ABSTRACT
Introduction The history of African economic development in the post-independence era teaches us a number of lessons that are of great relevance for the continent’s growth prospects in the post-2007-09 global financial and economic crisis (global crisis) era. A number of growth dilemmas are worth highlighting in this context. First, while African countries have been able to achieve high levels of growth, they have been unable to sustain them for an extended period. Indeed, growth has been characterized by booms and busts; volatility and instability have been the key characteristics of post-independence development in Africa. It is estimated that the average African country has experienced at least two episodes of such cycles since the 1960s (Ndulu et al. 2008; Arbache and Page 2007). One important contributing factor to growth instability is the high dependence on primary commodities trade, exposing economies to terms of trade shocks. Indeed, most growth spurts and collapses have been driven by terms of trade shocks. The second dilemma is that growth has remained “elusive” – to borrow Easterly’s (2002) expression – in the sense that even when growth was achieved, it remained a mirage for the majority of the population. The gains from growth in terms of social development have remained limited, uneven, and very slow to materialize. A key reason is that the foundations of growth have remained narrow, as a result of the failure of structural transformation in most African economies. A related reason is that growth has typically been jobless, hence the slow improvement in living standards. Third, Africa’s growth has been a story of chronic and widening financing gaps. The gap between domestic saving and demand for private and public investment has forced African countries to rely heavily on external financing. However, until recently, African countries have remained below the radar screen of international private investors, hence relying primarily on official loans and grants. The growth collapses of the 1980s and 1990s were to a large extent the result of a financing crisis, as African countries were suffocated by ballooning external debts. Africa’s inability to mobilize domestic resources is an important reason for its inability to reach and sustain high levels of growth.
