East Asian Tigers and African Lions

William Easterly has recently argued that contemporary poverty in African nations may largely be accounted for by technological differences that date back for centuries, if not millennia:

1500 AD technology is a particularly powerful predictor of per capita income today. 78 percent of the difference in income today between sub-Saharan Africa and Western Europe is explained by technology differences that already existed in 1500 AD – even before the slave trade and colonialism. Moreover, these technological differences had already appeared by 1000 BC. The state of technology in 1000 BC has a strong correlation with technology 2500 years later, in 1500 AD...

A large role for history is still likely to sit uncomfortably with modern development practitioners, because you can’t change your history. But we have to face the world as it is, not as we would like it to be...

In a recent speech in Kampala, Gordon Brown offered a prognosis (coupled with a long list of policy recommendations) that was decidedly less gloomy about the future of Africa. Building on the observation that the continent is "full of more untapped potential and unrealised talent than any other," Brown continued as follows:

Twenty years ago nobody would have predicted that China and India would be the big drivers of growth and political superpowers they have become. And there is no reason to believe the countries of Africa cannot make similar leaps in the decades to come.... just as people have spoken of an American century and an Asian century, I believe we can now speak of an African century...

I believe the new African growth will come from five sources;

• a faster pace of economic integration in Africa's internal market, and between your market and those of other continents, facilitated by investment in infrastructure
• a broader based export-led growth, founded on new products and services
• investment in the private sector from African and foreign sources in firms that create jobs and wealth
• the up-skilling of the workforce, including through the acceleration of education provision, IT infrastructure and uptake and finally through
• more effective governance to ensure that effective states can discharge their task of creating growth and reducing poverty

Each of these five priorities will be difficult to achieve. But we should remember the value of the prize. Because if we can agree a new model of post-crisis growth then Africa - already a 1.6 trillion economy - will continue to grow even faster than the rest of the world. This is not my assessment, but that of the world's leading companies and analysts. For example a report just published by the McKinsey Global Institute claims that Africa's consumer spending could reach 1.4 trillion dollars by 2020 - a 60% increase on 2008. In other words in ten years African consumer spending will be as big as the whole African economy is today.

It is those sorts of projections which mean people are now rightly talking not just of East Asian tigers, but of African lions.

Brown is careful to note that this rosy scenario is a "possibility rather than a probability" and that "it will happen through choice not chance." But, as Shanta Devarajan has recently observed, the choices necessary to make it happen are already being made:

In recent years, a broad swath of African countries has begun to show a remarkable dynamism.  From Mozambique’s impressive growth rate (averaging 8% p.a. for more than a decade) to Kenya’s emergence as a major global supplier of cut flowers, from M-pesa’s mobile phone-based cash transfers to KickStart’s low-cost irrigation technology for small-holder farmers, and from Rwanda’s gorilla tourism to Lagos City’s Bus Rapid Transit system, Africa is seeing a dramatic transformation.  This favorable trend is spurred by, among other things, stronger leadership, better governance, an improving business climate, innovation, market-based solutions, a more involved citizenry, and an increasing reliance on home-grown solutions.  More and more, Africans are driving African development.

Shanta links to a long list of emerging African success stories.  

While the economic consequences of an African resurgence will be major, the social implications could be even more profound. I believe that the rise of the African lions will do more to shatter racial stereotypes in the United States and elsewhere than any government policy or electoral outcome. But that is a topic for another post.

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Update (7/25). I do not dispute the empirical claims made by Comin, Easterly and Gong, nor mean to suggest that that Brown's speech and Devarajan's post have any bearing on these claims. But I have serious doubts about the relevance of their findings for identifying future centers of economic dynamism or for shaping development policy. History can matter for long periods of time (for instance in occupational inheritance or the patrilineal descent of surnames) and then cease to constrain our choices in any significant way. Once reliable correlations can break down suddenly and completely; history is full of such twists and turns. As far as African prosperity is concerned, I believe that a discontinuity of this kind is inevitable if not imminent.

From an overview of the McKinsey report referenced by Brown:

While Africa's increased economic momentum is widely recognized, less known are its sources and likely staying power... Africa's growth acceleration was widespread, with 27 of its 30 largest economies expanding more rapidly after 2000. All sectors contributed, including resources, finance, retail, agriculture, transportation and telecommunications. Natural resources directly accounted for just 24 percent of the continent's GDP growth from 2000 through 2008. Key to Africa's growth surge were improved political and macroeconomic stability and microeconomic reforms... total foreign capital flows into Africa rose from $15 billion in 2000 to a peak of $87 billion in 2007... Today the rate of return on foreign investment in Africa is higher than in any other developing region.