COUNTRY NOTE 3: AFRICA’S GROWTH TRAGEDY: AN …



Country Note 3: Africa’s Growth Tragedy: An Institutional Perspective

Africa’s slow growth was unexpected (Easterly and Levine 1997; Collier and Gunning 1997). In the 1960s, most African countries were richer than their Asian counterparts, and their stronger natural resource base led many to believe that Africa’s economic potential was superior to overpopulated Asia’s. This view was shared by renowned economists, from Gunnar Myrdal in his well known Asian Drama, to Andrew Kamarck, the founding director of the World Bank’s economic analysis complex, who listed seven African countries that he thought could grow at annual rates of 7 percent or more (Enke 1963; Kamarck 1967). More recently, many economic reports, including several by the World Bank, foresaw rapid growth in Africa.

The continent’s growth record, however, has fallen well short of expectations. Over the last four decades, in the 28 countries that have complete GDP series for this period, the median growth rate has gradually but persistently declined (Figure C3.1) and eleven countries now have income levels lower than at the time of their independence.

Figure C3.1: Africa: Getting poorer over decades

[pic]

Note: Box-and-whisker plot for decadal growth rates of 28 African countries that have GDP series from 1960s onward. The plots show averages as well as the dispersion around them: i.e. median, first and third quartiles, and outliers.

Source: World Bank, World Development Indicators, 2004.

Ranked by their growth performance since 1960, 15 of the world’s 20 slowest performers and only two of the 20 best performers are in Africa (Table C3.1). Perspectives on Africa have thus become much more guarded (Acemoglu, Johnson, and Robinson 2002).

As noted earlier in this report, growth has been poorly predicted not only in Africa but in the developing world in general. Growth is difficult to predict because it reflects processes of change, and complex historical and political forces. Social scientists and historians have limited predictive power particularly when it comes to breaks with past trends—which are the essence of development processes.

Table C3.1: African growth in context: average annual growth rates of real per capita GDP, 1960-2001

|Best performers | |Worst performers | |

| | | | |

|Botswana |6.4 |Guyana |0.5 |

|Korea, Rep. |5.8 |Argentina |0.5 |

|Singapore |5.6 |Cote d'Ivoire |0.5 |

|China |5.6 |Bolivia |0.3 |

|Oman |5.4 |Zimbabwe |0.3 |

|Hong Kong, China |5.2 |Burundi |0.3 |

|Thailand |4.5 |Nigeria |0.2 |

|Ireland |4.2 |Rwanda |0.2 |

|Japan |4.1 |Ghana |-0.1 |

|Malaysia |3.9 |Senegal |-0.2 |

|Portugal |3.8 |Chad |-0.4 |

|Lesotho |3.6 |Venezuela, RB |-0.5 |

|Indonesia |3.5 |Central African Republic |-0.7 |

|Spain |3.3 |Zambia |-1.1 |

|Hungary |3.2 |Haiti |-1.1 |

|Greece |3.2 |Sierra Leone |-1.1 |

|Norway |3.1 |Madagascar |-1.3 |

|Egypt, Arab Rep. |3.0 |Niger |-1.5 |

|Finland |2.9 |Liberia |-3.2 |

|Italy |2.8 |Congo, Dem. Rep. |-3.3 |

| | | | |

Note: Real GDP per capita growth rates (only for countries with GDP per capita series since 1960).

Source: World Bank, World Development Indicators (2005).

Seeking to understand the deep forces influencing Africa’s growth performance, researchers have increasingly looked into structural factors: geography (Sachs and Warner 1997; Bloom and Sachs 1998; Mellinger, Sachs, and Gallup 1999); ethno-linguistic polarization and inequality (Easterly and Levine 1997); and institutions.

The effect of institutions on growth has been a particularly fertile area of research in the last ten years, bringing new analytical insights and perspectives (Acemoglu, Johnson, and Robinson 2001, 2002). For example, some see the origin of Africa’s institutional weaknesses in the long-lasting effects of European colonial rule which had little incentive to develop African local institutions and focused instead on developing extractive institutions (Crawford 1994). As discussed the Country Note on natural resources, the so-called “natural resource curse” has been another factor emphasized in the literature (Sachs and Warner 1995, 2001).

Recently, the focus has been on the African state. A growing consensus in scholarly research as well as in policymaking circles views poorly functioning state institutions as the root cause of Africa’s development problems, and believes that solutions are to be found within the state itself and political institutions that link the state and society (Davidson 1992; Chege 1999; Herbst 2000; van de Walle 2001).

Post-World War II geopolitics might have played a role. The system of international relations polarized by the Cold War, which Africa’s new democracies had to face after their independence, turned much of Africa into an arena of political struggle between the two superpowers. Cold War politics did not encourage the development of effective state institutions and good governance in Africa. In many instances, the US and USSR supported political regimes and leaders intent on preventing such institutions from emerging (Herbst 2000).

From a longer historical perspective, the cause may be the pattern of state formation in Africa (Herbst 2000). For geographical reasons, state power was particularly costly to consolidate in Sub-Saharan Africa: population densities were low and barriers to long-distance transport too numerous. Thus Africa’s pattern of state formation and consolidation differed from those in some other parts of the world.

In Europe, for example, land was scarce relative to labor, and therefore incentives to exert control over land were strong, even if at the cost of wars. Nation states that could efficiently perform key functions—mobilize fiscal and human resources, organize and finance an army, provide public goods through effective administrations, and establish legitimacy, not least though their ability to deal with citizens through representative institutions—were able to thrive. States that could not, disappeared.

Herbst argues that this Darwinian process of state selection and survival did not take place in Africa, where it was labor that was scarce, not land. The drawing of national borders by former colonial powers, independent of the new states’ ability to exert their authority over their territories, worsened the problem by enabling “weak” states to persist without requiring them to strengthen their institutional foundations, effectiveness, or political legitimacy. Because their countries lacked the external threat of war or territorial conquest that had driven much of European state-building, post-colonial African leaders never faced significant incentives to extend their power—including power related to the provision of public goods on the entirety of their territory. States that did not have to fight to survive had no need to invest in effective administrative and fiscal institutions, to control domestic opposition, or to make political concessions to their citizens. Aid and the Cold War in some cases accentuated this state of affairs.

Other observers have emphasized the emergence of the African state, not as an organic evolution of existing societal and institutional arrangements, but as an artificial creation oblivious to those arrangements. Mamdani (1996), for instance, pointed out that European colonial rule created state institutions relying on customary law under a regime of “decentralized despotism” that was exerted through indigenous chiefs. The population was ill-prepared to participate as citizens in the modern states that succeeded colonial rule. Hence, Mamdani argues, most of Africa’s post-colonial history is to be understood as citizens’ struggle for their rights. Davidson (1992) emphasized that the nation state as a mode of social organization was ill-suited to African realities. A European creation, it ignored the checks and balances embedded in indigenous power structures and their evolution in the years before colonial rule. It alienated political structures from the lives and needs of the population. As a result, following decolonization, modes of governance rapidly shifted to “neopatrimonial” systems of rule, characterized by “client-patron” relationships (Joseph 1998).

Seeking a solution to Africa’s states’ inability to exercise their authority across the territories they are to control, Herbst (2000) suggested rethinking colonially-imposed borders. While this is a highly controversial solution, Davidson (1992) also suggests that creative thinking is needed to find alternatives to nation states, that can incorporate indigenous African forms and traditions of governance. Recent reports suggest looser political arrangements, to enable greater autonomy in divided societies (World Bank 2000; Ndegwa and Levy 2003).

While different forms of explanation—geographical, political, institutional—all provide useful insights and perspectives, it is unlikely that any single approach will be able to respond to all the questions that the continent’s performance raises. For example, none is able to explain the differential growth within the continent. Why has Botswana been able to grow at the world’s fastest rate for the past four decades, notwithstanding one of the highest rates of income inequality in the world and a reliance on natural resources, which has been a curse in many other developing countries? Why has Tanzania been able to maintain corruption at relatively modest levels, and to create a national ethic? Why has political stability been elusive in Ivory Coast in the past ten years, but not in Ghana? Among Africa’s largest economies, why have some countries been able to grow so much faster than others (Figure C3.2)? As emphasized throughout this report, specificity is important for accurate analysis of growth and for design of effective growth strategies: depending on the country, or the time, some factors may be more important than others

Figure C3.2: Africa’s seven biggest economies: volatile and unstable

(indexes, 1960=100)

Notes: African countries with the largest populations and with GDP per capita series starting in the 1960s.

Source: World Bank, World Development Indicators, 2004.

Figure C3.3. Africa: rebounding in the late 1990s

(median of GDP per capita growth rates)

Notes: Numbers of countries in sample are in parentheses. “Aggregate” is total Sub-Saharan African GDP over total population. Three-year moving averages.

Source: World Bank, World Development Indicators (2004).

Recent improvements in policies seem to account for improvements in performance starting in the second half of the 1990s, when the median growth rate rose from -0.6 to a positive 0.9 percent—a significant 1.5 percentage point increase (Figure C3.3). Yet behind these policy improvements were improvements in political governance in some cases (Ghana, Kenya, Mali, Tanzania, Uganda) while in others there were improvements in security (Mozambique, Sudan), making it difficult to see a stable causal relationship. Although some studies (Gelb, Ngo, and Ye 2004) show that structural reforms and the quality of their implementation track African performance quite well, there is in Africa a strong sense that improvements in the economic fortunes of the continent will depend on its ability to establish effective political governance structures and to ensure security—from which better policies will necessarily emerge. This perception is confirmed by the focus of new leaders on dealing with weak institutions—in for example Ethiopia, Ghana, Mali, Mozambique, Tanzania, South Africa, and Uganda (World Bank 2000).

Table C3.2: Annual growth in 18 African countries, 1975-2003

|Country |1975-84 |1985-89 |1990-96 |1997-2003 |

|Six sustained reformers |0.3 |0.9 |1.5 |2.2 |

|Six later adjusters |-2.3 |0.1 |-2.2 |1.8 |

|Five governance- polarized|-0.9 |0.3 |-0.6 |-1.6 |

| | | | | |

Note: Median of the real GDP per capita growth

Eight sustained reformers are Benin, Burkina Faso, Ghana, Malawi, Mali, Mozambique, Uganda and Zambia (Mozambique and Uganda do not have a complete 1975-2003 GDP per capita series). Eight later adjusters are Cameroon, Chad, Guinea, Madagascar, Mauritania, Niger, Senegal, Tanzania (Tanzania and Guinea do not have a complete 1975-2003 GDP per capita series); and five governance polarized countries are Cote d'Ivoire, Kenya, Nigeria, Togo, and Zimbabwe. This classification is from the 1994 World Bank study, Adjustment in Africa.

Source: World Bank, World Development Indicators (2004).

Expectations that the improvement noted above indicates a break with past trends need to be balanced with the knowledge that few developing countries have been able to transform episodes of growth into sustained and prolonged growth. As discussed in the Country Note, Lessons from Countries That Sustained Their Growth, the key is countries’ ability continuously to adjust and reform institutions in a manner that enables them to sustain higher levels of income and lay the basis for further growth.

References

Acemoglu, Daron, Simon Johnson, and James A. Robinson (2001), “The Colonial Origins of Comparative Development: An Empirical Investigation”, American Economic Review 91 (5):

Acemoglu, Daron, Simon Johnson, and James Robinson (2003), “An African Success Story: Botswana”. In Dani Rodrik, ed., In Search of Prosperity: Analytic Narratives on Economic Growth. Princeton, NJ: Princeton University Press.1369-1401.

Bloom, D., and J. Sachs (1998), Geography, Demography, and Economic Growth in Africa. Brookings Papers on Economic Activity, 1998:2. Washington DC: The Brookings Institution.

Burnside, Craig, and David Dollar (2000), “Aid, Policies, and Growth”, American Economic Review 90 (4): 847-686.

Chege, Michael (1998), Liberal Democracy and its Malcontents: Contrasting Perspectives of a Democratic Capitalist World Order from Sub-Saharan Africa in the 1990s. Cambridge, MA: Harvard Academy for International and Area Studies, Weatherhead Center for International Affairs.

Collier, P., and J. Gunning (1997), Explaining African Economic Performance. Center for Study of African Economies Discussion Paper, University of Oxford.

Crawford, Young (1994), The African Colonial State in Comparative Perspective. New Haven, CT: Yale University Press, November 1994.

Davidson, Basil (1992), The Black Man’s Burden: Africa and the Curse of the Nation State. New York: Times Books.

Easterly, William, and Ross Levine (1997), “African Growth Tragedy: Policies and Ethnic Divisions”. Quarterly Journal of Economics 112 (4).

Enke, Stephen (1963), Economics of Development. London: Denis Dobson.

Gelb, Alan, Brian Ngo and Xiao Ye (2004) Gelb, Ngo, and Ye (2004), Implementing Performance-Based Aid in Africa: The Country Policy and Institutional Assessment. Africa Region Working Paper Series No. 77, November 2004.

Glaeser, Edward, and Andrei Shleifer (2001), “Legal Origins”. NBER Working Paper No. 8272. Cambridge, MA: National Bureau of Economic Research. [Do we use this source?]

Herbst, Jeffrey (2000), States and Power in Africa: Comparative Lessons in Authority and Control. PUP: 2002.

Joseph, Richard A. (1998), “Patrons, Clients, and Factions: New Dimensions of Conflict Analysis in Africa”. In Peter Lewis, ed., Africa: Dilemmas of Development and Change. Boulder, CO: Westview Press.

Kamarck, Andrew (1967), Economics of African Development. New York: Praeger.

Kanbur, Ravi (2000), “Aid, Conditionality, and Debt in Africa”. In Finn Tarp, ed., Foreign Aid and Development: Lessons Learned and Directions for the Future. London: Routledge. [We do not use this source anymore]

Mamdani, Mahmood (1996), Citizen and Subject: Contemporary Africa and the Legacy of Late Colonialism. Princeton, NJ: Princeton University Press, 1996.

Mellinger, Andrew D., Jeffrey D. Sachs, and John L. Gallup (1999), “Climate, Water Navigability, and Economic Development”. Working Paper No. 24 (September). Washington DC: Center for International Development.

Ndegwa, Stephen N., and Brian Levy (2003), “The Politics of Decentralization in Africa: A Comparative Analysis.” In Building State Capacity in Africa: New Approaches, Emerging Lessons. Washington, DC: The World Bank.

North, Douglass C. (1990), Institutions, Institutional Change, and Economic Performance. New York, NY: Cambridge University Press. [Do we use this source?]

Robinson, James (2002), “States and Power in Africa by Jeffrey Herbst: A Review Essay”, Journal of Economic Literature XL (June): 510-519.

Rodrik, Dani (1999), The New Global Economy and Developing Countries: Making Openness Work. Policy Essay No. 24. Washington: DC: Overseas Development Council. [Do we use this source?]

Rodrik, Dani, Arvind Subramanian, and Francesco Trebbi (2002), “Institutions Rule: The Primacy of Institutions over Integration and Geography in Economic Development.” IMF Working Paper 02/189. Washington, DC: International Monetary Fund. [Do we use this source?]

Sachs, J., and A. Warner (1997), “Sources of Slow Growth in African Economies”, Journal of African Economies 6 (3): 335-376.

van de Walle, Nicolas (2001), African Economies and the Politics of Permanent Crisis, 1979-99. Cambridge, UK: Cambridge University Press, 2001.

World Bank (2000), Can Africa Claim the 21st Century? Washington: DC: World Bank.

World Bank (2001), Aid and Reform in Africa. Washington, DC: World Bank.

-----------------------

1960s

1970s

1980s

1990s

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download