This post still brings another instalment of the role of government in society. I’ve contended as a central argument that a government needs to follow the money. When a government follows the money, the government can see where the money does not seem to be flowing and address poverty.
Living in an increasingly globalised world, money flows in rather challenging patterns. Money flows when individuals or groups of individuals make a choice to invest somewhere. In searching for stable investments, many people have turned to investing in tracks of land. Major US universities have entered into a relationship with developing African land with the explicit intention of improving agricultural productivity.
The main issue at hand is land rights. Many times these agricultural lands support livelihoods of subsistence farmers. Additionally, land gets tied to natural resource management and exploitation. The government negotiates a deal to assign value to the land and create a contract. Some of these “contracts” fall far below any reasonable person standard of land wealth. Vidal and Provost outline one such deal in Sudan where “the 49-year lease of 400,000 hectares of central Equatoria for around $25,000 (£15,000) allows the company to exploit all natural resources including oil and timber.” Clearly, land should be worth more than $0.06/hectare. When you follow the money, you discover absurdity.
And these absurdities matter because the government who leases the land loses sovereignty. In economics terms, they lose the ability to capture the rents of their resource endowment. On Monday, I’ll post an accessible review of Paul Collier’s “The Plundered Planet” which provides a more detailed discussion about following the money around concerns of natural resources.