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Month: November 2012

Of Africa — and Writing

With the venerable Soyinka now 78, I wish I could report that his new volume of sweeping reflections is of the same stature as his best work, but sadly it is not. The book is vague, ponderous and awkward. Soyinka never says “house” when he can say “habitation,” “native” when he can say “autochthon,” “dominant” when he can say “hegemonic.” Phrases in quotation marks float free of any source. When he makes broad generalizations and criticisms he sometimes expects the reader to mentally provide specific examples. (Do you remember exactly what President Obama said in Cairo in 2009? I had to look it up.) The book abounds in passages full of 10-dollar words that have to be read two or three times to figure out what they mean. About contentions in Christian theology, for example, he says:

“These all-consuming debates and formal encyclicals are constructed on what we may term a proliferating autogeny within a hermetic realm — what is at the core of arguments need not be true; it is sufficient that the layers upon layers of dialectical constructs fit snugly on top of one another.”

That’s Adam Hochschild discussing Nigerian writer and 1986 Nobel laureate for literature Wole Soyinka‘s new book Of Africa in the New York Times Book Review.

Africom: Not Ready for Prime Time?

The [Benghazi] assault, on the anniversary of the Sept. 11, 2001 attacks on the United States, has already exposed shortcomings in the Obama administration’s ability to secure diplomatic missions and act on intelligence warnings. But this previously undisclosed episode, described by several American officials, points to a limitation in the capabilities of the American military command responsible for a large swath of countries swept up in the Arab Spring.

At the heart of the issue is the Africa Command, established in 2007, well before the Arab Spring uprisings and before an affiliate of Al Qaeda became a major regional threat. It did not have on hand what every other regional combatant command has: its own force able to respond rapidly to emergencies — a Commanders’ In-Extremis Force, or CIF.

To respond to the Benghazi attack, the Africa Command had to borrow the CIF that belongs to the European Command, because its own force is still in training. It also had no AC-130 gunships or armed drones readily available.

As officials in the White House and Pentagon scrambled to respond to the torrent of reports pouring out from Libya — with Mr. Stevens missing and officials worried that he might have been taken hostage — they took the extraordinary step of sending elite Delta Force commandos, with their own helicopters and ground vehicles, from their base at Fort Bragg, N.C., to Sicily. Those troops also arrived too late.

From an excellent article in the New York Times last weekend on how Africom — the United States Africa Command — is not ready for prime time because it is understaffed.

Fingerprints

Not the Katy Perry song, but actual fingerprints, which can be used to improve credit markets by lowering default rates.

A new article by Giné et al. in the American Economic Review:

We implemented a randomized field experiment in Malawi examining borrower responses to being fingerprinted when applying for loans. This intervention improved the lender’s ability to implement dynamic repayment incentives, allowing it to withhold future loans from past defaulters while rewarding good borrowers with better loan terms. As predicted by a simple model, fingerprinting led to substantially higher repayment rates for borrowers with the highest ex ante default risk, but had no effect for the rest of the borrowers. We provide unique evidence that this improvement in repayment rates is accompanied by behaviors consistent with less adverse selection and lower moral hazard.

In other words, fingerprinting does a ton of good to the credit market. Because they fear getting denied loans in the future, borrowers who have been fingerprinted repay at a higher rate, and fingerprinting also both (i) reduces the proportion of bad borrowers and (ii) the likelihood that borrowers will invest borrowed funds in risky projects.

The fact that fingerprinting borrowers reduces default rates might seem obvious, but note that it had never been shown convincingly before that improvements in how lenders identify borrowers led to improvements in credit markets.

Moreover, those improvements are important for policy because they can reduce the amount of credit rationing. As Stiglitz and Weiss (1981) have shown, because of adverse selection and moral hazard, lenders often have to maintain artificially low interest rates. This causes credit to be rationed in many economies, which means that many people are denied loans.