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African Development: An Institutionalist Analysis

Paper Session

Saturday, Jan. 4, 2025 12:30 PM - 2:15 PM (PST)

The Marker Union Square San Francisco, Spade I
Hosted By: Association for Evolutionary Economics
  • Chair: Howard Stein, University of Michigan

Chinese Energy Projects in Africa. Are They Building a Sustainable Development? Or Are They Devastating the Environment?

Alicia Girón
,
Economic Research Institute UNAM
Andrea Reyes
,
University Studies Program on Asia and Africa

Abstract

China had a close relationship with African countries since before the Non-aligned Movement. The influence of Russia and China helped countries achieve independence. The lack of a strong bourgeoisie in the newly independent countries made it difficult to establish a democratic regime without achieving successes in social welfare; on the contrary, dictatorship governments protected by colonial countries were consolidated. The advent of investments from China, regardless of whether they are democracies or governments resulting from coups d'état, have helped governments reduce social debt. We refer to social debt as the lack of infrastructure in access to energy, transportation on roads, airports, and ports. Infrastructure projects are being financed largely by China's Policy Banks, specifically the China Development Bank (CDB) and the China Export-Import Bank (CHEXIM), because to the extent that Africa's natural resources are very important for the digital economy and for climate change, it is observed how Chinese investments in renewable and non-renewable energies in Africa increased. In Xi Jinping's speech, the African continent is important through monetary agreements where the Chinese currency becomes a currency of exchange, but even the annual meetings organized by Beijing have been very fruitful because of the conflict in Eastern Europe. In this presentation we are going to study the renewable and non-renewable energy investments of Policy Banks and Chinese corporations in Africa, questioning to what extent it is possible to achieve the ‘Just Transition’ in a region characterized by great economic, political and social inequalities.

The Evolving Role of China in Africa: from Banker to Rescuer?

Yan Liang
,
Willamette University

Abstract

The paper examines the evolving role of China in the African continent and specifically, the impacts of China’s lending and debt restructuring practices on African countries’ foreign debt crisis. China’s infrastructure lending has been shown to produce positive impacts on the recipient countries and it demonstrates the potential of Southern-led development finance. And yet, China’s large scale lending also saddles recipient countries with debt. The paper shows the ways in which China provides rescue lending, whether through central bank swap lines or other forms of emergency lending, and it also sheds light on the debate on whether the rescue lending provides meaningful relief or it simply “kicks the can down rhetoric road". Finally, China’s controversial role in sovereign debt restructuring raises questions about China’s willingness and capacity in reforming the sovereign debt system. In all, the paper illuminates the impacts and trends of China’s lending to the African countries and its role in addressing Africa’s sovereign debt crisis.

A Revolution Deferred: Polycrisis and the Failures of Incremental Change in South Africa

Geoffrey Schneider
,
Bucknell University

Abstract

Thirty years after the fall of apartheid, South Africa is facing multiple crises. Neoliberal policies have been a disaster, dramatically increasing unemployment and inequality while fostering capital flight and de-industrialization. Efforts to de-racialize the business environment via Black Economic Empowerment (BEE) programs have been a vehicle for systemic corruption. Modest reforms, such as social grants and improvements to housing and basic infrastructure, have done little to change the situation of most black South Africans, many of whom still live in shacks in townships created during apartheid. Meanwhile, economic crises in other African countries, fostered by disastrous neoliberal policies imposed by the International Financial Institutions (IFIs), along with conflicts and climate disruptions, are generating increasing flows of immigrants into South Africa.
Original Institutional Economics (OIE) is often associated with advocacy for incremental versus radical change to minimize dislocation. However, in South Africa, attempts to implement incremental change have proven unable to cope with the major crises facing society. The power of the vested interests to withstand pressures for significant changes reigns supreme. In this time of debilitating polycrisis, is it time for institutionalists to pressure for more radical change? This paper will document the extent to which the vested interests have resisted efforts to transform South Africa into a stable society featuring adequate human development for all. Drawing on the literature on the evolution of economic systems, the paper will then attempt to determine whether incremental change can address the polycrisis in South Africa, or if more radical change is warranted.

Climate Change, Industrial Policy and African Currency Challenges: An Institutional Perspective

Howard Stein
,
University of Michigan

Abstract

In the current financial system, African countries find themselves at the bottom of a hierarchy of currencies, under constant pressure to accumulate dollars. African economies are stuck in a vicious cycle of commodity dependence, economic instability, and periodic debt crises that undermine the capacity of African states to respond to the pressure of climate change. African countries cannot rely on the existing financial organizations like the IMF, World Bank and African Development Bank that are vested in the status quo. What is needed is a global exchange system that properly values renewable energy production and green manufacturing, built around a financial architecture reflecting the comparative regional strengths of renewable production systems. This paper lays out the structural causes that link Africa's currency challenges to the failures of industrial policy over the years. It also highlights how new industrial policy and new institutional arrangements, including efforts centered around addressing climate change can address these causes. The paper builds on related work (Olabisi and Stein, 2024), which proposes an African-based Green Bank to serve as the region-focused repository of climate finance and climate-focused industrial policy.
JEL Classifications
  • O5 - Economywide Country Studies
  • O1 - Economic Development