The "African growth tragedy" best describes the economic experience of sub-Saharan Africa since the 1970s (Easterly and Levine 1997). In many countries, the overall level of income per capita has not increased beyond the levels of income at independence. Corruption and excessive governmental intervention into the economy plague these countries. Like most African countries emerging from colonialism, Botswana was an extremely poor nation. Unlike most other African countries, Botswana managed to escape its low level of development and prosper since independence. Botswana went from being the third poorest nation in the world in 1965 to an upper-middle income nation today. Between 1966 and 1996, it was the fastest growing nation in the world with an average annual growth rate of 7.7 percent. Unlike its fellow sub-Saharan countries that chose anti-capitalist, statist policy development, Botswana's leaders opted for the path less traveled (at least in sub-Saharan Africa)--an economic and political system built around the rule of law and voluntary exchange. Botswana's political leaders pursued policies that secured property rights and limited the government's role in the economy. As a result, the citizens prospered.
Botswana's prosperity did not result from chance. Post-colonial Botswana was a newly formed nation that was largely committed to an ideology of cosmopolitanism, tolerance, and small government. As a result of these values, which were helped along by emergent reinforcing institutions, Botswana's economy grew. Though Botswana's development strategy never really embraced market fundamentalism, it did experiment with some of the important classical liberal institutions of free choice and tolerance. Unsurprisingly, their strategy experiment succeeded.
Unfortunately, the experiment with free market policies in Botswana did not last long. By 1975--just 10 years after Botswana had gained independence from Great Britain--Botswana's experiment with limited government had come to an end. Policymakers and voters thought that the government needed to play a larger role in the economy, and they went about establishing a national defense (something that was nonexistent in the early years), expanding government aid for education, providing health care coverage for most citizens, and building more roads. Even though many expatriates and former government officials have warned policymakers in Botswana about the dangers of big government, the government has continued to grow rapidly. In fact, government growth has been so rapid that it has outpaced the rate of growth in gross domestic product in Botswana for the past 10 years.
The purpose of this paper is not to focus on the growth of government in Botswana, nor do we intend to speculate on how Botswana's future growth will be affected by a large welfare state. Instead, this paper discusses Botswana's experiment with limited government and the subsequent development that resulted from this limited government. Although things have changed in Botswana in recent years, it is still important that we recognize the early years for what they were: a natural experiment in which limited government produced prosperity. We use original data from fieldwork and conventional data sources to support our claims. Our approach could be described as an ethnographic approach. Our results are based on seven weeks of fieldwork, a lengthy review of historical examinations of Botswana, and an extensive survey of the University of Botswana's historical archives. In all, we conducted 35 interviews with businessmen, government officials, expatriates, and local citizens in Botswana during the summer of 2004.
Botswana's Post-colonial Growth (1)
In 1965, Sir Seretse Khama became prime minister of Botswana, and the following year he became the first elected president of Botswana. Khama had been educated in the United Kingdom and had married a white Englishwoman named Ruth Williams in 1948. Under Botswana's colonial rule, Khama and Williams were not allowed to return to Botswana because their marriage caused tension with their apartheid neighbor, South Africa. By the mid-1950s, the ban on Khama's return to Botswana had escalated into an international news story. Human rights groups expressed outrage with the British government, and they criticized Great Britain for actively encouraging and upholding a racist protectorate. Although the crisis caused stress for Khama and his wife, it made Khama the most popular and charismatic political figure in Botswana by the time he was allowed to return to his homeland in 1956.
Prospects for this newly independent African nation were not good at the time of independence, however. Prior to independence, Botswana had a dismal growth record. Many considered it to be one of Africa's poorest nations. Based on conventional data sources, Botswana was the third poorest nation in the world in 1965 (World Bank, 2004). Botswana lacked access to navigable waterways, which greatly reduced its ability to engage in international trade. It was desolate and sparsely populated, which limited the division of labor. Furthermore, Botswana suffered from occasional famines, high rates of illiteracy, lack of adequate potable water, minimal health facilities, and a lack of other social amenities--and had virtually no infrastructure. Only two secondary schools offered five-year courses. More than 80 percent of the population depended on subsistence farming, and the government did not have enough tax revenue to balance its budget.
Once in power, Khama began promoting a set of radical reform policies that proved to be a significant departure from the Marxist experiments occurring in other...