Question

Many different development policies have been tried in Africa, especially during later parts of colonization and after independence. Please mention at least three of these policies used that can be considered as statism and the neo-classical response to this. Comment shortly the main idea behind these policies and the drawbacks (failures) which ultimately made policy makers question their effectiveness and seeking other policies.

Answer 1

• Eight African countries enacted similar policies, one being state-led import substitution. The countries were thus poorly prepared for international competition due to high protection, and, heavy import dependency
• Structural adjustment
• Investment climate reform, leading role of the state in operating, and, creating manufacturing firms

There was no regard for efficiency in investments as the managerial capacity of these states was overstretched.

The structural adjustment resulted in better macroeconomic management, rapid liberalization of trade, faster overall growth. The rapid liberalization of trade, freeing-up of import of second-hand clothing for sale, led to a severe contraction of the industry. The Government then moved from Statism to a neoclassical response.

Donors shifted focus to the institutional, and, physical environment for private firms to operate. Policies reflect priorities of the aid community, donor agenda is insufficient & poorly implemented. Mauritius and Tunisia emulated the East Asian model. There was a transition from low-end manufacturing towards technology intensive, and, sophisticated goods.

Neoclassical model did not triumph. It was the state governing the market. Governments liberalized economies, removing trade barriers, and, freeing prices; deregulating the private sector.