The Notary, Our Noble Master
Not So Fast, Holmes

Tens of Millions Headed Europe's Way

The IMF just published a short paper which a development specialist characterized by this tweet:

A few passages:

How does the historical experience of the African countries compare with the performance of the low-income Asian economies? Historical data for Bangladesh, Cambodia, and Vietnam over the 2000–10 period (Figures 8 and 9) reveal the strength of employment growth in industry and services for the
south and east Asian countries relative to average growth.

The change in employment shares for both industry and services for these countries is higher than for almost all of the sub-Saharan African countries with the exception of services employment growth in Ghana, Senegal, Rwanda, and Tanzania (Figure 8 compared with Figure 6). This result was possible for a variety of reasons:

-- There was a very labor-intensive pattern of growth in industry, with annual industry employment growth rates between 6 and 8 percent for Bangladesh and Vietnam and almost 20 percent for Cambodia. This compares with an average employment growth rate of 4 percent per annum for low-income countries with limited natural resources in sub-Saharan Africa.

-- A much lower labor force growth in the Asian economies meant that a lower share of labor got stuck in agriculture. 

-- Even though overall productivity rose rapidly, the strongly labor-intensive growth in industry and services actually dragged down relative productivity slightly in these sectors (the data points for these sectors are found in the lower right-hand side of Figure 9)....

With the majority of new jobs created in countries currently classified as low income (such as Democratic Republic of the Congo and Ethiopia), the agricultural sector remains important for creating employment. Stronger growth in other sectors could push this estimate down slightly, but it is unlikely that the labor force in agriculture will shrink over the nextdecade—young people seeking jobs will simply have no other option. If African agriculture realizes its potential, however, agricultural jobs could be more productive, higher-earning jobs.

A major factor in the slow-moving employment distribution is the very high growth rate of the labor force. Indeed, the share of industrial wage jobs in total employment rises only from 2.3 to 3.2 percent because the jobs are growing from such a small base relative to the projected increase in the labor
force.

A major element of structural transformation is the movement of workers from low-productivity to more productive activities....

The analysis shows that a major, and often underappreciated, factor behind the slow employment transformation in sub-Saharan Africa compared with the Asian benchmarks was demographics—a labor force growing much faster in sub-Saharan Africa. But another factor was the importance of the mining sector in the growth and employment patterns of sub-Saharan Africa’s industrial sector, and weak productivity in the service sectors because of the high share of household enterprises. Sub-Saharan Africa has a large labor productivity dispersion within the services sectors, including a highly productive financial sector but a number of low-productivity household enterprises in the trading and personal services sectors. Looking forward to 2020 and using optimistic assumptions on output growth, the prospects are good for overall productivity growth in the region. But the employment absorption in the nonagricultural sectors will occur mainly in the services sector and nontradables industrial sector (construction, utilities) rather than in manufacturing.

This report's interesting for a few reasons. First, it disproves a cliche you see invoked incessantly on German talk shows. This is the idea that Africa's economic problems are caused by Europe's agricultural policies, which favor native farmers over African ones. Because Europe subsidizes cane sugar, goes the cliche, it is no longer economical for African farmers to grow similar crops. This, in turn, causes poverty, which sends people to Europe.

The first problem with this cliche is that it's never accompanied by numbers. The typical set-up is for some German journalist to interview some African farmer, who points to his fields and says European competition is destroying him. The assumption is, as always, that no ordinary person living in a third-world country is capable of being mistaken or, God forbid, shading the truth. I have yet to see a credulous German journalist ever critically examine these statements.

If they interview anyone for backup, it's always some "expert" (as often as not with a nose-ring, ponytail or the like) with an advocacy group, who uncritically repeats the canard that Western agriculture policies are screwing African farmers, without ever explaining exactly how this is so, or how significant a factor it actually is, or whether other causes might also contribute to the problem. Oh, and as with all experts with whom the German reporter agrees, no mention is ever made of actual qualifications.

Nor do any of these development experts ever explain how we might eliminate European agricultural subsidies. These subsidies exist because European farmers are politically powerful, and generally popular. The average European wants to see mid-sized (especially organic!) farms continue to operate near them inside their own country, and therefore they support farm subsidies. It's perfectly rational for them to do this. There's nothing wrong with preferring policies which assist people 10 kilometers away from you instead of people 10,000 km away. This is how human nature has always worked, and you defy it at your peril. Especially in France, where farmers can and do bring the whole country to its knees whenever prices drop.

But even aside from these points, the paper shows this argument's just wrong. The point should not be to make it easier for Africans to operate small-scale, low-productivity farming operations. They should be discouraged from doing this. Asian economies became richer by reducing the share of workers in small-scale farming, and redeploying them to more-productive sectors of the economy. Of course, the remedy might come from greatly increasing the productivity of African agriculture by consolidation, but we all know what that means, and how popular that sort of thing is among European Greens.

It would be one thing if population growth were small. But alas, as the paper points out, it's still much too large. Too many young people chasing too few reasonably-paid jobs.

The upshot is clear: For the next decades, without radical policy changes which don't seem likely, sub-Saharan Africa will produce tens -- perhaps hundreds -- of millions more young people than its low-productivity economies can provide meaningful employment for. All of these young people see every day how rich Europe appears on their smartphones. Uncounted millions will try to get to Europe by any means possible.

European politicians pride themselves on how seriously they take the challenge of long-term global warming. But very few are taking the short-term challenge of massive population flows from Africa seriously.

Comments