Slavery in Mauritania

Slavery still exists in Mauritania today. According to the UN 10% to 20% of people still live in slavery.

http://www.youtube.com/watch?v=5yQlOPD8mNo

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.

Corruption and economic welfare

I collected data on GDP per capita and Corruption Perceptions Index (CPI) for 50 countries in the year 2009, disregarding the level of GDP per capita. The sample consists of developed, developing and least developed coutries. I discovered significantly negative relationship between GDP per capita and perception of corruption. CPI ranges from 1 to 10. Higher index implies lower corruption perception.

Corruption and economic welfare across nations

Source: IMF (2010), Transparency International (2009), own estimate

In general, countries with higher GDP per capita have significantly lower corruption perception and better institutional governance as well as the rule of law. The main finding is that if GDP per capita increases by 1000 USD, Corruption Perceptions Index will, on average, increase by 0.2 index points, all other remaining constant. It means that the persistence of corruption drops when countries become wealthier. GDP per capita is a good predictor of corruption perception. In general, 74 percent of the variability of corruption perception in the sample is explained by GDP per capita variation.

The least corrupt countries in the sample are New Zealand (9.4), Denmark (9.3), Sweden (9.2) and Switzerland (9.0). The highest perception of corruption was found in Haiti (1.8), Venezuela (1.9), Russia (2.2) and Belarus (2.4).

As we can see, fighting corruption is an important policy measure of encouraging economic development on the road to prosperity.

Corruption eruption

The Economist wrote an interesting article about corruption where it discussed the problematics of corrupion and why does it exist. The answer is simple. The chances of being cought are small while the temptation of bribery is too high as benefits are so great. According to "When in Rome act like a Roman" argument, bribery is the price the you have to pay to enter the world's most difficult markets. Bribery can also speed up the bureaucratic procedures. On the other hand, tackling corruption can make your way a bit more difficult as in the case of IKEA when the company entered the Russian market and decided to fire managers who were paying bribes to local officials. Ethics is the only weapon that can overtake the corruption.

Ethical principles are the ones that can make people, firms and govermnents change the why they deal with the situations. Moreover, in the US, the Department of Justice is prosecuting far more cases than ever before. In 2001, only eight cases were prosecuted. Now there are 150 cases, which confirms that things are improving. As the likelihood of being cought is dramatically higher than few years ago, firms are not taking on more risk that before. That is why not so many firms tend to do their work in the corrupt way. Internet as well makes it easier to control firms' activities. Thus, it is easier to reach the information. There is still a lot to be done with the help of a watchful eye.

Millions of poor Indians are considered criminal by tradition

The Economist wrote an interesting article about the lack of the rule of law in India. Law protects only high-ranking wealthy individuals. That is what millions of poor Indians experience each day, as many are imprisoned without sufficient evidence. The right to justice is one of the basic human rights. World leaders should encourage India to enforce laws that would give all people the right to file the complaint and be properly treated, despite their origin. Western nations should set an example of the rule of law for the developing world. Sadly, many developed nations underestimate the importance of robust system of law for economic development of third-world countries.