Working Paper 22

The Political Foundations of Development: The Case of Botswana

SCOTT BEAULIER AND J. ROBERT SUBRICK*

* Scott Beaulier is a Mercatus Center Social Change Graduate Fellow, and a PhD student in Economics at George Mason University. J. Robert Subrick is a Senior Research Fellow at the Center for Institutional Reform and the Informal Sector (IRIS) at the University of Maryland. The ideas presented in this research are the authors' and do not represent official positions of the Mercatus Center at George Mason University.

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The Political Foundations of Development: The Case of Botswana*

Scott Beaulier Department of Economics George Mason University

sbeauli1@gmu.edu

J. Robert Subrick Center for Institutional Reform and the Informal Sector

University of Maryland Robert@iris.econ.edu

I. Introduction The role of the collective choice mechanism is fundamental in explaining why some

countries are rich and others are not (Robinson 2002). Politics provides the basis of

exchange in the modern economy. The limits of what can and cannot be property and

what contracts are enforceable are largely defined by the political system. During the

twentieth century, the political process became the primary source of law. Even in

common law countries, statute law became the source of laws. The role of the judge has

been minimized. The growing importance of the political markets in the allocation of

resources is essential to understand both growth tragedies and growth successes.

The role of regulations, the extent of taxation, and the growth of bureaucratic

control each have had an impact on the extent of the market and, therefore, the division of

labor. This, in turn, negatively influences economic development. Barro (1997) has

found government consumption to be negatively correlated with economic growth. Yet,

governments provide the essential services-such as the third-party enforcement of

contracts- that harness incentives which promote economic development. La Porta,

* The authors wish to thank George Ayittey, Peter Boettke, Thomas Stratmann, and Richard Wagner for useful comments and suggestions. The standard disclaimer applies.

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Lopez-de-Silanes, Shleifer, and Vishny (1999) found that larger governments tended to

be associated with the provision of higher-quality public goods. Therefore, some of the

functions of government seem to be market-enhancing (Olson 2000).

More recently, theories have been put forth that explain how geography interacts

with institutional development to promote or hinder economic growth. Acemoglu,

Johnson, and Robinson (2001a) attempt to merge geographical and institutional

arguments by claiming that geography and demographics affect the institutions that will

emerge—those institutions with the highest population densities and lowest life

expectancies at the time of colonization will do the worst. The reasoning is that

Europeans were less likely to set up a proprietary state that promoted long-term wealth

creation. Instead, Europeans in regions with high population density and/or low life

expectancy would expropriate rents from the population as fast as possible, because long-

term colonization would have been much more costly. They have recently extended this

argument (Acemoglu, Johnson, Robinson 2002). Engerman and Sokoloff (1997) provide

a second possible explanation of the interaction of geography and institutions. They

argue that climate influenced the type of organizational structure that agricultural

production undertook. Temperate regions were not conducive to large-scale plantations

and dependence on slave labor. As a result, more egalitarian institutions emerged that

served to better protect the ‘public’ interest and the market framework.

Yet, the empirical literature that assesses cross-sectional determinants draws

attention to factors that cannot be ignored when one examines an individual case study.

For example, openness to trade (Sachs and Warner 1995a), the rule of law (Barro 1997)

ethnolinguistic fractionalization (Easterly and Levine 1997), social infrastructure (Hall

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and Jones 1999), and the institutions of private property (Acemoglu, Johnson, Robinson

2001a) have all been found to be robust correlates of economic development.

This paper explores the political foundations of economic growth in Botswana. In

particular, we apply the theory of the proprietary states to economic development

(Grossman and Noh 1990, 1994; Grossman 2000). First, we find that Botswana’s

government has been able to adopt polices that do encourage economic growth rather

than expropriate wealth from the citizenry. Even though it is a land-locked country with

poor geographic terrain, Botswana has protected private property, avoided the curse of

natural resources and the accompanying rent-seeking, and maintained a relatively low

inflation environment. Documenting the ‘good’ polices of the Botswana government

raises the question of why has the Botswana government been able to promote

development? That is, why has the Botswana state not been more predatory? We

suggest that the success is attributable to the unlikely threat of social upheaval by the

citizens. This success is almost entirely due to the government’s provision of public

goods, and its ability to successfully solve problems that arise during a time of crisis.

Wars of attrition between interest groups were avoided.

The paper proceeds as follows. The next section compares the policies adopted

by the Botswana government with the rest of sub-Saharan Africa. The evidence suggests

that Botswana has adopted policies conducive to economic growth. Section III will offer

a brief background summary of Botswana’s pre and post-colonial political economy. A

few pages devoted to an enormous and rich history does not do this justice, but it must

suffice in order to allow us to proceed to the central questions this paper will ask. Section

IV will look at the exceptional post-colonial growth of Botswana and summarize some of

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the leading explanations of this success: its government’s decision to not be a predator on

the populace. We show that the government has been market-augmenting. The best

attempt to account for Botswana’s success is that of Acemoglu, Johnson, and Robinson

(henceforth AJR, forthcoming). This section will offer a brief summary of their

argument and extend it with the theory of the proprietary state of Grossman (2000).

Section V briefly examines the cross-sectional evidence regarding the proprietary states.

Section VI extends the cross-sectional study by pointing to more specific instances where

Botswana engaged in decidedly non-predatory policymaking that is consistent with

Grossman’s theory of the proprietary state. Perhaps this should not be seen so much as

an alternative explanation to the AJR story, but rather one that runs deeper than the “good

institutions” account. Section VII concludes.

II. The Usual Suspects in Africa

It is well-known that the economic performance of sub-Saharan Africa has been dismal.

Easterly and Levine have neatly summarized this as “Africa’s Growth Tragedy.” Yet the

reasons for the ‘tragedy’ are not clear. For example, Easterly and Levine (1997) argue

that cultural heterogeneity leads to poor policy outcomes. Yet, their measure of cultural

heterogeneity does not eliminate the effect of the Africa dummy variable, which suggests

that they failed to explain Africa’s growth tragedy (Englebert 2000). In order to check

the validity of this hypothesis, we regress the quality of political institutions proxied by

the government effectiveness on the growth rates since 1965, 1970, and 1975. We then

instrument the quality of political institutions with a measure of cultural heterogeneity.

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Table 1 reports the results. In all three cases, we find no such effect. It appears as though

ethnic diversity cannot explain sub-Saharan Africa’s poor economic performance.

Table 1. Government Effectiveness and Ethnic Diversity Growth65 Growth70

Growth75

Government Effectiveness

-12.64 (29.63)

-11.50 (26.95)

-11.18 (25.91)

Observations 37 37 37

Another possible explanation for Botswana’s success is that it is a former British

colony. Botswana may have had the advantage of better institutions because of the good

fortune of being colonized by Great Britain rather than France. In order to examine the

validity of this hypothesis, we examine the growth rates of former British and French

colonies in sub-Saharan Africa. Table 2 presents the means of growth rates for the

former British and French colonies in sub-Saharan Africa since 1965, 1970 and 1975.

Two things stand out from Table 2. First, there appears to be no difference in growth

rates between British and French colonies. Second, the level of development is higher for

the former French colonies. Botswana’s success is not the result of being a former

British colony.

Table 2: Economic Growth in Former British and French Colonies Growth

British French P-value

Since 1965

3.58 (19) 3.47(27) .57

Since 1970

3.48 (19) 3.37 (27) .56

Since 1975

3.01(19) 3.20(27) .39

N= 19 for British Colonies and N=27 for French Colonies. P-values are for a t-test on the means between the former British and French Colonies

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Many of the recent explanations for the lack of economic development are

attributed to geographical factors. Sachs (2001) and Sachs and Warner (1995) argue that

climate, proximity to the coast, and distance from the equator are detrimental to

economic performance. Diamond (1997) offers a similar explanation but finds the

climatic and geographic differences to have played an important role thousands, if not

millions, of years ago. If these theories were correct, then we would expect Botswana to

be poor. It is a landlocked country that is close to the equator. Yet it has grown.

Something more fundamental must be the reason.

The development of ‘good’ institutions is essential for economic development to

occur. Botswana has developed such institutions. The reason for development of high-

quality institutions is not obvious. Yet the evidence suggests that Botswana has

developed high-quality institutions. For example, Botswana is open to international trade

and has a low inflation rate. The rest of the essay attempts to explain Botswana’s

success. But first, we should pause briefly to further elaborate on Botswana’s relative

superiority in adopting good policies.

Table 3 reports the average levels of five indicators of the quality of policies

adopted by the Botswana government. Our five polices are (1) the rate of inflation; (2)

the ratio of the sum of imports and exports to GDP as a proxy for openness to

international trade; (3) the ratio of M2 to GDP—this gives us an idea of how developed

the stock market is in Botswana; (4) the number of telephones per 1000 people serves as

a proxy for public good investment; and (5) the ratio of Government Expenditures to

GDP.1

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Table 3. Average Policy Measures Botswana SSA Inflation (1965-1995) 10.9 61.18 Trade 92.13 68.82 Financial Market Depth 20.67 21.92 Telephones 22.96 12.08 Size of Government 21.83 17.05

In order to better evaluate the quality of public policy in Botswana relative to the

other sub-Saharan countries, we generate the first principal component of these five

policies. Principal component analysis produces a linear combination of the correlated

policy variables that minimizes the joint variance of its components. Table 4 lists the

countries by the goodness of their policies. Botswana is near the top of the list.

Table 4: Policy Index Country Policy Index Seychelles 5.109531Namibia 3.159597Mauritius 3.076802South Africa 2.845035Cape Verde 1.962877Swaziland 1.903871Sao Tome & Principe 1.303893Lesotho 1.139234Mauritania 1.086695Botswana 0.9651121Equatorial Guinea 0.9322813Gambia, The 0.8960031Angola 0.8283035Gabon 0.4105617Togo 0.3490987Zambia 0.336541Congo, Rep. 0.225Kenya 0.1641859Comoros 0.0712376Cote d'Ivoire 0.0528834Liberia -0.1705998Zimbabwe -0.2048163

Senegal -0.2579237Ethiopia -0.3920619Malawi -0.5097044Guinea-Bissau -0.5708181Tanzania -0.7492145Mozambique -0.7873102Central African Republic -0.7946656Nigeria -0.8809316Benin -1.089033Mali -1.133388Cameroon -1.151893Sudan -1.19807Burkina Faso -1.281336Ghana -1.294243Sierra Leone -1.353089Madagascar -1.3625Chad -1.394989Niger -1.41166Rwanda -1.488033Burundi -1.535763Guinea -1.659535Uganda -1.774796Congo, Dem. Rep. -2.372371

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Overall, the evidence suggests that Botswana adopted good policies. Natural

resource abundance and poor geographic endowments have not deterred economic

development. Botswana is an example of a market-augmenting government. In order to

understand how this came about, we must get an understanding of how Botswana’s

political institutions evolved. To truly understand the political institutions, we must

engage in a brief historical examination of how these institutions have evolved from pre-

colonial tribal arrangements to their respectable, Western form today.

III. A Brief History of Botswana

Botswana is a landlocked country the size of Texas (220,000 square miles) that borders

Zimbabwe to the northeast, South Africa to the east and south, Namibia to the north and

west, and touches Zambia at one spot on the Zambezi River in the north. Approximately

1.6 million people inhabit Botswana but a large proportion (roughly 80%) of this

population is located along the fertile eastern border of the state, with the most populated

region near the capital of Gaborone. The reason for this population concentration is that

84% of the nation’s land is classified as largely uninhabitable Kalahari Desert land.

Botswana’s arid climate makes drought a frequent social concern for Botswanans. Until

Zimbabwe’s independence in 1980 and South Africa’s reforms of 1994, Zambia was the

only democratic nation bordering Botswana (Parson 1984, 4).

Indigenous conditions in the tribal lands of Botswana (Bechuanaland at that time)

exhibited many unique features that deserve mention. First, the political organization of

the tribe was largely autocratic. As the most powerful individual in the tribe, the

Tswanan chiefs were held in great respect and reverie. The chief determined how land

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was to be allocated between hunting, farming, and residence. Family members and close

friends of the chief usually handled the administrative and supporting roles. However,

the chief was usually regarded as an equal to his people. Kgotlas were frequently held

where adult males would gather with the chief to discuss public issues. At these

assemblies, the chief was often given advice, criticized, and responsible for administering

law and order. As Schapera (1952, p. 64) noted, popular assembly was not a common

practice of African tribes. In fact, “this feature (popular assembly) is far more

characteristic of Sotho, and especially Tswana, than any other Bantu.” Botswana’s tribal

experience was an exceptional one in that there was greater toleration of dissent in this

region than anywhere else in pre-colonial Africa.2

The Tswana chiefs were actively involved in the economic affairs of the tribe.

Many of the aristocracy were large cattle owners. While the standard practice of tribes

was to allow for common land holdings, private ownership of the cattle on these

commons was prevalent. As a residual claimant with direct interests to the success of the

cattle industry, the chief’s interests in the key sector of pre-colonial Bechunaland were in

large part tied to those of his people.

In 1853, Bakwena chief Sechele organized a meeting with the British. For 40

years he had successfully defended his lands against numerous invasion attempts by other

African tribes and the Boers. Realizing that additional threats from the Boers could be

insurmountable, he hoped he could gain British protection in the event that the Boers

attacked again. The British rejected Sechele, and minor conflicts between Tswana tribes

and their neighbors persisted. These circumstances changed when, in 1884, Germany

annexed South West Africa (present-day Namibia). Bechuanaland now became a region

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of strategic importance for the British. In response to continued demands by Tswana

chiefs for protection and out of a concern with Germany’s presence in sub-Saharan

Africa, the British established the Bechuanaland Protectorate over what is now present-

day Botswana in 1885.

Due to the perceived lack of resources in Bechuanaland, the high level of civil

strife in South Africa and Rhodesia, and the relative strength of the Tswana tribes, there

was limited British colonial involvement in Bechuanaland. The lack of roads into

Bechuanaland further limited the ability of the British colonizers to influence the affairs

of their colonists. There was simply no cost effective way that the British could monitor

the events in Bechuanaland.

While it is ambiguous whether colonial interventions were a long-term help or a

hindrance to economic performance in Africa overall3, historians maintain that the British

took an approach to Behcuanaland that can been regarded as “benign neglect”.4 This

interpretation maintains that there was limited involvement in the protectorate’s affairs,

and the British left little social and physical infrastructure in Bechuanaland. Evidence

lies in the fact that 75% of British spending on the protectorate went to “administrative

expenses”, while another large portion was spent on upgrading tribal militants in the

event that additional threats by either Germany or the Boers occurred (Parson 1984, p.

22). The primary reason for the policy of benign neglect was the high costs of

transportation to monitor the colonists in Bechuanaland.

By 1934, the British were attempting to tighten their grip on the Bechuanaland

Protectorate. These attempts were largely thwarted, however, as Botswana was the

beneficiary of world tensions elsewhere throughout the 1930s—first the Great

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Depression, then the Second World War. In the midst of these debacles, the British did

not have the additional resources to engage in increased enforcement and extortion of the

Bechuanaland Protectorate. After the war, the British attempted to combine the

Bechuanaland Protectorate into their South African colony. Two events that played an

enormous role in the thwarting of annexation efforts were the rise of the National Party in

South Africa in 1948 and the marriage of Chief Sereste Khama to white Englishwoman

Ruth Wilson.

Studying abroad, Khama was banned from returning to Bechunaland to assume

his chieftainship. The ban was imposed with the hope of easing tensions in South Africa

related to the interracial marriage. Khama remained in exile until 1956. At that time, he

rescinded his claim to chieftainship and returned to Bechunaland. By 1960, an anti-

apartheid, anti-colonial party, the Botswana People’s Party (BPP) had been formed. In

response, Khama helped to form the Botswana Democratic Party (BDP), which unlike the

urban based BPP appealed to the rural commoners and tribal chiefs alike. Relative to the

BPP, the Khama-led BDP had a more powerful coalition and took a more gradual

approach to ending British colonial rule.

The British officially granted independence to Botswana in the spring of 1965.

The first elections were held in the fall of 1965, and the Botswana Democratic Party

enjoyed a landslide victory. Since 1965, the BDP has maintained majority control of the

presidency and National Assembly of Botswana. The Botswana People’s Party never

materialized into much of a political rival, and by 1969 the Botswana National Front

(BNF) became the major rival to the BDP. Led by Kenneth Koma, the BNF enjoyed

immediate success by winning three seats in the 31-member assembly in 1969.5 The

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BNF’s popularity grew in the 1970s, declined throughout the 1980s, but then support

again escalated in the late 1990s.

Botswana’s democratic system can be understood as a Westminster Parliamentary

system with a unicameral, 31-member Assembly responsible for legislation. In addition,

there is a House of Chiefs that serves an advisory role to the Assembly and president.

Parliament has the power to “make laws for the peace, order, and good government of

Botswana” (Parson 1984, p. 39). However, the strong Westminster system where the

executive is responsible to the legislature is modified to allow for more power in the

hands of the president. The president can withhold the signing of bills, which results in

their being returned to the Assembly; if the Assembly passes the bill again, the president

has three weeks to sign the bill. The president also serves as commander-in-chief of the

armed forces and appoints all ministers and a vice-president (Parson 1984, pp. 39-40).

In addition to their Western-style of governance, Botswana also inherited a

Western system of law that is best described as Dutch-Roman, although there is a

common law element. Botswana’s transition to a Western legal tradition is an interesting

story in that the criminal courts have adopted a rich version of the rule of law. At the

same time, however, a respect for the traditional/customary law remains strong and

practiced through civil law. It seems the introduction of change in both the legislative

and judicial offices, while keeping many of the older customs in place, allowed for a

rather smooth transition to a more Western political and legal system.

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IV. The Adoption of Good Policies

With the exception of life expectancy numbers6, nearly every measure of health and

social well-being indicates significant improvement in the average Botswanan’s living

conditions since independence. What has led to these tremendous improvements in well-

being is the fact that from 1965 to 1995 Botswana was the fastest growing country in the

world—it grew at an average annual rate of approximately 7.7% over this period.

Measures of Botswana’s economic and political freedom have steadily improved as well.7

Botswana rose from the third worst nation in terms of economic wealth in 1965 to an

“Upper Middle Income” nation that enjoys a per capita income (adjusted for PPP) of

approximately $5,796 in 1998 U.S. dollars. To put that figure in perspective, Botswana’s

per capita income is approximately twice as high as the average East Asian tiger’s per

capita average of $3,280. The average individual in Botswana enjoys an income

approximately four times that of other sub-Saharan African individuals (the average

income for sub-Saharan Africa—with Botswana excluded—is approximately $1,440 per

person). The adoption of ‘good’ policies underlies Botswana’s success.

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AJR (forthcoming) provide the best contemporary account of Botswana’s success.

They suggest that Botswana’s outstanding economic performance can be explained by

the following factors:

1. Botswana possessed relatively inclusive pre-colonial institutions, placing constraints on political elites.

2. The effect of British colonialism on Botswana was minimal, and did not

destroy these (pre-colonial) institutions.

3. Following independence, maintaining and strengthening institutions of private property were in the economic interests of the elite.

4. Botswana is very rich in diamonds, which created enough rents that no group

wanted to challenge the status quo at the expense of “rocking the boat”.

5. Botswana’s success was reinforced by a number of critical decisions made by the post-independence leaders, particularly Presidents Khama and Masire.8

They summarize by finding that good institutions—the institutions of private property

and the rule of law—were the key determinant of Botswana’s success.

The institutions of private property provide a starting point of analysis for

accounting for Botswana’s growth. The remainder of this paper extends the basic

insights of AJR in order to account for the political foundations of the institutions of

private property. We will examine the institution which defines and enforces property

rights: the central government. We attempt to explain why Botswana’s government has

not engaged in predatory behavior that undermines the institutions of private property.

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V. How did the “Good Institutions” Become Good?

Following Grossman and Noh (1990, 1994), we examine the theory of the proprietary

state. In order for the government to act as if it were proprietary, three constraints must

be considered. The first constraint that the state faces is a tax evasion constraint. The

best-known example of this is the Laffer curve. Excessively high tax rates deter people

from paying their taxes. The government must not over-burden its citizens with high

taxes. In 1999, the highest individual marginal tax rate in Botswana was 30%. The

average for the sub-Saharan countries is approximately 36%. The highest marginal

corporate tax rate in Botswana was 15% in 1999. For the other sub-Saharan countries, it

is 34%. The first constraint appears to be met.

A second constraint is that the state credibly commits to protecting private property.

North and Weingast (1989) argue that the Glorious Revolution provided the appropriate

constraining institutions (independent judiciary, Parliament controlling the purse strings,

etc.) to prevent extraction by the monarch. Hayek (1960) argues that the institutional

features that secure the rule of law such as a written constitution, a federalist system, and

judicial review protect private property. Rather than focus on what institutions tie the

King’s hands, the next section focuses on the ability of the government to signal that it

will not confiscate private property. In the case of Botswana, the government adopted

several anti-predatory policies, which clearly signaled a commitment to long-term

development.

The final constraint that a proprietary state faces is the threat of revolution from the

populace. In order to deter social upheaval, the government must be able to satisfy the

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demands of the electorate. The negative effect brought on by special-interest legislation

must be minimized so as to prevent social divisions.

Grossman and Noh focus on the interaction of the credibility constraint and the threat

of social upheaval. First, in order for the state to be credible, the ruling party must be

stable. If there is a constant threat of upheaval, then the ruling party is less likely to act

like a stationary bandit and more like a roving bandit (Olson 1993). Botswana satisfies

this condition. Since its independence, there has been only one ruling party. In addition,

there is evidence that Botswana’s ruling party continues to cater to its electorate by

providing higher levels of public goods to regions that return strong electoral support to

the party.

Second, the citizenry of the state must feel that it is not being exploited by the state.

One possible manner for this to occur is for public goods to be provided from tax

revenues. Investment in social infrastructure such as the paving of roads or the provision

of basic education signal to the electorate that the government is not simply taxing the

people in order to maximize the ruling party’s well-being. Unlike many other sub-

Saharan African nations, Botswana’s people are very satisfied with their government’s

performance: the level and quality of public goods seem to be consistent with what

individuals want.9

Table ?? presents the average level and changes in the provision of public goods in

Botswana since independence. One striking result is that in all categories, Botswana has

enormously increased its provision of public goods. [The table will come along later.]

Rodrik (1998) provides part of the explanation for the correlation between good policies

and high government spending. As a country becomes more open, their government

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spending increases to help offset some of the risks associated with open markets.

However, this cannot tell the whole story.

The high level of government spending and the good economic performance in

Botswana is probably an issue of the scope versus scale of government intervention.

[ADD SHLEIFER ET AL. STUFF HERE]

In order to better understand the relative success of Botswana, an explanation of why

Botswana adopted the “good institutions” that allowed for escape from the African

poverty trap is needed. Good institutions serve as the basis for economic growth but why

do some countries adopt those institutions and others do not is the next question. The

first serious problem that the AJR argument confronts is related to the issue of “inclusive

pre-colonial institutions” that constrained the political elites in Botswana. If the pre-

colonial institutions were so effective at constraining elites, why did Botswana perform

rather poorly prior to independence?10

The emergence of these institutions can alternatively be explained as the result of

wise decisions upon their gaining independence, but it seems somewhat ironic that the

political and legal institutions chosen closely matched those of Great Britain. This result

requires a refinement of the AJR thesis: while Great Britain was not active in the

provision of public goods and resource extraction, their administrative policy did

significantly alter the political and legal institutions that existed in colonial Botswana. In

contrast to the AJR thesis that British interventions in Botswana were minimal and “did

not destroy pre-colonial institutions”, we will soon see that Great Britain did introduce

policies that led to distortionary outcomes for colonial Botswana’s development.

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The importance of presidential leadership by the likes of Khama and Mereste was

undoubtedly a significant element of Botswana’s success. When faced with difficult

policy decisions that would have significant long-term effects, Khama and Masire

adopted growth-enhancing polices.11 For example, when faced with the seemingly

overwhelming challenge of establishing a post-colonial transitional development plan,

Khama seemed to do all of the right things. With the prospects of success seemingly zero

when he came to power, we would predict that Khama would have behaved in ways that

secured short-term gains. To use Olson’s (1993) terminology, he should have become a

‘roving’ bandit. What actually occurred is that Khama’s government immediately set out

to establish itself as a “financially viable entity”.12 But, Botswanan officials did more

than adopt rhetoric to promote “financial viability”; their actions, including allowing

outside investors opportunities to explore and invest in their diamond mines (Hartland-

Thunberg 1978), the establishment of strong international ties,13 and a Coasean bargain to

overcome a potentially devastating water-cattle dispute of the early 1970s (Parsons,

1981) all helped to signal that Botswana government was committed to long-term

development.

In addition, a fact that has been overlooked to date is the role that the “hut tax”

played on the development of political and social infrastructure in colonial Botswana;

perhaps the case was not one in which Botswana had “inclusive political institutions”

checking elites, but rather that Botswana had very little in the way of political institutions

prior to independence.

The next section will offer a more detailed analysis of the role the “hut tax” and

public good provision played in Botswana’s growth and development. While we are

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sympathetic to the Acemoglu et al story that institutions and private property rights

mattered in Botswana, we need to continue to get at what mechanism led to these

institutions “sticking” in Botswana, but failing in so many other development stories.

VI. Specific Mechanisms Promoting the ‘Good’ Institutions

A. The Perverse Effects of the ‘Hut’ Tax

Both AJR (2001b) and most historical accounts maintain that Britain’s

colonial rule of Botswana was one of “benign neglect”. Yet, the historical record

suggests that there were a few British policies that proved distortionary in their effects on

the Botswanan population. The worst of these policies was the “hut tax”, which was

imposed on all Botswanan families owning huts.14 The British introduced this policy in

1899. By 1919, the ‘hut’ tax had become a permanent fixture of Botswana’s colonial

society, and an additional ‘native’ tax requirement of three shillings was introduced.15

An important point to note relating to this tax was that payment was to be received in

British cash only. Historians maintain that this element of the British tax scheme led to a

serious shift in Botswana’s work force. As Schapera argues, the taxation “forced upon

the people the necessity of finding a regular sum of [British] currency each year”

(Schapera 1947, p. 7).

Depending largely on cattle farming, Botswana’s economy was mainly a self-

sufficient economy prior to the hut tax. The effect of the tax on the Botswanan economy

was immediately felt. A large share of the population was unable to pay the tax, because

they did not obtain British currency from their employment. This led to a massive

increase in male job search activity in the formal labor market. However, there were very

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few jobs available in Botswana. The result was massive emigration into South Africa

where individuals could be assured employment in Great Britain’s colonial mining

operations. With poor pay for their work relative to the high tax, Botswanan men spent a

large portion of the year working in South African mines to come up with the needed

money. Estimates suggest that men working in the South African mines spent anywhere

from 9-11 months of the year in South Africa. At its peak in 1943, the emigration of

Botswanan men into South Africa for employment reached nearly 50% of the adult male

population (Schapera 1947, pp. 1-39).

A few of the effects from this policy are obvious. With the loss of a large fraction

of its most able-bodied individuals, the physical, economic, and social infrastructure of

Botswana suffered greatly. The most skilled artisans and entrepreneurs, no longer able to

service this missing male population, were probably a significant fraction of the

emigrating population.16 The fabric of civil society was strained by the loss of such a

large share of males, which forced many more women to take on a larger role around the

hut. And, perhaps most importantly, political organization in terms of quality and

quantity was seriously affected.

The severity of the ‘hut’ tax led to the diminution of social capital. Women took

on an even larger burden in the home. The men who did not move to South Africa for

employment were far less active in social and political organization than they had been

before—their preoccupation was much more focused on managing to make a living and

pay the hut tax than on other affairs. Two crucial components to the strengthening of

civil society are time available for leisure activities and a large population of participants.

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The ‘hut’ tax seriously hampered both of these necessary preconditions for the growth of

civil society.

The ‘hut’ tax provides a possible mechanism for why Botswana began to enjoy an

economic turnaround when it did. Botswana’s growth was not a miraculous event

suddenly beginning in 1965. The slow erosion and eventual elimination of the ‘hut’ tax

provided the basis for growth, development, and political revolution. Once adult males

were no longer severely constrained by the tax, a large return of the native population

occurred. As this influx of males (who were more likely to be active in social and

political infrastructure development) occurred, a gradual push towards independence

began.

While many historical accounts offer some kind of great leap forward story of

Botswana’s success, the thesis of this paper instead argues that it was no miracle, but

rather the result of one hard lesson learned at the hands of British. The period

immediately prior to independence might have seemed like a time in which everything

was “up for grabs” in Botswana, but the reality is something much different: Botswana’s

post-independence social and political institutions were in place long before the period

often referred to as the revolutionary period in Botswana. These institutions took their

Western form not at the 1965 period of independence, but instead at an earlier period

when politically and socially attuned males were making their return to the nation.

The above explanation might seem controversial, but its significance should not

be overlooked. Unfortunately, the hypothesis that the ‘hut’ tax mattered for economic

growth is a difficult one to test for several reasons. First, sub-Saharan African data are

notoriously unreliable. Second, it is hard to determine what time period would be the

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relevant one to focus. However, one would predict a priori that, from this thesis, as the

‘hut’ tax became less relevant and native males returned to Botswana, economic, social,

and political growth should have resumed. Finally, testing this hypothesis also runs into

the problem of what to test Botswana’s experience against. No sub-Saharan African

nation had a similar colonial experience with a different outcome in terms of number of

people temporarily emigrating.

B. Population Density and the Effective Provision of Public Goods [ADD—

CURRENTLY INCOMPLETE!]

As we stated earlier, there is strong evidence that the people of Botswana are quite

content with their government. Their levels of taxation are lower than the sub-Saharan

African average, yet they have high levels of public good expenditures for things like

education and roads. The mechanism driving the ‘good’ institutions of private property

in Botswana is not just due to political stability; when the government is an active player

in the market, it is participating in relatively effective public goods investment.

Herbst (2000) maintains that the lack of good transportation networks is a primary

reason for the collapse of many African nations. Without the easy transport of market

institutions and the rule of law to rural areas, large regions of Africa cannot experience

growth. Similarly, without the easy access to markets that roads provide, individuals

cannot get their products to market. Both Herbst and Platteau (2000) maintain that high

transportation costs warrant increased public spending on the paving of roads and other

infrastructure investment. Yet, there is overwhelming evidence pointing to the

ineffectiveness of these large-scale programs.

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Botswana is the best example of good public investment in roads in sub-Saharan

Africa. With a large population concentration in the southeastern part of Botswana, the

public transportation projects enjoy a far greater demand than they do in other parts of

sub-Saharan Africa. Instead of following the example of most of sub-Saharan Africa by

investing in grossly inefficient transportation programs, Botswana’s public transportation

projects have, in large part, been less inefficient than other countries. The Botswanan

government is providing something much closer to an efficient level of sought-after

public goods. This is evident both in the overall popularity of the government and in the

country’s economic performance.

Prudent public good investment can help promote the ‘good’ institutions of

private property and the rule of law. Botswana’s level of public spending is quite high,

but there is evidence suggesting that this high level of spending has been ‘good’ spending

compared to the public goods spending of other countries in sub-Saharan Africa.

ADD STUFF ON PUBLIC GOOD INVESTMENT CONCENTRATED IN

DENSELY POPULATED SOUTHEAST

C. Economic Competition in the International Arena17

Another area that continues to be underemphasized is the role the international climate

played in Botswana’s development. Of all its neighbors, Botswana was the only nation

free from serious political turmoil since the independence period of the early 1960s.

Furthermore, it is no longer dependent on the International Monetary Fund and World

Bank; in fact it now serves as a sponsor nation. It has attracted tremendous outside

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investment, particularly in its rich mining projects. Yet, there is little mention of the role

Botswana’s international position played in its economic growth.

Immediately following independence, Botswana remained exceptionally

dependent on the British Exchequer for overseas aid funds.18 Stemming in large part

from the growth related to the discovery of diamonds, Botswana was able to do away

with British grants by 1972. Yet, Botswana was far from out of the woods at this early

juncture of its independence. Its leaders embarked on a massive program in pursuit of

more diverse foreign aid, more private capital investment in its mining operations, and

guarantees of protection in the event that Botswana was pulled into a conflict with one of

its disruptive neighbors.

Botswana was successful on all three of these fronts. It was able to attract support

from the United Nations and gained acceptance in 1966. This success allowed for

assistance and advice related to Botswana’s development from such institutions as the

World Bank and the International Monetary Fund. With hindsight we observe that

involvement with these organizations usually proved to be the kiss of death for any

developing country. Interestingly, Botswana was very reluctant to heavily rely on World

Bank or International Monetary Fund funding. These organizations served much more of

an advisory role than a lending or planning role in Botswana’s development.

In addition to improving their world status and potential credibility as a borrower,

Botswana also attracted tremendous private foreign investment into their mining

interests. Largely due to careful policies that balanced the desire for government

revenues from mining operations with an awareness that too large a burden on new

foreign investment would seriously thwart potential growth, Botswanan officials

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successfully allocated mining privileges in a way that allowed extensive mining

operations to explore and extract with a knowledge that they would be taxed at a fairly

predictable rate.

The other important aspect of Botswana’s international success was its

commitment to nonracial domestic policies and noninvolvement in foreign affairs.19 This

tolerant approach produced many beneficial results. First, it led to an extensive in-flow

of political refugees from both South Africa and Zimbabwe. Many of these individuals

were talented, contributing advice to Botswanan officials. Second, an explicit

commitment to a nonracial, noninterventionist program helped to assure that in the event

of conflict, Botswana would receive financial and military aid from the West. And,

finally, a commitment to Western principles of equality before the law and

noninvolvement in foreign affairs promoted even more foreign investment in Botswana’s

domestic economy.

VII. Conclusions

Many of the problems of Sub-Saharan Africa can be summarized simply as government

failure. The post-colonial regimes evolved into predatory states rather than protective

states. The role of political institutions and, in particular, their ability to signal that the

government will not engage in the expropriation of property are crucial in understanding

the African development tragedy. Time and again, sub-Saharan African rulers have

chosen immediate, short-term extraction policies over long-run growth policies. We have

maintained that the kind of political instability that Grossman (2000) describes has been

the key determinant of these predatory policies.

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Grossman’s political stability cuts the other way, as well: rulers who can count on

a long tenure in office will offer a set of policies more conducive to long-term economic

growth. Rather than focus on a country that has been unable to escape government

expropriation, this paper has focused on just the opposite by looking at a country where

expropriation was avoided. By examining a country that has an exception to the African

tragedy, we can begin to develop more general policy prescriptions for what has worked

as compared to what might work.

Throughout our account, we have tried to offer a few alternative explanations of

why Botswana was successful that are consistent with the Grossman (2000) model. To

search for the “unicorn” in stories of growth where a nation has been successful without

the institutions of private property and the rule of law seems like an inefficient research

program; rather, the growth theorist’s primary concern should be with why some nations

came to accept the “right institutions” of private property. However, the AJR argument

that institutions and property rights mattered is no longer enough; the story is deserving

of much more than the obvious. As Jared Diamond (2002) has surmised, “The next step

in our understanding of economic growth lies in the black box of institutions.

Economists desperately need to move from treating institutions as an independent

variable to treating them as a dependent variable.” This has been the beginning of such a

task.

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Endnotes

1 Sachs and Warner (1997) offers a nice summary of how these measures serve as good proxies for the “goodness” of government policy. 2 It should be noted that Ayittey (1992) regards toleration of dissent as the key determinant of Botswana’s success. We will not dispute Ayittey’s claim, but rather offer an extension of his argument which maintains that, in addition to toleration of dissent, Botswana’s ruling elite sent many other signals demonstrating that it was committed to non-predatory rule. 3 Herbst (2000) minimizes the effect of colonization on African development. By contrast, Young (1994) maintains that the effect of European colonization was quite detrimental to development, because European colonization of Africa was largely driven by policies of “ruthless extraction”. We will remain silent on the point of whether colonization promoted or hindered economic development overall, but we do find that the colonizing country, whether it be Great Britain or France, did not matter in sub-Saharan Africa. 4 Dale (1995) and Samatar (1999) both give readers this impression of Great Britain’s involvement in the Bechuanaland Protectorate. 5 The BNF is widely recognized as an explicitly socialist alternative to the BDP. 6 Much of the problem with Botswana’s failure to increase life expectancy stems from the fact that the adult population is plagued with an HIV/AIDS prevalence rate somewhere between 30-35%. 7 See Gwartney, Lawson et al (2001). These measures find that Botswana’s freedom rating rose from a 3.8 in 1975 to a 6.9 in 1999. This translated into Botswana moving from less than a 25th percentile nation (in terms of freedom) in 1975 to a nation above the 65th percentile today. 8 Parsons (1998) argues that the success of chiefs Khama, Sebele, and Bathoen was the primary determinant of Botswana’s success. 9 Support for this can be found in the Southern African public opinion poll, African Barometer. Table 5 provides overall satisfaction with democracy from Botswana, as well as satisfaction levels from individuals in neighboring countries.

Table 5: Satisfaction With Democracy Overall how satisfied are you with

the way democracy works in ______________?

Botswana Zimbabwe Zambia

Very/Fairly Satisfied

74.6 18.2 58.8

Not Very/Not at All Satisfied

21.7 56.9 35.2

Don’t Know

2.8 6.8 3.7

Source: Southern African Democracy Barometer (2001), Public Opinion Center: Cape Town, South Africa.

10 Recall that at the time of independence, Botswana was the third poorest country in the world. Presumably, the “inclusive pre-colonial institutions” important to the AJR account should have been promoting economic growth prior to independence. Bauer (1981, 1984) documents just how poor African nations were at the time of independence. 11 The role of outstanding leadership cannot be appreciated enough. Support for the good leadership story can also be found in Widner (2001), which maintains that Tanzania’s success in establishing the rule of law is largely attributable to the strong leadership of its chief justice, Francis Nyalali.

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12 See Botswana’s Transitional Plan for Social and Economic Development, pp. 6-7. 13 For an excellent account of Botswana’s strategic international positioning immediately following independence, see Potholm and Dale’s (1972) Southern Africa in Perspective: Essays in Regional Politics. See also Carter and Phillip’s (1980) From the Front Line: Speeches of Sir Sereste Khama and Herbst’s (1992) United States Economic Policy Toward Africa. 14 The British implemented a similar tax scheme with far more tragic results in present-day Zimbabwe, Malawi, and Zambia. Thousands of individuals were forced from their homes in these regions if they were unable to come up with the necessary funds. 15 For an extensive discussion of the ‘hut’ tax, see Hermans (1974). 16 Simone Wegge has found a regular pattern in immigrants from Europe to the United States. A large fraction of the population was comprised of the most able-bodied and entrepreneurial individuals in Europe. See Wegge (2000) and Wegge (2001). 17 Herbst (1992) offers an excellent summary of international relations between the United States and sub-Saharan Africa. 18 Picard (1987) estimates that some 90 percent of overseas aid funds in 1966 came from Great Britain. 19 For a leading account of Botswana’s favorable international position, see Dale (1995).