Download country note 3: africa`s growth tragedy: an institutional

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
1960s
1980s
1970s
1990s
10
0
-10
1960s
1970s
1980s
1990s
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).
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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
Botswana
Korea, Rep.
Singapore
China
Oman
Hong Kong, China
Thailand
Ireland
Japan
Malaysia
Portugal
Lesotho
Indonesia
Spain
Hungary
Greece
Norway
Egypt, Arab Rep.
Finland
Italy
Worst performers
6.4
5.8
5.6
5.6
5.4
5.2
4.5
4.2
4.1
3.9
3.8
3.6
3.5
3.3
3.2
3.2
3.1
3.0
2.9
2.8
Guyana
Argentina
Cote d'Ivoire
Bolivia
Zimbabwe
Burundi
Nigeria
Rwanda
Ghana
Senegal
Chad
Venezuela, RB
Central African Republic
Zambia
Haiti
Sierra Leone
Madagascar
Niger
Liberia
Congo, Dem. Rep.
0.5
0.5
0.5
0.3
0.3
0.3
0.2
0.2
-0.1
-0.2
-0.4
-0.5
-0.7
-1.1
-1.1
-1.1
-1.3
-1.5
-3.2
-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).
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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.
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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)
250
200
150
100
50
0
2002
1999
1996
1993
1990
1987
1984
1981
1978
1975
1972
1969
1966
1963
1960
Nigeria
South Africa
Kenya
C ote d'Ivoire
C ongo, Dem. Rep.
Sudan
Ghana
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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)
6.0
4.0
2.0
0.0
-2.0
Africa (28)
Africa (41)
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
1971
1968
1965
1962
-4.0
Aggregate
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
Six later adjusters
Five governancepolarized
0.3
0.9
1.5
2.2
-2.3
-0.9
0.1
0.3
-2.2
-0.6
1.8
-1.6
5
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.
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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
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Collier, P., and J. Gunning (1997), Explaining African Economic Performance. Center for Study of
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Crawford, Young (1994), The African Colonial State in Comparative Perspective. New Haven, CT:
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Glaeser, Edward, and Andrei Shleifer (2001), “Legal Origins”. NBER Working Paper No. 8272.
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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,
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Robinson, James (2002), “States and Power in Africa by Jeffrey Herbst: A Review Essay”, Journal of
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Sachs, J., and A. Warner (1997), “Sources of Slow Growth in African Economies”, Journal of
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