Ending Africa's Poverty Trap

AFRICA'S DEVELOPMENT CRISIS is unique. Not only is Africa the poorest region in the world, but it was also the only major developing region with negative growth in income per capita during 1980-2000 (table 1). Some African countries grew during the 1990s, but for the most part this growth recovered ground lost during the 1980s. Moreover, Africa's health conditions are by far the worst on the planet. The AIDS pandemic is wreaking havoc, as is the resurgence of malaria due to rising drug resistance and the lack of effective public health systems. Africa's population continues to soar, adding ecological stresses to the economic strains. Policy-based development lending to Africa over the past twenty years, known as structural adjustment lending, did not solve the problem. A heavy debt burden is evidenced by the 155 Paris Club restructurings of African countries' debt between 1980 and 2001, much more than for any other region. In general, Africa remains mired in poverty and debt. This paper focuses on the tropical sub-Saharan African countries with populations of at least 2 million people in 2001. We leave out North Africa (Algeria, Egypt, Libya, Morocco, and Tunisia,), southernmost Africa (Botswana, Lesotho, Namibia, South Africa, and Swaziland), and a number of very small economies (Cape Verde, Comoros, Djibouti, Equatorial Guinea, Gabon, The Gambia, Guinea-Bissau, Mauritius, Sao Tome and Principe, and Seychelles). Both nontropical ends of Africa are much richer than tropical Africa. They grow temperate crops, escape the worst of malaria, enjoy (in the south) vast deposits per capita of gold and diamonds, and (in the north) benefit from proximity to EU markets. The smallest economies present idiosyncrasies that would distract more than inform the analysis. The thirty-three sub-Saharan African countries on which we focus (and which are listed in table 2) had a combined population of 617 million in 2001, with a population-weighted average annual income of $271 per person, or a mere 74 cents a day. Every country on the list is a low-income country according to World Bank country classifications, and twenty-six are among the forty-nine Least Developed Countries in the world by the United Nations classification. Of the four countries with income per capita of $500 or more, three (Angola, Cameroon, and Congo) are oil exporters, and only Cote d'Ivoire, which is currently in a vertiginous political and economic collapse, is a non-oil exporter. Every country on the list has a life expectancy at birth below sixty years, and in all but Ghana, Madagascar, and Sudan life expectancy at birth is below fifty-five years. Child mortality rates (deaths before the age of five per 1,000 live births) are above 100 in every country. The standard diagnosis is that Africa is suffering from a governance crisis. With highly visible examples of profoundly poor governance, for example in Zimbabwe, and widespread war and violence, as in Angola, the Democratic Republic of the Congo, Liberia, Sierra Leone, and Sudan, the impression of a continent-wide governance crisis is understandable. Yet it is wrong. Many parts of Africa are well governed even though stuck in poverty. Governance is a problem, but Africa's development challenges run much deeper. Using our thirty-three-country sample, table 2 reports some common governance indicators that make this point. The first column presents a ranking of African governance compiled by Steven Radelet, (1) who regresses a set of widely used World Bank governance indicators due to Daniel Kaufmann, Aart Kraay, and Massimo Mastruzzi on GDP per capita, (2) and ranks countries according to the residuals from that regression, thereby standardizing the measurement of governance by level of income. This procedure recognizes that poorer countries have systematically poorer governance measures than richer countries, since good governance itself requires real resources. Well-governed African countries are defined as those with residuals at least 1 standard error above, and poorly governed countries as those with residuals at least 1 standard error below, the regression line. …