This well-designed study brings a debate from economics about the relative power of weak economies into the political economy subfield of political science. The author makes a compelling case that African countries have bargaining power with China, but many fail to use that power to their development advantage. Given their convictions about dependency theory, many Africanists interested in development will be skeptical. If Seyfried is right in her argument, however, there are significant policy implications. Moreover, the study reinforces the idea that African interlocutors have real agency in dealing with outsiders, engaging another contemporary debate.
The debate that Seyfried brings from economics into political economy is one about the relative advantages of weak economies in attracting foreign investment and deploying the benefits of these investments in the interest of growth and development. Nearly all development experts, and a great many African policymakers, Seyfried claims, are wedded to the “Weak Bargaining Power Narrative.” This narrative says that African economies are unfavorable venues for foreign investment due to their low return potential, political instability, corruption, poor infrastructure, and low human capital, inter alia. Rejecting this near-consensus, Seyfried embraces the “Power of Weak Economies” theory. According to this theory, investors find emerging markets attractive due to the “market access, cheap unskilled labor, and natural resources” that they offer (29).
Taking a detour, Seyfried argues that these factors made China itself an attractive market for foreign investors, starting in the early 1980s. And indeed, Western foreign investors did pour capital into China beginning at that time. Seyfried argues that China used its bargaining power as an “attractive” investment market to negotiate good deals with these outside investors. In turn, China used the fruits of these investments—human and physical capital formation—as a key element of its overall development strategy.
Seyfried defines bargaining power as “the relative structural attractiveness of a market to the investor” (11, my emphasis). The structures she references include “economic factor endowments,” such as market size, infrastructure, and so on (39). By this definition, all African states have some bargaining power, but some more than others. The first question this raises for Seyfried is whether there is any relationship between bargaining power (defined this way) and the “deal quality” that African partners get, as we would expect. In Chapter Three, using precise definitions, she shows that (structural) bargaining power and deal quality are not in fact correlated: countries with high bargaining power often get bad deals and vice versa. Explaining this puzzle is the central purpose of Seyfried’s book.
The next two chapters of the study start to address the puzzle by showing that there is a major gap between the perception of bargaining power and its reality. Chapter Four does this through a conjoint study of Chinese private investors and investment hosts in Nigeria. This exercise shows, first, that Nigerians do not drive hard bargains with their Chinese partners and, second, that Chinese investors would in fact accept much more stringent controls on their investments if asked. The following chapter examines the historical range of deal-making patterns across African states, finding that some have been more “price-takers,” accepting what they were offered, whereas others have been “price-setters,” demanding that foreign investors agree to terms that benefit the local economy. This analysis serves to justify Seyfried’s selection of case studies, which include Ethiopia and Tanzania (price-setters), Kenya and Nigeria (price-takers), and South Africa (an intermediate case).
Chapter Six begins the task of explaining this anomaly, while Chapter Seven completes the job. Several reasons emerge to explain this puzzle. First, investment hosts in some African countries have internalized the “Weak Bargaining Power Narrative” from the time of independence; they believe that investors will flee if they either drive a hard bargain or change investment rules. Second, more decentralized polities have more difficulty communicating about what Chinese private investors will accept. Third, African democratic polities have a shorter time horizon than countries ruled for long stints by a single dominant party. This explains why Ethiopia and Tanzania, centralized, party-dominant states have received strong deals from Chinese investors and turned the benefits of these good deals into development advances.
It is unfortunate that some elements of this study make it less accessible to its target audience than might have been the case. It is replete with technical language from economics that will be unfamiliar to some in the development and policy circles. Further, a huge percentage of the book is consumed with presenting the research design and methods, while the results are described too briefly. Ironically, given the obvious positivist convictions of the author, the study makes a powerful case that “culture” (i.e., perceptions and internalized norms) matter more than objective material conditions for development. Due to the style of presentation, however, many constructivists will eschew this study.
Nonetheless, the study deserves to be read carefully and debated. It boldly challenges a central element of the received wisdom about African development with careful research and argumentation. It suggests that the right policies could set at least some African countries on a path of sustainable development. And it makes a strong case that the impediments to adopting these policies lie more in the minds of policymakers and entrepreneurs than in the “brute facts” of global economics.
