Wrong growth economics
In recent times, Africa has become a principal focus of research and policy analysis for many economists. The reasons for this particular interest vary. They range from Africa’s unique attributes as the historical reservoir of supplying ‘sustainable energies’ (slave labour) to the rest of the world and how such identities have transmogrified into pastures of market fixes to carry the global burden of climate change, through the provision of land for the cultivation of alternative energy crops and fields of pasture and woods for carbon sequestration (see, for example, Carmody 2011; Showers 2014; Obeng-Odoom 2015a; Nega and Schneider 2016). For Washington and London, indeed for Paris and Berlin and other seats of global power, the interest in Africa also has something to do with the growing Chinese influence on the continent – as a special issue of African Review of Economics and Finance (Jung, Lampert and Robertson 2016) has recently established. Regardless of the reason, the consensus is that African economies are experiencing an epic rise never before seen in the history of the continent. Leading economists have tacitly accepted this narrative and concentrated rather on explaining it. The principal explanations are that ‘Africa is rising’ because we now have quality data on African economies (Fosu 2010) and have now developed a more appropriate economics in new institutional economics (Acemoglu and Robinson 2012), or both. Greg Mills and Jeffrey Herbst (2012) have even declared that ‘Africa’s third liberation’ – centred on growth and a major advance on its first (freedom from colonialism) and second (freedom from dictators) liberations – is here with us.
In Africa: why economists get it wrong, Morten Jerven (2015) demonstrates concretely that, in fact, economists are entirely mistaken in their analyses of what is happening in Africa. Not only is their statistical information contrived, but also their description is wrong, their explanation is worse, and their policy advice is grotesquely awry. While this argument is not new (see, for example, Hill 1966), the book under review is the most recent, most extensive and, perhaps, the most visible.
Unfortunately, Jerven’s contribution has been misunderstood. Some scholars, sensing his challenge to mainstream economics, confusingly regard his impressive oeuvre as Marxist, a rejection of market-based economic development. Others claim that even if not Marxist, the book is a fundamental challenge to mainstream economics in its application to Africa (see Burbidge 2016). In this journal, two contrasting interpretations of Jerven’s book have been published. While Andy Wynne and Abiodun Olamosu stress that in fact Jerven ‘dismisses Karl Marx’ (Wynne and Olamosu 2015), Alfred Zack-Williams (2016) suggests that Jerven’s work is Marxist by equating it with the work of Andre Gunder Frank. Zack-Williams also suggests that Jerven’s book is a radical green critique by pointing to some similarities with the work of René Dumont. Indeed, for the same book, some have interpreted it as showing that ‘if we can get the numbers right, we can help more people’ (Gates 2013), while others contend that Jerven’s argument is ‘nice models … do not tell the whole story’ (Woodson 2016, 579). Many others – Jerven himself provides a lengthy list of reviews and reflections on his work on his website (Jerven 2013b) – have correctly interpreted the book, but have missed the political economy of his work.
It is, therefore, important to set the records straight and provide a political-economic assessment. According to Jerven, economists have been seeking to explain two things. First, chronic failure of growth (first generation of economic growth literature, pre-2000s) and second, slow growth trends (second generation of growth literature, post 2000s). Neither of these is correct in the African case. In fact, Jerven argues, economists are chasing something that never happened! African economies grew recurrently after the continent gained independence (especially in the 1950s and the 1960s) from various colonists and have grown largely since the 1990s. What economists are doing is using data collected in the late 1970s and 1980s and forming impressions about Africa based on data sets that cover two periods when Africa experienced a major recession. It is odd, then, that the explanation of the so-called African problems is assigned to state institutions and over-intervention. Indeed, Jerven argues that the first generation of economics literature confused the effects of the 1980 problems for the causes of the problems in the 1980s (4).
For Jerven, economists get Africa wrong because, although they pick ideas from history, they cherry-pick history and hence do not really understand the totality of history. They seek, instead, to use shortcuts to become African experts but, depending on downloaded data sets often without knowing either the contexts within which the data were generated or the processes that are captured in the data, they become, instead, empty barrels. Relying on unreliable data, their models are also ahistorical. They ignore detailed, careful long-term studies; they ask the wrong questions; and they err on interpreting economic phenomena. Even worse, these problems cannot be remedied because they are structural to the field: unless economists are prepared to abandon years of perfecting a flawed approach, the problems can only get worse. Indeed, for Jerven, addressing the problem is only possible if the grand question asked about Africa changes. The question needs to change from why Africa has not grown/has grown slowly to how Africa grows and why Africa first grew, declined, and has regained growth. This reframing has two advantages: it gets the history right but also getting the history right leads to focusing on the right contemporary policy issues (8). The focus for this rebirth of economics should be on approaching Africa as a continent experiencing recurring growth, not newly occurring growth.
For non-economists, this book provides the confidence and tools to judge economists: question their assumptions, their evidence, their interpretations, and ascertain the plausibility of their ‘technical’ economic advice (10). Economists too will gain from reading this book, especially if they will take the author’s advice: ‘a bit more humility among many economists would be useful; in particular, a better understanding of the limits of their own data sets and statistical testing is needed’ (10). Indeed, economists and non-economists alike will learn that ‘A useful piece of general advice for cross-disciplinary work is that assumptions, data points and observations should roughly match the state of knowledge in other disciplines. It could be argued that this is not only useful advice but a fundamental principle’ (70).
Political economists may well say, ‘we told you so,’ however, they will cringe at the near total absence of ‘the political economy of growth’ from the analysis. The book gives little attention to whether social progress is, in fact, accurately measured by GDP, in what ways GDP actually leads to a devaluation of labour in the huge informal economies in Africa, the widespread existence of social enterprises whose activities are devalued by growth, and the direct link between GDP addiction and the brazen destruction of natural resources in Africa. Even worse, the book overlooks the invention of GDP as a springboard to enhance the power of Western countries, to force Africa to open its doors to plunder by transnational corporations, and massive displacements in Africa owing to the promotion of ‘growthmania’, an idea developed at length in E. J. Mishan’s book, The costs of economic growth (1967). There is little discussion of the growing inequality in Africa and much less discussion of inequality between Africa and the global economy. Indeed, even within Jerven’s own narrow framework of technical, data-based analysis of GDP, neither the stagnant contribution of Africa to global GDP nor its implications for society, economy and environment are analysed.
In fact, the history of GDP says something completely different. There is nothing African about the manipulation of GDP. This political number has always been manipulated to win wars, to maintain imperial power, to include in and exclude from powerful clubs and to distract attention from pressing issues that confront power structures, as Lorenzo Fioramonti discusses in his book Gross domestic problem (2015). In the book being debated, work is non-materialist and the book seeks a paradigmatic change on the basis that better quality technical power and numbers alone can save economics. The evidence, however, shows that growth – indeed the entire economics establishment – owes its success not to its superiority of ideas or methodology at all. Economics has attained its imperial status not just because of strong and rigorous methodology or even its better use of data, but also because it serves an ideological role and that ideology is what, in fact, sustains the position of ‘economic science’. As Michel De Vroey (1975, 416) famously noted: ‘in a class society, the ruling class cannot be indifferent to the type of social science developing in the society in which it holds power.’ More recently, John Weeks (2014) has put the case against economics differently, as expressed in the title of his book, The economics of the 1%, emphasising the materialist nature of measurement and economics. It is, of course important, to study technical quality and Jerven does so brilliantly, but technical acuteness cannot be fully understood without an analysis of the political economy of measurement or of ideas more generally. Therefore, my overall recommendation to readers is to immediately get their copy of Jerven’s brilliant work and study it for its exposition, but they need to get supplements from other recent books, especially Lorenzo Fioramonti’s meme, Gross domestic problem. The rest of my debate is divided into three sections, looking respectively at the details of Jerven’s arguments, my own critical reflections, and my more extended recommendations to Jerven’s readers.
GDP and growth in Africa: the devil is in the detail
Africa: why economists get it wrong provides a detailed analysis of GDP and growth in Africa. It is divided into four chapters prefaced with an introduction that sets the tone and the context for the rest of the book. Chapter 1 focuses on the idea of economic growth, how its meaning and measurement have changed over time, and why the current understanding is misleading. It explains two types of growth: intensive (arising from increasing the quantity of the factors of production) and extensive, or the more qualitative drivers of growth, centred especially on technology in the production function. The chapter contextualises the contribution of Robert Lucas in the broader endogenous growth tradition. This focus emphasises how the story of growth is one of experiments, shifting from the focus on factors that contribute to growth to examining the relative importance of those factors and then actually talking about the determinants of growth, that is, we have moved from assumptions about growth to accounting for growth, and then to determinants of growth (14). This explanation emphasises why the change in focus has occurred: the need to be more precise and the improvement in modelling techniques. Yet, the chapter shows that the input in the analysis (quality of data), the conceptualisation of growth, and the interpretation of growth (especially confusing correlation for causation) have not improved.
Chapter 2 shows how economists use history, emphasising their questionable reading of history, and use of historical evidence. The chapter probes the attempt to look at the historical roots of poverty and low/no growth. The debate the chapter tries to resolve is between ‘causal history’ and ‘compression of history’. Causal history is based on rich, careful, long-term, even painful study of context subject to different checks ethnographic, archival, even archaeological. Compression of history, on the other hand, is the staple of mainstream economists. It entails downloading data sets and running them against each other to see if something interesting comes up. Control variables are used, different robustness checks are carried out and different techniques tried. It may take a coffee break to do some of the checks or an afternoon and voila! The history of Africa can be told. Jerven shows that most of the work on the historical roots is in the domain of compressed history, whether it is dealing with institutions and African development or ethnicity and development.
Chapter 3 looks at ‘African growth recurring’. By this focus, Jerven shows the true story of growth pattern in Africa: it is, at least since independence, a case of an inverted U-shaped graph, rising from 1950 to 1970, declining in the 1970s and 1980s, and rising again since then. In turn, the ‘Africa on the rise’ literature is neither new nor news. This simple argument has important policy implications because the policy choices for a continent where growth recurs are different from the choice to be made where growth is rising for the first time. For Jerven, the focus should be on the idea of ‘growth as a recurring process’ (76), especially in resource-rich economies – where the process is easily discernible. Unlike Paul Collier and others who explain this idea as ‘resource curse’, leading to the search for solutions in markets to constrain corruption in the political class, Jerven rejects the resource curse thesis outright (92–93). Instead, he draws attention to the patterns of trade as the problem.
Chapter 4 promises to offer ‘a […] deeper, criticism of GDP growth in Africa [that] results from looking beneath the statistical surface, and asking what real information does this metric actually contain?’ (102). What it actually delivers is analysing data problems to show that there is a disconnect between what actually make up African economies and what GDP figures show. A key part of this analysis is what Jerven calls Africa’s ‘statistical tragedy’, a phrase which means that we do not know much about African economies: GDP benchmarks are anachronistic, some as old as two decades, and hence do not tell us what is happening in Africa today. The idea of a benchmark, as Jerven shows, is quite arbitrary in the sense that it is fixed, based on whichever year for which African statistical authorities have enough information to analyse the economy and the GDP for all other years, since the benchmark is based on some estimates and modelling, not comprehensive information about the economy.
Between the doxy and the doxa
Unfortunately, the far sightedness of Jerven is eclipsed by two cataracts. First, he does not link the turn to institutions and good governance in the 2000s to the rise of new institutional economics. In turn, he makes no analytical distinction between what Boettke, Fink and Smith (2012) have called mainstream (neoclassical) and mainline (new institutional) economics and respectively between the economics of individuals and choice and the economics of institutions and exchange. So, he conflates both the orthodoxy and the so-called heterodoxy in the form of new institutional economics. In this sense, the book does not succeed in showing that what has been happening in the economics of Africa is echoed in what is happening in the economics discipline more generally, as the account of Harold Demsetz (2002), a leading new institutional economist, suggests.
The cataract is an unwillingness to extend his analysis from the doxy (orthodoxy of neoclassical economics and the so-called heterodoxy of new institutional economics) to the doxa (real world political economy), to use Pierre Bourdieu’s nomenclature recently utilised for the analysis of global trade by Bill Dunn in his book, Neither free trade nor protection (2015). Chapter 3, which is supposed ‘to focus less on aggregate growth and more on the political economy of growth, asking who benefits’ (4), is centrally focused on growth with no analysis of inequality at all. Chapter 4 promises to go deeper than statistical issues (102), but the analysis remains data- and technique-driven – without attention to conceptual matters. Pertinent issues such as whether to take the ecological critique of growth seriously and deduct environmental bads (and other bads) from the gross measure to arrive at a net national product (NNP) are entirely overlooked. More fundamentally, the meaning of progress, its measurement, how congruent it is with well-being are not even contemplated. Yet, as argued elsewhere (Obeng-Odoom 2013, 152), these issues constitute crucial pieces in the jigsaw of analysing African economies.
It is certainly important to deal with the statistical limits of GDP, but also important are three additional aspects of GDP: first, its conceptual underpinnings, second its philosophical basis, and third its historical journey to becoming what Fioramonti calls ‘the world’s most powerful number’, in his book Gross domestic problem (2015). Trying to resolve these issues leads to questions about the relationship between GDP and inequality, GDP and poverty, GDP and environment, indeed GDP and happiness; and GDP and the structure of African urban economies, especially the dominance of informal economies (Obeng-Odoom 2015a). That is why by ignoring the conceptual aspects of GDP, Jerven’s work misrepresents the structure of African economies, especially the huge informal economies there are and how even the most comprehensive improvement in techniques, benchmarks, and data quality in formal economies will overlook the huge informal economies and hence misrepresent African economies. Indeed, these neglected issues necessarily mean that we will need to focus on GDP and the idea of economic development itself, how it has evolved and in what ways it has been measured over time. Why did development change from being regarded as a colonial project to exploit resources in Africa to becoming a project for nationwide change? From being centred on ‘hard’ ‘economic’ matters to soft economic matters such as ‘human capital’, from being too economic to being socio-economic. Some of these issues are raised in H. W. Arndt’s Economic development: a history of an idea (1989) and in more recent work (Obeng-Odoom 2013; 2015a), so Jerven had much work on which to build.
Yet, Jerven made a conscious choice which leads to the view that the growth problem is technical in nature. Questions of power, imperialism, and racism, even Eurocentrism, are missing in the book. Not surprisingly, Jerven’s reading list is seriously wanting in political economy research in Africa. There is little engagement with research in political economy journals – the exceptions being few indeed: two New Left Review articles by Arrighi (2002) and Lawrence (2010) and one Cambridge Journal of Economics article by Mkandawire (2001). Research published in such political economy journals as Review of African Political Economy and The Review of Black Political Economy do not get even a polite nod. There are a few references to the work of radicals such as Fantu Cheru and Cyril Obi, Frederick Cooper, Walter Rodney, and Mahmood Mamdani, but no preponderance towards political economy or even postcolonial analysis. So, the question arises about what or where Jerven is going with his critique. Jerven makes no appeal to justice, or oppression. In turn, his critique is open to many interpretations. For instance, African statisticians worry that Jerven's work is aimed at dismissing the effort of African professionals in the many statistical bodies in Africa. Indeed, some African institutions have had to issue public statements against Jerven’s work and, at least in one case, Jerven has been prevented from travelling to Africa by power brokers on the continent (121–123). Part of the reason is of course that Jerven’s book is centrally focused on state capacity – without acknowledging any significant improvement and certainly without looking at the structure of African economies (importantly, informal economies). However, any claim that Jerven’s intentions are to undermine African statistical bodies will also need to take into account some crucial observations he makes: on p. 111, for instance, where he explicitly makes the case against those Bretton Woods institutions responsible for reducing the capacity of African institutions and, at the same time, asks them to work more, while implicitly suggesting that the statistical authorities require more support. Also, Jerven notes: ‘Africa’s growth failure happened because of a combination of external economic shocks and a less-than-perfect policy response, from both international donors and national economic policy makers. But laying the blame solely on institutions and policies was a costly mistake’ (125). However, many mainstream economists such as Daron Acemoglu make similar claims (as Jerven correctly notes in his book) that Africa struggles because of colonial problems. Indeed, it appears that, in his earlier book, Poor numbers (Jerven 2013a), Jerven singled out or focused almost entirely on what, in his extensive review of that book, Michael Lipton summarises as ‘Africa’s national-accounts mess’, critiquing national institutions on the grounds that they are not sufficiently independent, the statisticians are poorly trained, and the other members of staff are not up-to-date on the use of the latest software, among others (see Lipton 2013 for a detailed review). So, in the book under review, Jerven might really be seeking to shut the stables when the horses have already bolted! That is why a clearer political commitment is needed from him. Yet, it is interesting to read how Jerven himself thinks the struggle can be won, including ‘getting African economies right’ (130):
The solution is to refocus the study of economics on the study of economies. The increasing distance between the observers and the observed has created a growing knowledge problem. With the move to cross-country studies based on macro-analysis, country-level nuances have been lost. In other words, cross-country growth regressions can take us only so far. (130–131)
It is the job of scholars to give tempered assessments that navigate between what is make-believe and what passes as plausible evidence. That’s how you avoid a statistical tragedy. (123)
I hope I have shown that simply by asking questions – How good are the numbers? What are the assumptions? How convincing is the story? – one can engage critically with mainstream economics. (132)
But the real problem with the idea of a resource curse is not so much that the calculations are wrong – important as that is. Rather, the idea – drawing on the metaphor of metaphysical forces of a curse and hence the impossibility of nations to do much about it – diverts attention from property and class relations as well as rent capture by transnational forces and corporations, the challenges of globalisation, and the nature of uneven exchange, even imperialism (Obeng-Odoom 2015b). The resource curse analysis, in effect, is a grand scheme to undermine national authority and mercantilism and calls for more and more for neoliberal globalisation.
Does knowing why economists get Africa wrong solve the problem?
It is clear that it is crucial to know why economists get Africa wrong, but stopping at this stage without a radical political-economic analysis of the foundations of Africa’s past, present, or future prosperity is insufficient. Jerven focuses on technical arguments, but the GDP is more a political tool than a technical measure. The GDP has always been manipulated and contested for that reason. The Soviet Union was a victim of GDP manipulation, as Lorenzo Fioramonti shows in Gross domestic problem (2015, 33–40). China, the USA, and others have all manipulated or refrained from correcting their GDP calculation for political reasons rather than technical ones. The issue with the GDP is, therefore, not only technical, but also political-economic. Africa’s development has not always been tied to GDP: it has evolved from one matrix to another – for political-economic reasons intricately interwoven with matters of expediency. The GDP anoints the globalisation turn, it anoints a particular vision of progress, and it anoints a particular type of power. This foundational focus is necessary to understand and transcend the roots of the complex social conditions in Africa. There are certainly more structural issues, including the appropriation of the African commons, the dynamics of the vast informal economies in Africa and their insertion into the global economy, and the growing inequalities within Africa and between Africa and the rest of the world. Neglecting these foundational matters and fine-tuning GDP only endorses – indeed worsens – the ongoing world order which tries to spit Africa out to the margins and tie it there. The technical, data-based analysis of GDP can – indeed should – be part of a holistic political-economic critique of mainstream economics, especially in its deployment to understand Africa. In this sense, we salute Morten Jerven for his contribution to the struggle, while encouraging him to be more critical and take African political economy seriously.