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John Campbell - Great Decisions

John Campbell

John Campbell is the Morton L. and Carole S. Olshan Professor of Economics at Harvard University and Chairman of the university’s Economics department. He is the author of several books including, The Squam Lake Report: Fixing the Financial System.

John Campbell is the Morton L. and Carole S. Olshan Professor of Economics at Harvard University and Chairman of the university’s Economics department. He is the author of several books including, The Squam Lake Report: Fixing the Financial System.

Transcript

Will China’s policies in Africa and Latin America conflict with U.S. interests?

No, they do not necessarily conflict with U.S. interests. China has become a major economic force in the world. It has undertaken substantial investments in Africa. At the China-Africa forum, now taking place in Beijing, the Chinese government announced that it plans to lend Africa twenty billion dollars over the next three years. The issue is not China in Africa. The issue is whether China behaves in a positive way in Africa, a way that is congruent with its growing economic importance. There are some positive sides. China seems to be more deeply involved now than in the past in attempting to work out a solution to the issues that currently separate Sudan and South Sudan. There are also signs that are not so positive. For example, Chinese involvement in the mining of diamonds in Zimbabwe; where, in effect, the revenue for those diamonds is bypassing the Central Treasury and going directly to the Zimbabwean Ministry of Defense. I suppose from a Chinese perspective, they might well argue that’s a Zimbabwean issue. But nevertheless, the Chinese are involved. What’s important is that China play a positive and responsible role in Africa. Historically, the Chinese have focused on extraction of resources. They have focused on the construction of infrastructure. And they have paid very little attention, too little attention, to questions of governance. As I say, there are some signs here and there that that is changing. And change, in that area, is development to be hoped for.

And how far back does China’s involvement in Africa go?

Well, it’s altogether remarkable. Ten years ago, it was relatively small. But the process has accelerated, so that over the past three or four years it has greatly increased. So we’re talking about a relatively new phenomenon.

So, is there a fundamental difference between the way the U.S. and China invest in Africa? Is the U.S. playing a positive role?

Is the U.S. playing a positive role? Yes, the U.S. is playing a positive role. Now, U.S. investment in Africa tends to be concentrated in a few areas, particularly petroleum. Chinese investment is more broadly based. U.S. investment has to take into account various factors that the Chinese up to now have not, though I hope they will in the future; issues that are enshrined in the Foreign Practices Act, for example. But there’s an even more basic issue. And that is, historically, American companies have been cautious about investing in areas outside of North or South America, the EU, or Japan and China; cautious and conservative. And that mindset has limited, I think, where American investment in Africa is.

Would a Chinese slowdown hurt Africa?

Yes, or at least it potentially will. I think it’s important, though, we bear in mind that the Chinese are not universally loved in Africa. For example, there is a significant backlash underway against them in Zambia. I suspect there will be on in Zimbabwe, once Mugabe goes. The Chinese have been remarkably unsuccessful in penetrating the Nigerian oil industry.

The issues that China is going to have to overcome in Africa have to do with their perceived racism; the fact that they are reluctant to employ indigenous labor. They very often live in segregated facilities. And there is a sense, particularly on the street, that very often they have driven a bargain which is rather too sharp. So I think it’s important that we bear in mind that the Chinese in Africa are not ten feet tall. They make mistakes, just as anybody doing business in Africa will make mistakes.

That being said, they’re still relatively well liked in Africa.

Oh, I’m not so sure. I think it varies considerably from one part of the continent to another. And it also varies depending on which part of a population you are talking about. For example, in some places the elites are making out like bandits, in part because of a relationship with the Chinese; they’re popular with the elites but not necessarily below that. So it depends, it varies. Africa is an extremely big and extremely complicated place, and there’s a tremendous amount of variation.

Is there a perception that the Chinese are just better at getting things done than the U.S. in Africa?

It’s more a question of focus. Resource extraction and infrastructure construction, all undertaken without reference to human rights or other governance issues, tend to make the Chinese particular popular. But, as I said before, there is the potential, realized in some cases, of backlash. It’s very interesting; the more democratic the country, the more the skepticism. Zambia recently had elections in which the opposition presidential candidate won. Zambia is functioning as a genuine democracy, and that is where the anti-Chinese backlash, right now, is probably the clearest.

And while we take into consideration humanitarian concerns and rule of law; what can the U.S. do to still ensure competitiveness in Africa?

Well for one thing, there is a dialogue between the Unites States and China on Africa. And we urge more responsible Chinese behavior, and with some success. Again, we have a multifaceted partnership with China on a whole host on different issues and different areas, and there’s a lively dialogue that goes on. If your question is: What can U.S. investors and manufactures do to become competitive within a specifically African environment? My answer to that is that they have to become more engaged in an African environment, so that they can learn where the U.S. competitive advantage rests.

It was the Hong Kong Chinese that established, made a major contribution to, the establishment of the textile industry in northern Nigeria. That in turn has collapsed because of cheap Chinese exports combined with difficulties in the power structure. And then you add to that the fact that even when companies are under Beijing’s own auspices, they don’t necessarily follow coherent policies or investment strategies.

Do you foresee China’s investment in Africa at all growing in the coming years, and why is that?

Yes, I think it will grow. Well, Africa has the primary products that China needs and wants. Africans are also concerned about China opening the Chinese market to a wider range of African exports, particularly manufactured items. President Zum in Beijing made that point in his public remarks. So, yes, I think the trade between the two will grow, and as the trade grows, so will Chinese investment.

The U.S. has a history of intervention in Africa, though it has been some time. Can you foresee a situation where we could have another military intervention, large scale?

No, not now. The last, sort of significant, U.S. military intervention was in Liberia, and that actually was really quite small. With respect to the Lord’s Resistance Army, I think the U.S. has contributed maybe one hundred trainers. There is only one U.S. military base in Africa, and that is in Djibouti. AFRICOM doesn’t have troops of its own; it has to borrow them from other military commands. Beyond that, in the aftermath of Iraq and Afghanistan, it’s very difficult for me to imagine that there would be the necessary political support for significant U.S. intervention in Africa. If there was an unmitigated human rights disaster or humanitarian disaster, the U.S. would certainly participate in an international effort. We always do. But, I think that’s rather different than talking about military intervention.