The Quantum of Growth

This chapter is based on an analysis of sub-Saharan Africa (SSA)’s markets for tradeables and domestic goods. SSA shows a relative weakness in its GDP growth and more volatility, as observed between 2000 and 2019. This weakness in growth is traced to the region’s greater reliance on the more exogenously given driver of exports rather than the more endogenously given drivers of investment and consumption. Exports of commodities give a partial equilibrium argument based on just one market for tradeables. The Dutch disease and resource curse arguments hold that exports of commodities will cause the exchange rate to appreciate, thereby inhibiting the export of manufactures. However, SSA’s GDP growth requires a more general equilibrium argument in that its growth is observed to track well the prices of two key commodities—fuels and metals. Accordingly, we fashion a general equilibrium hybrid model that complements Lewis (The Manchester School 22:139–191, 1954), Singer (American Economic Review 40:473–485, 1950), and Prebisch (Economic Bulletin for Latin America 7:1–22, 1962) to infer that declining terms of trade for commodities in the tradeables market for exports will affect the entire goods market, especially manufacturing and services. In addition, the fallacy-of-composition argument is used to infer that global demand for exports of commodities in the tradeables market will constrain demand in the entire goods market, especially for manufactures and services. This is borne out for SSA, which is seen to reduce its share of manufacturing in GDP between 2000 and 2019.