The Constraints on State Intervention in Sub-Saharan Africa since Independence. A comparison of public policies in Sub-Saharan African Economies with the high-growth Developmental States in East Asia

Contents

1. Introduction

2. Central Constraints for State Intervention in Sub-Saharan Africa
2.1. Endogeneity and Time Dependence of Constraints
2.2. The Persistence of Fragile Political Landscapes
2.3. The Dependence on Commodity Exports and the Inability to Generate Sustainable Public Revenues

3. The East Asian Developmental State

4. The Question of Transferability – To What Extent Can the East Asian ‘Miracle’ Resolve the African ‘Tragedy’?

5. Case Study: Constraints on State Intervention in Kenya Since Independence
5.1. Overview
5.2. History of the Political Landscape
5.3. Developmental of Public Revenues
5.4. Findings: Limited Transferability of the Developmental State

6. Conclusions

7. Appendix

8. Bibliography

1. Introduction

The debate on the decisive constraints on state intervention which might have impeded a developmental progress in Sub-Saharan African since the era of independence in the 1950s and 1960s is manifold. Whereas mainstream analyses have been regarding inadequate policy choices and excessive pursuit of self-interests by developing country governments as the core reasons for unsatisfactory developmental outcomes (e.g. Krueger, 1974), others criticise the voicing of such general inferences and, instead, emphasise historical and structural circumstances as the underlying causes that can explain the ‘African tragedy’ (e.g. Mkandawire, 2001; Hausmann & Rodrik, 2003). Hence, the role of the state in enabling development for has continuously been subject to a shift of theoretical paradigms. The economical uprising of the ‘East Asian ‘developmental states’ during the second half of the 20th century contributed to this dispute as a functional relationship between the decisive impact of marketor state-driven approaches could not be established.

Reviewing the variety of potential factors that may have constrained the implementation of ‘developmental’ public policies in Sub-Saharan Africa – such as political instability (e.g. Posner & Young, 2007), policy externalisation (e.g. Dufy & Sindzingre, 2014), commodity dependence (e.g. Auty & Gelb, 2001), detrimental demographic patterns, volatility of revenues or a fragile macroeconomic system (e.g. Deaton & Miller, 1995) – it is clear that a disentangled identification of individual causes is, on the one hand, difficult to conduct and, on the other hand, not intended due to the limited scope of this essay. Thus, by discriminating between constraints and by focussing the analysis on the most relevant ones, it is possible to provide an analytical framework that allows for a critical review of the evolution of the restraints on state intervention in Sub-Saharan Africa in light of the policy experiences provided by the ‘success story’ of East Asia.

Henceforth, I will demonstrate that the central pillars restricting state intervention in Sub-Saharan Africa have been political instability coupled with an overly dependence on commodities as primary export goods. Due to these aspects, a structural inability to generate sufficient and diverse forms of public revenues prevailed which, in turn, impeded the implementation of development-enhancing public policies. This argumentation is also valid nowadays as governments across Sub-Saharan Africa are internally disjointed in agreeing what route for development to take and they are still incapable to mitigate revenue losses brought about by sudden declines in commodity prices. As a result, the ‘developmental’ state policies are only of a limited significance to Sub-Saharan Africa. The essay is organised as follows. Section 2 discusses the most central constraints on state intervention. In section 3, the conceptual framework of the East Asian developmental state is presented before section 4 analyses its relevance for Sub-Saharan Africa. Section 5 provides a country case study. Section 6 concludes.

2. Central Constraints for State Intervention in Sub-Saharan Africa

2.1. Endogeneity and Time Dependence of Constraints

The quest for defining the relationship between state intervention and the relatively low level of development in Sub-Saharan Africa can have multiple entry points. One way is to analyse stages of economic development over a time period of several decades, to highlight the differences in policy-making and to then, in retrospect, derive developmental lessons that might explain the divergent levels of outcome (e.g. Adelman, 2000). The strength of this attempt is that it provides an expanded overview of existing interlinkages such as between demographic patterns and the availability of sufficient workforces for industrialisation (Adelman, 2000: 6). However, the outcome is a complex interdependence of causes which can only be understood when it is regarded in relation to particular external factors.

The central reason articulated in the mainstream for implementing public policies detrimental to development is the issue of a ‘wrong’ type of state intervention in Sub-Saharan Africa. Whereas some argue that import-substitution policies in the early years of independence should have been replaced by export-oriented growth strategies (e.g. Grabowski, 2010), others account overemphasised intervening by the state, i.e. through wrong macroeconomic policy or by repressing private sector development, as the main mistakes of African leaders. On the other extreme, these views are opposed by dependency theorists who posit that the roots of causation are not be found within Sub-Saharan African governments but that external factors play a more significant role for underdevelopment. In detail, enduring economic exploitation during and after colonialism that leaves the region in a desperate position of the global trading system (e.g. Jaffe, 1985). Another aspect is the devastating impact of structural adjustment induced by the leading international financial institutions in the 1980s to the 1990s (e.g. Mkandawire, 2001; Heidhues & Obare, 2011). Then again, the intermediate view acknowledges an interplay between given circumstances – such as inefficient political institutions (following the power vacuum left by the colonial settlers) and geographic realities (like being landlocked or excessive endowment with natural resources) – and a structural inability to invest in the expansion of alternative economic sectors as the critical combination of constraints (e.g. Akyüz & Gore, 2001).

The various arguments support the stance of an impossibility to determine an isolated factor that can distinctively explain the development path experienced by Sub-Saharan Africa countries. Knowing that they are not homogenous themselves and are different developmental outcomes are likely to occur, substantiates this notion even further. This endogeneity characteristic of constraints is complemented by the aspect of time dependence. In example, while public revenues are of less importance in export-depending countries during phases of commodity booms and growth, i.e. during the 1970s and the 2000s, they demonstrate a central constraint when world prices begin to fall rapidly and sustainable forms of public revenue flows are lacking (e.g. IMF, 2011; World Bank, 2015). As a consequence, the analysis of constraint necessarily needs to be eyed through a shortand long-term lens.

2.2. The Persistence of Fragile Political Landscapes

The ability of a state to consult, implement and effectively enforce public policies significantly depends on the political landscape it finds itself in (Young, 2004). Certainly, this characteristic is not exclusively applicable to Sub-Saharan Africa. However, reviewing the development of the political nature following the strategic destruction of human capital and economic infrastructure by colonial powers (Bertocchi, 2011), Sub-Saharan Africa is signified by enormously unstable and illegitimate regime changes. Posner and Young (2007) find that in the first 20 years following independence, political changes across Sub-Saharan African governments primarily eventuated by forceful means. Whereas in the 1960s around three quarters of the incumbent leaders where overthrown either by military coups or assassination, only 25% experienced a non-violent change of office (Posner & Young, 2007: 128). The use of violence as an instrument for voicing political concern advocates for the existence of a linkage between fragile political landscapes and a constrained framework for state intervention as decisions by the ruling authorities might instantly erupt into severe clashes. Adding to that, the paradigm of the Sub-Saharan ‘Big Men’ started to gain in prominence across many Sub-Saharan African states since the 1980s (Hydén, 2013: 103). Although formal institutions were in effect by law, the ‘Big Men’ metaphor signified the persistence of a high share of African leaders who attempted to apply informal means of personal cult and assertiveness to make policy. As for instance, throughout the time span between the 1960s and the 1990s the amount of irregularly ruling leaders was constantly at least double as high in Sub-Saharan Africa than in the rest of the world (Posner & Young, 2007: 129). Thus, the comparison of the political infrastructures of Sub-Saharan Africa with the rest of the world bears methodological concerns as the reference group is not being differentiated. Moreover, ‘Big Men’ could paradoxically – this is especially due to their reliance on some sort of populist approval – impersonate a rather close relationship with the people they govern (Daloz, 2001: 279). By looking at more recent political developments across Sub-Saharan Africa, further problems for state intervention arise as the consequence of increased vertical division of power across governmental hierarchies (Resnick, 2014). Studies have shown that federal authorities in Sub-Saharan Africa compete with local governments as they aim to attribute popular and successful policies to their own efforts but simultaneously deny their influence when policies or service delivery have negative outcomes (Boone, 2003). In these cases, the label ‘political decentralisation’ is being exploited for the purpose of concentrating power even further.

Viewing these arguments within the realm of economic theory, the presented line of thoughts can be manifested with respect to the time dependence of this particular constraint. Of relevance is, in example, Olson’s (1993) articulated significance between political time horizons and the extent of extractive policies. According to his theoretical framework, ‘Big Men’ holding office over a long period should restrain from predatory behaviour as it is in their interest to maintain a basic level of economic development to ensure future income streams. In turn, the evidenced frequent turnovers of political leaderships should result in the opposite outcome, i.e. in increased levels of domestic extraction. Adding to that, the literature on rent seeking identifies problems for long-term development due to abundantly existing profit-making opportunities in politically fragile countries (e.g. Krueger, 1974; Bates, 1981). The circumstance that fragile political landscapes have existed in most Sub-Saharan African countries is a reason why state intervention can only be successful when right conditions apply. Yet, the persistence of high degrees of political informality by both ‘Big Men’ and only seemingly decentralised political power continues to be a remarkable burden for effective state intervention.

2.3. The Dependence on Commodity Exports and the Inability to Generate Sustainable Public Revenues

The second vital combination of constraints on state intervention in Sub-Saharan Africa can be viewed in the insufficient generation of revenues and the predominance of economies depending on primary commodities (cit.?). In order to present the suggested linkages more clear, it is helpful to assess each chain of thought individually.

It has been established that effective interventions by the state require sufficient monetary resources in order to finance public policies (e.g. Kaldor, 1980; Bates & Lien, 1985). Public health, provision of educational training, promotion of the private sector or financing an expansion of the manufacturing sector, in each of these cases governments can only have a meaningful stake if they are able to draw on sufficient funds, i.e. generated through tax collection, that is employed for the wellbeing of the public. However, low-income countries are generally characterised by a relatively inferior level of public spending as the ‘Wagner Law’ (Tanzi & Schuknecht, 2000: 15) describes. Reviewing the trend of tax revenues accumulated across Sub-Saharan Africa from 1980 shows that it is determined by an averagely low (Ahlerup et al., 2015: 693) and, in some cases, periodically volatile development (Keen & Mansour, 2009 :6). Two critical implications as to why public revenues depict a remarkable constraint for state intervention can be subsumed from this. Firstly, overall low levels of taxation mostly translate into a weakly operating and, hence, poorly intervening apparatus of state. Some view that this further entails problematic legitimacy issues between the state and its citizens (e.g. Levi 1988; Sindzingre, 2007; Di John, 2009). Secondly, the evident fluctuation of public revenues emphasises the structural uncertainty underfinanced states in Sub-Saharan Africa have to deal with. In the context of these circumstances, a deficiency of diverse and sustainable types of revenue sources can be illuminated. A disaggregation of ‘tax revenue’ into single components demonstrates the continuing overarching reliance of low-income countries –which almost entirely consists of Sub-Saharan African states – on taxes from the trade of primary commodities (IMF, 2011: 28). Certainly, the trade tax-to-GDP ratio in resource-rich countries like Angola, Nigeria or Zambia is expected to be higher than in resource-poor countries. Nevertheless, it can be observed that the trend of, in example non-resource exporting countries is aligned with the volatile changes in global commodity prices which signifies that unprocessed commodities are being utilised as primary source for revenue generation throughout the region (see chart 7d. in appendix). This conjuncture is aggravated by the proven failure to transform taxes from trade with more sustainable forms like corporate or income taxes (Baunsgaard & Keen, 2005; Bird & Zolt, 2005).

In a short-term perspective, the dependence on commodity exports and the associated generation of unsustainable trade taxes mean that sudden declines of world prices vitally decrease public revenues and also the range of effective state intervention. In the long run, the bias of Sub-Saharan African economies towards natural resource-based revenues is structurally ‘penalised’ by a secular decline in the terms of trade (Prebisch, 1950). This dynamic character accentuates the difficulty for state intervention arising from revenue issues.

3. The East Asian Developmental State

Having outlined two critical factors influencing the extent of state intervention in Sub-Saharan African governments, this section is now concerned with the conceptualisation of the ‘developmental state’. A significant amount of the development literature has contributed to this research field as it considers a transformation of the policies conducted during the exceptional uprising of a distinct group of East Asian states as a credible development benchmark Sub-Saharan Africa failed to achieve so far.

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