Post by Tukuler al~Takruri on Jan 31, 2019 18:52:53 GMT -5
The African Model: Asia’s path may not work, but there is an alternative
Labour-intensive export-led industrialisation worked for China, but Africa is not China. It must come up with its own strategies to reduce poverty.
Africa’s economic progress over the last 25 years has been a mixed bag. On the one hand, the proportion of people living in extreme poverty has declined from 54% to 41%. On the other, the absolute number of people living in poverty has increased in this same period as population growth has outpaced the 0.5% average fall in the poverty rate.
In order to reduce poverty at a faster pace, some development specialists suggest Africa should follow the path previously taken by several Asian economies: namely, embarking on a path of labour-intensive export-led industrialisation.
Ethiopia may also be illustrative. The East African nation is one of the few exceptions on the continent in that it is actively following the path of Asian-style labour-intensive export-led growth. Its wage gap with China is in the order of 1:8. Its strong state is concertedly pursuing industrialisation. And it has created thousands of new manufacturing jobs. Yet, so far, economists have found few signs that these developments are significantly improving the material well-being of Ethiopia’s lower-income groups.
This suggests that rather than producing for international markets, most of Africa’s economic growth in the coming decades may be better realised by catering to and connecting growing domestic markets.
Africa’s “population boom” does not just create challenges but also opportunities through a process of domestic market integration. Growing domestic markets enhance consumer demand, while rapid urbanisation increases labour productivity. The greater population density of cities allows for a higher degree of resource sharing, access to public goods such as a health and education, divisions of labour, and faster spill-overs of knowledge. A stronger focus on domestic markets also tends to strengthen the linkages between a country’s agricultural, industrial and service sectors without having one sector alone (i.e. manufacturing) pulling the economy to higher GDP levels.