Wednesday, September 3, 2014
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The Lost Continent

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.

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