"Why is Africa (still) Poor?" by Ragnar Øygard (Professor, Economy, UMB)
Why is Africa (still) poor?Ragnar ØygardUMB School of Economics andBusinessApril 30, 2013
Why is Africa (still) poor?• Many causes – manyspeakersMy explanation:• History, institutionsand policy
Why is Africa (still) poor?• The right question?• Alternative question: Why is so much of theworld so rich?• Turning point ca. 1800
Why is Africa (still) poor?• Less growth in Africa than other parts of theworld since 1800 – and esp. last 50 years– In total income– In per capita income (high rates of populationgrowth)But: very high growth rates last decadeAnd: There have been big improvements in healthand education
Why less growth in Africa?Growth regressions - Robust findings:Higher growth is correlated with:-Higher saving and investment level-Not being in Sub-Saharan AfricaSo what is it with Africa?
Why less growth in Africa?GeographyorInstitutions?
Institutions and PolicyJared Diamond: «Guns, Germs andSteel»:-Few or no plants and animalssuited for domestication-Little or no settled agriculture-Not hierarchical settled farmersocieties-Hunter-gatherers: «The originalAffluent Society» (Marshall Sahlins)-Easy victim for Europeancolonizers
The Scramble for Africa• Slave trade• Division of Africa bycolonial powers• Extractive institutions– e.g. little investment ineducation – as opposed toin temperate colonies
The colonial legacy: Institutions• Young, weak andfractionalized stateswith little basis in pre-colonial divisions• Weak notion of«nationhood» – of«being in the sameboat»• The language of thestate is the colonizer’slanguage
The colonial legacy: Institutions &policy• Young, weak andfractionalized states:Redistributive policies• Extractive institutions– autocratic regimes:Weak «checks andbalances» and «rule oflaw»• Contested power –civil war
The colonial legacy: PolicyAt independence: Divisonbetween political power andcontrol over the economyand businesses.Adoption of policies of:-nationalization and-Import-Substituting-Industrialization- Trade barriers- Overvalued exchange rates- Parastatals and monopolies
Current trends: Reason for some optimism!• Natural resource boom• Growing sense of nationhood• More democracy – e.g. constitutional transfer ofpower.• Better policies for broad based growth – e.g. byinvestment in education, agricultue and ruralsectors• Foreign direct investment• Falling population growth ratesAfrica can catch up – but it will take some time!