Globalization, Growth, Inequality, and Poverty in Africa: A Macroeconomic Perspective

Abstract

The last two decades has witnessed an increase in globalizing influences affecting most countries, Africa included. These influences have arisen partly as a result of domestic and international policies, such as trade policies, and partly as a result of general globalizing impulses, such as technological developments and enhanced communications. The single overarching objective of this paper is to outline the macro evidence on the extent to which globalization is taking place and poverty is reducing in Africa, and to consider this to both characteristics of the region (i.e., within the region) and relative to other global regions. It draws on some of the most recent evidence about the globalizing processes in various forms so as to try to determine the speed and extent of globalization in Africa. This helps to put into proper perspective the impact of globalization on poverty and inequality. It is essentially a partial and descriptive approach, at best indicative of associations, and stops short of attempting to identify, empirically, channels of influence and causal relationships.

Introduction: Globalization–Poverty Channels and Case Studies from Sub‐Saharan Africa

“…The growth rate of real GDP for oil-producing countries and resource-intensive countries in SSA during the period of 2002-5 was 6.2 per cent and 7.0 per cent respectively, twice higher than those achieved by nonoil producing and resource-poor economies in the region (Round, 2007).…”

“…First, as documented in detail by Round (2007) and reproduced here in Table 1, SSA is not behind other developing regions in terms of trade openness, as conventionally measured in terms of a trade intensity index (imports and exports relative to GDP in current US$). Further, as expected, average trade intensity has increased in SSA in line with the overall global increase, but not as rapidly as almost all other low and middle income regions (this trend is observed irrespective of whether the intensity index is calculated with or without country GDP weights).…”

“…Table 2, reproduced here from Round (2007), shows estimates of FDI flows (inflows and outflows combined) expressed relative to GDP and (net inflows) as shares of the total net FDI received by developing countries, in both cases shown at the regional level. SSA shows a marked increase in 1980-84 1985-89 1990-94 1995-99 FDI relative to GDP from 0.30 in the first period to 2.74 per cent in the final five-year period.…”

“…It is worth noting that in the 1990s, when there was a marked increase in the share of developing countries as a whole in world total FDI, Africa's share fell to 4 per cent. These aggregate measures such as the trade intensity index are the outcome of many factors and conditions that could affect these ratios, including low levels of per capita income, geographical location and the trade composition, and as such cannot be used as an indicator of the outcome of liberalization policies (Round, 2007). As Pritchett (1996) argues, for the latter, a 'structureadjusted' trade intensity index should be used, which takes into account a host of structural characteristics such as size of GDP per capita, resource endowments, location factors.…”

“…The incidence and depth of poverty has deepened in the region. According to the estimates provided by Chen and Ravallion (2004), reported in Round (2007), the number of poor, measured in income poverty based on the US$1 a day international poverty line, increased in SSA, almost doubling from about 164 million in 1981 to 313 million in 2001 (Table 3). As the total number of poor in the world fell on account of the sharp reduction in China and other countries in Asia for this period, the proportion of the world's poor in Africa rose from about 11 per cent to approximately 29 per cent during this period.…”