Thursday, August 19, 2010

Africa's Growth Strategy According to McKinsey

The 2010 World Cup shifted the world’s gaze to Africa. According to many, Africa is considered the final frontier, the last remaining pocket of the world that is ripe for ambitious economic development much like its emerging economic predecessors: China, India and Brazil. Shortly after the World Cup, publications in highly recognized business and economics journals such as The McKinsey Quarterly and The Economist provided informative insight on the continent’s economic climate and the associated business opportunities and challenges. Following a highly prescribed formula, the authors advocated vigorously for neoliberal macroeconomic policies such as the privatization of public services, a focus on systemic exports, and an enabling environment for multinational corporation foreign direct investment. As somewhat of a combined silver bullet for economic development, many economists implicitly believe these policies will ultimately mend social, governance, and ecological issues in these regions. Many of these articles are written for managers of multinational companies to provide them with insights on how to successfully enter these markets, how to identify attractive competitive environments, and how to avoid political interference. They are also meant to advise policy makers in these regions on how to create enabling environments that would attract foreign business investment.

This neoliberal approach to development is tiring and in many ways frustrating. Has the severe backlash from the catastrophic effects of neoliberal policies imposed on emerging economies in the 1990s not rattled the seemingly impenetrable devotion to these macro level policies? Is our goal here to exhaust all remaining populated areas on the planet with this approach before we realize that we have it wrong? Even the highly sought for industrialized economy to which these authors encourage Africa to aspire is showing debilitating cracks in its armor as the West is embarrassingly recovering from the devastating impact of the very ideologies now slated for Africa. Joseph Stiglitz put it best when he said that due to the corruption and lack of transparency in US financial reform, the World Bank would deem the country uncreditworthy.

More generally, the economic woes caused by the worst financial meltdown in history, the ecological woes in the form of human-induced climate change, and the social woes in the form of obesity and disease all represent signals that perhaps the economic growth model slated for Africa may create a similar doom machine while affording other regions of the world with greater economic wealth. More shocking is the fact that these policies we’re encouraging Africa to adopt are the same ones that we’ve been using in the industrialized world that led to the many social and ecological issues in Africa. I’m referring to natural resource exploitation without representation, inequitable agriculture subsidies, and the use of intellectual property rights that preclude access to those most in need. Metaphorically, we’re giving Africa the stick we’ve been hitting them with for decades and advising them to use it on themselves.

Nowhere in these articles is there discussion of sustainable development; development that incorporates social, governance, and ecological issues to preserve the integrity of future generations across both space and time. For instance, the ecological effects of promoting the same old routine is astounding given that we know that if the 1 billion people living in Africa consumed at a rate equivalent to the West, we’d need several planets to sustain ourselves not to mention the fact that we’d severely compromise the need to reduce CO2 emissions by 80% by 2050. We’re already seeing this breach as a result of China and India’s development where I recently heard that 30% or 300,000,000 Chinese are expected to fly overseas in 2010. Cursed by tunnel-vision syndrome, these authors presume that the carrying capacity of the planet is limitless or at least will increase with traditional economic growth. As Thomas Friedman put it, Mother Nature doesn’t do bailouts.
Perhaps now’s the time to think of Africa as a beacon through which the rest of the world can look for a more sustainable form of development. Not only could this help the continent but it may represent part of the solution to the rest of the globe’s woes. Some of the most innovative business models are emerging in the global South, many in African countries such as Kenya, Tanzania, and Ghana. These business models are inclusive in nature, ecologically sustainable, and uniquely tailored to the needs of the local context. In other words, entrepreneurs in Africa are coming up with the solutions not some foreign multi-national corporation heavily guided by an arguably flawed system of economic development. This is not unlike James Howard Kunstler’s “World Made by Hand” which describes the near future in a small town in upstate New York where a chain of global crises has forced the community to fend for itself. Whereas the West needs to turn the 'titanic' to get there, Africa is perhaps less restricted from the institutional barriers to change evident in industrialized economies.

Tuesday, August 3, 2010

Bala Falls Energy Project: Model for Sustainability?

As a partial resident of Bala, Ontario and admittedly biased, I’ve become familiar with the highly contested Bala Falls Hydro project by Swift River Company that would generate 4.3 MW of power for the province yet would come at a fairly substantial social and economic cost to the town of Bala. The Star and the Globe and Mail have written stories on it.

On the one hand, this project is perceived by many to be a “Green Project” using renewable sources of energy as it would wean Ontario off the need for fossil fuels and nuclear energy (Quebec and BC are highly dependent on hydro for a majority of their power). On the other hand, the impact on the local community of Bala could be devastating. The project is expected to take 2 years to build which would sever the convenient thoroughfare cottagers use to get to and from their cottage. Moreover, the landmark Bala Falls that attract visitors would be all but destroyed not to mention the fact that environmentalists would argue that hydro should not be labeled green because of its disruptive effect on ecosystems. For instance, see the following:

Hydropower doesn't count as clean energy
Hydroelectric power's dirty secret revealed

With already 2 power stations, has Bala contributed enough? Oddly enough, Ontario has so much spare capacity on its grid that it sells a good chunk of its power to the US.

Any thoughts on this? Is hydro considered a green source of energy in your mind? Do we label projects as “green” based on their relative improvement (from coal for example) or more absolute contribution(i.e. whether they support the integrity of ecosystems)? Is this merely a “not in my backyard” scenario or something more? When those favoring the project call this “sustainable”, are they forgetting the social and economic pillars that would be impacted? Should we be concerned that we might be neglecting the demand side of energy, always obsessed with supply? Or is this simply a symbol of a social and economic inevitability for small communities?