Economic Decline in Africa
April 7, 2004
Africa is an economic disaster. In sub-Saharan Africa, per capita gross domestic product (GDP) is now less than it was in 1974, having declined over 11 percent. As a result, hundreds of millions of Africans have become poorer, according to a study published by the National Bureau of Economic Research.
The direct cause of these countries' impoverishment is the lack of investment. Over the past 40 years the investment rate has fallen:
- Since 1975 the investment rate has declined to 8.5 percent of GDP.
- This compares to 20 to 25 percent for the average developed nation and 30 percent for East Asian economies.
- Furthermore, most African investment was directed to inefficient and corrupt public sector projects.
Another problem is that Africa is sorely lacking in human capital, especially education and health:
- In the 1960s, the overall primary school enrollment rate averaged 42 percent, compared to a nearly 100 percent rate in rich nations and East Asian countries.
- If Africa had enrollment rates at developed nations' levels during the 1960s, its average 0.9 percent growth rate would have been 2.37 percent and per capita incomes would be 2.5 times larger.
- If Africa's life expectancy matched developed nations', its annual growth rate would have been 2.07 percentage points larger.
The authors point out that massive aid programs have not helped much. Instead, they suggest that new initiatives may be needed. For example, more research could be focused on the devastating health problems because Africans themselves have neither the resources nor the expertise to discover the vaccines that prevent AIDS or malaria.
Source: Les Picker, "The Economic Decline in Africa," NBER Digest, January 2004; based upon: Elsa Artadi and Xavier Sala-I-Martin, "The Economic Tragedy of the XXth Century: Growth in Africa," National Bureau of Economic Research, Working Paper No. 9865, July 2003.
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