization of the national grid network would have a positively marginal impact but it would not solve the underlying problem of energy poverty. A different approach, as suggested above would be a good start….a natural monopoly model.

Why Doesn't Capitalism Flow to Poor Countries?

Rafael Di Tella and Robert MacCulloch.


We find anecdotal evidence suggesting that governments in poor countries have a more left wing rhetoric than those in OECD countries. Thus, it appears that capitalist rhetoric doesn't flow to poor countries. A possible explanation is that corruption, which is more widespread in poor countries, reduces more the electoral appeal of capitalism than that of socialism. The empirical pattern of beliefs within countries is consistent with this explanation: people who perceive corruption to be high in their country are also more likely to lean left ideologically (and to declare support for a more intrusive government in economic matters). Finally, we present a model explaining the corruption-left connection. It exploits the fact that an act of corruption is more revealing about the fairness type of a rich capitalist than of a poor bureaucrat. After observing corruption, voters who care about fairness react by increasing taxes and moving left. There is a negative ideological externality since the existence of corrupt entrepreneurs hurts good entrepreneurs by reducing the electoral appeal of capitalism.


Casual examination of right wing political rhetoric reveals large differences across countries. Right wing parties in poor countries extol the virtues of capitalism less often than their counterparts in rich countries. Instead, they appear tolerant of government intervention to regulate markets and of subsidies to contain income disparities. An intriguing possibility is that few voters in poor countries want to have a US-style capitalist system. Since economists believe that such a system is the most conducive to growth, a puzzle is, why isn't capitalism, as a way to get a country out of poverty, a more attractive idea in poor countries?

One potential explanation for these patterns in the data is cultural differences across poor and rich countries. For example, it has been argued that capitalism spread in the countries that are rich today because the prevailing religious culture approved of success and the accumulation of individual wealth, whereas in today’s poor countries other cultures (such as Catholicism) stood in the way of capitalism. An alternative explanation, economic in nature, is that voters in poor countries are choosing left wing governments to redistribute the little income there is. More inequality, in this view, moves average income up relative to the median, and may introduce a desire for redistribution. A number of authors, however, have emphasized that, at least amongst advanced industrial nations more unequal countries seem to distribute less, not more. And since countries can move to the center, and redistribute within a market economy, it does not explain why many countries loose faith in the private sector altogether.

A more promising hypothesis is suggested by taking at face value what political parties say. Simple inspection of the traditional platforms of established parties, such as the PT in Brazil and the PRI in Mexico, reveals that corruption of the capitalist class is often invoked when justifying a more paternalistic role of government. Thus, a striking difference in the rhetoric of politicians that support redistribution across rich and poor countries is how often those in the latter group make reference to corruption. Thus, in the main part of the paper we explore empirical evidence bearing on the hypothesis that support for left wing parties originates in perceptions of corruption. We discuss three types of evidence. The first is simply a reinterpretation of the work of Djankov et al (2002) on the regulation of entry. They find that countries with more regulation on the entry of firms, in terms of delays and money spent in the process, also have more corruption. This, we argue, is also consistent with the idea that corruption invites regulation (and other left wing policies). The second type of evidence concerns corruption levels aggregated at the country level. We show that there is a positive correlation within countries between the total amount of corruption today and how left the government becomes in later years. Finally, analysis of subjective data within countries reveals that individuals who believe that there is more corruption are also more likely to be in favor of more government intervention in the economy. Interestingly, there is no evidence that corruption is correlated with non-economic attributes of ideology.

In the final part of the paper we present a simple model that can help explain why people who see more corruption in government are more left wing. It is based on the idea that corruption reduces the “moral legitimacy” of business because voters are concerned with fairness. When they observe corruption, voters react by moving left, even if this is costly to them, much as there are rejections of positive offers in the ultimatum game.3 There is a negative externality in the sense that the existence of corrupt entrepreneurs hurts good entrepreneurs by reducing the general appeal of capitalism. Our paper builds on the literature studying the role of the social contract and how economic organization is built on beliefs (e.g., de Tocqueville (1955), Lipset and Rokkan (1967), Lipset (1979), Rokeach (1973), Feldman (1988), Inglehart (1990), Denzau and North (1994), Putterman (1996), inter alia). Two important papers are Piketty (1995) and Benabou (2000). The former shows that an initial distribution of beliefs concerning the importance of effort in determining performance can lead to two different types of equilibria, one (the other) with low (high) taxes and a belief, which holds in reality, that individual effort is (is not) important in determining income.4 Benabou (2000), on the other hand, shows that for a class of interventions that increase output, such as public education when capital markets are imperfect, multiple steady states can arise. Finally, Alesina and Angeletos (2002) show how fairness can influence the choice of taxes: if a society believes that luck or corruption (rather than effort) determine wealth, it will choose high (rather than low) taxes, thus distorting allocations and making these beliefs self-sustaining. Putterman, Roemer and Sylvestre (1998) and Alesina, Glaeser and Sacerdote (2002) review the contributions to this growing literature.

In our model, different beliefs on the importance of corruption determine how much government intervention voters will support. Since such interventions increase corruption levels, it can be shown that this class of models also has the potential for multiple equilibria.We also draw on the corruption literature.5 Some authors have emphasized how corruption has undermined popular support for economic reforms.6 Our work can be seen as formalizing these ideas in the context of general economic ideology (and not to views solely about reforms), exploiting the distinction between two different forms of corruption: extortion and capture. A number of economists have shown how corruption may reduce growth (see Rose-Ackerman (1978), Shelifer and Vishny (1993); for empirical evidence see Mauro (1995) and Knack and Keefer (1995)). An early paper by Andvig and Moene (1990) describes how multiple equilibria in corruption can arise. Work in this literature has also studied how government interventions may improve social welfare even when corruption originates in these very same interventions (see Banerjee (1997), Ades and Di Tella (1997), Acemoglu and Verdier (2000) and Djankov et al (2003)). An implication of this approach is that it may be hard to justify interventions in very poor countries that cannot afford to pay the high salaries necessary to control corruption, a point made explicitly in Acemoglu and Verdier (2000). Our paper is closer to Glaeser and Shleifer (2002). They explain the rise of regulation in America as the efficient response to the subversion of justice by robber barons during the Gilded Age, when the scale of business can be assumed to have grown (see also Djankov et al (2003)). Finally, a large literature has studied how countries may get to have intrusive regulations (Stigler (1971), Peltzman (1976), Becker (1983), Kroszner and Stratmann (1999), inter alia), or bad institutions that retard growth (e.g., North and Thomas (1973), De Long and Shleifer (1993), Acemoglu, Johnson and Robinson (2001), inter alia), or get to choose bad policies (e.g., Alesina and Drazen (1990), Fenandez and Rodrik (1990), inter alia). But in these models voters want to have good policies (and capitalism), and there is some impediment to their adoption. We are focused on the case where voters do not want capitalism.

Section I motivates the paper with (new) evidence consistent with the idea that poor countries elect governments that tend to use left-wing rhetoric. Section II explores the empirical connection between corruption and ideological position in three settings: across countries, within countries over time, and across individuals (within countries). Section III presents a model where the observation of corruption changes citizens’ beliefs about a characteristic of capitalists (their fairness level) and increases the desire for government intervention. Section IV concludes.

  1. Motivation: Anecdotal Evidence on Political Rhetoric across Countries

The claim that political parties in poor countries are less capitalist than those in rich countries, which serves as motivation for this paper, is not well documented. There is some suggestive historical evidence available. For example, a standard informal justification for military coups in Latin America in the 1970's is that they were the only way that right wing ideas could get to be implemented, given their small electoral appeal.7 The case of Argentina, where the center-left Radical and Peronist parties have alternated in government during the last century, is another case in point.8 A more systematic approach would involve using data on the pre-electoral rhetoric of political parties around the world. We are, however, unaware of the availability of data on political rhetoric across countries. An examination of voting records of legislators could be a useful proxy, but unfortunately, data with that level of detail are not available beyond OECD countries. Furthermore, politicians sometimes change their “ideology” once in office (and we are interested in their proposed policies while they are running for office. See Cukierman and Tommasi (1996). Interestingly, in the one systematic study of this issue available for non-OECD countries, all the recorded cases of switches involve populist parties becoming more right wing (see, for example, Stokes (2001)).

Closer to our needs is the data set compiled by Beck et al (2001). They use a two-step approach. First, they record the party identification of a country’s political leaders. These include the chief executive (prime minister or president), the largest government party and the three largest parties in the government coalition. Second, they classify the parties following preferences regarding greater or less state control of the economy – the standard left-right scale. This is inferred by their name and by the information contained in a set of sources. Thus, parties that contain terms such as “conservative” or “Christian democratic” in their names are classified as right-wing. Similarly, they are classified as left-wing if their name includes the words communist, socialist, or social democratic. The category center is reserved for parties that are called centrist. Parties that cannot be classified in these categories are recorded as “other” and not included in our study (these are frequently parties in non-competitive electoral systems).9 When the orientation of the party was not immediately obvious from the name, Beck et al checked a set of sources, again with the criteria of greater or less state control of the economy. Parties are classified as center if these sources reveal them to advocate the strengthening of private enterprise but also to support a redistributive role for government. These sources included The Europa Handbook and Banks’ Political Handbook of the World as well as Political Parties of Africa and the Middle East: A Reference Guide (1993), Political Parties of Eastern Europe, Russia and the Successor States: A Reference Guide (1994) as well as a website maintained by Agora Telematica which provides short definitions of parties. In the rare case sources disagreed, Beck et al noted it in their database (and we exclude them here). The sample includes a maximum of 136 countries over the period 1975-97.

Some Results

Perhaps the simplest measure to study initially is the color of the party to which the chief executive is affiliated. In 1997 there are data on 105 countries. If we divide this group of countries by income within the sample (real purchasing power) we find that, within the richest third, 44% are classified as left, 3% as center and 53% as right wing. Within the poorest third, 63% are classified as left, 6% are center and 31% are right. If we use the world distribution of income, which gives us 49 (25) countries in the top (bottom) third, we find that within the richest group countries are evenly split with 24 left and 24 classified as right. Within the poorest group, 68% of countries are classified as left, 8% as center and 24% as right. Moving to a simple table of frequencies for the full 1975-97 sample presents similar results. There are 2,311 country/year observations. Of the 488 for OECD countries, 39% (50%) have a chief executive affiliated to a party classified as left (right) by Beck et al. Of the 1,823 observations for Non-OECD countries, 61% (33%) are classified as left (right).

Table A1 in appendix 1 adopts a definition of government that follows more closely electoral appeal (as opposed to political maneuvering) based on the color of the largest government party (rather than of the chief executive). It partitions the sample symmetrically by thirds on the basis of within- sample income. Again the data suggest that successful right wing parties are more frequent in rich countries. Their frequency relative to left wing governments is monotonically increasing in income. This is not affected when the data are analyzed at two points in time in Table A2. Although during the early part of the sample (1975-80) left wing governments were more common than later on (1992-97), in both periods right wing governments are relatively more common in rich countries. Table A3 compares three alternative definitions of color of government available from Beck et al, chief executive, largest government party and 3 main parties in government. We also assign a cardinal scale to the parties (assigning 1 to right wing parties, 0 to center parties and -1 to left wing parties) so as to simplify comparisons. For all definitions of government a simple t-test strongly suggests that right wing parties are more common in richer countries. In other words, the data give a similar picture to that presented in Table A1.10 This is still true even when we weigh data on party ideology by the proportion of the total available seats obtained.

Other variables may affect the relationship between government ideology and level of development. An obvious candidate is inequality. Given the low quality of the data it is best to start with raw frequencies of political color and partition the sample in two using data on the Gini coefficient from Deininger and Squire (1996). Again poor countries are more left wing and, if anything, more unequal countries seem to be more right wing.

The previous tables treat each country/year observation in our data set as independent. However since our data include repeated observations on the same country over time it is of interest to relax this assumption and give more weight to changes in government. A simple approach is to look at random effects regressions that allow for serial correlation in the error term.11 Table A5 reports the results. We also include other controls. We include Freedom, a country's level of political rights as measured by Freedom House, a control for whether the countries were experiencing civil war (from Doyle and Sambanis (2000)) and a control for inequality (see appendix 2 for data definitions). This is desirable given the correlation between redistribution, democracy and inequality predicted in theories of the growth of government (Peltzman (1980)), of the Kuznets curve and extension of the franchise (Acemoglu and Robinson (2000)) and in theories of capital-skill complementarities during development (Galor and Moav (2003) and Galor et al (2003)). Data availability on these new controls reduces the sample to 80 countries. For clarity we also eliminate countries in the Soviet block prior to 1990 (so that only 75 remain) although the results are unaffected by this choice.

Rich countries (i.e., in the top third of the income distribution in our original sample) are again associated with more right wing governments across all definitions, even after controlling for other variables that could be associated with different color of government. It is worth noting that more unequal countries tend to have more right wing parties. This point, which has been made informally contrasting the US and European experiences, is the starting point of Piketty (1995) and Benabou (2000) and, to our knowledge, has not been documented before. The coefficient on War indicates a positive and statistically weak association between right-wing government and there being a civil conflict in the corresponding country. Results remain similar if we exclude the smallest 25% of countries based on population size. There is no correlation between Freedom and the ideological orientation of the government. One could still argue that controlling for democratic differences in this way is insufficient to study the robustness of the left/poor correlation and that one should only look at countries with perfect degrees of freedom. This would be misleading for two reasons. First, countries that are perfectly democratic that are not in the richest third are still very rich relative to the rest of the sample. Thus, we would be studying if capitalism flows to countries that are rich (but not in the richest third). Second and more importantly, our Freedom variable concerns how democratic are governments once in power, not if they got there through democratic means. Thus, a finding that dictatorships lean left more often than right would still be consistent with right wing parties being unattractive to voters. The reason behind the left/authoritarian correlation may be found in the left-wing view of pressure groups (the “forces of reaction”) as using violence and misinformation through the media (and not just offering bribes). Thus, repression of individual rights is necessary to carry out socialist reforms and socialist countries score low on Freedom (Fidel Castro is an actual case of a left-wing politician that is initially popular and then justifies becoming increasingly autocratic in these terms).

  1. The Link between Corruption and Ideological Orientation: Three Pieces of Evidence

As noted in the introduction, informal evidence suggests that the rhetoric of left wing parties in less developed countries is closely connected to corruption. See also Jauretche (1947). In this section we explore evidence bearing on the hypothesis that the resistance to adopting capitalism in the third world is correlated with the public’s perception of corruption. We propose three pieces of evidence. The first comes from re-examining the evidence on the regulation of entry presented in Djankov et al (2002). The second comes from examining the relationship between aggregate levels of corruption and political orientation of government within countries (using the Beck et al (2001) data set). And the third piece of evidence comes from examining subjective opinions on corruption and the role of government across individuals using World Values Survey data.

A Reinterpretation of "The Regulation of Entry" by Djankov et al (2002) In their comprehensive study, Djankov et al collect data on the procedures regulating firm entry across countries, including the number of procedures, the time for putting the firm into operation, and total cost.12 They report that they cannot reconcile the evidence available with public interest theories of regulation. Instead their evidence is consistent with "tollbooth" theories whereby regulations are put into place to allow rent extraction by bureaucrats. For example, a basic finding is that the number of procedures enters positively in bad-performance regressions (i.e., where the dependent variable is water pollution, deaths from intestinal infection, etc). They then present corruption regressions where the number of procedures, time and cost measures all enter positively. They state, "While the data are noisy, none of the results support the predictions of the public interest theory" (page 25), favoring instead the "tollbooth theory". Lastly they find that lack of political rights in the country enter positively in regulation regressions (dependent variable=number of procedures). Thus, regulation is heavy in autocratic countries, "consistent with the public choice theory that sees regulation as a mechanism to create rents for the politicians and the firms they support" (page 34).


This evidence can also help explain why capitalist ideas don’t flow to poor countries. When business people are perceived to be failing to deliver on their social contract, either because they are polluting the environment or because they are corrupting bureaucrats, offended citizens vote for more controls in the forms of more regulations. A simple way to distinguish this explanation from the “tollbooth” theory is to look at evidence at the individual level. A finding that people who perceive corruption to be widespread also want more government regulation would be difficult to explain if regulations were simply facilitating rent extraction by bureaucrats. This kind of evidence is discussed in section II.c. As for the finding that autocrats regulate more, there seems to be an equally appealing interpretation to the one proposed by Djankov et al, namely that they are passing these laws and regulations to "buy" the legitimacy that they lack from a democratic electoral process. Remember that their paper focuses on written regulations. By increasing the amount of written regulations, more autocratic leaders strengthen the bargaining position of bureaucrats vis a vis firms. But why would they do that? One possibility is that they are simply trying to buy the support of the bureaucracy. But this approach would risk alienating the - typically - more powerful business community. A more plausible story, then, is that autocrats are regulating as a way to discipline business and get the support of the general population, because as Djankov et al emphasize, few dictators have a secure position.

Corruption and Ideology at the Aggregate level

A simple approach to see if corruption is playing a role in the appeal of capitalism is to examine the within-country correlation of measures of aggregate corruption and ideology of the government. Table B looks at the correlation between the Beck et al (2001) measure of government ideology and the International Country Risk Guide (ICRG) corruption index introduced into economics by Knack and Keefer (1995). The corruption variable is available since 1984 and indicates the opinion of analysts on each country regarding how widespread is corruption. We focus on OLS fixed effect panel regressions and three different definitions of color of government (chief executive, largest government party and three main government parties). The results show that high levels of corruption are correlated with less right wing governments (with a three year lag), across all definitions of government. The relationship is statistically significant. Columns (4) and (5) show that these correlations are robust to weighting the largest government party and three main government parties by the proportion of seats that each of them controls. The analysis is not designed to deal convincingly with problems of endogeneity, so it has to remain illustrative. (As a small step towards addressing these issues, we have lagged the right-hand variables three years). If we also control for an index of development in the above regressions (for example, GDP per capita adjusted for purchasing power parity) then the coefficients on corruption become more negative and significant across all specifications. Interacting the level of corruption with the level of income in these regressions gives a positive and significant interaction term, indicating that the correlation between corruption and how left the government is gets larger in size at low levels of income. This is consistent with the idea that a given level of corruption is more effective in moving the electorate left in poor countries.

Evidence on Individual Beliefs from the World Values Survey

The data for this section come from the World Values Survey Series (WVS, see Appendix 2). A large random sample of individuals are interviewed and asked a series of questions to "contribute to a better understanding of what people all over the world believe and want out of life". The 1995-7 wave includes one survey in each of 51 nations that asks a question on corruption. It asks, "How widespread do you think bribe taking and corruption is in this country?" The four relevant response categories are: 1. Almost no public officials are engaged in it. 2. A few public officials are engaged in it. 3. Most public officials are engaged in it. Almost all public officials are engaged in it. Accordingly, four dummy variables capturing each of these responses are created: Perception of Corruption – almost none, - few officials, - most officials, - almost all officials.

 Table C1 uses this variable to study ideological inclination. This is possible because individuals also answer a question on ideological self-placement: "In political matters, people talk of "the left" and "the right". How would you place your views on this scale, generally speaking?" The interviewer then shows a scale with numbers 1 to 10 written down with the word "Left" below the number 1 and the word "Right" below the number 10. Accordingly, the variable Right Wing is created taking the values 1-10. A total of 51,810 people across 48 countries answer both questions of interest. Regressions (1-2) in Table C1 present ordered probit regressions, of the form:

Rightij =aPerceptionofCorruptionij+bPersonalControlsij+Countryj+εij

 where Rightij is the ideological position of individual i living in country j, Perception of Corruptionij is the perception of corruption of individual i living in country j, while εij is a standard error term (i.i.d) and Countryj is a country dummy. We also include a large set of personal controls, Personal Controlsij (including gender, age, marital status, income, education, country of residence and employment status of the respondent). When we use all this information the sample reduces further to 37,278 people across 43 nations.

Regression (1) in Table C1 shows that individuals who perceive corruption to be widespread are less likely to identify themselves as right-wingers. Regression (2) shows that the result survives the inclusion of personal controls. They enter with the expected signs: people on higher income, men and the self-employed all tend to lean ideologically towards the right. In both regressions the effect of Perception of Corruption is monotonic and large. To obtain a measure of the size of the effect, note that a person who perceives corruption to be widespread (almost all officials engaged in it) is predicted to move toward the left-end of the scale by 0.14 units of the underlying continuous variable relative to the base category (Almost no public officials are engaged in it). The size of this effect is bigger than a fall from the top to the bottom income quintile, and suggests that an aggregate corruption shock of this size would move 4.5% of the electorate to the left (i.e., from an even split to 54.5% vote left and 45.5% vote right). A similar estimate, although smaller in size, obtains when we limit the sample to countries in the OECD. This again supports the idea that the left-corruption connection is stronger in poorer countries.

Although the strength of the average effect is striking, there are examples suggesting that the effects vary in intensity depending on the historical circumstances. Indeed, the pro-market reforms of the early 1990’s in Argentina were sometimes justified by the high levels of corruption in the state- owned companies. This suggests that it is worth comparing countries that differ in their history of interventionist governments. Specifically we compare the effect of observing corruption on ideological inclination for countries with different starting ideology. This is done by including the variable Largest Government Party (equal to one when the largest government party is right and –1 when it is left, see Appendix 2) averaged over the previous five years into regression (2), as well as an interaction term. This leaves a sample of 33,244 individuals in 35 countries. Standard errors are clustered at the country level. Specifically, the coefficient on perception of corruption (cardinalized with equal distance between the categories) is –0.033 (s.e. 0.016), the coefficient on Largest Government Party (right) equals 0.198 (s.e. 0.080), while the interaction between Largest Government Party (right) and Perception of Corruption equals –0.055 (s.e. 0.020). Thus, individuals who perceive there to be more corruption within the country are more likely to be left and on average people are more right in countries that have had a right wing government over the past five years. Importantly, the observation of corruption turns people left more when the government has been ideologically to the right. Similar results obtain with other definitions of government ideology (Chief Executive and Three Main Government Parties).

This suggests, more generally, that corrupt acts differ in the way they are perceived by the electorate. The corruption literature has suggested that there are two different types of corruption: extortion and capture. The former is initiated by a bureaucrat on a firm that would otherwise be honest; the latter is initiated by a firm on a bureaucrat (or politician) that typically has to change the law to favor the firm.15 The WVS includes the question "Generally speaking, would you say that this country is run by a few big interests looking out for themselves, or that it is run for the benefit of all the people?" The possible answers are 1. Run for all the people and 2. Run by a few big interests. We define the variable Captured as those answering the second option. Regression (3) includes Captured together with Perception of Corruption in our ideology regressions. The coefficient on Perception of Corruption after controlling for Captured provides us with one rough measure of the extent to which individuals see corruption of the extortion variety. The effect of Perception of Corruption is smaller, reflecting the high correlation between the measures of the two types of corruption. Interestingly, the effect is negative and significant suggesting that corruption, even of the extortion variety, moves people left.

These findings introduce two restrictions on the theoretical explanations that we derive below (Section III). First, the effects should vary with the history of intervention in the country. Observing corruption in an interventionist environment has a smaller effect than observing it in an environment where taxes and intervention are low. Second, corruption even of the extortion type (typically involving low-level bureaucrats) sometimes makes people upset with firms. More generally, these results are difficult to rationalize using the results in Djankov et al (2002). These authors show that the "tollbooth" theory of regulation performs better than the "public interest" theory. Our results suggest, however, that the tollbooth theory cannot be the full story. If bureaucrats are putting in regulation to extract bribes, then why would it be that rational people who observe corruption want more intervention? In section III below, we develop a simple theory of regulation based on the idea of the "legitimacy" of business.

Robustness: Perceptions of Corruption and Economic Attitudes

People may have different views on what they define as left and what they define as right. The differences that occur across countries are absorbed into the country dummies included in our regressions. It is still of interest to examine the connection between corruption and the various components of ideology. Previous work emphasizes how left/right political choices reflect the basic cleavages in society. Lipset and Rokkan (1967), for example, argue for the importance of the religious and class (or economic) cleavage. A large part of the variation in the latter that explains party choice can be captured by an individual’s belief concerning three basic economic questions: beliefs concerning the role that individual needs should play in determining income, beliefs concerning the role of merit in determining income, and the beliefs concerning how desirable is private ownership of property.

We start with the role of needs as captured by attitudes towards poverty. For ease of exposition we treat the variable Perception of Corruption as cardinal (assigning the value 1 to “almost no officials” and 4 to “almost all officials”). We also attach the letter R (L) if, in the natural interpretation, higher values are associated with a right wing (left wing) ideological placement. The dependent variables in the first three columns deal with attitudes towards poverty. Column (1) in Table C2 uses the answer to the question ”Why, in your opinion, are there people in this country who live in need? Here are two opinions: which comes closest to your view?” The two relevant options are 1. They are poor because of laziness and lack of willpower, OR 2. They are poor because society treats them unfairly. The variable, which is called Not Lazy-L is positively associated with Perception of Corruption, suggesting that people who perceive corruption to be widespread are more likely to reject the idea that poverty is due to laziness in favor of the idea that the poor are unfairly treated by society, compared to those that do not think that corruption is widespread.

Column (2) explores a different framing. It asks “In your opinion, do most poor people in this country have a chance of escaping from poverty, or there is very little chance of escaping?” The two relevant answers are 1. They have a chance or 2. There is very little chance. Again those who perceive high levels of corruption also express a left wing view. Column (3) focuses on the question “Do you think that what the government is doing for people in poverty in this country is about the right amount, too much, or too little?” The relevant answers are 1. Too much or 2. About the right amount, or 3. Too little. It reveals that people who perceive corruption to be widespread are also more likely to say that the government is doing too little to alleviate poverty. This result is interesting for theories that see corruption arising from government intervention. One possibility is that individuals understand that the optimal intervention may be larger when the bureaucrats implementing them are corrupt, as there could be leaks. This is implausible and depends on there being no aversion to corruption per se.17 Thus, the result in column (3) is consistent only with a sophisticated version of what Djankov et al (2002) call the "public interest" view and is inconsistent with the "tollbooth theory" where regulation is put into place to extract fees.

Column (4) asks about beliefs concerning the role of merit in determining income (interpreting merit as payment in proportion to individual output). The dependent variable is the answer to "Imagine two secretaries, of the same age, doing practically the same job. One finds out that the other earns considerably more than she does. The better-paid secretary, however, is quicker, more efficient and more reliable at her job. In your opinion, is it fair or not fair that one secretary is paid more than the other?" Individuals who perceive corruption to be widespread are more likely to say that it is not fair to pay more to the more efficient secretary.

The dependent variable is the answer to the question, "There is a lot of discussion about how business and industry should be managed. Which of these four statements comes closest to your opinion? 1. The owners should run their business or appoint the managers; 2. The owners and the employees should participate in the selection of managers. 3. The government should be the owner and appoint the managers; 4. The employees should own the business and should elect the managers.” Individuals who perceive corruption to be widespread are also less likely to say that business should be managed in ways that are typical of capitalism.

III. Corruption and Ideological Orientation: Interpretation

The patterns present in the data raise two broad questions. First, do the correlations uncovered in Tables C1-2 involve a causal effect? Second, if the effect is causal, what explains it? In other words, why do people turn left when they observe corruption?


There are two broad causal interpretations for the corruption-left correlation uncovered in Tables C1-2. First, it could reflect that observing corruption causes people to move left. Alternatively, it could reveal that observing corruption is a fixed left wing trait. Our research approach is not designed to deal with this issue convincingly, so a full investigation is left for future research. One possibility we explored was to see if Perception of Corruption was correlated with other, non- economic aspects of ideology. If there were no correlation, one could argue that observing corruption is not a general left wing trait (although it could still be an economic fixed trait). One problem we encountered reading the literature was that it was less clear what political scientists think are the core non-economic ideological beliefs. Some political scientists have argued for the increasing importance of values that emphasize a libertarian/authoritarian dimension as well as “post materialist” values that focus on quality of life (rather than economic preservation).18 A recent example is a paper by Knutsen and Kumlin (2003), which identifies moral values (religious versus secular), libertarian/authoritarian and ecology versus growth orientation as the three central (non- economic) values used in party choice.

When we correlate Perception of Corruption with variables included in the World Values Survey to capture these categories, we get a mixed picture. For example, the moral core value of ideology is captured by asking “Please tell me if homosexuality can always be justified, never be justified or something in between”. The scale reveals that 1 equals “Never justifiable” while 10 equals “Always justifiable”. The correlation with Perception of Corruption is negative and, once personal controls are included, significant at the 1% level. People who perceive corruption to be widespread are more likely to report the standard right-wing answer (Never justifiable) not the left- wing one (Always justifiable). This is contrary to what was found in Table C2 where economic attitudes were used. When we study the other variables available in the WVS capturing non- economic attributes of ideology identified in previous work we obtain more mixed results. A more formal approach is to compare the effect of corruption perceptions on right wing inclination under three different specifications. The first involves only one right-hand variable: Perception of Corruption. The second involves this variable, as well as the set of economic beliefs included in the WVS. And the third involves Perception of Corruption and the set of non-economic beliefs included in our data source. The coefficient on Perception of Corruption is unchanged when moving from the first to the third specification; whereas it is halved when we move from the first to the second specification (equality of the corruption effect on the first and second specifications is rejected at the 10% level). This is suggestive of the idea that part of the effect of corruption on ideology operates through its impact on economic beliefs.

Two Interpretations

From the point of view of the objectives of the paper, however, the ambiguity about causal effects is perhaps less worrying. The reason is that, even if there is a non-causal interpretation and left wingers just happen to see corruption everywhere, the evidence would still explain the findings in tables A and B. In particular, it would explain the main question in the paper, namely why capitalist rhetoric doesn’t flow to poor and corrupt countries. To see this, assume that a left and a right wing party compete for votes. The left wing rhetoric includes the word corruption whereas right leaning politicians never mention it. Now assume that a shock increases the amount of corruption in the country. Voters that observe this will see that the left-wing politician was correct on this issue. Other things equal, this will make voters lean left. Thus, shocks that increase the perception of corruption would lead voters to choose left wing parties, and for capitalist ideas not to be adopted, even if the corruption-left connection is a fixed effect at the individual level.

A more difficult challenge conceptually is to build a causal theory, whereby corruption is observed and people then turn left. We develop the notion that commercial institutions have to be “legitimate” as a mirror to the idea of legitimacy in government which has been discussed in the political science literature. Thus, the public decides to tax, regulate, monitor and control business according to how "deserving" they perceive them to be. Businesses, in turn, are more deserving the more they share the social norms of society, for example in terms of fairness and honesty, as well as the more productive they are. Before making these notions more precise in a model, we note some requirements that we impose on our explanation. First, as discussed in section II.c, it has to explain why an act of corruption turns the public against businesses when both business and bureaucrats have to be willing participants in such acts. Second, and also as discussed in section II.c., we ask that the predictions vary with the general level of intervention in the economy. Thus, corruption when intervention is heavy is less damaging to firms than when government intervention is low.

Finally, historical examples suggest that we should ask the theory to account for the many historical cases in which right wing parties fail to convince voters that they will be tough on capitalists. An example of this is the failed presidential bid of novelist and liberal candidate Mario Vargas Llosa in Peru in 1990. His candidacy had everything one would expect is needed to achieve a “separation” between the right and bad capitalists (e.g., his wealth was not derived from contracts with the state). A standard informal explanation is that people vote by emotional association. Thus, voters in corrupt countries may emotionally associate the capitalist party with bad entrepreneurs, regardless of the policies the party proposes. This can be interpreted as a form of fairness motives in the utility function. Interestingly, an important case where separation between the pro-capitalist party and bad capitalists was achieved is Theodore Roosevelt’s presidency in the US. The standard account of how he achieved this appears to be consistent with a (variant) of fairness motivations as the need for regulating big business was connected to morality in some of his writings (see Morris (2001)). This episode suggests that when a second policy is available (punishment and regulation of the offending firms), other pro-business policies are possible. Note also that fairness helps explain the separation failure because it is based on previous information. Thus, voters are not attracted to a party that credibly promises to stop corruption from now on as what they want is someone that can reduce the payoff of the (corrupt) capitalists. In this view, capitalism can only succeed only after the bad capitalists are “punished”. On how laws conceive the corporation as a moral actor, see Rose- Ackerman (2002).

We propose a model where corruption reveals information about the type of capitalists in terms of how “fair” or deserving they are. (The working paper version of the paper develops a model based on rational preferences where capitalists have different productivities; available upon request). In it, the decision of the public to adjust bureaucratic wages is absent. This is done without serious loss of generality as long as in equilibrium technology (in particular monitoring ability) and distribution of preferences (moral costs) are such that it is not optimal for the public to set wages in such a way as to deter all forms of corruption. See Besley and McLaren (1993) and Mookherjee and Png (1993).

A Link between Corruption and Ideology based on Fairness Considerations

The setup is a one shot “dictator” game augmented with a prior signal concerning the corruption of the capitalists and the bureaucrats. We consider only one broad policy available to voters. We assume a type of preferences that mean that workers do not fully confiscate the rich because they would regard that as “unfair” (e.g., Akerlof and Yellen (1991), Rabin (1993)). In particular individuals have “reciprocal preferences”, as in Levine (1998) and Rotemberg (2002, 2003). When the bureaucrat’s material payoff is smaller than the firm’s, so that the observation of corruption still leads to a smaller update on the bureaucrat type than on the firm’s type. The intuition for the key result (the observation of corruption is more damaging to capitalists than to bureaucrats) is as follows. Firms dislike taxes. Bureaucrats like them (in our setup this occurs indirectly; see also footnote 21). An act of corruption means that both were, to some degree "unfair" towards workers. Why then react hurting one more than the other? First, there is the fact that voters get some of the tax receipts. Second, and more importantly, for a similar level of altruism, the bureaucrat is always ready to be corrupt because of the (assumption of) lower pay. Thus, the act of corruption is more telling (i.e., induces a larger change in the posterior) on the firm's level of altruism. This predicts that a person that sees corruption amongst public officials as widespread will declare to dislike capitalists (the correlation between these two WVS questions is significant at the 1 per cent level). An alternative explanation is to exploit the natural distinction between extortion and capture. The distinction being that, by assumption, only bureaucrats misbehave under extortion whereas only firms misbehave in the case of capture. Then, if capture cases tend to involve better known actors from business and politics than extortion cases, they would tend to be covered more often in the media (e.g., Mullainathan and Shleifer (2002)) and to be more salient in the eyes of the public when they make their voting decisions.

The model emphasizes the idea of commercial legitimacy, whereby the income of business people has to be accepted by voters. This idea, which parallels the notion of legitimacy of government authority employed by political scientists, is summarized in the model by the degree of mutual respect (or reciprocal altruism) of the different members.25 In particular, the main variable of interest (the level of taxation) is determined by a combination of self-interest, a sense of fairness towards others and an incentive constraint arising from the difficulty of producing output in a highly taxed economy.26 This is related (but not identical) to a class of efficiency problems generated by high taxes that prevent the poor from fully taxing the rich. More precisely, in this model the main cost of taxes from the point of view of the voters is that firms hide more (i.e., join the unofficial economy). Formally this plays a similar role to having the standard efficiency costs of high taxes.27 One advantage of the present set up is that voters update less when taxes are high, something that could capture the idea that corruption as more “justifiable” when taxes are high.

A difficulty in the fairness models is that outcomes are judged according to how close they are to a target or “fair” outcome, but there is no natural way to define this. We follow Levine (1998) and Rotemberg (2002, 2003) in assuming that an agent’s feelings towards others are affected by what they believe others feel towards them. Thus, a bigger weight is put on money in the hands of an individual who is thought to be more altruistic. This naturally leads to a dynamic signaling game, as a player’s actions potentially reveal their altruism. While we wish to retain the basic notion of fairness, the idea that an individual firm will change their (secret) corrupt behavior to affect these perceptions is implausible, even if these secret acts sometimes get caught. The set up we analyze, a dictator game augmented to allow for a prior signal, reflects this (as in Hoffman et al (1994) and Ruffle (1998)).

Finally, there is an ideological externality in the sense that the individually rational acts of corrupt entrepreneurs lead to the belief that capitalists are un-deserving, hurting the rest of society (good entrepreneurs and workers). The profits of entrepreneurs are inter-dependent as corrupt acts give a bad name to capitalism and hurt good entrepreneurs (see Velasco and Tornell (1992) for a different type of externality in a model with interest groups). This result depends on the degree of correlation of altruism levels across capitalists that is assumed. This provides some justification for the preoccupation of corporations to have other firms adopt forms of corporate social responsibility. See also the discussion in section 4 of Rose-Ackerman (2002).

  1. Conclusion

Our paper is made up of three parts. In the first, we explore anecdotal evidence suggesting that political rhetoric in developing countries is tilted to the left of the ideological spectrum. Thus, right- wing rhetoric is less extreme in poor countries than in rich countries while the rhetoric of left-wing parties appears more extreme in poor countries than in rich countries. Overall, this suggests that US- style, pro-capitalist political parties have electoral difficulties in the third world. We do not have formal systematic evidence on electoral rhetoric, but data on the ideological identification of political parties around the world from Beck et al (2001) is consistent with this view.

In the main part of the paper we attempt to provide an explanation. Our conjecture is that corruption plays a role in shaping ideologies. The paper provides empirical evidence that is consistent with the hypothesis that corruption moves the electorate to the left. We discuss three types of evidence.

  1. First, we argue that cross-country evidence showing that more regulation is correlated with more corruption (Djankov et al (2002)) is consistent with the idea that corruption reduces the appeal of capitalism (as well as with the “tollbooth” theory presented by these authors).
  2. Second, we present evidence on a link at the aggregate level between corruption and ideology within countries. We show that there is a negative correlation between a country’s aggregate level of corruption and how much to the right is the government in later years (and there is no evidence of reverse Granger causality).

Third,we look at data on beliefs across individuals within countries. We show that people who think that corruption amongst public officials is widespread in the country tend to report themselves on the left of the political spectrum. The effect is monotonically increasing in the perception of corruption, well defined statistically, and comparable in size with other determinants of left-wing preferences, such as being on low income. We partition ideology into economic and non-economic attributes of ideology, and document their correlation with perceptions of corruption. People who perceive there to be widespread corruption also tend to think that the government is doing too little to fight poverty or to think that the government should run firms (rather than owners and managers).

In the third and final part of the paper, we discuss possible interpretations of these correlations. We ask that the model is consistent with three pieces of evidence, including that a) the corruption-left connection changes with a history of heavy government intervention in the country, b) corruption of all kinds (i.e., both of the capture and of the extortion variety) turn people away from capitalism, and c) even right-wing parties that credibly promise to control corruption often have electoral difficulties (i.e., there is failure to separate bad capitalists from right wing parties).

The root assumption of the model is that voters are willing to pay to punish people who are of the "unfair" type (as in the ultimatum game). Bayesian updating after an act of corruption, is more unfavorable to capitalists (than to bureaucrats) because they are richer. Thus, even if we do not exploit the distinction between extortion (corruption initiated by bureaucrats which hurts firms) and capture (corruption initiated by firms for their benefit), the model can still explain why corruption hurts capitalists more than bureaucrats. The existence of corrupt entrepreneurs hurts good entrepreneurs by reducing the general appeal of capitalism. Accordingly, perhaps the most important message of the model is that it points out that corrupt entrepreneurs can have a negative effect on all entrepreneurs by undermining the electorate's faith in markets. A limitation of our model is that good entrepreneurs and the public have no way of disciplining corrupt entrepreneurs. In practice there may be ways of making these entrepreneurs internalize the costs of their actions (perhaps through judicial prosecution or through social norms). Overall, the paper shows that corruption has an ideological side to it. Increases in corruption adversely influence the electoral performance of pro-capitalist parties.

Survey Descriptions

The ideology variables Right, Left and Center, are defined by Beck et al in two steps. First, they identify the party of key political players. Then they asked whether the orientation of a party (regarding greater or less state control of the economy) was immediately obvious from the name. Otherwise they checked sources, including The Europa Handbook and Banks’ Political Handbook of the World. Information on party orientation comes from Political Parties of Africa and the Middle East: A Reference Guide (1993), Political Parties of Eastern Europe, Russia and the Successor States: A Reference Guide (1994) and the Web site maintained by Agora Telematica ( Countries: Afghanistán, Albania, Algeria, Angola, Argentina, Australia, Austria, Bahamas, Bangladesh, Barbados, Belarus, Belgium, Belize, Benin, Bolivia, Botswana, Brazil, Bulgaria, Burkina Faso, Cambodia, Canada, Cape Verde, Central African Republic, Chile, China, Colombia, Comoro Islands, Congo, Costa Rica, Croatia, Cuba, Cyprus, Czech, Denmark, Dominican Republic, Ecuador, El Salvador, Ethiopia, Fiji, Finland, France, Gambia, East Germany, West Germany, Georgia, Ghana, Greece, Grenada, Guatemala, Guinea, Guinea Bissau, Guyana, Haiti, Honduras, Hungary, Iceland, India, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Korea, Laos, Latvia, Lebanon, Lesotho, Liberia, Lithuania, Luxembourg, Macedonia, Madagascar, Malawi, Mali, Malta, Mauritius, Mauritania, Mexico, Moldova, Mongolia, Morocco, Mozambique, Myanmar, Namibia, Nepal, Netherlands, New Zealand, Nicaragua, Niger, Norway, Pakistan, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Poland, Portugal, Romania, Russia, Senegal, Sierra Leone, Slovakia, Slovenia, Solomon Islands, South Africa, USSR, Spain, Sri Lanka, St Lucia, Sudan, Suriname, Sweden, Switzerland, Taiwan, Tajikistan, Tanzania, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, USA, Uganda, Ukraine, United Kingdom, Uruguay, Uzbekistan, Vanuatu, Venezuela, Vietnam, Western Samoa, Yemen, Yugoslavia, Zambia.



Right: Parties on the right are those with the terms “conservative” or “Christian democratic” in their names, or are labeled right-wing in their sources.

Left: Similarly, parties classified as left if their names reveal them to be communist, socialist, or social democratic or if the sources label them as left-wing.

Center: Similarly, centrist parties are those called centrist by their sources or if their proposed policies can best be described as centrist (e.g., because the party advocates strengthening private enterprise but also supports a redistributive role for government).

Chief Executive: A discrete variable that refers to the political orientation of the party of the chief political decision-maker in the country. Assigned three numerical codes: -1 if the Chief Executive is left wing, 0 if center and 1 if right wing.

Largest Government Party: A discrete variable that refers to the political orientation of the Governing party with most seats in the legislature. It is assigned three numerical codes: -1 if the largest government party is left wing, 0 if center and 1 if right wing.

Largest Government Party (by seats): A continuous variable capturing the political orientation of the largest Governing party as above, but now weighted by the proportion of seats it occupies in the legislature.

Three Main Government Parties: The political orientation of the government parties with the first, second and third largest number of seats in the legislature, obtained by taking a simple average across the political orientation of each of these parties. The government parties are assigned three numerical codes: -1, 0 and 1 depending on whether they are left, center or right-wing assigned equal weights.

Three Main Government Parties (by seats): A continuous variable capturing the political orientation of the three largest government parties as above, but where each one is weighted by the number of seats it occupies in the legislature.


Freedom: A scale from 1 to 7 measuring the extent of political rights. Nations with a rating of 7 come closest to the ideals of free and fair elections. Those who are elected rule, there are competitive parties or other political groupings, and the opposition plays an important role and has actual power. Nations with the lowest numbers have systems ruled by military juntas, religious hierarchies, or autocrats. A

rating of 1 means political rights are virtually nonexistent. The data is produced in an annual survey

produced by regional experts, consultants, and human rights specialists. Source Freedom House. War: A dummy variable equal to one when there is a civil war in that country/year. A civil war is defined as a

domestic conflict involving of over 1,000 battle deaths per year. From Doyle and Sambanis (2000).

Inequality: The Gini Ratio, obtained from the Deininger and Squire (1996) World Bank “high quality” data set. Corruption: The International Country Risk Guide (ICRG) corruption index has been produced annually since 1982 by Political Risk Services, a private international investment risk service. It is measured on a 0 to 6 scale. The index is based on the opinion of experts, and intends to capture the extent to which “high government officials are likely to demand special payments” and “illegal payments are generally expected throughout lower levels of government” in the form of “bribes connected with import and export licenses, exchange controls, tax assessments, police protection, or loans”.

GDP per head: GDP per capita, in 1992 US$, from the World Development Indicators of the World Bank.


Individual Level Surveys and Variables:

Survey Descriptions

World Values Survey and European Values Survey (Third wave: 1995-7). The Combined World Values Survey is produced by the Institute for Social Research, Ann Arbor, MI, USA. The series is designed for cross-national comparison of values and norms. Both national random and quota sampling were used. All of the surveys were carried out through face-to-face interviews, with a sampling universe consisting of all adult citizens, aged 18 and older. The countries surveyed in the 1995-7 wave which have data on both corruption and ideology include: Argentina, Armenia, Australia, Azerbaijan, Bangladesh, Belarus, Bulgaria, Bosnia- Herzegovina, Brazil, Chile, Colombia, Croatia, Dominican Republic, Estonia, Finland, Georgia, Germany, India, South Korea, Latvia, Lithuania, Macedonia, Mexico, Moldova, Nigeria, Norway, Peru, Philippines, Poland, Puerto Rico, Russia, Moscow, Slovenia, South Africa, Spain, Andalusia, Basque, Galicia, Valencia, Sweden, Switzerland, Taiwan, Turkey, Ukraine, United States of America, Uruguay, Venezuela, Serbia- Montenegro.



Right Wing Voter: Dependent variable is the answer to the question "In political matters, people talk of "the left" and "the right". How would you place your views on this scale, generally speaking?" Interviewer shows scale with numbers 1 to 10 written down with the word “Left” written below the number 1 and the word “Right” below the number 10 (World Values Survey).

Perception of Corruption: A categorical variable that is the answer to the question “How widespread do you think bribe taking and corruption is in this country?”. The answers are (1) Almost no public officials are engaged in it. (2) A few public officials are engaged in it. (3) Most public officials are engaged in it. (4) Almost all public officials are engaged in it (World Values Survey).

Captured: A dummy equal to 1 when the respondent gives the second answer to the question: “Generally speaking, would you say that this country is run by a few big interests looking out for themselves, or that it is run for the benefit of all the people?” (1) Run for all the people (2) Run by a few big interests (World Values Survey).

Personal Income Quintile: This heading refers to a set of 4 dummy variables which take the value 1 depending on which income quintile the respondent’s family income belongs to. The base category is the lowest income quintile (World Values Survey).

Work Status: A set of dummy variables taking the value 1 depending on the respondent’s employment status: “Unemployed”, “Self-employed”, “Retired”, “Student” or “Housewife”. The base category is “Employed” (World Values Survey).

Marital Status: A set of dummy variables taking the value 1 depending on the respondent’s marital status: “Married”, “Divorced”, “Separated” or “Widowed”. The base category is “Never Married” (World Values Survey).

Age: The respondent’s age in years (World Values Survey). Male: A dummy variable equal to 1 if the respondent is male and 0 otherwise (World Values Survey). Age Finished School: The age at which the respondent finished full-time education (World Values Survey).



Acemoglu, Daron and Thierry Verdier (2000) “The Choice Between Market Failures and Corruption American Economic

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Turning The Natural-Resource Curse Into What It Should Be – A Means To National Prosperity

John O. Ifediora.

It is the irony of human nature, and indeed the incentive mechanism inherent in social institutions, that some societies less endowed by nature strive harder to improve their collective lot, and in many instances succeed in achieving their development objectives more frequently than their counterparts with more favorable allotments of natural resources. And if necessity is truly the mother of invention, then the sorry economic conditions of many resource-rich African nations may not be so ironic after all. When it comes to wasted wealth, and the problems that bedevil poor countries that are rich in natural resources, especially oil, there is plenty of blame to go around. Economists have long observed that such countries tend to do badly. In a study in 1995, Jeffrey Sachs, now of Columbia University in New York, showed that the resource-rich grow more slowly than other poor countries—even after such variables as initial per capita income and trade policies are taken into account.

The usual explanation for this is “Dutch Disease”, named for the hardships that befell the Netherlands after it found North Sea gas. When a country strikes hydrocarbons, a sudden inflow of dollar-denominated revenues often leads to a sharp appreciation in the domestic currency. That tends to make non-oil sectors like agriculture and manufacturing less competitive on world markets, thus leaving oil to dominate the economy.

Experts have offered fixes for the economic aspects of this “curse of oil” for a while. Some governments have used stabilisation” policies: when oil prices are high, revenues are set aside; when prices fall, governments use the funds to cushion the blow. A related idea is to park part of the proceeds from resources in offshore “funds for the future”. In theory, such funds would not only help spread the wealth over several generations, but also help avoid over-appreciation of the local currency. Some countries even disburse some oil revenues directly to every household, thereby ensuring that ordinary folk see tangible benefits.

These are fine ideas in principle, and in developed countries they even work to some extent. Officials in oil-rich Alberta and Alaska are now handing out potfuls of cash to households. But charges of wasteful government spending and cronyism abound. It has been suggested that a new Iraqi government could disburse oil bounty to its citizens too, but doing so properly in a country where the poor do not have bank accounts will be tricky. Norway has an offshore oil fund that is often touted as a model for developing countries. Yet even the virtuous Norwegians have been raiding it for politically popular causes.

In developing countries, such raids are the rule rather than the exception. Zambia set up a stabilisation scheme to manage mineral exports; but as prices soared in the 1970s, the government dropped it—and years of pain followed when prices fell again. Venezuela set up a fund for the future, “El Fondo de Inversiónes”, in 1974, but was soon raiding the kitty. An orgy of domestic spending left the country with a herd of white-elephant projects, huge foreign debt and declining social spending.

Michael Ross, at the University of California at Los Angeles, argues that oil-rich countries do far less to help the poor than do countries without resources. He points to evidence that oil and mineral states fare worse on child mortality and nutrition, have lower literacy and school-enrolment rates and do relatively worse on measures like the UN's “Human Development Index”.

Why? Economics offers some answers. Unlike agriculture, the oil sector employs few unskilled people. The inherent volatility of commodity prices hurts the poor the most, as they are least able to hedge their risks. And because the resource is concentrated, the resulting wealth passes through only a few hands—and so is more susceptible to misdirection.

This misdirection points to another explanation for the oil curse that is gaining favour: politics. Because oil money often flows directly from Big Oil to the Big Man, as Africa's dictators are known, governments have little need to raise revenues through taxes. Arvind Subramanian of the IMF argues that such rulers have no incentive to develop non-oil sources of wealth, and the ruled (but untaxed) consequently have little incentive to hold their rulers accountable.

Some argue the Persian Gulf has escaped the oil curse. True, access to health care and education in the Gulf did improve (though booming populations in places like Saudi Arabia are eroding those gains). And a few countries, such as Qatar and the United Arab Emirates, have tried to diversify their economies. But a study by Mr Subramanian suggests that the Gulf's oil has rotted democratic institutions. Rachel Bronson of the Council on Foreign Relations, a think-tank in New York, points as evidence to life before oil. When the Saudi ruling family needed tax revenues, it consulted the merchant classes in Jeddah, so there was some mild democratic participation. The arrival of vast oil wealth, she argues, wiped out the power of the merchants, and made it easier for the royal family to quash democracy.

Another recent political argument is that resources fuel civil war. An analysis by Paul Collier of Oxford University suggests that for any given five-year period, the chance of a civil war in an African country varies from less than 1% in countries without resource wealth to nearly 25% in those with such riches.

Mr Subramanian concludes that economic factors like the Dutch Disease and corruption alone do not explain the oil curse. He maintains that the problem is weak institutions. George Soros, a financier who has set up charities to work on this issue, agrees.

Making oil transparent

The good news is that international initiatives are starting to shine a cold light on the murky business of oil. Tony Blair is promoting the Extractive Industries Transparency Initiative (EITI), a voluntary effort involving governments and oil majors. George Soros is backing the “Publish What You Pay” campaign, which demands more aggressive disclosure. Even big oil companies, long accused by activists of propping up dictators with bribes, are joining the transparency bandwagon.

As with the issue of global warming, BP is the oil major making the most public noise—and Exxon Mobil apparently the one most opposed to change. Ask senior executives of both firms what they think of the oil curse, and their answers are strikingly different. Graham Baxter at BP says “the curse of oil is a problem that BP recognises, and we have a part to play in helping our hosts deal with this wall of dollar-denominated cash coming into their fragile economies.” But André Madec of Exxon says: “We don't like to call it the oil curse, we prefer ‘governance curse'. We are private investors, and it is not our role to tell governments how to spend their money.”

Yet the two firms' actions are not so different. BP may be vocal on the issue, but after getting burned in Angola (it published information about its oil bid and got a bitter rebuke from government officials) it no longer strays far from the pack. And Exxon, for all its gruff talk, is at the heart of a controversial project aimed at monitoring the revenues generated by the new Chad-Cameroon oil pipeline. The money is deposited in offshore escrow accounts and scrutinised by an oversight committee representing parliament and civic organisations. It is also involved in half a dozen countries participating in the EITI.

How far can transparency go? Mr Sachs sees no reason why government oil contracts should stay secret. Companies and governments have usually engaged in a conspiracy of silence about contractual terms, signing bonuses and other rake-offs. But things are changing. The western oil majors (though not state-run goliaths in China and India) are coming to see more transparency as inevitable or even desirable. As Mr Madec puts it, Exxon wants oil revenues to “go to the people rather than accounts in Switzerland” as it helps secure his firm's “licence to operate”. In other words, it reduces the risk of boycotts and bad publicity.

The World Bank now seems keen: “Countries have no justification for secrecy,” insists Rashad Kaldany of the bank's International Finance Corporation. “All of these agreements will be made public in future.” And the IMF is already leading the charge: it required Equatorial Guinea, Angola and other recalcitrant countries to open up their oil accounts or risk ostracism.

The best news is that more poor-country leaders are coming to the view that transparency is best. The fledgling oil states of São Tomé e Príncipe and East Timor are eager participants in the EITI. Some two dozen in all have joined up. Nigeria's recent participation is encouraging the rest of West Africa, Mr Soros reckons, just as Azerbaijan's involvement has shamed Kazakhstan and other neighbours into cleaning up their act.

Mr Kaldany thinks the effect will spill over from oil to other resources. The push for greater disclosure is, he says, already leading to demands for greater transparency in the power, water and construction sectors. If push really comes to shove, natural resources may yet become what they should be for some of the world's poorest people: a blessing.

Currency devaluation: Reasons and effects

Editorial Commentary.

The massive devaluation of the Naira by the CBN has left Nigerians scratching their heads and each others head. As they ponder the fate of the Naira, and why so many on fixed income see a rapid erosion of their purchasing power, the Council now feels compelled to provide elucidation. While this effort may not provide any relief of collective anxiety, it should provide a sense of direction.
At the Bretton Woods Conference in July 1944, international leaders sought to insure a stable post-war international economic environment by creating a fixed exchange rate system. The United States played a leading role in the new arrangement, with the value of other currencies fixed in relation to the dollar and the value of the dollar fixed in terms of gold—$35 an ounce. Following the Bretton Woods agreement, the United States authorities took actions to hold down the growth of foreign central bank dollar reserves to reduce the pressure for conversion of official dollar holdings into gold.
During the mid- to late-1960s, the United States experienced a period of rising inflation. Because currencies could not fluctuate to reflect the shift in relative macroeconomic conditions between the United States and other nations, the system of fixed exchange rates came under pressure.

In 1973, the United States officially ended its adherence to the gold standard. Many other industrialized nations also switched from a system of fixed exchange rates to a system of floating rates. Since 1973, exchange rates for most industrialized countries have floated, or fluctuated, according to the supply of and demand for different currencies in international markets. An increase in the value of a currency is known as appreciation, and a decrease as depreciation. Some countries and some groups of countries, however, continue to use fixed exchange rates to help to achieve economic goals, such as price stability.

Under a fixed exchange rate system, only a decision by a country's government or monetary authority can alter the official value of the currency. Governments do, occasionally, take such measures, often in response to unusual market pressures. Devaluation, the deliberate downward adjustment in the official exchange rate, reduces the currency's value; in contrast, a revaluation is an upward change in the currency's value.

For example, suppose a government has set 10 units of its currency equal to one dollar. To devalue, it might announce that from now on 20 of its currency units will be equal to one dollar. This would make its currency half as expensive to Americans, and the U.S. dollar twice as expensive in the devaluing country. To revalue, the government might change the rate from 10 units to one dollar to five units to one dollar; this would make the currency twice as expensive to Americans, and the dollar half as costly at home.

Under What Circumstances Might a Country Devalue?
When a government devalues its currency, it is often because the interaction of market forces and policy decisions has made the currency's fixed exchange rate untenable. In order to sustain a fixed exchange rate, a country must have sufficient foreign exchange reserves, often dollars, and be willing to spend them, to purchase all offers of its currency at the established exchange rate. When a country is unable or unwilling to do so, then it must devalue its currency to a level that it is able and willing to support with its foreign exchange reserves.

A key effect of devaluation is that it makes the domestic currency cheaper relative to other currencies. There are two implications of a devaluation. First, devaluation makes the country's exports relatively less expensive for foreigners. Second, the devaluation makes foreign products relatively more expensive for domestic consumers, thus discouraging imports. This may help to increase the country's exports and decrease imports, and may therefore help to reduce the current account deficit.

There are other policy issues that might lead a country to change its fixed exchange rate. For example, rather than implementing unpopular fiscal spending policies, a government might try to use devaluation to boost aggregate demand in the economy in an effort to fight unemployment. Revaluation, which makes a currency more expensive, might be undertaken in an effort to reduce a current account surplus, where exports exceed imports, or to attempt to contain inflationary pressures.

Effects of Devaluation
A significant danger is that by increasing the price of imports and stimulating greater demand for domestic products, devaluation can aggravate inflation. If this happens, the government may have to raise interest rates to control inflation, but at the cost of slower economic growth.
Another risk of devaluation is psychological. To the extent that devaluation is viewed as a sign of economic weakness, the creditworthiness of the nation may be jeopardized. Thus, devaluation may dampen investor confidence in the country's economy and hurt the country's ability to secure foreign investment.

Another possible consequence is a round of successive devaluations. For instance, trading partners may become concerned that a devaluation might negatively affect their own export industries. Neighboring countries might devalue their own currencies to offset the effects of their trading partner's devaluation. Such "beggar thy neighbor" policies tend to exacerbate economic difficulties by creating instability in broader financial markets.
Since the 1930s, various international organizations such as the International Monetary Fund (IMF) have been established to help nations coordinate their trade and foreign exchange policies and thereby avoid successive rounds of devaluation and retaliation. The 1976 revision of Article IV of the IMF charter encourages policymakers to avoid "manipulating exchange gain an unfair competitive advantage over other members." With this revision, the IMF also set forth each member nation's right to freely choose an exchange rate system.

Under a fixed exchange rate system, devaluation and revaluation are official changes in the value of a country's currency relative to other currencies. Under a floating exchange rate system, market forces generate changes in the value of the currency, known as currency depreciation or appreciation.

In a fixed exchange rate system, both devaluation and revaluation can be conducted by policymakers, usually motivated by market pressures.

Poor Men With Money: On The Politics of Not Studying The Poorest Of The Poor In Urban South Africa

James Williams.

Poverty and violence crisscross ethnographies of the African city. This is especially pronounced in anthropological research from South Africa, where considerable efforts are made to describe and document poverty and violence across segregated cityscapes. Correlations between poverty and vulnerability are often asserted in the literature: the “poorest of the poor” are presented repeatedly as the persons most susceptible to violence and harm. In this paper I aim to complicate how poverty and vulnerability are conventionally linked. Drawing from fieldwork on young African migrants’ informal work in Cape Town, I show how hazardous slight gains in prosperity can prove. Once the migrants’ entrepreneurial ventures took off, the youths were recast quickly as persons of suspicion and acceptable targeting. I present an episode in counterpoint of other migrants losing their property and means of livelihood. Countering expectations, these migrants’ descent into poverty’s inconspicuousness protected them during an outbreak of anti-immigrant violence. The ethnography shows poverty and vulnerability to be closely connected facets of urban life but more dynamically than assumed and not associable in predictable ways. I argue that anthropology’s disproportionately narrow focus on the most economically and socially disadvantaged members of society risks eclipsing small yet significant fluctuations in wealth and well-being among the urban poor as a whole. Such a politics understates their diversity.

Anthropologists I met in Cape Town during the period of my fieldwork often told me that I was studying “the wrong kinds of [African] migrants” in their city. A well-meant remark if hard to decrypt at first, this was circuitous, in retrospect valuable guidance in the customs and subtleties of local anthropological inquiry. It speaks to the complex politics of studying the urban poor in South Africa specifically.

Studying “the wrong kinds of migrants” encompassed several sets of concerns. It first referred to how the scales and sites of my project disturbed conventions. By conducting fieldwork with a diverse population of unaccompanied young male migrants in Cape Town who had traveled to South Africa from different West and Central African countries, had formed ties with each other in the city, and had organized themselves as deft economic networks that tentacled across the urban underworld, I was not studying a familiar diaspora of migrants joined by shared national bonds or a common ethnicity (cf. Greenburg 2010; Morreira 2013; Steinberg 2006). In further contrast to existing research in South African cities, particularly work in Cape Town, I had not embarked on a bounded fieldsite study on the lives of migrants in a specific suburb (cf. Dodson and Oelofse 2000; Owen 2011).

The comment next concerned how I had failed to articulate my study in terms of the topical national debates and pressing political agendas that prominently shape the landscape of scholarship in contemporary South Africa (Becker 2007). Misaligning or at least too loosely connecting my research to these agendas, failing to pose my project “in terms of social ‘application’ or ‘intervention’” (Gillespie and Dubbeld 2007:129), the relevance of my fieldwork was brought into question.

Though research on African migrants and refugees in South Africa was prolific at the time of my fieldwork (2006–2009), responding to vociferous discussion across and beyond the country about the presence and well-being of the millions of African foreign nationals who had come to South Africa since the end of apartheid (Crush and McDonald 2000; Hassim, Kupe, and Worby 2008; HRW 2006; Madsen 2004; McDonald et al. 2000), I had not framed my work—a study of entrepreneurialism and survival in the shadows of an African city via networks of young male migrants—within such topical terms. I was reprimanded especially at the start of my fieldwork for not centering “xenophobia” sufficiently in my research proposals, a key word in postapartheid discourse (Desai 2008; Neocosmos 2006; Nyamnjoh 2006; Sichone 2008), which gained heightened saliency in May 2008, midway through my fieldwork, following a wave of exceptionally violent attacks on African foreign nationals in Johannesburg and Cape Town (Landau 2010; Pillay 2013). Circumnavigating urban South Africa in different orbits of surveillance and exchange to the majority of African migrants and refugees there, with different energies, aspirations, and social and relational fields, the youths I worked among were not seen as pertinent subjects for research at a time when migrancy and neighborliness had returned the nation so urgently to global headlines. The migrants were too minor to Migrant Studies to warrant ethnographic scrutiny.

Remarks about the right and wrong “kinds of migrants” gestured principally, however, to an especially unsubtle moral politics I came to observe at large in the South African academy. Within this rubric, studies of the most destitute members of society hold priority and are most encouraged. I should study “poorer migrants” instead, I was told various times by my hosts, and “the poorest of the poor” ideally, migrants and refugees from Zimbabwe, Mozambique, or Malawi: “the makwerekwere.”2 Or, the same scholars added, if I did not plan to work with the poorest migrants in Cape Town, I should study migrants the most vulnerable to xenophobic violence in urban South Africa: the Somalis. The poorest or most vulnerable migrants in Cape Town were held up to me as deserving and legitimate subjects of ethnographic attention. The youths I had elected to study could not be placed among them.

An “anomalous” study such as mine, therefore, as one senior anthropologist described it, of young migrants in Cape Town who forge modest but regular means of livelihood despite their poverty and who find ways to survive relatively unharmed in the city despite the continuous risks of violence they face was viewed as outlier research, dubious. It furthermore threatened to unstitch an established, but I will argue also myopic, narrative about African migrants and refugees in the new South Africa as wholly impoverished and helpless victims. One researcher long experienced in advocacy efforts with migrants in Cape Town said my research could detract from the important ongoing work of scholars and NGOs in South Africa in drawing public attention to migrants’ adversities. “Worse, James,” she joked very seriously, “studying those gangs of yours will give the impression that all migrants in Cape Town are ‘Nigerian’ drug dealers!” Animated by anxieties specific to the migrants I had chosen to work with—elusive young men associated popularly with crime and violence; wily, miscreant urban figures; or, as iterated above in crude but locally understandable terms, “Nigerians”—anthropologists tried to coax me away from conducting research that would likely and inconveniently conclude that small numbers of poor African migrants in South Africa negotiate urban life with a degree of successfulness (see Simone 2004 for a crucial essay from Johannesburg that reaches similar conclusions). Attending to the wrong kinds of African migrants, my study was seen to endanger a responsible, mindful, postapartheid anthropology premised on an “ethic of care” for the poor and vulnerable (Spiegel 2005).

Urban Poverty and Vulnerability

In her sensitive research on low-income households on the margins of the city, Fiona Ross describes political and economic processes that have produced a notoriously segregated landscape of wealth and poverty in Cape Town (Ross 2010, 2015). She references landmark works that historicize the study of urban poverty in South Africa, a reading of which might help explain why ethnographic research in South Africa today centers so consistently on the lives of the most vulnerable, the most harmed, and the most destitute and why South African anthropologists tend to see and critique their work inimitably in expressly moral terms.3 Possibly in contrast to how the urban poor have been constructed as an object of inquiry in anthropology elsewhere in the world, relatively late in the discipline’s histories (Das and Randeria 2015), Ross reminds us that anthropologists of southern Africa have been attentive to urban poverty for a very long time and have always conceptualized it politically.

My aim here is not to query the sentiments of the anthropologists in Cape Town who generously hosted and guided me during my fieldwork. Nor is it to enter ongoing local debates over whose research subjects are most relevant or appropriate (Nyamnjoh 2012; Van Wyk 2013). I want to pause instead on a small fragment of detail buried within the remarks made about the migrants in my project to elaborate a puzzle or inconsistency of urban life that I think is known to many who live in Cape Town but that is strangely often passed over in writings and reports on the urban poor. I want to present examples of this disconnect in the paper ethnographically.

As well as reinforcing this volume’s core claim that the urban poor do not make up a uniform whole (“the poorest of the poor” is an idiomatic phrase in South African scholarship, state discourse, and public conversation that already acknowledges their diversity), by framing my choice as between the poorest migrants from Southern African states on the one hand and the Somali migrants targeted most visibly by anti-immigrant violence on the other, South African anthropologists were also decoupling poverty and vulnerability as two contests of life in Cape Town. Many migrants in Cape Town live in appallingly impoverished conditions and struggle desperately to find work and housing, they explain, and many migrants are victims of violence, intimidation, and discrimination at the hands of state officials and local residents (a definition of vulnerability I use throughout the following sections), but, and crucially, these are not synonymous populations. My hosts were carefully separating two aspects of life among the urban poor that are widely assumed to coincide within the same groups and persons (as may indeed be the case for many poor black South Africans in much of Cape Town; see, e.g., Seekings and Nattrass 2005). Their comment helped me query the reliability of poverty as an index of migrants’ well-being and safety.

Reports into the causes of the organized violence against African foreign nationals in South African cities in May 2008 made similar conclusions (e.g., Bekker et al. 2008; FMSP 2009; HSRC 2008). While narrative accounts of the violence describe a general building up of antagonism and tense entanglement among the urban poor in South Africa since the 1990s, between African migrants and refugees and poor black South Africans most prominently, the statistical data painted a contrary and more specific picture. The data showed that the foreign nationals who suffered most directly from the anti-immigrant violence in 2008 (in terms of assets lost and physical injuries) were not the poorest.4 Anti-immigrant violence did not peak in areas of greatest social deprivation. Challenging sensational media coverage, the poorest African migrants in South African cities, who made up the majority of persons in the relief camps set up in the aftermath (Robins 2009), were very rarely victims of interpersonal violence.

Poor Men with Money

I conducted fieldwork in Cape Town between 2006 and 2009 with four networks of young male migrants aged 18–35, comprising almost eighty youths total from nine West and Central African countries. Their average age was 23 years. Almost all were unmarried and childless. I set out to understand how these migrants, representatives of a growing population of African youth crisscrossing international borders in search of employment and refuge, created opportunities for themselves in South Africa without legal documents, the support of family members, and the benefits of belonging as citizens.

The migrants demonstrated aptitude and resourcefulness as economic actors in Cape Town, a finding mirrored in comparative research on youth and livelihood in other cities (e.g., Cole 2005; De Boeck and Plissart 2005; Durham 2000; Hansen 2008; Honwana and De Boeck 2003; Mains 2012; Sommers 2012; Tienda and Wilson 2002; Weiss 2009). I sought to understand how they accomplished this. I studied the relations the migrants forged with patrons and partners in the city to courier and trade in small goods and illicit items. I mapped “territories” within which they worked and provided services. I observed how their mobility and forms of companionship made possible by their memberships in networks offered ways to elide the surveillance of the state and cultivate new niches for work.

The city itself became my fieldwork’s central actor. Its fast-changing form creates inconstant openings of opportunity and exposure. Attuned to its cadences and rhythms, the migrants made decisions to live and work in ambiguous, fast-changing urban areas in central Cape Town in which the possibilities for both fortune and risks were high. They poised themselves at volatile, distrustful nodes of citywide networks that exposed them to profound fluctuations in income and safety. These fluctuations make it hard to label these migrants stably as moneyed or impoverished, as vulnerable to risk or immune from it (though they identified passionately as both poor and vulnerable in our earliest discussions). Rather, and as I hope I bring out in what follows, there was always an unsteadiness to their wealth and well-being. Onsets of poverty and vulnerability were frequent and hard to anticipate. Daily life undulated between extremes; the young men found this terrifying and exciting. I was not convinced by the claims they made that the violence they were subjected to bore solely the name of xenophobia.

Such opacities—a conspicuous access to money; blurry urban zones in which the migrants lived and worked; their rapid, unseen movements and vast reach of connections; an ability to survive in times of crisis; the sometimes illicit wares of their trade—turned these youths into persons of intense suspicion. They embodied a type of African migrant rife in public discourse, which made them infamous despite their small numbers: stylish, strong, and untrustworthily flush young men; “Nigerians” associated with unlawful activities and gangster violence, exemplifying capacities pungent with millennial capitalism and occult economies (Comaroff and Comaroff 1999).

I thus found and felt poverty and vulnerability throughout my fieldwork in Cape Town, but not continuously or transparently or in ways that matched the descriptions, calculations, and intensities of poverty and vulnerability presented in most literatures on migrants in South Africa. In the following sections I try to bring out some sides to this: first, some scenes from a group of migrants’ nighttime work in the inner city, which shows young migrants amassing not insubstantial sums of money together from guarding cars and team trading in small goods and drugs, yet becoming progressively more vulnerable by doing so; second, the history of a household of different male migrants in the coastal suburb of Muizenberg, which initially thrived as a dormitory shelter for unaccompanied boys and young men but eventually succumbed to economic pressures and neighborly violence and emptied. These portraits muddy standard descriptions of urban life because they show poverty and vulnerability to be closely connected facets of daily life but in unpredictable ways and not directionally associable. The lifeworlds of this specific cadre of migrants might be best characterized by slight, irregular, and often rapid oscillations between prosperity and scarceness, danger and safety, solidarity and isolation. I argue anthropology’s focus on the poorest and most vulnerable migrants in South Africa eclipses such complexities and accomplishments.

Three points come through the ethnography. First, we see a flow of money through the hands and households of the migrants, sometimes in plentiful amounts. The youths’ trickiest challenge, in most cases, was not how to obtain money but rather how to hold it, keep it, and transform it into something of permanence. In the words of one migrant, they struggled to find ways to make their money “work” for them.

Second, the ethnography shows unsteady, at times even inverse, relations between poverty and vulnerability. As the migrants’ entrepreneurial efforts began to blossom, for example, they faced greater scrutiny and resentment on the streets of the city. They scaled momentarily out of the discreetness and perhaps even security of poverty to become exposed and endangered. This challenges assumptions of poorness as a reliable gauge of social security.

Third, the ethnography shows once more how newfound prosperity among the urban poor places strain on relationships. This is where my paper speaks with other contributions from sub-Saharan Africa in this volume, where poverty and politics are explored in terms of relational wealth (De Boeck 2015; Englund 2015; Ross 2015). Among the young migrants, specifically from the perspective of the networks they worked and lived within, the advent of even small sums of money disturbed relations. Economic fortune thus not only brought heightened risks of violence and visibility, it also threatened to destabilize the bonds constitutive of the networks that allowed them to work and accumulate wealth as economic actors in the first place.

Night Work

The migrants’ work in Green Point ends promptly at 2 a.m. Though some of the cars they have been watching over since dusk remain unclaimed, thus unpaid for on the streets, they know it is unsafe to stay out longer in the city once the crowds have dispersed and the coldness and quietness set in. We gather to talk through the evening’s events and redistribute the money they have earned. An older migrant counts the pooled bills and coins at lightning speed and then dispenses the money back to the men in similar-sized handfuls. Money is stored over as many bodies as possible. No one risks traveling the city with the entire network’s earnings on their person. As they now start to leave their workplace to travel homeward through Cape Town in pairs and small groups, the youths are at their most vulnerable. These are the hours when the assaults and arrests of “Nigerians” occur.

For 6 months of fieldwork in Cape Town, for three or four evenings each week, I accompanied a 10-strong group to Green Point at nightfall to observe them guarding cars belonging to locals and tourists who patronize the restaurants and nightclubs in this expensive suburb.5 It is the classic occupational niche for male African migrants in Cape Town: an informal security service built from personal contacts; a line of work that demands charisma, patience, and an imposing physique more than permits or qualifications. The small sums of money migrants earn from guiding cars into parking spots on the streets and watching them until the owners return mask and enable their concurrent and considerably more profitable sales in “SIM cards,” the term we jointly invented for the small goods and illicit items being sold simultaneously. On a Friday or Saturday night, individual nightly earnings from guarding cards and selling “SIM cards” could exceed R200 per person, a considerable sum of money.

Although they are viewed by many in Cape Town as perfunctory and unskilled, I came to appreciate the remarkable collective organization and discipline their work required. The work is neither self-explanatory nor easy to observe. The migrants’ successfulness as car guards depends on the men always varying their roles and approaches, on staying alert and unseen in the city, on knowing when to use charm and when to show muscle, and on hiding their individual identities to present themselves publicly as an indistinguishable mass. Their well-practiced, unspoken, collaborative actions are swift and minute. The men dress deliberately in ways that make it hard to tell one migrant from another. It took me several weeks of strained observations before I started to fully appreciate the myriad surveillance practices, nonverbal signals, choreography of roles and positions, and techniques of the body that make up the network’s collective movements, all of which are designed to ensure that every potential customer is seen by the network and that risks and threats are detected early.

They taught me some of these movements. The first of these, “following,” referred to how the migrants watch each other on the streets. Each youth is assigned another youth to follow throughout a night’s work; this migrant follows another in turn. The web of surveillances forms a circuit among the migrants designed to ensure the network sees every potential customer. I sketched down their sight lines.

“Following” means the migrants have to keep track of two “stations” at once. As well as working their own corner or stretch of street in Green Point, the men must also ensure that the brother they are following has registered possible clients nearby, whistling to them if they appear distracted. It also means each migrant watches more than people. They must follow what has happened in an entire environment and also what might possibly happen to come. It is quite challenging in practice because “targets” are not always easy to categorize. Even close up, it can be hard to discriminate between a customer returning to their car, a shopper looking for a sale, and a passerby, each of which requires a different body, face, and style of approach. The men use every clue available to help classify their targets and assess situations for risks: clothing, walking patterns and speeds, sounds, eye movements, and the size, race, age, and sex of bodies. Green Point can be swarming at its busiest times. As many visitors to Cape Town will experience, however, car guards are almost always standing at an owner’s car by the time they return. This feels uncanny the first time you visit, because, unbeknownst to you, you have been watched.

The migrants’ maneuvers proved reasonable ways of addressing practical challenges, but I needed an elevated vantage point and a good teacher at my side before I could see them myself and appreciate their effectiveness. Placid and suave, Soldier endured over 40 hours of being my “eyes” without complaint.

We start with following, says Soldier,6 because it will help me to start to see the working group as a coordinated team. He says I have been focusing too much on specific transactions the different migrants make. Soldier instead wants me to recognize “how we see everything.” He said boys at home in Kinshasa learn to trust each other this way. At street level, it is simply not possible to grasp all of their lines of vision from any single place, even to see all the migrants. Soldier is pushing me to see the network beyond its people: to take into account the street, the cars, the clothes of others, lights and shadows in Green Point, and sounds of traffic, sirens, migrants’ whistles, and laughter. The men trust the network to see on their behalf.

He shows me the migrants “dancing” next—a range of arm gestures and hand signals that convey information to the others. These can alert the network to an excess of customers to deal with in a particular location (rapidly opening and closing both hands), a significant sale that has been made (a fist is punched into the other hand; this also alerts a supervisor that a migrant is carrying a large amount of cash), or a near shortage of “SIM cards” (reloading a machine gun against the stomach). Dancing gestures are relayed from migrant to migrant until either Brad or Wesley, whichever supervisor is roaming Green Point, is informed. The communication chain is faster than using cell phones, which are avoided because of the costs and attention they incur.

As Soldier and I observed and discussed the network’s work on the Green Point streets, I learned of the stories and mementos recited through bodies and words that were attached to many parts of the men’s work. The precision with which they worked mirrored a precision in language the men used to speak about it. The names and parts of some of their maneuvers used in guarding and selling reached far back into their pasts. “Switching,” for example—changing migrants between guarding posts periodically to prevent one migrant’s face gaining unnecessary recognition by the police or patrons—was devised, they said, after masked Bakongo hunting rituals the youths had seen as children in which the identities of masked men performing (men they knew) were concealed from spectators. Presenting themselves as identical shells of persons but concealing and changing the individual inside, this practice partly addressed their security concerns in Green Point.

Other maneuvers were devised in South Africa. They said they had learned to copy Zimbabwean migrants’ habits of storing the takings of their work in sellable commodities. During an evening’s work, every hour or so, up to 1 a.m., the supervisors would gather coins earned from the men and snake over to Long Street to exchange them into bills, cigarettes, or “SIM cards,” which they could sell immediately. Such items were redistributed among the migrants to ensure no single migrant held the entire proceeds of their work at once.

Migrants’ actions in guarding and selling together proved coordinated, interdependent, and remarkably effective. The gestures and tactics they used were neither automated actions nor original inventions produced by contingencies or challenges of working in the city center. Rather, the men had assembled strategies to use in Green Point by copying others or finding ways to deploy old skills in a new economic setting. Shared terms personalized and dramatized their work. Past life operations found fresh use in this new city.

We see a migrant network here operating as a tightly ordered and profitable organization. Internally structured by a set of roles and duties that make up a working whole, the network deployed carefully planned techniques and strategies with corporate consistency. The migrants read moving landscapes collaboratively, arranging themselves in and across different working locations to boost their economic opportunities. They operated in the presence of tight surveillance, suspicion, and violence. Though individual migrants hold distinct places in the network’s history and life—among themselves, each youth is known within the network for his distinct portfolio of skills, knowledge, and characteristics—at work on the streets, all of the migrants ultimately prove substitutable and secondary to the welfare and work of the network as a whole.

It was always difficult for me to reconcile the different intensities in the migrants’ behavior in Green Point. They conveyed palpable enthusiasm to work in this unsafe locality; migrants assigned car guarding duties elsewhere begged a transfer to Green Point. Even after incidents of violence, confrontations involving police or rival migrant groups, work spirits stayed high. When troubles occur on the streets, the network’s priority was to return to guarding positions as soon as possible. Migrants also know that the police will not intervene in fights between migrants or between migrants and local youths unless a tourist or a bar patron in Green Point is involved. “We’re alone out here,” one youth told me, emphasizing the vulnerability of the migrants in the inner city. They warned me many times that their sales pitch in Green Point could be lost instantaneously.

The Death of a Household

Joshua and Babatunde acquired the lease to their house in Church Street, Muizenberg, in February 2002, a sand-swept terrace tucked one street behind the scruffy coastal suburb’s main road. They lived in Church Street together until March 2008, sharing the house with large numbers of young male migrants they affectionately called their “sauvage boys,” whom they spoke of as both being employed by them and as under their care.

In 2002, when the men negotiated the lease to the Church Street house, Muizenberg was a thriving and greatly preferred place of residence for scores of African migrants and refugees new to South Africa (Owen 2011). Large migrant families moved into cheap, vacant houses and apartments in the area. Newcomers sought bed space in the homes of fellow nationals. Sensing opportunity, Joshua and Babatunde left their small apartment in the city to rent a larger property in Muizenberg and take in young tenants on a short-term basis, particularly those they deemed to have earning potential. They reasoned that the move would formalize their fledgling odd-job business in the Muizenberg area and enhance their status as connected, benevolent patrons. Joshua told me that over 60 boys had stayed with them since 2002.

In late 2006, when I met Joshua and Babatunde through three youths they employed, the household had stabilized to a dozen longer-term occupants. This occurred at a time when many migrants were starting to move out of Muizenberg to suburbs in the north or into townships, priced and pushed out by community efforts to regenerate and more strictly police the neighborhood—a demonstration of the fast-changing, patchwork geography of wealth, tolerance, and risk that characterizes the city’s urban form. Joshua and Babatunde’s once flourishing enterprises began to wane thereafter. In March 2008, unable to pay the rent they owed and fearing the repercussions that would follow from a formal eviction process, the men and their boys moved out.

The Muizenberg household was the largest in my study. Between December 2006 and March 2008, it comprised twelve permanent members. Joshua and Babatunde, 10 years older than the other members, comanaged the men’s work and household affairs. It was unusual among the migrant households I surveyed for its large and diverse membership, for how guests came by freely and frequently, and for how it remained fixed in one location for the bulk of its existence. Most unusually, however, it failed to demonstrate sufficient acuity of city life to withstand the financial and social pressures faced by young male migrants who tenant in Cape Town.

Church Street was two streets’ walk from where I lived. It held infamous status in the area. Church Street was singled out as the “epicenter of crime and antisocial behavior” in community and police forums in Muizenberg I attended at the start of my fieldwork. One enraged resident described the street as “a hell pit.” She called its mostly Congolese occupants “Nigerian drug pimps and gangsters.”

I spent many long evenings with members of the household. My relations there began in October 2006 when I met its three youngest occupants after a church service downtown that drew large migrant congregations: two cousins from Sierra Leone and their Liberian friend Simbah. I had seen Simbah’s Lone Star football shirt on Muizenberg’s beach several times before—he owned two of the shirts and was almost always wearing one of them—and that gave me a friendly comment to make as the four of us walked off in the direction of the train station. The three were impressed when I told them I had been to Liberia and had met several refugees from Simbah’s home county in Cape Town. We continued talking on the train, then over takeout coffee and chips on the beach, and later on the steps leading up to the Church Street house. I was struck by the ease with which the migrants poured out entire life stories to me at first meetings.

The mass of people and the sheer amount of activity in Church Street struck me most of all when I first visited the house in the last week of October: boys clambering over saucepans of rice and stew Joshua had laid out on the floor for dinner; clothes and blankets strewn over floors and the backs of chairs; fast music coming from a stereo in one corner and a London football match relayed from a radio in another, each on full volume; garbage and beer bottles in piles; newspapers; more boxes than I could count; a cracked TV on mute. The dirty living room, where eight youths also slept, was crammed. My entrance interrupted a mealtime, causing only a marginal disturbance. I was greeted inside like a close friend, told to step or sit where I wanted, then given a bowl and instructed to eat and drink. Dinner prefaced a typical evening in Church Street of talking and dancing and drinking that ended only when Babatunde decided to sleep and demanded quiet, or when the beer had finished, or when the Congolese pastor down the road knocked on the door to plead for noise restraint.

Calm conversation was an alien mode of speech there. You shouted to communicate. For private discussions, the youths and I stepped onto the steps outside or into the storeroom off of the kitchen, which doubled as the bedroom for Mukanzi and Saeed. Or we left the house altogether. Only Joshua and Babatunde had the capacities to guarantee stillness—Joshua through a sigh of “Well, well, well” that indicated an important statement would follow; Babatunde by punching a wall or a boy—but a compelling story or a hymn from one of the youths could sometimes hush the household.

After a month of visits, I had become a familiar guest in the household and was accordingly treated less respectfully, though always given food and expected to eat if I called by at night. I was not the household’s only regular visitor. The men had friends and lots of girlfriends from Muizenberg and farther away who stopped by frequently, sometimes overnight—other migrants, lost whites in the area searching for drinking or smoking partners, and a few black South Africans. I enjoyed my uninteresting presence in their dilapidated house. The ebullient, rowdy atmosphere was a refreshing contrast to the seriousness and dangerousness of the other sites in my project. Despite the squalor, Babatunde’s moodiness, and the declining state of the network’s operations, it was an animated space, where stories of the day and tales from home supplied ample material for rubbing and teasing. Joshua encouraged raucous behavior. Fagin-like, he held court on his worn armchair as the men played cards through the night, paraded girlfriends in and out, smoked, drank, and scuffled. Lines between a playful argument and violence were sometimes hard to decipher. There were comical moments in Church Street, too, such as the occasional group prayers with the pastor, who prayed for the men’s souls and good fortune in their deal making. A memorable pastime was the youths’ reenactments of scenes from their favorite films. Titanic was a popular choice; Saeed and Davis could perform dialogues of courtship and drowning from memory, which had everyone laughing and calling for encores.

My familiarity in Church Street meant the householders’ behavior was less and less censored around me. I learned of Babatunde’s volatile temper quickly. I started seeing him behave more roughly toward the others, which he had restrained during my first visits. His outbursts unsettled me. Once, after receiving news from Johannesburg of an overdue utility bill, he lost his temper with Mohammed and Ibrahim and shattered four glass bottles at their feet. I reacted hysterically. The boys put their heads down and drank on in silence, giggling once he left the room.

I watched the household start to struggle financially month by month. Each member was expected to contribute to the upkeep of the house, but because their business operations were stalling, limited to some informal trading and a few contract jobs here and there (delivering, hunting down spare parts for electricians and mechanics in rougher parts of Cape Town, odd gardening), incomes were increasingly scarce. The shared evening dinner was sometimes their only meal of the day. The men were less confident in Muizenberg today than in past years, I was told, and almost always back at the house before nightfall. The younger boys started spending more time in my apartment at night, slipping home in the early hours after SMS messages were sent to them saying Babatunde was asleep. Simbah and the Leoneans sheltered at my house if they had been unable to earn during the day, which was common by late 2007. Joshua said to me that the pressures of making ends meet in the house were affecting Babatunde’s mood. It accounted for his rages and “new love of drinking.”

Church Street was the least discreet household I knew. As did other bachelor migrant households on Church Street, it achieved notoriety for its loudness and many visitors. Reflecting a growing, more acceptable intolerance toward migrants and refugees across the city by this time, it was blamed more openly and specifically for crime and drug sales in the area. Household members tried turning their increasingly anomalous status in Muizenberg into a story of themselves as a vanguard group. The men bonded more closely together.

Feuding between the migrants and their neighbors intensified. Bricks were thrown through windows on weekends and the men faced harassment on the streets. Tensions peaked in January 2008 when two household members were assaulted with broken glass and a spade, after which their pastor, rather than condemning the action and intervening in the community, pleaded they find a new house. A new property was hard to secure given the network’s size and now limited finances. The house they finally found in Retreat, three stops along the train line toward Cape Town, was smaller, more expensive, and in a suburb with fewer migrants. The extent of the household’s poverty was revealed to me on the day of their move in late January when their things fell apart as we lifted their furniture onto a pickup truck I had hired for them.

Joshua and Babatunde tried hard to recreate an atmosphere of dormitory playfulness in the new, quiet, and discreet property, but they had lost their remaining trading posts during the move and struggled to find new sales partners. Men were often left stranded in Muizenberg late into the night from where journeying home alone was terrifying. Girlfriends stayed longer and more often.

Unable to maintain itself, the household in Retreat dissolved in May 2008 even though there was no violence nearby. Alternative places to live had become better options; for some, these included the government camps for displaced persons. In January 2009, when I concluded my fieldwork, Joshua, Babatunde, and four other migrants were living in a single room of a shared building in Woodstock. Simbah and the Leoneans moved back to Johannesburg. The others moved first to the camp in Wynberg, later to the camp in Harmony Park, after which I lost contact with them. Two eventually elected to take the United Nations High Commissioner for Refugees repatriation and left South Africa.

Reflections on Not Studying the Poorest of the Urban Poor

I set out to map the relational networks young unaccompanied migrants in urban South Africa lived and worked within as fully and carefully as possible—networks that bound the migrants together and through which they earned livelihoods, created opportunity, and kept themselves safe—in response to gaps I found in the literature, which expresses and theorizes forms of connectedness and action among the urban poor through social and economic networks extensively but that often lacks detailed descriptions of networks’ day-to-day maneuvers and movements. The migrants I worked among were not the poorest African migrants in Cape Town, even the migrants in Muizenberg, whom I watched fall quite quickly from a previous state of plenty.

The teams of young migrants I studied proved fortuitous economic actors in a competitive and dangerous city. Their excitement for work in the most hazardous parts of the inner city was often contagious. Yet their access to money made them persons of suspicion and increasingly vulnerable. They also struggled to transform their money into long-lasting assets or to spend and consume it efficiently. Landlords leasing apartments and houses to them exorbitantly inflated rental costs. Excluded from community organizations and rejected by NGOs that provide assistance to African foreign nationals in the city, they did not have access to formal banking services. Their uncertain legal statuses led to their avoidance of state officials. Our times together were strangely often more relaxed, enjoyable, and comradely when poverty and destitution set in: when money was short, relations were full; then, too, life in the city was safer. Poverty appeared to cloak or insulate the migrants from other kinds of danger, including threats of brotherly betrayal and rivalry.

The ethnography shows how African migrants in Cape Town are entangled in a miscellany of racial, social, economic, and political tensions that characterize contemporary South Africa.7 The politics of urban migrants are central to the story of the new South Africa. The ethnography posits migrants’ informal employment and housing as especially prominent intersections. The targeting of the Church Street household by its once friendly neighbors underscores the tenseness of the urban landscape in which migrants live. Drawn into a particularly sensitive firestorm around housing that is now making itself center stage in South African politics, the migrants are embroiled in disputes and dramas extending far beyond neighborliness or immigration. An inquiry into the outbreak of violence against foreign nationals in South African cities in 2008, for example, cited the state’s scant provision of low-cost housing and the ability of migrants to rent property in sensitive areas of urban development as the two most significant factors contributing to growing anti-immigrant sentiments (HSRC 2008). The growing presence of migrants as urban tenants and entrepreneurial street salesmen is loaded with political significance. Through their everyday accomplishments and visibility, migrants such as those I worked among reminded those around them of the slow pace of wealth redistribution since democratization. They reinforced a sore, past precedent concerning the limited prospects for poor black South Africans to claim the city of Cape Town as theirs. For these reasons, Cape Town was not a neutral backdrop in front of which the lives of urban youths unfolded but instead played an active role in determining which forms of living and livelihood were possible. Cities themselves are prominent actors in urban ethnographies of the politics of the poor.

The ethnography further shows poverty and vulnerability to be closely connected facets of urban life, but more dynamically than assumed, not associable in predictable ways. Far more detailed analysis is needed on how poverty, well-being, vulnerability, and opportunity connect and overlap among the urban poor in cities such as Cape Town and why assumptions that equate poverty with vulnerability persist so strongly in the social scientific literature.

The unstable disconnections between the poorest and most vulnerable populations in Cape Town I have attempted to sketch out are likely specific for African migrants and for younger male migrants especially. The challenges these young migrants face, however, have implications for generalizations made about the politics, relational infrastructures, and the accomplishments of the urban poor. I suggest that anthropology’s unrelenting focus on the most disadvantaged members of society, the “poorest of the poor,” is screening off vast terrains of urban life from our analysis.



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An Important Man for an Important Position: Professor Gambari As President Buhari's New Chief of Staff

Professor Ibrahim A. Gambari.

By John O. Ifediora.

The appointment of Professor Ibrahim Gambari as the new Chief of Staff to President Buhari of Nigeria is a wise decision. It is an important position that can only be occupied by an important person, and professor Gambari, by all meaningful standards, is an important person. His tenure at the United Nations as the Under-Secretary for Africa, his service to Nigeria as the country’s Minister of Foreign Affairs, his last position as the Pro-Chancellor of Bayero University, in addition to the intermediate positions he occupied in various Nigerian administrations attest to his selfless dedication to Nigeria and the well-being of its citizenry. Beside his service credentials, his educational qualifications are just as impressive; he did his undergraduate studies at the London School of Economics, and received his doctorate from Columbia university in New York.

Professor Gambari brings to his new position an unparalleled gravitas grounded on practiced and exercised diplomacy only accessible through experience and temperament. His humble beginnings have and continue to serve him well; this has made him a favorite personality in diplomatic circles around the world, and a sought-after expert in international conferences. At the Council on African Security and Development, we have had the pleasure of having him in two of our international conferences on Development and security in Nigeria, and the state of higher education in Nigeria, where he delivered the keynote addresses; in both instances the audiences left with informed analysis of the problems and possible solutions. We remain confident that in his new position at the presidency, President Buhari would enjoy the same competent analysis of national problems and informed solutions Professor Gambari can bring to bear.

Innovative Development Strategies In Africa

Rejoice Ngwenya.

Africa’s real per capita income today is lower than in the 1970s, leaving many African countries as poor as they were forty years ago. I would not like to seek a consensus of the definition of 'development ' but like oxygen, it is the absence of liberal democracy that is a catalyst of under-development. Political scientists at Harvard and economists the world over talk about the human development index – inter alia a quantitative analyses life expectancy at birth, knowledge, and a decent standard of living. Development that lacks a human face is as bad as democracy that disregards the minority. As long as Africa does not take a holistic approach in its development model, we will always offer credible, denialist reasons for underdevelopment.

Key elements in the model of development

Policy correctness

We should not get caught in the sandstorm of oversimplification. Africa has to get its basics right. Zimbabwe is perhaps at the stage where Ireland once was – huge budget deficits, high unemployment and diminished industrial capacity. ‘What happened? The Irish focused on costs in the economy. The government reduced costs under its control, steadily cutting taxes since 1987 and lessening the uncertainty costs related to large deficits.’ Uncontrolled expenditure on arms, ammunition; huge subsidies on education and health, a bloated civil service and unwieldy Parliament are some of the variables that Africans need to address if they are to remain in charge of their development.

Shunning aid and debt

Aid-dependency has to be eliminated. From Egypt to Mozambique, Ghana to Ethiopia, finance ministers plan their economies with budgetary support from either Bretton Woods institutions or multilateral partners. It is fashionable for left-wing ‘Pan Africans’ to direct their wrath at these institutions that ‘exploit’ gullible African states. I differ slightly in that mismanagement by selfish leaders drives nations in the path of permanent expectation of benevolence. Those who lend us money – like any bank – have to be paid back. We voluntarily submit ourselves to ‘punishing’ adjustment programs so as to win favour. Zambian economist Dambisa Moyo defines aid as ‘sum total of both concessional loans and grants has well-documented resentment for handouts. She adds: ‘It is these billions that have hampered, stifled and retarded Africa’s development.’

I agree with Norberg that while it is noble to repay debts, it is cruel to ask ‘innocent’ citizens to pay back a dictator’s debt. Over a period of ten years, Mugabe’s blue eyed prodigy – central bank governor Gideon Gono ran two billion US dollars worth of debts propping up an unpopular dictatorship. The Morgan Tsvangirayi half of government has had to assume half of that debt in order to restore the ‘lender of last resort’ status to our central bank. This is unfair to millions of us who are not beneficiaries of ZANU-PF patronage. It is suggested that government convert a substantial part of its property portfolio into cash for the purpose of reducing government debt.

Most development agencies – whatever that means- have a strong affinity to both development and humanitarian aid. African countries – even ‘developed’ ones like South Africa, have been lulled into this dangerous loop of expectation that a part of national budgets could be sustained by aid, especially infrastructure development. What therefore is Ms Moyo’s alternative path in the matrix of replacing this ‘addiction’ to aid? ‘It would appear, despondent with their record of failure, that the Western donors are increasingly looking at anyone for guidance on how best to tackle Africa’s predicament.’ Issue singular or collective [pooled] government bonds on the international or domestic markets. Have investor friendly policies to attract FDIs. ‘Look East to China,’ Mugabe adds. Subsidy-free, tariff-free trade. Grameen Bank-type microfinance: ‘Small-scale banking to poor people has the capacity to create enterprise and growth in developing countries,’ says Ms Moyo. Zimbabwe has almost four million citizens in exile. ‘Remittances make an important and growing contribution to relieving poverty.’ Savings: recently in Zimbabwe, a popular Western Union and VW agent boss lost four hundred thousand Euros to thieves. He kept this money in his bedroom!

Free trade

Most African economies tend to be timid and closed. When Zimbabwe discarded its local currency to the multicurrency option, the incentives for foreign direct investment became more tangible. The only challenge being how we stimulate domestic productivity and demand for local goods in the face of punishing cheaper imports from China. Africa has reason to protect her fledgling industry from dumping, but that tends to nurture complacency and xenophobia. South Africa has a culture of strong exports, but whether or not that has alleviated unemployment is debatable, yet they are still considered a dominant economic power-house in the South African Development Community [SADC]. Under free trade, producing for others is producing for yourself. High corporate taxes, anti-investor labour laws, partisan ‘indigenisation’ policies and life-sapping subsidies to state-controlled public utilities have destroyed Zimbabwe’s appetite for foreign direct investment.

Comparative advantage, value addition

A development model that ignores what one country can do best is worthless. Zimbabwe grows some of the best tobacco in the world, yet we pride ourselves as exporting the best leaf to China. Of late, we have stumbled onto ‘priceless’ diamond fields, but local ‘indigenous’ business pressure groups are falling over each other to export uncut stones to India and Israel. Botswana is in a similar situation. Angola has oil, so does Nigeria, Uganda and Ghana. Africa’s development future lies in us being able to process primary commodities and exporting them as finished goods. The truth is that we get rich by exporting what we [can] make best. The challenge though, is how to deal with superior price and quality competition. The answer lies in technology transfer, free market labour laws and supportive infrastructure – factors within our control – and also unfair ‘anti-dumping’ tariffs imposed on our products by vindictive developed nations like USA. Norberg makes reference to Harvard researchers Jeffery Sachs and Andrew Warner, also Sebastian Edwards who noticed a higher, faster growth rate of [2-6 times higher] in free trade countries than protectionist ones.


Fiscal accountability and financial prudence play another role in development resurgence. Africans that are perpetually at conflict like in Zimbabwe, the DRC, Somalia and Sudan will never see the development light of day. During elections, Mugabe’s war machinery launders millions of dollars into clandestine electoral programs ranging from youth and women’s ‘income generating’ projects, farm ‘mechanisation’ offers to employment of thousands of police and army personnel. If these resources were channelled into higher education, skills development, export promotion and paying off the seven-billion dollar external debt, the ‘cost of democracy’ would not be such a burden to the national fiscus. McMahon relates Ireland’s resurgence with reduced taxes, fiscal reform, wage moderation and the promise of higher profits.

Political will

Development is as much physical as it is mental. We Africans have to be committed to putting growth plans into motion. Governments or the state, needs to appreciate that its role is only limited to that of policy maker and regulator. I sense that at one stage, Dambisa Moyo’s ‘Dead Aid – Why Aid is Not Working and How There is Another Way for Africa’ seems to insinuate that Themba Sono’s suggestion of ‘selling off family silver’ leaves governments too exposed and with no controlling shares in scarce national resources. Speaking generally, there is no one so fit to conduct any business, or to determine how or by whom it shall be conducted, as those that are personally interested in it. African governments are too paternalistic. Mostly, it is for personal, selfish gain. Whenever the Zimbabwe government tries to do business, for example, disaster occurs. Zimbabwe Iron and Steel Company has two major debts, one to a Chinese bank that was due and has been renegotiated to be paid by end of 2011. The other debt involves US$240 million from a German bank. They have now done the right thing – sell off 60% controlling shareholding to a Mauritian private company to spare us citizens further agony of subsidising an ailing giant.

Development Banking

If development banks are a familiar feature on the landscape of financial services, then they should play an increasing role in Africa’s quest for industrial supremacy. A function of development banking in [southern] Africa would accordingly include the financing of the economic infrastructure of the less developed areas of the region. My country is battling to supply optimum electrical energy. The government’s call for private sector investment is welcome, but rather tentative. Unfortunately, given our high country risk factor, the answer to financing such projects would lie in the Zimbabwe Infrastructure Development Bank, Development Bank of South Africa or African Development Bank. However, J.A. Lombard proposes that government underwrites such projects to ease loan servicing burden. Lombard continues: ‘Most of the true regional development banks of the world are in fact the banking element of a broader strategy of economic cooperation among governments in the region.’

Structural adjustment

Africa’s left-wing movement is habitually livid about liberal structural adjustment prescription on what they term ‘a neo-colonialist imperialist driven agenda’. I differ not because I am a liberal, but argue that collective condemnation of wholesome policy reform is inspired mostly by a desire for attention than noble cause. Most countries that improved their policies have returned to positive rates of GDP per capita growth. How else can we take charge of our development if we do not cut wasteful government spending, encourage private sector competition, commercialise public enterprises or minimise state interference in markets?

In Zimbabwe, 60-70% of our national budget is recurrent expenditure – mostly wages for civil servants. State enterprises – like Zimbabwe Broadcast Corporation, National Oil Company of Zimbabwe, Zimbabwe Electricity Supply Authority, Air Zimbabwe and the Grain Marketing Board – receive 100% subsidies to sustain the political agenda of Mugabe and ZANU-PF. While the argument is how such a fragile, cash budget economy can cushion the poor, my point is that if Africa generates more employment opportunities and taxes flow to the state, economies can sustain social development programs.


Poverty does make us mere objects of Geldorf- Bono type pity. The curse of Africa South of the Sahara is political instability, failure to manage transition, bad politics, flight of human capital, depressed domestic demand, failure to attract FDI, collapsed infrastructure, weak financial markets, and over-reliance on rain-fed agriculture, no value-addition of primary commodities, overly protected exchange rates, worker-centric labour, an obsession with public enterprises and the debt burden. Perhaps part of the answer is sustainable development, which, according to Wikipedia is a pattern of resource use that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but also for generations to come.

By Rejoice Ngwenya,
Coalition for Market and Liberation Solutions, Harare, Zimbabwe.


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