What is the main problem of African economic systems?

What is the main problem of African economic systems?

Being an African country appears to negatively correlate with economic growth despite controlling for human capital, geographical endowment, and other common input factors in the standard model (Engelbert, 2000). Indeed, poverty, political instability, and corruption appear to be pervasive in modern African states. Moreover, in an attempt to make sense of Africa’s historic development path. Moreover, I identified that much of the underdevelopment that we currently observe in Africa is rooted in Africa’s colonial past.

The African population has been heavily exploited in colonial times, especially in the form of slavery, which is a consequence of colonialism. According to the Stanford Encyclopedia of Philosophy, colonialism is defined as the “practice of domination, which involves the subjugation of one people to another” (2017).

With the onset of exploration starting in the 15th century, European nations began their centuries-long subjugation of the African people. Arguably, the trans-Atlantic slave trade was the most horrendous consequence of colonialism for Africa. While slavery in Africa existed prior to the 15th century, colonialism brought it to an unprecedented scale (Nunn, 2008). It was estimated that around 20 million slaves were exported from Africa during the colonial era, out of which 12 million were displaced through the trans-Atlantic slave trade (Nunn, 2008).

In addition to the 20 million slaves successfully captured. We must also acknowledge that many more were killed in the raids to acquire slaves.

Aside from the sheer brutality of slavery, it had a devastating effect on the African demographics. Nunn estimated that, as a result of slavery, the African population is only half of what it could have been by 1850 (2008). Aside from the dramatic displacement of the population, colonialism and slavery had far wider consequences that persistently affected the African economies.

In addition to the blow on demographics, colonialism exacerbated the ethnic fractionalization in Africa, which restrained economic prospects and promoted ethnic tension. With more than 3000 ethnic groups and over 2000 spoken languages, Africa is the most diverse continent on earth (Easterly & Levine, 1997).

However, the high degree of ethnolinguistic diversity may not be worth celebrating under the economist’s lens.

Railway map of Africa, including tracks proposed and under construction, The Statesman’s Yearbook, 1899.

High levels of ethnic fractionalization exhibited strongly negative correlations with a lower provision of public goods and worse social cohesion (Easterly & Levine, 1997). Easterly & Levine’s study found that the excessive degree of ethnolinguistic diversity accounted for 28% of the growth differential between Africa and East Asia (1997). One explanation for this can be traced back to slavery. To acquire slaves to engage in trade with the Europeans, African villages and tribes often raided each other. The constant rivalry between communities discouraged the formation of larger communities and perpetuated the fragmentation (Nunn, 2008).

In addition to slavery, Europeans also created divisions within ethnicities during their colonial rule.

An example can be found in colonial Rwanda, where two artificial ethnicities Hutus and Tutsis were created by the Belgian colonizers. They developed a narrative, which claimed that inhabitants with lighter skins were racially superior to Tutsis that originated from Ethiopia, and the rest of the population were Hutus.  Such a narrative reinforced the division and planted the seeds for ethnic tension. Ultimately, the tension erupted and materialized into the atrocious Rwanda genocide, which led to the massacre of one million people and wiped out 12% of the Rwanda population in 1993 (United Nations).

Furthermore, colonialism contributed to the weak state capacity currently observed in many African states.

Upon gaining independence from the Europeans in the 1960s, African political leaders inherited states where the political legitimacy was lacking and the capacity of the government was weak. The challenge to establish political legitimacy has two roots. First, the high degree of ethnic fractionalization complicated the establishment of broader national identities (Englebert 2000). Second, the states formed inorganically with arbitrary demarcation that disregarded ethnic and cultural identities (Michalopous & Panaioannou, 2016). Furthermore, the lack of infrastructure and effective governing mechanisms made exerting control over the entire nation a daunting task.

The political system established by the European colonizers was largely an exploitive system.

One which intends to extract rent from the colony instead of promoting the welfare of the population. Looking beyond the history of colonialism, African leaders had few alternatives. Colonialism and slavery had largely dismantled the development of larger nation-states in Africa and left post-independence political leaders in Africa with few legacies (Nunn, 2008).

As a result of the weak state capacity and legitimacy, the political system African leaders inherited was fragile. This incentivized the politicians to shore up power by pursuing neo-patrimonial policies, which are essentially redistributive policies that favored a specific segment of the society (often a small minority) in exchange for political loyalty at the cost of the broader population (Englebert, 2000). Thus, this often meant that the government in Africa had a low incentive to pursue policies conducive to long-term growth. Such as increased investment in education, infrastructure, and healthcare (Englebert, 2000).

Hence, the colonial past offers a viable explanation for the poor policy choices observed across many under-developed African states today.

Lastly, colonialism, in particular the history of slavery, left Africa with a culture that is detrimental to economic development. Englebert has noted that the effect of the “African dummy” is still not completely accounted for despite controlling for additional factors mentioned above such as ethnic fractionalization, public good provision, and political stability (2000). This implies that one may need to look far beyond the variables traditionally analyzed in the discipline of economics. The additional factor that may help resolve the issue is culture. It is well-established that trust between people is fundamental to the establishment of a well-functioning market economy and a democracy (Nunn & Wantchekon, 2011).

In Africa, the prevalence of slave raids during the colonial era made distrusting people a more efficient heuristic for decision making and that persisted in the form of culture (Nunn & Wantchekon, 2011). It was not uncommon that people sold into slavery by their kins or members of their community. In addition, as villages, sometimes also to defend themselves, needed to acquire steel weapons and firearms from the Europeans, the chief had the incentive to criminalize people unjustly to sentence more people to be slaves (Englebert, 2000). This arguably started the tradition of a corrupt judicial system.

Both of these developments significantly reduced the level of trust people had at the time and arguably shifted the cultural equilibrium.

A map showing religious distribution in Africa

Nunn & Wantchekon found in their studies that the ethnic groups heavily targeted by the slave trade in the past are less trusting of others today even after many generations and moving to new locations (2011). The pervasive culture of distrust offers an additional perspective for explaining the status quo observed in African economies.

In conclusion, colonialism plays a big role in explaining Africa’s historical development path. Colonialism exacerbated ethnic fractionalization, undermined state legitimacy and government capacities. Furthermore, gave rise to a culture that is detrimental to growth. Lastly, the present underdevelopment of many African states can find its origins in the colonial era.

What is the main problem of African economic systems? Written by Tiger Guo

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What is the main problem of African economic systems? References

Colonialism (Stanford Encyclopedia of Philosophy). (2017, August 29). Stanford Encyclopedia of Philosophy. https://plato.stanford.edu/entries/colonialism/

Englebert P. 2000. Solving the mystery of the Africa dummy. World Dev. 28:1821–35

Easterley, William, & Levine, Ross. (1997). Africa’s Growth Tragedy: Policies and Ethnic Divisions. The Quarterly Journal of Economics, 112 (4), 1203-1250.

Nunn and Wantchekon (2011). “The Slave Trade and the Origins of Mistrust in Africa” American Economic Review 101 (7), pp. 3221-3252.

Nunn, Nathan. (2008). The Long-term Effects of Africa’s Slave Trades. The Quarterly Journal of Economics, 123(1), 139-176.

Michalopoulos and Papaioannou (2016). “The Long-Run Effects of the Scramble for Africa” American Economic Review 106 (7), pp. 1802-1848.

“Outreach Programme on the 1994 Genocide Against the Tutsi in Rwanda and the United Nations”. United Nations. 7 April 2021. Retrieved 19 April 2021.

What is the main problem of African economic systems?