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Charter Cities Podcast Episode 52: Education, Electricity, Fertility, and Economic Growth with Charlie Robertson

Join us for a round-the-world trip where Charlie Robertson delves into the history of South Asia, Sub-Saharan Africa, and the West, and offers his explanation for why some countries have flourished while others have floundered.


What do high education and low fertility rates have in common? According to today’s guest, Charlie Robertson, they are both positively correlated with economic growth. In today’s episode, Charlie shares the reasons why he believes that countries that don’t get their fertility rates down to below 3 children per woman and those that don’t have adult literacy rates above 70% are doomed to remain trapped in poverty. Join us for a round-the-world trip where Charlie delves into the history of South Asia, Sub-Saharan Africa, and the West, and offers his explanation for why some countries have flourished while others have floundered. Charlie is the Global Chief Economist at Renaissance Capital and the author of The Fastest Billion and The Time-Travelling Economist.


Key Points From This Episode:

  • Understanding economic trends in Africa over the past few years.
  • Factors that lead to the creation of urban slums.
  • Charlie’s hypothesis on the link between fertility and economic growth.
  • What Charlie sees as the optimal fertility rate.
  • Basic adult literacy rates in Sub-Saharan African countries when they were decolonized.
  • A statistic that highlights the progress that has been made on the education front globally.
  • Why education is imperative for growth.
  • The correlation between education and fertility.
  • The importance of correctly sequencing educational priorities.
  • An explanation of the economic success being experienced in the Philippines.
  • Comparing the rate of economic growth in India and China.
  • Reasons why Pakistan hasn’t kept up with India’s levels of economic growth.
  • Explaining Sri Lanka’s downfall.
  • Charlie’s thoughts on the China-Pakistan Economic Corridor.
  • The energy financing issues facing African countries.
  • Challenges of using green energy as a baseload power source.
  • Why Charlie believes governments should be focusing on providing electricity to factories rather than homes.
  • Benefits of decentralized energy systems.
  • The potential of municipal-level financing approaches.



Kurtis: Welcome to the Charter Cities Podcast. I’m Kurtis Lockhart. On each episode, we invite a leading expert to discuss key trends in global development in the world of cities, including the role of charter cities and innovative governance will play in humanity’s new urban age.

For more information, please follow us on social media or visit

 Jeffrey: I’m Jeffrey Mason, research manager at the Charter Cities Institute. My guest on the podcast today is Charlie Robertson. Charlie is the Global Chief Economist for Renaissance capital and is the author of The Fastest Billion, The Story Behind Africa’s Economic Revolution, and The Time-Traveling Economist: Why Education, Electricity and Fertility Are Key to Escaping Poverty published this year. We talked about these and many related topics in today’s conversation. Thank you for listening.


 Jeffrey: Thanks for coming on the show, Charlie.


 Charlie Pleasure to be here. So honored to come and speak with you. Thanks.


 Jeffrey: You’ve spoken and written in the past about how you were sort of expecting a big boom for African growth over the past decade, as the continent had been kind of on this sort of upward trajectory. Things were looking relatively good. But of course, in sort of recent years, things have stalled out a little bit for a lot of countries in Africa. What do you think changed or what went wrong to lead us to the situation where growth across Africa has kind of stagnated?


 Charlie When we did The Fastest Billion in 2012, it was after a good decade or so of vastly improving growth already. I guess one of the themes I’m trying to get out in this book, is that when things are going well, and the new book, The Time-Traveling Economist is more about these long-term underlying drivers. When things are going well, governments look good, everyone’s praising them and life looks relatively easy. When growth was good in the 2000 to say, 2014 period, you had a decent commodity run that was supporting a lot of the economies. So exports were up, but your revenues were up, the government’s had a bit more to spend, they could improve infrastructure, you saw some decent projects actually getting completed, you saw the rollout of telecoms. What we’re trying to get out in The Fastest Billion was to first highlight all of the progress in different areas that were coming, and then try and explain some of the underlying themes that might be explaining it. We did touch on education.


One chapter in that kind of 14-chapter book was about education. There was some of that better governance, although I suspect some of that now reflects the higher growth that again, makes governments look good. But what I had not grasped was the importance of some of the other themes that I’ve been trying to work out what went wrong since 2014. The obvious answer is, commodity prices fell, and that undermined growth for a fair number of countries in Sub-Sahara, but it wasn’t just that. The Time-Traveling Economist is trying to work out what are the other underlying themes that really matter. Education plays even more highly, in terms of its importance now, but I’ve also added in the key points of electricity, and oddly, fertility rates, which was controversial to me, let alone to the people I’m not talking to about.


 Jeffrey: Sure. We’ll get to some of those topics in a little bit here. I’m wondering how you think rapid urbanization fits into the story about African growth. Because, historically in say, the United States, the UK, Europe, elsewhere, cities were sort of these hubs for productivity, and growth and sort of industrialization. That sort of historical link has largely broken down for a lot of cities across Africa. How does rapid urbanization kind of fit into this narrative?


 Charlie Well, The Time-Traveling Economist, I’ve gone back to Europe in the 19th century, New York, studied Latin America in the 20th century as well. What’s absolutely crucial is that you get your educated population. I was citing a study in Nigeria, I think 94% of those who got secondary school education left their village in Nigeria, and nearly everybody who didn’t get to secondary school education stayed at home. Education prompts people to seek a better life, a better paid life. That tends to involve going to the cities where the jobs might be, but the jobs aren’t there if local savings across the economy are not pretty high. If you’ve got no savings in the economy, those better educated, rural villages do leave, they turn up in a city, but there’s no financing for cheap factories to create the jobs. What you start to get is slum cities on a massive scale. Whether that’s the favelas in Rio. or whether that’s the slums that you can see in Bombay, or Mumbai, or increasingly in Lagos, or Kinshasa. I think you’re going to be coming in a big way in Dar es Salaam.


Those slums are reflective of a lack of savings. The lack of savings then is reflective of a lack of high fertility. The lack of savings means a lack of infrastructure, a lack of money in the banks that can lend to create jobs, to help companies set up so people turn up and become urban poor, instead of rural poor. I say to – well, bank study, I think about Sub-Sahara saying that’s become quite a significant thing. I almost remember the phrase, just quite good or bad, about that issue of people – yeah, something to do with  entrepreneurs, these people who have created businesses, but just don’t have the resources to build those businesses, and therefore employ more people.


 Jeffrey: Basically, you’re sort of – we get people who are kind of stuck in this informal, small-scale economy that really has really no chance of becoming productive.


 Charlie Well, I still would guess that and I can’t prove that though. But guess that if you’re collecting millions of people in one place, you’ve got banks and potential to start building a business in a very slow way. Actually, the 19th century Europe did or the 19th century UK. So, if you have read kind of Dickens and all those Charles Dickens stories about poverty in the UK cities. The UK also had relatively high fertility, so they didn’t actually have a vast amount of savings and it took a really long time to industrialize, and for the UK to grow its economy. China, Asia, so many of the success stories we know in the last 50 years, it’s happened much, much more quickly, much faster growth. Urbanization hasn’t involved in East Asia, that same degree of slum situation and the cities, because I think the fertility rates came down faster, savings grew faster. My point is, that the cities do grow, and they are helpful for growth, even in a higher fertility economy. But it’s not the rapid progress that we could see.


 Jeffrey: Let’s say on the fertility point for a moment. You’ve kind of articulated a little bit, this argument, right? It’s hard for the poor to save, especially when they have a lot of kids to take care of, seeing sort of rapidly rising incomes, and downstream. This creates problems for the availability of capital to be invested in an economy, right? Various points in the last couple of decades, we’ve seen some really aggressive fertility control policies, China’s one child policy is sort of the most notable of these. But now, little ways down the line, we’re seeing in real time, like a real collapse of birth rates globally, even just outside of the high-income countries. That comes with a whole sort of slate of economic consequences. o policy is kind of shifted in the other direction, China upped it to two-child, three-child, and policy I think last year cut all restrictions entirely. We even saw these kinds of reversals a while ago. Singapore over a course of 16 years, starting in 1970, ping ponged from stop at two to have three or more parentheses, if you can afford it. That’s a really quick reversal.


Now, lots of countries are sort of trying to do the exact opposite, prop up  with policy, and it seems to really not be that effective in most places. How do you kind of overcome this reversal, where fertility causes certain problems when you’re at a particular level of development. But then once it comes down, it causes a different set of problems. Is there a way to navigate through that you think, that hasn’t really been tried yet? Or how do you sort of balance these issues?


 Charlie I think this is a real problem, because what we’ve got is the Western, primarily the Western media, or perhaps the northern hemisphere media, banging on about and quite understandably so, the problems of low fertility and rapidly aging societies. We’re going to see some pretty extraordinary changes in economic trends, probably in places like Korea, which is going to be the oldest nation in the world by 2030, older than Japan, followed not that far behind by China. What we’ve seen, and you’ve mentioned a couple of examples already, but I could throw in Russia, or Iran, countries which have managed to get the fertility rate down. But unfortunately, down to about one child per woman. At that point, getting it back up again, proves extremely difficult. But the mantra that’s coming across, if you pick up the Economist Magazine, or the Financial Times, you’ll get many more articles about the problem of low fertility.


When I sit there at Central Bank in Abuja, Nigeria, and the economist is sitting on the table, the message that’s being sent is that low fertility is a problem. What it is, high fertility is a problem first, and the countries that don’t get their fertility rates down don’t ever get out of poverty. We don’t have any high fertility economic success stories. You do have low fertility rich countries; you don’t have high fertility rich countries. My point here is that, the families can’t save if they’ve got on average five or six kids. In fact, they don’t save much if they’ve got on average above three kids. The big jump happens when you get down to two to three kids. Yes, if you get below two kids, Luxembourg or Hong Kong do have even higher, higher savings. But really, you don’t need that level of savings, you don’t need the kind of 200% of GDP sitting in deposit in the banks. Just getting that big doubling from about 30%, 35% of GDP bank deposits at three to four kids. Up to 60% on average, when you’ve got two to three kids. That’s the difference, which suddenly enables governments to do everything, to roll out electricity that’s cheap, to roll out roads, and bridges and decent urban infrastructure.


I guess what I’m getting at in the book to anyone who’s listening on the fertility thing is, yes, get your fertility rate down below three. You don’t need to do it via China’s one child policy. You know, every other country that’s got wealthy has done it as well without that. But be wary of letting it fall below two, because getting it back up again becomes extremely difficult. So, I guess what I’m trying to say is there’s two stories here, there’s a story I’m not writing about, because it’s not relevant to the escaping poverty, core thesis of the book. That’s the aging societies of the Western northern hemisphere. That’s for somebody else to talk about. But I’m just talking about, let’s get to the point where incomes have risen dramatically, where governments have got infrastructure, where economies are growing at 5%, 6%, 7% a year. Let’s get to that point and then think about how to make sure you don’t go overboard on that encouraging low fertility.


 Jeffrey: Yeah, that makes sense. One of the other key themes that you’ve talked a little bit about already is education. Right, this is an area that receives huge attention within the international development community, ton of research in this area about trying to figure out what works, what doesn’t. Yet, most sort of lower income countries, proficiency in basic mathematics, basic literacy, at least the data we do have says it’s really quite poor and progress really isn’t happening in most places. Why is it so hard for countries to make their basic education systems better?


 Charlie I’m going to come back to where this came from or this renewed focus by me. In The Time-Traveling Economist ten years ago, I talked about secondary school education, like 11 to 17 years old. But in this book, I ended up talking about just basic adult literacy. It was prompted in part by trying to look at Kenya’s potential for a manufacturing revolution, or East Africa in general. I was comparing it to Korea, and Korea had gone from 30% adult literacy in 1945 to about 90% in 1960, they claim. The World Bank says a little bit different like 85%, but it was still a big jump, 30 to 85, 30 to 90, massive jump. This book on industrialization in the 60s that I found in the LSU Library said, you need to have 70% to 80% that created it very fast. You’d be slightly skeptical about the numbers. Stalin, Joseph Stalin, the Soviet leader who didn’t really like to be told bad news. His people told him that Soviet Union was getting two percentage points a year. That’s what 20 percentage point gain in literacy every decade. About 40% between 1920 and 1940, which was enough for the Soviet Union to industrialize, and stop Hitler’s victory in World War II, in fact.


First start, it does take time. What were Sub-Saharan governments left with when the West decolonized in say, 1960? Most countries at best had about 20% adult literacy. Even if you manage the Stalinist level of forcibly changing society with a very heavy-handed, top-down approach, you wouldn’t really expect it to have got much beyond 60% adult literacy by 1980, and maybe 100% by the year 2000. That would have been your best-case scenario, if you use Stalin’s model as a possible proxy. I mean, the Koreans will tell you, you could do it faster than that. But I am slightly skeptical of the data. They were trying to compete with North Korea, which claimed it got to 100% in about five or 10 years. So South Korea took 15 to get to 90%. I think that was this little –


 Jeffrey: That seems a little –


 Charlie It was, yeah. I’m a little suspicious. So it does take time, but we’re still not at 100% literacy even in 2020 for many countries in Sub-Sahara. What’s gone wrong? Some countries started even lower. Some of the Francophone West African countries started at about 5% adult literacy in 1960. So you wouldn’t necessarily even expect to get to maybe 85 by the year 2000. I mean, I guess there’s a number of things. First, you have this wonderful period of the ’60s to ’70s when commodity prices were high. Governments did have cash to throw at a lot of different things. But education was not the proven developmental success requirements in the ’60s and ’70s. People were writing about in theories, but we didn’t have much data on how this was affecting economic growth. There was very little data.


Development economics didn’t really start until 1950. So the ’60s and ’70s, certainly people were saying we need primary education, but they’re also saying, we need university graduates. Again, there’s doubt about the figures here. But in Congo,  was, there was lots been written about them having maybe 30 graduates when they became independent. That’s barely enough to fill a cabinet, let alone a university, or a school or, a hospital, or the army or any of the many, many things any country needs to develop. There was an argument, they needed to focus on tertiary education, and of course, secondary education. It’s not just about primary. Then you’ve got a problem with teachers. When you’ve got a population that’s growing as fast as Sub-Sahara, or South Asia’s population group in the late 20th century, the number of kids coming into the school system every year is growing. The class size is getting larger, and larger, and larger and you’re ending up in a situation today. Where in Malawi, I think you get class sizes of 80 or 120 children in one class. I mean, how can you possibly?


I used to try and help kids learn to read in a UK primary school when I was about 17. That was one-for-one, and you could see it, maybe making a bit of a difference over an hour, as me one on one with one kid, not me trying to teach 120 children how to read and write. I think it becomes difficult when governments didn’t know for a long time how important it was, when the population is growing so fast, and when governments have got so many requests for their time, and cash and money. Should you be investing in in hospitals? One of the key things about the fertility rate is, it’s very strongly linked to child mortality. If you’ve got a lot of kids dying before the age of five, families tend to have more kids, because they fear that result. So actually, if you’re trying to get fertility down, then you’re to be investing in basic health care, not necessarily basic education, one could argue. I think whether it’s security issues, Civil War, default issues, the cyclicality of commodities, which means governments are flush with cash some decades and have nothing in subsequent decades. It makes extremely difficult to get this right.


But the good news is that nearly everywhere has the number of countries that still have a significant problem with the education fund, represent about 100 million people globally out of over – a well over seven billion now. Is it not nearly eight billion.


 Jeffrey: I think so.


 Charlie In that regard, there has been progress. Governments have in the end got it right. It’s just taken quite a long time.


 Jeffrey: How much of the education issue is a chicken and egg problem in the sense that – right, there’s an argument that you’ve sort of articulated about how education feeds into growth. But what about sort of the reverse of that, where you start getting growth. You have the economic and social conditions where it is no longer imperative that the kids are at home, say, helping out on the farm, or with the family trade or something. But where it actually becomes sort of more viable for those kids who attend school, and the parents can evaluate that sort of trade off and say, “Yes. They should be going to school, rather than, say helping at home and doing X, Y, Z that we need them to do.


 Charlie The trains do move together. But the way it works is, we can see from all of these studies is you won’t get growth without education. There’s no illiterate rich country. There’s no high fertility rich country. The people who are literate don’t leave the village, so they never get growth. They’re much more likely to have larger families and condemn those children to poverty, because they won’t have the cash. The parents won’t have the cash then to invest in them in their education. So you can see that when women in particular get educated, they’re not having their first kid at 13, because they’ve already left school. They’re having their first kid at 19 when they finally finish secondary school. The odds are, they’re having two less kids already. So straight away, it makes a difference.


Those working women or potentially working women could go out and earn an income because they’ve had an education. That makes the trade off about having more children. Also, well, there is a trade off because they’re sacrificing an income. But again, if you’re an illiterate woman working in a village, the income is subsistence agriculture are not much better. So it can feed into itself, but I think what we can see in the data is that until you’ve got your basic literacy of 70% to 80%, you will not have a manufacturing sector. If you do not have a manufacturing sector, you are not going to see your country escape poverty. There’s a little exception like Seychelles, which is too small to ever have a manufacturing sector, but they had tourism, which again, takes off when you’ve actually got a literate society. You don’t get massive tourism industries in countries that are illiterate.


However, you take off, the education comes first. Manufacturing normally, but sometimes it can come through services. Then it becomes an issue of sequencing the educational priorities. The Koreans got absolutely right. Would you trust them, exact numbers or not? Primary School first. Make sure everyone’s getting that primary school education, everyone can read and write, and then focus on secondary. And pretty quickly, start focusing on tertiary a decade or so after that, because university graduates will be required to help you build that heavy industry, the steel industry, the car industry, that you could be getting in 20 or 30 years after your textile takeoff. What we’ve seen in say, Sri Lanka or Mauritius is, in fact, they move more into services rather than heavy industry.


But Korea in the ’70s, when they’re just doing textiles, were already planning their university courses to focus more on the sciences, so that factories like Kia, Hyundai, Samsung, those businesses could start to thrive in the 1990s. So they were thinking ahead. In that regard, growth helps. Because once the growth is coming in, the money’s coming in for governments to start to build out that secondary and then tertiary education, which then enables you to take off to the next level, and not get stuck in a kind of middle-income trap.


 Jeffrey: Yeah, this is something interesting that we’re seeing a lot of in the new cities, charter cities space with universities and training centers, kind of as anchor tenants or as components of some of these projects. Particularly with a focus towards tech, towards training talent in Africa and elsewhere, in computer science and similar fields, different branches of engineering. Such that one, they can sort of facilitate the greater integration of sort of the global big tech firms into these places as they sort of expand their physical presences or their remote presences, but also to bolster those fields on the domestic side. It’s interesting to see how some entrepreneurs I think are sort of taking that further along third step of tertiary education into their own hands in their respective fields.


 Charlie When I think of a country like Kenya, you can see, they’ve already got adult literacy of 80%. That figure has been up there for over a decade now. So they’ve got enough to get out of poverty and move to the next level. Unfortunately, like the Philippines in the late 20th century, the fertility rates still fairly high. It’s still at about three, and a half to four kids per woman like the Philippines in the ’90s. The Philippines was not a great success story. Because if your fertility rate is that high, you don’t have the local savings, so you don’t have the electricity and Kenya doesn’t. You don’t have cheap, reliable electricity, so the factories don’t come. So you then have to earn your return in a different way. The Philippines did it by exporting their labor on a massive scale, because they had well-educated people, well enough educated people to go and get jobs in Hong Kong or Singapore, but they couldn’t create the jobs at home. Then it becomes a remittance flows story back to the Philippines.


Now, it’s changed in the Philippines now, because the fertility rates become below three kids. Now, the Philippines has got cash from the banking system, which is enough to fuel its kind of manufacturing growth story as well. So it’s got remittances, and the manufacturing coming through and tourism. It’s all looking great for the Philippines. Kenya is not there yet. So I suspect we will see Kenyans moving abroad. I’m not surprised to see Kenyans kind of manning the hotel in Jordan where I was out a couple of years ago, slightly more than a couple because of COVID, but a few years back. But you’ve also got this technological change that wasn’t open to the Philippines in the 20th century, which as you’re getting at is tech. You do have the Silicon Savannah story. It does help to have good universities that are helping support that specific sector. When I talk about manufacturing, what I really mean is high-value added something, away from a subsistence agriculture, which has got no value-added production. So it can be manufacturing, that’s what we’ve got used to. It can be tourism; we’ve seen that happen. It could also, of course, be the tech space. But we’ve never quite seen that happen to take the country out of poverty before, but this might be the 21st century difference to the 20th century.


 Jeffrey: India seems like interesting, perhaps test of that, right? Because, in say, 1970, India and China were roughly the same in terms of GDP per capita, right? And then China takes off starting in the ’80s and ’90s. India starts growing in the ’90s, but it’s never really been at the same sustained high level, and then there’s sort of this fairly sizable gap now. But you also sort of said, there’s kind of this observable trend where once countries get to a certain fertility rate, there tends to be a shift in the structure of the economy. I think India is starting to sort of get close.


 Charlie Very much.


 Jeffrey: Or they’re basically – are they’re really at that level you’re talking about?


 Charlie Yeah, it is.


 Jeffrey: So what would you say your expectations are for, say India over the next 20, 30 years?


 Charlie Well, in India’s case, the fertility rate has come down, and that’s absolutely fine. What I find – there’s an interesting comparison point actually to talk about Bangladesh, India, Pakistan, and Sri Lanka. So we could perhaps do that in a sec. But just between India and China, I was quite surprised when reading the book and had to delve quite deep into this. But Mao just didn’t do very much for female education, relative to many other communist leaders. You know, from Lenin onwards, communist leader said, “Everyone needs to be literate.” Castro got universal literacy way back 1963. He’s quite lucky Cuba started with a very high level. Soviet Union very much a Leninist priority. Mao seems to have a bit of a problem with teachers. He thought they were a bit above themselves. A big chunk of them got sent off to kind of work camps during the Cultural Revolution. The results of that was that by 1980, only 50% of Chinese women, adult women could read and write, which at one level, I’m shocked by because it was a communist system already for 30 years by that point. But at another level, I’m not shocked by because no one bought anything from China in 1980. Because the adult literacy rate wasn’t high enough to industrialize.


It took until the ’90s for overall adult literacy to be high enough over 70% for China to take off. It took India another 20 years. So from the early ’90s until 2014 is the number – 2010 to ’14 is when we know that the data got better for India. China had this advantage, which enabled it to take off, and industrialize and indeed produce services. Actually, China exported more services, the last time I checked in as compared to the 2000s, than India did. Because China just had everything going for it at the low fertility rate and a good education, but India’s there now. So India’s fertility rate came down. It was actually government push in the 20th century. In some cases, not very kindly on the population. There’s some bullying, I think of certain people to get forcibly sterilized, so it wasn’t ideal from a kind of humanitarian perspective.


But nonetheless, with the education that the numbers are now supporting India’s growth, and India doesn’t have that same level of external debt that high fertility countries usually have. Because it’s got low fertility, it’s got its own saving. It’s managing to finance his own growth, and I think is now going to be one of the fastest growing economies for the next 30 years. China’s already aging, we know that. The labor force is already shrinking. India didn’t do such an acute plunge in the fertility rate, and I think has got a lot longer to run. I think that, yeah, I think it’s going to look great on the next 30 years, along with Philippines and along with Indonesia. These countries are all now at the right place with all of the cylinders firing 100%. Well, close to 100 %.


 Jeffrey: So you mentioned a little bit before, Pakistan, Bangladesh, Sri Lanka, and looking at the performance of say, India, Pakistan, and Bangladesh specifically over the past maybe two decades. India has basically since the ’90s been performing at a higher level than Pakistan, and past Pakistan, and then GDP per capita. Bangladesh has now also overtaken Pakistan. What do you think is going on here? Why is Pakistan struggling to keep up with Indian and Bangladeshi growth?


 Charlie Well, we talked about countries doing education perhaps not as quickly as Starling, not as quickly as Korea. Pakistan has really not done it quickly, and I think that’s been the big problem. All of South Asia started – well, actually not Sri Lanka. But Bangladesh, India, and Pakistan all started roughly the same sort of post-colonial inheritance. Though, thanks to the Brits. You had something like 20% adult literacy in all countries in 1960. India had what was called the Hindu rate of growth in the ’60s and the ’70s, when they only grew up something like 1% per capita, per year. Actually, not that different from some European countries in the 19th century, because the fertility rate was coming down slowly, the education rates were coming up, but slowly, but they got there and Bangladesh got there. Bangladesh tried even harder on the fertility, getting the fertility rate down.


Pakistan didn’t and I assume that a part of that was its focus on defense and military spending. They had these number of wars in the first few decades of independence, had a sense of existential threat. So you’ve got in some cases, brilliant infrastructure in Pakistan. If you’ve driven up down the kind of the main highways, you’ve got an infrastructure system that is built for an army to be able to get up and down the country if it needs to, to fight a war. But it didn’t focus on educating girls. And yet, this East Pakistan, which is Bangladesh, these two were the same country until 1971. East Pakistan didn’t have to spend on defense after ’71 in a big way did decide to focus on education. The situation now is that Bangladesh exports as much per capita as India does, and double what Pakistan does.


Bangladesh and India export double per capita what Pakistan does. They’ve got enough electricity in both the countries because the fertility rates low, but the fertility rates still over three kids per woman in Pakistan, so they haven’t had the local savings. So they’ve gone to dollar bond markets. They’ve gone to China to be able to fund their investment and they built up a lot of external debt. So you have a government which hasn’t focused on, particularly female education is where you can see a real lag in Pakistan. But in Muslim Bangladesh, they did focus on enough female education, and perhaps went too much on defense. As a result, they are decade, two decades behind their peers.


Sri Lanka is a different story just because they were actually looking like the most successful economy in South Asia generations ago. Apparently, Lee Kuan Yew was really worried. When he was in charge of Singapore from the ’60s onwards. He was really frightened that Sri Lanka was going to eat his lunch, that global trade was going to use that place, Colombo as the kind of the main trading port, not Singapore. What did Singapore have is kind of not very much, a little swamp in the middle of some islands. It’s not a great situation. The British who financed I think 25% of the economy was the British naval base in Singapore. When that left in the ’60s, it was like – stuffed. But they had the misfortune of ethnic conflict, leading to that long war from the mid-80s to the late 2000s. Just when Sri Lanka should have been booming, they had the good education, had the fertility, had the good electricity, it was booming, it was industrializing, it’s got a manufacturing export base today. But just when you should have been using those profits to reinvest in your economy, to support the growth model as Korea has done, or Singapore, or Taiwan, or Hong Kong, it went on defense issues or military issues, or too much of it went. The consequence then after 2009 was, Sri Lanka says, “We need to catch up. We lost all those decades, relative to the East Asian Dragons, the Tiger economies. Let’s catch up by borrowing.” They’re now in default.


It’s a very interesting story, because it’s one of those countries where low fertility, education, electricity even when you’ve got it all right, it doesn’t absolutely 100% guarantee that your economy just flies forever.


 Jeffrey: Yeah, policy conflict, all these things matter a lot.


 Charlie Still do. They still do. But it’s hard to mock it up. What I’m arguing is, it’s hard to mock it out when you’ve got these conditions. Generally, you’ll think, “Oh, those people know what they’re doing. That guy, Modi, running India seems to have got it right. Duterte in Philippines, people may not have loved his populism. But you know what, the economy was doing well, but that’s because he was lucky enough to have these good numbers. But if you’re not lucky enough to have these good numbers, you go to Nigeria, and you say, “What’s happening there?” The president gets the blame for a lot, because so much doesn’t look like it can work right. I’m arguing, it can’t work right when savings are so constrained, education levels still aren’t there, electricity still not there. It’s very, very hard to look good as a government when you’ve got the inheritance that some of the current leadership in Sub-Sahara have got today.


 Jeffrey: Yeah. While we’re on this topic of Pakistan, and you mentioned Pakistan’s increasingly important relationship with China. How do you see the China-Pakistan Economic Corridor or CPEC factoring into Pakistan’s economic and political future? This is something that our senior researcher at CCI, Matt McCartney, he’s written a book on this, which more or less comes to the conclusion that, well, it certainly can be beneficial. It’s far from a cure all. Then there’s kind of an active debate about, is it time to sort of call CPEC a failure? The project at Gwadar seems pretty notable and important, but maybe some of the rest of the project less so. Where do you see CPEC in the China-Pakistan relationship going?


 Charlie Well. I mean, in general, Chinese lending to the developing countries, I saw is pretty good and mostly on the positive side five or 10 years ago. It felt that the Chinese were coming in with very low interest rates on the loans, which made a big contrast to my financial market investors I speak to. The guys who buy Euro bonds from various countries and will charge 6%, 8%, 10% interest rates. Chinese will come in and be charging two or three, so that felt good. The Chinese, my sense was, we’re focusing on infrastructure. When a government borrows a Euro bond, they might fund it to get a tax cut to win the next election. Short-term, unsustainable.


It felt that China was also developmentally close enough to countries like Pakistan, that it was only 20, 30 years ago. Elderly, more older Chinese in their 50s will remember what China was like when it looked a bit like Pakistan 30, 40 years ago. For lots of reasons, I thought this is quite a good thing. Where I’ve kind of slightly altered my point of view is, is that when I looked into and I can’t talk about with regards to Pakistan, in as much detail, because I think they did focus on power there, as well as the transport corridor. In fact, both are important. But elsewhere, it’s been focused on mining projects in parts of Africa, which is great for China, which wants to buy the goods from those mines, but isn’t quite as transformational on railway lines to again, partly get some of those commodities back to China. And less on what I think was absolutely essential was electricity.


I think an element of this then is, China’s been lending on projects where it’s now making those sorts of products, railways have doubled in size in China in the last 20 years. It wasn’t what led Chinese take off in the ’80s and the ’90s. Chinese take off in the ’80s, ’90s was city factories on ports selling goods, not much in the way of railways, not that much in a way of roads was necessary. You just have to have a decent port and some power next to a factory at that port. And only afterwards did they roll out the infrastructure. I would argue for Pakistan, cheap financing for factories, so they could start to boost their exports was arguably more in Karachi, say, on the coast, will be more important than a rail network heading into China. Probably, Pakistan would have been better with cheap financing for factories and exports of more textiles, or to help them move up the value-added curve in the agricultural sector where they are so strong.


I suspect there’s been a slight angle of the Chinese, one, necessarily lending for exactly what the country is really needed. That’s fair enough. Every country has its own interests in why it lends. Tied aid isn’t the only surprise. And of course, Chinese companies then have made money out of that too. The 2% to 3% interest rate is the headline good news story. But if you have to use a Chinese company to build a power station, and they’re charging 10%, 20%, sometimes more profits on that contract, a lot of that work effectively becomes a subsidy for China, Inc, not necessarily for Pakistan, or Kenya, or Nigeria. I mean, underlying all of that, of course, for Pakistan has massive geopolitical security aspects. They buy weaponry from China, they want strong links with China, they feel they need that alliance to rival to India. There’s another angle in quite a big way there. But I think it’s still helpful in in the long – there is infrastructure getting built and that’s hard to take away once it’s done, once the railway is done, or some new generating capacity is done. So in that regard, it’s probably still somewhat better on average than some of the financial market lending, which could be just a tax cut ahead of an election.


 Jeffrey: Let’s stay with – as we’re talking a lot about electricity here for a moment, let’s stay with that. One of the things that I did appreciate about your framing of the electricity issue, in the time traveling economists is your focus on getting energy consumption up, which in a lot of ways in sort of Western countries is a little bit of a taboo or a bad thing. There’s kind of this scarcity mindset. So I appreciate it, in particular your framing on that matter. But I’m wondering, how do you see the kind of global shift, at least attempted shift, I think maybe the conflict in Ukraine and some other things that have kind of made it more difficult. But this global attempt to shift away from oil and gas is going to affect the electricity issue for a lot of these countries, right? Maybe it’s cheaper to build up a gas plant than something else. But in terms of what the financing maybe is available for is something else that creates tradeoffs and challenges. How are lower-income countries going to be able to sort of straddle this problem?


 Charlie Yeah. I’m talking about every week at the moment, and is hugely important. I saw a guy who’s just back from a conference in Brussels, and he just said, “It’s appalling. We’re sitting here in Africa trying to get power.” Western banks are not going to finance a 10, 20-year fossil fuel projects to enable us to get power because of Western moral concerns about climate change from countries that have been polluting for two centuries, and carbon emissions in somewhere like Nigeria, I think is about a half a ton of carbon per person. The Kyoto targets from the early ’90s, the Kyoto Treaty targets were about three tons per capita at the time. Given global population is now at two tons per capita, Nigeria could quadruple its power carbon emissions and still only just get to what the Kyoto targets are. The best country in Europe, I think, is Sweden and they do about four and a half tons of carbon per person. That’s what, nearly 10 times what Nigeria and Tanzania do. It’s an incredibly sensitive issue.


The financing issue, I personally would argue, you do need some baseload of power, which is likely to be gas, could be coal, could be oil. Because so much of the other power, as Europe’s discovered this summer, is vulnerable to climate change in itself, ironically. You get a drought, and Norway’s rivers can’t produce the hydropower it used to. France’s rivers can’t keep the nuclear power reactors cool. So yes, solar power is going up, you’re losing on hydro and you’re losing on nuclear. You do need some steady baseload of power. I’m curious as to how this plays out. Will we get maybe Chinese banks, or Indian banks, or somebody being prepared to finance some of these long-term projects? Of course, it becomes a lot easier if your fertility rate comes down.


Morocco’s got 100% of GDP sitting in deposit on its banking system, and the interest rate is 2%, because they got so many savings. So if Morocco wants to build out its own power supply, it can do that from its own resources. In the 20, 30-year horizon, I suspect we won’t be using fossil fuels, anything like as much as we are now, but there could be changes. So there is an issue about baseload power, reliable power. But there’s also an issue about how do you focus that power at first? And where I feel and fear that governments are making mistakes in some countries is that they’re saying everyone should have access to power, which I think we’d all agree with. Of course, everyone should. But if you’ve got the choice between supplying power to a household that can’t afford it, needs subsidies to pay for it, then if you are subsidizing that household to get connected to the grid, to start using electricity, it’s costing a government money, and governments don’t have much money in these countries.


If you instead focus on delivering power to factories, which is what Korea did in the ’60s or ’70s, or what France did in the 1920s, what America did in the 1920s, and only then start rolling out electricity to the rural areas. That then means your factories are starting to make profit, and that profit means you can pay back the debts that have been used to build up the electricity system. That profit enables you to make a profitable system, not a loss-making system. Too many of the electricity systems in Sub-Saharan are loss making. The more power you supply, the more losses you make. The closer to bankruptcy governments are getting. This is not the direction I think governments need to focus on for the next five or 10 years in most cases. So there’s a lot going on with power and it’s a tough one.


 Jeffrey: I’m curious how much you think decentralized energy systems and energy markets will help leapfrog this a little bit, if you can’t necessarily hook up to whatever your region’s unreliable power supplier is but you can have maybe your own little windmill, or your own solar generator or something else? How much can this problem be leapfrogged versus, there’s kind of that baseline you talked about?


 Charlie For industry, I’ve been very excited by that idea. I’ve been asking a lot of people about that and I keep on getting the same pushback. Let’s take solar, you can put it on the roof of your big factory, and it’s great in countries with high sunlight. But when it’s raining, that’s going to have an impact, and you have to shut down the factory at six o’clock because you haven’t got any more power. That’s not the most efficient use of a factory. You ideally want shifts to be working into the evening and using the equipment inside that factory to a high degree. The same for a windmill, and the wind doesn’t blow. Factories do need reliable baseload power, and that’s tended to come from fossil fuels in the past.


But for households, I think this could be a brilliant way for a whole load of people to leapfrog. I saw some numbers in Zimbabwe, I think and I may get it wrong, two million people have got access by their own solar panels on their own roofs, because they can’t use the grid. South Africa, there’s been a huge push. I know a number of people who’ve gone out there. Of course, they’re the people who are better off.


But then you’ve got a company, I think it’s M-KOPA in Kenya, where they rent you, lease you a solar panel to put on your roof. Every time you use it via an app, you’re paying 20, 30 cents a day. But after 12 to 18 months, you’ve bought it outright, and then you’ve got your own power supply to charge up your phone, to perhaps get your kid to learn some clever tech skills and start earning loads of cash. So this I suspect could be the way to jump, to accelerate rural households, particularly rural households in smaller villages and so on to get electricity in a way that it’s probably not in the government’s economic interests or ability to afford to do it really in the next five to 10 years.


 Jeffrey: Yeah, it’s definitely an exciting space. I had no idea about that figure in Zimbabwe you gave, that’s very surprising. I’m sure, whatever it actually is, if it’s in that ballpark, that’s a very, very surprising, but very, very exciting number.


 Charlie Definitely double check it. It’s somewhere on my Twitter feed, Zimbabwe solar @RenCapMan. You’ll find the three.


 Jeffrey: One thing I’m wondering about, when we’ve been talking about finance, a lot of what we’ve been talking about here is either sort of on the private side, or maybe we’re kind of thinking in sort of a national perspective. But of course, in the US, right, there’s a robust and elsewhere, there’s sort of a robust network of sub-national municipal financing. But this is much weaker in the south, Global South. There’s a case I believe in Senegal, I think it was 2015. Dakar tried to issue a municipal bond, and the national government shut that down. This financial infrastructure for cities and regions is generally very weak and creates a system where all these lower levels are then reliant on the top.


I’m wondering, if more of this financial infrastructure could be, in a lot of cases, it’s already legalized, but built out. Or how receptive do you think, say firms like yours for instance would be acceptable in those kinds of financial products?


 Charlie That’s a really interesting question, but I’m not going to give you a very good answer, because I haven’t done enough work on it. But I guess what I’m conscious of over 20 years is the excitement that would create a city of Buenos Aires bond, for example. The yield tended to be a bit better. Actually, the credit rating of the city, the capital city anyway, could often be, in some ways better than the country as a whole. I mean, I would argue, say Lagos in Nigeria, which has got a vast amount of its own tax base, might be a better credit in some ways. I mean, it hasn’t got the access to the oil. That’s a federal story. But you could see the case for cities to say what Lagos in Nigeria needs. It’s got the education, it’s got the 80% literacy, it hasn’t got the electricity it needs to develop a manufacturing base. If they borrowed money to build that, suddenly you’re in a city growing 5% or 10% a year. It is an interesting idea.


I guess what I’m conscious of is having spoken to so many finance ministries, and Argentina’s the perfect example here, is that when governments do lose control of their provinces, or cities, or allow unchecked borrowing, the risk is it ends up backfiring and blowing up at the country level, not just the city level itself. I think that’s why in Nigeria too, I don’t think city states are allowed to go out and borrow money. But you’re addressing a point when we think of China, and a lot of the urban development in China has been financed by local government, cities, regions, selling land to developers. And yes, eventually, that could go too far and cause a problem. But for decades, that’s been supportive of Chinese growth. Yes, I could see it happening, and I can see it working. But I can’t think of any places at the present where that’s being encouraged. I guess it’s because there is a fair amount of debt right now, with global interest rates going up no one’s trying to encourage people to issue more at a sub-national or city level.


 Jeffrey: Right. I think it’ll be interesting as well as more and more of these types of city projects that we work with and that others are doing, as more and more of those start to reach maturity or some of these different financial institutions to get more, I think, exposure to these types of projects to the point where a new city as an asset class is as sensible to somebody as, “Okay. You want to do a transit system or power system,” something like that. I think it’ll be interesting to see how that develops as this sort of ecosystem matures over the next –


 Charlie Just to add in, I was just talking to some people about Lagos at the moment, because there’s this debate going on for – well, it’s been going on for a long time, but it’s got more intense in the last year about VAT, value added tax, which gets raised disproportionately in Lagos. Because there’s so much business in that city, roughly 20 million. I mean, people say bigger numbers, but maybe 20 million people out of 200 million. But maybe 20% or 30% of GDP, just in this one city. But the VAT receipts, the value added tax receipts get then collected by the Federal Government. Lagos is saying, “We’re not getting this money back. This is our money that we’re raising that we want to be able to reinvest to make Lagos even more successful.” So there is an element of, can you be given more ownership of your own – the taxes, and money and wealth that’s created in your city? We’ve got it in the UK. London subsidizes the rest of the United Kingdom and sometimes London is packed into tubes trying to get to work and, I say, it’d be rather nice if a bit more of that were spent here, please.


 Jeffrey: For sure. I’ve really enjoyed our conversation, and I’m wondering now that The Time Traveling Economist is out, what’s your next project? Do you know yet?


 Charlie I think this is going to take a good few years to seep into all the areas I’d like it to. So I’m doing a trip down to East Africa in October to try and talk to people about the book and the themes in it. Hopefully, in Nigeria in early December, Cairo at the end of October. My job now is to try and promote this and get people to think about some of these issues, because there are some key simple things: get infant mortality down, encourage smaller families, but not too small. That then helps the savings and that enables your country to take off. But, sadly for politicians, it’s a payoff on a 10 or 20-year horizon. It’s trying to find people who are prepared to do the right thing for their children, even if it’s not much help for their immediate career.


 Jeffrey: Yeah, that’s a difficult task, but I think your work here will help push that forward in a big way.


 Charlie Hundred percent. Thank you so much for the time.


 Kurtis: Thanks so much for listening. We love engaging with our listeners, so please always feel free to reach out. Contact information is listed in the show notes. To find out more about the work of the Charter Cities Institute, please follow us on social media, or visit


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Renaissance Capital

The Fastest Billion

The Time-Travelling Economist

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