The Therapy Sessions
Thursday, January 27, 2005
African poverty revisited
In my earlier post on foreign aid, some commenters took me to task for my belief that foreign should only be spent on countries that enact needed reforms - the so-called "harsh" remedies for African poverty.
I ask those commenters, which of these do have a problem with? And why?
African nations must reduce budget deficits (which are the highest in the world). They desperately need to end price controls, particularly on food and energy. Price controls favor the rich in the cities while they impoverish farmers, encourage scarcity, and create black markets. Countries must stop recklessly printing worthless currency (which causes inflation), develop fair systems of taxation (so that citizens will develop a proprietary understanding of their governments), and clamp down on corruption (which is difficult if people do not have a proprietary understanding of their government).
It is vital for countries to open their borders to trade with (at least) other African countries. Right now, working for the customs department is the road to wealth for mid-level African bureaucrats: the bribes and tariffs are wealth creation, African style. Freeing trade will improve access to needed goods (especially food), stimulate competition and improve efficiency. Standards of living and diets will not be far behind.
State-owned enterprises, which fill the pockets of corrupt leaders, should be sold. Most of them divert government money and attention, and the collusion of business and government interests inevitably leads to corruption. (Imagine if the owner of your company could have you arrested and tortured for not working hard enough. This has been the case in the Congo. Cotonniere, the state-owned cotton monopoly, makes government officials rich and the police beat farmers when they fail to grow enough cotton.) Business and government interests are best kept separate. African property ownership thoroughly needs to be reformed and legitimized. Currently, Africans are allowed to work lands that have been in their families for centuries, but they do not own them and they can lose them at any time. Formal ownership of land would make households wealthier, give homeowners collateral so that they can formally borrow money, and reduce tribalism. It would also strengthen African legal systems, which in most cases are in their infancy.
What countries would practice such radical economic policies?
We live in one: these are the very same policies practiced by the rich nations of the world, and they are the primary reason that these countries maintain their wealth.
Anyone care to debate?