What should South Sudan do?

Chris Blattman, one of the best development bloggers out there, has a post on what South Sudan should do. Just to recap, the formerly autonomous southern region of Sudan decided in early 2011 in a referendum to secede from Sudan. They will officially gain their independence on 9 July 2011.

Chris first describes what Abhijit Banerjee and Esther Duflo have proposed in an interview with David Leonhardt. They suggest anti-poverty measures like some very basic health care. Chris points out the obvious:

Today, South Sudan is a state in name only. The long term welfare of its citizens means sustained stability and security and order. Without it, all the anti-poverty impacts, no matter how great, will evaporate in months.

He goes on to propose an agenda that is pragmatic and soberingly realistic. It is worth quoting in full (emphasis mine, I left out his last suggestion):

1. Build compacts [Abkommen, Übereinkunft], possibly unequal and unsavory ones, with warlords and other big men, giving them a stake in continued peace, even if it means they control crucial ministries or development organs.

2. But for goodness sake try not to give up the ministries or development organs. There are non-pecuniary ways to buy people off. And spread it out so you get petty [kleine] barons rather than oligarchs. They’ll be easier to deal with in 20 years when you have the strength.

3. Next, give every incentive for elites, especially the ones apt to war, to invest in fixed assets whose value depends on stability and growth. Make them entrepreneurs. Oil rigs don’t count. Property in Juba [Southern Sudan's capital] does. So do plantations and small factories, even if they need subsidies to operate at first. This is hard, and will require attention and dedication.

4. Aim for minimal corruption in twenty years, not two.

5. Create a minimally competent police force, one that is less criminal than the criminals. And a court system, with particular attention to the places where ethnic groups repeatedly clash over land or rights or respect. Target programs to these hotspots to buy some measure of content.

6. Train and educate the military like the bejeezus [wie verrückt], and at all costs do not let it slip into factions.

Trusting Chris’ expertise on post-conflict countries, I guess these steps are needed in order to give poverty reduction a chance in the future. I especially like his third suggestion because this not only fosters stability but also the future prospect of economic development. As Acemoglu, Johnson and Robinson have pointed out for the case of Botswana, economic development is facilitated if the elite (e.g. cattle owners in Botswana) has an economic interest in good institutions (e.g. secure property rights, fair export conditions).

However, one of Abhijit’s suggestions might be helpful to underpin Chris’ proposal as well:

A small universal cash grant to everyone over 12, based on biometric identification. This guarantees that no one has to face the humiliation of being totally indigent, and from our evidence, makes people more productive as well. Making it universal is important, so that they do not attempt to identify the poor (which is very difficult to do effectively in poor countries).

I would extend this suggestion to a medium universal cash grant, and combine this with the right and need of local, regional as well as central governments to tax their people. Why is that helpful for the nation building steps that Chris describes?

He correctly points out that a state needs to build its basic capacities first in order to ensure stability and peace: police, military, and courts. But institutions that are purely built to ensure stability run the risk of getting out of political control (Update: I see that Ken Opalo stresses this point as well:

[Chris agenda] is absolutely right. But with the caveat that the security hawks should be watched. They tend to overstay their welcome. Rwanda, Uganda and Ethiopia needed security more than a decade ago. Now their saviors, Kagame, Museveni and Zenawi, respectively, are quickly turning into latter day Bokassas.)

Of course, Chris knows this all too well. So isn’t there a way to make the government institutions responsive towards their own citizens, accountable? To build a state on the interaction of the government with the governed?

The fiscal sociology literature argues that there might be a way: tax people. In the words of Mick Moore in a paper entitled The New Fiscal Sociology in Developing Countries:

[A] significant … meta-proposition has been developed and explored in recent literature relating to developing countries: the … expectation that there is a causal connection between (a) the dependence of governments on broadly-levied taxes, rather than other sources of revenue and (b) the existence of the kinds of binding constraints on governments and institutionalised political representation that constitute the foundations of liberal democracy.

So far, this is an under-researched topic in economics – probably because it is difficult to show theoretically and empirically (in a convincing way!) that this causal connection exists. But imagine a village or region in which the local police force and the local courts are financed by a yearly household lump sum tax. How will the people react if treated unfairly? Or being asked to pay a bribe? How well will they be informed about costs and benefits of police and courts? Community monitoring can play an important role, as Björkman and Svensson have shown in their 2009 QJE paper „Power to the People“ on Ugandian hospitals. Taxation may be a way to institutionalize such monitoring efforts.

There are obvious problems with this approach and I would love to hear your thoughts. But I think a modification of Abhijit’s suggestion could be a first step: a medium universal cash grant in order to make sure that people can actually pay these taxes. Such a grant could therefore not only act as an effective anti-poverty program, but also as an institution building program to counteract the dangers of Chris’ pragmatic, yet neccesary nation building approach.


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