african economies in transition

7/30/2019 African Economies in Transition

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American Economic Association

African Economies in Transition: Volume 1, The Changing Role of the State by Jo AnnPaulson; African Economies in Transition: Volume 2, The Reform Experience by Jo AnnPaulsonReview by: Margaret S. McMillanJournal of Economic Literature, Vol. 39, No. 2 (Jun., 2001), pp. 610-612Published by: American Economic AssociationStable URL: http://www.jstor.org/stable/2698280 .

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610 Journal of Economic Literature, Vol. XXXIX(June 2001)papers of which make up this volume. Fewgraduate students would even be consideredfor such honorific treatment; but Lucad'Aglianowas seen as truly exceptional by allwho encountered him. The book is a shiningexception to the rule that honorific volumesassemble bottom-drawer papers. The quality,while not universallysuperb, is generally high.And the best of the contributions will be ma-jor references for the field of developmentstudies for years to come.All the papers address issues of labor, inone or another aspect, which was the area ofLuca's sadly terminated research. Thus eachof the three papers in section 1, entitled"Growth,Trade and Employment," the onlysection not to include labor in its title, is con-cerned with one or another aspect of labormarkets.Enzo Grilli and Giovanni Zanaldain"Growth and Employment: Where do westand?"reviews the evidence which shows thatthe elasticity of employment with respect tooutput,whichis generally ow in industrial oun-tries, is often far higher in developing coun-tries, as it was in the past in industrialcountries. The reasons for this important ob-servation are judiciously examined. EdmundV. K. Fitzgerald and Giorgio Perosino in"Trade Liberalization: A Critical Approach"offer an important survey of what one mightcall post-Heckscher-Ohlin analysis of the ef-fects of openingcountriesto freer trade. A widerangeof literature s reviewed,embracingbothnew micro models and macroeconomic ap-proaches.Francesco Daveriand RiccardoFainiin "Riskand Migration"refine and extend theHarris-TodaroModel and apply their modelto regional migrationwithin Italy.Gustav Ranis and Frances Stewart in "V-Goods and the Urban Informal Sector"com-bine theory and detailed empirical analysisofa much-neglected area: the informal sector.Because urban factor markets are stronglysegmented,high- andlow-productivity ctivitiescan co-exist. Under this general umbrella, theauthors identify a successful case (Thailand)and an unsuccessful one (Philippines).Giorgio Barba Navaretti examines "Seg-mented Labour Markets in Sub-Sahara Af-rica" using theory and empirical analysis of350 enterprises in Ghana and Kenya. SimonAppleton, John Hoddinott, PramilaKrishnan,

and Kerry Max in "The Labour Market andFemale Schooling?" find that the paucity offemale education in Africa is not well-explained by lower Mincerian returns. Min-quan Liu on "Labour Allocation under Bao-chan" argues that a traditional Chinesecollective farming system can overcome theproblem of shirking n the provisionof laborforcollective activities. The elaborate theoreticalstructure did not convince this reader that se-rious problems do not remain, especiallywhen quality of work, as well as raw output,are important.Partha Dasgupta in "NutritionalStatus andPoverty Traps"returns to a theme which hehas elaborated on with Devraj Ray. If thelong-run relation between food intake andthe market value of work delivered is non-concave, it may prove impossible for the poorand unhealthy to break through the barrierwhich excludes them from the labor market.Such cases, as Mirrlees noted long ago, caneven make equality inefficient. And inequal-ity can emerge between individuals who areinitially identical.Were Luca d'Aglianoalive today, he wouldfind some important answers to his questionsin this volume. But he would also find morequestions to feed his great appetite for ques-tioning research and speculation. The bene-fits which he cannot enjoy are provided to theprofession in this short but densely-packedvolume.

CHRISTOPHERBLISSOxfordUniversityAfrican Economies in Transition. By Jo Ann Paul-

son. Volume 1, The ChangingRole of the State.Volume 2, The Reform Experience. Studies onthe African Economies. New York: St. Mar-tin's Press, 1999. Pp. ix, 342. ISBN 0-312-17751-8. JEL 2000-0287 and 2000-0288What kinds of reforms have (socialist) Afri-

can countries implemented in an attempt tomove away from state-led developmentstrategies? And, are there any lessons we canlearn from these experiences that will help toease the transition in other countries? Thiscollection of essays is devoted to these issuesand is likely to leave the thoughtful readerwith more questions than answers. This is notnecessarily the fault of the authors. Rather it


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Book Reviews 611is a testament to how little documented infor-mation is available on this topic, even in Af-rica. In this respect, the volume is a usefulcontribution to the literature on Africanpolitical and economic development.Like many studies of this kind, the worksuffers from an ideological bias. This is notsurprising as the study was commissioned bythe World Bank and written mostly by WorldBank economists with, it appears, little inputfrom Africans. Although the quality of the es-says is variable, for the most part, there is stillan underlying acceptance of the World Bank"party line" that runs throughout much of thework. For example, Tommasi states, withoutany supporting evidence, "Opening the econ-omy [of Madagascar] to outside investors isessential, not only because of the shortage ofcapital but, more importantly, because itwould instill new dynamism" (volume 2, p.111). Not all of the essays suffer equally fromthis problem. For example, regarding privati-zation, Adam notes that, at present, foreigninvestors are likely to have superior bargain-ing power vis-a-vis African regulatory institu-tions. Thus, although he does not explicitlysay it, he implies that opening the economyto foreign investors might not be welfareenhancing.The book is in two volumes. Volume 1 con-tains seven chapters and is divided into twoparts. Part 1 focuses on macroeconomic pol-icy and performance and investment. Part 2focuses on the questions of privatization andpublic enterprise reform. Volume 2 containssix chapters, also divided into two parts. Part1 contains four case studies of Angola andMozambique, Madagascar, Tanzania, andMozambique treated separately. Part 2considers the role of agriculture.Chapter 1 of volume 1 by the editors, JoAnn Paulson, and Michael Gavin, provides anobjective and useful overview of the politicaland economic context of the reform programsin Angola, Benin, Congo, Ethiopia, Guinea,Madagascar, Mozambique, Somalia, and Tan-zania. It is in this chapter that we learn thatthe emphasis of the study is primarily oncountries that declared themselves Marxist inthe late 1960s or early 1970s and thereforestarted economic liberalization with a 15-20year legacy of state domination of the econ-

omy. However, what differentiates thesecountries from others in Africa becomes lessand less clear as the reader learns of theexperiences of other African countries.Particularly refreshing is the chapter byEdgardo Barandiaranon the role of govern-ment in Africa. Barandiaran makes no pre-tense at having answers to Africa'sproblems.Rather, he argues that at this time, we cannotadequately assess the progress of governmentreforms in Africa because we just don't havesufficient information. Instead, the chapterraises a number of interesting questions in-cluding: What functions should governmentperform? What role should government playin resource distribution? How should govern-ment raise revenue? And, how should govern-ment manage the revenue it does have so asto maximize social welfare? The author doesnot provide answers to these questions butrather provides a framework n which to thinkabout them. He then goes on to argue thatbecause the political systems in these coun-tries have not as yet changed, governmentscontinue to serve the interests of a few keybut small constituencies (including foreigndonors). Finally, the author argues that the

pace of economic reform will continue to beslow without political reform.The case study of Angola and Mozambiqueby Pereira da Silva and Solimano examinestwo countries attempting reforms in themidst of civil war. As we know from recentwork by Paul Collier and Anke Hoeffler, civilwar affects most of the world's poorest coun-tries. For this reason, I find this case studyparticularly compelling. The authors arguethat trying to design economic policy with-out regard to the political situation in thesecountries is hypocritical and doomed to fail-ure. They even go so far as to argue that incountries experiencing civil war, existing net-works supporting the old political economymust be dismantled. While this might betrue, it is not obvious that economics has any-thing to offer on this count. Finally, they ar-gue that the situation in these countries is notconducive to private investment and henceany recovery must be led by public sectorinvestment.Both chapters on agricultureare somewhatdisappointing. Although very different in


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612 Journal of Economic Literature, Vol. XXXIX (June 2001)their approaches, the authors both documentextensively the lack of progress in the agricul-tural sector in Africa.Jones suggests that partof the failure to improve agricultural perfor-mance is due to the slow implementation ofincentive measures while Barrett and Carterargue that the current reforms ignore impor-tant microeconomic linkages. These essaysleave the reader wondering why it is thatgovernments can't figure out the thingsabout reform that these authors apparentlyunderstand.In spite of its shortcomings, there is muchto be learned from the book. We need morebooks of this sort with more input from Afri-cans if we are to truly understand what isgoing on in Africa.

MARGARETS. MCMILLANTuftsUniversityUpdating America's Social Contract: Economic

Growth and Opportunity in the New Century.By Rudolph G. Penner, Isabel V. Sawhill, andTimothy Taylor. New York, London: W. W.Norton, 2000.The 95th American Assembly came to-

gether in June 1999 to discuss the variousproblems facing the economy of the new mil-lennium and, in this volume, announces thatthree are particularly pressing. First, the "neweconomy" of globalized trade and rapid tech-nological innovation may not be raising pro-ductivity as much as one might wish. Second,standards of living are becoming less equal,and the poor are not advancing as rapidly asthe rich. Third, someone will have to pay tomaintain the standard of living of the babyboomers when they retire. The Assemblyalso makes a series of reasonable recommen-dations about these problems: encouragesavings for productivity growth, increasethe returns to work at the low end of thewage distribution, and combine tax/benefitchanges with longer working times to pay forbaby-boomer pensions.

The Assembly calls this an agenda of the"radical middle" - a program so reasonablethat it deserves the same kind of zealousbacking that radical Left and Right agendasreceive. The Assembly views itself as a pru-dent assessor of the country's problems, afaith that becomes understandable when you

leaf through the appendix of the book to dis-cover who actually constitutes the Assembly:corporate vice-presidents, big-name profes-sors, think-tank presidents, editors, lawyers.The Assembly was founded in 1950, a timewhen people believed that such chablis-and-gouda conclaves could and should identifythe real problems the country faces. Unfortu-nately, while the Assembly has been workinghard through the years to define our realproblems for us, nobody seems to have beenlistening: "These three long-term issues . . .have been apparent to serious policy analystsfor at least two decades. Yet year after year,America has only waved its hands at theseproblems . . ." (p. 10). No wonder theAssemblyis becoming radical.In this volume,-the Assembly asks the threeauthors Penner, Sawhill, and Taylor to makethe case for the problems it has selected forpriority thinking. They do so very persua-sively and with a great deal of breadth andunderstanding.After an initial chapter layingout the radically middle agenda, the authorscarefully review the recent performance ofthe U.S. economy in chapter 2, and then de-scribe in chapters 3, 4, and 5 the three mainproblems of productivity,inequality of oppor-tunity, and retirement. The analysis is cogentand largely consistent with the existing litera-ture. In the end, the three problems all in-volve raising income. Productivity is a prob-lem because without productivitygrowth, ourstandard of living may fall behind that ofother peoples, like the Japanese and the Ger-mans (pp. 21, 81, 85). Inequality of opportu-nity is important because life is like afootrace for money, and everyone should runhard but start at the same line (pp. 103, 163).Retirement finance is important because youcan't expect children to take care of their par-ents for a long time (p. 123). In fact, thingswould generally be better if people wouldjust work more (pp. 79, 89, 103, 138, andelsewhere). The policy proposalsare not new,but that is not the point of a radicallymiddleagenda (p. 17): the radical part is not theideas, it is the intensity with which the As-sembly believes in the reasonableness of theideas.Are these ideas reasonable? To assess thebook completely, the reader needs to arrogate

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