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The political economy determinants of economic growth in Malawi

Working Paper 40

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Jonathan Said and Khwima Singini
Abstract
Since independence Malawi has failed to translate initial periods of economic growth (growth acceleration regimes) into sustained long-term growth (growth maintenance). This paper assesses why this has been the case and what feedback loops have existed between growth, the political settlement and institutions. This is done by assessing Malawi’s: (1) deals space – are business-government deals credible and open to many, or not credible and closed? (2) rent space – where do political elites source money for their political objectives? (3) product space – to what extent does Malawi’s product base organically spur economic growth? Malawi’s long-term growth problem is that the rent space for the political elite remains too heavily tied to the ‘powerbroker’ business elite that have a low propensity to invest and support exported-oriented reforms. There is relatively little alignment of political rents to ‘magicians’ (value adders and job creators), rentiers (except mining and cotton) and workhorses (the poor). Developmental interest is increasing, though this comes about in dribs and drabs when politicians want growth, so that support is stop-and-go and lacks the continuity necessary to overcome major structural challenges to structural transformation and growth maintenance. This suggests that the nature of growth going forward will be volatile, with a number of booms and crises in short-term growth. While long-term growth is likely to remain positive, driven by improvements in technology, the financial sector, energy and regional integration, it is unlikely to be strong enough in the next eight years to support the welfare requirements of the burgeoning population so as to allow Malawi to maintain high long-term growth. Altering this route would probably involve the disintegration of Malawi’s deeply embedded patronage and clientelist political settlement through the emergence of a developmental dominant party or the easing of political pressures currently caused by a five-year democratic term in which the largest voter group is rural, subsistence farmers, who are too far removed from the government’s policy-making process.