Poverty reduction in Africa

Poverty in Africa has been rising for the last quarter-century, while it has been falling in the rest of the developing world. Africas distinctive problem is that its economies have not been growing. Globally, the number of people in absolute poverty has been in decline for approximate ! years, yet in Africa it is still increasing. Accounts for Africas economic distinctiveness and derives implications for international policies for poverty reduction. "ver the period #$%&' &&& Africas population-weighted per capital annual growth of gross domestic product (G)P* was a mere &.#+. ,t stagnated, whereas other regions experienced accelerating growth. ,ndeed, between #$-& and &&& the annual rate of divergence was an astounding !+. )uring the #$$&s, the limited response to reform induced a broader search for explanations. Africas growth failure has attracted competing explanations.n)uring the #$-&s the .orld /an0 diagnosed the problem asninappropriate economic policies with /erg offering the first clear statement of this position. /ates was the first to explain these dysfunctional policy choices in terms of the interests of powerful groups, notably the taxation of export agriculture. )uring the #$$&s, the limited response to reform induced a broader search for explanations . 1ecently, three further explanations have gained currency: institutions , leadership, and geography .

Physical Geography: Three Opportunity Groups

Africas defining physical geography is of a massive land area divided into 22 countries, with a low population density. /ecause Africa is land-abundant, yet low-income, natural resource endowments loom large. 3owever, they are unevenly distributed. Parts of Africa are abundant in natural resources, but others are resourcescarce. 4urther, because Africa is enormous and divided into many countries, many of them are landloc0ed. 5here are three categories6 resourcerich, resource-scarce but coastal, and resource-scarce and landloc0ed. 5he bestperforming category globally has been the coastal, resource-scarce countries of which there are many Asian examples. 5he worst-performing category globally has been the landloc0ed and resource-scarce. ,n between, the resource-rich countries have on average grown moderately but with large differences both between countries and time periods. Africa broadly followed the global pattern, with three differences. 5he largest difference was in the category of countries that are resource-scarce and coastal. 5he second difference was in the resource-rich category, although here the difference has persisted since the #$%&s. 5he third difference between Africa and the other developing regions is in the distribution of

population between the three categories. ,n the developing world other than Africa some --+ of the population lives in coastal, resource-scarce countries, ##+ in resource-rich countries, and a mere #+ in landloc0ed resource-scarce countries. ,n Africa the population is approximately evenly spread between the three groups. 5he African population is heavily s0ewed toward the globally slowgrowing category of landloc0ed, resource-scarce, and away from the globally fastgrowing category of coastal, resource-scarce.

Landlocked and Resource-Scarce

5he most stri0ing difference between Africa and other developing regions is in the proportion of the population in landloc0ed, resource-scarce countries. Globally, on average if neighbors grow at an additional one percentage point that raises the growth of the country itself by &.2+. "utside of Africa the landloc0ed, resourcescarce economies on average gain larger spillovers, at &.7+6 they orient their economies toward ma0ing the most of these spillovers. /y contrast, in Africa the growth spillover for the landloc0ed, resource-scarce economies is a mere &. + "verall, the landloc0ed, resource-scarce countries triply depend on their neighbors. 8ost obviously, they depend on their coastal neighbors for access to the sea 5he landloc0ed have an interest in the economic governance of neighboring countries because if their neighbors continue to forego opportunities this closes off their own opportunities. 5he third dependence is that it ta0es two to integrate6 the landloc0ed cannot integrate unless their neighbors implement policies that enable it to happen. 5he potential for integration into the regional mar0et matters more for the landloc0ed than for their neighbors. ,t is possible that developments such as e-trade and air freight that do not disadvantage landloc0ed countries might offer a new route to global integration. 9learly, the landloc0ed countries should push these opportunities to the hilt. /eing landloc0ed is not a choice, but being airloc0ed is largely a matter of airline regulation and competition policy. 5he policies that produced high-cost monopolies such as Air Afrique were mista0en. :imilarly, the twin pillars of e-trade are telecoms and education. Policies that raise the cost of international telecoms, or ma0e access unreliable, are costly for landloc0ed, resource-scarce countries. Although these countries are the core of Africas poverty problem.

Resource-Rich.
5he resource-rich countries are increasingly important in Africa, partly as a result of higher commodity prices and partly as a result of resource discoveries.Globally, high commodity prices are a mixed blessing for resource-exporting countries. 9ollier and Goderis find that for the

first ! years growth is significantly higher. /y the fifth year this faster growth has cumulatively raised constant-price G)P by ;2+ compared with what would have happened with lower prices. 5hree processes generate this long-term adverse effect. "ne is )utch disease, which ma0es nonresource exports uncompetitive6 in <igeria oil exports led to the rapid collapse of agricultural exports. Africa was ruled by narrow ethnic autocracies that lac0ed national aspirations. :ince the #$$&s the spread of democracy across much of resource-rich Africa might potentially provide accountability to citi=ens. 9ollier and 3oeffler (#!* find that globally over the period #$7&' && in the absence of natural resource rents democracies tend to grow significantly faster than autocracies but that the opposite holds when resource rents are large. 5hey suggest that in resource-rich countries democracy tends to get corrupted into patronage politics as resource rents substitute for taxation. "ther resource-rich African countries are now democratic, but they are >>instant democracies. As demonstrated by Afghanistan and ,raq, it is possible to establish electoral competition in any conditions, but it is harder to establish effective chec0s and balances.

Resource-Scarce and oastal.

Africas exceptionally rapid population growth is changing even this advantage. 9ountries such as ?enya and :enegal face sufficient pressure on land that continuation in their traditional speciali=ation will condemn them to slow growth, with agricultural technical progress offset by diminishing returns to labor. 5he only African country to succeed in this category has been 8auritius, which followed the Asian pattern in transforming itself through exports of manufactures from an impoverished sugar economy into an upper-middle income country and by far Africas richest economy. 5he essential aspect of government behavior is that it should not actively inhibit the emergence of a new export sector by burdensome regulation, taxation, or predation. /efore #$-& manufacturing and services were concentrated in the "rgani=ation for @conomic 9ooperation and )evelopment ("@9)* economies, loc0ed in partly by trade restrictions but mainly by economies of agglomeration. 5he concept of economies of agglomeration is that when many firms in the same activity are clustered in the same city their costs of production are lower.

!u"an Geography
5he other important distinctive aspect of Africas geography6 human geography, both political and social. Africas political geography is unmista0ably stri0ing6 it is divided into far more countries that any other region, despite being less populous than either :outh or @ast Asia.

:mall population and ethnic diversity are the two distinctive socio-political features of African geography6 each creates problems. 5he other socio-political aspect of African geography is the high ethnic diversity of the typical country. @thnic diversity need not be a decisive impediment to development, but it does have implications for political architecture. Africa is much less ethnically diverse than at the national level. A third aspect of diversity is that it ma0es a society more prone to violent conflict. Africas current economic opportunity is its natural resource rents. A disproportionate share of Africas population lives in resource-rich countries, and for the foreseeable future commodity prices are going to be high with discoveries s0ewed toward the region. 5he second problem caused by the interaction of physical geography and human geography is that coastal, resource-scarce Africa has missed its opportunity to brea0 into global mar0ets for labor-intensive goods and services. Although on average African economic governance remains significantly wea0er than other regions, there are now several coastal, resource-scarce countries where governance has improved, notably Ghana, ?enya, 5an=ania, :enegal, and 8adagascar. 5he final problem generated by the interaction of human and physical geography is a heightened ris0 of violent internal conflict. African countries have characteristics that globally ma0e a country prone to such conflict.

onclusion: #our $"plications for Policies to Reduce African Poverty

African poverty reduction depends on raising African growth. Africas population in landloc0ed, resource-scarce countries as opposed to coastal, resource-scarce countries alone accounts for one percentage point off Africas growth rate compared with other regions. 5he interactions of physical and human geography have created intractable and important problems that have yet to be addressed and that probably need both regional and international action. "ne is how to manage resource rents in the context of ethnic diversity. 5he most appropriate polity is a design that such countries tend not to have6 strong chec0s and balances on how governments can use power and decentrali=ed public spending. 5he second problem is how to compete with Asia despite having let Asia get decisively ahead. 5he third problem is proneness to violent internal conflict./ecause of the large regional economic spillovers, this is a regional issue. 5he fourth, and perhaps least tractable problem, is that so much of Africas population lives in landloc0ed, resource-scarce states. Poverty reduction in these societies is li0ely to need large and sustained aid inflows, not so much for investment in economic development, but rather for the direct raising of consumption levels.