Transcript The Economic Cost of Conflict on Innovation

The Global Economic Crisis:
Implications for Africa
Dr. Lisa D. Cook
Department of Economics
Michigan State University
Context: Study and Practice
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Assistant Professor
Research on finance and development
Post-doc at Treasury Department with Tim
Geithner and Larry Summers as Senior
Advisor on Finance and Development
Advised Governments of Nigeria and
Rwanda with Jeffrey Sachs
Working on Gates project on financial
crises in Africa
Context: Pre-Crisis
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Reversal of decades’ long decline of growth
in Africa
Africa’s Recent Economic
Performance
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Between 1980 and 1989, real GDP
per capita in Africa fell by 1.1% on
average.
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But between 2000 and 2005, real GDP
per capita in Africa increased by 2.1%
on average.
Africa’s Recent Economic
Performance
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New article in the American Economic
Review
– Cook and Beny (2009)
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Luck, or significant increases in
commodity prices, and policy reforms
are correlated with recent trends in
economic growth.
Africa’s Recent Economic
Performance
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Now that the world’s luck has turned
bad…
– …the question is whether the effects of
the many crises Africa faced in the last 12
months can be attenuated by policy
changes that occurred in the late 1980’s
and 1990’s.
Africa’s Recent Economic
Performance
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IMF World Outlook
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Bleak picture released earlier this week
Predicts decline from 5.25% in 2008 to 2.0% in
2009
Three Global Crises
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Food, energy
Financial
Economic (Real)
Three Global Crises
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Let’s review what has happened in the
last 12 months.
Three Global Crises
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Food crisis
– March 2007 to March 2008 (Bloomberg):
» The world price of Wheat ↑ 130%
» Rice ↑ 74%
» Corn ↑ 31%
Food Prices
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Increased dramatically internationally
Food Prices
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Corn-based ethanol production was a factor
Three Global Crises
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Africa has been the region hardest hit
by these crises.
Food Prices
Three Global Crises
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Last year this time, the price of
gasoline was at its highest price, a
national average or $3.50, in recorded
history, even when adjusting for
inflation.
Three Global Crises
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Since many of the African countries
that export oil also import it, the
energy crisis would also have a
negative effect on African economies.
Financial and Economic Crises
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We now know that the global financial
crisis followed by the global economic
crisis began in the United States.
Financial and Economic Crises
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Falling demand and rising
unemployment in the U.S. have been
followed by falling demand in the rest
of the world.
Financial and Economic Crises
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Many predicted that Africa was
insulated.
– Inside and outside Africa
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Financial press, popular press
Financial and Economic Crises
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This is not so.
ODA Crisis
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Gleneagles Commitment
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Rich countries’ promise to double ODA in real
terms to Africa from 2005
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To meet MDGs
0.7% of GNI by 2010
Met only by a handful of countries
ODA Crisis
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Gleneagles Commitment
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ODA more than doubled since 2001
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$42 billion in 2001 to $120 billion in 2009
– 0.30% of GNI of donor countries
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ODA to Africa also more than doubled
between 2001 and 2004
$10 billion to $26 billion
ODA Crisis
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Gleneagles Commitment
– Shortfall of $240 billion predicted
– Economic crisis will diminish prospects
for meeting these goals as countries turn
inward
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Global economic growth slowing
ODA Crisis
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Gleneagles Commitment
– How will they keep these promises?
– How will Africa meet the MDGs absent
extra ODA flows?
Concluding Remarks
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Specific Recommendations
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During Q&A