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Meet the economic gangsters

Economic gangsters come in all shapes and sizes — they're Asian dictators and Somali pirates.

Botswana has become the shining example for the rest of sub-Saharan Africa in that it’s widely touted as a success story. What does that country have that others don’t?

Botswana is an interesting case in many dimensions. They have free and fair elections, they’ve had good economic growth, they have political stability rather than war. And when people try to figure out the reason, they say: well they have so many diamond mines, that must be part of the story. But that’s certainly not enough. There are plenty of African countries rich in resources who have been disasters. Sierra Leone, where I’ve worked, is a good example.

One thing that sets Botswana apart is their early leadership did institute social programs that provided a safety net for the population that ensured against economic shocks, so the government wasn’t being run by economic gangsters trying to plunder the country.

In the chapter about Indonesia, you mention that the country in fact did fairly well economically, had economic growth, in the midst of all this collusion between private enterprise and the Suharto government. Corruption can, in some cases, lead to positive outcomes in spite of itself. How do you explain that?
It isn’t that corruption necessarily was good for growth. It’s probably the case that all that corruption in Indonesia still stifled growth, but it wasn’t as bad as it might have been, and part of the reason is that the whole corrupt crony system in Indonesia was actually quite centralized and well organized. Essentially in that case corruption was acting as a tax, and Suharto and their family and cronies got their cut, their 10 to 15 percent. But they never asked for 50 percent or 80 percent, so it was a very sort of pervasive system, but it was never blatant enough or large enough to put legitimate businesses out of business.

The other kind of corruption is the very chaotic kind, where every single border guard, every customs official, every tax collector is on their own shaking people down for bribes, and in that case, without the coordination, the centralization and the control, corruption can be a lot more damaging because in those cases you don’t know what the price is for anything.

We don’t make the claim that corruption is ever good, but there are forms that may be less bad for economic growth than others.

Where do the Somali pirates fit into the economic gangster model?

Somalia is like the perfect storm: no government, incredible poverty and a really lucrative shipping route right by their coastal waters.

In terms of how to stop it, surely in the long run if there were an effective government in Somalia there’d be less piracy. I do think that it could be productive to think about alternative employment opportunities for these Somali fishermen who have these boats.

If they were put on salary, where they weren’t desperate looking for food or their next meal, basically, this would only increase the cost of shipping 0.5 percent, something tiny, but those crumbs could be a lot for these Somali guys with their boats.

You could even have the other side, where Somali fishermen get a reward for reporting on any Somalis who are going to engage in piracy or get a reward for handing over any of their comrades who were engaged in piracy. So I think there may be a smart way to do it if the world major powers got together.

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http://www.globalpost.com/dispatch/commerce/090806/meet-the-economic-gangsters