World
Yesterday marked the UK release of the 2008 Economic Freedom of the World Report, produced by the Fraser Institute in Canada in association with the IEA. Fraser’s motto is “if it matters, measure it”. Some of the IEA’s Austrian-economics followers might be sceptical of that motto but, nevertheless, the report has some important messages. Here, I focus on one.

African nations occupy most of the bottom spots in the index. With the exception of Venezuela, the ten nations with the lowest levels of economic freedom are extremely poor countries: Zimbabwe, Angola, Myanmar, the Republic of Congo, Niger, Guinea-Bissau, Central Africa Republic, Chad, Rwanda, and Burundi. As James Gwartney, the lead author and professor of economics at Florida State University said “Weakness in the rule of law and property rights is particularly pronounced in sub-Saharan Africa, among Islamic nations, and for many nations that were part of the former Soviet bloc.”

There is an important lesson here for the Make Poverty History Campaign and the so-called Trade Justice Campaign. The former has campaigned for more government aid for poor countries. Both groups have campaigned to try to stop the forces that lead to the liberalisation of trade in poor countries. There are many unfortunate direct economic effects of aid (it can raise real exchange rates and damage export sectors for example). But an important indirect effect is that it can give greater financial power to governments and enable government officials to benefit from financial preferment. In other words, aid has effects that lead to bad governance and can undermine the rule of law and property rights. Similarly, trade regulation, quite apart from the damaging direct economic impact it has, is well known to be a major source of corruption in under-developed countries.

Neither of these observations proves that aid or trade regulation are a bad thing (though, in my view the latter is, without doubt). However, these campaigners should just pause for thought – as should the Bishops who recently marched on Parliament to support them. They should realise that, if they are wrong, the consequences could be serious. Clergy in particular have a responsibility to think carefully about all angles of political and economic subjects before they make public comments – one wonders if they always do so.

Philip Booth 154x154

Academic and Research Director, IEA

Philip Booth is Academic and Research Director at the Institute of Economic Affairs and Professor of Finance, Public Policy and Ethics at St. Mary's University, Twickenham. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. Previously, Philip Booth worked for the Bank of England as an advisor on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs and on the editorial boards of various other academic journals. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.

2 thoughts on “Africa needs freedom, not aid”

  1. Posted 24/09/2008 at 19:09 | Permalink

    I suggest that African countries needs more than freedom. At the end of the Second World War, occupied countries in Europe had freedom but they also had millions of aid given through the Marshall plan.

    If we use NGOs working through local partners to target aid that helps local people then we start to rebuild communities. It is through strong local communities backed by strong families that we start the regeneration and cohesion of any country.

    Perhaps after Africa we should target the UK.

  2. Posted 24/09/2008 at 19:09 | Permalink

    I suggest that African countries needs more than freedom. At the end of the Second World War, occupied countries in Europe had freedom but they also had millions of aid given through the Marshall plan.

    If we use NGOs working through local partners to target aid that helps local people then we start to rebuild communities. It is through strong local communities backed by strong families that we start the regeneration and cohesion of any country.

    Perhaps after Africa we should target the UK.

Comments are closed.