Here’s Why Africa May Never Move Forward

27.09.2017 • United Kingdom

Andrew Lockley – Exponential Investor (United Kingdom) –

No tech today! Instead, we’re analysing the long-term trends that profoundly affect your investments.

Yesterday, we started off looking at Africa’s population explosion. It’s projected to overtake Asia, as the most populous continent in coming decades – despite having a far smaller land area. That’s because the continent – particularly its sub-Saharan component – has some serious constraints to its economic development.

Frankly, it’s difficult to see a way out. The entrenched history of negative economic growth in some African countries, together with borderline growth in others, suggests that Africa will remain deeply troubled for decades to come. This is a situation that does not only affect the economy. With a continuing population explosion, the chance of social advance in the continent as a whole is greatly reduced – perhaps to a point where any fundamental change is improbable. Just as surely as a lack of children affects the “dependency ratio”, so does an abundance of them. It all boils down to too few workers, feeding too many mouths.

Why is Africa stuck in poverty?

The work of academics like Tim Dyson show that rapidly growing populations are typically found in countries which do not transition to democracy – and it may even be socially impossible for such countries to make this change.

An explanation which sheds additional light on the situation is “pathogen stress theory” – and that’s our subject for today. This theory helps explain the inability of some societies to develop. After all, it’s difficult to justifying trading with strangers, if they are likely to carry serious infectious diseases. (We’ve looked at the biology and economics of neglected tropical diseases before, in Exponential Investor.) Africa’s lack of economic progress, and consequential poor disease control, may therefore lock it into a vicious circle of delayed development. Widespread disease begets a closed, patriarchal and often violent society. This, in turn, chokes off economic development. Poverty prevents deployment of the basic sanitation, healthcare and nutritional improvements needed to control diseases. This, in turn, leads to ongoing population growth – via the mechanism of poverty.

 

What could break Africa’s cycle of poverty, disease and despotism?

One ray of hope comes in the form of a long-overdue focus on the diseases of the developing world. While governments have played a part, philanthropy is becoming increasingly important. It will be interesting to see if health initiatives, such as those of the Bill & Melinda Gates Foundation, will help affect social transformation. The money from this foundation comes ultimately from Microsoft’s former Windows monopoly – equivalent roughly to a “Windows tax”, if you’ll pardon my historical pun.

Much of the Gates’ cash has been spent on some of the smartest public health initiatives the world has ever seen. Unlike much of the foreign aid lavished on despots, the Gates’ donations have not typically ended up in the back pockets of dictators and their cronies. And remember: these autocrats have been elevated to power by the very same closed societies that the diseases themselves have formed. Dictatorship flows naturally from disease.

Interestingly, this effect is by no means exclusive to Africa. We see similarly closed, authoritarian societies throughout the tropics, where serious infectious diseases are also prevalent. However, none match the intractable pockets of economic backsliding found in Africa.

As spectators, it’s dangerous to fall into a trap of complacent superiority. Even in cooler climates, this biologically inspired xenophobia can rear its ugly head. The deadly Spanish flu epidemic of the early 20th century has been suggested as a contributory factor to the rise of fascism, which took place just a decade or two later. It’s probably no coincidence that the racism of this period was rhetorically linked to dirt and disease. If you want to turn people against outsiders, playing on their natural fear of infection and infestation is a winning strategy. This is all the easier, if your audience has grown up around untimely death, caused by invisible pathogens.

Africa’s transition from its current sorry state is not a given. The Gates Foundation and its ilk don’t have unlimited resources. Further, vaccination initiatives are often actively resisted, notably by Islamist societies – a situation not helped by the US’s foolhardy misuse of medical programmes to capture Osama bin Laden. The cultural resistance thus entrenched has led, for example, to a stalling attempt to globally eradicate polio. While that disease may seem a distant memory to us, in my father’s youth it was an ever-present threat. Even in my own childhood, I met paralysed survivors of this terrible disease. It pays to remind ourselves of how recently we have escaped the clutches of deadly infection – and the suspicious culture it engenders.

Without the economic growth that’s needed to end the poverty that is underpinning population growth, it’s difficult to see how Africa can make a transition to a prosperous and politically stable society. While this situation persists, African countries’ economic growth may often remain negligible or negative. Meanwhile, its population growth will persist.

What are the global consequences?

As we saw yesterday, increased migration is a likely consequence – unless an economic and healthcare transformation happens. On the plus side, this means Europe will have a ready flow of eager workers – waiting to take jobs left vacant by its empty kindergartens.

However, our continent’s ability to accommodate large African influxes is questionable. The divisive Brexit vote certainly showed how controversial an issue immigration is. Unlike migration from reasonably prosperous EU countries, a growing African diaspora poses far more challenges. Many individuals will inevitably come from countries where education is extremely limited, disease is rampant, and malnutrition can permanently affect physical and mental development.

Low levels of educational attainment make it very difficult for migrants to find gainful employment in a knowledge-dominated economy. Germany, for example, struggles with stubbornly high unemployment rates among its plentiful developing-world migrants. This doesn’t bode well for long-term integration.

Furthermore, the perceived need for disease control isn’t just an artefact of xenophobia. The UK already has to impose sensible restrictions on those who have been in Africa – notably as regards blood donations (HIV) and border screening (TB).

To twist a meme: reality does not always have a liberal bias.

Some of these facts make deeply uncomfortable reading. This is particularly true for those of us reared on the values of an inclusive, tolerant, multicultural society. Nevertheless, we would do well to remember that these values have arisen from a childhood insulated from the diseases still ravaging the developing world in general, and Africa in particular.

Fortunately, the devastating influence of disease on development may be fading.

The conservative culture familiar to us from Georgian period dramas show just how different our own society used to be – when it was riddled with disease, and cursed by the intermittent risk of hunger. We should, therefore, not be shocked by similar mores in other countries. Nevertheless, conservatives frequently fall into the trap of cultural superiority, while conveniently forgetting culture’s biological origins. Comparably, liberals tend to overlook that there is a hard-headed biological rationale to people’s wariness of strangers – one which cannot easily be shifted.

Overcoming disease is the key to unlocking a brighter future for Africa.

All in all, Africa is going to become an increasingly important influence on the economy of our country, and that of our European neighbours – not least by exerting migration pressures. While disease control may ultimately transform this situation, it will take time. The challenges remaining therefore present us with some uncomfortable truths and hard compromises – many of which challenge our most fundamental beliefs and values.

We don’t shy away from these difficult issues in Exponential Investor – and that’s just one reason why our coverage helps guide your investment decision-making. If you want to be a smart investor in the 21st century you need to understand the influence of Africa.

If you’d like to develop your understanding of how to invest for the long term, check out Cycles, Trends and Forecasts. It’s our publication dedicated to those who invest patiently – reaping rich rewards by taking a long-term view.

Do let us know what you think of the future of Africa – and its effects on the rest of the world: andrew@southbankresearch.com.

Best,

Andrew Lockley
Exponential Investor

-Read more at www.exponentialinvestor.com-

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