23 Things They Don't Tell You About Capitalism

So, if the structural factors have always been there and if their influences would have, if anything, diminished over time, those factors cannot explain why Africa used to grow at a decent rate in the 1960s and 70s and then suddenly failed to grow. The sudden collapse in growth must be explained by something that happened around 1980. The prime suspect is the dramatic change in policy direction around the time.

Since the late 1970s (starting with Senegal in 1979), Sub-Saharan African countries were forced to adopt free-market, free-trade policies through the conditions imposed by the so-called Structural Adjustment Programs (SAPs) of the World Bank and the IMF (and the rich countries that ultimately control them). Contrary to conventional wisdom, these policies are notgood for economic development (see Thing 7). By suddenly exposing immature producers to international competition, these policies led to the collapse of what little industrial sectors these countries had managed to build up during the 1960s and 70s. Thus, having been forced back into relying on exports of primary commodities, such as cocoa, coffee and copper, African countries have continued to suffer from the wild price fluctuations and stagnant production technologies that characterize most such commodities. Furthermore, when the SAPs demanded a rapid increase in exports, African countries, with technological capabilities only in a limited range of activities, ended up trying to export similar things – be they traditional products such as coffee and cocoa or new products such as cut flowers. The result was often a collapse of prices in those commodities due to a large increase in their supplies, which sometimes meant that these countries were exporting more in quantity but earning less in revenue. The pressure on governments to balance their budgets led to cuts in expenditures whose impacts are slow to show, such as infrastructure. Over time, however, the deteriorating quality of infrastructure disadvantaged African producers even more, making their ‘geographical disadvantages’ loom even larger.

The result of the SAPs – and their various later incarnations, including today’s PRSPs (Poverty Reduction Strategy Papers) – was a stagnant economy that has failed to grow (in per capita terms) for three decades. During the 1980s and 90s, per capita income in Sub-Saharan Africa fellat the rate of 0.7 per cent per year. The region finally started to grow in the 2000s, but the contraction of the preceding two decades meant that the average annual growth rate of per capita income in Sub-Saharan Africa between 1980 and 2009 was 0.2 per cent. So, after nearly thirty years of using ‘better’ (that is, free-market) policies, its per capita income is basically at the same level as it was in 1980.

So, the so-called structural factors are really scapegoats wheeled out by free-market economists. Seeing their favoured policies failing to produce good outcomes, they had to find other explanations for Africa’s stagnation (or retrogression, if you don’t count the last few years of growth spike due to commodity boom, which has come to an end). It was unthinkable for them that such ‘correct’ policies could fail. It is no coincidence that structural factors came to be cited as the main explanations of poor African economic performance only aftergrowth evaporated in the early 1980s.

Can Africa change its geography and history?

Pointing out that the above-mentioned structural variables were invoked in an attempt to save free-market economics from embarrassment does not mean that they are irrelevant. Many of the theories offered as to how a particular structural variable affects economic outcome do make sense. Poor climate can hamper development. Being surrounded by poor and conflict-ridden countries limits export opportunities and makes cross-border spill-over of conflicts more likely. Ethnic diversity or resource bonanzas can generate perverse political dynamics. However, these outcomes are not inevitable.

To begin with, there are many different ways in which those structural factors can play out. For example, abundant natural resources can create perverse outcomes, but can also promote development. If that weren’t the case, we wouldn’t consider the poor performances of resource-rich countries to be perverse in the first place. Natural resources allow poor countries to earn the foreign exchanges with which they can buy advanced technologies. Saying that those resources are a curse is like saying that all children born into a rich family will fail in life because they will get spoilt by their inherited wealth. Some do so exactly for this reason, but there are many others who take advantage of their inheritance and become even more successful than their parents. The fact that a factor is structural (that is, it is given by nature or history) does not mean that the outcome of its influence is predetermined.