Why Is Africa Poor?
The simple answer to why
sub-Saharan Africa is poor is that they have less capital per person than
richer nations. That's the definition of a poor nation. In the
word's of famed economist Ludwig von Mises:
There is but one means available to improve the material
conditions of mankind: to accelerate the growth of capital accumulated as
against the growth in population. The greater the amount of capital
invested per head of the worker, the more and the better goods can be
produced and consumed. This is what capitalism, the much abused profit
system, has brought about and brings about daily anew.~ Ludwig von Mises, The Anti-Capitalist Mentality, p. 10
The real question is why,
in sub-Saharan Africa, is the process of capital accumulation that makes other
regions of the world rich seeming not to work? Africa's sad story owes in
large part to the fact that socialism and Marxism swept across most of the
continent during the Cold War. I am going to tell you the tale of 2
nations. Neighbors. Two different economic systems, two SHOCKINGLY different
results.
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Zimbabwe's GDP per Capita Since Mugabe Took Office (Source) |
When asked why Africa is
poor the class warfare types have a standard answer that Africa is exploited by
rich, non-African nations. I'll show you shortly this socialist/communist
rich exploitation mindset is actually the cause of Africa's poverty, and is
exactly what's keeping much of the region in poverty. Plus, the facts are
firmly against that foreign exploitation notion anyway since almost all the
capital being accumulated in the sub-Saharan African nations today came from
their trade with other nations in the first place.
The cause of the
persistent poverty in this region of the world is easy, and I'm going to use
Zimbabwe as an example. The first graph above is Zimbabwe's declining GDP
per capita since their Marxist president, Mugabe, came into power in 1980.
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Zimbabwe vs. Botswana GDP/Capita 1975-1985 (Source) |
In 1980 Botswana (their
neighbor) was just as poor as Zimbabwe. To the left are the 2 neighboring
nation's GDPs per capita from 1975 - 1985. At the end of the article I'll
show you what GDP per capita looks like now so you can contrast the growth
under capitalism with the increased poverty under socialism.
Zimbabwe, Marxism & Seizing Control
of The Means of Production
What socialism fails to
realize is that stealing assets ensures poverty. That is why you have
never, on the face of this earth, seen any nation become rich through
socialism. You have seen some nation's become rich through the mechanism
of free-market capitalism, then later adopt socialism. However, contrary
to what socialists will tell you about wanting to solve the boom/bust cycles of
capitalism in order to help the poor, in reality, their methods only ensure poverty.
Zimbabwe is a fine
example of this; the country recently had its "elections." The
incumbent president/dictator (Mugabe) got "re-elected."
Mugabe is a Marxist. Like all socialists & communists he speaks
of equality then proceeds to treat people very unequally. His specific
take on Marxism is he wants to create a:
"socio-economic system ... which is planned and operated by
those who are chosen by the people." Asked what kind of society he
hoped to lead, Mugabe replied, "A truly democratic society devoid of
racism... a society where there is equality, where there are civil
liberties. ... And as far as our own program is concerned, we are for a
socialist society, you see."(Source: PBS interview)
After the last election
Mugabe announced that Zimbabwe is tired of being exploited! In typical
socialist & Marxist fashion Mugabe announced that the proletariat of
Zimbabwe were no longer going to be oppressed by the rich (mainly white)
bourgeois!
His party is calling this
policy "indiginization." If Zimbabwe is to reduce the control
of the rich and empower the people, then all stocks on the Zimbabwe stock
market must have 51% of their shares taken (without pay of course) for the
benefit of the people of Zimbabwe. In 2000 Mugabe did something similar
and seized the land of the richest farmers (also without compensation)
because they were too rich. "How can Zimbabwe say we are an
independent country when our resources are controlled by others?"
(referring to white land and business owners). Mugabe's party spokesman asked.
Mugabe is taking his cue straight from the the great book itself:
Yes, gentlemen, the Commune intended to abolish that class
property which makes the labor of the many the wealth of the few. It aimed at
the expropriation of the expropriators. It wanted to make individual property a
truth by transforming the means of production, land, and capital, now
chiefly the means of enslaving and exploiting labor, into mere instruments of
free and associated labor.~ The Communist Manifesto
When Zimbabwe went
through its earlier Marxist - "we hate the capitalists!" - moment
back in 2000 they seized land, today it is socializing the ownership of all the
businesses. The 2000 farm seizure went against property rights (the very
core tenet of liberalism and of free market capitalism), and it had
consequences. It lowered production, which lowered tax revenues, which
caused the government to have to print money. By 7 years later they were
into inflation so bad people were using $100 million dollar bills to buy
groceries.
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Zimbabwe's Fall in GDP After the 2000 Land Seizures (Source) |
That is the effect of
Marxist action against the means of production: in the name of fighting
inequality you attack the only thing in the economy that produces output,
employment, and is growing. The effect of this: Zimbabwe's GDP shrunk
every year from the farm seizures until 2009. How's that for a recession?
Zimbabwe's Keynesian
Stimulus Ahead
The Mugabe Administration
announced that once they "get" this money from indiginization of
these stock shares, then "the people" of Zimbabwe have decided to
spend it on new roads, infrastructure and social programs. The country
can't otherwise afford these things because their treasury is empty. Well
that's not the real cause, let me take it back a step. Their treasury is
empty because they have created a strongly anti-business climate and no one
other than a lunatic would do business there if they had a choice.
This is an especially bad
idea because, for those who don't know, Keynesian stimulus of this kind causes
inflation. Today, in 2013, Zimbabwe is preparing to embark down the same
road to printing billion dollar bills that these anti-capitalist methods took
it down in 2000.
Botswana, Capitalism
& High Quality of Life
Bordering Zimbabwe to the
west is Botswana who took a, thankfully, very different approach to their
socialist neighbor. That is why today they have one of the highest
qualities of life in the Africa and Zimbabwe has one of the lowest.
Botswana adopted total free trade and total, unregulated,
laissez-faire capitalism. By doing so new businesses began to appear.
Zimbabwe has taken the opposite approach and, by attacking the small
amount of remaining wealth, created a climate where you'd have to be insane to
open up a business.
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GDP per Capita = Capitalist Prosperity In Botswana vs Socialist Poverty in Zimbabwe (Source) |
Growth from Free trade: Botswana has overall mostly free trade. This has
caused a booming export industry to grow up in the last 30 years.
Botwana's economic freedom has attracted a lot of foreign investment into
the country. Remember where we started at the opening of the article?
The only method to improve the quality of life of the common citizen is
to increase the amount of capital in a country per head of population
There is no other method, and this is exactly what capitalism has done in
Botswana. Today foreign assets account for 66% of all total bank assets
in the country. This foreign investment that has helped fuel growth and
amplify the growth from the free enterprise / free market system.
Growth from Free Market
Capitalism: The growth laissez-faire
capitalism has caused in Botswana is seen in the new sectors in the economy
that didn't exist even in 1980. According to Botswana's Central
Statistics Office mining has been largely unchanged, and today
makes up 26% of Botswana's economy compared to 25% in 1980. Manufacturing
is also unchanged making up 4% of the economy. The change has been the
rise of modern industries that have sprung up due to the capitalist economic
freedom the country enjoys. Those growth industries include: trade,
hotels, banking, insurance, telecom, transportation, construction, and
utilities. Manufacturing & mining haven't increased much, or, to coin
the phrase used by authors who object to jobs created by capitalism: these are
not "bad", "low paying" "wage slave" jobs.
Growth from Responsible
Government: At a time when Americans
consider why we have no economic growth we might want to compare ourselves to
Botswana. The country has:
- Kept national debt under 10% of GDP (the US is presently
105% of GDP)
- Kept annual budget deficits to 2% of GDP (the US deficit is
6.6% of GDP)
- Have nearly no barriers to free trade (the US government
controls every aspect of trade)
- A federal income tax top bracket of 25% (the US is presently
39.6%)
- Corporate tax rates are either 5%, 15% or 25% (the US is
presently 35%)
- Equipment imported into Botswana for use in business is tax
& tariff free
- Raw materials imported are tax & tariff free (haha, the
US even puts a tariff on oil at a time when we are paying $4/gallon at the
pump)
The Good News
The good news is Zimbabwe
could very easily transform itself from a poor, vacated, socialist shit-hole
into a thriving, booming epi-center of Africa. Neighboring Botswana
(where every sane person living in Zimbabwe has long since fled to) has the
most capitalistic, freest economy in all of sub-Saharan Africa. It is
also no coincidence that since it adopted those policies it has also had the
highest economic growth rate of any nation in the world, even surpassing Hong
Kong. Private sector growth in Botswana has been in the double digits for
going on 4 decades! Also (which is an important point after this week's
indignization announcement in Zimbabwe), Botswana's Constitution has a
provision that expressly protects all private property from government
seizure.
To those who are
unfamiliar there is a data set called the Penn World Table that tracks
worldwide incomes. Overall the world is become richer and richer in every
country in an absolute sense. The countries who engage in
socialist or Marxist methods and deny their people access to the capitalist
process of accumulating capital are the only exceptions. The Penn World Table can be viewed here.
I am going to close you
where we began. And I'm going to again give you a von Mises quote because
I happen to like his explanation on this topic more than other economists:
What constitutes the greater wealth of a capitalistic
society as against the smaller wealth of a noncapitalistic society is the
fact that the available supply of capital goods is greater in the former
than in the latter. What has improved the wage earners’ standard of living
is the fact that the capital equipment per head of the men eager to earn
wages has increased. It is a consequence of this fact that an ever increasing
portion of the total amount of usable goods produced goes to the
wage earners.None of the passionate tirades of Marx, Keynes and a host of
less well-known authors could show a weak point in the statement that
there is only one means to raise wage rates permanently and for the
benefit of all those eager to earn wages—namely, to accelerate the
increase in capital available as against population. If this be
“unjust,” then the blame rests with nature and not with man.~ Ludwig von Mises, The Anti-Capitalist Mentality, p.58