Academic journal article The Cato Journal

Entrenching Economic Freedom in Africa

Academic journal article The Cato Journal

Entrenching Economic Freedom in Africa

Article excerpt

In the 1950s and 1960s, many Africans believed that independence would change prospects for rapid economic growth and development. First, independence implied the end of colonialism and its despotic, exploitative, and repressive institutions. Second, with the Europeans gone, Africans could now engage in democratic (people-driven, participatory, and inclusive) constitution-making to provide themselves with dispensations that reflected their customs, realities, beliefs, values, cultures, and aspirations. Third, public policy would be focused on maximizing the objectives of the indigenous peoples. Fourth, the new governments, now controlled by Africans, would provide the enabling institutional environment for effectively managing ethnic diversity. Fifth, the new post-independence governments were expected to deal with historical injustices and provide all individuals, groups, and communities with the wherewithal to participate fully and effectively in economic growth and development. Finally, the new governments were expected to restructure property rights, especially in environmental resources, and achieve equity in allocation and sustainability in exploitation.

The general belief was that the new leaders would be able to restructure the critical domains, especially property rights, and produce new and more effective incentive structures. Given the extremely high levels of poverty in these countries, it was critical that the new governments provide incentive structures that encouraged indigenous entrepreneurship, as well as institutions that adequately constrained civil servants and politicians from engaging in inefficient redistributions of income and wealth.

Failure of the Post-Colonial State

At independence, most African countries opted for statism, a development model that emphasized government control of resource allocation, minimized the functions of the market, and granted the state significant power to intervene in private exchange, as well as to own and control productive resources. Eventually, the state came to dominate the economies of most African countries.

Several reasons have been advanced to explain the choice of statism in post-independence Africa. First, many Africans considered the state as the most important actor in the war against mass poverty and deprivation, and were willing to grant it significant power to intervene in private exchange so it could aggressively confront poverty. Second, many indigenous elites of the time believed that the state was the only institution capable of reconstructing and rehabilitating societies and communities that had been devastated by colonial exploitation. Third, the state, now controlled and dominated by indigenous elites, was considered the only entity with the capacity to hold together competing ethnic and nationality groups and provide the enabling environment for national integration, peaceful coexistence, and sustainable development. Fourth, development economists of the time argued that the state was the only institution capable of successfully organizing the large, highly expensive, risky, and complex development projects needed to meet rising public obligations and deal with poverty, as well as provide employment opportunities for a restless population and enhance the ability of these emerging economies to participate competitively and gainfully in the post-World War II global economy. Fifth, the general ethos of the period favored expansion of the welfare state and public management of the economy. Sixth, many of the continent's new leaders had been educated in Europe, where social engineering and economic planning were popular ideas (see Krueger 1992, Decalo 1992).

During the early years of independence, the economic projects that were expected to generate the wealth to fight poverty, as well as to provide the masses with employment opportunities, were considered too risky and complex for what was essentially a highly underdeveloped and unsophisticated private sector. …

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