Origins of Sub-Saharan African Varieties of Capitalism and Implications for Development Policy

Abstract

The Varieties of Capitalism approach is applied to Sub-Saharan African economies, and a proposition is made. It is argued that the state of underdevelopment and the legacy of colonial economic policy are characterized by several key structural and business-environmental conditions which makes market institutions to emerge as the predominant form of recourse (relative to private sector non-market institutions) for managing economic transactions and solving coordination problems, and which create extreme LME-type outcomes. However, the state of underdevelopment is also characterized by structural inadequacies which distort the forms and efficiency of these market institutions and thus limit aggregate efficiency. The size and coordinative capacity of private-sector non-market institutions is structurally limited to overcome these problems. The state thus emerges as a major compensating, facilitating and/or substituting actor in economic affairs. Yet, the possibility of government failure lurks to derail the success of such state compensation, thereby leading, in the worst cases, to more neo-patrimonial forms of capitalism.