Only 10 of the 54 African countries can be labeled economic success stories: Angola, Benin, Botswana, Ghana, Madagascar, Malawi, Mali, Mauritius, Uganda, and South Africa. This hardly comes as a surprise as Africa is the most economically unfree continent. No African country is classified by the Heritage Foundation/Wall Street Journal’s 2011 Index of Economic Freedom as “free.” Mauritius is classified as “mostly free,” and listed as “moderately free” are Botswana, Cape Verde Islands, South Africa, Rwanda, Madagascar, Uganda, and Burkina Faso. (Some of the countries labeled economic success stories have undemocratic political systems: Angola, Burkina Faso, Madagascar, Rwanda, and Uganda.)

Ironically, traditional Africa, in contrast to modern Africa, was characterized by much economic freedom for centuries before the arrival of the European colonists. There the basic economic and social unit was the extended family, the lineage, or the clan. The means of production were owned by the lineage—a private entity separate from the tribal government—and thus privately owned, although individual ownership was common. Land, for example, was lineage-controlled, giving rise to the myth of communal ownership, while hunting gear, spears, and fishing canoes were individually owned. Nevertheless the extended family acted as a corporate unit, marshaled family labor, and decided what crops to cultivate on the family land. There was sexual division of labor, and the cultivation of food crops was always a female occupation in traditional Africa, which explains why over 70 percent of Africa’s peasant farmers today are women. Produce harvested from the farms was used to feed the family; any surplus was sold in free village markets.

Ubiquitous Markets

Markets were ubiquitous in precolonial Africa. Two types were distinguishable: the periodic (weekly) rural markets and the large regional markets. Some of these regional markets grew into large towns such as Timbuktu, Kano, Salaga, Sofala, and Mombasa. They served as exchange points for long-distance trade. Timbuktu and Kano, for example, served the long-distance caravan trade over the Sahara and the long distance trade from the coastal areas. Free-trade routes crisscrossed the continent. Goods and people moved freely along them. Men dominated the long-distance trade while women held sway over the rural markets, which largely involved trade in agricultural produce.

Prices on Africa’s markets were not controlled or fixed by chiefs or tribal governments. They have always been determined by bargaining in accordance with the laws of demand and supply. For example, when corn is scarce, its price rises, and the price of fish generally tends to be higher in the morning than in the evening, when fishmongers are anxious to return home.

Besides primary activities such as agriculture, hunting, and fishing, Africans engaged in a variety of industrial activities in the precolonial era—such as cloth-weaving, pottery, brass works, and the mining and smelting of iron, gold, silver, copper, and tin. In Benin, “the glass industry made extraordinary strides,” Cheikh Anta Diop writes in Pre-colonial Black Africa. In Nigeria, “the cloth industry was an ancient craft,” adds Richard Olaniyan in Nigerian History and Culture. Kano attained historical prominence in the fourteenth century with its fine indigo-dyed cloth, which was traded for goods from North Africa. Even before the discovery of cotton, other materials had been used for cloth. The Igbo, for example, made cloth from the fibrous bark of trees. The Asante also were famous for their cotton and bark cloth (kente and adwumfo).

Startup Capital

To secure initial startup capital for commercial operations, African natives turned to two traditional sources of finance. One was the “family pot.” Each extended family had a fund into which members made contributions according to their means. Among the Ewe seine fishermen of Ghana, the family pot was called agbadoho. Members borrowed from this pot to purchase their fishing nets and paid back the loans.

The second source of finance was a revolving credit scheme that was widespread across Africa. It was called susu in Ghana, esusu in Yoruba, tontines or chilembe in Cameroon, and stokfel in South Africa. Typically, a group of, say, ten people would contribute perhaps $100 each to a fund. When the fund reached a certain amount—say, $1,000—it was handed over to the members in turn, who invested the cash in an endeavor. The Grameen Bank in Bangladesh was built on this concept of a revolving rural credit scheme.

Profit made from these economic activities was private property; it was for the traders to keep, not for the chiefs or rulers to expropriate. The traditional practice was to share the profit. Under the abusa scheme devised by the cocoa farmers of Ghana at the beginning of the twentieth century, net proceeds were divided into three parts: A third went to the owner of the farm, another third went to hired laborers, and the remaining third was set aside for farm maintenance and expansion. Under the less common abunu system, profits were shared equally between the owner and the workers. Variants of this profit-sharing scheme were extended beyond agriculture to commerce and fishing.

Chiefs and kings played little or no role in economic production. Their traditional role was to create a peaceful environment for trade and economic activity to flourish. No tribal government enterprises existed. In most cases across Africa, Peter Wickins writes in An Economic History of Africa, “there was no direct interference with production.” In fact State intervention in the economy was the exception rather than the rule in precolonial Africa. As Robert H. Bates observed in Essays on the Political Economy of Rural Africa, “In precolonial Africa, the states underpinned specialization and trade; they terminated feuds; they provided peace and stability and the conditions for private investment; they formed public works. . . . In these ways, the states secured prosperity for their citizens.”

Peasant Capitalism

The system described above may be called “peasant capitalism.” It differs from Western capitalism in two respects. First, as noted, the operating unit was the clan, not the individual. Second, profit was shared. Regardless, the clan was free to engage in whatever economic activity it chose. It did not line up before the chief’s palace for permission to engage in trade, fishing, or cloth-weaving. If an occupation or a line of trade was unprofitable, African natives switched to more profitable ones and always enjoyed the economic freedom to do so. In modern parlance, those who go about their economic activities on their own free will are called “free-enterprisers.” By this definition, the kente weavers of Ghana; the Yoruba sculptors; the gold-, silver-, and blacksmiths; as well as the various indigenous craftsmen, traders, and farmers were free-enterprisers. The natives have been so for centuries. The Masai, Somali, Fulani, and other pastoralists who herded cattle over long distances in search of water and pasture also were free-enterprisers. So were the African traders who traveled great distances to buy and sell commodities—a risk-taking economic venture. The extended family system offered them the security and the springboard they needed to launch and take the risks associated with entrepreneurial activity. If they failed, the extended family system was available to support them. By the same token, if they were successful, they had some obligation to the same system.

Indigenous Africa under Colonial Rule

When Africa was colonized, the Western powers sought to control indigenous economic activities. For the most part, however, the natives were free to go about their business. In West Africa, European settlement was confined to the urban enclaves and the rural areas were left almost intact. In central and southern Africa the story was a little different. The plunder and barbarous atrocities against the natives in King Leopold’s Congo need no belaboring. In southern Africa, where the climate was more congenial to European settlement, there were widespread land seizures, massive dislocation of the natives, and restrictions on their movements and places of residence. Nonetheless, despite the formidable odds, the natives could open shops and compete with European firms. Many did and were successful. There were rich African shopkeepers as well as timber merchants, transport owners, and farmers during the colonial period. Given the opportunities and access to capital, African natives showed themselves capable of competing with the foreigners.

The Golden Age of Peasant Prosperity

The period 1880–1950 may be described as the golden age of peasant prosperity in Africa. Though colonialism was invidious, one of its little-acknowledged benefits was the peace it brought Africa. The slave trade and competition over resources had fueled many of the tribal wars in precolonial Africa. The abolition of the slave trade in the 1840s eliminated a major cause of war, and the introduction of cash crops to service Europe’s Industrial Revolution provided new economic opportunities. In addition, skeletal forms of infrastructure (roads, railways, bridges, schools, post offices, and so on) were laid down during this period. This greatly facilitated the movement of goods and people and gave economic expansion a tremendous boost. For example, A. A. Boahen writes in Topics in West African History,

The volume of cotton exports from French West Africa rose from an average of 189 tons in 1910–14 to 495,000 tons in 1935–39, while that of coffee soared from 5,300 tons in 1905 to 495,000 tons in 1936. The volume of groundnuts (peanuts) exported from Senegal alone increased from 500,000 in the 1890s to 723,000 tons in 1937. However, the greatest success story was that of cocoa production in Ghana, whose volume of exports rose from only 80 lbs in 1881 to 2 million lbs in 1901 and 88.9 million lbs in 1911. This made Ghana the leading producer of cocoa in the world, and the quantity continued to rise until it reached a record figure of 305,000 tons in 1936.

The economic system used by African natives to engineer that prosperity was their own indigenous system. Except for a few places in Africa, notably in the Portuguese colonies, plantation agriculture was unknown. Cash crops—cocoa, coffee, tea, cotton—were grown by peasant farmers on their own individual plots using traditional farming methods and practices.

The fundamental point is that African natives had the economic freedom to decide for themselves what crops they could cultivate and what to do with the proceeds. As Francis Kendall and Leon Louw—two white South Africans—noted in After Apartheid: The Solution: “The freedom that characterized tribal society in part explains why black South Africans responded so positively to the challenges of a free market that, by the 1870s, they were out-competing whites, especially as farmers.” But black success had tragic consequences. White colonists feared black competition:

Not only were blacks better farmers but they were also competing with white farmers for land. Moreover, they were self-sufficient and hence not available to work on white farms or in industry, particularly in the Transvaal gold mines where their labor was badly needed. As a result a series of laws was passed that robbed blacks of almost all economic freedom. The purpose of these laws was to prevent blacks from competing with whites and to drive them into the work force.

In 1869, 1876, and 1884 the Cape Assembly passed a series of Location Acts (the first set of apartheid laws) that sought to protect white farmers from black competition and to force blacks to become wage laborers by working for white farmers. Then came the Native Land Act of 1913. The rest is history.

Postcolonial Predation

Elsewhere in Africa the natives were stripped of their economic freedom by functionally and culturally illiterate leaders after independence in the 1960s. Claiming that free-market capitalism was a Western ideology, most of the first generation of postcolonial African leaders adopted State socialism—the antithesis of free markets—as their economic ideology. A proliferation of socialist ideologies swept the continent, including some quite bizarre examples: Julius Nyerere’s Ujaama (“familyhood,” or socialism, in Swahili) in Tanzania; Leopold Senghor’s vague amalgam of Marxism, Christian socialism, humanitarianism, and “Negritude” in Senegal; Kenneth Kaunda’s humanism in Zambia; Marien N’Gouabi’s scientific socialism in the Congo (Brazzaville); Muammar Gaddafi’s Arab-Islamic socialism in Libya; Kwame Nkrumah’s Nkrumaism (“consciencism“) in Ghana; Mobutu Sese Seko’s Mobutuism in Zaire; and Habib Bourguiba’s Bourguibisme in Tunisia.

Unoccupied land, along with the commanding heights of the economy, was seized by the State in Angola, Ethiopia, Nigeria, Mozambique, Tanzania, and other countries. Foreign companies were nationalized, and a plethora of government controls were instituted to assure State participation in the economy. A dizzying array of State enterprises was established haphazardly.

Fundamentally Alien

This socialist ideology is fundamentally alien and failed miserably everywhere it was implemented in Africa. State ownership, controls, and intervention were never part of Africa’s economic heritage.

More outrageous were the frontal attacks on trade and commerce the natives had engaged in for centuries. In many African countries they were squeezed. Indeed, there was a time when the director of the Club du Sahel, Anne de Lattre, would begin her meetings with the remark, “Well, there is one thing we all agree on: that private traders should be shot” (West Africa, Jan. 26, 1987, 154). Under Sekou Toure’s nonsensical program “Marxism in African Clothes” in Guinea, “unauthorized trading became a crime” (New York Times, Dec. 28, 1987, 28).

In Ghana the Marxist Rawlings regime denounced indigenous markets as dens of economic profiteers and saboteurs. It slapped stringent price controls on hundreds of goods during the 1981–83 period. Markets were burned down and destroyed at Accra, Kumasi, Koforidua, and other cities when traders refused to sell at government-dictated prices.

On May 18, 2005, another episode of economic lunacy was repeated in Zimbabwe. Paramilitary units armed with batons and riot shields smashed up stalls of street traders in a police operation in the capital, Harare. “The official statement claimed that the raids were aimed at black-market profiteers who were hoarding commodities,” the New York Times reported. In what President Robert Mugabe dubbed “Operation Murambatsvina,” which the State-owned press translates as “Operation Restore Order” but in Shona translates as “Operation Drive Out the Rubbish,” the police destroyed 34 flea markets and netted some Z$900 million ($100,000) in fines and seized some Z$2.2 billion of goods. “President Mugabe blamed the West for the nation’s economic crisis,” BBC News Africa reported. At least 22,000 street traders were arrested and over 700,000 people left homeless.

No African chief or king could commit such acts of economic lunacy and cultural perfidy and remain chief. There is nothing wrong with the traditional economic system of free markets, free enterprise, and free trade. All the leadership had to do after independence was to build on it. Only Botswana did this. But the vast majority of African leaders—an assortment of black neocolonialists, Swiss-bank socialists, quack revolutionaries, and crocodile liberators—instead went abroad and copied all sorts of alien practices to impose on their people.

Have they learned? No. Black neocolonialists have been busy importing another alien ideology, from China: On August 14, 2010, Xinhua reported: “A total of 25 Confucius institutes have been opened in 18 African countries.”

There is very little either complicated or interesting about poverty. Poverty has been man’s condition throughout his history. The causes of poverty are quite simple and straightforward. Generally, individual people or entire nations are poor for one or more of the following reasons: (1) they cannot produce many things highly valued by others; (2) they can produce things valued by others but they are prevented from doing so; or (3) they volunteer to be poor.

The true mystery is why there is any affluence at all. That is, how did a tiny proportion of man’s population (mostly in the West) for only a tiny part of man’s history (mainly in the nineteenth, twentieth, and twenty-first centuries) manage to escape the fate of their fellow men?

Sometimes, in reference to the United States, people point to its rich endowment of natural resources. This explanation is unsatisfactory. Were abundant natural resources the cause of affluence, Africa and South America would stand out as the richest continents, instead of being home to some of the world’s most miserably poor people. By contrast, that explanation would suggest that resource-poor countries like Japan, Hong Kong, and Great Britain should be poor instead of ranking among the world’s richest places.

Another unsatisfactory explanation of poverty is colonialism. This argument suggests that third-world poverty is a legacy of having been colonized, exploited, and robbed of its riches by the mother country. But it turns out that countries like the United States, Canada, Australia, and New Zealand were colonies; yet they are among the world’s richest countries. Hong Kong was a colony of Great Britain until 1997, when China regained sovereignty, but it managed to become the second richest political jurisdiction in the Far East. On the other hand, Ethiopia, Liberia, Tibet, and Nepal were never colonies, or were so for only a few years, and they rank among the world’s poorest and most backward countries.

Despite the many justified criticisms of colonialism and, I might add, multinationals, both served as a means of transferring Western technology and institutions, bringing backward peoples into greater contact with a more-developed Western world. A tragic fact is that many African countries have suffered significant decline since independence. In many of those countries the average citizen can boast that he ate more regularly and enjoyed greater human-rights protections under colonial rule. The colonial powers never perpetrated the unspeakable human rights abuses, including genocide, that we have seen in post-independence Burundi, Uganda, Zimbabwe, Sudan, Central African Empire, Somalia, and elsewhere.

Any economist who suggests he has a complete answer to the causes of affluence should be viewed with suspicion. We do not know fully what makes some societies richer than others. However, we can make guesses based on correlations. Start out by ranking countries according to their economic systems. Conceptually we could arrange them from more capitalistic (having a larger free-market sector) to more communistic (with extensive State intervention and planning). Then consult Amnesty International’s ranking of countries according to human-rights abuses. Then get World Bank income statistics and rank countries from highest to lowest per capita income.

Compiling the three lists, one would observe a very strong, though imperfect, correlation: Those countries with greater economic liberty tend also to have stronger protections of human rights. And their people are wealthier. That finding is not a coincidence, so let us speculate on the relationship.

Rights and Prosperity

One way to gauge human-rights protection is to ask to what extent the State protects voluntary exchange and private property. These signify the rights to acquire, keep, and dispose of property in any fashion so long as one does not violate the rights of others. The difference between private property rights and collectively held rights is not simply philosophical. Private property produces systemically different incentives and results from collective property.

Since collectivists often trivialize private property rights, they are worth elaborating. When property rights are held privately the costs and benefits of decisions are concentrated in the individual decision maker; with collectively held property rights they are dispersed across society. For example, private property forces homeowners to take into account the effect of their current decisions on the future value of their homes, because that value depends, among other things, on how long the property will provide housing services. Thus privately owned property holds one’s personal wealth hostage to doing the socially responsible thing—economizing scarce resources.

Contrast these incentives to those of collective ownership. When the government owns the house, the individual has less incentive to take care of it simply because he does not capture the full benefit of his efforts. It is dispersed across society instead. The costs of neglecting the house are similarly spread. You do not have to be a rocket scientist to predict that under these circumstances, less care will be taken.

Nor is nominal collective ownership the only force that weakens social responsibility. When government taxes property, it changes the ownership characteristics. If government were to impose a 75 percent tax on a person selling his house, it would reduce his incentive to use the house wisely.

This argument applies to all activities, including work and investment. Whatever lowers the return from or raises the cost of an investment reduces incentives to make that investment in the first place. This applies to investment in human as well as physical capital—that is, those activities that raise the productive capacity of individuals.

To a significant degree the wealth of nations is embodied in their people. The starkest example of this is the experience of the Germans and Japanese after World War II. During the war, Allied bombing missions destroyed nearly the entire physical stock of each country. What was not destroyed was the human capital of the people: their skills and education. In two or three decades, both countries reemerged as formidable economic forces. The Marshall Plan and other U.S. subsidies to Europe and Japan cannot begin to explain their recovery.

Proper identification of the causes of poverty is critical. If it is seen, as is too often the case, as a result of exploitation, the policy recommendation that naturally emerges is income redistribution—that is, government confiscation of some people’s “ill-gotten” gains and “restoration” to their “rightful” owners. This is the politics of envy: bigger and bigger welfare programs domestically and bigger and bigger foreign-aid programs internationally.

If poverty is correctly seen as a result of the unwise government intervention and lack of productive capacity, more effective policy recommendations emerge.

Powell opens with four theoretical essays whose common theme is that “the engine of economic growth is not better inputs, but rather an environment in which entrepreneurial activities can be capitalized upon.” That environment is shown to determine whether entrepreneurship gets channeled into uses that make capital more productive, generating prosperity for all, or into such activities as conquest and obtaining sinecures in the bureaucracy, permitting a few to live high at the expense of the many.

A seemingly counterintuitive observation from the last essay in this section is that “those countries with the highest economic freedom . . . have a rate of business failure that is almost twice as high as countries with the lowest economic freedom. . . .” This reminder that capitalism is a profit and loss system, in which the losses play an indispensable role, cannot be emphasized enough to those who have elevated the bailout to the chief economic policy tool.

The next four chapters are devoted to countries that failed to grow because they failed to establish institutions that foster productive entrepreneurship. The wide variety of cultures and circumstances covered in this section adds to the robustness of the findings.

George Ayittey’s discussion of how country after country in Africa opted to throw out the capitalist baby with the colonialist bathwater on independence is a sobering example of libertarian class theory in action. He minces no words, characterizing most African countries as ruled by “unrepentant gangsters.” His essay is replete with details of specific poverty-inducing policies, supporting his contention that most African states direct entrepreneurship into destructive paths. As he pithily summarizes, “Because politics constitutes the gateway to fabulous wealth in Africa, the competition for political power has always been ferocious.” No wonder negative growth is the rule in those countries.

Essays on Latin America and Romania show some of the difficulties of overcoming colonial and communist legacies, respectively. The Latin American essay recounts numerous false starts on the road from parasitic to constructive entrepreneurship. Whether it was land reform programs or the neoliberal privatizations of the 1980s and 1990s, the result was the continued fleecing of the weak by the strong, with free markets wrongly getting the blame. The Romanian case shows the harm to entrepreneurship of a radically uncertain regulatory environment based on executive decrees.

This section ends with Sweden, long lionized by American “liberals” for its advanced welfare state. Here we learn how the high taxes, heavy labor-market regulation, and opulent safety net that comprise that welfare state have smothered entrepreneurship. While Sweden could live off its previously accumulated capital for a while, it eventually was beset by a host of predictable problems. The silver lining in Sweden’s case is that when these problems reached crisis level, some of the most counterproductive policies were jettisoned.

The success stories covered in the last part of the book also avoided adopting market-driven reforms until their hands were forced by necessity. Certainly ideology played little role in Ireland, where the same politician whose policies caused the problems (downgraded debt that could not be monetized and abysmal economic growth) conceded to reality and reversed course. Elsewhere, it took some changes in personnel. Once that occurred, crises begat reform in New Zealand (lagging growth induced by protectionism and a sclerotic labor market, plus a 1984 currency crisis), India (a 1991 foreign-exchange crisis), Botswana (the third-poorest nation in the world in 1965), and China (over 36 million dead from disastrous economic policies from 1949–1976). These cases contrast with Robert Higgs’s finding that crises in the United States led to permanent movements away from free markets. One possible explanation is that those countries had run out of margin for error. (As I write these words, the United States may soon find itself in that situation.) The essayists who discuss each of these disparate success stories also document some degree of backsliding once the situation was stabilized.

This book is extremely valuable for anyone who wants to know what works and what doesn’t in national economic development.

After all, Ehrlich made those claims in 1968, and that was a long time ago. But in 1990 he published The Population Explosion, a sequel to his first bestseller.¹ Yet again time has proven that Ehrlich’s premises, on which his projections are based, are severely flawed. If an excess of three decades worth of statistics contrary to his theories do not dent his reputation, then Ehrlich deserves the title Teflon Prophet.

It is not the facts that compel Ehrlich’s supporters as much as a fanatical adherence to his solutions: global central economic planning more ambitious than anything Marx ever dreamed of. Ehrlich says he “can’t really see any truly insuperable barriers to reorganizing our society so that virtually everyone could lead a more pleasant, productive, satisfying life.”² As he sees it, our choice is to abandon the market for an “orderly, planned way to a sustainable human life-support system or to be brutally forced into that shift by nature.”³ When he wrote so wistfully about “reorganizing our society” did he envision himself as one of the reorganizers?

Ehrlich recognizes that reorganization would mean “giving up many things that we now consider to be essential freedoms.” While the costs would be great, so would the supposed benefits, which include “avoiding the total collapse of civilization and the disappearance of the United States as we know it.”⁴ Ehrlich is serious, and he’s taken seriously by the anti-capitalist coalition. His perceived sainthood rests not on acumen or accuracy, but on the fact that the solutions he offers are ideologically in tune with his supporters.

The most recent major study to disprove the theories of Ehrlich came from the International Food Policy Research Institute (IFPRI). In its book Global Food Projections to 2020, the IFPRI looks back at the last 30 years of world food production—coincidentally the period since the publication of Ehrlich’s first book. With the advantage of hindsight the Institute finds “that most regions have made substantial inroads against poverty and averted widespread famine in recent years.”⁵ The result has been a significant drop in the numbers of malnourished children. In high-risk developing countries malnutrition rates declined from “an aggregate rate of more than 46 percent in 1970 to 31 percent in 1997.” That translates “into an absolute decline of 20 million malnourished children since 1967.”⁶

In 1990 Ehrlich had a very different view of Latin America. He lamented: “Since 1981, per-capita food production has also been lagging” there and that “population growth is already outstripping food production.” Yet the IFPRI says that per capita cereal production increased from 225.3 kilograms in 1967 to 253.4 kilograms in 1997. During the period of 1990–1997 cereal production was growing at an annual rate averaging 1.9 percent, compared to a population growth rate of 1.7 percent.⁷ Ehrlich’s book was already wrong by the time it was printed: per capita food production, instead of lagging, grew by 11 percent over the next decade and cereal production increased faster than the population.

What the IFPRI has to say is good news all around, but more so for the developing countries. Instead of heading toward global famine, food supplies are increasing for the vast majority of the world’s population. The IFPRI found:

• “caloric availability per capita rose in developing countries between the 1960s and the early 1990s by 400 kilocalories, reaching nearly 2,700 kilocalories per day by 1997″;⁸
• per capita cereal production, from 1967 to 1997, “rose substantially”;⁹
• per capita gains in cereal production “rose from 176 kilograms in 1967 to 226 kilograms in 1997, an increase of 28 percent.”¹⁰

No Malthusian Crisis

The IFPRI is not alone in its conclusions. Tim Dyson, professor of population studies at the London School of Economics, wrote in the British Medical Journal that “a global malthusian crisis is unlikely to occur during the next few decades.”¹¹ Dyson surveyed the various regions of the world and found a healthy scenario regarding food and population. He said that famines on the Indian subcontinent “will be things of the past” provided the region remains politically stable. In China he found “no cause for alarm,” and both “Latin America and the Middle East have a record of progress in feeding their people and this is likely to continue.”¹²

Ehrlich, who projected massive famines in his first book, ignored his original projections in his second book. Instead of admitting he was wrong he wrote: “Of course, [as if he knew this all along] food production worldwide has continued to increase somewhat faster than the population for the last four decades.” But while some people believe this will continue for the foreseeable future, he says, “all signs point in the opposite direction.”¹³

Dyson wrote that the trend, instead of reversing, has continued unabated: “Food production should be able to keep up with the growth in world population that is projected to occur over the next 25 years. An important reason for this is that the worldwide growth in cereal yield shows no sign of slowing down.”¹⁴

Data from the U.N. Food and Agricultural Organization (FAO) shows worldwide cereal yields to have increased from just over one ton of cereal per hectare in the early 1950s to about 3 tons by the late 1990s.¹⁵ And worldwide averages are significantly below those of the developed world, implying room for a great deal of growth.

Areas that Ehrlich once said were hopeless are today feeding their own people. In his 1990 book Ehrlich claimed that food production in India, which had increased contrary to his prior warnings, had finally “lost momentum.” But the IFPRI data shows Ehrlich to be inaccurate yet again. Instead of losing momentum, rice production in India grew from 3.7 metric tons per hectare in 1990 to 4.2 in 1997. In addition, wheat production increased from 2.2 tons to 2.6, and maize increased from 1.5 tons to 1.7 tons.¹⁶ India, which was importing over 9 million metric tons (mmt) of cereals in 1967 was exporting almost 2 mmt by 1997.

Ehrlich had even less hope for the entire South Asia region. Yet the Institute’s data show that its food production increased throughout the ’90s and surpassed India’s in percentage terms. In 1990 Erhlich said Vietnam, once “a rich food exporting region,” was suffering from ecological destruction.¹⁷

In 1967 Vietnam imported 1.5 mmt of cereal. By 1982 imports were down to 0.6 million, and when Ehrlich’s book was released, Vietnam was exporting 1.2 mmt. By 1997 exports were up to 2.8 mmt.¹⁸

There are two fundamental reasons that Ehrlich has consistently, and substantially, erred with his projections. All his calculations are based on two false factors: he assumes food production must decrease while population growth rates remain steady. As we’ve seen, food production has continued to increase for the three decades since he first sounded his warnings. But Ehrlich felt such declines were inevitable and said the “tragedy” would be compounded by the fact “that the world population seems committed to a growth rate of closer to 2 percent for the next few decades.”¹⁹ While “few” is indeterminate, it is safe to assume he meant more than a couple; say, 30 years—until 2020.

But instead of remaining near 2 percent population growth rates had already declined by the time Ehrlich wrote his book. Population growth peaked around 1970 at 2.1 per cent. By 1980 it was down to 1.73 percent, and when Ehrlich’s book was published it had dropped to 1.7 percent. In 1995 the Institute for Demographic Studies said the rate had declined even further, to 1.5 percent.²⁰ And it continued to plummet so that by 2000, at 1.3 percent, it was closer to 1 percent than to Ehrlich’s projected 2 percent. Even the United Nations, which usually overestimates population growth, says that growth levels by 2015 will be down to 1.03 percent.²¹

Point of Agreement

There is one area on which Ehrlich, Dyson, and the Institute all agree: sub-Saharan Africa. There cereal-production rates declined almost from the day the colonial powers pulled out until today. In 1967 per capita cereal production was 127.9 kilograms but by 1997 it had dropped to 124.6 kilograms. This production rate is only one-fifth that of the developed countries and is about half the average for the developing countries. In spite of being the least populated continent, perhaps partially because of it, Africa’s per capita food production is significantly lower than that of South Asia, the next poorest region in the world.²²

In August 2000 the FAO warned that 17 countries faced severe food shortages, all in sub-Saharan Africa.²³ But what is clear is that in the majority of these cases, 12 countries by my count, political problems and war are the main cause of food shortages. Almost all the “basket cases” of the world from 30 years ago are now well on their way to feeding themselves, but not Africa. That raises the question why. If we look at the successes we see some dramatic changes. From 1958 to 1962 an estimated 30 million Chinese starved to death under an artificial famine created by socialist economic and agricultural policies.²⁴ Market reforms were instituted after Mao’s death, and food suddenly became more plentiful. The late political scientist David Osterfeld noted that after reforms, food production increased by 40 percent.²⁵ Since the early ’90s, when Osterfeld wrote his book, cereal production in China has increased by a further 17 percent.²⁶ In addition, market reforms have vastly increased the wealth of nonfarmers in China, making it relatively easy for them to afford to import the surpluses of food being produced in much of the rest of the world.

India, which Ehrlich had written off, has also turned into a food exporter. Again market reforms predated the rise in production. The late Julian Simon noted in Atlantic Monthly that “Most price controls were lifted, and price supports were substituted for controls. Indian farmers had a greater incentive to produce more, so they did. They increased production by planting more crops a year, on more land, and by improving the land they had. They also introduced higheryield strains and improved fertilizers.”²⁷ Since Simon wrote those words cereal production in India has increased 50 percent further.²⁸

But Africa has continued down the road of state intervention. What market reforms have been instituted have been half-measures and often repealed later. In many cases, such as Zimbabwe, the government has waged war on private markets intentionally, undermining private property rights and the incentives to produce. Reforms in Africa have been so half-hearted that the IFPRI produced a paper on the subject titled The Road Half Traveled.²⁹

Throughout Africa state marketing boards often hold a monopoly on critical foodstuffs. Frequently these boards will pay farmers below-market rates and then sell the produce on the world market with all profits going to the government or to individuals in the government. It remains true that Africa is a bastion of state control over agriculture. But it is not enough that the state withdraw from agricultural matters. The rule of law and the sovereignty of individual property rights must be upheld. It is difficult for any business, let alone farmers, to plan for the future if they cannot enter into secure contracts or if they have no legal claim to the property they use.

Other factors that undermine agricultural production include the periodic influx of “food aid” to Africa, which destroys local production. Often such aid is given to the central government and is used to expand state activities that attract human capital from the private sector. Paradoxically, one factor in Africa’s lack of development may be that the continent, on the whole, is underpopulated. Agricultural production needs to get to markets, and for that to happen, infrastructure is needed. But infrastructure cannot be built if the numbers of people it will serve are few. One simply does not build multimillion dollar highways to villages of 200 people.

The battle to feed humanity is not over. And while the fight is still being waged, it does appear that, contrary to Ehrlich, humanity is winning. Throughout the world, market forces have vastly expanded the ability of mankind to feed itself. And as a result, food per capita has continued to grow for the last few decades. Nations that only a few decades ago were pronounced hopeless now produce surpluses because of market reforms. Endemic starvation is essentially limited to one corner of the world where markets are not embraced and where private property is not secure. Of course, this does not stop the anti-capitalist coalition from blaming capitalism. Nor does it prevent the coalition from suggesting new forms of socialism, on a global scale, as the solution.

But the evidence, which grows daily, indicates that the fight over food is more illusionary than real. Substantial progress is intentionally ignored and starving children are used as propaganda to persuade the world to adopt global economic planning. A phony crisis is being invented in the hope that it will persuade people to adopt a counterfeit solution.

1. Paul and Anne Ehrlich, The Population Explosion (London: Hutchinson, 1990).
2. Ibid., p. 184.
3. Ibid., p. 44.
4. Ibid., p. 181.
5. Mark Rosegrant et al., Global Food Projections to 2020 (Washington, D.C., International Food Policy Research Institute, 2001), p. 3; www.ifpri.cgiar.org/pubs/books/globalfoodprojections2020.htm. See also Bjørn Lomborg, The Skeptical
Environmentalist: Measuring the Real State of the World. (New York: Cambridge University Press, 2001), chapter 9.
6. Ibid., p. 4.
7. Ibid., pp. 5, 8.
8. Ibid., p. 5.
9. Ibid.
10. Ibid.
11. Tim Dyson, “Prospects for Feeding the World,” British Medical Journal, October 9, 1999, p. 988.
12. Ibid., p. 989.
13. Ehrlich, p. 68.
14. Dyson, p. 990.
15. Ibid.
16. Rosegrant et al., p. 22.
17. Ehrlich, p. 73.
18. Rosegrant et al., p. 10.
19. Ehrlich, p. 109.
20. Jim Peron, Exploding Population Myths (Chicago: Heartland Institute, 1995), p. 35.
21. Per Pinstrup-Andersen, Rajul Pandya-Lorch, and Mark Rosegrant, The World Food Situation: Recent Developments, Emerging Issues and Long-Term Prospects (Washington, D.C.: International Food Policy Research Institute, 1997), p. 28.
22. Rosegrant et al., p. 5.
23. Report can be read at www.fao.org/WAICENT/faoinfo/
economic/giews/english/eaf/eaftoc.htm.
24. Jasper Becker, Hungry Ghosts: China’s Secret Famine (London: John Murray, 1996).
25. David Osterfeld, Planning versus Prosperity (New York: Oxford University Press, 1992), p. 64.
26. Based on data in Rosegrant et al., p. 22.
27. Julian Simon, “The State of World Food Supplies,” The Atlantic Monthly, July 1981, pp. 72–76.
28. Based on data in Rosegrant et al., p. 22.
29. Mylène Kherallah et al., The Road Half Traveled: Agricultural Market Reform in Sub-Saharan Africa (Washington, D.C.: International Food Policy Research Institute, n.d). It can
be found at www.ifpri.org/pubs/pubs.htm#fpr.

But things may not have been quite as they were reported. Largely ignored by the major world media were comments of a Nigerian Muslim leader, Nabiu Baba Ahmed. He told the South African Press Association that the source of the trouble was not the offensive article but rather, government sponsorship of the pageant itself.

“It is true we have been having pageants in Nigeria for almost 40 years but that has never bothered us as Muslims because they were privately organized,” Ahmed explained. “But this time it is systematically funded by the government using taxpayers’ money and its agencies . . . which is unacceptable.” He added that the government made matters worse by its involvement in scheduling the pageant during the holy fasting month of Ramadan. This information doesn’t excuse the rioting, and neither did Ahmed, but it does suggest that we shouldn’t accept what’s in the newspapers as the definitive story.

Indeed, if full and accurate reporting from Africa were the norm, we’d be reading about a 33-year-old Nigerian named Thompson Ayodele. I predict that we soon will. A journalist for a major newspaper in Lagos, he is busy planting intellectual seeds in fertile soil—seeds that in time will yield big, positive changes for Africa’s most populous nation. In 2001 he formed the Institute of Public Policy Analysis in Lagos. A private, nonprofit think tank, IPPA’s objective as described on its website (www. ippanigeria.org) is “to provide market-oriented analysis of current and emerging policy issues, with a view to influencing the public debate and the political decisionmaking process.”

I have met Ayodele on several occasions in the past year. He visited my organization in Michigan and attended one of our training seminars for free-market leaders. With great confidence I can say that he has what it takes to bring an idea revolution to his country— vision, passion, eloquence, and total commitment. Like his friend James Shikwati in Kenya (see my column last May, “A Leonard Read for Africa”), he is part of a new generation of Africans eager to liberate the continent from the shackles of failed socialist policies.

Ayodele’s task is no small one, but he is invigorated by the challenge. In the last half-century, Nigeria’s 130 million people suffered under a succession of corrupt, strife-ridden, statist regimes and a military dictatorship until 1999, when a peaceful transition to civilian government took place. The current administration is making some progress toward political stability and a freer economy, but in the face of ethnic and religious tensions, it desperately needs thinkers and activists like Ayodele to educate the public about free markets. “What Nigeria needs,” he says, “is the economic freedom that will result if government abolishes its many obnoxious laws that hinder private initiatives and innovations.”

Thompson himself is the product of the power of ideas. Several years ago, and with no formal training in economics or philosophy, he was struck by an article in the Times of London by Julian Morris of the London-based International Policy Network (IPN). Morris explained how an international ban on the ivory trade would produce new incentives for profits in poaching and that the best way to save the elephants was to “privatize” them through a system of property rights and private ownership. Fascinated by this approach, Ayodele contacted Morris, who in turn put him in touch with free-market think-tank leaders in Britain and the United States. Ever since, he has immersed himself in reading and learning free-market economics and has become an articulate public spokesman in the Nigerian media.

IPN chairman Linda Whetstone lauds Ayodele for the network he is building within Nigeria: “He is managing to get the message out, despite enormous difficulties, and to explain that it is only the institutions of the free society that can help Nigerians— limited government, the rule of law, an independent judiciary, property rights, free enterprise, and freedom of speech.”

In its first year the IPPA has sponsored two well-attended seminars for policy leaders that caught the attention of leaders in the Nigerian government. Udo Udoma, chairman of the Nigerian Senate’s powerful appropriations committee, offered this glowing endorsement: “What IPPA represents, il core values and ideas, also represents m own long-cherished ideas and values wit which Nigeria can be made great and prosperous.”

Ripe for Liberalism

Public opinion suggests that ordinar Nigerians may be ripe for free-market ideas Ayodele notes that the public exhibits ; nearly total lack of confidence in govern ment promises. Rich and poor in great num bers are opting for private education. Peopli know that government enterprises have beei huge and expensive failures. The receptioi Ayodele gets when he speaks to audience: around the country is, he says, “positive anc optimistic because Nigerians have seen ever} type of government failure imaginable anc they are willing to try something that the) see has worked in other parts of the world.’ He plans commentaries and conferences ir coming months that will explain the wisdorr of free trade, deregulation, and the expansion of private property rights.

Considering the history of Africa, the significance of Ayodele’s work in Nigeria is enormous. With nary an exception, countries that gained their independence from colonial powers in the 1960s turned immediately to socialist central planning. The intellectual classes were nearly unanimous in their support for socialism and thoughtful opposition was virtually nonexistent. Now, the abysmal poverty and corruption those policies produced are animating a whole new class of activists and intellectuals on behalf of free-market alternatives. Almost all of the new think tanks springing up, like IPPA in Nigeria and Inter-Region Economic Network in Kenya, are committed to thrusting a stake through the heart of the socialist idea.

The liberation of a continent, one nation at a time, may have begun.

As Ludwig von Mises wrote in Socialism:

Nowhere and at no time has the large scale ownership of land come into being through the working of economic forces in the market. It is the result of military and political effort. Founded by violence, it has been upheld by violence and by that alone…. The great landed fortunes did not arise through the economic superiority of large scale ownership, but through violent annexation outside the area of trade.

According to this story in the Observer (UK), this still goes on today, in Africa:

Ethiopia is one of the hungriest countries in the world with more than 13-million people needing food aid, but paradoxically the government is offering at least 7.5 million acres of its most fertile land to rich countries and some of the world’s most wealthy individuals to export food for their own populations….

But Ethiopia is only one of 20 or more African countries where land is being bought or leased for intensive agriculture on an immense scale in what may be the greatest change of ownership since the colonial era.

An Observer investigation estimates that up to 50m hectares of land – an area more than double the size of the UK – has been acquired in the last few years or is in the process of being negotiated by governments and wealthy investors working with state subsidies.

The land rush, which is still accelerating, has been triggered by the worldwide food shortages which followed the sharp oil price rises in 2008, growing water shortages and the European Union’s insistence that 10% of all transport fuel must come from plant-based biofuels by 2015.

In many areas the deals have led to evictions, civil unrest and complaints of “land grabbing”….

Leading the rush are international agribusinesses, investment banks, hedge funds, commodity traders, sovereign wealth funds as well as UK pension funds, foundations and individuals attracted by some of the world’s cheapest land.

Together they are scouring Sudan, Kenya, Nigeria, Tanzania, Malawi, Ethiopia, Congo, Zambia, Uganda, Madagascar, Zimbabwe, Mali, Sierra Leone, Ghana and elsewhere. Ethiopia alone has approved 815 foreign-financed agricultural projects since 2007. Any land there, which investors have not been able to buy, is being leased for approximately $1 per year per hectare.

According to an Ethiopian living in England:

The foreign companies are arriving in large numbers, depriving people of land they have used for centuries. There is no consultation with the indigenous population. The deals are done secretly. The only thing the local people see is people coming with lots of tractors to invade their lands.

All the land round my family village of Illia has been taken over and is being cleared. People now have to work for an Indian company. Their land has been compulsorily taken and they have been given no compensation. People cannot believe what is happening. Thousands of people will be affected and people will go hungry.

This is eminent domain and Kelo writ very large. Some, seeing the involvement of  corporations, will conclude this is privatization and modernization. But true champions of liberty and property will be appalled and will condemn it loudly for the theft and usurpation it is.

Today much of Africa remains hungry—almost a third of sub-Saharan Africa is undernourished. Since the late 1960s Africa’s agricultural production has been in decline: Farm productivity has dropped and food imports have risen. African governments are complicit in the continent’s hunger because they have hindered their citizens’ ability to grow as much food as possible.

In Starved for Science: How Biotechnology Is Being Kept Out of Africa, Robert Paarlberg argues that Africa fails to feed itself in part because of the limited use of biotechnology and blames African governments and their European counterparts for that failure. Starved for Science explains how the increased use of genetically modified seeds would benefit African farmers—and stomachs—and explains why the use of biotechnology and other agricultural science is so limited in Africa.

Paarlberg, who teaches political science at Wellesley College, makes the case for science in agriculture by detailing the dramatic impact the vast changes in agriculture have had over the past few hundred years. The book focuses on the latter half of the twentieth century, when the Green Revolution swept through Asia and, through the use of technology, hugely bolstered agricultural production.

Africa desperately needs similar changes—yields per acre in some African countries are less than a tenth of yields in the United States. African farmers would gain greatly from better technologies and seeds. Unfortunately, government policies stand in their way.

Paarlberg blames developed-world biases for Africa’s lack of agricultural improvement, especially a bias against genetically modified (GM) foods that dramatically limits Africa’s ability to grow more. In part these biases stem from the developed world’s ability to feed itself without a strong emphasis on the agricultural sciences or GM foods. Officials can therefore indulge environmentalist crusades against agricultural progress without apparent cost.

The European Union, non-governmental organizations, and the United Nations all played a role in exporting these biases to Africa, although the local governments also deserve a share of the blame. Instead of helping African farmers grow bigger crops to feed more people, European governments are doing the reverse, actively working to strengthen regulations in African countries, making the approval and use of GM seeds more difficult, and subsequently decreasing the potential productivity of African farmers. The governments of Germany, the Netherlands, and Norway, for example, have funded efforts to promote anti-GM regulatory frameworks and deprive farmers of the best tools they have. Similarly, the United Nations Environment Program (UNEP) exists not to help African farmers increase their output, but rather to increase the regulations that inhibit their farming.

Starved for Science makes a succinct case regarding the who’s and why’s of the barriers to Africa’s biotechnology use, but there are a few components of Paarlberg’s argument that could be stronger.

He spends little time discussing the specific problems that biotechnology can solve and the specific advantages of GM seeds. Although he details the possibilities of a drought-resistant seed, Paarlberg does not delve deeply into the successes of GM seeds in countries where they are currently being used, such as South Africa. With freedom to make their own decisions South African farmers are growing more food for themselves and their families and have enough extra to sell to others. Beyond increasing the local supply of food, having extra crops allows the farmers to increase the sizes of their farms, create jobs, start other businesses, and save money for the future.

The other incomplete aspect of Starved for Science deals with the incentives Africans face when debating growing GM crops. Even when they have the choice of using GM seeds they have to decide if it’s worth doing so, since European markets usually ban GM goods. The book would have been improved if Paarlberg had investigated the tradeoffs here more thoroughly.

Allowing free rein for biotechnology would be an important step toward eliminating the hunger that plagues Africa. The sad truth is that politics is apt to continue obstructing that and other avenues of progress.

This article draws heavily on his research in “Somalia After State Collapse: Chaos or Improvement?” coauthored with Ryan Ford and Alex Nowrasteh, published in the Journal of Economic Behavior and Organization, vol. 67, 2008.

Perhaps the title overstates the situation slightly. It is hard to call any country mired in poverty an economic success. Yet by most measures Somalia’s poverty is diminishing and Somalia has improved living standards faster than the average sub-Saharan African country since the early 1990s. In that sense Somalia is at least a relative success story. The most interesting part of Somalia’s success is that it has all been achieved while the country has lacked any effective central government.

For many, the “A” word—anarchy—conjures up notions of chaos. For others it simply means the absence of a single government ruling a geographic area. In this second sense, Somalia has been in a state of anarchy since the fall of Siad Barre’s dictatorship in 1991. The result has been, in general, economic development rather than chaos—although there certainly have been chaotic periods. The interesting questions are how has development been promoted and what has caused the chaos.

Somalia, located on the eastern horn of Africa, gained independence from Italy and Great Britain in 1960. A democracy was initially established but it was overthrown in a military coup in 1969, when General Barre was installed as dictator. He ruled until his government was overthrown in 1991. Since the fall of Barre’s government there have been multiple attempts to establish a new central government, but Somalia has remained an essentially stateless society.

Immediately after the central government collapsed the chaos many would have predicted came about. Rival warlords plunged the country into civil war as each attempted to install himself as the new head of state. During this period the famous “Black Hawk Down” incident, preserved in novel and movie, occurred. Eighteen U.S. soldiers and more than 1,000 Somali died in a violent conflict that followed U.S. and U.N. intervention. The foreign forces eventually withdrew in 1995.

With the withdrawal of U.N. forces the immediate prospect for installing a new government diminished—and with it so did the fighting. Somalia’s entire experience with formal government has been one of plunder and resource extraction by the ruling elite. As long as there was a prospect for a new government, each clan had a strong incentive to fight to make sure it was on the receiving, rather than giving, end of the plundering. Once there was no longer the immediate prospect for a new central government the clans began to settle back into their traditional customary and mostly peaceful relationships with one another.

Each period of violent chaos in Somalia has generally centered around outside attempts to establish a new government inside Somalia. The most recent of these, which is still going on, is the Ethiopian-backed Transitional Federal Government (TFG), which entered Somalia in 2006. Opposition to the TFG bolstered support for the Islamic Courts Union (ICU), which itself became a de facto government in some areas of southern Somalia, including the former capital, Mogadishu. In December 2006 Ethiopia invaded and overthrew the ICU and installed the TFG in the former capital. However, there is little popular support for the TFG. Its control is weak and there are frequent decentralized attacks against TFG officials and soldiers and their Ethiopian supporters. It remains to be seen whether the TFG will gain greater control over the country or if clan factions and warlords will overthrow it.

From the U.N. withdrawal in 1995 until Ethiopa’s invasion, Somalia did have some violent crime, but nowhere near the level that existed during its civil wars. In fact the Somali were able to maintain a functioning customary legal system that not only provided law and order but also formed the institutional foundation that enabled them to achieve greater rates of economic development than they achieved while they had a state and greater rates than many of their African neighbors.

Customary Law in Somalia

Somali law is based on custom interpreted and enforced by decentralized clan networks. The Somali customary law, Xeer, has existed since pre-colonial times and continued to operate under colonial rule. The Somali nation-state tried to replace the Xeer with government legislation and enforcement. However, in rural areas and border regions where the Somali government lacked firm control, people continued to apply the common law. When the Somali state collapsed, much of the population returned to their traditional legal system.

The Xeer outlaws homicide, assault, torture, battery, rape, accidental wounding, kidnapping, abduction, robbery, burglary, theft, arson, extortion, fraud, and property damage. The legal system focuses on the restitution of victims not the punishment of criminals. For violations of the law, maximum compensation to victims is specified in camels (though payment can be made in equivalent monetary value). Typical compensation to the family of a murder victim is 100 camels for a man and 50 for a woman; an animal thief usually must return two animals for every one he stole.

Clan elders chosen on the basis of their knowledge of the law judge cases. The elders cannot create the law. They only interpret the community customs. Elders who make decisions that deviate from community norms are not consulted in future cases. When a dispute arises between two members of different clans, their clan elders must reach a compromise. If they are unable to do so they appoint an elder from another clan to settle the dispute.

After a verdict is reached the criminal must compensate his victim the appropriate amount. If he is unable or unwilling, his extended family must pay the compensation. Every Somali is born into an insurance group based on his lineage to a common great-grandfather. Out of their own self-interest these insurance groups help enforce the judgment on wrongdoers. When an individual becomes particularly troublesome a family can publicly declare that he is no longer a member, effectively making the person an outlaw. Outlaws must find another insurance group willing to sponsor them, or they are expelled from the larger clan. In cases in which more formal enforcement of the law is necessary, clan elders can call for all clansmen to form a posse to enforce the verdict; clansmen are obligated to answer the call.

Since Somali courts are independent of one another, they often interpret customary law differently. Within clans, differences of interpretation are usually quickly resolved, but this process can take much longer on the national level. Ultimately, through the resolution of disputes the law is discovered and conflicts in interpretation are resolved. Although the interpretation of the law stems from clan elders, the clans are not de facto governments.

Throughout Somalia individuals are free to choose new insurance groups and elders on becoming adults. They are allowed either to form a new insurance group with themselves as head or join an established group, if it accepts them. Movement between clans is particularly widespread in southern Somalia: Some clans have more adopted members than native-born members.

The individual clans and insurance groups are not geographic monopolies. Geographic distribution of clans does not match territorial boundaries. As pastoral Somali move throughout their country, their legal system moves with them. So in any given area multiple clan governance systems can exist.

While local cleric courts became the dominant source of law in some regions, and Qur’anic law is traditionally applied to marriage and inheritance, the common law of Xeer and the accompanying elder dispute resolution and insurance groups are the main source of law in Somalia. The Xeer shares a focus on restitution and the protection of life and property with English common law and other polycentric systems. The traditional Somali legal system existed unofficially during the reign of Siad Barre and since the collapse of the state it has emerged to provide some level of the rule of law on which coordination in the Somali economy could be based.

Economic Performance

There is no doubt that Somalia remains extremely poor today. However, as far as living standards can be assessed, they appear to be improving since the collapse of Somalia’s national government. In fact, standards are improving faster in Somalia than in most of sub-Saharan Africa.

In other research my coauthors and I used the World Development Indicators to compare Somalia’s performance with 41 other sub-Saharan African countries in both the current period and, when data allow, over time. All data from Africa—and perhaps Somalia in

particular—should be treated with caution. But our findings are broadly consistent with the improvements other ethnographic and anthropological evidence has found.

Unfortunately, using a broad cross section of countries over a 20-year period for a region with often unreliable (or uncollected) data limits our metrics of comparison. We examined 13 measures: the death rate, infant mortality, life expectancy, child malnutrition, telephone mainlines, mobile phones, Internet users per 1,000 population, households with television, DPT immunization, measles immunization, percent of the population with access to sanitation and an improved water source, and cases of tuberculosis.

Although Somalia’s 2005 standard of living was low by western standards, it compared fairly favorably with other African nations. Of our 13 measures, Somalia ranked in the top 50 percent of nations in five and only ranked near the bottom in infant mortality, immunization rates, and access to improved water sources. Although in 2005 the nation placed in the bottom 50 percent of countries on seven measures, it has actually improved performance relative to other countries since the collapse of the Somali state. Somalia ranked in the bottom 50 percent of all seven variables for which we have 1985-1990 data. In the last years of the Somali nation-state (1985-1990), its performance relative to other African countries deteriorated from the early 1980s, with Somalia losing ground in life expectancy, death rate, and infant mortality as well as DPT and measles immunization. Only telephone landlines showed a slight improvement during this time.

Life expectancy in Somalia fell by two years from 1985 to 1990, but it has increased by five years since becoming stateless. Only three of the 42 countries improved life expectancy as much since 1990.

While Somalia’s infant mortality ranking has continued to slide, its death rate has improved, jumping from 37th to 17th since 1990. While still in the bottom 50 percent in cases of tuberculosis, Somalia’s relative rank has improved from 40th to 31st since the collapse of the government. Although Somalia’s immunization rates for measles and DPT are among the lowest in Africa, its problems in this area existed before the collapse of the state. During the last five years of government rule Somalia’s immunization rankings fell from 19th and 21st, respectively, to next to last in both categories. While the country has stayed near the bottom of this ranking, the percentage of children immunized has improved.

Access to improved water sources is a problem in Somalia. It ranks considerably better in access to improved sanitation facilities. Unfortunately, neither of these measures was available over a long enough time period to compare performance before the collapse of the state.

Telecommunications is a major area of success in Somalia. The one measure for which we have complete data, telephone landlines per 1,000 of population, shows dramatic relative improvement since Somalia became stateless, moving from 29th to eighth among the African countries included in our survey. It ranks high in mobile phones (16th) and Internet users (11th), while it ranks 27th in households with televisions.

In many African countries state monopolies and licensing restrictions raise prices and slow the spread of telecommunications. In Somalia it takes just three days for a landline to be installed; in neighboring Kenya waiting lists are many years long. Once lines are installed, prices are relatively low. A $10 monthly fee gets a customer unlimited local calls, and international calls are only 50 cents per minute. Web access costs only 50 cents an hour. According to The Economist, using a mobile phone in Somalia is “generally cheaper and clearer than a call from anywhere else in Africa.”

We also compared Somalia to a subset of African countries that have been peaceful to make sure that it was not wars in other countries that account for Somalia’s relative improvement. We found basically the same results.

Although the data should be treated with caution, our findings are consistent with the evidence showing the rural pastoral sector growing and an increasing willingness of international businesses to open up in Somalia. Unfortunately there is one new international “business” in Somalia that has many observers concerned—piracy.

What About the Pirates?

Piracy has been on the rise in Somalia over the past year. In fact, if you have heard about Somalia in the news recently, it is likely because of the piracy. Some Somali have organized themselves into pirate bands that use small craft to raid large foreign ships passing by the country. They often hijack the cargo and crew and demand ransom. Somali pirates have attacked more than 100 ships in the last year. As of December they were still holding 17 ships with approximately 300 crew members for ransom. Estimates indicate that these pirates were paid nearly $30 million in ransom over the last year.

Because of Somalia’s strategic location at the entry to the Red Sea and Suez Canal, the Somali pirates are becoming an increasing international concern. The already well-armed pirates have used some of their profits to invest in more sophisticated weaponry, making themselves an even greater threat.

Although they are a concern, this is not merely a symptom of a “failed state,” as many media reports make it out to be. In one sense, that the piracy is committed against passing foreign vessels is a tribute to the internal effectiveness of Somali customary law. The pirates are well-armed and obviously not hesitant to use violence. Yet they do not plunder Somali ships. What’s more, they interact peacefully with other Somali when they are on land. Although the total number of pirates is small, it has been estimated that 10,000 to 15,000 people are employed by the pirates indirectly in related industries such as boat repair, security, and food provision. (Other enterprising Somalis have set up special restaurants to cater to the hostages.) That pirates use voluntary market transactions to purchase goods and services on land, rather than pillage, provides some evidence that Somali law is fairly robust if even these otherwise violent people respect it when conducting their internal affairs.

Somalia’s pirates are criminals, of course, but the nonpirate Somali are not and should not be subject to retribution, including the imposition of an internationally “friendly” government, for the criminal acts of a few.

Instead, Somali pirates should be dealt with like any other violent criminals. Those responsible for crimes should be punished and stopped from committing future acts of piracy. This is probably best accomplished by armed ships protecting shipping lanes, not an internationally backed invasion or sponsoring of a new Somali government. Any government sponsored in Somalia would likely prey on the population just as Siad Barre’s regime did. Such predation would likely result in many more criminal acts with far worse consequences than anything done by the pirates.

Somalia’s Lesson

Somalia’s lesson should not be overstated—it is no libertarian utopia. I certainly don’t plan to move there anytime soon. But Somalia does demonstrate that a reasonable level of law and order can be provided by nonstate customary legal systems and that such systems are capable of providing some basis for economic development. This is particularly true when the alternative is not a limited government but instead a particularly brutal and repressive government such as Somalia had and is likely to have again if a government is reestablished.

Economist George Ayittey often refers to many African governments as “vampire states,” which suck the lifeblood out of their citizens and their economy. He recently wrote that the “rogue African nation-state should be left to the fate it deserves—implosion and state collapse.” Many would react with horror to such a suggestion and say, “If that happened you’d end up with another Somalia!” The lesson we should learn from Somalia is that that’s not so bad—at least when compared to the often ghastly alternatives.

In the mid-nineteenth century Baptist preacher William Miller predicted the second coming of Christ on March 21, 1843, or between that date and March 21, 1844. When Christ failed to show, Miller “discovered” that the actual date of arrival was October 22 of that same year. This day came and went with nary a hint of Christ’s arrival. Undeterred, Miller awaited Christ’s return until his death in 1849. As Miller was to write in his memoir, “Were I to live my life over again, with the same evidence that I then had, to be honest with God and man, I should have to do as I have done.”

I was reminded of this tragically comic event as I read Jeffery Sachs’s The End of Poverty: Economic Possibilities for Our Time, a purported “blueprint” to solve global poverty. In clear, concise, and at times convincing prose, Sachs shames the world for not doing more to promote development in poor countries and argues for an increase in foreign aid to jump-start the growth process. His obdurate faith in foreign aid contradicts the majority of empirical evidence gathered over foreign aid’s 60-year modern history. Undeterred, Sachs forges ahead with a flawed strategy.

Sachs uses as his blueprint the United Nations Millennium Project, which, among other things, seeks to halve the number of individuals living on less than $1 a day and reduce by two-thirds the mortality rate for those under 5 by 2015. Ambitious stuff, no doubt. After a couple of hundred pages of autobiographical ruminations, Sachs finally outlines his course for reaching these goals: money, money, money. Rich countries, writes Sachs, have consistently shorted the developing world in foreign aid. Accordingly, he called on the U.S. government and their Western counterparts to increase “Official Development Assistance” to 0.44 percent of GDP in 2006 and to 0.54 percent by 2015. Approximately $7 billion needs to be spent by 2015 on scientific research to address climate change, energy production, and health care in poor countries, Sachs writes.

For people familiar with the history of foreign aid, this simply sounds like more of the same failed policy that development “experts” have been pushing for decades. Since 1960 Africa has been the constant recipient of development aid from the West, but standards of living are no better than before. There are now several governmental and quasigovernmental agencies specifically tasked with helping lift poor countries out of poverty. The U.S. government alone has spent over $500 billion in development aid. Sadly, there’s little evidence that any of these international welfare programs have done anything for sick and hungry people. As economist Peter Boone concluded, “Aid does not significantly increase investment and growth, nor benefit the poor as measured by improvements in human development indicators, but it does increase the size of government.”

If foreign aid fails to bring about growth, what will? According to MIT economists Daron Acemoglu and Simon Johnson and Berkeley political scientist James Robinson, “Economic institutions encouraging economic growth emerge when political institutions allocate power to groups with interests in broad-based property rights enforcement, when they create effective constraints on power-holders, and when there are relatively few rents to be captured by power-holders.” Douglass North made much the same point in his 1993 Nobel Prize lecture: “Institutions form the incentive structure of a society and the political and economic institutions, in consequence, are the underlying determinant of economic performance.” In short, a constitutionally limited government that respects property rights and promotes the rule of law is the best foundation for economic growth.

Unsurprisingly, the world’s poorest countries fail to provide these basic functions. Law, instead of being a tool that provides security and reliability, is arbitrary and selectively enforced. The right of property is nonexistent, and trade, often the engine of growth, is tightly controlled by the state. In much of Africa, for example, high barriers to trade are the norm. As one World Bank study found, “African tariffs are more than three times higher than those in the developing countries with the highest growth rates and more than five times higher than those in OECD countries.”

With all the book’s failings, however, the optimistic message should not be discarded. Sachs is correct that we have the tools and the knowledge to end extreme poverty. But the world’s leaders—and one of its better-known economists—are not interested in the one proven recipe for economic progress. Instead of heeding Sachs’s advice, policymakers would do better with that of Adam Smith, who in 1755 wrote that “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.”

Screenwriter Richard Curtis received a great deal of attention for his 2005 movie The Girl in the Café. The film was the big-screen component of the Live 8 campaign, which included a deluge of media events and concerts around the world in an effort to increase aid to African countries and other developing nations at the approaching G-8 conference.

“I didn’t give my life to politics in order to say that I was part of a generation that succeeded in cutting the tariff on the import of processed coffee to 27.3 percent,” declares one of the movie’s characters. “I want to be a member of that great generation that for the first time had in its power to wipe out poverty, and did so.”

It’s a powerful message, but is aid truly the best way to wipe out poverty in Africa?

Africa’s growth problem is well documented. In a 1997 article in The Quarterly Journal of Economics, William Easterly and Ross Levine report that real per-capita GDP has been stagnant or declining in most African countries since 1960. Nearly all those countries had growth rates lower than the typical Asian country during this period, and many experienced economic decline. With the exception of some modest success stories such as Botswana and Lesotho, the view that Africa is a “growth tragedy” is sadly accurate.

This lack of growth has led to the impoverishment of hundreds of millions of people. Any attempt to remedy poverty in Africa must therefore focus on economic growth. The question of why some countries grow and others stagnate is at least as old as Adam Smith. In The Wealth of Nations Smith pointed to the quality of institutions, specifically economic freedom, as a factor in economic advance:

The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security, is so powerful a principle, that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the follow of human laws too often encumbers its operations; though often the effect of these obstructions is always more or less either to encroach upon its freedom, or to diminish its security.

Historical and empirical evidence validates Smith’s insight that economic freedom matters for development and prosperity. In a 2004 Cato Journal paper, for example, economists James Gwartney, Randall Holcombe, and Robert Lawson found that a one-unit increase in the economic-freedom index would raise per-capita GDP by 1.25 percentage points. Similarly, Jac Heckelman and Michael Stroup write in a 2000 Kyklos article that nearly half the differences in growth between countries can be explained by differences in economic freedom. Niclas Berggren surveyed the literature on economic freedom and growth in a 2003 issue of The Independent Review and concluded that an increase in economic freedom generally leads to growth.

This finding, however, does not give developed countries clear guidance on which policies to pursue. Even development economists who acknowledge the importance of institutions—such as Jeffrey Sachs—often remain vigorous proponents of increased government-to-government aid. Peter Bauer and other economists, however, have argued that foreign aid should be eliminated because of its deleterious effects on less-developed countries (LDCs) and that trade is the primary route to prosperity.

Both domestic and international trade are important for growth. Millions of Africans live at subsistence level, producing everything their households consume. Even where production above household consumption is possible, the absence of trading networks makes it impossible to convert higher production into a higher standard of living.

The opportunity to produce for the market creates an incentive to increase the supply of labor in a household. Given the low capital-to-labor ratio in most LDCs, a tiny increase in the supply of labor can result in a large increase in production. In addition, labor can be a form of capital formation. An example would be farmers forgoing leisure to clear and improve additional land for cultivation.

Trade also increases the supply of labor because of its reciprocal nature. In his 2000 book From Subsistence to Exchange, Bauer pointed out that trade is the impetus for economic advance because it brings the possibility of material improvement to people’s attention. The availability of inexpensive but desirable goods because of trade provides a strong incentive to increase production.

Perhaps more important, the ability to produce for trade allows citizens of LDCs to benefit from specialization and the division of labor. Farmers no longer have to be concerned with producing everything their households need and instead can focus on growing cash crops such as cocoa. Specialization and the division of labor allow for the emergence of other productive enterprises. A final benefit of increased trade is the creation of trade networks. Trade networks lead to improved transportation routes and help to facilitate communication and dissemination of new ideas and innovations.

Openness to Trade Leads to Growth

The empirical evidence that a country’s openness to trade leads to prosperity is clear. Jeffrey Sachs and Andrew Warner find in a 1995 Brookings Institution paper that countries open to trade have average growth rates around 2.5 percentage points higher than countries closed to trade. In the Economic Freedom of the World 2001 Annual Report, James Gwartney, Robert Lawson, and Charles Skipton found that a one-unit change in a country’s trade-openness index can increase long-term growth by two-tenths of a percentage point.

While developed countries that remove their import barriers cannot force LDCs to open their economies, they can increase the payoffs for doing so, thereby strengthening the incentive for institutional change.

As a matter of historical fact, aid is not a necessary condition for escape from poverty. Nearly the entire developed world was able to escape from subsistence level without aid. The important question for policymakers is the effect of aid on economic growth.

A review of the literature on aid and economic development shows that aid is unlikely to reverse Africa’s growth tragedy because of the incentives it creates for rulers of African LDCs. While it is true that there are many types of foreign aid, the focus here is on cash and loans made directly by governments or organizations such as the IMF and World Bank. Regardless of where the aid comes from, though, it ultimately goes from one government to another.

Recall that a poor institutional environment is the primary reason for the low economic growth of these countries. In the long run, aid would only lead to economic growth if it created incentives for positive institutional reform. Yet aid creates exactly the opposite incentives. Government-to-government transfers create a moral hazard where rulers have little to no incentive to improve institutions because bad institutions lead to aid. In fact, rulers have a reason to make things worse in order to keep the aid coming.

The presence of government-to-government transfers in poorly governed countries creates what Bauer called the double asymmetry of foreign aid. On the one hand, aid as a percentage of GDP in these countries is relatively small and thus aid can do little to improve their situations. As a percentage of discretionary spending, however, aid is generally high. Thus the bad incentives discussed earlier dominate any good incentives that may exist.

The empirical literature on this topic is large and varied, with the current debate focused not on the general importance of aid but when aid might play a positive role. For example, Craig Burnside and David Dollar write in a 2000 American Economic Review article that aid is beneficial only in a good policy environment. While Easterly, Levine, and David Roodman called this finding into question in a 2003 follow-up article, it is important to note that nearly all African countries have bad policy environments. Thus even if the research of Burnside and Dollar is correct, this does not imply that aid to Africa will be beneficial. Increased aid in a poor policy environment is likely to make things worse given the perverse incentives.

How best to reduce poverty in Africa is a difficult question. Given that foreign aid is less than 1 percent of most donor countries’ GDP, it seems like a simple and relatively inexpensive solution to African poverty. Calls for increased aid such as Live 8 therefore also seem reasonable. Considering the importance of institutions in economic development, however, maintaining or increasing aid hardly seems promising given the perverse incentives it creates for institutional reform. In fact, as Easterly shows in his 2001 book The Elusive Quest for Growth, experience demonstrates that aid does little to alleviate poverty and often retards economic development by making institutions even worse than they already were.

While the citizens of developed countries cannot vote to change the institutional structure of African LDCs, they can pressure for the removal of their own barriers to trade. Doing so will increase the payoffs to production for international trade in Africa, which should increase internal pressure to make these countries more open to trade. Only through external contacts with developing countries will Africa be able to go from poverty to prosperity.

Indeed, as if in anticipating Richard Curtis and the Live 8 movement, 40 years ago the late Milton Friedman issued a clarion call for the elimination of poverty that rests on far more solid economic grounds. In the classic Capitalism and Freedom he wrote: “We could say to the rest of the world: We believe in freedom and intend to practice it. No one can force you to be free. That is your business. But we can offer you full cooperation on equal terms to all. Our market is open to you without tariffs or other restrictions. Sell here what you can and wish to. Use the proceeds to buy what you wish. In that way cooperation among individuals can be worldwide yet free.”