Thursday, November 18, 2004

Anarchy Somalian style

An interesting BBC account of life in Somalia (the only country in the world without a government):

"Somalia is a pure free market," one diplomat told me.
And the central Bakara market certainly looks to be thriving. Some businesses, such as telecoms, are also doing well, with mobile phone masts and internet cafes among the few new structures in Mogadishu, a city where many buildings still bear the scars of the heavy fighting between rival militias of the early 1990s.
But is a pure free market a good thing?
Speaking from a theoretical point of view, some economists might say so, but in the very harsh reality of Mogadishu, it means guns and other military hardware are freely available in a market not far from the city centre.


Although Somalis are able to survive and some are even prospering, everyone I spoke to in Mogadishu is desperate for a return to some semblance of law and order - schools and hospitals can only follow security on the new government's to-do list.
"I just want a government, any government will do," one man told me.


The diplomat knows more about how to give a good soundbite than basic political economy. As de Soto has shown, markets are extremely inefficient in the absence of institutions such as property rights and the rule of law. There seems to be no rule of law in Somalia so it is incorrect to say there is a free market, and therefore false to infer from the Somalian situation that free markets are undesirable. Whilst Somalia does prove, unfortunately for the people living there, that anarchy is not necessarily a libertarian utopia, there are other examples of markets and other institutions working in the absence of government.
(more here)

UPDATE (21.11.04): Via Tom Palmer, a World Bank article that details where and how the private sector is providing a surprisingly good service. From the conclusion:
The achievements of the Somali private sector form a surprisingly long list. Where the private
sector has failed—the list is long here too— there is a clear role for government interventions.
But most such interventions appear to be failing. Government schools are of lower quality
than private schools. Subsidized power is being supplied not to the rural areas that need it but
to urban areas, hurting a well-functioning private industry. Road tolls are not spent on roads.
Judges seem more interested in grabbing power than in developing laws and courts.
A more productive role for government would be to build on the strengths of the private
sector. Given Somali reliance on clan and reputation, any measures allowing these mechanisms to function more broadly would be welcome; credit and land registries would be a good start. And since Somali businesses rely heavily on institutions outside the economy, international and domestic policies supporting such connections would help.

4 Comments:

Anonymous Anonymous said...

I'm not clear exactly how Somalia is an example of anarchy "not working". Pre-anarchy Somalia was by any reasonable measure much worse... the World Bank is also not an impartial observer in this case, since they are owed several hundred million dollars by the non-existant government of somalia and have made clear that any new government will be expected to make good on that debt.

7 April 2005 at 04:42  
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