Exporting Freshwater To Kigali

By Karl Muth - 16 September 2011
Rwanda carnegie mellon university neoliberal free trade

It’s the tension that characterised Twentieth Century economics: freshwater versus saltwater.  A few of America’s great economics programmes, all of them near freshwater bodies of water (the University of Chicago, Minnesota, Rochester, Carnegie Mellon), became known as the homes of “freshwater economics,” a conversation dominated by liberal philosophy, limited state intervention, and market-driven solutions.  Meanwhile, another school developed on America’s coasts (Harvard, MIT (and Sloan), Stanford, and Yale) adopting a less liberal, more Keynesian approach to economics.

 

While the battle in the U.S. has been an approximate stalemate, with some unlikely proponents of freshwater policy (the Clinton-era North American Free Trade Agreement, for instance) and many Republican interventions (some even coming in the form of heavy-handed tariffs, such as the Republican-supported Light Truck Tariff Arrangement, which drove vehicles such as the BMW X5 and Nissan Titan to be built in the U.S.), the liberal philosophy has enjoyed a better export market.

 

Today, one of the main campuses of the freshwater economic movement announced it would be moving abroad: Carnegie Mellon, which watched the Twentieth Century (the university was founded in 1900) go by from its own quiet neighbourhood in Pittsburgh, will open a new campus in Kigali, Rwanda.  It’s not a first time for saltwater export.  The University of Chicago, the flagship in the freshwater fleet, opened campuses for its top-ranked business school in Singapore and Spain and, more recently, added a campus in London.  It also maintains a centre for research in Paris.

 

But Carnegie Mellon’s venture in Africa is a first in the central region of the continent, rather than the Middle East (an assortment of American universities maintain a presence in the Middle East, primarily in Qatar, including Cornell, Georgetown, and Northwestern).  Why now, and why Kigali?

 

Kigali is a bustling town of roughly a million people and might seem to some an unlikely place to sow the seeds for African neoliberalism.  At its founding, Kigali used a coupon that could be traded freely with the Mark; these trades were later reconciled in a 90-day clearing (this practice still exists, known as vierteljährlich handelswährung) operation in Berlin against current-period export revenues or bills of lading - traders missed an incredible peg arbitrage opportunity that would have turned 1902 Rwanda into 2002 Argentina.  Kigali’s customs service, corrupt under German rule, became notorious under Belgian control, creating a legacy of bureaucracy and bribery that continues today.  The period of currency manipulation and increasing government suspicion of outsiders continued for decades.

 

As governments have changed in Rwanda, each has (at least for a period) attempted to maintain a currency peg (and failed).  President Habyarimana, oscillating between economic policies that would advantage one or another of the nation’s ethnic groups, drove away the few foreign investors who had looked at Rwanda in the 1960’s.  Despite swings between export encouragement and rabid protectionism, rarely has fortune looked in Rwanda’s direction; the country’s nominal GDP per capita has never managed to exceed $750.

 

However, liberal universities have a history of large influence in post-conflict zones, particularly in places recovering from internal conflict.  While the influence of the Chicago Boys after the 1973 Chilean coup is the most famous example, various neoliberal institutions have had more subtle effects, from encouraging the rapid evolution of economic policy in the Philippines to opposing minimum wage laws in post-handover Hong Kong.  The disorder of post-internal-conflict political reformation combined with the fact that incoming regimes are more likely to have military might than economic expertise allows foreign institutions to have disproportionately more influence.

 

While it is uncertain what effect Carnegie Mellon’s presence will have in Rwanda, or who will study at the new Kigali campus, it seems likely the long-term effect may be liberalising and regional or continental in scope.  In Africa, a continent rife with corruption and bribery (which is, in liberal eyes, usually simply actors trying to find a more efficient solution than government systems offer), the time may finally have come for a sub-Saharan, freshwater university.  We will find out in two or three decades, when the first graduate of Carnegie Mellon Kigali’s class of 2016 in economics takes public office.

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