A Monstrous Waste Of Human Potential

Economist.com: First get the basics right.
The title pretty much says it all. Africa needs to start with the basics — good government that protects property rights, enforces contracts and treats people equally before the law. That’s the right starting point. In time prosperity will follow. How we get there is an unknown.

It’s worth remembering, however, that we have been bemoaning the plight of Africa for decades and if they had embraced capitalism several decades ago we wouldn’t even be talking about this. I know, I know: how do we get there? Once that question is answered we’ll just need to allow them to develop and a few decades after that Africa will no longer be an issue.

Sub-Saharan Africa (hereafter, “Africa”) is the world’s poorest continent: half of its 700m people subsist on 65 US cents or less a day. Even more worryingly, it is the only continent to have grown poorer in the past 25 years, despite the explosion of technology and trade that has boosted incomes in other regions. Not even Africans want to invest in Africa: an estimated 40% of the continent’s privately held wealth is stashed offshore. This survey will ask two questions. Why is Africa so poor? And what are Africans doing about it?

The short answer to the first question is “bad government”. As recent events in Zimbabwe show more vividly than any economics textbook could, rulers who respect neither property rights nor their own laws swiftly impoverish their people. No other African country has regressed as fast as Zimbabwe has over the past five years, but several have made similar mistakes in the past from which most have yet to recover. Only one African country, Botswana, has been consistently well governed since independence. Not coincidentally, average incomes in Botswana have grown faster than anywhere else in the world in the past 35 years, from bare subsistence to over $3,000 a year. But only one African in 400 lives in Botswana.

The short answer to the second question is that many individual Africans are working hard to better their own lot, but their rulers are prone to getting in their way. Too many governments are predatory, and not enough are competent. On the plus side, the continent has grown more democratic since the end of the cold war, raising hopes that African governments will become more responsive to their people’s needs. That is very welcome. But, as Africans say, you cannot eat democracy. The real test is whether democratic governments will be able to lay the foundations for economic growth.

A few African countries are growing rapidly. Leaving aside those that have enjoyed sudden oil windfalls, the best performers are Mozambique, Rwanda and Uganda, which notched up growth rates of 12%, 9.7% and 6.2% respectively in 2002. All three countries have been doing well for a decade or so, and all three can plausibly claim that this is a result of better governance. The catch is that all three are growing from the lowest base imaginable, having suffered cataclysmic civil wars. All three have been given torrents of aid — between 50% and 70% of the national budget — to help them rebuild. None has yet regained its (modest) pre-war prosperity, and Rwanda’s growth slowed in 2003.

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