The causes and impact of the african debt crisis

This article examines the African debt crisis. It focuses on factors leading to the accumulation of the debts and their impact on the debtor nations. The significance of the study lies in the fact that the African debt burden presents a gruesome picture of hopelessness. This is reflected by the continent’s massive debt of $230 billion, equivalent to almost three times the continent’s annual export earnings. This is expected to jump to $550 billion by the year 2000. Africa’s crushing debt burden has become one of the most important factors constraining recovery and development. As the United Nations Children’s Fund estimates, one thousand people die each day in Africa because of the debt crisis. The analysis shows that due to the multifaceted nature of the causes of the debt crisis, both creditors and debtors should agree on the options for dealing with the crisis. It further shows that there is the urgency for Africa to tackle its numerous sociopolitico-economic problems. Africa can make real economic progress only when it begins to get on top of its debt crisis.     

Estimation of a country’s economic development on the basis of the global competitiveness index

This article investigates the competitiveness of macroeconomic objects at different hierarchical levels. Analysis of a country’s competitiveness is presented on the basis of the global competitive index. The author offers an integral indicator of a branch of industry’s competitiveness potential according to seven main factors that permit numerical estimation.     

The Legacy of Black Lynching and Contemporary Segregation in the South

Wacquant (2001) and others have argued that social control efforts directed at racial and ethnic minorities frequently shift institutional form and become more nuanced as societies modernize, even as the underlying function persists. This study examines the connection between southern lynching and housing segregation. We argue that legal, political, social and demographic changes in the south made lynching dysfunctional as a means of control. Among other more nuanced control mechanisms, modern housing segregation helped serve as a replacement. We test this proposition by relating historical southern black lynching rates to recent levels of segregation in southern MSAs. We find that an MSA’s historical lynching rate is positively and significantly linked to the MSA’s current segregation levels after accounting for standard determinants of segregation. Thus, segregation does not just occur generally throughout the south, but follows a very particular pattern based on past lynching rates. Our findings add to a growing literature on the legacy of lynching, such as studies examining contemporaneous variation in support for and use of capital punishment.     

Global Imbalances: Is Germany the New China? A Skeptical View

In this paper we evaluate the current account patterns of China and Germany. We point out that China’s current account surplus as a share of global GDP in recent years resembles that of Germany’s. Yet, an important difference is that the Euro block’s current account inclusive of Germany has overall been balanced, whereas emerging Asia’s current account inclusive of China has mostly been characterized by sizable surpluses. We further find that both China and Germany’s current account surpluses seem to be accounted for by common factors. However we have reasons to doubt the long run viability of these current account trends in future decades. Demographic transitions in China and Germany are projected to reduce their surpluses, and this effect is stronger for Germany. We also discuss plausible reasons to doubt the extent to which the Euro block will move towards significant surplus in the coming years.     

Internationale Wettbewerbsfähigkeit — Fragmente zu einer Theorie internationaler Unternehmenstätigkeit

Summary International competitiveness — fragments of a theory on international entrepreneurial activity. — Contrary to the orthodox market conception — where firms’ decisions involve merely efficiency-oriented adaptation to ensure general equilibrium — a more pragmatic approach must take account of the endogenous character of market structures: The driving forces behind innovations — and hence “progress” — are the creation and exploitation of market imperfections by firms. As companies use their core skills worldwide, international competitiveness is determined on the firm level, thereby disposing of the traditional trade theory with its focus on the nation-state and a given endowment with ressources. “Creative destruction” must be viewed as an institutional change on a global basis, enterprises being the center pivot of dynamics in the course of which the means of internationalizing and internalizing business functions will differentiate more and more.

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Résumé Capacité de concurrence internationale: fragments d’une théorie de l’activité d’entreprise internationale. — Contrairement à la conception orthodoxe de marché — oú les décisions des entreprises consistent seulement d’adaptions orientées à l’efficience pour assurer l’équilibre général — une approche plus pragmatique doit considérer le caractére endogéne des structures de marché: la force motrice derriére les innovations et avec cela ?le progrés? sont la création et l’exploitation d’imperfections par des entreprises. Comme ceux-ci appliquent leurs connaissances essentielles universellement, la capacité de concurrence internationale est déterminée sur le niveau d’entreprise, ainsi disposant la théorie de commerce traditionnelle avec sa concentration sur l’état-nation et la dotation donnée en ressources. ?Destruction créative? doit être considérée comme un changement institutionnel de mesure universel oú les entreprises sont le pivot central d’un processus dynamique à la suite duquel les mesures d’internationaliser et d’internaliser les fonctions commerciales différencieront de plus en plus.

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Resumen Competencia international: elementos de una teoria sobre la actividad empresarial international. — Al contrario de la opinión ortodoxa sobre el mercado, donde las decisiones de los empresas implican simplemente una adaptatión de cara a la eficiencia para asegurar equilibrio general, un enfoque mas pragmático debe tener en cuenta el carácter endógeno de las estructuras de mercado: El motor detras de los innovaciones y por tanto del ?progreso? es la creation y explotaci?n por las empresas de imperfecciones en el mercado. Considerando que los empresas utilizan sus abilidades basicas en un contexte global, la competencia international se dètermina a nivel de empresa lo que permite prescindir de la teoria traditional del comercio internacional con su èmfasis en los conceptos de estado national y riqueza de recursos. ?Destruction creativa? debe ser observada como cambio institucional a nivel global, con las companias constituyendo el centro del proceso dinámico en el curso del cual los medios de internacionalizar e internalizar funciones empresariales darám origen a diferencias cada vez más grandes.

     

State-Building in Resource-Rich Economies

One of the most significant differences between developing countries and today’s advanced states is the fact that many developing countries rely heavily on one or several natural resources. That such dependence shapes the state’s ability to tax—its fiscal capacity—is commonly argued in the political science and applied development literatures. This paper approaches the issue from an economic angle. Our analytical foundation builds upon a novel theoretical framework, and allows us to model fiscal capacity as an ex ante investment under uncertainty. For our panel of 30 hydrocarbon-rich economies, instrumental-variables results provide strong empirical support for our theoretical proposition: resource intensification weakens state-building by impeding the state’s fiscal capacity. This result provides an inaugural validation of the economic analytics of state-capacity determinants: understanding these determinants serves to build stronger states and support sustainable paths of development. Our result also suggests that one of the main tools of fiscal policy-analysis in resource-rich economies, namely optimal taxation, could gain in practical relevance by incorporating capacity-constraints into the analytical fiscal-framework.     

Energy sanctions and the global economy: mandated vs unilateral sanctions

International Economics and Economic Policy - The world is witnessing an unprecedented episode of ‘economic warfare’, with more than 30% of global GDP (the G7’s share) pitched...     

Service delivery frameworks as instruments of citizen empowerment: A tale of two experiences,India and South Africa

This paper presents a comparative assessment of South Africa and India's service delivery improvement strategies, challenges, successes and lessons learnt in advancing their service delivery reform programmes. The cardinal argument in the paper is that the public administrative systems adopted and inherited in the post-democratic epochs in India and South Africa were incapable of meeting the service delivery needs of their respective citizens. They epitomised the traditional and hierarchical public administrative systems that were the object of reforms in the 1990s. The reform initiatives also coincided with global reforms on public administration systems taking place under the aegis of the new public management framework. A key feature of new public management is its application of private-sector ideas to the public sector, such as individual accountability. The paper further undertakes a comparative review of service delivery improvement frameworks of South Africa (Batho Pele) and India (Sevottam) in relation to their objectives and implementation modalities.     

Is there an Anglo-American corporate governance model?

This paper questions the existence of an Anglo-American model of corporate governance and capitalism. Significant differences between the UK and US models of corporate governance are identified. The UK is a principles orientated system based more on voluntary codes operated on a ‘comply or explain’ basis, whilst the US system is more rules based and litigious. The UK focuses more on ex ante protection of ‘outside’ shareholders, whilst the US focuses on ex post protection of share traders. Institutional investors are expected to play a more prominent and wide ranging role in corporate governance in the UK than the US, though the evidence on their voting behaviour and wider ‘engagement’ activity is not readily available. The explosion of private equity led leveraged buy-out activity in the mid 2000s challenges the efficiency of both models and could be a harbinger of a ‘new capitalism’; relying more on incentive compatible remuneration packages and less on public disclosure and market discipline. Alternatively, it could simply be driven by the tax advantages currently enjoyed by debt over equity, the special deferred capital gains (‘carried interest’) tax treatment enjoyed by private equity, low (long as well as short term) real interest rates (‘cheap money’), and rising equity prices.     

Development prospects and policy for Africa: Structural adjustment and beyond

Conclusion Africa’s economic recovery in the 1990s, though somewhat fragile, is very encouraging. Policy reforms, primarily in the form of SAPs, have led to improved economic performance. However, as we approach the post-SAPs era of the 21st century, African countries need to intensify efforts in the pursuit of sound policies and further structural reforms. Much higher growth rates, exceeding 7 percent annually, are deemed as necessary to be attained and maintained over a longer period for there to be meaningful reductions in poverty. This paper has advocated a set of policy areas which need to be given priority in Africa as the 21st century approaches. African countries are in a better position now, than anytime since the crisis of the 1980s, to build a path toward sustainable development. In that regard, maintaining market-oriented policy reforms remains the imperative for the immediate future and beyond. It is now up to Africa’s leaders to provide the requisite leadership for a home-grown, rather than donor driven, attempt at sustainable socio-economic development.     

How Do Female Spouses’ Political Interests Affect Male Spouses’ Views About a Women’s Issue?

This paper explores how the degree of female spouses’ political interest affects male spouses’ views about women’s empowerment using individual level data in Japan. Controlling for unobserved area-specific fixed effects, results show that males are likely to consider women’s empowerment important if their spouses are interested in politics. This spouse effect is observed for conservative males but not for progressive-neutral males. Results were unchanged when the endogeneity bias caused by spouses’ political interests were controlled for. These findings suggest that female family members’ political interests and views play an important role in determining male views regarding women’s issues.     

Is There a Link Between Casual Employment and Export-Orientation of Firms? The Case of Kenya’s Manufacturing Sector

Empirical evidence on the link between trade and employment outcomes in Africa is severely limited. The paper analyses employment outcomes, that is, the rise in casual employment in Kenya’s manufacturing sector in relation to firms’ export orientation. While exporting firms generally account for a higher proportion of employment in the manufacturing sector, the proportion of workers in exporting firms declined by over 20% between the early 1990s and 2003. On the other hand, the proportion of casual workers employed in manufacturing firms increased over the same period. However, the empirical results show no strong evidence of “exporting” significantly influencing the proportion of casual workers employed by firms. The combination of an increasingly skilled labour force in Kenya and deepening casualisation among workers points to a conundrum that requires further analysis. That notwithstanding, the results suggest a need for policy focus not only on job creation, but also on the quality of jobs created.     

Struggling against apartheid: The use of economic sanctions on South Africa

Conclusion It is clear that the United States is in a dominant position in relation to South Africa’s economy, which has an economic climate working against its decision to be isolated from world opinion. The apartheid policies have produced an economy that is severely distorted by its having a restricted market for its industrial products, a critical shortage of skilled labor, a high level of structural unemployment, a high and increasing military budget, and by its support of an economically unviable Bantustan system. These distortions, combined with record balance of payments deficits and a net disinvestment of foreign funds, have resulted in currency outflows that were covered by the United States providing decisive support for a $1.1 billion loan from the IMF. Contrary to the impression that has been promoted by the South African government, S.A. mineral exports are not crucial to the United States. However, South Africa does depend upon the United States for its export market of these minerals, which are essential for providing the necessary funds for governmental expenditures and foreign exchange that are needed in order to support its high import content industries. The large percentage that exports have in S.A.’s gross national product increases this vulnerability. Thus, if we look at the evidence, it is clear that the United States has viable sanctions that it can implement against South Africa’s inhuman political and social policies. Although the United States has these leverages it refuses to utilize them, even though it would be in its interest to do so. It is vital that those persons who are genuinely concerned about human rights and the apartheid system apply whatever pressure is necessary to force the U.S. government to immediately utilize these leverages in the form of sanctions that would force the S.A. government to change its policies. The black community must take the responsibility for leading this effort.     

The structure of the South African labor market, 1970–83

The structure of the labor market in the Republic of South Africa over 1970–83 is strongly linked to the Natives Land Act of 1913, No. 27, which dispossessed blacks of their legal right to land ownership. One of the intended results of this act was to increase the supply of cheap black labor to South Africa’s predominantly white-owned industry. Thus, over the 1970–83 period, as before, blacks occupied the lowest ends of the educational, occupational, employment, and income distributions among all races in South Africa. On the other hand, the white minority lived at a standard equal to that of Americans and Scandanavians. However, even within these constraints, the demographics of South Africa are such that over the next decade or more, and even in the absence of major political upheaval, blacks may comprise an increasing percentage of the workforce and occupy positions which have been mainly occupied by whites to date.     

The optimal exchange rate regime for a small country

This paper examines the welfare comparisons between a freely floating, a managed floating, and a pegged exchange rate regime. We compare the expected loss under these regimes by modifying and generalizing Hamada’s (2002) model to accommodate intervention policy. We consider the de jure and de facto classifications, where the former is defined by the officially stated intentions of the monetary authorities, while the latter is based on the actually observed behavior of the nominal exchange rate. We first examine the exchange rate regimes from the central bank’s policy stance and the actual exchange rate policy. Next we assume that the regime which the private sector perceives according to an official announcement may be different from the one adopted actually by the central bank. We examine nine combinations of the de jure and de facto regimes. We interpret that, whenever they are different, there is informational friction between the central bank and the private sector. We show that the welfare level of a small country under freely floating is no less than that under other regimes, and that with some restrictive conditions, the de facto pegged or de facto managed floating is close to freely floating. This partly explains “Fear of floating” and “Fear of pegging”.     

Exports and Productivity Growth: First Evidence from a Continuous Treatment Approach

A recent survey of 54 micro-econometric studies reveals that exporting firms are more productive than non-exporters. However, previous empirical studies show that exporting does not necessarily improve productivity. One possible reason for this result is that most previous studies are restricted to analysing the relationship between a firm’s export status and the growth of its labour productivity, using the firms’ export status as a binary treatment variable and comparing the performance of exporting and non-exporting firms. In this paper, we apply the newly developed generalised propensity score (GPS) methodology that allows for continuous treatment, that is, different levels of the firms’ export activities. Using the GPS method and a large panel data set for German manufacturing firms, we estimate the relationship between a firm’s export-sales ratio and its labour productivity growth rate. We find that there is a causal effect of firms’ export activities on labour productivity growth. However, exporting improves labour productivity growth only within a sub-interval of the range of firms’ export-sales ratios. JEL no.  F14, F23, L60     

Entwicklungstendenzen der internationalen Handelsordnung

Summary Trends of Development in the System of International Trade. — A widely accepted practice of starting from the actual system of international trade when estimating future developments presupposes that no important changes in the system will occur. The author does not consider such an assumption justified. Even now, the beginnings of a modification of the rules of international trade in favour of development countries may be clearly discerned. These countries are largely exempt from an obligation to liberalize their trade. The principle of reciprocity does not apply to them. Also, the author is of opinion that plans to grant preferential treatment to development countries will sooner or later materialize, which would mean giving up the most-favoured nation clause. In addition, there are the changes due to the formation of regional economic groupings. Apart from the undeniable progress of both EEC and EFT A, the author expects a progressive integration in Latin America as well as Africa. Consequently, it is to be expected that, in the years ahead, the system of international trade will be further complicated by exception, preference and discrimination, all of which will probably lead also to changes in the flow of trade.

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Résumé Tendances dans le développement du système du commerce international. — Une pratique répandue de se baser sur le système actuel du commerce international en estimant le développement futur présuppose qu’il n’y aura pas de changements importants dans ce système. L’auteur est d’avis qu’une telle supposition n’est pas justifiée. Même en ce moment, on peut discerner les commencements d’une modification des règles du commerce international en faveur des pays à développer. Ces pays sont largement exempts de l’obligation de libéraliser leur commerce. Le principe de réciprocité ne s’applique pas à eux. Puis, l’auteur est d’avis que les projets d’accorder des tarifs préférentiels aux pays à développer se réaliseront sous peu, ce qui veut dire qu’on renoncerait à la clause de la nation la plus favorisée. En outre, il y a les changements provenant de la formation de groupes économiques régionaux. Outre le succès indéniable de la CEE et la EFTA, l’auteur s’attend à une intégration progressive en Amérique Latine et en Afrique. Par conséquent, il faut s’attendre à ce que le système du commerce international sera d’avantage compliqué, dans l’avenir, par des exceptions, des préférences et des discriminations, ce qui entrainera probablement des changements même dans l’écoulement du commerce.

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Resumen Tendencias en el sistema del comercio internacional. — La mayoria de las proyecciones sobre el desarrollo del comercio mundial parten del supuesto que el sistema internacional de intercambio vigente no sufrirá alteraciones de importancia. El autor opina que este supuesto es injustificado. Existen actualmente claros indicios de que las reglas del comercio mundial cambien en favor de los paises en desarrollo. Estos paises apenas han liberalizado su comercio, apartándose asi del principio de reciprocidad. Además, es muy probable que el empefio de estos paises por conseguir un trato aduanero preferencial para sus exportaciones por parte de los paises industrializados, tenga éxito; ésto supondria el abandono del principio de la nation más favorecida. El mecanismo institucional del comercio mundial tenderá a modificarse también debido a la formación de agrupaciones económicas regionales y como resultado de un progreso paulatino que cabe esperar en el proceso de integration económico iniciado en la America Latina y en Africa. A raiz de todo ésto, excepciones, preferencias y discriminaciones complicarán el marco institucional del intercambio mundial en los próximos anos, lo cual incidirá naturalmente en las corrientes internacionales de bienes y servicios.

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Riassunto Tendenze di sviluppo del regolamento internazionale del commercio. — L’uso largamente diffuso di prendere a base l’attuale regolamento del commercio mondiale per previsioni dello sviluppo del commercio internazionale, parte dalla supposizione che non si verificherà nessuna sostanziale modificazione. Questo secondo il parère dell’autore non è giustificato. Già attualmente sono riconoscibili chiare tendenze di modificare le regole dell ordinamento del commercio mondiale a favore dei Paesi in sviluppo. Questi Paesi sono largamente esonerati dall’obbligo délia liberalizzazione. Il principio délia reciprocità non trova su di loro applicazione. Inoltre secondo l’opinione dell’autore bisogna tener conto di questo: che gli sforzi di concedere preferenze doganali ai Paesi in sviluppo fra non molto avranno successo. Con ció ci si sarebbe anche allontati dal principio délia nazione piú preferita. A questo si aggiungono le trasformazioni che sono venute fuori dalla formazione di raggruppamenti economici regionali. Accanto agli evidenti successi délia CEE e dell’EFTA, l’autore calcola anche i progressi dell’integrazione nell’America latina e in Africa. In conformità a ció si deve far conto per i prossimi anni su una complicazione del regolamento mondiale del commercio per mezzo di eccezioni, preferenze e discriminazioni che potrebbero condurre anche a modificazioni délie correnti di commercio.

     

Traps for the American and world economies. Apropos the Russian translation of Joseph E. Stiglitz’s The Roaring Nineties. Seeds of Destruction (Sovremennaya ekonomika i pravo, Moscow, 2005)

The appearance of a new book by the winner of the 2001 Nobel Prize in economics Joseph Stiglitz, The Roaring Nineties. Seeds of Destruction (Norton, New York, 2003), was a major event in world economics. The author is more than merely an eminent American scholar. He served in the Clinton Administration as chair of the President’s Council of Economic Advisors (1993–1997). At the World Bank, he served as Senior Vice President and Chief Economist (1997–January 2001), took part in economic policy making in the United States and around the world, and visited dozens of countries. The Russian translation of his work was made by G. G. Pirogov, Dr. Sci. (Polit.), who succeeded in bringing home to the reader the frenetic spirit of Stiglitz’s ideas and making in the shape of notes important addenda and elucidations that develop the book’s ideas.     

Episodic Nonlinearity in Leading Global Currencies

We perform non-linearity tests using daily data for leading currencies that include the Australian dollar, British pound, Brazilian real, Canadian dollar, euro, Japanese yen, Mexican peso, and the Swiss franc to resolve the issue of whether these currencies are driven by fundamentals or exogenous shocks to the global economy. In particular, we use a new method of testing for linear and nonlinear lead/lag relationships between time series, introduced by Brooks and Hinich (J Empir Finance 20:385–404, 1999), based on the concepts of cross-correlation and cross-bicorrelation. Our evidence points to a relatively rare episodic nonlinearity within and across foreign exchange rates. We also test the validity of specifying ARCH-type error structures for foreign exchange rates. In doing so, we estimate Bollerslev’s (J Econom 31:307–327, 1986) generalized ARCH (GARCH) model and Nelson’s (1988) exponential GARCH (EGARCH) model, using a variety of error densities [including the normal, the Student-t distribution, and the Generalized Error Distribution (GED)] and a comprehensive set of diagnostic checks. We apply the Brooks and Hinich (1999) nonlinearity test to the standardized residuals of the optimal GARCH/EGARCH model for each exchange rate series and show that the nonlinearity in the exchange rates is not due to ARCH-type effects. This result has important implications for the interpretation of the recent voluminous literature which attempts to model financial asset returns using this family of models.