Cafe Hayek

The Realist

The latest EconTalk is here—William Easterly talking about the ideas in his two books, The Elusive Quest for Growth and The White Man's Burden. He is remarkably unenthusiastic about the ability of the West to help the rest of the world in any grand way. Small steps, yes. Big overhauls are impossible. Growth must come from the bottom up and must be woven into the culture of the country. It must emerge. A great contrast with the optimism of Paul Collier.

The Bottom Billion

The latest EconTalk is a conversation with Paul Collier about the ideas in his book, The Bottom Billion. I think he is overly optimistic about military intervention and the productivity of voluntary standards in helping people in desperately poor countries. But his discussion of conflict is very interesting. I never realized how common rebellion and violence is in poor countries. Reading about it got me thinking about the incentives that conflict creates and the incentives that produce conflict. I also never thought about the challenges of land-locked countries, a phenomenon that Collier highlights. William Easterly is scheduled to appear on EconTalk in two weeks. He'll provide a different perspective.

Freedom and the Ultimate Resource

The Wall Street Journal's Mary Anastasia O'Grady summarizes the findings of the latest - the 14th - Heritage Foundation / The Wall Street Journal Index of Economic Freedom.  Here are the opening paragraphs of Ms. O'Grady's summary:

Are the world's impoverished masses destined to live lives of permanent misery unless rich countries transfer wealth for spending on education and infrastructure?

You might think so if your gurus on development economics earn their bread and butter "lending" at the World Bank. Education and infrastructure "investment" are two of the Bank's favorite development themes.

Yet the evidence is piling up that neither government nor multilateral spending on education and infrastructure are key to development. To move out of poverty, countries instead need fast growth; and to get that they need to unleash the animal spirits of entrepreneurs.

....

The Index also reports that the freest 20% of the world's economies have twice the per capita income of those in the second quintile and five times that of the least-free 20%. In other words, freedom and prosperity are highly correlated.

As Julian Simon taught us, the ultimate resource is the free human mind.  A land rich in petroleum, arable land, and iron ore and other minerals is useless to a society of humans incapable of rational thought and intolerant of change.  Nor would such a land of potential plenty realize its potential if its inhabitants are restrained by tyranny or by widely shared misconceptions that individual enterprise, innovation, profit, and the pursuit of worldly pleasures are degrading or sinful.

But unleash people from the countless foolish and rent-seeking constraints imposed by government and from constraints imposed by their own superstitions and they will create resources.  They will flourish and prosper, not only materially but also culturally and intellectually.  A free people can and will build a dynamically prosperous society in even relatively barren and inhospitable places such as New England, Arizona, and Hong Kong.  An unfree people will languish in poverty even in lush paradises such as much of Central and South America and in lands teeming with 'natural' resources such as Congo and Russia.

Better than Bono

Karol, with Marginal Revolution's own Tyler Cowen, just published this outstanding article in the current issue of the Wilson Quarterly.  It's entitled "The Micromagic of Microcredit."  Here are the concluding paragraphs:

With microcredit, life becomes more bearable and easier to manage. The improvements may not show up as an explicit return on investment, but the benefits are very real. If a poor family is able to keep a child in school, send someone to a clinic, or build up more secure savings, its ­well-­being improves, if only marginally. This is a big part of the reason why poor people are demanding greater access to microcredit loans. And microcredit, unlike many charitable services, is capable of paying for ­itself—­which explains why the private sector is increasingly involved. The future of microcredit lies in the commercial sector, not in unsustainable aid programs. Count this as another benefit.

If this portrait sounds a little underwhelming, don’t blame microcredit. The real issue is that we so often underestimate the severity and inertia of global poverty. Natalie Portman may not be right when she says that an end to poverty is “just a mouse click away,” but she’s right to be supportive of a tool that helps soften some of poverty’s worst blows for many millions of desperate ­people.

Paths to Property

Karol and her Mercatus Center colleague Paul Dragos Aligica have just had their important new monograph -- Paths to Property -- published by the prestigious Institute of Economic Affairs.  (And my colleague Pete Boettke supplies the Foreword.)

Karol and Paul challenge the conventional wisdom (made popular today by certain Irish rock stars) that Africa's poverty can be solved with more foreign aid.  But nor will prosperity emerge from simple cookie-cutter "market solutions."  Property rights and markets are utterly essential for prosperity, but these must emerge from the bottom up.  Top-down imposition tends to produce sorry results.  Empirical examples abound, drawn from Karol's extensive fieldwork in sub-Saharan Africa.

Easterly vs. Bono

Bill Easterly is always worth reading.  Here are a couple of paragraphs from his op-ed that appears in today's edition of the Los Angeles Times:

In truth, Africans are and will be escaping poverty the same way everybody else did: through the efforts of resourceful entrepreneurs, democratic reformers and ordinary citizens at home, not through PR extravaganzas of ill-informed outsiders.

The real Africa needs increased trade from the West more than it needs more aid handouts. A respected Ugandan journalist, Andrew Mwenda, made this point at a recent African conference despite the fact that the world's most famous celebrity activist — Bono — was attempting to shout him down. Mwenda was suffering from too much reality for Bono's taste: "What man or nation has ever become rich by holding out a begging bowl?" asked Mwenda.

By the way, my wife's work in Africa supports Easterly's thesis.

Africans Need Capitalism

Karol has a superb letter published in today's edition of the New York Times:

To the Editor:

In "'Patient' Capital for an Africa That Can't Wait" (column, April 20), Thomas L. Friedman is spot-on in his diagnosis of Africa’s poverty as rooted in a lack of capitalism.

If this diagnosis is correct, what is the prescription?

Africa's leaders have the power to encourage patient capitalism (where returns are 5 to 10 percent and payback is over a longer period of time) by reducing barriers to businesses, by improving tenure security for both men and women, and by respecting indigenous institutions and customs.

Policies that push entrepreneurs into the informal sector, promote tenure insecurity, limit women's property rights and are based on central planning rather than decentralized experimentation will only stymie progress.

The examples that Mr. Friedman cites are not aberrations. Africans are as entrepreneurial as any people. With some basic legal reforms, they can be empowered to capitalize on their talents.

Karol Boudreaux
Arlington, Va., April 20, 2007

The writer is a senior research fellow at George Mason University and research director of Enterprise Africa.

Easterly on Africa

Bill Easterly -- who recently taught a seminar for our graduate students here at George Mason -- has this nice op-ed in today's Wall Street Journal.  It's entitled "Africa's Poverty Trap."  Here are Bill's final three paragraphs:

The cowed IMF and the World Bank never mention the words "free market" in thousands of pages devoted to ending poverty. Even the World Bank's 2005 World Development Report "A Better Investment Climate for Everyone" doesn't mention the forbidden words.World Bank economists are so scared of offending anyone on Africa that they recite tautologies. The press release describing the findings of the 2006 World Bank report "Challenges of African Growth" announces: the "single most important reason" for Africa's "lagging position in eradicating poverty," finally "has been identified." It is "Africa's slow and erratic growth." The next World Bank report may reveal that half a dozen beers has been identified as the single most important reason for a six-pack.

Today Unctad (in its 2006 "Big Push" report) still offers to make possible government "infant-industry policies" for "small, fragmented economies" by setting up a regional market, presumably so Burkina Faso and Niger can help absorb the potential output of the Togolese automobile industry. Unctad lacks everything but chutzpah: All aid to Africa, it said, should be moved into a new U.N. Development Fund for Africa, to which Unctad helpfully offered its "in-house experience," by creating a Commission on Aid and Development inside of Unctad. Unctad will thus permit the economics of Africa to at last "escape from ideological biases," so we can finally understand "why economic activity should not be left entirely to market forces."

The free market is no overnight panacea; it is just the gradual engine that ends poverty. African entrepreneurs have shown what they are capable of. They have, for example,launched the world's fastest growing cell phone industry to replace the moribund state landlines. What a tragedy, therefore, that aid agencies have foisted the poorest economics in the world on the poorest people in the world for 50 years. The hopeful sign is that many independent Africans themselves are increasingly learning the economics of how to get rich, rather than of how to stay poor.

Out of Africa

The smarter, wiser, and more-talented half of the Boudreaux team has this very nice essay in yesterday's edition of Nairobi's The Nation.  In it, Karol encourages Kenya's government to increase that country's elephant population by lifting its ban on trophy hunting and by decentralizing control over natural resources.

By the way, because of Karol's leadership of Enterprise Africa! -- and her work that grew out of that effort -- she has been appointed to the Working Group on Property Rights of the U.N.'s Commission on Legal Empowerment of the Poor.  This news is good for Karol; it's wonderful for millions of poor people in Africa.

Sam Walton or Bono?

Michael Strong argues that Wal-Mart is one of the world's great forces for alleviating poverty.  He's correct.

Like Debating Whether or Not the Earth is Round

Andy Morriss's wonderful talent as a writer of letters to the editor is unmatched.  This letter he sent today to the editor of the Financial Times is evidence:

Sir,

Bono is following up on his hug of German Prime Minister Angela Merkel at Davos last January and with a visit to Germany to launch “a series of debates with German thinkers on African development and the role of the west.” (“Geldorf and Bono take G8 campaign to Germany,” Dec. 27).  What is to debate? Only entertainers and politicians could be unaware of the straightforward starting points for solving Africa's many problems: free trade and governments that neither murder their citizens nor steal their property.  The role of the west in implementing these solutions is equally clear: cut tariffs and other barriers to trade with Africa and eliminate official toleration (including foreign aid, official recognition, arms sales, etc.) of murderous regimes like Sudan's and kleptocratic ones like Zimbabwe’s.

Andrew P. Morriss
H. Ross & Helen Workman Professor of Law
University of Illinois, College of Law

Reed This

My friend Larry Reed, President of the Michigan-based Mackinac Center for  Public Policy, is one of the most energetic and able activists for a free society.  The New York Times -- yesterday and today -- profiled Larry's important work.  (I believe that these links are free.)

Two things of special note.  One is this comment, from yesterday's report, about people such as Larry who understand the power of markets to create widespread and lasting prosperity:

“Their philosophy encourages selfishness and greed,” said Iris J. Lav, who runs the State Fiscal Analysis Initiative, a network of 29 liberal state-level groups organized in part as a countervailing force. “If you have problems, they don’t care — just too bad.”

Of course, this accusation is nonsense.  We market advocates might be mistaken, but it's an old and shop-worn -- but still galling -- allegation that we "don't care."  People, such as Ms. Lav, who level this accusation cannot seem to see beyond the immediate and the visible.

It's interesting that few people would accuse Ms. Lav of not caring, despite the fact that, if we market advocates are not mistaken in our analyses, the policies that she endorses will lead to more and deeper poverty and hardship.

It's much easier -- and probably more viscerally gratifying -- to accuse those with whom you disagree of moral failings than to grapple with the content of their arguments.

The second thing to note is from today's article: I cannot understand why Jeffrey Sachs seems to learn nothing from the works of William Easterly and Peter Bauer.  If Africans are to become prosperous, they'd better follow the lead of James Shikwati rather than that of Professor Sachs.  (Africans can also learn a thing or two from my wife's recent work there.)

Easterly, by the way, recently defended Hayek from Sachs's utterly misinformed reading of The Road to Serfdom.  Here are the opening and closing paragraphs of Bill's superb essay:

Scientific American, in its November 2006 issue, reaches a "scientific judgment" that the great Nobel Prize-winning economist Friedrich Hayek "was wrong" about free markets and prosperity in his classic, "The Road to Serfdom." The natural scientists' favorite economist -- Prof. Jeffrey Sachs of Columbia University -- announces this new scientific breakthrough in a column, saying "the evidence is now in." To dispel any remaining doubts, Mr. Sachs clarifies that anyone who disagrees with him "is clouded by vested interests and by ideology."

....

Mr. Sachs is wrong that Hayek was wrong. In his own global antipoverty work, he is unintentionally demonstrating why more scientists, Hollywood actors and the rest of us should go back and read "The Road to Serfdom" if we want to know what will not work to achieve "The End of Poverty." Hayek gave the best exposition ever of the unpopular ideas of economic freedom that somehow triumph anyway, alleviating far more national and global poverty than more fashionable Scandinavia-envy and grandiose plans to "make poverty history."

Tonight at dinner (at a Liberty Fund conference on property rights) I'll raise a glass to the memory of Milton Friedman and Peter Bauer, to Bill Easterly, to James Shikwati and June Arunga and Karol Boudreaux and Larry Reed and to everyone working to slay the superstitious belief that force, rather than freedom, is creative.

Monsanto Saves Lives

Want to know one way that a multinational corporation and the profit motive combine to save the lives of many Africans?  You can find out here.

Karol Boudreaux on the Radieaux

With good reason, my wife, Karol, recently was interviewed on the Virginia public-radio program With Good Reason.  The topic is economic development and foreign aid in Africa.

You can listen here; after clicking on this link, scroll down to "African Trials" and then click on "Listen Now."  And I encourage you to do so!  (Karol is the second person interviewed in this episode; her interview begins about 13 minutes and 10 seconds into the program.)

Going to the Wal-Mart for China

FLOW's Michael Strong explains Wal-Mart's role in lifting hundreds of thousands of Chinese people out of poverty.

Between 1990 and 2002 more than 174 million people escaped poverty in China, about 1.2 million per month. With an estimated $23 billion in Chinese exports in 2005 (out of a total of $713 billion in manufacturing exports), Wal-Mart might well be single-handedly responsible for bringing about 38,000 people out of poverty in China each month, about 460,000 per year.

There are estimates that 70 percent of Wal-Mart's products are made in China. One writer vividly suggests that "One way to think of Wal-Mart is as a vast pipeline that gives non-U.S. companies direct access to the American market."  Even without considering the $263 billion in consumer savings that Wal-Mart provides for low-income Americans, or the millions lifted out of poverty by Wal-Mart in other developing nations, it is unlikely that there is any single organization on the planet that alleviates poverty so effectively for so many people. Moreover, insofar as China's rapid manufacturing growth has been associated with a decline in its status as a global arms dealer, Wal-Mart has also done more than its share in contributing to global peace.

Decentralization in Namibia

My wife, Karol's, important research into the sources of, and obstacles to, entrepreneurship in sub-Saharan Africa continues.  She just returned from an 11-day visit to Namibia.  Here's her most-recent dispatch from the field, offering evidence that decentralization of decision-making authority is the way to go.

South African Taxi Regulation and "Deregulation"

Enterprise Africa! -- a joint research project of The Mercatus Center at George Mason University, the Free Market Foundation in South Africa, and the Institute of Economic Affairs in London -- just released this study of South Africa's taxi industry.

The research reported in this study finds that the "deregulation" of the South African taxi industry was too circumscribed, too faux, to be regarded as genuine deregulation.  One consequence of the faulty policy steps is an increase in violence.  What causes this violence?  What proposals are advanced to reduce this violence?

Read this important study to find some answers.  (Full disclosure: the principal author of the study is my better half, Karol Boudreaux.)

Enterprise Africa!

My wife, Karol, has been back in Africa for the past three weeks doing research for the Mercatus Center's project Enterprise Africa!.  She's in Rwanda now -- a country that is today much more peaceful, and commercial, than it was in the mid-1990s.  Here's Karol's recent dispatch from Rwanda.

Easterly on Aid and Africa

In 1981 I took an International Trade course at NYU from the great Fritz Machlup.  (Pardon my bragging: I earned an A in Machlup's class -- and Machlup bragged that he refused to go along with grade inflation.  To this day, my A in Machlup's class counts as one of my proudest achievements.)

Anyway, one day in that class Machlup said that "the problem with development economics is that it attracts the least-developed economists."  William Easterly (now at NYU) is a counter-example to Machlup's claim.  Easterly is a first-rate scholar, economist, and writer.  His op-ed in today's Washington Post offers much wisdom on what ails Africa.

Reality-Based Grasp of "Aid"

Franklin Cudjoe, Director of Imani, a Ghana reality-based thinktank -- that is, a thinktank that rejects the belief that force can be a magic potion -- had a wonderful essay in yesterday's Wall Street Journal.  (It's here, but a paid subscription is required.)

Here's Franklin's closing paragraph:

African leaders must be pushed to reduce economic intervention, free financial markets, remove bureaucratic obstacles to setting up businesses, establish property rights and enforce contract law. These are the forces that release entrepreneurial energy. But the ruling cliques will do none of these unless forced to do so as a condition of aid. The [Jeffrey] Sachs aid model has financed tyranny and corruption for 40 years, leaving Africans destitute. The world trade meeting in Hong Kong will hear cries for "Trade Justice" for Africa, representing more protectionism and more state-run, aid-fueled schemes. What we really need is economic freedom and the rule of law at home: We are perfectly capable of improving our own lot if only allowed to do so.

Famine in Niger

In this essay, Thompson Ayodele puts his finger on the source of famine in Niger.

"Aid" Analysis

This article in today's New York Times offers a superb analysis of a big part of the reason why so many Africans remain mired so deeply in poverty.

Here's the punchline:

Since 1981, the United States Agency for International Development said in a troubling report in September, outsiders have sought to fix Malawi's ills through more than 20 economic adjustment programs devised by the World Bank and eight related loans from the International Monetary Fund. International charities poured in countless private dollars. Overseas development assistance - foreign aid - totals about $35 per person, and makes up $8 of every $10 spent on economic development.

Yet despite that, the report states, only Yemen, Ethiopia and Burundi have worse rates of chronic malnutrition than does Malawi, where 49 percent of all children are stunted. Moreover, that rate has not improved for 15 years.

My only real disagreement is with the theme, expressed well in the article's title: "Amid Squalor, an Aid Army Marches to No Drum at All."

The problem isn't that the legions of "aid" dispensers and foreign "experts" aren't well-coordinated with each other.  Instead, a far worse problem is that the U.N., the World Bank, other "aid" agencies, and the governments in Africa together prevent individual Africans from marching to their own drums -- or, more precisely, from developing their own drum beat out of their own bits of local knowledge and individual preferences.

Hat tip to Karol.

Carter on Africa

David Brancaccio, host of the PBS program NOW, interviewed Jimmy Carter after the former president returned from a trip to Africa.  Here's the transcript of the 30-minute-long show.

Carter -- traveling under the auspices of the Carter Center -- rightly points out that many problems suffered today by Africans can be solved by relatively simple and inexpensive techniques, such as straining drinking water through a sieve in order to protect against guinea worm.

But Brancaccio is unduly impressed:

BRANCACCIO: Now you must reflect on this a lot. If the Carter Center and individuals can make so much of a difference, imagine what you could do if you were to harness the power of government to--

PRESIDENT JIMMY CARTER: Oh yeah.

BRANCACCIO: --fund even more. But what holds us back?

PRESIDENT JIMMY CARTER: One thing that holds us back is a misknowledge that erroneous belief that the people can't respond themselves. Because they are somehow incompetent, or too corrupt.

But our experience has been, in 35 nations in Africa, that the people there are just as intelligent, just as ambitious, just as hardworking, and their family values are just as good as mine. They are poor, and they don't have the facilities, and they're not literate. They don't understand the complexities of these diseases. Sometimes the complexities are very simple. But you give them a chance, and they respond overwhelmingly.

And this is what we have found to be a fact. So we deliver our services directly to the villages or directly to the families, or sometimes put medicine directly into the people's mouths. There's almost zero chance for corruption or diverting the funds or services. The people do it themselves. And it's remarkably effective.

BRANCACCIO: But this is what I wanted to ask. If you and your Center and the people on the ground, who embrace these opportunities to make such great inroads into these tropical diseases, into these diseases of poor countries, imagine what could be done when governments also do that. Is there a way that taxpayer money can be used more effectively to deal with the problems of the developing world when it comes to health?

PRESIDENT JIMMY CARTER: Absolutely. The problem is that American people, among the richest in the world-- have very little contact or awareness of or relationship with the poorest people in the world. I mention Mali, or Ethiopia.

Carter and Brancaccio then join in an orgy of mutual head-shaking-in-disbelief-and-regret that Americans are so misinformed that we withhold affordable sums of money to cure poverty in under-developed countries.

Are these gentlemen unaware that hundreds of billions of dollars have been spent on so-called foreign aid since the end of WWII?  Are they unaware that these expenditures, as documented by economists Peter Bauer and, more recently, William Easterly, have at best proven to be utterly ineffective?

The third-world's problems are not caused by western stinginess; they're caused by foolish policies in the third world -- and can be solved only by changing these policies in a direction more favorable to commerce and capitalism.

Nigeriens Kept Poor by Government

New York Times columnist Nicholas Kristof has more insight and wisdom in his column today than you'll find in any fifty randomly chosen volumes on economic development or in any pronouncement whatsoever on poverty and "foreign aid" by Jeffrey Sachs.

The people of Niger are poor not because that country is densely populated.  (It's not: it's population density is nine persons per square kilometer.)  They are poor not because of drought; not because they lack resources; not because Americans and Europeans are rich.  They are poor because, for example,

local regulations stipulate that companies must give all employees six weeks and two days of paid vacation a year. Not surprisingly, there are almost no employers in Niger.

Commerce is the foundation of civilization, the font of prosperity, and the key to peace.  Niger's government -- either because of foolishness or evilness (take your pick) -- squashes commerce in that country.  No amount of aid, mosquito nets, op-eds by Sachs, or serenading of Bono and Paul McCartney will do Nigeriens any good until commerce is allowed to flourish there.

Enterprise Africa!

Here's an update on Enterprise Africa!, the important research project that my wife, Karol, is conducting with some of her colleagues at the Mercatus Center and with some George Mason University economics graduate students.

Enterprise Africa!

Since September 12, my wife, Karol, has been in South Africa.  She and GMU graduate student Susan Anderson are there until October 19th, leading the research effort for the Mercatus Center's Enterprise Africa! project.

(During this time, I'm lone parent to our eight-year-old son, Thomas.  It's quite an experience -- for Thomas and for me!)

Here's a link describing Enterprise Africa!

Is Niger's Problem Over-population?

Inspired by the sad plight of the people of Niger, letters today in two major U.S. newspapers -- the New York Times and the Christian Science Monitor -- repeat the age-old myth that poverty is caused by over-population.

Let's look at just a few facts.

Niger's population density is 9 people per square kilometer.  Compare this figure to the population densities of much more prosperous countries:

France: 110 people per sq. km.

Czech Republic: 133

Switzerland: 181

Italy: 197

Germany: 236

United Kingdom: 250

Japan: 340

Netherlands: 484

South Korea: 493

Taiwan: 636

Hong Kong: 6641

Now let's cheat big-time in favor of the overpopulation hypothesis by counting as relevant only Niger's arable land.  If all Nigeriens lived only on Niger's arable land, the population density of this land would be 260 persons per square kilometer -- much denser than 9 persons per sq. km., but nowhere close to the population density (counting all the square kilometers, arable or not) of the likes of the Netherlands, South Korea, and Hong Kong.

(All facts reported above are calculated from data available at the CIA's World Factbook site.)

Where's the evidence for the apparently indestructible belief that over-population is a fundamental 'cause' of poverty?

The world needs more scholars of the likes of Julian Simon.

More Facts About Niger

Owen Barder, at Owen’s Musings, fairly demands more facts (and fewer speculative presumptions) about what’s going on in Niger.

In search of more facts, I went to the latest Gwartney-Lawson-Holcombe Economic Freedom of the World study (2004).

Niger ranks low. While the freest country in the world, Hong Kong, has an overall score of 8.7 out of 10, Niger’s overall score is 5.4.  Niger's score is comparable to that of Chad (5.6), Ecuador (5.6), Gabon (5.2), Nigeria (5.7), Pakistan (5.8), Rwanda (5.4), Syria (5.2), and similar countries where people's most abundant possession is poverty.

The U.S. overall score is 8.2.

Below are Niger’s ranks in more fine-grained categories of economic freedom. (For purposes of comparison, I include in parentheses the U.S. rank for each category.)

Size of Government: 78^th (16^th)

Legal Structure & Security of Property Rights: 92^nd (16^th)

Access to Sound Money: 92^nd (3^rd)

Freedom to Trade Internationally: 106^th (29^th)

Regulation of Credit, Labor, and Business: 109^th (3^rd)

Credit Market Regulations: 83^rd (8^th)

Insufficient data are available for Niger to rank its performance on the labor-market-regulation, and business-regulation, fronts.

.......

Statistics being unavoidably influenced by human choices of definitions, methods of data gathering and categorization, and on and on, no collection of statistics is immune from criticism. (My favorite book on this topic, by the way, is Joel Best, Damned Lies and Statistics (2001).) But the Gwartney, Lawson, & Holcombe study is quite sturdy and as objective as any such empirical study can possibly be. It offers serious empirical, objective data that show Nigeriens to be the unfortunate victims of a heavy-handed, market-hostile government.

And any people so plagued live lives that are especially precarious. For example, in a year in which nature is friendly, no one starves. But let nature get a bit nasty – let nature withhold rain or dump too much rain or send swarms of locusts – and people literally starve to death. One of the great benefits of economic freedom – and especially of greater integration into the global market – is that people are not held hostage to the whimsy that mother nature inevitably plays with their own locales or countries.

Niger has No Market Economy

Tim Harford, over at Private Sector Development, did some research and found these sad but unsurprising facts about Niger – the same Niger that the Washington Post recently alleged had become a victim of a recent move toward a free market:

- It costs nearly four years' income to pay the fees required to set up a limited liability company in Niger; entrepreneurs also have to deposit minimum capital of over seven years' income.

- Niger has the most rigid employment laws in the world.

- If you want to get a loan, it costs nine months' income to set up some kind of collateral. Coverage by credit registries is almost nonexistent.

- Trying to collect an unpaid invoice by going through the courts will take nearly a year and cost over 40% of the invoice's value.

I would also bet that Niger is no great practitioner of free trade. (Although Niger has been a member of the WTO since 1996, the WTO probably does too little to influence Niger to adopt genuinely open-trade policies.  Recent research concludes – as reported in last week’s Economist – that the WTO "demands too little of its poorer members."  [See the "Economic Focus" section of the August 6th issue of The Economist.])

But even if I’m wrong about Niger’s trade policies, the facts that Tim uncovered are sufficient evidence against the proposition that Nigeriens enjoy a market economy. They don’t. And therein is Niger’s problem.

Niger's Problem Isn't Nature

Kenyan James Shikwati speaks much good sense on the famine in Niger. I especially like this insight:

When aid money keeps coming, all our policy-makers do is strategize on how to get more.... They forget about getting their own people working to solve these very basic problems. In Africa, we look to outsiders to solve our problems, making the victim not take responsibility to change.

Niger's problem isn't caused by nature.  Nor, contrary to Owen's suggestion, is it helpful to describe Niger's problem as "poverty."  Of course Nigeriens live (and die) in grinding poverty.  But the relevant problem is whatever impediments its people suffer in their attempts to pursue those wealth-creating activities that give rise to wealth-creating institutions.

More Musings on Niger's Famine

Owen offers some sensible musings on the famine in Niger. But, I believe, he misses an important point when he says:

But using aid funds to buy food locally, which is what Café Hayek criticizes, is exactly what the donor should be doing, as it supports local food producers and increases production.

What’s important is that people have food to eat, not that they or their countrymen produce the food that they eat.

This "report" in the Washington Post says that farmers in Niger are now withholding their produce from the market in hopes of selling it to the U.N. and other "aid" agencies at prices higher than Nigeriens can pay. (I don’t know if this piece of the "report" is accurate – much of the rest of the report is nonsense – but I take this particular reported fact as true.) Under these circumstances, it’s possible – possible – that these western "aid" agencies, flush with taxpayer money and having no profit motive to entice them seriously to seek to pay the lowest possible price for the food products that they will then distribute to starving Nigeriens, will pay prices so high that local farmers withhold much of their inventory from the market until the "aid" agencies arrive.

If this is what happens – and it seems from the Washington Post's "report" that this is precisely what’s happening – then people go hungry in the meantime. And this going-hungry-in-the-meantime is no consequence of a freer market in Niger (as was implied in the Post's "report"; it’s a consequence of "aid" agencies’ intervention.

Even if Owen is right that in the long run these higher prices paid to farmers will stimulate more agricultural production, the fact remains that in the here and now people starve while local farmers await the free-spending "aid" agencies to buy their produce.

But unless the U.N. and other "aid" agencies plan to continue indefinitely to buy Nigerien agricultural output, why presume that "aid" agency purchases of such output today will permanently stimulate the agricultural sector to produce greater output?

Moreover, even if some "aid"-agency policy (or government policy) artificially stimulates Nigerien agricultural output to higher levels, this consequence does not necessarily mean that Nigeriens will have more to eat. Suppose that many Nigeriens have a comparative advantage at producing, say, crafts for export to countries that have a comparative advantage at producing food for export to Niger. If so, then these Nigeriens are better off producing more crafts, exporting them in exchange for imports of food, and eating this imported food. The fact that this food isn’t grown in Niger is irrelevant. What matters is having enough food to eat. The nationalities of those who supply the food is of no importance.

I don’t know what are Nigeriens current comparative advantages. Many, no doubt, have a comparative advantage in the agricultural sector. But surely not all do – and any policy that artificially stimulates agricultural output will, in the long-run, do Nigeriens no good.

A "Report" in the Post

This “report” in today’s Washington Post is utterly inept.  The “reporter” aims to explain some of the causes of the famine in Niger.  Here’s a sample of the “report”:

It [the famine] is the result not only of food shortages but a host of other problems, including vendor profiteering, a government policy shift toward a free market, and a decline in the traditional culture of generosity that once helped communities in Niger survive cyclical periods of scarcity.

I wonder if editors at a newspaper as sophisticated as the Washington Post are just a bit embarrassed that one of their reporters (Craig Timberg) explains food shortages as being caused by, among other things, “food shortages.”

Of course, the other things Mr. Timberg lists don’t pass the smell test.

I don’t know much about Niger (and I’m vacationing this week in Virginia Beach, so I’ve too little time to do much impromptu research), but because free markets have an overwhelmingly positive record at delivering the goods – and because this record is pretty widely understood today – surely listing “a government policy shift toward a free market” as a cause of famine requires a great deal of explanation.

But if you read the story, you’ll find none.  What you will find is a juvenile willingness to accept the myth of generous pre-commercial man – man who, pre-market, shared, but who now is given more and more to selfish exploitation.

I was struck then that even Mr. Timberg – after praising the great generosity of Nigeriens before their alleged descent into markets – writes that "Niger, a landlocked nation of 11.7 million, suffers through hunger crises about once every decade.”  I suppose that such periodic famines are consistent with a splendid sharing ethic, but it’s something of a stretch to explain why the market has made things so bad today while in the sharing-dominated past things were, well, still rather bad.

I’m also struck by this remark in the report:

A U.N. report found that prices in markets in Niger have shot up sharply because of profiteering, said James Morris, executive director of the U.N. World Food Program, speaking from San Francisco.  Some traders, he said, have raised prices in anticipation of the arrival of aid groups, which often buy food locally to save on transport costs.

Perhaps if the U.N. weren’t in Niger, traders would be selling food directly to starving people rather than waiting for well-meaning westerners to buy it.

I don’t know what’s going on in Niger, but I’m pretty confident that it has precious few market forces at work – despite this “report” in today’s Washington Post.

Hat tip to Jude Blanchette.

Take Easy Shots if They're All You've Got

William Butterfield has a point: my and Arnold Kling’s posts on the futility of foreign "aid" to African governments are "easy shots." The real challenge is to discover and describe ways to enable ordinary Africans to achieve lasting prosperity. Saying ‘let them have capitalism!’ and ‘government policies are likely to fail now just as they have in the past’ is indeed easy. But as long as many prominent folks pontificating atop tall soapboxes don’t yet see these easy truths, repeating them is likely worthwhile – and made even more worthwhile if there’s little evidence that a large portion of the soapbox-pontificators’ audience is also unaware of these easy truths.

I’m less confident than Bill about the efficacy of western donors paying directly for desirable policy changes (such as reductions in the time and red-tape necessary to open businesses in Africa). And I am certainly not one who believes that trade rather than aid is the key to more prosperity. While it's desirable for a number of reasons for western governments to stop protecting their domestic producers from potential African competitors, until Africans begin on their own to develop a civil society – a society in which advanced commerce and wealth accumulation by non-elites is tolerated, a society more honest than corrupt, a society governed more by the rule of law than by the fists of tyrants, a society in which science and rational thought enjoy at least as much respect as mysticism – Africans will remain mired in oppressive poverty.

Stopping the flow of foreign aid is likely a necessary, if not a sufficient, step toward encouraging the organic growth of civil society in Africa.

Yes, yes – it’s true that all of the above is easy to say. Beyond our cutting off our subsidies to the tyrants and bureaucrats who inevitably obstruct ordinary-people’s efforts to create civil society from the ground up, I do not believe that there exists a recipe for western action that will help ordinary Africans.

I’m reminded here of one of H.L. Mencken’s aphorisms. I offer it to the Bonos, the Blairs, the Bushes, the Sachses, and all others who fancy that this time rich-governments' $$$, £££, ¥¥¥, and direction will help ordinary Africans : "The fact that I have no remedy for all the sorrows of the world is no reason for my accepting yours. It simply supports the strong probability that yours is a fake."  (On page 63 of H.L. Mencken, Minority Report.)