Why Economists Fail in Africa

A great new book is just out by Morten Jerven called Africa: Why Economists Get it Wrong. It is a follow up to his excellent 2013 book, Poor Numbers: How We Are Misled by African Development Statistics and What to Do about It that I featured several times in this blog.

He argues: “There has been a chronic failure among economists to explain growth in Africa. The methods and analytical angles they have used to explain relative failure in Africa were conceived in the 1990s, but these were unsuitable for explaining growth in the 1960s or growth since the 2000s”.

Jerven does not deny that there has been economic failure in Africa. Zimbabwe is of course a case in point. But this was not generic failure, over the whole ‘post-colonial’ period across a whole continent. Rather there have been variations: growth in fits and starts, cycles of successes and failures, often with success being hidden by the aggregate statistics given the informal nature of much economic activity (certainly the case for Zimbabwe, as I’ve argued many times).

But what he calls this “erroneous stylised fact” of generic failure over a long period has been the basis for an ahistorical, decontextualised analysis of African growth patterns, which attempt to explain the African “shortfall” through cross-country or cross-continental comparison. The assumption is that it was a set of “initial conditions” that created the African predicament. Conditions such as environmental factors, ethnic fragmentation and a lack of social capital have all been suggested to have a direct role in the failure of economic growth. Just being African seems to be a problem according to some of this analysis.

However, Jerven argues “the causality story – initial conditions causing slow growth – is wrong and therefore not useful for policy advice”. Moreover, he argues “policy typologies such as the distinction between “closed” and “open” economies, or the related “bad” and “good” policies, do not correlate coherently with episodes of economic growth in African countries”.

The title of this blog is a reference to the much-lauded book, ‘Why Nations Fail’ ,that I have reviewed before on this blog’. Jerven also takes this argument to task as it offers a far too simplistic and functionalist a view of institutions and governance, and, he argues, gets causality back-to-front. Effective institutions and ‘good’ governance emerge from development, and are not so much its precursors, he suggests. As he notes: “several decades were wasted putting a lot of effort into curing symptoms that were thought to be causes”.

So what are the key complaints Jerven has against economics as applied to Africa? It’s of course not all economics and economists that his ire is focused on, but a certain style of aggregated economic reasoning derived from comparative cross-country econometrics. Why has this approach been so problematic, and what can be done about it?

The problems Jerven outlines are multiple. The data that are used is often very shaky and patchy. Models derived from such data are inevitably suspect: garbage in, garbage out, as the adage goes. Aggregation across countries, and comparisons with patterns elsewhere miss out on the particularities of different economies and their histories, and so end up offering false or at least highly simplistic explanations. Africa, of course is not a country, but many and diverse nations, regions and economies with complex histories. But simple narratives prevail and are reinforced by aggregate economic analysis. Jerven identifies a few choice media quotes from The Economist over time that regurgitate the narrative that ‘Africa’ is a disaster, or alternatively today, ‘Africa’ is rising; statements that are almost completely meaningless and not supported by solid data.

The consequences of these faulty analyses – and the media tropes that follow on – are of course very real, as the book points out. Decades of structural adjustment policies were pushed across Africa on false premises, and with disastrous consequences. The arguments for institutional reform and good governance as preconditions for development may fail, as these new institutional forms may have to emerge from developmental processes, and be appropriately adapted to contexts (just as happened in Europe or the US). And, of course, the generic prescriptions for a whole continent fail to pay attention to location and specificity, and of course political economy and history.

So what to do? There are clearly a number of important challenges. One of course is to improve the data that analyses are based on. If we are relying only on very poor numbers, then it’s difficult to expect anything other than the garbage that is currently churned out. With better spatial differentiation, improved time series and so on, we can get to grips with variation and pattern, and offer greater nuance in our analyses. Good numbers really do matter. If growth pathways are so much to do with context – of politics, history, and so on – then cross-country econometric comparisons, especially with massively unlike settings (say comparing Asia or Europe with Africa) are really largely a waste of effort. Instead, Jerven argues, we need to move from cross-country econometrics to understanding particular economies in context, and understanding how African economies actually work. This means a focus on real markets, not the abstractions of models; informal and formal economic activity and the interactions between, not just what is in the formal statistics; and the historical and political factors that frame and shape options for the future.

The profession of economics with its current false scientism and its obsession with quantitative method has, over time, distanced itself from the complexities on the ground. The search for grand, universalising explanations for growth, poverty, inequality or whatever, has lost sight of the particular, contingent, conjectural conditions that create change and transformation. This is a profound methodological point. The book hints at the need for a revolution in development economics that brings back the older traditions of political economy and economic history. Such analyses must be focused not on assumed or inferred economic rules or an obsession with initial conditions driving uniform change, but the particular operations of particular economies – of nations, regions in particular settings.

Zimbabwe has a proud history of this type of economics (alongside some of the other more problematic sort). The Department of Economic History at UZ has long been an important source of insight into economic change over time, rooted in particular locations. The Zimbabwe Institute of Development Studies, sadly no more, was a focus for political economy analysis of labour, land, industrial change and more by many key scholars. Today, work at institutes such as the African Institute for Agrarian Studies, the Centre for Applied Social Sciences or the Labour and Economic Development Research Institute continue this work. Sustaining these intellectual traditions – rooted in place, context and history – will be important, as Zimbabwe seeks an alternative growth path into the future. Such analyses should help resist the more simplistic and often dangerous prescriptions from the flawed economics of the mainstream.

This post was written by Ian Scoones and first appeared on Zimbabweland

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