Michael Tanner of the Cato Institute focuses his latest National Review Online column on an important piece of news from Africa that has nothing to do with civil war, Islamic extremism, or an Ebola outbreak.
Many African countries have made progress on reforming and liberalizing their economies. Few any longer embrace the Soviet model that once dominated the continent. Over the last decade and a half, many African countries have taken steps to reduce or stabilize their annual budget deficits and their long-term debt. Foreign debt has dropped by a quarter on average, and budget deficits have fallen by two-thirds. Inflation is still too high, but it has moderated, falling from an average of 22 percent in the 1990s to just 8 percent. Property rights have become more secure, and the size of government has declined, although not nearly enough.
Increased economic freedom contributed to reasonably strong GDP growth over the last decade, growth that continued even after the recession. Real GDP grew at an average annual rate of 4.9 percent between 2000 and 2008 — twice as fast as in the 1990s. Extreme poverty has diminished, as has child mortality.
But there remains much to do. …
… Too many African countries responded to the worldwide recession by falling into the Keynesian trap of countercyclical spending and debt. As a result, deficits and long-term debt have risen rapidly, especially in countries like Ghana and Zimbabwe. The number of countries with increasing debt-to-GDP ratios rose from 25 in 2010 to 31 in 2013. Moreover, several countries used the recession as an excuse to shift their spending priorities from investment to consumption. As a result, the IMF recently concluded that “many countries continue to exhibit large fiscal deficits even though growth and revenue are back to (or near) pre-crisis levels. . . . In some countries this is a result of a recomposition of public expenditure away from investment that has resulted in further increases in public debt.”
African countries also remain remarkably corrupt.
