Africa's Free Trade Area Could Lift Millions out of Poverty
From socialist dictatorships to free trade, the prospects for African growth are looking better than ever.
Alexander C. R. Hammond —
In recent months, African nations have been in the process of creating, signing and ratifying the African Continental Free Trade Area (AfCFTA). The agreement is one of the largest trade liberalisation efforts since the founding of the World Trade Organization in 1995.
Last Sunday, at the 31st African Union (AU) Summit in Nouakchott, Mauritania; the total number of AfCFTA’s signatories reached 49 out of 55 African Union (AU) member states. So is free trade becoming mainstream in African politics?
If all 55 AU nations ratified the proposed agreement, AfCFTA would create a trading area with 1.2 billion people and a cumulative GDP of $2.5 trillion. It aims to improve trade within the continent by immediately removing tariffs on 90 per cent of goods, with the remaining 10 per cent of tariffs on “sensitive goods” phasing out over time.
Being able to trade freely with one’s neighbours is vital for economic growth. In 2016, just 18 per cent of Africa’s total exports were traded within the African continent. In Europe and Asia, intra-regional trade accounted for 69 per cent and 59 per cent of total exports respectively.
Under the AfCFTA, the UN Economic Commission on Africa estimates, intra-African trade could increase 52.3 per cent by 2022. It could double again, after the final 10 per cent of tariffs are removed. If adopted, the AfCFTA has the potential to revolutionise African trade and add billions to the continent’s GDP.
Quality of government could also improve through competition to create welcoming and stable business environments.
For the AfCTFA to be implemented, 22 countries must ratify the agreement. So far, six have done so. Unfortunately, prior to last weekend, the AfCFTA did not have the support of the continent’s two richest nations. Whilst Nigeria remains reluctant to cooperate, South Africa, the continent’s largest economy, has finally signed the agreement.
Admittedly, the AU has a long history of failed promises and meaningless acts. If AfCTFA succeeds, it will signify an important shift away from the socialist policies of Africa’s past. As Professor George Ayittey, the president of the Free Africa Foundation, explains:
Most African nations took the socialist route after independence… In many places in Africa, capitalism was identified with colonialism, and since the latter was evil and exploitative, so too was the former. Socialism, the antithesis of capitalism, was advocated as the only road to Africa’s prosperity… and in its wake followed economic atrophy, repression and dictatorship.
Africa’s socialist experience started in Ghana, the first African colony to gain independence in 1957. Kwame Nkrumah, the man many consider to be the “Father of African socialism”, pursued “complete ownership of the economy by the state”. Nkrumah encouraged Africans to “not rest content until we demolish this miserable structure of colonialism and erect in its place veritable paradise”.
Ahmed Sekou Touré of Guinea in 1958, Modibo Keita of Mali and Leopold Sedar Senghor of Senegal in 1960, Kenneth Kaunda of Zambia in 1964 and Agostinho Neto of Angola in 1975 were just some of the leaders who followed Nkrumah’s example.
“Predictably, in one country after another, economic ruin, dictatorship and oppression followed with deadly consistency… In Africa, socialism was implemented through the one-party state apparatus. The state would own everything and direct economic activity,” explains Ayittey.
Compare Africa’s past with its present. The AfCTFA is championed by Paul Kagame, the AU’s Chairman and President of Rwanda. Kagame describes himself as an avid free-trader and a disciple of Lee Kuan Yew, the first leader of the independent free-trading nation of Singapore. He is not alone: Mahamadou Issoufou, the President of Niger, noted that mobilising his peers to sign the agreement was easy as “most leaders already wanted to create a free-trade area in Africa”. The AfCTFA will mean “more integration (and) more growth for the whole continent,” Issoufou has declared.
Beyond the AfCFTA, overall trends across the continent indicate shifting attitudes towards free enterprise.
As Marian L. Tupy of the Cato Institute notes, “Africa’s love affair with socialism persisted until the 1990s, when, at long last, Africa started to reintegrate into the global economy”. According to the Economic Freedom of World report, Africa’s economy is becoming freer – its economic freedom score is now equal to the world average in 1996.
Tupy continues: “Trade relations with the rest of the world were somewhat liberalised (after 1990), and African nations started to deregulate their economies, thus climbing up the rankings in the World Bank’s Ease of Doing Business report.”
Despite this trend towards liberalisation, many African nations continue to be rife with corruption, ruled by dictators and face persistent poverty. But the AfCTFA and the desire of 49 nations to pursue intra-African free trade is a symbol that attitudes in what was once described as “The Hopeless Continent” are changing.
From socialist dictatorships to free trade, the prospects for African growth are looking better than ever. Let’s hope this deal adds billions of dollars to the continent’s economy, lifting millions out of poverty.
The Earth was 509.4 percent more abundant in 2023 than it was in 1980.
Marian L. Tupy, Gale Pooley —
The Simon Abundance Index (SAI) quantifies and measures the relationship between resources and population. The SAI converts the relative abundance of 50 basic commodities and the global population into a single value. The index started in 1980 with a base value of 100. In 2023, the SAI stood at 609.4, indicating that resources have become 509.4 percent more abundant over the past 43 years. All 50 commodities were more abundant in 2023 than in 1980.
Figure 1: The Simon Abundance Index: 1980–2023 (1980 = 100)
The SAI is based on the ideas of University of Maryland economist and Cato Institute senior fellow Julian Simon, who pioneered research on and analysis of the relationship between population growth and resource abundance. If resources are finite, Simon’s opponents argued, then an increase in population should lead to higher prices and scarcity. Yet Simon discovered through exhaustive research over many years that the opposite was true. As the global population increased, virtually all resources became more abundant. How is that possible?
Simon recognized that raw materials without the knowledge of how to use them have no economic value. It is knowledge that transforms raw materials into resources, and new knowledge is potentially limitless. Simon also understood that it is only human beings who discover and create knowledge. Therefore, resources can grow infinitely and indefinitely. In fact, human beings are the ultimate resource.
Visualizing the Change
Resource abundance can be measured at both the personal level and the population level. We can use a pizza analogy to understand how that works. Personal-level abundance measures the size of an individual pizza slice. Population-level abundance measures the size of the entire pizza pie. The pizza pie can get larger in two ways: the slices can get larger, or the number of slices can increase. Both can happen at the same time.
Growth in resource abundance can be illustrated by comparing two box charts. Create the first chart, representing the population on the horizontal axis and personal resource abundance on the vertical axis. Draw a yellow square to represent the start year of 1980. Index both population and personal resource abundance to a value of one. Then draw a second chart for the end year of 2023. Use blue to distinguish this second chart. Scale it horizontally for the growth in population and vertically for the growth in personal resource abundance from 1980. Finally, overlay the yellow start-year chart on the blue end-year chart to see the difference in resource abundance between 1980 and 2023.
Figure 2: Visualization of the Relationship between Global Population Growth and Personal Resource Abundance of the 50 Basic Commodities (1980–2023)
Between 1980 and 2023, the average time price of the 50 basic commodities fell by 70.4 percent. For the time required to earn the money to buy one unit of this commodity basket in 1980, you would get 3.38 units in 2023. Consequently, the height of the vertical personal resource abundance axis in the blue box has risen to 3.38. Moreover, during this 43-year period, the world’s population grew by 3.6 billion, from 4.4 billion to over 8 billion, indicating an 80.2 percent increase. As such, the width of the blue box on the horizontal axis has expanded to 1.802. The size of the blue box, therefore, has grown to 3.38 by 1.802, or 6.094 (see the middle box in Figure 2).
As the box on the right shows, personal resource abundance grew by 238 percent; the population grew by 80.2 percent. The yellow start box has a size of 1.0, while the blue end box has a size of 6.094. That represents a 509.4 percent increase in population-level resource abundance. Population-level resource abundance grew at a compound annual rate of 4.3 percent over this 43-year period. Also note that every 1-percentage-point increase in population corresponded to a 6.35-percentage-point increase in population-level resource abundance (509.4 ÷ 80.2 = 6.35).
Individual Commodity Changes: 1980–2023
As noted, the average time price of the 50 basic commodities fell by 70.4 percent between 1980 and 2023. As such, the 50 commodities became 238.1 percent more abundant (on average). Lamb grew most abundant (675.1 percent), while the abundance of coal grew the least (30.7 percent).
Figure 3: Individual Commodities, Percentage Change in Time Price and Percentage Change in Abundance: 1980–2023
Individual Commodity Changes: 2022–2023
The SAI increased from a value of 520.1 in 2022 to 609.4 in 2023, indicating a 17.1 percent increase. Over those 12 months, 37 of the 50 commodities in the data set increased in abundance, while 13 decreased in abundance. Abundance ranged from a 220.8 percent increase for natural gas in Europe to a 38.9 percent decrease for oranges.
Figure 4: Individual Commodities, Percentage Change in Abundance: 2022–2023
Conclusion
After a sharp downturn between 2021 and 2022, which was caused by the COVID-19 pandemic, government lockdowns and accompanying monetary expansion, and the Russian invasion of Ukraine, the SAI is making a strong recovery. As noted, since 1980 resource abundance has been increasing at a much faster rate than population. We call that relationship superabundance. We explore this topic in our bookSuperabundance: The Story of Population Growth, Innovation, and Human Flourishing on an Infinitely Bountiful Planet.
Appendix A: Alternative Figure 1 with a Regression Line, Equation, R-Square, and Population
Appendix B: The Basic 50 Commodities Analysis: 1980–2023
Appendix C: Why Time Is Better Than Money for Measuring Resource Abundance
To better understand changes in our standard of living, we must move from thinking in quantities to thinking in prices. While the quantities of a resource are important, economists think in prices. This is because prices contain more information than quantities. Prices indicate if a product is becoming more or less abundant.
But prices can be distorted by inflation. Economists attempt to adjust for inflation by converting a current or nominal price into a real or constant price. This process can be subjective and contentious, however. To overcome such problems, we use time prices. What is most important to consider is how much time it takes to earn the money to buy a product. A time price is simply the nominal money price divided by the nominal hourly income. Money prices are expressed in dollars and cents, while time prices are expressed in hours and minutes. There are six reasons time is a better way than money to measure prices.
First, time prices contain more information than money prices do. Since innovation lowers prices and increases wages, time prices more fully capture the benefits of valuable new knowledge and the growth in human capital. To just look at prices without also looking at wages tells only half the story. Time prices make it easier to see the whole picture.
Second, time prices transcend the complications associated with converting nominal prices to real prices. Time prices avoid subjective and disputed adjustments such as the Consumer Price Index (CPI), the GDP Deflator or Implicit Price Deflator (IPD), the Personal Consumption Expenditures price index (PCE), and the Purchasing Power Parity (PPP). Time prices use the nominal price and the nominal hourly income at each point in time, so inflation adjustments are not necessary.
Third, time prices can be calculated on any product with any currency at any time and in any place. This means you can compare the time price of bread in France in 1850 to the time price of bread in New York in 2023. Analysts are also free to select from a variety of hourly income rates to use as the denominator when calculating time prices.
Fourth, time is an objective and universal constant. As the American economist George Gilder has noted, the International System of Units (SI) has established seven key metrics, of which six are bounded in one way or another by the passage of time. As the only irreversible element in the universe, with directionality imparted by thermodynamic entropy, time is the ultimate frame of reference for almost all measured values.
Fifth, time cannot be inflated or counterfeited. It is both fixed and continuous.
Sixth, we have perfect equality of time with exactly 24 hours in a day. As such, we should be comparing time inequality, not income inequality. When we measure differences in time inequality instead of income inequality, we get an even more positive view of the global standards of living.
These six reasons make using time prices superior to using money prices for measuring resource abundance. Time prices are elegant, intuitive, and simple. They are the true prices we pay for the things we buy.
The World Bank and the International Monetary Fund (IMF) track and report nominal prices on a wide variety of basic commodities. Analysts can use any hourly wage rate series as the denominator to calculate the time price. For the SAI, we created a proxy for global hourly income by using data from the World Bank and the Conference Board to calculate nominal GDP per hour worked.
With this data, we calculated the time prices for all 50 of the basic commodities for each year and then compared the change in time prices over time. If time prices are decreasing, personal resource abundance is increasing. For example, if a resource’s time price decreases by 50 percent, then for the same amount of time you get twice as much, or 100 percent more. The abundance of that resource has doubled. Or, to use the pizza analogy, an individual slice is twice as large. If the population increases by 25 percent over the same period, there will be 25 percent more slices. The pizza pie will thus be 150 percent larger [(2.0 x 1.25) – 1].
“We find that each of the past four generations of Americans was better off than the previous one, using a post-tax, post-transfer income measure constructed annually from 1963-2022 based on the Current Population Survey Annual Social and Economic Supplement.”
“57% of [US] workers are making more money now — after adjusting for inflation — than they were a year ago. 41% of us have seen a real wage increase of more than 5%.”
1,000 Bits of Good News You May Have Missed in 2023
A necessary balance to the torrent of negativity.
Malcolm Cochran —
Reading the news can leave you depressed and misinformed. It’s partisan, shallow, and, above all, hopelessly negative. As Steven Pinker from Harvard University quipped, “The news is a nonrandom sample of the worst events happening on the planet on a given day.”
So, why does Human Progress feature so many news items? And why did I compile them in this giant list? Here are a few reasons:
Statistics are vital to a proper understanding of the world, but many find anecdotes more compelling.
Many people acknowledge humanity’s progress compared to the past but remain unreasonably pessimistic about the present—not to mention the future. Positive news can help improve their state of mind.
We have agency to make the world better. It is appropriate to recognize and be grateful for those who do.
Below is a nonrandom sample (n = ~1000) of positive news we collected this year, separated by topic area. Please scroll, skim, and click. Or—to be even more enlightened—read this blog post and then look through our collection of long-term trends and datasets.
