14 thoughts on “The Rwandan Divergence”

  1. Reblogged this on Against Jebel al-Lawz and commented:
    This is from the Marginal Counterrevolution, my new attempt to subvert and replace the original Marginal Revolution. I did not bother announcing this blog here before because of my reluctance to engage the readers here in petty personal disputes. Whether a post appears on the Counterrevolution or on this blog depends on my personal sense of propriety.

  2. The divergence (well, first, convergence, then divergence) started even before the Rwandan Genocide (or the Burundi one) and the rise of the RPF. What can account for that?

    1. If you look at real GDP:
      https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&met_y=ny_gdp_pcap_cd&idim=country:RWA:BDI&hl=en&dl=en#!ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_pcap_kd&scale_y=lin&ind_y=false&rdim=region&idim=country:RWA:BDI&ifdim=region&hl=en_US&dl=en&ind=false
      the early 1990s catch-up seems to have been random and insignificant. However, if you look at nominal GDP (U.S. $):
      https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&met_y=ny_gdp_pcap_cd&idim=country:RWA:BDI&hl=en&dl=en#!ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_pcap_cd&scale_y=lin&ind_y=false&rdim=region&idim=country:RWA:BDI&ifdim=region&hl=en_US&dl=en&ind=false
      There seems to have been a Rwandan boom in the late 1980s that was more prominent. Coffee prices cannot explain this:
      https://research.stlouisfed.org/fred2/series/CUUR0000SEFP01
      So I’m really not sure what caused the currency appreciation.
      Burundi had a coup in 1987 and political violence in 1988:
      https://en.wikipedia.org/wiki/Pierre_Buyoya
      while the political situation in Rwanda was stable at the time. The death of Dian Fossey also helped make Rwanda more famous as a tourist attraction. But those are just guesses. The early 1990s urbanization boom may or may not be related to all this.

  3. I see, thanks.
    By the way, are you still sure the conditions for countries that decide to adop rarional policies and bet on exports-led growth (say, North Korea in the near future) to succeed are still there even having to face the competion of China, India, etc.?

    1. Yeah, sure. Chinese labor costs are rising, so it’s clear at least some Chinese goods will be soon priced out of the market without subsidies or other help. I’m going to do a post soon not quite on this subject, but on a tangential one. It’s about institutions, is what I’m saying.

      And competition from India? Come on, man.

      1. Well, India may have been a bad example–although its exports have gone up four-fold in less than a decade, and some of its products in Brazil are around 15% more expensive than their Chinese counterparts, cheap enough, depending of the quality, to displace the local product–, but my point is, since Japan’s rise, East Asia knows about exports-led growth (China has a 35-year head start over today’s challengers, Vietnam has a 30-year one, both have economies of scale and Confucian tradition, none is rich enough to disdain competing on low wages yet). The field seems crowded.

  4. I guess, when all but two (one of the)Sub-Saharan country, rank below 62 th place on the Ease of Doing Business ranking, they are not too eager to test the hypothesis, so I must yield to you. It is a shame, I have been (philosophically) bullish on the least chaotic African democracies (Cape Verde, Benin, etc.) for a long time.
    Thanks for the answers.

      1. I don’t recall having read the post (if nothing else, I think I would remember the South Korea vs Brazil comparison). Very interesting.
        Yes, I guess Cabo Verde is a positive outlier. Maybe it is the twin deficits, the overreliance on foreign aid and remittances or maybe I just feel that being the model child among the former Portuguese colonies, the one that managed to transition to democracy and really competitive elections without unleashing chaos, should have yielded more, maybe it is anxiety because no other Portuguese former colony seems to be on the path for success, but I am clearly understimating what Cabo Verde achieved. As for Benin, I guess it is my wishful thinking, it managed a decent transition from Socialism to democracy, and I would like to see it rewarded (also, it is another Romance language–at least, oficially– country). I wonder if China’s involvement in Ethiopia will help to change the “largely internal and service/investment based” part.

        1. “I wonder if China’s involvement in Ethiopia will help to change the “largely internal and service/investment based” part.”
          -It’ll be really difficult, but things are moving in that direction. Ethiopia is a large country with natural infrastructure not nearly as good as that of China and which is landlocked by Somaliland, Somalia, Djibouti, and Eritrea. As Tyler pointed out some weeks ago, Ethiopia is already making shoes for export.

  5. The country are indeed very similar. A big difference is language (FWIW, English is the preliminary education language in Rwanda, French in burundi).

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