Africa’s post-independence leaders – like many developing country policy makers in the 1960s and 1970s – looked to industrialization as the key to rapid economic growth. But, the state-led, import substituting industries they created were frequently unsustainable, and efforts to spur industrial development in Africa largely vanished in the 1980’s. While the last two decades of the 20th Century were boom times for industry in low and middle income countries; industry was moving out of Africa. This presentation addresses two questions: why Africa should industrialize and how.
Recent research indicates that economies with more diverse and sophisticated industrial sectors tend to grow faster. Africa, however, is moving in the opposite direction. New evidence on changes in industrial structure and sophistication for 18 African economies between 1975 and 2005 shows that industry in most African economies has declined in relative importance, diversity, and sophistication. Lack of industry limits growth: this is why Africa should industrialize.
How Africa can industrialize presents a complex challenge that calls for two broad areas of policy action. The first is the less controversial: continuing the investment climate reforms urged by the international financial institutions, but with increased emphasis on infrastructure, skills and regional integration. The second is likely to provoke more debate: Africa must learn to compete. Industrial policies – such as an export push, spatial industrial policies, and efforts to attract task-based production – are likely to be needed, but we know relatively little about the costs and benefits of such initiatives. For this reason the Brookings Institution and UNU-WIDER have launched a collaborative research program on industrialization in Africa called Learning to Compete.
Dr. John Page
Senior Fellow in the Global Economy and Development Program at the Brookings Institution in Washington, DC
Director, UNU Office at the UN, New York
Conference Room 7, Temporary North Lawn Building, United Nations Headquarters, New York