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Figure of the week: Might a few outlier economies explain Africa’s abnormally high inequality?


On Thursday, July 7, the International Monetary Fund (IMF) revised its economic outlook for South Africa. Despite “considerable economic and social progress” since 1994, the IMF report cited high income inequality, among other factors, in its projection of slow growth and increased unemployment in the medium term. Earlier this year, in the Brookings Africa Growth Initiative’s Foresight Africa 2016, we explored this pressing problem—high income inequality—across the continent. The initial takeaway was that sub-Saharan Africa has greater in-country income inequality than other developing countries around the world. However, after separating seven outlier economies—Angola, the Central African Republic, Botswana, Zambia, Namibia, Comoros, and South Africa—we noted that income inequality, measured by the Gini coefficient, in the rest of the region actually mirrors the rest of the developing world, which currently stands at 0.39. All seven outlier economies have Gini coefficients above 0.55, a level reached by only four other countries worldwide: Suriname, Haiti, Colombia, and Honduras. 

It is important to explore precisely why this disparity exists. Notably, sub-Saharan Africa is not only an outlier in income inequality, but also in the relationship between economic growth and poverty reduction. Generally, in the developing world, every 1 percent of growth reduces poverty 4 percent. In sub-Saharan Africa, however, every 1 percent of growth only reduces poverty by 3 percent. In Foresight Africa 2016, Brookings Nonresident Senior Fellow Haroon Bhorat suggests that this disparity may be because of the commodity booms that have sustained growth periods in African economies, which bring extraordinary returns to capital but limited job growth. Alternatively, these commodity booms may have accompanied a fall in manufacturing output; growth is thus concentrated in the low-productivity services sector. In any case, this graph forces us to consider exactly what type of structural transformation is necessary for continued economic growth and acknowledge that inequality in sub-Saharan Africa might require different solutions in different countries.

For a more in-depth discussion on this issue, see Foresight Africa 2016 and Bhorat’s discussion of African inequality in relation to the Sustainable Development Goals.

Omid Abrishamchian contributed to this post.

Authors

  • Mariama Sow
      
 
 




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Millions Learning Case Studies


      
 
 




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President Obama’s role in African security and development


Event Information

July 19, 2016
10:00 AM - 11:30 AM EDT

Falk Auditorium
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

Register for the Event

Barack Obama’s presidency has witnessed widespread change throughout Africa. His four trips there, spanning seven countries, reflect his belief in the continent’s potential and importance. African countries face many challenges that span issues of trade, investment, and development, as well as security and stability. With President Obama’s second term coming to an end, it is important to begin to reflect on his legacy and how his administration has helped frame the future of Africa.

On July 19, the Center for 21st Century Security and Intelligence at Brookings hosted a discussion on Africa policy. Matthew Carotenuto, professor at St. Lawrence University and author of “Obama and Kenya: Contested Histories and the Politics of Belonging” (Ohio University Press, 2016) discussed his research in the region. He was joined by Sarah Margon, the Washington director of Human Rights Watch. Brookings Senior Fellow Michael O'Hanlon partook in and moderated the discussion.

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Transcript

Event Materials

      
 
 




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The Young African Leaders Initiative: Soft power, smart power


In 2010, Africa’s leaders gathered at the African Union in Addis Ababa to celebrate 50 years of independence. In Washington, President Barack Obama marked the occasion by hosting a town hall meeting of young African leaders from nearly 50 countries.

What looked at the time to be a curious way to mark a significant moment in the continent’s history was in fact the genesis of what could become the most innovative Obama initiative in Africa. 

When asked during the session by a young woman from Mali why he had convened such a meeting, Obama said that he wanted “to communicate directly to people who may not assume that the old ways of doing business in Africa are the ways that Africa has to do business.” The president added that he wanted the young leaders to meet each other, to develop a network of like-minded people working for a better future, and to reinforce each other’s goals and aspirations.

That town hall marked the launch of the Young African Leaders Initiative (YALI). Over the next two years, YALI engaged Africa’s youth, principally through events coordinated by U.S. embassies throughout the region. Then, during a speech in 2013 in South Africa, Obama announced the establishment of the Washington Fellowship. Subsequently renamed the Mandela Washington Fellowship (MWF), the program initially was designed to bring 500 young leaders to the U.S. for six weeks of executive leadership training at U.S. universities and four days in Washington to meet with each other, leaders in the administration, and to have a town hall with the president. In 2016, the program was increased to 1,000 fellows.

The fellows

When USAID put the application online for the first class of fellows in December 2013, the response was extraordinary. Nearly 50,000 applied for 500 slots. Similar numbers have applied for the two subsequent classes. Over the course of three classes of fellows, there have been 119,000 applications for 2,000 openings.

The U.S. government kept the qualifications relatively simple. Young men and women from each of sub-Saharan Africa’s 49 countries are eligible to participate, including from countries on which the U.S. has sanctions, such as Sudan, Eritrea, and Zimbabwe. Applicants generally have to be between 25 and 35, proficient in English, possess a proven record of leadership, and have a commitment to return to the continent. Fellows apply for one of three tracks: business and entrepreneurship, civic leadership, or public management.

A review of the program found that in the first cohort, the gender split was 50/50, nearly 40 percent owned a business, and a similar number ran a nonprofit organization. Eighty percent of the class had never traveled to the U.S., and more than half grew up outside capital cities.

The key element of the fellows’ program occurs during the specialized six weeks of leadership training that takes place at nearly 40 universities across the U.S. At the universities, the fellows, in cohorts of 20, are exposed not only to programs tailored specifically for their interests, but to other young Africans who share a passion for making a difference in their communities and countries. For most fellows, meeting other young Africans from different countries is one of YALI’s key benefits, as is forging genuine ties with Americans and U.S. institutions.

The narratives of the 2,000 Mandela Washington Fellows illustrate some of the most compelling stories and realities on the African continent today.

Importantly, the MWF program is cost-efficient, as the average cost of a fellow coming to the U.S. is $24,000. At least half is paid by the participating U.S. universities and a host of companies, including Coca-Cola, IBM, the MasterCard Foundation, AECOM, Microsoft, Intel, McKinsey & Company, GE, and Procter & Gamble, who have made grants or in-kind contributions to the fellowships and the YALI program.

YALI’s broader impact

YALI is having an impact on its participants. An initial assessment by IREX, USAID’s implementing partner, found that over 80 percent of male and female fellows who owned businesses reported an increase in earnings in the year following their fellowship in the U.S. Business fellows also leveraged more than $3 million in new sources of support through loans, grants, equity financing, and in-kind contributions.

Fellows who participated in the civic leadership training reported that the impact of their nonprofit organizations nearly tripled to over 1.6 million beneficiaries, with an average contact per fellow increasing from less than 3,000 to just fewer than 15,000 beneficiaries.

Over 80 percent of the fellows reported that they remained in contact with other fellows during the course of the year, and 70 percent indicated they continued to be involved with their host university. The ongoing connectivity is helped by the three regional conferences in Africa that USAID convenes for program alumni, more than 200 internships on the continent—most sponsored by corporate partners—as well as funding for fellows to attend conferences and other programs after they have returned to Africa.

As part of YALI’s broader reach, USAID created four Regional Leadership Centers (RLCs)—in South Africa, Kenya, Ghana, and Senegal—that offer distance and in-class leadership training to about 3,500 participants annually.

The YALI Network (Figure 1) was established in 2013 as a means to stay connected online to the tens of thousands of young Africans who applied for the fellowship but were not selected as well as others interested in the initiative. The network, which provides access to global leaders in relevant fields and opportunities for collaboration on a range of activities, has attracted nearly 250,000 members. Participants in the RLCs and the YALI Network can earn certificates in various courses, including climate change, women’s empowerment, and the election processs.

Figure 1.


Source: YALI Network

YALI, of course is not without its challenges. Recruiting from 49 countries can be exceedingly difficult, and the quality of Skype and telephone connectivity can vary significantly, which impacts the interview process. Due to the high volume of applicants, embassies have learned that they need more time to review applications. Extra efforts have been needed to accommodate fellows with disabilities. YALI’s biggest challenge, though, is winning the support of African leaders who generally have yet to embrace the program due to its unilateral launch.

What’s next?

YALI is a cost-efficient and effective way to invest in Africa’s future, especially as it concerns deepening trade and commerce with the region, strengthening democratic institutions and empowering civil society. If the next administration continues to invest in the program, YALI could become an enduring legacy program of the Obama administration much like the African Growth and Opportunity Act (AGOA) and the President’s Emergency Program on AIDS Relief (PEPFAR) are, respectively, for the Clinton and Bush administrations. Over time, YALI inevitably would contribute to a new generation of transformative African leadership and deeper ties between the U.S. and Africa in a way that few other programs do.

      
 
 




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Panel Discussion | The crisis of democratic capitalism

We hosted a Panel Discussion on “The Crisis of Democratic Capitalism” with Martin Wolf, Chief Economics Commentator & Associate Editor, at The Financial Times. Martin was awarded the CBE, the Commander of the Order of the British Empire, in 2000, “for services to financial journalism”. He was a member of the UK government’s Independent Commission…

       




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Debt: The dose makes the poison

Global debt has reached a level not seen since 1970. The current environment of low interest rates and subpar growth performance has triggered a debate about benefits and costs associated with debt. This debate has mainly focused on advanced economies. However, emerging market and developing economies (EMDEs) also face record-low borrowing costs and many have…

       




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Illicit financial flows in Africa: Drivers, destinations, and policy options

Abstract Since 1980, an estimated $1.3 trillion has left sub-Saharan Africa in the form of illicit financial flows (per Global Financial Integrity methodology), posing a central challenge to development financing. In this paper, we provide an up-to-date examination of illicit financial flows from Africa from 1980 to 2018, assess the drivers and destinations of illicit…

       




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New trends in illicit financial flows from Africa

The January revelations around illicit financial gains by Isabel dos Santos, Africa’s richest woman and daughter of former Angolan president Edoardo dos Santos, have once again brought the topic of illicit financial flows to the forefront of the conversation on domestic resource mobilization in Africa. Unfortunately, illicit flows are not new to the continent: While…

       




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The future of global manufacturing

Today’s rapidly evolving manufacturing technologies including artificial intelligence, advanced robotics and the "internet of things"—often referred to as “Industry 4.0” technologies—are poised to reshape the global manufacturing landscape, with important consequences for the traditional role of manufacturing in economies’ structural transformation, growth, and job creation. As we explore in our chapter in the just-published book…

       




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Latin America, with few bullets to spare

       




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IMF Special Drawing Rights: A key tool for attacking a COVID-19 financial fallout in developing countries

When the world economy was starting to face financial fragility, the external shock of the COVID-19 pandemic put it into freefall. In response, the United States Federal Reserve launched a series of facilities, including extending its swap lines to a number of other advanced economy central banks and to two emerging economies. Outside of the…

       




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The time to ramp up protection against Asian financial contagion is now

A surge of financial crises across emerging economies has already begun. Ecuador and Zambia have been the first to default. Argentina has postponed negotiations with creditors, Turkey looks more and more vulnerable, and the International Institute of Finance warns that South Africa is next. Collapses in exchange rates are an indication of who might follow.…

       




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What to do about the coming debt crisis in developing countries

Emerging markets and developing countries have about $11 trillion in external debt and about $3.9 trillion in debt service due in 2020. Of this, about $3.5 trillion is for principal repayments. Around $1 trillion is debt service due on medium- and long-term (MLT) debt, while the remainder is short-term debt, much of which is normal…

       




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Solving both the short- and long-term COVID-19 crises

The global COVID-19 health and economic crisis compels us to act in the short-term—in the here and now. We can’t look away from the human health consequences without giving our best efforts to lessen the suffering of those infected. On the economic side, there is also great pain that must be assuaged. Some people are…

       




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What accounts for gaps in student loan default, and what happens after

Executive summary In a previous Evidence Speaks report, I described the high rates at which student loan borrowers default on their repayment within 12 years of initial college entry, often on relatively modest amounts of debt. One of the most striking patterns emerging from that report and other prior work is how dramatically default rates…

       




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The challenges of curriculum materials as a reform lever

Executive Summary There is increasing momentum behind the idea that curriculum materials, including textbooks, represent a powerful lever for education reform. As funders are lining up and state leaders are increasing their policy attention on curriculum materials, this report discusses the very real challenges of this effort. The report draws on my experience over the…

       




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FAFSA completion rates matter: But mind the data

FAFSA season has just ended -- the final deadline to fill out the 2017-18 Free Application for Federal Student Aid (FAFSA) was June 30. This year, as every year, many students who are eligible for aid will have failed to complete the form.1 This means many miss out on financial aid, which can have a…

       




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Does state pre-K improve children’s achievement?

Executive Summary There is a strong and politically bipartisan push to increase access to government-funded pre-K. This is based on a premise that free and available pre-K is the surest way to provide the opportunity for all children to succeed in school and life, and that it has predictable and cost-effective positive impacts on children’s…

       




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Evidence on New York City and Boston exam schools

New York City is wrestling with what to do with its exam schools. Students at Stuyvesant, Bronx Science, and Brooklyn Tech (the oldest exam schools) perform brilliantly and attend the best colleges. Their students score at the 99th percentile of the state SAT distribution (with Stuyvesant at the 99.9th percentile) and they account for the…

       




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Can schools commit malpractice? It depends.

Recently seven students attending public schools in Detroit sued the state of Michigan in a Federal district court. Shortages of materials, not having skilled teachers, and poor conditions of their school buildings had deprived them of access to literacy, which, they argued, is essential in order to enjoy the other rights enumerated in the Constitution. …

       




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School policies and the success of advantaged and disadvantaged students

executive summary We make use of matched birth-school administrative data from Florida, coupled with an extensive survey of instructional policies and practices, to observe which policies and practices are associated with improved test performance for relatively advantaged students in a school, for relatively disadvantaged students in a school, for both, and for neither.  We consider…

       




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Accountability for early education–a different approach and some positive signs

Early childhood education in the United States is tangle of options—varying in quality, price, structure, and a range of other dimensions. In part as a result, children start kindergarten having had very different experiences in care and very different opportunities to develop the skills and dispositions that will serve them well during school. Systematic differences…

       




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A promising alternative to subsidized lunch receipt as a measure of student poverty

A central component of federal education law for more than 15 years is that states must report student achievement for every school both overall and for subgroups of students, including those from economically disadvantaged families. Several states are leading the way in developing and using innovative methods for identifying disadvantaged students, and other states would…

       




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Lebanon’s latest reform-for-support plan

The emergency rescue program revealed by Lebanese Prime Minister Hassan Diab on April 30 purports to address comprehensively Lebanon’s economic collapse. While tabled in more desperate times made even worse by the impact of the coronavirus, the program dusts off the essential deal of earlier Lebanese attempts to attract external support: Lebanon would enact extensive…

       




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GCC News Roundup: Saudi Arabia, UAE, Qatar, Kuwait implement new economic measures (April 1-30)

Gulf economies struggle as crude futures collapse Gulf debt and equity markets fell on April 21 and the Saudi currency dropped in the forward market, after U.S. crude oil futures collapsed below $0 on a coronavirus-induced supply glut. Saudi Arabia’s central bank foreign reserves fell in March at their fastest rate in at least 20…

       




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Webinar: Public health and COVID-19 in MENA: Impact, response and outlook

The coronavirus pandemic has exacted a devastating human toll on the Middle East and North Africa (MENA) region, with over 300,000 confirmed cases and 11,000 deaths to date. It has also pushed the region’s public healthcare systems to their limits, though countries differ greatly in their capacities to test, trace, quarantine, and treat affected individuals. MENA governments…

       




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Pandemic politics: Does the coronavirus pandemic signal China’s ascendency to global leadership?

The absence of global leadership and cooperation has hampered the global response to the coronavirus pandemic. This stands in stark contrast to the leadership and cooperation that mitigated the financial crisis of 2008 and that contained the Ebola outbreak of 2014. At a time when the United States has abandoned its leadership role, China is…

       




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Putting women and girls’ safety first in Africa’s response to COVID-19

Women and girls in Africa are among the most vulnerable groups exposed to the negative impacts of the coronavirus pandemic. Although preliminary evidence from China, Italy, and New York shows that men are at higher risk of contraction and death from the disease—more than 58 percent of COVID-19 patients were men, and they had an…

       




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Webinar: Jihadism at a crossroads

Although jihadist groups have gripped the world’s attention for more than 20 years, today they are no longer in the spotlight. However, ISIS, al-Qaida, and al-Shabab remain active, and new groups have emerged. The movement as a whole is evolving, as is the threat it poses. On May 29, the Center for Middle East Policy…

       




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Largest Minority Shareholder in Global Order LLC: The Changing Balance of Influence and U.S. Strategy

Bruce Jones explores the prospects for cooperation on global finance and transnational threats, the need for new investments in global economic and energy diplomacy, and the case for new crisis management tools to help de-escalate inevitable tensions among emerging powers across the globe.

      
 
 




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The Challenges to the World Trade Organization: It’s All about Legitimacy

Although the World Trade Organization has delivered significant global environment benefits through the liberalization of world trade, Joshua Meltzer explains that a changing international economic environment has created a series of significant challenges for the organization. Meltzer argues the WTO must focus on its capacity for global economic governance to respond to these current challenges.

      
 
 




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The Renminbi: The Political Economy of a Currency

The United States and other countries have complained that China keeps the value of its currency artificially low, boosting China’s exports and trade surplus at the expense of its global trading partners. Arthur Kroeber explains how the ongoing currency conflict is rooted in two very different views about the function of exchange rates.

      
 
 




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The Euro-Area Crisis: Weighing Options for Unconventional IMF Interventions

Domenico Lombardi and Sarah Puritz Milsom explore the role of the International Monetary Fund in the eurozone crisis and review the policy options that the international community must consider to strategically and effectively address the current situation.

      
 
 




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Mapping racial inequity amid COVID-19 underscores policy discriminations against Black Americans

A spate of recent news accounts reveals what many experts have feared: Black communities in the U.S. are experiencing some of the highest fatality rates from COVID-19. But without an understanding of the policy contexts that have shaped conditions in Black-majority neighborhoods, one may assume the rapid spread of the coronavirus there is caused by…

       




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COVID-19 is turning the Midwest’s long legacy of segregation deadly

The COVID-19 pandemic is unmasking a lot of ugly economic and social truths across the Midwest, especially in my home state of Michigan. The appearance of a good economy in the Midwest following the Great Recession (which hit the region very hard) was a bit of an illusion. Prior to the arrival of the coronavirus,…

       




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COVID-19’s recent spread shifts to suburban, whiter, and more Republican-leaning areas

There is a stereotypical view of the places in America that COVID-19 has affected most: they are broadly urban, comprised predominantly of racial minorities, and strongly vote Democratic. This underlines the public’s perception of what kinds of populations reside in areas highly exposed to the coronavirus, as well as some of the recent political arguments…

       




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How a Detroit developer is using innovative leasing to support the city’s creative economy

Inclusive growth is a top priority in today’s uneven economy, as widening income inequities, housing affordability crises, and health disparities leave certain places and people without equitable access to opportunity, health, and well-being. Brookings and others have long argued that inclusive economic growth is essential to mitigate such disparities, yet implementing inclusive growth models and…

       




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How ‘innovation districts’ are continuing the fight against COVID-19

Last month, I wrote about innovation districts’ critical efforts to mitigate the impacts of COVID-19. Since the outset of the pandemic, these districts have leveraged their academic research capabilities, innovation infrastructure (e.g., laboratories, advanced technologies, Big Data for modeling), and local and global peer networks to understand and contain the spread of the coronavirus. These…

       




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The next COVID-19 relief bill must include massive aid to states, especially the hardest-hit areas

Amid rising layoffs and rampant uncertainty during the COVID-19 pandemic, it’s a good thing that Democrats in the House of Representatives say they plan to move quickly to advance the next big coronavirus relief package. Especially important is the fact that Speaker Nancy Pelosi (D-Calif.) seems determined to build the next package around a generous infusion…

       




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COVID-19 is expanding further into Trump country

The COVID-19 pandemic has already shown a dispersion away from the nation’s most urban and densely populated counties to suburban, somewhat whiter, and less politically Democratic parts of the country.  Yet the group of counties that newly qualify as areas with a high prevalence of COVID-19 cases are even more dispersed, and represent places where…

       




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Which city economies did COVID-19 damage first?

Since the United States first witnessed significant community spread of the coronavirus in March, each week has brought a fresh round of devastating economic news. From skyrocketing unemployment claims to new estimates of contracting GDP in the first quarter of 2020, there has been little respite from the growing awareness that COVID-19 is exacting unprecedented…

       




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American workers’ safety net is broken. The COVID-19 crisis is a chance to fix it.

The COVID-19 pandemic is forcing some major adjustments to many aspects of our daily lives that will likely remain long after the crisis recedes: virtual learning, telework, and fewer hugs and handshakes, just to name a few. But in addition, let’s hope the crisis also drives a permanent overhaul of the nation’s woefully inadequate worker…

       




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As states reopen, COVID-19 is spreading into even more Trump counties

Even as the COVID-19 pandemic drags on, America has begun to open up for some business and limited social interaction, especially in parts of the country that did not bear the initial brunt of the coronavirus.  However, the number of counties where COVID-19 cases have reached “high-prevalence” status continues to expand. Our tracking of these…

       




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Can social media ‘targetcasting’ and democracy coexist?

Speaking recently at Georgetown University, Mark Zuckerberg told an audience “I’ve focused on building services to do two things: give people voice, and bring people together.” He later said “More people being able to share their perspectives has always been necessary to build a more inclusive society.” The speech anointed Facebook as the “Fifth Estate”…

       




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How the Gannett/GateHouse merger could deepen America’s local news crisis

Last week, shareholders at Gannett and GateHouse, the nation’s two largest newspaper chains, voted to approve the merger of the two companies. Gannett, which publishes USA Today, owns just over 100 newspapers while New Media Enterprises, GateHouse Media’s parent company, owns nearly 400 American newspapers across 39 states. When combined, the new company will own…

       




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What does the Gannett-GateHouse merger mean for local journalism?

Thousands of local newspapers have closed in recent years, and thousands more have cut back staff and reduced their coverage. In the wake of the merger of the nation's two largest newspaper publishers, Gannett and GateHouse Media, Research Analyst Clara Hendrickson explains the economics driving the crisis in local journalism, and why it matters for…

       




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MSNBC debate moderators largely ignored people of color

In the fifth Democratic presidential debate in Atlanta, Georgia, debate moderators promised at the outset that they would talk about race and public policy. They absolutely failed to deliver. Despite several candidates mentioning issues related to race early in the debate, the MSNBC moderators waited until 90 minutes into a two-hour debate to ask the first…

       




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The lessons of the Afghanistan Papers

The Afghanistan Papers, published a week ago by The Washington Post, offer vivid details and sometimes shocking assessments, but few surprising insights. The hundreds of interviews collected by the special inspector general for Afghanistan reconstruction (SIGAR) and obtained by the Post show clearly that the United States has been fighting a long, costly war that…

       




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March Madness and college basketball’s racial bias problem

The NCAA basketball tournament is one of the most-viewed sporting events in the United States. In 2019, nearly 20 million viewers watched the championship game, and each tournament game (67 total) averaged about 10 million viewers. Over 17 million people completed a March Madness tournament bracket for the 68-team tournament. Among youth, basketball is one…

       




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Critical in a public health crisis, COVID-19 has hit local newsrooms hard

While the coronavirus may be a global pandemic, the public health crisis has revealed the critical role of local news outlets currently working tirelessly to cover the impact of the coronavirus on their communities. These outlets have helped to disseminate essential information from state and local government actors, prevent the spread of misinformation, and report…