Sub-Saharan Africa – A history of the global economy: 1500 to the present
Explanations for Africa’s poverty (internal vs external, or institutional vs resources):
1) External
a. Dependency Theory (1970) – view that the development of the West was
simultaneously the underdevelopment of the Rest.
Followed by Acemoglu 2010 and Nunn 2008 interpretations which attributed
Africa’s fate to European decisions: during slave trades and colonial rule.
Both agree that the process of establishing institutions (property rights etc)
hasn’t gone that far to promote market-based development.
2) Internal
a. Gives primacy to institutions as determinants of economic outcomes (critique
of indigenous institutions and land tenure as constraints on economic growth)
b. Factors of production (natural & human resources)
i. Sub Sahar Africa was land-abundant & labour-scarce until 20thC
ii. Land was resistant to intensive methods of agriculture
iii. It explains choices on technology: extensive rather than intensive use
of land
African Economies 1500-1650:
- Regional economies which are not linked with each other
- Trade via the Sahara and institutional framework for long-distance trade
- 15thC was the beginning of direct trade with Europe (Portuguese), therefore expansion
of markets, and via Atlantic
- land used rather externally
- no clear trend towards long-term increase in the population leaving in states
Africa during the peak of the Atlantic slave trade, 1680-1800:
- escalation of the Atlantic slave trade to unprecedented levels which encouraged
private and state enterprise into slave trade
- new crops, exchange with other than commodity currencies – institutional reform that
reduced costs of doing business (benefits limited until business included slaves)
- enhanced inequality, shortages of labour and effective demand
- net increase in political centralization
Markets, slaves and states 1800-80:
- two impulses: 1) pressure for abolition of slave trading, and 2) in contrast
continuation and expansion of other slave trade
- major expansion of commodity production -> increased demand and increased use of
slaves
Colonial era, 1880-1960:
- progressive industrialisation of Europe and North America created enlarged markets
for a range of agricultural and mineral products from Africa
- settler colonies (most of land was reserved for European use), peasant colonies (large
areas alienate to European companies)
o African workers produced crops for markets -> real wages high due to labour
shortages
o Policies to tax black real wages, creation of private monopsony
o Dramatic growth – high demand for labour
- European colonization didn’t alter economic incentives to change compulsion in
labour recruitment – it was the opportunities it provided that lead to abolation of
slavery
- Human capital formation
Independence and African economies, 1960-present:
- 1960/70 trend towards greater state intervention in African economies
- 1980s – Structural Adjustment: crucial transition: from administrative to market
mechanisms of resource allocation – dramatic economic improvements in Uganda
- 1960-1973 economic growth outpacing population growth in most countries
- from 1967 to oil shock – marginal efficiency of investment had been falling: amount
of additional units of investment required to generate one more unit of output rose
(possibly because more skilled labour was need)
- 1973-1995: aggregate story was slow and negative (boom was ended by Oil Shock of
1973) but some of the oil exporters (Nigeria, Angola) jumped into rapid growth and
forms of “Dutch Disease” (the oil-fuelled appreciation of the currency diverted
resources away from alternative exports)
- 1995-present – aggregate growth of 4-5%, at least 2% per capita per year
- in general, no country has grown well throughout the post-colonial period – many
countries experienced fast growth but then stagnation (possibly due to protectionism
and excessive competition in world markets)
- possible explanation: combination of policy ‘mistakes’ and political instability
- first decade of economic liberalization: “lost” in terms of economic growth and
declining expenditure on health and education
Now:
- economic growth enormously widespread across Africa
- question whether this boom will lead to greater structural change than before (its lead
by high overseas demand for mineral exports, which are non-renewable and because
of their huge economies of scale – more conductive to inequality)
- on the other hand, it is arguable that Africa is more likely to receive manufacturing
investment thanks to relatively cheaper and better educated labour force than it had at
the time of independence
Review (1): Africa, poor and static?
- In 1800s “men measure out their lives in famines”
- For colonial period Africans grew taller
- 1980s real incomes per capita in Sub-Saharan Africa were generally not significantly
higher than at the time of independence. Yet, there were major advances in education
and health
- 1995-now – despite violent conflicts, overall economic trends have been positive: in
income, education and health
- Since independence, the aggregate picture was slow growth until 1973, then a period
of stagnation and even decline, followed by faster and more widespread growth since
1995
Review (2): economic development in Africa – dynamics and constraints:
- Internal constraints on labour productivity made it possible for the export of captive
labour to be profitable for the parties to the sale, but without external market, there
would have been no slave exports
- Slave trades damages wider economies of the region by reinforcement of labour
scarcity which was possibly due to political fragmentation: the absence of huge
empires capable of enforcing and the interest of states in avoiding the large-scale sale
of their own subjects