Why has Africa Grown So Slowly

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Why has Africa Grown So Slowly?

• Xavier Sala-i-Martin
• Columbia University

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Distortions and the Cost of Investment

• Investment is low in Africa
• Investment is Expensive
• Risk may be overstated

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Survey of Business Leaders
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Human Capital (1) Education

• School Enrollments are low
• Investment in Education does not lead to more
  enrollment incentives
• Keep in mind that the solution of education
  incentives may NOT be in the education sector but
  in other sectors (Labor Market?)
• Education of GIRLS has added benefits in terms of
  Health and Fertility

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Survey of Business Leaders
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Human Capital (II) Health

• Life expectancy has increased in African over the
  last 40 years but
• AIDS
• Malaria
• We now face a public health crisis, a pandemic of
  biblical proportions

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Survey of Business Leaders
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Geography, Tropics and Institutions

• Most Sub-Saharan Africa has adverse Geography
• Landlocked
• Tropical
• Direct impact on productivity (soil, specific
  agricultural productivity,) (Sachs and Warner
  1995)
• Direct impact on health and, thus, productivity
  (Sachs and Warner 1995)
• Indirect impact on institutions (Acemoglu et al.
  2000)
• INSTITUTIONS AND NATURAL RESOURCES (Nigeria,
  Sala-I-Martin and Subramanian 2003)

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Survey of Business Leaders
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Survey of Business Leaders. Corruption and the
Natural Resource Curse
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Survey of Business Leaders Red Tape,
Bureaucracy, Waste
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Survey of Business Leaders
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SBL Market Efficiency

• Good Markets Efficiency (fair competition, no
  monopolies)
• Labor Market
• Laws
• Meritocracy
• Female Discrimination
• Distortions from NPOs and IFIs
• Financial Markets Efficiency
• Banking System
• Stock Markets
• Capital Risk

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Survey of Business Leaders
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Openness (Globalization?)

• Africa is essentially CLOSED (1 of world trade)
• And whatever Trade depends too much on a single
  natural resource (oil, diamonds,)

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Is Globalization to Blame?

• What is it? Free Movement of
• Capital
• Labor
• Goods
• Technology
• Information
• Have any of these arrived in Africa?

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Excessive Public Spending and bad government
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Ethnic Fractionalization and Conflict

• Countries at war between 1960-2002 Algeria,
  Angola, Burundi, Chad, Cote dIvoire, Democratic
  Republic of Congo, Djibouti, Eritrea, Ethiopia,
  Guinea-Bissau, Liberia, Libya, Mauritania,
  Morocco, Mozambique, Namibia, Niger, Nigeria,
  Rwanda, Sierra Leone, Somalia, South Africa,
  Sudan, Togo, Uganda or Zimbabwe.

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Survey of Business Leaders
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USING BACE COEFFICIENTS
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What to do?

• African Countries
• Peace
• Institutions/Markets
• Openness
• Promote a Market Environment and a Business
  Favbric
• Rich Countries/Institutions
• Change AID Programs
• Focus on Health RD
• RADICAL CHANGE ask, penalize if do wrong, local
  answers
• Shift from HUGE AID (Sachs, Blair, Bono, ) to
  LEARNING
• Understand the distortions you are causing
• Bring BUSINESS!!!
• Open Markets (especially EU, USA and Japan s
  agricultural protectionism)
• NGOs
• Learning
• Focus on what works (ie, progresa-type programs)
• Health (doctors without borders)
• Bring BUSINESS!!!