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Earlier this month, the International Monetary Fund and the African Export-Import Bank made US$800 million in credit available to Zimbabwe. This initiative is meant to help the country restore its ravaged economy.
But for Zimbabwe and other nations that lack the basic institutions required to build wealth, simply loaning them money is not an effective strategy for reducing poverty. What’s needed instead are programmes that foster the conditions that cause long-term prosperity and well-being.
A report just released by the Legatum Institute, an independent development think tank, helps identify some of those conditions. The 2009 Legatum Prosperity Index was developed by a group of 13 distinguished economists and policy experts. The study ranks 104 nations by their level of prosperity. Of the 15 countries that ranked lowest on the Index, nine are in Africa–even though many African countries, from the small Guinea Bissau to the relatively large Ethiopia, were excluded from the rankings due to a dearth of data. Overall, 55 percent of Africa ‘s population–and 90 percent of the world’s population–is covered by the Index.
Africa ‘s dismal performance can’t be attributed to a lack of aid. The region received a total of US$716 billion in international assistance between 1960 and 2006, after adjusting for inflation. Yet many countries in the region have failed to achieve sustained economic growth. In 1981, 53.7 percent of Africans were living below the poverty line. Today, that number is virtually unchanged–it’s still above 50 percent.
While Africa’s poverty has not diminished, other countries have become richer, creating an ever-widening degree of global economic inequality. In 1960, the average person living in Asia, for instance, was poorer than the average African. By 2003, the average Asian was almost two and a half times richer than the average African.
For policymakers, then, the big question is as follows: If 50 years’ worth of aid hasn’t had much effect, what will?
The Index points the way to an answer. It identifies nine “building blocks” of prosperity–economic fundamentals, entrepreneurship and innovation, education, democratic institutions, governance, health, personal freedom, security and social capital. Nations lacking in these areas are at a serious disadvantage when it comes to achieving both wealth and happiness. Viewing Africa through this lens, the nature of the region’s problems becomes clearer.
Look at Kenya, which ranked 95th on the Index. Almost a quarter of Kenyans live on less than one US dollar per day. The country’s plight is exacerbated by a disastrously high incidence of HIV/AIDS, with close to five percent of the population infected. Traditional aid hasn’t helped Kenya because it doesn’t address the country’s systemic problems. Kenya is plagued by high rates of assault, homicide and theft due to frequent civil conflicts, often caused by its repressive and corrupt government.
Or take Nigeria, which came in at 98th overall. The technology infrastructure in the country is very poor, with less than one personal computer per 100 people. Nigerian elections are poorly regulated, and there’s no independent judiciary. The result has been severe political instability that’s crippled this nation of over 140 million.
Contrast the state of these two countries with Botswana, which ranked 56th on the Index. Botswana has experienced consistent economic growth over the last few years. In fact, since it gained its independence from Great Britain in 1966, the country’s economy has grown faster than China’s by some measures. Botswana would have ranked even higher in the Index if it were not suffering from one of the world’s worst AIDS epidemics.
The Prosperity Index makes clear what many already know about prosperity–in order for any society to flourish over time, people need to feel safe, and have the freedom to express themselves, start businesses, practise their religion, keep themselves healthy, and develop meaningful social connections. Growth is absolutely vital for Africa. The last 50 years of development policy have shown that money alone, especially money donated, can’t bring the region out of poverty. What’s needed is a holistic approach that focuses on the building blocks that empower Africans to help themselves.
Roger Bate is the Legatum Fellow in Global Prosperity at AEI. Thompson Ayodele is the director of initiative for Public Policy Analysis, a public policy think tank promoting this issues of free society based in Nigeria.
Versions of this article appeared in the Nigerian Tribune (Nigeria) and the Tripoli Post (Libya).
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