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Policy Syndromes and African Economic Growth

by Augustin Kwasi Fosu

Many African countries grew fairly strongly until the early 1980s. If that growth had been maintained, these countries could have halved extreme poverty (daily income of less than US$1) by 2015. The question is, why did this growth not continue? 

In this article I argue, based on the Growth Project (1), that several policy syndromes derailed African growth. First, however, I set out the African growth record, and then discuss the various policy syndromes explaining the record as well as the environment contributing to these syndromes.

The growth record

Table 1 shows that average GDP growth in subSahara Africa (SSA) was high in the 1960s until the early 1980s after which it began to decline. With an annual population growth rate of roughly 2.9 per cent, the period from the early 1980s to the early 1990s was one of contracting per capita incomes. The growth record has improved since the mid-1990s, with an average annual growth rate of 4.5 per cent (excluding South Africa) during the last half decade compared with population growth of 2.3 per cent per year. Yet, it is estimated that a higher GDP growth rate (approximately 7 per cent annually) is required for African countries to halve extreme poverty by 2015.

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These averages mask differences in growth among SSA countries. During the 1981-85 period when the average growth rate was historically the lowest in SSA as a whole, several African countries achieved growth rates of at least 4.0 per cent: Benin, 4.7; Botswana, 10.0; Burkina Faso, 4.2; Burundi, 5.4; Cameroon, 9.4; Chad, 9.2; and Republic of the Congo, 10.6 per cent.

Another characteristic of the African growth record is its episodic nature within countries. Many countries that started as growth leaders in the 1960s had by 2000 become growth laggards (e.g., Côte d’Ivoire, Gabon, Kenya, South Africa, Togo, and Zambia). Conversely, several early laggards became growth leaders as of the 1990s (e.g., Benin, Burkina Faso, Ghana, Senegal, and Sudan).

While the evidence on the episodic nature of African economic growth may be rather inexact, what is incontrovertible is that African countries have exhibited highly variable growths during the last four decades. The SSA average standard deviation of GDP growth per worker over 1960-2000 is estimated at 3.24 per cent, the highest among all regions of the world. Indeed, the coefficient of variation (CV) is nearly four times the world’s average.

Explaining the growth record: the syndromes

What accounts for the growth records of SSA countries? The following ‘syndromes’ can be identified: ‘state controls’ (SC), ‘adverse redistribution’ (AR), ‘intertemporally unsustainable spending’ (IUS), and ‘state breakdown’ (SB). The complement of the union of these syndromes is the ‘syndromefree’ (SF) regime.

SC involves the control by the state of resource allocation, including direct and indirect controls of prices and actual state production and distribution, supplanting the role of markets. Under AR, government officials redistribute resources to their cronies and in favor of their regional constituencies, usually with ethnic undertones, in a manner that exacerbates polarization. In the case of IUS, a commodity boom would lead to exuberant public spending that overshot the inter-temporal optimal allocation of resources, such that when a bust invariably occurred, incomes fell faster than they should have; on average, then, a reduction in growth would result. SB involves an open warfare such as a civil war or very high frequency of coups d’état, leading to a breakdown in the rule of law.

Over the 1960-2000 period, roughly 34 per cent of all SSA country-years could be classified as SC, followed by SF with the relative frequency of 25 per cent, SB with 10 per cent, and IUS with 9 per cent. It can be seen that the syndrome-free regime has been more frequent in Africa than one might think. Second, state failure has not been as frequent as may be believed. What seems to have occurred, however, is that there are very few cases of countries experiencing SF over the entire period (Botswana is probably the only exception), while the frequency of SB has risen considerably since the 1990s.

The syndromes and growth

To what extent have these syndromes affected SSA growth? Based on an in-depth regression analysis, the evidence that syndromes reduced SSA growth is strong. Being SF is both a necessary condition for achieving sustainable growth and a near-sufficient condition for preventing growth collapse. Avoiding syndromes could add 2.5 percentage points to per capita annual growth. This estimate is certainly not paltry, for it is substantially larger than SSA’s growth deficit with the rest of the world. 

Explaining the syndromes

Why then did these syndromes occur? From the 26 case studies produced by the Growth Project, the following have been found.

Initial conditions

The initial conditions at the time of independence heavily influenced the policies adopted by many African countries. These conditions included: 

• Reigning international paradigms, which portrayed socialist policies as more egalitarian than capitalist policies. Leaders opting for socialist policies tended to resort to various forms of state controls, which in turn provided rent-seeking opportunities in support of adverse redistribution that was intended to preserve their political base.
• Experiences of the initial leaders. Those early African leaders who were politically conservative based on their respective experiences, derived internally or externally, tended to adopt relatively liberal economic policies, in contrast to their socialist-leading counterparts. 
• Group-identity rivalry. As the physical and political boundaries of many African countries were the result of colonial partitioning that had no regard for well defined (ethnic) groups, the early African leaders found it necessary to adopt strong central governments intended to tame likely group-based centrifugal political forces.
• Initial institutions. Modern institutions supplanted traditional chieftaincies as governing entities in many African countries, especially following independence. Yet, the adopted governing practices were only a shadow of the inherited modern institutions, with the checks and balances usually stripped in order to maintain the centrality of the executive branch of government. 

Supply shocks

Negative supply shocks, e.g., oil price shocks and droughts, resulted in shortages in the presence of price controls. Many governments chose to fix prices in the face of such shocks in order to make goods and services more affordable to the poor at large. Such a policy, however, led to more and/or stricter state controls.

In the case of commodity booms, governments usually engaged in exuberant public spending as if the booms were permanent, overshooting the optimal intertemporal expenditure allocation. Thus, inter-temporally unsustainable spending would result. This syndrome has been particularly characteristic in natural resourcerich economies, where governments also saw the opportunity to use the revenue windfalls during booms to reward their cronies and ethnic constituencies who supported their political entrenchment, and to attempt to maintain that redistribution even during the busts.

Institutions

The Fabian socialism adopted in many African countries contributed to the high frequency of state controls. The executive branch of government was made dominant in many African countries, usually through the diminution of political checks and balances, and became entrenched in power. Over time, the military became the only real competing institution capable of changing the executive. This role of the military, coupled with the competition for rent made available by the various controls or high revenues from natural resources, resulted in ‘elite’ political instability involving high frequencies of coups d’état. Where adverse redistribution was severe, polarization was likely to accentuate, eventually resulting in open warfare in many instances.

Economically driven political expediency

There appears to be a U-shape evolution of syndrome-free (SF) frequencies over the 1960-2000 period. SF and non-SF events were split about equally during the early post-independence period. SF then diminished in importance until more recently when it began to rise again beginning in the late 1980s. The relatively high frequency in the early period was likely due to chance, as the early leaders were roughly divided equally between socialist and capitalist tendencies. In contrast, the most recent upward trend is attributable to economically driven political expediency, for the socialist experiments often ran into fiscal difficulties which, especially with the demise of the Cold War, required the assistance of the Bretton Woods institutions in exchange for reforms.

Conclusion

That economic growth in Africa overall has been dismal over the last four decades is generally recognized. Moreover, growth has been episodic and not sustained. The lack of sustainability can be attributed to various policy syndromes. These syndromes themselves have, furthermore, been endogenous with respect to the environment within which African governments have operated. To engender policies that Augustin Kwasi Fosu is Deputy Director of WIDER. Previously he was Senior Policy Advisor (Chief Economist) at UN Economic Commission for Africa in Addis Ababa and Director of Research of the African Economic Research Consortium, Nairobi. generate sustainable growth will, therefore, require appropriately changing the setting within which policy is formulated.​ ​

The change would include the need to have more accountable governments, with appropriate constraints on the executive, and to minimize the use of distributive politics engineered to hold on to power. Unfortunately, the evidence suggests that as the incidence of syndrome-free regimes has increased recently in Africa, so also has state breakdown. The challenge, then, is how to continue to accentuate the frequency of syndrome-free regimes while minimizing state failure.

(1) See the ‘Explaining African Economic Growth Collaborative Research Project’ (the Growth Project) organized by the African Economic Research Consortium (AERC). Two substantive volumes based on this research are forthcoming under the general title, The Political Economy of African Economic Growth, Cambridge University Press, edited by J-P. Azam, R. Bates, P. Collier, A. Fosu, J. Gunning, B. Ndulu, D. Njinkeu, S. O’Connell, and C. Soludo. The article derives mainly from A. K. Fosu, ‘Anti-Growth Syndromes in Africa: A Synthesis of the Case Studies’.

​Augustin Kwasi Fosu is Deputy Director of WIDER. Previously he was Senior Policy Advisor (Chief Economist) at UN Economic Commission for Africa in Addis Ababa and Director of Research of the African Economic Research Consortium, Nairobi.