Multiplying paths to development

Why the EU is considering new approaches to poverty reduction.

Economic growth is the principal driver of poverty reduction in Africa: that is the message coming from the European Commission, EU member states and other development actors. Few experts and policymakers believe that growth will, on its own, lift Africans out of poverty.

A simple statistic illustrates this point: the number of the world’s poorest people who live in India and China – medium-income countries with high growth rates – exceeds the entire population of Africa. But without growth, all other schemes to reduce poverty will lack the economic underpinning required to be sustainable.

Andris Piebalgs, the European commissioner for development, told MEPs earlier this month that the “over-arching theme of growth, job creation and
investment” was “crucial” for both the EU and Africa, and should be the first point on the agenda of the bilateral summit in Libya in November.

“This theme will allow leaders to discuss enablers for economic growth in
areas like energy efficiency, private-sector development and trade, agriculture and food security,” Piebalgs said. (The other main issues he wants to see raised at the summit are environmental protection, especially relating to climate change and biodiversity, and peace and security.)

This is a departure from the habitual discourse on development, in which poverty reduction – the ultimate aim of development policy – was treated as a distinct issue with its own rules and logic, separate from stimulating growth.
A Commission official conceded that in the past, development funding had often been heavy on health and education while neglecting a national government’s ability to maintain the complex service-delivery systems that are necessary to make schools and hospitals function properly. Students need roads to get to schools, and those roads need maintenance. Teachers need to show up for work, and need to face disciplinary action if they do not. Hospitals need cooling systems for medicines and lighting for operating theatres, and hence reliable power supplies. Now, the Commission not only recognises this, the official suggested, but has adapted its policies accordingly. A green paper on development, to be presented in the coming months, will be evidence of this shift.

Sustainable growth

In the decade before the global economic crisis of 2008, 22 of Africa’s non-oil producing countries registered average annual growth rates of more than 4%, according to World Bank figures. This growth delivered poverty-reduction rates of 1% every year – a rate higher than India’s.

Shantayanan Devarajan, the World Bank’s chief economist for Africa, says that good policies were critical in translating economic growth into effective poverty reduction. Such policies do two things, he suggests. They underpin growth and make it sustainable, and they make sure that the benefits of growth trickle down to ordinary Africans. “Many of these governments have taken hard decisions that were delivering results before the crisis,” he said. “This created momentum for reform. The political environment for pro-poor reform has inexorably improved,” he added.

The global crisis has brought economic growth in Africa to a standstill, although the African Economic Outlook projects that it will pick up again this year, and even more so next year. But Devarajan credits governments with providing the right response. “When the global crisis hit, all reform pay-offs disappeared,” he said. “Nevertheless, African policymakers continued pursuing reform.”

He attributed this to an understanding on the part of the élites that they can no longer ignore the needs of their citizens. “African people, having seen the populist policies of the past, are now demanding reform,” he said.

Labour markets

The quest for economic growth brings with it its own difficulties. Development donors have traditionally been uneasy about involving the private sector in development activities, but such involvement is now seen by many as necessary to spur growth.

Donors and governments are also often uneasy about dealing with the informal sector, that is, economic activity that is unregulated and untaxed – yet 90% of Africa’s employment is provided by such businesses. Africa’s labour markets have to absorb 7-10 million new entrants every year, and without the informal sector, they would simply languish (and threaten trouble for their governments).

Finally, pro-poor policies supported by economic growth do not make governments more democratic. Ethiopia, for example, has made great progress toward meeting most Millennium Development Goals.
Its primary-school enrolment almost tripled between 1990 and 2007. Child and maternal mortality have both fallen. The country registered double-digit growth in the years up to 2007-08, with slightly lower growth since then.
Through programmes at the local level, Ethiopia’s government has become more responsive to the needs of its citizens – which could be seen as a building block of democracy.

All this, however, has not resulted in a better overall environment for political debate, which is the essence of democracy.

Sooner or later, donors will have to decide whether they want to support the Ethiopian path or give priority to political development.

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