African economic development

Could the 2010 World Cup bring an end to decade-long economic stagnation and poverty persistence on the African continent? Political and social unrest in the great number of African countries has led to civil wars and consequently, African countries experienced little or no economic growth. Institutions such as World Bank have produced vast amounts of theoretical and empirical literature concerning African development agenda. African economic history is a history of colonization which serves as an efficient instrument for controlled experiments to test different theories of economic development and explain the true causes behind economic success and failure.

To be more percise, there is a limited amount of successful country studies that serve as a model of development to other African countries. In particular, legal origins of colonizers explain both initial economic conditions and long run economic performance. South Africa has been colonized by the Dutch and Great Britain. These two countries have exported their legal system based on the rule of law, robust property rights and liberal commercial code. The same happened in Mauritius, Gabon and Botswana. Incidentially, African countries abundant with natural resources were a quick target to European colonizers who focused their attention to the extraction of natural resources rather than on building a solid system of property rights protection and long term law enforcement. This hypothesis probably explains why countries situated near equator are deemed to long-run economic stagnation.

Policymakers in less developed African countries should realize the drawbacks of political instabillity and potential conflicts. Without strong institutional foundations of economic performance such as a clear committment to establish a sound system of property rights protection, foreign aid will help little and produce no net gain for African countries. This reaffirms the basic postulate of economics: Incentives matter. Everything else is a commentary.