Introduction

This chapter focuses on a particular type of policy failure, namely the sacrifice of future income for present gain. All societies and their governments face a trade-off between present and future consumption, but in Africa this has often led to serious policy errors. The core phenomenon we discuss is an unsustainable boom in public spending. However, we also include a less common event, looting. Although fairly rare, when looting occurs its implications for growth have been substantial. Bouts of unsustainable public spending were usually, although not invariably, triggered by booms in revenues from natural-resource rents. These were often amplified by unsustainable debt accumulation. Looting of assets occasionally took the form of dispossession of private assets, but more commonly the target was publicly owned assets.

Both unsustainable public spending booms and asset looting were sometimes simply mistakes, but were more commonly rational strategies. Unsustainable strategies can be rational even though they are socially costly because many of the costs are external to the calculus of decision takers. In section 2, we discuss the episodes of unsustainable public spending, and in section 3 we turn to the looting episodes. As with all our syndromes, it is possible for a single episode to be characterized by multiple syndromes. Thus, the second Nigerian oil boom of 1979–83 features an unsustainable boom in public spending which took the form of looting, so that it is included in both sections.

Unsustainable public spending

Many African economies have remarkably undiversified export structures.