The Cargo Problem

Econophile's picture

If there was ever a more complicated place in the world it’s Kenya. I just got back from my third trip there. It made me think about why they are so poor and we are so rich.

There are 42+ million people in Kenya and most of them are poor. The government says they are expanding at 4-5% per year. Annual GDP is only $71.4 billion. Apple had $156 billion in revenues in 2012. 40% of the workforce is unemployed. Per capita income is about $900 per year making one of the poorest countries on the planet. Yet the media there are brimming with optimistic reports of economic progress.

The capital, Nairobi, is a growing, sprawling city with an official population of 3,500,000 but it’s really much, much larger. There are large slums on the outskirts. While there is an emerging middle class and a top tier of 5,000 millionaires, most Nairobians are struggling.

It is not as if there has been no progress. There has been a lot of construction in and around Nairobi and real estate is in a boom phase. New shopping strip malls and housing developments serve the growing middle class. And many people (60% of the “poor”) have cell phones. More cars, more jitneys, and more buses clog the roads. And more inflation which robs people of their savings.

There are two foundations of their economy: agriculture and tourism. Tourism by far is the most important since it brings good jobs and foreign exchange. Tourism accounts for more than 50% of the economy. Half of farming is subsistence level only.

It makes you wonder. If things are so good, why are things so bad?

It isn’t the people. Many speak English and are well educated. But their talents are wasted because of a lack of opportunity. I discussed politics with a waiter who had wanted to be a biologist. A safari guide who speaks 3 or 4 languages, who is a trained and certified wildlife expert is paid $30 a month and relies on tips from generous tourists to get by. It is considered a very good job.

There are many explanations for poverty. One popular idea is Jared Diamond’s theory espoused in the book, Guns, Germs and Steel. He takes an historical look at why some parts of the globe thrived and some didn’t. His explanation for success was: the rise of grain agriculture in temperate zones, the decimation of non-temperate zone populations from diseases spread by temperate zone invaders, and the technology of advanced weaponry. Cultures living in temperate zones of the planet thrived and those elsewhere failed to grow beyond subsistence levels.

Diamond’s book was a response to a question from a New Guinean who asked him, “Why do you have so much cargo and we so little?” “Cargo” being pidgin for material goods. I believe that Diamond’s answer only goes so far. Those factors can explain many things in the dim historic past, but it is not as applicable today. It leaves out one really important thing: ideas. Or, to be more accurate, the right ideas.

For example, another question one can ask is: “Why do some societies in the temperate zones thrive and others fail?” Or, “Why do some societies in tropical zones thrive and others fail?” It’s not because technology isn’t known to poor societies. Everybody (almost) everywhere has access to this knowledge. The thing missing in Diamond’s theory are the sociological factors: the methods of human organization. Here I am talking about economic and political systems. These are the ideas the make us or break us.

The formula for success anywhere on the planet isn’t that difficult to discover. You need freedom. That is, solid property rights, a just legal system that protects property rights and the enforcement of contracts, and limited government and low taxation. Add in the personal freedom to do what you damn well please as long as you don’t abridge someone else’s rights. If you do these things, capital (wealth from savings) and an entrepreneurial spirit will rise and drive human progress. These are the ideas that emerged from the Enlightenment and culminated in the founding of the United States of America. It has worked everywhere it has been tried.

These are the things that Kenya and most African countries lack.

Since gaining independence from Britain in 1960, Kenya took the socialist path and the economy stagnated. Bad roads, bad communications, state owned industries, rising poverty, corruption. Basically they just spent the capital that had been accumulated during colonial times. Colonialism was bad but so were and still are the successive socialist-kleptocratic regimes that suck the country dry and keep them poor. They just raised the national sales (VAT) tax to 16% and everyone is complaining because prices have shot up. In 1989 impoverished China took a different road and now they are building roads in Kenya as part of their foreign aid (with a commercial ulterior motive, of course).

Everyone I talked to at “ground level” in Kenya said the number one problem is corruption. When you get down to the detail of what they really mean by that is that they lack the above mentioned freedoms needed for success. The courts are corrupt. The politicians are corrupt. The police are corrupt. The bureaucrats are corrupt. Crony capitalism is rampant. While they espouse the philosophy of “democracy”, that usually means the winners get to distribute political spoils to their cronies and fellow tribesmen.

How do you change that? Can you just change the system and expect human behavior to change overnight? Well, you’ve got to start somewhere. It won’t happen overnight, but if freedom breaks out in these countries, I believe things and people will change for the better. I believe that stripped down to our essentials, human beings behave pretty much the same. It’s all the crap that’s piled on top of us starting at birth that is the problem.

Free market capitalism is what I have been talking about here. It is what is called an emergent system, that is, a spontaneous social organization that emerges when the right conditions (freedom) are present. It is a ground up mostly self-regulating system. It’s not something that government invents (a top down system), but it’s the system that most closely matches human nature and allows individuals to reach their potential. Before you get too excited, recall the conditions of freedom I mentioned above require government to protect and enforce our human rights. It’s not easy; it takes time. And it’s not perfect, but as history has shown, it sure as hell beats anything else.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
dadichris's picture

"All your cargo are belong to us" - Banksters

shovelhead's picture

Not a novel concept alert.

You have to produce more than you consume to have wealth. If that excess 'capital' is being stolen or malinvested (producing no return) there will be no wealth.

Infrastructure that reduce cost/labor inputs will increase wealth. Rule of law and property rights reduce wasteful friction in an economic system and protect and increase wealth far beyond their costs.

When people are free to pursue their own economic interests within the confines of law (not harming others) they will do so and learn to create successful outcomes. People generally do not engage in activities that will not create a surplus.

Some nations have an abundance of natural resources which give them an advantage but if any of these 3 legs of the stool is weak or missing, theirs is going to be a poverty stricken nation.

There' a million reasons why countries, even cities and villages fail but most can be traced to a lack of one of these basic elements.

Meteorite strikes not included.

Eric L. Prentis's picture

The Cargo Problem is an interesting article. However, it’s “competitive markets” that are required, not “free markets.” Please read, “Free Markets are Fraudulent Markets: How the Financial Elite Con Us into Wanting the Wrong Thing.”

Itinerant's picture

You need freedom. That is, solid property rights, a just legal system that protects property rights and the enforcement of contracts, and limited government and low taxation.

This is the most peculiar definition of freedom I have ever seen. Freedom is property rights and enforcements of contacts -- sounds more like fascism to me. For most people freedom has always meant freedom from debt and peonage, that is, (being forced to) working for somone else's benefit.

Freedom=creditor rights, how perverse can you be !!!

Historical 'progress' has in fact been driven by factors that are completely the opposite to freedom, namely by war. It is war that has conjured up most innovations in technology and social organizations in a bid to survive enemies or vanquish others.

As an essay this is completely ahistoric and undifferentiated ideological simplification.

Radical Marijuana's picture

"As an essay this is completely ahistoric and undifferentiated ideological simplification."

Yes, Itinerant, that is what I thought too.

NoTTD's picture

WHAT??  You mean you want to bring the evils of free market capitalism to these innocents?   For Shame!!!

tip e. canoe's picture

interesting, just was in another "third-world" country in another area of the globe, and #1 problem there according to most everyone i spoke to there, was (you guessed it)


looks like we have a plantary issue on our hands.   question is: now that our space-age communication can easily connect ourselves to each other, are we going to put down what divides us and collectively develop IDEAS to solve this problem once and for all (or at least insulate ourselves from it)?

or are we going to continue to all slave away on our little respective plantations, using these communication tools to constantly bicker back & forth who's slaving away on the best plantation?

Lord Koos's picture

This is a bullshit arguement against "socialism", which is working pretty well in say, Switzerland and much of Scandanavia. A society can be fair and full of opportunity whether it is capitalist, socialist, a monarchy -- as long as there is a fair and ethical rule of law. Corruption is the problem, and corruption will kill any economy no matter what the system or philosophy.  

kchrisc's picture

"Cargo problem?"

Answered by Mises in "Human Action," Rothbard in "Man, Economy and State," Hayek in "Road to Serfdom." The Austrian school of economics has the answer to this and more.

I can summarize for those unmotivated to engage independent and differing views--Government is and always has been what ails us. Supporting counter-productive socialpathic criminals and thieves in their quixotic machinations is what always does us in. History concurs on this as well.


"Don't agree with me, think with me."

daemon's picture

"You need freedom. That is, solid property rights,.... Add in the personal freedom to do what you damn well please as long as you don’t abridge someone else’s rights."

And that's precisely where the problem begins . Tell this the "native american" .

"Free market capitalism is what I have been talking about here. It is what is called an emergent system, that is, a spontaneous social organization that emerges when the right conditions (freedom) are present ."

Well, maybe it's time for you to look at how some hunter/gatherer people live (lived ?). Maybe, then will you begin to understand the "culturally centric" character of your analysis.


Mercury's picture

Colonialism was bad but so were and still are the successive socialist-kleptocratic regimes that suck the country dry and keep them poor. They just raised the national sales (VAT) tax to 16% and everyone is complaining because prices have shot up.


And thanks to a certain Kenyan-American America in ten years is going to look a lot more like Kenya now than Kenya in ten years will look like America now.

Then Jared Diamond can celebrate the shrinking Kenyan/American "cargo gap".

Econophile sights Diamond who blames the world’s unequal wealth distribution on shit-luck from tens of thousands of years ago (but passes on connecting the dots as to what this implies about various human populations' development since then) but the practical suggestions at the end of this post are essentially the conclusions of the much sharper Hernando DeSoto.


smartstrike's picture

Somalia is an example of an economic system does not have any central government but does have absolute capitalism.

Lordflin's picture

Africa has been plundered by the monied interest for a hundred years. We are the next on the slave block...

czardas's picture

The real plundering was done by its rulers.  By 1964 90% of Africa was "free" (lol).  It has since received over $1T (not counting hundreds of billions of charity aid).  Almost all was squandered - enriching dictators, weapons, absurd projects. Moreover, Europeans left a system of education and transportation that has been allowed to disentegrate. 

The Congo, larger than Texas, had 30,000 miles of road upon independence.  It now reports having 800 miles of paved road. Same for the electrical grid. What's amazing is that the most needed items - tractors, bulldozers, fertilizer, plows, seeds - were ignored.  There comes a time when you have to decide your own future.  

JerseyJoe's picture

Funny - no mention of all the oil and gas being found in Kenya.  Estimated Billions of barrels of light sweet and trillions of cubic feet of NG.   Look up African Oil (AOIFF in the US).  

Here is their latest presentation.

Kenya's economy will be surging in the coming years as rail, road and pipeline networks are added and upgraded.  New port and refineries are being added.  And several countries - including Norway are working with the government to make sure the money doesn't end up in Swiss accounts.  Undoubtedly, new hospital, schools and added western amenities will be added for support in the influx of foriegn experts come to support the efforts that run across the spectrum of needs.  An enhanced and more stable energy grid will undoubtedly follow - which will help economic growth up and down the economic ladder.  

To me , Kenya is one of the world's better stories in progress. 

Funny how this expert on Kenya missed all this.  

Radical Marijuana's picture


If there was more oil discovered and produced in Kenya that will only enable their exponential growth to overshoot even worse, and then collapse far worse. There continues to be nothing to cope with what happens after we have high-graded ourselves to hell, by having supported exponential growth of the human population and human activities on the basis of natural resources that are being consumed, at rates which are impossible for any known technology to later replace.

Since our real human ecology and political economy actually operate through the maximum possible deceits and frauds, which are designed to be able to maximize the short-term benefits, while deliberately ignoring the longer term costs, there is NO sane human or industrial ecologies. For Kenya to "develop" itself on the basis of the Neolithic Civilization model only drives its exponential growth to overshoot even worse!

The whole world is based on turning natural resources into garbage and pollution as fast as possible. For Kenya to be able to do more of that will not end well. The basic problem is that we operate everything through deceits about the real death control systems, which back up frauds in the financial accounting systems. Those things are creating conditions where the more successful they become in the short-term, the worse they become in the longer term, while the shorter term situation transforms into the longer term situation at an exponentially accelerating rate!

Mercury's picture

I think that's why the nice Chinese are building all those roads and infrastructure...

Twodogs's picture

Guns, Germs and Steel should only be taken in an historical context to explain how things like geography contributed to civilization. The only things standing in the way now are religion, culture and corruption.

yofish's picture

"it is impossible for places like Kenya to ever fix any of their problems without different death control systems". 

With all due respect, you sound like you're a full of shit blowhard. I say with 'all due respect' because you are so obscure you are the only one that knows what 'you think' you're talking about.

"The REAL solutions are better death controls, because those are the REAL problems. Therefore, my IDEAS are radical revolution in the philosophy of science, applied to political science, then applied to militarism, then applied to the monetary systems, so that the human and industrial ecologies evolve within natural ecologies. My IDEAS are NOT discontinuous with what the ruling classes are really going to do anyways, but rather are an adaptation to facing those facts, and attempting to work with and through them."

Better death controls, hmmm, let me think what those might be......

Radical Marijuana's picture

Indeed, yofish, you SHOULD "think what those might be!"

The primary problem is that advances in science and technology have created weapons that are trillions of times more powerful than anything that previously existed in human history. How can we sanely operate any of the traditional kinds of death controls when the weapons are trillions of times more powerful? Actually, I do NOT expect that question to be answered in any better ways. I do NOT believe we will get "better death controls." I am simply pointing out the theory that we SHOULD apply superior, radically revolutionized, scientific methods to the basic human ecology and political economy problems. However, what I actually expect is that we will be attempting to tack as close to the wind as possible, as the drastic selection pressures from having exponential growth overshoot mostly are then blowing things away. None of the creative ideas, or acceptably good solutions, to the runaway exponential growth, are in the same order of magnitude as those problems really are.

The paradoxes are about whether human beings can operate superior forms of artificial selection, that work with and through natural selection, to more consciously participate in our evolutionary ecologies. What I actually expect is that the current runaway systems of operating civilization through the maximum possible deceits and frauds will eventually collapse into crazy chaos, which causes the worst forms of death control insanities to occur. In theory, the military should go through paradigm shifts with respect to how to operate murder systems AFTER the weapons become trillions of times more powerful. However, in practice, they are the most brainwashed to believe in their own bullshit, and therefore, amongst the least able to go through the necessary paradigm shifts. We should see that there are real reasons why Africa is rife with warlords. We need radically better "warlords" to cope with the magnitude of the problems. However, given that the weapons are so many orders of magnitude more powerful, it is extremely difficult to imagine how the old process of civil chaos can gradually evolve towards some new sort of stable systems.

Anyway, what I am sure of is that as long as the vast majority of people do not face the basic fact that the death controls are central to everything else, and that those must exist in some form or another, then there can not be anything else than the continued actual operation of the real death controls, through the maximum possible deceits, which overall provides the worst possible death control systems. We need to radically change our language, and how we think. Almost everything we call "birth control" is actually death control. Obviously, what we call "birth control" is the most effectively and efficient form of death control. However, that can not be systematically integrated unless it is publicly seen and admitted to be that. Everything I am saying is based on radical understanding of how energy systems evolve ecologies. That is the context in which I recommend "better death controls." ... That does not mean that I believe that will actually happen, since I believe that will continue to be deliberately ignored and/or lied about by the vast majority of the population, and especially by the ruling classes who have the most influence over that.

However, meanwhile, like I said, the real world is being dominated by the already established ruling classes, and they, for sure, will continue to operate their kinds of death control systems, through the maximum possible deceits and denials about what they are really doing. Regarding that through sets of false fundamental dichotomies will not make it better. Better death controls are based on a greater use of information, enabling a higher consciousness. It is artificial selection that is more aware of the existence of natural selection, along with moralities which appreciate how and why natural selection generated the kinds of ecologies which it did in the past. However, obviously, what is actually happening in Kenya is an insanely far overshooting, through exponential growth, which will almost certainly end in drastic genocides and democides. That will very probably become what selects for far worse death control systems, rather than anything better.

PGR88's picture

Limited Government.

OldTrooper's picture

The author left much of Jared Diamond's thesis out.  I'd encourage anyone even remotely curious in the subject to read the book.  It's a surprisingly easy read and makes some very interesting points.

How long, in all the tens of thousands of years of human experience, has there been any significant organized movement toward free markets and individual liberty?  Think of it that way and our experiments with rule of law, property rights, etc. are but the blink of an eye - and we don't even really know how they are going to turn out yet.   With what is happening today I'd hardly call any of these experiments an unqualified success (though preferable to anything else yet devised), if for no other reason, because they've proven incapable of resisting corruption by collectivism.

The notion that governments are required to protect and enforce our human rights flies in the face of too many historic examples to list here.  I leave you with this:

Anusocracy's picture

Things that restrict government tend to promote civilization.

Things that promote government tend to restrict progress.

Lord Koos's picture

This is one of the more stupid and simplistic generalizations I have ever read.  

NoTTD's picture

You must not read much.

robobbob's picture

Please don't associate yourself with that crap theory from Guns, Germs and Steel.

interesting idea, but in the end, a guilt ridden intellectual force fitting facts to prop up a theory that doesn't hold water.

I think your own conclusions work much better. different cultural paradigms lead to...gasp...different outcomes. in this case, forced collectivization used as cover for legalized corruption.

for all the haters, please don't be too hard on the natives. dragged from the stone age into the modern age overnight in historical terms, and whenever any of them do finally start getting **it together, some outside empire stages an assasination, a coup, a civil war, or chained to foreign debt, to make sure the game always stays rigged. don't think yourselves too superior. all that is being feverishly worked at being set up in the western world now.

feudalism. not just for natives anymore.

czardas's picture

My problem with the book was that his examples were almost exclusively small, geographically and ecologically limited places.  Many empires have failed - Portugal, Ghana, China, Rome, Hittite, Mayans - but its citizens did not vanish because they had options of moving.  Ecological changes could bring disaster but as long as there are options, folks can move and the ecology can repair itself. Islands (the majority of his examples) make relocation impossible.  

malek's picture

Nope, it's just a camouflaged theory of IQ as he cannot speak it out openly...

are we there yet's picture

Where people of African ancestry increase, poverty and crime increase. Across cultures, religions, latitude, longitude, rainfall, etc..  Within a country, within a state, within a city, within a neighborhood. This is a painful but a deeply persistant corrilation across time. No one wishes this to be so, but is is hard to ignore.

hivekiller's picture

It's IQ stupid. Dumb people build low level civilizations. It's endemic in Africa where the average IQ is 70.  The countries with the highest IQs, with the exception of Israel, have the highest cultures. And it goes down from there. Why do people keep avoiding the obvious?

orez65's picture

"It's IQ stupid."

I believe that Russians are and have been, in general, of high IQ.

They sure screwed up their economy doing the "communism thing" for 70 years.

Are the Greeks of low IQ?

Their civilization of thousands of years ago is the foundation for Western civilization. Yet see how their economy has collapsed today.

It's not just the IQ it's staying away from the "socialist plague".

are we there yet's picture

I have been to Russia several times recently and have been impressed with their entrapraneural spirit. Their economy is improving as they adapt away from their socicalst past. Ours (the US) is doing the opposit as Obama increases socicialism with 47 million food stamp dependants, obamacare, etc.. The Russians I know think we(the US) are destroying ourselves in a way that makes no sense. The famous quote of Putin to Obama a while back was 'we've been where you are going, and it doesn't work'.

czardas's picture

Russia lacks a historical experience of freedom  (I, too, have been there several times.)  Much "improvement" stems more from foreign investment (a new activity) than any change in attitudes toward markets. The real problem is demographic - since 1992 they've lost 17 million and are forecast to lose another 30 million.  This does not bode well for any consumer-based economy.

akak's picture

That's your problem right there: the so-called "consumer-based economy".

No REAL economy can be based on consumption rather than production, not for very long anyway.  Sure, you can burn through your accumulated capital and pretend that savings don't matter .... well, until you go bankrupt.

This notion of a "consumer-based economy" is pure short-sighted and outright insane Keynesian bunk.

donsluck's picture

Wrong. Obamacare is Fascist as it requires the purchase of a private service, health INSURANCE. Now food stamps, that's Socialist. But then again, Obama did not create food stamps, and the rise in the use is a reflection of an economy desimated by the theft of trillions of dollars by the big banks...under Bush, continued by Obama. Obama's biggest problem is that he is capricious.

hivekiller's picture

Russia did not adopt communism. The Tsar was overthrown by the Jews and communism was installed. They murdered off the upper and middle classes and programmed the rest. They destroyed Russia culturally as well as plundered their wealth. Either get a clue or shut the fuck up.

Twodogs's picture

It's da Jews that dunnit, I tells ya! Thanks for clearing that up, anti-Semite.

darteaus's picture

Bolsheviks - Ultimately became The Communist Party of the Soviet Union.  Founded by Vladimer Lenin (Jew) and Bogdanov (not Jewish).

Party splits in 1903 between Lenin & Julius Martov (Jew)-who now leads the Mensheviks.

In April 1906, the Mensheviks struck an alliance with the Jewish Bund.

Following the failure of the mid-1907 revolution, the Bolsheviks began debating whether to boycott the new parliament known as the Third Duma. Lenin, Grigory Zinoviev (Jew)Lev Kamenev (Jew) and others argued for participating in the Duma.  The resulting disagreement again splits the Bolsheviks, and now Lenin (Jew) is in solely in charge.

  Providing facts...NOT saying the JOOOOOoooozzzzzzzz did it!

oddjob's picture

Ugly people do ugly things.

Imminent Crucible's picture

If you read Murray and Herrnstein, you know that Asians and Ashkenazi have higher average IQ than the rest of us. But Japan is a failing state committing cultural suicide and China is a vast polluted dump awash in unbelievable corruption.  And Ashkenazi are the worst pimple on America's butt right now, being the largest welfare class we have, aka Wall Street.

So tell me again how high IQ leads to successful societies.  Or just learn some real history, Bong Lord.

malek's picture

You're confusing requirement with outcome-guarantee.
And you forgot to explain away why high corruption China or Russia are still doing much better than Kenia or lots of other countries.

If you take off the political correctness blinders you can read Jared's book as an accurate depiction of higher IQ popragation.

And if you pay attention it gets even better:
Why was the horse domesticated but the zebra not? Jared gives you half the answer in Germs, Guns and Steel. Now figure out the other half, it's not so hard.

hivekiller's picture

Jews are crippled by being ideologues. It overrides their IQ.

donsluck's picture

When you stick to your ideas after being shown conflicting evidence, YOU are an idealogue.

Anusocracy's picture

What conflicting evidence?

There are two types of cognition that form a spectrum.

Both types of cognition exist in a low to high spectrum.

There are quite a few motivational behaviors, possessed by most everyone, that vary in intensity.

Given that, let's make generalizations about IQ in various populations.

DeadFred's picture

The article talks about solutions but when I read it I don't see a single banker hanging from a lamp post.

jballz's picture


well at least Obama is stickin to his roots.



bank guy in Brussels's picture

Very funny as Econophile's Jeff Harding describes Kenya, but also describes Obama's other country, the USA:

« ... The courts are corrupt. The politicians are corrupt. The police are corrupt. The bureaucrats are corrupt. Crony capitalism is rampant. While they espouse the philosophy of “democracy”, that usually means the winners get to distribute political spoils to their cronies and fellow tribesmen. »

Ha ! That really is today's America in a nutshell.

But Africa does have huge cultural problems -

- The only area of the world which still has population growing exponentially. As the world's current 7 billion people is expected to grow to 10 billion by about 2050, nearly all of that growth will come from Africa. NOTHING stops Africans from having babies, not education, not anything.

- In Africa, the particular kind of kleptocracy is built around what really is still a master-slave mentality ... meaning that it is total fantasy to hope for an 'honest free market' and the 'rule of law' ... If Americans themselves have now lost these items, and can't manage to get them back, how are desperately poor Africans with little means to fight their overlords, supposed to accomplish such grand fantasies ?