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Friday, 21 May 2010

African Poverty and Property Rights

James Robinson argues that the absence of property rights lies at the heart of Africa's underdevelopment. We have previously discussed Robinson's material (e.g here).  The critique is in line with the "institutional school" led by Acemoglu which rightly emphasise that institutions are the fundamental cause of underdevelopment, although here Robinson pushes the reductionism too far. However, what is intriguing, and rightly so in my view, is that he does not then go on to argue that we need property rights now! For good reason, as well see herehere and here. Rather he offers a broad sets of "solutions for Africa" written largely for the American audience. One of the solutions is the need to change the "political trajectories of society" through supporting civil society as a way of altering the balance of power. I touched on this here.

Poverty in Africa: What History Teaches About Property Rights, James Robinson, Insider Online / Defining Ideas, Commentary :

One of the burning intellectual and policy issues of our day is the poverty in sub-Saharan Africa, attracting the attention of everyone from entrepreneurs such as Bill Gates through movie stars such as Madonna and Angelina Jolie to rock stars such as Bono and Bob Geldof. The World Bank measures poverty levels by the number of people who live on less than $1 a day; the majority of those people, around 350 million of them, live in sub-Saharan Africa. Moreover, Africa is the only part of the world in which the absolute number of poor people is increasing. By
2015, despite all the attention given to the United Nations’ Millennium Development Goals, the number of poor people in Africa is forecast to be more than 400 million.

Why are there so many poor people in Africa today? Has Africa always been like this? There are many views. Some see African poverty as having deep roots in the geography and ecology of the continent. Others argue that Africa is plagued by a culture that does not allow capitalism to flourish.

The real reason that Africa has been poor historically and is poor today has to do with property rights. In short, African countries do not have the type of property rights that are connected with economic progress in Western Europe or North America. And the property rights they do have tend to be insecure.

The form of property rights in Africa—and their absence, in many cases—is the root source of its poverty, which creates both good and bad news. The good news is that Africa is not doomed to poverty; if its property rights institutions can be improved, Africa will grow and its people’s living standards will improve. The bad news is that there is no silver bullet for improving property rights. For example, throwing aid money at Africa may alleviate suffering but is unlikely to improve its institutions. Worse, many of the problems with property rights in Africa stem from problems with politics and political institutions; these problems are not easy for either insiders or outsiders to fix.

Plows and Wheels

When examining the role of property rights in African poverty, we should begin by looking at its history. We know that before the Industrial Revolution began in Great Britain about 230 years ago, differences in the levels of prosperity among countries were much smaller than they are now. Whereas today the average income of a citizen of the United States is about 40 times that of a citizen of a country such as Ethiopia or Sierra Leone, in 1750 that difference was probably only two or three times. Between 1750 and 2009, the United States experienced rapid economic growth, but African countries did not. Even in 1750, however, there were important differences in the structures of the various societies. Although we don’t know when many of those differences emerged, we can open some windows on the past.

In 500 AD, for example, the Kingdom of Aksum flourished in northern Ethiopia; it had a written language, minted its own coins, and enjoyed a diversified agricultural economy based on ox-drawn plows. The kingdom traded with the eastern Mediterranean, the Persian Gulf, the Arabian Peninsula, India, and Sri Lanka. The Roman emperor Constantine converted to Christianity in 312 AD; Ezana, the king of Aksum, did so in 333 AD, a mere 21 years later.

Nevertheless, in both technology and the development of political institutions, Africa’s trajectory seems to have been different from Western Europe’s. Outside Ethiopia, neither the plow nor the wheel was used in sub-Saharan Africa; the great urban centers of Aksum and Mali seem to have been the exception rather than the rule. Moreover, the political institutions of both these societies could best be described as “absolutist” in that they were ruled by kings whose power was relatively unconstrained by checks and balances.

The economic problems created by absolutism are well illustrated by the history of the Kingdom of the Kongo (in what is now the Democratic Republic of the Congo, which took its name from the premodern kingdom). The capital of the Kongo, Mbanza, had a population of around 60,000 when it was first visited by the Portuguese mariner Diogo Cão in 1483, making Mbanza about the same size as Lisbon and larger than London, which had a population of about 50,000 in 1500.

The Kongolese learned about plows and wheels from the Portuguese, who sent missions in 1491 and 1512 to encourage better agricultural practices. Yet neither the plow nor the wheel was widely used until early in the 20th century. We learn why from existing accounts of how the society was organized. The Kongo was governed by a king and an aristocracy whose wealth was based on slave plantations and the extraction of taxes. Slavery, which was central to the economy, was practiced by the elite both to supply their own plantations and to sell to Europeans at the coast. Taxes were arbitrary (one was collected every time the king’s beret fell off).

To have become more prosperous, the Kongolese would have needed to save and invest in plows, for example. But this would not have been worthwhile in that any extra output they produced by using plows and wheels would have been expropriated by the king and his lords. Most people’s property rights were also highly insecure; many moved their villages away from roads so as to reduce the incidence of plunder.

Aksum and its successor, Ethiopia, may not have looked very different from contemporary European societies in 500 AD, even developing a form of feudalism at the same time as Europe did. Yet after this point, very different institutional dynamics took hold and the property rights institutions of Western Europe began to diverge from those of Africa. In Europe, domestic slavery had disappeared by 1400; around the same time, feudal institutions such as serfdom began to crumble. Both institutions continued in Ethiopia until the mid–20th century.

Defeating Absolutism

As 18th-century British historian Edward Gibbon (author of The Decline and Fall of the Roman Empire) put it, the Ethiopians “slept near a thousand years.” But something very different was happening in Britain. Not only did labor market institutions and property rights for people change, so did property rights in ideas and people’s access to land change. The 1623 Statute of Monopolies created the world’s first patent law; as serfdom eroded, private property rights in land developed. Those institutions, which subsequently spread to some European colonies, including the future United States, created a radically different set of economic incentives in Britain.

Why did this happen in Britain but not in the Kongo or Ethiopia? Interestingly, the motivation behind the Statute of Monopolies was not to create a patent law but to stop the king from granting monopolies via “letters patent.” Thus the creation of a law that ultimately protected intellectual property rights and stimulated innovation was a byproduct of the conflict between Parliament and the king, an attempt by Parliament to defeat absolutism.

The political conflicts of 17th-century Britain, through the Civil War of the 1640s to the Glorious Revolution of 1688, removed the type of absolutist political rule that led to insecure property rights in the Kongo and Ethiopia. Indeed, we can see the political transition of Britain beginning with the decline of serfdom in the 14th century. After the Black Death of the 1340s, the English state passed the Statute of Laborers, an attempt to stop wages from rising. The ensuing rebellion forced the king to rescind the statue, evidence that he lacked the power to enforce it.

Britain, then, was on a very different political trajectory, one with huge consequences for property rights and prosperity. The kings of the Kongo and Ethiopia also faced domestic opponents, but they were unable to triumph; even if they had, they most likely would have become absolutist kings themselves. What is distinctive about the British experience is not just that absolutism was defeated but that one absolutism was not replaced by another.

What explains the rise of Parliament and the defeat of absolutism in Britain? Why did the rise of Parliament create changes in economic institutions? The answer is that British society had undergone a series of large shocks that not only greatly increased the number of those with an interest in secure property rights but also empowered them.

Even more important than the early shock of the Black Death was the redistribution of land brought on by Henry VIII’s dissolution of the monasteries after 1536, the enormous economic opportunities created by the New World, and the expansion of inter-oceanic trade after 1492. The Whigs who fought and defeated absolutism in 1688 did so to change state policy and institutions in ways that would promote their economic interests. Because their coalition was so broad, what they wanted would benefit society as a whole, with no going back to absolutism. The institutions that protected the privileges of the king at the expense of his subjects, and that allocated monopoly rights for profitable lines of businesses to the elite aligned with the king, were torn down, to be replaced by institutions providing much greater incentives to save, invest, and innovate for a larger slice of society.

It is no coincidence that Britain’s Industrial Revolution began within a century of the Glorious Revolution of 1688 and the ascendance of modern parliamentary democracy over the monarchy. The great inventors—such as Richard Trevithick, builder of the first full-scale working railway steam locomotive; James Watt, the Scottish mechanical engineer and inventor; Richard Arkwright, the mechanical engineer credited with using water power for spinning machines; and Isambard Kingdom Brunel, a British engineer whose designs revolutionized public transportation—were able to take advantage of the economic opportunities generated by their ideas, secure in the knowledge that their property rights would be respected.

Dispersed Rights and Development

The political developments in Britain that led to secure property rights and widespread economic opportunities were the outcome of conflict and the defeat of absolutism. The same was true in the United States; good British institutions were not transmitted to the Jamestown colony. For one thing, British institutions were not yet fully established in 1607. For another, the model of colonization that the settlers had in mind was inspired by Spanish conquistadores Hernán Cortés and Francisco Pizarro—capture the ruler and exploit the indigenous people. But such a strategy was infeasible in the colonies; by 1619, the Virginia Company, having given up trying to exploit both indigenous peoples and colonists, created a general assembly based on universal male suffrage.

As British North America developed, British elites tried time and again to create a relatively oligarchic society with heavily restricted economic and political rights for the vast mass of individuals. In each case this model broke down, just as it had in Virginia, because, as in Britain itself, those with an interest in secure property rights and widespread economic opportunities gained the upper hand, though they did so for different reasons than in Britain itself. In the New World, where land was plentiful and labor scarce, the mass of people had power because they did not rely on elites for access to economic opportunities. Instead, the elite had to rely on the people. Such early conflicts created a society with widely dispersed political and property rights in which economic opportunities were probably more widespread than anywhere else in the world at that time, culminating in the U.S. Constitution and the economic success of the United States in the 19th and 20th centuries.

African institutional dynamics were very different. In Ethiopia was isolation and stasis; elsewhere, the insecurity of property rights was exacerbated by the slave trade, which distorted paths of political development and led to the emergence of states, such as the Kongo, based not on investing but on slavery. Africa’s increasing economic backwardness made it vulnerable to colonialism, which replaced one form of absolutism with another. Later, independence did the same, with predictable consequences for property rights.

A good example of this is Sierra Leone, whose status as a British colony emphasizes that there was no advantage in such status. Six years after independence in 1961, Sierra Leone was taken over by Siaka Stevens, who pulled up the railway line to the south of the country and sold off all the track and rolling stock to isolate the Mendeland region where support for his opposition was strongest. The roads fell to pieces and schools disintegrated. National television broadcasts stopped in 1987. The Sierra Leone Produce Marketing Board expropriated farms; when the governor of the central bank complained about fiscal profligacy in 1980, he was thrown to his death from the roof of the central bank offices. Stevens and his successor, Joseph Momoh, created monopolies, expropriated assets, and looted diamond wealth. In 1991 the regime collapsed into a civil war. Today most of Sierra Leone is controlled by 149 chiefs who are elected for life from “ruling houses.” People without connections to those chiefs and ruling houses can quickly find their land expropriated. Sierra Leone’s per capita income is far below what it was 50 years ago; it also has one of the worst life expectancy rates in the world.

Sub-Saharan Africa’s poverty has emerged over a long period of time. But its origins and persistence have nothing to do with geography.

Many Africans are struggling to change their situation, aspiring to be wealthy and live long and rewarding lives, as witnessed by the thousands who risk life and limb trying to gain access to Europe and a better future for themselves and their families. Should we help them? If so, what can we do? I think we should help them, for several reasons. First, many things we do affect Africa, even if unintentionally, so we are already involved. Second, we cannot help but be influenced by Africa’s poverty, which breeds discontent and false messiahs, such as Osama Bin Laden, that can lead to problems for the United States. Finally, we feel distress and moral outrage at witnessing such suffering and destitution.

Solutions for Africa

What can we do? First, let us be clear about foreign aid: Foreign aid is not the cure, but neither is it the cause. Sierra Leone got little aid in the 1970s and 1980s when Stevens was running the country into the ground. Such aid can be siphoned off by corrupt politicians, giving them more resources to play with, but the roots of Africa’s economic problems long predate foreign aid. Three things would help sub-Saharan African societies get on the right track economically.

First, give Africans more economic opportunities, which doesn’t mean throwing money at them. What it does mean is opening markets to African exports and trade. In the 17th century, British trade was crucial for developing and strengthening those individuals who ultimately changed politics and property rights. This could also happen in Africa.

Second, economics must play a bigger role in foreign policy. Foreign policy toward Africa has been driven too much by short-term politics without focusing on economic development, but promoting prosperity in Africa is good long-run foreign policy. Supporting dictators who are “pro-Western” risks creating an anti-Western society.

Finally, development assistance must help change the political trajectories of societies. By this I don’t mean imposing democracy, though that could be good if the new democracy could be made to work. The historical evidence suggests that good political and economic institutions emerge from a balance of power in society. To achieve this, we should help civil society and the media promote de facto checks and balances on rulers. This emphasis is likely to be much more effective in Africa than promoting what James Madison, principal crafter of the U.S. Constitution, referred to as “parchment” institutions: those that exist on paper but aren’t reflected in the interests and goals of the people.


  1. " The real reason that Africa has been poor historically and is poor today has to do with property rights. In short, African countries do not have the type of property rights that are connected with economic progress in Western Europe or North America. And the property rights they do have tend to be insecure. "

    The question is not 'property rights', the question is 'whose property rights'.

    " Nevertheless, in both technology and the development of political institutions, Africa’s trajectory seems to have been different from Western Europe’s. "

    No fertilizer, Sherlock. Gee, could this have something to do with, say, the death of half the population of The Congo under Belgian rule, systematic disenfranchisement like apartheid and just run of the mill colonialism?

    What this writer does, it tip toe around the realities of colonialism and neocolonialism. There is no 'miraculous' reason why Africa (African people, but not Western corporations in Africa) are doing poorly.

    You only need to follow Zambia's money, and the billions that are lost to the country every year, for an explanation why most of the people are poor.

  2. I agree with Robinson that lack of secure property rights is the main cause of Africa’s poverty. But to attribute this to our paucity of formal institutions is superficial. Robinson dismisses the explanation that Africa is plagued by a culture that does not allow capitalism to flourish. But that is nearer the mark. The absence of the wheel from our continent is also relevant.

    A point which I have not seen mentioned is the very small size of social groups before the invasion by outsiders. Why is this important? Because in clan groupings communities are so small that everyone knows everyone else, with the result that theft is extremely difficult to conceal, and is therefore a very risky activity.

    The absence of wheeled transport, and also of money, restricted travel and the movement of goods and wealth. But small social groupings constituted areas of security for what little property existed – mainly in the form of animals and stored crops, So theft was extremely dangerous.

    When there are no strangers and there is no danger of theft, there is no need for the trust which is so essential in today’s open society, with its frequent travel and constant interaction with strangers. Trustworthiness was therefore uncommon until recent times, and it was little valued as a quality. That would explain why property rights are now less secure in Africa than in other parts of the world.

    Setting up institutions is relatively easy, when compared to the much more difficult and lengthy process of building trust. But the latter is basic; and it is far more important.

  3. The poverty in that place should always be considered by the Government. People there should be given property rights.

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