Why can't Africa be more like Taiwan? Or South Korea? Or Thailand? Or Indonesia? Nothing obsesses development economists more than the question of whether today's poor nations can replicate the success of the handful of mostly Asian countries that escaped poverty by achieving sustained economic growth in the decades since World War II.
Often the conclusions are dour. The answers provided include "culture" or U.S. geopolitical influence -- attributes that aren't easy to duplicate in alien contexts. Sometimes the answers are maddening -- such as Robert Wade's thesis that East Asian prosperity was achieved through the application of industrial policy tactics that are now effectively forbidden by the rules of the World Trade Organization.
Only rarely, as is the case with The Prospects for Sustained Growth in Africa: Benchmarking the Constraints, an IMF working paper by economists Simon Johnson, Jonathan D. Ostry and Arvind Subramanian, do you encounter even a shred of optimism. "Fatalism is unwarranted," they declare, a pronouncement that can only be seen as a resounding vote of confidence when the subject is Africa. (Thanks to Jonathan Dingel at Trade Diversion for the link.)
To be sure, it's a backward-facing kind of optimism. The authors argue that many sub-Saharan African nations are no worse off now than countries such as Indonesia or Thailand were when they initiated their growth spurts, and they may even be, in some respects, better off. So there's hope!
We compared Africa today with countries that were similarly weak in the past -- in terms of their institutional development -- and yet managed to escape from poverty. Looking at the data suggests (but does not prove) that these "deep" indicators, especially for a group of "promising" African countries, are not much worse in Africa today than they were in much of East Asia in the early 1960s (e.g., Indonesia and Thailand) or in Vietnam and China circa 1980. There are inherited institutional weaknesses in Africa -- and internal conflict and societal fractionalization remain concerns -- but the East Asian experience definitely demonstrates that some institutional weaknesses can be escaped. So the good news is that breaking away from a country's institutional legacy is possible because it has been done by others, including some East Asian countries which were not that dissimilar from some promising performers in Africa today.
Of course, just because something is possible doesn't mean that it is inevitable. But right now may be a particularly fruitful time to revisit development strategy questions, because Africa's current economic health is rosier than anything the continent has witnessed in decades. GDP growth rates across the board are averaging between 3.5 and 4 percent. If managed adroitly, could the current economic expansion turn into something more long-lasting?
There's no easy answer there. As the authors observe, Africa's current economic growth is largely commodity-driven. The global economy has been growing strongly, and China's incredible demand for all kinds of raw materials has been floating everyone's boat. But rare indeed is the poor country that has become permanently rich by selling off its natural resources or agricultural bounty. The stark reality is that, of the 12 countries that the authors chose as their examples for how to get ahead, the vast majority did so by boosting exports of manufactured goods.
And that puts Africa in something of a paradox. Because if Africa wants to boost its exports of manufactured goods, it won't be enough just to remove regulations that slow down exporters or keep currency exchange rates under tight control. Africa will also have to figure out how to compete effectively with ... China -- the very same country whose voracious appetite for fossil fuels and minerals and timber and everything else is fueling current African growth.
That's a tall order. When China pumps out 7 billion pairs of shoes in a single year, is there room for anyone else?
Shares