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Attracting Capital to Africa

© Bryan Johnson

From Houston

I am sitting here in my hotel in Houston preparing to present my paper on economic freedom in sub-Saharan Africa. It is part of the Attracting Capital to Africa Summit hosted every other year by the Corporate Council on Africa. I am presenting my paper on, "Regulation in Sub-Saharan Africa: Prospects for Growth," as part of "Workshop 16". I am one of 22 people asked to present a paper for this conference of over 600 people from around the world.

I thought this week I would share a little piece based on my comments I will make at the summit:

Government regulation of economic activity is often considered by economists to be a necessary evil. For, a government's attempts to establish the rule of law, provide for a judiciary, and even write a commercial code are all forms of regulation. Thus, the question is not whether government's should regulate an economy. Rather, the question is what kind of regulation allows for the maximum freedom of individuals to engage in economic activities, and when does government regulation become counter productive.

Sub-Saharan Africa remains one of the world's most impoverished and economically repressed areas. Almost four decades after being identified by the World Bank and the International Monetary Fund as the next great region for economic growth, most of sub-Saharan Africa remains as poor today as it did in the mid-1960s. While there are many reasons why this is the case (war, famine, and civil unrest to name just a few), much of the world has continued to progress while sub-Saharan Africa has stagnated.

Many areas of the world, that were economically on par with much of sub-Saharan Africa in the mid-1960s, have made tremendous progress in achieving long-term economic growth and wealth. Indeed, much has been written about the lessons that the Asian development experience may or may not teach sub-Saharan Africa. But such a debate largely misses the point. The point is not what countries like Taiwan and Singapore specifically did to achieve economic growth. Instead, the question is why does growth occur and what can countries do to achieve it?

The Heritage Foundation began to analyze this question over a decade ago. The goal then, as it is today, was to empirically measure the level of economic freedom in countries around the world. To this end, I established a set of objective economic criteria - almost all of which can be generally defined as "regulatory" in nature. Since 1994, I have used this methodology to grade the level of economic freedom in various countries for the annual publication of the Index of Economic Freedom. And although many theories exist about the origins and causes of economic development, the findings of this study sheds some light on why some countries grow and others do not.

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