> > The African exception > > Mar 28th 2002 > From The Economist print edition > Economics focus > 28 3 02 > Experience in one sub-Saharan country shows that overseas aid is not the > only prerequisite for growth > > WHICH country has had the fastest growth in income per person over the past > 35 years? A few hints: it's not an East Asian "tiger", such as South Korea > or Singapore, nor an oil-rich Gulf state, nor China or the United States. > The answer is Botswana, a landlocked former British colony in a region > marked by poverty. > > Recently, some of its neighbours seem at last to have found new friends in > the rich world. After this month's conference in Monterrey, Mexico, both > Europe and America made fresh promises of billions of dollars in aid to poor > countries. Even George Bush, a sceptic about foreign aid, has agreed to > increase it, if only for countries with sound economic policies. > > Development economists often speak blithely of good "institutions" and wise > "policies". This is easily said in Washington. But where is the evidence > that good government leads to economic growth, in Africa or anywhere else? > For example, Harvard University's Robert Barro has argued that there has > been no post-war correlation between democracy and income. > > Botswana serves as a useful case study in getting the details right. Sadly, > this defies simple prescriptions. Some on the political left might attribute > Botswana's success to egalitarianism. Not quite: inequality there is as > severe as it is in Colombia or Brazil. Those on the right would like to > point to a laisser-faire regime. Wrong again: the government spends a hefty > 40% of GDP. > > In two recent papers, Daron Acemoglu and Simon Johnson of MIT and James > Robinson of the University of California, Berkeley, delve deep to find the > secrets of Botswana's success and Africa's failures. In many African > countries, such as Congo and Sierra Leone, gems and other natural resources > seem to be the root of all evil. Easily plucked from the riverbeds, they > fuel countless civil wars. In one study*, the authors argue that in > Botswana, valuable minerals have had benign effects: diamonds enriched the > elite enough to discourage further "rent-seeking". > > Another paper? points, perhaps unsurprisingly, to "institutions of private > property" as a cause of success. But the paper turns to history for > explanation. The harder it was for Europeans to settle a region, the greater > the culture of exploitation created: finding a foreign land hard to settle, > colonists preferred to exploit the natives from afar, rather than to build > wealth. By looking at mortality rates of pioneering soldiers, sailors and > bishops, the authors found a strong correlation between colonists' death > rates and modern measures of political risk and expropriation. Indeed, the > authors estimate that these shortcomings account for nearly all the income > gap between Africa and rich countries. > > Though the model works well for most countries, Botswana offered a surprise. > British colonialists left the country pretty much to its own devices, seeing > it merely as a buffer zone against Germans and Boers. One would thus expect > more expropriation rather than less. Even so, Botswana did far better than > the authors' equations would predict, leading them to dig deeper. > > They first examined Botswana's history before the colonists. The country's > tribal politics made dissent easy, giving commoners a voice against the > king. Cattle were privately owned, with wealth spread across the rural > population, not concentrated in cities. The country was ethnically > homogenous. Fortunate facts all, but hardly a guide for other places with > weaker checks on leaders. A more pressing question is how to build > institutions even when history is not on your side. > > Perhaps more telling is the way the interests of the elite have been > harnessed to good effect. At independence in 1966, Botswana had two schools > and few roads. Perhaps Britain's most valuable legacies, besides the English > language, were the law and contract procedures. Botswana's politics have > developed along the lines of a single dominant ruling party, closer to > Japan's pre-recession LDP than to Europe's ideas of multi-party democracy. > But minority parties do exert pressure. > > Wealthy and secure, the elite pursued sensible policies, such as a customs > union with South Africa, and a currency pegged to the rand. The country > never tried to oust most of its expatriate labour as some other countries > did. Foreign mining companies were welcomed, and the country dealt with them > fairly but firmly: it even renegotiated its contract with South Africa's > diamond giant De Beers when it realised the scale of its reserves. > > > > The worm in the bud > Botswana's experience suggests that poor countries must try to align the > incentives of the elite with those of the masses, much as companies in rich > countries try to tie managers' rewards to those of shareholders. It also > backs the view of Hernando de Soto, a Peruvian economist, who has proposed a > stronger approach to land titling in poor countries. Where countries receive > aid, Botswana's experience suggests that profitable goals include better > courts and legal systems; and that one good use of cash is to fight > diseases. > > Disease is Botswana's greatest problem. Around 30% of its adults are > infected with HIV, the virus that causes AIDS. Can good governance help > here? Perhaps: Botswana's diamond wealth is being put to good use, including > free AIDS drugs to anyone in need. > > One lesson from Botswana is that history shapes countries. Another is that > good management is at the centre of growth, and that the rule of law is as > important as are the laws of economics. > > > > * "An African Success Story: Botswana", by Daron Acemoglu, Simon Johnson and > James A. Robinson. CEPR Discussion Paper 3219, February 2002. > > ? "The Colonial Origins of Comparative Development", by Daron Acemoglu, > Simon Johnson and James A. Robinson. American Economic Review. December > 2001. > > > > > Three things to note: > > 1. Since Botswana started from next to nothing, maintaining > an "enormous" growth rate is a statistical artifact, > flowing from the law of small numbers. > > 2. Most of the "success" of Botswana lay in its status > as South Africa's first self-governing bantustan, > even if it got to that status via independence from > the British. The country was always mostly a vassal state > and still is, heavily dependent on South African success. > The diamond mines are run by the De Beers/Anglo crowd, > same people who run the South African ones. > > 3. South African economic performance dwarfs Botswana up > till 94 (i.e apartheid South Africa). Curiously this is > never a cause for much puzzlement amongst these people > (though, granted, some Marxists actually developed the idea > that apartheid was really a creature of capitalism!) > > 4. Botswana can keep on at that "miraculous" > growth rate for many decades and still be miserably poor, > arid, barren, diseased and windswept. > > Nice big game attractions though, even if they're set to > drain the Okavango within a few decades. >
