Humanity will have wiped out most of the world’s extreme poverty by 2030, except in sub-Saharan Africa, where 400 million people will, on present trends, continue to live blighted by hunger, stunted growth and poor health.
Research by Stefan Dercon at Oxford University puts the story into graphic form. In 2013, about half the world’s extreme poverty was in sub-Saharan Africa. By the end of the next decade, this share will rise to 90%.
The question of whether and how this outcome might be avoided prompted me to start researching a book about African development. Like my last book How Asia Works, this Africa project focuses on development success stories.
One theory why Africa’s development has trailed the rest of the world is the absence of what economists call positive demonstration or neighbourhood effects. Put simply, these concepts suggest that people and governments follow and copy each other, encouraging virtuous and vicious development cycles in different regions.
In Europe, successful countries copied Germany, which rationalised Britain’s invention-driven industrial revolution, copying and modifying existing technology and deploying it at far greater scale. In East Asia, the local pioneer was Japan, which borrowed manufacturing ideas from Germany and emphasised high-yield household farming. In turn, South Korea, Taiwan, China and Vietnam followed suit.
In Africa, a vast continent of 54 countries, there are two pairs of obvious leaders. In the 1970s and 1980s, Botswana and Mauritius were break-out economies. Mauritius was the first African country to use labour-intensive manufacturing to create full employment, influenced by Swiss and Taiwanese industrial policy. While Botswana brought new governance standards to Africa in terms of managing its vast mineral resources.
From the late 1990s, Ethiopia and Rwanda became the second pair of developmental outperformers. Ethiopia looked to South Korea, Taiwan and China. Rwanda focused more closely on Singapore, while also forging learning links with Mauritius. Both countries took away the East Asian lesson that high-yield household agriculture and labour-intensive manufacturing are keys to economic lift-off.
Friendships and rivalries between leaders
My research looks at inspiring development stories coming out of sub-Saharan Africa, what makes them spread, and what prevents them from doing so. I’ve found that when positive demonstration effects occur, it often depends on friendships or constructive rivalries between leaders.
The rise of Rwanda was for many years linked to the close personal friendship between Rwandan President Paul Kagame and the late Ethiopian premier Meles Zenawi, the intellectual leader of Asian-influenced development in Africa. Similarly, Benin’s ambitious and much-lauded 2016 Government Action Plan owes some of its inspiration to a working relationship between President Patrice Talon and Paul Kagame.
Unlike East Asia, where South Korea strived to prove itself to Japan in the 1960s, and Indonesia worked to keep up with Malaysia’s industrialisation in the 1980s, African economic policy is rarely driven by neighbourhood rivalry. In populous West Africa, however, there may be stirrings of positive rivalry among countries such as Senegal, Ghana and Benin. The common theme so far is a new emphasis on supporting small-scale agriculture.
Security and conflict
One unsurprising early lesson from Africa is that positive neighbourhood effects don’t work during times of political instability.
In the 1990s, Mauritian textile manufacturers opened factories in Madagascar to take advantage of their lower wages. In the chaos following Madagascar’s contested presidential elections in 2002, these factories were closed resulting in heavy losses. The Mauritian firms relocated to Bangladesh and India, ending an opportunity for an integrated Mauritian-Madagascan textile industry –despite the historic and geographic links between the two islands.
A study by William Easterly concluded that positive neighbourhood effects in Africa are fatally undermined by the ‘political economy of ethnic conflict’. Yet, it’s too early to make such a strong conclusion. Although few countries exhibit signs of becoming Asian-style economic tigers, many important economies – such as Kenya, Cote d’Ivoire and Nigeria – are in better political shape than they were a decade or two ago.
If Ethiopia, Rwanda, and one or two other African countries can embed fast-growth, inclusive models of development based on high-yield family farming and export-oriented manufacturing, we should expect that, as in Europe and East Asia, their neighbours will emulate them.