Published in Nov 2017

From ‘African growth tragedy’ to ‘Africa rising’ - Debunking the myths

‘Bad’ climate, geography, history and culture, are insufficient to explain the poor economic performance of Africa. Many countries in the 19th and 20thcentury defied these meta-structural factors to achieve economic development. Singapore has developed well despite its tropical climate, while the Scandinavian countries, Canada,and the US have developed despite their arctic and frigid climates, which can be as hostile to economic development as tropical climate. Landlocked Switzerland and Austria havebecome two of the richest countries in the world. Ethnic divisions in Switzerland, Belgium,and other European countries did not prevent their economic development. All of today’s developed countries in the past and China today have had many of the same ‘bad’ institutions that a history of colonisation is supposed to have created in Africa. Germany, Japan, and Korea defied those who had thought they have cultures that are hostile to economic development and went on to engineer economic ‘miracles’. Economic development has enabled all the above-mentioned countries to overcome these conditions.

In other words, correlation and causation have been confused in the arguments emphasising meta-structural factors. Given the reversal of sluggish growth and improved political and economic climates in most African countries, some people have enthusiastically embraced a new discourse, claiming that Africa is ‘rising’. And in many ways Africa is doing better – compared to 15 years ago, fiscal deficits have been reduced, there are fewer violent conflicts, people are healthier, and public access and use of ICT devices has grown rapidly. However, in terms of the development of productive capabilities[12] – the essence of economic development – we have shown that the ‘rise’ is mostly hype. Per capita GDP growth is in fact quite low, poverty rates and vulnerable employment rates haven’t improved much, and industrialisation is not happening, making the sustainability of the recent growth doubtful. All countries that have defied meta-structural impediments to growth have done so by increasing their productive capabilities: they reorganised and transformed their production activities. Historically, this has happened through an expansion of the manufacturing sector, which has higher productivity and greater scope for productivity growth than do other sectors. Moreover, the manufacturing sector in an economically backward country cannot develop without an intelligent and coherent industrial policy, as various economic theories and historical experiences show. The theories and the history of industrial policy are the issue that we respectively turn to in the next two chapters.

12 - Productive capabilities refer to the skills, productive knowledge and experience that are embedded in physical agents and organisations for a more detailed taxonomy of productive capabilities). The development of productive capabilities includes not only the development of capabilities of firms to produce more technologically advanced goods but also the infrastructure (e.g. roads and electricity) and institutions (e.g. financial system) to support this.

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By Ha-Joon Chang