Government Failure in Africa January 10, 2025 by Dan Mitchell

I mocked economists yesterday. To be more specific, I eviscerated 108 leftist economists who signed a letter warning that Javier Milei’s libertarian agenda would be bad for Argentina.

They now look like idiots given that country’s amazing turnaround.

I’ve also, at various times, mocked the Economist. And the British magazine has deserved criticism periodically because of articles about central banking, poverty, and the IRS.

Today, though, I’m going to give the magazine a bit of praise.

To set the stage for our discussion, here’s a map from the Fraser Institute showing the level of economic freedom in different countries. It’s bad to be orange and it’s even worse to be red.

The obvious takeaway from this map is that Africa is the most economically repressed part of the world.

So what should be done? The obvious answer is free markets and limited government. After all, that’s the only approach that has ever turned poor countries into rich countries.

What’s not so obvious, though, is that the Economist would agree. Yet that’s exactly what’s happened. Here are some excerpts from a new article.

Africa…is…the poorest continent. …its 54 countries…will have to do something exceptional: break with their own past and with the dismal statist orthodoxy that now grips much of the world. Africa’s leaders will have to embrace business, growth and free markets. They will need to unleash a capitalist revolution. …What should Africa’s leaders do? A starting-point is to ditch decades of bad ideas. These range from mimicking the worst of Chinese state capitalism, whose shortcomings are on full display, to…copying and pasting proposals by World Bank technocrats. …governments should build a political consensus in favour of growth. …Instead of fetishising government jobs…, Africans could do with more risk-taking tycoons. …Africa does not require saving. It needs less paternalism, complacency and corruption—and more capitalism.

Amen. The magazine may have a bad habit of supporting bad policy in Europe and the United States, but this article about Africa hits the nail on the head.

In an older column from the Foundation for Economic Education, Rainer Zitelmann was even more direct about Africa’s need for capitalism and less government. And he warned that foreign aid is counterproductive.

Here is some of what he wrote.

Development aid has a nice moral ring to it, and in some people’s view, it constitutes a kind of quasi-religious atonement for the sins of colonialism… But does it really achieve what its proponents hope it will? …In Asia, the fight against poverty and hunger has been so effective because so many Asian countries have implemented capitalist reforms. …Asian countries have received much less development aid than African countries. Zambia-born Dambisa Moyo, who studied at Harvard and earned a Ph.D. from Oxford, identifies Western development aid as one of the reasons for the failure to rid Africa of poverty. …financial transfers aimed at boosting economic development…have frequently ended up in the hands of corrupt despots rather than those of the poor. …Africa could definitely learn one thing from Asia: Hunger and poverty are not fought through development aid but through entrepreneurship and capitalism.

Given what I’ve written in the past, I fully agree with Zitelmann that foreign aid hurts rather than helps.

The only long-run solution to poverty is free markets.

The great challenge, though, is convincing African politicians to relax their control over the economy.

• Is it possible to bribe them to do the right thing, perhaps by making foreign aid contingent on better scores for economic liberty?
• Is it possible that the African people will get so angry about economic stagnation that they find their own versions of Javier Milei?
• Is it possible that international bureaucracies might go back to the era of the Washington Consensus and push African nations to liberalize?

All of those options offer hope, but I assume they also are unlikely.

Though one good change that could and should happen is that the statists at the OECD and IMF should stop trying to cajole African nations into raising their tax burdens. Haven’t Africans suffered enough? Or do those bureaucracies want more social turmoil like we have seen in Kenya?

P.S. By African standards, Botswana is semi-successful.