Artikel: Why Poor Countries Are Poor

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http://www.reason.com/news/show/33258.html?id=05dr3

Wel aardige leeskost vond ik, hoe krijgen we toch eens voor elkaar dat
er in die arm blijvende landen eens behoorlijk bestuur komt.

Welke krachten kan de internationale gemeenschap uitoefenen, behoudens
dom geweld? Zorgen dat verkiezingen eerlijk verlopen, maar dan ook echt?

Dus inclusief vrije pers, vrije informatie, het uitsluiten van fraude en
dwang, en zorgen dat iedereen kan stemmen?

Ik zet de tekst hier toch maar even onder:

Why Poor Countries Are Poor

The clues lie on a bumpy road leading to the world's worst library.

Tim Harford | March 2006 Print Edition

They call Douala the "armpit of Africa." Lodged beneath the bulging
shoulder of West Africa, this malaria-infested city in southwestern
Cameroon is humid, unattractive, and smelly. On a torrid evening in late
2001, I was guided out of the chaotic Douala International Airport by my
friend Andrew and his driver, Sam, who would have whisked us immediately
to the cooler hillside town of Buea if Douala were at all conducive to
being whisked anywhere. It isn't. Douala, a city of 2 million people,
has no real roads.

A typical Douala street is 50 yards wide from shack to shack. It's
packed with street vendors, slouched beside a tray of peanuts or an
impromptu plantain barbecue, and with little clusters of people,
standing around a motorbike, drinking beer or palm wine, or cooking on a
small fire. Piles of rubble and vast holes mark unfinished construction
or demolition work. Along the middle is a strip of potholes that 20
years ago was a road.

Down that strip drive four streams of traffic, mostly taxis. The streams
on the outside are usually made up of cabs picking up fares, while the
taxis on the inside weave in and out of the potholes and other cars with
all the predictability of ping pong balls in a lottery machine. Douala
used to have buses, but they can no longer cope with the decaying roads.
So the taxis are all that's left: beaten-up old Toyotas, carrying four
in the back and three in the front, sprayed New York yellow, each with a
unique slogan: "God Is Great, " "In God We Trust," "Powered by God, "
"Toss Man."

Nobody who sees a Douala street scene can conclude that Cameroon is poor
because of a lack of entrepreneurial spirit. But poor it is. The average
Cameroonian is eight times poorer than the average citizen of the world
and almost 50 times poorer than the typical American. And Cameroon is
getting poorer. Can anything be done to reverse the decline and help
Cameroon grow richer instead?

That's no small question. As the Nobel laureate economist Robert Lucas
put it, "The consequences for human welfare involved in questions like
these are simply staggering: Once one starts to think about them, it is
hard to think about anything else."


The Missing Jigsaw Piece

Economists used to think wealth came from a combination of man-made
resources (roads, factories, telephone systems), human resources (hard
work and education), and technological resources (technical know-how, or
simply high-tech machinery). Obviously, poor countries grew into rich
countries by investing money in physical resources and by improving
human and technological resources with education and technology transfer
programs.

Nothing is wrong with this picture as far as it goes. Education,
factories, infrastructure, and technical know-how are indeed abundant in
rich countries and lacking in poor ones. But the picture is incomplete,
a puzzle with the most important piece missing.

The first clue that something is amiss with the traditional story is its
implication that poor countries should have been catching up with rich
ones for the last century or so--and that the farther behind they are,
the faster the catch-up should be. In a country that has very little in
the way of infrastructure or education, new investments have the biggest
rewards.

This expectation seems to be confirmed by the experience of China,
Taiwan, and South Korea--not to mention Botswana, Chile, India,
Mauritius, and Singapore. Fifty years ago they were mired in poverty,
lacking man-made, human, technical, and sometimes natural resources. Now
these dynamic countries, not Japan, the United States, or Switzerland,
have become the fastest-growing economies on the planet.

Since technology is widely available and increasingly cheap, this is
what economists should expect of every developing country. In a world of
diminishing returns, the poorest countries gain the most from new
technology, infrastructure, and education. South Korea, for example,
acquired technology by encouraging foreign companies to invest or by
paying licensing fees. In addition to the fees, the investing companies
sent profits back home. But the gains to Korean workers and investors,
in the form of economic growth, were 50 times greater than the fees and
profits that left the country.

As for education and infrastructure, since the returns seem to be so
high, there should be no shortage of investors willing to fund
infrastructure projects or lend money to students (or to governments
that provide education). Banks, domestic and foreign, should be lining
up to lend people the money to get through school or to build a new road
or a new power plant. In turn, poor people, or poor countries, should be
very happy to take out such loans, confident that investment returns are
so high that the repayments will not be difficult. Even if, for some
reason, that didn't happen, the World Bank, established after World War
II with the express aim of providing loans to countries for
reconstruction and development, lends billions of dollars a year to
developing countries. Investment money is clearly not the issue; either
the investments are not being made, or they are not delivering the
returns the traditional model predicts.


A Theory of Government Banditry

As our car slowly bumped and lurched through the crowds, I tried to make
sense of it all by asking Sam, the driver, about the country.

"Sam, how long was it since the roads were last fixed?"

"The roads, they have not been fixed for 19 years."

President Paul Biya came to power in November 1982 and had been in
office for 19 years by the time I visited Cameroon. Four years later, he
is still in power. He recently described his opponents as "political
amateurs"; they are certainly out of practice.

"Don't people complain about the roads?"

"They complain, but nothing is done. The government tells us there is no
money. But there is plenty of money coming from the World Bank and from
France and Britain and America--but they put it in their pockets. They
do not spend it on the roads. "

"Are there elections in Cameroon?"

"Yes! There are elections. President Biya is always re-elected with a 90
percent majority. "

"Do 90 percent of people vote for President Biya?"

"No, they do not. He is very unpopular. But still there is a 90 percent
majority. "

You do not have to spend a long time in Cameroon to realize how much
people resent the government. Much of government activity appears to be
designed expressly to steal money from the people of Cameroon. According
to the global watchdog Transparency International, Cameroon is one of
the most corrupt countries in the world. I was warned so starkly about
government corruption, and the likelihood that officials at the airport
would attempt to relieve me of my wad of West African francs, that I was
more nervous about that than the risk of malaria or a gunpoint mugging
in the back streets of Douala.

Many people have an optimistic view of politicians and civil
servants--that they are all serving the people and doing their best to
look after the interests of the country. Other people are more cynical,
suggesting that many politicians are incompetent and often trade off the
public interest against their own chances of re-election. The economist
Mancur Olson proposed a working assumption that government's motivations
are darker still, and from it theorized that stable dictatorships should
be worse for economic growth than democracies, but better than sheer
instability.

Olson supposed that governments are simply bandits, people with the
biggest guns who will turn up and take everything. That's the starting
point of his analysis--a starting point you will have no trouble
accepting if you spend five minutes looking around you in Cameroon. As
Sam said, "There is plenty of money...but they put it in their pockets."

Imagine a dictator with a tenure of one week--in effect, a bandit with a
roving army who sweeps in, takes whatever he wishes, and leaves.
Assuming he's neither malevolent nor kindhearted, but purely
self-interested, he has no incentive to leave anything, unless he plans
on coming back next year. But imagine that the roaming bandit likes the
climate of a certain spot and decides to settle down, building a palace
and encouraging his army to avail themselves of the locals. Desperately
unfair though it is, the locals are probably better off now that the
dictator has decided to stay. A purely self-interested dictator will
realize he cannot destroy the economy and starve the people if he plans
on sticking around, because then he would exhaust all the resources and
have nothing to steal the following year. So a dictator who lays claim
to a land is a preferable to one who moves around constantly in search
of new victims to plunder.

I cannot confirm that President Biya fits Olson's description of a
self-interested dictator. But if he did, it wouldn't be in his interest
to take too much from the Cameroonian people, because then there would
be nothing to take next year. As long as he feels secure in his tenure,
he will not wish to kill the golden goose. Like the virus whose very
existence relies on the bodies it afflicts, Biya would have to keep the
Cameroonian economy functioning in order to keep stealing from it. This
suggests that a leader who confidently expects to be in power for 20
years will do more to cultivate his economy than one who expects to flee
the country after 20 weeks. Twenty years of an "elected dictator" is
probably better than 20 years of one coup after another.

Staying with the simplifying assumption that Biya has absolute power
over the distribution of Cameroon's income, he might decide to steal,
say, half of it every year in the form of "taxes" that go into his
personal bank account. That would be bad news for his victims, of
course, but also bad news for Cameroon's long-term growth. Think of a
small business owner considering an investment of $1,000 in a new power
generator for his workshop. The investment is expected to generate
income of $100 a year. That's 10 percent, a pretty good return. But
since Biya might take half of it, the return falls to a much less
attractive 5 percent. The businessman decides not to make the investment
after all, so he misses out and so does Biya.

Olson does not predict that stable dictatorships will do good things for
their countries, just that they'll damage the economy less than unstable
ones. Of course, Biya might make his own investments--for instance,
providing roads or bridges to encourage commerce. While they would be
expensive in the short term, they would help the economy to prosper,
leaving Biya with more opportunities to steal later. But the flip side
of the businessman's problem applies: Biya would be stealing only half
of the benefits, not nearly enough to encourage him to provide the
infrastructure that Cameroon needs.

When Biya came to power in 1982, he inherited colonial-era roads that
had yet to fall apart completely. If he had inherited a country without
any infrastructure, it would have been in his interest to build it up to
some extent. Because the infrastructure was already in place, Biya
needed to calculate whether it was worth maintaining, or whether he
could simply live off the legacy of Cameroon's colonial rulers. In 1982
he probably thought the roads would last into the 1990s, which was as
long as he could reasonably have expected to hold onto the reins of
power. So he decided to live off the capital of the past and never
bothered to invest in any type of infrastructure for his people. As long
as there was enough to get him through his rule, why bother spending
money that could otherwise go right into his personal retirement fund?


Bandits, Bandits Everywhere

But perhaps Biya is not in control as much as it first appears. A little
traveling in Cameroon reveals that whether or not Biya is the
bandit-in-chief, there are many petty bandits to satisfy.

If you want to drive from the town of Buea to Bamenda, farther north,
the most popular way to make the trip is by bus; minibuses ply all
long-distance routes in Cameroon. Designed to seat 10 people in comfort,
they will depart as soon as 13 paying passengers have boarded. The
relatively capacious seat beside the driver is worth fighting for. The
vehicles are old bone-shakers, but the system works pretty well. It
would work a lot better if not for all the roadblocks.

Bullying gendarmes, often drunk, stop every minibus and try their best
to extract bribes from the passengers. They usually fail, but from time
to time they become determined. My friend Andrew was once hauled off a
bus and harassed for several hours. The eventual pretext for the bribe
was his lack of a yellow-fever certificate, which you need when you
enter the country but not when riding a bus. The gendarme explained
patiently that Cameroon had to be protected from disease. The price of
two beers convinced him that an epidemic had been prevented, and Andrew
caught the next bus, three hours later.

This is even less efficient than Mancur Olson's model predicts. Olson
himself would have admitted that his theory in its starkest form
underestimates the damage that bad governments inflict on their people.
Biya needs to keep hundreds of thousands of armed police and army
officers happy, as well as many civil servants and other supporters. In
a "perfect" dictatorship, he would simply impose the least damaging
taxes possible in whatever quantity was necessary and distribute the
proceeds to his supporters. This approach turns out to be impracticable,
because it requires far more information about and control over the
economy than a poor government can possibly muster. The substitute is
government-tolerated corruption on a massive scale.

The corruption is not only unfair; it is also hugely wasteful. Gendarmes
spend their time harassing travelers in return for modest returns. The
costs are enormous. An entire police force is too busy extracting bribes
to catch criminals. A four-hour trip takes five hours. Travelers take
costly steps to protect themselves: carrying less money, traveling less
often or at busier times of the day, bringing extra paperwork to help
fend off attempts to extract bribes.

The blockades and crooked police officers comprise a particularly
visible form of corruption, but there are metaphorical roadblocks
throughout the Cameroonian economy. To set up a small business, an
entrepreneur must spend on official fees nearly as much as the average
Cameroonian makes in two years. To buy or sell property costs nearly a
fifth of the property's value. To get the courts to enforce an unpaid
invoice takes nearly two years, costs more than a third of the invoice's
value, and requires 58 separate procedures. These ridiculous regulations
are good news for the bureaucrats who enforce them. Every procedure is
an opportunity to extract a bribe. The slower the standard processes,
the greater the temptation to pay "speed money."

Inflexible labor regulations help ensure that only experienced
professional men are given formal contracts; women and young people have
to fend for themselves in the gray market. Red tape discourages new
businesses. Slow courts mean that entrepreneurs are forced to turn down
attractive opportunities with new customers, because they know they
cannot protect themselves if they are cheated. Poor countries have the
worst examples of such regulations, and that is one of the major reasons
they are poor. Officials in rich countries perform these basic
bureaucratic tasks relatively quickly and cheaply, whereas officials in
poor countries draw out the process in hopes of pocketing some extra
cash themselves.


Institutions Matter

Government banditry, widespread waste, and oppressive regulations are
all elements in that missing piece of the puzzle. During the last 10
years or so, economists working on development issues have converged on
the mantra that "institutions matter." Of course, it is hard to describe
what an "institution" really is. It is even harder to convert a bad
institution into a good one.

But progress is being made. We've just seen one kind of institution:
business regulations. Sometimes, it can be improved with simple
publicity. After the World Bank revealed that entrepreneurs in Ethiopia
couldn't legally start a business without paying four years' salary to
publish an official notice in government newspapers, the Ethiopian
government scrapped the rule. New business registrations jumped by
almost 50 percent immediately.

Unfortunately, it is not always so easy to get corrupt governments to
change their ways. Although it is becoming clearer and clearer that
dysfunctional institutions are a key explanation of poverty in
developing countries, most institutions cannot be described with an
elegant model like Mancur Olson's, or even with careful data-gathering
by the World Bank. Most unhappy institutions are unhappy in their own way.

Such a uniquely backfiring setup was responsible for the world's worst
library. A few days after I arrived in Cameroon, I visited one of the
country's most prestigious private schools--Cameroon's equivalent of
Eton. The school boasted two separate library buildings, but the
librarian was very unhappy. I soon understood why.

At first glance the new library was impressive. With the exception of
the principal's palatial house, it was the only two-story structure on
campus. Its design was adventurous: a poor man's Sydney Opera House. The
sloped roof, rather than running down from a ridge, soared up in a V
from a central valley like the pages of an open book on a stand.

When you're standing in the blazing sunlight of the Cameroonian dry
season, it's hard to see at first what the problem is with a roof that
looks like a giant open book. But that's only if you forget, as the
architect apparently did, that Cameroon also has a rainy season. When it
rains in Cameroon, it rains for five solid months. It rains so hard that
even the most massive storm ditches quickly overflow. When that kind of
rain meets a roof that is, essentially, a gutter that drains onto a
flat-roofed entrance hall, you know it's time to laminate the books. The
only reason the school's books still existed was that they'd never been
near the new building; the librarian had refused repeated requests from
the principal to transfer them from the old library.

I was tempted to conclude that the principal was in an advanced stage of
denial when I stepped inside the new library to see the devastation. It
was in ruins. The floor contained the stains of countless puddles. The
air carried the kind of musty smell associated with a damp cave. The
plaster was peeling off the walls. Yet the library is only four years old.

This is a shocking waste. Instead of building the library, the school
could have bought 40,000 good books, or acquired computers with Internet
connections, or funded scholarships for poor children. Any of these
alternatives would have been incomparably better than an unusable new
library. The school never even needed a new library in the first
place--the old library works perfectly well, could easily hold three
times as many books as the school owns, and is waterproof.

If the library was such a pointless endeavor, why was it built at all?
It's all too tempting for the visitor in Cameroon to shrug his shoulders
and explain the country's poverty by presuming that Cameroonians are
idiots. Cameroonians are no smarter or dumber than the rest of us.
Seemingly stupid mistakes are so ubiquitous in Cameroon that
incompetence cannot be the whole explanation. There is something more
systematic at work. We need to consider the incentives of the decision
makers.

First, most of the senior education officials in northwest Cameroon come
from the small town of Bafut. Known as the Bafut Mafia, these officials
control considerable funds for the education system, which they hand out
based on personal connections rather than necessity. Not surprisingly,
the principal of this prestigious private school was a senior member of
the Bafut Mafia. Wanting to convert her school into a university, the
principal needed to build a library of university size and quality. It
was irrelevant to the principal that the current library was more than
sufficient, and that the taxpayers' money could have been better spent
in other ways or by other schools.

Second, nobody was monitoring the principal or her spending. Staff
members are paid or promoted not on merit but at the principal's
command. This is a prestigious school with good conditions for teachers,
so staff members would be particularly eager to keep their jobs, which
meant keeping in good favor with the principal. In fact, the only person
able to defy the principal was the librarian, who was accountable only
to the Voluntary Service Overseas office in London. She turned up after
the library was built but was at least in time to prevent the book
collection from being transferred and destroyed.

Either the principal was so stupid that she did not realize water ruins
books, or she did not care very much about the books and simply wanted
to demonstrate that the library had some books in it. The second
explanation seems more likely. With the money at her fingertips and
nobody to object to the wastefulness of building a second library, the
principal had full control over the project. She appointed a former
pupil of the school to design the library, probably to demonstrate the
quality of education provided by the school; she did prove a point,
although perhaps not the one she intended. But no matter how incompetent
the architect, the flaws in the design would have been spotted if
anybody concerned had a strong interest in making sure the library
functioned as a library. But that was never the prime concern of anybody
with authority. The people in power simply cared about putting up
something that could qualify the school as a university.

Consider the situation: money that was provided because of social
networks rather than need; a project designed for prestige rather than
use; a lack of monitoring and accountability; and an architect appointed
for show by somebody with little interest in the quality of the work.
The outcome is hardly surprising: A project that should never have been
built was built, and built badly. The lesson of the story might appear
to be that self-interested and ambitious people in power are often the
cause of wastefulness in developing countries. But self-interested and
ambitious people are in positions of power, great and small, all over
the world. In many places, they are restrained by the law, the press,
and democratic opposition. Cameroon's tragedy is that there is nothing
to hold self-interest in check.


Does Development Have a Chance?

Development specialists often focus on helping poor countries become
richer by improving primary education and infrastructure such as roads
and telephones. That's surely sensible. Unfortunately, it's only a small
part of the problem. Economists who have pulled apart the statistics, or
studied unusual data such as the earnings of Cameroonians in Cameroon
and the earnings of Cameroonians who immigrate to the United States,
have found that education, infrastructure, and factories only begin to
explain the gap between rich and poor. Because of its lousy education
system, Cameroon is perhaps twice as poor as it could be. Because of its
terrible infrastructure, it's roughly twice as poor again. So we would
expect Cameroon to be four times poorer than the United States. But it
is 50 times poorer.

More important, why can't the Cameroonian people seem to do anything
about it? Couldn't Cameroonian communities improve their schools?
Wouldn't the benefits easily outweigh the costs? Couldn't Cameroonian
businessmen build factories, license technology, seek foreign partners,
and make a fortune?

Evidently not. Mancur Olson showed that kleptocracy at the top stunts
the growth of poor countries. Having a thief for president doesn't
necessarily spell doom; the president might prefer to boost the economy
and then take a slice of a bigger pie. But in general, looting will be
widespread either because the dictator is not confident of his tenure or
because he needs to allow others to steal in order to keep their support.

The rot starts with government, but it afflicts the entire society.
There's no point investing in a business because the government will not
protect you against thieves. (So you might as well become a thief
yourself.) There's no point in paying your phone bill because no court
can make you pay. (So there's no point being a phone company.) There's
no point setting up an import business because the customs officers will
be the ones to benefit. (So the customs office is underfunded and looks
even harder for bribes.) There's no point getting an education because
jobs are not handed out on merit. (And in any case, you can't borrow
money for school fees because the bank can't collect on the loan.)

It is not news that corruption and perverse incentives matter. But
perhaps it is news that the problem of twisted rules and institutions
explains not just a little bit of the gap between Cameroon and rich
countries but almost all of the gap. Countries like Cameroon fall far
below their potential even considering their poor infrastructure, low
investment, and minimal education. Worse, the web of corruption foils
every effort to improve the infrastructure, attract investment, and
raise educational standards.

We still don't have a good word to describe what is missing in Cameroon
and in poor countries across the world. But we are starting to
understand what it is. Some people call it "social capital," or maybe
"trust." Others call it "the rule of law," or "institutions." But these
are just labels. The problem is that Cameroon, like other poor
countries, is a topsy-turvy place where it's in most people's interest
to take actions that directly or indirectly damage everyone else. The
incentives to create wealth are turned on their heads like the roof of
the school library.

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