Nungwi and Real-Live Economics

This weekend, we visited Nungwi, a town in the north of Zanzibar with stupendous beaches (development work is so trying at times). I went with Rebecca and Dave, a friend of a friend, and we had an excellent time. We took an uncomfortable and squished two-hour daladala ride there from Stone Town, which basically consisted of benches on the back of a truck (it was so much fun!). When we got to the town, we walked a good ten minutes through the very normal-looking village of Nungwi to get to the beach area (by normal-looking I mean it looked just like the other villages I’ve seen so far on Zanzibar, namely unpaved streets, very basic housing and infrastructure, etc.).

On the beach, there are a number of very nice hotels, resorts and restaurants, all frequented by Mzungus and all at Mzungu prices. But it was the weekend, so we splurged ($5 for a pizza and $2.50 for a beer still won’t break the bank, even on an intern’s stipend). We found a room at a very run-down guest house not right on the beach, with a double bed for the three of us (it was a long night), fist-sized holes in the window screens (but I brought duct tape!), water that we had to ask to have turned on every time we wanted to flush the toilet, and a very decent mosquito net.

We spent the afternoon on the beach, and the evening in a very cool bar run by “impostafarians” (African guys who dress up like Jamaican Rastafarians and smoke way too much weed – our guest house was also run by an impostafarian, and it took him much too long to form even semi-coherent sentences). Perhaps the coolest thing I saw all weekend was four Maasai guys in full traditional robes shooting pool and smoking cigarettes at a beach bar. Rebecca and I desperately wanted to take a photo, but we couldn’t do it subtly enough...

We had some good food (with cheese! and vegetables!), some good beer, and lots of interesting conversations. We swam a bit, though it rained on the second day, and it only got sunny as we left to go home. Walking from the expensive and prosperous beach area back through the village got me thinking though... When I took the introductory microeconomics course at McGill, the thing I delighted in the most was how applicable it was to daily life (please note I was also taking courses along the lines of signal processing and linear algebra which, in comparison, don’t pop up too often on the evening news). I find that economics is even more tangible in daily life in a developing country.

My first experience with this was in 1994, when my family was in Mexico for Christmas and the peso dropped spectacularly (the reasons for which depend on who you ask, but I like to blame the IMF, whether directly or indirectly). I remember people crowding around currency exchange bureaus in a panic the evening of the crash; the next day, after I laboriously trudged to the store in the pounding sun for a box of juice, it turned out the price had gone up by a peso overnight, and since I had brought exact change for yesterday’s price, I had to go all the way back home and make the round trip again (I was ten, so it seemed really far). And that was the first time the IMF ticked me off, though I didn’t know it at the time.

Economic volatility is evident in the coinage in Tanzania. Just like the Mexican Peso, the Tanzanian Shilling tanked as of the early 1980s, going from about 8 shillings to the US dollar in 1980, to about 195 shillings to the dollar in 1990, to about 800 in 2000, to about 1275 today (according to Penn World Table). As a result, coin denominations here start at 5, 10, and 20 shillings; however, as my friend Dave noticed, all of these tiny coins (they’re virtually worthless) were made before 1994. Coins made after 1994 start at 50 shillings, now worth about 5 cents. In the 1980s, you could actually buy something with a 5 shilling coin, but now even the cheapest thing I can find (a little cup of coffee from a man on the street) costs 50 shillings.

Finally, Nungwi could be used as a case study for the thesis that the trickle-down effect is a myth. For those unfamiliar with the concept, the trickle-down effect essentially states that if a country’s aggregate wealth increases (i.e. its GDP), even if the wealth is concentrated in the hands of a few (i.e. the rich), it will eventually “trickle down” to the poor through investments, increased job opportunities, taxes and government expenditure, etc. This perfect-market model has been used to justify things like giving incentives to rich investors to build swanky beach resorts, restaurants and bars.

Unfortunately, in reality, profits are not re-invested, but are expatriated by the foreign owners of these swish places; the few jobs that are offered pay poorly and often don’t even employ immediate locals, who generally don’t have the necessary skills (e.g. a working knowledge of one or two European languages and formal experience in the service industry); if taxes are paid (a common incentive for foreign investment is the waiving of property and income taxes), it is assumed the government spends the money on programmes to assist the poor, when in reality such programmes are often low on governments’ lists of priorities.

In short, though Nungwi has operated as a beach resort destination, popular among Europeans, probably for some time now, Nungwi village remains pretty much the same as any other village in Zanzibar. A popular analogy for the trickle-down effect is if the sea level goes up, the little boats rise along with the big ones (the dhows rise along with the luxury liners?). As Dave aptly put it though, the problem is when the water rises in the private swimming pools, nothing really happens to the little boats...