Re-think Development in Africa
By Komla Tsey.
In this thought provoking book, Komla Tsey argues that if governments, NGOs, development donor agencies and researchers are serious about development in Africa, they need to get down to ground level, both metaphorically and literally. They must search deep into Africa's own rich oral traditions by creating space and opportunity for ordinary Africans, whose voices have so far been conspicuously absent in the development discourse, to tell and share their own stories of development. Story-sharing as research methodology acts as a mirror, reflecting the participants' self-evaluation of where they have come from, where they are now, and how to proceed into the future. They are strategies that can empower and enable individuals and communities of people to be agents of their own change which, in Tsey's view, is what development is all about.
Impediments to holistic development in African countries
John Ifediora.
A common argument adduced in defense of Africa’s abysmal development pattern or lack of it is that African policy makers lack the will and dedication essential to crafting and assiduously implementing well-recognized socio-economic vectors that other countries in the West and East Asia have cleverly adopted to spur development. In the case of Nigeria, critics point to the fact that in 1960 South Korea and Nigeria had comparable levels of national income or parity in Gross Domestic Product. From this base level, it is then extrapolated to the present differential in economic performance by both countries, and conclude that South Koreans did much better because Nigerians are saddled by a succession of rotten leadership, and corrupt public servants. This has been a consistent explanatory theme and criticism, but both are wide of the mark. Unfortunately, however, they have been the focal points of attempts to rectify African development trajectory by well-meaning experts from donor nations and multinational development agencies.
Rotten leadership and bureaucratic corruption are not indigenous to African countries; they thrive quite nicely in developed and developing nations of the world. The only reason for observed differential impact on outcomes is that institutions in Western economies and other moderating socio-cultural observances are so well-advanced and refined that they effectively contain and minimize the negative effects of bad leadership and corrupt practices. By institutions I here make reference to legal, economic, and political systems that govern behavior, and by socio-cultural observances I point to the unifying power of a commonly observed religion, a common language, and cultural adherences that infuse a sense of belonging and collective ownership of a defined territorial competence with sovereignty or what is commonly called a country.
In African countries, the Tower of Babel effect (Genesis 11:1-9) is very much in evidence through its capacity to discourage organized effort via a multiplicity of distinct languages, and allegiances to just as many social belief systems and cultural constraints. This is problematic in crafting development-friendly public policies that at once address the demands of the various constituencies that make up the polity. Any development policy thrust in this context of disorganized state is a near impossible feat, and naturally such attempts fail; but this reality has not deterred African leaders from introducing new ones with prospects just as promising as those before them. Meanwhile a country’s effort at development is defeated, and the country either stagnates or retrogresses. That many African countries are very weak or failing is a manifestation of the inability of governments to carry out their core functions such as the exercise of monopoly on violence, provision of essential infrastructure, enforcing the rule of law, and providing basic welfare services to the masses. A debasement of these capabilities leaves a devastating vacuum that cannot support any development initiative in any country.
Legal, economic, and political institutions in a country are invariably dependent on the quality of the educational system the country’s citizenry enjoys. In almost all countries in sub-Saharan Africa the quality of primary, secondary and tertiary education is at best irredeemably bad; this quality notwithstanding, access to them is just as abysmal. So far, especially in Nigeria, the solution peddled by policy makers is the expansion of access but not much on the question of quality. The outcome is that every year more functional illiterates are unleashed into private and public sectors starved of a well-educated workforce. The result is a debilitating paucity of the liberating effects of a liberal arts education, and scarcity of job-ready graduates with marketable technical skills. Without these qualities in place, African countries would remain unable to attract and retain out-sourced jobs by global corporations, and would perpetually remain at the mercy of a never-ending chain of development experts.
A better understanding of what development means
For over sixty years, right after the Second World War, the development ‘industry’ that emerged from the ashes of burnt-out European economies, began its march towards Africa and other parts of the world to spread the gospel of market-led development theories. The underlying assumption was that development is a technical process that can be mechanically applied to all societies without much variation in expected outcome. After witnessing the spectacular outcomes of such mechanical approach in Western Europe and East Asia, the idea that a one-size-fits-all development methodology was taken as settled reality. Now it is clear that this reasoning is faulty for two good reasons: (1) the assumption of what development entails is incomplete, and (2) the successes witnessed in Europe and East Asia are a result of a long history of effective and sustaining social- institutions that are malleable and receptive to development initiatives. The attempt to replicate such successes in Africa has failed miserably because African countries lack the necessary institutions needed for sustained development. In other words, institutions matter; thus, a different articulation of development and how to engender it are now imperative.
Development, like any other endeavor to improve social welfare must be holistic and attend to economic, healthcare, educational, and spiritual or religious aspects of human existence that improve and sustain a minimal standard of living within existing realities in a country. This means looking at things from the point of view of those whose welfare one intends to improve. In early attempts to introduce development policies in sub-Saharan Africa, the overwhelming emphasis was on the economic aspect of human conditions in total disregard of other equally important necessities that engender human development. Unfortunately, this deficiency in understanding continues to be present in development models currently applied to African countries. A country that does not have a steady-state supply of electricity, a functional educational system that enhances its human capital, an efficient legal system that enforces the rule of law, and the liberalizing effects of a progressive socio-political system cannot industrialize and engage in the manufacture of goods; it also means that it cannot take advantage of beneficial externalities that accompany production of goods and services, which in turn deprives it of technologies that permeate and enhance other sectors of the economy. This is the lot of many African countries.
A step in the right direction
Personal development requires careful planning. It is also a lengthy process that demands efficient use of time, setting and accomplishing goals, acquisition of useful knowledge through formal and informal education, proper nourishing of the body, access to good healthcare, and purposeful use of accumulated human capital. The development of a country is no different; it requires all of the above plus the collective will to take full ownership of the country by performing the duties required of citizens such as paying taxes, participation in the electoral process, and unwavering fidelity to the rule of law. But in the mix of all these must be a unifying factor or factors such as a common language, affiliation with a particular religion, identification with a common ethnicity, or uniform acceptance of a form of government. The absence of a unifying factor amongst the citizenry makes the development of a country a difficult proposition. A closer look at the myriad of cultural, ethnic, religious, and linguistic cleavages that decorate the landmass of Africa is sufficient to illustrate this point.
For African countries to achieve meaningful and sustained development, it is now clear to both partial and disinterested observers of the continent that policy makers and those whose affairs are governed must engage in a partnership of constructive planning for growth, and unifying factors that endow citizens with ownership rights to their country. Ownership rights and vested interest can be readily achieved through effective use of the tax system. Through taxation governments not only derive needed revenue stream to fund social projects, it also empowers citizens to demand transparency on how tax revenues are spent. Unfortunately in most African countries governments do not rely on tax revenues to fund projects; they would rather rely on revenue from natural resources, loans from multinational institutions, and foreign donors, all in the concerted effort to avoid accountability to their citizens. The citizens, naturally, are quite content not to be burdened with taxation. But this disposition is defeatist, for it severs the necessary and important relationship that undergirds sustainable development. It is upon such foundation that other development vectors such as education, transportation networks, steady-state supply of electricity, financial institutions, telecommunication, and healthcare are productively deployed. So much for a one-size-fits-all model of development.
Africa's development in historical perspective
By Bates, Nuun & Robinson.
This edited volume addresses the root causes of Africa's persistent poverty through an investigation of its longue durée history. It interrogates the African past through disease and demography, institutions and governance, African economies and the impact of the export slave trade, colonialism, Africa in the world economy, and culture's influence on accumulation and investment. Several of the chapters take a comparative perspective, placing Africa's developments aside other global patterns. The readership for this book spans from the informed lay reader with an interest in Africa, academics and undergraduate and graduate students, policy makers, and those in the development world.
Africa Trade & Investment Global Summit (ATIGS) 2018
The Council on African Security And Development (CASADE) is pleased to announce this international event that holds enormous potential for Africa's development initiatives. CASADE is a partnering organization of this event, and its director, Professor John Ifediora, is a scheduled speaker at the event. http://atigs2018.com/atigs-2018/
The 2018 Africa Trade & Investment Global Summit (ATIGS), scheduled on June 24 to 26, 2018 at the World Trade Center – Ronald Reagan Building in Washington D.C. Under the main theme “Driving Trade, Unleashing Investment and Enhancing Economic Development: the Gateway to African Markets”, ATIGS 2018 goals and objectives are aligned with two of the United Nations Sustainable Development Goals (SDGs): (SDGs 8 and 17).
ATIGS is a prestigious biennial business conference and exhibition designed specifically: (1) to promote and facilitate international trade between Americas, Asia, Caribbean, EU, UAE, with Africa, (2) to facilitate foreign direct investment in Africa and, (3) to provide a platform for businesses to expand into new markets. The ATIGS 2018 edition will gather 2000-plus key economic players from more than 70 countries including government delegations, high-profile African leaders, project developers and international investors.
The vision of ATIGS is built on the model of rotating the location of the summit every two years through a bidding process and organizing country-specific ATIGS in between. In 2016, ATIGS team spent over 150 days travelling to meet stakeholders at events & countries worldwide with a prioritized agenda for ATIGS 2018 – Washington D.C and touching base on ATIGS 2020 – Dubai; ATIGS 2022 – Beijing; ATIGS 2024 – Brussels, ATIGS 2026 – Addis Ababa; and, ATIGS 2028 – South America.
The 3-days event will provide a unique platform to gain strategic knowledge about local investment opportunities and business networking. High-level speakers, exhibitors and global investors and deal-making will top the agenda at ATIGS 2018, covering 16 economic sectors, particularly manufacturing, agribusiness, power, construction, infrastructure, transportation, IT, tourism, telecoms, health, fintech, and natural resources sectors. High-potential projects in Africa will be presented to international investors. Featured agenda items will include projects showcase, deal marketplace, exhibition, country presentations, and among others. The ATIGS 2018 will bring together key policymakers, African Ministers, Ambassadors and senior government representatives in various intergovernmental bodies.
The effective use of China’s soft power in Africa
Africa's natural resources have long provided allure for China. On the back of large infrastructure investments, concessional loans and grants, China has developed strong trade partnerships with many African countries. In order to deepen ties further and to make its attractiveness less dependent upon its deep pockets, China has sought in recent years to expand its "soft power" in Africa. China's growing focus on soft power in the region suggests that it is mindful of how these platforms could help to nurture geopolitical allies, export its economic model and values and, perhaps most importantly, make African countries pay heed to China because they want to, and not only because they want to secure funds for their next big infrastructure project.
Primarily, the soft power of any country relies on the appeal of its culture, social and political values and economic model. In combination, these concepts must prove attractive to others in order for influence without coercion to occur. The US, lacking the colonial baggage of many European powers, has often been held in high regard in Africa. Indeed, the Pew Research Global Attitudes Project suggested in 2013 that China still lags behind the US in terms of soft power on the continent. However, the view of China among Africans is largely positive, particularly among younger generations, who admire China's impressive economic advancements in recent decades and its prowess in scientific and technological fields.
China much more popular in Africa than elsewhere
Africans' favourable sentiment towards China is particularly evident when compared with the view in other regions of the world. In Europe only 28% of Germans and Italians share a favourable view of China, and in the US an estimated 37% of the population view China in a positive way, according to Pew Research. The unfavourable views of China in Europe and the US have probably been spurred by a number of issues, including unease about the country as a commercial competitor and its protectionist measures, as well as frustration over its non-interference policy in foreign affairs and weak respect for human rights.
In contrast, 72% of Africans view China favourably, with many seeing China's economic trajectory over the past two decades as an example to follow. The poll shows that large majorities of respondents in Senegal (78%), Kenya (77%), Nigeria (71%) and Ghana (70%) view China as a partner rather than an enemy—much higher than in most other countries. In economic terms, this result proves unsurprising, as China is the second leading trading partner with Ghana and Kenya, the fourth leading partner with Nigeria and the fifth with Senegal. China has also provided significant support for infrastructure projects in those countries, underlining that its attractiveness rests primarily on its economic muscles.
Look and learn
However, China is moving beyond its focus on trade and investment. The development of Chinese media outlets in the region is one such example. The expansion of China's state media in Africa began in earnest in 2009, when Xinhua—the country's official news agency—increased its number of news bureaus on the continent to more than 20. In 2008 the news agency also launched its China African News Service to increase reporting on issues of mutual interest, and Xinhua is now an important source of information in many African countries. In 2012 the state-run broadcaster, Chinese Central Television (CCTV), founded CCTV Africa and selected Nairobi, Kenya's capital, as its first broadcast hub outside its headquarters in Beijing, illustrating its commitment to expanding television coverage on the continent.
Together with the African edition of the state-run English-language newspaper, China Daily, these media outlets have challenged the discourse of long established Western media outlets, which are viewed within China as preserving a monopoly in the region and endorsing negative narratives regarding local Chinese economic motivations. China's media expansion comes at a time when many Western outlets are scaling down their media presence on the continent. China hopes that the growing reach of Chinese media in Africa will further nurture favourable views of the country and generate less bad press than it has become used to.
Alongside news broadcasting, the airing of Chinese soap operas has become a popular medium through which contemporary Chinese life is publicised. The show Doudou and Her Mothers-in-Law is dubbed in Swahili and has been broadcast across East Africa since 2011, gaining widespread public appeal. Such broadcasts have the ability to serve as a platform to help China to promote its values and culture.
Despite these advances, however, only around one-third of Africans have a positive view of Chinese music, films and television. This is in stark contrast to science and technology—an area in which nearly three-quarters of Africans have a positive view of China, supported by its technological leaps over the past two decades. This seems to be changing amongst younger generations, however; more than 50% of those aged 18-29 in Nigeria and Ghana enjoy Chinese music, television and films, according to Pew Research, suggesting that younger Africans are more open than older generations to what Chinese culture has to offer.
Come and learn
Reinforcing the push behind enhanced Sino-African relations are China's education and training campaigns in Africa. The development of more than 30 Confucius Institutes across Africa, teaching Mandarin and Chinese culture, lends support to China's long-term strategy of maintaining the positive attitudes of young Africans towards China. Towards the end of 2013 more than 35,000 African students were studying in China, of which the majority were beneficiaries of a Chinese government scholarship scheme that aims to support African students throughout their education in China. In Ghana the number of students offered scholarships approximately doubled to 111 for the 2013/14 academic year, and up to 15,000 trainees from the continent have been funded since 2007.
The scholarships have lately extended their remit past a focus on language and culture to include scientific and technological fields. By 2013 China had doled out more than 500 scholarships to Rwandan students in the disciplines of engineering, finance, information and communications technology, medicine and agriculture. The African Talents Program was launched in 2012, creating one of the world's largest short-term training programmes. Its aims are to train an estimated 30,000 African professionals in China between 2013 and 2015 and to speed up the transfer of technology to African countries. Furthermore, up to 18,000 African trainees will profit from full scholarships to study at Chinese universities under the arrangement.
However, while these schemes are presented as signs of China's generosity, their creation is likely to have been spurred by growing criticism of the country's poor record on employing locals on its investment projects on the continent. There have been numerous examples of African workers protesting against the treatment they have received from Chinese companies, including low wages, inadequate safety equipment, a lack of training and a ban on union activities, raising fears that China is exporting its own poor labour and employment standards.
Paying for favours
Africa has also become the main recipient of Chinese foreign aid. In July 2014 the country's second White Paper on foreign aid was released. It reported that aid from China during 2010-12 amounted to an estimated US$14.4bn, of which 51.8% went to African countries. In addition, China has granted debt relief worth hundreds of millions of dollars to African countries. China's levels of aid are still relatively low in comparison to OECD countries, but many EU countries are now allocating a declining proportion of their aid budgets to African countries. France, for example, which has traditionally been one of the largest donors in Africa, allocated just under 39% of its total bilateral aid budget in 2011-12 to Africa, down from more than 50% in the early 1990s, according to OECD figures.
There are few signs of Chinese aid inflows to the continent waning. This hints at the current limits to China's soft power in Africa; China's attractiveness still rests primarily on government-backed multi-billion-dollar schemes. In contrast, the US—which also has large aid programmes in many countries on the continent—is generally seen as an attractive role model regardless of what its government does.
China's soft power strategy is still young—Hu Jintao, the former Chinese prime minister, identified it as a policy priority in 2007—and its education programmes and media expansion efforts are likely to boost its popularity. Moreover, its presence will continue to be welcomed as a counterbalance to the often paternalistic attitudes of Western aid agencies.
However, anti-Chinese sentiments are brewing across the continent: small-scale traders in Malawi complain that Chinese businessmen are undercutting the businesses; youths in Cameroon lament that Chinese-funded projects employ locals only for the most low-skilled tasks; authorities in Ghana have cracked down on illegal Chinese gold miners; Niger, previously keen to move away from its dependence on France, is now worrying about its growing reliance on China; Zambian workers have complained about exploitation by Chinese employers; activists are criticising Chinese companies' opaque methods. The list could go on. These examples highlight that as China continues to pursue economic opportunities in Africa, its appeal as a soft power risks fading.
**First appeared in The Economist.
Bridging the leadership gap in Africa
Syerramia Willoughby.
What is Ubuntu? Is it a radical or benign concept? Ubuntu is a traditional African philosophy which means “I am, because we are”. It seeks to convey “the humaneness of the human being”. Despite the geographic and socio-cultural diversity of the continent, the idea behind this philosophy is present in communities all over the land mass that is Africa. Can this value system shape a new brand of leadership for the African continent? That was the question under discussion at the 2015 Africa Utopia Festival by LSE academics Awol Allo, Vanessa Iwowo and Jason Hickel.
A key challenge to defining a new brand of leadership for Africa lies in examining the source of the knowledge we use to shape our values, myths and narratives. As Dr Awol Allo pointed out in the discussion, Europe is the “silent reference of all knowledge”.
For example, the conceptual categories and analytic frameworks that dominate almost all disciplines of international law – civilisation, progress, reason, secularism, humanism, universal freedom of trade, distinctions between public and private, religion and secularism – are European concepts with their own unique European teleology.
This is not to say that Europe and European thinkers are too Eurocentric or that they regard their world view as universal. Neither is there a desire to dismiss or condemn Western knowledge. Rather, as Dr Allo puts it, analysing the source of the knowledge we consume helps us become aware of “the silences, omissions, erasures and battle cries underneath the current international order.”
The prevalence of eurocentric ideas can also be seen within the economic narrative of Africa Rising. In fact, Dr Jason Hickel pointed out that it is often ignored that the strongest period of economic growth in Africa was during the 1960s and 1970s just after the end of colonialism. Development was proceeding apace along with a rapid reduction in poverty using strong state-led interventions in the economy. This was a time when Africa was genuinely rising without resorting to Western prescriptions, relying instead on visionary leadership from figures such as Julius Nyerere in Tanzania and Kwame Nkrumah in Ghana. This era came to an end when African countries adopted Structural Adjustment Policies in the 1980s and 1990s under pressure from the IMF and World Bank and is now widely regarded as a disastrous period in the continent’s history.
Africa is rising once more, but Dr Hickel contends that this is the wrong kind of growth. The buzz around the economy in a number of African countries in centred almost exclusively around resource extraction which instead of reducing inequality increases it. Dr Hickel put a number of questions to the audience: Who really benefits from this economic model? If Africa is rising, who is it rising for? Should Africans seek to groom its leaders based on a foreign model devoted to extraction, accumulation, materialism and consumption? Or should our economies be modelled on the principles of Ubuntu – on justice, equality and ecological responsibility?
The principles of ubuntu can have an impact not just economically, but also politically. Leadership is far from being a single universal absolute truth, as Dr Vanessa Iwowo argued. It is much more a social construct. As heterogeneous as Africa is, this strand of shared value systems which includes Ubuntu that runs along the continent can crafted into a new brand of shared leadership values not only for the continent, but which can be exported beyond its shores.
Dr Iwowo believes the first step to achieving this would be to develop an understanding of cultural identity or what it means to be a member of contemporary African societies along with the accompanying implications, responsibilities and expectations.
Perennial conflict in East and Central Arica as well as periodic outbursts of xenophobia in South Africa shows that there still remains a gap to be bridged from rhetoric to reality. Yet, it is a bridge that must be crossed for Ubuntu to take its rightful place in the global scheme of affairs.
*Willoughby is at LSE
Poverty and development traps? Yes, but two African countries managed to escape both
Charles Kenny and Andrew Sumer.
Remember the poverty trap? Countries stuck in destitution because of weak institutions put in place by colonial overlords, or because of climates that foster disease, or geographies that limit access to global markets, or simply by the fact that poverty is overwhelmingly self-perpetuating. Apparently the trap can be escaped.
The World Bank did its annual assessment of poor countries last week. Low-income countries are those with average gross national incomes (GNIs) of less than $1,005 per person per year.
And there are only 35 of them remaining out of the countries and economies that the World Bank tracks. That's down from 63 in 2000.
New middle-income countries this year include Ghana and Zambia. Lower middle-income countries are those with per capita GNIs of between $1,006 and $3,975 per year; while upper middle-income countries are those with per capita GNIs between $3,976 and $12,275.
The remaining 35 low-income countries have a combined population of about 800 million. Tanzania, Burma, the Democratic Republic of the Congo, Ethiopia and Bangladesh account for about half of that total, and there are about 350 million people living on under $1.25 a day in the remaining low-income countries.
So what's behind all of this sudden income growth? Is it a story about aid? One prominent Zambian, Dambisa Moyo, has written of her country that "a direct consequence of the aid-driven interventions has been a dramatic descent into poverty. Whereas prior to the 1970s, most economic indicators had been on an upward trajectory, a decade later Zambia lay in economic ruin". In the 1980s, aid to Zambia averaged about 14% of the country's GNI. In the 2000s, a decade of strong growth, the same proportion was 17%. If Zambia's ruin in the 1980s was the result of aid, is Zambia's graduation to middle-income status in the new millennium a sign that aid now works really well?
Of course both the ideas that previous stagnation was all the fault of aid, or current growth was all the result, are ridiculous. The price of copper (Zambia's major export) was depressed in the 1980s and saw its price rocket in the middle of the last decade as China and India's economies grew and demand for the metal soared.
Remember the poverty trap? Countries stuck in destitution because of weak institutions put in place by colonial overlords, or because of climates that foster disease, or geographies that limit access to global markets, or simply by the fact that poverty is overwhelmingly self-perpetuating. Apparently the trap can be escaped.
The World Bank did its annual assessment of poor countries last week. Low-income countries are those with average gross national incomes (GNIs) of less than $1,005 per person per year.
And there are only 35 of them remaining out of the countries and economies that the World Bank tracks. That's down from 63 in 2000.
New middle-income countries this year include Ghana and Zambia. Lower middle-income countries are those with per capita GNIs of between $1,006 and $3,975 per year; while upper middle-income countries are those with per capita GNIs between $3,976 and $12,275.
The remaining 35 low-income countries have a combined population of about 800 million. Tanzania, Burma, the Democratic Republic of the Congo, Ethiopia and Bangladesh account for about half of that total, and there are about 350 million people living on under $1.25 a day in the remaining low-income countries.
So what's behind all of this sudden income growth? Is it a story about aid? One prominent Zambian, Dambisa Moyo, has written of her country that "a direct consequence of the aid-driven interventions has been a dramatic descent into poverty. Whereas prior to the 1970s, most economic indicators had been on an upward trajectory, a decade later Zambia lay in economic ruin". In the 1980s, aid to Zambia averaged about 14% of the country's GNI. In the 2000s, a decade of strong growth, the same proportion was 17%. If Zambia's ruin in the 1980s was the result of aid, is Zambia's graduation to middle-income status in the new millennium a sign that aid now works really well?
Of course both the ideas that previous stagnation was all the fault of aid, or current growth was all the result, are ridiculous. The price of copper (Zambia's major export) was depressed in the 1980s and saw its price rocket in the middle of the last decade as China and India's economies grew and demand for the metal soared.
But growth among low-income countries in Africa and elsewhere isn't just limited to big mineral exporters.And the continent is fast drawing in more investment. Foreign direct investment to Africa is projected to rise to $150bn by 2015, reports the Africa Attractiveness Survey (that's more than the total global aid budget) – and domestic resources are being mobilised at a faster rate, too, as the Commission for Africa 2010 report discussed.
Even gold and diamond-producing Ghana, which declared itself 63% richer at the end of last year than previously thought, didn't suggest the newfound riches were the result of mineral exports. Instead, the recalculation was driven by the fact the country's services sector was a lot bigger than previously calculated. Part of that will reflect the incredible success of the telecoms sector - 75% of the country's population are mobile subscribers. And, of course, the expansion of telecoms is a worldwide phenomenon. So a lot of the growth we are seeing in poor countries is broad-based, not just reliant on the current commodity boom – which is good news for the future.
Of course there's much to do to translate this growth into better and faster poverty reduction. Looking at the progress data for the millennium development goals (MDGs) for Ghana and Zambia there's nowhere near the kind of progress you would hope to see on income poverty. Twenty years of growth in Ghana has reduced the number of people living on $1.25 or less from just over 7 million to just under 7 million – and inequality (as measured by the Gini coefficient) rose significantly. However, in both Ghana and Zambia, the number of children in primary school has climbed along with literacy rates, and infant mortality has fallen. Even if they're not on track to meet the MDGs, quality of life is getting much better.
What shall we take from this? Three things. First, consider the good news that there are fewer poor countries around. Not least, it suggests that public and private investment (including aid) can help even the poorest countries get rich(er). This is one more reason why optimism should come back into fashion.
Second, the World Bank country classifications - which are used to help determine types and levels of support provided by many aid agencies - may need a rethink. They are based on a decades old formula, and on the idea that most poor people live in poor countries. But we know that middle-income countriesnow account for most of the world's population living in absolute poverty. And the data suggests these aren't just poor countries by another name - they really are better off than low-income countries, not only in terms of average income but by human development and other development indicators too. We need aid allocation models to take account of poor people and of deprivations beyond income - not just poor countries with a low GNI. And fewer poor countries and poor people in time also suggests greater aid funds for global public goods - be these for climate adaptation, vaccines or other shared global issues that will shape the next 25 years.
Third, as countries develop their own resources, fighting poverty becomes increasingly about domestic politics. Not surprisingly, this means inequality is rising up the agenda. New research shows that the emerging middle classes may have a big role to play. Who they side with - the poorest or the economic elite - will determine what kind of development emerges in the new middle income countries.
In short, even the poorest countries can get richer – and that's a good news story.
• Charles Kenny is a research fellow at the Center for Global Development and the author of Getting Better: Why Global Development Is Succeeding - And How We Can Improve the World Even More.
• Andy Sumner is a research fellow at the Institute of Development Studies and a visiting fellow at the Center for Global Development
US-Africa Relationship Under President Ramaphosa
Anthony Carroll.
Last Friday’s State of the Nation Address by newly-elected South African President Cyril Ramaphosa outlined many of the challenges that confront his country nearly a quarter of a century after the end of apartheid. These include economic inequality, unemployment, decaying social conditions, and corruption. His forthright remarks represent a paradigm shift in that country’s governance and governing principles and provides an opportunity for the United States to reengage with a strategic ally after nearly two decades of eroding relations.
It is only fitting that Mr. Ramaphosa usher in this new era. Once the favored protégé of Nelson Mandela, Ramaphosa was the chief negotiator for the ANC during the Convention for a Democratic South Africa (CODESA) process that effectively dismantled the odious system of apartheid. The institutions established at that time, including a much admired constitution, have flexed their muscles in the past few months exorcizing the corrupt and incoherent eight-year reign of Mr. Ramaphosa’s predecessor, Jacob Zuma. The coming months will reveal the depths of corruption that marked the Zuma era and, as the Truth and Reconciliation process salved the wounds of apartheid, provide South Africa an opportunity to set a new course.
The United States should extend its hand to Mr. Ramaphosa and contribute when requested and where it can, not only for some ideal but for its own strategic self-interest. This process will not be easy. After the bloom of the post-apartheid process faded and Nelson Mandela relinquished power, U.S.-South Africa relations began a downward arc. Among the irritants included dismay over President Thabo Mbeki’s policies on HIV/AIDS, differing positions on Israel, Palestine, Iraq, and Libya, South Africa’s preferred embrace of fellow BRICS countries (most concernedly Russia) and myriad disagreement on trade relations starting with a scrapped regional free trade agreement and more recently, disputes on U.S. chicken exports.
While this trend occurred in both Republican and Democratic administrations, it has been especially fractured during the later years of the Zuma administration. The symptoms included a compulsive attention to protocol over substance, limited access to government decision makers in Pretoria, thinly veiled opprobrium by U.S. diplomats, and an eroded civil discourse that included allegations by high level ANC officials that the United States was intent on fomenting regime change. Well, regime change did occur, and the United States had nothing to do with it. Rather, it was South Africa’s independent media, civil society, parliament, and judiciary that waltzed Zuma and his cronies out the door.
So where to begin? We can start by maintaining our current programs of assistance in South Africa. While we have ongoing military and counterterrorism collaboration with South Africa, laudable U.S. initiatives in health programming like PEPFAR have benefited millions of South Africans. A second area of strength is in trade. South Africa has been the largest beneficiary of the Africa Growth and Opportunity Act (AGOA) by trading 141 items without duty, including automobiles and fine wines. Lastly, over 600 U.S. firms have offices in South Africa and provide a strategic and secure platform to grow U.S. commercial interests on the African continent. Using these as a base, here below are a few recommendations where the United States could advance Mr. Ramaphosa’s and its own interests.
First, South Africa is a leader in medical research and life sciences in both the government and private sector. The United States could foster partnerships between U.S. educational institutions and bioscience organizations such as the Biotechnology Innovation Organization (BIO) that could address Africa’s vast unmet health needs. Second, South Africa is the logical platform for U.S. businesses to exploit the Africa continent. Indeed, South Africa’s fastest growing trade relations are with its African neighbors. American technical assistance and political capital can be leveraged to support the emergence of African regional integration, a process logically led by South Africa, the continents largest and most sophisticated economy. Additionally, South African financial institutions, including the Johannesburg Stock Exchange (the world’s fourth oldest exchange) can be a conduit for U.S. creative capital going into Africa. Last, with three consulates and Africa’s largest embassy in Pretoria, the U.S. government has the platform in which to respond to advise and technical assistance requests by the South African government, private sector, and civil society.
*Anthony is founding director of Acorus Capital, a private equity fund investing in Africa, and a vice president of Manchester Trade Limited, an international business advisory firm. He has over forty years of experience working with Africa and is an adjunct professor at Johns Hopkins School of Advanced International Studies.
**Courtesy of Council on Foreign Relations
Another Good riddance in the ranks of African Leadership; Ethiopia’s Prime Minister Resigns.
As more misplaced, misassigned, and morally bankrupt African leaders are systemically forced out of office, the continent may in fact have a brighter future. The recent departures of South Africa’s Zuma, Zimbabwe’s Mugabe, and Mr. Desalegn of Ethiopia are not coincidences; they are harbingers of things to come as Africans find and embrace free speech, and democratic principles. Said differently, Africans are now saying to their leaders “Get your priorities right or ship out.” Real change is afoot, and we are anxious to see the fruit it bears. Jim Moore of New York Times explains what led to the forced exit of Ethiopia’s Prime Minister.
Jim Moore.
The prime minister of Ethiopia, Hailemariam Desalegn, resigned on Thursday, state media reported, after deadly unrest pushed the government to release several high-profile political prisoners. The announcement followed the release this week of Eskinder Nega and Woubshet Taye, two prominent journalists who spent seven years in prison, and of Bekele Gerba, one of the country’s most important opposition figures, who was jailed in 2015. The state broadcaster reported that Mr. Hailemariam submitted his resignation to Parliament on Thursday, and that he expected it to be accepted. An interim leader is likely to be appointed until the ruling coalition names a new leader.
Hallelujah Lulie, a political analyst in Addis Ababa, the capital, said Mr. Hailemariam’s resignation “was just a matter of time.”“Things were deteriorating,” he said, adding that many had expected a new prime minister to be named at the next congress of the ruling coalition, scheduled for this summer.
Africa’s second-most populous country and an important United States ally in the fight against terrorism, Ethiopia is a regional powerhouse with grand economic plans. But it has experienced violent clashes for more than two years, with protesters calling for economic and political reform. Implementation of the government’s agenda has been slow, and tensions have escalated as the public’s patience has waned.
In a move many believed was designed to release some of that tension, Mr. Hailemariam announced in January that the country would free some prisoners, including opposition politicians. Several hundred were freed, but the government continued to hold some of the most high-profile prisoners, including the journalists and Mr. Bekele.
Observers have said that the government’s reluctance to free prominent prisoners illustrated divisions within the ruling party over the release program specifically and of the march toward reform generally. “There are elements within the ruling party who don’t want to do that, who want to resist it at every turn,” said Hassan Hussein, an Ethiopian analyst and professor at St. Mary’s University in Minneapolis. He said the government and members of the opposition, especially the political party of the Oromia people, had disagreed about the conditions for releasing prisoners.
To accelerate the process, Oromia opposition members inside and outside Ethiopia called for a boycott on Monday. Shops and banks in the province of Oromia were closed, and those who did not join the street protests largely stayed home, residents said. Activists said as many as 20 people were killed. The boycott was officially canceled after Mr. Bekele was released on Tuesday, but Mr. Hallelujah said the protests had continued in many places. “It’s easy to call a protest, but it’s very difficult to call it off,” he said. “It takes its own life and its own course.”
That is precisely what appears to have spooked the most powerful member of the four-party coalition, which has been facing down more than two years of demonstrations in the country’s most sensitive regions. The government cracked down against the protesters, and at least 669 people have been killed, according to the Ethiopian Human Rights Commission.
The ruling coalition, which has run the country since 1991 and controls every seat in Parliament, is also fracturing from within. Two of its marginalized members, representing the regions where the protests began, joined forces to contest the power of the coalition’s dominant member — an unexpected alliance of former enemies that, observers say, appears to be succeeding in challenging power.
Mr. Hailemariam’s resignation appears to be the latest chapter in that political saga. “I think his resignation probably is because of those differences among the coalition groups,” said Girma Seifu, an opposition politician who was once the only lawmaker who was not a member of the ruling coalition.
Mr. Hailemariam came into office in 2012, after the death of Meles Zenawi, whom Mr. Hallelujah described as a “bigger than life figure.” Mr. Meles had ruled with a heavy hand — and, some say, a micromanager’s scrutiny — since 1995. But Mr. Hailemariam gave little indication that he had either the wide-angle vision or the close-up attention of his predecessor.
Many Developing Countries Are Trapped: Few Can Climb The Economic Ladder
Maria A. Arias, Yi Wen.
The low- or middle-income trap phenomenon has been widely studied in recent years. Although economic growth during the postwar period has lifted many low-income economies from poverty to a middle-income level and other economies to even higher levels of income, very few countries have been able to catch up with the high per capita income levels of the developed world and stay there. As a result, relative to the U.S. (as a representative of the developed world), most developing countries have remained, or been "trapped," at a constant low- or middle-income level.
Such a phenomenon raises concern about the validity of the neoclassical growth theory, which predicts global economic convergence. Specifically, economics Nobel Prize winner Robert Solow suggested in 1956 that income levels in poor economies would grow relatively faster than income in developed nations and eventually converge with the latter through capital accumulation. He argued that this would happen as technologies in developed nations spread to the poor countries through learning, international trade, foreign direct investment, student exchange programs and other channels.
But the cases in which low- or middle-income countries have successfully caught up to high-income countries have been few.
Many poor countries today have a per capita income that is 30 to 50 times smaller than that of the U.S. and sometimes even lower (less than $1,000 per year in 2014). For such countries to catch up to U.S. living standards, it may take at least 170 to 200 years, assuming that the former could maintain a growth rate that is constantly 2 percentage points over the U.S. rate (which is about 3 percent per year). This would be difficult, if not impossible. It is even harder to imagine that such countries could reach U.S. living standards within one to two generations (40 to 50 years), similar to how North American and Western European economies caught up to Britain during the 1800s after the Industrial Revolution. To achieve that speed of convergence today, the developing countries would need to grow about 8 percentage points faster than the U.S. (or about 11 percent per year) nonstop for 40 to 50 years. In recent history, only China came close to this; it was able to maintain a 10 percent annual growth rate (7 percentage points above the U.S. rate) for 35 years, but per capita income in China was still only one-seventh of that in the U.S. in 2014.
Hence, the lack of income convergence and the relative income traps appear to be real problems.
In this article, we first define the concept of an income trap and describe evidence that points to the existence of both low- and middle-income traps. Second, we analyze the historical probability of transitioning to higher relative income groups and test the persistence of the traps over time. Finally, we offer some hypotheses on the existence of income traps, as well as their policy implications.
Defining the Income Trap
The economic development literature provides various ways to classify countries by income groups, as well as several definitions of the "poverty trap" and the "middle-income trap."2 Most researchers have used absolute measures of income levels (such as median income per capita) or growth rates to define what constitutes a low- or middle-income trap, but in doing so, they have ignored the more pervasive phenomenon of the lack of convergence.
Although many so-called middle-income countries have experienced persistent economic growth, their growth rates never surpassed the U.S. growth rate; consequently, these countries have been unable to close their income gaps with the U.S. In other words, these countries remain "trapped" at relatively lower income levels compared to the living standards of the developed countries, contrary to the neoclassical growth theory's predictions that they will converge due to technology spillover and international capital flows.
The lack of relative income convergence implies that income per capita in the U.S., as well as general living standards, will continue to be 10 to 50 times higher than in low-income economies and two to five times higher than in middle-income economies. Therefore, redefining the low- and middle-income traps as situations in which income levels relative to those of the U.S. remain constantly low and without a clear sign of convergence allows us to study the issue of economic convergence (or lack of it) more directly.
The most common examples of rapid and persistent relative income growth (leading to convergence) are the Asian Tigers (Hong Kong, Singapore, South Korea and Taiwan); other countries include Spain and Ireland shows a sample of these economies where relative per capita income grew significantly faster than in the U.S. beginning in the late 1960s all through the early 2000s, catching up or converging to the higher level of per capita income in the U.S.
In sharp contrast, per capita income relative to the U.S. remained constant and stagnant between 10 percent and 40 percent of U.S. income among the Latin American countries that are listed. Despite experiencing moderate absolute growth during the same period, they remained stuck in the "relative middle-income trap" and showed no sign of convergence to higher income levels.
The lack of convergence is even more striking among low-income countries. For example, Bangladesh, El Salvador, Mozambique and Nepal are stuck in a poverty trap, where their relative per capita income is constant at or below 5 percent of the U.S. level. Even though their economies might have grown moderately in absolute terms, they have not grown at a rate faster than the U.S. growth rate; thus, their relative income levels have not increased. As a result, the income gap between these nations and the U.S. has permanently been at least 20 times their own income per capita.
In comparison, China has been able to grow relatively faster than the U.S. since about the early 1980s, breaking away from the relative low-income trap and reaching middle per capita income levels. India has also shown signs of escaping the low-income trap since the early 1990s. However, both countries still have a long way to go to catch up and converge to the levels seen in developed economies, and both have yet to encounter the relative middle-income trap.
Are the Traps Real?
Studying the historical evidence of how a country's relative income changed after a given number of years confirms the existence of both relative income traps. For each year between 1950 and 2011, we determined whether a country's relative income fell into a low range (≤15 percent of U.S. income), middle range (>15 to 50 percent of U.S. income) or high range (>50 percent of U.S. income). We then compared that relative income classification to the same country's relative income after 10 years, 20 years and at the end of the sample (30 to 61 years, depending on data available).
The relative low-income trap is highly persistent: The probability of remaining trapped in the low-income range is 94 percent after 10 years 90 percent after 20 years and 80 percent in the entire observational period, 30 to 61 years. Meanwhile, the effects of the relative middle-income trap are strong in the 10-year period (with a probability of remaining in the middle-income status of 80 percent and a 9 percent probability of regressing to low-income status), but dissipate in the longer term. Still, shows that more than half of the economies that had a middle-income status at the beginning of the sample remained at or below that relative income status (with a cumulative probability of 47 percent + 17 percent = 64 percent), indicating that these economies experienced a small probability of relative convergence to higher levels of relative income even after having moderate absolute growth during the entire 30- to 61-year period.
In other words, the probability of escaping the middle-income trap is 11 percent after a 10-year period, 21 percent after a 20-year period and 36 percent after 30 to 61 years. Also interesting to note is that countries almost never degrade to low- or middle-income status once they have reached the high-income status: The probability of remaining at a high-income status is at least 97 percent.
Going back further in history, the general picture is not very different. Calculating the countries' transitions among relative income groups between 1870 and 2010, the low relative income trap is highly persistent even in the long run, and the probability of remaining in a middle-income trap is still substantial enough that it warrants a search for further explanations. These results also support our claim that both the relative low-income trap and the relative middle-income trap exist because the probability of transitioning from low income to middle income is only 5 percent and from middle to high income is only 18 percent—even in the very long run (140 years).
Explanations for Income Traps
The literature lacks systematic explanations for the lack of rapid convergence, especially the middle-income trap phenomenon. We discuss the theories that stand out, in our view, as the most prominent. The general theme underlying these theories is that there are barriers to technology spillovers and frictions in resource reallocation.
First, a developing country's local monopoly power can act as a barrier to new technology adoption and international capital flows. Interest groups in developing countries have little incentive to open up the domestic market and allow competition from foreign firms with more advanced technologies. There is empirical evidence to support this theory, but it does not explain why nations remain trapped in low- or middle-income levels even when they adopt policies to open domestic markets or when they enact radical economic reforms that lift barriers to international capital flows. In fact, many nations have tried to attract foreign direct investment (FDI) but have not been very successful; even if they do attract FDI, they are still unsuccessful in climbing out of the income trap. For example, Mexico adopted financial liberalization in the 1970s, accumulating a large amount of debt. But when the U.S. hiked interest rates in the early 1980s, Mexico suffered a debt crisis, partly because of its lack of capital controls. As another example, Russia also adopted dramatic economic and political reforms to lift capital controls, starting in the early 1990s, but the result was a collapsing economy, not a reviving one.
A second popular theory to explain the income traps focuses on institutions. This theory proposes that poor nations fail to develop because of bad political institutions, such as a dictatorship. Under bad political institutions, the elite class builds extractive economic institutions to expropriate profits from the grass-roots population. Hence, the rule of law and private property rights are not protected, and the private sector has little incentive to accumulate wealth and adopt new technologies to improve productivity.7Notable examples of the institutional theory are the communist countries in Eastern Europe during the postwar period before their economic reform in the late 1980s and early 1990s, as well as today's North Korea.
The institutional economists also apply this theory to explain why the Industrial Revolution took place first in late 18th century England instead of in other parts of Europe. They argue that this was because England had the best political institutions in the world, thanks to the 1688 Glorious Revolution, which strengthened private property rights by restricting the British monarch's extractive power on the British economy.
However, the institutional theory's explanation of the Industrial Revolution based on the notion of better private property rights has been criticized by many economic historians; they argue that private property rights and the rule of law in many countries outside England, such as 18th century China, were just as secure (or even more so) as those in England, yet the Industrial Revolution did not happen there.
Furthermore, the institutional theory does not entirely explain the mechanism of economic development, and it is inadequate to explain instances such as Russia's dismal failure to grow after the shock therapy economic reform in the 1990s or China's miracle growth since 1978 under an authoritarian political regime. A similar case can be made about areas with identical political and economic institutions, such as the different counties within the American cities of St. Louis or Chicago, or the different parts of northern and southern Italy, where there are sharp contrasts of both pockets of extreme poverty and blocks of extreme wealth, both violent crime and obedience to the rule of law.
Instead, both regional economic inequality and the failure or success stories of nations that have attempted industrialization could be explained by the specific development strategies and industrial policies adopted, rather than by the political institutions per se. In what follows, we will use the experience of Mexico and Ireland to shed light on the middle-income trap.
The Cases of Ireland and Mexico
To further investigate the issue of why some countries have failed to climb the income ladder and others have succeeded, we dig deeper into the diverging cases of Ireland and Mexico. Both countries maintained a roughly similar level of development in terms of per capita income going back as early as the 1920s. However, each took dramatically different approaches to development in the postwar era, leading to the different outcomes seen, especially after the 1980s. This occurred despite both nations' adopting political democracy: Mexico in 1810 and Ireland in 1921. Ireland's economy did not experience fast growth between the 1920s and the 1950s because of anticolonial policies based on the since-discredited strategy of import substitution industrialization. However, since the 1950s, Ireland used its state's capacity built in the previous period and adopted industrial policies to gradually open up to global markets to attract FDI, instead of fully liberalizing its capital markets at once. Moreover, special government agencies were created to guide and steer such foreign investment through preferential policies (subsidies) and proper regulations to nurture its manufacturing sector. Ireland also increased government spending on public education for all and adopted new tax, fiscal and monetary policies to control high government deficits and inflation; in addition, it promoted domestic investment and targeted its exports to Europe and the U.S.
On the other hand, Mexico was a far more open economy than Ireland between the 1920s and 1970s, but Mexico lacked sufficient government effort and discipline to build its state capacity to steer the economy. Mexico's exposure to international oil markets as an oil exporter, as well as the rapid expansion of public debt in the 1970s, made the economy susceptible to more liquid short-term capital flows, instead of longer-term foreign investment. Its large government debt became very expensive after the interest rates in the U.S. were increased drastically to curb inflation, pushing the Mexican economy into default and prompting a large currency devaluation.
Moreover, Mexico did not invest highly in education, nor did it establish government agencies to design industrial policies to promote both foreign and domestic investment in areas consistent with Mexico's comparative advantages. Economic reform and nationalization of the banking system in the early 1980s prompted investors to look for financing outside of the banking system, changing the financial landscape and failing to stimulate industrial growth that would invigorate the economy.11 Financial liberalization at the end of the 1980s, oil export-led growth and eventual debt restructuring helped stabilize the economy, though rapid economic growth did not return.
Comparing the divergent growth paths of Mexico and Ireland in the 20th century suggests that state capacity and industrial policies are critical in explaining the issue, rather than differences in political institutions or vast interests of local monopolies, per se. Unlike what the Solow growth model suggests, technology is embedded in tangible capital, which is most likely to originate from the manufacturing sector instead of the agricultural and natural resource sector or service sector. Hence, advanced technology only flows from developed nations into developing nations through costly fixed investment in manufacturing. Financial capital investors from developed countries are typically interested in short-term capital gains (especially in real estate and natural resources), not in the foreign nation's long-term development.
Such types of capital flows should be controlled, instead of encouraged, by developing countries' governments. Thus, those nations that can find ways to grow their manufacturing sector through continuous investment and domestic savings are more capable of achieving technological and income convergence to the technology frontier of the world.