African development from a comparative perspective

African development from a comparative perspective

Grandmother-verifiable statistics

In 1901, my grandmother was twenty-four. She had six children, as was common in Iceland at that time, even if the common number of births per woman had decreased from almost six in the first 1850s to four around 1900, like in today’s Ghana. Actually, the amount of births per woman in Iceland was four in 1960, so Iceland and Ghana are separated in this respect by a half-century or less. It took Ghana significantly less than fifty years, from 1960 to date, to lessen the amount of births per woman by three, from almost seven to four. It took Iceland a hundred years . 5, from the late 1850s to date, to lessen the amount of births per woman by three, from five to two (or 2.1 to be precise, the critical number that keeps the populace unchanged in the lack of net immigration).

True, Ghana has made faster progress on the populace front than a great many other African nations. The common number of births per woman in Sub-Saharan Africa has decreased from 6.7 in 1960, as in Ghana, to 5.3 in 2005. These averages, however, mask a broad dispersion in fertility across countries. Mauritius is right down to two births per woman weighed against almost six in 1960. Botswana is right down to three, from seven in 1960. The ladies of Kenya, Tanzania, and Uganda will have five, six, and seven children each normally weighed against eight, seven, and seven in 1960. 1

Goodbye to short lives in large families

The point of the comparison of demographic statistics is that social indicators often give a clearer view than economic indicators of important areas of economic development. Moreover, several social indicators of health insurance and education – fertility, life span, literacy, and such – are plentiful for most countries and perhaps reach farther back in its history than many economic statistics. Fertility matters because most families with many children cannot afford to send all of them to school and empower them to help make the the majority of their lives. Families with fewer children – say, several – have an improved shot at to be able to provide a good education to every child, thus opening windows and doors that otherwise might remain shut. Reducing family size, therefore, is among the keys to more and better education and higher standards of life. As Hans Rosling has described very vividly, short lives in large families are no more a common denominator in developing countries. 2

Around the world, including in many elements of Africa, there exists a clear trend toward smaller families and longer lives. In Ghana, for instance, life span at birth has increased by a lot more than three months each year since 1960, from 46 years in 1960 to 58 years in 2005. In Sub-Saharan Africa normally, all 48 countries included, life span increased less rapidly, from 41 years in 1960 to 47 years in 2005. Average life span is now increasing again in Africa, having reached a peak of 50 years in the late 1980s and decreased mostly due to the HIV/AIDS epidemic.

Iceland’s economic history through African eyes

Why don’t we now go back to Iceland and briefly trace its economic history since 1901 through African eyes, since it were. In 1901, Iceland’s Gross Domestic Product (GDP) per capita was a comparable as that of Ghana today, measured in international dollars at purchasing power parity. This observation, illustrated in Figure 1, follows from two simple facts:

  1. Iceland’s per capita GDP has increased by one factor of fifteen since 1901, a mechanical consequence of the average rate of per capita output growth of 2.6% each year from 1901 to 2006;
  2. In 2006, at USD 2,640 at purchasing power parity, Ghana’s per capita GDP was about one-fourteenth of Iceland’s per capita GDP of USD 36,560.

Figure 1. Through African Eyes: Iceland’s per capita output, 1901-2006 (2000 = 100)

With the duration of time, Iceland’s economy grew. The uneven trajectory in the figure traces the ups and downs of Iceland’s actual per capita GDP, whereas the smooth one shows Iceland’s potential per capita output, conventionally estimated by a straightforward regression of actual per capita GDP promptly, thus abstracting from business cycles. By 1920, Iceland’s per capita GDP had reached the amount of today’s Lesotho. By 1945, Iceland had become Namibia and by 1960, Botswana. By 2006, Botswana’s per capita GDP had climbed to USD 12,250, 1 / 3 of Iceland’s. Put differently, Iceland’s per capita GDP in 1960 was 1 / 3 of what it really is today, and its own annual growth rate of 2.6% each year tripled the amount of per capita GDP from 1960 to 2006. By 1985, leaving Africa behind, Iceland had become South Korea.

Turning up capital (and books)

How did Iceland do it? To produce a long story short, upon achieving Home Rule in 1904, Iceland accumulated capital at a reasonably rapid pace, a myriad of capital, because of this is what capitalism in a mixed market economy is focused on, plus effort: physical capital through saving and investment, human capital through education and training, foreign capital through trade, financial capital through banking, and social capital by way of democracy, institution building, and equality. Natural capital also played a job, first rich fishing grounds offshore and later hydro power and geothermal energy, however the key to the successful harnessing of the country’s natural capital was its earlier accumulation of human capital. And human capital is just about the single most significant key to Iceland´s growth performance, because of smaller families and steadily longer lives.

When Home Rule was achieved in 1904, the majority of Iceland’s impoverished population had been literate because literacy have been near universal because the end of the 18th century. Thus, Icelanders were ready for the present day age into that they were catapulted at the start of the 20th century. Not merely is the general degree of education permitted by near-universal literacy best for growth, however the social conditions – law abidance, for instance – that produce near-universal literacy possible are almost surely also best for growth. Exact measures of literacy in Iceland in 1900 are unavailable, but statistical information on the amount of books published is available. In 1906, the amount of books in Icelandic published per 1000 inhabitants was 1.6, which is a lot more than in today’s Norway and Sweden. By 1966, the amount of books published in Icelandic per 1000 inhabitants had climbed to 2.7, the existing level in Denmark and Finland. By 2000, the figure for Iceland had increased to seven books published per 1000 inhabitants. It’s possible that, with small editions of every book, small countries such as for example Iceland (population 300,000) have room for more titles. Nonetheless, they are impressive figures, and reading is wonderful for growth. 3

Closing the gap

At the start of the 21st century, African societies face a twofold challenge. First, they need to achieve near-universal literacy because education may be the key to the accumulation of human capital along with other types of capital and the main element to growth-friendly management of natural capital. In 1970, 28% of adults in Sub-Saharan Africa knew how exactly to read and write. By 1990, Africa’s literacy rate had risen to 51% and by 2006, to 61%. Youth literacy – that’s, literacy among those between your ages of 15 and 24 – had increased to 73% in 2006. The literacy gap should be closed as fast as possible, with no child left out. With near-universal literacy, Ghana ought to be able increase its per capita GDP by one factor of fifteen – you will want to? – in three generations, or less, as Iceland did by practicing democracy and turning up capital of most kinds through education, trade, and investment. Other African countries should aswell, though most have further to go than Ghana, whose per capita GDP in 2006 was twice that of Kenya and almost four times that of Malawi.

Right now, fourteen out of 48 Sub-Saharan African countries have were able to decrease the number of births per woman below 4.3, Iceland’s 1960 figure. Some distances are shorter than they could seem.


1 All figures on output, fertility, and literacy cited in the written text are extracted from the World Bank‘s World Development Indicators 2007 except the historical figures on Iceland that are obtained from Statistics Iceland.

3 Canoy, Marcel F. M., Jan C. van Ours, and Frederick van der Ploeg, “The Economics of Books,” Chapter 21 in V. Ginsburgh and D. Throsby (eds.), Handbook of the Economics of Art and Culture, 2006, North-Holland, Amsterdam. Also available as CEPR Discussion Paper No. 4892, February 2005.

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