Jun 08 2009

Thanks to Greif, No Need to Grieve Over Development

by at 11:27 pm under Uncategorized

By emphasizing the importance of the way cultural context shapes markets and economic transactions, Avner Greif was able to go beyond North and Putnam’s institutional and social capital-based prescriptions for avoiding path dependency. According to Greif, social structures determine the interactions between economic actors. In this way, Greif’s analysis calls for the need to manage complexity by considering multiple variables, going beyond stark numbers and neoclassical theory, and maintaining the flexibility to adapt to circumstance. This is especially relevant to development today, as can be exemplified in looking at Rwanda as a case study.

Through a comparative historical analysis, Greif showed that the collectivist approach of the medieval Maghribi merchants caused them to close off their trading and market expansion prospects. The individualist Genoese merchants, however, prospered under a more inclusive trading network that enhanced the wealth of Genoa and gave way to beneficial, formal contract enforcing and coercion constraining institutions. The implications of Greif’s findings are huge for development, as the social structures of modern developing countries resemble the cultural collectivity of the ill-fated Maghribi. However, this actually offers promise for the people of Rwanda, as the 1994 genocide—a tragic punctuated disequilibrium—can be interpreted to have shocked the country out of its collectivist culture, one that was once defined by strife between the dense, ethnic networks of the Hutu and Tutsis, into a more individualistic culture that is more prone to avoiding the economic failings of the Maghribi.

Although the legacy of genocide remains as a threat to both internal development and regional stability, it has at least united the locals, the people at the very bottom who were removed from the Hutu Power extremists. The common people of Rwanda are no longer either Tutsis or Hutus, but individual Rwandans who cannot afford to set themselves up as closed-off outlier clusters in the struggle to achieve self-reliance in healing and rebuilding their economic well-being. Greif’s arguments show that developing countries must be wary of collectivist cultural predispositions, and Rawanda has already found opportunity to break out of that vicious path dependency.

At the same time, Greif’s point about the dynamic relationship between markets and political institutions is even more important to consider, as it brings in the need to further consider context to find a balance among all players within Rawandan society. The country, then, would need contract enforcing and coercion constraining mechanisms that work in congruence to the evolving circumstance of the country itself. Fortunately, this can be evidenced through Rwandan President Paul Kagame’s efforts to restructure the country through his own institutions—formal reforms and reconciliation strategies, an emphasis on the empowerment of women in leadership positions, and the proposal of new management models to attract foreign investors. These are factors that are meant to work according to Rwanda itself, from its own interstices, and not from the biases of foreign, aid-based polities.

Much still needs to be done for Rwanda to ensure that it achieves virtuous cycles, but it is at least on the right path. Since its economy, for now, is mainly based on agricultural efforts by local farmers with simple tools, it must take care to appropriately sequence its local development strategy to more appropriately ease itself into the global economy—one that will allow it to generate independent ties to other emergent groups and potential allies. Despite being landlocked and mainly relying on subsistence agriculture, Rwanda supports the densest population in Africa that, perhaps, will eventually propel the country to take advantage of the synergistic processes of cities to support its growth, as long as it is done with measures to manage complexity.

Its first step would be to ensure that its rural farmers can be competitive enough to be integrated into the global chain of production. Poor product quality, inefficient transportation, and lack of access to information flows, as such, must be countered through product standards, quality control, and local infrastructure development to support efficient processing and marketing of agricultural products. After this is done, the proximity of city regions can be considered in helping farmers eventually specialize, diversify and replace imports. As long as its restructuring strategy can improvise and adapt to uneven development, as Jane Jacobs stressed, Rwanda will be able to successfully balance itself in the network of globalization to reduce negative impacts and promote positive externalities.

No responses yet | Categories: Uncategorized

Comments RSS

Leave a Reply

You must be logged in to post a comment.