The result of the SAPs – and their various later incarnations, including today’s PRSPs (Poverty Reduction Strategy Papers) – was a stagnant economy that has failed to grow (in per capita terms) for three decades. During the 1980s and 90s, per capita income in Sub-Saharan Africa fellat the rate of 0.7 per cent per year. The region finally started to grow in the 2000s, but the contraction of the preceding two decades meant that the average annual growth rate of per capita income in Sub-Saharan Africa between 1980 and 2009 was 0.2 per cent. So, after nearly thirty years of using ‘better’ (that is, free-market) policies, its per capita income is basically at the same level as it was in 1980.
So, the so-called structural factors are really scapegoats wheeled out by free-market economists. Seeing their favoured policies failing to produce good outcomes, they had to find other explanations for Africa’s stagnation (or retrogression, if you don’t count the last few years of growth spike due to commodity boom, which has come to an end). It was unthinkable for them that such ‘correct’ policies could fail. It is no coincidence that structural factors came to be cited as the main explanations of poor African economic performance only aftergrowth evaporated in the early 1980s.
Pointing out that the above-mentioned structural variables were invoked in an attempt to save free-market economics from embarrassment does not mean that they are irrelevant. Many of the theories offered as to how a particular structural variable affects economic outcome do make sense. Poor climate can hamper development. Being surrounded by poor and conflict-ridden countries limits export opportunities and makes cross-border spill-over of conflicts more likely. Ethnic diversity or resource bonanzas can generate perverse political dynamics. However, these outcomes are not inevitable.
To begin with, there are many different ways in which those structural factors can play out. For example, abundant natural resources can create perverse outcomes, but can also promote development. If that weren’t the case, we wouldn’t consider the poor performances of resource-rich countries to be perverse in the first place. Natural resources allow poor countries to earn the foreign exchanges with which they can buy advanced technologies. Saying that those resources are a curse is like saying that all children born into a rich family will fail in life because they will get spoilt by their inherited wealth. Some do so exactly for this reason, but there are many others who take advantage of their inheritance and become even more successful than their parents. The fact that a factor is structural (that is, it is given by nature or history) does not mean that the outcome of its influence is predetermined.
Indeed, the fact that all those structural handicaps are not insurmountable is proven by the fact that most of today’s rich countries have developed despite suffering from similar handicaps.[4]
Let us first take the case of the climate. Tropical climate is supposed to cripple economic growth by creating health burdens due to tropical diseases, especially malaria. This is a terrible problem, but surmountable. Many of today’s rich countries used to have malaria and other tropical diseases, at least during the summer – not just Singapore, which is bang in the middle of the tropics, but also Southern Italy, the Southern US, South Korea and Japan. These diseases do not matter very much any more only because these countries have better sanitation (which has vastly reduced their incidence) and better medical facilities, thanks to economic development. A more serious criticism of the climate argument is that frigid and arctic climates, which affect a number of rich countries, such as Finland, Sweden, Norway, Canada and parts of the US, impose burdens as economically costly as tropical ones – machines seize up, fuel costs skyrocket, and transportation is blocked by snow and ice. There is no a priorireason to believe that cold weather is better than hot weather for economic development. The cold climate does not hold those countries back because they have the money and the technologies to deal with them (the same can be said of Singapore’s tropical climate). So blaming Africa’s underdevelopment on climate is confusing the cause of underdevelopment with its symptoms – poor climate does not cause underdevelopment; a country’s inability to overcome its poor climate is merely a symptom of underdevelopment.
In terms of geography, the landlocked status of many African countries has been much emphasized. But then what about Switzerland and Austria? These are two of the richest economies in the world, and they are landlocked. The reader may respond by saying that these countries could develop because they had good river transport, but many landlocked African countries are potentially in the same position: e.g., Burkina Faso (the Volta), Mali and Niger (the Niger), Zimbabwe (the Limpopo) and Zambia (the Zambezi). So it is the lack of investment in the river transport system, rather than the geography itself, that is the problem. Moreover, due to freezing seas in winter, Scandinavian countries used to be effectively landlocked for half of the year, until they developed the ice-breaking ship in the late nineteenth century. A bad neighbourhood effect may exist, but it need not be binding – look at the recent rapid growth of India, which is located in the poorest region in the world (poorer than Sub-Saharan Africa, as mentioned above), which also has its share of conflicts (the long history of military conflicts between India and Pakistan, the Maoist Naxalite guerrillas in India, the Tamil–Sinhalese civil war in Sri Lanka).
Many people talk of the resource curse, but the development of countries such as the US, Canada and Australia, which are much better endowed with natural resources than all African countries, with the possible exceptions of South Africa and the DRC (Democratic Republic of Congo), show that abundant resources can be a blessing. In fact, most African countries are not that well endowed with natural resources – fewer than a dozen African countries have so far discovered any significant mineral deposits.[5] Most African countries may be abundantly endowed with natural resources in relative terms, but that is only because they have so few man-made resources, such as machines, infrastructure, and skilled labour. Moreover, in the late nineteenth and early twentieth centuries, the fastest-growing regions of the world were resource-rich areas such as North America, Latin America and Scandinavia, suggesting that the resource curse has not always existed.
Ethnic divisions can hamper growth in various ways, but their influence should not be exaggerated. Ethnic diversity is the norm elsewhere too. Even ignoring ethnic diversities in immigration-based societies such as the US, Canada and Australia, many of today’s rich countries in Europe have suffered from linguistic, religious and ideological divides – especially of the ‘medium-degree’ (a few, rather than numerous, groups) that is supposed to be most conducive to violent conflicts. Belgium has two (and a bit, if you count the tiny German-speaking minority) ethnic groups. Switzerland has four languages and two religions, and has experienced a number of mainly religion-based civil wars. Spain has serious minority problems with the Catalans and the Basques, which have even involved terrorism. Due to its 560-year rule over Finland (1249 to 1809, when it was ceded to Russia), Sweden has a significant Finnish minority (around 5 per cent of the population) and Finland a Swedish one of similar scale. And so on.
4
See H-J. Chang, ‘Under-explored treasure troves of development lessons – lessons from the histories of small rich European countries (SRECs)’ in M. Kremer, P. van Lieshoust and R. Went (eds.),
5
See H-J. Chang, ‘How important were the “initial conditions” for economic development – East Asia vs. Sub-Saharan Africa’ (ch. 4) in H-J. Chang,