Recent evidence has undermined the narrative of ‘Africa Rising’, as the World Bank predicts a growth deceleration in the continent from 3.6% to 2.5%. One driver of such disappointing growth is sluggish productivity growth. In fact, productivity growth has been on a downward trend since the mid-2010s (see here). How can countries in the region boost their productivity?
In a new chapter in the Handbook of Cliometrics, I tackle this question for a global set of countries from a historical perspective. I focus on research that highlights the ‘proximate’ determinants of prosperity, which include factors that are relatively easy to measure quantitatively, such as productive equipment or labour employed in the production process. In this post, I take some of the insights from that publication as a lens to view the narrative of ‘Africa Rising’ in the last decade.
The historical experience of other economies below the technological frontier, such as Southern Europe or some parts of Asia, shows that two factors are critical in catching up with high-income countries. The first is the adoption of technologies that are not always ‘appropriate’ (or cost-effective) in every context. Highly productive innovations have historically stemmed from scientists and firms in environments characterized by relatively abundant productive and human capital levels. Therefore, these innovations are not necessarily suitable for low-end technological environments, where labour tends to be cheaper and productive capital scarce. In other words, why invest in expensive manufacturing equipment or advanced AI-based software designed to employ fewer high-wage workers if local labour is cheap?
This conundrum was partially resolved in some European countries during their industrialisation process by investing heavily in productive equipment and promoting the education of the labour force, who worked closely with the adoption of imported technologies and the creation of new ones. After learning by doing, workers adapted the foreign technologies to the circumstances of local businesses and markets.
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The second relevant factor for catching up with technological leaders relates to the misallocation of resources. This can happen in various ways. For instance, gender discrimination and poverty prevent people from doing the job they are passionate about. In this way, they end up contributing to the economy in ways that are sub-optimal for them (because they cannot realize their professional dreams and aspirations), and for the rest of society that does not profit from their talent. Also, corruption and dubious political practices hinder economic competition and redirect monetary resources from productive investments to the pockets of politically influential individuals.
Finally, good management practices are essential to motivate workers and ensure they thrive within the firm. Lack of leadership can result in apathy among workers and inefficient procedures that hinder the productive capacity of a firm. Although it is hard to say which of these three factors has been most relevant to long-term growth in other contexts, research shows clearly that they are of utmost importance when creating the right conditions for businesses and workers to flourish.
But are these economic indicators sufficient to create a flourishing society?
Capital and productivity are crucial for economic development and material living standards, but if we are ultimately interested in how individuals flourish, we need to look beyond economic indicators. Excluding the years of the Covid-19 pandemic, life expectancy in the African continent has improved uninterruptedly since the early days of the AIDS epidemic more than two decades ago. The same applies to educational outcomes as measured by years of schooling. My research shows that amidst low levels of economic performance, health and education have been major sources of ‘human growth’ during the 20th century.
Consider Europe’s first half of the 20th century, when military conflicts and misguided macroeconomic policies created deep economic crises amidst declining mortality and illiteracy. This period was quite remarkable from a health perspective: families gained access to clean piped water and effective sewerage systems, hospital care and antibiotics. The huge returns of these services in terms of lower mortality, I argue, largely compensated for low levels of economic performance. To be sure, this is no consolation for those who suffer from, among others, material and other kinds of deprivation now or in the past. The point I want to make is that judging a region’s development from a purely economic perspective misses important ways in which people’s lives have changed and, in some cases, improved for the better. Macroeconomic indicators suggest that this could apply to the mounting scepticism towards the ‘Africa Rising’ narrative too.
Past economic and societal forces are not destiny, but they do teach us about the paths that other individuals and countries have faced. Whether we can learn from them depends on the particular context one considers. The history of comparative development during the 20th century shows that low levels of economic performance were once the result of physical and human capital endowments, while nowadays, this is not the case: productivity differentials account for most of the rising cross-country inequality. Technological innovation biased towards specific skills and capital has made some technologies more suitable in certain contexts, while resource misallocation hinders an economy from realizing its full potential.
These forces might be at work when accounting for some of the dimensions behind growth deceleration in Africa and the lack of consistent catching up to higher-income countries. But before concluding that the narrative of ‘Africa Rising’ should be discarded, one should acknowledge the many ways in which Africans’ lives have improved since 2000, for instance, in terms of health and education. There is much more to be done. We should not be complacent about the current state of affairs. But using only economic metrics to promote the idea that ‘Africa is not rising’ is one-sided and dismissive of the many ways in which a society delivers to its citizens.
