Sources of stagnation in sub-Saharan Africa

This paper investigates the sources of economic stagnation in sub-Saharan Africa during the 1970s. Several policy variables are considered, as well as a set of ‘environmental’ variables which include climate, violence, export prices and other exogenous factors. The paper uses statistical analysis in an attempt to identify the relative importance of the policy variables and the ‘environmental’ variables, taken as groups. It also seeks to identify particular policy variables which seem to have been most significant in determining growth outcomes.The technique employed for investigation is reduced-form econometric estimation. In a preliminary analysis, the impact of the international trade environment on average economic performance in Africa during the period since independence is investigated. The results suggest an extremely close relationship between movements in export prices and average performance throughout the 20-year period.A second econometric exercise investigates the joint impacts of environmental and policy variables on growth in a cross-section of African states since 1970. The spirit of the approach is exploratory, and a relatively large number of variables are constructed and tested through multivariate analysis. A primary finding is that the environmental variables seem to have had more impact on growth as a group than the policy variables. This finding must be qualified, however, by the continuing lack of some important policy variables. Agricultural price data have not yet become available in sufficient quantity for cross-section analysis, nor have several important human resource variables and indices of the use of resources in the public domain.Among the policy variables which have been used for the analysis, those identified with retrenchment during periods of declining commodity prices seem most significant. Primary among these are the real effective exchange rate and some measures of effectiveness in foreign exchange reallocation during periods when imports must contract severely.In the final section of the paper, the cross-section results are used for a counterfactual analysis of the growth experiences of individual African states. Measures of growth opportunity cost are constructed which suggest the degree to which errors in management and uncontrollable circumstances have held states below their potential growth paths. The results suggest that some ‘success stories’ may owe much to good luck, while some ‘failures’ may well be due less to bad management than to adverse circumstances.