NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

An Author Highlights African Successes' Findings,

Noting Progress, and Challenges that Persist




Simon Johnson




                                                   MIT Professor Simon Johnson

In the early 2000s, then-NBER President Martin Feldstein asked colleagues whether, despite decades of slow growth for the African continent overall, there were examples of successful economic development — countries where economic growth was robust and growth-supporting institutions had been adopted. What lessons could they offer?

By mid-decade, he had assembled a team of researchers led by Sebastian Edwards of UCLA, Simon Johnson of MIT, and David Weil of Brown University, and secured funding from the Bill and Melinda Gates Foundation, which encouraged partnerships between members of the NBER family and others who were deeply immersed in research in Africa to explore these issues.

The results of the ensuing, decade-long research project have just been published in African Successes, a four-volume series from the University of Chicago Press. Johnson outlines some of the central findings in the following Q & A.

Q While there was great hope for African development in the '50s and '60s, hope seemed to decline during subsequent, troubled decades. Was there a tipping point when hope for African growth began to return?

A Around 2000, people began to shift their views. You can link it to the rise of China, to rising commodity prices, and to the increasing prominence of emerging markets in middle-income countries but also in Africa.

I don't think we should jinx it even yet. These economic successes are understood better in retrospect than at the time. Some observers will tell you that that several things are still missing in Africa. Africa has not developed the same diversified manufacturing base that East Asia did, for example. There's still a lot of commodity-based economic activity and commodities, we know, are highly cyclical. And are there really regimes that are robust and that can outlive any individual? I don't want to rush to inappropriate celebration.

But we did succeed in documenting in detail in these four volumes that a lot of things have changed. These are important things, meaningful things, and many seem hard to reverse.

Q Are government institutions associated with rapid growth in some places, or is government in general viewed as a drag on growth?

A That [latter] view is actually more often articulated in the U.S. than in many other places, because what you'll hear and what you see in other parts of the world are things we take for granted here. Law and order, basic provision of infrastructure, can you get a letter delivered? We just assume that it's part of the air we breathe, but it's not in the rest of the world and certainly not in Africa. There was a lot of discussion among the scholars who contributed to these books about the various building blocks for economic development, and the books display a wide range of views.

My personal interpretation of recent African experience and research is that some foundational things have to be done well by the government, with support and legitimacy from civil society. If you have those, then you can choose between a largely private sector economy or an economy with a bigger government role.

The volumes include really interesting papers on Sierra Leone and other post-conflict situations, exploring how you rebuild the foundations after they have been stripped out by civil war and ethnic conflict. Those are some of the most impressive stories. They’re not yet complete.

Q What are some of the countries that have achieved that sort of democratic stability you're referring to?

A I think everyone would agree that Botswana has done well, and South Africa has to some degree. Nigeria... in some people's books it gets high points, but that is controversial. Tanzania and Ghana are other places that have really come a long way.

Q Are those places also the poster children for economic success?

A Look, I think it's a bundle. You can have economic growth without strong political institutions and support, but at some point it catches up with you, and there is a coup or instability. For stability, you have to become more democratic, power has to be shared, and there needs to be some sort of middle-class with representation or voice. It’s not “one size fits all,” but economics and politics moving together is a general idea that is confirmed by the experience in Africa.

Q There is a widespread impression that in most African countries a tiny layer of the population has education and a good living situation, while much of the population is living barefoot and in dire poverty. But some of the successes suggest that this impression does not describe the general state of a country.

A Right. The African middle class is not huge and it needs to get bigger, but the situation is not as extreme as you suggest. There's been a lot of brain drain from Africa, but the plus side is that brain drain has caused what we can call brain circulation — people leave Africa and get experience, education, and work experience, then come back. This builds a diaspora that's actually rather talented. a country needs to create the conditions to induce them back; when they return, it can be very helpful.

Q What countries have done well in that respect?

A Nigeria has a big expatriate community. Ethiopia, too. Somalia may strike you as being a strange place to mention in this context, obviously it's got a lot of negatives, but they also have people in the diaspora trying really hard to help them.

Q How much concern is there among researchers and analysts in the project about the degree of dependence on natural resources in Africa?

A There's been some diversification in the economies, the service sector is growing, but there is more to do. The piece of the economy that's missing or underdeveloped — and several researchers have looked to this very carefully — is light manufacturing for export. Textiles and apparel would be the classic sector, but it could be shoes and other things.

East Asia obviously grew with a sort of step-ladder approach, starting off in some relatively low tech things and moving up mostly around manufacturing. Africa hasn't done that to the same degree. It's got a big mobile phone sector, for example; there are plenty of Internet businesses developing; there are sophisticated consumers; and some natural resource sectors have significant value-added. But there continue to be questions about whether countries need manufacturing, how much they need, and the implications if it is not the leading sector of recommended development.

Q How does China's experience bear on this? China's had great success along the coast, but much of the population is still poor, especially in the interior.

A The cost of doing business in China is relatively low: not just labor costs but also electricity and transportation. If you compare the cost of producing things in China with the cost in Africa away from the coast, the hinterland infrastructure in Africa is not very good, so China still often has a cost advantage.

But that's only part of China's impact on Africa. China has been demanding a lot of natural resources, bidding up the price of natural resources over the past 20 years, although it has recently slowed down.

So China has partly contributed to African successes and is partly a reason why, if you think manufacturing and manufacturing exports are important, you might worry about what comes next for Africa.

 
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