Tim Worstall

It is Their Own Fault

A slightly provocative statement but Ruth Lea argues that the current poverty in much of Africa is, at least in part, the fault of the rulers:

This brings me to my second issue – the drivers of
economic growth. The necessary conditions for growth are well-known and
reasonably uncontroversial.

They include a stable
and peaceful political environment (no wars); non-corrupt and fiscally
prudent governments; efficient administrations; respect for property
rights and the rule of law; open economies and market-oriented and
business-friendly tax and regulatory regimes.

Yet time and time again these conditions are flouted, especially, but not exclusively, in Africa.

Robert
Mugabe’s corrupt regime in Zimbabwe and the tragic destruction of its
once prosperous economy is frequently reported. So is the predilection
of some of Africa’s leaders for conspicuous consumption.

But all too infrequently reported are the difficulties faced daily by Africa’s business people, the wealth creators.

The World Bank’s [1]
latest business survey of 155 countries showed that four-fifths of the
20 countries with the most difficult business conditions were in
sub-Saharan Africa.

Africa’s business people face
many obstacles when creating and investing in businesses, including
heavy regulation and taxation, weak property rights and crippling
start-up costs.

In Sierra Leone, business taxes
can account for 164pc of the company’s gross profits. In Niger it costs
4½ times the annual per capita income to set up a business, in the
Democratic Republic of the Congo the multiple is five.

By comparison, in the UK and the US the cost is less than 1pc.

Yes, there are also no doubt other reasons and issues that contribute but it’s difficult to see that this isn’t at least a part of it.

In

6 responses

  1. Harry Barracuda Avatar
    Harry Barracuda

    Slightly controversial? Get real, most African countries are rife with corruption at all levels. Aid is frequently hijacked for profit, and there is no point in sending cash aid because it only end’s up in people’s pockets.
    People like Mugabe typify the continent. The sad thing is, if your friends with Europe and America, and lining their pockets as well, it’s considered acceptable.

    Reply
  2. Tristan Avatar
    Tristan

    I thought it was well accepted that corruption is the biggest cause of poverty in the developing world.
    Well, accepted amongst those who don’t have an anti-capitalist ideology to promote or a colonial guilt complex…

    Reply
  3. angry economist Avatar
    angry economist

    All this stuff has been around for ages!
    Never read William Easterly’s “The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics” (2001)
    Or anything by Stiglitz?
    Both of whom worked for the World Bank.
    C’mon folks – read some books. Get your heidz out of the newspapers. How often do they think they are onto something new that’s already been written about, much more thoroughly, years ago?
    You need to do some reading beyond the dead trees my friends…

    Reply
  4. The Pedant-General Avatar
    The Pedant-General

    Tristran,
    “Well, accepted amongst those who don’t have an anti-capitalist ideology ”
    A fine point, well made, but it strikes me that even your most head-in-the-clouds-type moonbat socialist ought to recognise that corruption makes a mess of any economy, however organised.
    PG

    Reply
  5. angry economist Avatar
    angry economist

    Corruption of course exists, and was a direct product of socialism in some cases. Former Soviet Union, China, former Yugoslavia, etc etc – all had significant levels of corruption, still do.
    However – in other countries, such as Denmark, Finland, Norway, Sweden – which have had social (-ist to varying degrees)- they always come out as some of the least corrupt countries in the world.
    The difference is that a market, rule of law and democracy probably increase transparency and lead to less corruption. Also many of the scandinavian countries have cultural traits that are averse to corruption.
    PS – the reason why there’s such a heave NGO presence in certain countries is because NGOs now deliver aid programmes directly to beneficiaries in many cases, or are there on the ground to ensure the effective disbursement of aid. They have by-passed some national governments who are either too corrupt or inept to be trusted. This is a direct response to corruption.
    You can still give aid to corrupt countries, but the model for delivering aid has to be different, and you have to avoid things like big capital projects with big money and lots of fact subcontracting deals (i.e. huge scope for skimming and bribes).
    PS – I got most of this insight from reading the 2 books I mentioned before… is anyone getting the message…?

    Reply
  6. angry economist Avatar
    angry economist

    Ok! if you can’t be bothered to read the book – you can see this geezer at IPPR tomorrow @1pm tomorrow.
    Making Globalization Work: An ippr event with Professor Joseph E. Stiglitz
    08 September 2006 –
    1:00pm-2:00pm
    At this event, Professor Joseph E. Stiglitz of Columbia University will discuss his latest book Making Globalization Work.
    Four years ago, Joseph Stiglitz outlined the problems that the rapidly integrating world was facing in Globalization and Its Discontents. Now in Making Globalization Work, Stiglitz brings the story up to the present, examining how change has occurred even more rapidly over the past four years, proposing solutions and looking to the future.
    He puts forward radical new ways of dealing with the crippling indebtedness of developing countries, a new system of global reserves to overcome international financial instability, and an economically incentivised framework of dealing with the problem of global warming. He argues for the reform of global institutions such as the UN, the IMF, and the World Bank to make them truly capable of responding to the challenges that globalization brings.
    Professor Joseph E Stiglitz is one of the world’s best-know economists. He was Chief Economist at the World Bank; Chairman of President Clinton’s Council of Economic Advisors and, won the Nobel Prize for Economics in 2001. He is currently Professor of Finance and Economics at Columbia University and, the author of bestselling Globalization and its Discontents and the Roaring Nineties, both published by Penguin.

    Reply

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