Chapter 88 Section 6 African Issues

African governments suffer even more than Latin America or India from misdirected economic policies associated with the collectivist concept of "development planning."But, like the rest of the "Third World", in the belief that the laws of economics can be violated with impunity, the same implicit reason (or excuse, according to one's view) has been advanced that Africa is somewhat "different".In defense of this rationale, many arguments have been advanced.In general: underdevelopment, local lack of investment capital, excessive reliance on a single commodity, encouragement of "nascent industries", or "specificity" of Africans and their culture - a more dangerous quasi-racist connotation.Naturally, cultural factors did play a role in Africa, especially when the outgoing colonial government did not pay enough attention to the differences between tribes and religions when grouping African countries together.But first, as Peter Ball points out, the experiences in Africa (and elsewhere) illustrate two points.First, if two peoples live under the same political system of liberal capitalism, one nation usually outperforms the other; The people below will prevail over their in-laws.A common-sense conclusion is to choose a (capitalist) political system that makes life better for everyone, even if it creates relative inequality between different races with different cultural orientations.So, if one knows what happens when one abandons the tried and tested model of limited management, the rule of law and the free market, one understands why African countries are in such bad economic shape after the colonial period.

The situation is indeed very bad.In the 1970s and 1980s, Africa's per capita output actually fell, so Africa was poorer than it was in the 1960s.But on a per-population basis, Africans received a larger share of development aid from the West than anyone else in the 1980s.Controls on farm prices to subsidize urban dignitaries undermined agriculture, as did the confiscatory policies associated with export marketing bureaux and the enforced brutal collectivization of agriculture.Foreign imports and foreign investment were blocked.The massive foreign debt accumulated was used to build ill-conceived prestige projects.Because of such mistakes, there is a tendency to lose all hope in Africa.This must be resisted.In any case, Western countries should recall what institutions like the World Bank did and enabled these follies.The role played by those Western economic developmentists in the United States is nothing to be proud of.

Furthermore, a closer examination of the economic situation in Africa would challenge certain preconceived notions, with South Africa, for example, prominent in terms of mineral resources, economic development and structural sophistication.So far, the country's leading politicians deserve a lot of praise for the fact that the worst fears of a disruption of order have not materialized.But trying to minimize its economic problems, or thinking that a massive influx of foreign capital will solve them, does South Africa one iota of good.There is much state guidance on investment and too little competition.The interests of the industrial conglomerate are not threatened with takeover.A strong CTU South African Trades Union Congress boosted real wage growth.In industry, its wages are broadly similar to those in Taiwan, higher than in South Korea, and about double those in Brazil.It is not surprising that, in this case, the investment was made in the purchase of labour-saving equipment, and unemployment was very high, thereby bringing poverty.Unfortunately, in the general election, there are some less responsible members of the ANC whose socialist high-profile and unrealistic expectations will make these problems more difficult to solve.But the way forward is still to do what we do for other overly collectivized economies: reduce inflation and taxes, control public costs, reduce regulation, promote competition and avoid protectionism.The only source of funding for improving the quality of education and living standards needed by black South Africans is to create the right conditions to create wealth.Alas, there are no alternatives, no shortcuts.

The economies of other countries demonstrate that free enterprise can be as effective a source of progress in Africa as elsewhere.East Africa is undergoing a quiet revolution, so quiet that its lessons may not be learned.I am indebted to Burd Ann Wyer.Harris and GT Management plc have provided me with many of the following materials.Kenya, the most industrialized and economically advanced country in East Africa, has traditionally been excluded from the category of mismanagement in the region.But now, Uganda, Zambia, and Tanzania, all countries that were previously impoverished by government incompetence and corruption, are now moving forward rapidly.Uganda has reined in its inflation, turning a budget deficit into a surplus.It has all but eliminated foreign exchange controls, welcomed foreign capital, privatized the Agricultural Marketing Bureau, which had taken a toll on cotton and coffee production, and now plans to start a securities market.Zambia's privatization program has been slow, but has made big strides in reducing inflation and opening a stock exchange.Tanzania has lowered tariffs, removed price controls and has a vigorous privatization program.Naturally, political instability still risks undermining the economic progress of many of them.But economic progress itself created the conditions for a stable democratic government.One of the most effective ways to establish free political institutions on the African continent is to promote a free economy.