Economic Gangsters | Ray Fisman

Summary of: Economic Gangsters: Corruption, Violence, and the Poverty of Nations
By: Ray Fisman


In ‘Economic Gangsters: Corruption, Violence, and the Poverty of Nations’, Ray Fisman delves into the reasons behind the persistent poverty in countries like Kenya, despite fertile land and abundant resources. This book summary unravels the complexities of corruption, civil unrest, and economic challenges these nations face. Diving into the contrasting views of economists Jeffrey Sachs and Bill Easterly, and the role of foreign aid, you will discover how ‘economic gangsterism’ – corruption at various levels – contributes to the poverty trap. By examining real-life examples, Fisman sheds light on rational decision-making behind seemingly irrational and violent behaviors, providing insights into how we can navigate the complex issue of global poverty.

The Poverty Dilemma

Despite the potential for economic growth in countries like Kenya, poverty remains widespread while others like South Korea and China flourish. Foreign aid has been utilized, but experts disagree on its effectiveness. Columbia University economist Jeffrey Sachs advocates for more foreign aid to end the “poverty trap,” while New York University economist Bill Easterly argues that it is a waste due to corruption. Easterly suggests that civil governments and stable societies need to come first to build prosperity, and that sending cash to countries like Kenya has not cured poverty. The success stories of India and China, which both rejected foreign aid and implemented free market reforms, seem to support Easterly’s arguments. However, effective poverty-fighting programs could help to lift three billion people out of poverty, and better access to government data and forensic economic research would be powerful in informing such programs.

Corruption and Diplomatic Parking Tickets

This passage explores the correlation between corruption and the behavior of diplomats when it comes to parking violations. It argues that corruption is a cultural behavior deeply rooted in the laws of economics. The passage illustrates how corruption poses a challenge to economic development in poor countries, where significant portions of aid disappear through theft and bribery. The author identifies the causes of corruption and the challenges of ending it, emphasizing the importance of creativity and understanding economic incentives.

Poverty and War in Africa

The vicious cycle of poverty and civil unrest in Chad and other Sub-Saharan African nations is explored in this book excerpt. Chad’s frequent droughts worsen poverty and catalyze violence. The lack of government support and unpredictable rainfall conditions lead to subsistence farming and a lack of emergency savings. Armed conflicts often follow periods of drought, with devastating consequences. This pattern has been observed in other African countries such as Angola, Liberia, Mozambique, Rwanda, Somalia, and Sudan. The lack of crop insurance and food stamps, common in rich nations, further exacerbates poverty and societal instability. Climate change is also expected to significantly worsen droughts and other extreme weather events in this region, making it increasingly difficult for subsistence farmers to make a living. The text stresses that while rich societies generally don’t experience civil war, two-thirds of African nations have had armed conflicts since the 1980s. The author argues that scholars and policymakers must undertake innovative, comprehensive approaches to combat the vicious cycle of violence and poverty in Sub-Saharan Africa.

The Dark Reality of Witch Killings in Tanzania

In times of famine, accusations of witchcraft surge in the poorest areas of Africa. Tanzania’s Sukuma ethnic group often engage in murder of older women accused of witchcraft. Witch killings double during droughts, with the poorest families being the most affected. Prosecutions for these killings remain rare, and the belief in witches persists, leading to little intervention or protection for accused women. This practice is an economic phenomenon linked to the reality of financial stress during times of crisis. While foreign aid often focuses on long-term investments, it does little to address the short-term triggers of African civil wars and witch killings. However, Ulanga district offers a glimpse of hope, as traditional healers provide shelter and care for accused witches until the famine ends.

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