Globalization, poverty and inequality in Sub-Saharan Africa: a political economy appraisal

Paper explores the policies and political context underlying the response of African countries to globalisation, with an emphasis on trade liberalisation.African countries have had mixed experiences with globalisation, with some achieving better social outcomes than others. The outcomes suggest that it is possible to liberalise and reduce poverty and inequality (Ghana and Uganda) but that a more nuanced approach that takes complementary policies into account (Mauritius) is more sustainable.The variance in the response to globalisation is a function of several factors. They include the political-institutional framework, state capacity and external actors. Economic crisis and political change gave some non-democracies a mandate to liberalise in the short-run (Ghana, Uganda), but crisis was neither necessary (Mauritius) nor sufficient for liberalisation to occur. It did, however, insulate regimes and gave them political space to meet globalisation’s challenges.In the long-run, however, a political system that demands accountability and encourages coalition-building (such as in Mauritius) appears to create conditions that are more conducive to balancing the costs and benefits of globalisation and is more sustainable than crisis-driven reforms. State capacity determines the ability to independently design and implement complementary policies. Together with leadership, it determines how skilfully a regime can negotiate and build consensus around the response to globalisation.The key lessons and conclusions include:Mauritius illustrates that supply-side policies in credit, infrastructure, skill development and technological support are critical for countries to successfully adjust to global competition. Simple well-designed compensatory programs are equally important. The presence of these policies demonstrates that the government is meeting its end of the social contract. By helping losers from globalisation through the transition, they can help reduce resistance to reforms and empower them. Strengthening complementary policies means strengthening state capacity – both individuals and institutions. Mauritius also demonstrates that finding the balance between fostering efficiency through competitive pressures and building capabilities of firms is important the experience of Mauritius suggests that in democracies, an electoral system that forces coalition-building encourages leaders to ensure broad-based equitable growth. The experiences of Ghana, Uganda and Zambia show that in regimes marking clear breaks with the past, interest groups are less significant in influencing the path and pace of liberalisation and policy reversal is rare. By contrast, in political regimes that are essentially a continuation of business as usual despite changes in leadership, interest groups are more influential in determining the onset and pace of liberalisation. Ghana and Uganda show that agricultural performance is an important determinant of how pro-poor the response to globalisation is in less industrialised countries. The two countries also suggest that while non-democracies can successfully liberalise, the transition to multiparty democracy or pressures for it can either derail the liberalisation process or become a distraction. The lack of accountability and openness can also make it difficult to build coalitions for liberalisation even among the winners. [author]