Economics: Trade, Aid, & Theory | The Pope and the CEO

The (i)logic of Aid ?

Leon Louw, Executive Director of the Free Market Foundation in South Africa recently wrote that “Aid” is in conceptually ludicrous. According to Louw, Aid is by its nature an abuse, rather than “abused” as often stated. Firstly, countries in supposed need of aid are poor because their governments make them poor by adopting pro-poverty anti-prosperity anti-market policies – “aid” cannot possibly counteract their inevitable effect. Secondly, Louw states that “aid” is “government-to-government” – people in rich countries reward oppressors at home and beggars abroad in proportion to how good they are at maximizing poverty. And finally, in the unlikely event that someone thinks of a way to defy reality and get “aid” to victims of oppressive governments, the desire to plunder producers of wealth and enrich those who consume it is perverse. Give these realities, Louw argues that countries getting more “aid” have lower growth on average than comparable countries getting less, is entirely predictable, if not inevitable. Furthermore he argues that, by adopting a few pro-market reforms, India and China have each created many times more wealth than all the so-called “aid” looted in rich countries for oppressors in poor ones. What is your view? Is there a place… Read more
The Missing Middle in Africa

The issue of the missing middle – i.e. the fact that Small and Medium Enterprises are vastly underrepresented in emerging and poor economies is near and dear to my heart. Much of what we do at SEVEN focuses on this issue and you may expect many of my posts to focus on this topic/issue. The Huffington Post recently had a good post on the missing middle in Africa by J. Skyler Fernandes and Lena Sene representing SACCA, the South African Chamber of Commerce in America. In the article, they argue that the “missing middle” is too broad a term and suggest to use the term “SME Finance Gap,” especially with regards to the investment issue. As long as we start doing something about it and not just talk about it, I’m all for it! And i think that is exactly what SACCA is trying to do. A trio of experts, with Skyler who is the current COO of SACCA and Euvin Naidoo (The former President of SACCA) and James Wanjohi (Managing Director; The Branson School of Entrepreneurship) presented their plans earlier this year at the World Economic Forum in Davos, Switzerland. And if you’re interested in news from Africa, check… Read more
Bad Charity?

One of our Pioneers of Prosperity Award winners told me that her key competitor is charity. She provides youngsters with the opportunity to sell T Shirts in Kenya. This represents for many of them a lifeline and a key entry into a working career. They invest their money in buying an inventory and setting up their own business and many of them were able to scale their small business to considerable size. But, she said every time a shipment of donated clothing arrives, the business goes flat. You can’t beat a free Tshirt. Many an aspiring young entrepreneur has lost their meager savings invested in a small business due to their having to compete with our free charity offerings. Sometime our actions have unintended consequences. That is why it is important not to just have a hear for the poor but also have a mind for the poor. Time Magazine has an article concerning this very issue: does charity harm the recipients? One person they interviewed saw our charity in this way: “Africa is the greatest dumping ground on the planet. Everything is dumped here.” … How about that for an on-the-ground perspective on economic aid?! Humanitarian Aid is a… Read more
Habits of Higly Efffective Countries

The kind folks at the International Policy Network in London gave me a study conducted by Leon Louw and published in 2006 by the Law Review Project in South Africa. While this is exclusively focused on South Africa, it serves as invaluable food for thought and inspiration to anyone interested. Leon has a keen way to drill down to the essence of things and ask the right (and often painful) questions. Some of the chapters to pay particular attention to are: Africa, Race And Poverty (Chapter 3) has subtitles like “Is foreign aid foreign harm?” or “Poor advice for poor countries,” “Why Africa is prospering” and “Poor countries have poor policies” The Growth Imperative (Chapter 4) backs up the statement that “Wealth makes ‘everything’ better” and spends some time to explore what ‘everything’ is. In Chapter 5, there is an interesting chart called “Factors commonly, but mistakenly, presumed to be determinants of poverty” – makes for very challenging but interesting reading. He lists Age, Aid, Colonialism, Democracy, Education, Infrastructure, Leadership, Natural Resources and Race to just name a few. Chapter 9 is entitled “Factors Affecting Growth” and in it Leon explores the various findings his research has produced on the… Read more
Cool Business

The key to economic prosperity is to build a sustainable, growing business. Here is a story I read in an essay by Roland Hoksbergen, an economist from Calvin College, that describes the power of a scalable business model in emerging markets: (The book is called, “Economic Justice in a Flat World: Christian Perspectives on Globalization,” Edited by Steven L. Rundle, Paternoster 2009, 201-221. The essay is entitled “Transformational Development: The Role of Christian NGOs in SME Development.”) “Madame Lefèvre began a small Popsicle business in Haiti about ten years ago. She began with one freezer and sold out of her house. Today, she operates a business with 22 freezers, 40 employees in the factory and 500 merchants. Through this business, Mme. Lefèvre has affected her community by creating jobs that sustain hundreds of families in Port-au-Prince. Empowering others through employment, Mme. Lefèvre has helped individuals rise from poverty through work. When poor people knock on her door and ask for money, Mme. Lefèvre gives them some Popsicles and tells them to go out and sell. The next day they pay for a new load of Popsicles from their sales the day before. Of her over 500 merchants, most arrive each… Read more
How to become the top performing country in the world…

The World Bank declared Georgia the top performing country in the early two thousand’s and jumped from 137 to 18 on the ease of doing business scale, ahead of Germany and France. How did that happen? The country was led at the time by Kakha Bendukidze, a scientist/philosopher/entrepreneur who became famous for saying that Georgia should sell anything but it’s honor. The European Stability Institute published on its website an interesting research report about this time in Georgia. “This report looks at the promises of the Rose revolution, the way Georgia presented itself as a model for other countries, and the implications of its elites embracing libertarianism as a national ideology. The shaping of Georgia’s current reform agenda risks deepening the divide between Georgia and the rest of Europe, leaving the country more isolated and vulnerable. It is time to take a closer look at the origins, the impact and the likely consequences of Georgia’s ongoing libertarian revolution.” Bendukidze’s company is called OMZ Group More information on Georgia can be found on the World Fact Book