Africa: A History of Failed Economic Growth

by Seth Payne & Catherine Lee

In 2005, the plight of Africa received its fair share of attention, be it from international summits, the world’s richest man and his wife, or Irish rock stars. The topic is likely no news to the American public: the developed world, with its ever-increasing media coverage, is constantly exposed to the grim realities of sub-Saharan Africa, where half the population subsists on less than a dollar a day and the life expectancy is as low as 33 years. Some estimates put the poverty rate in all of Africa at nearly 45%. According to the United Nations Conference on Trade and Development (UNCTAD), Africa’s poorest countries have extreme poverty rates close to 90%. The World Bank calculates that GDP growth in sub-Saharan Africa is a mere 3.5% and that growth would need to be 7% to cut poverty levels in half over the next decade. Most disturbingly, sub-Saharan Africa is the only region on earth where the number of people living in poverty has increased in the past 20 years.

Why has Africa failed? What has been tried? And, most importantly, where do we go from here?

Why Africa?

Africa�s notoriously corrupt governance is a commonly cited reason for its persisting poverty. With only a few exceptions, the countries of Africa turned to dictatorship soon after gaining independence from European colonial powers. The type of abuse is seen in the case of Mobutu Sese Seko of Zaire (renamed Congo in 1997). During Mobutu�s 35-year-rule as head of a �democratic� government, he and his ministers sold and pocketed the lucrative mining rights to Zaire�s substantial cobalt, nickel, and diamond mines. Nigeria, a country rich in oil deposits, has generated over $280 billion in foreign oil sales in the last 30 years. Yet, Nigeria remains one of the 20 poorest countries in the world and is forced to import about 70% of its own fuel needs due to gross mismanagement and rampant corruption. Other forms of corruption include mismanagement of land despite the plentiful availability of it. Land reform in Zimbabwe, meant to return land from European owners to family farmers, simply benefited native Africans with strong ties to the Europeans. However, in light of all this, critics of the poor governance theory claim that African governments have not been particularly worse than those of other developing regions, which have also experienced their share of tyranny and corruption. Yet others argue that poor governance is a result, not cause, of Africa�s faltering economy.

Africa�s colonial history may also have played a crucial role, with respect to initial conditions of African nations� political independence. Firstly, European colonial powers left behind very little in terms of infrastructure. This is in contrast to the colonization of East Asian tigers such as Korea and Taiwan, where pre-World War II Japan had developed extensive infrastructure. European imperial powers may also have debilitated their African colonies� economic stability by gearing their production toward only a few raw materials, leaving the countries extremely vulnerable to price swings.

Africa’s poorest countries have extreme poverty rates close to 90%... Most disturbingly, sub-Saharan Africa is the only region on earth where the number of people living in poverty has increased in the past 20 years.

Another oft-cited theory is that of geographic determinism. Various subtheories exist under this broad heading. One states that tropical climate regions have less incentive to develop than those of temperate climate, for abundant natural resources are already at hand. This is referred to as the �resource curse.� Another conjecture claims that continents that are long vertically, such as Africa and South America, experience great variations in latitudes, which signifies greater variations in climates and leads to difficulty in the transfer of technology. Yet others speculate that Africa lacks inlets for commerce into the interior parts of the continent, as does Europe through the Baltic and Adriatic Seas, Asia through the gulf of India and Persia, and both Europe and Asia through the Mediterranean. Furthermore, three-fourths of sub-Saharan Africa�s population lives more than 100 kilometers interior of the continent � the highest concentration of inland population in the world. This may be owing to an erratic climate and lack of fertile land near the coast. Others attribute this phenomenon to the legacy of slave trade, which may have encouraged inward movement, away from the seas.

Over the past twenty years, a new threat has jumped to the forefront in challenging Africa�s prospects for development: the HIV virus. The statistics are staggering. Currently, more than 26 million people are infected, with more than 2.3 million deaths per year. 8,500 contract the disease every day. A report by Great Britain�s Royal African Society estimates that the disease suppresses the overall sub-Saharan annual GDP growth rates by 0.8 percentage points; in some countries, that rate is a high as 2.6 percent. Unfortunately, poor economies and a weak political culture have made combating challenges such as the AIDS epidemic difficult.

Challenges for the Future

To date, aid policies to Africa have generally fallen into one of two categories. In the first, the West has extended compassion without fully inviting or enabling Africa to participate in world markets. For example, in times of famine, violent ethnic conflict, or natural disaster, the West, through both governmental and NGO action, has sent millions of dollars to provide immediate relief to suffering Africans. Yet simultaneously, the domestic policies of both the United States and the European Union provide substantial subsidies to domestic farmers which cripple Africa�s efforts to create self-sustaining economies. According to Barry Nalebuff, Milton Steinbach Professor of Management at Yale�s School of Management, �agricultural subsidies create excess supply and depress prices� for African farmers in economies where Agriculture is one of the few, if not the only, means of internally generating capital.

Effectively, these subsidies “undermine the ability of third-world farmers to compete where they have a comparative advantage.” Currently, U.S. corn is sold on the world market at 20% below the actual cost of production. Wheat is sold at 46% below production costs. Clearly, African farmers cannot participate in a world market where prices are so artificially deflated. According to a recent OXFAM report, Western subsidies and import barriers cost developing nations about $100 billion a year – twice the amount they receive in aid. Not only do these policies significantly curtail African economic development, but also they prevent African nations from developing the resources to combat significant domestic challenges. Thus, the West feels compelled to relieve immediate suffering but fails to consider the impact of its domestic policies. This compassion-only approach has, to some degree, bred a paternalistic view of Africa in the west and created an “us and them” mentality toward both the countries and people of Africa.

In the second category, on the other hand, aid has been given at a high price to those countries in the most need of loans and also the least capable of repaying them. In “Biblical Foundations for Christian Social Teaching,” a study set to be published in 2007, Thomas Ogletree, Professor of Theological Ethics and former Dean of Yale Divinity School points out that in the past, charging high interest rates on loans was frowned upon as abuse of the poor and needy. “Such exploitation continues to corrupt the lending practices of many banks and financial institutions in the contemporary world”, he says. “Loans are offered to people facing desperate financial circumstances with interest rates so high as to exacerbate their plight.” Clearly, loans given to African nations should not cause more problems than they are intended to solve.

In other cases, cash has been given only with the promise that the money be spent on importing goods from the donor country. The United States, for example, has required that aid dollars earmarked for the purchase of HIV/AIDS medication be spent only on American-made drugs even when generic versions of these medications can be purchased from South Africa or India at substantially lower prices. The UN Economic and Social council refers to this type of aid as “tied aid” and estimates that the effectiveness of such aid is reduced by as much as 45% due to such strict stipulations. Additionally, unrealistic political strings have often been attached to aid, forcing African nations to refuse help because of the difficulty meeting political expectations.

Despite the bleak state of both African economies and failed western aid policies, there are indications of hope and change. Botswana, a landlocked state surrounded by poverty-stricken neighbors, has had tremendous growth over the past four decades. According to Daron Acumoglu, Simon Johnson and James A. Robinson, authors of “An African Success Story: Botswana,” positive social dynamics have contributed to this growth. In addition to sound economic policies, “maintaining and strengthening institutions of private property [are] in the economic interest of the elite.” These institutions also provide economic opportunity to the poor which has helped to develop a stable middle-class by “[protecting] the property rights of potential and actual investors, [providing] political stability, and [ensuring] that the political elites are constrained by the political system and the participation of a broad cross-section of society.” This combination of sound policy and properly-aligned interests has led to solid and stable economic conditions without the need of endless foreign aid. Botswana functions well because its institutions allow for all citizens to effectively participate in an economy where competing interests efficiently work towards a mutually beneficial end. Certainly, Botswana’s success can be replicated in other parts of Africa and western aid policies can play an important role in creating much-needed economic stability.

“You are asking to generalize fifty-three countries–800 million people. Circumstances are different from nation to nation. Some African countries have made real strides... the approach must be multifaceted.”

So what ultimately makes the problem of sustainable development in Africa intractable? There is likely no single answer. “You are asking to generalize fifty-three countries – 800 million people,” comments Susan Rice, Senior Fellow at the Brookings Institution and former Assistant Secretary of State for African Affairs. “Circumstances are different from nation to nation. Some African countries have made real strides... the approach must be multifaceted.” These facets may range from the elimination of trade barriers caused by the protectionist policies of wealthy nations to the provision of electricity. Solutions do not have to come from solely the public sector, either. “Private sectors play an important role. We must provide incentives to the private sector to look at Africa [as a viable business venture].”

Ineffective aid policy is not only economically inefficient but, arguably, it is also immoral. Both John Stuart Mill and Jeremy Bentham, utilitarian philosophers who wrote during the 19th century, argued that in order for public policy to be moral, it must maximize the happiness of the greatest number of people and minimize suffering. In utilitarianism, intent is far less important than the realistic expectation of an action’s consequences. Current aid policy grossly violates these utilitarian precepts. Either countries send aid and believe their obligation is fulfilled due simply to their good intentions, or they pursue policies, fully aware their actions neither maximize happiness nor minimize suffering. Take two of the aid policies already described: charitable giving in the presence of domestic agricultural subsidies and the United States’ “tied aid” for HIV/AIDS medication. In the first example, Western nations may feel that their moral obligation is fulfilled by temporarily relieving suffering in African nations when in fact their domestic policies amplify the very suffering they seek to relieve. Not only do agricultural subsidies maximize the happiness of the least amount of people – in this case American farmers – but they also significantly increase the suffering of Africans. The simultaneous pursuit of policies which serve to undermine each other, regardless of the intent of each individual policy, is ineffective at best and immoral at worst. Similarly, by requiring African nations to purchase HIV/AIDS medication at substantially higher prices when equal and less-expensive alternatives are available, the happiness of American pharmaceuticals is maximized while the suffering of Africans infected with HIV/AIDS is neglected. Helping 10 people when you could have just as easily helped 100 is a clear violation of utilitarian principle. In both of these cases, the method of providing aid is immoral because it fails to maximize the happiness of the greatest amount of people and instead, is designed to alleviate guilt, in the case of charitable giving, or increase the profitability of American companies, in the case of HIV/AIDS medication. Continually pursuing policies that cripple Africa’s fledgling economies or amplify its political, ethnic, and social weaknesses, regardless of how well-intentioned these policies may be, represents a substantial lack of societal integrity and moral clarity.

Seth Payne, CIO, is a graduate student at the Yale Divinity School
Catherine Lee, News Editor, is a junior in Ezra Stiles College