Mapping growth into economic development: has elite political instability mattered in Sub-Saharan Africa?

American Journal of Economics and Sociology, The, Nov, 2004 by Augustin Kwasi Fosu

I

Introduction

OVER THE POSTCOLONIAL ERA, Sub-Saharan Africa (SSA) has experienced rampant elite political instability (PI) in the form of coups d'etat. For example, available evidence shows more than 60 "successful" coups, 70 abortive coups, and 125 reported coup plots during 1958-1985 (McGowan 1986).

Recent research suggests that this form of PI has been deleterious to economic growth for developing countries generally (Alesina et al. 1996; Barro 1991), and for SSA in particular (Fosu 2001, 2002, 1992; McGowan and Johnson 1984). Since attaining economic development--improvement in the quality of life--in the long run requires economic growth, such studies provide useful information regarding the role of PI in retarding the development process.

In the short or medium run, however, economic growth, including changes in per capita GDP, may not represent a good indicator of economic development (Hicks and Streeten 1979; Morris 1979; Adelman 1975; Baster 1972). (1) Unfortunately, statistics based on alternative measures of economic development, such as the Physical Quality of Life Index (PQLI) (Morris 1979), are not generally readily available for any meaningful intertemporal analysis. For example, although Newman and Thompson (1989) analyzed PQLI data for 1960, 1970, and 1980, their rather limited sample of 46 developing countries comprised only 14 SSA nations.

The Human Development Index (HDI), recently developed and regularly updated by the United Nations (see, e.g., United Nations 1990, 1991), now provides a more comprehensive means for assessing intertemporal changes in the level of development than the use of per capita income alone. The HDI is, of course, not without its detractors. McGillivray (1991), for example, argues that the index is redundant as a measure of economic development. As argued below, however, this and other criticisms (see, e.g., Morris 1993) are unlikely to significantly undermine the validity of the present analysis.

How have the rampant coups d'etat in developing countries, especially in SSA, contributed to differential paths of economic development among these countries? While recent research suggests that those SSA nations with the greater incidence of PI have tended to perform less well in terms of economic growth (Fosu 2001, 2002, 1992), a related and equally important question is: What has been the role of PI in mapping growth into economic development? The present paper seeks to shed light on this question.

II

Theoretical Framework-Mapping Growth into Economic Development

"ECONOMIC DEVELOPMENT" IS DEFINED in the current paper as "improvement in the quality of life" (see Todaro 1994, pp. 14-19; World Bank 1991, p. 4; Sen 1981). (2) It may thus be achieved by transforming increased production into augmented quality-of-life variables, such as health and literacy, as well as command over other utility-enhancing goods and services. It is equated here to progress in "human development" as defined by the United Nations (1990, pp. 9-16). In order to distinguish it from human development in the anatomic sense, however, "economic development" is retained in the present discussion. To map economic growth into economic development, consider the following relationship:

h = (1) h = f(y),

where h is human/economic development, and y is economic growth. The function f maps y into h. In its rudimentary form, f reflects the neoclassical view that economic development results directly from economic growth (e.g., Goldstein 1985; Ram 1985). In contrast, others have argued that economic growth may not "trickle down," thus requiring special considerations for basic needs in improving the quality of life (e.g., Hicks and Streeten 1979; Streeten 1977; Adelman 1975). (3) The form off is unknown, however. To simplify the analysis, it is assumed here to be linear. Hence, Equation (1) is rewritten as

(2) h = [a.sub.1] + [a.sub.2]y + u,

where al and [a.sub.2] are coefficients, and u is the error term. The intercept reflects factors that affect b independently of y. For example, foreign aid that directly improves education and health will raise the intercept, but not necessarily the slope.

On the other hand, [a.sub.2] should reflect the mapping of y into h. If the neoclassical approach is strictly correct and growth is directly mapped into economic development irrespective of the institutional framework, then [a.sub.2] is constant. Institutional conditions unique to a particular country may influence [a.sub.2], however. (4) For instance, a relatively militaristic nation is apt to transfer resources into the military and away from civilian use. For a given y, a larger transfer to the military should decrease h. Indeed, conditions that lead to a reduction in the quality-of-life-improving spending for the population at large are likely to lower h. Such conditions might include dictatorships that expend resources in order to maintain themselves in power at the expense of improving the quality of life for the general population.