Africa, Liberalization and the West

by

by Charles

There was a really good dKos diary on Africa, but my computer automatically updated Windows and re-booted, and it was lost it before I could bookmark it. Dang it! I tried to find it and failed, not realizing there are around 200 dKos diaries posted every day, and that dKos has a clunky search function. Oh, well. Another good work into oblivion. Too bad, because it was a gold nugget in a morass of angry partisanship.  [Update:  Tim found the link (thanks), and more narrative is below the fold at the end.]

A few days ago, economics professor William Easterly wrote a piece in the Washington Post titled The West Can’t Save Africa. More accurately, western governments can’t send money to African governments and expect problems to be solved. Easterly makes the case that individual Africans, with the help of accountable non-governmental aid organizations, can make significant improvements to their environs. His more expanded thesis here. An excerpt:

Seventeen years after the fall of the Berlin Wall, there is only one major area of the world in which central planning is still seen as a way to achieve prosperity – countries that receive foreign aid. Behind the Aid Wall that divides poor countries from rich, the aid community is awash in plans, strategies, and frameworks to meet the very real needs of the world’s poor. These exercises only make sense in a central planning mentality in which the answer to the tragedies of poverty is a large bureaucratic apparatus to dictate quantities of different development goods and services by administrative fiat. The planning mindset is in turn linked to previously discredited theories, such as that poverty is due to a "poverty trap," which can only be alleviated by a large inflow of aid from rich country to poor country governments to fill a "financing gap" for poor countries. The aid inflow is of course administered by this same planning apparatus.

This is bad news for the world’s poor, as historically poverty has never been ended by central planners. It is only ended by "searchers", both economic and political, who explore solutions by trial and error, have a way to get feedback on the ones that work, and then expand the ones that work, all of this in an unplanned, spontaneous way. Examples of searchers are firms in private markets and democratically accountable politicians. There is a robust correlation (0.73) between economic and political freedom, on one hand, and economic development, on the other hand.

To describe why centralized aid plans (such as proposed by Jeffrey Sachs) don’t and won’t work, Larry White uses the Underpants Gnomes analogy, courtesy of South Park.

Gnomes Business Plan
Phase 1: Collect underpants
Phase 2: ?
Phase 3: Profit

Sachs Africa Plan
Phase 1: US taxpayers give (more) money to sub-Saharan African governments or multinational aid agencies, "directed to specific needs".
Phase 2: ?
Phase 3: Africa embarks on cumulative growth.

Given the above, it’s enough to make western governments think twice about where to direct aid. Governmental reform (or at least economic liberalization) in African nations couldn’t hurt either, but that’s a long-term project. As more of an aside than anything, a study by Persson and Tabellini (by way of Brad Plumer) made the following conclusions:

  • …on the interplay between democratizations and economic liberalizations. Both induce accelerations of growth, but the sequence of reforms is crucial: countries liberalizing their economy before extending political rights do better.
  • Specific democratic institutions influence the fiscal and trade policies implemented after democratization, which may explain why presidential democracy leads to faster growth than parliamentary democracy.
  • There was a third conclusion but it’s not very clear to me.

Update:  There’s an interesting piece at dKos titled What’s the Matter with Africa, which offers an interesting historical perspective from pre-colonial times to present.  However, Devilstower lost me here:  "There’s been no serious effort to support functional democracy in Africa, because the temperate nations don’t want democracy in Africa."  He offers no support for the contention that democracy is not wanted, and "temperate nations" is too broad.  The United States is a temperate nation, yet we’ve had next to no involvement in the running of things in Africa, and the 2005 State of the Union message was pretty clear in stating that freedom and democracy are wanted for all nations.  The sentiments of the onetime colonial occupiers may be another issue, but it seems that there is more of an indifference to democracy from the European nations, not opposition.

While it’s easy and cost-free to deride the president for not doing more than issuing hot air, the fact of the matter is that United States has committed significant aid resources to Africa relative to the former colonial nations.  The question now is how to do it best.  More resources to the seekers rather than the planners seems one way.

19 thoughts on “Africa, Liberalization and the West”

  4. Planet of Slums
    A less optimistic post from B Plumer. I had read and saved Plumer’s post before Charles posted this. I try to follow this subject a little, but get confused as to what “economic liberalization” really means, both in theorey and in actual practice and consequences. I also have trouble determining which political institutions (e.g., a non-corrupt judicial and contract system) can be delayed.
    And just for grins, in case they are considered successes, I will describe India and China as mercantilist extractive economies, with the resource extracted being cheap labor. Like tin or oil, it can’t last forever.

  5. Charles: there are a lot of problems with government aid: for instance, political pressures in the donor country lead to both restrictions on aid (like the global gag rule) that have more to do with politics in the US than with needs in the developing world, and also to requirements that the aid involve purchases from donor country firms. Both are just bad.
    But one problem with your post, I think, is that it overlooks the enormous differences between different sorts of aid. It’s not, for instance, as though we don’t know that microloans work in a lot of places, or that lowering the burden of disease can help a country out a lot.
    In these cases, the Gnome business plan doesn’t apply, since the first step is a lot less vague, and the third step doesn’t have to be “Africa’s problems are all solved at once!” (as if there weren’t a huge nest of interrelated problems). It’s more like:
    Step 1: provide malaria bed nets, enough to cover a lot of the country.
    Step 2: watch fewer people die.
    A good thing, no?
    You might be interested in this old post of mine, which contains an idea (not mine) that I really think would help a lot.

  6. Centrally planned economies haven’t worked out too well, and I think Sachs would be the first to admit this. What NGOs can’t seem to do is set up the kind of infrastructure (education, health) that strong, not-too-corrupt governments can. Think of the successes of the last 20 or 30 years. Korea, China, Singapore, some of the Eastern European countries, etc. Almost all had something in common: many previous years of some psychotic dictator or oligarchy or junta insisting that the population had to be healthy and well-educated, for the greater glory of the motherland/great leader/whatever. You then have to go into a relatively free (in the sense of economic) period, where you control corruption and crime.
    So if you can figure out how to get NGOs to insist that every African gets a first-rate education and reasonable community-based
    healthcare, I’m sure everyone would love to hear about it. Franklin Graham’s bibles just won’t do the trick…

  7. Woeld Bank Figure One Out
    Maria Sanches of Wapo via Helmut guesting at Majikthise
    “There have been two broad approaches to reducing poverty among development policy analysts and countries seeking economic well-being and social well-being. Amartya Sen calls these two approaches growth-mediated and support-led processes.”

  8. World Bank on Latin America
    Appears to be big story;Mark Thoma picks up the Sanchez WaPo piece:
    “Two of their main conclusions are a breakthrough for the bank: that private-sector growth is not a panacea for the poor and that inequality must be targeted directly. A third conclusion is almost heretical for the bank: that the state needs to take on more responsibility rather than less. “Converting the state into an agent that promotes equality of opportunities and practices efficient redistribution is, perhaps, the most critical challenge Latin America faces in implementing better policies that simultaneously stimulate growth and reduce inequality and poverty,” the report says.”

  10. A good thing, no?
    Yes it is, Hil, but the problem is how, which is where Easterly was going. There is no argument regarding mosquito nets. Stipulated. I also agree with many of Sachs’ solutions, but the issue is administering and implementing, and too much of his plan involves centralized government and centralized planning. Given that centralized planning has been such a monumental failure in communist and socialist states, why should we expect success when the same is applied to large public works projects in Africa? Why is India succeeding where Africa is not? India was a colony, it is mostly tropical in latitude, it has plentiful natural resources and is now a sovereign nation.

  11. Charles,
    you know, a lot of people are going to jump on you for the India/Africa comparison. Might you consider fleshing it out a bit more before I start up a thread at HoCB?

  12. “There was a third conclusion but it’s not very clear to me.” …Charles, in post
    “Why is India succeeding where Africa is not?” …Charles at 11:20
    It is exactly that question that led me when you first posted to ponder the third unclear (and I agree it is tough) point:
    “Third, it is important to distinguish between expected and actual political reforms: expectations of regime change have an independent effect on growth, and taking expectations into account helps identify a stronger growth effect of democracy.”
    If a populace has built in negative expectations, if they simply don’t believe that a structural improvement in their lives is possible, it can be very hard to motivate them. Not that I am saying that is the meaning of the third bullet, but something like that might be in play in Africa. Seekers have positive expectations, but are outliers that may not be able to change cultures.

  13. Why is India succeeding where Africa is not?

    First place I’d look is where they’re different: Africa is a collection of countries; India is one country. There are other differences, too, but I’d guess that this is the dominant one. Consider that a great deal of Africa is landlocked countries, for starters.

  14. “Africa is a collection of countries; India is one country.”
    Sounds like an indirect argument for central planning, unless you understood some other consequence of the diversity and fragmentation. I really can’t say whether India is much less diverse in culture, ethnicity, than Central Africa but I know it ain’t Sweden.
    Assuaging the Barbarians at the Gate
    Mark Thoma again, linking to a paper using Ancient Rome to understand globalization and its discontents. Lots of good stuff there.
    “The central problem identified by Gibbon and Smith is that complex societies need rules to function, whether on a national (state) level or in international relations. But we do not always comply voluntarily with rules and rules require some enforcement. In addition, they need to be formulated. The enforcement and the promulgation of rules are both consequences of power, and power is always concentrated and unequally distributed. …”
    My links may seem off-topic, but I see the development problem if economic liberalization precedes political liberalization in the creation of corrupt oligarchies and plutocracies that become unwilling to surrender advantage. Ricardo’s Ladder. This in turn does not generate moderate reform movements but radical leftist forces. Examples:Venezuela and Palestine. Umm, many many other examples.
    Now in underdeveloped non-democratic societies the risks to the seekers and entrepeneurs may be so high that only plutocratic and oligarchic incentives will suffice. In which case we have a problem.

  15. I don’t want to be heaping scorn on Charles, but realizing that India has a literary tradition that extends back to the Bronze Age is one of those small things that might qualify as a difference.

  16. The British colonial system had a more effective educational system at the primary level than the English did at home for many years. A colleague of mine did his Master’s on how the Indian and Irish colonial educational systems were actually imported back into England to replace the scatter-shot grammar and church schools for the lower classes. In the African colonies, the occupying powers didn’t seem to bother much with the educating: that mission was left to a few volunteer missionaries (many of whom died off pretty rapidly from disease).
    That’s just one example, though. The British occupation of India was bureaucratic on an absolutely massive scale, as befits a colony that generated so much wealth that England went to war twice to force China to buy the colony’s main export (the Opium Wars). Africa, not so much. Reread The Heart of Darkness sometime: there aren’t many indications of an actual colonial administration or any of the institutions that would indicate a hopeful future for a Congo freed of Belgian control.
    Not all colonies are equal.

  18. Fukuyama the Liberal
    Michael Signer of Democracy Arsenal on the failure of the neo-con vision with Iraq as refuting example. This leads to a general attack on the libertarian/conservative vision which connects to this thread in a way I will illustrate with two quick ridiculous but illustrative examples.
    1)Iraq: If you remove all authoritarian repression from a society the citizens will spontaneously and quickly form a democracy.
    2)Development:Build ten farms or factories and a market/distribution system will spontaneously and quickly appear out of thin air.

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