Africa's Long Depression: The Growth and Debt Crises of 1975-2000

In the 1980s and 1990s, most countries in Africa saw their economies shrink as demand for their exports weakened, government indebtedness increased, and countries faced political upheavals. Consequently, more people fell into poverty, social service quality declined, and many of the continent's most skilled citizens chose to migrate. The magnitude of this GDP decline exceeded that of the 1930s and the malaise lasted twice as long.

Many African countries face a similar constellation of challenges today as in the early 1980s, as commodity prices have waned, debt burdens have risen, and high global interest rates have increased the cost of finance. With an eye to the future, what can we learn from the last depression and debt crisis in Africa?

This project will write an economic history of the 1980s-1990s in Africa with three key objectives: firstly, to examine the immediate causes of the crisis and the country characteristics correlated with the severity of the growth reversal, as well as the diversity of policy paths charted through these headwinds. Second, to assess this episode in the perspective of long-run African development, and ask whether and what institutional legacies have trapped countries in boom-bust economic cycles. Lastly, to relate these findings to contemporary debates about the need (or not) for debt relief and grant financing in developing countries.

The project will draw on improved access to historical macroeconomic data and country studies, much of it from the World Bank and IMF, but complemented with reports from African research and statistical institutes. It will purposely take a birds-eye view and use simple descriptive analysis to show how the crisis unfolded across Sub-Saharan African countries, and exploit country variation to consider counterfactuals. This will address questions such as the extent to which export composition alone predicts the severity of the growth decline and indebtedness. It will also ask if some countries choose policy paths that more successfully ameliorated the effects of this turbulence. For instance, did the discipline that came with fixed exchange rates for countries belonging to the CFA zone make an appreciable difference?

A bigger debate in African economic history is the degree to which institutional legacies and lack of economic diversification continues to hinder sustained economic growth. To what extent do the growth reversal of the 1980s and 1990s support or complicate such a narrative? Can it speak to the nature of institutions that accentuates such volatility?

How we answer these questions matters for our understanding of the resolution of future crises. It helps us to predict which countries will fare better or worse, should the prospect for future growth dim further. It also speaks to the realism of domestic policy solutions to severe debt overhang, versus the need for external debt write-offs. It will also shed light on the extent to which countries have in fact changed their fundamentals, in ways that may arrest growth declines in the future.