Economic Development in Perspective

Defining what we really mean by “development” is one of the central challenges for humanity in the 21st century. Look back fifty years and it all seemed easy. We had “first world countries”, and “third-world countries”. We had the  stages of growth, and a belief that economic development and development itself were more or less synonomous.

Of course in the last half century times have changed. We now have a much more balanced view of development. The Human Development Index has brought to the fore the importance of non-economic indicators like literacy and life expectancy. The environmental movement has mainstreamed the significance of sustainability. And radical ideas like Bhutan’s Gross National Happiness have shown us that completely different ways of looking at development are possible.

As positive as these recent trends are, one fear I have is that the importance of economic development is quickly becoming underappreciated, especially in western “development studies” programs.

Nothing brought this home for me more vividly than, last month, when Malawi published projections for the income from this year’s tobacco harvest. Tobacco production is, by far, Malawi’s most important industry. It generates roughly 60% of export earnings – the foreign exchange from which, in turn, buoys the rest of the economy.

Tobacco is not just a big industry on paper, its very very noticeable here. In the central region, many smallholder farmers grow at least some tobacco, at times it feels it’s almost as common a sight in rural areas as maize. There are also huge tobacco estates scattered around the country, which employ hundreds of people each. And many better-off people, including a good number of my co-workers and friends, grow tobacco on a semi-commercial basis as a side business on family land. Come harvest season, tobacco is everywhere.

Tenje Field A small field of tobacco growing in Tenje Village, Ntchisi District, Malawi

That’s why I was so shocked by what I read last month: national export earnings for tobacco this year were expected to be somewhere around $380 million. $380 million?!!?! From the country’s largest export industry? From the crop I see everywhere, being grown, dried, graded, baled, and loaded on to trucks? From the industry everyone talks about when they talk about Malawi’s economy? $380 million…

Reading this in the local paper was one of the first times I think I really realized what economic development means.  Malawi’s leading industry, its source of 60% of export revenues, earned $380 million last year. That’s about on par with the United Kingdom’s 2009 earnings for the manufacturing of watches and clocks ($349 million). It’s lower than the UK’s 2009 export earnings from the manufacture of “corrugated paper and containers” ($435 million).

It’s less than the export earnings from the UK’s wine industry (I didn’t even know the UK had a wine industry), which came in at $504 million in 2009. It’s closest UK competitor seems to be the export earnings from the “quarrying of sand and clay” ($385 million), which is remarkable since sand and clay are low value, high weight products, which don’t generally lend themselves to export. And, of course, Malawi’s tobacco earnings pale in comparison to earnings from the UK’s ubiquitous and omnipresent “manufacture of tubes” industry, which brought $2,092 million in 2009.

All of this really puts into perspective for me the real challenge of economic development. Any economy which would generally be considered “developed”, like the UK’s, has dozens and dozens of obscure industries (seriously…UK wine?) which earn more annually than the flagship industry in Malawi. While Malawi’s economy rises and falls with annual tobacco earnings, people take little notice of the earnings from “manufacture of knitted and crocheted pullovers” ($654 million for the UK in 2009), “manufacture of toys and games” ($1,161 million) or any of the other diverse and unexpected industries that keep developed economies moving. And yet many of these industries absolutely dwarf Malawi’s tobacco crop in terms of export earnings.

 

Looking at this, I have to think that, while the pursuit of human development and quality of life should be the real goals of growth in Malawi, a lot of economic growth is also going to be needed to make these nobler goals possible. A lot. I knew that Malawi, like many developed countries, is dependent on one major export industry – I just didn’t realize how small that industry really was. I think that putting things into perspective can really help to appreciate the scale of the challenge, and maybe restore to the goal of economic development, e.g. the development of new industries and manufactures, a bit more well-deserved prominence in the greater development debate. Human development is important, but things like health and literacy won’t come freely – there needs to be a diverse and vibrant economy in place as well to support them. $380 million per year from your largest industry just isn’t going to cut it…

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Note: All UK economic stats were taken from the UK Office for National Statistics online site. Of course I initially wanted to use Canadian export statistics, but Stats Canada saw fit to try to charge me $81 for the privilege. Transparency at its finest…

9 responses to “Economic Development in Perspective

  1. Wow, this is staggering! Really puts things in perspective.

    “Manufacture of tubes?” Really?

  2. Owen, what a fantastic post! To me, this really highlights the importance of private sector based development initiatives. Thanks for sharing!

    E

  3. I’m going to have to get in on the market for knitted and crocheted pullovers!

    • Haha, I think that ship might have sailed (literally even) in the 19th century. Surely a declining industry…

  4. An excellent thought provoking write-up! Tobacco generates only $380 million, yet it is so ubiquitous in Malawi, while on the other hand, wine in the UK generates $504 million, yet you do not even know if there was such an industry. This shows that there is more productive work that Malawi can do with the land that is being degraded by tobacco.

    The problem is, however, is that the politicians are so used to the current status. They think that there is no future beyond tobacco, which is why government sent a delegation of officials and tobacco industry captains to Uruguay to demonstrate against a World Health Organisation (WHO) meeting which passed protocols that threaten the country’s tobacco industry.

  5. Nice paper. Two figures that would have helped me to interpret the detailed stats would have been the total population, and the per capita GDP. I was concerned Malawi might be tiny, but its not: 15 million to the UK’s 62 million. The per capita income of the two countries is
    Malawi: US$219 (WDI, 2004)
    UK: US$33,800 (purchasing power parity (PPP))
    —source: http://yv2.me/yh34
    So UK is 154 times Malawi!

    I also dredged up from the depths of my subconscious Zipf’s Law. I can’t find a current article which isn’t drenched in calculus, but the Wikipedia article says that “the… relationship occurs in many other rankings, unrelated to language, such as the population ranks of cities in various countries, corporation sizes, income rankings, etc.” The relationship, applied here to words in natural language, is: “…that given some corpus of natural language utterances, the frequency of any word is inversely proportional to its rank in the frequency table. Thus the most frequent word will occur approximately twice as often as the second most frequent word, three times as often as the third most frequent word, etc. ”

    What this means for firms, I’ve seen written, is that the largest firm in a mature industry will be twice as large as the second largest, three times as large as the third largest, etc. Rank versus size always produces the same curve.

    I wonder if there’s a similar relationship between wealth of nations, and number of different exports, with the wealthiest exporting twice as many products as the 2nd wealthiest, three times as many as the third… etc.

  6. Thanks, Owen. Reading this not only gave my brain and heart something to gnaw on, it also taught me much more than my mining night class.

  7. Good post. I remember attending a lecture during my graduate studies in Cape Town about the evils of focusing on economic growth in development work. When I remarked that residents of Khayelitsha (Cape Town’s largest slum/township) just a couple kilometers away would probably like a little personal economic growth the lecturer responded with, “Well thats just a problem of redistribution.” And so goes the logic of much of the Aid industry, give the NGOs more money to “redistribute” instead of investing in programs that will spur economic growth. This isn’t the whole story but it is a big part of it unfortunately.

  8. Hi Owen,

    Rosemary (from the Ottawa City chapter) here. I have been reading your illuminating postings.

    This was a good one. I have been thinking about development for many years and your article reminded me as I am sure it has reminded others that although it has been important to focus on the social-educational-advocacy aspects of development which as you say were unheard of in the first part of the century, it is important to remember that “development” is a holistic process and must look at the broader picture and the economic-technical realities to succeed. I am thinking that the more people on the ground understand how this works, the more power they have to work towards changing it. What do you think? Or do you think that maybe sometimes ignorance is bliss and if people knew how little their main export meant to the world’s markets that they would get discouraged? Hmmm ..thanks for making me think!

    Keep up the great work.

    Rosemary

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