Globalization and Development in Sub-Saharan Africa

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Author(s):
UN
31 Dec 2013
Pages:
93
ISBN:
9789210559102 (PDF)
http://dx.doi.org/10.18356/55ccd968-en

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This publication critically reviews the effects of globalization on sub-Saharan Africa over the last three decades. The large gains expected from opening up to international economic forces have, to date, been limited, while there have been significant adverse consequences. Foreign direct investment in the region has been largely confined to resource—especially mineral—extraction, even as continuing capital flight has reduced financial resources available for productive investments. Premature trade liberalization has undermined prospects for the economic development of productive capacities in many sectors – including manufacturing and agriculture -- are not sufficiently competitive to take advantage of improvements in market access.
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  • Introduction
    Africa’s growth performance since gaining independence from colonial rule in the 1960s was disappointing. So used are we to this assessment that we forget that Africa was, at least in the first decade of independence, growing faster than other developing regions in the world. However, events in the late 1970s dramatically set back the continent and led to stagnation and regression through to the 1980s and 1990s. Africa’s role in the global economy is largely responsible for this, expressed most visibly in insufficient resource mobilization and capital formation as well as capital flight, and in the continent’s lopsided trade relations.
  • Resource mobilization for development
    To overcome the development and poverty challenges facing SSA, strong and robust growth is widely recognized as a precondition. Many observers (e.g. Blair Commission Report, 2005) target 6-8 per cent of annual growth. It is very difficult to reduce poverty through redistribution alone when average income levels are low, as is the case in SSA, although growing income inequality certainly has not helped. Further, political stability and development prospects decrease with greater economic insecurity (UN 2008). However, there is little evidence that the policies of the three decades have helped the SSA region mobilize resources to finance such growth, to reduce economic insecurity and to generate investment and structural transformation.
  • Aid: Unpredictable, fragmented and welfare-oriented
    In the absence of stronger private capital flows to Africa, aid can and has contributed to narrowing the external financing gap. It has also successfully done so in other regions, most notably and famously in post-war Europe in the form of the Marshall Plan. Nonetheless, the net, long-term, actual contribution of aid to development has been controversially debated for decades.
  • Trade and development
    In line with the 1981 Berg Report, much World Bank research has suggested for a long time that Africa would gain most by specializing in agriculture. Removal or reduction of subsidies and protection in the North would give farmers in SSA the opportunity to significantly increase their shares in these markets, and would allow them to benefit from their comparative advantage in agriculture. Yet, the evidence of African agricultural competitiveness remains dubious for most crops. Reliance on trade liberalization and static comparative advantages in agriculture or resource-based industries is also at odds with the development experience of almost all earlier development or rapid growth experiences, which have invariably involved pursuing industrialization and diversification strategies (Chang 2003).
  • Conclusions
    Developments since the 1980s have fundamentally changed the environment and conditions for developmental states attempting to pursue selective industrial or investment and technology policy. Most importantly, economic liberalization – at both national and international levels – has seriously constrained the scope for government policy interventions, especially selective industrial promotion efforts. This is especially apparent in international economic relations, but is also true of domestic or national policy environments, where World Bank and IMF policy conditionalities as well as WTO and other obligations have radically transformed the scope for national economic development policy initiatives.
  • References
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