[Image Credit: DFID ‘laying Foundations for the Future (2013)]
‘What worries me is when you see developments that can transform a city so fast and become very hard to come back from, we are talking about serious, physical concrete changes and real massive vested interests, it becomes very hard to change that (and) to introduce new taxes (…) new housing schemes, because the land is being used in all these ways.’
Land is a finite resource. Whilst this is perhaps more apparent in Kigali, than Addis Ababa, these cities’ government led urban development drives demonstrate a preciousness about land distribution and the political purposes of such use. This is the comparative vantage point that Dr. Thomas Goodfellow is taking in his new work on urban development and taxation in Ethiopia and Rwanda. During a recent JEFCAS seminar, Goodfellow underscores the permanence of change created by urban developments that actualize ‘physical concrete changes and real massive vested interests’. This radical change is set against the urban citizens of these countries, who in a best case scenario may find new employment opportunities if they are able to compete in a job market situated around business tourism or high end financial products, but in a worst case scenario find themselves (re)displaced into the countryside or shrinking slums with no benefit from these often massively state funded projects.
Goodfellow joins a chorus of economists that herald the increasing relevance of property tax. The stated potential for property tax is not just as a tax on property, but a tax on increasing wealth in both Addis and Kigali’s real estate growth. The average property tax in most developing countries falls at around 3%, offering varying degrees of significance in state and local revenues. Rwanda has an official property of 2-4%, which in real terms (due to loopholes and antiquated valuation systems) works out at about 0.009%. A libertarian’s paradise indeed! The situation in Ethiopia is even less appealing where taxes as fairly piecemeal, with effectively no property tax. The reasoning for this deficit varies according to the political economy of each country: Rwanda’s ‘elite bargain’ avoids discussion of property tax in order to reproduce a careful balance of political power for the ruling Rwandan Patriotic Front between businesses and its economic success story; the Ethiopian People’s Revolutionary Democratic Front mixes their need for urban political support (making redevelopment of housing a priority), Chinese development intervention/partnership, and the restriction of diaspora investment into real estate. Both polities produce specific interest driven development of their major cities.
Goodfellow’s preliminary analysis therefore lends further cases to the claims made by Thomas Piketty’s Capital in the Twenty-First Century. This work highlights the rise of rentier wealth, and the protection of assets in property that remain untaxed, which can translate over time into patrimonial wealth. Most obviously connecting these perspectives is the framing of property tax as a tax on wealth and as a necessary tool for combating emerging forms of and increasing inequality. Goodfellow’s comparative analysis casts doubt on achieving this measure, as the speculative tenancy rates rather than benefits to the urban poor drive the current development logic in these countries.
Certainly, any observer can take varying degrees of cynicism away from this comparative study, however, considering in addition the comparative absence of political freedoms in both Rwanda and Ethiopia, it is unsurprising that China finds common bedfellows with these partners in construction (and oppression). Aside from this speculative connection, China certainly is exporting its own model of development into these parts and other parts of the global south.
China’s infamous Three Gores Dam project highlights the challenges of massive scale development that displaces residents. With over a million people were forced to relocate, new residences were built, but the problems of permits and affordability led to the continued displacement of hundreds of thousands. Similarly, in Addis, new housing projects continue to rise, but are ill affordable for the lottery winning residents. Most end up paying for the housing by remaining in the slums and renting out the apartments. In Chinese cities, where slums are cleared for the construction of high-rise apartments as housing for the growing consumer middle-class, the poor are made homeless with the rhythmic shove of a bulldozer’s front end. William Vollmann in his global south reflection Poor People, is covered with an image he captured of one such individual.
[Image credit: Magnesia News (2015)]
This man works his way through the rubble after the clearing of homes for a new road in Nanning. This is perhaps the enduring counter-reality of the high-rises in Kigali, Addis, and various other Chinese cities.
The featured image for this post, conversely portrays the more apparent reality. This construction worker, captured by the UK government’s Department for International Development, stands proudly in the foreground of the make-shift scaffolding and concrete foundations. The fate of such workers and the urban poor who dwell amidst this property driven development, remains, as Goodfellow states, uncertain at best. Fast-paced, ‘concrete changes’ in the name of preserving political hegemony and serving elites, can be tamed by property tax and other progressive measures; yet, what reason do such governments have to adjust their own interests and challenge beneficial status quos?