What's the best way to spread the wealth?

Great Debates
1

[Not talking about the US, so don’t answer before you read the question]

Assume that you are the head of a new government in Africa, one of the many we get every year, and your goal is to spread the wealth.

You have a few different models to choose from. In the South African model, stability was prized and so the wealth stayed in the hands of the few. Change is coming slowly, and will not improve the lives of millions any time soon.

In Zimbabwe, plantations were partitioned and many sectors of the economy collapsed, and the lives of millions will not improve any time soon.

There is enough natural resources, if tapped, and enough arable land, if it can be cultivated, to raise the national average in all economic categories.

So, what do you do to arrive at an economy that benefits the whole population?

2

In Venezuela, Hugo Chavez is using an approach called sembrar el petroleo – “sow the oil” – i.e., spend the revenue from the country’s oil industry (nationalized since the '70s) on providing the masses with education, health care, and other things that, it is hoped, will leave the country with a much stronger economic base after the oil runs out. Seems to be working, so far. Meanwhile, there’s been some land reform, but no wholesale expropriation of the elite’s property – they’ve been stripped of their monopoly on political power, no more than that. That’s probably the best approach for the hypothetical country you posit in the OP.

3

Invest in infrastrucure and law enforcement to make the country attractive to foreign businesses, and don’t let them in without securing some assistance in health care and education from them.

4

As BrainGlutton suggests, put your money in your people, ultimately they are your best resource.

5

Free markets, private property, rule of law.

6

First thing I would do is call these guys - wealth cant be spread legally if it does not have a legal existence.

Second, I would create a strong independent judiciary to enforce both civil and criminal law without interference from politics and existing wealth. I dont know who to call to help with that though. Transparency Int’l could probably give some assistance.

Third, promote literacy and numeracy so everyone can understand the basics of the law and wealth without relying on overworked and/or possibly corrupt bureaucrats or other intermediaries. There are countless agencies to call for help on this topic, unlike the above. Perhaps too many agencies actually.

Finally, I’d call the Grameen Foundation and have them send over some consultants.

Slight hijack, but one problem is that there are sometimes too many groups trying to help. Focusing aid through two or three main umbrella groups might help many countries instead of allowing every agency to come in that wants to help. Too many cooks in the kitchen, and all that.
I’m crossing my fingers too in regard to Hugo Chavez and his policies. I hope they work out with minimal disruption. I am hoping the current wave of liberalism/socialism in Latin America has better results than the last one.

7

The biggest killer of wealth is corruption. Corrupt countries are poor countries. Get rid of the corruption so that laws and rules are followed. Create a permanent “sting” squad that goes around offering money to bureaucrats and police, and bust the guilty hard.

Invest in education, and in fostering the climate that supports education. Having schools is not enough. Parents have to want their children to get a good education. Remember to put as much effort into trade education as into high school/college education.

Encourage small business, not big business. The good small businesses will get big soon enough, and the big businesses don’t need help.

Tax property. Many of the countries with huge estates have low or no property tax. Use the property taxes to fund the schools. Over time, this will break up the huge estates without the chaos we see in Zimbabwe.

w.

8

I agree with the corruption and education bits, also the small business bit.

However, I reckon that large, sensible projects like Hydroelectric schemes, roads and general infrastructure are also useful.

Not prestige projects, but the necessary bones of an economy.

9

[QUOTE=FRDE]
I agree with the corruption and education bits, also the small business bit.

However, I reckon that large, sensible projects like Hydroelectric schemes, roads and general infrastructure are also useful.

Not prestige projects, but the necessary bones of an economy.
[/QUOTE]

FRDE, your point is well taken. I was referring to small businesses, not small projects. While hydroelectric schemes have their pluses and minuses, infrastructure in general is a crucial point that I omitted. Regarding that, a curious story.

Once when I was working in Africa, I was at a reception with the Minister of Roads. In jest, I said “So I suppose you’ve just paved the road through your village?”

“Of course,” he replied, “if I didn’t the people of the village would have my skin”.

“In my country, they’d call that corruption”, I commented with a smile.

“Not here,” he said, “here I’m likely to be the only Minister of Roads from my village in a hundred years. If I don’t pave they roads there now, they’ll never get paved.”

I thanked him for his comments, drank to his health, and went off to reflect on the interchange. After while, I realized that as a way of allocating scarce resources, while it had obvious problems, at least it would eventually get roads built all over the country … autres pays, autres mores …

w.

10

@Intention

  • a very interesting story - an interesting approach.

Part of my views are because I’ve been to Ghana on business, one of the stabler sub Saharan states.

While there we went to look at the Upper Volta dam, IIRC only one turbine was running and two were sitting on the river bank. Yet that was supplying the electricity for Accra and its surrounding area - which I reckon is one of the reasons why Ghana is a bit more stable than other states.

We also looked at some ridiculous vanity projects that were just rotting, the roads were astonishingly bad and when our local contact took us to see the village that he sort of adopted we had to be careful not to step in the open sewage channel.

It made me realize that targeted projects could make a heck of a difference, also that it is not so easy to steal (big time) from large projects if they are closely managed.

11

Part of my plan would be to teach sex ed to everyone, and to make birth control easily available. Allowing the poor people to grow up a bit before reproducing will mean that at least some of them will become better educated. Avoiding teen pregnancy will help the peasants get a little bit ahead of the game.

I talk about poor people and peasants because generally the rich already have access to good birth control.

Offer limited term government jobs to good students. These jobs could be something like improving the infrastructure for five or six years. The youths would be getting paid for their work, and the work would be beneficial to the whole country. After the term of service, the youth has a nice little nest egg to start out in life, and some practical work experience.

I agree that corruption is a huge problem, but I don’t really know what to do about it.

12

[QUOTE=Lynn Bodoni]
Part of my plan would be to teach sex ed to everyone, and to make birth control easily available. Allowing the poor people to grow up a bit before reproducing will mean that at least some of them will become better educated. Avoiding teen pregnancy will help the peasants get a little bit ahead of the game.

I talk about poor people and peasants because generally the rich already have access to good birth control.

Offer limited term government jobs to good students. These jobs could be something like improving the infrastructure for five or six years. The youths would be getting paid for their work, and the work would be beneficial to the whole country. After the term of service, the youth has a nice little nest egg to start out in life, and some practical work experience.

I agree that corruption is a huge problem, but I don’t really know what to do about it.
[/QUOTE]

Lynn, thanks for your post. Your point about birth control is well taken. However, in many cases, the problem is not simply access to birth control methods. Before people use them, they have to want to use them, and be allowed to use them.

One of the big issues is infant mortality. If you expect some number of your kids to die, you tend to have lots of them.

Another is the empowerment of women. Women do the work of childbearing and childrearing. Until they have a say in the matter, there’s not a lot of hope.

A third issues is economic. Birth rates tend to fall as the economic wellbeing of the populace rises.

Another, as you point out, is education. Not just sex education, though. An educated populace, particularly a female populace, that thinks about their choices is a necessary prerequisite.

Finally, there is the opposition to birth control, particularly by the Catholic Church. Not much I can say about that …

The good news is that the rate of population increase in nearly all areas of the world has been slowing for thirty years or so, and the trend is continuing. Even in the areas with high growth rates, the rate is slowing. The problem is by no means solved, but we’re gaining ground. UN estimates of the eventual population maximum have dropped consistently, with current estimates being on the order of 9 billion people.

My best to all,

w.

13

I just noticed that I failed to reply to one of your points:

[QUOTE=Lynn Bodoni]

…
I agree that corruption is a huge problem, but I don’t really know what to do about it.
[/QUOTE]

The mechanics of getting rid of corruption are easy. Get some slightly disreputable looking folks, stuff their pockets full of marked bills, wire them for sound, and send them out to see who’s willing to take a bribe. That part’s a no-brainer.

The problem is the political will to implement such a program. The FBI in the US started a program called ABSCAM, which did just that with US Congresscritters. After a couple of Congressfools were caught, the US Congress called the FBI on the carpet and told them to cease and desist immediately … and if it’s that hard in the US, which doesn’t have much corruption by world standards, it’s hard to imagine someone doing it in some backwater republic …

w.

14

The OP has forgotten about the Asian and Indian model. Make it desirable for foreign countries to outsource many of their operations to your country. The jobs will help to create a middle class which is lacking in many African nations. Invest the newly found wealth back into the infrastructure of the nation, further encouraging business and creating even more jobs.

Except that big businesses often provide more jobs.

What do you mean by “small” vs “big”? Some businesses like refineries, shipyards, and certain manufacturing are by necessity “big” as in they employ hundreds or thousands of people and generate millions or billions in revenue. Other businesses like shops are by necessity “small”.

It’s not the size of the business but the economic environment that matters. If there is not a stable, secure environment than people will be less inclined to open a business, knowing it can be taken away at a moments notice without warning.

15

[QUOTE=msmith537]
The OP has forgotten about the Asian and Indian model. Make it desirable for foreign countries to outsource many of their operations to your country. The jobs will help to create a middle class which is lacking in many African nations. Invest the newly found wealth back into the infrastructure of the nation, further encouraging business and creating even more jobs.

Except that big businesses often provide more jobs.

What do you mean by “small” vs “big”? Some businesses like refineries, shipyards, and certain manufacturing are by necessity “big” as in they employ hundreds or thousands of people and generate millions or billions in revenue. Other businesses like shops are by necessity “small”.

It’s not the size of the business but the economic environment that matters. If there is not a stable, secure environment than people will be less inclined to open a business, knowing it can be taken away at a moments notice without warning.
[/QUOTE]

While it is not necessarily true that big businesses provide more jobs, you are 100% correct that the crucial element is the stability of the business environment. Another curious story about that …

When I was working in the Philippines in the late '70s, and Marcos was the dictator and martial law was in force, I used to ask people “What do you think of Ferdinand Marcos?”. The usual replay was “He’s a corrupt dictator, there’s no human rights, democracy is dead”.

Then I’d ask “What do you think about Imelda Marcos?”. This one broke down on class lines, with the rich saying “She’s a low-class slut”, and the poor saying “We love her, she loves us.”

Then I’d ask “What do you think about martial law?”. Everyone, without exception, replied with some variant of “It’s the best thing that’s happened in a long time.”

This surprised me. I wondered why, and asked several people. One man gave me the clearest explanation, saying “Before martial law, we didn’t know who to pay off. It changed every week. But under martial law, I bribe the same man every week, and there’s no problem.”

From this, I came to understand that most people will gladly trade a lot of democracy and human rights for simple stability. As one man said, "I can start a business, make my payoffs every week, and when my son is old enough, he can take over the business.

As you observed above, msmith, it is the stability of the economic environment, rather than the details of the exact tax structure or employment laws, that is the crucial factor in people’s calculation about whether to go into business or stay in business.

My best to all,

w.

16

Nicely put - the rules don’t matter - what matters is certainty of outcome.

17

[QUOTE=msmith537]
The OP has forgotten about the Asian and Indian model. Make it desirable for foreign countries to outsource many of their operations to your country. The jobs will help to create a middle class which is lacking in many African nations. Invest the newly found wealth back into the infrastructure of the nation, further encouraging business and creating even more jobs.

[/QUOTE]

That requires education.

Education, empowerment of women (the biggest problem sex education programs are facing in many countries is that “a woman cannot say no to her husband”).

Even corruption is linked to education. My own experience implementing regulations and getting people to follow them in many chemical plants has had two strong points that other people before me always seemed to miss.

One, it is not possible to follow a rule you don’t understand. Seems like a no-brainer, right? But the thing is, if someone doesn’t understand the rule, even if they really want to follow it, they’ll do something wrong. So you have to start by simple rules. Too many institutions (both companies and countries) copy other people’s rules wholesale instead of developing their own; this often leads to having rules that don’t make sense for this institution’s specific situation, or even which are contradictory with the underlying culture.

Two, people will follow a rule if they see the benefit to it. Once a guy in a rubber factory was angry because the people in Quality wanted to toss away a bad batch. “Let’s just send it, if it gets there on time we get paid, and if they don’t notice it’s bad we don’t even get a return; if we tell them it’s going late because we’ve had to make it twice we get paid less.”
I told him it was going to a tire factory, gave him the brand, asked him what brand of tires he had. When he opened his mouth, I said “and your wife, your father, your sister… maybe you should check their tires too. Oh, and don’t forget the tires of the people you cross every day as you come to work, hmmm?”
Once he stopped seeing the rubber as “the customer’s problem” and realized that sending good rubber was a benefit to himself, he shut the hell up and I’m told he’s still one of the local champions for “sending only good stuff”.
People break rules because they think that doing so benefits them; if they thing that keeping them will have a bigger benefit, they will keep them. But this requires sensible rules and education.