Comparative Institutional Advantage and the Appropriate Development Model for Sub-Saharan Africa

The theory of comparative institutional advantage posits that certain types of firms locate production facilities in a particular location and avoid other locations due to unique institutional advantages and disadvantages. In sub-Saharan Africa, neoliberal policies, weak and corrupt states, and Transnational Corporations have created a particularly destructive variant of capitalism. African capitalism generates little in the way of economic growth, rewards mainly the TNC and the African elites, and undermines Africa’s economic future via activities that are utterly extractive in nature. African capitalism is facilitated directly by the WTO, the structural adjustment policies of the IMF and the World Bank, and the institutional structures of African economies. After outlining the problems with African capitalism as currently structured, the paper goes on to suggest an alternative to this model involving experimental, embedded, grass roots development efforts that build on domestic cultural institutions that would generate significantly more positive outcomes for the people of sub-Saharan Africa. By abandoning neoliberal policies, it might be possible to create a better economic model that would build on community-centered institutional strengths to benefit a greater proportion of the population.

Geoffrey E. SchneiderEmail:

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Geoffrey Schneider   is Associate Professor of Economics and Director of the Teaching and Learning Center at Bucknell University. He received his B.A. in economics from Northwestern University, and his Ph.D. in economics at the University of North Carolina at Chapel Hill, where he wrote his dissertation on the economic development of South Africa. Professor Schneider regularly teaches courses on economic principles, political economy, African economic development, comparative economic systems and an interdisciplinary capstone on South Africa. He has recently co-authored new editions of two textbooks, Economics: A Tool for Critically Understanding Society (with Tom Riddell, Jean Shackelford and Steve Stamos), and Introduction to Political Economy (with Charles Sackrey and Janet Knoedler). He has published a number scholarly articles on economic development and comparative economic systems, and on teaching and pedagogy. His current research includes a series of papers on comparative institutional advantage and economic systems, including theoretical work and case studies of Sweden, Nicaragua, and sub-Saharan Africa. He was recently selected as the recipient of the Bucknell University Class of 1956 Lectureship Award for Inspirational Teaching.