The Economist recently looked at one of the odd outcomes of the last half of the 20th century. Over the last 35 years, no country has experienced faster growth in per capita income than Botswana. That’s right, Botswana.
While the rest of Africa is mired in what seems like perpetual poverty, Botswana has had a long period of relative prosperity. Why?
There, things get complicated. As The Economist notes, Botswana is no egalitarian paradise — its income inequality is just as high as in other parts of the world. And with the government consuming 40 percent of the GDP, neither is Botswana a free market paradise.
Several economists have recently published papers on precisely this question and The Economist summarizes their findings thusly,
Wealthy and secure, the [Botswana] elite pursued sensible policies, such as a customs union with South Africa, and a currency pegged to the rand. The country never tried to oust most of its expatriate labour as some other countries did. Foreign mining companies were welcomed, and the country dealt with them fairly but firmly: it even renegotiated its contract with South Africa’s diamond giant De Beers when it realised the scale of its reserves.
Botswana’s experience suggests that poor countries must try to align the incentives of the elite with those of the masses, much as companies in rich countries try to tie managers’ rewards to those of shareholders. It also backs the view of Hernando de Soto, a Peruvian economist, who has proposed a stronger approach to land titling in poor countries. Where countries receive aid, Botswana’s experience suggests that profitable goals include better courts and legal systems; and that one good use of cash is to fight disease.
…
One lesson from Botswana is that history shapes countries. ANother is that good management is at the centre of growth, and that the rule of law is as important as are the laws of economics.
In fact it may not be possible to overstate the importance of a stable judiciary that provides clear signals for poor and wealthy alike as to how they may proceed in acquiring and disposing of wealth (and thereby enriching the entire country).
Source:
The African exception. The Economist, March 30, 2002.
The Botswana and the Mystery of Growth by Brian Carnell, unless otherwise expressly stated, is licensed under a Creative Commons Attribution-Noncommercial-Share Alike 3.0 License.
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