Debunking economic myths about African growth

By Zukiswa Mqolomba

Recent reports on Africa’s development have been characterized by high levels of optimism. This trend is totally different from previous commentary, which was riddled with pessimistic accounts about the future of the continent. Development agencies cite the rapid economic growth of some African countries as a sign of economic development. Seven of the 13 fastest growing economies in the world are African. This growth lies at the heart of what some commentators and politicians describe as the “Africa rising thesis”.

But Africa remains behind in almost every human and economic development indicator. According to the Human Development Reports for sub-Saharan Africa, nation states in sub-Sahara have disappointingly low Human development indicators (HDIs). Indicators pertaining to health, education and employment have fallen dramatically. Furthermore, sub-Saharan states have low levels of social protection, high unemployment, poverty and pervasive food insecurity. This is attributable, in part, by the emergence of a strand of development thinking in Africa in the 1990s that undermined the role of the state in socio-economic development. Spearheaded by the major economies (the US and UK) and the Bretton Woods Institutions (World Bank and International Monetary Fund), a market-based economic system in tune with economic liberalisation was adopted by developing countries as part of their lending conditions. In this instance, the role and the capacity of the state were significantly reduced. The private sector received pre-eminence in the new development approach with the privatisation of most state-owned enterprises along with outsourcing of service delivery.

The limitations of orthodox economics
General consensus is that the “leading developmental state” emerges in stark contrast to neoclassical economics that has long argued that “state interference” tempers with economic growth as it disrupts market equilibrium with devastating consequences. Institutional economics have since recognised the limitations of orthodox economics, whose failures to explain market “anomalies” is largely attributable to its failure to recognise the importance of non-market related institutions (ie political and cultural institutions) in shaping the very same institutions required to achieve market equilibrium.

The World Bank’s neoclassical reading of the success of the East Asian economies, with its focus on minimal state-prudent and conservative macroeconomic policies, is debunked as being too simplistic. Better yet, these were disproved by analysis that confirmed that South East Asian economies have developed through the active involvement of the state in determining strategic national agendas (ie the thrust of macro-economic and industrial policy, trade, and labour market policies), debunking the minimal state theory of development.

Structural adjustment programmes
Many scholars argue that structural adjustment programmes might have aggravated the deterioration of human security in sub-Saharan Africa attributable, in part, by the manner in which it diminished the role of the state in directing development. The employment performance of Africa’s economies did not adequately meet the needs of the society. Despite the calls to liberalise national economies, despite the focal policy themes to grow first, distribute later, despite narrowly defined economic growth trajectories since independence, and despite the promises of “trickle-down effects”, African states have not been able to make serious dents on poverty and unemployment levels.

Instead they have been bewildered by jobless growth levels. There has since been recognition that development in Africa requires more than sound economic management and that building state capacity in the pursuit of broader human development goals (ie employment and income equality) requires equal priority. Structural adjustment reforms demonstrate how Africa cannot leave the well-being of its people in the hands of an unregulated market, that the state has an integral role to play in directing development and ensuring that economic growth achieves the twin objectives of sustainable economic growth and improving social welfare simultaneously.

Learning from the East Asian Tigers
The emergence of the “leading state” in development discourse follows the rapid rise of the East Asian Tigers (such as Japan, China, Indonesia, Malaysia, Singapore, South Korea, Japan and Taiwan) as an economic and consequent political force in the 1990s. Much of what is known to constitute the “leading state” is, as a consequence, modelled against the East Asian Tigers. Their developmental states prefer state intervention in the operation of the free market in the interests of directing socio-economic goals. In this regard, the leading state is said to drive economic development, as well as industrialisation in the interest of the “public good”. The concept is said to be an institutional model that adopts a statist approach to account for the high patterns of economic growth of the lately industrialised nations.

The state has played a central role in China’s economic growth, for example, in the expropriation of private corporations into “public hands” (ie state-owned enterprises) for development purposes. China’s development trajectory fares well showing that the state has the ability to transform its economic bases by promoting productive income-generating economic activities. China also records an upward movement in the human development index (HDI) of more than 30% since its economic reforms. It has also experienced extraordinary institutional reforms, which have proven to be effective in promoting its economic growth.

The state must play a more critical role
So the above affirms the contributory functions of the state in economic development, and in ways that are distinct from Soviet-type, all-encompassing interventions.

Bearing in mind the success of the “leading state” of the East Asian Tigers, we should be focusing our efforts in building state capacity to lead development in South Africa and Africa at large. The post-colonial state has a responsibility to transform the structure of the economy and in ways that ensure economic benefits for all. We have seen powerful examples of how state building efforts have the resultant effects of improving the livelihoods of precious citizens.

Let us learn from these to ensure that poverty, unemployment and inequality become a thing of the past. Let us rebuild state capacity. Let us build a technocratic state that delivers on the national mandate. Let us build state capacity for all. Let the state lead.

Zukiswa Mqolomba is a senior researcher, senior policy analyst and scholar activist who currently works for the government. She is a political economist by training. She is currently doing her PhD in African Studies with the University of Cape Town. She is specialising on China-Africa relations. Previous work includes work as a consultant for the World Bank in Washington DC. She has two master’s degrees: a master’s from the University of Cape Town and a master’s in poverty and development from the University of Sussex. She is a pan-Africanist in terms of her ideological inclination. She believes in the African renaissance and believes that her generation of peers can make meaningful strides towards achieving it. She writes in her personal capacity.