31 October 2013

Development as Burritos

This one has been sitting in my drafts folder for months, but Hausmann just got me thinking about it again.

"Meze Fresh" is probably one of the best places to eat in Kigali. Certainly one of the fastest. It's a Chipotle-style Mexican place, with a range of salads, meats, salsas, and sauces in a bar at the front that are thrown together in a tortilla in no time at all. Plus they do margaritas. The owner, I'm told, is a young American guy in his 20s who worked in a Chipotle back home in California, and basically borrowed the entire concept and replicated it here. A similar thing is going on with the Office, or with the young Americans in Kigali setting up their own gyms and solar energy businesses.

To some extent, that is what development is. Borrowing ideas. At least that's what catch-up growth is. At the world technological frontier you need to invent new ideas to get economic growth, but for most developing countries you can get a long way just copying other ideas.

Hausmann's point is that it takes people to transfer ideas, because it's really hard to teach people things that depend upon learning by doing. Which resonates with the experience of all these expats in Kigali who came to do traditional aid work, decided they liked living there, and started spotting all these business opportunities based on ideas from back home. The policy implications of this? For developing countries, one is to make it really easy for people to come visit and live in your country. Rwanda is doing this. The kind of bureaucracy and visa fees you find in many other countries is just incredibly short-sighted.

I'm also reminded of another Hausmann contribution - growth diagnostics. In a place like Rwanda, having got the basics of physical security, macroeconomic stability, decent government administration, and infrastructure under control, one of the things that might start to bind as a constraint to growth is "information externalities."

Any suggestions for what any of this implies for donor policy? Can we and would we want to increase subsidies for foreign investment?


Bruce Byiers - ECDPM said...

Interesting post - on your last question I think donors are basically already beginning to subsidise foreign investments to Africa through challenge funds, partnerships and the like. I've been doing some work on that myself, but interesting to be reminded of the whole growth diagnostics approach and that it might be good to look at donor engagement withtheir own private sector from that perspective...

Michael said...

Well.... it shouldn't be forgotten that these same dynamic foreigners with all the knowhow... are the descendants of the people who enslaved and then colonized a big chunk of Africa... of course one wants to say, "all that happened long ago", but then we start asking whether francafrique is something real or not? Whether Washington did or did not maintain Jaafar Nimeiri in power for 10-15 years past his good days.... My point is that while it is easy to see the Chipotle story as a paradigm of development, it's also easy to see how that can be a starry-eyed view of the world... or an impatience with the old-timey reluctance to have all of main street owned by Walmart... There are also serious risks in a primarily rural and politically very high-risk environment to promoting a kind of tourist/upper middle class urban service economy... I wonder whether ten years of high urban growth that disappears in a paroxysm of urban violence is better than 20 years of slower but less destabilizing rural growth....? Possibly the political economy of most African semi-authoritarian regimes means that isn't really even a choice...

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