Home to one-sixth of the world’s people, but contributing only one-fortieth of world GDP, Africa is the most conspicuous victim of the global recession. After a half-decade of 5 percent growth, the continent’s growth rate is expected to halve this year. Some countries, like Angola, are contracting. Elsewhere, the crisis has swept away the benefits of several years of economic reform. Many Africans will fall back into desperate poverty.
Development economists wring their hands in despair: Africa defies their best efforts to create a miracle. On the eve of decolonization in 1960, real GDP per head in sub-Saharan Africa was almost three times higher than in Southeast Asia and Africans were expected to live two years longer on average.
In the 50 years since then, African real GDP per head grew by 38 percent and people lived nine years longer, while in Southeast Asia GDP per head grew by 1,000 percent and people lived 32 years longer.
At first, the solution for Africa’s underdevelopment seemed obvious. Africa needed capital but lacked savings. Therefore, money had to be provided from outside by institutions like the World Bank. Since extracting commercial interest rates from starving people seemed like usury, the loans had to be offered on a concessionary basis — in effect, aid.
Throwing money at poverty became a panacea. It was easy to sell, and it appealed to people’s humanitarian instincts. It also assuaged the guilt of colonialism, as with parents who give their children expensive gifts to make up for neglecting or mistreating them. But it did no good. Most aid was stolen or wasted.
Despite the eight-fold increase in aid per head to the Democratic Republic of the Congo between 1960 and 2007, real GDP per head decreased by two-thirds in the same period.
“Trade not Aid” became the new watchword. Spearheaded by the economist Peter Bauer in the 1980s, it became the nostrum of the Washington Consensus. Africa, it was fashionable to say, would catch up only if it deregulated its economies and embraced export-led growth like the “miracle” economies of East Asia.
Advisers from the World Bank and the IMF told African governments to stop subsidizing “national champions” and drop their trade barriers. Provision of a reduced volume of aid was to be conditioned on dismantling the public sector.
By 1996, only 1 percent of the population in sub-Saharan Africa was civil servants, compared with 3 percent in other developing regions and 7 percent in the OECD. Yet despite the rollback of the state, Africa has not made the leap to prosperity. In a complete affront to economic theory, the little capital there is in Africa is fleeing the continent to be invested in already capital-rich societies.
The problem with Africa, economists then started to say, was that it lacked effective states. Many countries had “failed” states that could not provide even the minimum conditions of security and health. With 15 percent of the world’s population, sub-Saharan Africa accounted for 88 percent of the world’s conflict-related deaths and 65 percent of AIDS victims.
What historians have known for 2,000 years — and what the 18th century’s classical economists also knew — suddenly struck the new breed of mathematical economists in the 1990s like a flash of lightning: Prosperity depends on good government.