15.2 C
New York
Tuesday, September 26, 2023

Buy now


Why Africa is one of the world’s most unequal continents

“Ncorrect and day my heart is bleeding,” sings Zimbabwean artist Winky D on his new album. “When I look at the poor and the needy, everything goes away with greed. Authorities don’t seem to share his concerns. Last month, police stormed a stage in the middle of a performance and shut down his set.

Hear this story.
Enjoy more audio and podcasts iOS or android.

Your browser does not support

Singer has sometimes done a better job of documenting inequality in Africa than economists. Measures of income distribution have long been guesswork because of incomplete data. But researchers are starting to peer through the statistical fog to peer past and present inequalities and uncover new evidence of them. They describe a continent that is wildly unequal in some areas and far from equal in others.

Most of the data comes from household surveys, which tend to downplay the extent of inequality. One reason is because surveys often ask people how much they spend, not how much they earn—and rich people rarely spend all their income. Another is that high earners are less likely to be sampled. For example, some surveys conducted in Ivory Coast completely excluded French and Lebanese residents.

In a newly published paper, Amory Gethin and his colleagues at the Paris School of Economics compare the evidence on income and consumption, cross-check survey responses with tax records, and then adjust the raw data accordingly. Their approach applies big assumptions to sparse data, but makes it easier to compare Africa with other continents. If their estimates are correct, the top tenth of Africans earn 54% of national income before taxes. The bottom half is just 9%. The ratio between the two is greater in Africa than in any other region of the world.

Also striking are the differences between African countries (see map). Southern Africa’s richest decile eats 65% of the pie, a class of its own. Inequalities have been gradually reduced in the western and northern parts of the continent, with a lucky few getting a 45% share. In those places, income distribution looks more like America than Brazil. They’re still unequal, but hardly global outliers.

According to a new paper by Ewout Frankema and Michiel de Haas of Wageningen University and Marlous van Waijenburg of Harvard University, this diversity has an intricate history. They argue that Africa has seen three waves of rising and falling inequality, each characterized by a different pattern of wealth accumulation. The first began in the 17th century and was based on slavery and control of trade routes. A warrior class profited by selling their fellow Africans to European and Arab traders.

The second wave came in the 19th century, when European nations established colonies in much of Africa. In general, the most unequal countries are those with the most settlers. In southern Africa, racist regimes have stolen vast tracts of land and imposed white minority rule. Inequality has also increased in places where producing new goods requires significant capital, such as in South Africa’s deep gold mines or where plantations are based.

According to the three authors, the third wave lasted from the 1950s to today. After independence, some governments looted the assets of their Asian and white minorities, redistributed land or established socialism, often with disastrous effects on economic growth.Then in the 1980s, more countries began to turn to free markets in pursuit of growth, and were influenced by the World Bank and International Monetary Fund. But the commodity collapse has reduced the funds available for redistributive policies. Liberalization is often derailed by corruption as companies are privatized or oil revenues are stifled by insiders.

Curiously, this latest wave does not show up in household surveys, which have found no consistent trends in inequality within countries since 1990. One possibility is that policies that tended to increase inequality were offset by equalizing forces, such as the abolition of price controls that impoverished farmers. Some scholars argue that an era of free capital mobility made it easier for tycoons to stash money in tax havens , where the revenue they generate is hidden. By one estimate, as much as 30% of Africa’s financial wealth is held overseas.

Development economists are often more concerned with poverty than with inequality: feeding the poor is often more urgent than counting yachts. But many people now realize that distribution matters, too. Augustin Fosu of the University of Ghana argues that while economic growth is the best way to reduce poverty, its power is weakened in African countries with high levels of inequality.

My friends all drive Porsches

African governments have largely avoided interstate wars. With little need for mass mobilization, ruling elites rarely need to make the kind of grand deals with citizens that create redistributive states elsewhere. On average, African governments collect only 16% of their taxes gross domestic product. About half of that comes from taxes on goods and services, rich and poor alike.Politicians often try to squeeze more tax revenue from small businesses, even as they grant exemptions to multinationals to encourage investment, notes Ayodele Odusola, an economist at the group United Nations Development Plan.

Informal financial flows can redistribute wealth. City workers send money back to their villages; pious people give alms to the needy; politicians offer jobs and money to networks of allies. In low-income countries, such support reduces poverty more than state-run social assistance programs, according to the researchers. Foreign Direct Investment, a think tank in London. But the effect on inequality is weak because the rich receive more private transfers than the poor.

Shared norms and social views may be evolving. Ebenezer Obadare, a sociologist at the Council on Foreign Relations, a U.S. think tank, said that in many African societies there is a widespread belief that wealth comes from supernatural sources. These beliefs sometimes suppress inequality, suggesting that the rich get so by conniving with evil forces. But Pentecostalism and its “prosperity gospel” have turned money into a blessing from God, imposing divine sanction on income disparity.Kenyan band Sauti Sol sings about worshipers cramming into shared taxis while priests ride in BMWSecond. Sometimes catchy lyrics speak louder than statistics.

Related Articles


Please enter your comment!
Please enter your name here

Stay Connected

- Advertisement -spot_img

Latest Articles