It empowers citizens.
African entrepreneurs are the key to solving Africa’s development
problems. It is they who can drive their continent’s economic growth and it is
they who can make their governments better. If money is invested engaging the
organic and transformative potential of local entrepreneurs, Africa will
flourish. If money is poured into government bureaucracies – which hold
back these entrepreneurs – Africa will continue to languish.
Big money to governments in Africa, as it does elsewhere, empowers
bureaucracies, promotes statism, and weakens government incentives to increase tax revenues through economic growth.
Furthermore, economic assets are often kept in the hands of the state,
leading to monopolies, stagnation, and the opportunity
for extortion. As a bitter cherry on top, the more the red tape increases, the
more discouraged entrepreneurs
get and a vicious cycle ensues.
There are many instances where money – funding
entrepreneurs and non-governmental bodies – does wonders in Africa. These
examples are often cited by development gurus who then claim that aid in
general is helping Africa, justifying any aid – including
that to governments. But there is a clear pattern: money to entrepreneurs and
non-governmental bodies helps; money to governments hurts.
A look at the history of England explains why outside money to
governments is damaging. In the 13th century, after the advent of
property rights, the monarch was forced to convene a group of citizens as a
tax-legitimizing device. That group’s name? Parliament.
Over several centuries, parliament capitalized on the monarch’s
chronic need for money and, indeed, made sure the crown did not gain financial
independence. Every time a monarch came to parliament to pass a new tax bill,
parliament obliged, but only after exacting more liberty from the Crown. Over
time, parliament emerged as the more powerful branch of government. In
hindsight, the two keys to the successful economic and democratic growth of
(a) the monarch’s shortage of money, not its adequacy; and
(b) the lack of aid from outside.
Likewise, in today’s sub-Saharan Africa, the opportunity exists to
put into motion true economic development. It will not happen by deluging African
leaders with aid dollars, but rather by adopting practical ways to help
Africa’s citizens thrive. Their increased strength is the best way to remove
blockages to progress in the long run.
First, rich countries must be challenged to remove trade barriers
for African countries now, irrespective of African trade policies. With global
market access, Africans would automatically attract private investment to their
countries, despite their institutional
weaknesses. These institutions would become stronger over time as businesses
began to flourish. Private investments capitalizing on access to global
markets would necessarily employ Africa’s low-cost labor, thus creating jobs.
This is in stark contrast with companies extracting mineral resources in
Africa, employing very few people relative to
size of the business.
Next, small entrepreneurs must be helped with seed money in
increments of $10,000 to $20,000 (in contrast to the approach of
mega-institutions who tend to direct billions into state bureaucracies). Even
these relatively small cash amounts can be broken up into several installments,
each of which
is provided under certain pre-determined performance criteria. Just like they
do everywhere else in the world, these entrepreneurs
would create jobs, products, services, and – let us not forget – choices. It
is precisely such jobs, entrepreneurs, and choices that form the bedrock of
What goes naturally with supporting small entrepreneurs is
introducing technologies that cost-effectively empower individuals, an area
where Western knowledge can obviously add value. Such technologies multiply
people’s abilities and deliver genuine aid to citizens
directly. A pair of wheels, for example, provides invaluable assistance in
moving a heavy load of bricks.
Heightened productivity gives rise to four exciting benefits.
First, as individuals control what they produce and consume, their lives improve. Second, when citizens accrue
increased economic clout, institutions are forced to become more responsive to
their needs. Third, by becoming more productive, users are able to pay for
productivity tools, creating opportunities for entrepreneurs to launch
profit-seeking enterprises to provide such tools. This is why businesses
selling computers and cell phones sprang up naturally in Africa. Finally,
profitable businesses attract imitators, unleashing competition. Competition
gives rise to innovation, specialization, scalability, lower prices, higher
wages, and a host of other good things including curtailing potential abuses by
businesses. It’s a virtuous cycle of organic economic growth that, like a
mighty wheel, can move the entire continent.
We must also take practical action toward building healthcare
infrastructure by working with local groups. Imagine if President Bush
promised, on behalf of the United States, to give $1 million to match any
grassroots group (meeting certain organizational and self-sustainability
criteria) that can come up with $1 million of its own. With only $1 billion,
one thousand such clinics would spring up with real roots in the ground,
possibly attracting African doctors back into their homeland from Western
countries. This is only one of many kinds of grassroots enterprises that can be
Finally, those of us in developed countries can also give direct
aid to Africa by purchasing African products. And if rich countries want to
further help Africa, they can issue vouchers to their own citizens to encourage
the purchase of African goods in Western stores.
The time has come for us to stop pouring billions of dollars into
bureaucracies. Instead, we must activate the billion brains in Africa, each of
whom will tame those bureaucracies and make the continent a global economic
Iqbal Z. Quadir is the founder of GrameenPhone
in Bangladesh, and founder and executive director of the Legatum Center for
Development and Entrepreneurship at the Massachusetts
Institute of Technology.