Trade protectionists complain that our existing trade agreements hurt rather than serve American workers. Certainly, President Trump’s election was a wakeup call for pro-free traders like myself. And the lesson is clear: Our future trading relationships must create more jobs and greater prosperity for America.
Yet to do that in a sustainable way, we need the global population to grow wealthier and better able to import higher-value American goods such as the iPhone. And if our exports increase, free trade’s existing benefit (saving Americans lots of money) would find the ally of new jobs.
But to get the world to “buy (more) American,” we’ll need to see dramatic improvements in the rule of law, access to quality education, the empowerment of women, and foreign direct investment. A new report from the World Bank underscores this point.
Titled “Africa’s Cities, Opening Doors to the World,” the report explains why economic growth in African cities is so poor compared to other urban areas around the globe. It’s no small concern. More than 472 million people live in African urban areas, and that population is expected to double over the next 25 years.
THE REPORT EXPLAINS WHY ECONOMIC GROWTH IN AFRICAN CITIES IS SO POOR COMPARED TO OTHER URBAN AREAS AROUND THE GLOBE.
So what does the report teach us?
For a start, too many “potential urban investors and entrepreneurs look at Africa and see crowded, disconnected, and costly cities.”
One problem is the cost of living in African cities where “55 percent of African households face higher costs relative to their per capita GDP than do households in other regions.” And that, “Overall, urban households pay 20 to 31 percent more for goods and services in African countries than in other developing countries.”
The report notes that ultimately, these “costs are borne by urban firms. Higher wages mean lower returns — unless workers are more productive. And without the economic density that gives rise to efficiency, Africa’s cities do not seem to increase worker productivity. The result is that investment expectations remain low for cities in the region.”
“THE RESULT IS THAT INVESTMENT EXPECTATIONS REMAIN LOW FOR CITIES IN THE REGION.”
To fix this concern, says the report, African city planning needs dramatic improvement. It’s not just about throwing money at the problem. Outside of small central business districts, roads and supporting services tend to be of poor quality and highly congested.
Another problem: businesses in African cities tend to be spread out without appreciation for economies of scale. For example, in most global cities, specific industries operate in proximity to one another. In addition, transport links and business-enabling services are designed to support the needs of the industry nearby. Without these benefits, the economic structure of many African city businesses tends to be focused on local supply-and-demand markets. The more lucrative export markets to other regions or nations are highly limited.
The report also notes that because most African cities lack adequate public transportation, many urban workers have to commute by foot. They don’t have money to buy cars. This inefficient allocation of time leads to long-term productivity costs. Unable to travel to the place of work that best suits them, workers accept jobs unsuited to their skills. Talent is wasted.
Another problem revolves around good planning and weak rule of law. Too many urban businesses spend years to gain land purchases and operating licenses. Moreover, in many cases, weak rule of law means that the reliability of a major capital investment is uncertain. This matters because if investments are too risky, they will never get off the ground.
“TOO MANY URBAN BUSINESSES SPEND YEARS TO GAIN LAND PURCHASES AND OPERATING LICENSES.”
What can be done? The report authors offer two key ideas. “First, formalize land markets, clarify property rights, and institute effective urban planning. Second, make early and coordinated infrastructure investments that allow for interdependence among sites, structures, and basic services.” The idea being that city planners should change their ethos to support long term investment rather than short term kleptocracy and bureaucracy.
This takes us back to our starting point: what’s in it for American workers?
The answer is simple. Over time, as African cities grow in wealth, American investors and workers will face ever more lucrative opportunities. Just as consumers in London and Paris buy high-value U.S. goods and services, one day the residents of Nairobi and Lagos might do the same. In short, the U.S. government has a long-term interest in helping African nations develop. If we’re sensible, for example, we’ll employ more U.S. AID grants and loans into projects that pursue these long-term policies.
To improve lives in African cities and American towns alike, we must think originally. Throwing aid money and sympathy at Africans in poverty is a pale excuse for moral justice, not an action in its service. For their better future, and for ours, creative change is needed.