From: Terry W. Colvin (fortean1@mindspring.com)
Date: Sun Jun 30 2002 - 00:20:01 MDT
spike66 wrote:
>
> Jeff Davis wrote:
>
> >Upon further reflection, I find I owe the list et al
> >an apology.
> >
> Jeff, dont worry, we wont take your picture down off the piano. {8-]
>
> As for the messed up condition of Africa, this is one that most of
> us have pondered and come up empty and frustrated. We extropians
> might as well proclaim that we didn't break it and we cannot fix it.
>
> spike
See this article: Economist, June 29, 1996, pp. 19-21.
A Solution to Africa's Problems
Growth in Africa: It Can Be Done
By Jeffrey Sachs
In the old story, the peasant goes to the priest for advice on saving his
dying chickens. The priest recommends prayer, but the chickens continue
to die. The priest then recommends music for the chiken coop, but the
deaths continue unabated. Pondering again, the priest recommends repainting
the chicken coop in bright colors. Finally, all the chickens die. "What a
shame," the priest tells the peasant. "I had so many more good ideas."
Since independence, African countries have looked to donor nations--often
their former colonial rulers--and to the international finance institutions
for guidance on growth. Indeed, since the onset of the African debt crises
of the 1980s, the guidance has become a kind of economic receivership, with
the policies of many African nations decided in a seemingly endless cycle
of meetings with the IMF, the World Bank, donors, and creditors.
What a shame. So many good ideas, so few results. Output per head fell
0.7 percent between 1978 and 1987, and 0.6 percent during 1987-1994. Some
growth is estimated for 1995 but only at 0.6 percent--far below the
faster-growing developing countries....
The IMF and World Bank would be absolved of shared responsibility for slow
growth if Africa were structurally incapable of growth rates seen in other
parts of the world or if the continent's low growth were an impenetrable
mystery. But Africa's growth rates are not huge mysteries. The evidence
on cross-country growth suggests that Africa's chronically low growth can
be explained by standard economic variables linked to identifiable (and
remediable) politices....
Studies of cross-country growth show that per capita growth is related to:
* the initial income level of the country, with poorer countries tending
to grow faster than richer countries;
* the extent of overall market orientation, including openness to trade,
domestic market liberalization, private rather than state ownership,
protection of private property rights, and low marginal tax rates;
* the national saving rate, which in turn is strongly affected by the
government's own saving rate, and
* the geographic and resource structure of the economy....
These four factors can account broadly for Africa's long-term growth
predicament. While it should have grown faster than other developing
areas because of relatively low income per head (and hence larger
opportunity for "catch-up" growth), Africa grew more slowly. This was
mainly because of much higher trade barriers; excessive tax rates; lower
saving rates; and adverse structural conditions, including an unusually
high incidence of inaccessibility to the sea (15 of 53 countries are
land-locked)....
If the policies are largely to blame, why, then, were they adopted? The
historical origins of Africa's antimarket orientation are not hard to
discern. After almost a century of colonial depredations, African nations
understandably if erroneously viewed open trade and foreign capital as a
threat to national sovereignty. As in Sukarno's Indonesia, Nehru's India,
and Peron's Argentina, "self sufficiency" and "state leadership," including
state ownership of much of industry, became the guideposts of the economy.
As a result, most of Africa went into a largely self-imposed economic exile....
Adam Smith in 1755 famously remarked that "little else is requisite to carry a
state to the highest degrees of opulence from the lowest barbarism, but peace,
easy taxes, and tolerable administration of justice." A growth agenda need
not be long and complex. Take his points in turn.
Peace, of course, is not so easily guaranteed, but the conditions for peace
on the continent are better than today's ghastly headlines would suggest.
Several of the large-scale conflicts that have ravaged the continent are
over or nearly so.... The ongoing disasters, such as in Liberia, Rwanda and
Somalia, would be better contained if the West were willing to provide modest
support to African-based peacekeeping efforts.
"Easy taxes" are well within the ambit of the IMF and World Bank. But here,
the IMF stands guilty of neglect, if not malfeasance. African nations need
simple, low taxes, with modest revenue targets as a share of GDP. East taxes
are most essential in international trade, since successful growth will
depend, more than anything else, on economic integration with the rest of the
world. Africa's largely self-imposed exile from world markets can end
quickly by cutting import tariffs and ending export taxes on agricultural
exports. Corporate tax rates should be cut from rates of 40 percent and
higher now prevalent in Africa, to rates between 20 percent and 30 percent,
as in the outward-oriented East Asian economies....
Adam Smith spoke of a "tolerable" administration of justice, not perfect
justice. Market liberalization is the primary key to strengthening the
rule of law. Free trade, currency convertibility and automatic incorporation
of business vastly reduce the scope for official corruption and allow the
government to focus on the real publics goods--internal public order, the
judicial system, basic public health and education, and monetary stability....
All of this is possible only if the government itself has held its own spending
to the necessary minimum. The Asian economies show how to function with
government spending of 20 percent of GDP or less (China gets by with just
13 percent). Education can usefully absorb around 5 percent of GDP, health,
another 3 percent; public administration, 2 percent; the army and police,
3 percent. Government investment spending can be held to 5 percent of GDP
but only if the private sector is invited to provide infrastructure in
telecommunications, port facilities, and power....
This fiscal agenda excludes many popular areas for government spending.
There is little room for transfers or social spending beyond education and
health (though on my proposals, these would get a hefty 8 percent of GDP).
Subsidies to publicly owned companies or marketing boards should be scrapped.
Food and housing subsidies for urban workers cannot be financed. And,
notably, interest payments on foreign debt are not budgeted for. This is
because most bankrupt African states need a fresh start based on deep
debt-reduction, which should be implemented in conjunction with
far-reaching domestic reforms.
--
Terry W. Colvin, Sierra Vista, [Cochise County] Arizona (USA)
Primary: < fortean1@mindspring.com >
Alternate: < terry_colvin@hotmail.com >
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