Trade and Industrialization Strategy
4.4 Sustainability and Policy Stance
TI
e interrelationships between sustainability and policy stance are summarized below in Table 4.7. Correlation analysis shows a moderate, though definite relationship between the Economic Sustainability Index and the Economic Policy Stance Index. It is clear that though good performance sustainability and policy stance are related, a country cannot assure its long-term sustainability on the basis of macroeconomic policies alone. In terms of the income variables, we find the most significant correlation to be between sustainability and per capita income, with only slight relationships between sustainability and income growth, and policy stance and income. There is no significant relationship between the EPSI and growth. The implications of these results are somewhat ominous. It appears that countries which have been successful have by and large succeeded on the basis of taking advantage of temporary conditions, and not on the basis of a solid foundation of creating an enabling environment for long-term growth and pursuing sound economic policies.Table 4.8: Correlation Matrix - Change in ESI, ESI, EPSI and Income
Item Medium Term ChangeinESI EPSI-1999 E51-1999
£51-1987 0.17 - 0.75 I
PerCapita Income -1987 0.04' 0.03' ,
Per Capita Income - 1999 - - 0,41
10-Year PerCapita Income Growth 017 0.16 0.14
£51-1999 - 0.29
-Grounds for optimism can be found, however, in an examination of the relationship between medium term ESI change and the other variables. The strongest correlation in the table is the one between lO-year per capita income growth, and medium term ESI change. This suggests that economies which have grown in the past 10 years have managed to translate this growth into improved conditions for long-term sustainability. Moreover, countries which showed ESI improvement were not necessarily countries with high incomes, or high sustainability to begin with. The overall implication, then, is that though substantive improvement in terms of long-term sustainability and policy stance has not been made in the past, defmite potential for progress in the 21stcentury exists.
The findings in this Chapter once again demonstrate the problematics of African economies to pick-start and sustain a rate of growth sufficient to reduce poverty in the foreseeable future. The ESI is uniformly low across the region mainly because the particulars that make up the bundle from which the index is derived including human capital, structural diversification, efficiency of governance (as measured by transaction cost) and macroeconomic sustainability are very low.
Although countries score better with the ESPS, there is no necessary correlation between it and ESI nor growth performance. Countries that score high on EPSI do not have high ESI nor sustained GDP growth rates.
These findings tally with the observations of Chapter Two and point to the need for a broader approach to policy selections and the development of strategies that are consistent the initial conditions that define the starting point.
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