Joe Studwell on Africa, Asia, and What Development Actually Requires

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Learn more at Mercadis.org For a full transcript of every conversation and hands with helpful links, visit conversation with Tyler.com. [MUSIC] Hello everyone and welcome back to Conversations with Tyler.

Today I'm speaking with Joe Studwell. Joe has a long and distinguished career as a journalist for many publications, but I know him best for two of his books.

The first is how Asia works, which is extremely well known,

and has had major impact. And now this winter he has a new book coming out, which I thought was great, and enjoyed very much. It is called How Africa Works, success and failure on the world's last developmental frontier.

Joe, welcome. Thank you, it's nice to be here. I have many questions about Africa.

“If lack of population density has been a major problem,”

does that mean we should now be especially optimistic about the Nigerian Delta, which is densely populated? Yes, you're right, and Nigerian Delta is more densely populated. The most parts of Africa.

And it reminds us that population density or increased population density alone

is not enough to solve all of Africa's problems, because Nigeria has been a country plagued with problems since independence. But Nigeria has also been looking in much better shape in the last 20 years compared with the period before that since independence. And I would argue that a big part of that is increased population density.

And broadly, I am, or broadly, across Africa, there is no doubt that very low population density has been the biggest problem for the continent's development. Contrary to what the academic literature has told us the last 50 years, which was that it's all to do with governance

and civil war and civil strife and ethnic strife. In reality, the biggest problem that Africa has had and largely as a result of the disease burden on the continent, which is absolutely unique in its virulence, is having population density which, in 1960,

was one fifth out of Asia as a whole, and one seventh, what it was in East Asia. But is it the case? Nigeria has relatively done so well compared to the rest of Africa. They have oil, of course, and they have remarkable talent in the population.

And relative to oil and talent, it seems to me on average they quite underperform. I see so many years, but they grow 1%, or maybe 0, or you're not sure, because someone's judging the numbers. Like, why should we think the population density matters

if the number one example of that underperforms? So I would say that Nigeria has been something of it outlier in terms of underperformance, as a state which is densely populated by African standards. And as we all know, they had a terrible civil war there in the late 1960s.

The ethnic divisions in Nigeria, even by African standards, are particularly acute. You have a nation which is broadly divided in three with roughly equal numbers among those three groups,

and they've always fought for power with each other.

So the ethnic fragmentation problem has been particularly difficult in Nigeria. Nonetheless, I would say that the population density is what has allowed Nigeria to do have a better performance in agriculture than most people expect

over the last 20, 30 years. And has also contributed to the outperformance of the whole legal area on the coast, which is a real sort of high of entrepreneurial activity. So I would agree with you that Nigeria doesn't

give great hope to us that greater population density across Africa is going to produce better results. But I would say that there are particular reasons within Nigeria that we can point to as to why Nigeria hasn't delivered as much as one would hope so far.

Now you're very good coverage of Botswana in your book, which is arguably the greatest sub-Saharan African success story putting aside South Africa as a special case.

“And they obviously have very low population density, right?”

Diamonds not too many people do the division. People are relatively rich through some decent heritage from British colonial administration. Does that also push against population density being a key issue?

No, because Botswana is an outlier and another sense

when there are three big diamond mines at Botswana. But that's where all the money for development has come from and it's just being well managed. And they didn't need people. I mean mining doesn't require much labor more than mining.

There's only 10,000 people work in the diamond industry in Botswana. So the low population density of Botswana doesn't prove anything.

“I think what we're talking about is possibilities”

that there are for development in countries that don't have outside mineral or hydrocarbon assets and are going to rely on their people to deliver development. And of course, people are the key input in a poor country because you don't have cash and you don't have technology.

You've got people. It's how you mobilize those people that determines your potential to develop rapidly. And if you don't have enough of those people, you can't move forward.

Let me see if you are more optimistic about Africa than I am because you might be. If I look at the history of economic growth in Denmark,

there are hardly any years where Denmark grows at 8 to 10 percent

or even 6 percent.

“Maybe right after World War II, but that's a special time.”

Denmark does well because they have very few years with big negative growth rates. Every now and then a recession like anywhere else. But they just keep unplugging along at something not too far from 2 percent. And you can trust that Denmark just won't do anything terribly stupid. Is there any sub-Saharan African country

where you have even a remotely equivalent faith in their governance where you think, "Well, they're going to be the next Denmark. It might take longer than we would like, but you know, they're going to get there." Well, let's get back to Botswana. They managed growth very well.

They had a sovereign wealth fund that allowed them to stabilize growth rates. But you're absolutely right that this is something that African countries now need to do. African countries have been extremely bad about this. I talk about it in the book,

but it's principally being the hydrocarbon states that have had the most volatile growth over time. And the evidence is that they're becoming a little bit better at managing that. Growth and we have to hope that that continues going forward.

And it's certainly one of the biggest lessons of East Asia, and one that you almost never

here repeated, is that what developmental states in East Asia did was to get stable growth rates, which then signaled very effectively to the private sector, that they could expect steady growth of 5, 6, 7, 8 percent going forward and encouraged private investment to increase. And you're absolutely right, you're not going to do that with growth rates that bounce around.

But I do think that this problem is at least being recognized now. But even Botswana worries me in this regard. So they've had a pretty good heritage in history. But the last two years, corruption indices are up sharply. Their politics seems to have become a personal feud.

There were all those recent articles that they can't deliver basic health services to their population. In terms of governance,

“they seem to be going backward from a pretty good start, right?”

I think you could say that, but I'm not sure that it's fair yet to say that they are really going backwards. They're in a major transition.

The Botswana development party is out of power for the first time since independent.

So there's a lot of change going on in that respect. I think they're going through a difficult period, but I'm not sure that they're definitely going backwards. I mean, you could say similar things to what you've just said about Botswana about the United States. Well, possibly we're coming backwards.

But Tanzania worries me also. So three years ago, I had many friends and acquaintances telling me the reforms we're going wonderfully. This is the next market-oriented miracle, you know, a bet on Tanzania. I've only been there once. I guess I was a little skeptical. And now in the last year and a half, Tanzania and politics seems quite volatile. It's not stable anymore. It's of course not a petro state.

There's not an issue comparable to diamonds. So it doesn't dis-problem just crop up again and again and again. That there's not a stable place where you would really want to put much of your money. There's certainly continued to be a lot of problems with politics, but you don't see the levels of civil strife in Africa that we saw in the 1990s. You don't see the number of coups in Africa that we saw in the 1990s. I mean, what we have at the moment if you think of violence as mainly

violence that is focused on the Sahel, all really relates to a very particular problem that's partly climatological. It's partly demographic and it's just very difficult to manage. So I don't think that the political story is great, but the data tell us that there is, you know,

stable. But is there still a lot of bad governance? I think that there is, but that is why my book

concentrates when it's presenting optimism on what is going on in the private sector and particularly what's going on in agriculture and which doesn't require a lot of state input and state activity. And the numbers there are really pretty good. I mean, we've had the fastest average rate of agricultural GDP growth since 2000, about 4.5% in Africa compared with anywhere else in the world. There's been faster than anywhere else in the world and that's really a kind of night and day change

“to where Africa was at in the 70s, 80s, 90s. So those sorts of things are very important.”

The growth of the agricultural sector is also creating the first large private sector firms in Africa,

because of course agriculture has a manufacturing component as well when we process all the stuff that is grown and we're getting large firms operating across borders in Africa now in the agribusiness sector. I mean, you know, we're talking about the politics of Tanzania as a cause for concern, but I mean, equally, you could look at Bakreza, the biggest Tanzania and agribusiness firm. It now operates in eight, nine or ten different countries in eastern southern Africa.

It's moved into all sorts of other businesses, they own a football club, they own a TV station,

they're in petroleum products, they're in all sorts of stuff, I mean, they're a proper diversified

conglomerate of the kind that we would associate with or I would associate with South East Asia, all that's going on in the private sector, despite the still concerning politics that you rightly refer to. Does Africa have a manufacturing future? Does robotics coming AI,

“possibly semi-shoring? Yeah, I mean, I believe that Africa does have a manufacturing future,”

but making what? And like at what cost of energy? They will start as everybody does, producing garments, producing textiles, which in certain enclaves is already going on in Madagascar in the Situ, in Morocco, and they'll move on to other things, and they'll start with those things because they are the most labor-cost sensitive products. And Africa is now in a position where depending on which state you're looking at, taking China as a reference point, the cost of labor

is now between a half and one tenth of what it is in China. So factory labor is now around $600 a month at its cheapest in a country like Ethiopia or Madagascar, it's $60 or $65 a month. So is a tenth of the cost. And that's already beginning to have a bit of effects, and often

“with Chinese firms moving production to Africa. So I think there is a, I think there is a future”

for manufacturing. It will depend on the extent to which African governments understand that you don't really move forward fast for very long without manufacturing, that every, every developed country apart from a few Petro states and financial centers has gone through a manufacturing phase of development. It depends on the extent to which African governments engage with that. But some without that will, the Ethiopians, for instance, have already attempted to do that. What they're trying

to do is being somewhat derailed, but a two-year civil war that took place from 2020, but they're back on it now and they're trying to move forward. And the idea that robotics and AI are going to change the story, I personally just do not buy and principally for two reasons. One is the cost reason, because whenever people talk about what's happening with robotics, no one ever talks about the cost of robots, you know, in garmenting, for instance, even a basic robot will cost you

in excess of $100,000 and you pay the cost upfront. And you've then paid that, whether there's demand for your products or not, also in garmenting and in textiles, robots don't work very well, because they don't, they can't work with material very well, they're much better at working with with solid things. So you spend $100,000 for a robot when you can go out in somewhere like Tana in Madagascar and get another skilled, because they've been doing it now for 20 years,

garmenting employee for $60 or $65, to make the new order that you just got. And if the order

about the cost of robotics. But think of what automation, more generally, is not that expensive.

Like most countries, they are deindustrializing, even South Africa has been deindustrializing for a while, and China maybe has peaked out at industrialization, measured in terms of employment. It's hard to trust their numbers, but maybe just everywhere is going to deindustrialize,

“and that will be very bad for Africa. I don't think so, but I think South Africa is deindustrializing,”

because the ANC has followed a hyperlibrary approach to economic policy. I don't think the ANC is ever really understood economic policy, frankly. So South Africa is an outlier in that respect. There are many other states in Africa where the Nigeria or Ethiopia, which understand

they've got to have a manufacturing future and intend to pursue one. So as I was saying, the other

point is what people miss is the flexibility with robotics and AI. There's very limited flexibility with robotic and automated production. When demand goes up, you can't just stick in more robots, but when demand goes up in a people operated factory where the cost of labor is low, you can stick in more people and produce more. And I mean, just one example, you know, during COVID, when everybody was having home deliveries of supermarket goods, the price of a UK firm called a Cardo, which was

running runs a supermarket, but was also developing the software and consulting around building blind warehouse. It's went up through the roof, but now it's down through the floor and only last week, Croger supermarket in the US said we're closing five of these super modern blind warehouses. And the reason fundamentally is because they lack the flexibility that human labor brings to the job. So I'm not saying that robots, automation and AI are not important. They are important.

What I am saying is that they are not going to derail a manufacturing future for a number of African countries that aggressively pursue it. If there's a lot of developing nations around the world, you could look at India, you could look at Pakistan, even Thailand, where manufacturing has not taken off the way one might have wanted. It's just major forces operating against it. And in the US manufacturing employment was once 37% of the workforce, now it's seven to eight

percent. It just seems like it's swimming upstream for Africa, which again has quite expensive energy to think it will do that well. And again, South Africa had very good technology, pretty high state capacity. I don't see the alternate world state where AYs or A and C would have made that work. Well oddly enough, I mean, pre the end of a part, I though the manufacturing performance of South Africa was really not bad at all. You know, with classic industrial policy

“quite high levels of protection and so forth, I think that demand for manufactured goods will”

continue to be high around the world and that the labor cost will continue to be a prime determinant of where producers go for low value added goods. And so I think that the opportunity is there for African countries. We'd say there's transportation costs internally, energy costs, political order, uncertainty. You know, where's the place where people really want to put all these manufacturing firms? So, I mean, on energy costs, these have traditionally been

very high in Africa because there has not been the investment in energy, but with the development of massively reduced cost for solar and wind, actually things look quite good and the development of geothermal as well. There's no reason that I can see why African countries aren't

going to be able to produce very cheap electricity, which as you say is a critical input for a

manufacturing economy. And in fact, we've seen that in Ethiopia already. Ethiopia has electricity, which is a defraction of the cost of other African countries, because they set out with an aggressive industrial policy to make that happen. Quite a lot of it's through hydro, because of course, they are one of the great sort of water towers of Africa, but also wind and solar are being built

“out as well, and geothermal. So, I think that there's no reason why Africa can't get towards”

cheap industrial electricity. And in terms of road connections, I mean, an awful lot of road connections have been built. I mean Africa's not great, but road density has been actually significant success story, not only of the last 20 years, but of the last 50 years.

quality of the roads. And, of course, since 2013, Belton Road, you know, the Chinese have put in

150 billion dollars. But a lot of that is for their mining, right? It doesn't necessarily help

diversification. No, 80% of that has gone to roads and power and water, and other utility stuff. There's a long history of big infrastructure projects that are then not maintained very well. It's also a problem with solar power, right? World Bank in the past has put a lot of money into different projects involving dams or water systems, and then over time, many of them just decay. Well, yeah, I mean, but again, Tyler, you know, this goes back to what I was saying about

if you look at the government's staff, you can still be pretty miserable about Africa. But what we're seeing on the continent is a level of traction from the private sector that we haven't

“seen before. And I think, you know, so also in, if you think about time, use of water, for instance,”

a big reason for the very good agricultural performance in the last 20 years, and for around cities, African farmers now getting up towards Asian yields. A big reason for that is farm-a-led irrigation. So you referred to kind of state-led projects that have just failed. And they were loads of them.

And to be fair, they were not always just African government projects in the past.

You know, if you go back to the 60s and the 70s often, they would be UN projects. Sure, World Bank projects, and they were misconceived, not least, actually, in relation to demographics, because, you know, there were projects which actually needed more labor and bigger markets than were there. And this is the reason that they fell into disuse for it very often. But what you have now, all over Africa, and there's already three, four million hectares of irrigated land that's been

added in the last couple of decades, and it's been added by individual farmers who buy pumps and get an either themselves dig boreholes or get them dug by people who are providing that service. And it's this much more micro approach to building business, whether it's agricultural business,

“or otherwise, that's what I think gives some calls for optimism.”

Did you boot to your side? What do you think is the best run African port? That I don't have a good answer to, because I didn't look at the ports very closely. But I mean, the obvious answer would be, if you were saying, we're talking the whole of Africa. The obvious answer would be the tojane med port that the Moroccans. Well, but sub-Saharan, again, putting aside South Africa as a special case, the port seems to be another level of mess that if you're exporting,

you have to deal with the bad port system. If you're in East Africa, there's even a lot of property rights still up for grabs, there's Somalia land, there's Somalia, there's Ethiopia, there's Eritrea, they want access to the sea, there's Ethiopia versus Egypt, there's Rwanda involved in the Congo. That's the place where you ought to have a really great port driving growth in the whole region, but it just seems it's not coming any time soon. Again, Dejibuti

does seem to have a fair degree of order, because people put military bases there, but that's the exception. No, I mean, I agree, but again, what I've read in well bank reports suggest that the, you know, situation still still bad, but better than it was 10 and 20 years ago. Why has been in doing so well now? Well, some people say that the leader who's got tunnel,

“who's got his hands around the developmental situation, and, you know, and I think that that”

is quite possibly the story. I mean, you know, we are seeing some genuinely positive leadership in Africa and Beninia. I mean, there's a sensible approach to agricultural development, you know, at the beginnings of an industrial policy, and just getting things done and delivering things. But then, you know, go back to Nigeria. I mean, Nigeria's defense. I would say that anybody really who's follows Nigeria has been fairly impressed by what Tanupu has managed to do

there. I mean, the guy came in and ended a petrol subsidy that everyone said would never end,

because it was too politically difficult to do it. It cost $10 billion a year, which is a lot of money in Nigeria, and he did and he came in and he ended it, and there was no serious violence around that. In sub-Saharan Africa, which do you think are the two or three countries doing the best

the statistics about people graduating at different levels of education, you know, of course,

Ghana and Nigeria always did pretty well, always accounted for a high proportion of Africa's

university graduates. In East Africa, I don't think that Kenya does badly in terms of, in terms of the human capital, it turns out, very, you know, well-educated and entrepreneurial people, again, the problem is the politics. Ethiopia, big investment in vocational education, that's made a significant difference, Rwanda, similarly made a significant investment in vocational education.

“So I think there's, you know, there's a lot of stories around that are really not too bad,”

and I also think that we have to be fair to Africa and remind ourselves that back in 1960,

started the proxib at start of the independence era, Africa had the least educated population

in the world by a long, long way. I mean, in 1960, literacy in Africa was 16% one-six. And according to a World Bank report that came out in the 80s, they rolled out across Africa, the fastest developed formal education system that the world has ever seen. And in some measures, education performance in Africa now exceeds South Asia, which is pretty remarkable given the South Asia was very far ahead in 1960. So I don't think that it's fair to criticise Africa too aggressively

on its education performance. I think the governments around the continent have taken education very seriously. I mean, you know, the classic was again Tanzania, right? So we can talk about our terrible politics our in Tanzania, but Nairares government increased literacy from just over 10% to 80% in one generation. And that was a huge mobilization of resources to achieve that. And that's, you know, another thing that African governments had to do that Asian governments

didn't have to do after independence. Asian governments didn't have to worry about having

“an illiterate and enumerate population. The comparison with South Asia, I think I see that”

differently. India has high variance, but at the upper end, the IITs are amazing, right?

If you come out of a good IIT, your life is set. You learn a lot of money, you'll be highly productive. You could get employment in the UK or the US. Africa doesn't seem to have anything like that, not sub-Saharan Africa, or Sri Lanka, which is quite literate, well-educated. It's hard to find a sub-Saharan country that's at all like Sri Lanka on educational indicators. Rural Pakistan clearly might be worse than much of Africa, but isn't South Asia just making

much bigger strides? I don't think so in the sense that I wouldn't point to the IITs in India as evidence of the strength of India's education system. And when I agree, the people who come out of the IITs are fantastic, but they're only 30,000 people in the IITs. I mean, they're just

“like numerically inconsequential. But how much output they produce is what matters, right?”

And it's evidence that there's feeder systems. If you can produce some number of very, very, very good people, your feeder systems must also be doing pretty well, at least some of them. Yeah. But there's also a question of timing. I mean, I think that the point that you make about about very high performing institutions in Africa begins to become more relevant now. You know, the order of priorities in Africa after 1960 was to get the population,

literate and numerate, and that's where resources went. Now, there's a change. Yes, Africa going forward needs really elite universities. You know, there's a beginning of efforts to create that in in Rwanda, where there's a couple of U.S. universities that have got involved in the random tertiary education system. So, yeah, I mean, I hear what you say, but I think it's that's a problem of Africa going forward and not a problem around which we should judge Africa today.

We agree that disease burden is very important, which do you think are a few countries making the most progress on that? Well, again, I'd say I'd say that there's been huge progress constant and wide because partly because outside institutions like the WHO or the Gates Foundation

a high priority. I mean, the performance in terms of the reduction of deaths of under fives,

for instance, which fairly some critical measure when you look at demographics. I don't know where

in the world beats Africa in terms of what's been done over the last 50 years. But say, predictively, the places that have cut disease burden down the most should do better first,

“right? There's an implied prediction and which particular places do you think those are?”

I haven't looked in sufficient detail country by country to be able to say where I think. Again, I mean, I would say that in Central Africa the Rwanda's done very well on health. I'd say that the Ethiopian's done very well on health, but I do think that, you know, it's just a generally positive story across the continent, what has been done in terms of reducing this horrific disease burden that really has dominated African history.

The Bruce Cessordot, if Dartmouth, he has a famous article where he argues, or some would say shows that the longer a country has been colonized for, are the better it's likely to be doing? Do you agree with that result and do you think it's true

“for Africa? I think that you can find cases that bear that out, but I'm not sure that it's”

a great rule of when you're just looking at duration rather than also how colonialism operated, what it did, you know, when you look at the qualitative difference, for instance, between French colonialism in West Africa and Japanese colonialism in Taiwan is not just about duration. Yeah, I don't have a great answer to that to that question and, you know, most colonial stories in Africa were pretty short and fairly similarly short,

right? Because most colonization happens in the 1880s and most colonization is over in the 1960s. Do you think the UAE will become a major financial centre for much of Africa? Very possibly. It's already happening to a significant extent. You know, there'll be Mauritius trying to compete as an offshore centre, but certainly when you get up to the Horn of Africa, UAE is already this sort of preferred destination.

Let's say you're running a hedge fund and you're investing some number of billions of dollars.

“Would you be more likely to invest in East or West Africa if you had to say?”

I like the look of both the different for different reasons. Certainly Nigeria tops out in terms of venture capital money coming into Africa at the moment, but when you've got a country like

Ethiopia with, you know, 150 million people, that's an attractive market if you develop a business

that works. So I think that it won't necessarily be about East or West going forward. I think that early entrance and whether they're hedge funds or whether they are multinational companies, they'll think first about the most populous countries on the continent so they will think about Nigeria and Ethiopia and then go down the list from there. I think that, you know, they'll also be differentiation based on regions based on, you know, what's grown in agriculture, what's manufactured,

and so forth. Should Africa have more special economic zones, say the way that Dominican Republic has? Well, Africa has already had a good number of special economic zones and they haven't worked well, but the seven that the Chinese have opened seem to have worked better. So I think the jury is out on that question. I think down the road, yes, Africa will need more zones, but there's no point in opening investment zones unless they get the political attention that's going to make them

successful. But don't they just need a bit to be left alone? I mean, tattoo city in Kenya is going pretty well and the government hasn't wrecked it and there's a lot of energy behind it in some capital. Isn't that likely to succeed? It is if there's a clear demand there to begin with and private saint tracters who are going to make it work and in that case,

yes, it zone should always be left alone. I mean, there are, for instance, and outside I just

have a rather, there's a successful Chinese managed and Chinese owned investment zone and it does absolutely fine. So that type of investment zone, I think, yeah, just let people get on with it and leave them alone. I was thinking more of state-led investment zones where there'd be many failures

committed when they open a zone to making sure that it works. It should Africa experiment with charter cities, with charter cities, right? So it's like a special economic zone, except more radical. There's some actual surrender of sovereignty. Like Hong Kong was a charter

“city of the British Empire, obviously they did very well. I think Africa should and probably”

will experiment with all sorts of things. I wouldn't offer it as a prescription, but if there's a government that's thinking, right, let's try this. You know, good, good luck to them. It's not impossible. It's not impossible that it will work. Just as Hong Kong works for colonial Britain. How permanent do you think are the current borders of Africa? Say, over the next 30, 40 years. Not 500 years out, but the foreseeable future. I think Tyler that we will continue to see the form

that we've seen since independence in Africa. I'm sure you're aware that the African Union really since inception has operated to head off any changes in borders in Africa. And that is

really because the leading politicians have always taken the view that if you let African borders

change once, in one state, you open the door to absolutely mayhem in this ethnically very diverse continent. So there is kind of very built-in hardwired AU opposition to any change in borders. So you get kind of classic cases where no one will even talk about it. I mean for instance smallies. You know where the smallies are split between Ethiopia, northeast Kenya, British Somali land,

“as a French, French and then Italian Somali land. I can't even remember that. It's a five-way split.”

And you know, they've got, they went to the AU back in the, in the 60s. And I've done it, subsequently said, you know, this is ridiculous. Where are smallies? Why are we living in five different countries? And the AU won't touch it. And as I say, that is because the received opinion of the,

of the senior leaders in the AU has been, if you start changing borders in Africa, you'll never stop it.

And I suspect that will remain the case going forward because the fear is there. I mean really the only case of a border change that you have in Africa. Since the Second World War is, when Eritrea splits from Ethiopia. And that was the result of a referendum that was 99%. But as we're taping in late January, 2026. It at least seems as if the U.S. and France will recognize Somali land and the UAE and Israel already has. Israel probably wouldn't do that on

its own without assurances. So that will be a border change. It doesn't that in fact predict mayhem under your theory, which is an, in fact, my expectation. I'm sorry to say, well, I think I think the AU will continue to resist and resist and not recognize this. You know, it's like the EU, you think won't recognize it. No, no, the AU is. Oh, AU, but does that matter if the U.S. and France

“and the UAE have recognized it? Isn't that just what matters? It doesn't, so it may not matter”

in practice with the outside world, but it matters in practice for Africa. You know, so the AU will retain its position. I mean, it's a bit like Morocco and Western Sahara. I mean, the AU still says that there are 55 states in Africa because it still counts Western Sahara as a state. Even though, you know, the U.S. is now in favor of that being turned over to Morocco. Now, your recent book is on Africa. I'll just hold this up again. How Africa works? I don't agree with everything in

it, but I do really think it's an excellent, well-researched, extremely well written book. I'll recommend it again to everyone, but I also have some questions for you about Asia if you're game. What has gone wrong in Thailand? The 1990s, it looked so good. Foreign investment fell off. They're going to lose manufacturing to China. It seems there's a lot of stagnation, politics, hasn't gone so well. They were a relatively wealthy country for their region. Why didn't

that go better? Well, it hasn't gone so badly. I mean, Thailand's always had a pretty strong

currency, partly as a result of tourism being a great part of the economy. You know, the manufacturing is hardly being sort of hollowed out. And the politics has always been the total mess, right? I mean, I don't think the politics has become any worse, and the position of the monarchy,

So, I don't, to me, Thailand doesn't look like a big mess relative to what I've seen in the past at all. I suspect that they will will carry on with this very messy politics that they have until at some point the relationship between the monarchy and politics is confronted. But that's

an almost kind of revolutionary thing to contemplate in terms of Thailand. I'm sure you're familiar

with South Korean birth rates. What do you think is actually going to happen there? Over time, the country disappears or becomes filled with immigrants, possibly from Africa, or they somehow manage massive birth subsidies, which work. There's all seen quite improbable to me, but I'm not sure what I'm left with. Yeah, it's certainly very interesting. And I mean, of course, China has a very low birth rate, a little bit higher than Korea, but still very low. But I mean, one observation I would

make is that China actually is much more cosmopolitan, society than either Korea or Japan,

and so having a falling population is more difficult for Korea and Japan, because

the populations don't want foreigners coming in to do the jobs. I don't want those African coming in to do the jobs. So then what else are you going to do? Well, you know, you're going to offer them these great big subsidies, but there is a very poor record for offering all kinds of subsidies in all kinds of countries around the world to try and get people to have kids when they don't want to. So I don't know. I mean, the only forecast I have is that the problem will have to

become significantly more acute than it is now before they begin to talk about it seriously. But it can be too late, right? Peter T. L. has this notion that you get stuck in a trap. Once you're economy starts shrinking, it's harder to do something about it, because you are fewer resources, even if you're a per capita numbers are fine. Yeah, well, well, maybe they're relating, they may be they're relying on the on the robotics and AI that we were talking about.

“Do you know Phil, confidence about robotics and AI solving the the Korean depopulation problem?”

Well, it may solve their production problem, but it doesn't solve the problem of no one being around to enjoy it, right? That's still there. Now, Japan is, you know, depending how you measure it, has debt to GDP ratios of something between 200 to 230%. How will they get out of that mess? I need to, they have a higher birth rate, but it's not that high, right? Yeah, 0.3? Yeah. Yeah. So I don't know. I mean, the same way that Britain got out of the same level of

debt after the Napoleonic Wars, you know, with inflation, but when they inflate, their interest rate goes up, right, and their future borrowing costs rise. Can they even get traction that way? I don't know. I mean, I know that there are people who think that they can. Yeah, I don't know

what the answer is, but you know, you don't not crazy inflation, but just a bit of sort of steady

inflation. I'd have to go back and look at what happened in the UK after the Napoleonic Wars in

“order to understand how it was, but I do remember that it was largely inflation that solved the”

problem. You know, UK at that people written, we'd have to call it at that time, had fantastic demographics, especially early in the mid-19th century. Yeah, yeah. And East Asia doesn't. Should we just weigh down, grade our estimate of East Asian futures? Like is there a positive scenario for any of the main countries? Yeah, I think it certainly looks difficult. I mean, I tend to sort of not get much further when I think about this than being profoundly amused by the fact that we have

spent the last 250 years being obsessed with the mouth-usian view of the world and, you know, believing that we're going to breed ourselves into a disaster. And of course, at the end of the day, then ever, then it was a mouth-usian risk, at least in practical terms, but depopulation is

“way more serious than population growth ever was, I think. For the world, there's a whole,”

how well do you feel industrial policy has worked? Oh, it's worked extremely well, and it's been refined over, you know, well over a century. Yeah, I mean, do the whole approach of targeting cheap money at manufacturing, putting some protection in place, rewarding, exporters of manufactured goods. You know, it's created jobs, it's raised the technological level

manufacturing is the only bit of the economy that really delivers the convergence and that was supposed to get across the whole economy in the sort of orthodox view of life. So,

“I think that industrial policy has done very well. The problem is, of course, getting away from it”

then proves extremely difficult. Not only getting away from industrial policy, but getting away from the getting away from the trade surpluses that it tends to produce, you know, so whether it's Japan or Germany or now China, the countries that have run the most effective industrial policy, become a problem for the whole of the rest of the world. But as a means to develop your economy, as a means to raise your people up, I think it's had a very good performance. But say your

Brazil, Brazil seems to have underperformed for almost 50 years, and they do plenty of industrial policy. They have actual scale. It's now considered happy news that this year they might grow at 2%. I mean, hasn't it just failed in Brazil? In addition to Mexico and many other places? I don't know Brazil terribly well. I mean, the first thing I'd say about Brazil is that, you know, it's underperformed for the last 200 years, not just the last 50. And, you know, the country is

just a mess in terms of development. I mean, if you look at the agriculture sector, the dominance of scale agriculture, the appalling way in which smallholder agriculture is treated,

“now it's undervalued. And I think, you know, if I knew more about industrial policy in Brazil,”

I think what I would be saying is that, you know, it's been ineffectively applied, patchually applied, not applied consistently over long enough period. And sure enough, a large part of it, and is a total failure. But at the same time, you can point to bits that are clearly a success and the obvious one that everyone always points to is in Brazil. Or take India, now the world's most populous country, they had plenty of industrial policy,

mostly a failure, right? Like, why be so convinced industrial policy on average is a good thing. It works, maybe, when there's very high human capital, which would be East Asia, and the rest of the world, it seems to me, to underperform.

“No, I think it failed in India, because people like Mahalanova,”

after the Second World War, would just absolutely clueless. And India just never ran any kind of

effective industrial policy. I mean, they didn't understand the competition as fundamental to effective industrial policy. They thought it was much more organizational and you pick your winners and you don't subject them to competition. I think they're pretty straightforward reasons why industrial policy didn't work in India. How much of economic growth do you think is just explained ethnically? So Chinese dual virtually everywhere, Hong Kong didn't have industrial policy,

it became rich, just like the Chinese-based economies that did. Well, I'd say that, I mean, actually, I'd say to an extent that Hong Kong did have industrial policy

in as much as, well, Hong Kong was always very free and external trade. The domestic economy was

kind of colonial stitch-up and there were sort of two of everything, two supermarket operators, you know, one firm running the airport, the other firm running the airliner's so on. And also that, you know, of course, when the textiles trade arrived in Hong Kong after 49, it was already highly efficient, not through a very long period of development in Shanghai. So it wasn't like it was beginning with zero knowledge, but as to how much is ethnic? I mean, ethnicity often embodies

certain education backgrounds, it embodies some ethnicities, have got to a point where they're better off than others. So I think it's kind of easy to confuse what might be ethnic with what is just something reflected in that particular group of people for other, for reasons other than other than ethnicity. You know, this is the famous Koman Gong-Easterly paper that shows per capita income in the year 1000, predicts per capita income today, surprisingly well. So maybe culture is

just super persistent, ethnicity is one of the things that carries it. And a lot of development

economics is maybe spinning its wheels. I like to think that's not true, but I've never found

a flaw in their paper. I mean, for me, policy makes a difference and wherever I've lived in the world,

something like ethnicity carries good policy, right? It could be, but there's so much,

you know, for me there's so much noise in the data by finding it personally just find it out to

“sort of maintain credible attention. What's so interesting to you about Central Italy?”

It's nothing particularly interesting other than that. I suppose it was an area where there was a bit

of land reform, an area where industry took off in rural areas. So there's this kind of

stuff to be seen there, which is not what the tourist normally looks for. And you live there, right? Yes, so I lived, but I really just lived in Italy for 10 years, just because it was a sort

“of relatively cheap place to live. And this was Perugia or where? Yeah, near Perugia.”

Yeah, Perugia. Yeah. Before my last question, just to recap, just two books,

how Asia works and how Africa works are essential reading. His earlier books are interesting as

well on Southeast Asia and finance. Final question. What will you do next? I'm not sure what I'll to next. I'm kind of thinking about a developmental history of the UK because I've never written

“about my own country. And I think there are a number of things in the development of the UK that”

are not spelled out particularly clearly in what is generally a very good literature. I mean, there've been some excellent books written about the UK economy, but I think there are one or two things that I'd like to explore more that haven't really been covered. And I think it's also partly that I feel like I've done a lot of traveling and I'd like to not travel from one another. So travel in the UK though, right? That's travel. Yeah. Yes, I can go and see the UK and

go and see the kind of grim post-industrial cities of the UK. Anyway, Joe Stodwell, thank you very much. Thank you, Tyler. Thanks for listening to Conversations with Tyler. You can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. If you like this podcast, please consider giving us a rating and leaving a review. This helps other listeners find the show. On Twitter, I'm @TilerCowin and the show is @CowinConvows. Until next time,

please keep listening and learning.