Is GDP a good measure of a country’s development?

Reading time: 6 minutes

Gross Domestic Product (GDP) is the standard measure for the value added generated by the production of goods and services in an economy over a specific time period – the total value of all goods and services produced in a country minus the value of the goods and services required for their production. But is it enough to measure a country’s development?  

This measure can be divided by the country’s population, returning the amount of money that each individual gets in a particular country, known as GDP per capita, which provides a much better determination of living standards as compared to GDP alone, allowing comparisons between countries of different sizes. 

GDP per capita per country in 2020

Since it is simpler to quantify the production of commodities and services rather than measure other welfare accomplishments using a multi-dimensional index, GDP is the most commonly used indicator to gauge economic growth. However, it is not a sufficient indicator of development on its own. Development is a multifaceted idea, with not only an economic component but also a social and environmental one that should just as well be taken into account.

Economist view 

Thomas Piketty, renown professor and French economist, states that future economic downturns brought on by technological or populational reductions would most likely result in enormous concentrations of economic and political power as the richest individuals amass more capital (or wealth). In line with this, he claims that inequality is rooted in ideology and politics and argues that his beliefs explain the fundamental flaws in capitalism’s market system. Given this, Piketty says it cannot be expected that sustainable development would always result from an increasing GDP.

Thomas Piketty argues against using GDP growth as synonym for development

Other economists have also weighed in on the topic, as exemplified by Nobel Prize-winning economist Simon Kuznets´s view that GDP should not be used as a gauge for “the welfare of a nation”.

Moreover, Nancy Folbre, professor of economics at the University of Massachusetts Amherst, once said that “Time that you spend taking care of your kids is very valuable time, but it doesn’t get factored into GDP.” According to Folbre, about half of the time people spend working, on average, is unpaid work which is not accounted for in GDP. She thus states that the GDP measurement will only be able to provide an estimation of a portion of the overall economic picture that is regularly taken into account.

Alternate measures

As an alternative to GDP per capita, the United Nations Development Programme (UNDP), The World Bank, and the non-profit Social Progress Imperative, launched, respectively, the Human Development Index (HDI), the Human Capital Index (HCI) and the Social Progressive Index (SPI).

The Human Development Index

The Human Development Index (HDI), an indicator of the multi-dimensional aspect of development, incorporates the conventional approach to measuring growth in the economy while accounting as well for education and health, which are key factors in determining how developed a society is. This is determined by taking the geometric mean of the GDP per capita, the life expectancy at birth, and the average of the mean and expected school years.

Human Development Index per country in 2017

The Human Capital Index

The Human Capital Index (HCI) ranks 157 countries on a set of four health and education indicators. The main advantage is that, unlike GDP, it emphasizes output rather than input. For instance, the weighting of educational quality in relation to school years is better when it is determined by actual adjusted learning. The main criticism of the HCI is that it might overvalue the tangible advantages of health and education, commoditizing people instead of valuing their contributions to society and inherent status as fundamental human rights. However, it is anticipated that the HCI will be used primarily by developing countries to quantify the outcomes of social sector investments, leading to increased expenses on human development, which the World Bank claims has been overlooked in favor of infrastructure and institutional development.

The Social Progress Index

The SPI is arguably a more accurate metric for assessing societal development. Created by the non-profit organization Social Progress Imperative, the SPI is one of the main achievements of the Stiglitz-Sen-Fitoussi Commission on the Measurement of Economic Performance and Social Progress. The Commission’s main goal was to look into alternative metrics to the one-dimensional GDP measure for measuring a nation’s wealth and social development. Despite only having data for the past four years, this indicator is still relatively new and covers more than 130 nations.  

The SPI is an improvement over the HDI because it increases the number of composite indicators from four to fifty-four in a variety of areas, including fundamental human needs, well-being pillars, and advancement opportunities. This index can therefore synthesize the most important factors that influence development. As an illustration, it considers the availability of water and sanitation, education and health outcomes, public crime, housing, information access, and communication, among others. Naturally, the SPI’s primary flaw is that it is comparatively complicated and impractical to use in informing policy decisions.

Social Progress Index per country in 2021

Weakness of GDP – Examples

The biggest weaknesses that are attributed to GDP target the fact that it solely considers average income, hence failing to reflect how most people actually live or who benefits from economic expansion. Many crucial elements that affect well-being are not included in how much consumable material things people produce, such as a healthy environment and good physical condition. 

For instance, an oil spill can raise GDP because it costs money to clean it up, but it also has a negative impact on the environment. Besides this, GDP includes the value of the sugar-sweetened beverages we sell without deducting the health issues they cause. In a similar fashion, it counts the number of cars we make without accounting for the amount of emissions they produce, and adds up the cost of developing new cities without deducting the cost of replacing vital forests.

Moreover, there is concrete evidence, such as the data from The Office for National Statistics (ONS), which reports that the UK’s annual GDP growth averaged just under 2% from 2009 to 2019. In contrast, over that ten-year period, income inequality rose by 2.2%, and in the year ending March 2020, the ONS’s annual average ratings of life satisfaction, happiness and anxiety all declined. Despite GDP growth, the trend of rising income inequality shows that not everyone is benefiting from it or living a prosperous life, proving that GDP is a poor indicator of citizens’ well-being.

Conclusion

Although GDP is a rough indicator of a society’s standard of living, it does not directly consider leisure, health, education, environment, changes in income inequality, advances in technology or the importance that society may place on different types of output, be that positive or negative.

The World´s Happiest Countries (2015)

All aspects of the standards of living, whether they are purchased and sold on the open market or not, have an impact on people’s happiness, and that is why GDP is not a perfect measure for a country’s development. Given this, the HDI, the HCI and particularly the SPI, have come to try to solve some of the concerns raised over GDP´s accuracy, adding important information on a country´s development levels.


Sources: International Growth Centre, Scientific American, Our World in Data

Mariana Gomes

Joana Brás

Leonor Cunha

Power up: Sustainable energy in Developing Economies

Reading time: 6 minutes

Sustainable Energy

With the global population growing and industrialization spreading in developing countries, humanity’s hunger for energy has reached unprecedented levels. Currently, energy is the largest source of greenhouse gas emissions from human activities, and developed countries are the main ones responsible for this crisis. The average person in these countries consumes 100 times more than the average person in some of the poorest countries. 

With increasing awareness about the environmental effects of burning fossil fuels, the call for a more sustainable base has never been louder. All around the world, developed countries are powering towards a low-carbon future by embracing solar, wind, geothermal and other renewable energy sources. However, developing and emerging countries still face challenges regarding this new transition.

Making a distinction between these two types of countries, developing countries rely primarily on agriculture, having a low income per capita. On the other hand, emerging countries have already witnessed economic growth due to the development of the industrial and technological sectors.

Sustainable Energy in Developing Countries

Energy access is not equally distributed around the globe. In fact, many developing countries, like Kenya or Ethiopia, are just starting their process of industrialization, and electricity is still not available to everyone, as approximately 13% of the global population still lacks access to this primary need. 

Energy poverty is not only a matter of sustainability, but also a major problem for human physical and mental health. It is estimated that, around the world, people spend a combined 200 million hours a day collecting water, a colossal waste of their valuable lifetime.

This crisis affects women disproportionately, making up nearly 75% of those affected by energy poverty. Women are the main consumers of electricity in households since social norms have (sadly) assigned them the responsibility of housing chores like cooking or washing, which require electricity, making them especially vulnerable to the effects of energy poverty.

Moreover, it affects health through different pathways. Exposure to cold temperatures due to the lack of energy is known to be associated with high blood pressure, heart attack and stroke risks, among other diseases. This impacts the day by day of every individual that lives under this circumstance, from the child that cannot have a properly cooked meal to the doctor that could not save a life due to the lack of electricity. 

Doctors struggle to give their patients proper care without reliable electricity access

Insufficient energy also jeopardizes agriculture and manufacturing, thus keeping the poorest countries trapped in a vicious circle between energy poverty, air pollution and inequality; and they cannot afford the energy that can drive them out of this cycle. So, what is stopping countries to ensure worldwide energy access in an affordable, reliable, and sustainable way?

Developing nations are quite different within themselves, but they face similar challenges when it comes to energy sustainability. Let’s unwrap the idea a little more. One of the biggest constraints to attaining the previous goal is geographical, as the population in need is primarily concentrated in rural regions with no grid energy, and its extension is frequently financially and logistically impossible. In truth, fossil fuels were at the heart of industrial revolution, providing huge economic benefits to Western countries. Burning fossil fuels enabled an era of explosive growth for selected countries leading to extensive advances in productivity, income, wealth and living standards. 

Energy grids don’t reach everyone

As developing countries now express the wish to industrialize and share those same benefits, they must find a way to do so sustainably. They cannot let themselves fall into the same fossil fuel dependency trap western economies did. Therefore, the future must be sustainable, and renewable energy should receive early attention in these high growth areas. Improving efficiency and reducing carbon dioxide is easier and less expensive to achieve at the time of the new construction for energy, rather than at later stages. So, it is indeed an initial investment worth making. Besides that, many of these initial costs are money that otherwise would have been spent on fossil fuel exploration, extraction and conversion to electricity. 

In the long-run, sustainable energy alleviates a country´s balance of payments. The initial investment could be high, however, renewables, like solar or wind, are the cheapest source of power. Also, most developing countries have abundant renewable energy resources, which decreases manufacturing costs. Thus, this gives developing countries a competitive advantage when compared to emerging economies. 

Countries have a choice between investing in fossil or renewable energy

This idea is not just as theoretical and utopical as it may seem. Sustainable energy is already making an impact in the developing world, with many developing countries using renewable energy sources, an idea considered science fiction only a few years ago. In the last few years, these nations invested more in these technologies than developed countries, accounting for 63% of global investment in renewable energy (when viewed on per gross domestic product basis). However, it is important to refer that the economic distress caused by COVID-19 may jeopardise future investments.

Power Africa

Two out of three people in sub-Saharan Africa lack access to electricity, being one of the most serious barriers to long-term economic growth and development in this region. Launched in 2013 by President Obama, Power Africa program’s goal is to install at least 30 000 megawatts of cleaner and sustainable energy by 2030, as well as 60 million new households and businesses. It is meaningful to select and prioritise efforts. Policymakers must continue to develop effective policies to secure a successful transition to sustainable renewable energy systems within the framework of sustainable development

Sustainable Energy in Emerging Countries

The main problem regarding sustainable energy in emerging economies lies in the transition from fossil fuels to renewable energy sources for electricity generation. Part of the industrialization of emerging economies, like China or India, involved already non-sustainable energy, using fossil fuels, so there are already sunk costs when investing in sustainable energy. Countries such as Costa Rica and Brazil use renewable energy as their primary source of energy, accounting for 90% of Costa Rica’s and 85% of Brazil’s energy production.

Solar Energy International (SEI) opened its first International Solar Training Center in Costa Rica in 2018

In the last decade only, China has grown to become a renewable superpower, dwarfing all developed countries in terms of renewables. China is also making efforts to become an important environmental partner for African countries, providing financial and technical assistance to developing countries. Recently, it also announced two new Chinese funds totalling US$ 5.1 billion to help developing countries tackle climate change and development problems

War Impact

The current Russia-Ukraine war is having an impact on how the world sees fossil fuel dependence. Many voices in Europe are now, more than ever, questioning the continent’s heavy dependence on Russian oil and gas for energy. The threat of official sanctions on Russian fuel is strengthening the argument for a shift towards endogenous, sustainable energy sources. Some countries turning to clean energy may just be what is needed to weaken the crude business for the transition towards sustainable sources to be recognized as inevitable. 

Many question Europe’s dependence on Russian oil and gas

However, there is a danger that countries will not use this event as a chance to make deep, structural changes to their energy systems, but as an opportunity for quick profits. A European ban on Russian imports will leave large quantities of oil ready for the taking, which could be an incentive for other countries to do just that. India, for example, has already begun to heavily import Russian crude. If prices rise, they stand to gain a reasonable profit from refining Russian oil and selling it onwards, for example, to Europe.


Sources: Open Edition Journals, Our World Data, Science Direct, OCDE, Enel, Inspire Clean Energy, The Economic Times.

Constança Almeida

Mariana Gomes

Leonor Cunha

Slaves of the Cheap: The Labour Exploration Cycle

Reading time: 8 minutes

Mobile phones, clothes, flowers, or shoes. Many of the products we consume and use every day are produced by people trapped in what is called labor exploitation. First, what do we mean by labor exploitation and what are its principal forms and characteristics around the world? According to the International Labor Organization (ILO), labor exploitation involves workers who, against their will, accept miserable overworking conditions and receive low wages.  

In other cases, such as that of forced labor situations, workers are coerced to work due to violence or intimidation. Truth is, it is a challenge to define such complex concepts since its definition varies across the globe. There can be a lengthy debate of when a worker is acting out of free will or under coercion. People in extreme poverty may be forced by economic reasons to accept unfair working conditions. Irregular migrants are particularly at risk, as without legal documents they may put up with anything rather than risk denunciation to the authorities followed by deportation.

According to the International Labor Organization, approximately 25 million people are estimated to be within situations of forced labor, seeing their rights taken away. This translates into 5,7 victims of forced labor for every 1000 humans

Prevalence (per 1000 persons) of forced labor, by age and category

Although forced labor is more predominant in under-development countries, it can be found in every corner and industry of our globalized world.

Number and prevalence of persons in forced labor around the world

A Poverty cycle

Why would anyone willingly put themselves in a position so vulnerable to the exploitation by others? Shouldn’t they simply find a better job, perhaps pursuit higher levels of education? Surely, it should be easy…

Poverty creates vulnerability to these detrimental forms of work, which in turn contribute to perpetuate the poverty of the workers. It is not a cycle one easily escapes from. Just try and put yourself in such a worker’s shoes: to leave your exploited position (assuming you even have the option to walk away) will mean a significant reduction in income, which you may not be able to afford. Even if you managed to scrape up enough savings to put yourself and your family through a jobless period, there’s still the question of finding another job. Remember, you are a poor, likely uneducated, unskilled laborer. Do you think there are lots of opportunities available?

If the job doesn’t pay well, savings are likely to be scarce, and no company can compete for long with the low prices, achieved by those grossly underpaying for labor, leaving only the exploiters to provide work for the entire labor force. 

Increasing qualifications is also not an option: education is costly and requires time, and long hours working for little time doesn’t leave much room for personal investment.

Forced Labor in Supply Chains

We all know we live in the age of globalization. The t-shirt you are wearing right now may have been to more countries in its short existence than you have in your entire life, one land per stage of production. And yet, it still manages to make its way to you so amazingly cheap! Ever wondered how? (1)

The truth is many companies exploit their workers to cut costs

Most products go through a lengthy chain of producers, manufacturers, distributors, and retailers before they reach each consumer. Consequently, it is a challenge to control who is working where and under which conditions. Companies have a responsibility to ensure no forced labor is being used in the production of the goods they sell, playing a key role in building a sustainable economy and society. 

Agriculture provides the raw materials for most finished products – the sector is packed with cases of forced labor

Some companies have taken measures proactively. However, decades of “voluntary corporate social responsibility” have failed to protect people. There is a need for a higher-scale improvement that is hard to achieve with voluntary action. 

Fortunately, progressive steps have been made to combat forced labor, such as the development of modern forced labor legislation. The Introduction of the UK Modern Slavery Act required large corporations to report their efforts to tackle forced labor in their supply chains.

Additionally, at the beginning of 2022, the European Commission released its highly anticipated mandatory human rights and environmental due diligence directive to foster sustainable and responsible corporate behavior across global value chains. This is a notable moment in the history of human rights. This purpose would impose a large duty on EU and third-country companies to identify and address actual and potentially harmful impacts on human rights in the firm’s operations, as well in value chains.

Children

Children around the world are also routinely engaged in labor that is considered detrimental to their health and development. In the world’s poorest countries, slightly more than 1 in 5 children are engaged in child labor. Eastern and Southern Africa have the largest proportion of child laborers, having approximately 26 % of children aged 5-17 performing this type of activity. 

The entire exploitation chain is particularly vile when with comes to kids. Children who are forced to work (either by someone or by their circumstances) are the ones who will have more trouble breaking the cycle.

Child workers are paid even less than adults and are often preferred by employers, as they are less likely to strike or have demands. Besides that, a large pool of child labor available hurts unskilled wages, worsening the poverty issue and delaying even more technological progress. This leads to harder conditions for families, who are more likely than ever to send their children to work.

Because it is children that we are talking about, the consequences spread even further along in time. Working children are more likely to underperform academically, as shown by data from 12 Latin American countries; they find that third and fourth graders who attend school and never conduct market or domestic work perform 28% better on mathematics tests and 19% better on language tests than children who both attend school and work. Besides that, they are also more likely to drop out of school, which has negative consequences on the child’s development and their future prospects, and on the country’s chances of social and economic development.

But surely, everyone agrees child labor is bad. Why isn’t it simply forbidden? 

In most places, it is. But, again, it is not so simple as that. Even in some places where they technically can’t, children continue to work, mostly in agriculture or factories. And we must remember that many of these little workers are the sole providers, or at least a crucial part of their sustenance for their families (with their parents being unemployed or unable to work).

The ILO estimates that some 246 million children are currently involved in child labour

How to end

What if we just ended it? What would the actual impact be?

There are two major sides to consider when answering this question: these workers’ incomes and the impact on consumers of the products they contribute to.

We’ve discussed already the negative impact on these families of simply removing these exploitative jobs, namely their reduction in income. To prevent them from (further) descent into poverty, either robust welfare programs would have to be set up, were the job posts to simply disappear, or firms would keep the worker, now paying fair wages and not engaging in harmful practices for their employees. 

Either way, production costs go up, which the manufacturers can either absorb (assuming they can afford it) or pass along the production chain to the consumer. So, consumers will likely be paying more. Remember your well-traveled t-shirt? Not so cheap anymore. The same goes for your coffee, your chocolate, or your electronics.

In more concrete figures, we are talking about a practice that annually generates 150 billion USD in profits, an ILO estimate. The same organization estimates ending child labor alone to cost around 760 billion USD worldwide (including the cost of adequate schooling for all 246 million kids now working) to achieve long-term benefits worth 5.1 trillion.

How about those augmented prices? Although it is hard to estimate what that would look like, we can use products now in the market which are branded Fairtrade (meaning, among other things, that they stay clear of labor exploitation in their production chain) as a proxy of how much more the average consumer would have to pay for everyday items. A quick search online shows, for example, chocolate with a fairtrade stamp priced at 2.70€, over twice what a similar chocolate costs. A t-shirt marketed as Fairtrade can cost as much as 30€ – the same as several packs of shirts in some stores.

Fairtrade products are often more expensive

Of course, some of the disparity comes from other practices in Fairtrade (environment-friendly, etc.) or simple lack of economies of scale, but the fact remains: breaking away from this cycle will be costly. Yet, it surely is a price worth paying.


(1) To find out more about this check out our article about Fast Fashion here.


Sources: Unicef, International Labour Organization, Delta Net, The Woodgrove Outlander, BIICL, White & Case, European Commission, EY.

Constança Almeida

Leonor Cunha

Africa’s food crisis: Can sustainable agriculture be the answer?

Reading time: 6 minutes

Food crisis has been a reality in Africa for many years, and at this point images of malnourished African people, although still shocking, are no longer news. In 2020, due to the pandemic, we saw a tremendous worsening of world hunger. This calls for an urgent change in the primary sector, mainly to more sustainable practices.

If we don’t change the way we are operating in the agri-food systems we won’t be able to achieve the SDGs (sustainable development goals), and the goals for 2030

Food and Agriculture Organization of the United States Chief
Mother and child in Nigeria suffering from hunger and malnutrition

The primary sector still stands as the main driver of African economies. Modernization and research on this matter are, however, far from its potential, as most workers are still unqualified. Aligned with this is the lack of farmers commitment to change their practices and see the long-term results of overexploitation. Consequently, responsible and fact-based agriculture is rare, especially in rural areas. These damaging agricultural and pastoralist methods, alongside climate change and its resulting extreme weather conditions, will be unsustainable for African ecosystems. As consumers begin to value organic and chemical-free production, a greener approach could improve both the environmental and economic situation of African nations. Sustainable agriculture is an almost perfect fit with Africa’s current state.

But what is meant by sustainable agriculture?

This concept consists of managing renewable natural resources in such way that provides food, income and livelihood for present and future generations, while maintaining or improving the economic productivity and ecosystem services of these resources. This type of farming combines environmental safety with economic profitability and efficient use of non-renewable resources. Conserving water resources, reducing the use of chemicals, developing ecosystem and crop biodiversity are just some of the goals of sustainable agriculture.

Over the years, value and demand for organic products has increased, thus by adopting sustainable agricultural practices, Africa would distinguish itself from most of the developing world that, unfortunately, has been increasing its use of pesticides and synthetic fertilizers, as it is the case of Brazil and Bangladesh. In addition, to purchase those same pesticides and fertilizers, farmers need to request loans, limiting household budget as debt accumulates. Thus, unlike their counterparts, organic farmers have increased their earnings and food security.

Graph 1: Increase in pesticide use, from 1990 to latest data (2007-12)

The benefits of sustainable agriculture

An example that clearly illustrates the benefits of sustainable agriculture is Ethiopia. In the degraded region of Tigray, a 10-year experiment, starting in 1996, provided evidence that organic and sustainable agriculture does have benefits to poor farmers and communities. To do so, ecological agricultural practices were introduced, including composting, water and soil conservation activities, among others.

The impact of compost on crop yield was rapidly visible, and data collected from 2002-2004 indicated that, on average, composted fields gave higher yields, sometimes double, than those treated with chemical fertilisers. Moreover, the positive effects of compost can remain up to 4 years, opposite to the latter that must be applied every year. With this, farmers have not only been able to cease debt resulting from fertilizers purchases, but also, since they are obtaining higher yields, it leads to economic returns. All this just by changing from fertilizers to compost.

Furthermore, since organic production focuses on smaller and more diverse crops, communities have access to a wider variety of nutrients and vitamins that help fight hunger and malnutrition. This also has a positive impact on HIV/AIDS patients that when malnourished, develop the full symptoms of the disease at a faster pace. Other health benefits include the reduction of illnesses and deaths due to agrochemical exposure.

A more independent continent

Nevertheless, as we all know, foreign aid is a very present reality for Africa, which contributes for it to be overshadowed by other nations. Thereby, offering local people work-for-food opportunities allows them to take care of their immediate food needs, while ensuring that they feel ownership of a project they have built themselves. This type of model encourages long-term participation for a truly sustainable system, and it improves physical capital, since market accessibility becomes a requirement. By building a network between farmers, NGOs and the government, many infrastructures would improve, as the agriculture industry tends to move forward in these African nations.

An indirect benefit would be African communities’ view on education, as their traditional knowledge builds up with new information. Educational programs on agriculture have been proven effective in other regions. In China, for example, farmer field schools helped reduce pesticide usage while raising crop yields. By seeing their educational and technological improvements literally bear fruit, governments can value sustainable agriculture differently and ensure children attendance at school. An increase in productivity can benefit the latter, since selling production surpluses will help paying for school fees. Similarly, an increase in labor demand for related activities could increase women’s participation in the economy and generate different sources of income for households.

However, it is not that easy…

Some challenges arise for African countries when seizing opportunities regarding the adoption of sustainable agricultural practices, especially in terms of market access difficulties and building productive capacities. This happens mainly due to the absence of economic incentives from the African Governments and their decision to implement policies, such as agrochemical subsidies, which makes the transition even less appealing.

UN calls for more funding for organic farming in Africa

A further constraint is the lack of awareness, not only at the farm level but in the whole society. The fact that this type of agriculture is completely absent from its agricultural education and R&D leads to massive misinformation barriers that inhibit its implementation. Related to this is the fact that no system can become operational if it is not institutionalized: in many African countries, research and development in agriculture are inadequate and suffer from lack of trained personnel, facilities, and motivation, making it difficult to build satisfactory research traditions and local expertise.

Additionally, there are three conditions that are crucial to analyze when studying the possible implementation of sustainable agriculture in a country: reasons for non-sustainability must be known, there must be sufficient information on the resource base to target activities that will foster sustainability, and the resource base can be monitored to evaluate sustainability. The problem is that these are uncertain in almost every African country. Another relevant restriction is the fact that developing countries do not have the appropriate research methodology to implement sustainable agriculture. Fundamental questions, such as what treatments to implement, what measurements to consider, how the data can be analyzed and how long the experiments should be conducted, are yet to be answered.

African farmer using pesticides

The challenges are worth surpassing

All in all, sustainable agriculture is assured to have a positive impact in Africa, but it requires appropriate incentives and intensified financial and technical assistance to ensure food security and social stability. It is essential for African governments to create awareness on the subject so that private organizations can contribute to the implementation of sustainable agricultural practices.

In a time where the world population does not seem to cease increasing, additional land will have to be cultivated, which gives even more importance to this issue: since all the major causes of land degradation are the result of poor land management, sustainable agriculture will do a great job preventing it.


Sources: The Borgen Project, Vox, African Wildlife Foundation, Stein T. Holden, Regional Office for Africa, African Business, Rainbow for the Future, Science Direct, Taylor & Francis Online, UNDP, Agence Française de Développement (AFD), The African Exponent, African News, Africa Center, United Nations Conference on Trade and Development, Third World Network.

Madalena Andrade

Magda Costa

China’s Victory on Absolute Poverty

Reading time: 6 minutes

On the 25th of February 2021, President Xi Jinping of the People’s Republic of China (PRC) announced that China had achieved an outright victory in eliminating absolute poverty in the country by lifting 770 million people out of poverty in the past 40 years. It was also stated that over 70 percent of the total global reduction in absolute poverty was attributed to Chinese efforts, for the same time frame.  

Nevertheless, there has been plenty of scepticism from western media regarding these achievements, especially concerning potential differences between what the World Bank and the PRC consider to be absolute poverty. With this article, our aim will be to analyse the veracity of these claims by examining the statistics concerning China’s poverty alleviation efforts, while also assessing what policy measures were adopted to reduce abject poverty. 

What does the PRC consider to be poverty? Concerning China’s poverty line, there have been three different standards employed by the Chinese government to characterise poverty: the 1978, the 2008 and the 2010 ones, the latter being 2300 yuan per person per year, meaning 6,3 yuan ($0,94) per day. For the World Bank, the most recent standard for poverty sits at $1,90 per day (at 2011 Purchasing Power Parity (PPP)). Unfortunately, for the untrained eye and sensational media, this glaring 1 dollar difference implies that it exists a discrepancy in criteria between the two institutions. However, this thought process has a crucial failure: it fails to put China’s poverty line value in 2011 PPP prices. 

Figure 1 – China’s 2010 poverty line at constant prices

From the graph above, it can be observed that China’s poverty line value is not a constant 2300 yuan for each year, but rather one that has adapted to price changes, with a poverty value of 2536 yuan per year, equivalent to 6,95 yuan per day, for 2011. According to the 2011 PPP, 1$ would be equivalent to 3,52 yuan, meaning that China’s poverty line would be approximately 2,00$ day (2011 PPP), which is in fact a higher value than the World Bank’s. 

Figure 2 – China’s Population living in poverty throughout the years (2010 standard) 

Regarding the second claim made, the data indicates that it was in fact in China where most poverty alleviation occurred: in the 1980–2018 timeframe, the 750 million Chinese who were lifted out of poverty represent approximately 63% of the total change in the poverty population, which went from 1926 million people in 1980 to 698,4 in 2010 (at the $1,90 Standard). 

One might still think that the 1,90$ standard is still too unambitious for a person to be considered lifted out of absolute poverty, because even if an individual does earn this minimum amount of money, he/she might still not have access to clean water or proper medical care. In fact, while the World Bank claims that in 2018 there were around 700 million people living in extreme poverty, the UN reported a whopping 1,5 billion people as being food insecure and unable to conduct normal human activity. 

Two assurances and three guarantees

Consequently, the Chinese government, when establishing the 2010 poverty line, deemed essential to include in the poverty alleviation objectives the “two assurances and three guarantees”: the two assurances, also called the two no worries, being adequate access to proper food and clothing, which would be assured if the 1,90$ benchmark was to be achieved, whereas the three guarantees are the following ones: 

The access to compulsory education, which was boosted by investing in new public-school facilities in poorer regions, especially for pre-school children who lack the independence to go to distant schools on their own. In addition, the PRC government established a subsidy program where families only gained access to extra income if their children attended compulsory schooling.  

The access to basic medical care, which, once again, was boosted by investing in new health care facilities and in the number of medical personnel employed by the state. For remote impoverished villages, a program was created where poor families were ensured at least a visit from a state physician each month.  

Figure 3 – Chinese Government’s investment in Poverty alleviation measures 

Finally, the access to secure housing, as most of the previously impoverished counties, in this past decade, were in mountainous regions, such as the Sichuan or Yunnan provinces, which have limited potential for economic growth. These citizens’ decrepit homes, which lacked access to essential amenities, combined with their low incomes derived from old-fashioned agricultural practices, possessed a significant challenge to their lives’ improvement. Thus, the Chinese government subsidised the construction of new houses where the access to clean water and electricity was assured in areas with less arduous conditions, allowing these citizens to relocate to them for free. 

Figure 4 – Newly built relocation homes for Sichuan’s impoverished families

The Job-Placement

Evidently, when establishing these new communities, the necessity to create new job opportunities for the relocated citizens arose. For those that were re-established in different rural areas, they were able to maintain their agricultural practices, albeit with renewed tools and machinery funded by local governments. For those that were moved into urban areas, most were able to find new jobs in the secondary sector, many of which were propelled by the e-commerce sector.

The prevalence of e-commerce in China means that it has never been so easy for local firms to ship their products to other parts of China, which increases their potential consumer pool and allows for remote regions to have more profitable firms. As such, local governments were able to cooperate with the private sector in establishing new factories to employ these relocated citizens. 

This job-placement example demonstrates what has been a continuous process in Chinese society for the past 40 years: the organised cooperation between the government/public sector and private enterprises. As a market-socialist nation, China’s economy is organized in a considerably different way than Western Countries’: if not for the prevalence of Public State Enterprises in the economy, then the regulatory hand of the Chinese government vastly outweighs the West’s, who more often adopts a laisse-faire style approach to solving economic problems. 

Nonetheless, despite running these government projects, China’s debt-to-GDP ratio has remained at relatively low levels, although it has recently risen, mainly due to COVID19. Likewise, its GDP growth rate has remained positive throughout this period, meaning that these types of projects are not some sort of far-fetched utopian idea, but rather they are feasible projects that tackle poverty problems at their core

Figure 5 – China’s real GDP per capita (at 2017 dollars PPP)  

China as an example to follow 

In conclusion, it is vital for policymakers, especially those working in the field of development economics, to understand how China’s implemented policies could be adopted in other parts of the world, because, as it stands, it was in China where most progress has occurred. Furthermore, as the UN 2030 goal is to eliminate absolute poverty, the effective way to achieve it will surely involve getting a better grasp on past data and policy decisions guiding the world towards a better future. 


Sources: The World Bank, National Bureau of Statistics of China, The Guardian, Beijing Review, BBC, CGTN, Council Pacific Affairs, Xinhua News Agency 

André Rodrigues

The ugly truth about palm oil

Reading time: 5 minutes

Palm oil is a silent presence in most of our daily lives. It can be found from bread to ice cream, from toothpaste to chips and from soap to fuel, but do we really know the truth about it? 

Palm oil is an edible vegetable oil original of a palm tree named Elaeis guineensis, native from Africa, even though most plantations nowadays are in south-east Asia, with Indonesia and Malaysia representing 85% of global production. Due to its characteristics, such as high saturation, oxidation resistance, stability at high temperatures, low cost and versatility, it is widely adopted on a globe scale.  

It can be found in more than a half of packaged products consumed in the US, in 70% of personal care items and it can be used as animal feed, as a biofuel or as cooking oil, and it is estimated that we consume, in a global average, 8kg of palm oil per year, making it the most used and demanded vegetable oil in the world.  

On the one hand, this crop is the most efficient when compared with others, such as soy, coconut or sunflower. Also, its costs of production are lower than every other animal or vegetable oil, making it very cheap and accessible to the consumer, allowing it to be the used widely as a cooking oil in Asia, where the economic and demographic growth would lead to the increase in demand in the future (today India, China and Indonesia account for 40% of the world’s consumption). In the west, it was adopted in some diets, because it is healthier than other fats, and its use as a biofuel corresponds to more than half of its importation into Europe. 

To supply all the palm oil demand with alternative vegetable oil, it would take almost five times more land than coconut, sunflower and rapeseed, and more than eight times soy. Due to this, palm oil supplies 35% of the world’s vegetable oil, on just 10% of the land. Thus, the suppliers were encouraged to increase production, and, for that purpose, they counted with the support of private funds, bank loans and the IMF (International Monetary Fund). 

This industry has a considerable impact on the economies of its producers, accounting for 13,7% of Malaysia’s gross national income, and it is the product more exported by Indonesia, the world’s top producer, accounting for nearly 40% of the worldwide production, providing employment to over two million Indonesians directly. 

Between 1995 and 2015, its annual production quadrupled, from 15.2m tonnes to 62.6m tonnes and by 2050, it is expected to quadruple again, reaching 240m tonnes, which lead the production to spread through Africa and Latin America. This production expansion promoted an increase in employment in this sector and, consequently, could lead to a decrease in poverty. However, this is not what has been happening

The workers in Malaysia and Indonesia complain about gender inequality: “The women on the plantations have no rights, not even the right to a salary in many cases” says Herwin Nasution, president of SERBUNDO, a trade union alliance representing mainly agricultural workers in Indonesia. The inexistence of an official employment contract makes these workers vulnerable to illegal conditions, turning the plantations into a place where labour exploitation and human rights abuse are a reality, and where, sometimes, child labour is found.  

In fact, the working conditions are very poor, with long shifts, limited access to clean water and use of toxic chemicals without adequate protective equipment, and the workers receive no support from their employees regarding health insurance, maternity license or school facilities.  

Additionally, palm oil production has a devastating impact on the environment. In order to produce the palm trees, tropical forests were burned and cut down, in one of the regions of the globe with more biodiversity and making it responsible for about 8% of the world’s deforestation between 1990 and 2008 (only in Indonesia there was recorded a loss of 25.6 million hectares of tree cover, during the period from 2001 to 2018). By burning these forests, greenhouse gas is released, namely CO2, having a severe contribution to global warming, and it is the main reason why Indonesia is the third country in the world with more gas emissions. Moreover, the intensive cultivation method without planning or care for the environment could lead to soil erosion and water pollution.  

Furthermore, it destroys the habitat of hundreds of species, even when it is considered illegal, as it happened in Riau, Indonesia, one of the most affected regions, where 84% of elephants living there died after losing 65% of its forest, in the last quarter a century. But Bornean Pygmy elephants weren’t the only ones affected by the deforestation. More than 100,000 Bornean orangutans, a critically endangered species, died between 1999 and 2015, and almost 75% of Tesso Nilo National Park in Sumatra, that secured the habitat for the endangered Sumatran tiger is now covered with illegal palm oil plantations.  

You could think that a way to solve this would be if we stopped producing or consuming it, and instead started buying other vegetable oils, such as soy. However, the problem would remain, because the need to make way to the plantation would stay the same. Also, these other plantations would need more land than palm oil, making these alternatives possibly worse, and, besides that, none of them would be a perfect substitute since none of them has the same versatility, utility or functionality as palm oil.

Despite this, the palm oil problem could still be lessened. The solution to this problem could be to change the way it is produced to a more sustainable one, that respects the rights of workers, recognizes the responsibility with the environment and uses the effluents and waste to other activities, along with the increase of inspections in order to close all the illegal plantations. The consumer could distinguish the products produced in a sustainable way through the RSPO (Roundtable on Sustainable Palm Oil) certificate (around 20% of the world’s production), that forbids deforestation and promotes the conservation of these highly diverse habitats.

The awareness regarding this topic has increased and, as a consequence, several companies and countries demand the production of this vegetable oil to have a certification of sustainability or are applying measures against it. In Norway, all importations of this oil as biofuel were banned, and in the UK, the supermarket chain Iceland started a campaign[1] to ban palm oil from their label products until it is proven to be of sustainable origin. In some cases, we can already see the results, such as in the UK, where 75% of the total palm oil imported was sustainable, by 2016.  

With development economies pursuing an exponential growth in palm oil production, such as Colombia, where fields that were formerly used to coca plantation or to raise cattle are converted to palm trees plantations, making it more sustainable, a new tomorrow to palm oil production arises.


[1] An example of this campaign is the following advertisement: https://www.youtube.com/watch?v=oA10-oZi4Xc


Sources: The Guardian, Org, WorldWildlife, Statista, Dialogochino, Cell, BBC

Mariana Gomes

A New Era for Development Economics

Reading time: 7 minutes

Economics is commonly seen as a theoretical branch of the social sciences – one of its own branches, however, is not. Development economics, which deals with growth of lower income countries, provides, in contrast, a very hands-on approach to the application of its models. Central to this branch of economics is the last mile problem. 

The Last Mile Problem 

Many fail to understand the obstacles towards providing supplies to remote areas in underdeveloped countries. Medical supplies, schoolbooks, and transportation of essential goods (all of which are the basis of human development) cannot be sent to their destinations due to a lack of supporting infrastructure. To illustrate this, let us take the example of a shipment of vaccines to a village in Africa: while it certainly is possible to get the vaccines to the closest regional capital, many times, there is no infrastructure that can safely transport from the capital to the village. This last stretch is the crux of the last mile problem. 

Fig. 1 – Illustration of the Last Mile Problem

Theory vs Experience  

Older development economics theories have sought to fight the last mile problem (decades before the term was even coined), but in a standoffish, figure-it-out-yourselves way, post-WWII economists such as Ragnar Nurske saw that development was to be overseen by the nation’s government, investing in many different industries, rejecting trade with other countries. Others preferred neoclassical models, where a laissez-faire market approach would of most benefit, the government interferes the minimum in economic affairs of both individuals and society. However, what most economists from this era failed to understand were the underlying issues that were at the heart of these countries’ underdevelopment: disease prevention and education. These were crucial points that not just theory could solve. They had to be tested on-field. 

A revolutionizing and experimental approach to Development Economics was introduced to us in 2019 by Michael Kremer, Esther Duflo and Abhijit Banerjee, awarding them the Nobel Prize in Economics. This innovative approach implemented Randomized Control Trials (RCT) experiments, a reliable way to infer and confirm causality relationships, and so much was achieved. When faced with a certain question/concern, through randomised allocated regions or groups of people, experiments are assigned, tackling the problem in many ways. Afterwards, the outcomes between the different trials with or without interventions are compared. With this experimental process one can assess the impact of social policies on poor and middle-income countries.  

Process of Randomized Controlled Trials

So, if in the past, most development economists created their work tucked away in the comfort of their offices, many have now started to complement and base their ideas and deductions in experimental on-field work. In special focus on the work of these three pioneers, their trials were mainly conducted in India and Africa, striving to find new and innovative ways to fight poverty and improve people’s living standards. Some of the problems tackled regarded important old concerns such as health and education.  

The impact of randomized controlled trials 

When it comes to health, immunization rates are the most predominant issue. According to UNICEF, to this day, around 27 million children and 40 million pregnant women are not provided with a basic package of immunizations, yearly. This leads to many deaths that could have been prevented by more efficient practice and supply of incentives for vaccination.  

In India, although vaccination services are offered exempt of any charge, in public health facilities, the immunization rate still remains low in some areas, specifically the more rural and poorer. As a response to this, Duflo and Banerjee randomly grouped 134 villages in rural India into 3 groups: one in which there was a monthly reliable mobile immunization camp, where a nurse and an assistant went to the villages, providing easier access to vaccination services in those villages; another with the same immunization camp, but for each completed immunization, the children’s households received incentives (raw lentils and metal plates); and finally the control group (i.e. with no intervention done).  

The results showed that the second group had the most positive outcome, increasing vaccination rates by six times more than before. This was a result of people having easier access to getting vaccinated and incentives that gave a reason to not postpone their immunization. In fact, it ended up being less costly per vaccination to provide these incentives, since the medical professionals needed to be paid regardless of the services being provided or not.  

Moreover, efficiency in education, in terms of incentivizing children to attend school, was also empirically studied by these three economists. They started by discarding previous objectives/solutions that came from the assumption that the problem was centred around the poor management and inefficiency of teachers, curriculums, and pedagogy programs, and instead focused on the design of the educational system itself. Thus, in contrast, Pathram and J-PAL, the research organisation founded by Banerjee and Duflo, studied a practical and innovative way to teach primary grade children which prioritized and assessed their actual learning levels (not the specific class year they were in). Instead of constantly flunking children that lacked specific knowledge from previous school years, they undertook another methodology, which was evaluated and found effective, known as “Teaching at The Right Level”. Such method grouped students into the same learning levels and provided them with targeted resources to achieve higher levels. This ended up showing that children were capable of learning fundamental skills such as how to read and basic math in just 30-45 days.  

At a 2010 Ted Talk event, Esther Duflo also shed light on how to subsidize education by observing in which interventions a 100$ grant would be more effective in incentivizing extra years of education. Surprisingly, it turned out that just by explaining to people the benefits of education, something inexpensive to do, it increased school attendance by 40 extra years in that community. Furthermore, based on a past field study by Kremer, in regions where it is common to have worm infections, offering deworming treatments to children in schools added up to 28.6 more years, being the second most effective intervention. 

A step in the right direction 

All in all, the world of development economics was forever changed with the introduction of experimental research. For years, most economic reasoning and foreign aid has derived from a neo-classic economic approach in which it was believed that by increasing GDP per Capita through improvements in market structure, technology and public goods would make people automatically behave in a more socially beneficial way. As a result, the impact of this help was never capable of being accountable or fully efficient and most poor countries remained in the same situation. 

However, as one can imagine, these small and geographically exclusive experiments are also restricted by some issues. The broader is the problem we want to solve, the harder it is to draw a specific and effective resolution for it, so this field of study needs to be continuously evolving. Nevertheless, a new collaboration with behavioural economics and experimental approach, through Randomized Control Trials, opened the doors to new ways of unconventional thinking, providing life changing solutions and helped development economists improve substantially causality reasoning.


Team’s note

Dear reader, as we have reached the end of the article and being RCT a very broad topic, if you would like to further explore RCT in the context of economics, then take a look at this article. If you also wish to know what Nudging and RCTs have in common, check this article.


Sources: Brookings, ResearchGate, Journal of African Economies, Habitat for Humanity, Great Britain, J-Pal, MIT News, The Conversation, TED Talk Ideas Worth Spreading, Firstpost, Thebmj, Hindustan Times 

Benedita Elias

Guilherme Barroca

Fast Fashion: what we are not seeing

Reading time: 5 minutes

The term “fast fashion” refers to the highly profitable first world fashion industry grounded on the low-cost mass production of clothing, accessories and footwear in third world countries, which allows consumers to purchase new, trendy and readily available garments for the lowest prices. 

The word “fast” describes how quickly retailers can place new designs into the stores all around the world, keeping pace with the constant demand for more and different styles. Its origins date back to late 20th century as manufacturing became cheaper with the use of new materials like nylon and polyester. Many companies, such as Zara, H&M and Forever21, started building its business models on inexpensive labor industries in Asia, creating seasonal and trendy designs that easily pierced consumers all over the world due to its low prices. But what is the cost of this rapid turn-over of low-cost garments?  

Primarily, we must focus on the significant environmental impacts of fast fashion. Approximately 80 billion piecesof new clothing are purchased every year, leading mass production of clothing to account for 8% of worldwide carbon emissions and placing the fashion industry in the top 5 of the most polluting industries in the world. Moreover, this industry is considered to be the second-largest consumer of the world’s water supply: according to a National Geographic study, each cotton shirt takes 2700 litters of water to be made, enough water to sustain one human being for three years.  

Water needed to do a shirt 

On top of that, fast fashion uses pesticides for dyeing and production, leading to a heavy pollution of waterways in many developing countries. This happens because whilst in developed countries governments ban most of these chemicals, in the poorer ones their dependency on the clothing industry does not allow them to do so, which leads us to the main damage made by this industry: its tremendous impact on the countries in which production takes place.  

Because most multinational fashion companies set their factories in countries with inadequate labor laws and little to no government control, working conditions are dehumanising and dangerous, as many people do not have the luxury to turn down any form of work and have no choice but to work under these conditions in order to survive. 

These conditions include a 14 to 16 hours of work per day, seven days a week while facing physical and verbal abuse from their supervisors and often locked in closed spaces filled with toxic substances and no ventilation. In many countries, minimum wages range from a half to a fifth of the living wage required for a family to meet its basic needs, leading textile workers to be some of the lowest-paid employees in the world. 

However, the main issue taken by the fast fashion industry into developing countries is child exploitation. The race between companies to find the ever-cheaper sources of labor, in order to achieve the common goal of maximising profits, has led them to neglect basic human rights and cope with some of the worst forms of child labor. This happens because many employers in these countries actually prefer employing children, as much of the supply chain requires low-skilled tasks and some are even better suited to children due to their small fingers, which do not damage the crop.   

Bangladesh, India, China, Thailand and Pakistan are some of the 51 countries that use child labor in the garment industry, in which millions of children are subject to long working hours, exposure to pesticides and often paid below the minimum wage, which we have already discussed is far from being enough for living a decent life with basic needs. According to the International Labour Organisation, there are around 170 million children aged between five and seventeen years old in child labor, almost 17% of the global population of children. Of these, half are working for fashion supply chains.  

Children working on factories

But  as with most topics, there is another side to it. While the treatment and compensations of textile workers in developed countries is inhumane and a potential violation of basic human rights, there are positive effects that cannot be ignored. The choice between a life on the streets and a modest-paying job is a choice between life and death for many in developing countries. Not to mention children, without a certain commitment to a place to spend their time, tend to fall towards prostitution and drugs as a way to make ends meet. Despite all its flaws, the textile industry is, at the moment, one of the factors that plays a part in deterring the descent of the younger generation into an even worse life. 

In addition, this industry employs thousands of workers and, in an extreme scenario where people simply stop consuming, it will cause many who really needs this job, despite its atrocious conditions, to lose it and be in an even worse financial situation.  The lesser of two evils.  

Nevertheless, the fast fashion cycle isn’t limited to its production in developing countries; a piece of clothing can travel half the globe in its lifetime. Finished products are shipped and sold to Western nations – this is fast fashion’s first pipeline. In developed countries, damaged or unwanted pieces of clothing are donated to charitable organisations, which redistribute them to developing countries – this is the second pipeline.  

Therefore, the cycle of self-consuming fast fashion is perpetuated across the globe, incentivising poorer countries to keep producing clothing articles at extremely low costs, as the resulting influx of donated clothes from developed countries is a cheaper alternative to clothing than the establishment of a self-serving textile industry within the developing country.  

Let us take the African example: the continent once renowned for its fabrics and textiles, coveted by European explorers, has a dying clothing industry due to overwhelming donations from abroad. The image of an African child in a worn-down graphic tee or a Los Angeles Lakers jersey is all too common. Foreign imports of clothing intensified during the 1980s and 1990s when trade barriers were removed.  

Some East African nations, in an effort to reignite their textile industry, proposed a ban of clothing imports by 2019. This plan was swiftly rescinded due to pressures by developed countries such as the US, which stand to gain from fast fashion’s second pipeline – over 40,000 US jobs would be lost. It is important to take into account the negative effects of donating clothing towards developing countries, as they may be causing more harm than good.  

All in all, fast fashion is a contentious topic; there is no denying that our lives, as developed nations, have benefited from its fruits. Our easy clothing doesn’t come without its downfalls, however. Where do we draw the line? Many turn a blind eye to fast fashion’s vicious cycle – but we cannot keep ignoring it. Perhaps a more conscious choice of clothing is in order.  


Sources: The New York Times & The Guardian

Foto de perfil de Guilherme Barroca

Guilherme Barroca

Foto de perfil de Madalena Andrade

Madalena Andrade

Telecommunications: The next big step for Africa

Team’s note

Dear reader,
The article you’re about to read is the product of a challenge the teams Development Economics and Technology made to each other: to create a relevant article about submarine telecommunication cables. Curious about how can these cables possibly relate to Development Economics? Keep reading!

Every day, we hear about new technologic innovations and digital products and services made to boost our economy and make our lives much easier. This quick access to any sort of information at just a tap of a finger has been considered the new normal. But how is it evolving in developing countries on the African Continent?

Contrary to what you would think, Africa has been evolving quite rapidly in terms of telecommunication infrastructures. Did you know that, in 2019, the number of cell phones per 100 habitants in Botswana was 174? This comes from the fact that cell phones are way cheaper and easier to use than personal computers, for example, making the implementation of the internet in Africa mostly instigated by this.  

One of the key players in enabling Africa to connect countries both inside and outside the continent are the submarine telecommunication cables. With its establishment in some key regions alongside the coast of Africa, such as South Africa and Nigeria, this continent was exposed to a new era of globalization. The purpose of the cables is to transmit telecommunication signals across seas and oceans in order to connect continents and provide easier access to data/internet. As a result, it launched a digital economic expansion and overcame many communication boundaries.

Unfortunately, the truth is that more than 60% of the African population does not have yet access to the Internet and its perks, and there are still many difficulties regarding the adaptation to this new reality that needs to be solved.

Considering these facts, how can this connectivity benefit Africa? And what are the main challenges of it?

Travellers consult their mobile phones in Abidjan, Ivory Coast

Until 2009, only three submarine cables provided the whole African continent with internet. Besides, only one of them was located in the South, meaning that the population in Sub-Saharan Africa was limited to a single outdated cable in order to access the internet. Due to this lack of infrastructure, it was hard to broadcast data within the african continent and between continents. Fortunately, over the past decade, many more cables were installed across thirty-seven countries. Just this improvement led to a great change in Africa’s connectivity. In the regions that are online, we are already able to see the economic impact that these new infrastructures can trigger. For instance, a study from a partnership between RTI (an american nonprofit research institute) and Facebook states that in Kenya there was an increase in employment and job quality in fibre-connected areas, characterized by the creation of new jobs and the replacement of low-skilled jobs for more skilled ones (more specifically, an 8.4% increase in skilled employment). Other outcomes include the increase in foreign investment, governance quality and in the national GDP for many countries.

And yet, almost half of the countries with the capability of having a direct submarine cable connection are only connected to one or two, despite being able to withhold more. Such dependence on a few number of sources made these regions vulnerable to consistent internet outages and slow-downs. For example, it is common for these cables to become disabled by several incidents in particular cuts caused by maritime activities and natural disasters. In June of 2017, an anchor of a container ship damaged the only submarine cable that was connected to Somalia. The Internet outage transpired for more than 3 weeks, causing chaos across the country and economic losses around $10 million per day. Alternatively, digital outages may also come from cable breaks provoked by natural landslides i.e. seaquakes. These incidents tend to be more of a risk to East and Central African regions and are usually more costly to repair as it takes a longer time to reverse the damage.

Submarine cable

Furthermore, African countries also face another big challenge regarding connectivity isolation. The introduction of submarine cables in Africa only reached a small portion of its population, mainly people who lived in urban coastal regions and belonged to an educated and upper class. In contrast, most Sub-Saharan African countries are characterised by vast landlocked territories scarce in infrastructures and a predominant rural population. Although there is a need for terrestrial infrastructure, it seems to be less effective because not only is it more expensive, but also quite complex given the need to cross several borders. In addition, non coastal areas who are digitally isolated are more prone to suffer network outages and take more time to recover, incurring high economic costs. As a result, the deployment of these submarine cables contributed to a digital divide.

Evidently, the problem surrounding rural connectivity will not be solved through traditional solutions, and so some companies like Google and Facebook offered innovative ideas to tackle this issue. In Kenya, Google, through a sister company called Loon, partnered up with Telekom Kenya (Public-private telecommunications entity) and came up with a project that consisted in distributing helium filled balloons above 20km from sea level around the country’s most inaccessible regions. These balloons are powered by a solar panel and have an antenna which provides internet signals within a 5000sq km reach. Moreover, Facebook tried another approach through the usage of drones and satellites and is still to this day studying alongside Airbus various ways of high-altitude internet supply.

Other great examples of landlocked areas’ effort to overcome these boundaries are Botswana and Rwanda. Botswana’s government, alongside with 11 private companies, created a program named “Fibre to Home” with the purpose of offering boundless bandwidth for internet connection in homes. Besides, Rwanda has been partnering up with KT Rwanda Networks and GSMA in order to develop new infrastructure to increase mobile deployment in the country. As a result, between 2014 and 2016, the individual access to the internet increased from 10.6% to 20%.

As we can see, Africa has been on the eye of many private companies willing to invest and solve the problems that this continent is now facing regarding the development of telecommunications. The most ambitious project coming up is 2Africa. Facebook is working with african and global telecommunication operators to create a 37,000km long subsea cable that will connect 23 countries, spanning from Africa to Europe and the Middle East. The joint network capacity that it will offer is three times more than the one that currently exists in Africa. Despite it being expected to improve the continent’s economy and provide a more stable connectivity, it’s difficult to make more accurate predictions since the impact of Covid-19 on the African economy is yet to be analyzed, and it could greatly affect the outcomes of this new project.

Nonetheless, we must not forget that effective and precise regulation needs to be formulated to ensure an open and competitive environment. Without this, cartel agreements and monopolies may appear and thus benefit from an excessive market power and the ability to overprice services and goods. This may deeply affect the growth of the telecom sector. Additionally, we also need to consider the high digital illiteracy across the continent. As a way to combat this problem, ITU and Norway have combined forces to provide training for 14,000 Ghanaians in order to better and strengthen their digital skills, allowing them to undertake jobs in the future that work with this technology and make the most of the internet.

Students of Kibiribiri Church of Uganda Primary school during a Computer Training Meetup at their school

The Covid-19 pandemic has greatly affected our economies, and Africa is no exception. Still, it did not slow down foreign investment nor did it diminish international interests in this continent. In fact, it is anticipated that Africa will grow more than ever after this crisis comes to an end. Investments in fintech, a digitalized way of providing financial services, is among the most important matters that countries and companies are willing to develop.

All in all, Africa still has a long way to go. It will be through the combined efforts of both public and private investment that Africa will overcome the many prevalent challenges and reach its full potential. This way, we believe that the development of telecommunications in this continent will grow exponentially in the upcoming years. The future is bright.

Team’s note

Dear reader,
Having reached the end of the article, we hope you found it insightful and interesting to read. We kindly remind you that this article is the product of a partnership where both the Development Economics and Technology teams challenged each other to write a relevant article on the same topic – submarine telecommunication cables. Don’t forget to check out their article as well. Until then, stay tuned, stay aware.

Benedita Elias

Somaliland: A New Hope

The main purpose of development economics should be to give any country or community hope. Hope for a future they own and where they can grow. But no hope is seen nor given to anyone in Somalia, as the country has been a disaster since the day it gained independence in 1960. With the premise of bringing the major native ethnic group of the Somalis together, the British and Italian colonies were unified. Its government started as a failed democracy, followed by a brutal dictatorship under Siad Barre, resulting in wars and many genocides across the country. The dictatorship lasted two decades, until in 1991, the government was dismantled by rebel armed groups. Afterwards, no government successfully took control. Somalia has been in a civil war with different factions fighting for control, being the perfect hub for terrorist groups, warlords and pirates. An absolute anarchy. The years go by and there is still no hope for the Somalis.

But there is one exception – Somaliland, a region of Somalia that belonged to Britain in the north of the country. It has had relevant developments and it’s starting to have its first foreign diplomatic relations. It possesses its own currency and even its own passport. Its achievements have been considered remarkable. Even though it is not internationally recognized as a country separated from Somalia (yet), it’s developing the best it can to become one.

In this article we will focus on this small wannabe country and try to ascertain if it can indeed become a successful nation recognized by the rest of the world or if it is just another African state waiting for its decline. Is there still any hope for the Somali people?


Map of the faction division in Somalia, as of 2017

Map of the faction division in Somalia, as of 2017


A short story of tragedy

Dictator Siad Barre of Somalia

Dictator Siad Barre of Somalia

Somaliland has always been the odd one out in this unification, being always marginalized by the rest of the country. In 1978, during Barre’s dictatorship, with the goal of unifying other Somali dominated territories, the national government started a war with Ethiopia, which it lost. This defeat destroyed the economy of the country, the lives of its citizens and the image of its government. Because of this, in the mid-1980s, rebellions started rising. Somalia’s military started a brutal counteroffensive, not only against the rebels, but also against the different clans that supported them. It was in Somaliland that the national army marched to the region’s largest cities of Hargeisa and Burao. Using artillery and air strikes, they bombarded the cities, destroying 90% of Hargeisa and 70% of Burao, killing thousands of civilians. This is known as the Isaaq Genocide. Barre’s government collapsed in January 1991, and in April of the same year, Somaliland declared independence. All Somaliland militias were dismantled or incorporated into the new national army of Somaliland, providing a solid stabilization and security in the region. For the rest of Somalia, a long civil war awaited.


On the road to a better future

For Somaliland to become a successful country, there are some key points that must be assured: regional stability, an efficient government and a healthy economy.

Somaliland is considered the most stable region in the Horn of Africa. As the former militias join the national army, this army remained loyal to the new government. After the remaining of Barre’s forces were defeated, many other dangers were still present, such as Islamic terrorist organizations, pirate groups and the other numerous factions in the civil war. All were successfully expelled. Its major stability problem is still with the neighboring Puntland with whom it has some territorial disputes. As of national identity, these were the same people marginalized by the rest of Somalia and the same clans killed in the Isaaq Genocide. We can associate the loyalty of Somaliland’s troops to this strong national identity.

Its government started as a democracy that distributed all major powers between the most powerful clans. Later in 2002, it decided to substitute it for a more ideology-based democracy. This new government had a modern constitution, with full separation of powers between independent institutions. In 2003, the first president of Somaliland was elected, and the subsequent elections have been all considered fair and legitimate internationally, largely thanks to this government architecture that was built with no help from abroad. All of this made Somaliland’s government gain the recognition of most efficient democracy in East Africa.

As for its economy, despite having great potential, it’s still quite underdeveloped as it continues to be based on livestock exports, largely to Arab countries. The government is progressively looking to diversify its economy, investing in its most promising sectors. Somalia is situated in the Horn of Africa, a valuable strategic location since it’s where many trade routes pass through. Somaliland took advantage of this by investing in its ports. Berbera’s Port is one of the biggest and most developed ports in the region and is a booming site for maritime operations, providing access for maritime trade and attracting foreign investment from China and the UAE. Its territory also has an abundance of mineral resources, such as industrial ore like iron and titanium and even rare metals. Oil reserves are also present and have already started being explored in 2018.

To summarize: it’s the only stable region in Somalia, as well as one of the most efficient governments build from the ground that has a promising economy. This great potential is not officially recognized in the world, but in many ways, it is unofficially: it has trading agreements with multiple countries, such as the UK and Taiwan, and is a member of multiple international organizations such as the UN’s Unrepresented Nations and Peoples Organization.

Somaliland representative Mohammed Omar Hagi Mohamoud meeting Taiwan’s President Tsai Ing-wen

Somaliland representative Mohammed Omar Hagi Mohamoud meeting Taiwan’s President Tsai Ing-wen


Current problems

There are still many weaknesses inhibiting the self-declared country from being recognized. For instance, the ongoing civil war with the north-eastern area of Somalia – Puntland, due to the territorial dispute over eastern provinces, whose control is claimed by Somaliland based on colonial boundaries and by Puntland based on tribal affiliation. Another obstacle is that many countries and international organizations, including the African Union, don’t support a successful separatist’s movement, no matter how efficient it may be, fearing it may encourage other similar movements to seek independence. And because it has no recognition, no foreign aid can be provided to the government. Hence, the government is very dependent on private donors and investment, leaving the danger of corruption of the government wide open.

Apart from its lack of recognition, Somaliland also has many internal problems. It still presents an extremely low GDP per capita of $347 US, making it the fourth poorest country in the world, according to the World Bank. As the effects of climate change increase, it endangers the livestock industry, which is still the backbone of the current economy, resulting in income loss and famine to a part of the population. Despite Somaliland’s efforts and investments towards education, half of the children still have no access to school. Several human rights abuses are still committed, such as feminine genital mutilation, which unfortunately is still very popular in Somalia as it’s estimated that 98% of women have been submitted to it, according to ActionAid.


The Veredict

Truth is, this reality is very complicated. It takes a very long time to see improvements in a country, and failed cases of separation are the most common examples. But against all odds, this government has been achieving all the right benchmarks in the 30 years of its independence: stability in a region globally known for widespread chaos, a complex political system that disapproves and punishes corruption and a promising economy built with investments in infrastructure and education. Moreover, by granting international recognition, the resulting provision of foreign aid would alone solve many of Somaliland’s problems. But one question remains: if the international community doesn’t reward this nation, how can it expect to see more of its kind in the future?

Sources: World Bank, East African Business Week, UNICEF, UN News, The Conversation, Institute for Security Studies, Economist, Britannica, BBC, Action Aid, The Taiwan Times