The Economic Chronicles of the Kingdom, 1955-2011 Part.3
This post could have been titled ‘Morocco v The Rest Of The World’. and can be summarized in two sentences:
in 1955, Morocco’s GDP ranked in the bottom 12% out of 72 countries.
in 2009, Morocco’s GDP ranked in the bottom 32% out of 190 countries.
This is good news: it can be argued that Morocco’s catching up to the global mean is real and tangible, and that is has done well over half a century by lifting itself up from poverty to average, the performance has to be put in perspective: the distribution of global GDP has changed dramatically: it has grown more unequal, and the seemingly bimodal shape of the density estimate in the graph belies the large number of countries left behind the curve, literally. The “bimodal shape” refers to the two humps observed in the light-grayish curve of Real GDP Per Capita for 2009, one close to 6 – 8, which refers to a Real GDP Per Capita of $1,200 and $1,500, and a wealthier hump of $13,000 to $17,000. Morocco’s performance puts it in the vicinity of the upper bound of the first hump, with about half as much, in current terms.
In 1955, discrepancies between countries were not as striking; on the other hand, there were only 72 countries whose individual economic data were recorded. Nonetheless, distribution was very close to a theoretical normal distribution, with average Real GDP Per Capita around $ 476.24 (in current prices) and about 95% of all values between $478.3 and $474.2, what is more, countries in the left hand-side tail, the richest countries are quite rare, if any.
Morocco’s Real GDP Per Capita ranked in 1955 around the bottom 12%, close to the lower decile that is. As usual, going from small A to larger B does not necessarily mean we have scored good. It is true Morocco has grown about an average full percentage point above worldwide trend, but is it enough? Or is it even statistically significant?
Growth in Morocco is definitely more volatile: even as its mean is significantly higher, the standard deviation is about twice as large as the average global growth. Indeed, if it was not for the large differences in growth levels, Morocco could have improved its standing in the global percentile. in short, the Moroccan economy hasn’t done enough in terms of β-convergence (the maximum growth rate to catch up to more advanced economies) and has definitely failed to generate enough in terms of σ-convergence (the ability to achieve growth rates without too much volatility through redistributive growth).
It is not too harsh a statement: after all, volatility around growth levels for the past decade has been cut by 15% relative to the 50-years long trend, and 20% when compared to pre-1999 levels. What happened was, the economy did not push stronger in achieving more in reducing volatility. At this stage, the argument that maximum growth doctrine, even if it has been achieved at some level by the Moroccan economy, did not generate the anticipated level of wealth and income per capita. This might explain why even as Morocco has improved its ranking by jumping two full deciles, it is not nearly enough to qualify as a true emerging market with upper-middle income potential; simply put, Morocco was lucky enough to improve its ranking because other countries have messed up their development model – check the lower right hand-side tail to verify: it is no good to boast a 30% bottom when the said 30% are much poorer.
The alternative way to go might reside in a little-known and seldom advocated policy, that is, to achieve the lowest possible volatility over an intermediate or long period of time.
Consider a generic Moroccan economy, where everything runs smoothly with no volatility, i.e. a stable economy with the same growth rate of 5.655% every year from 1961 to 2010, which is the exact average growth of real GDP Per Capita over the same period of time. GDP Per Capita is expected to grow 16.5 times in 50 years, which means GDP per capita (current US$) would reach $3,871.57 instead of the existing $3,053.53 per capita. The generic economy has run on the same growth rate, the same population, but there is one crucial factor that explains the $818 gain per capita (or the aggregate sum of $ 26.7 Bn, or 213 Bn dirhams) and a notch higher toward the $ 4,036 Upper-Middle Income Countries per World Bank nomenclature. In fact, there is a way to quantify the gains from any policies designed to reduced output per capita volatility. A completely ‘sanitized’ growth brings increases GDP Per Capita by $ 800.
Halving output per capita volatility by 50% means growth gains would amount to $160. This shows growth stability is not an easy target to achieve, and the potential benefits have long-term effects, but it is clear the σ-convergence path has more benefits to the Moroccan economy. Unfortunately, growth volatility in Morocco has been followed by a proportionally larger drop in average output per capita – even as demographic growth dropped too, so this is, up to less than a percentage point, the economy’s entire responsibility.
The political argument for a more stable growth is more difficult to make: no political party or organization would advocate moderate growth rate for higher stability. Elected representatives cannot produce electoral manifestos without ambitious growth rates: recall PJD’s pledge to increase GDP Per Capita 40% by 2016, which means they need to achieve an annual growth of 6%, or 7% when demographic growth is taken into account. The unelected officials need to promote a narrative whereby Morocco is a dynamic, Mediterranean Dragon, and potential growth rates of steady 5% do not look terrific when sold to foreign investors.
Come to think of it, this is the actual cost of development policies in Morocco: these should have at least alleviated the effects of volatility. Instead, some have only exacerbated them, to the tune of 213 Bn dirhams of lost development.