Economist Jeffrey Sachs discusses how Africa can escape its continuing poverty. Africa has many countries within it, few of which are not stagnant in growth and possess some amount of wealth. He comments 'What a shame. So many good ideas, so few results'. Even though Africa has tried many different policies, the growth rate either declined or was below 1%. Now we should take a look at what causes Africa's problems and how to solve them.
A country's economic growth rate is related to the income level of the country, the extent of overall market orientation, the national saving rate, and the geographic and resource structure of the economy. In Africa's case, higher trade barriers, excessive tax rates, lower savings rates, adverse structural conditions, and inaccessibility to the sea could be the problems.
First, higher trade barriers. Since higher trade barriers limit the openness to trade greatly, Africa's countries find it hard to trade freely with other nations. Because most of Africa had been under colonial rule, the countries still tend to think that trade could be a threat to the nation's sovereignty. The countries should become more open towards trade with other countries.
Second, excessive tax rates. High tax rates can often be an obstacle in economic growth. In the previous chapters of the book, it was easy to observe that too high a tax rate has adverse effects - it raises deadweight loss but actually decreases the tax revenue. In this sense, the high taxes of African countries would have put pressure upon consumers, but would also have lessened the government revenues. Maybe lowering the tax rate could be of help.
Third, lower saving rate. Since savings are used for the overall development or economy, a lower saving rate means that less money can be invested in development. The government should start campaigns promoting saving and banks should give out a larger percentage of interest.