Tag Archives: corruption

Billionaire Boom?

JESS HARIG

There are 55 billionaires on the continent of Africa.

That was the big news from Ventures magazine just about one month ago, when Ventures Africa reported a list of the richest people in Africa. The total number of billionaires, much higher than reported by Forbes in previous years, combined to a total worth of nearly $144 billion. The billionaires themselves live in just 10 of Africa’s 55 independent countries. This “news” was reported across various media outlets, in essence cheering on the new development and focusing on personal stories of the individual entrepreneurs who made the list.

My gut reaction to the news was strong. In essence it was: “Why the *&%$ does this matter?” Of all the economic news both good and bad, the personal stories of triumph or despair that could possibly come from this vast continent, why should I care about the existence of a few incredibly wealthy individuals? What does this mean for the other billion or so people living on the continent? Most of the reporting, thanks to due diligence, did make mention of the numbers of people living in poverty on the continent, and referenced the debate over growing income inequalities in many African countries. But when the World Bank reports that the number of people living in extreme poverty on the continent of Africa rose from 205 million to 414 million over the past three decades, is just a mention of the debate on inequality enough? To me, absolutely not.  But clearly, others would disagree with me. Many would see the existence of billionaires to be extremely positive, as evidence of strengthening capital markets, and the promotion of regulatory systems that allow for entrepreneurship. While these trends may be true, I believe what should matter when discussing things related to economic development is the plight of an everyday person, not a rich outlier.

Don’t get me wrong. I’m not rejecting the notion that the ability of 55 people to become billionaires represents some positive economic trends.  I am also not complaining about this news because the reporting portrays Africa in a positive light. What I am rejecting is the dichotomous portrayal of Africa (in this instance, in the media) as either “Africa on the rise” – a place of youth, hope, opportunity – or “Africa: the Dark Continent” – a place of death, poverty and despair. In this case, clearly the media chose the former face of Africa.

The problem with either side of this coin is that it misses the nuance that is so important to understanding what is happening economically and socially in the diverse countries that comprise Africa. Reporting of this story hopes to portray Africa in a positive light, and seems to stay away from the more complicated, countervailing themes of income inequality and poverty. Journalists conveniently ignore problems or trends that cannot and should not be ignored.

One of the first trends I noticed in the reporting on the billionaires was a focus on the presence of several women on the list. As a feminist and women’s advocate, I am certainly pleased to see women doing well for themselves economically in Africa, independent of men. Reporters seemed to have fun with the female aspect of the list, with fun tag lines like “move over Oprah”, referencing the wealthy and powerful American who, according to this list, is no longer the wealthiest black female in the world. She has been replaced by Folorunsho Alakija, a Nigerian fashion designer and oil tycoon whose estimated worth is over $7 billion. But again, my thoughts go back to “why does this matter?”. It brings up questions that I struggled with throughout gender-focused courses in grad school. Does the presence of a few female billionaires mean empowerment for everyday women? Two other women heavily referenced in this context are Isabel Dos Santos, an investor and the daughter of Angolan President, Eduardo Dos Santos, and Mama Ngina Kenyatta, the widow of Kenya’s first President. While I would like to assume that these women are billionaires based improving economic conditions in Africa, I am fully aware of the nepotism and cronyism that plague industry and politics alike in Africa, I’m not so certain their inclusion on this list is a sign of improved gender equality or women’s empowerment. The articles reacting to these seemed to think these women were bucking the trend of “big men” ruling Africa, but at least two seem to have their wealth simply because of their connections to “big men”.

Another thing the reporting basically ignored, or chose not to delve in to, is the geographic disparity of where the billionaires are from.  Of the total 55 billionaires, 20 are Nigerian, nine are South African and eight are Egyptian. The fact that 20 of the 55 billionaires are from Nigeria is interesting. It’s no secret that many of Africa’s nations are plagued by corruption in politics and business. And Nigeria in particular is notorious for this, ranked the 37th most corrupt nation in the world. This known fact combined with the country’s disproportionate share of billionaires should raise some red flags. And furthermore, South Africa and to an extent Egypt are known economic outliers in Africa, with GDPs that far outpace most of their African neighbors.

The last aspect I’ll touch upon that I believe was underreported is the industries in which the billionaires on the list made their money. It’s no surprise that oil and gas industries are heavily represented on this list, particularly out of Nigeria. It’s also no surprise, at least to those of us interested in the environment or West Africa or both, that Nigeria has a dismal track record when it comes to oil and gas exploration. Their environmental practices are ruining the Niger delta, workplace safety is almost nonexistent, and corruption within the industry and government relations remains abundant. Not to mention the incredibly detrimental impacts of these trends on Nigerian communities who rely on the oil and gas industry for jobs. Obviously oil and gas was not the only industry on the list. Fields like telecoms, manufacturing, financial services and construction are also represented on the list, which I believe does evidence a changing and improving economic situation in Africa, as these are not extractive industries that have the potential to create long-term, skilled employment for Africans. However, based on what I gathered from the list, these industries are mostly gaining strength in South Africa and they may not yet be viable industries in all African countries.

So there you have it. My long-winded reaction to a very small piece of news that was both over-reported in terms of coverage, and underreported in terms of content and context. But where does it leave us? I can only speak for myself, but it leaves me with hope and a sense of challenge. It leaves me with hope because, yes, it is positive that entrepreneurship is taking hold in Africa on a larger scale than previously experienced. But the challenge is what I sense more – the challenge to change the way we view economic development. To dig deeper beyond the surface level “billionaires exist” to the more complex, and certainly more worthwhile ideas of who does this benefit? How did those billionaires come to be? And perhaps most importantly – what does this mean for the life of the everyday individual struggling to provide for their family? In essence, I’ll care more about these billionaires, these outliers, when I hear how they use their economic power to change the industries that made them wealthy – from industries that allow a few to capitalize, to industries that offer viable and safe livelihoods for the communities and families and everyday people who live in the African countries that they too call home.

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China’s Main Internal Challenges In the Next Decade

ALEX BOWE

As China’s celebration of Golden Week, the holiday commemorating the founding of the People’s Republic on October 1st, 1949, winds down and millions of Chinese return to their everyday routines, it is a time to consider the obstacles that the world’s most populous nation currently faces. China’s famed economic growth has been slowing recently and many wonder if Beijing will be able to persist and maybe eventually overtake the United States. In a recent book, Yan Xuetong, the Dean of Tsinghua University’s International Relations Department and one of China’s most prominent public intellectuals, optimistically forecasts that China will, in fact, be able to maintain its growth. Yan argues in History’s Inertia (lishi de guanxing), his new book, that China should be able to maintain its economic boom over the next decade and maintain an annual growth rate of roughly 5% after that, which will be enough to see China become a global superpower. The key to achieving this, Yan asserts, is introducing substantive reforms that will allow the country to adapt and overcome circumstances just like during the “reform and opening” that Deng Xiaoping oversaw in the 1980s. Those reforms allowed China to recover from decades of stifling central control and grow into the powerful nation it is today. Here is a rundown of some of the main issues these new reforms will have to address in the coming years. All of these topics are worthy of extensive and in-depth exploration, but a brief overview will suffice for now.

Corruption: This is probably the most serious issue because no matter what reforms Xi Jinping and co. introduce, nothing will happen if Beijing can’t enforce them adequately and uniformly, and local government officials are notoriously evasive when it comes to doing things that they don’t exactly want to. As I predicted in an earlier post, Beijing seems intent on demonstrating that it is serious about cracking down on high-profile corruption; Bo Xilai’s life sentence, which was harsher than many expected, is a strong indicator of this seriousness. Beijing’s merciless conviction of one of the nation’s most well-loved and well-pedigreed rising political stars should have sent a clear message to those who might consider graft or using their offices for personal gain. Xi has gone on the record saying that tackling corruption is his highest priority; taking down a highly visible crook is one thing, but most Chinese are more concerned about small-time official corruption than headline-grabbing national cases. The local corruption cases are the cause of most of the things that make the Chinese lose faith in their government, such as poorly constructed infrastructure projects that collapse, contamination of food due to poor industrial oversight, and a general lack of faith in the justice system. For real success over the long term that will help maintain the public’s confidence in the government, Beijing needs to keep doing more to create a pervasive anti-corruption culture in all levels of government, not just catch the big fish.

Population and labor force: China’s population is expected to peak at 1.4 billion around 2026. While a population as large as this brings its own particular problems, the biggest threat to continued Chinese growth and stability stemming from this is the dependency ratio. The dependency ratio is the number of non-workers (i.e., dependents) to workers in an economy and is a crucial indicator of growth prospects; an economy that is too weighed down by elderly and children will have difficulty accumulating savings, among other things. China is aging quickly, setting up a series of major problems later on. This is tied to the fertility rate, which has been falling for decades and is currently 1.56. China’s labor force peaked in 2011 and saw a decline of .6% in 2012. As the labor force continues to shrink, China will be hard-pressed to keep up its economic growth. Beijing has been thinking about reforming the One Child Policy for some time but has only adopted the mildest of modifications. Improvements will not happen overnight even if radical policy changes are made; indeed, with a chronic problem like this, only long-term solutions can work, so radical adjustments would not help even if the Party wanted to take that route. Since there will not be enough working-aged adults in China to comfortably support both themselves and dependents in coming years, one solution may be to allow in more immigrants, but given the already huge population, this is politically sketchy at best. There have been other consequences of China’s artificially manipulated fertility, such as gender-based selective abortions that have caused men to severely outnumber women, but arguably the labor force issue is poised to create the biggest stumbling block for the country.

Pollution: China’s pollution problem includes both air quality and contamination of other natural resources. As was mentioned in an earlier post, Beijing is planning a massive 1.7 trillion RMB initiative to combat smog. This plan will reduce PM2.5 contamination by 25% , lower Beijing coal use by 50%, cap the number of vehicles at 6 million, and force 1,200 companies to either close up or meet stricter standards by 2017. This plan, if successful, could prove to be a model for the other Chinese cities that suffer the most from smog – Beijing isn’t even the most polluted – and go a long way toward satisfying the demands of the increasingly well-off urban middle class for cleaner living. The more the government is associated with unclean air, the less legitimacy it will retain in the eyes of the public as the effects become increasingly visible. Cleaning up the air and water will be crucial both to maintain the Communist Party’s legitimacy and to keep the health of the Chinese people from being harmed any further than is already unavoidable.

Water: China has about 6% of the world’s fresh water supply and has to provide for a fifth of the entire human race with that amount. According to the Wilson Center, however, one out of every two gallons of water in China is polluted. Half of all groundwater and 2/3 of all surface water is contaminated. This is largely from industrial pollution but also from power generation: 70% of all power in China comes from coal, consumption of which will increase as much as 30% in the near future. What’s more, the processing and use of coal requires a great deal of water, which is already scarce in much of China: 80% of the nation’s coal comes from water-scarce regions. Further complicating this is the fact that most of China’s water is in the south, whereas most of its agricultural land is in the north. The government has just finished a massive undertaking to re-route water from the southern, more heavily populated regions to the relatively sparsely populated north… in order to grow the food with which to feed the population-heavy south. China, as the world’s largest grain producer, desperately needs water to grow its food but at the same time is increasing its use in power generation, which demands more water, leaving less for domestic use. At current rates, China is expected to be more or less out of water as soon as 2030. Beijing desperately needs a solution here since water is literally the sine qua non of everything else it might wish to do: without a stable water supply, no country can hope to survive. A good place to start would be to cut back on energy that requires water – the tricky part is that most methods of conventional power generation also require water, not just hydropower – and to import more grain while decreasing domestic production, but this problem has no easy solution and few hard ones.

Human rights: Yan Xuetong believes that as China’s power draws nearer to the US’s, the differences in the ideological aspects of their political institutions will weaken, which will include their views on human rights. For the time being, however, Beijing is infamous for its problematic relations with ethnic minorities, its issues with human trafficking, and its harsh crackdowns on political dissenters. In order to be viewed as legitimate in the eyes of the world, Beijing must attempt to resolve these matters favorably. Even the issues that seem simple, however, like internet restrictions, are politically difficult: as long as the Party fears that an open and free internet will undermine its power, net access will remain restricted. Some observers were hopeful that a new free trade zone in Shanghai with unrestricted internet access might herald a new liberality in this regard, but these reports were ultimately proven false for now.

Much of early Chinese political thought strongly emphasizes the aspect of morality in the leadership of a state; if a state is governed with morality, others will naturally be drawn to it and validate its authority without a need for subjugation by force. In the 7th century BCE, Guanzi wrote, “If a country is large but governed by one who is petty, the country will be governed in accordance with that man; if the country is small but governed by a great man, the benefit to the country will be great.” Without this element of morality, only military strength will be able to maintain a country’s status, which will fade as its power does. This is the difference between “humane authority” and a hegemony or tyranny. If China is to become (and remain) a superpower over the next decade, humane authority will be the only way to both overcome its current obstacles and remain stable in the future. If it tries to hold onto power merely through sheer force and fails to address its underlying critical contradictions, as other superpowers have tried to do in the past, it may end up on the ash-heap of history, after all.

 

Alexander Bowe has an MA in International Studies from the Korbel School and is currently a doctoral candidate in Political Science at Tsinghua University.

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The Trial of Bo Xilai: The Shot Heard ‘Round China in the War Against Corruption

ALEXANDER BOWE

The trial of Bo Xilai, former senior Party leader of Chongqing, has fascinated China and much of the rest of the world. Bo fell from grace dramatically last year when he was arrested amidst accusations of using his office for personal gain and in connection with a suspicious death of a foreign man. As a highly visible figure in Chinese politics, his allegedly scandalous behavior has been taken very seriously by the authorities. Both Chinese government leaders and external observers have repeatedly pointed out that corruption and unbecoming behavior of public officials severely threaten China’s future stability and the people’s faith in the government. Bo’s personal popularity also strayed dangerously close to a cult of personality, which is viewed as anathema to China’s governmental legitimacy. The country’s experiences under the cult of Mao Zedong demonstrated just how badly things can go when a single man’s ideology takes precedence over sound policy and institutional accountability as a whole; those wounds are still too fresh for the government to allow anyone else to even approach that kind of power. Due to the combination of reckless behavior and personal power that may have grown to threaten Beijing’s authority, Bo’s arrest seemed to have been a long time coming.

China has a conviction rate of roughly ninety-nine percent, meaning that a case only proceeds to trial if a conviction – a favorable outcome for the state – is a certainty. Therefore, it follows that in general the state only allows trials to occur when it wants to crack down hard on someone and to have others know about it. There is an old expression in Chinese: sha ji gei hou kan, or “kill the chicken to scare the monkeys” (literally “kill the chicken and let the monkeys see”). In short, the Chinese Communist Party desperately wants to be seen to follow through on its recent vows to crack down on corruption; Bo’s alleged abuse of power, embezzlement, and involvement in a sordid murder scandal made him the perfect target to demonstrate the Party’s seriousness. He is the proverbial tallest blade of grass that will be cut first. The Chinese government wants to be sure that others take note. If Bo is convicted, as he is certainly expected to be, that will be a strong indication of the government’s increasing focus on combating corruption and the culture that enables it.  Continue reading

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