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The Economies of sub-Saharan Africa.

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Introduction

Economics Unit 5- Exam Question The Economies of sub-Saharan Africa 4a) Contrast the economic performance of sub-Saharan Africa during recent years with that of other parts of the developing world. The economic performance of sub-Saharan Africa has had little success. The African leader's economic policies have been a failure, involving too much state intervention rather than letting the invisible hands of the market forces control the economy. Although in such little developed countries the government is needed to provide guidance and lead the market in the right way, the policies were too government orientated and depended mainly on state-run industrial enterprises. This in turn leads to the corruption of civil servants. The countries acted as if they were near developed, enforcing import tariffs and quota controls. Even with so much help from foreign loans and aid from the World Bank and IMF, the total wealth of Africa is only a little more than Belgium. Of the 29 sub-Saharan countries, only 6 were seen to have improved their economy, with Ghana as the model example. Yet, Ghana's people are still some of the poorest in the world. Whereas, those in Asia, such as the 'tiger' economies, have had a much greater success by far. Take China for example- it is one of the fastest growing economies in the modern world, last year achieving 10% economic growth. ...read more.

Middle

Without the right policies to encourage foreign direct investment (such as China's Special Economic Zones), Africa stands little chance. Ultimately, economic growth raises living standards. c) Evaluate the economic policies which the passage suggests help account for 'Africa's disastrous performance' in the 1980s. The economic policies that Africa tried to adopt all required extensive state intervention, such as state marketing boards for agricultural products, over-valued exchange rates, import tariffs and quota controls as well as state run enterprises. Policies that usually involve government intervention do not do well to promote growth. Since mentioned above about the importance of investment to help promote growth in countries, investors do not appreciate high government intervention as it means more restrictions and laws. Investors invest in free-market economies, such as Hong Kong as there are less rules and regulations. Quota controls and an overvalued currency will disrupt the export performance of a country rather than encourage it. This is because although it makes imports cheaper for the country, the country's goods will be more expensive for the other countries; therefore they will find they lack foreign exchange to purchase other necessary goods for the country's benefit. Sometimes it is necessary to import large amounts of goods into the country for everyone's well being, such as good fertiliser for agriculture. If a quota is set on the amount that can be imported just to protect local industries, then this is not efficient. ...read more.

Conclusion

This leaves national export figures worse than before. When Cash Cropping fails, service cuts are used, reducing public spending, particularly in essential areas such as food subsidies, health and education. These cuts in the past have reversed the development successes of the 1960s and 1970s, with rising child mortality, school enrolment falling, and more and more people going into absolute poverty, lowering people's standard of living overall. While the rich countries have exploited the low prices of African commodities, African countries are suffering. As a result, the value of labour decreases, capital flows become more volatile, there is a down-spiral effect as well as social unrest. The IMF and World Bank are controlled and 'owned' by developed nations such as USA, Germany, UK and Japan, therefore they decide what policies Africa should adopt, exploiting them. Yet it cannot all be blamed on these policies- the country's own political stability and government system is also important. Africa suffers from constant wars and government corruption. IMF and World Bank have received much criticism, and have accepted that such Structural Adjustment Policies (SAPs) have not worked out. Rather, they now have Poverty Reduction Strategy Papers (PRSPs). Yet, these have not worked out either. What countries like Africa needs most is aid from Non governmental organisations such as Oxfam, who focus on helping people gain self reliance, develop needed skills and empowerment which will help the local people gain self independence. ...read more.

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