Bad Law Keeps People Poor

Why does most of Africa stay poor while other parts of the world prosper?

People blame things like climate, the history of colonialism, racism, etc.

But I say Senegalese businesswoman Magatte Wade gives the right explanation: too many rules.

“Once you hire someone, good luck getting rid of them for any reason,” Wade complains. Her government must approve every firing.

“Then the tax code is so complicated… worth at least two or three truckloads of paper.”

Wade started a lip balm company. Some of her ingredients are not made in Senegal, so she imports them. To “protect” Senegalese manufacturers, the government makes importing ingredients expensive.

“Some have a 70% import tariff on them!” she says.

President Donald Trump now threatens similar taxes on imports from China.

In Africa, people sometimes escape such taxes by paying bribes. We hear a lot about African corruption.

“People complain about corruption as if corruption is a root problem,” says Wade. “I say no. Corruption is a natural consequence of stupid, senseless, idiot laws.”

She says there would be just as much corruption in the U.S. if taxes and regulations here made it as difficult to do business as Senegal does.

“The only way to fix corruption is to simplify,” advises Wade.

Wade’s business has survived because she was fortunate enough to find a helpful bureaucrat who pointed out a loophole.

“I went to see the head of customs, and we started looking together,” recounts Wade.” Looking through the volumes of crushing regulations, they “found a clause in one of the binders saying if you’re exporting 80% of your products, and if you’ve been in business for two years, you can ask for an exemption.”

Most people are “clueless” about these obstacles, she says, especially those in academia, Hollywood and the news media. “They have such a strong anti-capitalism bias.”

To raise awareness about why economic freedom creates prosperity but regulation prevents it, Wade and the Foundation for Economic Education made a documentary titled “Made in Mekhe.”

In it, she asks: “Why is it that a couple decades ago, China was at the same level as most African countries? Countries like Singapore made it. Hong Kong made it. Even a place like Dubai — bare land of desert sand — all of a sudden, Dubai (is) one of the financial centers of the world! You’re like, what? What happened here?”

She says booming places like those understood that they wouldn’t create prosperity unless they made it easy for business to operate.

But international aid organizations have a different solution. Wade says they often make Africa’s problems worse by adding rules. The U.N.’s “Sustainable Development” goals include things like “inclusive and equitable quality education,” “climate change” and “gender equality.”

“We have chains around our necks! No one is seeing it. Then they want to come talk to me about inequality! We need greater economic freedom!”

Governments send $50 billion a year to Africa, and businesses offer Africa free goods.

TOMS Shoes promotes itself by sending a pair of shoes to Africa for every pair you buy.

Wade says: “I know it came from a good place. I get it. But can you just think further down the road?”

She points out that a result of TOMS “charity” is that African shoemakers go out of business. “You can’t compete with free!”

But donation promotion has become trendy among Western businesses, says Wade. “Now you’re seeing it with tampons, seeing it with soap, with everything!”

Africa becomes dependent instead of self-sustaining. It would be better, says Wade, if Westerners simply encouraged African governments to stop strangling their own entrepreneurs.

“If I have a job then, guess what? My malnutrition problem goes poof! Even access to clean water goes poof,” says Wade. Instead, “the business climate sucks so much that people like me can’t do that work of creating companies and jobs.”

10 thoughts on “Bad Law Keeps People Poor

  1. When I visited Zimbabwe last March, our guide in Victoria Falls told us that the jobs disappeared and 80% of the people are now entrepreneurs. You might want to check the veracity of this information – the guide said that these tiny businesses are not required to pay taxes and there is no sales tax. The business were recycling tires by turning them into sandals, taking old electronics to repair, refurbish and resale, fixing old cars, etc. The people appeared to be happy running their own businesses. Our guide also told us that their current president ran on anti-corruption, but is also corrupt. Perhaps the president’s administration is too incompetent to harass these entrepreneurs or have no method to track sales. Or maybe there is just a post Mugabe lull in “strong man” tactics. He also said that 80% of the people are Christian, though when asked it seemed that they may not be the strictly Biblical type.

  2. Sam Childers (Machine Gun Preacher) comes to mind.
    The work he does is astounding, adopting and rescuing many children, ‘putting his life on the line and if necessary, killing kidnappers.
    He schools and then teaches them how to work for a living, while protecting them in the community he has built.
    His Movie MACHINE GUN PREACHER, staring Gerard Butler tells it as it is.

  3. As an entrepreneur in Tanzania, I’ve got to say so much of this rings true. All the best talent in this country goes to work for aid agencies. Aid agencies like the UN give hundreds of thousands to millions of dollars to private sector companies that already have hundreds of thousands of dollars. It’s corrupt. Then there’s the Tanzanian government itself, which makes products like tablets and computers that it’s work force need to grow, twice as expensive.

  4. I am so in agreement with this woman. John Stossel should interview John Carter in Syracuse NY. He a pastor of a large church there. They partner with another group of churches in missionary efforts. Carter’s church sends regular teams there to help. They do not give a hand out. They took financial and business people who helped the folks in Bungoma set up businesses with micro-finance loans. Easy to pay off, easy to get started (hairdressing, sewing, cooking oil, shoe repair, etc). These Bungomans set up their businesses and in 10 years, those who walked now were able to afford a bike, if you rode a bike, you might now afford a car, and if you were living in a ramshackle shed, you might have a simple home. A hand UP, not a hand OUT is what is necessary! Google Abundant Life Christian Center in Syracuse NY and you will be amazed at what this group of people has done.

  5. We all know the solution, but Congress won’t do it. Get the government out of business and get back to being the government that runs the country and defends us, period.

  6. The China tariffs are a necessary balancing to the decades of neglect by the American government. But, over the long haul, they should balance at very low rates, or no tariffs at all.

  7. There is a great book called “When Helping Hurts” that looks at American’s mentality of charity, and the unintentional damage caused by it to communities.

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