Published on Africa Can End Poverty

Right analysis, wrong conclusion?

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During my recent seminar in Geneva, where I was also meeting with the Africa Progress Panel, a couple of members of the audience (which consisted of ambassadors, U.N. staff, civil society and academics) said, “I liked your analysis, but not your conclusions.” 

The seminar summarized many of the points I have been making on this blog:

  • For the decade before 2008, Africa was experiencing sustained and widespread economic growth, thanks to aid, debt relief, private capital flows, high primary commodity prices, and improved macroeconomic policies
  • Despite being the least integrated region, Africa was perhaps the worst hit by the global crisis
  • Contrary to some people’s fears, African governments continued to pursue prudent economic policies during the crisis—even though the visible payoffs to these policies (growth and poverty reduction) had suddenly diminished
  • Conclusion:  Economic policy in Africa, which had been improving before the crisis, and either stayed on course or improved during the crisis, has never been better.

    Since my conclusion followed directly from the analysis, I had three possible explanations for the reaction mentioned above:

    1. Some people may have interpreted the conclusion that policy “has never been better” as implying that all is well in Africa—which of course is not the case.  There is huge room for improvement in those policies, but that doesn’t negate my conclusion, which was a statement about current policies relative to the past.
    2. Others were uncomfortable with the notion that African governments were willingly pursuing these policies which were, as my discussant mentioned, the same policies advocated by the IMF and the World Bank.  Perhaps these governments had no choice but to follow these policies.  While it is true that many of these policies were the same as those contained in IMF and World Bank programs, it is clear that this time—and in fact over the past ten years—the policies were increasingly driven by African governments themselves.  In at least a few cases, the Bank may have suggested that the country go for a larger fiscal stimulus, but the government demurred because they didn’t think they had the capacity to implement a larger spending program, and they didn’t want to risk increasing their debt levels.  Also, it was not because they had no choice:  during previous crises, such as the commodity price busts of the late 1980s, the response of many African governments was very different—they introduced exchange rate controls, price controls, and a host of untargeted subsidies.  They could have done the same this time, but they didn’t.
    3. Finally, reading between the lines of the questions, I got the impression some people felt that the global economic crisis should have caused a rethinking of development policy, whereas I was suggesting that “orthodox” economic prescriptions continued to apply.  When developed countries are stimulating domestic demand, shouldn’t African countries consider doing the same, rather than the export-led strategy they have been pursuing until now?  But small African countries face limits on how much they can stimulate domestic demand; they have to export to generate sustained economic growth.  Similarly, just because the U.S. is considering regulating the derivatives side of its financial markets, it doesn’t follow that African countries should abandon their programs of financial-market deregulation—because the starting points are different.  The U.S. financial sector is largely private, but some parts are in need of regulation.  By contrast, the financial sector in many African countries is still largely government-owned and –operated, leading to political patronage and huge losses; reduction in government control is likely to improve matters.

Let the debate continue...


Shanta Devarajan

Teaching Professor of the Practice Chair, International Development Concentration, Georgetown University

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