Recent high growth rates and increased foreign investment in Africa have given rise to the popular idea that the continent may well be on track to become the next global economic powerhouse. This “Africa Rising” narrative has been most prominently presented in recent cover stories by Time Magazine and The Economist. The Foreign Policy argues that both publications are wrong in their analysis of Africa’s developmental prospects — and the reasons they’re wrong speak volumes about the problematic way national economic development has come to be understood in the age of globalization.
To begin with, both articles (in Time Magazine and The Economist) use unhelpful indicators to gauge Africa’s development. They looked to Africa’s recent high GDP growth rates, rising per capita incomes, and the explosive growth of mobile phones and mobile phone banking as evidence that Africa is “developing.” Specifically, Time referred to the growth in sectors such as tourism, retail, and banking, and also cited countries with new discoveries of oil and gas reserves whilst The Economist pointed to the growth in the number of African billionaires and the increase in Africa’s trade with the rest of the world.
Any honest economist would know that these indicators only give a partial picture of how well development is going — at least as the term has been understood over the last few centuries. From late 15th century England all the way up to the East Asian Tigers of recent renown, development has generally been taken as a synonym for “industrialization.” Basically, rich and developed countries figured out long ago, if economies are not moving out of dead-end activities that only provide diminishing returns over time (primary agriculture and extractive activities such as mining, logging, and fisheries), and into activities that provide increasing returns over time (manufacturing and services), then you can’t really say they are developing. So unless Africa is industrializing, then Africa is not developing.
Neither of the two articles mentions manufacturing, or its disturbing absence, in Africa. And that, in turn, confirms once again the extent to which the idea of development as industrialization has been completely abandoned in the last few decades. Free market economics has come to advise poor countries to stick with their current primary agriculture and extractives industries and “integrate” into the global economy as they are. An increase in GDP growth shows increased growth from free trade shows increased trade but not development.
The failure to mention industrialization thus renders most comparisons of growth in Africa and East Asia spurious. For example, the Time article, which suggests that, “during the next few decades hundreds of millions of Africans will likely be lifted out of poverty, just as hundreds of millions of Asians were in the past few decades,” cites the divide that has opened up between rich and poor in China and India as a warning that inequality could also become a problem as Africa’s progress continues. The Economist article cited a World Bank report that claims that “Africa could be on the brink of an economic take-off, much like China was 30 years ago,” noting that, in both cases, a mass population of young workers stood at the ready to boost growth. It also touched on the importance of education: “Without better education, Africa cannot hope to emulate the Asian miracle.” A recent U.N. report paints a far less flattering picture of Africa’s development prospects.
According to FP, the report finds that, despite some improvements in a few countries, the bulk of African countries are either stagnating or moving backwards when it comes to industrialization. The report also finds that Africa remains marginal in global manufacturing trade has actually fallen from an already paltry 1.2 percent in 2000 to 1.1 percent in 2008, while developing Asia’s share rose from 13 percent to 25 percent over the same period. In terms of exports, Africa’s share of global manufacturing exports rose from 1 percent in 2000 to only 1.3 percent in 2008. Africa is also losing ground in labor-intensive manufacturing: Its share of low-technology manufacturing activities fell from 23 percent in 2000 to 20 percent in 2008, and the share of low-technology manufacturing exports in Africa’s total manufacturing exports dropped from 25 percent in 2000 to 18 percent in 2008.
Finally, Africa remains heavily dependent on natural resources-based manufacturing, which is an indication of both its low level of economic diversification and low level of technological sophistication in production. The share of resource-based manufactures in Africa’s total manufacturing exports declined only slightly in recent years, from 52 percent in 2000 to 49 percent by 2008. In East Asia and the Pacific, the number dropped to as low as 13 percent by 2008.
Such statistics and comparisons with East Asia are, of course, completely at odds with the “Africa rising” narrative.
A recent report by the African Development Bank, makes a similar point. “Africa’s growth tends to be concentrated on a limited range of commodities and the extractive industries,” the report states. “These sectors are not generating the employment opportunities that would allow the majority of the population to share in the benefits. This is in marked contrast to the Asian experience, where the growth of labor-intensive manufacturing has helped lift millions of people out of poverty…” The report goes on to note that “[p]romoting inclusive growth means… broadening the economic base beyond the extractive industries and a handful of primary commodities.”
This point was also not lost on recent Ghanaian presidential candidate, Nana Akufo-Addo, who warned: “About 30 years ago, some African nations, beginning with Ghana and Uganda, implemented liberal economic reforms to stop their economic decline. But in many cases we opened our markets to global competition when, beyond the extractive industries, we had nothing to compete with. So while the continent’s share of global foreign direct investment projects has improved steadily over the past decade, much of this investment has reinforced the structural deficits of our economies.”
Critics of industrial policies are correct to cite some historical cases where industrial policies have misfired in developing countries. But these critics are often selective in their criticisms, ignoring successful cases and neglecting to explain why industrial policies worked so well in the United States, Europe and East Asia while failing so badly in Africa and elsewhere.
From the 1950s to the 1970s, particularly in Africa and Latin America, many industrial policies failed because they were used inappropriately, with poor sequencing, and were often driven by political considerations or corruption rather than economic analyses or strict efficiency grounds. In Latin America, often the industrial policies were kept in place too long, and were too inwardly focused on small domestic markets, neglecting the need to develop international competitiveness. In contrast, the political economies of East Asian countries included institutions that tended to enforce stricter rules for which industries got subsidies and trade protection, and which got cut off from them when they failed to meet performance targets. They also adopted a more outward orientation in their industrialisation strategies. Crucially, this history says more about how industrial policies should be implemented — not if they should be implemented at all.
Despite the important gains in services industries and per capita incomes, Africa is still not rising, and services alone will not create enough jobs to absorb the millions of unemployed youth in Africa’s growing urban areas. Instead, steps must be taken to revise WTO agreements and the many trade agreements and bilateral investment treaties currently being negotiated so that Africa has the freedom to adopt the industrial policies it needs in order to make genuine progress.
This article is a follow-up to a debate that was started by Foreign Policy on “Africa rise.”
The article claim that he rumors of Africa’s explosive growth have been greatly exaggerated.