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Thursday, August 20, 2009

"The Market Failed in Africa."

The God that didn't fail:

No lesser masters of the market than Bill Gates and Warren Buffett have declared that the market has failed poor countries. In an era of global trade, most Africans have benefited not at all. Despite a flourishing market in most of the rest of the world, Africa remains a continent of poor villages and sprawling slums. So rather than investing in the continent's businesses and ventures, these billionaires fund NGOs and government projects for health, education, and technology. And they call for U.S. foreign assistance to do the same.

But take a look at the World Bank's annual report, "Doing Business," and you'll realize that many African economies have never had a business market to fail -- thanks to their governments' dense, unnavigable regulations. "Doing Business" ranks countries according to how easy it is for citizens to start and run businesses -- things such as registering a company, hiring and firing workers, getting credit, and so on. Poor countries in general and African ones in particular rank at the bottom of the list. The major reason is that their governments have never had an interest in fostering business because favor and aid for government and NGO projects comes so much easier. In essence, the market never failed because it never really existed.

[...]

If she listens to the current, broken aid system, Secretary Clinton will feed that same, backward system that has helped make Africa what it is today. Instead, she should listen to her long-ago predecessor, George Marshall, who gave the aid world its biggest success story. He did it by working with local businesses and respecting the power of markets. Africa needs nothing less.

The author then goes onto to say something I've regarded as patently obvious for decades, though simply cannot be said in polite society: European colonialism was, from at least the late 19th century, a good thing for Africa. The author's solution to revitalizing the continent is questionable; a new Marshall Plan. He does however have a point. The great benefit of the Marshall Plan was not so much the vast sums which flowed between the American and various European governments, but the strings that came attached. Even the Truman Administration understood that a revived Europe would need to liberalize its internal economies and move toward continental free trade. The post-war prosperity, what the French call the Thirty Glorious Years, was the end product of this approach.  Having saved western Europe, American attention drifted elsewhere and the continentals went back to their old statist ways. A measure of free marketism had saved them from Communism and poverty, but with money in the bank - so to speak - they returned to form. A new Marshall Plan for Africa would be subject the same restraints.

Posted by Richard Anderson on August 20, 2009 | Permalink

Comments

I think its a laugh when people say that the free market failed Africa. When did Africa become a free market? It is definitely not a free market by any stretch of the imagination. Most of their governments are even more intrusive and corrupt than this US administration and that requires some hard work.

Posted by: Floyd Looney | 2009-08-20 8:57:24 AM


Why would the folks who are running the so called "third world" African countries want to promote free enterprise anyway? Free enterprise is not something that can be controlled by government when applied in a pure form. So governments generally do not like and do not, in reality, promote free enterprise.
And the same people who run those countries are basically on welfare and dependants of the NGO's.
Its win / win for bothe the NGO's and the local governments. NGO's have the control and the local governments get to sit home and watch TV...just like welfare in Canada.

Posted by: The original JC | 2009-08-20 9:36:17 AM


Those trying to get a better understanding of why transplanted Western ideas and systems don't seem to take root in Africa might consider reading this essay by Kim du Toit, who grew up there before moving to California. Whether you agree with it or not, it's an eye-opener. Star Trek's Prime Directive is looking better all the time.

Posted by: Shane Matthews | 2009-08-20 9:36:30 AM


Publius,

The most powerful line of argument in defence of liberty in Africa is not defending colonialism. Exploitation doesn't square with a defence of freedom. Further, a defence of colonialism in the face of criticisms that the market has failed is simply anti-leftism (not pro-liberty-ism).

The reason markets have failed in Africa has been point out by the Nobel Prize-winning new institutionalist school of economics. It is because Africa lacks the institutional framework for markets to properly function. Incidentally, this is why markets have also failed in Russia.

Posted by: Robert Seymour | 2009-08-20 9:47:58 AM


Robert,

During the colonial period in places like Rhodesia, it was exactly those sorts of vital institutions that were being developed. Come independence they were quickly trashed.

Shane,

The experience of Botswana suggests you are being too pessimistic. You might argue that it is the exception that proves the rule.

Posted by: Publius | 2009-08-20 10:21:20 AM


Having lived in Africa I can confirm a few facts. First it is true that African governments operate with a bloated bureaucracy (gift of colonialism) and over regulation in many areas both of which produce a lot of corruption. There is also a lack of the basic elements of democracy, perhaps partly due to how the countries were carved up throwing together many different tribes and languages, often not too friendly to each other.

Does this mean Africa is beyond help? I think not, since all people aspire to happiness (food, shelter, good health, happy families, freedom et cetera) and deserve the opportunity to obtain happiness. I can also say that it is a myth and a lie that Africans are lazy and lack initiative and entrepreneurship. They are hampered by their governments and a lack of infrastructure more than anything else.

What is most sad about this article is Gates and company clamouring for government assistance. More of this is the last thing the African people need. There are many small private groups that provide assistance on the ground and directly to the people. They teach needed skills that are appreciated, or provide small loans to assist locals trying to start up a business. There are others that assist in improving livestock breeds and crops. It is the old story that if you teach a man to fish you help feed him for life.

Posted by: Alain | 2009-08-20 10:59:03 AM


The ends don't justify the means Publius. Forcing someone else to accept capitalism and markets is just as evil as, say, forcing someone to be altruistic. Using force against someone is always immoral no matter what the outcome.

On another note, it always amuses me to hear leftists cry out that we must force the rich to help others in the face of what Warren Buffett and Bill Gates are doing right now. But I do wish they would think this one through. They might as well be throwing their money out the window ...

Posted by: Charles | 2009-08-20 11:35:08 AM


Charles,

I wasn't saying the Europeans should have been in Africa (that's a separate question), simply that Africa was on the whole better off during the colonial period. Just as Russia was better off under the Czars than under Communism. Better or worse, not ideal.

Posted by: Publius | 2009-08-20 12:07:04 PM


I apologize for the misinterpretation.

I'm still not sure how much better off you can be as a second class citizen. Since, however, my knowledge of Africa is a bit lacking, I will refrain from debating this point with you ;)

Posted by: Charles | 2009-08-20 12:14:04 PM


"I'm still not sure how much better off you can be as a second class citizen."

That's a good point Charles. The clearest answer would be to compare life in Russia before 1917 to after 1917 - or before and after decolonization.

In the case of Russia, I think the Czars executed something like a few dozen dissidents a year, the Soviets pushed this into the millions under Stalin.

You might be a second class citizen in both cases, but you're more likely to be dead under Communism than Czarist authoritarianism. King Leopold ruthlessly exploited the Congo, though compared to those who succeeded the Belgians his barbarities were relatively mild.

It's the difference between theives and mass murderers. That sadly is the history of most of mankind. Either being robbed or murdered.

Posted by: Publius | 2009-08-20 1:16:48 PM


The experience of Botswana suggests you are being too pessimistic. You might argue that it is the exception that proves the rule.

Kenya used to be a promising state too, Publius. And don't even get me started on the train wrecks that are Mozambique and Sudan. Given time, Africa will no doubt find a way out of this mess. It has been the centre of great civilizations in the past and can be again. For that to happen, however, it will have to shed the baggage of both colonialism and tribal thinking. A country split into several rival fiefdoms is not a recipe for progress.

Posted by: Shane Matthews | 2009-08-20 8:29:38 PM



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