Good Government: The Key to Becoming a Rich Country

US Constitution According to the CIA World Factbook there are 20 countries in the world whose per capita GDP is $1,000 or less per year. Some of these countries are new, like, East Timor, some are tiny, and most have been racked by war over their history. Among the poorest countries are the Gaza Strip, Eritrea, and Comoros, which has endured no fewer than 19 coup or coup attempts in its 31 year history. Today, various news outlets are reporting that heavy gunfire has occurred outside the Congo election offices. First, if you know anything about the history of the Congo and Central Africa, this should comes as no surprise: the Congo/Zaire/Congo has been bathed in violence nearly continuously for centuries. It should also come as no surprise that the Congo is sixth from the bottom when it comes to per capita annual GDP at $700.

What makes these nations poor? There are lots of reasons, and they all contribute in different ways. War has already been mentioned. Other reasons are European colonialism, US exploitation, or lack of natural resources. Some of these are true; the crippling effects of the Belgians and then the Cold War supported government of Mobutu Sese Seko on the Congo are undeniable. On the other hand, the Congo is one of the richest oil and mineral areas in the world, so lack of natural resources can be ruled out in this case. We should also not underestimate the effect of disease. The tropics can be brutal on the welfare of a population. There are only a small handful of countries from the tropics that are not poor, and one of those is Singapore, and the others are tiny nations swimming in oil where most of the population is not sharing in that wealth.

So, what is it that rich nations have that poor nations do not have? I believe that the answer to that question is good government. Good government means different things in different countries, but it has some common traits. It it accountable to its citizens, it protects property rights, it provides for public safety, and it has a credible judicial system. There are certainly exceptions to all of these points, but rich countries have the luxury of arguing over degrees. In the US we may not agree on whether our government is efficient or if money is being spent in the proper manner. On the other hand, we out certain that our neighbor cannot come over and take our home from us, and if they do, the police would stop him. We are also fairly certain that nobody is going to shoot us if we try and vote in an election, and we are sure that schools, roads, and other public infrastructure will be provided by our government. Also, we know that our taxes go towards public spending and not into the personal bank accounts of our public officials. Cynics will, of course, point out exceptions to all of these examples, but, again, in the US we are arguing about a small number of aberrations and not the general state of things.

Poor countries have no such guarantees. In South Africa, the government has been trying for years to institute a property tax system. Unfortunately people do not believe their property taxes will be used for the public good. Unfortunately, even if they did believe this, there is no credible postal system to make sure that the payments arrive at the proper place. Without these taxes, roads cannot be built, schools cannot be provided, and public safety cannot be ensured. Bad government hurts.

There are lots of reasons that the countries that possess good governments have arrived there. These reasons include tradition, peace, strong leadership, and pressure from other nations that interact with them. However, they have arrived there, all of these nations are able to enforce the property rights of the land. Enforceable property rights are a major key to wealth. You know that if you pay the phone company for service, you will get the service, and when you go to work, you will be paid for that work. Because contracts are honored upon pain of prosecution, people have an incentive to expand their own, and therefore the nation’s, wealth. Countries with bad government do not have this incentive because the rewards to changing the status quo are far from certain.