From the Archives: 'The Poverty of Development Economics in Africa'

(This article appeared originally in the New York City Tribune on March 16, 1990, under the headline, "The Poverty of 'Development Economics' in Africa."  It has not previously appeared on the World Wide Web.)

African development specialists complain that Poland and Hungary will get over $500 million in economic aid in 1990 while the entire continent of Africa gets only about two-thirds that amount. There are substantial arguments to justify this imbalance, the most persuasive being that the Poles and Hungarians are eager to transform their deteriorating economic systems into free enterprise zones.

At the same time, it is clear that billions of dollars poured into persistently socialist and increasingly corrupt African governments over the past two or three decades has been money down a rathole. Congress and the President seem to think that American aid should be sent where it will be used most wisely and most profitably.

Certainly, poverty in Africa is one of the most serious problems facing the world today. Pervasive hunger and heavy national debts on that huge continent drain the international economy of resources that could be put to better use elsewhere, creating wealth rather than depleting it. To understand the current sad state of economic development in sub-Saharan Africa, one must go back to the early independence period.


Unfortunately, for both political and economic reasons, African governments adopted statist economic policies whose effect was to stifle growth, not enhance it. As Indian economist Deepak Lal put it in his aptly-titled book, The Poverty of 'Development Economics', “The most serious current distortions in many developing countries are not those flowing from the inevitable imperfections of a market economy but the policy-induced, and thus far from inevitable, distortions created by irrational dirigisme.”

In other words, current poverty in Third World countries and especially in Africa is the result of conscious policy decisions by ruling elites, often aided by development economists trained in the West who quite readily discarded the classical and orthodox economics in the tradition of Adam Smith, David Ricardo, and even John Maynard Keynes in favor of dicier theories and practices.

Perhaps the most trenchant and unconventional critique of orthodox development economics is found in Jane Jacobs' widely-discussed 1984 book, Cities and the Wealth of Nations. In it, Jacobs tackles head-on the field of macroeconomics and the development policies that flow from it, calling the whole field “a shambles.”

Like others who have analyzed the history of development aid, Jacobs notes that the impulse to send aid to underdeveloped countries was electrified by the success of the Marshall Plan in post-war Western Europe. The problem, of course, is that Marshall Plan aid was intended to repair fully developed but war-damaged economies, not transform embryonic economies ex nihilo.

“The healing of organisms,” she says, “including the organisms known as economies – is not at all the same as the metamorphosis of organisms, the conversion of them into something different.” Since the growing development industry of the 1950s and 1960s insisted on calling its projects “mini-Marshall Plans” and the like, disappointment was inevitable. This disappointment came at a high prices, as well.

One estimate is that in the 30 years ending in 1986, the West transferred about $1.6 trillion to the Third World, an amount equal to the total worth of all industrial stock traded on the New York Stock Exchange, and double the value of the entire U.S. agricultural sector.

The failure of the development economists was in their definition of development. They saw poverty as an obstacle to be overcome. They used military rhetoric to define development as a single-minded goal that can be reached by strategies, long-term planning, and setting targets. The unstated assumption was that “economic life can be conquered, mobilized, bullied, as indeed it can be when it is directed toward warfare, but not when it directs itself to development and expansion.”

Moreover, as Michael Novak has often pointed out, development economists are forever seeking the “causes of poverty.” Poverty, across all cultures and for most of human history, is mankind's normal state. What needs to be explored are the causes of wealth. Fortunately, that project was set off on a good start by Adam Smith in 1776.

The key, argues Jacobs, is that by its very nature, “successful economic development has to be open-ended rather than goal-oriented, and has to make itself up expediently and empirically as it goes along.” Jacobs defines economic development “as a process of continually improvising in a context that makes injecting improvisations into everyday life feasible,” amplifying this definition with the concept of “drift”: development entails “unprecedented kinds of work that carry unprecedented problems, [which drift into] improvised solutions, which carry further unprecedented work carrying unprecedented problems ...”

Small-scale economic actors in the Third World can be remarkable flexible in this fashion. Precisely because of the precariousness of their situation (most often in the unprotected, informal sector that exists apart from the officially sanctioned economy), peasants and micro-entrepreneurs respond well to the price mechanism. Deepak Lal argues that “unlike in richer countries, economic agents in poor ones will have few 'reserves' to fall back upon and will thus have to adjust speedily to a change in their economic environment by swiftly altering the terms on which they are willing to exchange economic commodities.” In developed economies, protected by large savings or the safety net of the welfare state, economic actors “can postpone the required price adjustments in a changing economic environment.”

It seems clear from this analysis that the informal sector – which, after all, existed and grew in the pre-modern era in Western countries even during the age of mercantilism – is the most effective engine of economic growth. It alone, unencumbered by the conservatism of bureaucracies and political elites, ready to adjust to changing conditions, willing to risk arrest and prosecution in order to achieve economic success, can create the conditions for growth even in the poorest of countries. Western development aid should thus be focused on assisting the informal, small-business sector and avoid government-to-government transfers that entrench unproductive, statist policies.

Richard Sincere is a Washington-based issues analyst and author of Sowing the Seeds of Free Enterprise: The Politics of U.S. Economic Aid in Africa, published in 1990 by the International Freedom Foundation.

No News Is New News: Revisiting the Somali Crisis of 1992-93

With the release on October 11 of the new Tom Hanks' movie, Captain Phillips, which is about the capture of an American cargo ship by Somali pirates; with the attack on the Westgate mall in Nairobi by Somali terrorists affiliated with al-Shabaab; and with this week's anniversary of the 1993 Battle of Mogadishu (later chronicled in the book by Mark Bowden, Black Hawk Down, and the 2002 Ridley Scott film of the same name), it seemed timely to revisit the Somali crisis of 1992-93 by looking at old video.

The video, in this case, is an episode of “On the Line,” which was produced by the Voice of America (VOA) for its Worldnet television network. The date was October 8, 1992. The occasion was the George H.W. Bush administration's lame-duck decision to send American troops to Somalia to protect the deliveries of humanitarian assistance, which had been obstructed by thugs and warlords.

On the Line: Crigler, Sincere, Untermeyer, Natsios

This troop deployment came to an insidious end just a year later, when the Clinton administration decided, after the debacle later portrayed in Black Hawk Down, that U.S. forces should be withdrawn from Somalia.

The guests on “On the Line” that day were Andrew Natsios, at the time director of the Office of Foreign Disaster Assistance within USAID and President Bush's special representative for humanitarian assistance in Somalia; Frank Crigler, the penultimate U.S. ambassador to Somalia (1987-90), who had retired from the Foreign Service earlier that year; and myself, then the director for African affairs at the International Freedom Foundation in Washington.

The host of the program was Chase Untermeyer, then director of the Voice of America and later U.S. Ambassador to Qatar.

Untermeyer asked me to explain the causes of the conflict in Somalia. My reply:

The causes are deep-seated, of course. The collapse of the government could have been a temporary power vacuum in which another government would come to power quickly. But in fact we see rival factions arising all over the place and the fact is that these factions are hostile to the humanitarian aid that's coming into the country and that is what is causing the technical problems in solving the disaster.

He asked Natsios, “Who is in charge in Somalia?” Natsios replied:

In terms of Somalis, no one is in charge of Somalia. In fact, I wish this were a civil war, at least we could negotiate with the two sides as we've done all over the world. In the Angolan civil war, the Mozambican civil war, the Sudan civil war, Ethiopia, Afghanistan, this is not like that. Even if the warlords agreed, they don't control half the militias. There are just bands of young thugs running around with guns who are high on the drug called khat, an amphetamine. They are uncontrollable and they don't answer to anybody.

Then Untermeyer said, “Mr. Sincere, is it correct to refer to Somalia as a country. Does it have any semblance of national order or rule at the moment?”

I answered:

I think that the best description for Somalia today was actually written by Thomas Hobbes 400 years ago, [in] Leviathan:  it's the state of nature, a war of all against all. It's something almost unprecedented in 20th century history. We're simply unused to a situation like this. And that is why it's so difficult for the United States, the other Western democracies, and the United Nations to get a handle on this and to actually help the situation.

Ambassador Crigler added to my response:

Let me comment on that, Chase, because I think this is a situation that's not going to remain unique. I don't believe it's unique even today. I think we're seeing something not unlike that in Yugoslavia, or what's left of Yugoslavia, and even, as we speak, in Georgia in the former Soviet Union – a situation in which the state of nature seems to be the only substitute for a repressive state structure.

(I find it interesting that both Georgia and the former Yugoslavia have settled into stability, with several former Yugoslav states joining NATO and the European Union. Somalia remains anarchic by comparison.)

Crigler continued:

The state structure in Somalia was really imposed from without, in any case, there was never really a nation-state as we know it in Somalia before, and that has collapsed since [President Mohammed] Siad-Barre's fall because that rigid structure is no longer there and simply crumbled of its own and there was nothing left to take the place of it. What has happened over the years under that rigid structure is that people have lost the talents for settling their ethnic differences by peaceful means. Traditionally, as Andrew [Natsios] was suggesting, the elders were able to moderate those differences. Those skills were lost during this period of repression and I'm afraid that's not a unique situation we're going to see in the world today.

Later, Andrew Natsios suggested that, if the rival Somali factions didn't resolve their own problems, the United States would withdraw its troops. (That prediction came true, if in tragic fashion.) Untermeyer asked me if I agreed that that is a good policy. I said:

I think it's the best policy. This is ultimately up to the Somali people to solve for themselves. Order cannot be imposed from outside. Humanitarian assistance cannot be provided if rival clans are actually shooting the humanitarian assisters. It's a tragic situation and it is ultimately up to the Somali people to get together and say, “We no longer want to have this war. We must live peacefully.” And it's not up to us to impose that on them. We can prod them, we can cajole them, but beyond that, there's not much we can do.

At that point, Untermeyer asked Ambassador Crigler about Somalia's strategic importance, and then posed the same question to me. My answer:

Well, certainly, from a geopolitical standpoint, Somalia always will have a strategic value to the United States and to any rivals the United States might have. But I think the point should be made that a comparison has often been made that the United States is paying more attention to Yugoslavia than to Somalia and the accusation has been leveled that this may be of racist origin but in fact the amount of aid that the United States has sent to Somalia has far outstripped what's been sent to Yugoslavia in the same period of time. I don't think the United States has fallen down on the job in this at all but the fact is that the hostility that we're facing in the region is blocking our ability to solve the problem.

Twenty-one years later, and we are still facing a region that is blocking our ability to solve the problem.

Here's the complete video of episode 24 of “On the Line,” just under 20 minutes, as recorded in the VOA studios on October 8, 1992: