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Why Africa Needs Economic Freedom

Why Africa Needs Economic Freedom

5 Mins
April 4, 2010

February 16, 2008 -- As he departed for a tour of Africa, President George W. Bush said the United States rejects "the paternalist notion that treats African countries as charity cases." I wish he would reject the paternalist notions of his own administration that treats American citizens as charity cases. No matter, let's consider that impoverished continent for a moment.

Bush said, "I'm going to witness the generosity of the America people firsthand. It will give me a chance to remind our fellow citizens about what a compassionate people we are." Of course, the foreign aid taken from American taxpayers by the U.S. government and sent to Africa doesn't represent "compassion" because real caring need not be coerced. And in any case, the United States and other Western countries have dumped hundreds of billions of dollars into Africa with dismal results. If this is compassion, one would hate to see true insensitivity.

Many Americans do not resent such aid to Africa and, indeed, give to private charities because they are repulsed by the grueling poverty they see in the cradle of the human race. And perhaps Bush meant well when he spoke of "investments" rather than charity for Africa. But the money going there, for the most part, is wasted. One can understand why by looking at the economic systems that dominate the continent.

Let's put African development in perspective. In 1990, I did a study at the Heritage Foundation, with the help of researcher Bryan Johnson, entitled "Why Asia Grows and Africa Doesn't." We asked the question, "What would sub-Saharan Africa look like if it had grown at the rate of the economically dynamic Asian Tigers—Hong Kong, Singapore, South Korea, and Taiwan?"

Let's remember that these Asian countries had been poor and had been decimated by World War II and the Japanese occupation, with another war further crippling Korea. The African countries had been poor as well, and while some—the old Belgian Congo, for example—suffered particularly under colonial rule, others had some infrastructure supplied by the colonial powers that ruled them.

For the four Asian countries, we looked at GDP growth using "purchasing power parity," which adjusts for currency exchange rate differences and inflation, between 1965—about the time the European colonial empires were breaking up—and 1985. We found that the Asian GDPs grew from a total of $50.5 billion to $269.9 billion, over a four-fold increase. Of course, population grew during that period as well, but even so, the income per capita of individuals in those countries rose from $1,080 to $3,949. Not bad!

So how about Africa? In 1965, the sub-Saharan African countries, minus South Africa and its dependents and a few countries for which we couldn't get good numbers, had a total GDP of $121.4 billion. By 1985, those economies had grown to $211.8 billion, only about a 75 percent increase. Worse still, with population growth, the per capita incomes were stagnant at about $500.

But what would the GDP of those African countries have looked like if they had grown at the rates of those Asian countries? We found that rather than a $211.8 GDP, they would have had $648 billion. Further, per capita income in Africa would have been $1,841 rather than a paltry $500—a $1,300-plus growth dividend!

We did that study at the time I was developing the indicators that would later make up the Heritage Index of Economic Freedom. In an early application of the techniques used in the Index, we looked at inflation rates, commercial banking freedom, capital markets, price controls, taxation, and other factors. Not surprisingly, we found that the Asian countries seemed far freer than the African ones. Freedom meant economic growth and prosperity.

Now in 2008, some two decades after that study, I've looked again at those numbers. The results are even more dramatic. The average per capita GDP of the four Asian countries is $25,223 compared to only $1,492 for the same African countries, minus a couple that are in such bad shape that there are no figures available. But with a well-developed freedom index, we can observe that on a scale of one to one hundred, the average freedom of the African countries is only 57.6, compared to 79.2 for the four Asian ones; Singapore's score was 87.4 and Hong Kong's was 90.3.

Of course, the economic indicators are really ethical indicators that point to the deeper roots of Africa's problems. For the most part, the governments and cultures of African countries reject the fundamental principles of individualism: that individuals should be free to run their own lives as they see fit; that they should deal with one another based on mutual consent; and that governments should protect these liberties. The fact that African governments loot rather than protect private property, confiscate profits through high taxes, and dictate prices are not only acts of economic stupidity. They are acts of immorality.

Foreign aid given to African countries by the governments of prosperous countries simply steal from their taxpayers to give to corrupt African bureaucrats who keep their own citizens in poverty. Such aid perhaps provides comfortable pillows for the inmates of these torture chambers.

What is needed in Africa is a moral revolution. President Bush speaks of private investment and free trade as paths to prosperity in Africa, and those will be part of the picture. But sadly, neither Bush nor any other high-profile person seems to have the understanding or rhetorical skills to make that case.

In 1989, I walked through the suburbs of Dar Es Salaam, Tanzania, the poorest country I ever visited. I saw under the hot sun in dusty expanses small outdoor stalls with hard-working individuals making and selling the basic necessities of life. That evening, I ate at a small restaurant run by a man who had started life by selling food in one of those stalls and worked his way to his own dream. I was asked to say a few words to some of those entrepreneurs who I had seen that day, and who had gathered there thanks to the aid of a local self-help group that encouraged their efforts.

I told them that I had seen the men making wood into furniture and metal into pots and pans. I had seen the women making cloth into clothing. But I had seen something more, something spiritual. (What was the Swahili word for that, they asked?) I had seen individuals creating in themselves the discipline to get up each day, to secure raw materials, and to put the time and energy into producing their products. I had seen them creating external manifestations of their virtues: their businesses. I had seen them creating the confidence that they were not helpless in the power of uncontrollable forces, but capable of taking control of their lives. And I had seen them creating the hope that they, their families, and their friends would not be doomed to live in grueling poverty but, rather, in prosperity.

I told them that I knew for a fact that prosperity is possible because the United States was at one time a great under-developed country, but that we had what Africa does not have: individual freedom, including economic liberty. I told them that they work as hard as any American, harder perhaps because their very lives depend on it so much more. I told them that for centuries the poor of every country—individuals just like them—have come to America and worked their way up to the prosperous lives that are befitting human beings. I told them that they too should demand such freedom from their own government.

They asked me why no one had ever said these things to them before.

I didn't expect my talk to spark a revolution. But I hoped that, over the years, others who are repulsed by the poverty they see in Africa or anywhere in the world would understand that the evidence is clear, that only economic liberty will eliminate it. And I hoped that they would understand that economic freedom must be founded on a morality of rational self-interest.

So as President Bush tours the economically Dark Continent, if you talk to those who claim that they really want to see an end to poverty in Africa, ask them to use their minds, ask them to look at the evidence, and ask them if they believe that every African (or American, for that matter) has a right to his or her own life. Their answers will be an indicator of their true level of compassion.

Edward Hudgins


Edward Hudgins

Edward Hudgins is research director at the Heartland Institute and former director of advocacy and senior scholar at The Atlas Society.

Edward Hudgins
About the author:
Edward Hudgins

Edward Hudgins, former director of advocacy and senior scholar at The Atlas Society, is the founder of the Human Achievement Alliance and can be reached at ehudgins@humanachievementalliance.org.

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