Hafed Al-Ghwell
For decades, the prevailing consensus around sustainably developing “the rest of the world” has always centered on adopting export-driven strategies and the allure of the rapid economic growth that follows soon after. In a nutshell, if countries invested in infrastructure and built their manufacturing bases, they could expect windfall export revenues that would pay off the astronomical costs of leapfrogging into the future. But it turns out — as with most things in life — it is never that simple.
The obsession with a one-size-fits-all sustainable development strategy worked for Asia’s tiger economies, which achieved explosive growth, primarily driven by exports and sustained by sophisticated trade and financial hubs. To date, just four of those economies now contribute more than $3 trillion to global gross domestic product, which is comparable to the combined GDP of 15 Arab countries, explaining the allure of adopting such an approach. However, even if infrastructure-driven, export-led strategies may have worked wondrously in Asia, they should never have been promoted as the silver bullet for the world’s low to middle-income countries in Africa and elsewhere.
A vital aspect of the export-driven growth model is the substantial investment in infrastructure to harness each country’s untapped potential, increasing economic activity. Its advocates would also frequently cite the successes in Asia, yet even the developing countries that poured resources into infrastructure developments are still lagging behind their Asian counterparts in crucial manufacturing sectors like textiles. This suggests that more than just infrastructure is needed for economic growth and a universally applicable model.
After all, such strategies have their fair share of shortcomings beyond the occasional hiccup. Often, there is a tendency to overlook that African countries, for instance, do not possess the same competitive advantages as the Asian countries that successfully implemented this export-driven growth model. For example, while Asian countries could rely on a vast pool of low-wage labor, wages in Africa are generally higher than in other nations with similar income levels, putting them at a disadvantage from the get-go.
Moreover, focusing on infrastructure drove surges in imports, increasing domestic demand for cheaper foreign goods, choking local, nascent manufacturing capacities and contributing to balance of payments issues. This, in turn, forced poorer countries to take on significant debt loads (which have tripled in the last decade) to sustain this erroneous model. The increased cost of servicing that debt crowded out national budget priorities crucial to sustainably growing their economies, such as healthcare and education.
Granted, the short-lived spike in domestic demand could spur some economic activity, but such increases have never been sufficient to create good, well-paying jobs for the millions of young people entering the labor force every year. As a result, unemployment rates are rising and inequality is growing between urban and rural areas and between different segments of society. And that is not all.
There is a certain wry cynicism in insisting that the world’s developing countries build export economies from the ground up. But assuming they succeed, where will those exports go? Poorer countries still need to overcome numerous obstacles in global and even regional trade due to protectionism, making it impossible to exploit their comparative advantages and potentially diversify their economies. Moreover, if developing countries retaliated with trade barriers of their own, it would impede the capital, resources, labor and services its infrastructure and local industries need to sustain the desired export-led economies.
Aside from protectionism, debt distress and instability, other significant headwinds, from food and water insecurity and energy poverty to threat multipliers like worsening climate change, pandemics and conflict, make it even more difficult to subscribe to sustainable development models that do more harm than good. Therefore, it is way past time for Africa, including the Maghreb, to chart alternative paths toward economic growth by taking nuanced approaches considering each country’s unique needs and challenges to build a more sustainable and equitable future for all.
Instead of fixating on infrastructure investments and manufacturing capabilities, Africa can learn valuable lessons from Latin American countries with similar resource endowments. One such lesson is the importance of prioritizing agricultural productivity enhancements by focusing on cost-effective measures aimed at small-scale farmers who stand to gain the most from increased productivity. Latin America and Africa share similar land and climate conditions, but they also share a long history of massive public investments in infrastructure in anticipation of sophisticated export economies.
Boosting agricultural productivity has several advantages. First, it helps ensure food security and improved nutrition for the continent — a critical prerequisite for sustainable development. Second, increasing the income of smallholder farmers directly impacts poverty reduction, while extra disposable income can be used to invest in or sustain other sectors. Third, higher agricultural productivity can also lead to value-added agro-processing industries, which create jobs and spur economic growth. Lastly, it improves environmental sustainability through reduced pressure on natural resources such as land, water and forests, combined with less pollution from chemical fertilizers, reduced greenhouse gas emissions from burning fossil fuels (e.g., diesel) used for irrigation pumps and less soil erosion due to fewer tilled fields.
Given Africa’s complexities and unique challenges, it is clear that a one-size-fits-all strategy is doomed to fail. Instead, the continent should explore hybrid approaches combining replicable elements of the export-driven growth model with other methods that capitalize on each nation’s strengths and advantages. For example, countries with abundant natural resources should focus on developing industries that exploit these assets. At the same time, those with well-educated labor forces could prioritize investments in sectors such as technology and innovation. In each case, the key is to identify the unique competitive advantages of each country and to design policies that leverage these strengths.
To wit, the export-driven growth model, though alluring, has yet to deliver the expected economic benefits for many in Africa. The reasons for this are manifold, ranging from the lack of competitive advantages to the overemphasis on flawed development models that leave Africa addicted to debt and increasingly unable to build the economies of the future.
By studying the experiences of Latin American countries and prioritizing agricultural productivity enhancements, Africa can chart a more sustainable and inclusive path to economic growth. Furthermore, embracing hybrid approaches and tailored strategies that focus on each country’s unique advantages will prove more fruitful than relying on a single, forced sustainable development model that has thus far yielded disappointing results.
