Historically, in the developing world, active macro-economic and industrial policy on the part of the state is more often than not greeted with pessimism and scepticism. This very prevalent competency and trust-deficit emanates from valid concerns that the state — specifically in the developing world — is often too inefficient and too corrupt (sometimes both) to successfully and efficiently implement policy pertaining to balanced economic growth and development, both in their own country and region.
But despite the shortcomings of government, real and imagined, the state realistically remains the only viable institution able to manage and facilitate the required large-scale economic and social development that can influence levels of employment, the production and allocation of goods and services, the distribution of income and assets that can ultimately be held accountable for its decisions and policy implementations by its citizenry through the process of democratic elections every election cycle.
Within this framework it has become increasingly imperative that state actors reduce various crippling institutional weaknesses they experience to ensure greater levels of development in their countries. Counter-productive variables such as corrupt bureaucracies, inefficient markets, weak state-run institutions and ineffective public services must be urgently addressed.
For any successful state to ensure inclusive economic growth and development for their citizens, governments must strengthen and solidify their own state capacities. Once this is achieved it would facilitate the promotion of cooperation as well as the deepening of various institutional networks crucially required by non-state actors – such as the private sector – to ensure sustained long-term growth and innovation, specifically in a context where traditionally market failures have been consistent.
Specifically in sub-Saharan Africa, various states in the region over the past few decades have failed to successfully implement the required structural adjustment programmes required to promote and facilitate the required levels of inclusive growth desperately required in the region. The nefarious combination of macro-economic austerity, unrealistic levels of rapid liberalisation, privatisation and deregulation not only contributed to a failure to create and produce a supply-side boom, but also counter-productively, set the region back economically. This led to productivity growth in most sectors in the region stalling which in turn exponentially grew the informal economy throughout the region with negative consequences.
However over the last decade overall GDP across the region has grown consistently at an average of 6% a year. According to the United Nations Conference on Trade and Development this translates to approximately 3% of real per capita growth. In addition growth has also been widespread throughout sub-Saharan Africa with only a handful of economies in the region contracting. There was of course a steep downturn experienced in 2009 due to the devastating effect of the global financial and economic crisis but in the sub-Saharan region overall growth rates have managed to remain largely positive.
While the welcomed economic growth is incredibly encouraging it’s important to understand the nature and context of this growth. The fact that there has been a wide variation in individual state economic performance across the region is largely due to the exponential growth rates of oil and mineral-producing countries. Added to this, in terms of comparing the economic growth with other developing world regions, sub-Saharan Africa still lags behind East and South Asia in terms of economic growth and development.
To ensure more balanced and equally dispersed levels of economic growth and development in the coming decades it’s crucial an alternative and equally realistic development agenda be implemented by various state policymakers in the region.
This development agenda will require a more fluid connection between macro-economic policies coupled with tighter sectoral measures that would prove vital in effecting long-term structural transformation in various state economies in the region.
Measures which could be implemented to achieve this sought after – yet elusive – structural transformation include;
- Building a solid policy framework that takes into account a strong growth/investment/employment axis.
- A real focus on active fiscal measures that would include counter-cyclical measures and a greater commitment to public investment.
- A crucial management of monetary policy that would focus on ensuring interest rates remain low and conversely, exchange rates remain at stable and competitive levels.
In addition to the potential policy framework measures and considerations outlined above, various countries in the region must also place greater emphasis on positioning their respective states in a wider regional and global context. This would include greater importance and focus on developing “South-South” links and relations beyond the region. Through developing greater relationships with trading partners in South-South nexus this would potentially also align strategic economic ties with other countries around the world in terms of trade, foreign direct investment, finance and technology.
The reality of attempting to induce and ensure economic growth and development in the uncertain times we’re experiencing is proving to be challenging for many states. Therefore countries must be more innovative and creative when it comes to economic policy development and implementation.
A more flexible approach that is still able to operate within the remit of the rules and norms of economic development and growth strategies will prove crucial for raising the probability to success for developing world countries, specifically in an African context in the decades to come.
@ S Ferguson
“The leaders of the ruling parties in Africa don’t have a clue on how to develop Africa and this includes the ANC. ”
From “Thing 11: Africa is not destined for underdevelopment” of Cambridge development economist Ha-Joon Chang’s “23 things they don’t tell you about capitalism”:
“Since the late 1970s (starting with Senegal in 1979), Sub-Saharan African countries were forced to adopt free-market, free-trade policies through the conditions imposed by the so-called Structural Adjustment Programs (SAPs) of the World Bank and the IMF (and the rich countries that ultimately control them). Contrary to conventional wisdom, these policies are NOT good for economic development (see Thing 7). By suddenly exposing immature producers to international competition, these policies led to the collapse of what little industrial sectors these countries had managed to build up during the 1960s and 70s. Thus, having been forced back into relying on exports of primary commodities, such as cocoa, coffee and copper, African countries have continued to suffer from the wild price fluctuations and stagnant production technologies that charaxterize most such commodities.”
@Wynand:
Can you name the previously state owned industries in South Africa that have been sold to the private sector?
@Garg Zola
A 30% stake in Telkom was sold to a US-Malaysian consortium in 1997, which was renationalised in 2004 because it was a mess:
“Impact:
• cost of local calls skyrocketed without crosssubsidisation
from long-distance calls;
• 2.1 million of 2.6 million new lines disconnected
as unaffordable;
• 20,000 Telkom workers fired, leading to
ongoing labour strife;
• transparency decreased still further in the
telecommunications sector”
“2003: IPO on the New York Stock Exchange: only
$500 million. Estimated $5 billion of Pretoria’s own
funding of Telkom’s late 1990s capital expansion
lost in the process.
2004: SA state repurchase of foreign consortium’s
shares; not much change to policies and practices”
A 20% stake in SAA was sold to an Italian company in 1998, renationalised in 2005:
Reason:
“Repurchase by a state agency: no
reason to have a foreign investor in
the first place. ‘Technical expertise’?
SA air transport industry
sufficiently sophisticated to handle
airport expansion.”
In which the government lost an amount commensurate to the Italian company’s initial investment of R890 million and out of which the company made a 108% profit.
Source: http://www.equinetafrica.org/bibl/docs/DIS30trade.pdf p21
There is also Joburg water which was privatized but had to be renationalised because of a cholera outbreak since people in Alexandra township could no longer afford water and took from a river. 300 died 120000 infections.
@Wynand, these governments in Africa went to the IMF because they were broke and their leaders had stole all of the money. When oil was discovered in Nigeria the government in that country overvalued their currency and this led to a flight of money out of the country. Corruption became the order of the day in Nigeria and the people moved into the cities where there were no jobs. When the price of oil dropped,these dictators running Nigeria, went to the foreign banks and borrowed money on their oil. When this country could no longer pay their loans, the government was forced to go the IMF. The leaders in Africa were the ones that mismanaged the economies that led to the decline of Africa’s economies and not the IMF.
Speaking of growth in Africa, the economic base of these countries were so low in Africa, that the growth you talked about didn’t mean very much.
Speaking of the government getting involved in the developing off Africa, many African government have been setting up companies on paper to steal from the government.
@ S Ferguson
If these countries could grow in spite of corruption in the 60s and 70s and increase GDP per capita by 37% over this period, which you seem to think doesn’t mean very much even though this was the about the same annual pace at which rich nations grew during 1820 – 1913, then I don’t see why these coutries have to adopt growth destroying austerity policies to reduce their debt since this policy is now a universal failure. Europe at the moment being a prime example of this.
It is better to reduce your debt by increasing your income, i.e., by growing, than to reduce it by forcing countries to save which leads to economic depression. It doesn’t make sense either to punish the entire population of a poor country for the mistakes of a corrupt dictator. There are two sides to a balance sheet, the liabilities and the assets. Neoliberals are quick to forget about the assets, the productive capacity of a country. It is not diminished by the debt a country has, so it makes more sense to put the country to work to pay down its debt than to put it out of work and strip it of its resources in the process to repay odious debts.
There should have been no growth destroying strings attached to those loans from the World Bank and IMF, just as China’s loans to the developing world today comes without any conditions regarding the macroeconomic policies used by the countries it lends to.
@Wynand, when China loan money to African government, she bring her people from China to do the work on the projects. China doesn’t trust the African government nor do they trust the African labor.
Most of Africa growth is not balance and their economies are based on extraction. There is very little being done to produce goods like the early Japanese did in the last part of the 19th century.
No, the people should not suffer because some dictators destroyed the economy of many African countries. However, many of those dictators were still in power until recently.
@ S Ferguson
“Most of Africa growth is not balance and their economies are based on extraction.”
You keep ignoring the fact that this is due to the neoliberal policies of the 1980s – 2000s forced on debt ridden African countries by the rich nations to keep Africa in low value added economic activities (extraction) which the rich nations import and turn into high value added products and then resell to the rest of the world, in the process accrueing most of the value added (productivity growth) to themselves:
“Since the late 1970s (starting with Senegal in 1979), Sub-Saharan African countries were forced to adopt free-market, free-trade policies through the conditions imposed by the so-called Structural Adjustment Programs (SAPs) of the World Bank and the IMF (and the rich countries that ultimately control them). Contrary to conventional wisdom, these policies are NOT good for economic development (see Thing 7). By suddenly exposing immature producers to international competition, these policies led to the collapse of what little industrial sectors these countries had managed to build up during the 1960s and 70s. Thus, having been forced back into relying on exports of primary commodities, such as cocoa, coffee and copper, African countries have continued to suffer from the wild price fluctuations and stagnant production technologies that charaxterize most such commodities.”
Thing 11, “23 things they don’t tell you about capitalism” by Cambridge economist…