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Monday, December 8, 2014

Africa must make inclusive growth happen

Blind exuberance and naïve optimism has trumped honest commentary on Africa’s growth and boom story. Do not get me wrong. Africa is on the ascent, economically. The ranks of the urban consumer middle class is growing. There is money to be made in Africa.

For a majority of Africans, the Africa rising narrative is hollow. Africa’s growth is intangible for over half a billion men and women trapped in moribund rural economies. For nearly 70 percent of Africa’s youth who lack skills Africa’s growth is intangible. For the hundreds of millions of women who eke out a living in unproductive agricultural fields and whose small-scale business are starved of credit, Africa rising is empty words.

Zedekiah dropped out of a crowded rural public school at the tender age of 13. His teachers hardly showed up and Zedekiah had never held a textbook in his hands. When he dropped out at class 6, Zedekiah could not read at the level of a middle class urban child in class 3. Semi-illiterate and without skills, he is now 17, married and employed as motorcycle taxi (boda-boda) rider. There are millions of African children like Zedekiah. How much of the Africa rising narrative would teenagers like Zedekiah expropriate?

In many parts of rural Africa, over 60 percent of teenage girls are out of school because their families cannot afford sanitary towels, which cost only $2.50. These girls will join the ranks of millions of Africa’s young and illiterate mothers, vulnerable to disempowering poverty and lack of opportunity.

What does the Africa rising story mean to the soaring number of young Africans who make perilous trips across the Sahara Desert and the Mediterranean Sea, in an attempt to enter Europe illegally? According to the International Office on Migration, over 43,000 young Africans have lost their lives in a desperate bid to cross into Europe since 2000.

In Africa, rising incomes have disproportionally benefited the rich. For a majority of African families, growth in household disposable income has not matched gains in per capita GDP. Thus, to enable inclusive growth and prosperity, African countries must implement responsive policies, deep and sustained public investment in education and skills formation, appropriate industrialization, agriculture and rural infrastructure, affordable urban housing, water and sanitation, and labor market reforms.

Inclusive growth bolsters labor productivity, enhances health and education outcomes. Inclusive growth is the kind that breaks intergenrational poverty traps, expands opportunities in agriculture and manufacturing. Inclusive growth must build assets, create enduring wealth and deepen resilience at the household level.  In their book, The Spirit Level: Why Equality is Better for Everyone, Richard Wilkinson and Kate Pickett show that greater social and economic inclusion is strongly associated with longer and stronger periods of sustained economic growth.

Understanding and tackling the multidimensional nature of inequality and its impacts on different groups in society is critical for inclusive growth and shared prosperity. In his Apostolic Exhortation released in November 2013, Pope Francis wrote; “Some people continue to defend trickle-down theories, which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world”.

Nobel Laureate Paul Krugman believes that much of macroeconomics of the past 30 years was spectacularly useless at best and positively harmful at worst. The world needs new economic thinking to drive policies and investments for inclusive growth and participation, not trickle down, in the economy through accountable and transparent governance. Transparency and good governance matters. A recent report “The Trillion Dollar Scandal” released by ONE Campaign reveals that every year an additional 10 million children in sub-Saharan could be educated if corruption was eradicated and 500,000 more primary school teachers could be hired.

Inclusive economic growth is entwined with the political economy. In their book, Why Nations Fail: The Origins of Power, Prosperity and Poverty, Daron Acemoglu and James Robinson argue that extractive political and economic institutions lead to economic stagnation and poverty. This is especially true in societies polarized along ethnic or religious lines. Political bias is detrimental to inclusivity; hence we must pay attention to distributional effects of policies on different social groups.

Most of all, Africa must nurture a new generation of economic thinkers to re-imagine the prevailing economic model, which has produced odious growth at the top but failed spectacularly to deliver inclusive growth and shared prosperity.

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