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2009 AEC- Public institutions and the private sector at time of economic crisis in Africa

10-Nov-2010

The global economic crisis of 2008 and market failures have forced countries to pay closer attention to the performance of the private sector and production activities. Generally, policy makers agree that multi-stage adjustments led by public institutions should be pre-requisites and co-requisites for private sector activities. But, in Africa, public institutions may not be able to strategically manage inter-temporary adjustments for selecting priorities and switching them, during crisis. Yet the evidence of the demiurge functions of these institutions remains incontrovertible. In this paper, we argue that public institutions are more strategically placed in promoting aggregate efficiency - transforming low end human capital to higher end, during crisis. The hypothesis is that public institutions which maintain a positive marginal per capita expenditure on education for creating higher end human capital, over that of marginal per capita expenditure on consumption are able to grow out of crisis faster. We introduce the "Hecksher-Ohlin Preference Locus" model, and Törnqvist slack index to track the effort to promote aggregate efficiency in Africa. We found that few countries have successfully promoted aggregate efficiency, instead of consumption, as a condition for the economies to support private sector-driven growth and quickly break away from economic crisis.

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