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Cluster of Excellence EXC 2052 - "Africa Multiple: reconfiguring African Studies"

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Africa Multiple? Critical Reflections on the Discipline of Economics in Africa

Multiplicity is the defining concept of the Cluster of Excellence "Africa Multiple". It is through relations that multiple modes of existence, values, forms of knowledge and performances in areas like identity, politics, production, mobility, and consumption come into being. As much as the idea of multiplicity should be celebrated for both its epistemological and emancipatory potential, there is a a danger to gloss over social fields where multiplicity has actually been reversed through the workings of power, ideology and hegemony. Economics in Africa is one such fields, writes Professor Howard Stein, a renowned development economist from the University of Michigan. Professor Stein has been visiting the Cluster as a guest from June 13 to 17th, 2022. During his time in Bayreuth, he spent time mentoring graduate students, and gave a lecture on “Ideas on the Move: On the Institutionalization of Neoclassical Economics in Africa”, which drew on a recent paper published in “Economy and Society”. While Zambian economist Grieve Chelwa recently found that economics has an “Africa problem”, Professor Stein finds that Africa has also developed an “economics problem”. Professor Stein was invited by the Stefan Ouma, the Chair of Economic Geography.

In the first two decades of the post-independent period, there was a consensus around the idea that the challenges of African economic development were complex and not easily comprehended by a single theoretical paradigm. There was agreement around a number of key points. Economic development was a discontinuous process of structural transformation. National poverty tended to be self-perpetuating with low-income countries caught in a vicious circle of poverty.  A big push was needed to get out of the poverty trap. In 60s and 70s, across the continent, national development plans provided a framework to guide efforts in social areas like education and health care and in economic sectors like agricultural and industry. New investment was central. Some like Hirschman pushed an unbalanced approach that emphasized key sectors where strong linkages to other sectors. Others including Rosenstein-Rodan and Nurkse pushed for the simultaneous investment in related sectors. A key focus was industrialization often with an emphasis on import-substitution.

Economists and other social scientists in African universities debated the nature and impact of capitalism with questions about the role of the national bourgeoisie and their link to the world system. Economists gained knowledge of specific sectors and studied industrialization, technological acquisitions, and the role of international trade and capital flows. Economic training included planning techniques like input-output models and cost-benefit analysis. The relative financial independence of national universities, the generally more pluralistic intellectual environment in a much less unipolar world, and the self-assertiveness of new states permitted a much more open intellectual terrain compared to what was to happen later. The alternative perspectives of the sixties and seventies gave way in the 1980s and 1990s with its singular focus on neoliberalism and standardized doctrinal textbooks representing idealized neo-classical versions of Western economies.

Economics is the language of power that plays a largely uncontested role in shaping policy and in controlling resources. Donors have long recognized the centrality of economics in helping to meet their political and institutional objectives.  As neoliberalism became a core global objective of the US and other Western governments, so to was the need to spread the neoclassical economic paradigm that justified these policies.

What is neoclassical economics and how does it relate to neoliberalism? Neoliberalism is really a set of policies (privatization, macrostabilization with an emphasis on austerity, deregulation and user fees for public goods) that arises from the foundational constructs of neoclassical economics. The microfoundations of neoclassical economics are defined by a commitment not only to methodological individualism but also to homo economicus or self- interested economic man and the acceptance of equilibrium as a natural state.  Assumptions about human behavior are a product of both rational deduction and axiomatic reasoning (posited set of rules where rational predictable behavior is assumed without explanation or proof). A number of general propositions arise from these microfoundations that are at the heart of the theories underlying neoliberalism. These include the commitment to state minimalism, a preoccupation with static efficiency, a focus on distortions and marginality, changes in relative prices leading to predictable outcomes, and finally development as shifts in equilibrium states.

Closely aligned with neoclassical theory is the presumed static efficiency gains that purportedly arise for countries through free trade that nudge countries to follow their comparative advantage.  However, not all neoclassicals are neoliberals due to the presence of market failures. At the core of the proponents of neoliberalism however was a view that state failures were much more important than market failures. In the 70s, development writers argued along these lines-Deepak Lal, Ian Little, P.T. Bauer, Anne Krueger and Bela Ballasa attacked state-led development and blamed it for the lack of sustainable growth. Authors like Ballasa and Krueger were directly involved with its development of adjustment at the World Bank. Public choice style arguments emphasized that the state could not be the guardian of the public interest since there was no market to constrain the behavior of homo-economicus inside of governments.

As adjustment was introduced in 1980, there was resistance from economists trained in traditions other than neoclassical economics. The World Bank and other donors realized that opposition could be demobilized, and “ownership” generated by incorporating the economics profession into the Western economic model. The crisis of African universities in part due to the austerity of adjustment created the opportunity. Donors provided stipends to retrain old faculty, provided the demand for these local “skills” in aid packages and promoted neoclassical economics through organizations like the African Economic Research Consortium (AERC), formed in 1988 with the support of the World Bank and other agencies. The AERC set out to revamp higher education by training graduate students and through grants to economics departments in African countries to organize graduate coursework and research along Western lines. The flow of tens of millions of dollars was a huge inducement for African economics departments to participate in the programs. Today, economics departments throughout Africa look no different than their Western counterparts.

Neoliberalism removed constraints on capital flows, privatized state companies, and liberalized trade undermining local manufacturing capacity leading to more reliance on imports of manufacturing goods. Increasingly African countries became more dependent on exporting unprocessed raw materials for foreign exchange. Austerity led to the neglect of important areas like infrastructure that was vital to attract FDI in areas other than resource extraction. Hence, adjustment deindustrialized the continent and returned Africa to colonial style extraction with its problematic boom and bust commodity cycles.

The tools of mainstream economics are limited in their ability to conceptualize the structural and institutional exigencies of development, which are even more challenging with African countries at the bottom of the of global supply chain. Recent studies have indicated that Africa’s exports after 2000 have increased without a comparable rise in domestic value added. Yet, orthodox economists see liberalized Africa as naturally following its comparative advantage.

African governments need to draw on the accumulated knowledge of multiple theoretical paradigms to develop strategies to diversify and structurally transform economies. Today governments complain that they cannot find economists to help them draw up new national plans and industrial policy strategies, facilitate their access to global financial markets, or evaluate projects in which they can invest acquired wealth in productive activities.

None of this is easily conceptualized in the neoclassical paradigm that currently dominates the discipline in Africa; one that narrowly focuses on a world of marginal changes, retracted states, and trade between countries based on static comparative advantage.

Howard Stein, Professor Department of Afroamerican and African Studies and Department of Epidemiology, University of Michigan, Ann Arbor, MI

Further readings:

  • Tony Killick “Trends in Development Economics and the Their Relevance to Africa”, Journal of Modern African Studies 18 (3), 1980
  • Thandika Mkandawire “The Spread of Economic Doctrine and Policymaking in Postcolonial Africa”, African Studies Review 57(1), 2014
  • Howard Stein, Beyond the World Bank Agenda: An Institutional Approach to Development, U. of Chicago Press, 2008
  • Howard Stein, “Institutionalizing Neoclassical Economics in Africa: Instruments, Ideology and Implications”, Economy and Society 50(1), 2021

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