Free Trade, Open Borders and Weak Institutions: Why Is Development In Côte d’Ivoire So Fragile?

Wealth of Nations Podcast

In Greek mythology, Sisyphus was condemned to roll a boulder up a hill every day of his life, only to watch it come tumbling down as he reached the top. Economic development in many developing countries is a Sisyphean task, as strong decades long progress can be rapidly be undone by adverse international conditions or domestic political events. For example, Côte d’Ivoire during the 1960s and 1970s had one of the fastest growing economies in the world. Between 1961 and 1980 cocoa production increased five fold, with Côte d’Ivoire producing 40% of the world’s raw cocoa and fueling an economy that regularly grew by 10% a year. However, a collapse of global cocoa prices and rising ethnic and xenophobic tensions fueled an economic and political collapse just as spectacular. In today’s podcast episode I will be discussing the policies fostered Côte d’Ivoire’s booms in the 1960s and 1970s, the causes for the economic and political collapse from 1978 to 2011, and the politically fragile resurgence of Côte d’Ivoire under the presidency of Alassane Ouattara.
Although Côte d’Ivoire achieved independence from France in 1960, its first president Félix Houphouët-Boigny endeavored to maintain close relations with France. In particular, he retained senior colonial administrators, and welcomed French investment and the French managers who ran these enterprises. As late as 1973, 48% of senior civil servants were French expatriates. In 1984 60% of private managers in major corporations were similarly from France. The government also welcomed a large Lebanese diaspora, which numbered as high as 100,000 at its peak, and played a dominant role in wholesale and large retail trade. Most importantly, massive numbers of migrants from poorer neighboring countries, especially Burkina Faso, were encouraged to migrate to Côte d’Ivoire. By 1973, a quarter of the population was foreign born, with this concentration even more pronounced in the labor force. 41% of all workers in 1973 were born abroad, including 57% of all workers in the urban informal sector and 72% of plantation workers were foreign born.
The industry that most attracted massive numbers of migrants was Côte d’Ivoire’s cocoa industry. Much of the south of Côte d’Ivoire has ideal growing conditions for cocoa, but is very lightly population. At independence, Côte d’Ivoire had a population of only 3 million, with a population similar to that of South Dakota today. The government of Houphouët-Boigny promised relatively secure property rights, with the governments motto being land belongs to they who make it the most productive. Between 1961 and 1978, cocoa production increased from 85,000 to 320,000 tons, with over a fifth of the world’s cocoa grown in Côte d’Ivoire. The government encouraged other commercial crops such as cotton, rubber and bananas while at the same time incentivizing foreign investment in agroprocessing industries. The state facilitated this economic expansion by investing in infrastructure and agricultural extension by levying export taxes on cocoa. The civil service gained a reputation for relative effectiveness, with the administration of Houphouët-Boigny making it clear that those who were loyal and capable had many opportunities to make money through their connections with the state. The group of loyal politicians and bureaucrats made up the core of the political system, with all of the foreign born workers necessary for running the economy with limited access to political power.
The period of rapid economic development came to a halt in 1978 when the international price of cocoa collapsed. The price of cocoa collapsed from $4,600 per ton to only $800 per ton in 2000, with inflation making this fall even more severe. However, migration to Côte d’Ivoire continued as neighboring countries were still substantially poorer, and it was unclear that the fall in cocoa prices were permanent while the average woman had 7 children through the course of her life resulting in the population increasing by more than 3.7% a year during this period. Per capita income 6,000 per year to 4,000 per year between 1980 and 2001. The administrative capacity of the state started to fall apart, as the government did not have access to the patronage necessary to ensure loyalty and effectiveness of government officials. Instead, local leaders started to build up networks of power of their own, with the primary tool they had to gain support was the power to decide who, and even more importantly, who didn’t have access to land.
The death of President For Life Houphouët-Boigny in 1993 marked a major transition in Ivorian politics. His successor Henri Konan Bedie, increasingly emphasized Ivoirité , or having an Ivorian, especially southern, ancestry. In 1998, Bedie passed land laws that took land rights away from migrants. Mob attacks and violent expropriation targeted at migrants became increasingly common. Bedie’s successors, Guei and Gbagbo continued these ethnocentric violence, including a law that barred anyone with foreign born parents or grandparents from running from office. The law was seen as specifically aimed at Alassane Ouattara, the most popular candidate of northern Muslim ancestry from running in the 2000 elections.
The dramatically weakened Ivorian state was unable to stop factions angry in both the north and south of the country from gathering arms. In 2002, the country was plunged into a civil war, with the country divided between north and south. Forces on both sides of the conflict have been accused of brutal human rights violations. The economy of the country continued its collapse, with GDP per continued its collapse with GDP PPP per capita falling by 17% during this period. In 2010, the warring parties were able to organize elections in which were won by Alassane Ouattara. His southern opponent, Laurent Gbagbo, refused to accept the results. After a brief civil war, Ouattara and the military forces of the northern Force Nouvelle won the civil war, and the country was reunified.
Alassane Ouattara inherited massive challenges on the economic and political front. Alassane Ouattara has been highly effective at solving Côte d’Ivoire’s economic problems. Between 2011 and 2019 GDP PPP per capita increased from $3,300 to $5,100, with GDP growth averaging at over 8% a year. These economic results are especially impressive given that the price of cocoa fell during this period, while the country slowly exhausted its limited gold and hydrocarbon reserves. The core of the economic recovery was a boom in cocoa production. Alessane Ouattara partially restored the policy of protecting property rights of whoever made land useful through extensive land certification.This combined with increasing political stability led to a massive increase in land under cocoa production.
Between 2010 and 2018 the amount of land under cocoa production increased from 2.3 million hectares to 4 million hectares, while the total amount of cocoa produced increased from 1.3 million tons to 2 million tons. Cote D’Ivoire has seen rapid increases in the production of other commodity crops such as cashews, palm oil and bananas. Moreover, the government has worked to encourage foreign direct investment into the country, with FDI increasing from $300 million to $1 billion with extra incentives granted to agricultural processing companies so that Cote D’Ivoire could retain a greater share of the value added from agricultural production. Finally, massive investments in infrastructure and agricultural extension show the increasing capacity of the state to support economic developmemt.
However, there are many economic weaknesses to Cote D’Ivoire’s economic growth. Yields on cocoa remain low, and have actually fallen under Ouattara’s rule as much of the new lands opened to cocoa are not suitable for growing crops. Cocoa is increasingly grown in rainforests, with 40% of cocoa grown on protected forests. Moreover, progress on increasing processing capacity has been limited, with the share of cocoa processed domestically declining from 38% to 32% and the share of cashews processed domestically increased from 3% to 10%. Finally, the government has not made social sector funding a priority, with infrastructure consistently prioritized over health care and anti-poverty measures.
These weaknesses are closely linked to the political crisis that threatens to cut Côte d’Ivoire’s economic miracle short. The fundamental problem is that many ordinary Ivorians do not see their own economic fortunes tied to the rapid increase of commodity crop production, and the construction of new roads and bridges. Something that has become very visible in the elections to be held on October 31st 2020. Even before the elections, Ouattara’s administration had been at great pains to make sure his candidates had the best chances. Only 4 of 44 candidates were allowed to run for president, with Laurent Gbagbo, former president and Guillame Soro, former leader of the New Forces barred from running. Moreover, Alassane Ouattara had initially agreed no to run for a third term, but instead nominated Amadou Gon Coulibaby, long time friend and former Prime Minister for the position. However, after Amadou Gon Coulibaby died of a heart attack at the age of only 61, Alassane Ouattara felt not choice but to run himself.
Unfortunately, Ouattara’s belief that only he can run the country is not entirely unmerited. His two leading opponents from the south of the country, Henri Konan Befie and Laurent Gbagbo have longstanding histories of fomenting hatred of northerners and migrants. His primary northern opponent, Guillame Soro, is widely believed to have encouraged mutinies that seized conrtol of 9 cities. Ouattara has tried to starve the armed forces of resources both to maximize domestic economic expenditures, but also to reduce the political power of the armed forces, angering many allied to military men like Soro. Nevertheless, massive protests have erupted against Ouattara’s decision to run for a third term. 16 people have so far lost their lives, and normally bickering opposition leaders are threatening to boycott the elections unless Ouattara rescinds his nomination, and the country’s constitutional court and electoral council see thorough reform to ensure free and fair elections. Ouattara, though an effective economic manager, is threatening the democratic legitimacy of the Ivorian state by running for a third term. In a country with a history of bitter civil war like Côte d’Ivoire, a loss of such democratic legitimacy could lead to the resumption of civil war.
The process of economic development in countries like Côte d’Ivoire is like Sysiphus rolling a boulder up a hill. Good policies such as the embrace of immigrants, global markets and strong state capacity can allow rapid economic growth to take place. However, a collapse of commodity prices or political mismanagement can just as easily destroy the progress made. If Alassane Ouattara wants the accomplishments of his administration to endure, he needs to build strong institutions and a political coalition to support these institutions. In the present context, this means defusing the current political crisis even if this means stepping down as president for the good of his country.
Selected Sources:
State, Society and Political Institutions in Côte d’Ivoire and Ghana, Richard Crook
Cocoa Booms, the Legalisation of Land Relations and Politics in Cote D‘Ivoire and Ghana: Explaining Farmers’ Responses, Richard Crook
State Capacity and Economic Development: the Case of Côte d‘Ivoire , Richard Crook
Commerce in Côte d’Ivoire: Ivoirianisation without Ivoirian Traders, Catherine Boone
Africa’s New Territorial Politics: Regionalism and the Open Economy in Côte d’Ivoire. Catherine Boone
The politics of identity and violence in Côte d‘Ivoire, SA Konate
THE POLITICS OF “OTHERING”: WILL ETHNIC POLARIZATION DESTROY CÔTE D’IVOIRE? Stephanie A. Kimou
Cote d’Ivoire’s Post-Election Crisis, Nicolas Cook
Push, Pull, and Push-back to Land Certification: Regional dynamics in pilot certification projects in Côte d’Ivoire, Catherine Boone
Shifting visions of property under competing political regimes: changing uses of Côte d’Ivoire’s 1998 Land Law, Catherine Boone
Effects of political economy on development in Cote d’Ivoire, Emilie Combaz