Dec 16 2007

Policy and private capital: the dialectic of African growth

Category: Uncategorized<ADMINNICENAME> @ 4:11 PM

The Economic Commission on Africa, a sleepy member of the U.N. family, has added its voice to the growing chorus of optimists about prospects for Africa’s economic performance. In its new report on the region’s economy, the commission forecasts robust growth, reinforcing similar forecasts from the International Monetary Fund and The World Bank. The report’s analysis is worth pondering, especially the emphasis on the importance of diversification, Africa’s lack of it and how government policies might promote greater economic diversification. Lack from the report is a close examination of how the private sector in Africa drives both concentration and diversification of economic activity and why. The over-emphasis on the role of government policy has long characterized the Economic Commission on Africa. The reasons for this one-sidedeness are understandable. Government policies in Africa remain sub-optimal in economic terms. However, by failing to identify the challenges facing the private sector in the quest for diversification, the ECA unwittingly reinforces the view, still prevalent in Africa, that getting the right government policies will by itself lead to prosperous and diverse economies in the different sub-regions of Africa. The private sector thrives in many places in the world without good government policies. And African growth remains hampered more by capital flight and a lack of inward investment from around the world than by poor government policies. The two factors of course are related but they also operate independently. The business class of Africa remains insufficiently represented by Africans themselves, who continue to too-often look outside their home ground for business and professional opportunities. As Paul Collier points out in various ways in “The Bottom Billion,” his study of poor countries (many of which are in Africa), the draining of talent and capital from sub-Saharan Africa makes “it harder for these nations to decisively escape the trap of bad policy and governance.”

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