Investment, Growth and Poverty: Lessons from Malawi and Madagascar on Re-taking the Middle Ground

Malawi is popularly regarded as a paradigm of African capitalism, having pursued an export-orientated, agriculturally-based development strategy in accordance with the dictates of international comparative advantage. Until the late 1970s, when the economy was derailed by exogenous shocks and poor policy response, the reward was almost two decades of rapid economic growth. Madagascar is often cited as an example of failed African socialism. Capital-intensive import-substituting industrialisation, nationalisation, a distorted incentive regime and over-extension of the state's economic apparatus contributed to three decades of declining per capita income in the post-independence period. Also by way of contrast, Malawi has pursued over a decade of largely uninterrupted stabilisation and structural adjustment programmes under the auspices of the IMF and World Bank, whilst Madagascar has been slow to respond to the macro-economic crisis facing many low-income LDCs in the 1980s. This book review article assesses two books on the economic experience of these two contrasting African economies