Table of ContentsIntroductionGrowth in Sub-Saharan AfricaGrowth in ChinaConclusionIntroductionIn this essay, the growth between China and Sub-Saharan Africa (SSA) will be explained in terms of their contrasting growth over the years 1980. The growth between the two will be explored from the perspective of institutional theory. Key influences, both internal and external, will be identified and assessed based on how they have shaped the economic and business landscape of the two emerging markets. Institutions are an essential element of any society, they impose a structure on the behavior of individuals. Institutions and their rules definitely guide what we do, that is, how they can impact economic growth. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get Original Essay Some of the institutional models and theories that will be applied and evaluated in relation to the growth of China and SSA are the Linear Stages Theory, Lewis Development Theory and the Neoclassical Model, these theories attempt to explain the development process and what has happened so far. To explore some potential constraints on future growth, the key concepts of diminishing and increasing returns can be explored, with technology playing a role in providing a possible solution. Growth in Sub-Saharan Africa In an academic journal, the Third World Quarterly, an article entitled "Orientalism and African Development Studies: The Motif of 'Reductive Repetition' in Theories of African Underdevelopment", Edward stated that the Images we see in the media regarding Africa and its development are different from reality. An example of this would be the issue of The Economist entitled "The Desperate Continent", published in May 2000, which described Africa as a weak and war-torn country. As a region, SSA is made up of 48 countries, 32 of which are poor countries. independent and has more than 910 million inhabitants. Only 37% is urbanized and the electricity production of the whole of SSA is equal to that of Spain. SSA has the lowest share of global economic output and is heavily dependent on exports of raw materials such as gold, oil and diamonds. The majority of the region is agricultural and many rely on aid. However, Sub-Saharan Africa has a diverse set of economies in terms of growth. For example, Ethiopia, Mozambique and Tanzania were among the five fastest growing countries in terms of average annual GDP growth, growing at over 7% between 2010 and 2015. Growth rates of GDP in Chad in 2016 was -7% and in Equatorial Guinea -9.75%, showing the contrasting development rates of the countries. However, this is GDP growth and a better indicator of wealth might be GDP per capita, which shows total production which is then divided by population figures and therefore gives us the average amount of income that people win. This is a better indicator to show the standard of living in these countries. (See Annex 1 for the annual percentage growth in GDP per capita for these countries). SSA has been the slowest growing economy, it is now on the rise. Aid is decreasing and foreign direct investment (FDI) is increasing. Conflicts cause less disruption and some places become less violent. In a report titled The Rise of African Consumer published by Mckinsey andCompany, a global management consulting firm reported that the results of the survey it conducted showed that “Africans are exceptionally optimistic about their future. 84% say they will be better off in two years.” African consumers demand quality products and are brand conscious. "African consumers want the latest fashion and a modern shopping experience." This supports the idea that there is now a new African middle class where 300 million people are now on the average income scale. The Economist, mentioned previously in its issue titled Africa "The Continent Without Hope", also supported the idea by publishing an article a few years ago.later titled Africa Rising, stating that "after decades of slow growth, the Africa has a real chance of following in Asia's footsteps. However, there are arguments against this that support Lewis's theory of development in terms of the transition of work between two sectors. from The Economist, both articles do not mention the absence of manufacturing industry in Africa (See Annex 2 to see Africa's total exports). In the future, Africa must industrialize, otherwise it will face the problem of diminishing returns. In order to increase GDP growth percentages, a country needs to produce more, it needs the technology and machinery available to it in order to provide increasing returns. David Ricardo, a classic British economist of the late 18th and early 19th centuries, suggested that there would be a limit to growth due to prices rising so high that consumers could not afford products . However, Ricardo was wrong, because at that point in history he would not have been able to predict the technological advancements that had occurred in recent years. Advances in technology mean that production can be carried out more efficiently and can be carried out by machines, which has therefore lowered the prices of products as there are no labor costs. Additionally, Ricardo believed that we would run out of land to grow food, but he did not foresee us going to other countries to obtain food. Lewis's theory of development attempts to explain the growth of a developing country in terms of the transition of labor between two sectors. . Both sectors are based on a dual economy where the first sector concerns agriculture, traditional, etc. and the second sector is the manufacturing/industrial sector. When there is a shortage of land and an unlimited supply of labor to work the land, a surplus of labor results. Growth occurs when more workers choose the manufacturing and industrial sector due to more attractive wages, leading to reinvestment of excess profits contributing to the growth of the economy. Currently, this is not something that SSA takes advantage of to emulate growth success stories such as those in the East. Asian miracle. The East Asian miracle is an example of how rapid economic growth can be achieved through industrialization. The East Asian miracle involves high-performing Asian economies such as Hong Kong, "Tigers" such as Taiwan, Indonesia, Thailand and Malaysia, which have turned their sustained growth rates into wealth gains real. All of these countries started from a low starting point, so growth was rapid. They used more resources by investing in morecapital and infrastructure and used their existing resources more efficiently. The 1993 World Bank report suggested that the reasons for successful growth were due to reasonable and stable macroeconomic policy, low inflation during periods of growth, which as if there was high inflation it would mean that wages would rise and prices would not be competitive. But as inflation was low, prices remained competitive for export. In addition, there were small budget deficits, low government borrowing, and low and stable interest rates. There were secure financial systems, trusts were created and businesses could invest. Trade policy and exchange rates were very important, there was a policy of import substitution whereby the government stopped the importation of products that it believed could be manufactured itself. They had a pro-export regime and export credits and government incentives were offered to companies that exported, for example tax breaks for exports and targets were set, things like lower taxes or Tax breaks, privatization and less state intervention are what neoclassical theory suggests. contribute to the growth of an economy. Additionally, Asian countries have weak monetary policies, so the weaker currency makes products cheaper when exported to other countries, making the market more attractive to foreign buyers. The institutional basis for growth in the East Asian miracle was the basis of shared growth and equality. From the late 1950s to the 1990s, Japan had the same political party, showing the cohesion and general agreement of the censuses within their communities. There is a business-friendly environment and even deliberative councils where countries come together and discuss long-term planning on how to improve the economic situation. Agreements are made with government and business with the aim of continuing to improve. When it came to accumulating human and physical capital, the emphasis was on improving education, infrastructure and savings. Harrod Domar's growth model was that to improve the economy, people should have saved in order to finance the investments that this model supports in Japan. action to establish their post office, which allowed people to keep their savings and use them as investments. East Asian tigers are open to foreign technology, which has also contributed to their growth. For example, they copy technology from other countries and encourage specific industries by the government by selecting the best industry to invest in. A combination of all of these has been important, but there is an argument made by Paul Krugman, an American economist who believed that the East Asian miracle was similar to the Soviet Union of the 1950s which later collapsed and believes that diminishing returns will soon set in. The development of the East Asian tigers is very impressive and a model that other emerging markets could use. However, for SSA, this may not be feasible due to barriers to doing business in the region. For example, the Tigers were very export-oriented and worked to keep costs low, produce the products, and make them attractive to foreign buyers. But due to the geographical location of SSA, many countries are landlocked andTransport costs are two to three times higher than for coastal countries, according to the World Bank. They have weak supply chains and do not have the advantage that the Tigers had because they do not have access to the seas. Without the intervention of government institutions to help build transport links across SSA, these costs will not decrease. Additionally, an Afrobarometer survey conducted for the SSA region revealed that “1 in 5 people still often lack food, drinking water or medical care.” care and 1 in 2 experience occasional deprivation. More than 2 in 5 people frequently lack cash income to meet their basic needs, and 3 in 4 report going without money at least once a year. This “experienced poverty” has decreased in 5 countries: Cape Verde, Ghana, Malawi, Zambia and Zimbabwe, but has unfortunately increased in 5 others: Botswana, Mali, Senegal, South Africa and Tanzania. The survey shows that unlike the tigers, they are unlikely to be able to follow Harrod Domar's growth model, because the economy cannot be improved by people saving to finance the economy. investment, because the domestic savings rate is low, very stable and very unlikely to change. Another criticism of the Harrod Domar model is that countries like those in SSA lack the cultural and institutional conditions to fully utilize savings. Although many Africans now have access to online banking through their mobile phones, this is not significant enough to be the difference SSA needs. There is also not much social cohesion within SSA, law and order is weak in many African countries, and African companies pay higher bribes (as a percentage of sales ) than in other emerging market regions. came after 1976, the year Mao Zedong died. Mao Zedong, nicknamed Chairman Mao, dominates the history of China in the 20th century. He was the head of the Communist Party and was one of the leaders of isolationism from 1953 to 1978. Before that, there was the civil war in China, where the Nationalists were defeated by the Communists and the Nationalists were defeated. been exiled to Taiwan. After these events, Chairman Mao isolated China from the rest of the world and China adopted a collectivist way of life. Collectivism meant that no one owned private property and everyone lived together and was assigned a job. Chairman Mao implemented his first five-year plan. Chairman Mao's first five-year plan focused on Soviet-style industrialization, which meant the collectivization of agriculture, political centralization, and a census taken in 1953 showed that China had a population of more than 503 million. inhabitants and that in 1958 there were approximately 750,000 farmers. The result of Chairman Mao's isolation in 1953 led to a famine in China with estimates of between 18 and 40 million deaths, which many Chinese still refuse to believe today, an economic regression and this is what economist Perkins described it as a "catastrophe". Chairman Mao was marginalized and responded in 1966 by launching the Cultural Revolution. All traditional Chinese culture was removed, all elements of capitalism were removed and he set up the Red Guards which were a group of mostly students who would actively and aggressively defend. Mao. After Mao's death, China had to do two things. First, whatever policies emanate from Mao, they must continue to support them, and whatever directions Mao gives the country, they will continue to follow them...