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As previously stated, Somalia has had a difficult infancy. It was first inhabited in the 7th century by Arab tribes25, but has experienced several changes in leadership since. In 1887 Britain proclaimed protectorate over the diminished area of Somaliland (since France had required the area later to come Djibouti). The following year an Anglo-French agreement was made defining the boundary between Somali possessions of the two countries; this has remained in place despite the disorder that has occurred since.
Britain’s first occupancy of the country was relatively short-lived, being invaded by the Italians in 1940, only to take back ownership in 1941. After partly returning to Italian control the country is granted internal autonomy in 1956. Following this, in 1960 the British and Italian parts of Somalia became independent, merged and formed the United Republic of Somalia (with Aden Abdullah Osman Daar elected as president). But this was only the beginning.
After becoming a Republic, Abdi Rashid Ali Shermarke beat Aden Abdullah Osman Daar to become president, only to be assassinated two years later. Muhammad Siad Barre assumed power in coup thereafter, before declaring Somalia a socialist state and nationalising the majority of the economy. In 1981 Barre’s regime began to face opposition and by 1991 it was so strong that he was ousted, leaving the country without government for 9 years. The constant turmoil that Somalia went through was detrimental to their growth.
Without a strong government voted in by democracy a nation is likely to face corruption and myopic governance. Although it may seem that Somalia, and other African countries like it, were slow to emerge as a democracy many forget that Europe had suffered numerous upheavals, revolutions, coups and conflicts – including the small matter of two world wars, the east-west partition of the entire continent over numerous decades and persistently periodic fighting in the Balkans in the twentieth century alone; it would have been unrealistic expect Africa to develop so quickly26.
However, in-between foreign governance and democracy a disturbing habit developed among the Somali officials: corruption. In 2009 Somalia was perceived to be the most corrupt country on the planet27. It had marred every aspect of Somali society. When Africa had been ruled by Western nations (after the ‘scramble for Africa’) regal qualities of life had been created to tempt minor officials from Bristol, Burges or Bordeaux to work in the colonies28. Large houses, lush gardens, servants, swimming pools and allowances were all just perks of the job that were to be expected.
Inheriting these privileges overnight (when the foreign powers left), it was hardly likely that Africa’s new rulers were going to renounce them. Thus, Somalia’s new leaders began to enjoy their lifestyle. They enjoyed it so much, that they started to delve into more obvious methods of corruption. Many prospered on bribery from the profiteers in the so-called gray economy29. Other government workers could obtain “letters of credit” (the right to draw funds from government-held foreign exchange accounts) allowing them to import goods for sale and for family use.
Corruption is notoriously difficult to prove, especially so when Somali law states there are no legal consequences or sanctions for officials who exploit their position for private gain30, hence officials do not care if they were caught. Resources, extracted from the rural areas through various legislative devices and controls, were never used for development for the common people. The elites used them to develop only the urban areas and built statues of and monuments to themselves31.
Corruption affects those worst off in society, increasing the poverty trap significantly. According to preliminary report by a United Nations monitoring group in Somalia, up to half of all food aid meant for hungry people is siphoned by the warlords who control territory where most of the country’s displaced people live32. Further evidence is not hard to find – The Somali government announced its cabinet in 2010; a cabinet that is bigger than India’s, the largest democracy in the world33. India has a population of 1. 2billion and a GDP of approximately $1.
16trillion, yet lawless Somalia has only 9million inhabitants and a GDP of less than $9million but feels it needs more ministers? Furthermore, the Somali president Sheikh Sharif Ahmed has been in office more than 18 months but has yet to fulfil his election promise of restoring basic services – The government has not built one single institution in education, healthy, security, roads or any other industry. The solitary credible service they have provided is renovating the old parliament building. The negative effects corruption can have on a countries growth rate come in abundance.
An example would be that governments tend to shift spending away from social areas and towards the construction of unneeded projects or lower quality investments34. In corrupt countries, corrupted politicians will tend to choose corrupt investment projects (chosen not on the bases of their intrinsic economic worth, but on the opportunity for bribes these projects present). When these politicians influence the approval of an investment project the rate of return, as calculated by cost-benefit analysis, ceases to be the criteria for project selection.
The result of this is that many projects are left uncompleted or built so poorly that they require continuous repair. In these circumstances it is not surprising that capital spending fails to generate economic growth. High corruptions tend to reduce Government revenue, which in its place reduces the resources available to finance spending, including public investment. It can lead to tax evasions, as business men may pay bribes to low level officials to secure tax breaks. According to the Core Service Data Unit, nearly 69% of people believe tax collectors are corrupted.
The taxes which they are collecting may also be corrupt; custom officials often create favourable tax policies for their relatives, friends and their own businesses. This promotes the creation of monopolies and oligopolies, hindering competition and undermining the image of the government as a facilitator of private sector growth. Not only does corruption make it hard for small companies by facilitating tax evasion, it also introduces higher costs of doing business. Evidence from private sector assessments suggests that smaller firms bear a disproportionately large share of these costs.
Firms may choose to avoid the administrative costs of opening new premises by paying bribes; however it will be much easier for businesses already owning premises to do this due to the economies of scale they receive and their existing connections to officials. Finally, corruption can be obstreperous towards foreign investment. They are more likely to shun a country if they feel they will be at a disadvantage compared to businesses from within, or feel the costs become too high or unpredictable, thus corruption risks the country being marginalized in the international economy. Ethnic rivalries:
The emergence of religio-ethnic rivalry is a manufactured phenomenon, which is linked to post-colonial modernization35. Almost all countries in the African continent suffer from high religious and ethnic fragmentation. The population of Somalia is divided into two main ethnic groups: Hamitic stock and associated clans, who constitute 85% of the population, and the Bantu who account for 14% (other minorities include Europeans, Indians and Pakistanis)36. Like most other African nations Somalia is also home to a number of clans, namely the Darood, Hawiye, Digil-Rahanweyn, and Dir clans (although other clans, subclans and sub-subclans exist)37.
Since the war, strong clans have occupied valuable urban and agricultural real estate by force. The patterns of clan settlements have changed particularly in urban and arable areas such as Lower Shabelle and Mogadishu. These specific areas have undergone substantial changes due to heavy infusions of non-resident clans supported by their mercenaries. In South Central Somalia valuable agricultural land and urban real estate have been taken over byarmed clans for economic gains. These stronger clans have grabbed rich plantations and real estate owned by agricultural clans and indigenous groups, often leading to their displacement or enslavement.
The displaced are then forced to move out of traditional lands into new areas, thus changing demographic constitutions. The ‘stronger’ clans are likely to grow or maintain strength if they have a significant proportion of government in their clan – this way laws may be swung in their favour and land is easier to win. The larger clans are significantly wealthier than the smaller, inferior clans. This is likely to explain the distribution of income within the country; the poorest 10% of the population receive only 1.
5% of total GDP38. With a Gini Coefficient of 40 Somalia is lagging considerably behind more developed countries such as Sweden and New Zealand39. This could be a problem for Somalia as a poor distribution of income (or wealth, for that matter) can lead to tension between tribes. In turn, this may lead to higher crime rates (as clans begin to fight or steal from each other) and a lack of cooperation within communities. A poor distribution of income can also lead to a country failing to maximise the utility of society.
Someone on a high income may not gain as much utility from an additional $200 as someone on a low income would – high incomes can demonstrate diminishing marginal returns – and so it would be conductive to society to spread income more evenly. These factors all have a detrimental impact on a country’s ability to grow economically. High inequality threatens a country’s political stability because a higher percentage of the population are dissatisfied with their economic status, which makes it harder to reach political consensus among groups with higher and lower incomes40.
This in turn makes the country a higher risk to potential investors, and so is likely to lose out on foreign venture. It can also limit the use of important market instruments, such as changes in prices and fines. Higher rates for electricity may promote energy efficiency, however in the face of serious inequality governments introducing even slight increases in prices risk causing extreme deprivation among the poorest citizens. GDP growth will consequently suffer, as the government must subsidise basic amenities as well as losing out on tax revenue.