Stiglitz in Namibia

Economists at 10,000 metres

It is said in Arabic that when the king hires a poet he always chops off his tongue. Poets are notoriously difficult and capricious people and are hence liable to say dreadful things that neither the kingnor his court wish to hear. And even if the king is prudent he canmake a mistake in his choice of poet. Of course the broader understanding of this Arabic aphorism was made very clear at the UN where bureaucrats arepaid the sort of stratospheric salary that most people in Africa only dream of. In the UN one was constantly reminded that you do not speak your mind because you had what UN staffers called ‘the golden gag’.

Economists, unlike poets,are less prone to capricious behavior and any good and prudent king can usually choose one based on his writings with little potential of him saying anything uncomfortable or that which he does not wish to hear.  Once, when I was working for the Commonwealth Secretariat in London I commissioned a brilliant Nobel Laureate named Joseph Stiglitz to work for us. We asked him to prepare a report on how the international community should close the Doha Round of negotiations at the World Trade Organization. Having read much of Stiglitz’s work one knew pretty well what the results of the report would be. Of course one of the truisms of all consultancy is that you never rehire a consultant who surprises you with his recommendations. A surprise is a sign of your incompetence as a bureaucrat. And yes, it also means exactly what you think it means- consultants are by and large only hired to reconfirm and provide further evidence of your own prejudices.

Professor Stiglitz flies a great deal and would almost certainly have more frequent flyer points than Santa Claus. He is paid well by his clients and he flies and sees bits of the world where various leaders wish to have his sage advice. The beauty of the flying around the world  at 10,000 metres is that you can get a really broad world view of things. The minor details of specific small places can be left to mere minions to address.

Last week at UNAM with the great man discussed the government’s plan to industrialize Namibia. I argued what I have time and again in similar discussions in Namibia and Botswana. Industrialization won’t work in Namibia, not because I don’t want it to work, but because of the economic fundamentals. The rules of globalization may be utterly repulsive to many but they are disregarded at the nation’s peril. Namibia, like neighboring Botswana, is a very high cost location to produce anything. There is simply no reason for business which has a choice to locate here. Ramatex has failed and diamond beneficiation is failing for the very much the same reason.Until Namibia addresses the reasons for its high cost structure and low productivity then all industrialization is very likely to meet a similar fate as diamond cutting and Ramatex.

Professor Stiglitz’s response to this line of argument was apparently quite reasonable. He countered that if you drill for oil and fail twice do you stop drilling or continue to look? The obvious retort is that if one does not learn from past mistakes and you continue to drill for oil in the same place you will get the same outcome. This is essentially the situation in Namibia. The reason why Namibia and Botswana are so expensive is because of the very high cost of management and professional staff. The only way to break the high cost structure is to bring in competition from skilled professionals from throughout Africa and even Asia. Despite loudly singing the AU anthem at meetings, any such suggestion is seen by Namibian officials and politicians as pure heresy. Allowing in the ‘makwerekwere’, even on a limited quota basis, get responses across southern Africa like one gets when on uses very bad language in church.

In the final analysis no amount of glossy policy papers and advice from Nobel Laureates will change the facts on the ground in Namibia. The costs of production are too high and until the government develops a real policy that will actually address this most fundamental of constraints to investment all the talk of industrialization is simply, as the Zambians so eloquently call it, ‘wayawaya’. Addressing this takes something few governments have and that is the steely will to look their people in the eye and tell them the truth about what really stops investment, growth and prosperity. Psychologists will tell you that recognizing a problem is half the battle to solving it. Not so in economics. The price of solving this problem is the political cost of imposing a high economic burden on one’s own people in order to transform the nation. In most countries this is politically too expensive and the very reason why countries may grow but don’t ever develop and transform.

These are the views of Professor Roman Grynberg and not necessarily those of UNAM where he is employed