When Tyler called Joe Studwell’s How Asia Works “perhaps my favorite economics book of the year” back in 2013, he wasn’t alone: it became one of the most influential treatments of industrial policy ever written. Now Studwell has turned his attention to Africa with How Africa Works. Tyler calls it excellent, extremely well-researched, and essential reading, but does Studwell’s optimism about the continent hold up under scrutiny?
Tyler and Joe explore whether population density actually solves development, which African countries are likely to achieve stable growth, whether Africa has a manufacturing future, why state infrastructure projects decay while farmer-led irrigation thrives, what progress looks like in education and public health, whether charter cities or special economic zones can work, and how permanent Africa’s colonial borders really are. After testing Joe’s optimism about Africa, Tyler shifts back to Asia: what Japan and South Korea will do about depopulation, why industrial policy worked in East Asia but failed in India and Brazil, what went wrong in Thailand, and what Joe will tackle next.
Watch the full conversation
Recorded January 23rd, 2026.
Thank you to Trace Capital Management for sponsoring this transcript.
TYLER COWEN: Hello everyone, and welcome back to Conversations with Tyler. Today, I’m speaking with Joe Studwell. Joe has a long and distinguished career as a journalist for many publications, but I know him best for two of his books. The first is How Asia Works, which is extremely well known and has had major impact. And now, this winter, he has a new book coming out, which I thought was great and enjoyed very much. It is called How Africa Works: Success and Failure on the World’s Last Developmental Frontier. Joe, welcome.
JOE STUDWELL: Thank you. It’s nice to be here.
COWEN: I have many questions about Africa. If lack of population density has been a major problem, does that mean we should now be especially optimistic about the Nigerian Delta, which is densely populated?
STUDWELL: Yes, you’re right. The Nigerian Delta is more densely populated than most parts of Africa. And it reminds us that population density or increased population density alone is not enough to solve all of Africa’s problems, because Nigeria’s been a country plagued with problems since independence. But Nigeria has also been looking in much better shape in the last 20 years compared with the period before that since independence. I would argue that a big part of that is increased population density.
More broadly, across Africa, there’s no doubt that very low population density has been the biggest problem for the continent’s development, contrary to what the academic literature has told us for the last 50 years, which was that it’s all to do with governance and civil war and civil strife and ethnic strife. In reality, the biggest problem that Africa has had — and largely as a result of the disease burden on the continent, which is absolutely unique in its virulence — is having population density, which in 1960 was one-fifth that of Asia as a whole and one-seventh what it was in East Asia.
COWEN: But is it the case Nigeria has relatively done so well compared to the rest of Africa? They have oil, of course, and they have remarkable talent in the population. And relative to oil and talent, it seems to me, on average, they quite underperform. I see so many years where they grow 1 percent or maybe zero, or you’re not sure because someone’s fudging the numbers. Why should we think the population density matters if the number one example of that underperforms?
STUDWELL: I would say that Nigeria has been something of an outlier in terms of underperformance as a state which is densely populated by African standards. And as we all know, they had a terrible civil war there in the late 1960s. The ethnic divisions in Nigeria, even by African standards, are particularly acute. You have a nation which is broadly divided in three with roughly equal numbers among those three groups, and they’ve always fought for power with each other. So, the ethnic fragmentation problem has been particularly difficult in Nigeria.
Nonetheless, I would say that the population density is what has allowed Nigeria to have a better performance in agriculture than most people expected over the last 20, 30 years, and has also contributed to the outperformance of the whole Lagos area on the coast, which is a real hive of entrepreneurial activity.
So, I would agree with you that Nigeria doesn’t give great hope to us that greater population density across Africa is going to produce better results, but I would say that there are particular reasons within Nigeria that we can point to as to why Nigeria hasn’t delivered as much as one would hope so far.
COWEN: Now you have very good coverage of Botswana in your book, which is arguably the greatest sub-Saharan African success story, putting aside South Africa as a special case. And they obviously have very low population density, right? Diamonds, not too many people — do the division. People are relatively rich through some decent heritage from British colonial administration. Does that also push against population density being a key issue?
STUDWELL: No, because Botswana is an outlier in another sense, that essentially, the economy is a giant diamond mine. There are three big diamond mines in Botswana. That’s where all the money for development has come from, and it’s been well managed, and they didn’t need people. Modern mining doesn’t require much labor. There’re only 10,000 people working in the diamond industry in Botswana, so the low population density of Botswana doesn’t prove anything.
What we’re talking about is the possibilities that there are for development in countries that don’t have outsized mineral or hydrocarbon assets and are going to rely on their people to deliver development. Of course, people are the key input in a poor country because you don’t have cash, and you don’t have technology. You’ve got people, and it’s how you mobilize those people that determines your potential to develop rapidly. And if you don’t have enough of those people, you can’t move forward.
COWEN: Let me see if you are more optimistic about Africa than I am, because you might be. If I look at the history of economic growth in Denmark, there are hardly any years where Denmark grows at 8 percent to 10 percent or even 6 percent. Maybe right after World War II, but that’s a special time. Denmark does well because they have very few years with big negative growth rates. Every now and then, a recession like anywhere else, but they just keep on plugging along at something not too far from 2 percent. And you can trust that Denmark just won’t do anything terribly stupid.
Is there any sub-Saharan African country where you have even a remotely equivalent faith in their governance, where you think, “Well, they’re going to be the next Denmark. It might take longer than we would like, but they’re going to get there.”
STUDWELL: Well, to go back to Botswana, they managed growth very well. They had a sovereign wealth fund that allow them to stabilize growth rates. But you’re absolutely right that this is something that African countries now need to do. African countries have been extremely bad about this. I talk about it in the book, but it’s principally been the hydrocarbon states that have had the most volatile growth over time. The evidence is that they’re becoming a little bit better at managing that growth, and we have to hope that that continues going forward.
Certainly, one of the biggest lessons of East Asia — and one that you almost never hear repeated — is that what developmental states in East Asia did was to get stable growth rates, which then signaled very effectively to the private sector that they could expect steady growth of 5, 6, 7, 8 percent going forward and encouraged private investment to increase. And you’re absolutely right, you’re not going to do that with growth rates that bounce around, but I do think that this problem is at least being recognized now.
COWEN: But even Botswana worries me in this regard. They’ve had a pretty good heritage in history, but the last two years, corruption indices are up sharply. Their politics seems to have become a personal feud. There were all those recent articles that they can’t deliver basic health services to their population. In terms of governance, they seem to be going backwards from a pretty good start, right?
STUDWELL: I think you could say that, but I’m not sure that it’s fair yet to say that they are really going backwards. They’re in a major transition. The Botswana Development Party is out of power for the first time since independence, so there’s a lot of change going on in that respect. I think they’re going through a difficult period, but I’m not sure that they’re definitely going backwards. You could say similar things to what you’ve just said about Botswana, about the United States.
COWEN: Well, possibly we’re going backwards [laughs], but Tanzania worries me also. Three years ago, I had many friends and acquaintances telling me the reforms were going wonderfully. This is the next market-oriented miracle, bet on Tanzania. I’ve only been there once. I guess I was a little skeptical.
And now, in the last year and a half, Tanzanian politics seems quite volatile. It’s not stable anymore. It’s of course not a petro state. There’s not an issue comparable to diamonds. Doesn’t this problem just crop up again and again and again, that there’s not a stable place where you would really want to put much of your money?
STUDWELL: There certainly continue to be a lot of problems with politics, but you don’t see the levels of civil strife in Africa that we saw in the 1990s. You don’t see the number of coups in Africa that we saw in the 1990s. What we have at the moment, if you think of violence, is mainly violence that is focused on the Sahel and all really relates to a very particular problem that’s partly climatological, partly demographic, and it’s just very difficult to manage.
So, I don’t think that the political story is great, but the data tell us that there is considerably more democracy in Africa than there was in the ’80s and ’90s, and that states are more stable. But is there still a lot of bad governance? I think that there is, but that is why my book concentrates — when it’s presenting optimism — on what is going on in the private sector, and particularly what’s going on in agriculture, which doesn’t require a lot of state input and state activity.
And the numbers there are really pretty good. We’ve had the fastest average rate of agricultural GDP growth since 2000, about 4.5 percent in Africa, compared with anywhere else in the world. It’s been faster than anywhere else in the world. And that’s really a kind of night-and-day change to where Africa was at in the ’70s, ’80s, ’90s. Those sorts of things are very important.
The growth of the agricultural sector is also creating the first large private-sector firms in Africa because, of course, agriculture has a manufacturing component as well when we process all the stuff that is grown. And we’re getting large firms operating across borders in Africa now, in the agribusiness sector. We’re talking about the politics of Tanzania as a cause for concern, but equally, you could look at Bakhresa, the biggest Tanzanian agribusiness firm. It now operates in eight, nine, or ten different countries in East and Southern Africa.
It’s moved into all sorts of other businesses. They own a football club, they own a TV station, they’re in petroleum products, they’re in all sorts of stuff. They’re a proper diversified conglomerate of the kind that I would associate with Southeast Asia. All that’s going on in the private sector, despite the still concerning politics that you rightly refer to.
COWEN: Does Africa have a manufacturing future? Is robotics coming, AI, possibly some reshoring?
STUDWELL: Yes. I believe that Africa does have a manufacturing future.
COWEN: But making what? And at what cost of energy?
STUDWELL: They will start, as everybody does, producing garments, producing textiles, which in certain enclaves is already going on in Madagascar, in Lasutu, in Morocco, and they’ll move on to other things. They’ll start with those things because they are the most labor cost-sensitive products.
Africa is now in a position where — depending on which state you’re looking at, and taking China as a reference point — the cost of labor is now between a half and one-tenth of what it is in China. Factory labor is now around $600 a month at its cheapest. In a country like Ethiopia or Madagascar, it’s $60 or $65 a month. So, it’s a 10th of the cost, and that’s already beginning to have a bit of effect, often with Chinese firms moving production to Africa.
So, I think there is a future for manufacturing. It will depend on the extent to which African governments understand that you don’t really move forward fast for very long without manufacturing, that every developed country — apart from a few petro states and financial centers — has gone through a manufacturing phase of development. It depends on the extent to which African governments engage with that, but some, without doubt, will.
The Ethiopians, for instance, have already attempted to do that. What they’re trying to do has been somewhat derailed by the two-year civil war that took place from 2020, but they’re back on it now, and they’re trying to move forward.
The idea that robotics and AI are going to change the story I personally do not buy, principally for two reasons. One is the cost reason, because whenever people talk about what’s happening with robotics, no one ever talks about the cost of robots. In garmenting, for instance, even a basic robot will cost you in excess of $100,000, and you pay the cost upfront, and you’ve then paid that, whether there’s demand for your products or not. Also, in garmenting and in textiles, robots don’t work very well because they can’t work with material very well. They’re much better at working with solid things.
So, you’ve spent $100,000 for a robot when you can go out in somewhere like Tana in Madagascar and get another skilled — because they’ve been doing it now for 20 years — garmenting employee for $60 or $65 to make the new order that you just got. And if the order doesn’t come through, you can sack them. You see what I’m saying? There’s a point about the cost of robotics.
COWEN: But think of automation more generally — it’s not that expensive. Most countries are de-industrializing. Even South Africa has been de-industrializing for a while, and China maybe has peaked out at industrialization, measured in terms of employment. It’s hard to trust their numbers. But maybe just everywhere is going to deindustrialize, and that will be very bad for Africa.
STUDWELL: I don’t think so. I think South Africa is deindustrializing because the ANC has followed a hyper-liberal approach to economic policy. I don’t think the ANC has ever really understood economic policy, frankly, so South Africa is an outlier in that respect. There are many other states in Africa, whether Nigeria or Ethiopia, which understand they’ve got to have a manufacturing future and intend to pursue one.
Then, as I was saying, the other point is, what people miss is the flexibility with robotics and AI. There’s very limited flexibility with robotic and automated production. When demand goes up, you can’t just stick in more robots, but when demand goes up in a people-operated factory, where the cost of labor is low, you can stick in more people and produce more.
Just one example: during COVID, when everybody was having home deliveries of supermarket goods, the price of a UK firm called Ocado, which runs a supermarket, but was also developing the software and consulting around building blind warehouses went up through the roof, but now it’s down through the floor.
And only last week, Kroger supermarket in the US said, “We’re closing five of these super-modern blind warehouses.” And the reason, fundamentally, is because they lack the flexibility that human labor brings to the job. So, I’m not saying that robots, automation, and AI are not important. They are important. What I am saying is that they are not going to derail a manufacturing future for a number of African countries that aggressively pursue it.
COWEN: But there’re a lot of developing nations around the world — you could look at India, you could look at Pakistan, even Thailand — where manufacturing has not taken off the way one might have wanted. There’re just major forces operating against it. And in the US, manufacturing employment was once 37 percent of the workforce; now it’s 7 percent to 8 percent.
It just seems like it’s swimming upstream for Africa — which again, has quite expensive energy — to think it will do that well. And again, South Africa had very good technology, pretty high state capacity. I don’t see the alternate world state where a wiser ANC would have made that work.
STUDWELL: Well, oddly enough, before the end of Apartheid, the manufacturing performance of South Africa was really not bad at all, with classic industrial policy, quite high levels of protection, and so forth. I think that demand for manufactured goods will continue to be high around the world, and the labor cost will continue to be a prime determinant of where producers go for low value-added goods. So, I think that the opportunity is there for African countries.
COWEN: But say there’re transportation costs internally, energy costs, political order uncertainty. Where’s the place where people really want to put all these manufacturing firms?
STUDWELL: On energy costs — these have traditionally been very high in Africa because there has not been the investment in energy, but with the development of massively reduced cost for solar and wind, actually, things look quite good, and the development of geothermal as well. There’s no reason that I can see why African countries aren’t going to be able to produce very cheap electricity, which as you say, is a critical input for a manufacturing economy.
In fact, we’ve seen that in Ethiopia already. Ethiopia has electricity at a fraction of the cost of other African countries because they set out with an aggressive industrial policy to make that happen. A lot of it’s through hydro, because of course they are one of the great water towers of Africa, but also wind and solar are being built out as well, and geothermal. So, I think that there’s no reason why Africa can’t get towards cheap industrial electricity.
And in terms of road connections, an awful lot of road connections have been built. Africa’s not great, but road density has been, actually, a significant success story, not only of the last 20 years, but of the last 50 years. If you go somewhere like Rwanda, you’re blown away by the quality of the roads. And of course, since 2013, Belt and Road, the Chinese have put in $150 billion.
COWEN: But a lot of that is for their mining, right? It doesn’t necessarily help diversification.
STUDWELL: No, 80 percent of that has gone to roads and power and water and other utility stuff.
COWEN: There’s a long history of big infrastructure projects that are then not maintained very well. It’s also a problem with solar power, right? The World Bank, in the past, has put a lot of money into different projects involving dams or water systems, and then over time, many of them just decay.
STUDWELL: Well, yes, but again, Tyler, this goes back to what I was saying about if you look at the government stuff, you can still be pretty miserable about Africa. But what we’re seeing on the continent is a level of traction from the private sector that we haven’t seen before. If you think about use of water, for instance, a big reason for the very good agricultural performance in the last 20 years, and for around cities — African farmers now getting up towards Asian yields — a big reason for that is farmer-led irrigation.
You referred to state-led projects that have just failed, and there were loads. To be fair, they were not always just African government projects in the past. If you go back to the ’60s and the ’70s, often there would be UN projects, World Bank projects —
COWEN: Sure.
STUDWELL: — and they were misconceived, not least actually, in relation to demographics, because there were projects which actually needed more labor and bigger markets than were there. And this is the reason that they fell into disuse very often.
But what you have now all over Africa, and there’s already three, four million hectares of irrigated land that’s been added in the last couple of decades. And it’s been added by individual farmers who buy pumps and either dig boreholes themselves or get them dug by people who are providing that service. It’s this much more micro approach to building business — whether it’s agricultural business or otherwise — that’s what I think gives some cause for optimism.
COWEN: Djibouti aside, what do you think is the best run African port?
STUDWELL: That I don’t have a good answer to because I didn’t look at the ports very closely, but if we’re talking the whole of Africa, the obvious answer would be the Tanger Med port that the Moroccans have —
COWEN: Well, but sub-Saharan — again, putting aside South Africa as a special case — the port seems to be another level of mess that if you’re exporting, you have to deal with a bad port system. If you’re in East Africa, there’re even a lot of property rights still up for grabs. There’s Somali land, there’s Somalia, there’s Ethiopia, there’s Eritrea — they want access to the sea.
There’s Ethiopia versus Egypt. There’s Rwanda involved in the Congo. That’s the place where you ought to have a really great port driving growth in the whole region, but it just seems it’s not coming anytime soon. Again, Djibouti does seem to have a fair degree of water because people put military bases there, but that’s the exception.
STUDWELL: I agree, but again, what I’ve read in World Bank reports suggests that situation is still bad, but better than it was 10 and 20 years ago.
COWEN: Why is Benin doing so well now?
STUDWELL: Well, some people say the leader, Talon, who’s got his hands around the developmental situation, and I think that that is quite possibly the story. We are seeing some genuinely positive leadership in Africa, and Benin — yes. there’s a sensible approach to agricultural development, the beginnings of an industrial policy, and just getting things done and delivering things.
But then, go back to Nigeria. In Nigeria’s defense, I would say that anybody, really, who follows Nigeria has been fairly impressed by what Tinubu has managed to do there. The guy came in and ended a petrol subsidy that everyone said would never end because it was too politically difficult to do it. It cost $10 billion a year, which is a lot of money in Nigeria, and he did it. He came in and he ended it, and there was no serious violence around that.
COWEN: In sub-Saharan Africa, which do you think are the two or three countries doing the best job on human capital?
STUDWELL: Well, in West Africa, if we’re just looking here at the statistics about people graduating at different levels of education, of course, Ghana and Nigeria always did pretty well, always accounted for a high proportion of Africa’s university graduates.
In East Africa, I don’t think that Kenya does badly in terms of the human capital. It turns out very well-educated and entrepreneurial people. Again, the problem is the politics. Ethiopia — big investment in vocational education that’s made a significant difference. Rwanda similarly has made a significant investment in vocational education. There’re a lot of stories around that are really not too bad.
I also think that we have to be fair to Africa and remind ourselves that back in 1960 — proximate start of the independence era — Africa had the least educated population in the world by a long, long way. In 1960, literacy in Africa was 16 percent, one in six. And according to a World Bank report that came out in the ’80s, they rolled out across Africa the fastest developed formal education system that the world has ever seen. In some measures, education performance in Africa now exceeds South Asia, which is pretty remarkable, given that South Asia was very far ahead in 1960.
So, I don’t think that it’s fair to criticize Africa too aggressively on its education performance. Governments around the continent have taken education very seriously. A classic was, again, Tanzania, right? We can talk about how terrible the politics are in Tanzania, but Nyerere’s government increased literacy from just over 10 percent to 80 percent in one generation, and that was a huge mobilization of resources to achieve that. That’s another thing that African governments had to do that Asian governments didn’t have to do after independence. Asian governments didn’t have to worry about having an illiterate and innumerate population.
COWEN: The comparison with South Asia — I think I see that differently. India has high variance, but at the upper end, the IITs are amazing, right? If you come out of a good IIT, your life is set. You’ll earn a lot of money. You’ll be highly productive. You could get employment in the UK or the US. Africa doesn’t seem to have anything like that, not sub-Saharan Africa. Or Sri Lanka, which is quite literate, well educated. It’s hard to find a sub-Saharan country that’s at all like Sri Lanka on educational indicators. Rural Pakistan, clearly, might be worse than much of Africa, but isn’t South Asia just making much bigger strides?
STUDWELL: I don’t think so in the sense that I wouldn’t point to the IITs in India as evidence of the strength of India’s education system. I agree the people who come out of the IITs are fantastic, but there are only 30,000 people in the IITs. They’re just numerically inconsequential.
COWEN: But how much output they produce is what matters, right? And it’s evidence that there’re feeder systems. If you can produce some number of very, very, very good people, your feeder systems must also be doing pretty well, at least some of them.
STUDWELL: Yes, but there’s also a question of timing. I think that the point that you make about very high performing institutions in Africa begins to become more relevant now. The order of priorities in Africa after 1960 was to get the population literate and numerate, and that’s where resources went.
Now there’s a change. Yes, Africa, going forward, needs really elite universities. There’s the beginning of efforts to create that in Rwanda, where there’re a couple of US universities that have gotten involved in the random tertiary education system. I hear what you say, but I think that’s a problem for Africa going forward and not a problem around which we should judge Africa today.
COWEN: We agree that disease burden is very important. Which do you think are a few countries making the most progress on that?
STUDWELL: Well, again, I’d say that there’s been huge progress continent-wide, partly because outside institutions like the WHO or the Gates Foundation have operated in multiple states, but partly also because African states themselves have made it a high priority. The performance in terms of the reduction of deaths of under-fives, for instance, which is a fairly critical measure when you look at demographics — I don’t know where in the world beats Africa in terms of what’s been done over the last 50 years.
COWEN: But say, predictively, the places that have cut disease burden down the most should do better first, right? There’s an implied prediction. Which particular places do you think those are?
STUDWELL: I haven’t looked in sufficient detail, country by country, to be able to say where. I would say that in Central Africa, Rwanda’s done very well on health. I’d say that Ethiopia has done very well on health, but I do think that it’s just a generally positive story across the continent of what has been done in terms of reducing this horrific disease burden that really has dominated African history.
COWEN: Bruce Sacerdote of Dartmouth — he has a famous article where he argues — or some would say shows — that the longer a country has been colonized for, the better it’s likely to be doing. Do you agree with that result? And do you think it’s true for Africa?
STUDWELL: I think that you can find cases that bear that out, but I’m not sure that it’s a great rule of thumb when you’re just looking at duration rather than also how colonialism operated, what it did. When you look at the qualitative difference, for instance, between French colonialism in West Africa and Japanese colonialism in Taiwan, it’s not just about duration. I don’t have a great answer to that question. And most colonial stories in Africa were pretty short and fairly similarly short, right? Because most colonization happens in the 1880s, and most colonization is over in the 1960s.
COWEN: Do you think the UAE will become a major financial center for much of Africa?
STUDWELL: Very possibly, and I think it’s already happening to a significant extent. There’ll be Mauritius trying to compete as an offshore center, but certainly, when you get up to the Horn of Africa, UAE is already the preferred destination.
COWEN: Let’s say you’re running a hedge fund, and you’re investing some number of billions of dollars. Would you be more likely to invest in East or West Africa, if you had to say?
STUDWELL: I like the look of both for different reasons. Certainly, Nigeria tops out in terms of venture capital money coming into Africa at the moment, but when you’ve got a country like Ethiopia with 150 million people, that’s an attractive market if you develop a business that works. So, I think that it won’t necessarily be about east or west going forward.
I think that early entrants — whether they’re hedge funds or whether they are multinational companies — they’ll think first about the most populous countries on the continent. So, they will think about Nigeria and Ethiopia and then go down the list from there. I think that there’ll also be differentiation based on regions, based on what’s grown in agriculture, what’s manufactured, and so forth.
COWEN: Should Africa have more special economic zones, say the way that Dominican Republic has?
STUDWELL: Well, Africa’s already had a good number of special economic zones, and they haven’t worked well, but the seven that the Chinese have opened seem to have worked better. So, I think the jury is out on that question. Down the road, yes, Africa will need more zones, but there’s no point in opening investment zones unless they get the political attention that is going to make them successful.
COWEN: But don’t they just need a bit to be left alone? I mean, Tatu City in Kenya is going pretty well, and the government hasn’t wrecked it, and there’s a lot of energy behind it and some capital. Isn’t that likely to succeed?
STUDWELL: It is if there’s a clear demand there to begin with and private-sector actors who are going to make it work. In that case, yes, the zone should always be left alone. For instance, outside Addis Ababa, there’s a successful Chinese-managed and Chinese-owned investment zone, and it does absolutely fine. So, that type of investment zone, I think, yes, just let people get on with it and leave them alone.
I was thinking more of state-led investment zones where there’d been many failures, and that’s where African governments need to be more careful, more thoughtful, and more clearly committed when they open a zone, to making sure that it works.
COWEN: Should Africa experiment with charter cities?
STUDWELL: With charter cities?
COWEN: Charter cities, right. It’s like a special economic zone, except more radical. There’s some actual surrender of sovereignty. Like Hong Kong was a charter city of the British Empire. Obviously, they did very well.
STUDWELL: I think that Africa should and probably will experiment with all sorts of things. I wouldn’t offer it as a prescription, but if there’s a government that’s thinking, right, let’s try this, good luck to them. It’s not impossible. It’s not impossible that it will work just as Hong Kong works for colonial Britain.
COWEN: How permanent do you think are the current borders of Africa, say over the next 30, 40 years? Not 500 years out, but the foreseeable future.
STUDWELL: I think, Tyler, that we will continue to see the form that we’ve seen since independence in Africa. I’m sure you’re aware that the African Union, really, since inception, has operated to head off any changes in borders in Africa. That is really because the leading politicians have always taken the view that if you let African borders change once in one state, you open the door to absolute mayhem in this ethnically very diverse continent.
So, there is very built-in, hardwired AU opposition to any change in borders, and you get classic cases where no one will even talk about it. For instance, the Somalis, where Somalis are split between Ethiopia, northeast Kenya, British Somaliland, and is it French and then Italian Somaliland? I can’t even remember that. It’s a five-way split. They went to the AU back in the ’60s and have done it subsequently, said, “This is ridiculous. We’re all Somalis. Why are we living in five different countries?” And the AU won’t touch it.
As I say, that is because the received opinion of the senior leaders in the AU has been, if you start changing borders in Africa, you’ll never stop it. I suspect that will remain the case going forward because the fear is there. Really, the only case of a border change that you have in Africa since the Second World War is when Eritrea split from Ethiopia, and that was the result of a referendum that was 99 percent.
COWEN: But as we’re taping in late January, 2026, it at least seems as if the US and France will recognize Somaliland, and the UAE. And Israel already has. Israel probably wouldn’t do that on its own without assurances. So that will be a border change. Doesn’t that, in fact, predict mayhem under your theory? Which is, in fact, my expectation, I’m sorry to say.
STUDWELL: Well, I think the AU will continue to resist and resist and not recognize this.
COWEN: The EU you think won’t recognize it?
STUDWELL: No, no, the AU.
COWEN: Oh, AU. But does that matter if the US and France and the UAE have recognized it? Isn’t that just what matters?
STUDWELL: It may not matter in practice for the outside world, but it matters in practice for Africa, so the AU will retain its position. It’s a bit like Morocco and Western Sahara. The AU still says that there are 55 states in Africa because it still counts Western Sahara as a state, even though the US is now in favor of that being turned over to Morocco.
COWEN: Now, your recent book is on Africa, I’ll just hold this up again, How Africa Works. I don’t agree with everything in it, but I do really think it’s an excellent, well-researched, extremely well-written book. I’ll recommend it again to everyone. But I also have some questions for you about Asia, if you’re game.
STUDWELL: Yes, yes.
COWEN: What has gone wrong in Thailand? The 1990s — it looked so good. Foreign investment fell off. They’re going to lose manufacturing to China, it seems. There’s a lot of stagnation. Politics hasn’t gone so well. They were a relatively wealthy country for their region. Why didn’t that go better?
STUDWELL: Well, it hasn’t gone so badly. Thailand’s always had a pretty strong currency, partly as a result of tourism being a great big part of the economy. The manufacturing has hardly been hollowed out, and the politics has always been a total mess. [laughs] I don’t think the politics has become any worse, and the position of the monarchy — it’s always been a disaster. But Thailand has always functioned fine despite all of that.
So, to me, Thailand doesn’t look like a big mess relative to what I’ve seen in the past at all. I suspect that they will carry on with this very messy politics that they have until at some point the relationship between the monarchy and politics is confronted. But that’s an almost revolutionary thing to contemplate in terms of Thailand.
COWEN: I’m sure you’re familiar with South Korean birth rates. What do you think is actually going to happen there over time? The country just disappears? Or it becomes filled with immigrants, possibly from Africa? Or they somehow manage massive birth subsidies which work? Those all seem quite improbable to me, but I’m not sure what I’m left with.
STUDWELL: Yes. it’s certainly very interesting. Of course, China has a very low birth rate. A little bit higher than Korea, but still very low. One observation I would make is that China actually is a much more cosmopolitan society than either Korea or Japan, so having a falling population is more difficult for Korea and Japan because the populations don’t want foreigners coming in to do the jobs. They don’t want those Africans coming in to do the jobs. [laughs]
So, what else are you going to do? Well, you’re going to offer them these great big subsidies, but there’s a very poor record for offering all kinds of subsidies in all kinds of countries around the world to try and get people to have kids when they don’t want to. So, I don’t know. The only forecast I have is that the problem will have to become significantly more acute than it is now before they begin to talk about it seriously.
COWEN: But it can be too late, right? Peter Thiel has this notion that you get stuck in a trap. Once your economy starts shrinking, it’s harder to do something about it because you have fewer resources, even if your per capita numbers are fine.
STUDWELL: Yes, well, maybe they’re relying on the robotics and AI that we were talking about. [laughs] Do you not feel confident about robotics and AI solving the Korean depopulation problem?
COWEN: Well, it may solve their production problem, but it doesn’t solve the problem of no one being around to enjoy it, right? That’s still there.
[laughter]
COWEN: Now, Japan, as you know, depending how you measure it, has debt to GDP ratios of something between 200 to 230 percent. How will they get out of that mess? They have a higher birth rate, but it’s not that high, right? It’s like 1.3.
STUDWELL: Yes. I don’t know. The same way that Britain got out of the same level of debt after the Napoleonic Wars with inflation?
COWEN: But when they inflate, their interest rate goes up, and their future borrowing costs rise. Can they even get traction that way?
STUDWELL: Well, I don’t know, but I know that there are people who think that they can. I don’t know what the answer is. Not crazy inflation, but just a bit of steady inflation. I’d have to go back and look at what happened in the UK after the Napoleonic Wars in order to understand how it was. But I do remember that it was largely inflation that solved the problem.
COWEN: But UK — well, Britain, we’d have to call it at that time — had fantastic demographics, especially early to mid-19th century, and East Asia doesn’t. Should we just way downgrade our estimate of East Asian futures? Is there a positive scenario for any of the main countries?
STUDWELL: Yes, I think it certainly looks difficult. I tend to not get much further when I think about this than being profoundly amused by the fact that we have spent the last 250 years being obsessed with the Malthusian view of the world and believing that we’re going to breed ourselves into a disaster. And of course, at the end of the day, there never was a Malthusian risk, at least in practical terms, but depopulation is way more serious than population growth ever was, I think.
COWEN: For the world as a whole, how well do you feel industrial policy has worked?
STUDWELL: Oh, it’s worked extremely well, and it’s been refined well over a century. Yes, the whole approach of targeting cheap money at manufacturing, putting some protection in place, rewarding exporters of manufactured goods — it’s created jobs, it’s raised the technological level at which the economy operates, and there’s really no substitute for it because, as has been shown, manufacturing is the only bit of the economy that really delivers the convergence that we’re supposed to get across the whole economy and the sort of orthodox view of life. So, I think that industrial policy has done very well.
The problem is, of course, getting away from it then proves extremely difficult. Not only getting away from industrial policy, but getting away from the trade surpluses that it tends to produce. Whether it’s Japan or Germany, or now China, the countries that have run the most effective industrial policy become a problem for the whole of the rest of the world. But as a means to develop your economy, as a means to raise your people up, I think it’s had a very good performance.
COWEN: But say you’re Brazil. Brazil seems to have underperformed for almost 50 years, and they do plenty of industrial policy, and they have actual scale. It’s now considered happy news that this year they might grow at 2 percent. Hasn’t it just failed in Brazil, in addition to Mexico and many other places?
STUDWELL: I don’t know Brazil terribly well. The first thing I’d say about Brazil is that it’s underperformed for the last 200 years, not just the last 50. And the country is just a mess in terms of development. If you look at the agriculture sector, the dominance of scale agriculture, the appalling way in which smallholder agriculture is treated, and how it’s undervalued.
If I knew more about industrial policy in Brazil, I think what I would be saying is that it’s been ineffectively applied, patchily applied, not applied consistently over a long enough period. And sure enough, a large part of it is a total failure, but at the same time, you can point to bits that are clearly a success, and the obvious one that everyone always points to is Embraer.
COWEN: Or take India, now the world’s most populous country. They had plenty of industrial policy — mostly a failure, right? Why be so convinced industrial policy, on average, is a good thing? It works maybe when there’s very high human capital, which would be East Asia, and the rest of the world, it seems to me, to underperform.
STUDWELL: No, I think it failed in India because people like Mahalanobis after the Second World War were just absolutely clueless, and India just never ran any kind of effective industrial policy. They didn’t understand that competition is fundamental to effective industrial policy. They thought it was much more organizational and you pick your winners, and you don’t subject them to competition. So, I think there are pretty straightforward reasons why industrial policy didn’t work in India.
COWEN: How much of economic growth do you think is just explained ethnically? So, the Chinese do well virtually everywhere. Hong Kong didn’t have industrial policy. It became rich just like the Chinese-based economies that did.
STUDWELL: Well, actually, I’d say that, to an extent that Hong Kong did have industrial policy inasmuch as, while Hong Kong was always very free in external trade, the domestic economy was a kind of colonial stitch up and there were some two of everything. Two supermarket operators, one firm running the airport, the other firm running the airlines, and so on. And also, of course, when the textiles trade arrived in Hong Kong after ’49, it was already highly efficient. It had gone through a very long period of development in Shanghai, so it wasn’t like it was beginning with zero knowledge.
But as to how much is ethnic . . . Ethnicity often embodies certain education backgrounds. Some ethnicities have got to a point where they’re better off than others, so I think it’s easy to confuse what might be ethnic with what is just something reflected in that particular group of people for reasons other than ethnicity.
COWEN: There’s the famous Comin/Gong/Easterly paper that shows per capita income in the year 1000 BC predicts per capita income today surprisingly well. So, maybe culture is just super persistent. Ethnicity is one of the things that carries it, and a lot of development economics is maybe spinning its wheels. I’d like to think that’s not true, but I’ve never found a flaw in their paper.
STUDWELL: For me, policy makes a difference, and wherever I’ve looked in the world, I’ve seen clear evidence of policy making a difference.
COWEN: Oh, that’s true for sure. But it could be something like ethnicity carries good policy, right?
STUDWELL: It could be, but for me, there’s so much noise in the data that I personally just find it hard to maintain credible attention.
COWEN: What’s so interesting to you about Central Italy?
STUDWELL: There’s nothing particularly interesting other than that, I suppose, it was an area where there was a bit of land reform, an area where industry took off in rural areas. So, there’s stuff to be seen there, which is not what the tourists normally looks for.
COWEN: And you’ve lived there, right?
STUDWELL: Yes, but I really lived in Italy for 10 years just because it was a relatively cheap place to live. [laughs]
COWEN: And this was Perugia or where?
STUDWELL: Yes, near Perugia because it was a relatively cheap place to live.
COWEN: Before my last question, just to recap, Joe’s two books, How Asia Works and How Africa Works are essential reading. His earlier books are interesting as well, on Southeast Asia and finance. Final question — what will you do next?
STUDWELL: I’m not sure what I’ll do next. I’m thinking about a developmental history of the UK because I’ve never written about my own country, and I think there are a number of things in the development of the UK that are not spelled out particularly clearly in what is generally a very good literature. There’ve been some excellent books written about the UK economy, but I think there are one or two things that I’d like to explore more that haven’t really been covered. I think it’s also partly that I feel like I’ve done a lot of traveling, and I’d like to not travel for a while.
COWEN: Travel in the UK though, right? That’s travel too.
STUDWELL: Yes, yes. I can go and see the UK and go and see the grim post-industrial cities of the UK.
COWEN: Joe Studwell, thank you very much.
STUDWELL: Thank you, Tyler.
Image Credit: Nick J.B. Moore