An interesting counterfactual

Start by thinking about the US movie industry. Now take away copyright protection - the government gives up on trying to police it. Next, get rid of most of the country's movie theatres so that the one place where the industry can most securely monetize content is gone. Next, cut per capita income to about $1000. And, get rid of most of the infrastructure that's complementary to the film industry. Finally, make sure that there's no government support of the industry to make up for all the other problems.

There'd be no movie industry at all, right?

Except Nigeria's already there and producing more films per capita than the average for developed countries. Olufunmilayo Arewa documents Nollywood's success.

The rise of the film sector in Nigeria runs counter to existing trends in the film sector in which developing countries, which produce 1.2 films per million inhabitant annually, lag developed countries, which produce 6.3 films per million inhabitants annually.¹⁷³ At current Nollywood production levels, Nigeria produces approximately 6.7 films per million inhabitants annually.¹⁷⁴ Bridging the developing country film production gap remains challenging, particularly because the optimal ways to create domestic film industries remain elusive in many instances. Prior to the proliferation of Nollywood films, at least one commentator suggested that government takeover of the film industry would be the only means by which Nigeria could develop a film industry.¹⁷⁵ 

Notably, although many countries have sought to incentivize particular types of film production through direct government funding, subsidies, or film protection schemas involving film quotas,¹⁷⁶ many of these industries have not been commercially viable in the absence of subsidies or other support schemes. In contrast, Nollywood has created significant volume of local video film content with virtually no government involvement or subsidies. The success of Nollywood may in many respects be attributable to a lack of government involvement and its decentralized nature, which has permitted Nollywood participants to be highly entrepreneurial, adaptive and innovative. Nollywood now may employ as many as 200,000 people directly with estimates of indirect employment as high as 1 million.¹⁷⁷ The market-driven Nollywood approach is less costly than existing models of film production and distribution and may offer a new model for developing countries that wish to develop domestic film industries. [emphasis added; number does seem high, Nigeria population about 158 million...]

Arewa says Nollywood succeeded, in part, because very lax copyright enforcement meant Nollywood films enjoyed early broad distribution, building demand for later works. Now that the brand has been established, more secure property rights could be useful. And, copyright enforcement has stepped up a bit; Arewa quotes the following:

Industry officials and government agencies have started paying closer attention to piracy, but so far there hasn’t been much of an effect. A recent police raid on a well-known DVD-copying operation resulted in a brief confrontation between police and piracy-ring leaders. The pirates stood their ground and burned a police truck, then went back to work making knock-off Nollywood copies. The only repercussion for the offenders? A bill for the damage to the police vehicle.²¹²

Films are low-budget, usually financed by friends and family, and distributed on DVD through informal networks. They don't earn much, and even with copyright, vendors couldn't charge more than the $2-4 they charge per disc: consumers couldn't afford it. But better protection would now yield higher returns through increased legitimate distribution.

Arewa sensibly suggests a few potential channels, like capitalizing on pirate distribution networks through in-film product placement and advertisement, where other alternatives like moving from informal to formal business environments and strengthening intellectual property protection might not be feasible. The lessons probably apply more broadly.

Update: Cowen previously pointed to more on Nollywood and online distribution of Nollywood films: Nollywood plus Netflix = profit.

Feeling good, doing harm - aid edition

Brian Stewart reviews a new book by Samantha Nutt.

Every so often a new book arrives with the force of a much-needed whack over the head.

That's the jolting effect of Samantha Nutt's Damned Nations: Greed, Guns, Armies and Aid, which is causing a sensation within the increasingly troubled world of humanitarian aid.

Written by one of Canada's most influential humanitarian activists, it's the clearest examination I've read in quite a while of the economic incentives — and our own Western inadequacies — that fuel the seemingly intractable violence in so many war-torn countries, particularly in mineral-rich Africa.

A medical doctor and the co-founder of War Child Canada, Nutt is someone who speaks with remarkable moral authority, after spending more than 16 years struggling to help the most vulnerable targets, children and women, in the world's most dangerous conflict areas.

...

On a still larger scale, Nutt warns of a growing trend towards aid competition that harms far more than it helps as the sector becomes dominated by two extremes.

At one end of the spectrum is "a virtual fiefdom of large aid organizations," while at the other is "an abundance of novelty start-ups … led by students, celebrities, and other assorted individuals" with little relevant training or experience.

Meanwhile, "the space between them is rapidly evaporating."

Some of her criticism will sting many of those who acted with the best intentions.

For example, she cites the current trend towards "volunteer tourism," in which high school, church and college groups spend a few weeks building schools or orphanages in an impoverished locale, as a classic case of good intentions breeding bad results.

These groups, she says, "make a spectacle out of poverty and expose overseas communities — especially children — to exploitation and abuse."

What's more, "a revolving door of unskilled workers on the ground in two-week increments is more a burden than a benefit to any community."

Other targets are the giant fund-raising charities that spend huge sums to promote "child sponsorship" through images that portray people as pure victims, passive recipients of charity.

"These are the vestiges of neo-colonialism, cloaked in altruism…. precisely why these appeals are highly effective."

Unless you have specialist skills in demand in poor countries, you're likely deluding yourself if you think your tourist visit is doing any particular good. Which is fine if the work is better than nothing and if it no donation would otherwise obtain. But if Nutt's right that it's more burden than benefit, the delusion is harmful.

I'll have to add the book to the queue.

Drug trade and economic development

Turns out that cocaine production is a net earner for Peru. In theory, it could go either way: the dangers associated with the illegal sector could scare off more activity in the legal sector than the cocaine trade is worth, or the displacement effect could be smaller than net revenue generation.

A new IMF paper says the cocaine trade generates more economic activity than it displaces. Shame it's not in the GDP statistics.

Using UNODC data, we have estimated that the production of illegal coca and cocaine represents the equivalent of 0.9 percent of total GDP in 2009. (See table 3 and figure 7 of the appendix for further details.) By comparison, similar calculations for Bolivia based on UDAPE (2010) data imply that coca leaf represents between 1/8 percent and 1 and 1/4 percent of total GDP, and UNODC sources suggest that illicit coca production represented the equivalent of 21 percent and 14 percent of agricultural output in 2008 and 2009, respectively for Bolivia, as compared to values ranging between 3.6% and 8.25% from 1990 to 2008. Similarly, Colombian DANE (2010) data imply that the share of production of coca and cocaine has ranged between ¾ and 3¾ percent of total GDP from 2000 to 2008, declining toward the end of the period as a result of the coca eradication efforts.

Read the whole paper if you want to learn more about the organization of cocaine production in Peru - a fun read despite extensive use of VARs and impulse-response functions towards the end.

More discussion here; HT: @NZDrug