Africa: Why Western Economists Get It Wrong

Development economics as a field of study was formally launched in the 1950s by the Afro-Caribbean economist Arthur Lewis who, out of necessity, wanted to understand how his own country, Saint Lucia, could transform from an agro-based economy into a modern industrial state (later, in 1979, Lewis was awarded the Nobel Memorial Prize in Economics for this work, the only black person to have won the prize to date).

For Lewis, the key to providing a satisfactory answer to the problem of underdevelopment lay in studying those societies as they were and not in comparing them to some mythical ideal. Saint Lucia, like all developing countries, had a lot of underemployed labor in its agricultural sector. The question was how best to marshal this valuable resource into driving industrialization.

Sadly, development economics has moved away from Lewis’ pioneering contribution of studying poor countries on their own terms. For example, today’s development economists explain Tanzania’s lack of development as stemming from its inability to be more like Sweden. This way of studying development, termed the “subtraction approach”, has led us down a dark alleyway where there is more confusion than elucidation.

That, at least, is the charge leveled by economic historian Morten Jerven in his bookAfrica: Why Economists Get It Wrong published in 2015, but still circulating and prompting debate in academia and amongst practitioners.

Aided by the revolution in computing power and by the supposed triumph of neoliberal thinking, a certain type of influential development economics arose in the 1980s whose dominant methodological approach was the compilation of cross-country datasets for the purposes of statistical analyses.

These studies, termed the “first generation growth literature” by Jerven, set out to show that economic growth depended on a standard set of globally relevant factors. For instance, government involvement in the economy was hypothesized to be a key factor explaining why poor countries had grown slowly, betraying the extent to which the ideological currents of the time influenced economic research.

Jerven shows that much of this research was flawed at a conceptual level. First, the data for most African countries was collected at a time when their economies were in crisis. This data was therefore not a typical representation of how these economies functioned in normal times.

If anything, the data were an outcome and not the cause of the crisis. Second, the data for industrialized countries was reverse-engineered into the models to fit the story. For example, industrialized countries would automatically be presumed to have zero government involvement in the economy even though this was not the case (subsidies to US and European farmers, anyone?). Lastly, the economists working in the 1980s and 1990s were trying to explain a “chronic failure of growth in Africa”, something that had not happened in reality. African economies grew healthily in the 1960s and 1970s and did not grow at all in the 1980s and 1990s.

Continue reading on Africa is a country

By Grieve Chelwa