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October 18, 2005

Nicholas Kristof: Starved by Red Tape.

There is a shorter version of this Nicholas Kristof column available, or rather a distillation of his points:

n countries like this, children end up being killed not only by malaria and measles, but also by an insistence on the six-week paid vacation.

This land of mud huts and malnourished babies is the very least developed country on the planet, but local regulations stipulate that companies must give all employees six weeks and two days of paid vacation a year. Not surprisingly, there are almost no employers in Niger.

So if we in the West want to help children in countries like Niger, we should send vaccines and mosquito nets -- but we also must push these countries to open themselves up for business. Right now, many African countries are in effect killing their own citizens by making it staggeringly difficult for entrepreneurs to open shop.

The World Bank has published a fascinating ranking of how easy it is to do business in 155 countries of the world. New Zealand ranks first, followed by Singapore and the United States. No African country is in the top 20.

But of the 20 countries in the world where it is most difficult to do business, 17 are African, according to the study, ''Doing Business in 2006.'' Niger ranks 150th, followed by Sudan, Chad, Central African Republic, Burkina Faso and -- the very worst place to try to do business -- Congo.

Take a simple construction project -- building a warehouse for books. In Niger, obtaining the necessary licenses would involve 27 procedures over half a year. And in either Nigeria or Zimbabwe, the licenses would take nearly a year and a half to obtain.

Here in Niger, for example, when people get money (sent to them from a relative abroad, for instance), they often use it to buy a motorcycle or a stereo system, because it is so onerous to invest in a formal business. Or to avoid hassles, they open an unlicensed business -- perhaps a bed-and-breakfast, instead of a hotel.

The minimum wage is set at $35 a month in Niger, higher than the local market level. Employees are allowed to work no more than nine hours a day, weekend work is basically prohibited, and women are not allowed to work evenings at all. Layoffs are usually not allowed.

Perhaps those rules (typically inherited from European countries during colonial days) sound as if they protect workers. But the upshot is that companies don't come to Niger and don't hire anyone they don't want on the payroll forever. So almost all people toil in the informal labor sector where there are no protections whatsoever.

In a village 600 miles east of the capital, Niamey, for example, I met a woman named Aisha whose 2-year-old daughter had just died of malaria (partly because she couldn't afford to take the child to the doctor). Ms. Aisha is five months pregnant, although she is so malnourished you can barely tell she's pregnant at all.

Her husband has traveled to a nearby country to look for work, and so Ms. Aisha survives by scrounging the countryside for firewood and then hiking three hours each way to the town of Zinder to sell bundles of wood on the street. It's hard work, seven days a week, and it earns her the equivalent of 40 to 50 cents for a very long day.

Ms. Aisha and the other villagers would be far better off if Nike started a sweatshop here paying the peasants 10 cents an hour to make shoes. But Nike wouldn't do that, both because there would be howls of outrage from American campuses at the exploitative wages and because Niger's labor laws are so uninviting.

Another casualty of overregulation in poor countries is trade. Farmers in sub-Saharan Africa use less than one-twentieth as much fertilizer as those in the West, partly because import duties and red tape can make fertilizer eight times as expensive here as in Europe.

In Zinder, Tchiaka Issoufou, the owner of a small shop, explained that he makes regular trips to Nigeria by truck to buy radios and electronic gear to fill his store. The customs officials make him pay a tax of several thousand dollars per truckload, arbitrarily applied -- plus he has to pay off the police at roadblocks and avoid the bandits with machine guns who steal vehicles.

So let's give more aid to indigent countries. Let's forgive some of their debts. But let's also get them to rip up their red tape, and to help their people by welcoming businesses -- including sweatshops -- and by taking away those six weeks of paid vacation.

The short version? Two portions Hernando de Soto, one part Transparency International. In addition, a side order of screw the International Labour Organisation. As Tim Harford puts it more politely:

Kristof is doing what few journalists are able to do - see past well-meaning regulations to understand their true effects. The sad truth is that a poor country cannot just rule itself rich: regulations stipulating longer holidays and better pay will simply be ignored if they're out of touch with the harsh reality of a life in poverty.

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October 18, 2005 in Make Poverty History | Permalink


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Wow, between the Euro-style vacations, minimum wage, red-tape and graft, that's one messed up country.

Posted by: -keith in mtn. view | Oct 18, 2005 4:38:28 PM

That's not just a picture of Africa today it's also a picture of Europe's future under EU control.

Posted by: Rob Read | Oct 18, 2005 5:13:47 PM

I'd dispute the statement that these rules originated in colonial times. I think the culprits are more likely to be the "advisors" foisted on African countries post-independence by such well meaning countries in Europe.

Of course the socialist outlook of most post-colonial governments should also shoulder some of the blame.


Posted by: Remittance Man | Oct 19, 2005 9:51:47 AM