4 - Policy Choices

Summary

Focusing on the determinants of economic growth in the post-independence period, researchers from the Africa Economic Research Consortium (AERC) isolated a set of “anti-growth” syndromes: styles of policymaking that reduce the rate at which national economies could grow (Ndulu, Collier et al. 2007). Most common is the combination of policies that they designate as “control regimes,” which led to:

1. A closed economy.

2. The distortion of key prices in the macroeconomy.

3. The promotion and regulation of industries.

4. The regulation of markets.

In this chapter, I shall describe these policies and discuss their origins and their consequences. Control regimes are economically costly, and I shall explain why incumbents nonetheless retained them, even after their costs were known. The reason, I argue, is that the policies generated political benefits for Africa's authoritarian regimes. They provided elites with sources of income and furnished means for transforming even declining economies into political organizations, enabling politicians to recruit political dependents, willing to fight – if necessary – to keep them in power. While yielding political advantages, however, these policies contributed to the subsequent collapse of Africa's states.

The Content of Control Regimes

As reported by the AERC researchers, governments that adopt control regimes regulate trade, manipulate the interest and exchange rates, and develop close ties with urban-based industries.