Against the Current
The Lost Continent
Robert Skidelsky
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LONDON – Home to one-sixth of the world’s people, but contributing only one-fortieth of world GDP, Africa is the most conspicuous victim of the global recession. After a half-decade of 5% growth, the continent’s growth rate is expected to halve in 2009. Some countries, like Angola, are contracting. Elsewhere, the crisis has swept away the benefits of several years of economic reform. Many Africans will fall back into desperate poverty.
Development economists wring their hands in despair: Africa defies their best efforts to create a miracle. On the eve of decolonization in 1960, real GDP per head in Sub-Saharan Africa was almost three times higher than in Southeast Asia, and Africans were expected to live two years longer on average. In the 50 years since, African real GDP per head grew by 38% and people lived nine years longer, while in Southeast Asia GDP per head grew by 1000% and people lived 32 years longer.
At first, the solution for Africa’s under-development seemed obvious. Africa needed capital, but lacked savings. Therefore, money had to be provided from outside – by institutions like the World Bank. Since extracting commercial interest rates from starving people seemed like usury, the loans had to be offered on a concessionary basis – in effect, aid.
Throwing money at poverty became a panacea. It was easy to sell, and it appealed to people’s humanitarian instincts. It also assuaged the guilt of colonialism, as with parents who give their children expensive gifts to make up for neglecting or mistreating them. But it did no good. Most aid was stolen or wasted. Despite the eight-fold increase in aid per head to the Democratic Republic of the Congo between 1960 and 2007, real GDP per head decreased by two-thirds in the same period.
“Trade not Aid” became the new watchword. Spearheaded by the economist Peter Bauer in the 1980’s, it became the nostrum of the Washington Consensus. Africa, it was fashionable to say, would catch up only if it deregulated its economies and embraced export-led growth like the “miracle” economies of East Asia. Advisers from the World Bank and the International Monetary Fund told African governments to stop subsidizing “national champions” and drop their trade barriers. Provision of a reduced volume of aid was to be conditioned on dismantling the public sector.
By 1996, only 1% of the population in Sub-Saharan Africa was civil servants, compared to 3% in other developing regions and 7% in the OECD. Yet despite the rollback of the state, Africa has not made the leap to prosperity. In a complete affront to economic theory, the little capital there is in Africa is fleeing the continent to be invested in already capital-rich societies.
The problem with Africa, economists then started to say, was that it lacked effective states. Many countries had “failed” states that could not provide even the minimum conditions of security and health. With 15% of the world’s population, sub-Saharan Africa accounted for 88% of the world’s conflict-related deaths and 65% of AIDS victims. What historians have known for 2,000 years – and what the eighteenth century’s classical economists also knew – suddenly struck the new breed of mathematical economists in the 1990’s like a flash of lightning: prosperity depends on good government.
So how to get good government? Restoring or securing it conjures up the dreaded specter of colonialism. After all, for all its other failings, colonialism provided the essential precondition of economic development: peace and security. The development discussion today is essentially about how such preconditions of poverty reduction and economic growth can be achieved without colonialism.
The most interesting contemporary contribution is by the Oxford economist Paul Collier. He argues that many African states have fallen into one or several development traps that are extremely difficult to escape. Moreover, once a country is mired in one of them, it is easy to fall into the next. Being poor makes you prone to conflict, and being in conflict makes you poor. So what hope is there for a poor country torn by civil war?
Citing the British mission to Sierra Leone, Collier argues for military intervention, when feasible, to secure peace. He supports international involvement to enforce post-conflict peace. But ongoing international assistance should be limited to providing voluntary good-governance templates.
Frameworks for how governments should make public spending transparent or how foreign resource-extracting companies should report their profits would make yardstick comparisons easier for local political activists, as well as providing a source of legitimacy for the government. The much-discussed Kimberly Process is a pilot project. Diamond companies volunteer not to buy from conflict areas in an attempt to prevent diamonds from funding warlords. This would be good for business, as affluent Western customers are now put off by the thought of buying blood-soaked jewelry.
Regional integration has featured prominently only in the last 50 years in Europe, but it has already resulted in a host of political and economic benefits to Europeans. Considerable evidence indicates that integration could be beneficial for Africa as well, given a framework suitable for African conditions.
This is a project worth supporting. Other efforts worthy of attention include formalizing the huge informal economy in states such as Ghana. Typically, these are projects that employ international expertise under domestically issued mandates.
It is a sign of the poverty of development economics that proposals such as these are regarded as cutting edge. However, as long as there is a roadblock every 14 kilometers between Lagos and Abidjan – two of West Africa’s leading cities – progress on the ground will be slow.
With refugees spilling over borders, pirates hijacking ships, and terrorists finding shelter, it is clear that, although Africa’s solutions are its own, its problems are not. The rest of the world can no longer afford Africa’s poverty. But the evidence of 50 years of failed efforts is that it hasn’t a clue what to do about it.
Robert Skidelsky, a member of the British House of Lords, is Professor emeritus of political economy at Warwick University, author of a prize-winning biography of the economist John Maynard Keynes, and a board member of the Moscow School of Political Studies.
Copyright: Project Syndicate, 2009.
www.project-syndicate.org
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alykhansatchu 06:23 28 Jun 09
Dear Lord Skidelsky
If one's starting point is 50 Years ago, it is indeed a truly abject story. However, it is frequently at moments of major change that the exercise of looking in the rear view mirror becomes redundant. I believe we sit on the very cusp of that inflexion.
Near term the Landscape is completely problematical and the non correlated theory has been rendered redundant. All Income Streams have been crunched and the risk of a Flood of Returnees at the very moment our Economies are on the ropes is putting further pressure on what are high BETA Economies because of their small absolute size.
However, I believe the medium term bull story is very much in tact. We have embarked on a process of convergence. The First Bridge for this convergence process was the Mobile Phone. Now the Wholesale Internet is set to wash up on our shores. In my case, literally, the Cables have landed just outside Fort Jesus in my home town of Mombasa. Its the Old Fax story. One is useless. Two and you can send one to each other and more it becomes exponential. The Citizen was a lone Voice, cut off from the rest of the World. Ideas travelled individually and at a pedestrian speed. Today Ideas are pinging across the Continent.
This Development is set to dynamically change the Continent. The Political dynamic is difficult to model. Many Administrations have the look of Khamenei's Iran and they need to wisen up very fast indeed. There is a Tsunami wave coming and King Kanute still applies.
As the Citizen transforms from single Lilliputians with a net and the state is its Gulliver, we will see interesting developments. Take Madagascar. The ejected President signed a contract with Daewoo where he he ceded a great deal of Land for the princely sum of zero. That contract was egregious and not worth the paper it was written on. He was either an Incompetent or a Thief. And that has been the narrative for many Years. Companies that enter into these thinly veiled rip offs have scrambled political antennae. These contracts are not worth the paper they are written on.
An important development is the fact that the Demand side of the African equation is much more multi sided now. We are deep in the V, but the Chinese, the Indians, the Middle East and even Russia are all stepping into the breach. This is a net add and an important one.
Hard Commodities have been a curse in many ways. Narrow Interests who have wrestled control of the State have managed to take an egregious share, in many instances with the direct connivance of MultiNationals. There has been no trickledown. On the other side of the coin, note that Africa is a Continent of Small Holder Farmers. If we get the Agriculture right there is very effective trickledown. Look at Malawi. Its an interesting thought as to where we need to put our resources to work.
We have a very tricky near term landscape. However, the absolute low Base effect, the fact that we have entered a Century that will be defined as one of Intellectual Capital and that we can now connect all these 900m Souls at a very low Cost all signal that change is afoot.
Aly-Khan Satchu
www.rich.co.ke
Twitter alykhansatchu