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__________________________________________________________________
Andrés
Marroquín
Gramajo
Where
did
the
Miracle
Come
From
?
Exploring
Institutional
Formation
in
Botswana
The
African
Continent
is
multifaceted
.
It
includes
countries
such
as
the
Sudan
,
where
deep
poverty
and
misery
occur
in
a
framework
of
a
seemingly
ever-lasting
civil
conflict
,
and
,
at
the
same
time
,
countries
such
as
Botswana
,
which
has
reached
the
highest
rate
of
economic
growth
in
the
world
.
According
to
the
data
available
,
Sub-Saharan
Africa
is
the
only
region
in
the
world
that
did
not
grow
during
the
second
half
of
the
twentieth
century
(
Gelb
,
2000
).
This
unfortunate
situation
has
motivated
several
social
scientists
to
explore
the
experiences
of
a
few
African
countries
that
seem
to
be
exceptional
with
the
purpose
of
identifying
the
secret
formula
for
growth
in
the
continent
.
This
is
the
case
of
Botswana
.
The
economic
performance
of
Botswana
,
however
,
is
the
result
of
an
amalgamation
of
elements
that
include
leadership
,
coincidence
of
economic
interests
,
and
particular
characteristics
of
the
country
(
such
as
ethnic
homogeneity
).
This
paper
does
not
present
the
magic
formula
,
but
contributes
to
understand
how
the
traditional
(
and
cultural
)
structure
of
economic
life
Andrés
Marroquín
(
Ph
.
D
.,
George
Mason
University
,
2006
),
is
currently
Professor
of
Economics
at
Universidad
Francisco
Marroquín
.
Preliminary
versions
of
this
paper
have
been
presented
in
Montreal
,
at
the
2006
meeting
of
the
Canadian
Association
for
African
Studies
(
CAAS
),
and
in
New
Orleans
,
at
the
2005
meeting
of
the
Public
Choice
Society
.
in
Botswana
affected
the
implementation
of
macroeconomic
policies
(
and
the
existence
of
institutions
)
that
have
been
regarded
as
key
in
the
performance
of
the
country
(
Acemoglu
et
al
.,
2003
)
1
,
and
fiscal
and
monetary
policies
(
Beaulier
,
2003
)
in
particular
.
Large
fiscal
deficits
can
have
negative
consequences
for
short
and
long-term
growth
(
Baldacci
et
al
.,
2003
),
which
is
evidenced
by
the
recent
crises
in
public
finance
in
emergent
markets
such
as
Argentina
.
In
Botswana
,
coordinated
monetary
and
fiscal
policies
and
restrains
on
spending
,
have
contributed
to
the
accumulation
of
reserves
that
have
been
a
key
1
Acemoglu
,
Johnson
and
Robinson
(
2003
)
rightly
identified
important
elements
that
have
contributed
to
Botswana
’
s
social
and
economic
improvement
:
“
Our
conjecture
is
that
Botswana
’
s
institutions
reflect
a
combination
of
factors
.
These
include
tribal
institutions
that
encouraged
broad-based
participation
[
such
as
the
Kgotla
]
and
constraints
on
political
leaders
during
the
precolonial
period
;
only
limited
effect
of
British
colonization
on
these
precolonial
institutions
because
of
the
peripheral
nature
of
Botswana
to
the
British
Empire
;
the
fact
that
upon
independence
,
the
most
important
rural
interests
,
chiefs
and
cattle
owners
,
were
politically
powerful
;
the
income
from
diamonds
,
and
finally
,
a
number
of
important
and
farsighted
decisions
by
the
post-independence
political
leaders
,
in
particular
Seretse
Khama
and
Quett
Masire
”
(
p
.
84
).
__________________________________________________________________
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__________________________________________________________________
element
to
palliate
the
volatility
of
the
country
’
s
revenues
,
which
have
been
recently
generated
by
the
diamond
industry
.
My
field
research
suggests
that
there
is
a
generalized
mystique
shared
by
many
public
servants
regarding
fiscal
frugality
.
Direct
interviews
suggest
that
public
servants
are
concerned
with
the
harmful
consequences
of
overspending
and
budget
deficits
.
2
This
was
summarized
by
Dr
.
Clark
Leith
when
he
referred
to
the
current
government
party
(
the
BDP
),
and
the
incoming
elections
at
the
time
:
The
BDP
has
almost
certainly
got
a
very
long
time
horizon
.
And
so
even
if
they
are
at
risk
for
loosing
the
election
this
year
,
and
nobody
has
indicated
that
likely
to
happen
,
but
even
if
they
were
,
their
time
horizon
would
suggest
that
they
are
looking
at
the
long
term
,
they
have
a
discount
rate
much
like
any
other
political
party
in
a
committed
democracy
.
3
A
senior
officer
of
the
Central
Bank
,
regarding
diamond
revenues
,
supports
this
point
:
So
they
[
the
Twsana
people
in
general
,
and
the
authorities
in
particular
]
managed
to
avoid
these
big
white
elephants
…
big
national
airports
and
jumbo
jets
…
They
said
right
from
the
very
beginning
,
“
we
are
going
to
use
this
money
,
put
it
into
a
fund
and
it
would
be
managed
for
development
purposes
only
.”
And
then
any
recurrent
spending
budgets
would
have
to
be
self-financed
.
In
other
words
,
if
they
built
a
hospital
out
of
the
funds
,
that
they
would
have
to
have
the
income
to
be
able
to
maintain
it
.
So
,
they
did
not
do
anything
unless
they
were
sure
they
had
the
2
Interviews
conducted
at
the
Department
of
Corruption
and
Economic
Crime
(
Gaborone
,
Botswana
,
July
2004
).
income
and
the
means
of
running
it
on
an
ongoing
base
.
4
Another
official
expressed
a
similar
opinion
:
Since
the
beginning
all
the
mineral
revenues
were
meant
to
be
used
for
investment
,
not
current
spending
.
The
aim
has
been
to
replace
one
asset
with
another
asset
.
The
mineral
assets
that
are
underground
instead
of
being
used
for
current
consumption
should
be
used
to
purchase
other
assets
:
physical
assets
,
such
as
roads
,
school
,
and
clinics
,
etc
.;
financial
assets
in
the
form
of
foreign
exchange
reserves
;
and
investment
assets
,
like
human
capital
to
have
better
educated
and
healthier
people
.
5
Although
there
is
agreement
in
the
literature
that
attributes
Botswana
’
s
economic
performance
to
the
implementation
of
effective
policies
,
little
is
known
about
the
origin
of
such
policies
and
of
how
these
policies
became
institutionalized
among
public
servants
during
the
postcolonial
period
.
An
important
exception
can
be
found
in
Poteete
and
Marroquín
(
2005
).
They
propose
that
the
origin
of
current
institutions
is
the
overlapping
interests
of
the
government
and
cattle
owners
.
This
coincidence
of
interests
has
been
instrumental
in
the
avoidance
of
over-appreciation
of
the
national
currency
(
the
real
exchange
rate
),
which
is
a
requirement
to
avoid
the
so
called
Dutch
Disease
.
In
this
article
I
build
on
this
idea
.
Tiebout
(
1956
)
proposed
that
economic
agents
could
move
from
one
state
to
another
to
flee
from
excessive
fiscal
burdens
.
This
implied
that
for
states
to
4
ibid
.
3
5
ibid
.
ibid
.
__________________________________________________________________
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__________________________________________________________________
Figure
1
–
REAL
GDP
GROWTH
VS
GOVERNMENT
SURPLUS
/
DEFICIT
(
1975-84
)
SUB-SAHARAN
AFRICAN
COUNTRIES
keep
their
taxable
base
they
have
to
implement
adequate
fiscal
policies
,
such
as
reasonable
tax
rates
(
including
the
“
inflation
tax
”)
that
do
not
encourage
individuals
to
move
out
of
their
jurisdiction
looking
for
better
tax
treatments
.
Based
on
Tiebout
’
s
idea
,
I
develop
a
simple
gametheoretic
model
to
shed
light
on
the
fiscal
policy
path
that
has
been
followed
by
Botswana
’
s
authorities
.
For
clarity
,
in
some
instances
I
also
include
and
discuss
data
from
Ghana
as
a
suitable
comparison
country
.
The
model
explains
the
formation
of
institutions
regarding
two
elements
:
1
)
the
movable
characteristic
of
assets
in
pre-
and
post-colonial
Botswana
;
and
2
)
the
overlapping
economic
interests
of
the
government
and
the
private
sector
.
The
overlapping
of
interests
between
the
social
elites
and
the
bureaucracy
was
fundamental
in
the
creation
of
a
sound
institutional
capacity
(
Poteete
and
Marroquín
,
2005
).
The
coincidence
of
interests
suggests
why
the
government
implemented
policies
that
favor
the
private
sector
elites
,
which
had
positive
spill-over
effects
for
the
whole
country
.
The
two
elements
reinforce
each
other
and
have
contributed
to
create
the
current
mystique
,
widespread
among
Botswana
officials
,
who
tend
to
avoid
government
deficits
.
FISCAL
DISCIPLINE
AND
GROWTH
Fiscal
deficits
and
economic
growth
are
self-reinforcing
(
Easterly
and
Schmidt-
Hebbel
,
1993
).
This
means
that
higher
rates
of
economic
growth
are
usually
associated
with
budget
surpluses
.
Although
a
quantitative
relationship
does
not
mean
causality
,
as
Figure
1
shows
,
there
is
a
positive
association
between
the
result
of
the
budget
and
the
real
growth
of
the
economy
in
Sub-Saharan
Africa
.
6
Between
1975
and
1984
none
of
the
countries
in
the
sample
had
negative
growth
and
government
surpluses
;
budget
6
The
source
for
Figure
1
is
World
Bank
(
2005
).
__________________________________________________________________
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47
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__________________________________________________________________
surpluses
in
all
cases
where
related
with
positive
real
growth
rates
.
TABLE
1
—
PER
CAPITA
GNP
IN
FIVE
AFRICAN
COUNTRIES
FISCAL
CONDUCT
IN
BOTSWANA
In
terms
of
its
rate
of
growth
,
and
the
government
surplus
as
percentage
of
GDP
,
Botswana
stands
out
as
exceptional
.
High
rates
of
growth
have
been
associated
with
budget
surpluses
.
This
result
illustrates
the
effectiveness
of
macroeconomic
policies
that
have
been
discussed
in
the
literature
on
Botswana
(
Acemoglu
et
al
.,
2003
;
Poteete
and
Marroquin
,
2005
).
There
are
different
elements
that
might
account
for
this
rare
result
.
The
absence
of
predatory
practices
is
usually
associated
with
the
figure
of
the
first
president
of
the
republic
,
Seretse
Khama
,
who
,
according
to
several
civil
servants
,
set
the
initial
path
towards
good
management
and
low
corruption
.
7
This
culture
of
frugality
has
been
present
in
Botswana
since
independence
from
Britain
in
1965
,
and
helps
explain
Botswana
’
s
economic
performance
compared
with
other
African
countries
(
see
Table
1
).
8
7
Set
of
interviews
conducted
with
retired
civil
servants
in
Gaborone
,
Botswana
,
June
and
July
2004
.
8
Before
independence
,
however
,
there
is
evidence
that
without
grants
from
the
U
.
K
.
and
the
Colonial
Development
and
Welfare
Office
,
the
government
would
have
incurred
in
high
deficits
(
Republic
of
Botswana
,
1966
,
p
.
8
,
cited
in
Samatar
,
1999
).
Annual
Growth
Rate
1960-80
1980-91
Ghana
-0
.
8
-0
.
3
Cote
d
’
Ivoire
2
.
8
-4
.
6
Nigeria
4
.
2
-2
.
3
Kenya
3
.
1
-0
.
3
Botswana
9
.
9
5
.
5
Source
:
Samatar
(
1999
),
p
.
2
.
MODEL
To
understand
fiscal
frugality
in
Botswana
a
simple
model
based
on
a
decision
tree
is
set
up
.
Two
arguments
justify
the
use
of
this
model
:
1
)
Tiebout
’
s
theory
of
state
competition
,
and
2
)
the
fact
that
the
main
assets
in
Botswana
before
independence
were
cattle
,
which
is
a
movable
commodity
.
In
fact
,
cattle
have
been
the
main
agricultural
assets
of
the
inhabitants
of
Botswana
since
pre-colonial
times
.
Isaac
Schapera
,
an
anthropologist
who
studied
the
Tswana
People
,
indicates
in
his
classic
A
Handbook
of
Tswana
Law
and
Custom
that
before
the
coming
of
the
Europeans
cattle
were
the
most
important
medium
of
exchange
,
being
accepted
more
readily
in
barter
than
any
other
commodity
.
They
constituted
the
bogadi
paid
to
a
woman
’
s
family
at
marriage
.
They
were
also
the
most
suitable
objects
of
sacrifice
to
the
ancestral
spirits
,
and
so
the
means
of
securing
supernatural
protection
and
guidance
.
And
probably
most
importantly
,
the
mere
possession
of
cattle
was
in
itself
a
source
of
status
,
for
a
man
’
s
wealth
was
estimated
by
the
size
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