Download Defining the Tragedy

Jared Barnett
David Alexander
Nancy Du
Varun Sharma

1960s - 7 African countries predicted to have GDP growth
over 7%
• Negative growth from 1965-1990


Lower GDP growth than other areas - S. Asia & Latin America
1980: Africa comparable to S. Asia
• Africa’s GDP has declined whereas S. Asia has nearly doubled
• Africa’s % of world exports was 4x S. Asia, now halved, as S.
Asia has doubled
• Lower life expectancy and lower avg. caloric intake


Africa Dummy Variable – ignores differences among
countries
Economic Policy & Indicators
• High black market premiums & budget deficits; Low financial
liquidity
• Low investment in human capital: education & training
Geography & Diversity
 Fractionalization: 14/15 Most ethnically
diverse. 54 Countries w/ avg. of 4
neighbors.
• Additional Linguistic Diversity
 Varying
Natural Endowments
• Coastal v. Land-Locked (40%)
• Resource Rich v. Scarce
 Low
growth includes all country types:
• Nigeria: coastal and oil producing but highly
volatile growth patterns remain
 Lingering
effects of colonialism
• British v. French, et al.
• Hands off v. Hands On
 Corruption
and Rent Seeking
 Conflicts
& Volatility – Emerging
Democracies
• Political assassinations & civil wars
• Low Levels of FDI and International Trade
I.
Geographic and Demographic
Concerns
II.
Colonialism and Current Politics
III.
Ethnic Divisions
IV.
Poor Economic Policies
Fragmentation
I.
•
•
•
A). Small Country Size
B). Migratory Trends
C). Intra-Continental Trade
Costs of Fragmentation
II.
•
•
A). Unequal Resource Distribution
B). Loss of Scale
 State
Building and Metropole Identities
• British Colonization
• French Colonization
 Legitimate
vs. Illegitimate states
• Rent Seeking
• Neopatrimonialism
(Personal Rule)
 Ethnic
Divisions
• (colonial roots)
 “ethnically
polarized societies are more
likely to select socially sub-optimal policies”
 Wars of Attrition
• Compounds the effects of other causes of the growth
tragedy
 economic policies
 public goods – schooling, financial depth,
telephones/worker
 Rent
Seeking
• Corruption and Bribes
• Exchange Rate example
• “Common Pool” Problem

Generally:
 Excessive gov spending, Lack of Openness to International Trade,
Low investment in human capital

Specifically:
• Landlocked and Resource Scarce
States
 Majority of African population
 Not engaging in trade with neighbors
 Policies that raise the cost of human capital and prevent
international trade (ie Monopolies)

Coastal Resource Scarce States
 Lack of openness to international Trade

Resource Rich States
 Dutch Disease
 Macroeconomic Volatility
 Ineffective Public Spending

Since 1994 GDP growth has approached 5%, & 6%
from 2004-06, including all country types

Contributing factors
• rising commodities prices
• increased international debt relief

Ethiopia –climate conditions + higher
prices for exports
• Growth masks underlying problems – volatility remains

Solutions to reduce volatility
• Leverage aid in 2nd stage of democratic growth
 Better leadership in development programs
 Promote regional collaboration  Neighbor Multiplier