A Decade of Economic Slippage
SUB-SAHARAN AFRICA. World Bank calls for political reforms and less corruption to `unleash human potential'
DEVELOPMENT economists are hoping African governments will take a cue from East European political reform. If there is to be any improvement in the economic lot of Sub-Saharan Africa, according to World Bank assessments, then governments must unleash their countries' ``human potential'' with profound political reforms. This is the underlying notion of a 30-year retrospective published by the World Bank in November entitled ``Sub-Saharan Africa: From Crisis to Sustainable Growth.'' Departing from its official stance of assessing a country on the basis of its financial situation, not its politics, the World Bank calls for government in the region ``that concentrates its efforts less on direct interventions and more on enabling others to be productive.''
More free enterprise
This recommendation for less government and more free enterprise has spurred an ongoing debate among African specialists.
Adebayo Adedeji, executive secretary of the UN Economic Commission for Africa (ECA), contends that the ``World Bank is asking countries to move from one extreme to the other.'' In an interview from ECA headquarters in Addis Ababa, Ethiopia, Mr. Adedeji disagreed with the bank's priority on transferring many state-owned enterprises to private hands in Africa. ``It is not necessarily true that private enterprise is more efficient,'' he said.
Bank officials say that aside from the ``remarkable dynamism of the informal sector'' [which operates outside official control], disincentive and inefficiency are the norm in the region's economy. Sub-Saharan Africa's share of the world market since 1960 has halved to 1.5 percent.
The November bank report plainly refers to widespread patronage and waste that stymie development: ``Ultimately, better governance requires political renewal. This means a concerted attack on corruption from the highest to the lowest levels.''
Political credibility will lend itself to financial credibility, the report stresses, as political liberalization will renew the confidence of international aid donors and commercial creditors.
Home to many poor
Home to many of the world's poorest people, Africa receives more official foreign assistance and debt relief relative to its gross domestic product than any other region in the world. Nonetheless, says Stanley Fischer, World Bank vice president for development economics, the 1980s will be known as ``the decade of a total loss for Africa. It has regressed rather than progressed.''
With a collective external debt that rivals its collective gross national product, the living standards of most of the 45 countries of Sub-Saharan Africa can hardly hold steady, much less improve, he says.
Given the current 3.3 percent annual birthrate, the continent's burgeoning population may double to 1 billion by the year 2000, presenting the toughest challenge for the continent to feed itself and to preserve its natural resources.
In its annual report on external debt of developing countries, issued Dec. 18, the World Bank identifies several inhibitors to Africa's development: lack of a diversified export base, heavy dependence on primary commodity exports (ranging from coffee to minerals), a fast-growing and poorly educated population, and a largely ineffective health-care system that only exacerbates the severity and incidence of disease.
Some 85 percent of African assistance comes from official sources ranging from the World Bank to national governments. Capital flows to the region, including international aid, must increase by 4 percent a year, to reach $22 billion by the year 2000, the bank says.
The 300-page study attributes the region's crisis largely to internal problems of low savings, low investment, and low productivity. All of this, says World Bank vice president for Africa Edward Jaycox, is because ``human potential'' in Africa is squandered.
The November report ``comes out in the context of the history of disagreement over just what to do about the region's recovery,'' says a senior UN official. A World Bank report published in March 1989, ``Africa's Adjustment and Growth in the 1980s,'' looked at Africa's economic picture in relative terms. It said that export earnings fell, but falling oil prices helped importers; that terms of trade declined, but are still 15 percent higher than in the 1970s; that export prices in Africa have fallen less than elsewhere; and that the region's share of overseas development assistance has doubled since 1970.
The March report was met with consternation by some regional specialists. Shortly after its release, ECA issued a disclaimer, saying that the report was skirting the issue of the need for more directed development.
Adedeji questions the bank's analysis: ``In fact, the government has a role to play in the transformation of economies. Take agriculture, for example. Last year, when cocoa fetched a high price, the export and marketing boards set up by governments were disbanded, and profits were made by middle men and not by the farmers. When the market slumped, farmers bore the brunt of low prices, resulting in a disincentive for producers.''
Adedeji strongly supports government's help in price stabilization so that cocoa and other producers are ensured of a market value for their goods. Fifty percent of Sub-Saharan Africa's export earnings go toward servicing its debt. ``Every time commodity prices go down, interest rates go up and the debt burden increases,'' he says.
``This year cocoa prices plummeted by 50 percent, if next year they increase by 20 percent, the bank will regard this as growth.''
Mr. Fischer asserts that ``what's missing in development is the positive role of the state.'' Mr. Adedeji thinks the bank should go further with this view.
Throughout the debate the World Bank persists with the assumption that African governments whose leaders have adopted reforms, should win further external support. ``If we only help countries that adjust,'' Fischer contends, ``there's a better incentive for engaging in structural adjustments.''
Adedeji concedes that the bank's posture is improved: ``The general thrust of the November report is 1,000 percent better than the March report because it identifies the need for capacity building - improved health, education, government promotion of cooperatives. It begs the question that if the Bank can make such a shift in such a short period of time, just how theoretical is their approach toward African recovery?''
Referring to the ECA reaction, Fischer smiled: ``I guess it was a compliment of sorts.'' He added that positive response to a report does not necessarily mean that aid will eventuate.
Mr. Jaycox refers to the early 1980s as a period of ``severe aid fatigue'' (of donors and investors), when Africa suffered from a dwindling response to its economic crisis. ``At last the vicious cycle of fatigue and despair has been broken. We need to build on that. Just as Europe was the aid priority after World War II; just as South Asia was the priority in 1960s; so Sub-Saharan Africa should be the international community's development priority for the 1990s and into the next century.''
The UN official says the international community responds in a ``here and now fashion'' to the needs of the developing world. '' Africa's problems have been so pressing for so long, he laments, that the severity of its crisis just doesn't pack the punch of more topical events.