The Political Economy of Economic Performance. Voxi Heinrich Amavilah
progress SSACs have made over the years is not discernible because current research often represents Africa by all African poor performers. By contrast, Asia, Europe, and America are almost always defined by the high performers. For instance, in rationalizing the making and essence of the so-called East Asian growth miracles, the World Bank (1993) claims that “from 1965 to 1990 the twenty-three economies of East Asia grew faster than all regions” (1). However, emphasis ends up almost entirely on the eight high-performing economies of Japan, Hong Kong, South Korea, Singapore, Taiwan, Indonesia, Malaysia, and Thailand. How did the rest of the region fare? Would growth have been that spectacular if the poor performers were included? That is an important question to raise because when referring to Africa, the same study excludes Botswana from its discussion on condition that Botswana is a mono-commodity economy. One is then left to wonder what the purpose of comparison in all circumstances is, since nearly all African countries are mono-commodity economies anyway!
I am convinced that by using these arbitrary approaches anyone can just as easily show SSA outperforming other regions in any year; it all depends on which economies one picks to represent that region. If one chooses to represent Africa with Botswana and Asia with Burma, then Africa has grown faster than Asia for more than forty years. If Africa is South Africa (even under Apartheid) and Asia is Afghanistan (even during its calmest years), then Africa is many years more technologically advanced than Asia. Clearly the running of regressions before the data has even been collected seems so wrong (a moral judgment on my part, I know) to continue, but it does continue. Such exercises are a waste of time; they are for the economics profession what IQ debates are for psychology; they generate a lot of interesting information, but little insight. Hence, until researchers begin to study SSACs rather than inferring their situations from other countries, policy-making in Africa will not benefit from recent advances in the economics of growth and technological change.
Take one more example. In an influential IMF paper, Ghura and Hadjimichael (1996) modify Mankiw, Romer, and Weil (1992) to examine the economic growth of a number of SSACs over the period 1981–1992. However, the endogenous aspects of the model motivated in the theoretical part of the paper are ultimately not tested. Hence, the results of the paper lack the prescriptive guts that one would expect from it. Thus, the paper says too much about the poor performance of SSACs and too little about what must be done, and leaves individual countries in the cold (once again). This is a contradiction in terms because unlike purely academic institutions, the IMF and the World Bank’s mandates are to support effective policy-making.
Two Themes
The usual excuse for the absence of study of SSACs is the lack of data—the false claim that careful studies of African countries are difficult (costly and impossible) to carry out because of the unavailability of data. Despite Yaw Nyarko and William Easterly’s (2007) analysis that development is an experimental problem-solving process, and hence “the lacunas in Southern African historical knowledge cannot be attributed to a dearth of data” (Thompson 1969, 3)—, the problem is they are consequences of unfocused research efforts. After all data does not speak for itself in spite of the popular saying. What is needed is understanding rather than knowledge of information, and for that no country has to start from scratch. This means that much of the knowledge required for a decent standard of living anywhere by anyone on earth has already been invented. It is somewhere ready for transfer to where it is needed. The two problems standing in the way are (a) appropriate rules on either side of the transfer channel as Paul Romer (2010) has recently stressed, and (b) lack or limited understanding of knowledge available for transfer. 5 There is no need to reinvent the wheel, and SSACs may finally have found things that make growth work for them.
I exhibit the evidence in two broad themes. The first theme is about the factors and forces behind Africa’s recent positive performance. This theme starts with the argument that recent economic performance in Africa has depended upon the intensity of technology use—mainly the newer technologies of internet and mobile (cell) phone. Working silently in support of the intensive use of technology is the technological knowledge of a general nature that has been accumulating over the years in these countries. I demonstrate that fact with annual publications data for Botswana, Namibia, and South Africa for the period 1976–2004. An interesting question that arises is: Why is all this happening now, and is it too little and too late? Part of the answer, it turns out, is external influences like openness and globalization, and the other part is improvement in the quality of local institutions. I show this with two related essays to end the first theme.
The second theme of the book is about how the performance trajectory can be maintained with increasing speed and vitality. If I am correct that the observed reversal of misfortune in SSACs is due to newer technologies made possible by the specialized knowledge that has accumulated over the years, improved quality of institutions, and globalization, then it means in the past the major obstacle to performance was of a technological nature, but it was not the absence of relevant technological innovations! Instead, it was due to inhibited spread of technological innovations (cf. Arrow 1969; Mansfield 1971; Rogers 2003). One obvious inhibitor was the spread of knowledge. The sixth chapter describes some problems with conventional models of the diffusion of innovation and proposes simple modifications. A further obstacle to the diffusion of technological change, which has significant implications for long-run economic growth, is the negligence of resource intra-actions and interactions. Standing on the shoulders of Sir W. Arthur Lewis (1965) and Paul M. Romer (1990, 1993, 1994), I show that resource intra-actions and interactions are important for technological change, and hence for economic growth. Economies with strong positive resource intra- and interactions produce more output than others. In fact, intra- and interactive economies are characterized by economies of scale and would produce twice as much output as others, and their rates of growth and change are high because of it.
Concluding Remarks
Pre-GGR, the economic performance of SSACs depended on the intensity of use of newer technologies mainly the internet and mobile phone. These technologies are productive because the general knowledge required to make them productive has been accumulating quietly for years. Also over the years, a deeper integration of African countries into the world economy and improving quality of institutions have aided the performance observed since mid-1992. Whether or not the GGR was a “party pooper” for the SSACs is not as important as the fact that these countries can sustain growth, and the spread of technological innovations and intra-active and interactive use of resources remain crucial. The chapters that follow seek to demonstrate this concluding remark.
NOTES
1. In fact, much of this material was written in response to that collection. I shared my comments with Timothy Taylor, Managing Editor of JEP, and I gratefully acknowledge the brief conversation we had.
2. Professor A. Fosu’s two volume Development Success Historical Accounts from More Advanced Countries (2012), and Achieving Development Success: Strategies and Lessons from the Developing World (2013) both by Oxford University Press clarify these issues in a more balanced way.
3. The third largest number of speakers after Indo-European speakers, see World Fact Book, Inc., 1999.
4. Henri A. Junod’s The Life of a South African Tribe, Volume II, Mental Life. University Books, Inc., New Hyde Park, New York, 1962 shows that life was very different only fifty years ago. To claim that Africa has undergone the least change in the world is just untrue!
5. I am aware of the argument in which the knowledge transfer process is not always Pareto optimal due to resistance to change and other special group self-interests as put forward by Boyan Jovanovic and Yaw Nyarko (1995) in their paper “The transfer of human capital.”
Intensity of Technology Use and Economic Performance
African countries have fared poorly compared to some countries in other regions, but relative to their own performance history some SSACs have done quite well over the recent past. The 1992–2007 decade was especially