23 Things They Don't Tell You About Capitalism

Even East Asian countries that are supposed to have particularly benefited from their ethnic homogeneity have serious problems with internal divisions. You may think Taiwan is ethnically homogeneous as its citizens are all ‘Chinese’, but the population consists of two (or four, if you divide them up more finely) linguistic groups (the ‘mainlanders’ vs. the Taiwanese) that are hostile to each other. Japan has serious minority problems with the Koreans, the Okinawans, the Ainus and the Burakumins. South Korea may be one of the most ethno-linguistically homogeneous countries in the world, but that has not prevented my fellow countrymen from hating each other. For example, there are two regions in South Korea that particularly hate each other (Southeast and Southwest), so much so that some people from those regions would not allow their children to get married to someone from ‘the other place’. Very interestingly, Rwanda is nearly as homogeneous in ethno-linguistic terms as Korea, but that did not prevent the ethnic cleansing of the formerly dominant minority Tutsis by the majority Hutus – an example that proves that ‘ethnicity’ is a political, rather than a natural, construction. In other words, rich countries do not suffer from ethnic heterogeneity not because they do not have it but because they have succeeded in nation-building (which, we should note, was often an unpleasant and even violent process).

People say that bad institutions are holding back Africa (and they are), but when the rich countries were at similar levels of material development to those we find in Africa currently, their institutions were in a far worse state.[6] Despite that, they grew continuously and have reached high levels of development. They built the good institutions largely after, or at least in tandem with, their economic development. This shows that institutional quality is as much an outcome as the causal factor of economic development. Given this, bad institutions cannot be the explanation of growth failure in Africa.

People talk about ‘bad’ cultures in Africa, but most of today’s rich countries had once been argued to have comparably bad cultures, as I documented in the chapter ‘Lazy Japanese and thieving Germans’ in my earlier book Bad Samaritans. Until the early twentieth century, Australians and Americans would go to Japan and say the Japanese were lazy. Until the mid nineteenth century, the British would go to Germany and say that the Germans were too stupid, too individualistic and too emotional to develop their economies (Germany was not unified then) – the exact opposite of the stereotypical image that they have of the Germans today and exactly the sort of things that people now say about Africans. The Japanese and German cultures were transformed with economic development, as the demands of a highly organized industrial society made people behave in more disciplined, calculating and cooperative ways. In that sense, culture is more of an outcome, rather than a cause, of economic development. It is wrong to blame Africa’s (or any region’s or any country’s) underdevelopment on its culture.

Thus seen, what appear to be unalterable structural impediments to economic development in Africa (and indeed elsewhere) are usually things that can be, and have been, overcome with better technologies, superior organizational skills and improved political institutions. The fact that most of today’s rich countries themselves used to suffer (and still suffer to an extent) from these conditions is an indirect proof of this point. Moreover, despite having these impediments (often in more severe forms), African countries themselves did not have a problem growing in the 1960s and 70s. The main reason for Africa’s recent growth failure lies in policy – namely, the free-trade, free-market policy that has been imposed on the continent through the SAP. Nature and history do not condemn a country to a particular future. If it is policy that is causing the problem, the future can be changed even more easily. The fact that we have failed to see this, and not its allegedly chronic growth failure, is the real tragedy of Africa.

Thing 12 Governments can pick winners

What they tell you

Governments do not have the necessary information and expertise to make informed business decisions and ‘pick winners’ through industrial policy. If anything, government decision-makers are likely to pick some spectacular losers, given that they are motivated by power rather than profit and that they do not have to bear the financial consequences of their decisions. Especially if government tries to go against market logic and promote industries that go beyond a country’s given resources and competences, the results are disastrous, as proven by the ‘white elephant’ projects that litter developing countries.

What they don’t tell you