Did you learn that the United States is rich because we have bountiful natural resources? That has to be nonsense. Africa and South America are probably the richest continents in natural resources but are home to the world’s most miserably poor people. On the other hand, Japan, Hong Kong, Taiwan and England are poor in natural resources, but their people are among the world’s richest.
Maybe your college professor taught that the legacy of colonialism explains Third World poverty. That’s nonsense as well. Canada was a colony. So were Australia, New Zealand and Hong Kong. In fact, the richest country in the world, the United States, was once a colony. By contrast, Ethiopia, Liberia, Tibet, Sikkim, Nepal and Bhutan were never colonies, but they are home to the world’s poorest people.
There’s no complete explanation for why some countries are affluent while others are poor, but there are some leads. Rank countries along a continuum according to whether they are closer to being free-market economies or whether they’re closer to socialist or planned economies. Then, rank countries by per-capita income. We will find a general, not perfect, pattern whereby those countries having a larger free-market sector produce a higher standard of living for their citizens than those at the socialist end of the continuum.
What is more important is that if we ranked countries according to how Freedom House or Amnesty International rates their human-rights guarantees, we’d see that citizens of countries with market economies are not only richer, but they tend to enjoy a greater measure of human-rights protections. While there is no complete explanation for the correlation between free markets, higher wealth and human-rights protections, you can bet the rent money that the correlation is not simply coincidental.
With but few exceptions, African countries are not free, and most are basket cases. My colleague, John Blundell, director of the London-based Institute of Economic Affairs, highlights some of this in his article “Africa’s Plight Will Not End With Aid” in The Scotsman (6/14/04).
Once a food-exporting country, Zimbabwe stands on the brink of starvation. Just recently, President Robert Mugabe declared that he’s going to nationalize all the farmland. You don’t have to be a rocket scientist to figure out that the consequence will be to exacerbate Zimbabwe’s food problems. Sierra Leone, rich in minerals, especially diamonds, with highly fertile land and home to the best port site in West Africa, has declined into a condition of utter despair. It’s a similar story in nearly all of south-of-Sahara Africa. Its people are generally worse off now than they were during colonialism both in terms of standard of living and human-rights protections.
John Blundell says that the institutions Westerners take for granted are entirely absent in most of Africa. Africans are not incompetent; they’re just like us. Without the rule of law, private property rights, an independent judiciary, limited government and an infrastructure for basic transportation, water, electricity and communication, we’d also be a diseased, broken and starving people.
What can the West do to help? The worst thing is more foreign aid. For the most part, foreign aid is government to government, and as such, it provides the financial resources that allow Africa’s corrupt regimes to buy military equipment, pay off cronies and continue to oppress their people. It also provides resources for the leaders to set up “retirement” accounts in Swiss banks. Even so-called humanitarian aid in the form of food is often diverted. Blundell reports that Mugabe’s thugs rip labels off of wheat and corn shipments from the United States and Europe and re-label them as benevolence from the dictator.
Most of what Africa needs the West cannot give, and that’s the rule of law, private property rights, an independent judiciary and limited government. The one important way we can help is to lower our trade barriers.