Commodity Prices and Growth in Africa

A frican economies export primary commodities, and most export little else. Policymakers as well as economists and historians of African economic development have seen these exports as both a hope and a curse. The following parable tells the story: Once upon a time, a servant of the ruler discovered a miraculous plant, which grew readily in that country, and whose seeds could be woven into fine cloth. So desirable was this fabric that it became prized all over the world and fetched a high price. After two-score years, the plant accounted for most of the country’s trade with the world. The ruler ordered the peasants to grow the plant, paid them only a fraction of its price, and he and his nobles became fabulously wealthy. Because the ruler wished to be remembered as a great ruler, and as the father of his country, he used his wealth to build a great army, and brought machines from foreign countries to make the fine goods that previously could only be obtained from foreign merchants. But the machines often broke down, and the goods that they made were of poor quality, and after the ruler died, they were left to rust. Under the ruler’s successor, there was a war in a foreign land where the plant also grew, so that there was a great shortage, and its price increased threefold in only three seasons. The new ruler spent his newfound riches on “fantastic extravagance” while “immense sums were expended on public works after the manner of the East, and on productive works carried out in the wrong way or too soon.” Not even the threefold increase in prices could support these expenditures, and the country soon found itself deeply in debt. When the war ended, and the price fell, the country could no longer pay the interest on its debt, or borrow more money, even after it had sold its only useful public work to a foreign power. So that power sent a mission to the country, the publication of whose report (from which the above