My wife and I just got back from a safari vacation in Tanzania. It was exhilarating, but – as I often tend to – I found myself trying to find parallels or patterns from my work to apply to whatever my current situation is, no matter how incongruous. Over conversations with locals about how their country continues to develop, and I found myself considering the rules for separating countries between “developed” or “developing” economies.
I can’t remember which economist (or previous professor) asserted that a country is still “developing” until it can hire a dog catcher. The idea here is that removing stray animals is clearly in everyone’s interest, but there is no clear responsibility for any individual; only a sophisticated collective player (i.e. – an operating state government) can manage this. By this measure, Tanzania isn’t quite a developed country yet.
How about this example: you are driving in the middle of the night in an utterly deserted country road, but there is a street light shining bright red ahead of you. You can see along the flat crossing road and every other direction; there is no traffic coming for miles. Still, the light shines red for stop. It stays that way for a full 20 seconds before changing to green and you continue forward. I would love to measure how long drivers from different countries would wait at a red stop light before presuming that the light was broken and moving forward.
Personally, I always liked the idea that obeying traffic laws (without observation) was a strong sign of widespread adoption of a sophisticated social contract, i.e. follow the law and everyone benefits. Again, by this measure, Tanzania isn’t quite a developed country yet.
By most lists (FTSE, MSCI, S&P), Tanzania has not reached the level of “frontier” market, but the changes going through the country have still been impressive. Over the past 10 years, GDP growth is up 40%. Weak Infrastructure, high poverty, crushing national debt and and painful inefficiency are still the norm, but the new investments coming into the country from abroad (either for mineral wealth for access to their inexpensive labor market) have the potential to transform the region. New technology allows this country, like its peers, to leapfrog levels of development as it develops. For example, the country may not require the same infrastructure costs for setting up phone lines if cell phones became the new standard. If solar cell and battery technology continues to improve, setting up a centralized power grid to distribute electricity may be an unnecessary burden for poor and rural countries. I look forward to keeping tabs on the country to see how it grows in the years to come.