Sub-saharan Africa National Economic Policy Analysis

According to the running mechanism of economy, the economic policy enforced by African countries can be divided into two kinds: the economic policy under "state interference" and the market-oriented economic policy.From post-independence to the 1980s, as the result of several factors facing Africa after independence, almost all African countries chose to rely on state in designing and carrying out economic policy. The state taking place of market as economic running mechanism played a prominent role in regulating economic activities such as: enacted regulations to control price, allocated foreign exchange, created lots of public enterprises, restricted trade, overvalued foreign exchange rate, et al. To some extent, this kind of economic policy was necessary and brought positive effects to African countries. But every thing has two sides, so does this economic policy. It also gave rise to some negative effects: overvalued exchange rate, large and prolonged budget deficits undermined the macroeconomic stability needed for long-term growth. Protective trade policy and government monopolies reduced the competition so vital for increasing production. Price regulations and wage-setting system prevented productive factors from mobilizing and so on.As a result, by the 1980s, the African economy generally came in stagnation and on decline. Naturally, factors outside Africa also contributed to the economical decline. But after all, the internal factors still play critical role in everything. As for the African economic stagnation, the most important factor was their poor economic policy: excessive state interference and intervention. Fortunately, most African countries recognized this problem and began to adjust their economic policy marked by "structural adjustment program".The transition of economic policy aimed at unleashing market to work fully and automatically so that competition can help improve the allocation of resources. The general measures carried out by African countries are as follows: reduced administrative rationing of foreign exchange, eliminated many non-tariff barrier, allowed the private sector to compete with parastatals freely, adopted price formulas with a clear link to world pricing, devalued the real exchange rate, reduced the taxation of African fanners, relaxed labor control et al. The implementation of these measures and the transition of economic policy led to the positive effects, got the price - market signals right and promoted the allocation of economic resources. But with time passing and further implementation of these measures, many severe economic and social problems appeared and the reform of economic policy didn't gain its ends as it expected to, as the precondition of the well-off implementation of reform is the existence of a perfect market. The undeveloped market in African countries prevented market from working right and fully, In addition, African countries didn't want to abandon direct control on economic activities to realize perfect market- oriented.From the mentioned analysis above, it can be seen that for the African countries, the crux of economic policy is to deal with the relation between market and state correctly. In my opinion, the African economic policy should be based on market-oriented with modest state interference in order that the "two hands" can really function.