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Archive for July 25th, 2011

Wealth Breeds Rage

John Githongo warns that in Africa, uneven economic growth can lead to a combustible situation when inequality festers and is not well managed [ht:cr]:

Across the world, as growth has spread and accelerated, so has inequality. It is clear that growth is often not enough to guarantee stable, cohesive societies. Rather than create a rising tide that lifts all boats, it can actually increase inequality in a society. And inequality, unlike poverty, is far more easily politicized, ethnicized and militarized, especially in African countries with heterogeneous populations and weak judicial and regulatory institutions. It is also far more combustible because it creates an identifiable enemy — a class that benefits disproportionately because of its unfair access to those who wield power. Mismanaging it can be catastrophic.

Steady economic growth and urbanization, combined with high levels of youth unemployment and conspicuous consumption on the part of the corrupt ruling elite, create a situation in which growth exacerbates political volatility instead of quelling it.

This story highlights the importance of a political economy of development that takes in to account changing socioeconomic conditions and respects local cultural institutions and social networks in order to promote a cohesive and stable society. Mainstream growth models, however, completely neglect any of these factors while only focusing on how to best promote the development of markets, which by definition will optimize growth for everyone. Githongo reminds us that a narrow approach to growth can lead to social unrest, outbreaks of violence, and the fragmentation of traditional social networks.

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