Poverty in Sub-Saharan Africa and its causes

It is increasingly clear that economic freedom, good governance and rule of law are key drivers in promoting economic growth and reducing poverty. In Sub-Saharan Africa, unfortunately, economic freedom and growth have trailed the rest of the world, says Christa Bieker, a policy analyst at the National Center for Policy Analysis.

For instance:

From 1974 through the mid-1990s, economic growth in Africa was negative, reaching a low point of -1.5 per cent annual loss of gross domestic product (GDP) in 1990-1994.

Today, per capita GDP for Sub-Saharan Africa is fully $200 less than it was in 1974 (after adjusting for inflation) – a decline of 11 per cent over the last quarter-century.

To turn the trend around, the region needs to implement sound public policies, says Bieker. According to the Fraser Institute's economic freedom index, there is a direct correlation between public policies and economic growth:

Nations in the top quartile of the economic freedom index have an average per capita GDP of $26,013, compared to $3,305 for those nations in the bottom quartile.

The top quartile has an average per-capita economic growth rate of 2.3 per cent, compared to 0.4 per cent for the bottom quartile.

Unfortunately, not one Sub-Saharan African country ranks in the top quartile of economically free countries. Decades of political corruption, government-controlled monopolies, high inflation, excessive regulation of businesses, and stringent import and export restrictions have led to Africa's current economic state. Adopting economically freer policies would increase the rate of economic growth in African countries and thus raise incomes, says Bieker.

Source: Christa Bieker, Healthier is Wealthier: A Better Way to Aid Africa, Brief Analysis No. 604, National Center for Policy Analysis, November 20, 2007.

For text: http://www.ncpa.org/pub/ba/ba604/

For more on International Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=26

FMF Policy Bulletin/ 27 November 2007