The African Money Pit

Much excitement surrounds the G-8 Summit taking place in Scotland this week, what with Tony Blair's heavy lobbying for the top industrialized nations to substantially increase their aid to Africa, and with the star-studded Live-8 rock concert backing him up. Unfortunately, an objective analysis may suggest that the well-intentioned initiative is misguided. (Or, as KipEsquire would put it, the initiative is the "politics of the warm fuzzy feeling", where it's more important to be perceived as "doing something", with too little attention paid to the effectiveness of the actions taken.) Saturday's Washington Post had an interesting article about how the G-8 is perceived by ordinary Africans. By their report, a typical perception is that of Kenyan coffee farmer Peter Kanans:

"Even if they cancel the debt, even if they give our governments aid money, ordinary Africans will not benefit," he said. "That money will only make the corrupt people richer and Africans international beggars for decades to come."

As Robert Guest noted, "Africa is not just the poorest continent in the world. It is the only continent that has gotten poorer in the last quarter of a century." Guest (who spent 7 years covering Africa for The Economist) reports that the problem in Africa is often blamed on the legacy of colonialism, but he asserts that this is a misdiagnosis. Rather, he agrees with the Kenyan coffee farmer that the problem is corruption. He cites the comparative examples of Botswana (which had virtually nothing when it became independent) and Zimbabwe (which had one of the most prosperous economies on the continent). Botswana has been governed prudently and honestly for the most part, investing in education, health care, and infrastructure. In the 35 years of independence, its economy has grown nine-fold. Zimbabwe has suffered under the infamously corrupt and counterproductive leadership of Robert Mugabe, and its economy has shrunk three-fold in the same time period. Colonial legacy would seem to have little to account for this 27-fold difference in success between these two countries.

In an essay in his textbook Learning Economics entitled "What Causes Prosperity?", Arnold Kling discusses the difficulty of finding the right combination of factors to achieve prosperity out of poverty. He notes that in addition to the right economic policy choices, there are fundamental elements of the underlying culture that must be present, which he identifies as three "ethics": a work ethic, a public service ethic, and a learning ethic. The first and arguably most fundamental is the work ethic. As Kling describes it, "the work ethic will exist if and only if people feel that work is fairly rewarded. If instead it becomes evident that rewards accrue to those who steal, deal in black markets, or serve a warlord or clan leader, then those behaviors will be more widespread than work." He does not offer any specific examples, but his description of what happens in the absence of a work ethic might have been written with parts of Africa in mind. (Robert Guest provides some colorful examples, such as police shake-downs road-blocks, where the people with the guns get to make up the rules.) Only when the first ethic is present can you move onto a public service ethic, such as investing in the roads, making it easy to buy and sell property with confidence, and so on.

Tom G. Palmer of the Cato Institute also identifies "institutions" as what Africa needs, drawing on his ideas about the importance of good institutions in enabling economic development, ideas which were informed by his experience in studying the adoption of liberal ideas in former Soviet bloc states. Russia too has suffered from a culture of corruption and graft in government, and the differences between North and South Korea can hardly be more stark.

Sending piles of money, along with good intentions, are not going to solve Africa's problems. Let's hope the G-8 will strive to actually do something effective, rather than just something warm and fuzzy.