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Africa Rising: Why High Economic Growth Is Not Improving African Lives

Africa Rising: Why High Economic Growth Is Not Improving African Lives

From OZY

By the books, it’s rising. Africa had six of the world’s 10 fastest-growing economies in the 2000s. Minerals, metals and oil are nourishing long-starved government coffers. In January, Kenya’s Revenue Authority said it had collected too much money in taxes over the previous six months — 24 percent more than during the same period the year before.

But don’t go telling your friends Africa is no longer poor. The raw numbers are misleading, and “much of Africa’s celebrated growth is vulnerable,” according to the first Africa Transformation Report, published last month by the African Council on Economic Transformation (ACET). According to ACET, African economies have failed to transform in ways that would ensure long-term gains.

In that argument, ACET joins a burgeoning subfield of economists trying to explain the discrepancy between fast economic growth and slow human progress in some African countries. Their ranks include Dani Rodrik and other development economists, but ACET’s report may be the most prominent. They hope their ideas change how we think about national success.

Rwanda President Paul Kagame at the EU-Africa Summit on April 2, 2014, in Brussels, Belgium

The Transformation Report’s argument against GDP growth is simple: In many African nations gains from extractive industries and rising commodity prices inflate GDP growth. That kind of growth is fleeting, as oil and mineral prices tend to bust over the long run.

“This time the question is: How do we ensure that growth lasts?” Yaw Ansu, Chief ACET’s chief economist, told an interviewer in March.

“Transformation” is trickier to measure than GDP growth, though. Indeed, one reason GDP has become a metric of choice is that it’s so neat—a single number that aims to measure the total value of goods and services in a country. The Transformation Index, in contrast, considers an array of metrics: economic diversification, export competitiveness, productivity, technology and something it calls “human economic well being.”

Read more at OZY