Transcript Sub-Saharan Africa: 3

Sub-Saharan Africa
Class 3
Internalist Perspective
Central Thesis
• African governments have
intervened to shift internal
terms of trade against farmers
• this has created significant
DISINCENTIVES to agricultural
production.
• Result is widespread agricultural
stagnation
Why have African
governments done this???
• corruption and incompetence
• to expand public services and public
sector employment (employer of last
resort)
• response to political demands of
urban interest groups
– weak state argument is signif. here
• commitment to industrialization
Mechanisms of
Intervention
• direct price interventions
– began with colonial govts and export
crops
• currency overvaluation--biased
impacts on city and countryside
• agricultural marketing boards
(parastatals)
– administer low producer prices
– dead weight on sector
Role of Import Substitution
Industrialization
• high capital requirements led to
starving of agricultural sector of
investment capital
• sectors that have emerged have
not generated linkages with
agriculture
World Bank Perspective
• States play too strong role in
economy
– Initially understandable but ...
• Too much public sector production
– 10-20% of total formal employment
in many countries
• Civil service sectors are too large
• External factors like falling terms
of trade have contributed
– but their role is exaggerated
Economic Policy change
since early 1980s
• 29 countries have made some
commitment to WB/IMF to structural
adjustment policy reform
• more than half reduced budget
deficits but did NOT increase tax
revenues
• many devalued currencies
• many reduced non-tariff barriers but
NOT tariff rates
Economic Policy Change
(cont.)
• 2/3 reduced tax burden on agriculture
but few dissolved state marketing
boards
• a few privatized public non-agric. public
enterprises/but not large ones of
“national” interest
• limited downsizing of civil service
– “ghosts” issue
– salary issue
Impacts of Economic
Policy Change???
Types of studies
•single country case studies
•cross-national research
Zimbabwe case study
 Most industrially developed country
outside South Africa
 other advantages--politically stable,
relatively good infrastructure,
competent bureaucracy
 World Bank predicts a less painful
adjustment
Focus is textile, clothing
and footwear industries
(labor intensive, low skill)
 In response to incentives, exports of
textiles and clothing grew at 12% per
year during 1980s
 Early 1990s--deindustrialization
textiles employment---25,300 (1990) to
12,400 (1995)
clothing employment---24,000 (1991) to
17,000 (mid 1990s)
Why deindustrialization???
 Tariff reductions on textiles were
designed to give clothing firms access
to cheap inputs but hurt domestic
textile production
 clothing firms were hurt by imports of
second hand clothing
 footwear industry could not compete
with Chinese imports
Cross-national studies
World Bank
 Step 1. Compare growth rates in pre-
and post-adjustment periods for 28
countries that accepted WB adjustment
programs
Change in average annual GDP per
capita growth, 1981-86 to 1987-91
Step 2. Recognize 3 subgroups on basis of
policy reform
ANNUAL GROWTH RATES, PER CAPITA GDP, BY
POLICY GROUPINGS
POLICY GROUPING
AVERAGE GROWTH
1981-86
1987-91
LARGE IMPROVEMENT (6)
MEAN
-0.8
1.1
MEDIAN
-0.7
1.1
DIFF.
+2.0
+1.8
SMALL IMPROVEMENT(9)
MEAN
MEDIAN
-1.1
-0.9
-0.1
-0.2
+1.0
+1.5
DETERIORATION(11)
MEAN
MEDIAN
-1.0
-0.6
-2.6
-3.2
-1.6
-2.6
Cross-national studies
Mosley and Weeks
GROWTH RATES OF CONSTANT PRICE GDP.
ALL SSA COUNTRIES (44)
WEIGHTED AVERAGE
WITHOUT NIGERIA
SIMPLE AVERAGE
STD. DEVIATION
1980-85
1985-91
0.7
2.3
2.5
3.1
3.5
2.2
2.8
2.4
Growth rates by adjustment
status
STRONG ADJUSTERS
1980-85
1985-91
WEIGHTED AVERAGE
WITHOUT NIGERIA
SIMPLE AVERAGE
STD. DEVIATION
-0.1
1.7
2.0
2.9
3.9
2.1
2.9
2.1
WEAK ADJUSTERS
WEIGHTED AVERAGE
SIMPLE AVERAGE
1.7
2.0
2.5
2.0
NON ADJUSTERS
WEIGHTED AVERAGE
SIMPLE AVERAGE
3.9
3.5
2.3
3.4
Growth by type of
program implemented
TYPE OF ADJUST.
REAL GDP
1980-90
NO ADJUSTMENT PROGRAM
TYPE OF ADJUSTMENT PROGRAM
COMPREHENSIVE
TRADE LIBERALIZATION
ONLY***
FOCUS ON AGRIC. MARKETS
FOCUS ON PUBLIC ENTERP. REFORM
OVERALL AVERAGE
***ONLY 1 COUNTRY
INVESTMENT
1980-90
EXPORTS
1980-90
3.2
0.3
-1.2
3.7
1.4
1.9
3.4
2.5
2.0
2.8
3.2
-0.5
-0.8
0.2
9.6
1.0
0.3
1.9
Relationships to particular policies and
political environment
------GROWTH IN------REAL GDP
1980-90
REAL EXCHANGE RATE
DECLINING 1980-90
INCREASING 1980-90
PUBLIC INVESTMENT
INCREASING 1980-90
DECLINING 1980-90
POLICY STABILITY
LOW INSTABILITY 1980-90
HIGH INSTABILITY 1980-90
INVEST.
1980-90
EXPORTS
EXPORT
1980-90
3.4
2.2
0.9
0.3
2.4
0.8
4.0
1.8
3.2
-0.6
4.6
-0.2
4.3
1.8
2.1
-0.9
6.3
-1.8
The social costs of
structural adjustment
 Good source: Sahn, Dorosh and
Younger, 1996. Does adjustment hurt
the poor? World Development 24(4):
719-747.
 Question: Have the major components
of structural adjustment worsened
income distribution and adversely
affected the poor (bottom 30%)?
Question 1. Who are the bottom
30%? How and where are they
embedded in the economy?
 Predominantly rural. Main income
source is agriculture. Mainly not as
waged workers. Heavily engaged
in subsistence agriculture.
 So the primary impacts will be on
their role as producers, not
consumers.
Methodology
 Focus on 10 African countries
implementing structural
adjustment programs
 Try to analyze effects of various
policy changes at the household
level.
 Try to do more than simply
compare conditions before and
after.
1. Impacts of currency
devaluation and opening of
economy to global economy.
 Impacts depend on previous access to
foreign exchange and imported goods at
favorable prices.
 Losers are those who lost RENTS (excess
profits) due to restrictions on trade and
exchange rates.
 Rural poor gained marginally from greater
competitiveness of products abroad
2. Impacts of fiscal policy
changes
 Conventional wisdom: Cuts in gov’t
expends. have disproportionate
impacts on the poor.
 Their procedure involves examining:
What is the level of cutbacks?
who actually benefits from those
services?
Level of cutbacks
Nature of the spending on health
 Vast majority of public expends. go to
hospitals or administration, not to
primary and preventative medicine.
 Who uses hospitals and clinics?
Percent of rural population using
health facilities in past month by
household expend. group
Cote d’Ivoire
Public hospital
Other public
Private
Ghana
Public hospital
Other public
Private
Quintile 1
Quintile 2
Quintile 3
Quintile 4
Quintile 5
2.6
6.6
0.2
2.9
7.3
1.1
4.3
7.8
0.8
4.9
9.4
1.0
8.7
7.5
1.1
1.9
2.6
3.7
3.9
3.6
5.1
3.8
5.4
5.8
5.9
6.6
7.2
6.4
4.0
9.4
Conclusion: Public hospital care is not well targeted
to the poor.
Nature of spending on
education
 On average, half of the education
budget goes to primary schools
 But per pupil expenditures are much
higher for secondary and university
students
Percent of eligible persons
attending public school by level, by
per capita expenditure quintile
Cote d’Ivoire
Primary
Secondary
Postsecondary
Ghana
Primary
Middle
Secondary
Postsecondary
Quintile 1
Quintile 2
Quintile 3
Quintile 4
Quintile 5
36
15
0
44
14
1
49
17
1
46
18
2
42
17
3
51
29
8
1
53
34
9
2
54
32
12
2
54
35
11
2
42
34
14
3
3. Impacts of changes in food
marketing systems
•Reductions in interference are likely on
net to benefit the rural poor
•Why???
•Rarely beneficiaries of subsidized food
prices
•Bore the costs of such schemes in their
role as producers
Conclusion
•Biggest losers will be urban elites who had
access to official markets and prices. Poor
rarely participate in official markets for
food, inputs, foreign exchange and credit.
•Secondary losers.
•Retrenched public sector employees
•Urban poor who had access to
subsidized food