Ideas Untrapped

It is quite common to hear people imply that any government that fixes Nigeria's electricity problem will enter the nation's pantheon of sainthood. But even the promise of immortality has not been enough for any meaningful change in the sector. I sat down with Timi Soleye - who is an industry player and insider (he is the President of CRYO Gas and Director of Power at Raven Energy) - for an extended chat on the issues facing the sector. Timi's take ended up being an extended commentary on the state of policymaking in Nigeria, and the country itself.

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I had a conversation with former deputy governor of the Central Bank of Nigeria, Professor Kingsley Moghalu, and it was worth every minute. He explained why the CBN has taken the role it has on economic policy (and how he thinks it has overstepped), the lack of state capacity in Nigeria - and why we need a philosophical basis for governance. I also asked him about his plans for the 2023 elections, what he thinks about the next 60 years of Nigeria, and his alternative vision for the country.

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In the first of a series of end of season episodes - host Tobi Lawson talks to Prof. Pat Utomi about the state of Nigeria, and how it all went wrong. You can listen on your preferred platform here, or from the player on the website. You can also rate us on any of the platforms or here - this helps others find the show.

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It has been a little over a year since we started the podcast. Host and curator of the show Tobi Lawson is a guest on this episode - to talk about the philosophy behind the project and his opinions on many of the issues the show has discussed.

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Here is the second part of my episode with Chris Ogunmodede. We continued the discussion on Nigeria’s political economy. We touched on institutional memory in the legislature and why we need a stronger civil society. Chris is insightful as always.

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TRANSCRIPT

TL: This is Ideas Untrapped and my guest today is Chris Olaoluwa Ogunmodede. He's a foreign policy analyst, a writer, editor and political risk consultant. His work centres on political institutions and foreign policy of African countries, particularly in the West African region, and he has extensive experience working across Africa, Europe, and the United States. He's an editor at the Republic, a Pan-African global affairs publication. You're welcome, Chris. It's a pleasure to have you here.

CO: It's a pleasure. Thanks so much for having me on your podcast. I'm glad to be here.

TL: One detour, quickly, that I want to take listening to your answer, is the role of ideas in all of this and messaging from the top or the centre, so to speak. President Buhari has a bit of a perceptive reputation, I would say, as inflexible. Inflexible, he is set in his ways, he has his idea. I mean, we just talked about the cabinet, I remember I think it was his first and probably the only media chat that he had where he said permanent secretaries are the ones running the government.

CO: Yes. I remember.

TL: We don't need ministers. And exchange rate was so and so in 1983, how come it is so and so in 2016. So what is the role of ideas in how the transmission mechanism of governance really really works? So, if the man at the centre, if the leader, if the visionary, so to speak, have some of these funny, archaic ideas about things, is there really any hope for governance? So that's one.

Secondly, which is one other thing you touched on in your answer, you talked about how PDP was found, the experience with succession and governance. And I'm leaning a lot on Carl LeVan here. Talking about how the post-colonial governance, especially after the civil war, has always worked in Nigeria by different veto power structures, exacting influences, pushing each other. But in that same process, I see someone like president Buhari, even right from his days in the military and even afterwards, as a bit of an outsider to that process.

So he does not come with all the governing credentials, so to speak or should I say experience. So how much do these two things - ideas and experience in actual governance and the influence with the governing structure behind power, how much do these two things influence the way the APC evolved as a ruling party?

CO: Yeah, I think a lot. As you pointed out, this is a president who you could charitably call incurious about a lot of things, and he relies on a very small circle of advisers, the cabal as it were. You know, that's the sort of colloquial description for his advisors. Many of them share his views on economics, on security, on practically everything that's important. This is also not a...president Buhari is not particularly gregarious, he is not particularly outgoing, he's something of a loner, he's a quite austere person. You contrast him with former president Obasanjo, for example, who couldn't be any more different even though they were both military heads of state.

President Obasanjo is something of an intellectual. He's written so many books. I mean he ran for UN Secretary-General at one point. He's someone who you will find on panels all over the [place], even to this day. Like, this is a person who has a worldview, he sees himself as an African intellectual statesman and has behaved that way. Not even just today, as far back as when we left the armed forces when he handed over in '79. This is someone who has engaged himself in African affairs, in particular. He's been a peacekeeping envoy to this person, to that person. You know, whether it's Charles Taylor, whether it's in Togo, this is someone who is often dispatching himself to be at the centre of [things], especially things that have to do with Africa.

He's someone who relies on a number of young [people]. One thing people don't know and just in the interest of disclosure, he's someone I know somewhat well, you know. President Obasanjo is someone who relies on a lot of scholars, academics, thinktanks. You know, he has a presidential library now. He's long had a Foundation, you know, these are things he uses to project not just his influence, but his willingness to learn so much about the world. When he was president, he was the kind of person who if you went to see him about something about a policy issue and you felt it's something that was worthy of his attention and he got the sense that you knew so much about [it], he was ready to offer you a job right there, that he would say to you things like OK, why don't you come and take this position and that.

President Buhari is not like that and this is where intellectual curiosity as a leader is consequential. But like I said, President Obasanjo had all of his flaws and you know, there isn't enough time to go through all of them, but he had that ability to one: spot ideas or at least listen to ideas if he'd never heard of them before. He was even willing to be pushed on his idea. You know, when you read The Accidental Public Servant by elRufai where he talks about his time working for OBJ, you get the sense that that's the kind of [relationship]. It was a somewhat combative relationship, but it was one of begrudging respect because he felt elRufai was someone worth listening to, he understood so much about governance, about public policy, public administration and all of that. So that's the kind of person president of Obasanjo was.

Whereas with President Buhari, it's only his inner circle and well, everyone, get lost. That lack of curiosity shows. That's why their policy responses in the administration on every issue is quite predictable. You can spot from a mile away what the administration would do on any issue. It's either to band this thing or to regulate that thing. Or, you know, they're a hammer that sees nails everywhere, the administration. And that's because that's the tone that's set from the top. The ministers and other members of the cabinet don't have a close relationship with him, they don't have any real influence. They certainly don't have any power, and that's by design. These were people who in some ways were foisted upon him and he just had to accept them. You know, like you pointed out, he said something about how ministers don't really the government and Perm Secs are. He only picked ministers, frankly, because he had to. He was more than happy to, you know, roll with the people he was rolling with. So the Ministers he selected are essentially part of the spoil system to him.

Now broadly, that's Democratic politics as a rule, but you know, like you pointed out that there's a constellation of forces as far as governance is concerned, but with him, none of that is there. And because like I mentioned, APC as a party consist of several different moving parts with very little in common, the internal mechanisms of the party are not that strong, and it became very evident with all of the parallel congresses and fighting factions. At one point, the party chairman was fighting with the governors and they eventually got him removed (I'm referring to Oshiomole). They got him removed. There is so much reliance on the personality of President Buhari. So when he set the tone, everyone simply just falls in line with it. Now, of course, that generally tends to happen in many democratic systems.

In many democratic systems, especially ones with weak political parties, that's what tends to happen. Where the President or Prime Minister, depending on the system, becomes like a sort of patrimonial figure where what he says is essentially an edict. You know, I would say APC is a weak party by virtue of the fact that they have no real means of resolving internal disputes without making them turn into something else, and it had to require the intervention of Buhari to resolve the issue with Oshiomole and the NEC and the governors and all of this stuff. So, apart from the fact that many of the governors and other elite in APC already agree with him on several policy issues, those who don't [agree] have no incentive but to fall in line.

Now, you contrast with PDP where especially under Yar'adua who was basically an old-style Marxist, for all intents and purposes, you know. The fact that he was that type of person succeeding a president who I would regard as a neoliberal president, Obasanjo, tells you the kind of diversity of thoughts inside PDP. People always say oh, there's no ideology in Nigerian politics. There is nothing that differentiates [the parties], that's actually not true. There are ideological differences. Clear ones, actually. PDP has something of a sort of free markets, at least it used to anyway, a free-market orientation towards, certainly, economic matters. Had the privatisations, the deregulations of the Obasanjo years, and then the Jonathan years.

Whereas with APC, they are much more of a Social Democratic/Democratic Socialist Party. You know, at least the people who formed the core of APC when they did. The Bisi Akande and all these other people. These are old-style union, you know, student's union, teacher's union types, farmer and labour groups. Those are the elements that became, at least in Southwest APC those are the elements that became the elites in the party. And you know, many of them came from the ACN and before that AC, and before that Alliance for Democracy, and then before that, whether it was SDP or Action Group cause some of these guys are that old. Somebody like Bisi Akande has been in politics since the days of Action Group under Awolowo.

That's the genesis of their political worldview, so there are clear differences between the parties. What I think people are referring to is the fact that parties are weak. So like I said, internal democracy is nonexistent, party discipline is nonexistent. So it means that the party is as strong as a couple of dominant figures who can come in and exert their will. For example, in a party primary, you can come in and essentially buy the nomination under some circumstances ignoring what the rest of the party might want. Governors are known to exert so much influence on parties, especially in the states. Because there is very little that binds the parties together, in political science they refer to it as party system institutionalization. That means the parties aren't really regarded as legitimate across society. They are not wedded to the society. Yes, people vote for them, they exist and they're registered and all but, for one thing, the low turn out in the election tells you that the overwhelming majority of voters do not regard them as legitimate.

So at the end of the day, because they are the only ones who participate and can exert their will because internal party dynamics are so weak, it now makes it easy to move from party to party. One minute you're in PDP. One minute you're in APC. One minute you're in Labour Party. One minute you're in APGA. So people conflict the fact that the parties are so weak that people can come and go with the fact that there is no governing ideology. There are clear differences when it comes to ideology. It's just because the parties are so weak, any dominant figure can just come and impose his will on the party, and everybody goes [along]. For example, Wike is basically the leader of [the] opposition in PDP and it's something I talked about a few weeks ago on Twitter after the Edo election. Wike has basically been PDP's leader since 2015. Because the national party is so weak and redolent, at this point, Wike is the most dominant of all the PDP governors. He governs a wealthy state, at least relative to the rest of the country. He's basically the leader of the opposition in real terms. Yes, you know, they have a PDP chairman and all these other stuff. But, Wike is the most dominant PDP figure in Nigeria and that is because he has been able to exert himself on the party.

Normally [a] political party should be expressions of several different things. A uniting ideology that brings different factions because, you know, there'll always be people with different views and things like that, while you want a broader governing philosophy. For example in the US, the democratic party are regarded as the centre-left, the republicans are regarded as right. In Nigeria, those labels don't quite work as well because, well, first of all, what is left in Nigeria and what is right? And like I said, the parties are so weak that anyone can be one thing today and the next thing he's another tomorrow. It's not that there is no prevailing ideology, it's just that the parties are largely the aggregation of one dominant figure's interest or several dominant figures' interest, so it's very easy to come in and stamp your authority and get your way. So all of this is why governance, as it were, under the Buhari administration has mostly been predictable, and one-way traffic.

Back when Abba Kyari was still alive, people always used to say he was secretly the president, I don't think that was necessarily what was true. What was true was that President Buhari had a set of ideas and Abba Kyari was the enforcer, and that is literally the role of the Chief of Staff. In the US, that is literally what the chief of staff does. Chief of staff is basically the President's number one protector. That's all he is concerned with. There have been lots of books written about White House chief of staff and one thing you will come to understand about that role is that the person thinks from one point of view only: the president. He doesn't think about the Vice President. He doesn't even think about the cabinet, he doesn't even think about himself or, at least, shouldn't. You think about what president wants and you defending it to a T. That's basically what Abba Kyari is.

Of course, because Abba Kyari and President Buhari were ideologically soulmates, all of their prescriptions matched and President Buhari trusted him, respected him so much and he was a very hard working man, so it was very easy for people to say, oh, Abba Kyari is the one pulling the strings. Now, he was a very powerful person, no question about that. I'm not trying to dispute that at all. What I'm saying is that it wasn't nearly as sinister as people thought. Here was a situation where he had been given a lot of free reign to govern by his principal and that's what it is. So that is what governance under Buhari had been like, at least, as far as [the] federal government. President set the tone at the top and Abba Kyari then, and now ambassador Gambari effects what the president wants and that's it. There's no sense of internal meeting. There really isn't one because there's no balance of power of that kind.

In certain governments, you get those kinds of situations where one person feels like oh, this is my view, that person has his view. Obasanjo used to encourage that kind of interaction, even Jonathan too to a certain extent used to, but with President Buhari, if disagreements emerge they're largely spontaneous, largely because people will always have their own agendas, their own interests, but a lot of it is largely going on with the president's total oblivion towards them.

TL: I might actually have to update my priors on ideology in the Nigerian political system because my partner always tells me PDP is capitalist and I remember my consternation on the show when Akin Oyebode actually said APC is centre-left. I was like, Woah! But interesting point of view raised there. Briefly, let's talk about president Obasanjo.

A lot of people still consider him the best president we've ever had...

CO: I would generally agree with that. You know, all things considered.

TL: One thing and the people who know him and different accounts about his time in government will tell you that he's very hands-on, he knows what's going on, there is never really [any] confusion about who's in charge, even though he's open to ideas and dissent and gives the people that he trusts a lot of latitude to be creative with policy. But there's something important that I want to raise and that is the issue of power vacuum.

I mean, you just talked about Kyari. There's this perception that in the current administration there's some kind of power vacuum. And that perception is fed by how much time it usually takes the presidency to react to some issues of national crisis. I remember when the Covid-19 outbreak first reached Nigeria, people both on social media and the traditional media were, for weeks, calling for the president to come out and speak. And we can say the same for a lot of other things, including EndSARS.

There are people who still think today that the signal about the reforms, because now, one of the government's defence is like oh, we were responsive. You guys said you wanted this...to dissolve SARS blah blah blah... But some people are of the view and which I agree that if the dissolution of SARS had been a presidential order or pronouncement, then, it could have calmed a lot of nerves, especially among the protesters. So let's talk about the issue of power vacuum - is it real? Is it not? And how much did president Obasanjo's legacy matter here particularly in the area of succession? Because a lot of people still see the handing over to Yar'Adua, some say maybe rather sinisterly, that it was his last act of revenge for not getting a third term. But we know that president Yar'Adua, for all his good intentions and his good heart, was not really a man of good health.

CO: Yes.

TL: And we had this period where transition, even handling over, constitutionally, to the vice-president became problematic because of the cabal, so to speak. There was some sort of vacuum. So how much does president Obasanjo's legacy matter here in the presidential tradition that have, sort of, been in play since the end of his administration?

CO: That's actually a very useful question because I believe that it's quite under-discussed, and here's why I said that. President Obasanjo is the first civilian democratic president for the first republic, right? He comes in with this wealth of experience - he's been a military head of state. Obviously, he's a career military officer. He was a commander in the civil war and all of this stuff. He was on the Supreme Military Council as number two to Muritala Muhammad and all this stuff. So, here's a person who comes into government and civilian democratic politics practically with a very good sense of what he wants to do.

And, of course, he brings his own personal traits and all of these stuff into governance and politics. He's a very towering, some might say, overbearing figure and he exerted a lot of hard power. You know, Obasanjo, frankly, with an authoritarian. If we are going to be frank. And because, like I said, he's the first one of the fourth public. So he has framed for Nigerians what a president should be like. Because don't forget before him, the last president we had was in 1983. So many Nigerians before Obasanjo don't have any recollection of what a civilian president is like. So in real terms, Obasanjo is the first civilian president for millions of Nigerians ever. Ever.

TL: True.

CO: Because many of them weren't born. And like you pointed out, many people regard him as the best leader, broadly, postindependence that Nigeria has had. The things he did on the economy and all of this other stuff. Along that came with, frankly, a lot of political baggage. You know, we don't talk enough about how many of the problems that befell PDP were things that he put in place, were problems he started to create. Whether it was handpicking candidates for PDP, whether it's muscling out PDP chairmen who disagree with him, whether it's instigating issues with governors that eventually lead to their impeachment.

You know, a lot of this aggrandising behaviour started with Obasanjo. So a lot of what we've come to understand as far as the mythology of the Nigerian president is of him. That colours everything we’ve now come to understand about the way a president should be like. So the president must always be seen. He must always speak. He must always this. He must always that. So that is why if you remember during the Jonathan years and people always said oh, he was weak, he was indecisive and people were running roughshod over him and this and that, that's because he chose to be hands-off. There's no right or wrong way to administer government. The devil is always in the details of the decisions you make or don't make.

So in that sense people always looked at Jonathan through the prisms of Obasanjo and to a large extent, people continue to look at Buhari through the prisms of Obasanjo. Forgetting, one: times are different, times have changed. Buhari and Jonathan are different people. There's never been this sense of allowing the institution to grow. You know it's not the Nigerian Presidency, it's the Nigerian President if that makes sense. In the US they talk about the modern American Presidency. It's this grandiose king-like office. In fact, there's a book by a guy called Arthur Schlesinger called the Imperial Presidency talking about how the American Presidency is essentially a king, and how the president, in real terms, is beyond the authority of Congress and the constitution and all of this stuff. You know, if you think the American President is an imperial one, I would argue the same is true about the Nigerian president. Even more so because in the Nigerian Constitution the structure of the distribution of power favours the Nigerian president even more so than the contextual equivalent in the US where what has happened is that the American President has assumed a lot of powers for himself... Oh, well, yes, "him" because there's only been male presidents. The American President has assumed a lot of powers for himself and when and they have gone to the courts, the courts have sided with the executive branch. You know, the American Presidency, at least as far as the Constitution goes, is quite a weak one.

The enumerated powers of the American president are quite specific, and they're quite minimal, but political developments over the last century, in particular, have granted the American president so many powers where at this point, especially on matters of national security and foreign policy, the president can frankly do whatever the hell he wants and everything else will be after the fact. I would say in Nigeria, the enumerated powers of the President are even much more pronounced and the political powers that the President has assumed more so. So that colours how people view the Nigerian presidency and then when you look at the fact that the National Assembly has so much turnover, I think the eighth National Assembly had a turnover rate of I believe, I may not be exact here, about 66 percent. That means 66 percent of the members of the eighth National Assembly did not come back. That's a terrible development if you care about the separation of powers. The institutional memory of the National Assembly is lost, basically. Not when you have two-thirds of the class gone, and then the president stays. But two-thirds, including by the way the senate president.

Let's not forget, the senate president was among those who departed. That is a loss of not just institutional memory of governance, but also the understanding of inter-government relations. And then the fact that you have to bring up all these new people up to speed on how governance works and how to be a good legislator. One of the most important lessons I learned as a young student was during an internship on Capitol Hill. I spent some time in the constituency office of a US Senator and one of the most valuable lessons I learned was how much time US Senators put into learning the procedural rules of the Senate. And how much powers they have institutionally, collectively and individually. That's how much power does one senator have, whether you're in the majority or minority? But especially when you're in the majority where you can actually get things done. How much power does his caucus or her caucus? And then, what are the powers of the Senate? Some senators spend a whole year learning this stuff because it's so important. It literally affects everything they do from the passing of the budget, the reconciliation process, parliamentary rules as far as presiding in the Senate. Back then when they still used to have what they call earmarks, which are basically senators reserving certain pet projects for their constituency.

There's a million and one thing Senators have to learn, basically, when they take office. So there are a hundred US senators. Imagine 66 of them are gone and a new set... now granted all hundred seats aren't up at the same time but imagine such a scenario where 66 go and another 66 have to come back. That gives the advantage to the executive branch. That's exactly what we have in Nigeria where two-thirds of every senate, every National Assembly class is gone and the new ones have to come and start learning how government works. Meanwhile, the president has been there the whole time. If you care about authoritarianism, that's something you should want to fix.

A lot of political science literature talks about the fact that legislatures need a period of 20 years post-transition - that's this period when they are coming out of authoritarian rule, whether it's a military dictatorship or something like that. But you know, legislatures need about 20 years to become really strong and capable enough to enforce the principle of separation. It gets harder to do that when two-thirds of your class is gone every time. And these are the things that I think much of the commentariat don't discuss enough. Like you know, we talk so much about restructuring, things like that, I've always made a point that personally, I think the National Assembly needs more former governors are not fewer. And this is a very controversial point because we all talk about how governors turned the senate to a retirement home, blah blah, blah. But there is actually a good sense of how former governors, having done a lot of the hard work of negotiating, understanding how especially public finance works, how to allocate certain benefits towards your constituency, how parliamentary rule work, Governors tend to know these things very well. Governors tend to also understand the informal side of legislative politics. You know, agenda-setting and all of that. How to build alliances in the Senate, how to work across party lines, Governors tend to know how to do that stuff very well because they've done it when they were Governors. Whereas with people who aren't Governors, they haven't been executives, they haven't had to deal with budgets and things like that, it's quite a learning curve. And these are some of the reasons why the Nigerian Presidency remains as outsized relative to the National Assembly, even though it's not supposed to be that way. You know, the National Assembly, one of its powers is oversight over the executive branch, over the presidency.

But in real terms, especially in this current dispensation, that's why people talk about it as a rubber stamp, because in real terms the political power is an unequal one. All of the power has been situated in Aso Villa and the National Assembly simply just rubber stamps. They go with the flow of the Villa. It's not supposed to be that way. And all of these developments largely stem from the Obasanjo years where Obasanjo was meddling constantly in the National Assembly's business. If you remember, there were five different Senate Presidents when Obasanjo was president. Five.

TL: Yeah.

CO: I mean I remember...Enwerem

TL: 2 or 3 speakers.

CO: Exactly, exactly. Okadigbo, Wabara...

TL: Ken Nnamani.

CO: Ken Nnamani, that's it. So, you know, those years were very tumultuous and those were very crucial years. Because like I said, that's the first democratic dispensation of Fourth Republic. So the groundwork that was laid back then is one that continues to still affect the Nigerian political dispensation, obviously, over time there was a bit more stability. David Mark was Senate president for eight years and all of that stuff. Some stability came over time, yes, but it didn't change the fact that...and this is how institutions work, going back to what we discussed, you know it's not a straight line. The signs of decline of institutional quality are often very apparent long time ago but you know, sometimes they move forward, they receded again, they move forward and they recede even further, you know, life doesn't move in a straight line. And that's essentially the point we have gotten to right now where, because of a number of and, these are mostly political development. They are not strictly constitutional ones. They're largely structural and political... Because of the things Obasanjo did, so much has come to be normalized.

Now if you remember when the National Assembly had all those fights about who would be principal officers during that interregnum where APC won the election, but we're waiting to be sworn in? If you remember President Buhari said something about oh, he didn't want to get involved in their matter and he wanted them to sort this out themselves and many, at least, much of the commenting class found that to be strange, that's an example of what I'm referring to. Because we were so used to, in the Obasanjo years, him meddling in the National Assembly's business, the idea that a president would not want to get involved in the selection of the National Assembly's business, seems so strange. So these are some of the changes over time that if people, especially in civil society say they want to see as far as good governance, better governance, these are some of the issues we need to address. It can't always be about the presidency, the presidency, the presidency. To me, restructuring has got to be about all of these ideas. What kinds of powers, authority do you want the National Assembly to have? What kind of authority do you want state governors to have? What should the relationship between state governor's and the House of Assembly be? Do you want them to continue to be appendages of the governor? Or do you actually want them to be functional? These are the kind of iterative conversations that we don't have enough of and if you want a proper restructuring, whatever restructuring means to you as a Nigerian, these are some of the things you need to consider.

TL: Those are very interesting thoughts, Chris. My final question, so to speak, on Nigeria, our beloved country, is that here we are. A lot of young people, they came out about an issue they are passionate about, they largely conducted themselves peacefully, they spoke their hearts, they expected their government to hear them and they are not asking for too much. But here we are. It has ended exactly the way Nigeria handles things. Lots of violence. Lots of denial. No one is really taking responsibility or leadership.

CO: Yes

TL: What is the way forward? A lot of people are talking about elections. Yeah, we just have to vote these people out, is it really as simple as electing the right people? Is it restructuring? What exactly does that mean? You know a lot of the conversations we have about restructuring is about constitutional reforms, rewriting the constitution and big conferences and some of this processes that makes consensus very, very difficult to get to, you know? Are there quick gains right now that you think can be delivered to Nigerians?

I mean, there's a lot to suggest that a lot of progress can be made even in the immediate. The judicial panel in Lagos is a good example. Today, I was reading the news that they made an unannounced visit to the military hospital to examine bodies, they had pathologists trying to test the system and hold it accountable within the powers that you have as a state government. Those are examples of quick gains, so why are we not doing these things? Why are we not testing the system and examine the fault lines, so to speak?

Also, there's the issue of apathy. A lot of people say parties win elections in Nigeria by largely relying on their political base. You have state elections where you barely get 200 thousand total votes. So a lot of people don't vote, mostly young people. So is voter apathy part of the problem? And if they come out and vote for their preferred candidate, how are they sure that their preferred candidates are going to be on the ballot to begin with? You know, so many other issues. The issue of money in politics is also an example. So many research as pointed you need a billion naira to become a senator in Nigeria, 3 billion to become a governor and you have young people who want to go into politics and try to change the system, are they not disempowered by default with the way we have designed the system? So, so many questions, but what is the way forward in the long term, in the medium term and the short term?

CO: Those are very important question because right now, at least as of this moment, the large scale demonstrations have practically ended, at least in Nigeria, you know, there's still lots of marches abroad and things like that, but in Nigeria, at least in the big cities anyway, the large scale marching to this place and that place is over. But there is a bit of uncertainty about what's next. Now, as you mentioned, there's been a lot of oh, 2023 and PVC, youth party...I did a bit of a thread last week talking exactly about this that, first of all, we have agreed that EndSARS, one of the subtexts of it is that the status quo is not working, how we're going to have to reconfigure the way we go about civic engagement, right?

OK, so when we look at the last inflexion point in Nigerian politics, I would say it was the end of the military regime when Abacha died and the transition. What was the, at least in my view anyway, what was the mistake that was made? They were several but one of the key ones was that many of the activists, you know, whether they were NADECO, campaign for democracy or whatever else, everybody ran to politics. Not literally everybody, but much of the muscle behind all of those campaigns, whether it was Bola Tinubu, Bisi Akande, everybody ran to electoral politics, let me be specific. They ran into electoral politics. That's not a problem in and of itself, but in building institutions, you don't put all your eggs in one basket.

Imagine a scenario where people like Gani Fawehinmi, for example, built up legal aid organizations, built up the judiciary, public defenders, their mandates and prestige was strengthened. Civil society organizations across a variety of policy issues were built up. Professional associations were built up. Religious organizations took on more of a civically responsible role as opposed to what they're doing right now, which in my view is not any of that. So the point I'm making is that imagine if there were a much larger constellation of forces, of social forces in the political space, as opposed to political parties and electoral politics alone? what would likely have happened is that the political class would have been forced to compete better.

Simply because, for example, you come up with one policy idea or the National Assembly takes one bill up for consideration, there's civil society push especially if it's a really unpopular one. There is civil society pushback, you know, professional organizations like the NBA and all of that stuff. Writers groups, creative groups, trade unions and the likes, everybody came up in arms, expressing their opposition, their collective civic opposition to certain things. That would have spelled, for one thing, the ability of countervailing forces in the political system to make their own voices heard. But because all of the muscle from the democracy campaigns, everybody ran to politics. Some people didn't. People like Alao Aka, Bashorun and the likes, they didn't go into politics. But a large number of the activists from the 1990s they went to politics, including, of course, Gani himself.

So that made electoral politics the, you know, crown jewel of civic participation. So when I start to see all this stuff about PVC and [2023], it just seems to me like a repetition of all of that. Like, I've seen so much oh, FemCo should be turned to a structure. FemCo should be turned to a party. Oh, FK should run for office and I'm thinking to myself, is that the only way that any of these people or these organisations have to make [a] change in Nigeria? If you are telling me that's the only way, then we're in bigger trouble than I thought. Because as far as I know, there are people who are still locked up in prisons across the country with no one to get them out. There are schools that are still crumbling. You know, there are a variety of policy issues across the board that we could address now. Those problems will not wait for 2023.

TL: Sorry to interrupt you, Chris. This is such an important but underrated point you're making. I mean, it's such an important one I can't possibly amplify enough. During this whole protest and all, I pointed out to a couple of friends about the decline of civil society. I don't know how that came about, but you talking about everybody going to electoral politics now seems to be connecting the dots. Look at SARS, for example, and this menace. Someone Like Chief Gani, God rest his soul, by now would have buried SARS in an avalanche of lawsuits.

CO: A long time ago. A long time ago. Are you telling me people like Gani, Alao Aka, Bashorun who took on the armed forces could not deal with a problem like SARS if given the institutional environment to work with? Please.

TL: Exactly, I mean, one of the empowering precedences, even for state judicial panels today, and I've seen a couple of lawyers cite this to me on social media is Fawehinmi Vs Babangida in 2003. Someone did that. Someone took the initiative to do that. So like you, I'm also quite worried about this narrative of we all have to go into politics as if there are no other instrumentalities of the society...

CO: It honestly confuses me when I hear it. Everyone has been saying, oh, Feminist Coalition should run for...and when I say this, it's an agnostic position I'm taking that, they may be good political leaders, they may not, I don't know but what I am pushing back against is the inherency of the fact that because they have demonstrated such brilliance in political organizing in one area of civil society, that it's necessarily going to translate to political office, I don't think that's necessarily true. And it's worth interrogating because when you say you want to vote for somebody, you should ask yourself why is it that you want that person as opposed to however number of other candidates. There ought to be something you're voting for. How do you know that because somebody was a good organizer in a social movement or a protest movement, they would necessarily make a good policymaker or a political leader? You ought to ask yourself those questions and when you don't, you are simply repeating the mistakes we made in 1998/99. Where, frankly, a lot of people who shouldn't have been in politics got into politics and, well, you know, here we are.

TL: That's a brilliant point. Needs to be said over and over and over again. I mean, I even tell people that ordinary protest they are bringing thugs...

CO: Exactly. [Laughs]

TL: Imagine what they would do to win an election? You know? So, I know I sort of derailed your answer, but, I mean...

CO: No, not at all. I think, no, it's very much part of the point in that we cannot simply think voting the "right people", I think it's very connected. First of all, what is the right people? You've got to ask that foundational question. Who are the right people? What ideas are you looking for? And even if you get the right people, the educated class in Nigeria likes to bang on about institution and I've explained, sort of, why I find that to be counterproductive. You know, you talk about institutions well, what kind of institutions are you going to build if you think all it takes is that you get in the right people? Well, people change.

You know, I did a tweet two days ago talking about how Alpha Condé, the Guinean president. So here's this guy who spent four decades in opposition, right? He gets sentenced to death in absentia by Sékou Touré. He's actually jailed by Lansana Conté, the successor of Sékou Touré. So he's basically suffered a whole lot as an activist. Here's this guy now as president, slaughtering people just because he wants the third time.

TL: We can say the same of Ouattara.

CO: Exactly. Exactly. This is literally Africa story all over, across the board of people who spend years in opposition, fighting this person, that person, docking bullets, running abroad, you know, living in exile, only for them to get into power and do at the very least exact same thing. If not worse. So to me, all these ah, yes, get the right people...there is no way, if you want the right people, they've got to be backed up by the right set of institutions, the right norms and countervailing forces that ... you see, politics fundamentally is about creating rival power structures. That's why, for example, the principle of separation of powers exists, so that one arm of the government doesn't become too powerful.

Even in the electoral realm, it ought to exist. That's why, for example, there are wings in a party, right? So in one party, there might be left-wing, there might be [a] moderate wing, there might be right-wing. You know, you need countervailing forces to keep each other honest. To constantly make you compete, not to get drunk on power. But when you say, oh, get in the right people, but you don't create that environment, they are not going to be the "right people". It's just not going to happen because power is a corrupting influence. If you put in the "right people", first of all, what do you know they're going to do in office? Who are they going to rely on as advisers? What do they intend to achieve in 100 days? Six months? A year, and then four years? What is it that they consider to be their priorities? What do they understand governance to be? You know these are the sets of questions that when you start to ask will give you a sense of the kind of environment you want to design for this so-called "right people" to go in there. Because when you start asking certain questions you recognize they cannot do it alone. They cannot read alone because governance is a collective effort.

But when you simply leave it at oh, the right people, you know, because, ah, during EndSARS, he was an organiser or she was an organiser, yes, and that...that doesn't necessarily mean they know anything about governance. It doesn't. And I feel it's still early days, we're still mostly reeling from that horrible killings. You know, this stuff is iterative and old habits die hard, right? So I get that for the most part, people are going to fall back on what they know. But at the same time, we should be willing to challenge even the things we consider to be settled knowledge. And one of those things that I really think we have to challenge is this idea that electoral politics and running for office is the only way to make [a] change.

When you get to a situation where even people, celebrities, now think the next game in town is to run for office, I'm not saying it's a good or a bad thing, but ultimately it's for you as the voter to determine if you want such people representing you. Because you liked an album they put out 10 years ago does not mean you want them representing you in the State House of Assembly or the National Assembly, or someplace like that. And I feel like too much...

TL: Just look at Desmond Elliot.

Laughs

CO: Exactly. I mean, yesterday, Twitter Nigeria gave this guy hell. They give him hell, and deservedly so. I mean, look at how much of a fool of himself he made. And, unfortunately, he's already in there and he's going to be there until 2023. So not unless you can recall him or something, you are going to have to live with, at least his constituents anyway will have to live with the fact that this guy doesn't know what he's doing. And those are the kinds of lessons we ought to start learning now. Start to tackle people in office now. Start to think about who you want representing you now. Start to familiarise with your local representatives now. Start to sensitise your neighbours, your association members, your church or mosque members now. There are a million and one things you can do now that don't have to wait till 2023. The problems that exist today will not wait for 2023, so why should you?

TL: Those are powerful, powerful insights, Chris. But finally, before I let you go, regarding Nigeria, and this is sort of a tradition on the show, what is the one idea that you would like to spread? That you'll like to see people adopt? An idea that you'll like to see rise in status, so to speak?

CO: It's very simple. We've got to develop a culture of critique. I think what we need in Nigeria is foundational ideas and notions that are at the heart of everything we do, everything we believe, and everything we desire as Nigerians because they will inevitably seep into politics and that's a culture of critique. One of the good things I've taken away from this EndSARS protest is that the young people have zero respect for any appeals to authority. They don't care if you went to Harvard, you're a perm sec or you're a general, they don't even care if you are the president, as a matter of fact. You have to make sense. And for me, that's what I find so instructive about that phrase "sorosoke". It's not just a little phrase saying "speak up", they're also telling you to make sense. It's not just about speaking up, you have to make sense. What you are saying must tally with what the average person understands intuitively. So you know, I say this because for so much of our past, especially older generations like ours, and we have simply given to authority blindly. Whatever they say, shut up, shut up and you sit down. Especially for we Yoruba people, there's a saying in Yoruba "won ki n sope agblagba n paro" you don't say an elder is lying. We've got to change things like that, I'm sorry.

Those kinds of beliefs are fundamentally incompatible with a knowledge-seeking society. This idea that someone's ideas are untouchable because of their status or their age, we've got to get rid of things like that, you know. And this extends across society. We've got to be able to critique, and I said this because so you've seen all these videos of these Lagos State House of Assembly members saying, oh, they're on drugs, blah blah blah. Well, one of the reasons every one of them is reacting this way is they're simply not used to being challenged. It's as simple as that. They are not used to so-called children on Twitter calling them out, saying things about them. And don't forget that what is on Twitter is no longer even within the domain of Nigeria alone. This is stuff all over the world. So it's being fed back to them, and they can't control it. That is why everyone is up in arms and saying oh, all these social media people are doing this and that. Because these people cannot deal with the fact that people they don't even regard as anything useful are pushing back at them, challenging them.

They do not see people on Twitter as a constituency of voters. They see them as children. These kinds of ideas have got to go. It does not matter whether you are the president or whether you are a pauper, you should be able to have your ideas challenged. You know, I didn't go to University in Nigeria, in fact, I didn't go beyond JSS 3, so, one thing I've heard from so many people is how in Nigerian universities you can't challenge your lecturer, you can't say this and that. That's absolute nonsense. Why can't you challenge your lecturer? Why can't you critique the ideas of somebody who claims to be teaching? That's the entire essence of pedagogy, of classroom education. That you bring up ideas, of course with reason, not every single idea deserves to be debated in my view, but for the most part, most topics within a scholastic framework can be debated.

So this idea that oh, if your lecturer says something, or that if you don't answer a test question the way your lecturer wants it to be answered they mark you down. These are things I've heard so many times and I have no reason to doubt. I'm sure they're true. These things sound absolutely insane to me, and it stems from this culture of suppressing the ingenuity of young people. You know, people are not allowed to challenge ideas. You say something, then, shut up! What do you know? Do you know who you're talking to? He's is the professor. He's a minister. Who cares? Who cares? Like, we have got to be able to critique ideas and a lot of our political cultures, a lot of our social interactions, a lot of our economic interactions stem from the fact that whenever there is perceived to be a power imbalance, the person on the lower totem of the power pole has got to remain there and shut up. That's not how societies progress. Ideas have got to be challenged. They've got to be critiqued and they've got to be revised sometimes. And it doesn't matter who is saying what. You know it's not always black and white to be sure. It's not always a case of right versus wrong, but that's all the more reason why ideas contested. We do not contest ideas in Nigeria collectively, we don't. Like, Daddy G.O said, the governor said, Prof. said. Who cares? You've got to be able to challenge ideas.

Yeah, so if I had one thing to pick, it would be that. We need to develop a culture of critique of everybody around us, including ourselves. Even you, you should be open to critique and others should be open to critique from you. Yeah.

TL: Thank you so much, Chris Ogunmodede, it's been fantastic talking to you.

CO: Likewise, it's been absolutely a pleasure. Thank you so much for hosting me.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.ideasuntrapped.com

I have long admired the thoughts of foreign policy analyst Chris Ogunmodede through his Twitter feed, and it was a pleasure having this conversation with him. Our jump-off point was the tragic fallout from the EndSars protests. Chris’ knowledge and grasp of the core issues ensured he had deep insights on all my questions. (P.S he had some fun bashing economists).

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Transcript

TL: This Ideas Untrapped and my guest today is Chris Olaoluwa Ogunmodede. He is a foreign policy analyst, a writer, editor and political risk consultant. His work centers on political institutions and foreign policy of African countries, particularly the West African region, and he has extensive experience working across Africa, Europe, and the United States. He's an editor at the Republic, a Pan-African global affairs publication. You're welcome, Chris, it's a pleasure to have you here.

CO: It's a pleasure, thanks so much for having me on your podcast. I'm glad to be here.

TL: We cannot really avoid the events of the last couple of weeks with the EndSARS protest and some of the tragic turn that things have taken since that very momentous period in the history of the country, so I think where I would like to start interrogating the issues is about the Nigerian security force, generally, not just the police. Because we know and as things turned out with the confrontation of the army with the protesters that the issue of abuse, extrajudicial killing and basically the overuse and exercise of power is symptomatic of our security force.

So I want to know, what do you think are the underlying issues that makes this such a systemic problem and that makes it so very difficult to solve? So there are two views I've encountered in talking about this. One is about colonialism, so I want to ask you - how much influence do you think the colonial establishment and governance has on our institutions? Is it still a relevant factor? Should we still keep using that framework and analysis in looking at our institutions today?

CO: That's a very good question and, you know, that's a very relevant question. I would say that the legacy of Nigeria's security forces are bound up in the colonial experience in the sense that the security forces, whether it's the police [or] the armed forces were created to repress local populations, to put down resistance movements, whether they were anti-tax ones, whether they were ones pushing for women's rights, you know, native rule, things like that. That is the contextual emergence from which modern Nigerian policing and the armed forces broadly, as you pointed out this is a problem that straddles across the security services, not just the police. And that's where [the] police, the army and other security elements of Nigerian society have emerged from: the suppression of popular expression of dissent.

Essentially what you had was the colonial authorities, when they departed, post independence, they were essentially replaced by a new class of elites who frankly were happy to pick up the baton from the colonial authorities because they too had a stake in continuing this repressive practices and you can still see many of these elements around Nigerian society. For example, loitering as a crime in Nigeria is something that came from the colonial experience where if you were seen to be in a neighborhood you weren't supposed to be in, you would be arrested or taken away. That's still happening in many parts of Lagos and other cities in Nigeria. If you look like you don't belong in a neighborhood, you will attract the attention of the police. It's like when you listen to some stories about SARS for example, they look at you as a young person driving a nice car, you look a certain way, in a certain neighborhood. Again, all of this is part of a legacy of oppression that has been passed down from that colonial heritage.

Now, this is not to say that the current elites, "post colonial elites" don't have any agency their own, but institutional change is harder than it sounds. You know, it's hard to get rid of bad habits. Old habits die hard. And once there hasn't been a social contract between constituent and authority in the sense that as soon as Nigeria got it's independence, it became a republic [in] 1963 and then the military took over in '66 and essentially we have been living through a militarised society, practically speaking since 1966. Yes, there was the transition to the second republic and that collapsed, and you had the third republic and that collapsed. Now we have the fourth republic. But fundamentally Nigeria's context has been one, at least post-1966, has been one of that same structure of violence and abuse.

Unless you have a proper social contract between the citizen and the state regarding what kind of policing do they want? What kind of law enforcement do they want? What kind of national security policies do they want? And these things have to be reflected, not just in the Constitution, but in the way individuals relate with themselves in their neighborhoods, with the way the political class relates with voters. As long as that doesn't exist, that colonial legacy of policing will continue to manifest itself regardless of the fact that we are continuing, of course, to go farther and farther of colonial experience, but those underpinnings of the colonial state haven't been removed and the only way to remove them is by underwriting a social contract between constituent and authority.

TL: It's interesting you talked about social contract because it's something I've also been thinking about in relation to a lot of these issues. I know you hinted at that, but is that really part of the problem that we are seeing here in terms of the relation between the citizens and the security forces? For example, the policeman's job leans more towards the protection of the regime or the people in power, as opposed to the protection and security of the public. And this relationship exist despite what the Constitution says, despite what rights we think we have and things like that, such that the police are basically an instrument of power or the expression thereof.

So how does social contract become part of the social cognition of a population?

CO: That's a very excellent question and frankly it's not one that there are obvious answers for, but I will certainly try to give my own take. First of all, when you look at the way a Constitution is written, there are many ways to do this - you could have a constitutional conference, you could have a constitutional convention, you could have a constituent assembly, so many countries have various iterations of the process by which they arrive at what they would regard as a Constitution that governs the social, legal and political interaction between the citizen and state. In Nigeria's case, to the extent that we have ever done that, it hasn't been very well considerate of all of the factors of society. In the sense that, Nigeria's Constitution whether it's 1979, whether it's 1999 Constitution, first of all, has often been written in secret. Not secret in the sense of being shot somewhere, but the consultation between these various elements of society has not been there. You know, you think of the fact that the '99 Constitution itself was, in large part, based on the conclusions of the Abacha constitutional conference understudied in '94 and they finished it in '95 where Abacha essentially handpicked a bunch of people who he wanted to draw a Constitution that was favourable to the armed forces.

So this is the kind of thing I'm referring to. If that is the way you arrive at a Constitution, then it stands to reason that the old order, the order that protects the status quo, is what you're going to get. Now, on the flip side, you look at Chile. They recently had a vote to overturn the Pinochet Constitution - Augusto Pinochet was the military dictator in Chile. This was a process that the Chilean left in particular who opposed Pinochet, it's something they've been fighting on for decades. There have lots of debate as to whether they were going to having consultative assembly and things of that nature, a constitutional conference. In any case, because the recognition was that that Constitution was not written with the will and consent of the Chilean people, as they wanted a constitution to be written. You cannot have such a Constitution continue to govern a democracy. So Chile transitioned to a democracy in 19...there was a plebiscite in '88 and the president took office in 1990, then Pinochet stepped aside. But the Pinochet Constitution remained there. So there was the recognition for that democratic transition to come full circle, you have to get rid of that Constitution because that Constitution protects so much of the political order Pinochet has created that even though Chile has been a democracy for 30 years now, it's still very much an authoritarian construct.

So bringing it back to Nigeria, that's precisely what I'm getting at, that until you have an understanding of a Constitution as Nigerians collectively want it, if it's a constitution that was written or reflects a previous era where there wasn't a broad-based consultation of people, the kind of social contract that you want to write to reflect in that Constitution is not going to be there. So if you, for example, want police reform and what that would look like in the Nigerian Constitution where some of the things you favour, including state police, boards of arbitration, an independent investigative panel to look at SARS and things like that, then if you want those things to reflect in the Nigerian Constitution, you have got to consult with all the elements of society to see what their views are about that.

Has happens at the moment, the Nigerian Constitution creates a federalized police. So those reforms that you might want, at least if you favour that kind of reform where you have a more decentralized police force, you're simply not going to get it. And you are not going to get at the kind of social contract between citizen and state where the police force is accountable to your governor, in your state, as opposed to your president in Abuja. I mean, imagine if you live in Cross River and you are the victim of SARS brutality. OK, yes, now there's the state panels and all of that. But until those state panel, what was your way of getting accountability? You had to go all the way to the Nigerian police force. Of course, this was when FSARS was still the structure, later on they brought them to the police command, but in reality, because the Nigerian police force is a federalized structure, you have to go all the way to Abuja to get any sort of restitution for yourself.

So if you want a social contract reflecting local accountability in policing, you have got to consult with other elements of society who share those views with you and this is where a responsible, robust civil society could come in. In a society like Chile, the ability to get rid of that Constitution, the Pinochet Constitution, was because several elements of civil society were able to rally themselves together and to create enough of the critical mass to put pressure on the political system to make that a salient issue. Thus far in Nigeria, we've been unable to do that. There are lots of organizations out there doing lots of great work on police reform, you know, CLEEN foundation and likes, but there have got to be much more voices in civil society trying to create that kind of momentum if they indeed favour a state/localized approach towards policing. They've got to be able to create that critical mass enough to get the National Assembly to take a look at that issue and make the necessary constitutional amendments that would make it happen. So it's all about what the society itself wants to do to make it's elites conform to the desires of it. Elites are naturally going to protect the status quo, it's up to you as civil society to organize yourselves to get that kind of social contract that you want.

TL: Another theory I would like to get your push back - if you have any - on is that our institutions basically reflect our level of development and that these things usually improve the more developed, the more rich a society becomes. How credible is that view? Because if you look at it from a state capacity angle, it's nice to have all these things, but we can also argue that there is some form of, I mean discounting motives, now, there is some level of incompetence in the way we do reform in Nigeria. You get a sense, a very deep sense that some of the necessary skills whether people or technical skills that are actually needed to be marshalled to solve some of these problems are critically lacking, especially in our bureaucracies. So do the problems that we have now just simply reflect our level of development, the level of education and wealth and human capital in an economy, generally?

CO: Right off the bat I will say that I'm much less a fan off the new institutional economics school of thought. Back when I was in undergrad I really used like, well, I still very much appreciate the arguments of Douglas North, Wallace and people like that, but overtime it's become very clear to me that one, as I mentioned earlier, institutional change is harder than it sounds. Two, institutions in and of themselves are not a panacea for anything in the sense that institutions are created and upheld by people. Something I've been talking about a lot over the last couple years of the Trump administration is the fact that, so many people, I remember having so many arguments with so many of my friends, colleagues, old classmates about if Trump were to win, what's gonna happen blah blah blah...and so many people will say oh, America's institutions are so great, they're so this, so that.

Now, I tend to look at institutional quality a little different. They don't collapse overnight. There is usually a point where there's an indication something isn't quite working as it ought to, or maybe it used to. There's a moment of a stress test. We've seen Trump got impeached, he didn't get convicted, but there's been so many things he has done that have run afoul of, frankly, the law or norms or traditions, and it seems like there's been no one able to stop him. And, usually, my response to people who make these pronouncements is that well, institutions are not automatic, they rely on people to want to defend them. To want to uphold them. So in Nigeria's case, the institutions Nigeria has reflect, one: the time they were created. They reflect the purpose they were created for, and they reflect the fact that institutional change is going to have to come when the incentive structure change.

When people hear institution they actually think of organizations. The way Douglas North talked about...and Douglas North was an institutional economists. When he talked about institutions he was referring to the rules of the game, you know, whether they be formal rule or informal rule, norms and things like that. So what most People understand to be institutions are actually organizations. So, like, people would say oh, institutions like the CBN, the Nigerian army... those are organizations. The institutions are the rules that bring them in existence in the first place. So I would say [the] separation of powers, for example, is an institutional norm, and then the reflection of those norms are the fact that we have [the] Villa, we have the National Assembly, we have the supreme court.

In that sense, when you look at Nigeria's institutions, they can only perform what they were created to do. When you look at Nigeria security forces, to go back to our previous conversation, because they were created to repress and because the institutional arrangements around security, law enforcement, policing, civil defence and things like that haven't been underwritten by a broad-based social contract like we refer to, they will only do what they were created to do, which is kill a lot of people. Until a social contract is reflected in the institutional change process, the institutions will do what they were created to do. They're not static in the sense that because they were created to do one thing at a certain time, they will always do that. However, it does recognize that, if there are no updates made to the system around them...the system governing those institutions, they will simply reflect the times they were created.

So in that sense, institution can be static. And like I said, because [in the] Nigerian society, by and large, the institutions that make up government, for example, are ones that are largely unaccountable to a broad public, are ones that regard distance between citizens and the government, that's simply what they will always do. So in that sense, Nigeria's economic institution... we've talked about political and security, let's talk about Nigeria's economic institutions. You can't ignore the fact that the government is the largest employer, for example, of labour in Nigeria. And the fact that registering a company, for example, is incredibly bureaucratic. That is because, by and large, a society where the average Nigerian did not have to depend on either the government or some other pillar of society like the church is one where people are going to be rebellious.

If people have what Amartya Sen called capability to do the things they want, how they want, when they want, then dissent becomes easier. And in Nigeria, the institutions Nigeria has do not tolerate dissent. So if the government can control your economic well-being, can control the way you try to pursue your livelihood, it believes you are more likely to be responsive. So that's why you want to go register a company, they have to make it difficult for you because the people in the bureaucracy, you know, the civil servants, or whomever feel like it is their role and responsibility as economic agents really and truly to be able to control what you do. They feel it's their role, they feel it's their entitlement and you've got to pay due deference to that. Otherwise, you won't be able to pursue your own livelihood.

That's the reason why, for example, the ease of [doing] business is very difficult because once everything is hunky dory, you can setup your own thing, you can pursue whatever economic activities you want, you don't need to always defer to the government, and because [the] Nigerian government is so paternalistic in its outlook, it has no other alternative but to essentially make your life a living hell. So in that sense, Nigeria's institutions can only reflect the time and purpose for which they were created.

TL: That's an interesting thought. It's also interesting that you referenced Douglas North because I've been wanting to talk to you about Why Nations Fail by Daron Acemoglu and John Robinson. So how do their framework which is that institutions are either inclusive, that is, they value freedom and allow for innovation, or extractive where they're corrupt and sometimes they frown on dissent like you are also describing - how do their framework differ from what you've been describing so far - which is that institutions functions according to the purpose for which they were designed? I know you hate that book so much, where did it fail and what's missing?

CO: So I think one of my major gripes with the book is the lack of specificity as to what inclusive and extractive means. You know, 'cause they used those two terms very loosely. For example, when you say "oh, inclusive institutions!" It's impossible for anyone to disagree with that because there's absolutely nothing incontrovertible about that. But then, when you get down to the nitty gritty of what inclusive and extracted means... for example, they portrayed China as one of the more extractive societies. OK, now fine, that's a perfectly legitimate argument to me. But it seems like China has been setup to essentially be a contrast to the US in terms of what successful institutions look like. You know,  America's Constitution, separation of powers... It makes a lot of casual arguments about how American institutions emerged.

They talk about things like land rights and so many English market traditions and things like that. But for one thing, it ignores the role of slavery and things of that nature. So at one point they talk about how growth under extractive political institutions, as in China, will not bring sustained growth and is likely to run out of steam. It ignores that economic growth and development is a process and they don't say in specificity when that's going to happen. Because, you know, when you look at the US, America's economic growth was quite helter-skelter. America didn't become a developed as we would understand... and, you know, this goes into so many different ways of understanding what developed and all of that [means]. That's a separate conversation.

But to understand America's economic growth as a developed economy, that didn't happen until roughly 1900 to be quite frank. You know, the late 19th century is when America started to really emerge as a developed economy, are we going to say then that everything that happened up until that point meant that America was an extractive economy? I mean, you can make that argument, but you would also be ignoring a number of factors that led up to that point. For example, the civil war, the nullification crisis, there are so many things that get in the way of making these kinds of causal arguments...you know, the Louisiana purchase, and this is a problem with economists generally. They tend to use a lot of bad history in making rather causal... this is something professional historians tend to say a lot that economists because they have where they're going to, they will go there A to B and they won't look anywhere else.

That's a lot of what Acemoglu and Robinson have done. They have ignored a lot of arguments that contradicts their own points. Like I've made with the comparison about the US and China where they say China will run out of steam. OK, but when? And it ignores, for one thing, the role of politics. A lot of what has happened to China really has been because Xi Jinping took over and he has pursued a different orientation of political economic management. You know, before him, you had Hu Jintao, Jiang Zemin who more or less where guys who ruled by committee. And I should say that I'm not a China specialist by any means, all I know is what I read from people who are China specialists. But these are sort of broad, commonly understood trends. But Xi Jinping has moved towards a more Maoist approach towards governing, foreign policy, economic policymaking. So who's to say that had that same trajectory continued from Jintao downward? Who's to say where China would be today?

Because by all accounts China has stepped back economically from what it was, you know, a couple of years ago. They've hit a little bit of a wall in the economy and growth has slowed. So in that sense, Acemoglu and Robinson's sort of path dependent arguments is contradicted by the fact that there are things that can happen which can alter the entire course of history. You can't always ignore those very important elements of history, which can change so much. Nothing is ever cast in stone, and when you say inclusive and extractive institution, it makes it seem as though those things are ends as opposed to means to an end. What are inclusive institutions? What are they supposed to do for you? What are extractive institutions doing to the society? Those things are a means to a path, they're not necessarily ends in and of themselves. And so much of what Acemoglu and Robinson discussed in Why Nations Fail just seems to be cribbed from, you know, Mancur Olsen, Charles Tilly, and so many of these guys, but a lot of it is bad impressions of what they have written because it's so simplistic, it makes so many sweeping generalizations and categorization that it just seems as though they've read so many different parts of these authors I've mentioned, put together a sort of literature review, picked in some random theories that they had and created a justification for it.

So in that sense, it's not a very helpful way for thinking about why nations fail. I just feel much of what they believe seem to be predetermined and they looked for justifications for them.

TL: We'll come back to Chile in a second. But as long as we're bashing economists...

Laughs

TL: Two economists, a couple of years ago, Ashraf and Galor - Oded Galor, I forgot the first name of the other guy - also wrote a paper talking about the path to development and the long-run determinants of development, generally. And they talk about ethnic heterogeneity and homogeneity as the determinant of development. So their model and, of course, their conclusion say that if a society is too heterogenous then that's bad, if it's too homogenous that's also bad and there's a sort of goldilocks zone in between. And that goldilocks zone is always Western Europe, for some reason.

Laughs

CO: Right.

TL: So, what do you think? I know that that particular paper has come under some severe criticism on methodological grounds, on ethical grounds, and so many others. But you have to ask yourself, and I'm trying to defer with common sense here, can we honestly say that part of the complexity that we are experiencing with governance in Nigeria has absolutely nothing to do with the fact that we are 250 ethnicities who speak twice as many languages?

CO: I recognize, like you mentioned, that that paper has come under severe criticism. The most famous one that I do remember was this "is poverty in our genes" or something like that that was written by this Harvard anthropologist. That's probably the most famous critique of it I've read but there have been several others. In any case, the problem with looking at heterogeneity as a source of anxiety in plural societies is that it's quite simplistic in its understanding of cohesion. Essentially, when you control for certain norms around certain institutional variables, you will find that ethnic diversity and heterogeneity is mostly...the effect of it is mostly negligible.

One of the good things about the social trust literature in the last 20 years I would say is that it's become quite robust, you know, people have started to use better variables to measure social trust as well as heterogeneity. And one thing a lot of scholars have found, especially sociologists have found, is that in many instances as opposed to ethnic diversity and heterogeneity, you are looking at the quality of certain institutions. For example, you look at Nigerian elections, how everyone always say that Nigerians are divided by religion, by tribe and to a certain extent that's true. It's one thing to say that, it's quite another thing to make a leap from that assumption to the fact that one of the reasons why we struggle to get "good governance" - and I have a problem with that term of good governance but that story for another day. Let's just go with it for now - it's one thing to go from Nigerians are divided by ethnicity and religion and all that to one of the reasons we can't have good governance is because we are too diverse, we're too this and that.

Rather than that, another way to look at this is why has good governance fail to come to Nigerians despite the fact that the average Nigerian provides his own light or her own light, security and all of this stuff? So rather than this being a problem of ethnic diversity, what it is is a collection of political elites across the entire spectrum of the Nigerian society have connived to become essentially roving bandits denying everybody the spoils of democratic governance. So once you can get to a place where certain indicators of good governance can be improved across the board, ethnic diversity no longer becomes a strong variable in the equation of ethnicity and governance. If you can get to a point where credible elections can be held where there isn't as much ballot snatching, vote rigging and things of that nature, then it becomes very difficult to say that, for example, the police force, which a lot of people use for rigging elections, is, you know, a contributor to ethnic or religious or tribal divisions in Nigeria.

Essentially, the point I'm trying to make is that once you can control for certain institutional variables in society and how those institutions respond to the collective of the people, it doesn't mean that heterogeneity stops becoming a source of social angst or things like that. It just means that the state capacity, once you can raise that beyond a certain minimum, it no longer becomes a case of ethnicity becoming a hindrance to getting good governance. You know, that argument is no longer able to fly. What you can then see is that you have raised the bar for governance. Now, how you do that very much depends on so many other things, but it no longer becomes that the reason we cannot get good governance is because, you know, Nigeria is ethnically divided and people are only going to cater for themselves and their own ethnic groups and things like that. Once you can raise the lowest common denominator across the board, the strength of the ethnic angle no longer becomes very potent if that makes sense.

TL: Talking about state capacity now, we return to Charles Tilly and he developed this war makes states hypothesis which so many other scholars have expounded on overtime. I just want get your response to how much... since we're talking about long-run determinants of institutions here, and one of the measures that scholars have used along the lines of Tilly over the years is that civil war was a lot more common in Africa as opposed to interstate wars and that may have affected our development or our ability to have state capacity because interstate wars give you the ability to develop manufacturing whether in weapons, coordination, collecting taxes and all these other things that most of our bureaucracies now struggle with. So how valid do you think that is?

CO: Yeah, I mean, to a certain degree, your state capacity is hurt when you fight civil conflicts because state formation first of all, as well as capacity is a collective effort requiring the participation and legitimation of all, at least, a broad-based snapshot of society. So, you know, the various ethnic groups, various social classes, people at different education level. So when you fight civil conflicts, you are more likely to cause lasting damage towards your own internal capacity as a state. You know, there's a reason why countries like Liberia, Rwanda, and others like them in Africa that have fought civil conflicts, have mostly continued to struggle with economic development. Because to begin with, they never had much state capacity and then when conflict breaks out, you have a situation where the state that's fragile to begin with starts to attack itself. And because many African countries have lots of large landmass and things like that it becomes very difficult to fight a protracted civil conflict. It takes time, it takes money, resources, people...so that just means an attritional battle that simply reduces the totality of your ability to rebuild, because even when the conflict is over, there is a peace agreement or what not, you are going to have to rebuild your society, not just in terms of physical infrastructure and things like that, but political settlements, peace agreement, reconciliation and things of that nature. Because when you think of state formation and state transformation, these are the elements that come into play, not just economic - you know, building an economy and your physical infrastructure, there's the social forces you have to contend with.

One of the reasons why Europe was able to rebuild after the war was the Marshall Plan, and this was of course a collective effort among the European countries to rebuild their economies using American assistance. Of course, they were lots of American companies who went to invest in Europe and made strategic investments in key sectors of European economies and things like that. Those kinds of agreements are easier to arrive at when it's sort of interstate because there are many more participants who are brought to the negotiating table and these intervening institutions that I've mentioned have much more of the institutional memory of creating that kind of atmosphere that can lead to this type of situation where you have a Marshall Plan. Whereas in a civil conflict, how do you do that? I mean, yes, you can have international organizations like the World Bank and commit to reconstruction and things like that, but that is a much more political process, because for one thing you have a situation where warring parties in the country don't even agree, or at least are trying to get to a place where there can be some sort of agreement amongst each other as to what do we do next. Whereas when it's interstate, they are much more interdependent on one another.

Economic interdependence, for example, is understood in international relations to be something that prevents the outbreak of war. Now, that's a contested idea, but it's one that continues to have some resonance in international relations. So when there is much more riding on states and other units of interaction in the international system to avoid that kind of situation where states go to war with each other and should they go to war with each other, in order to prevent the 2nd and 3rd order consequences of that outbreak of conflict, to manifest itself going further, there is much more of an avenue to, first of all, get them to stop fighting to end the conflict and then rebuild.

Part of the rebuilding of Europe was, well, one, self interested in that the United States saw an opportunity to remake Europe in its image and likeness but also to prevent the outbreak of further conflict. You know, to integrate European economies. That's much more it easier to do on an interstate level than it is to do intrastate. So in that sense, rebuilding state capacity gets harder, especially if you never had much of it to begin with, and when you look at Africa as a continent, there are many more states with weak state capacity than there are those that have strong state capacity. So in that sense there is some merit to the notion that war can make the state.

There is some merit to the idea that states can use the defence sector as a means of scaling up other industries, you know whether  it is manufacturing or otherwise, or information technology. But to get there, you needed to have had state capacity to be able to do so in the first place and for many African countries, they don't. So at best, all they would be able to do would be to get to a low intensity level of defence production and they wouldn't be able to create the kinds of high yield defense and manufacturing product that they might be able to sell on the international market and things like that. Because, you know, those are not capabilities they have. But they'd be able to create capabilities that would be able to be disrupted. So in the end they win nothing.

TL: I'll also like to return to your point earlier about actors as some kind of exogeneous shocks to long-run institutional patterns or memory. 2015 was hopeful for a lot of people in Nigeria. It was a transition to an opposition party. The elections were largely peaceful. People actually voted out a government which they have agreed was corrupt and has lost a lot of legitimacy. Now here's my puzzle, even though I had my disagreements at the time, how did the APC-led government lose its way so freaking fast? Like, what happened? Somehow it seems like these guys are not prepared to govern and we can see some of the symptoms of that incapability even now.

You know, you see rival government agencies... well, not rival government agencies, different government agencies coming to social media to argue about ridiculous things. You have agencies acting as laws unto themselves, there seems to be no coordination, communication, whether from the Ministry of Information or the Central Bank, is always messed up. You know, and some people will look back and say, Oh yeah, we shouldn't have expect anything different because maybe these guys were just a ragtag band of the disgruntled. But it's still puzzling. How did a coalition that rode the wave of popularity and, I'll say, illegitimacy, lose it's way that fast?

CO: Like you correctly pointed out, this government came in...at least, President Buhari came in with so much goodwill. You know, I've always said that Buhari came in with probably the largest amount of goodwill of any Nigerian president probably since Shehu Shagari. And that was because, you know, Shagari came in as the first president of the second public and there was so much anticipation and goodwill. Much the same was true of Buhari. Of course, it's a different context, but as you said, he's the first opposition president to take office. He won a fairly convincing election. Yes, it was very bitter, people had their disagreements and it was well contested. But as you noted, it was peaceful. The Buhari campaign, and it's very important to talk about it without being too colored by the experiences of what's happened after. Looking at it purely from the lenses of 2014/15, it was a truly remarkable campaign, you know.

Back in the day I was a volunteer for the Obama campaign and I remember just how that experience was incredibly...was probably one of the best political campaigns that many Americans had ever experienced. The Buhari campaign was kind of like that for many Nigerians. It was by the standards of Nigerian presidential campaigns, it was a remarkable exercise not just of messaging, but also of marketing, of connection with the Nigerian public in ways that previous presidential candidates or campaigns hadn't done.

And then, of course, just bring to it back to the Obama thing, I remember hearing that they'd hired some Obama campaign vets as consultants. So, everything made sense in the way that the messaging of Buhari as this sort of transformational figure who would changed so much about Nigeria based on his antecedents as a anticorruption crusader and all of this stuff. It was a really remarkable campaign. It was kind of decentralized. You know. You had the Southwest APC caucus who were doing their own thing. Who were largely in charge of the sort of the policy messaging and the branding and all of that stuff. And then you had the Northwest caucus of APC, who mostly did a lot of the groundwork and the get out the vote operations, and... you know, it was a truly organic campaign in ways that few Nigerian campaigns had ever been.

And then they won big and the APC also won big in the National Assembly elections and the governors' races. So frankly, the APC didn't anticipate winning by as much as they did and they were clearly unprepared to govern. You know, because when they get this big win, all of a sudden there's all this infighting among themselves about, oh, who gets to become principal officers in the senate and all of this stuff. We all remember what happened with Saraki, Dogara and all these other guys. This was a party that was lacking in discipline, frankly.

The desire to defeat Jonathan sort of papered over all of those cracks in their coalition. First of all, don't forget that APC was formed in 2013 or something like that. Yes, they've been in discussions for quite some time about a merger, but I always say that ABC resembled and continues to resemble a parliamentary coalition, rather than a Presidential System Party. Like when you look at Isreal, for example, where in a cabinet you might have... Let's say if it's a right wing cabinet, you might have the Likud, you might have Shas, Yisreal Beiteinu...these are all right wing parties. They have very little in common other than the fact that they don't like The Left and their government fall apart very quickly, one person resigns...

That's what APC has often felt like because there was very little that they had in common beyond "we want to get rid of this guy called Goodluck Jonathan" and as soon as they do that, it's like, well, OK, now what? And that's when all the stuff starts with the principal officers and all of the cat and mouse games that they're playing, and then the fact that the President takes six months to form a cabinet, especially given the scale of the challenge, everything he had promised, everything he talked about. That just told the entire world that this wasn't a party that was ready to govern. I mean, the country was teetering on the edge of a...

TL: Of an economic collapse.

CO: Right, right. I mean, times were really terrible when president Buhari took office. Like, it's hard to overstate just how awful Nigeria's economic conditions looked at the time and he takes six months to put together a government. And then when they do eventually put together a government, it's one of the most underwhelming set of picks you could ever ask for. You know, in terms of the weight of the expectation and all...

TL: I remember my mode upon seeing that cabinet list..that day, man, it was just... seriously, we waited six months for this?

CO: Right.

TL: Like, seriously?

CO: That was literally how so many people thought that "this is what we waited six months for? You've got to be kidding". So in political science they talk about political capital. That's when the leader, typically a new one, comes in. You know, you have all the goodwill, so many people are behind you, there's the euphoria of your inauguration and all of these stuff. There's why they talk about the first 100 days in the US, [that's] when president, frankly, has so much room to do a lot of things and what you do may even go on to shape the rest of your presidency. I always say that President Buhari, frankly, could have come in and done anything he wanted in, let's say, June of 2015, and the country would have overlooked it. They would have looked the other way cause such was the [goodwill].

The goodwill and expectation and hope was so high, so the fact that they took six months and when they put together, it was that cabinet. They've lost six months of policy initiatives, they've lost six months of political capital, they've lost six months of contact with foreign governments because that's also a part by virtue of the fact that there's no minister of foreign affairs or ministers of any kind. You know, governments, investors donors, they weren't sure what to do. Like, who do we talk to? Who do we go to? Do we wait? So there was so much that was lost and by the time the government get into shape and putting together the motions to start creating some policymaking motion, a lot of time had been lost.

And then don't forget that the president was ill a lot of 2016. He was away from the country, so effectively the president lost half of his term either due to ill health or the delays of picking a government and all of that. So there was so much the president lost that he, frankly, has never gotten back. And that is why the recovery such as it was, was quite underwhelming because there was the potential for a much stronger, and I'm not an economist, but you know, that's the way economic cycles work. Depending on what you do, there was the potential for a much stronger recovery, but then you had all this stuff with the currency, they were dithering back and forth between several ministries and, you know, there was such an incoherence in terms of government planning that a lot of Nigerians who were very sympathetic or supportive outright started to have second thoughts about "do these people know what they're doing?" and blah blah blah...before you know it, it's 2017. In 2018, they're starting to think about running again.

So, there is the fact that this party was simply not prepared to govern. They just weren't, you know. And this is despite the fact that they were and are so many experienced people in the party who've been in politics for a long time. Because, after all, their APC was formed as a merger of ACN, CPC, the new PDP as they call themselves and some people from APGA and, you know, these aren't newbies to politics. These are people who've been around for a long [time]. So you would think they'd be able to marshall some sort of urgency, but again, that speaks to the lack of party discipline inside APC, you know.

For all of the faults of PDP...because, one, it's a much more established party and because of its origins it's been the elite guard of previous iterations of the party, whether it was people from NPN or former military officers, this the party that had a much more...they were much more ready to govern. Parties like PDP and the likes are what political science literature will call authoritarian successor parties. That's parties formed within a political transition from authoritarian rule to democracy. So PDP was formed in '98 based on a number of elites who were opposed to Abacha, Solomon Lar and all these other people, put together the G34 and that's how they form it.

These are people who've been in government for a long time. They've been in politics for a long time and they, frankly, were organized. So as soon as Abacha dies, Abdulsalam scraps the Abacha transition and creates a new one, they gather themselves together, pick candidates all over the place, win, they get into office and they're ready to govern because so many of these have brought administrative and bureaucratic skills whether as former military officers or former governors or party heads, and things like that. And there was some sense of party discipline. There wasn't much party internal democracy, but there was at least some party discipline. Whereas in APC, there wasn't a whole lot of party discipline or party internal democracy. That's why over the last five years, so many factions have been fighting each other.

Remember the last round of primary elections? How "aww, my God" in fact, in a number of states, the weren't able to field candidates in the general election, such was the chaos where there were parallel congresses, parallel primaries, this thing and the other thing, they didn't file candidates in time, so they couldn't put up a... That's the kind of thing you've got under APC because this was not a well ordered party. This was a party where they had a strong figure in President Buhari, and that's about it. Everything else, there was no sense of...unity isn't even quite the word, but there wasn't a sense of party organization where, yes, all parties have there internal disputes all the time, but, you know, there wasn't any sense of: this is the goal. This is what the party believes in, this is the mechanism to resolve dispute.

The whole time Oyegun was fighting this camp, that camp was fighting that camp, and even in the states... I remember a time when there were nearly three wings inside APC in Lagos State, I mean, they've got so ridiculous during Ambode's time. So APC has a party never had time to develop organically and it showed. And it spilled into governance. I always say that you can't separate politics from governance. You know, one necessarily begets the other. You get to form a government because you need to win election. How do you win election? Mostly by forming political parties. So you can never separate the two and perhaps it's not even necessary to separate the two because after all, party politics is an expression of democratic politics just as much as governing is because after all you a mandate somehow... under the banner of a party and all of that, but it didn't seem like and still doesn't as far as I'm concerned that APC understood any of this.

So going forward and I stand to be corrected if I'm wrong on this, but it would be interesting to see what happens going forward...so this year we've had with two elections in Ondo and Edo. They won in Ondo and lost in Edo. I think the Edo elections are a harbinger of what's to come, frankly speaking, because there will come a time where there are so many people who are going to want to succeed President Buhari. There are so many governors, there are senators and those are people only within the party. There are some people who are in PDP who are still going to defect and all of this other stuff, I struggle to see how the center will hold. If for no other reason than the fact that the uniting figure that kept everyone in line is going to be on his way out, presumably anyway. So when there is no more Buhari, what is going to hold the party together? I really don't know. I really don't know.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.ideasuntrapped.com

I had a conversation with Efosa Ojomo of the Clay Christensen Institute. He is the co-author of the book The Prosperity Paradox - along with Karen Dillon and the late Harvard management guru Clayton Christensen. The central argument of the book is that economic development happens when businesses innovate by creating a previously non-existent market. The book has been largely shunned by development scholars and this is where I started my conversation with Efosa. I also go through some other criticisms of the book, and Efosa had interesting answers. The book relies on case studies and might be considered not empirically rigorous by development scholars. Regardless of critics, the argument is powerful and hard to ignore. I read it as changing the overall incentives of all stakeholders in the process of economic development - when bureaucrats, the private sector can all benefit from making the pie bigger, things can move very quickly.

Transcript

TL: Hi, and this is Ideas Untrapped. My guest today is Efosa Ojomo. Efosa is a senior research fellow at the Clay Christensen Institute. He has written a book called The Prosperity Paradox. It's a bestseller, and personally, one of the most refreshing books that I have read on the subject in the last couple of years. You're welcome, Efosa.

EO: Thank you very much, Tobi. It's a pleasure to be here with you. I can't wait to dive in. Thank you.

TL: Okay, so I'll start with the book and the central thesis, which I know as also appeared in your other publications, be it essays and articles. You talked about market-creating innovations as the key to prosperity, to getting the process of development started, to fighting poverty. What is your convincing evidence, so to speak, for this particular paradigm you're advocating? And why is the "Development Establishment", you know, aid agencies and scholars working in that area, why are they missing that point of view?

EO: Wow, so that is a great question to start. Unfortunately, it's not a question I can answer with one answer, so let me unpack the question. Because you asked what's the evidence for market-creating innovation? Why do development practitioners approach development and antipoverty programs a certain way? And why haven't they bought into this idea - the notion of market-creating innovation? So let me start with diagnosing the problem. When you want to address any issue you have to make sure you spend a lot of time diagnosing it. Let's go back to the aid industry and when it really began.

1949, Harry Truman gave a speech where he actually, unintentionally, I believe, catalyzed the beginning of the modern-day development industry. And in his speech (it was his inaugural address, you know, president of the US at the time), he defined the problem of development as rich versus poor. Developed versus undeveloped. First world versus third world. He didn't use all that language, but that's essentially how he defined it. As, you know, we are developed and we have all these resources, these poor countries are not developed, they don't have these resources, let us transfer resources to them and help them develop.

That is the main way the development industry works today. It's this idea that you are not developed, we are developed, we're going to transfer resources to you. So that's number one, right, [on] why the industry operates the way it does. Number two is that the development industry is an industry that attracts certain types of people. And so if you look at big players in the development industry, what you're going to see are people who have gone to school to get typically a PhD or Masters degree in the area of development. And so they study development as a whole as an entire entity and the research they do is often very focused on how one element impact entity.

So you might write a PhD thesis on how education of girls in this part of Ghana impacts their ability to go to school. Now, that's an interesting paper and you may find out, oh, if we educate girls, more of them will have fewer kids and they'll get advanced degrees, but that will not lead to the development of Ghana as a country. It answers, oftentimes, what I think is an inconsequential question. And so the development industry has a lot of players trying to do good work, unfortunately, they're answering the wrong or I would say inconsequential questions.

The third thing I would say with regard to development and why it's practice the way it is [is], in a weird way, we know what the answer is. The answer to development looks like, right, in our minds, whether it's right or wrong, it looks like America. It looks like Japan. It looks like France and England. In other words, you go to these countries that are wealthy, and generally speaking, things work. The roads are good, the electricity does not go out, the law enforcement, for the most part, works. And so you say, "you know what? The problem in our countries that are not yet developed is all these things don't work. So let us make them work." Let us fix the roads. Let us fix the laws. Let us fix the schools.

What these three things I just discussed are missing is the fundamental mechanism that helps these things work. Right, the fundamental mechanism that actually provides the resources or creates the value that really enables these things to work. And that fundamental mechanism is market-creating innovations. Which is connected to the initial question you asked: "what's the evidence that this actually worked?" Again, to answer that, we have to go back in time. We have to say, "if we have this hypothesis that market-creating innovations work, how can we show that? We had to go back to a time when these wealthy countries, the United States, countries in Europe, Japan and so on were not wealthy. We had to go back to when they had demographics that are similar to many poor countries today. And we said, what happened? Did these countries simply build the great infrastructure all of a sudden? The government, were they never corrupt and they just woke up one day and began to institute good laws and practices? Or was it a more dynamic nonlinear process of entrepreneurs across the country creating new markets, employing people, generating tax revenues, enabling the government to overtime improve its institutions? What we found was the latter. It was a more dynamic and nonlinear process.

And so that kind of finding is really hard to document at scale and what I mean is, you know, when you pass a law, it's in the record books, we know exactly when this law was passed and so we can look at society before the law and we can look at how society evolves after the law. The problem with innovation is it's really hard to say, okay, this is the date - on November 5th, 2006, this is the date this innovation came and created all this impact. It's a process. And so instead of looking at oh, these were the laws that were passed, this is how society evolved, that's how the institution changed the society. What's more important to do is say "what led to the passage of those laws? Who fought for the passage of those laws? Where did they get the resources to fight for the passage of those laws? Where did the government get the resources to enforce the laws?"

And so these questions are a lot more difficult to answer, but when you begin to unpack them, it's hard to divorce development from innovation and more specifically market-creating innovation. My hope is that development practitioners begin to ask the tougher questions and begin to engage in what a wise man, once called "intellectual honesty." And really assess - are our programs working? Are they working the way we want them to work? We've been doing development like this for over the past 20 years, over the past 30 years. How has that resulted in prosperity? COVID-19 has come around and all of a sudden development is pushed back 25 years. Uh, was it really pushed back 25 years or were we celebrating a false sense of progress? Because development is not pushed back 25 years in Japan, it's not pushed back 25 years in France, I can tell you that. And so we have to get to the point where we are asking the difficult questions on how to truly do sustainable development.

TL: I want to go to your latest article in Project Syndicate where you challenged African entrepreneurs and business people to rethink the way they do business, and invests more in market-creating innovations. My question is why are they not thinking about this already, what are the barriers if the returns are there given some of the examples and evidence you've cited?

EO: Well, first of all, market-creating innovations are innovations that transform complicated and expensive products into products that are simple and affordable. Now, these innovations make these products more accessible to many, many more people in society. And so an example would be the proliferation of mobile phones all across Africa, for instance. Or a company in Ghana called mPharma that is making medication drugs more affordable, more accessible to people. Micro Insurer is another example, making insurance more affordable to people who historically would not be able to afford existing insurance products. So examples abound. Now the question you ask about why if these things are so interesting and exciting, why are they not being pursued?

A couple of reasons, the first is there is a sense that innovation is something that happens after a society develops and becomes prosperous [because] it's only people with, you know, disposable income, with extra income that can actually afford many products on the market. So that belief is widespread. And unfortunately, it's really hard to go against a belief. One of the things we're trying to do is say no, no, no, innovation is not something that happens after a society develops, innovation is the process by which society develops. So that's one. The second thing is this concept of non-consumption.

Now, non-consumption is a phenomenon that happens in every society, but it's more prevalent in emerging economies or poorer countries. It describes how many people in the society would benefit from gaining access to a product or service, but because of the cost of the product, because of the skill necessary to use the product or the time needed to actually purchase and consume the product, or the simple fact that the product is just not available, many people cannot access these products. It doesn't mean they wouldn't benefit, but there are obstacles or barriers.

Now, the non-consumption economy as we like to call it contains all these individuals. The problem is when you do market research on opportunities, a lot of times the insights we get from our market research point to what we call the consumption economy. It points to people who already consuming. And so when you look at the market research for televisions in Nigeria or refrigerators in Ghana, what you are measuring is not all the people who would benefit if they had access to these products or services. What the market research data is measuring is all the people who can afford the services. And so? You say oh, refrigerators in Nigeria, only 2 million people have them, as an example - I actually don't know the number off the top of my head. Only 2 million people, that's a very small market. That doesn't warrant our investment especially when you compare it to a hundred million in the US, there's no market in Nigeria.

What market research does not take into account is what about nonconsumption? What about all the people who would benefit from gaining access to these refrigerators? [But] because we don't measure and value nonconsumption, it's hard to even see it as an opportunity. And the last reason I would give, you know, I'd be remiss if I didn't say [is] it's really difficult to go after nonconsumption. It's difficult for the first two reasons I described and it's difficult because you are literally creating a market that does not exist.

And so in the research that we've done on just studying market-creating innovators, whether the ones in the US, in Europe, in Africa, in Asia it doesn't matter. Before these innovators create the market, there is widespread disbelief, especially from those who are experts these economies. They tell them there's no way that this market exists. These people are too poor. They're not educated enough, they can't afford these products. And so, to go against the grain when there's no market, the people are poor, the environment is difficult to work in, those are obstacles that are really difficult for entrepreneurs and investors. And so part of our work, what we're trying to do is, say, look, many of these demographics we see, many of these characteristics of these economies are very normal. They're not easy, they're simply incredibly normal. You're not doing what has not been done before. And if we can normalize these difficulties and say if you take a more predictable approach to innovation and investment, we can't guarantee success but we can help mitigate failure. We think you can actually do better in these emerging economies.

TL: Do you think that there are conflicts of interest in most of the boardrooms of African businesses? I mean, in that piece you challenged Milton Friedman's opinion of the responsibility of a business in society, which he says is solely to the shareholders or the stakeholders. So, do you think that there's a conflict of interest in most boardrooms, where some of the things that entrepreneurs and some business leaders are interested in, in this case, market-creating innovations, are not things that investors really think can give them returns on their capital?

EO: Yeah, so I think there's a lot to unpack in that...because of the abundance of data all over the place, unfortunately, we now live in a world of short-termism. There's more short-term thinking going around. What do I mean? Well, you know, if I'm watching the news and I hear about this company, this investor that made a lot of money on some investments, was able to cash out in a few years, that affects the way I think, it affects the way I measure my own performance. And so this abundance of data has created short-term thinking.

In addition, what you also have is a lot of the literature on finance, what constitutes a good investment comes from countries that are already prosperous. They come from countries where I would say they are no longer, generally speaking, in the market creation phase. And so they are more in the efficiency phase. So they have roads, they have institutions, they have organization building companies and the question is often, oh, how do we make this more efficient? How do we make better products? When you use those same metrics to analyze projects and organisations in Africa or other emerging regions, you have a mismatch because the continent is still in a market-creating phase. And so to use private equity metrics that I would use in New York to measure projects in Lagos or Abuja or Accra or Nairobi makes absolutely no sense. Literally no sense. It's akin to using the same metrics to analyze the development of a 3-year-old and a 30-year-old. It makes no sense. And so instead of a conflict of interest, I think I would say it's a mismatch of metrics.

If, as the CEO of an African company or the board chair of an African company, I had the goal to grow my market size and capture 60 percent of the customers in Africa. Say, I make baby food or something 'cause you know Africa is a growing continent. Well, I'm not going to measure my performance the same way Gerber babies measures its performance in other countries. I'm going to say look, what did baby food companies go through when the US was a poor country? What did they invest in? How long did it take? How did they manage the relationship with government? How did they manage relationship with the community stakeholders? How did they develop their staff? And I'm going to use those metrics. 'Cause if I use the metrics that these companies today are using, I cannot develop. It's not like it'll take time. No no no, like, we will never develop.

Now, you know, there will be some wins here and there, there will be some lucky breaks here and there and that's what we see from time to time. But to truly develop in the circumstance we find ourselves, we need to step away from using metrics that are propagated all over the place and develop a core set of metrics that are contextualized to our own circumstance.

TL: Do you think that this framework that you describe - [that is] businesses really innovating their business models to target nonconsumption and grow the pie, so to speak. Do you think it's the absolute fundamental thing that has to happen, 'cause the way I read your book and some of your works is like a chicken and egg problem, right? Like, what has to happen first, you know? Some in the development literature would say that you need institutions, you need good institutions first before you can do some of these things that you say. What is your response to that?

EO: I mean, I empathize with those who say we need good institutions, but that is not really a value-add statement. The reason I say that is, okay, we need good institutions, what do we do next? We look at the Nigerian government, at least the federal government...in addition to the lack of managerial and technical capabilities, the government has roughly $200 or so to spend per year per Nigerian. Of that, maybe fifty to $75 goes out the door to service its debt. So roughly $125 to a $150. In addition, when you look at where it's starting, I mean, nobody would look at Nigeria and say we practice good governance, so it's starting from the back of the pack, and so it needs even more resources to get to good governance. When you compare where Nigeria is and what it has, the resources to, again, you know, whether it's Norway, Denmark, America. Norway spends twenty to $30,000 per person per year. And so the idea that, oh, Nigeria needs good institutions, that's like saying a homeless person needs more money. If they had more money, they wouldn't be homeless. That's not a value-add statement.

The question is, how do we get to good institutions? How did the US get to good institutions when it was poor? And so if somebody comes up and says - you know what Efosa, Nigeria spends $150 per year per person, here's how they can actually get good institutions and it's a realistic model. Then we can start the conversation. But when, you know, these experts throw out blanket statements oh, we need good institutions... I'm like, okay, what am I gonna do with that? What is the police officer who is demanding brides, making $50 a month going to do with you need to have better institutions? What is that politician who has made a bunch of deals before he or she becomes a senator or a governor and they get into office and they have to square all those they made deals with? They have to figure out how to amass as much wealth as they can because there are little to no economic opportunities in the country, what are they going to do with the "you need good institutions?" There are no incentives. Right? To live out that statement. So we do need to move a lot further from the "we need good institutions" argument because it has not done anybody any good.

You know, there's a paper we referenced in the book - how not to fix problems that matter? And ultimately what happens is a majority of institutional reform programs funded by big development players do not work. You know, you come to my country, you tell me, oh, I should behave this way, I should do this, I should make sure this is easier for people and many of the public sector participants on the ground just listen, they take the development dollars, they reformed the institutions in a way that makes the donors happy and they keep doing what they're doing. Because it doesn't cut deep. It doesn't fundamentally change how people think about society. The incentive systems, they don't change. So, do we need good institutions? Absolutely. How do we get there? That's a tougher question.

TL: Staying with that thought. Now, isn't there a case for, well, maybe it depends on what we mean when we talk about institutions right? And I know that scholars and even people who work in development are guilty of trying to imagine already formed institutions in developed nations and trying to graft a lot of their features in countries that do not have them. But for businesses to take risks, you know, don't you think that institutions like basic property rights protection, contract enforcement and things that create the environment for you to be able to take risk, however minimally, don't you think those should come before market-creating innovations or targeting non-consumption in the way you describe it?

EO: It's a good one. I think the better question to ask has to be more specific. Now, I'm not saying investors should just go and put their money in any country. And there no, at least, limited guarantees, that's not what I mean. I mean, after all, businesses are operating in Nigeria as we speak. I mean you are speaking to me through an Internet service connection. So the idea that somehow institutions don't work and we need better institutions, I mean, it's not too mature. We have to mature that idea. So we have to be specific. We have to say, if you are going to invest in this space, in this country, in this region, you have to ensure the specific fundamental requirements that as best as you can, no investment is ever secure or ever guaranteed... But you have to ensure there are fundamental, sort of legitimate, base-level institutions exist.

And I think if we went in with those sorts of questions, not ways Nigeria on the ease of doing business index, how is Nigeria's corruption perception ranking? That's too broad, generic, and that's not helpful to anybody. If the folks who are providing us with this Internet connection went into Nigeria with that thinking they would not have gone in. And so, somehow, that question forces an answer that is not helpful. The question has to be, look, I'm a transportation investor, I wanna go and make transportation more affordable for people in Malawi. Alright, let me look at who the transportation players are. Let me understand that sector. Let me understand who the government players are. Let me understand what the regulations are, how have they changed it over the last five years. How might they change it over the next year?

You have to do your homework. And, no offence, many investors are not willing to do the homework. And so of course, you're gonna not find Nigeria attractive when you go in with the oh, don't we need the baseline this and that? No, no, no, no, that's a lazy way to think about investing and more specifically, development. We go in more targeted. And if we do that, again, no guarantees we will be successful but that's a much better problem-solving exercise than oh, yeah, let Nigeria move up some rankings. Let's improve. What does a good institution look like? I mean, like you know, in the broad sense, what does that really even look like?

I mean, I think I would be more targeted than looking at Nigeria or, really, any country from a high level, like, how are the institutions? Don't we need this base level?

TL: That's a good point, but here is another way to look at this from my perspective. Some of the examples you cite like Mo Ibrahim, Celtel; Tolaram in Nigeria, don't you think that there's a bit of a survivorship bias in some of those examples? Like, for example, if we look at the case of Tolaram, yes, it has done really well. Well, "well" is relative here, so, but it has survived.

EO: It has.

TL: Yes, and it's become a household name and it may well be a replicable model for investing and doing business in this environment. But you can also argue that over those decades, a lot of businesses have also tried and failed.

EO: Yes.

TL: And aren't you picking winners? And in that sense, not really robust with your sample set in that sense. Because a lot of entrepreneurs who are trying to do things differently would tell you how hard it is. Some of them are losing money, some of them are losing their skin, some are highly demotivated and these are people that really, really want to do bold and innovative things. But the general, again, institutional environment, and in this case, specific policies that worked against them are serious barriers. So aren't you effectively simply picking winners and just ignoring the other side?

EO: It's a good question. I think I would answer, yes, if there was something anomalous about Tolaram in the context it finds itself. And so if I did not see similarities between Tolaram and Isaac Singer, who we wrote about, or Henry Ford who we wrote about, if I did not see similarities in how they had to engage with government, how they had to raise capital, how they had to almost lose their skin (in your language), then I would say, oh, yeah, we're just picking winners. But there's nothing anomalous about what they've done. In fact, I expect winners to look like Tolaram, Mo Ibrahim and several other companies that we talk about.

If they don't look like them, then the chances that they will win, at least market-creating, are very very slim. The other way I would respond to that is, I have never once and I will never say this is the easy path. This is incredibly difficult. It's so difficult that I am convinced this is the critical missing piece. It's paradoxical, but that is why we are not developing. Because there is this incredibly difficult thing we have to do, but we believe the only way we can do it is if the environment allows us do it and so we have to fix the environment. Now we believe that so strongly that we are willing to invest billions of dollars to try and fix the environment, with no connection to this mechanism that's gonna make the environment thrive. That's how strongly we believe in educating the public, in institutional reform, in fixing infrastructure whether or not it makes sense.

We're trying to do all that and we're paying little attention to empowering entrepreneurs. And so if I, for instance, were Mo Ibrahim, after I sell my Celtel and I become a billionaire, I would say okay, what's the next industry I want to democratize? And I go, and I do the hard work of building that I will not do governance. Nobody is winning the prizes. It's incredibly difficult to do any meaningful reform because the equation, we have the backwards. Development is difficult. There are no easy answers here. What we have to do is ask, what gives us the best chance? Does wishful thinking in light of poorly paid civil servants who have little to no incentive to improve the system give us the best shot at success? Or does figuring out a way to empower and create new markets where some of the revenues from those markets can be pumped into the institution and overtime maybe it gets better. Does that give us a better shot? I think I'm gonna put myself in that camp.

The last thing I would say on this is, there's a professor out of [the] University of Michigan. Yuen Yuen Ang who just published a book called China's Gilded Age - The paradox of economic boom and vast corruption.

TL: I know her.

EO: Yes, and so she talks a little bit more about the public sector side of things. I mean, no two countries are alike or identical, but she does a really good job of explaining how even in light of China's vast corruption, there was an economic development push that prioritized investors, markets and as a result, China, for all its problems, has been able to lift a billion people out of poverty, grow 10 percent over the last four decades, and improve. So, there no easy answers here, it's just we have to pick the camp we think makes the most sense, and I don't think the camp where a monopoly entity with little to no incentive to change, trying to incentivize them to change by giving them more resources and empowering them when the incentive system in society hasn't changed, like, somehow, that makes no sense to me.

TL: I like the Ang Yuen Yuen example. It's a great example and I've read both her books, I think what she's doing is fantastic. So here is my question on that. You gave the example of Mo Ibrahim. Now, don't you think that people like Mo Ibrahim - and of course this is not really about him - or people like him who focus on the issue of governance... now we may critique or find some fault in how we've been going about this. But don't you think they focus on the issue of governance because it is through governance, again, I reiterate, that you can get a hundred Mo Ibrahims?

Because, Tolaram may have adapted well, it may have really found a way to survive through thick and thin in Nigeria, however difficult others may say it is, by doing its homework and making targeted informed investments like you said. But, in the end, Tolaram doing well may not necessarily raise the GDP per capita of Nigeria.

EO: Yeah.

TL: Which in terms of poverty and prosperity that is what really matters at the end of the day, income for people. So don't think governance may not be the only way, but it's an easier, faster way for the kind of entrepreneurship that you are advocating to scale, really, really fast, you know. I mean, in America, yeah, Ford had an innovative business model that changed its generation and maybe the way business was done in America after. But also, there was an environment that did not entrench Ford, but that allowed others, Dodge, GM and most of these other companies to emerge and improve on those things and create tons of jobs.

So don't you think that governance is vital in a way that it allows businesses that really want to innovate to scale their business model really fast and for other businesses to look at their success and be encouraged to enter that space and do even better things?

EO: Absolutely governance is important. We say it in the book. Entrepreneurs ignite the fire, the government fans the flame. You can not have a developed prosperous society without ultimately getting governance involved, it's a matter of sequencing and incentives. Now, I would agree governance is important insofar as we're talking about the same thing. Again, I don't want us to limit our conversation to oh, good institutions are important, you know, that's a non-value-add statement. Governance is important if what we mean by that is working with economic development stakeholders to make sure the incentive systems in society benefit those who work in government. I, right now, can give you not one reason why a poorly paid civil servant who exists in a system that is steeped in corruption to go to work every day, do a great job, do as much as he or she can for the society that already thinks he or she is stealing money, not have enough money for rent, for health care needs, education need and go home because Mo Ibrahim Index says you need to have good institutions. No, No, No. That makes, again, no sense. I would not do that. You would not do that, I don't think.

Now if what we mean by governance is vital is, look, let us sit down here and let's do it the way the Chinese did. Let us align your incentives with how much investment dollars are coming into your state. Let us make sure that, you know, yeah, you get paid $100 a month, but if you are able to attract this much investment, if you are able to make sure these entrepreneurs thrive, then you get a 50 percent bonus. You get a 100 percent bonus. You develop the incentives to help the government do the job that we're asking them to do. Because it is a thankless job. It is a terrible job. It is a job where everybody thinks you're stealing money, whether or not you are. And we know this. So the idea that we should just keep measuring, saying, "what's wrong with these guys? Why we need to fix it" without sitting down and saying, how can we realistically fix this so we limit the incentive for government officials to steal? We're going to be spinning our wheels for years to come, right? That is what I think we can do from a governance standpoint. Align incentives, make sure, me as a public servant, I benefit if my society benefits.

If my society benefits, and I don't benefit, well, forget about it. It's not going to happen.

TL: I agree with you, we need to move away from some of these useless indices, to be honest. So do you think that changing incentives the way you analyzed, do you think that there are some, I don't want to say natural disadvantages or barriers that are specific to certain societies. For example Nigeria, there is oil and the so-called resource curse.

EO: Yeah.

TL: How do you think that can work with incentive problem? You know, because you have bureaucrats and public servants who have no incentive in the success of the private sector. They can simply sell oil licenses and drilling rights and keep collecting taxes from that same sector and borrow to plug the other fiscal holes and live like that for decades.

EO: Yeah. So, that's a tough question, right? And, again, I want to be as practical ask as possible. If you had a trust fund baby, you had a really wealthy person who didn't manage their money well, allowed their kids to do whatever they wanted, the question you're asking is, how can we incentivize this trust fund baby to actually care about self-improvement and development? I mean, that's difficult, right? What I would do is try and find the officials who will be open to a different way of creating value and wealth. I can guarantee you not all 36 governors in Nigeria are extremely corrupt, or at least corrupt at the same level. Not all of them will be uninterested or disinterested in an idea to create a new industry in their region.

TL: Certainly not.

EO: So it's not to say this is an easy road or, you know, you're just going to find people willy nilly. But you go to the first governor... I'm simplifying because we're on the podcast, right? I know people in government right now, and I can give names of people I trust. People who are trying their best to do well by the community. So the idea that oh, everybody 'cause I think that is what we imply when we say the government has access to oil and you're right, they do. But there are still going to be people in government who we take interesting ideas to and in communicating those ideas, we help them see if this works out, you would have generated this much income for this state. You would have created this much value if you allow this to work out. These many constituents would get jobs. You can talk about this in your next campaign.

Now, if you take that message to every governor in Nigeria, maybe they will all say get out of here, I am not buying it. If that happens, then go to Ghana. Go to Cameroon. Go to Rwanda. Go somewhere until you find a country where it will work. Again, I'm not advocating this because I think it's easy. In fact, I'm advocating it precisely because I think it's difficult. But, unfortunately, I do not see another way we can develop. I just do not. And once I do, I will start promoting that because before we started the podcast, you and I discussed the idea of intellectual honesty and I suppose I just do not see how we get out of the rut we're in if we don't start to think differently.

TL: One final area I'll like us to explore is culture. I mean, one of the books you cited in the book, which I like very much, is Deirdre McCloskey's Bourgeois Dignity, and she talked about how the social embrace, so to speak, of the culture of Commerce, sort of laid the groundwork for some of the things that happened in the West, you know?

EO: Yeah.

TL: So what role do you see for culture here? I mean, it's easy to talk about hard metrics and talk about governance and you know, but we know that culture is the software of society. So what role do you see for culture in this?

EO: You are absolutely right, culture is key. Culture is the software. But culture runs on hardware. And culture is connected to hard metrics. And so if I use your analogy of software and hardware, there is no software I know that runs on software like every piece of software runs on hardware and depending on the makeup of the hardware, if you have a really fast processor hardware, then your software will run faster if it has the capabilities to. And so culture might seem like software that's malleable, and it is valuable, but it is not malleable without hard metrics.

What do I mean? Well, let's think about why we may not value commerce as much as we should or why we value corruption as much as we do. Well, look at the hard metrics. If you're fortunate to get into a position of power in many of our countries, there are hard metrics in your life that increase - your access to the elites in society, certainly your bank account, your homes, your car, your children access to better education. Those are hard metrics. So the idea that somehow our culture values that practice makes complete sense. The idea that we value entrepreneurship and innovation in the US is connected to hard metrics as well, right? Look at the richest people here. It's all these innovators.

So for me, the two are sort of one and the same. What we know is that you can't change the software if it has no bearing on the hardware, if you don't change the hardware. In other words, if we don't figure out how to increase or improve those hard metrics, it's gonna be very difficult for us to change the software, sustainably. We might for a little while, right, we might for a political term or two. But what we're talking about here is long term development, decades-long. And if we don't figure out how to help people in society make progress in a way that they lead better lives, their kids lead better lives, they have access to better healthcare and so on... Unfortunately, the software is not going to change, the culture is not gonna change. And so I do think we can connect the two better.

TL: One final questions before I let you go, which is also a tradition on the podcast is, what is the one big idea right now that... it may be something you're working on or something you'll like to see. So what's that one big idea that you're thinking about right now that you will like to see spread and see the world adopt and see people believe more?

EO: Yeah, so I think for me, in the context of my work, it is this - innovation and entrepreneurship are not things that happen after a society fixes itself. They are actually the process by which society fixes itself. If more people can believe that then we can begin to talk about the “how”. We can begin to say okay, Efosa I get that, but this is my circumstance, this is my context. How can that hold true in my circumstance? There are things like political innovation. When I talk about incentivising the government, that is an innovation. When I talk about entrepreneurs figuring out how to manage the governance issue, that's part of their innovation. So, I think, for me, it would be innovation is something that happens not after society fixes itself, but it's the process by which society fixes itself.

TL: We'll do our best to help that idea spread.

EO: Thank you.

TL: Thank you so much. My guest today has been the author and prosperity researcher, Efosa Ejomo. Thank you very much for being with us, Efosa.

EO: Absolutely, it's my pleasure. Thank you.

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I spoke to urban planning scholar Taibat Lawanson about most things Lagos city. We discussed housing, overpopulation, infrastructure, and the many problems that have made Lagos hard to live. She described Lagos as a ''complex city'' - and she is a sceptic of developments like Eko Atlantic city.

TL: This is Ideas Untrapped, my guest today is Dr Taibat Lawanson who is a professor of urban planning at [the] University of Lagos. You're welcome.

TL: Thank you.

TL: The first question I'll like to ask you is, Lagos is generally perceived and described as a dysfunctional city. Do you agree with that assessment?

TL: I wouldn't say Lagos is a dysfunctional city. I would just say that Lagos is a complex city. 'Dysfunctional', you know, points to a lot of negative undertones, but I will say Lagos is a complex city in which everyone, the population (20 million+) are all trying or jostling for space in the quest for livelihoods, and a better life. So, for me, “complex” will be a more suitable word.

TL: So if there is some kind of attempt at responsible urban planning in Lagos, how do you think some of the problems that the city faces can be mitigated?

TL: There is urban planning in Lagos. As it is with other space of governance, the major challenges that the governance framework is unable to cater for the extensive population, so the infrastructure in the city is such that can accommodate comfortably 8 to 10 million people and we have a population that is definitely double that. So the challenge is that the urban planning framework and the governance framework is stretched beyond its capacity because of the population. And the issue now is that population keeps growing and the capacity of government to manage that population or provide a good life for the residents, you know, the challenge continues to grow.

TL: Okay. So, would you say that there is need for some form of population control measures in Lagos in terms of control of migration or should Lagos be incorporated into some form of national plan in terms of developing order cities and urban centres that can attract the excess population inflow in Lagos?

TL: Well, I've always advocated for [a] special status for Lagos. Lagos used to be the capital of the country and by the time the capital was moved to Abuja, a lot of the growth indicators or the development indicators did not move. Lagos is a centre of excellence, by its name. It's also a centre of economic vibrancy, you know, the economic capital of the country as it were and that hasn't changed. Beyond even the country, it extends as far as the West African coast. So while migration is something that has been happening all along and there's really no way you can control it, why do we have the migration...the high influx of people into Lagos? Some of them have to do with issues in other parts of the country, like the insecurity in the North, you know? So people are moving in because of safety and all of that. And Lagos is in a Federation and in a Federation you have certain rights as a Nigerian citizen so I don't know how population control can be achieved in a Federation.

What I think is that Lagos should be given a special status because of the challenges she faces as a sponge for the entire country and the West African sub-region. - Taibat Lawanson

What I think is that Lagos should be given a special status because of the challenges she faces as a sponge for the entire country and the West African sub-region. That's one. The second one is that we really need to look at the urbanization issue from a national development context. It's not enough for the government to identify all local government headquarters as urban areas, specific intentional programs and interventions must be made for urban development across the country. We need to have some measure of redistribution of resources, redistribution of skills and we really need to take upon governance very very seriously. People are coming to Lagos in search of livelihoods, you know, and then the question is why are they leaving where they are? They're leaving where they are because the livelihoods there are not secure or they are not sufficient. Alright? So the issue of, you know, migration or population control goes down to the issue of national development and decentralization of resources and opportunities for the people.

TL: One thing that also interests me is the issue of housing in Lagos. Housing appears to be quite expensive and the available housing cannot really meet the demand. Now, would you say that it's an issue of supply in terms of the development of housing is not fast enough to meet the demand or there are other bottlenecks in terms of land titling and property rights issues?

TL: Housing is a multifaceted issue. We have issues of affordability, availability, acceptability, quality, you know. The fundamental thing in the context of Lagos is what type of housing are we building? We have a national housing deficit of about 17 million and from the data, we learned that about, maybe, 30 or 40% of that 17 million is in Lagos. So Lagosians have, you know, a serious housing deficit. But then again, when you go to the highbrow areas of Ikoyi, Victoria Island, Lekki, you see a lot of vacant housing. So the problem has to do with what bracket of the housing market is facing this deficit? And that comes the issue of affordability, what kind of housing are we building and who can afford it? That's one.

With regards to availability, the types of housing that people who are starting up their lives or people who are earning meagre incomes can afford, who is building it? Was the approach towards it? Most of that type of housing is being done by landlords and it's done on an incremental basis. And it's done in such a manner that they, you know, are building these houses to use to secure their future. A manner of a pension plan, you Know... in a manner of speaking. So for them, they have to get something reasonable out of it, particularly since they have built, out of usually their pension or their savings or they take a loan from the bank or the cooperative society.

One of the reasons why the cost of construction is high is because even within the estate people are self provisioning these neighborhood facilities - water, electricity, the roads, the drainage and all of that. And it gets to be added to the cost of the housing units. - Taibat Lawanson

So the cost of construction is quite high, and how do we mitigate that? One of the reasons why the cost of construction is high is because even within the estate people are self-provisioning these neighbourhood facilities - water, electricity, the roads, the drainage and all of that. And it gets to be added to the cost of the housing units. So we really need to, kind of, look again at what is making housing expensive. Another issue is using materials that are sourced from abroad. So all those need to be decoupled. That is why housing is expensive. And when we look at the deficit again, we then say 'what about the quality of housing?' The man who lives in the slum, lives in a house, we can then say that - is it decent housing? Is it habitable housing? Is it fit for purpose?

In the context of things, when you're looking at housing, oftentimes good houses in bad environments are not counted, so we need to look at issues of urban upgrading. We need to look at issues of solving the drainage problem. And what really causes all these things is that people go into communities to build before services are provided and those services are meant to be provided by the government using planning standards or being guided by the operating development plans. But the city is growing much faster than the government's capacity, like I said earlier, to provide these services. But people are coming in and people have homeownership aspiration, so they continue to build and they continue to grow. And then the fundamental question of who are we building for?

Remember, I said earlier that most of the housing that is going on now is being done by landlords. The ones that are being done by developers are out of the reach of most people for the reasons I stated earlier. So the housing question needs to be fundamentally looked at. What are the imperatives for mass housing? And how can we get it done right at the cost that people can afford?

The mortgage market, which should be the natural recourse to supplying funding for mass housing, the mortgage market is quite stifled. And that needs to be rejigged, you know, we need to look at it and the only way we can make housing affordable and accessible to more people is to expand the opportunities to get housing finance. And that is through the mortgage system working hand in hand with the developers. The environment is changing. The new FHA chairman seems to be working towards that aspiration, but it's early days yet. But the fundamental thing is that we need to move from this one man building 3 flats and all of that to actually producing mass housing in an affordable manner.

TL: I know you've been...even though I haven't really seen any of your arguments in detail, but I know you are somewhat of a critic of projects like Eko Atlantic. What do you think such initiatives are missing in terms of delivering mass housing on a scale that matters?

TL: Okay, yes I am a critic of those grandiose projects and I call them aspirational projects. They are not at a response to the housing problem they are a response to the governance, security problem and our aspiration to fall into this world-class city, whatever that means. Eko Atlantic City is built or is designed with the diaspora and high net worth Nigerians, and we know that there are only so many of those people. So committing such amount of funds to, you know, meeting that needs or an assumed need of so *many* [few] people, I think, is fundamentally flawed. Alright. If there are 20 million people in this city and over 60% of them live below the poverty line, then providing housing should be looking at the fundamentals - how is the man on the street going to get a place to sleep at night? And committing the amount of resources and government support to these aspirational luxury-type, resort-type, housing estates, I think, is a problem.

And one of the consequences of this is that we're going to continue to live in a segregated city. Where the rich are behind their gated communities and they cannot come out because the angry poor are out at the gate, you understand? So we really need to open up the space...we need to open up the space and make sure that opportunities are available for all citizens of the city, whether rich or poor, at their own level. So it's not a problem for those who want to live in Eko Atlantic or who believe Eko Atlantic is an ideal, it's not a problem at all. But hand in hand with the development of Eko Atlantic we should see 1000 mass housing 2 bedroom, 3 bedroom for government workers, for policemen, for people who are earning within 100 to 200,000 naira month you understand?

TL: Yeah.

TL:  So it's alright to do the luxury housing, but it is also important to simultaneously provide for the majority of the people who live in precarious housing.

TL: As you know, we are still dealing with the fallout from the pandemic and Lagos, like most other cities that are economic centres, was hit very hard. So, what are the patterns you observed from your research in terms of adaptability and how Lagosians generally dealt with that crisis?

TL: Okay, um, I think Lagos was prepared. They started well and I guess that was because of the experience we had with Ebola in 2014. So we had the framework for dealing with such an issue...we have the basic framework and then, you know, the commissioner for health was intentional and the governor gave him every support. So we started off well, there was information dissemination, there was contact tracing and all of that. It started off well, and fortunately for us, somewhat, it started from international travellers, people who are generally at middle-income levels, so it was easier to trace them.

And then, at the beginning, there was a lot of distrust and there are lots of people who still deny the pandemic. It started to get a bit out of hand after the lockdown was announced. And why was that the case? The fact that many people live on daily wages and so they have to go out to feed. If they don't go out, then their families will starve. And when the palliatives started to be distributed, they were not targeting the people who are most at need. And that was because there was not sufficient data to capture them. The government did not know where those people are. They responded with the palliative distribution based on the data at their own disposal, and also because the way government operates, they do not actually recognize many of those who live in informal communities, and those are the people who were particularly impacted by the economic and social consequences of the lockdown.

If a city is going to have a 24 hour economy, then there must be infrastructure to support that economy. - Taibat Lawanson

The disease itself did not affect so many people. We're fortunate maybe because of the weather? Maybe because of the system that was put in place, maybe because of the natural resilience, but we've been quite fortunate with the spread of the disease, but the social and the economic consequences have been more dire, alright? And with regard to food security, with regards to rising prices of food, with regards to job losses and things like that. And that is primarily because the government simply doesn't have data for people in those places, in many of those places. And which brings me to the need for more partnerships between government and civil society actors.

During the lockdown, we realize that civil society, NGOs and faith-based organisations were more effective in supporting people who were at the lowest rung of the ladder. Because they know them, they've been working with them, they've been supporting them before the pandemic. So it's important that government, you know, does what it ought to do, but it's also important that government partners with those who are working in between the cracks and that's where the civil society actors curate data. Because to the best of my knowledge Lagos State operated using the data at their disposal. The only challenge was that the data was somewhat flawed and not fit for this particular purpose and that was why they were lags in the distribution of the palliatives. But Lagosians are resilient people, have bounced back and are trying to make you know the best of the situation as the economy starts to reopen.

TL: One other problem that Lagos faces, which is quite a significant challenge, is traffic congestion. And you already talked about how the infrastructure is stretched and there might be governance and fiscal challenges to delivering the infrastructure that will cater to the ever-growing population of Lagos. So I want to ask you, do you think policies that have been tried in other admittedly more developed cities like congestion pricing, do you think they work in Lagos or there will be challenges with their implementation?

TL: Okay, so take congestion charges, for example, it's been implemented in the UK, in London. You can't go into central London with your car, you get to pay higher. But what happens is that there are alternatives. You don't go into central London with your car, but there is a train that comes past your bus stop every 7 minutes. There's a bus that comes every 12 minutes. You can choose to go by bicycle, you know, so there are other opportunities. There are other alternatives to taking your car. The issue we have in Lagos now is that the public transportation takes fewer people than it ought to. So issues of congestion charges may be reasonable in high traffic areas like Lagos Island and all of that, but are only feasible after alternatives have been opened up.

So what are these alternatives? We have the light rail that is coming into the city centre. If that is implemented, if that starts to run, yes, the issue of congestion charges may come in. We have the largely untapped waterways. The waters of Lagos are empty. It should be full of boats and ferries moving people from one area to the other. There is nowhere in Lagos that you cannot get to by water within 30 to 40 minutes. And that's something that we're not doing enough of, so that also needs to open up. There need to be these alternatives before you can, you know, even make these stringent things. And now with the pandemic, people are afraid to go out in groups, the issue of physical distancing comes in. Somebody who has been using the BRT for example now doesn't want to be cooped up with 30 other people and chooses to take his car out for his personal safety.

You can't blame that kind of person because he's doing it for personal safety. So until these alternatives are put into place (and adequate communication and the reasons behind certain decisions are out in the public domain), then those kinds of interventions or those kinds of approaches would just be seen as not being inclusive. It's important to achieve development, but it's also important to achieve development in a manner that is respectful of the rights of the citizens and is inclusive, recognizes that people belong to different social-economic categories and also recognizes that people have different life experiences and ensure that at every point in time the rights and privileges of citizens are taken into consideration.

So take, for example, disability rights. Apart from the BRT, even within the BRT not many bus stops that are being constructed are wheelchair compliant. Not many road signs have the Braille component. So these citizens who have rights as much as the next person, they're not even being thought about or catered for in the development of the city. So all these things go hand in hand. The first thing is to recognize that you want to make things work. The second thing is to make sure that you are making things work for everybody, and so the scale may not be as high or as large as one intends to, but things must be done in a manner that is inclusive and is respectful of the rights of all citizens.

TL: Lagos is, among other things, the entertainment capital of Nigeria, the cultural capital of Nigeria. And it can definitely hold its own on the global stage. From what we've heard from our parents and through history, it used to have a very vibrant nightlife that seems to be... I don't want to see it dying, but petering out a bit. What do you think is responsible for that? Is it insecurity or gentrification in terms of housing? Or...what do you think is responsible for that?

TL: Okay, Lagos has a very vibrant entertainment scene, but the only thing is that the entertainment is kind of skewed towards a particular sector of the society and that's where the problem comes. We also have a lot of privatization of resources. So take for example the Bar Beach. The Bar Beach used to be a weekly Mecca of sort for most Lagos families. So after church on Sunday, you go with your cooler with your family to spend the afternoon on the beach. You can't do that anymore. Number one, the beach doesn't exist. It is now Eko Atlantic City. But there are other beaches in the city. But all these other beaches you need to have some money before you can even approach because you have to pay to enter, pay for your parking, pay for your coolers and all of that.

So the Commonwealth of the city has been privatized and so even the natural recreation facilities, one is not able to access them. The unprecedented urban growth also was a challenge where a lot of the parks and green areas were taking over for residential purposes. Over the last 10 years since Fashola's regime, Lagos has been deliberate about capturing some of those parks and gardens back, but there is also the challenge of access. Some of them are free, some of them you have to pay to use the services, and many of them are time-bound so after a certain period of the day you cannot access those services, and that's a problem. The other thing is with regards to sporting facilities. A lot of the sporting facilities are also, you know...they have financial implications and people are poor.

It's difficult for you to divert the money that you want to use to eat to pay a gate fee to access the beach or the stadium or things like that. And so where do people do their entertainment? They're watching DSTV or they're doing the pools' betting which has serious social implications and economic implications. Or they have to indulge in things that are not wholesome, so that's the problem you know. And then we have also the security situation where people feel unsafe when they go out after some time. One, because there is no infrastructure to support nightlife. How many of our street lights are working? How many of our policemen are going out in the evenings, you know, to see that people are safe and all of that? And many of these nightclubs that even currently exist, where are they located? Many of them are located in the business areas - like on Victoria Island, on Awolowo Road. So these are places that are not easily accessible except you have a vehicle.

So it takes you back to the infrastructure issues. If a city is going to have a 24-hour economy, then there must be infrastructure to support that economy. In Lagos, everything that is government-related, you know that is public, institutional related, shuts down at 5. So how do you expect life to go on when there is no enabling environment for life to go on in the night? So that's where that challenge is. But with regards to the music, to the dramatic arts and all of that, there is a resurgence of that coming up, but the infrastructure to support it in a way that triggers economic growth and is beneficial to more residents is where some more work needs to be done. I think the former governor did something called Community Theatres. And they constructed small theatres and cinema kind of places in five different local governments, but I don't know whether they have started operation and what the nature of their activities look like.

TL: So my final question to you, which is a bit of a tradition on the show is what's one big idea...and this could be about anything, urban planning or any other thing that you're researching or interested in. What's the one big idea you like to see spread everywhere and you'll like to see people adopt or carry in their head or implement?

TL: So for me now, something that really bothers me...and this is not even from an academic perspective, this just from somebody who's living in the city has to do with the waste, particularly the plastic waste. Our waste management structure is not robust enough to cover everything that needs to be done, but people are not helping matters. Lagosians are dirty. You know, there are throwing things out of the window, they are not putting their rubbish in the bin and things like that. They're not sorting their waste and the plastic waste is particularly stressful.

The circular economy has come in with regards to the plastic bottles and so companies like WeCyclers and other recycling companies are turning this plastic into something that has economic value. So that's working. But those foam plates are everywhere, they're blocking the drains, they're making a mess of everywhere and I think we need to take personal responsibility first. You know, how are you working with your waste? What kind of waste are you generating? How are you sorting it out? How are you getting it into the bin and how are you getting it into the LAWMA trucks and all of that? That's the first thing. And then for the LAWMA people, how are they sorting it and making economic value out of it?

But for me right now, we need to do waste sorting at home and we need to take personal responsibility for keeping our environment clean. I think a lot of the drainage problem in Lagos, apart from the really structural engineering ones, can be mitigated if people were more intentional about their waste management practices.

TL: Do you think there needs to be [a] strong regulatory or punitive response from the government in terms of this problem?

TL: Um, I think the first thing has to be massive orientation, reorientation towards living a cleaner life. Many people don't even know that it is wrong, many people don't know the consequences of some of their messy habits, so the government has to come out and, you know, educate. Public reorientation. Let people understand that throwing that bottle of Coke or something out of the window of the Danfo has implications for the quality of fish that we're going to eat if that bottle gets into the water, the kinds of chemicals that will be produced, and getting into the fish, the quality of the fish that we eat, the quality of the food that we get, and things like that. They need to understand that those seemingly careless waste practices have a direct link to the incidence of flooding in their neighbourhood.

The other day there was a picture of Akobi Crescent in Surulere and it was full of those packs. And probably the government needs to enforce, you know...where are these products coming from? What are the alternatives? I know in the UK now when you go to eat at these restaurants, if you don't ask for cutlery, you don't get. And they're using recyclable materials, like easily biodegradable materials like bamboo, like wood, they're asking you to come in with your straws and things like that. Some of them are charging you for plastic bags in the supermarket. In Germany, for example, you get a trade-off for every plastic bottle you bring into the shops. You understand, as long as you bring empty bottle[s] you get some credits.

In the UK your recyclables are weighed and you get a debit...you get a discount on your monthly bill for those recyclables. So we need a lot of those kinds of incentives in the waste management sector, then we need a lot of public reorientation before the issue of infractions, contraventions and punitive enforcement can come into play.

TL: It's it's been great talking to you. Thank you very much, Dr Taibat.

TL: Thank you, Tobi.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.ideasuntrapped.com

I had a conversation with Elizabeth Omotunde, Emmanuel Era, and Ronke Bankole on the ongoing protest against police brutality in Nigeria. We thought out loud mostly on police reforms, what the legacy of the protests might be, and the complicated morass of the Nigerian bureaucracy. Many thanks to my guests for finding the time to offer their thoughts. Like I have reiterated multiple times, this is the moment for the political leadership of the country to use this example to tackle some of the roots causes of our multiple social ills.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.ideasuntrapped.com

Trade economist Meredith Startz and I talked about her research on the information costs of trade. We discussed the strategies that traders use to lower costs associated with search (ensuring they get their goods to the market on time) and moral hazard costs (ensuring they get what exactly was ordered from their suppliers). We talked about how big businesses use fixed cost strategies to lower costs, the benefits of higher revenue for firms, and how innovative business models can improve contracting in long-distance trade. Meredith is doing important work, and I think her research deserves a lot more attention.  Bonus point; she also did field research surveying traders in Lagos.

TRANSCRIPT

TL: Welcome to Ideas Untrapped and my guest today is Meredith Startz. Meredith is a trade economist at Dartmouth College. You're welcome, Meredith.

MS: Thank you so much for having me.

TL: I love your work so much, I have to say. 'Cause, um...

MS: Thank you.

TL: Usually, when we talk about trade, at least from my familiarity with the literature and matters of policy, we usually focus on tariffs and like you mentioned in some of your papers, transportation costs. I kind of see your work as getting into the microeconomics of trade a bit, and I found it really, really fascinating. So briefly, if you can just introduce us to the concept of information costs in your work with you called search and moral hazard problems.

MS: Sure. So let me back up just one step to sort of talk about the context in which I'm often thinking about trade costs, including information costs. So I spend a lot of time talking to and interviewing wholesale and retail traders often in Lagos, in Nigeria. And as you sort of said, while the policy world and often the academic world focus on kind of the macro side of trade and trade costs and things like tariffs and sometimes transportation costs. You know, if you talk to any business actually engaged in trade, there's a whole lot more to it than that. There are things we kind of often lump under trade logistics that really make up a big part of the business, and so if you talk to people in Lagos who are importing clothing, or electronics, or something like that, you realise they're facing all kinds of challenges that they deal with in their business every day that you can't really summarize through these kinds of standard trade policy, tariffs discussions.

And so one of them that I ran across very early is that these traders are often travelling to the countries that they're sourcing from in-person to make purchases. So they'll get on the plane and go to China to buy things. And of course, they know that they don't have to do that. They could pick up the phone or get online to buy their products. And so you talk to them about why they're doing that and two things came up really frequently and this is where we're going to get to what I mean by information costs. So one is that they have to actually figure out what kind of products are available for sale, where in the world, who's selling it, what are the characteristics of those products, what's their quality? And when Economists hear that, it makes us think of what we call search - which is sort of a weird way of saying that the world doesn't conform to this very oversimplified assumption that Economists sometimes make use of that we call perfect information. Which is the sort of silly idea that everybody knows everything about the whole world that's relevant to the decisions they're making.

Obviously, that's not true in reality. And in the case of traders, one of the ways it's not true is that they have to figure out what products out there are actually available, at what prices, from what sellers? So that's the search problem that I'm talking about in my work. The other problem that these traders talk about all the time that they sometimes solve by going to make a purchase in person is the fact that you can't just send money off to the other side of the world and assume that you will necessarily get back exactly what you were expecting when you were expecting it. And so when I talk about a moral hazard problem, I kind of mean the trust or contract enforcement problem related to that. You send off money, you don't know what you're going to get back. It could be the wrong product or a lower quality version than you expected. Or somebody could even just keep your money and send you nothing. So that's the second kind of information cost that I talk about in my work.

TL: Yeah, that's fascinating. And I mean we buy these products every day, we interact with the retailers every day, and you're sort of getting into a lot of the things that go on through the backchannel. What are the strategies you observe? At least, from your study and what your model predicts, how do traders try to work around these costs? What are the strategies you observed?

MS: Yeah, there are a lot of strategies, the one that I focused on a lot is the one I just mentioned which is travelling to do business in person. And the way I kind of think about formalizing that is that when you're standing face to face with someone in a market or with your supplier, you can almost literally exchange money for goods at the same time. Right? You can be standing there in the warehouse, you see the shoes that you want to buy, you've looked at them, you've checked them out, you know that they're correct. You hand over your cash or you sign off on that wire transfer and you pick up the box of shoes and you leave with it. And at that point, you know exactly what you're getting and you know that you've gotten what you paid for. And so this is kind of a very formal way of thinking about something that I think is just a really practical, obvious solution for people in the trading business, right?

But if you think about flying to China, you kind of reduced your very remote problem back down to that face to face problem that you would have if you were right there in person with your supplier. And so that's kind of a way of avoiding all of these search problems and contract enforcement problems (one) that you face when you're far apart by just literally turning it back into a face to face transaction.

TL: One thing I thought about though, I mean, hearing you speak and reading through your work is that individual traders bear this cost. And from your observation, are there high trust clusters among traders and firms, where, for example, they can pull their resources and have a representative go to China or Dubai, or some of these entry ports in order to reduce the individual cost of travel and search?

MS: That's a great point and I had exactly that question when I started working on this. So I think the idea that you're getting at, is if some of these strategies you have for solving your problems like travelling abroad, carry these big fixed costs and you're a relatively small business, then you think it would be smart to get together and share that big fixed cost and only pay it once. To be totally honest with you, when I started asking traders about this, they kind of looked at me like I was a crazy person. Like, who are you asking me if I get together with my competitors and share all my information about the products I want to buy and let them go buy for me with my money? And of course, that's not always the case, we do see some people who collaborate with other traders.

But broadly, I think what's going on here is, you know, if you put yourself in the shoes of these small businesses, the people that it would be the easiest for them to network with or, you know, the most sensible in some ways are exactly the people who work near them and deal in similar goods. Those are the people it's easy to talk to, the people who might want to buy the same kind of things, to see you at the same time. And those are exactly the people who you're in competition with, who you don't want to give your private information to, who you don't want to give a leg up against you. You know, you want to have newer, more interesting things that customers will like more at lower prices than those people. And so I think what we see is that it's actually really hard for these businesses to cooperate in that way precisely because it would involve sharing information or cooperating with their competitors.

TL: So, how do big firms, I mean, these are small traders, right, and...how sensitive are these patterns to farm size? I think that's what I want us to start with, basically.

MS: Yeah, I mean so if I'm understanding you right, just as it would make sense for a couple of small firms to get together and try to share this fixed cost, the larger your company is the more it makes sense to you from a profit perspective to use this kind of high-cost strategies that then let you get goods at lower prices or get better goods, for instance. And so we should see larger firms doing more of this. And you know, within the data that I've collected, which still focuses on fairly small trading firms, that is true. Larger firms are more likely to take this kind of strategies like travelling to go buy in person. I think there is sort of a broader question which is, as the structure of the economy changes and the nature of firms engaged in the retail sector or in trading changes, do you see kind of a shift in ways of doing business? And my suspicion is that that is true, right? That larger firms do engage in things like setting up supply chains and distribution networks that sort of have higher setup costs, but then let them (to) continue to do things at lower prices.

And so in some countries, where you've seen a transition in the way retailing works, so for instance, in a lot of Latin America or in Mexico as you've seen this kind of big box store multinationals move in, you do see them lowering prices and changing the way supply networks work. And I think not much of that has happened in West Africa yet and why not is sort of an interesting question about how Nigeria's economy might change in the future.

TL: I will understand if you want to pass on this question, but does that strengthen or weaken the case for big businesses generally from, say, a policy incentive perspective?

MS: Yeah. That's a really tough question and this is sort of related to some work I'm doing now, so I may have a better answer for you in a couple of years. So let me lay out one thing that I think is a trade-off you might want to think about there.

TL: Okay.

MS: So, I think the kind of intuitively appealing aspect of increasing firm size is sort of what we were just talking about, right? That they have an advantage at paying these costs to set up really efficient distribution networks or supply chains. Right? The tradeoff going in the other direction is when you have large firms, they may have a lot of market power, either in the sense of their ability to raise prices for consumers or in the sense of their ability to sort of capture local regulation and lobby for policy or political decisions that are favourable to them, in a way that small firms have to be very competitive with each other and may not individually have the ability to influence those kinds of decisions. And I think it's not obvious, kind of, in theory, which of those is going to weigh out, right? That's an empirical question. And I think one thing that's interesting is to make a very broad generalization. I think you've seen this kind of big-box chains struggling both in West Africa and to a lesser extent in East Africa in recent decades, right? So you have the example of ShopRite which made a big initial expansion in Nigeria and is now pulling out.

And I don't know exactly what all went into that, how much of that was about bottom line, business tradeoffs not making sense versus other things. But the fact that Nigerian retailing is still so dominated by these small scale enterprises suggests that there may be some kind of countervailing costs or challenges that large firms face in scaling up, which might even directly outweigh the advantages you expect them to have in setting up sourcing or distribution networks. Right, and so I think there's both a question kind of right now, are they actually more cost-efficient, and if not, what are those other countervailing features? And then there's a second question down the road which is, suppose they can actually do things at a lower cost, does that result in lower prices for consumers or they're kind of able to capture markets in a way that makes things not actually better for consumers in the end?

TL: Talking about the struggles of large larger retail chains in West Africa and the case of ShopRite as an example, one thing I also found very interested in your results and your paper is the role of higher-income generally in the population and an increased consumer spending. And you pointed out that in that kind of environment or economy, it's not really about firm size, it's about the revenue of individual firms. Can you just outline how that works briefly?

MS: Sure, I mean that I think relates a lot to what we were just talking about, right? The really simple insight there is that suppose you have these strategies for overcoming, for instance, search or contracting problems like travelling or like investing in a distribution network, they carry some fixed cost. When a firm has higher revenue and they expect to be able to sell more to more people, they're going to be more able from a profit perspective to carry those big fixed costs. And to the extent that those strategies actually reduce marginal costs, they are then able to supply goods at lower prices. That abstracts from what we were just talking about, which is these sort of other issues about market power or regulatory capture.

TL: Does your model indicate any comparative result between an overall reduction in information costs generally, and how some of these multinational retail firms with established supply chains like you mentioned and some market power (which I would interpret as fixed cost strategies used in reducing this information cost)....which of these channels and I know this may be asking too much of you Meredith... which of these channels would you say improves welfare faster in terms of prices and, just generally, economically?

MS: Yeah, that is a really hard question. Let me say this...

TL: Okay.

MS: You know, if you ask most economists, I think their instinct will be - solve the underlying challenges, and then let the market tell you what the best strategies are or what the right firm size is. That's a big oversimplification, but I guess what I mean by that is I'm not sure there is necessarily a conflict between trying to reduce information costs for everybody and allow these sort of larger multinational firms to kind of bring in some of their cost advantages, right? Trying to reduce this other kind of frictions or challenges related to trade which might be about the difficulties of travel, it might be about financial regulations, it might be about, you know, access to Internet or infrastructure. Those are likely to help with everybody, right? And if you solve those problems then you can see, well, is what happens that these small firms are able to compete so much better that actually they survive or is what happens that kind of enables the ShopRites to come in and do an even better job. And so I would say rather than kind of trying to answer that question ahead of time and plan for it, you just solve the underlying problems and then you learn a lot about who's able to operate best in that environment.

TL: I understand your answer, but why I find that question relevant is the way that...and this is a bit political, the way that policy is actually done here, at least in my experience in Nigeria, where local firms are prioritised and even in some cases there are very serious barriers in terms of policy in the way of large multinational firms. You know, there's a bias towards local firms and policymakers kind of treat it as a tradeoff. Because in some countries, again Nigeria as an example, there are no really big local retailers with experience in supply chain management and all these advantages that multinationals may possess.

So I feel like if there is a better answer or a more informative answer about the implication of what you are making a tradeoff as a policymaker, it might not be economically speaking. Like you said you, you may just have to improve the overall business environment and let the market dictate. But as a policymaker, if I know that letting multinational firms operate alongside local firms and not erect all these barriers and make it an unnecessary tradeoff, I'm actually improving the overall welfare of the people and it might improve how we discuss trade and the overall attitude of policymakers. That’s why I find that question very relevant because trade can be a very sensitive issue in terms of policy here.

MS: Yeah, I completely hear you. And I think it's worth distinguishing two things in what we're talking about, right? One is about, kind of, the firm size and the business model and the other is about multinationals versus local firms. And I hear what you're saying that in Nigeria we may not be able to separate those things in practice if there aren't, kind of, local champions that are able to expand that larger-scale retailing model.

TL: Yeah

MS: The evidence that we have from other countries right now, right? Which you always have to be a little careful when you extrapolate from one context to a very different context. But the evidence that we do have seems to suggest that those kinds of big multinational retailing firms do help consumers when they enter the market. There's a very nice paper from the expansion of Walmart in Mexico by 3 economists who, sort of, studied related issue that says that that definitely lower prices for consumers and it actually did it in two ways. One was that the Walmart subsidiary itself offered lower prices, but the other was that it provided more competition for local firms who then also lowered their prices.

So you know, I think, my inclination is to say that I have a little trouble seeing, especially if you don't have local champions who can step up and try that business model that it's a little harder for me to see why you'd want to block firms from other countries that are able to do that. But as you say things are complicated and there's sort of a lot about how politics in any particular place works that makes it harder to implement that in practice.

TL: Interesting. One other thing I also like about your work is that there's a lot of room for improving the status quo without really spending so much money in regards to developing countries - without committing too much resources to interventions, there are some frictions that you can just get rid of and would generate some positive results. So I want to talk about contracting frictions a bit. You talked about third parties using financial services to deal with some of these frictions but, again, there's a situation where they bear excessive liabilities and they don't have the incentive to invest in providing those services. Are there government interventions or regulations that you think can create a market for reducing contracting frictions?

MS: So my hunch is that a lot of what is needed here is not only a conducive policy environment, but also innovation to make these type of financial and legal services more useful and accessible to small firms. So for instance, things like letters of credit or international arbitration services are perfectly well-established tools that large firms all over the world used to deal with this same kind of contract enforcement problems that they face when engaging in international trade. And I think, you know, the reason those are not very accessible to, say, smaller wholesalers or importers in Nigeria in their current form is not necessarily any specific regulatory barrier. But because for a bank to be willing to offer something like a letter of credit, they have to charge a cost that would be prohibitive for a small firm, for a bank to be willing to take on that liability and process the service.

And so I think probably a lot of what we need is innovation in how this kind of e-commerce platforms or financial services work to be able to provide that same function at a lower cost, right? 'Cause I think what we see, certainly in the data that I work with, is that if the cost of a letter of credit isn't lower than the cost of a one week trip to China? Importers are still going to solve their problem by just going to China.

TL: Yeah.

MS: I'm not an expert on financial regulation in Nigeria, but I think that maybe the best thing you can do is try to set things up in a way that actually encourage innovation in these services, right? Not just encourage the entry of kind of established players providing established products, but innovation that lets people figure out how to adapt these products in a way that works better for the local economy.

TL: How do traders respond to huge exogenous shocks like the global pandemic that the whole world is dealing with? How does it affect their strategies in terms of cost and every other thing they do to adapt?

MS: Yeah, as I'm sure you can imagine, it's been a really tough six months for these traders that I work with. So we've been doing some high-frequency phone surveys, just calling them to see how they're doing and how they're coping with things. And you know one thing that I think is interesting is they were actually feeling the crunch from the pandemic well before, I think, most people were because they started to see problems with their supply chains in China back in January. Right, which makes sense when you think about where they're getting their goods, and where was experiencing problems that early. So they've actually been suffering through this even before the local lockdowns and before, kind of, the general public started having issues. So I think overall, what we're seeing is that so far these kind of businesses are mostly surviving. They made it through the lockdown. They, kind of, totally shut down for a month or so and they're now back up and selling.

And they're kind of facing problems from two sides as you might expect, right? So the demand side is maybe not surprising right. Customers can't come around as much, customers are worried about their own income and their own livelihoods, and so they're buying less. And of course, the restrictions on interstate travel in Nigeria also cause problems. The kind of importers that I work with are selling not only in Lagos, but throughout the country. And so when half of their customers couldn't show up from other states where they had to kind of incur all these extra costs to get goods to them, that was really causing problems for them as well. On the supply side, they are still seeing problems, so when we were interviewing these traders as of early July, a lot of them still had not restocked this year. And they had about a month's worth of goods in stock, and so they were facing the challenge of how to deal with that. We're going to go back and talk to them again soon, so we'll find out what they're doing. But I would say, overall, the attitude seemed to be one of a holding pattern, just kind of wait and see what happens. And so we saw people starting to think about things like well, can I buy and sell more online or can I find different ways to deliver products to my customers? But in terms of their basic business model, it was really a see if we can wait it out kind of attitude the last time that we talked to them.

TL: It's been terrible. I can imagine.

MS: It's really tough, yeah.

TL: Yeah. I know I've been pushing you into policy talk quite often, so are there things you think traders - and of course, we can't really ignore policymakers in the whole picture - can do to better mitigate the effects of future shocks? I know we can really predict what's going to happen next, no one saw this coming, I don't know if anyone could have. But as a sort of general heuristic, what can better be done to mitigate the effects of future shocks?

MS: Yeah, that's I think the question on pretty much the mind of everybody in the world right now. You know, I think one thing that seems to have been quite hard, especially in Nigeria, that I think some countries or some regions in some countries have dealt with better than others is, there's sort of no planning for this kind of shock, right? I mean, kind of by definition, this is sort of such a large catastrophic problem that it would be hard to set up your business in a way that was completely immune to or insured against this kind of challenge. And part of what's particularly difficult about this kind of catastrophe is, in a way, we don't want people to go back to business as usual. From a public health perspective, the question isn't how can we get customers out there buying more things? It's how can we tide people over until we deal with the health problems so that then we can go back to business as usual. And so I think one thing that some countries have done better than others is basically finding ways to help people just tide things over until we solve the public health problem.

And my sense is that in Nigeria, not just from a business perspective, but even from a private citizen's perspective, there is a feeling that palliatives have not been very forthcoming or emergency loans have not been very forthcoming, and if you sort of talked to people about what have they actually been able to access to try to tide their business over or get a little bit of working capital so that they can get going again after the lockdown, they have struggled to access those kinds of things. And so, I think looking toward the future this is kind of what we have governments for, right? It's this kind of huge public collective problems that it's really hard for individuals or businesses to self insure against, and so being more prepared to give that kind of emergency insurance and emergency support that just gets people through to the other side, I think, is probably what we can focus on.

TL: Hope we all pull through together.

MS: Absolutely.

TL: Yeah, so we're going to get into some speculative grounds here, so please just indulge me.

MS: Absolutely.

TL: So as a general question I want to ask you this. Why is straight policy so controversial? I mean, either throughout history or now in Africa, at some point in Latin America. Importing versus exporting. Local firms versus foreign firms. What are the surrounding issues of trade that makes the economics, which to me seems pretty clear, so difficult to accept either by elites or policymakers, generally?

MS: Yeah, so here you're getting, sort of, my personal opinion as somebody who kind of wonder sometimes why trade economists aren't more effective at communicating what we know about the world to policymakers or to the general public. My sense is that there are two things going on, right? Or it's kind of the intersection of these two issues. So, one is that people throughout history in all circumstances are very susceptible to us versus them narratives. And so when you start talking about international trade or foreign investment or multinational activity in your country, it very naturally lends itself to that kind of us versus them political narrative, right? If you need somebody to blame for economic problems, it's very easy to say 'well, we don't want these foreigners being the ones who are profiting in this circumstance, we want it to be us.'

One of [the] deep insight of economists about trade is about the gains from exchange due to comparative advantage, which is the idea that if you have sort of different endowments or different skills in different places, right? So one place has a lot of capital, one place has a lot of skilled labour, or one place has a lot of unskilled labour. The kind of deep insight about trade is that if those places interact with each other economically, actually the kind of total surplus that everybody has access to is going to increase. And if we divide that up the right way, everybody can be better off. And economists really like this idea, and we think it's probably true. The thing that we haven't done so well about communicating about is that we've also known for a long time that that doesn't mean that everybody does end up better off in practice, right? There can be allocative or distributional consequences right where even if the total pie has gotten bigger, we fail to divide it up in a way such that everybody is actually better off in the end. And trade economists know that. And we've known it for a long time and I think to maybe unfairly malign my profession, we've kind of thought that that second part of the problem, which is how to divide up the pie so that everybody is better off, is kind of a problem for somebody else.

That's for the politicians or the political economists. Or the labour economists, I don't know who. And so we've really kind of pushed this narrative of trade is good, trade is good without then addressing the second part of that, which is trade is good, how do we make it good for everybody? And I think that's really fed into this kind of natural us versus them story, which is that it's easy to blame the foreigners for your economic problems. I wish I had a better package to offer you here, but I think that's really on me and my profession to come up with better ways of communicating about how you bring both parts of that puzzle together. Right? Trade can be good, and then how do we make it good for everybody?

TL: Okay, 2-part question in reacting to that. One is that, I mean, some economists might try to dance around that fact but the economics is also a normative science, right? And I see economics as utilitarian in a way. So if protectionism benefits a few people but you have a more open trade regime and you liberalize and it benefits a lot of people, even though, like you said, some people are going to lose out. Is there something fundamentally wrong with that vision of the world?

MS: I think, no. If I'm understanding you correctly, you're saying 'does everybody have to win to make it a good idea, or can we just have more people winning?'

TL: Yeah, yeah exactly.

MS: Yeah no, I don't think economics has anything to say about that, sort of, context free, right? I guess what I was sort of trying to emphasize before is you can say trade is good without even having to argue that it's better to make more people better off at the expense of a few. Now, you may also be right that we can go a step beyond that and say 'look, even if we can't redistribute perfectly so that literally everyone is better off, we're still in favour of this because we can make a lot of people better off and we're willing to accept the cost of a set of people who lose.' Personally, I am in total agreement with you about that. I would say that I think there's a bit of a cautionary tale in that strategy, in the backlash against trade that I think you're seeing in a lot of countries in the world right now, including my country, including in the United States. Where, increasingly, there's a negative reaction to free trade and pro-trade policies of all sorts, and I think a lot of people think that this may be because, you know, we… where, by “we” I mean, sort of, politicians and policymakers and economists and the general public kind of ignored the set of people who were losing from trade for too long.

And, it doesn't necessarily have to be the majority, it just has to be a group of people who are really hurting to then kind of change the whole narrative and to change the public view of trade. And so I think you do still want to be a little careful about saying, ‘well, the majority gain, and so we're willing to accept some losses’ [be]cause that could backfire on you in terms of the public perception of trade later on.

TL: The second part question is, would you think we'll be better off if there are more economists running policy? Maybe not every policy, but at least trade policy and we don't get into all the political complications or all the other things. Because...I'm not an economist, obviously, but economic findings can be counterintuitive. A couple of days ago I was still listening to somebody at the Central Bank talking about the recent ban on importation of maize that 'it's pretty stupid to have someone else produce what you eat.' But we know that is not true, right? So I'm just wondering would the world or us in Nigeria or anywhere else where some of these things can be a problem be better off if economists just run things, you know, and then we won't have to have endless tribal debates about some of these things?

MS: You're asking an economist, 'should you just hand us the reigns to let us take over?'

TL: Yeah.  

MS: You know, my personal preference... I am really speaking for myself here, I would be wary of just letting economists run things, or at least let me put it this way - letting academic economists run things. You know, we're very motivated by a desire to understand how the world works and the skills that make you good at that are not always the skills that make you good at, you know, thinking about or empathizing with everybody's circumstances, or communicating about that, or coming up with creative, practical solutions. Right, and so I think actually, in my ideal world, you have policymakers who are good at those things who are really, really listening to their advisors who are a bit more technocratic, who include economists and even academic economists.

And I think I would actually prefer that to letting economists run things, because I think economists can sometimes do stupid things like discount the set of people who are really, really hurting because they've been on the losing side of trade for the last 30 years. That's kind of not our skillset to know how to deal with those things. And so I think you want policymakers who are a bit more well rounded, but who take really seriously the technical advice that they are getting from economists.

TL: That's a very important nuance. So how do pro-trade institutions then evolve? That is, how do you have this sort of equilibrium that you're describing where the people running things may not necessarily be academic experts or economists, but they take the advice of experts seriously. They look critically at the evidence and things like that. How does a country evolve such institutions, generally? I know I am asking you hugely speculative questions.

MS: This is hardball here. If I knew the answers to this, you could just give me the Nobel Prize right now.

Laughs

TL: So I'm just interested in your opinion and your speculations, so...

MS: Yeah.

TL: Just feel free.

MS: Yeah, Okay, so let me try to say something about two different sides of that. So thinking about institutions more broadly. I sometimes wonder if, especially when it comes to trade or industrial policy, we get a little bit too fancy. That, you know, as far as anybody knows, there are some sort of fundamentals that seem to be associated with countries getting richer and people's standard of living improving and those are things like good infrastructure investments, and increasing human capital through health and education and international connections and communication. And having sort of sensible domestic policy even in just a very limited sense of not unnecessarily getting in the way of businesses doing what they need to do. (Kind of ease of doing business-type thing is what I'm thinking here.) And far be it for me to say those are easy things to accomplish, those are incredibly difficult things to accomplish, but you know some of it is not that complicated, right? Some of it is kind of stop getting in your own way.

And, I sometimes wonder if we spend a lot of time thinking about, you know, should we ban imports of this product or that product or try to have this kind of industrial policy and it's not that those couldn't have important effects on development but I sometimes wonder if we're spending a lot of time thinking about that rather than thinking about how to just improve the fundamentals. A kind of different way to think about your question, which is less about who is setting policy and more about kind of how do maybe nongovernmental institutions arise that are helpful to trade? I think is a super fascinating question that, to be totally honest with you, I don't think academics know a ton about. But let me give you an example, which is that credit bureaus, which are basically organizations that just report on the creditworthiness or the past history of individuals or firms, didn't start as a policy intervention, right?

If you look at their origins in a place like the US, that was actually a private business that started offering credit reports on individuals and then selling a service to businesses which was just their reports on all these people so that they could make a better decision about whether to lend them money or whether to go into business with them. So some of those kind of things I'm not sure we have to look to government for, it's more about thinking about what are private businesses or sort of mutual aid associations or business associations trying to accomplish and are there things that we're kind of putting in their way that make it more difficult for those sort of institutions to arise? I know that's a very abstract answer to a very tough question. So maybe a better of putting it is, I think that's a really important area for further study.

We know for instance, in the areas that I work in that market associations do a lot of work in Lagos. A lot of things like providing local order and dispute resolution and facilitating security or utilities or cleanups. Those are actually things that are at least in part being provided by these private market associations. So then you start asking yourself, 'okay, why are they not doing other things?' Why are they not providing kind of a credit bureau type service? And I wish I knew the answer to that question. I don't. But I think that, you know, that's sort of very fruitful both in terms of trying to learn about how the world works, but also thinking about kind of where some of these protrade institutions could come from in the future.

TL: How much do some underlying societal factors or initial conditions affect the evolution of pro-trade institution? What I have in mind here is culture, right? How much influence would you say that has on how institutions and, specifically, protrade institutions like we are discussing, how much influence do you think they have in the evolution of such institutions? I mean, one example I got from, I think [Avner] Greiff was, the Maghrebi Trader (Jewish traders) in Italy and the Genovese traders and how the former relied on ethnic networks and the latter kind of developed this statewide rule of law contracting regime. What determines such divergences? I mean, speculatively?

MS: Yeah. I think it's pretty clear that there are...this is going to now sound so abstract as to be a bit meaningless, but you know, obviously there are multiple ways of getting the same thing done. And just clearly you look around the world, there are different ways of doing business, and that those ways of doing business are kind of sticky overtime right? Certain places kind of have certain traditions and ways of doing things and they keep doing them. I think the place you want to be careful, though, is how much those kind of ways of thinking about business or those attitudes are a cause versus a symptom. So some of them are clearly a cause, but let me give you an example. You know, in the kind of work I do, people talk about trust a lot. And they try to come up with ways of measuring trust right? And we go around the world and we ask people questions about, you know, 'in general, how much do you trust people and would you trust your neighbour to do this? Would you trust a stranger to do this?' And then we try to think about, you know, is that a cause of growth or of a successful economy.

I'm very wary of that kind of thinking, that trust is a cause as opposed to a symptom, right? It's certainly meaningful. It's certainly correlated with all sorts of things like how you structure firms in your country. Like, there's some evidence that higher trust places even within countries are more likely to have larger decentralized firms for instance. But if you think about it, like, where do[es] trust come from? A lot of it is a response to the conditions that you experience in your daily life, right? And if you're in a place where your experience is that you can't assume that your local government or your police or whoever it is will follow through on what they say they'll do. Or will follow the rules or will make other people follow the rules, right? Or that somebody will be brought to justice if they do something to wrong you, then, of course, you say you don't trust people. And if you live in a place where if somebody steals something from you, they get caught and have to pay you back, then you might say that you have higher general trust because you correctly believe that other people will not end up doing bad things to you.

And that doesn't necessarily mean that the people are fundamentally different, right? People would be inclined to steal things all over the world. It's more a reflection of the environment you live in and how that constrains the way people behave. So, sorry you got me on my high horse about this particular issue, but I guess I'm really cautious about essentialist thinking about things like culture or trust kind of determining our outcomes, as opposed to reflecting the circumstances we are in, and maybe kind of nudging us along one path about how we tried to accomplish the same thing.

TL: That's abstract like you said, but I see your point.

MS: You got us into philosophy here, right?

Laughs

TL: Yeah, one thing that has always got me thinking too is that, earlier you talked about industrial policy, right, and how we can overthink some of these things. In terms of development and how it relates to trade, the "East Asian Tigers" have sort of become the standard for other low to middle-income countries. How much weight would you ascribe [to] export as a strategy in how those countries develop?

MS: Yeah.

TL: Again, that's a bit speculative, but let's go with it.

MS: So let me separate kind of two things. One is, how much you need a strong manufacturing sector? And the other is maybe something about trade balance, right? How much you need to have net exporting to promote growth. And I think the latter, right, this kind of intense focus on exporting has led to some policy choices that there's not great evidence for. So there's this now sort of old-fashioned idea about import substitution that you want to, sort of, restrict imports in part to kind of give your domestic industries a chance to grow strong and then start exporting and that's what you really need for growth. And I will say that there is I think very limited evidence that that actually works. The fact that some East Asian countries did that does not seem to extrapolate to... you know, we can't say that that generally has a causal effect on growth, and I think some countries are sort of nonetheless hanging on to that old idea in a way that is kind of dangerous.

The more general question about manufacturing is a really tough one right? Like there are a lot of countries out there that are trying to emulate the East Asian growth miracles, and I think there is a tendency to say, 'Well, okay, they followed this pattern, how can we follow that pattern too?' Dani Rodrik, who I think is probably one of the world's foremost experts on growth and structural transformation, has sort of for a long time, I think, be more of a proponent of the 'you need a strong manufacturing base approach.' Recently, he's been writing a lot about how growth patterns in the last couple of decades haven't necessarily involved that same pattern of industrialization and promotion of manufacturing, and that there's been some sort of skipping more directly to a more service-based economy in a lot of countries that have been growing quickly. And I think it's a little too early to know whether that pattern is equally successful. But I will say that I don't think we have a ton of evidence that just because some countries happen to follow this pattern, that there's anything that says you have to go through that exact same set of steps in order to grow.

I'm gonna be on the same hobby horse again just bringing it back to the case of Nigeria. You know, I do think that there's a tendency to set up a bit of a false dichotomy, right? You sort of talked about it [that] often, for sort of political reasons, it's popular to feel like it's a good idea to ban imports of something or to discourage foreign investment. And this is kind of set up as a like us or them situation. I think there's not much evidence that that's the case, right, that if you kind of work on fundamentals like infrastructure, human capital, good domestic policy, that's going to help your domestic firms. And if you don't do those things, keeping everybody else out doesn't necessarily do you any good.

TL: Interesting. How much do free trade agreements... I'm sure you're aware of the African Continental Free Trade Agreement that even Nigeria has been very slow to ratify and it's even keeping its borders closed to trade and making negotiations and things a bit difficult. But how much does do those agreements between blocs of countries, how much impact do they have on the overall pattern of trade generally?

MS: Yeah, this is well outside my area of expertise. My understanding is that regional trade agreements actually can have quite a bit of influence on trade patterns. What I will say is that I think there can be a big distinction between what's on paper at a high level in these agreements, and both the nitty-gritty of the regulations and what's actually happening on the ground, right? So I think what you've seen in some of including, like, African regional trade agreements in the past is, you call something some sort of trade agreement or free trade zone, but when you look at all of the accompanying regulations like phytosanitary regulations or border control approaches or harmonization of, you know, product regulations, those aren't in place. And so you get rid of the tariffs, but you don't still have anything that really looks like free trade if the goods are being held up at the border and hit with all sorts of fees for inspections or rejected for phytosanitary reasons supposedly or something like that, right? And so I think there is a lot of legwork to turn this kind of high-level intentions about regional agreements into something that actually encourages higher trade flows on the ground. You know, especially when it comes to smaller traders, if you think about small agricultural traders engaged in cross border trade. They are the ones who often either aren't really complying with what's on paper or are getting kind of held up by all of these little fees and inspections and regulations that they have to deal with.

TL: That's interesting. Tell me a bit more about what you're working on currently.

MS: Sure, so one thing that I've been thinking about recently actually, kind of, brings us back to the beginning of our conversation when we were talking about larger firms that might have kind of more formal supply chains or distribution networks. And so I've been thinking about, you know, in a place where you don't see a ton of those kinds of firms, how do goods actually get all the way out to consumers? And not just in a place like Lagos, but you know, maybe think about somewhere a little bit more remote, a smaller town, or even somewhere rural.

And what's interesting is that instead of kind of having one integrated supply chain where one firm owns the goods and imports them, and employs lorries and distributors and takes them out to its own stores, what you see instead is kind of a chain of actors who are all involved in getting those goods out. Right, and so you might see something like a cell phone or shoes or food products or whatever it is passing through the hands of you know 4, 5, 6 even more different firms or people on its way out to consumers. You have lots of intermediaries for buying and selling along the way, and so my recent work has been trying to think about why does that happen and when do we see goods passing through the hands of more intermediaries? And how does that affect consumers? And I think that kind of instinct for both a lot of economists and a lot of policymakers is that middlemen are bad, right? Middlemen are people who don't add value and maybe they increase prices and that must be bad for consumers. And So what I've been trying to think about both, kind of, empirically and in theory is: Is that true, and if so, when is that true? And one of the conclusions that I'm starting to get to is that in a situation where you have kind of a remote consumer, going through that long chain can actually be good because it's pro-competitive right? That if you had to have one big firm serving that little market, they would be a monopolist and they could charge really high prices. And if instead, you have this chain of smaller actors and goods pass through lots of hands, you might actually have more competition in that local market and that might be good for consumers in the form of lower prices.

TL: I really can't wait to read it. That sounds super cool.

MS: Great.

TL: One final question before I let you go - you've spent a lot of time with me, thank you very much - is what's the one idea you really like to see spread? It may be about trade or economics or your personal philosophy, anything generally. So what's that one idea you really think deserves a lot more attention in society or the world, generally?

MS: That's a great question. I think, you know, you may have gotten this idea from our conversation so far, but an idea that's important to me is that people are really infinitely creative and energetic in solving the problems that they face. And that if policymakers and academics follow their lead a bit more, you might find some unconventional approaches to solving the kind of economic challenges or promoting growth in the ways that we're after. So in my first project that we were talking about, right? The example of this is that people have these search and contract enforcement problems and they just get on a plane and go there in person to solve it. And I don't think I would have thought of that, I don't think most policymakers would necessarily have thought of that as a trade promotion tool, right? But if you look at what people actually do in reality to solve the problems they're faced with, you get those kinds of ideas. And so in the kind of research I do, for instance, when you talk about contract enforcement problems, people often take a very literal approach to thinking about policy solutions, right?

Like, okay, contract enforcement, you start thinking about improving the court system or increasing the rule of law right? And those are very good things. If you can get them right, that's a great idea. But, you know, even in countries with very strong rule of law, a lot of business and trade-related issues are resolved without the involvement of those formal institutions. They've involved things like personal relationships and travel and financial services and arbitration and credit bureaus and so on, continue to be important no matter how rich your country is. And so I think looking to those kinds of solutions that people actually use in practice gives you a lot of ideas about how you might be able to sort of smooth the path to these underlying goals without something like improve the court system, which is a really tall order, whereas maybe change your air services agreement, or, you know, let firms experiment with new trade credit services might be a slightly easier ask that could help us accomplish the same goals.

TL: I love that idea so much and we do our best to help you spread it.

MS: Thank you.

TL: Yeah, thank you very much. I've been speaking to Meredith Startz who is the assistant professor of economics at Dartmouth College. It's been fun talking to you, Meredith. Thank you very much.

MS: It's been a pleasure. Thank you so much for having me.

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