Economics 172
Issues in African Economic Development
Lecture 19
April 4, 2006
Outline:
(1) Bates (1981) on agricultural marketing policies
(2) Easterly (2001) on structural adjustment
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Agricultural marketing policies
•
In practice in colonial and postcolonial Africa marketing
board prices were set far below world prices, leading
to a massive transfer of income from African farmers to
European empires, later to central governments
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High taxation rates on African farmers
Country
Nigeria
Nigeria
Nigeria
Ghana
Senegal
Tanzania
Tanzania
Kenya
Kenya
Crop
Palm oil
Cotton
Cocoa
Cocoa
Groundnuts
Cotton
Coffee
Coffee
Coffee
Year
1971-72
1972-73
1976-77
1962
1972-73
1974-75
1976-77
1975-76
1975-76
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% of World Price
56
43
66
65
30
41
46
93 (estates)
64 (cooperatives)
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Who benefited from marketing boards?
(1) Central government revenue could increase
(2) Law enforcement and customs officials
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Who benefited from marketing boards?
(1)
(2)
(3)
(4)
Central government revenue could increase
Law enforcement and customs officials
Smugglers and organized crime
Bureaucrats working in the marketing boards
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Who benefited from marketing boards?
(1)
(2)
(3)
(4)
(5)
Central government revenue could increase
Law enforcement and customs officials
Smugglers and organized crime
Bureaucrats working in the marketing boards
Urban residents and other net agricultural consumers
 The big losers from the policy: African farmers
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Urban versus rural politics
•
There is a consensus that most African leaders
focused on urban politics rather than rural control
during the postcolonial period – a continuity from the
precolonial and colonial periods (Herbst 2000)
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Urban versus rural politics
•
There is a consensus that most African leaders
focused on urban politics rather than rural control
during the postcolonial period – a continuity from the
precolonial and colonial periods (Herbst 2000)
•
Imagine that the probability of a leader retaining power
is increasing in both urban and rural income, but is
more sensitive to urban incomes:
Prob (Retain Power) = F(YURBAN, YRURAL)
where F/YURBAN > F/YRURAL > 0
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Economic crisis of the 1970s-1980s
(1) Punitively high rates of taxation on agricultural
production (Bates 1981)  falling production
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Economic crisis of the 1970s-1980s
(1) Punitively high rates of taxation on agricultural
production (Bates 1981)  falling production
(2) Chronic budgetary deficits
(3) Rising foreign debts
(4) High rates of inflation
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Economic crisis of the 1970s-1980s
(1) Punitively high rates of taxation on agricultural
production (Bates 1981)  falling production
(2) Chronic budgetary deficits
(3) Rising foreign debts
(4) High rates of inflation
(5) Bloated state bureaucracy
(6) Inefficient state industrial sector
(7) High tariff rates, extensive foreign exchange controls
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International policy changes in the 1980s
•
International donors, like the World Bank and
International Monetary Fund (the “Bretton Woods
Institutions”) began imposing conditionality on loans, in
the form of economic reforms
•
The package of reforms they advocated became
known as structural adjustment
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International policy changes in the 1980s
•
International donors, like the World Bank and
International Monetary Fund (the “Bretton Woods
Institutions”) began imposing conditionality on loans, in
the form of economic reforms
•
The package of reforms they advocated became
known as structural adjustment
•
The debate over structural adjustment and foreign aid
policy more generally is the focus of the next lecture
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Whiteboard #1
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Whiteboard #2
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Whiteboard #3
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Whiteboard #4
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Whiteboard #5
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Map of Africa
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