Contrary to the assertions of one Zimbabwean journalist, the diamond trade may well exacerbate Zimbabwe’s already dire economic situation (most recent figures state GNI per capita is around $360- less than a third of Sudan’s).  Gaining approval from the World Diamond Council is a red herring: the most important issue is who will benefit from the trade.

The outlook isn’t auspicious. Zimbabwe is one of the worst regimes in the world for protecting property rights. Consequently, powerful elites are able to capitalise upon resource discoveries by taking control of the industries and using the proceeds for their own ends. Indeed a 2009 report, by Human Rights Watch, showed that the main domestic beneficiaries of Zimbabwe’s diamond trade are the very people responsible for undermining the process of political reform- namely ZANU-PF officials, police “reaction teams” and the military. 

Without an effective independent judiciary, those outside of the political elite are unlikely to be able to exact much leverage. Instead of giving the Zimbabwean economy a much needed shot in the arm, the diamond trade will likely help to fund the very government responsible for decimating the economy in the first place.  Whilst Zimbabwe’s diamonds might be “conflict free”, they certainly won’t be “corruption free”.

Oliver Stone’s new film, South of the Border, heaps praise on Venezuelan President, Hugo Chavez, for his experiment in “21st-century socialism”. Mr Stone has now gone even further, calling for the US to follow the Venezuelan “model” and  nationalise its energy industry. But Stone’s enthusiasm is misguided: Chavez’s economic reforms have proved disastrous. Venezuela is still in recession, the government is unable to provide basic services and the burgeoning black market is fuelling crime and corruption.

Stone’s penchant for left-wing demagoguery misses the reality of life under Chavez for ordinary Venezuelans. During the oil price boom years Chavez was able to redirect money towards gigantic government projects and hand out money to the “poor”. But Chavez also expropriated private property and slapped onerous regulations and price controls on businesses, sending private investment fleeing. Shops and businesses closed and ordinary Venezuelans were increasingly forced to rely upon the government for goods and services. The house of cards collapsed, along with the price of oil, in 2008: Venezuela was plunged into a deep recession from which it has not emerged. Rampant inflation- running at 30%- took hold as the government funds dried up and Chavez printed more money. Venezuelans now face rolling electricity blackouts, falling incomes, acute food shortages and soaring crime rates.

The Venezuelan state-owned oil company, PDVSA, which Stone wants the US to emulate, has suffered an equally troubled past. In addition to being responsible for numerous offshore oil rig disasters, there is considerable evidence that it subject to the short-term political whims of Chavez and his chavistas, who are accused of using the company as a vehicle for their pet spending projects. The disregard for sustainable oil production has led to a huge shortage of cash at PDVSA and its future remains uncertain. A recent review of 15 state-run companies by economist Richard Obuchi found that all “were producing well below goals or production capacity.” And with the Venezuelan private sector running scared, there is no one left to offer an alternative. 

Hardly surprising, then, that Stone’s rosy depiction of Chavez tanked in Venezuelan cinemas.

Richard Grant’s Telegraph article highlights President Kagame’s intention to model Rwanda’s development upon Singapore. In light of recent developments Kagame could do worse than looking a little closer to home for a model: Mauritius.

Like Rwanda, Mauritius suffers geographically and has little in the way of natural resources. However, following a successful democratic transition in 1976, Mauritian government reforms steadily built a favourable environment for businesses. Crucially, Mauritius developed a free press and strong independent legal institutions. These helped to expose and prevent the terrible corruption of political power for self serving aims that has stifled economic growth elsewhere in Africa.

Kagame is half way there. His oversight of a remarkable economic transformation should certainly be lauded: foreign investment has increased tenfold in the last six years. But he must abstain from intruding upon individual liberties. Freedom of speech, a transparent political legislature and an independent press are not optional extras- they’re wholly necessary to limit any government’s powers of intervention within the economy. 

Economic freedom is not an a la carte menu and the longer Kagame continues to treat it as such, the greater the risk of spooking investors and derailing his development project.  

Our daily round-up of what other think-tanks and commentators are saying on the big issues:

Dalibor Rohac on what Obama should learn from European scepticism of  Keynesianism.

Ronald Bailey looks at the government’s role in preventing environmental disasters.

What better rationale for cutting largely ineffective aid to India than Indians themselves saying that the prospect of DfID leaving their country “is not a concern”?  Stripping £300 million from our bloated aid budget may go un-noticed in recipient countries, but it would make a huge difference given the parlous state of our public finances.

As we’ve said before, taking DfID out of India need not cut our ties with this emerging giant.  On the contrary, cutting the wasteful spending and providing better incentives for British business to increase their investments into India—which are already more than the annual aid budget anyway—would be a much better way to foster close ties.