The African Growth Miracle?

by on April 22, 2012 at 6:44 am in Data Source, Economics | Permalink

I had not previously read this 2009 paper by Alwyn Young (pdf):

Measures of real consumption based upon the ownership of durable goods, the quality of housing, the health and mortality of children, the education of youth and the allocation of female time in the household indicate that sub-Saharan living standards have, for the past two decades, been growing in excess of 3 percent per annum, i.e. more than three times the rate indicated in international data sets.

National income statistics, which in this context are untrustworthy, indicate a growth rate of only about one percent.  Contra Young, here is a much less positive perspective, excerpt:

Yet this is nothing like the required economic advancement built around an actual or dominant “middle-class” milieu as commonly and quite wrongly suggested.

Africa’s burgeoning demography will challenge this future. Subsistence economies remain its anchors, and the alleged “demographic dividend”, that some blithely portray as a “driver”, will mostly transform into one of rising unemployment and growing informalisation.

Those who observe the lack of significant gains in African agricultural productivity often prefer the negative interpretation.  Too many of the observed progress seems to come from mining wealth.  In a recent short essay, Michael Lipton sums it up:

1. Stop kidding ourselves. (a) Faster GDP growth in Africa since 2000 is mainly a mining boom, with dubious benefits. Staples yields (and labour productivity) have not reversed the dismal trends that Peter Timmer diagnosed two decades ago: big, credible rises are seen in only a few African countries (e.g. Rwanda, Ghana). The populous ones (Ethiopia, Nigeria, maybe Kenya, above all DR Congo) tell a sad tale.

That we don’t know who is right is perhaps the most interesting fact of all.

Michael Heller April 22, 2012 at 7:14 am

“we don’t know who is right”

Of those three sources I’d trust Michael Lipton. Maybe I’m biased; he was one of my teachers at IDS. He is a *very* intelligent man.

Bob Knaus April 22, 2012 at 9:54 am

Michael Lipton correctly diagnoses the problems, but not (in my opinion) the cure. Will smallholder production of staple crops really work in a globalized commodity environment? I think not. That genie is not going back in the bottle.

I do see a role for smallholder production of specialty crops for export. This accomplishes many of Lipton’s non-economic goals, and brings in foreign exchange to boot. See cocoa production in West Africa, mostly by women, as an example. The supermarkets that African growers need access to are in Europe and America, not in Africa.

Peter A April 23, 2012 at 5:15 pm

You need to tailor the economy to the skillsets of the population. Africans will never be competitive in engineering, manufacturing, software, or any industry requiring abstract reasoning. If you take Africans off the land you leave the majority with nothing productive to do – in much the same way as African-Americans by and large have a very hard time finding productive employment in our post industrial economy. Pretending that Africans are East Asians is a sure way to destroy the continent.

Anonymous April 22, 2012 at 11:30 am

Re “faster GDP growth in Africa since 2000 is mainly a mining boom”, McKinsey’s recent “Lions on the Move” report concluded that only ~25% of African GDP growth from 2000-2008 came from natural resources sectors. Has someone else run the numbers and come to a different result?

gnikivar April 22, 2012 at 4:36 pm

One thing to keep in mind is that Africa is a pretty huge continent, and what’s true for one countries isn’t necessarily true for the continent. GDP growth has been averaging at above 10% for the last 6 years. GDP growth has been high but volatile for the past 15 years. Its not just gdp growth either. Exports have increased more than six fold and manufactured exports (they still make up a small part of exports) have grown even faster. While gdp growth in the resource poor countries has been poor in general, several resource poor countries, including Rwanda and Uganda, have seen relatively high growth rates over the last decade and a half.

Ronald Brak April 22, 2012 at 8:38 pm

The economic figures are a proxy for what people want, and people quite frequently want to not be dead. So I would look directly at life expectancy to get an idea of how things are improving and it does appear to have shown an improvement on average in recent years:

http://www.who.int/gho/mortality_burden_disease/life_tables/situation_trends_text/en/index.html

dkite April 22, 2012 at 11:50 pm

>Faster GDP growth in Africa since 2000 is mainly a mining boom

He says that like it is a bad thing.

Rahul April 23, 2012 at 12:22 am

Exactly! So long as it brings them prosperity what’s wrong with mining booms?

Marian Kechlibar April 23, 2012 at 4:55 am

Once the mining stops, entire regions turn into rusty brownfields. Happened on a smaller scale in Europe, as well. Pockets of severe unemployment, poverty and crime are created in this way.

Also, mining-based economy creates crony capitalism par excellence.

Rahul April 23, 2012 at 8:24 am

Sure, but for most of Africa it cannot be worse from where they started at? There are also many counterexamples where mining has successfully carried a nation for long periods while it diversified.

Steven Kopits April 23, 2012 at 11:00 am

Natural resources booms can help economies broadly, but they also permit entreched dictatorships to persist.

The appropropriate policy response would be align the incentives of politicians with sustainable, broad-based economic growth. In such cases, natural resources can become a source of funding.

TallDave April 23, 2012 at 11:27 pm

To be fair, in Europe it also left behind… modern Europe. Africa is pretty much all severe unemployment, poverty and crime anyway.

The second problem is why it won’t leave behind modern Europe in Africa; they just don’t have the social capital to effectively exploit their resources into sustainable economic growth. They fundamentally don’t understand why they can’t just take all the stuff by force. It’s very hard to build a system that aligns incentives and then get everyone to buy in, the way economies work in the OECD.

Morrissey April 23, 2012 at 12:17 am

Come on let’s be honest here, Africans only have a average IQ of 75 but they have the highest child rape cases.

Ronald Brak April 23, 2012 at 6:45 pm

Not sure what you’re saying here, Morrissey. African IQs are currently comparable to white Americans in the 50′s (African average IQ is about 81 or so, not 75) but the USA in the 1950′s was reasonably child rape light, so I don’t think there is a direct link between IQ and child rape. Other causes are likely to be responsible. For example, in my country child rape is often linked to religion.

Thorstein Veblen April 23, 2012 at 10:55 pm

Really, really hard to take anything written by Alwyn Young at face value.

Chinese TFP growth possibly -0.4% post-1978? (See his paper, “Gold Into Base Metals”.) But Africa has been growing at 3 percent.

Sure.

Several of his “mistakes” in ‘Tyranny of Numbers’ do not appear innocent. His results always rely on ‘sleight of hand’ deceptions. Read him in his own words from Gold into Base Metals…: “Like many magicians and alchemists, this paper buries its trickery…” Indeed.

I can’t think of an economist with any less credibility. Haven’t looked at his Africa paper in two years but I knew I didn’t like it.

TallDave April 23, 2012 at 11:20 pm

Social capital, social capital, social capital. Without it there can be no prosperity, with it there can be no poverty.

They don’t have it, they don’t understand why they need it, they are not working toward attaining it. Eventually, that may change.

John Watkins April 26, 2012 at 1:44 am

The question is, will the wealth of the mining boom be used to increase the wealth of the nation and educate its young, or will it be appropriated by an extractive elite? Color me pessimistic.

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