Monday, February 16, 2009

Captial, Africa needs capital...

... and maybe it could be green capital, according to United Nations Secretary General Ban Ki-moon.

Read about it here and here.

So, where is the capital going to come from?

Maybe from stimulus packages?


  1. Yes, Africa needs capital to achieve growth/development. Capital in the form of not just money, but from the aims of these articles, mainly infrastructure (power plants, canals, refineries ect.)

    The proposals of these Asian countries building geothermal plants in Africa (in my mind) parallels the massive infrastructure investment the Soviets made in undeveloped Latin American countries. Now these investments sit abandoned, a sunk cost, generating 0 return.
    The text book mentioned a steel plant in Nigeria that cost 5 billion $ and 25 years that has never produced any steel and never will (an accumulation of unproductive assets). What is so different now?
    As more Asian countries invest in Africa, everyone else will want a piece of the pie. Maybe an Asian version of the Monroe doctrine will emerage, maybe war.

    Problems I hade with this article:
    What exactly is a “green economy"? an example or a clear-cut definition is not mentioned in any of the articles.

    "Climate change" is also a theoretical concept, one of which politicians base numerous fallacies upon. The subject of “climate change” was mentioned at least 15 times.

  2. I agree that capital investment in Africa is a primary component of development. The secretary mentioned cross-border cooperation however, which I believe is generally more political/cultural and will probably be the major hurdle in many of these projects.

    As for the stimulus helping spur a "green economy" (I agree that "green economy" is basically a political buzzword these days), I have my doubts. The easiest way to do this would be to add money to the stimulus for subsidizing energy research and subsidizing scientific research in general (which was not accomplished due to the deletion of the additional NSF grant money in the latest stimulus bill) and creating a revenue neutral carbon tax. The tax on carbon would spur technology development for "green" initiatives, create jobs in this sector (thought this wouldn't be the primary goal as jobs would most likely be lost in other sectors), and by lowering the corporate tax (studies by the Tax Foundation show that about 80-90% of corporate tax is taken out of employee paychecks) or payroll tax perminantly, it would stimulate both savings and consumption. Just my two cents...

  3. I disagree with many of these calls to "green" our economies. Green technologies for the most part are much less efficient than oil, coal, and gas. Investing in these technologies means less money for other much needed investments, such as training, labor, and machinery; which is likely to slow down growth more than if they were allowed to use the more efficient energy source. Policies that force investment in these technologies and those that limit emissions(e.g. Kyoto Protocol) are likely to slow down industrialization, growth, and development, especially at a time when they are needed so much. It makes less sense, considering that it would take more capital at a time when it is and will continue to be scarce in the region. Is investing in these more expensive and less efficient technologies a good idea considering: they will hinder growth and development, all the other problems that need investment(extreme poverty, hunger, education, health care), and the fact that today's technologies are likely to be obsolete tomorrow and tech. less expensive in the future? I would much rather see the transition to green come through the market when it becomes economical to do so and when the poor won’t suffer from it. Another way this "Green Revolution" is hurting the poor is through policies such as ours that demand that a quarter of our corn be turned to fuel. This drives up demand and prices, adding to today's skyrocketing food prices. To me all this seems like another way the “educated” developed world thinks it knows best for the poor and “ignorant.” If you asked someone in Sub-Saharan Africa or Haiti(where last summer many were eating dirt cakes), whether they would like to see their governments invest in green technologies or things like education and hunger alleviation, what do you think they would say? What about policies that slow down foreign investment, industrialization, and those driving up food prices? If anything, what Africa needs most is more liberalization and stabilization, which would draw far more capital than is given in aid. But if global warming is a reality and in 40 years were all cannibals, says Ted Turner, I guess I will eat these words and you too!

  4. My comments in the 2nd paragraph were actually more aimed at our country. And adding a carbon tax would be letting the market develop the tech. It would be fixing a market failure by eliminating the externality. I also disagree that it will hinder growth and development. When you increase tech in a growth function, you're increasing that "A" coefficient. Even if current capital inputs are sidelined for research, in the long term the increase in that coefficient will make us more productive. The problem with "waiting for tech to be less expensive" is that it is made less expensive through R&D, not just time.