IndexIntroductionGrowth in Sub-Saharan AfricaGrowth in ChinaConclusionIntroductionIn this essay, the growth between China and Sub-Saharan Africa (SSA) will be explained in terms of contrasting growth from the Years '80. The growth between the two will be explored from the perspective of institutional theory. Both internal and external key influences will be identified and assessed with regard to how they have shaped the economic and business landscape of the two emerging markets. Institutions are an essential part of every society, they impose structure on the behavior of individuals. Institutions and their rules ultimately guide what we do, i.e. how they can impact economic growth. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an 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 stage theory, Lewis development theory and the neoclassical model, these theories attempt to explain the process development and what has happened so far. To explore some potential constraints to 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 titled “Orientalism and African Development Studies: The Motif of 'Reductive Repetition' in Theories of African Underdevelopment,” Edward said 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 Hopeless Continent" published in May 2000, which described Africa as a country with weak states devastated by war. As a region, SSA is made up of 48 countries, 32 of which are independent and has over 910 million inhabitants. Only 37% are urbanized and the electricity production of the entire SSA is equal to that of Spain Sub-Saharan Africa has the lowest share of global economic output and is heavily dependent on exports of raw materials such as gold, oil and diamonds. Most of the region is agricultural and much is dependent on aid. However, SSA has a diverse set of economies in terms of growth, for example Ethiopia, Mozambique and Tanzania are among the top 5 fastest growing countries in terms of average annual GDP growth at over 7% among 2010 and 2015. The GDP growth rates in Chad in 2016 were -7% and in Equatorial Guinea -9.75%, which shows 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 output which is then divided by population data and which then gives us the average amount of money people earn. This is a better indicator to show the standard of living in these countries. (See Appendix 1 to see the percentage annual growth in GDP per capita for these countries.) SSA was the slowest growing economy, now it is growing. Aid decreases and foreign direct investment (FDI) increases. Conflict is causing less disruption and some places are becoming less violent. In a report titled The Rise of African Consumer by Mckinsey and Company, a global management consultancy firm reported that the results of the survey conducted showed that “Africans are exceptionally optimistic about their future. 84% say they will be better off in two years." . African consumers demand products fromquality 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 in which 300 million people fall into the middle income scale. Also the Economist, mentioned in Previously for his issue calling Africa "the hopeless continent", he supported the idea by publishing an article years ago later called Africa Rising stating that "After decades of slow growth, Africa has a real chance of follow in the footsteps of Asia". However, there are counter arguments that support Lewis' theory of development in terms of labor transition between two sectors. In the well-known articles in Time Magazine and The Economist, both articles do not mention the absence of production in Africa. (See Appendix 2 to see Africa's total exports.) Raw materials are natural resources and are dead-end assets the GDP growth rates a country needs to produce more, they need the technology and machinery accessible to them to provide increasing returns. David Ricardo, a classical British economist of the late 18th and early 19th centuries, suggested that there would be a limit to growth because prices would rise so high that consumers would be unable to afford products. However, Ricardo was wrong as at that point in history he would not have been able to predict the technological advances that have occurred in more recent years. Technological advances mean that production can be done more efficiently and can be done by machines which therefore has lowered the prices of products as there are no labor costs. Furthermore, Ricardo thought that we would run out of land to grow food, but he did not foresee that we would go to other countries to get food. Lewis's theory of development seeks to explain the growth of a developing country in terms of the transition of labor between two sectors. The two sectors are based on a dual economy where the first sector concerns agriculture, traditional products 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, the result is a surplus of labor. The growth comes as more workers choose the manufacturing and industrial sector due to more attractive wages, resulting in reinvestment of surplus profits which helps grow the economy and currently this is not something the SSA is taking advantage of to emulate stories of successful growth like that of the East Asian Miracle. The East Asian miracle is an example of how rapid economic growth can be achieved with industrialization. The East Asian Miracle is about high-performing Asian economies like Hong Kong, “Tigers” like Taiwan, Indonesia, Thailand and Malaysia, which have turned sustained growth rates into real wealth gains. All of these countries started from a low base, so growth was rapid. They deployed more resources by investing in more capital and infrastructure and used existing resources more effectively. The World Bank report in 1993 suggested that the reasons for successful growth depended on reasonable and stable macroeconomic policy, there was low inflation during periods of growth which helped, as if there was high inflation this would mean that the wages would rise and prices would not be competitive. But because inflation was low, prices remained competitive for exports. Furthermore, small deficits occurredtaxes, low public debt and low and stable interest rates. There were secure financial systems, trusts were established and companies could invest. Trade policy and exchange rates were very important, there was a policy of import substitution whereby the government would stop importing products that they believed could be made themselves. They had an export-friendly regime and export credits and state 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 is what which neoclassical theory suggests will help grow an economy. Additionally, Asian countries have weak currency policies, whereby the weaker currency made goods 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, which demonstrates the cohesion and general consensus within their communities. There is a business-friendly environment and even deliberative councils where countries meet and discuss long-term planning on how to improve the economic situation. Agreements are made with government and businesses in an effort to continue improving. When it came to accumulating human and physical capital, the focus was on improving education, infrastructure and savings. Harrod Domar's growth model predicted that to improve the economy, people would have to save to finance the investments that this model supports in Japan. action to create their own post office which would allow people to have a place to store their savings to use as an investment. East Asian tigers have an openness towards foreign technology which also helped their growth, for example, they copied other countries' technology and promoted specific industries through the government's choice to choose the best industry to invest in. A combination of all this was important, but there is an argument put forward by Paul Krugman, an American economist who believed that the East Asian miracle was similar to that of the collapsed Soviet Union in the 1950s, and who believes that diminishing returns will soon occur. The development of the East Asian Tigers is very impressive and is a model that other emerging markets could use, however, for SSA this may not be achievable due to barriers to doing business in the region. For example, the Tigers were heavily export-oriented, aiming to keep costs low, produce goods, and make them attractive to foreign buyers. But because of the SSA's location, many countries are landlocked, and shipping costs are two to three times higher than in coastal countries, according to the World Bank. They have weak supply chains and do not have the advantage the Tigers had of not having access to the seas. Without intervention from government institutions to help build transportation links across SSA, these costs will not decrease. Furthermore, in an Afrobarometer survey conducted for the SSA region it was found that “1 in 5 often still lack food, clean water or medical services.” care and 1 in 2 experiences occasional deprivation. More than 2 in 5 people often lack cash income to meet basic needs, and 3 in 4 people report running out of money at least once a year. Such"Lived poverty" decreased in 5 countries, Cape Verde, Ghana, Malawi, Zambia and Zimbabwe, but unfortunately increased in 5 others: Botswana, Mali, Senegal, South Africa and Tanzania. The survey shows that, unlike tigers, they are unlikely to be able to follow Harrod Domar's growth model as the economy cannot be improved by people saving to finance investment as there is a low domestic saving rate which it is very stable and very unlikely to change. Another criticism of the Harrod Domar model is that countries such as those in SSA do not have the cultural and institutional conditions to fully utilize savings. While many Africans now have access to online banking via mobile phone, this is not substantial enough to be the difference the SSA needs. There is also not much social cohesion within the SSA, law and order is weak in many African countries, and companies in Africa pay higher bribes (as a percentage of sales) than in other emerging market regions. Growth in ChinaChina's major economic growth and development came after 1976, the year of Mao Zedong's death. Mao Zedong, called Chairman Mao, dominates the history of 20th century China, was head of the Communist Party and was a leader during the isolationism of 1953-1978. Before that there was the civil war in China, where the Nationalists were defeated by the Communists and the Nationalists were exiled to Taiwan. After theAfter the events, Chairman Mao isolated China from the rest of the world and China adopted a collectivist lifestyle. Collectivism meant that no one owned private property and everyone lived together and had assigned work. Chairman Mao implemented his first five-year plan. Chairman Mao's first five-year plan focused on Soviet-style industrialization, this meant the collectivization of agriculture, political centralization, and a census in 1953 that showed China had a population of over 503 million people and by 1958 c 'there were around 750,000 farmers. cooperatives. The result of Chairman Mao's isolation in 1953 meant a famine in China with estimates of 18-40 million deaths, which many Chinese refuse to believe to this day, an economic regression and was what economist Perkins described as a "disaster". 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 put in place the Red Guards, a group made up mostly of students who actively and aggressively defended Mao. After Mao's death, China should have done two things. The first was that whatever policies originated with Mao they should continue to uphold, and whatever direction the country was given by Mao they should continue to follow. Chairman Mao's legacy left China a technologically backward country with a huge peasant population. There were major food shortages and mass poverty. In 1978 Deng Xiaoping took power. Xiaoping was open minded towards new policies, the country would try new things and whatever didn't work, he would change and go in a different direction. The first reforms implemented under Xiaoping's leadership were the one child per family policy to help take control of the population. In terms of agriculture, families were given land even if they did not own it, but could cultivate it themselves. The government allowed them certain sums to produce on their land, and anything above that amount could be kept for themselves and sold for a profit. Xiaoping incentivized the system. State-owned enterprises of cities and towns..