Southeast Asia has consistently outperformed Sub-Saharan Africa in income growth. As the below chart indicates, its inhabitants were much poorer than Africans in 1960; today they are two and one-half times richer. In fact, over the past half-century, the region has been the most consistently successful in the developing world, growing almost continuously (apart from a brief hiatus after the 1997 Asian financial crisis).
Southeast Asia’s growth has also been much more inclusive than Africa’s. Whereas the latter’s two growth spurts since independence—in the 1960s and 2000s—have yielded little poverty reduction, Southeast Asia has produced spectacular reductions. Indonesia, for instance, reduced poverty from 60 percent in 1970 to 22 percent in 1984. Vietnam reduced it from 58 percent in 1993 to 14 percent in 2008.
Yet, the region does not meet the standard model for economic success, at least as defined by the World Bank and the rest of the Western development community. Governments have historically not been held in check by elections. Corruption is widespread. Governance has rated low on most indicators.
What then explains this success?
According to a recently completed research project Tracking Development (funded by the Dutch Ministry of Foreign Affairs), the difference lies in the policy choices made by governments in these two regions. The authors argue that there are three essential policy preconditions for sustained growth and poverty reduction. All must be present simultaneously to work.
1) Sound macroeconomic management. Inflation may not exceed 20 percent for any length of time.
2) Economic freedom for peasants and small entrepreneurs. The state did not attempt to dominate the economy, especially at the expense of small actors.
3) Pro-poor, pro-rural public spending. At least 20 percent of the state development budget was allocated to agriculture in ways that benefited peasants rather than large landowners. Leaders made it a priority to raise the productivity and profitability of smallholder food crop farming.
Ideology (social justice, nationalism) through political pragmatism (fear of radical or socialist opposition) to a correct interpretation of the historical relationship between agricultural and industrial development.
In contrast, no government in Africa has adopted all three. The third has proven especially elusive.
The final conference of this project took place in The Hague right before the holidays.
While participants accepted the main arguments, there was much debate on whether the results could be replicated in Africa or elsewhere. Some (including myself) argued that the political dynamics that produced these policies do not exist elsewhere and were unlikely to be recreated. Elites that do not see a reason to act inclusively will not. Weak states with very limited administrative capacity will not be able to implement these policies effectively. Ideology (and the preferences of donors) may favor other choices. In such places, more systemic issues must be addressed first.