Let them have “Good Institutions”

The people in poor countries have the same aspirations as those in rich countries — to have the same chances and opportunities, good health care, clean running water in their homes and high-quality schools for their children. The problem is that their aspirations are blocked today — as the aspirations of black people were in apartheid South Africa — by extractive institutions. The poor don’t pull themselves out of poverty, because the basic ability to do so is denied them. You could see this in the protests behind the Arab Spring: those in Cairo’s Tahrir Square spoke in one voice about the corruption of the government, its inability to deliver public services and the lack of equality of opportunity. Poverty in Egypt cannot be eradicated with a bit more aid. As the protestors recognised, the economic impediments they faced stemmed from the way political power was exercised and monopolised by a narrow elite.

…… Making institutions more inclusive is about changing the politics of a society to empower the poor — the empowerment of those disenfranchised, excluded and often repressed by those monopolising power. Aid can help. But it needs to be used in such a way as to help civil society mobilise collectively, find a voice and get involved with decision-making. It needs to help manufacture inclusion.

That is Daron Acemoglu and James Robinson writing in The Spectator on Why foreign aid fails – and how to really help Africa.

I am a firm believer in the fact that “institutions rule” and are “the fundamental cause” of long-run economic growth and political stability. That said, I think this latest addition to the “Aid Debate” also detracts from the real issues regarding the efficacy of aid. It also runs the risk of creating the impression that the promotion of good institutions is a substitute for all forms of aid, or worse, that aid has led to the persistence of bad institutions and endemic poverty in poor countries.

How would the Central African Republic look today if it hadn’t received any kind of foreign aid over the years? I, for one, don’t think that it would be a bastion of political stability and stellar economic performance.

Strong and stable institutions are absolutely essential for the achievement of political and economic stability and general improvement of human welfare. And we should definitely preach this gospel for all to hear. But they also take forever to emerge, and depend on all sorts of localized variables that an international institution builder would most certainly miss (also, see here). And in the meantime, we still have to deal with the challenge of making the lives of the poor better (and within their lifetimes, approx. 60 years). Under these conditions, single panaceas (aid-driven or not) will obviously not work, especially if they come in as vague a package as “good and inclusive institutions.”

Africa for Norway

Some light humour, because it is a nice and sunny Wednesday morning here in Nairobi and winter is about to get real for millions of hapless Norwegians.

More on this here.

H/T VKW

Re-assessing Africa’s Resource Wealth

Over at African Arguments Bright Simons tries to debunk the accepted paradox of African poverty in the middle of a natural resource glut. The post is definitely worth reading, and raises some salient questions regarding resource use and development policy in Africa – and by extension, the economic viability of some African states (thinking of Chad, Central African Republic and Niger….)

Of those few minerals that Africa is believed to hold globally significant or dominant reserves, nearly all of them are concentrated in 4 countries: South Africa, Angola, Democratic Republic of Congo and Guinea. When one computes the level of inequality of mineral distribution across different continental regions, Africa pulls up strongly, showing a far higher than average level of distribution ‘imbalance’ per capita or square mile. In very simple terms, it means that mineral wealth is more concentrated in a few countries in Africa compared to other continents. 

Adding that…..

with the exception of bauxite and petroleum, these minerals are not as widely used in industry (or in the same considerable volumes) as a number other minerals, such as tin, copper, nickel, zinc, iron, coal, and lead, that Africa does not produce in sufficient quantities. Indeed, of the top 5 metallic minerals which constitute 62 percent of the total value of global production, Africa is only a significant producer of one of them: gold. Africa has 8 percent of the world’s copper, 4 percent of aluminium, 3 percent of its iron ore, 2 percent of lead, less than 1 percent of zinc, and virtually no tin or nickel. To put these figures into perspective, recall that Africa has about 14.5 percent of the world’s population.

….. Africa’s low production of the ‘hard minerals’ minerals most intensely used in industry compared to the less widely used ‘soft minerals’ reduces its total take from the global mineral trade. But it also makes a nonsense of fashionable policy prescriptions that emphasise import-substitution strategies based on value addition to minerals, rather than export competitiveness through smart trade strategy and the deepening of the financial system to support entrepreneurs.

More on this here.

H/T Africa in Transition.

blair commission on african poverty recommends more billions in aid

The Blair Commission set up to find British solutions to African poverty has recommended that the Continent get more billions in aid. There is no doubt that Africa needs all the money it can get, aid cynics’ criticisms notwithstanding. But that money, if it ever comes, should come with new ideas.

Perhaps for a change the money slated for development programs should be channeled as credit to the nascent African middle class. I have previously criticized pro-poor development initiatives for their habit of merely keeping the poor afloat (Think of your average mother of six selling vegetables in a generic African slum). What Africa and its development partners need to do is channel the little development money it has in releasing the talent and aspirations of the middle class to create more jobs. This is not to slight Africa’s poor for lack to talent. It is a mere acknowledgment of the fact that it is the middle class that oftentimes has the education and connections to grow their small start-ups into businesses that create even more jobs.

And in other news, Kenya has struck commercially viable gold. The hunt for oil and gas in the north and north east of the country is still on. One hopes that all the exploration craze will be accompanied by an even greater craze when it comes to investing in Kenya’s human capital.

And yeah, I appreciate the irony in writing about foreign aid and Africa’s vast mineral wealth at the same time.

the african problem

Sub-Saharan Africa is in dire straights. It is the most sick, hungry, poor and ignorant region of the world. It is a region infested with despots and illiberal democrats who for decades have led their nations to economy ruin and pre-modern tribal divisions and ways of living.

As the world watches one of this region’s promising nations descend into chaos, it is important for us to ask each other hard questions about the African Problem. I say the African Problem problem because it is not by chance that from Senegal to Somalia, Chad to South Africa, there is not much success to talk about. Poverty, disease and ignorance rule supreme.

We need to ask each other hard questions because racially sensitive Westerners (or Easterners for that matter) on whom we depend for most of “our” solutions will not ask us these questions; Is it our culture? Why haven’t we managed to shed the tribe in almost a decade into the 21st century? Why do we tolerate such appalling levels of mediocrity among us? Why don’t we demand more from our leaders? Why don’t we produce real leaders.

Our dictators compare woefully to those from other regions. Pinochet murdered Chileans, enriched himself, but also modernised the economy. Lenin had a weird ideology and some intellect behind his murderous leadership but he modernised Russia. Suharto did not run Indonesia into the ground. And now we turn to Africa: Samuel Doe, “Emperor” Bokasa, Iddi Amin, Obiang, Abacha and all the other Nigerian generals, Mobutu, Mugabe, Charles Taylor…. etc. This is a list of common criminals. Nearly all of them lack (ed) an iota of ideology behind their leadership, nearly all impoverished their people more than they were before, and all are a shame to all Africans. None of them knew what it means to be leader of a people or peoples.

These leaders got obscene amounts of wealth while their country men and women walked around naked, sick, hungry and ignorant.

How hard can it be? Why haven’t we succeeded in having successful socio-cultural and economic institutions that work for us? Does anyone care? Of what use is a million dollars to any African anywhere if Reuters is showing pictures of naked flood victims from Mozambique??? Why are we stuck in pre-modernity?

The many questions aside, the one thing that is clear is that Africa needs to change fast or it will never catch up with the rest of the world. We should not confuse pre-modern subsistence existence with culture. People live in mud houses and roam around with emaciated goats not because they love it but because they can’t afford or do not know any better.