This week's African Leader's Summit in Washington was the first time that an American head-of-state hosted most of the African heads-of-state at one time, making it a historic event. In a more fundamental sense, though, it was nothing new. It was just politicians talking to politicians about politics. It was a big, expensive show, with high-sounding rhetoric that avoided the real issues.
If President Obama truly was concerned about prosperity for the people of Africa, he would demand that the leaders of those countries set their people free from the socialist and/or dictatorial stranglehold that is keeping them poor. The president didn't do that at the summit because the true purpose wasn't about the well-being of the people, but rather about politics, appearances, and legacy-building.
In addressing African leaders years ago, the President told them that governments that respect the will of the people and that govern by consent and not coercion are prosperous, stable, and successful. Thus, he does know that, and it certainly is true, but economic freedom is the key ingredient, with a strong correlation between economic freedom and well-being of a nation's people. Therefore, economic freedom should be a focus of any agenda that purports to have concern for the welfare of a poor nation.
The summit included a session where CEOs of selected companies could rub elbows with the most influential people in the various African states, with the ostensible purpose of building trade relationships for mutual benefit. The real benefits of trade, however, come from the free flow of goods and services from producers to consumers, with expanded competition lowering prices and raising the standard of living for ordinary people on the street. Expanded division-of-labor and comparative-advantage have been long recognized as building blocks for prosperity for all participants in interregional trade.
The meetings of favored CEOs with heads of state are simply invitations to continue the cronyism and corruption that are plaguing the nations already. Since only select CEOs were invited, it was also an invitation to influence peddling and cronyism here, something that is one of the core problems in America today.
Many African governments, democratic or otherwise, have assumed monopoly ownership of major industries and natural resources. The ill effects of monopoly power multiply when government uses its coercive powers to eliminate competition. Electricity, a government monopoly in many cases, is extremely unreliable, hindering business progress. Water, another monopoly, is also unreliable. A newspaper in Ghana last year reported that 55 percent of the water processed by the state operation was unaccounted for. Gold, oil, and other mineral resources are officially the property of the government, meaning that the politicians benefit from resource discovery and development, not the people. Monopoly distribution rights for many important agricultural products means that farmers have to take what the politicians decide to give them, not what the market can offer.
Dr. Dlamini Zuma, chairwoman of the African Union Commission said it makes business sense to invest in Africa, and that if American businesses do not, others will. That may be the case, but making it profitable to do business with politicians only helps the cronies and politicians, not African business in general or the African people. If it truly made sense to invest, companies interested in profits would have done so long ago. While some countries have improved significantly and are benefiting from it, business is still risky and unprofitable in the places that need it most. That is what needs to change.
African nations will prosper when they truly welcome free trade, free from protectionism, free from political interference, and free from corruption.
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