Jeff Sachs Then and Now: Low Growth and Bad Policy in Africa
In 1995, Sachs and Warner published “Economic Reform and the Process of Global Integration,” one of my favorite “big think” papers on growth. The punchline: Basically any country can achieve decent growth by avoiding a handful of really stupid policies. A quotable quote:
[S]ocialist and SLI [state-led industrialization] policies should be understood mainly as “policy experiments” (albeit enormously mistaken and costly ones), rather than as inevitable consequences of the economic structures of the countries in question.
I was surprised, then, when Sachs recently took a very different stand on African growth:
The standard diagnosis is that Africa is suffering from a governance crisis. With highly visible examples of profoundly poor governance, for example in Zimbabwe, and widespread war and violence, as in Angola, the Democratic Republic of the Congo, Liberia, Sierra Leone, and Sudan, the impression of a continent-wide governance crisis is understandable. Yet it is wrong.
I instinctively found this claim hard to believe, and my suspicions were confirmed this morning when I saw the latest Doing Business rankings. Check it out: 9 out of 10 at the bottom of the list are in Africa!
On closer reading of Sachs, though, I shouldn’t have been surprised. He doesn’t really claim that African nations do not on average have bad policy, only that African policy is not especially bad controlling for income. African countries don’t have bad policies considering how poverty-stricken they are.
And how does Sachs reach his conclusion that some African countries have good policy, when the highest-ranked country on the continent (Botswana) comes in 40th? By watering down the definition:
“Average” countries are those with residuals within 1 standard error on either side of the regression line. The table shows that, by this ranking, many countries [in Africa] are well governed.
I’m glossing over a lot of econometric subtlety, but frankly I think the 1995 Sachs would have read these results very differently. It only makes sense to start looking for non-policy explanations of poverty if countries are poorer than you would expect given their policies. The fact that African nations don’t have especially bad policy considering how poor they are is evidence IN FAVOR of the theory that bad policy is the cause of their poverty!
It’s time to stop making fashionable excuses for self-inflicted economic injuries in Africa, and get blunt: If you want to grow, you can learn a lot more from Hong Kong than Harvard.