Free Trade In West Africa

Here is a study of international small business in West Africa. It makes some interesting observations (pdf download!) on its study...

Our results show that interactions are particularly frequent with local religious leaders –known as marabouts – and with civil servants. In the two border regions surveyed, small
traders tend to develop fewer ties with politicians or security officers. The paper shows that
interacting with traditional religious leaders does not have a significant effect on economic
performance, despite the spiritual importance of such leaders, while support received from
state representatives and politicians is converted into economic performance. Small traders
use their connections to actors who have access to state resources or who can help them avoid tax and bans on certain products. Geographically, the paper finds significant differences between countries, regions and marketplaces. Social connections developed with state representatives have a much greater effect on economic performances in Niger and Benin than in Nigeria, where average profit is much higher. Experience is more closely correlated with profit in the region where traders have developed re-export trade activities than where petty trade is the dominant form of business.

The report notes that the re-export trade is actually smuggling activity.  So the situation on the ground:

1. To turn a profit, working with corrupt officials helps.  This in involuntary association, the result of force or fraud or both, but people gotta eat.

2. Voluntary association, that is help from religious leaders, do not prove to be financially helpful.

Now, let's see if education helps -

Surprisingly, education level, which is an important determinant of individual productivity,
has no significant impact on business profit in any of the countries. Having attended school
does not seem to help in informal trade of the border regions of Niger, Benin and Nigeria.
This result challenges those founded by Kuepié et al. (2009) who showed that education was still rewarding even in the informal labor market of some of the capital cities of West
African. The fact that education doesn’t contribute to economic performance is a matter of concern since it’s an important component of human capital, which is known to be an engine of economic growth. The absence of this effect could be the result of the discrepancy between the training received and the abilities required for trade. The other human capital factor, work experience, has a positive impact on informal trade, except in Benin.

So we learn -

1. Education attainment does not matter.  But note what they do not measure - those officials on top of the corrupt regime who gained their MBA or PhD from a Harvard undoubtedly benefit from the education.  It is just the benighted masses who are educated in West Africa do so to no apparent benefit.  As an aside, the name of the Islamic rebel group in West Africa is called Boko Haram, or "bogus education."

2. Since education is not helpful in economic development, perhaps it is a mismatch between what is needed and what is taught. All the same, work experience is the best education.

While experience is not related to profit in BNI, it is positively correlated to profit in the GaMaKa region. This correlation may be related to the historical development of trade between the markets of Gaya, Malanville and Kamba, which originated in the 1980s following the liberalization of international exchanges. This period was favorable to the development of re-export trade of second-hand textiles, which were imported free of custom duties through the port of Cotonou in Benin, transported by trucks to the
markets of Malanville or Gaya, from which they were then illegally exported to Nigeria,
where their import is banned (Walther 2009). The revenues generated by such trade have
contributed to the creation of a diaspora of foreign traders in the GaMaKa region, which
contrasts with the autochthonous business community of Birni N’Konni and Illela.

I've spoken to several people from that region regarding the brief renaissance of trade and prosperity, one fellow with a furniture factory.  They were doing well, and then new rules came down to kill it off.  So there is more going on than just entrepôt smuggling.

The analysis shows that more than a third of the small traders surveyed interact with local
religious leaders (marabouts) or civil servants, whereas contacts with politicians or security
officers are less frequent (one tenth). Small traders receive various form of support from
these categories of actors. The support received from civil servants, politicians, and security authorities is converted into economic performance. This conversion is channeled through two mechanisms: the mobilization of financial capital through connections to actors who have access to state resources and the non-compliance to law and rules concerning taxes or bans on certain products thanks to the collusion with security authorities. Interactions with traditional religious leaders have no significant effect on economic performance, despite the spiritual importance of these actors. We also found that education, widely regarded as an important determinant of productivity and income, does not have a significant impact on traders’ economic performance. This result could be the reflection of a misalignment between education curricula and the need of labor market. On contrary, work experience prove to have a positive impact on the traders’ profit.

So we have people struggling under manage economies in which corruption makes the world go round, and education serves no benefit.  Oppressed people turn to religious leaders, which must be providing a benefit besides money, since the rate of meetings is 10 religious to 1 business.

If you suppress free trade, you get religious extremism and corruption.  Is it any wonder the rebel group called itself "bogus education" as their rallying cry?

And given this, since the twin challenges of the USA are bogus education and corruption, shouldn't we be focussed on our own problems before opening an "Africa command" to "protect our interests."  Unless, of course, our interests are to suppress education and free trade in West Africa.

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