Mrs. Hillary Clinton Suggests Government Ownership of Industry Would be a Good Thing

By Adam Brickley

In a television interview Monday in the

Democratic Republic of the Congo (DRC),

Secretary of State Hillary Clinton suggested that

it would be a good thing for the government

to take an ownership interest in industry.

"How can you help this country?"

Christian Lusakueno of

the Congolese television station Raga TV asked Clinton.

"The future of this country is up t

o the Congolese people," said Clinton. "

The choices as to what direction you go

are truly yours to make.

"For example, the country has an extremely

rich reservoir of natural resources," she continued.

"Right now, the benefits from those resources

are not ending up broadly developing the country.

They are either being taken out of the country or

they are ending up in the hands of a very few people.

There are models for what has worked elsewhere.

The model that Botswana used when it discovered

diamonds–it made sure there was a trust fund created

for the country so that all of the money didn't leave the country.

In order to let a company like De Beers exploit their diamonds,

they said we want to own 20 percent of the company.

And as a result, if you go to Botswana, you see good roads,

you see clean water, because the people and their leaders

said we're not going to be exploited and we're not

going to let the benefits end up in a very few hands."

Brett Schaefer, a fellow in International Regulatory Affairs

at the conservative Heritage Foundation,

said of

Clinton's statement: "Her phrasing was extremely clumsy."

"I think it's probably a mistake to urge the government

to have a control, or a controlling stake,

in these types of industries because

government historically, especially in Africa,

has been particularly prone to

corruption and mismanagement," said Schaefer.
Botswana has indeed been successful in

the diamond industry, said Karol Boudreaux,

a senior research fellow at the Mercatus Center at

George Mason University and the head of

that organization's Enterprise Africa  project.

Boudreaux noted, however, that while Botswana has

had success in the diamond industry,

it history and political culture also makes its

distinct from other African nations.
"I think we should be really careful about

recommendations like that because

we're assuming that that government will be a

good manager and a transparent manager,

and an accountable manager–the way

the Botswanan government has been,"

said Boudreaux.
"The way it works there is that the government

is actually in a 50 percent-50 percent partnership

with the De Beers company, and so they jointly

control this company called Debswana,"

said Boudreaux. "

Originally the government had a 15 percent share

in that company, when diamonds were first

discovered back in the late 60s,

and the government has increased its

ownership share over time."
Boudreaux also said that while

the Botswanan government owns half

of Debswana,

it does not own any shares of the De Beers Group.
According to Boudreaux, Botswana is

also unique for the strict spending

controls that the government places on itself.
"One thing that's really unique about

Botswana's national development plans is that,

once they're passed by the parliament …

they cannot be amended," she said.

"They cannot go back and adjust the plan,

even if their diamond revenues increase substantially.

So, putting that kind of constitutional

constraint on yourself is a very

unusual thing to do in Africa."
Asked to contrast Botswana with

the Democratic Republic of the Congo,

where Secretary Clinton made her remark,

Boudreaux said: "There's just no comparison."
The Democratic Republic of the Congo,

she said, has a "history of just incredible corruption,

tyranny, et cetera."  
While noting that the Congolese government is

making efforts to "get a handle" on

mineral production in the nation's war-torn East,

Boudreaux said it is also "benefiting substantially"

from illegal mining in the area.

As for a Botswana-style venture, she said,

"How should I put this?

It's not clear that there'll be an initiative

to extract minerals in a transparent fashion

in East Congo any time soon."
Schaefer concurred that most African nations are

not like Botswana.

"What you see in African countries," he said,

"is a pattern of corruption, a pattern of

poor governance, a pattern of countries not

using the resources that they have for

the long term interest of the people. And so,

while Botswana is an exception,

I don't know if it can be applied as a rule

to follow for countries unless you address

this critical lack of good governance."
Boudreaux said Botswana had an advantage in that

it had avoided diverting significant resources

to a military establishment.

"They had no standing army until very recently,"

she said, "so the monies that they were

generating through the diamond sector

wasn't really going to support an army,

like it would be, say, in Nigeria or Angola."
"I think, in fact, it's very difficult to use

the Botswana example and suggest that countries

that have very different historical experiences

can basically do easily what Botswana's done,

because I don't think that they can," said Boudreaux.
"One thing that's kind of unique about Botswana

that you'll hear when you visit–that I've certainly

heard when I visited there–is that people talk about

their founding fathers just the same way that

Americans talk about our founding fathers,"

she said. "And so they are very aware that they

had a unique group of people who set up

their government, who placed limits on

the powers of government, and then

who themselves abided by those limitations."
"That's not a story that you hear in many

other African countries," she said.
Calls to the State Department were not returned.

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