Macro-policy for Sub-Saharan Africa

This book has argued for a strong causality between the determinants of growth, jobs, poverty, and hunger. Weak GDP growth in sub-Saharan Africa (SSA) requires upping the quantum of accumulation. Volatile growth in the region requires countering the impact of the hybrid Lewis-Singer-Prebisch-fallacy-of-composition model, through Kaldor-Lin-Chang productive transformation, with the development of manufacturing, allowing higher Lin-Chang-Andreoni technical change. Weak job growth in SSA requires upping aggregate demand in the goods market through higher domestic drivers of growth, investment and consumption, while the most poverty-reducing sectors are observed to be trade and manufacturing, requiring Kaldor-Lin-Chang productive transformation. Finally, hunger requires controlling inflation. This gives four macro-variables to focus on: (i) accumulation of capital (both physical and human), (ii) Kaldor-Lin-Chang productive transformation through the development of manufacturing, (iii) government budgets and (iv) prices. This has macro-policy implications for SSA. Kaldor-Lin-Chang productive transformation requires upping investment in manufacturing, but also the accumulation of human capital. Higher investment in 2000 is explained by the higher savings share in GDP in 2000 by 2%, but lower inflows in 2000 by 0.5% of GDP. If investment and savings have remained low in SSA, then the major determinant must be the cost of capital. The cost of capital in the money market is seen to be contingent on a trade-off between controlling prices and raising investment. SSA is observed to have run prudentially cyclical macro-policy, controlling inflation well over the period 2000–2019. However, this policy has therefore also been significantly cyclical, not helping raise investment. An equal constraint to the development of manufacturing is seen in the weak investment in human capital and knowledge-based capital—one not helped by the cyclicality of reducing government budget deficits, in turn curtailing investment in schooling and tertiary education.