Academic

Keenan on China, Africa, and Weatlh

By Lawrence Solum

Patrick Keenan (University of Illinois - College of Law) has posted Curse or Cure? China, Africa, and the Effects of Unconditioned Wealth on SSRN.  Here is the abstract:

This article addresses a fundamental question: how is the behavior of states affected by the manner in which they receive financial support? Most policymakers who debate the best ways to improve the lives of people living in the developing world agree that infusions of wealth in one form or another will improve the lives of people in poor countries. Some argue that this wealth should come in the form of aid from wealthy governments, while others argue that market mechanisms are the best approach. Both sides in this debate have devoted too little attention to a critical factor: How are the human rights practices of governments affected by the conditions associated with wealth? China's recent interest in Africa provides a sort of natural experiment in which to consider again the relationship between wealth, the conditions associated with wealth, and state behavior. Economists have long noted an association between economies dominated by sales of natural resources, such as oil or diamonds, and a range of ills, including weak economic development, corruption, and violations of human rights. Similarly, most infusions of foreign aid have had little positive effect on recipient states. This Article draws on scholarship from economics, political science, and human rights to show that China's investments in Africa run the risk of reducing the welfare of local people instead of improving their lives. This Article makes two principal contributions to the literature. First, I show that the conditions associated with wealth determine whether it has a positive or negative effect on the recipient. Some conditions are explicit and aimed at advancing the donor's strategic interests. Much of the aid that flowed from the U.S. during the Cold War was of this type. Other conditions are what I call market conditions, and in this category I include the kind of business climate a government enforces and the kind of social and human rights environment it fosters. Without the right mix of conditions, infusions of wealth can encourage governments to consolidate access to the wealth; centralize decision making regarding the distribution of rents; consume resources too quickly; and ignore the concerns of citizens. The second contribution this Article makes is to show that China's recent investments in Africa amount to unconditioned wealth, and raise a real risk that their effect on local populations will, in the end, be negative. I show that Beijing's investments can have the effect of relieving recipient states of the market pressures that can discipline host governments and reduce the temptation to engage in ill-advised investments, abuse of the local population, or a variety of other socially negative behaviors.

Full post as published by Legal Theory Blog on March 12, 2008 (boomark / email).