The IMF and WB in Africa

Ha-Joon Chang has a new book promoting protectionism, titled Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism. In an article in this month’s issue of Prospect magazine (hat tip to Pablo), he writes:

As for Africa, its per capita income grew relatively slowly even in the 1960s and the 1970s (1-2 per cent a year). But since the 1980s, the region has seen a fall in living standards. There are, of course, many reasons for this failure, but it is nonetheless a damning indictment of the neoliberal orthodoxy, because most of the African economies have been practically run by the IMF and the World Bank over the past quarter of a century.

While I agree that the IMF and the World Bank haven’t done a great job, I think it’s wrong to portray them as the caretakers of Africa and the institutions responsible for its disappointing growth rates. They’ve never had that much power, and I’ve never seen another academic suggest it. Research on African economic performance has focused on institutions and geography. As Paul Collier summarizes (pdf):

Africa’s growth failure has attracted competing explanations. During the 1980s the World Bank diagnosed the problem as inappropriate economic policies, Berg (1981) offering the
first clear statement of this position. Bates (1981) was the first to explain these dysfunctional policy choices in terms of the interests of powerful groups, notably the taxation of export agriculture. During the 1990s the limited response to reform induced a broader search for explanations (Collier and Gunning, 1999, 1999a). Recently three further explanations have gained currency: institutions (Acemoglu et al., 2001), leadership (Jones and Olken, 2005), and geography (Sachs, 2003).

Is there any academic research that concurs with Chang in blaming the IMF and World Bank for Africa’s disappointing growth?

1 thought on “The IMF and WB in Africa

  1. Jim

    I don’t know of any specific *academic* research, which I suspect is partly to do with the difficulty of modelling IMF/WB involvement in a growth regression, because how do you assess how much of a particular policy change was really down to their involvement and how much would have been done anyway? But I’d make the following points.

    The IMF/WB played some part, maybe a very big part, in significant policy changes during a time when many if not most sub-Saharan African countries went backwards economically. There was a general thrust towards restricting public spending and liberalising trade according to what I think was a fairly narrow view of market efficiency without enough regard to impacts on areas such as employment, infrastructure, public services, industrial development and the consequences of losing revenue from trade taxes.

    The role of the IMF/WB can’t be so easily separated from ‘institutional issues’, since they formed such an important part of the institutional governance of so many countries at the time. Also, free-market thinkers often criticise aid for making governments dependent on outside forces, but the IMF/WB also disempowered national governments and undermined their legitimacy in the eyes of their public. Most people in developed countries have no idea what it’s like to live in a country part-run by the IMF, but it can’t be healthy for politics.

    Lastly, I agree that IMF/WB staff are in part unfairly criticised, because for a long time they had no choice but to oversee the decline of African countries under crippling foreign debt burdens, because their paymasters in the developed countries didn’t want the debt forgiven, which would have been the just and rational thing to do. I’m puzzled by the lack of interest shown by economists in the debt crisis (alongside other factors often ignored by the mainstream of analysis such as the change in commodity prices / terms of trade and the growth of AIDS) in explaining Africa’s crisis in the 1980s and 1990s – again, I suspect this is partly due to analytical inconvenience rather than real-life significance.

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