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African Economic Development: Evidence, Theory, Policy
Abstract
This book challenges conventional wisdoms both about economic performance and about policies for economic development in African countries. Its starting point is the striking variation in economic performance: unevenness and inequalities form a central fact. The authors highlight not only differences between African countries but also variations within countries, differences often organized around distinctions of gender, class, and ethnic identity. For example, school dropout and neonatal mortality have been reduced, particularly for some classes of women in some areas. Horticultural and agribusiness exports have grown far more rapidly in some countries than others. These variations (and many others) point to opportunities for changing performance, reducing inequalities, learning from other African policy experiences, and escaping the ties of structure and legacies of a colonial past. The book rejects teleological illusions and Eurocentric prejudice, but does pay close attention to the results of policy in more industrialized parts of the world. Seeing the contradictions of capitalism for what they are—fundamental and enduring—may help policy officials protect themselves against the misleading idea that development is likely to be a smooth, linear process, or that it would be were certain impediments removed. The authors criticize a wide range of orthodox and heterodox economists, especially for their cavalier attitude to statistical sources. Drawing on decades of research and policy experience, they combine careful use of available evidence from a range of African countries with heterodox political economy insights (mainly derived from Kalecki, Kaldor, and Hirschman) to make the policy case for specific types of public sector investment.
... has been right to question such depictions. Consider for instance the practice whereby, for more than two decades, neoclassical economists placed a dummy variable into cross-country regressions to explain African growth failures that combined questionable data and homogenization (Cramer et al., 2020, Jerven, 2011. This practice, common beyond economics, is guilty of levelling African political and economic landscapes by assuming all African cultures to be 'neopatrimonial' or corrupt (Mkandawire, 2001(Mkandawire, , 2015. ...
... Within Bandung framings, development is understood as 'catching up, emancipation, and the right to development' (Mkandawire, 2011: 7). 13 The Bandung Conference saw self-determination as a necessary but insufficient route to emancipation, acutely aware of both the dangers that nationalism posed and the contradictory and damaging effects nationalism could have, and recognizing that capitalist accumulation was always violent, unequal and contradictory (Cramer et al., 2020;Harrison, 2020. The list of Southern development origin stories goes on. ...
The COVID‐19 pandemic motivated calls for the field of development studies to be recast. This article analyses two prominent, future‐gazing ‘pandemic papers’ to illustrate salient features of the ascendant trend towards a new ‘global development’ paradigm. By unpacking and interpreting major lines of reasoning put forward by two agenda‐setting articles, this contribution appraises how these texts make the case for the future of development studies. Through this analysis, the article questions the core arguments that seek to shift the contours of the discipline, and thus the study of development generally. In making their call to adopt a universalist or global development framework that includes a focus on Europe and North America, the authors of the ‘pandemic papers’ overlook the Southern origins of and justifications for the North‒South framework they seek to overturn. The present article acknowledges the importance of and supports returning to and advancing — rather than jettisoning — the intellectual lineage anchored in non‐Truman understandings of development, including as a popular project of Southern emancipation from colonial, imperial and structural subordination. Rather than de‐centring the global North‒South framework, it suggests that the analytically more useful way forward is for development studies to (re)centre the global South and use global South theories and lenses to better understand the world economy and the majority world.
... 10 Such an approach has been taken by several recent contributions to the literature, which have provided valuable insights for understanding and reappreciating the dynamics of catch-up industrialization (e.g. Cramer et al., 2020;Kattel et al., 2016;Mathews, 2016;Storm, 2015). What all these contributions lack, however, is an acknowledgement of the specifics of catch-up industrialization in a world of GVCs. ...
In the 21st century, international trade in manufactured goods in the 21st century operates through global value chains (GVCs). This thesis investigates whether this fact has changed the playing field for catch-up industrialization, and what limitations and opportunities it provides for developing
countries integrating with GVCs. It does so mainly through an analysis of the automotive GVC, relying on both secondary data for a broad set of emerging economies and on primary empirical data from the South African automotive industry, which has successfully integrated itself with the automotive GVC over the last thirty years. The thesis puts forward a holistic theoretical understanding
of catch-up industrialization. Combining this theoretical understanding with a deep appreciation of GVCs provides a strong analytical framework for analyzing catch-up industrialization attempts and achievements in the 21st century. This combination of three strands in the literature – the classical development economics perspective, the evolutionary innovation and technology perspective, and the GVC perspective – is novel and is capable of resolving the shortcomings of analytical frameworks that only use one or two of these perspectives.
The thesis finds that South Africa’s integration into the automotive GVC has achieved a major tenet of catch-up industrialization, namely the overcoming of domestic demand constraints and the exploitation of economies of scale through the penetration of export markets for manufactures. It shows that the dynamics associated with the automotive GVC have weakened some of the benefits traditionally associated with exporting manufactured goods. Product development and design capabilities have not emerged among domestic South African automotive component firms. The foreign lead firms in the automotive GVC and their global sourcing strategies neither require nor incentivize domestic component manufacturers to build up such capabilities. This thesis also
demonstrates that the backward inter-industry linkages from tapping into automotive export markets have been disappointing. The GVC-specific dynamics of follow sourcing and the proliferation of manufacturing technologies and material standards have undermined more substantial backward
linkages from exports of automobiles. Using secondary data on other emerging economies participating in the automotive GVC, this thesis shows that many of the trends observed in South Africa are common in other countries as well. The
emergence of design capabilities in domestic automotive component firms is extremely rare, even in countries with larger automotive production and export volumes. Given the dynamics of global sourcing and lead firm power in the automotive GVC, the successful development of backward interindustry
linkages from vehicle and component exports arguably requires more scale than before the emergence of GVCs. However, positive experiences in South Korea, China, and Taiwan, and to some extent also in Thailand and Turkey show that participation in automotive GVCs can still be leveraged for catch-up industrialization in a more successful way than South Africa has done. Industrial policy to aid the exploitation of economies of scale in vehicle and component production, alongside an industrial policy that facilitates the indigenization of technology and innovation and design capabilities in domestic companies rather than just the localization of productive activities are key elements of such strategies. These types of industrial policy have been largely absent in South Africa, as this thesis demonstrates. While catch-up industrialization seems to have become more challenging due to the emergence of GVCs, it remains possible.
... Furthermore, inconsistencies between African and other world economies, notably in terms of key financial and economic players and economic structure, have had a substantial impact on the continent's economic convergence goal and other regional cooperation endeavours. Liquidity lenders, for example, have failed to provide appropriate credit to smallholder farmers and miners, women, and youths in Africa, preferring to support wealthier and politically linked households instead (Cramer et al., 2020). ...
This study empirically explores the ICT diffusion-financial development nexus for 45 African countries over the period 2000–2018. For the investigation of the nexus, the recently developed panel VAR in generalized method of moments (GMM) estimation technique was applied. The findings provide evidence of bidirectional causality between ICT diffusion and the complex multidimensional nature of financial development (except for financial institution development and financial institutions access). The panel VAR in GMM reveals that (i) ICT diffusion is significant and positive to almost all the complex multidimensional nature of the financial development (except financial development index and financial markets depth), while (ii) the complex multidimensional nature of the financial development measures played both significant positive and negative roles in ICT diffusion. An important policy implication for sustainable financial development through the improvement and efficient use and affordability of ICT infrastructures/services is recommended.
... In turn, structuralist and neoliberal economics have been dethroned, restored and challenged again. Careful comparative research -in other words, the intellectual exploitation of variation -has provided the basis of what Cramer et al. (2020) advocate as rigorously evidence-based 'possibilism'. Armed with the results of such work, the leaders and citizens of developing countries can and, to a growing extent, do exercise a considerable ability to shape their destinies for themselves. ...
A critique of the growing influence of Critical Race Theory and applied postmodernist ideas at a major international think-tank.
The chapter will reflect on the debate around the impact of transnational corporations (TNCs) on industrialisation and development in the Global South in the context of the rapidly growing integration of the operations between TNCs’ home bases and their foreign-based affiliates and the increasing concentration of ownership and control in the hands of very few global financial corporates. The chapter considers the implications for the countries that host branches of TNCs and form a part of their chains and networks. Some of these countries have had some success in structural transformation and now have their own TNCs. These developments reflect the historical unevenness of capitalist development and the importance of analysing and understanding the political economy of individual countries.JEL KeywordsDevelopmental stateFinancialisationIndustrialisationManufacturingSectoral changeService sectorStructural change
Economic developments affect urban land-use changes. Using Lefebvre’s production of (urban) space as a conceptual framework, this study investigated the industrialisation process and its urban spatial outcomes in three cities (Galan, Dukem, and Bishoftu) along the southern outlet of Addis Ababa, Ethiopia’s capital. Landsat images were used to quantify the changing patterns of the three cities from the period 2006 to 2021. Interviews with key informants and document analysis were used to supplement these findings. The analysis reveals that in Addis Ababa-Bishoftu economic growth corridor, the unruly urban land-use changes have become a serious issue, challenging the sustainable development of cities. The study confirms that the proximity to Addis Ababa has contributed to the urbanisation process and urban corridor formation through investment expansion. This calls for a high level of expertise as well as integrated regional development for sustainable urban and industrial development.
The paper seeks to examine the joint effect of entrepreneurship and FDI inflows on economic wealth in Africa. It employs a dynamic system GMM for a panel dataset of 52 African economies between 2006 and 2020. The study finds that FDI inflows induced a negative impact on the ease of doing business but it increases the business capital start-ups of entrepreneurs. We find that entrepreneurship reduces economic wealth in the short term but in the long-term entrepreneurship positively affect economic wealth. The results show that FDI inflows increase economic wealth and that FDI is an important channel through which entrepreneurship can impact economic wealth. We find evidence to support that ease of doing business and FDI inflows are substitutes while minimum capital of starting business complements FDI inflows in determining economic wealth. Based on the marginal effects, we conclude that entrepreneurship reduces economic wealth but improves economic wealth when the level of FDI inflows increases in a country. The implication is that countries should provide strategies that promote economic wealth of individuals, people and entrepreneurs through prudent business development framework and FDI supports in the short term.
This chapter makes an observation that in South Africa industrial and competition policies have for the most part been considered separately rather than as complementary. The chapter argues that this approach has been counterproductive. It puts forward a case for closer coordination between the two. It suggests that industrial and competition policies can be mutually reinforcing in a number of important ways. The chapter further notes that, to a significant extent, large firms have maintained market power and access to rents through barriers to entry, abuse of dominance, and political influence, rather than through investment, innovation, and dynamism. These dynamics have had the effect of constraining growth in general and downstream manufacturing in particular. Reshaping the economy and rewriting its rules such that firms are incentivized to invest and innovate, will require an ambitious industrial policy strategy in which competition policy has an important supporting role to play.
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