Tuesday, July 14, 2009

Praising Obama and his call for economic freedom

The WSJ editorial board is known for its strong defense of economic freedom — and, in that capacity, have been (along with Forbes and Investor’s Business Daily) the strongest critics of the new administration’s spending, regulation and government intervention policies.

Thus, the column “Obama Gets It Right on Africa” this morning by editorial board member Bret Stephens immediately caught my eye. The subtitle was “We'd be glad if the government only skimmed 20%.”

Stephens notes Obama’s first-hand encounter with corruption in Africa in Dreams from My Father, specifically the government-owned monopoly that controls coffee exports in Kenyan. Stephens quotes a farmer’s lament (page 352 according to Google books):

"'The Kenyan Coffee Union. They are thieves. They regulate what we can plant and when we can plant it. I can only sell my coffee to them, and they sell it overseas. They say to us that prices are dropping, but I know they still get one hundred times what they pay to me. The rest goes where?' Francis shook his head with disgust. 'It's a terrible thing when the government steals from its own people.'"
Another Google book on the Kenyan one-party state (by Jennifer Widner of Princeton) notes that in the 1980s, the government either eliminated or marginalized the two organizations that once represented farmers’ interests, to minimize the political voice and economic returns that the coffee growers gain from their efforts.

Stephens guesses that this encounter was on the president’s mind during his speech Saturday in Ghana, which Stephens calls “by far the best of his presidency.” As Stephens writes:
Here's some of what Mr. Obama said: "No business wants to invest in a place where the government skims 20% off the top." "The purpose of foreign assistance must be creating the conditions where it's no longer needed." "The West is not responsible for the destruction of the Zimbabwean economy over the last decade, or wars in which children are enlisted as combatants." "We must support strong and sustainable democratic governments." "America can also do more to promote trade and investment." "We have a responsibility to support those who act responsibly and to isolate those who don't, and that is exactly what America will do." "History shows that countries thrive when they . . . create space for small and medium-sized businesses that create jobs."

All this is not only true, it's groundbreaking. Since British Prime Minister Harold Macmillan gave his "Wind of Change" speech (also in Ghana) nearly 50 years ago, Western policy toward Africa has been a matter of throwing money at a guilty conscience (or a client of convenience), no questions asked. The result, as Mr. Obama pointed out, was that countries such as Kenya, which had a larger GDP than South Korea in 1961, "have been badly outpaced."

Maybe it took a president unburdened by that kind of guilt to junk the policy. Or maybe it simply took a conversation with some of the Francises of Africa -- the politically invisible middle classes held down by their own kleptocratic rulers. Whatever the case, Africa will be well served if Mr. Obama can make good on his rhetoric.
(Stephens laments the disconnect between Obama’s desire for government transparency in Africa though not in the US — which may be true, but distracts from the importance of the main topic: achieving economic development for the 800 million residents of sub-Saharan Africa.)

Economist William Easterly of NYU also praised elements of the speech, specifically the recognition that Western aid to African governments has failed (and will always fail) to pull the Africans up from their poverty. Like Easterly, Chris Blattman of Yale felt parts of it soft-pedalled the needs for change.
Also, though I share some of Easterly's fears on foreign aid gone military, I generally feel like peacekeeping does more good than harm. I've just come back from Liberia, and a well-financed, well-timed UN mission is a thing of wonder.

But not all conflict is ended at the barrel of a gun. Where Bush was supremely successful was pushing African leaders to end war. In Liberia, South Sudan, Uganda, Cote d'Ivoire, Sierra Leone (the list goes on) leaders got a simple message: stop the fighting, now. Most often, the threat wasn't one of force, it was an economic and diplomatic one. I would like to think Obama will keep this up, but he didn't say so in his speech. Rather, he pointed to the barrels of America's guns.
As recently demonstrated in Central America, even the best political institutions are often fragile, and thus ending revolution and war can be an ongoing struggle.

Of course, not everyone loved the speech, particularly those activists wedded to blaming the former imperialists for Africa’s problems decades later. Thus it was encouraging to see an interview with the President of Liberia acknowledge the need of African countries to solve their own problems
BBC: Basically, President Sirleaf, if I could summarize, Barrack Obama was saying to you, the leaders of Africa, that you need to step up your game, will you rise up to the challenge

[President President Ellen Johnson] Sirleaf: Yes, I think that’s exactly what he was saying, and I think that each African leader myself included, will be charged to rise to the challenge, of promoting good governance, and that means vibrant civil society as he said, that’s freedom of the press, accountability, transparency, honesty, fighting corruption, the rule of law… and so yes I think each African Country will determine the policies and measures they use to meet the challenges, but I think those challenges are being met in many Countries already, and more, I think ,will be able to do so, because that’s the only way that we will also meet the call for an inter-dependent world. That’s what he talked about…

BBC: I’m listening to President Obama there, if I may interrupt you there, this speech makes it clear that for him, democracy and good governances is not just about holding elections, it’s about leaders not enriching themselves, getting rid of bribery and corruption, can you do that?

Sirleaf: we must do that! Each of our Country has to face this in different measures, Liberia is facing it, it’s been entrenched, systemic for a while, we are taking measures to do that, we must! because if we don’t then we will not be able to get the transformation that we all seek, and so in that respect you are absolutely correct.
I think everyone in the West should be rooting for the success of democratic Africa and its implications for freedom in the world. The economic success of Singapore allowed some to claim that the path to economic growth only required a benevolent dictator to do the right thing — Africa, like Latin America, has had generations of dictators, few of them benevolent.

India is attempting a messy and sometimes difficult path to demonstrate that economic development can come through free markets, democracy, transparency and accountability. Let us hope that at least some countries in Africa (Kenya, Ghana, Liberia) can emulate that path in the short run, offering hope to the rest of the continent (as Chile does in South America) by demonstrating a path out of poverty and tyranny.

This issue is salient to me on a number of levels, in a way that wasn’t true a year ago. Last November I had the honor of visiting Chile to speak about open innovation. Before going, and while there, I learned a little about its difficult but unique path towards economic freedom (far ahead of anywhere else in Latin America or Africa ).

More recently, a few weeks ago the eldest son of my wife’s best friend (Aaron) graduated from Stanford and began a new job in Rwanda. His company, funded by private investors from Little Rock, is attempting to fuel economic development through trade, beginning with its purchase Saturday of a defunct coffee warehouse in Kigali.

It is only the latest effort by Little Rock investors to help Rwanda. As Aaron explains it, the private investment efforts from Arkansas are a direct result of friendship ties developed by an American-educated John Rucyahana, a Rwandan Anglican bishop who came to Little Rock in 1998 to sponsor a new Anglican parish there that later became the Anglican Mission in the Americas.

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