Africa’s economics gets a new companion

But why does it always have to involve the restoration of presidential term limits?

It starts with a familiar story from April 1957, when then-Ghanaian President Kwame Nkrumah had a heated debate with Houphouet-Boigny of Ivory Coast on the right path to prosperity for post-colonial African economies. Nkrumah favoured complete independence from the market-oriented policies of the former colonisers, while Houphouet-Boigny was for continuity.

Arthur Jon Woronoff, the American author and editor, captured the intense competition between these two seemingly opposed paths in his 1972 book titled: “The West African Wager: Houphouet versus Nkrumah”. In it he wrote: “By placing economic considerations at the forefront; the Ivorian leader underlined his conviction that economic prosperity is the key to political maturity”.

Quite remarkably, fifty years later the debate is being resurrected in a new book, The Oxford Companion to the Economics of Africa, which appears to turn on its head the claim of economic prosperity first then political certainty will follow.

The book follows on a debate that has ensued since December 2011, when The Economist magazine published an issue with a cover story titled, “Africa Rising”. It showed how Africa had posted the fastest growth rates of any region on the globe on the back of improved commodity prices, better trade relations, and improving demographics.What was remarkable was that its positivity was a sharp contrast to another cover story by the same publisher in May 2000 titled: Africa: The Hopeless Continent. Although, the 2011 story was a late acknowledgement of a trend that had started a decade earlier, The Economist coverage confirmed the need to rethink the African economy. The question then and now is; what has led to the economic turnaround of the continent? And what approaches will ensure that there is no reversal?

In the Oxford Companion to the Economics of Africa, which is a compilation of essays by leading thinkers on Africa, there appears a move beyond rethinking the African economy to rethinking its economics. The work is proclaimed, in the Keynesian sense, to be “an engine of thought and analysis, rather than a given set of prescriptions”. In reality, however, it is a buffet of prescriptions.

The economists concede that they are challenged to find appropriate policies that can address the structural constraints to growth in African countries. Part of the challenge when thinking about Africa derives from the vastness of the scope contrasting sharply with the shallowness of detail. The team appears conscious of this. In the process, they pose simple but urgent questions: based on current projections, Africa’s population will hit 2 billion by 2050; so how will these new mouths be fed, housed, and educated without conflict over land and other resources leading to war?

The answers they give swing back into history; to the so-called “west African wager” and return to the present on a duo-pronged mantra of ensuring that economic policy is home-grown and the politics is democratic.

The lead essay states: “In its fifty years, Africa has suffered from market failures and government failure. In the West African wager, each side ignored one of the two. Today, the people of Africa seem to be striking a better balance – using government to address market failure, but avoiding some of the government failure that might ensue.”

The scholars want to use good governance to sort out market failure. They want more democratic reform in the political arena and more home-grown intervention in the economic arena.

They see improved political governance and macroeconomic management as the key drivers of the African renaissance, while engagement with the global economy, poverty and income inequality, and climate change are the major challenges.

The book is a bold attempt to shape the perspectives on African economics steeped in paradox. While acknowledging the diversity on the continent, the authors set out to show commonalities of perspectives, policy interventions, and outcomes.

Thematically structured along topics considered the most critical at the macro-scope level, the companion also has a section on country perspectives, which reveals the dearth of depth. The use of old and sometimes stale statistics compound the challenge. Fortunately, the writers show awareness that, ideally, anyone seeking to understand the economics of Africa needs to recognise that it is not one country but a continent with many economies.

The compilation was edited by Ernest Aryeetey, Professor of Economics and Vice Chancellor, University of Ghana, ShantayananDevarajan, Chief Economist, Africa Region, the World Bank, USA, Ravi Kanbur, T.H. Lee Professor of World Affairs, International Professor of Applied Economics and Management and Professor of Economics, Cornell University, USA, and Dr. Louis Kasekende, Deputy Governor of Bank of Uganda.

All are distinguished researchers in the fields of poverty, economic growth, and the role of financial institutions in fostering development.

Pioneering spirit

Kanbur controversially resigned from a directorship at the World Bank in 2000 over disagreements with the bank’s President, James Wolfensohn, on how to tackle poverty. All agreed that poverty defines a situation of inadequate health, nutrition and education as well as money and that labour-intensive economic growth, and investment in education and healthcare for the poor is critical in fighting it. But, according to The Economist magazine, Kanbur wanted the definition of poverty to include voicelessness, vulnerability and powerlessness. He wanted the anti-poverty strategies to emphasise “empowerment”; increasing poor people’s capacity to influence state institutions and social norms, security; minimising the consequences of economic shocks for the poorest, and opportunity; enabling access to assets for the poor.

Kasekende, who was the chief economist at the African Development Bank between 2006 and 2009 and is credited for leading efforts to help African economies fight off the worst effects of the global financial crisis, is of the same participatory approach as the others.

Since returning to Uganda’s central bank in 2008, he has steered policies of more transparency and stakeholder involvement in macro-economic management.

The involvement of these eminent personalities in compiling the Oxford Companion to the Economics of Africa exposes the extent of their ambition. The result is an unprecedented volume - 650 pages, which reveals their bold pioneering spirit. Unlike earlier writers who have grabbed only part of the elephant of economic underdevelopment in Africa and run with it, the authors attempt to wrestle the whole creature.

Their polite decision to call this compendium of tested wisdom by over 100 leading thinkers on African economics a “companion” rather than a guide reflects its tenor of sensitivity to a complex topic. Its first section is a collection of theoretical essays that are whittled bare of the burden of academic rigour, while the country perspectives at the back of the book are quick wraps of a complex topic.

Although the writers are World Bank, IMF, and Africa Development Bank types, their essays read a lot different from their familiar work for those institutions. Instead, the relaxed atmosphere of this book seems to encourage them to arrive at bold conclusions. Writing on the sustainability of Africa’s growth acceleration, for example, Michael Spence writes: “The Continent needs to make further progress in exploiting its overall size to overcome the challenges of small at the national level.”

The book has essays from familiar names like Paul Collier, Joseph Stiglitz, and Janvier Nkurunziza who offer broad perspectives. The topics are as diverse at the perspectives of the authors. One essay is on risk, and the often overlooked long-term adverse effects of death in the family or famine and drought. Another looks at brain drain, while yet another looks at democracy and development, or the effects of aid.

But it is the country perspectives that are most revealing. Written as if the authors were being chased by a buffalo, none of them is more than five pages. Some are two pages. And yet they manage to capture the economic mood of each country and the attitude of the author.

On Kenya, Jane Karingai writes about the paradox of structural transformation in a country that looked poised for takeoff but was held back because its “economic geography mimics ethnic boundaries”, thus creating a “volatile disequilibrium. In Rwanda, it is the power of good leadership to spur economic growth from a rate of 5.3% in 2004 to 11.2 in 2008 on the back of transformed agriculture, while in Tanzania the rosy economic growth indicators are tempered by uncertainty as other sectors such as services, manufacturing, and construction, displace agriculture, which still provides livelihood for 80% of the population particularly in rural areas.

Finally on Uganda, renowned economist Barbara Barungi addresses the challenge of turning sustained growth into structural transformation for human development. Why, the essay asks, are Ugandans still locked inpoverty, in rural areas, with poor infrastructure, and low human development indicators yet the economy has been growing at an average rate of over 5%? Barungi makes startling deductions from everyday observation like western Uganda prospering most from President Yoweri Museveni’s regime and northern Uganda coming off worst. What is unexpected however, are her proposals on how to prevent a bad situation from becoming worse. Why, many readers will ask after reading Barungi’s recommendations, does everything have to involve the restoration of presidential term limits?

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