23 Things They Don't Tell You About Capitalism

Thing 11 Africa is not destined for underdevelopment

What they tell you

Africa is destined for underdevelopment. It has a poor climate, which leads to serious tropical disease problems. It has lousy geography, with many of its countries landlocked and surrounded by countries whose small markets offer limited export opportunities and whose violent conflicts spill into neighbouring countries. It has too many natural resources, which make its people lazy, corrupt and conflict-prone. African nations are ethnically divided, which renders them difficult to manage and more likely to experience violent conflicts. They have poor- quality institutions that do not protect investors well. Their culture is bad – people do not work hard, they do not save and they cannot cooperate with each other. All these structural handicaps explain why, unlike other regions of the world, the continent has failed to grow even after it has implemented significant market liberalization since the 1980s. There is no other way forward for Africa than being propped up by foreign aid.

What they don’t tell you

Africa has notalways been stagnant. In the 1960s and 70s, when all the supposed structural impediments to growth were present and often more binding, it actually posted a decent growth performance. Moreover, all the structural handicaps that are supposed to hold back Africa have been present in most of today’s rich countries – poor climate (arctic and tropical), landlockedness, abundant natural resources, ethnic divisions, poor institutions and bad culture. These structural conditions seem to act as impediments to development in Africa only because its countries do not yet have the necessary technologies, institutions and organizational skills to deal with their adverse consequences. The real cause of African stagnation in the last three decades is free-market policies that the continent has been compelled to implement during the period. Unlike history or geography, policies can be changed. Africa is not destined for underdevelopment.

The world according to Sarah Palin… or was it The Rescuers?

Sarah Palin, the Republican vice-presidential candidate in the 2008 US election, is reported to have thought that Africa was a country, rather than a continent. A lot of people wondered where she got that idea, but I think I know the answer. It was from the 1977 Disney animation The Rescuers.

The Rescuersis about a group of mice called the Rescue Aid Society going around the world, helping animals in trouble. In one scene, there is an international congress of the society, with mouse delegates from all sorts of countries in their traditional costumes and appropriate accents (if they happen to speak). There is the French mouse in his beret, the German mouse in her sombre blue dress and the Turkish mouse in his fez. And then there is the mouse in his fur hat and beard representing Latvia and the female mouse representing, well, Africa.

Perhaps Disney didn’t literally think that Africa was a country, but allocating one delegate each to a country with 2.2 million people and to a continent of more than 900 million people and nearly sixty countries (the exact number depends on whether you recognize entities such as Somaliland and Western Sahara as countries) tells you something about its view of Africa. Like Disney, many people see Africa as an amorphous mass of countries suffering from the same hot weather, tropical diseases, grinding poverty, civil war and corruption.

While we should be careful not to lump all African countries together, there is no denying that most African countries are very poor – especially if we confine our interest to Sub-Saharan Africa (or ‘black’ Africa), which is really what most people mean when they say Africa. According to the World Bank, the average per capita income of Sub-Saharan Africa was estimated to be $952 in 2007. This is somewhat higher than the $880 of South Asia (Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka), but lower than that of any other region of the world.

What is more, many people talk of Africa’s ‘growth tragedy’. Unlike South Asia, whose growth rates have picked up since the 1980s, Africa seems to be suffering from ‘a chronic failure of economic growth’.[1] Sub-Saharan Africa’s per capita income today is more or less the same as what it was in 1980. Even more worrying is the fact that this lack of growth seems to be due not mainly to poor policy choices (after all, like many other developing countries, countries in the region have implemented free-market reforms since the 1980s) but mainly to the handicaps handed down to them by nature and history and thus extremely difficult, if not impossible, to change.

The list of supposed ‘structural’ handicaps that are holding Africa back is impressive.

First, there are all those conditions defined by nature – climate, geography and natural resources. Being too close to the equator, it has rampant tropical diseases, such as malaria, which reduce worker productivity and raise healthcare costs. Being landlocked, many African countries find it difficult to integrate into the global economy. They are in ‘bad neighbourhoods’ in the sense that they are surrounded by other poor countries that have small markets (which restrict their trading opportunities) and, frequently, violent conflicts (which often spill over into neighbouring countries). African countries are also supposed to be ‘cursed’ by their abundant natural resources. It is said that resource abundance makes Africans lazy – because they ‘can lie beneath a coconut tree and wait for the coconut to fall’, as a popular expression of this idea goes (although those who say that obviously have not tried it; you risk having your head smashed). ‘Unearned’ resource wealth is also supposed to encourage corruption and violent conflicts over the spoils. The economic successes of resource-poor East Asian countries, such as Japan and Korea, are often cited as cases of ‘reverse resource curse’.

Not just nature but Africa’s history is also supposed to be holding it back. African nations are ethnically too diverse, which causes people to be distrustful of each other and thus makes market transactions costly. It is argued that ethnic diversity may encourage violent conflicts, especially if there are a few equally strong groups (rather than many small groups, which are more difficult to organize). The history of colonialism is thought to have produced low-quality institutions in most African countries, as the colonizers did not want to settle in countries with too many tropical diseases (so there is an interaction between climate and institutions) and thus installed only the minimal institutions needed for resource extraction, rather than for the development of the local economy. Some even venture that African culture is bad for economic development – Africans do not work hard, do not plan for the future and cannot cooperate with each other.[2]

Given all this, Africa’s future prospects seem bleak. For some of these structural handicaps, any solution seems unachievable or unacceptable. If being landlocked, being too close to the equator and sitting in a bad neighbourhood are holding Uganda back, what should it do? Physically moving a country is not an option, so the only feasible answer is colonialism – that is, Uganda should invade, say, Norway, and move all the Norwegians to Uganda. If having too many ethnic groups is bad for development, should Tanzania, which has one of the greatest ethnic diversities in the world, indulge in a spot of ethnic cleansing? If having too many natural resources hampers growth, should the Democratic Republic of Congo try to sell the portions of its land with mineral deposits to, say, Taiwan so that it can pass on the natural resource curse to someone else? What should Mozambique do if its colonial history has left it with bad institutions? Should it invent a time machine and fix that history? If Cameroon has a culture that is bad for economic development, should it start some mass brain-washing programme or put people in some re-education camp, as the Khmer Rouge did in Cambodia?

All of these policy conclusions are either physically impossible (moving a country, inventing a time machine) or politically and morally unacceptable (invasion of another country, ethnic cleansing, re-education camps). Therefore, those who believe in the power of these structural handicaps but find these extreme solutions unacceptable argue that African countries should be put on some kind of permanent ‘disability benefit’ through foreign aid and extra help with international trade (e.g., rich countries lowering their agricultural protection only for African – and other similarly poor and structurally disadvantaged – countries).

But is there any other way for Africa’s future development beyond accepting its fate or relying on outside help? Do African countries have no hope of standing on their own feet?

An African growth tragedy?

One question that we need to ask before we try to explain Africa’s growth tragedy and explore possible ways to overcome it is whether there is indeed such a tragedy. And the answer is ‘no’. The lack of growth in the region has notbeen chronic.

During the 1960s and 70s, per capita income in Sub-Saharan Africa grew at a respectable rate. At around