MIT Study Reveals Why Africa Is Still Poor

this video is sponsored by better help Africa is the poorest continent in the world and as economic centers in Asia fully develop it's unfortunately only falling further behind today the majority of people in the world living on less than $1 a day live in Africa and the income gap between a large share of African nations and developed Nations has grown to a factor of 40 or 50 now addressing an entire continent as a single economic case study is normally a silly Endeavor there are 54 countries in Africa each with their own economic systems governments challenges

and opportunities asking sweeping questions about the economy of all of them at the same time would be like assuming that the USA and Ecuador had the same economic Dynamics but when it comes to Poverty this is a relatively Universal problem across all of Africa yes there are outliers like the St shells Marius and even Botswana but most of their economic output is unstable at best and based on dubious tax systems even then the nation with the highest GDP per capita on the continent would be lower middle income in Europe or North America this makes the

question of why is Africa poor even more important to answer the fact that most countries across the continent are undeveloped led a team of economists from MIT to look for underlying reasons that go deeper than individual National issues to see if there are common barriers to economic development in Africa that are not present in other regions around the world finding and understanding these issues if they exist has the potential to guide economic policy and Aid efforts to address the root of the problem rather than banding over the symptoms so what were the foundational issues if

any that the MIT researchers found when trying to answer this question how can issues be fixed and finally is there any reason for optimism on what is otherwise a fairly disheartening problem while the economy of an entire country requires thousands of people to manage you might feel a little overwhelmed just trying to manage your own life all by yourself I for one got a bit lost last year and resolved that this year I'll tackle my problems headon and I don't know if I would have had the confidence to do that without talking to my excellent

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more economic success and economic challenges unfortunately do the same today countries across Africa deal with a combination of problems that the world is perhaps overly familiar with political instability corruption and the destruction of capital makes it riskier for Industries to get established on the continent which means that people don't have access to economically valuable opportunities which causes impoverished population ations which causes even more political instability there are modern problems on top of this as well as the world has opened up to international trade and workers it's become harder for African Industries to compete and easier

for talented African workers to leave to find better opportunities in richer countries these issues are well documented and well understood but they are symptoms of other underlying problems so why has Africa so universally continued to struggle with this vicious cycle where countries in every other continent around the world haven't had the same issues or have been able to address them a good start would be geography almost like a real-time strategy game where countries exist on a map does have an impact on their early game development land is one of the factors of production alongside labor

and capital but in a way it's almost the foundational factor of production because even in the earliest civilizations spanning back thousands of years good land could support more people the more people that were supported by the land the more they could specialize in technical areas of a society outside of just hunting Gathering or farming for food to survive now obviously Africa is massive but land in the economic sense also extends to other aspects of geography as well like how fertile that land is access to drinking water and in the late game access to raw materials

and trade routes anytime economists look at the poverty experienced in Africa they almost without fail mention the abundance of natural resources that exists across the continent from precious metals fossil fuels diamonds and even rare Earths that have become vital to the electrification of the global economy the trillions of dollars buried in the continent's soil makes the poverty all the more heartbreaking because while the land is so abundant in this respect that same land has worked against the people that inhabit it for thousands of years and have put them in a position where today when those

resources are at their most valuable they are ill equipped to take advantage of them the most obvious place to start is simply how isolated most of the continent has been the Sahara Desert divides the continent east to west and for most of human history has effectively acted as a large ocean making most of the land to the South an island physically separated from a lot of the societal developments that took place along the trading routes between Europe the Middle East and Asia even today the countries in Northern Africa along the Mediterranean are more integrated in

global Affairs and are generally more developed in countries in the South and center of the continent the Sahara Desert is such an economically significant geographic feature that economists will often look at Northern Africa and subsaharan Africa as two completely separate entities both have their problems but subsaharan africas tends to be long-standing being isolated from even early global trade and the spread of ideas and Technology put the south of the continent behind their Northern neighbors and it would also later open them up to exploitation from technologically Superior regions that would Lish connections to the continent in

ways that were not mutually beneficial to put it mildly beyond that the land itself is not particularly fertile making the transition to productive agriculture is one of the most significant things Humanity has ever done but it was obviously easier to take that step where the land was more naturally fertile the Sahara Desert clearly isn't ideal for farming but even the most seemingly fertile lands in the center of the continent have poor soil quality that is prone to Rapid erosion unless it's carefully managed by even the most advanced modern farming techniques an ancient civilization would have

found it very hard to develop agriculture given these factors and there was also no real incentive to in Lush areas where agriculture would have been possible it was just easier to forage or hunt for food rather than invest the effort into developing Farms subsaharan Africa is also an environment that is very inhospitable with structured development the most fertile areas are r with tropical diseases insects and Wildlife that generally favor human groups that remain spread out and mobile anthropologists compare this with theories they have around other early developments that revolve around something they call the Trap

of sedentism this is where human groups would find an area so Lush with life and abundant in resources that were important to early humans like fresh water wood and a lack of predators they would just become Sentry in that area for Generations until they depleted everything they could hunt or gather at that point agriculture becomes the only option if the group has lost their nomatic ways these Gardens of Eden as anthropologists call it didn't really exist in Africa so people had to stay in smaller groups and they had to keep moving today this has resulted

in a continent that has many different ethnic groups that speak hundreds of languages and have very different cultural Norms even though the continent is divided amongst a lot of different countries those countries themselves are often individually divided between many different groups the large number of haphazardly drawn borders also causes other economic problems too yes this is in large part still thanks to the shadow left by colonialism but we still need to get to that as it relates to just using the land as a factor of production for economic development this dense cobweb of borders also

means that many countries are cut off from the outside world because they don't have access to Oceans for international trade transport infrastructure for trade is very minimal and what does exist is either far from fully developed or are leftover rail tracks from colonial empires that are falling into disrepair and were only set up in the first place with the intention of exploiting resources rather than building an independent economy the connections between countries are often at best dirt roads and even those that are lucky enough to be directly on the ocean for a chance at getting

involved in global trade still have other major Geographic barriers most of the African Coast especially in the west is raised and completely impractical to develop major shipping ports around so before humans even exist consisted Africa was far from an ideal spawn location for mid to late game economic developments these challenges also influenced the other factors of production including one that we rarely mention on this channel macroeconomists frequently talk about the way that land labor and capital interact to influence on economy in the case of Africa it had land that was less than ideal for farming

trade and Industry which meant it had a smaller more splinted population labor which meant that they were less concentrated in centers of Commerce which meant that instead of developing and sharing Technologies and infrastructure Capital they focused more on just surviving but there was also another element and that was entrepreneurship now when economists talk about entrepreneurship as a factor of production they're not just talking about people who go out and start a business they're more referring to people or even institutions that can coordinate the other factors of production land labor and capital into actually doing something

useful it should be noted that a lot of economists often just bundle this together with labor because labor also considers not just how many people are working in an economy but what their skills are as well a more skilled Workforce should be able to produce more more economic output given that entrepreneurship is arguably just another skill explains why these two are often merged together but the economic case study of Africa may be one of the clearest examples of why this is important enough to be considered as its own separate element now most of this is

based on the work of Darren Asam moglu and James a Robinson from MIT in their publication simply titled why is Africa poor we were lucky enough to speak directly with Professor Assam mogu who on top of publishing this paper also wrote the legendary book why Nations fail all while being one of the most academic researchers and the history of Economics needless to say it was good to get his insights on such a complex issue can you understand Ukraine today without its geography no its entire history especially recently is because of the place that it is

in you know next to Russia so that's geography and you cannot understand Saudi Arabia without its geography meaning it's endowments oil if Saudi Arabia didn't have oil it would be a very different place today so there are Geographic factors that matter but the question to which James Robinson and I gave a categorical answer categorical no is is geography the main factor that explains the large gaps in in comp per capita and in prosperity around the world and the answer to that is no institutions are overwhelmingly more important you know you are absolutely right subsaharan Africa

is really a jarring case of poverty failure to develop economically failure to to build industry and prosperity again even though these challenges exist it's important to address the underlying cause of things like the slow adoption of Technology as mlu and Robinson in their research look back to various groups around the continent and individual motivations for why they did or did not adopt certain Technologies even when they were made available to them even really simple Technologies like a wheel weren't widely adopted the cheap transportation that something this simple enables means that it becomes easier and easier

for societies to develop outside of small village groups because resources can be traded between different areas allowing people to specialize if something like food tools or building materials need to be transported by head portd where people just put heavy things directly on top of their head then that's way less efficient than even a basic hand card at that point it just becomes easier for societal groups to be self-sufficient because it's so hard to do trade now this wasn't unique to Africa indigenous Australians were also largely separated from the early exchange of Technologies and they two

remain as mostly self-sufficient groups of hunters and gatherers until Western colonies were established there if that's all there was to this story then that would explain why Africa was historically behind the empires of the north but it wouldn't explain why they remained behind what ASA MGO and Robinson found interesting was that even after Wheels became common knowledge on the continent the study groups still preferred to do things by hand and there was no clear reason why until they looked at the institutions ruling over these areas by the time Western technology made it to Africa regions

such as the Congo were Loosely run by kings that would rule by the Cree with little to no oversight they would raise revenues through arbitrary taxes and take things by force where they saw fit this pushed groups that wanted to avoid the rule of these unchecked leaders further away from the basic roads that existed in the region so instead of developing a culture of trade and Independence the tyrannical ruling institutions encouraged exactly the opposite fractured self-sufficient groups have carried through to the modern day where even within the many borders of Africa there are often dozens

of different cultural groups within a country vying for political representation and Power in this kind of environment it's EAS easy for bad leaders to establish themselves in positions of Power by appeasing to their group and managing the country in such a way that it comes at the expense of everybody else which means even a few hundred years later it's risky for people to rely on the economy to provide them what they need it might be much less efficient but it's much safer for them to just look after themselves it also wasn't worth putting too much

effort into making even simple stuff like a handcut when it could just be seized by some absolute monarch at their whim now of course this did not happen in a vacuum and it's impossible to look at the modern day economic struggles of Africa without exploring Conquest and colonialism all of the challenges that the continent of Africa had with divided populations inhospitable environments and poor economic management was made significantly worse by the Atlantic slave trade and later colonial empires the basic economics of the slave trade were unfortunately almost brutally simple and prayed on a lot of

the foundational weaknesses that we've been exploring so far colonial empires had established plantations in the newly discovered Americas but unfortunately for them unlike a lot of other colonies in the East Indies the native population was dying out too quickly to be put to work growing exotic spices so the Europeans needed to import a new labor force and well they weren't going to do it themselves so they turned to Africa a lot of the unchecked African rulers at the time already used slave labor themselves and they were happy to participate in this horrifying industry in exchange

for European Technologies particularly Firearms guns were technically Advanced tools but unlike a lot of other technology they didn't have the same problem with just being claimed because they were both property and a tool to enforce property rights allinone so powerful groups could get tools to become even more powerful and profit from capturing their Rivals to be sent overseas the Europeans took this slave labor and put it to use in their new colonies to produce exotic Goods to sell in Europe and they used the proceeds to buy even more guns to sell back to Africa in

exchange for more slave labor the reason they didn't just set up colonies in Africa itself was because at this time African groups after a long history of fighting amongst themselves were pretty powerful adversaries especially on their home turf that was full of tropical diseases dangerous animals and below average soil anyway it was just easier to sail across the Atlantic Ocean which highlights just how tough Africa was to settle of course this system didn't last forever American colonies started claiming Independence and the Industrial Revolution meant that Western militaries grew far more powerful very quickly in the

1600s with wooden sa ships and early Firearms it just wouldn't have been economically viable to colonize Africa like European powers were doing with other regions around the world but with modern armies steam ships and basic treatments for tropical diseases the large continent of Africa started to look very attractive as a colony especially since it was filled with resources that was suddenly very useful in the industrial ERA this time period on the continent was truly horrific to the point where we can't go into too much detail or this video will just get taken off YouTube but

from a purely macroeconomic perspective this laid the foundation for a lot of the government problems the continent still struggles with to this day when Colonial Powers moved out of Africa they took with them their tools ruling structures and Industrial relations education on the continent was almost non-existent and now a lot of groups couldn't even go back to their traditional way of life violent power grabs happened across the continent and even if the lead ERS that seize power were completely benevolent they had no training on what goes into running an Effective Government now of course a

lot of leaders across the continent have not been benevolent and instances of corruption well they've been known to happen at Independence you know some of Africa had the beginnings of a bureaucratic system a court system Etc that Europeans had themselves had set up but those were mostly in the main population centers in the main Urban centers they had not penetrated Society they had not become completely legitimized in fact Europeans often destroyed more legitimate indigenous institutions when they tried to build their own for reasons of control for example the British colonizing Nigeria they try to introduce

their own ruling families in places like Sierra Leon as well and when they left the shell the skeleton of institutions were not very Ed ful for building new economic activities but they were very amable for a strong man to take them over and use them for extraction the natural resources that should be Africa's golden ticket to economic Prosperity have in many instances just been used by despotic leaders as their own personal piggy bank to secure their own power constant political aaval and the continued rule of unchecked authorities means that the continent as a whole has

taken a serious reputational hit to the point where any industry across Africa is inherently seen as more risky than a similar industry in another continent this means Africa has struggled to get funding for even basic projects with huge potential upsides because it's just considered a too risky now sometimes this reputation is earned a few months ago we looked at the conflict unfolding in ner and how it was halting the development of an oil pipeline one of the easiest infrastructure projects to ever see a return on investment from but even still in the geopolitically uncertain country

it was just not worth the risk now fortunately while this situation almost seems hopeless there is room for optimism a lot of the underlying issues with the fail development of solid institutions to manage Economic Development are starting to show positive signs of progress Robinson and Asam mogo's paper was written more than 13 years ago now and a lot has changed since then Botswana is one of the fastest growing countries over the last 60 years since its independence and if you look at bwana it has all of the problems that others attribute to Africa it is

a landlock country it is not an easy country to navigate because of its you know richness of of all sorts of uh natural barriers to moving around and uh other issues it has diamonds which have been called a curse for other African countries it also started its independence period dirt poor and without much road or any type of educated Elite but it built better institutions for a variety of reasons we can get into them if you are interested but it built better institutions it created stable property rights it created a democracy that has worked reasonably

well over time it uh never led to a system where the court system was biased towards one group versus another it invested in people in education in public infrastructure it managed the diamond wealth well and it's achieved this relatively high level of income but it will be a mixed bag and it will take some time interest rates across the world right now are high which means International investors are even less attracted to places like Africa since they can get good returns by just buying extremely safe Investments when cash is earning less than a percent they

might be a bit more motivated to look at Africa as an option again the continent is also again embroiled in a number of very high-profile conflicts which is making even countries like China take a step back and see how this all plays out nobody can predict the future least of all economists but it also must be remembered that just 50 years ago most of Asia was in the same economic situation as most of Africa today 300 years ago a blink of an eye on the grand scheme of human history even the wealthiest Western Nations had

a similar economic output to the continent today one of the most poignant takeaways from Asam mogu and Robinson's research is that economic success tends to lead to more economic success most economies throughout history have been stagnant until they weren't if Africa's time does come it could be an economic success story the same as every other region that was plagued by problems until they made the first breakthrough our full interview professor as glue is available to listen to ad free on Spotify and every other popular music streaming platform we briefly touched on the problem of modern

day corruption in this video but it's something that we covered extensively in our video on erria one of the clearest examples of a struggling African nation you should be able to click to that video on your screen now thanks for watching mate bye