What have the Romans ever done for us?
I just came up with a new reason it’s a good idea to invest in the Ivory Coast.
That is beside:
- A young and growing population
- Fertile land with potential to produce more agricultural commodities than today, commodities that seem set to be in high demand in the future (at least if you listen to Jim Rogers)
- Offshore oil with potential for expansion
- A business friendly government, that so far seems unusually competent
- A democratically elected president that isn’t clueless about economics
- War fatigue, hopefully ensuring that the next 10 years will be less violent than the last 10 years. The best vaccine against war is war
- Debt relief coming up
- Support and investments from the IMF, World Bank and the EU
- Potential for a post-crisis rebound in many sectors
- By African standards very good infrastructure that was largely unharmed by the wars
- IMF predicting a 6% growth in 2012 and that it will hold steady to 2016
Advantage Ivory Coast
Practically all western countries have since World War II increased the complexity of rules, regulations, certificates and tax codes that business owners have to deal with. For example the Australian (yes, it’s a western country despite its location) tax acts and regulations had 1,324 pages in 1955, but increased to a whopping 15,698 pages in 2007.
The effect of this for someone starting up a business is that it gets very difficult to keep track of all rules and regulations, one doesn’t know what’s allowed or not, paying taxes takes a long time, and many things that were allowed in 1955 or not today.
In Ivory Coast one has to deal with a weak rule of law and arbitrary law enforcement, but at least the law and tax code is short, simple and easy to understand – reminding a lot of how it was in the western world in 1955. The Ivorian department for construction has for example published a great 10 minute long video that pedagogically explains all the taxes related to real estate.
As followers of this blog know, I have bought a house in a residential area in Cocody in Abidjan, and then had two small shops built on the premise facing the street. I bet that in most western countries, this would not have been allowed due to well-meaning regulations, or allowed but with crippling restrictions after a long bureaucratic process.
A corollary to Parkinson’s Law
As to why the complexity of laws and regulations has increased, there are multiple theories. The one I like intuitively is Parkinson’s law, ie that bureaucracy grows for bureaucracy’s own sake. Then there is a guy called Berglas that has come up with a corollary to Parkinson’s law, Berglas writes:
But writing in 1955, Parkinson could not have foreseen the massive impact that computerized automation would have in the following decades. This paper updates Parkinson’s law with Berglas’s corollary, namely that no amount of automation will have any significant effect on the size or efficiency of a bureaucracy.
Berglas is saying that with automation a lot more bureaucratic work could indeed be done faster and more efficiently than before, but at the same time more bureacratic work could be created using up any available resources and increasing complexity. Berglas is even arguing that it’s best if software projects aiming at automating bureaucracy fails:
Fortunately the project was a complete failure, at a cost to the tax payer of a few tens of millions of dollars.
But what a disaster if it had succeeded! Once the two hundred existing permits had been automated hundreds more permits and regulations could have been easily created and implemented efficiently.
I recommend reading the whole piece called Why It’s Important that Software Projects Fail
As for the Ivory Coast it’s not by any means immune to growing bureaucracies. During the Houphouet Boigny years it looks like the public sector grew in just the way predicted by Parkinson’s original article published in The Economist in November 1955 (which also is recommended reading).
…we must picture a civil servant called A who finds himself overworked. Whether this overwork is real or imaginary is immaterial; but we should observe, in passing, that A’s sensation (or illusion) might easily result from his own decreasing energy-a normal symptom of middle age. For this real or imagined overwork there are, broadly speaking, three possible remedies:
(1) He may resign.
(2) He may ask to halve the work with a colleague called B.
(3) He may demand the assistance of two subordinates to be called C and D.
There is probably no instance in civil service history of A choosing any but the third alternative. By resignation he would lose his pension rights. By having B appointed, on his own level in the hierarchy, he would merely bring in a rival for promotion to W’s vacancy when W (at long last) retires. So A would rather have C and D, junior men, below him. They will add to his consequence; and, by dividing the work into two categories, as between C and D, he will have the merit of being the only man who comprehends them both.