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Why is Africa Poor?

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liege posted on Mon, Mar 15 2010 3:35 AM | Locked

By poor I mean the general standard of living.

I have heard before that Africa is 'the most mineral rich continent in the world'. While I find proving this seems to be exceedingly difficult (if even possible), I would at least concede that, in terms of mineral wealth, the African continent is probably no worse off than any of the others ...

So what gives? Why do I see TV personalities selling the plight of these starving people? Are Africans really unable to develop any sort of infrastructure to provide basic necessities like food, clothing, shelter, and medicine?

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Smiling Dave replied on Mon, Mar 15 2010 4:32 AM | Locked

arent all the govts sociallist? or at the very least dictatorships that suck in money like a vacuum cleaner?

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Merlin replied on Mon, Mar 15 2010 4:46 AM | Locked

Perhaps one reason could be food aid form the west. By keeping Africa, by accident or design, in a permanently overpopulated condition (that is, there is more population than capital needed to get everyone to work) food aid is turning people into one-another’s enemies.

 

As long as sub-Saharan Africa is overpopulated, the death of one more person will mean a higher standard of living for others. Hence, as long a food aid continues there will be chilling civil war, genocide and, paradoxically, disease and famine.

 

I wouldn’t go as far as to say that cutting food aid would have sub-Saharan Africa grow at 20% annually, but it would certainly put an end to genocide (not local brawls) within a few years. Although I’m afraid that the whole continent would than go communistic.

Shortly, the way I see it, with the exception of some Free City which could be established, there is no short-cut to growth for Africa in the foreseeable future.

The Regression theorem is a memetic equivalent of the Theory of Evolution. To say that the former precludes the free emergence of fiat currencies makes no more sense that to hold that the latter precludes the natural emergence of multicellular organisms.
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Answered (Not Verified) Conza88 replied on Mon, Mar 15 2010 5:02 AM | Locked
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  • Imperialism.
  • Lack of conception / respect / enforcement / protection of individual property rights.
  • World Bank, IMF "loans" (with the goal of making the country their debt slave)
  • Continued foriegn government "aid", which supports the parasitic class and does nothing for those it is meant to. All it does is sustain the status quo, something I would imagine is part of the goal of foriegn governments "aid" programs. See: US "aid" packages to Pakistan.
Ron Paul is for self-government when compared to the Constitution. He's an anarcho-capitalist. Proof.
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Prateek Sanjay replied on Mon, Mar 15 2010 5:22 AM | Locked

Geography.

Let's just say that Africa is not suitable for widespread transportation and movement, either from coasts or land or rivers, and this does not allow for urban concentrations that help create division of labour and specialization.

This is also means no creation of capital, and thus no means of using natural resources.

Talking about government policy is pointless when faced with these simple hindrances.

I am sorry people, but nature is a bigger discriminator than man is, and even hundreds of years of serfdom didn't damage Europe as badly as Africa's geography did. Bad government policy is still only secondary.

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The Late Andrew Ryan replied on Mon, Mar 15 2010 5:49 AM | Locked

Well this is really just putting everything together on this page but this is what I initially thought when I saw this thread so nuts to the lot of you!

1. They advanced more slowly than Europe did and failed to even come close to catching up so Africa as a whole just failed and got its ass colonized so that it couldn't really begin to develop and was greatly exploited by its new masters.

2. The terrain absolutely sucks, it's a hot dry place which makes it particularly hard to get past subsistence levels, especially with all of the other crappy conditions

3. Foreign aid which destroys their economy

4. Barbaric governments which are warlike, oppressive, and which destroy all investment incentives, as well as eating up all the foreign aid for their own power.

5. Large foreign businesses getting in bed with the state in exchange for the exploitation of a single natural resource

6. A lack of thrift except for that which surrounds the local diamond mine or whatever, the problem is wherever you go in Africa there's likely to be one hell of a nice natural resource, and then nothing else worthwhile around for miles.

7. States absolutely failing to provide stability, the only function of theirs which should even begin to be seen as legitimate

8. There are a lot of internal conflicts between tribes, warlords, religious radicals and so forth which also hurt stability and take up valuable resources and human labor

"Lo! I am weary of my wisdom, like the bee that hath gathered too much honey; I need hands outstretched to take it." -Thus Spake Zarathustra
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Answered (Not Verified) Marek K Nowak replied on Mon, Mar 15 2010 6:20 AM | Locked
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It has nothing to do with geography, weather, nor agricultural production potential, nor overpopulation.

 

They are poor because they produce little per capita - they have low productivity.

Why they have low productivity?  Because they have very little capital accumulated (as well as human capital) per capita.

Why they have such low capital accumulation?  Because capital formation needs 3 things (according to Mises):

- Property

- Liberty

- Sound money

Africa has little respect for private property, little respect for property, and very bad monetary systems.

As long as African countries are dominated by extremely interventionist (and straight out communist often in the last 50 years) governments, and supported by Western government's aids, they will remain poor and miserable.

 

When you listen to African people complaining about their state of affairs, you often hear "this [president, government, whoever is in power] doesn't represent the need of the people".  Then you understand they are doomed.  

The state will never represent the need of the people, and as long as they think the solution comes from the government, instead of freedom from the state, they will continue to be in their destitute condition.

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scineram replied on Mon, Mar 15 2010 7:25 AM | Locked

Culture, institutions, De Soto's work.

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Physiocrat replied on Mon, Mar 15 2010 7:31 AM | Locked

Marek is correct as far as it goes bit there's an even more fundamental factor with regards capital accumulation: religion.

Africa for the most part, especially sub-saharan,  hasn't gone beyond primitivist animism. This leads to an over reverence and a crass neglect of the material- honour for the sprirts within the material but not the physical use thereof. Further this leads to the view that the real is behind nature and so time is spent on trying to commune with that which is beyond rather living in the here and now.  Add to this trying to please the ancestors you haven't got a a good recipe for capital accumulation.

On the development of views of reality I'd suggest Owen Barfield's Saving the Appearances

The atoms tell the atoms so, for I never was or will but atoms forevermore be.

Yours sincerely,

Physiocrat

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Merlin replied on Mon, Mar 15 2010 7:44 AM | Locked

Physiocrat:

Marek is correct as far as it goes bit there's an even more fundamental factor with regards capital accumulation: religion.

Africa for the most part, especially sub-saharan,  hasn't gone beyond primitivist animism. This leads to an over reverence and a crass neglect of the material- honour for the sprirts within the material but not the physical use thereof. Further this leads to the view that the real is behind nature and so time is spent on trying to commune with that which is beyond rather living in the here and now.  Add to this trying to please the ancestors you haven't got a a good recipe for capital accumulation.

On the development of views of reality I'd suggest Owen Barfield's Saving the Appearances

But wouldn’t that also apply to China, with its ancestor-worship and near-animistic religious tradition? Still China was by far the most advanced society on earth for centuries. Are there other factors at work here?

The Regression theorem is a memetic equivalent of the Theory of Evolution. To say that the former precludes the free emergence of fiat currencies makes no more sense that to hold that the latter precludes the natural emergence of multicellular organisms.
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Prateek Sanjay replied on Mon, Mar 15 2010 7:51 AM | Locked

Marek K Nowak:

It has nothing to do with geography, weather, nor agricultural production potential, nor overpopulation.

 

They are poor because they produce little per capita - they have low productivity.

Why they have low productivity?  Because they have very little capital accumulated (as well as human capital) per capita.

Why they have such low capital accumulation?  Because capital formation needs 3 things (according to Mises):

- Property

- Liberty

- Sound money

Africa has little respect for private property, little respect for property, and very bad monetary systems.

Private property and medium of exchange can not exist without urban concentrations that create division of labour, and African geography is not suited for it.

What do you think - that those near Stone Age people in the 1500s in the Canary Islands could have become a prospering liberal society, when they were cut off from the world and had scanty populations?

Lots of luck. Lots of luck if that were ever possible.

People, nature is a bigger discriminator than man is. Highland Scots didn't progress as fast as Lowland Scots, no matter whatever liberalism may have come from the Scottish Enlightenment.

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Merlin replied on Mon, Mar 15 2010 8:00 AM | Locked

Prateek Sanjay:

Private property and medium of exchange can not exist without urban concentrations that create division of labour, and African geography is not suited for it.

What do you think - that those near Stone Age people in the 1500s in the Canary Islands could have become a prospering liberal society, when they were cut off from the world and had scanty populations?

Lots of luck. Lots of luck if that were ever possible.

People, nature is a bigger discriminator than man is. Highland Scots didn't progress as fast as Lowland Scots, no matter whatever liberalism may have come from the Scottish Enlightenment.

I thoroughly agree that without urban concentrations liberal ideas will never take hold. But betting all on geography would appear to much. What about Switzerland? Pretty broken up and yet very advanced.

 

Or more generally, if geography plays the central role in development, than rich regions would always be the same, while in practice we know that, for example, Europe moved from a backward region to economic powerhouse while former Mesopotamia sunk.

 

The Regression theorem is a memetic equivalent of the Theory of Evolution. To say that the former precludes the free emergence of fiat currencies makes no more sense that to hold that the latter precludes the natural emergence of multicellular organisms.
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hayekianxyz replied on Mon, Mar 15 2010 10:02 AM | Locked

Marek K Nowak:
Why they have low productivity?  Because they have very little capital accumulated

Not really, given the difference in productivity between developed and developing countries, if capital accumulation really was the cause you'd expect to see rates of return on capital in developing countries being far, far higher than they currently are. Empirical estimates have capital constituting about a third of the production process (still more if you extend the notion of capital to human capital), which means it runs into diminishing returns very quickly. 

I think it was Lucas who estimated that rich countries would need about 300 times more capital than poor countries to explain the differences in productivity. The ratio is nowhere near that. 

"You don't need a weatherman to know which way the wind blows"

Bob Dylan

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DD5 replied on Mon, Mar 15 2010 10:18 AM | Locked

hayekianxyz:
Not really, given the difference in productivity between developed and developing countries, if capital accumulation really was the cause you'd expect to see rates of return on capital in developing countries being far, far higher than they currently are.

 

Would you care to explain why a machine that can bake 500 breads/hour in the US can mysteriously not achieve the same throughput  in Africa?  Because that is basically the crux of your argument.

 

 

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Answered (Not Verified) Marek K Nowak replied on Mon, Mar 15 2010 10:19 AM | Locked
Suggested by Jon Irenicus

hayekianxyz:

Marek K Nowak:
Why they have low productivity?  Because they have very little capital accumulated

Not really, given the difference in productivity between developed and developing countries, if capital accumulation really was the cause you'd expect to see rates of return on capital in developing countries being far, far higher than they currently are. Empirical estimates have capital constituting about a third of the production process (still more if you extend the notion of capital to human capital), which means it runs into diminishing returns very quickly. 

I think it was Lucas who estimated that rich countries would need about 300 times more capital than poor countries to explain the differences in productivity. The ratio is nowhere near that. 

The return on capital *would* be very high, in poor countries, if they had strong private property protection from the state, and enforcement of contracts.

Because that's not the case, any capital invested in poor countries is squandered bribing officials not to get expropriated, so that's the reason that return is poor, and accumulation is low.

Regarding the 300 times estimate, is that in monetary terms?  Anyhow, I'd be curious to see where that comes from.

A strong sign that capital accumulation is low, is that labor is cheap, because the ratio of labor to capital is very high.

Regarding 'capital constituting about a third of the production process', that pretty meaningless in my opinion, since it varies massively from industry to industry, and from the level of capital accumulation as well.

The increase in the production in america over the last 200 years is almost entirely attributable to capital accumulation and deepening of the division of labor.

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