The Economies of sub-Saharan Africa.

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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.  The market is slowly opening up and different markets are liberalised, therefore relying on market forces rather than government intervention.  The establishment of SEZs in Shenzhen and Guang Zhou has attracted much foreign direct investment.  With the opening up of the Insurance market in China, big foreign firms such as AIA, AXA, ING etc. have planned to establish businesses in the emerging market.  China’s BOP account is also doing well with increasing exports overseas after many technology markets set up and created new and cheaper technological products.  

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  1. Explain why a lack of investment may be an important explanation of slow economic growth in sub-Saharan Africa.

Economic growth refers to the long-run expansion of the economy's ability to produce output. This is one of five economic goals, specifically one of the three macro goals (stability and full employment are the other two). Economic growth is made possible by increasing the quantity or quality of the economy's resources (labour, capital, land, and entrepreneurship).  Investment is crucial in order to help a country develop.  Investment, according to the circular flow of income, is an injection into the economy. ...

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