The Brookings Institution Presents ... Evaluating Poverty Elimination: Boosting Entrepreneurship in Africa
Mbaku, John Mukum, Harvard International Review
In Doing Business 2012: Doing Business in a More Transparent World, the World Bank noted that many African countries have significantly improved their political and economic systems during the last several years, placing the continent in a position to emerge as a core center for economic development. However, as reported in the UN Development Programme's Human Development Report, 2011, many Africans remain trapped in extremely high levels of poverty: they live in countries where existing societal structures make it virtually impossible for them to escape poverty or even meet their basic needs. Of the forty-two countries with the lowest levels of human development in 2011, 81 percent of them were in Africa, and in nearly half of those, over 50 percent of the population suffers from extreme poverty.
Thus, the immediate policy priority for African countries should be to reverse this unfortunate reality. Historical discussions among economists on how to achieve this goal have produced two policy options: (1) a redistribution of income, and/or (2) provision of opportunities for the poor to create their own wealth--all to be accomplished through progressive taxation. Aside from the usual controversies about whether high marginal tax rates would negatively affect innovation and investment in productive capacity or reduce the desire of recipients to invest in self-improvement, it is obvious that the African economies do not presently have the resources to fully implement meaningful income-support programs.
Even with significant flows of foreign aid, cash transfers to the poor as a way to deal with the continent's poverty quagmire is not and can not be considered a sustainable public policy. The most effective and sustainable way to deal with severe poverty and minimize the chances that vulnerable groups will soon slip back into poverty is to enhance their ability to create their own wealth. Governments should follow a pro-poor growth policy that enhances the ability of the poor to participate fully and effectively in wealth creation and economic growth.
Revisiting the Source of the Problem
The decolonization project was expected to help Africans rid themselves of their European colonizers and then engage in democratic constitution-making processes to develop laws and institutions based on their own values, aspirations, traditions, and customs. These post-independence institutional arrangements were expected to minimize corruption, rent seeking, and other growth-inhibiting behaviors, in addition to securing peace and providing the wherewithal for peaceful coexistence, and enhancing entrepreneurship and wealth creation, especially among the poor.
Colonial public policy maximized the interests of Europeans. After independence, Africans hoped that public policies would be devoted exclusively to nation building, improvement of the welfare of citizens, and the protection of fundamental rights. In order for African countries to accomplish these important national goals, popular forces, with significant input from all of the country's relevant stakeholder groups rather than ethno-regional coalitions, had to control post-independence public policy.
Such a vision of governance was not shared by all Africans, as evidenced by the fact that many of Africa's post-independence ruling coalitions engaged in corruption and other behaviors that imposed significant costs on the people. The pervasiveness of venality in many of Africa's public services is a manifestation of the desire of ruling elites to subvert national laws to enrich themselves.
During decolonization, many of Africa's indigenous elites betrayed their preference for top-down, elite-driven, non-participatory approaches to constitution-making. For example, all former French colonies in sub-Saharan, Africa except Guinea accepted de Gaulle's offer of free association as autonomous republics within the French Community. By doing so, these elites adopted the French Constitution of 1958 as a foundation for their governance institutions and effectively deprived their citizens of the opportunity and right to select their own laws and institutions. …