Sunday, August 9, 2015

Botswana: Triumph of Central Planning

Botswana: Triumph of Central Planning[1]
Carl Stoll[2]
There is one shining point of light on the bleak African continent:
Botswana has pursued goals of good governance and preserves a democratic tradition from the time before Europeans arrived. It has known no coups d’état, hyperinflation, famine or civil war. Its growth rate has been steady throughout the years, in dramatic contrast to declining per capita incomes in most other black African countries.
So, have we found the philosopher’s stone, Hayek’s oh-so-spontaneous social harmony by virtue of impersonal market forces?
Well, Hayek isn’t ENTIRELY off the track. There is a vague family resemblance between Botswana’s successful political and economic policies and Hayek’s recommendations, in that both are embedded in 19th-century liberal democratic traditions like rule of law, etc.
But in Botswana there is nothing to be seen of the drastic privatization that is often recommended invoking (not always accurately) Hayek’s ghost.
Botswana stands out because it is the only Sub-Saharan African country that has become steadily more prosperous for 35 years, while almost all other Sub-Saharan countries have had negative long-term growth rates. It has had no civil wars or coups d’état. Democratic elections are held regularly. There is little corruption.
When Botswana became independent in 1965 it was very poor and had almost no educated citizens. 84% of the land is sandy desert. Its only business was cattle. It was much poorer and far worse educated than Uganda or Zambia. But it is now richer than either of them.
Various different factors have been named as responsible for this exceptional stability and growth.
1. British colonialism did not destroy pre-existing tribal political structures. The British basically ignored their colony of Botswana, since it had no apparent mineral wealth and was not attractive for European settlers. It served principally as a buffer state to prevent expansion of German colonialism and Boer influence.
2. Traditionally the native Tswana people have had political institutions that enabled free discussion of public affairs by ordinary people, and even allowed criticism of tribal chiefs. These institutions were integrated into the republic that became independent in 1965. The chief of the most powerful tribe was elected president, but he did not particularly favour his own tribe. He later greatly reduced the power of the tribal chiefs and increased the power of government.  
3. Law and order have prevailed. This legal security afforded large segments of the population security in their property rights, encouraging people to be productive and thrifty.
4. After independence mineral wealth was discovered in the form of diamonds, whose export provides a steady income. In other African nations mineral wealth has been a factor of discord, rivalry and corruption, but not here.
Does Botswana confirm Hayek’s thesis in The Road to Serfdom?  In other words, was Botswana successful because the government is small and does not meddle with the economy?
Botswana has indeed strong restraints on the executive and property rights are secure. It has followed sound economic policies, has had low inflation, avoided budget deficits and has protected private property (of both rich and poor).
However it has in no way followed a free-market ideology. 
Government has played a big role –- but not an overwhelming one -- in the country’s economic development. The government is the sole owner of all mineral wealth. On independence the government nationalized the only industry in the country –- a slaughterhouse, and has since built two new government slaughterhouses. The government heavily subsidises veterinary medicine, vaccines and agricultural extension services for cattle ranchers. The government’s revenue from diamonds is prudently invested in productive projects.
To put it in polemical terms, Botswana is a triumph of central planning.

[1] All information about Botswana was extracted from An African Success Story: Botswana, by Daron Acemoğlu, Simon Johnson & James A. Robinson, MIT Department of Economics Working Paper No. 01-37, July 2001 Download at:
Of course, Botswana has not known central planning in the striuct sense of the term, namely all production and consumption of all goods and services are planned by a central board 5 years in advance, down to the last tiddlywink. However free-market enthusiasts deliberately smear all government intervention in the economy as “central planning”.