Wednesday, May 29, 2013

Africa's Economic Boom

An excellent piece, from Shantayanan Devarajan and Wolfgang Fengler, at Foreign Affairs, "Why the Pessimists and the Optimists Are Both Right":
Talk to experts, academics, or businesspeople about the economies of sub-Saharan Africa and you are likely to hear one of two narratives. The first is optimistic: Africa’s moment is just around the corner, or has already arrived. Reasons for hope abound. Despite the global economic crisis, the region’s GDP has grown rapidly, averaging almost five percent a year since 2000, and is expected to rise even faster in the years ahead. Many countries, not just the resource-rich ones, have participated in the boom: indeed, 20 states in sub-Saharan Africa that do not produce oil managed average GDP growth rates of four percent or higher between 1998 and 2008. Meanwhile, the region has begun attracting serious amounts of private capital; at $50 billion a year, such flows now exceed foreign aid.

At the same time, poverty is declining. Since 1996, the average poverty rate in sub-Saharan African countries has fallen by about one percentage point a year, and between 2005 and 2008, the portion of Africans in the region living on less than $1.25 a day fell for the first time, from 52 percent to 48 percent. If the region’s stable countries continue growing at the average rates they have enjoyed for the last decade, most of them will reach a per capita gross national income of $1,000 by 2025, which the World Bank classifies as “middle income.” The region has also made great strides in education and health care. Between 2000 and 2008, secondary school enrollment increased by nearly 50 percent, and over the past decade, life expectancy has increased by about ten percent.

The second narrative is more pessimistic. It casts doubt on the durability of Africa’s growth and notes the depressing persistence of its economic troubles. Like the first view, this one is also justified by compelling evidence. For one thing, Africa’s recent growth has largely followed rising commodity prices, and commodities make up the overwhelming share of its exports -- never a stable prospect. Indeed, the pessimists argue that Africa is simply riding a commodities wave that is bound to crest and fall and that the region has not yet made the kind of fundamental economic changes that would protect it when the downturn arrives. The manufacturing sector in sub-Saharan Africa, for example, currently accounts for the same small share of overall GDP that it did in the 1970s. What’s more, despite the overall decline in poverty, some rapidly growing countries, such as Burkina Faso, Mozambique, and Tanzania, have barely managed to reduce their poverty rates. And although most of Africa’s civil wars have ended, political instability remains widespread: in the past year alone, Guinea-Bissau and Mali suffered coups d’├ętat, renewed violence rocked the eastern Democratic Republic of the Congo, and fighting flared on the border between South Sudan and Sudan. At present, about a third of sub-Saharan African countries are in the throes of violent conflict.

More mundane problems also take a heavy toll. Much of Africa suffers from rampant corruption, and most of its infrastructure is in poor condition. Many governments struggle to provide basic services: teachers in Tanzania’s public primary schools are absent 23 percent of the time, and government-employed doctors in Senegal spend an average of only 39 minutes a day seeing patients. Such deficiencies will become only more pronounced as Africa’s population booms.

And then there’s the fact that African countries, especially those that are rich in resources, often fall prey to what the economist Daron Acemoglu and the political scientist James Robinson have termed “extractive institutions”: policies and practices that are designed to capture the wealth and resources of a society for the benefit of a small but politically powerful elite. One result is staggering inequality, the effects of which are often masked by positive growth statistics.

What should one make of all the contradictory evidence? At first glance, these two narratives seem irreconcilable. It turns out, however, that both are right, or at least reflect aspects of a more complex reality, which neither fully captures. The skeptics focus so much on the region’s commodity exports that they fail to grasp the extent to which its recent growth is a result of economic reforms (many of which were necessitated by the misguided policies of the past). The optimists, meanwhile, underestimate the degree to which the region’s remaining problems -- such as sclerotic institutions, low levels of education, and substandard health care -- reflect government failures that will be very difficult to overcome because they are deeply rooted in political conflict.

However, even if both narratives are reductive, the optimists’ view of Africa’s future is ultimately closer to the mark and more likely to be borne out by developments in the coming decades. Africa will continue to face daunting obstacles on its ongoing path to prosperity, especially when it comes to improving its human capital: the education, skills, and health of its population. But the success of recent reforms and the increased openness of its societies, fueled in part by new information and communications technologies, give Africa a good chance of enjoying sustained growth and poverty reduction in the decades to come.
Continue reading.

The authors argue that the continent is leapfrogging some stages of technological progress, going right to the cellular era --- "the so-called mobile revolution" --- bypassing a long, plodding period of telecommunications development.