State Power, Entrepreneurship, and Coffee: The Rwandan Experience

Abstract

In the aftermath of the 1994 Rwandan genocide, Paul Kagame's new government embarked upon a revolutionary restructuring of the economy. It lifted tight government controls on the production, sale, and distribution of a variety of goods, liberalized many sectors of the economy, and gave people the freedom to trade openly. Perhaps the biggest success story of Rwanda's liberalization is the revitalization of the country's coffee sector, particularly the development of a new niche product: specialty coffee. A mainstay of the Rwandan economy since the 1930s when Belgian colonial officials encouraged coffee production, coffee remains a key export crop for Rwandans, generating millions of dollars of export revenue and garnering international attention for the high quality of the local beans. This study highlights two positive results flowing from Rwandan coffee production: * Liberalization strategies alleviate poverty and develop human capital. By removing pervasive and oppressive government controls over coffee production and sale, the Rwandan government has created space for smallholder farmers to be entrepreneurial, create new ties with foreign buyers, develop valuable skills, and increase their incomes. * Liberalization has had the unanticipated benefit of reconciliation. Liberalization in the coffee sector creates new incentives for smallholder farmers in Rwanda to work together for a common goal: improving their lives through the production of high quality specialty coffee. Working together toward this common goal has helped Rwandans to reconcile with each other in the aftermath of the 1994 genocide. Economic liberalization has improved the lives of thousands of Rwandans. With increasing income and new opportunities for entrepreneurship, Rwandans are better able to care for themselves and their families. Surprisingly, economic liberalization also seems to be playing a role in reconciliation. These positive outcomes suggest that a focus on economic liberalization in post-conflict environments may pay large dividends in terms of both economic development and peace.