The pathology of economics

COVID-19 exposes the deadly dominance of neoclassical economics in Africa.

On February 24, 2021 Ghana received a vaccine shipment (600,000 doses), the first to sub-Saharan Africa under the COVAX facility. It amounted to a tiny fraction of the hundreds of millions needed on a continent increasingly ravaged by the pandemic. Contrast this to the tens of millions already vaccinated in the UK and US. The optimism that Africa would be spared by “early lockdown”, “less dense population, “the effect of ultraviolet”, “a climate that meant people spent more time outside” and “Africa’s youthful population” has rapidly faded. Officially there are now more than 100,000 deaths on the continent, but the real numbers are much higher due to the paucity of testing and the lack of capacity to accurately track and evaluate causes of mortality.

The shortage of tests and vaccines are exacerbated by the West’s hyper-nationalism restricting the import of these two vital tools to combat the pandemic. The same forces have also generated a scarcity of personal protective equipment (PPE), the lack of monoclonal antibody and other treatments, and terrible shortages of medical oxygen so vital to keeping people alive. How is it possible, 60 years after independence, for African countries to be so highly dependent on the goodwill of the outside world for basic health goods? A good deal of the answer lies in the pathology of economics and related policies, which have spread like a pandemic globally and have come to dominate both the West and the continent of Africa. How did this come about? How does it relate to the strategies that have undermined African capacities to mitigate the effects of the pandemic on the health and welfare of its people? And what should be done?

Following independence, higher education was a key part of the national development project and was aimed at training Africans to take on vital new roles as doctors, teachers, lawyers, civil servants, and economists. Economic curriculum in universities theorized about the nature of Africa’s integration into the global economy and the domestic policies needed to enhance development. Debates on the government strategies drew on diverse theoretical traditions such as institutional and structural economics. There was a general consensus on the need for African countries to use government tools to build an industrial base.

Beginning in the early 1980s, donors shifted from supporting state planning and import-substitution industrialization toward imposing structural adjustment. They were resisted by local economists not inclined toward the neo-classical model that provided the theoretical basis of neoliberal policies. Donors even ghost wrote reports, pretended they were written locally and then praised them for their thoughtful insights. The World Bank and other donors realized that opposition could be demobilized, and “ownership” generated by incorporating the economics profession into the Western economic model.

The crisis of African universities, including the extreme decline of academic wages partly generated by the structural adjustment project of the World Bank in the 1980s, created the opportunity. Donors provided stipends to retrain old faculty, provided the demand for these local “skills” in aid packages and supported a new generation of students in neoclassical economics through organizations like the African Economic Research Consortium (AERC), formed in 1988 with the support of the World Bank and other agencies. The AERC set out to revamp higher education by training graduate students and by providing financial support to economics departments in African countries to organize graduate coursework and research along Western lines. The AERC flow of tens of millions of dollars from donors to African universities was a huge inducement for African economics departments to participate in the programs. Today, economics departments throughout Africa look no different than their Western counterparts. By the AERCs own count there are thousands of their graduates in African ministries and central banks, think tanks, NGOs, and academic institutions. Empowering this “epistemic community” of local economists created trusted purveyors of the international agenda and helped facilitate the institutionalization of neoliberal policies on the continent.

At the heart of adjustment were neoliberal policies of deregulation, privatization, macro-stabilization, and user fees in health and education, which were supposed to lead to static efficiency gains. Unfortunately, the results were very different. Public expenditure cuts and the privatization of social services in health care and education put African countries in worse health and on the wrong trajectory to combat any pandemic.

Neoliberalism loosened restrictions on capital flows, privatized state enterprises, and liberalized trade undermining local manufacturing capacity leading to more reliance on imports of manufacturing goods including pharmaceuticals and other health commodities. Increasingly African countries became more dependent on exporting unprocessed raw materials for foreign exchange. Hence, adjustment led to the deindustrialization of the continent and returned Africa to its colonial style extraction economy with its problematic boom and bust commodity cycles. Manufacturing fell from 18% of GDP in 1980 to only 7%-9% after 2000.

The tools of mainstream economics are limited in their ability to conceptualize the structural and institutional exigencies of development, which have become even more challenging with African countries at the lower end of the of global supply chain. Recent studies have indicated that Africa’s exports after 2000 have increased without a comparable rise in domestic value added. Yet, orthodox economists see liberalized Africa as naturally following its comparative advantage. Hence, we have prima facie evidence of a discipline that accepts a pathological condition as normal with all of the problematic incapacities to deal with the COVID-19 pandemic.

African policy makers need to draw on the wealth of accumulated knowledge in multiple theoretical paradigms to design strategies to diversify and structurally transform economies in a value chain world. None of this is easily conceptualized in the neoclassical paradigm that currently dominates the discipline in Africa; one that narrowly focuses on a world of marginal changes, retracted states, and trade between countries based on static comparative advantage.

Howard Stein is Professor of Afroamerican and African Studies and Epidemiology at the University of Michigan.

A more detailed elaboration of some of the arguments here can be found in H. Stein, “Institutionalizing Neoclassical Economics in Africa: Instruments, Ideology and Implications” Economy and Society Volume 50, No.1, Feb. 2021.

This blog post was originally published on Africa Is A Country. Photo by Drsheikh84.

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