African leaders discuss the state of the African economy at the 2010 IMF/World Bank Spring Meetings. Photo: International Monetary Fund (flickr)

The Economist

The Economist

Since 2001, the budding economies of the BRICS (Brazil, Russia, India, China and South Africa) have dominated global financial headlines. But looking back, it turns out some of the so-called “African lion” economies (Angola, Nigeria, Ethiopia, Chad, Mozambique and Rwanda) were just as fierce.

Six of the 10 fastest-growing economies in the world hail from the “forgotten continent” of Africa — putting up annual average GDP growth rates of around 8 percent or more from 2001-2010. The monumental rates have even earned these sprinters a spot next to “Asia's tigers” of the 1980 and 1990s — Making Africa one of the fastest growing regions in the world, according to The Economist.

Over the past decade, sub-Saharan Africa’s real GDP growth rate jumped to an annual average of 5.7%, up from only 2.4% over the previous two decades. That beat Latin America’s 3.3%, but not emerging Asia’s 7.9%. Asia’s stunning performance largely reflects the vast weight of China and India; most economies saw much slower growth, such as 4% in South Korea and Taiwan. The simple unweighted average of countries’ growth rates was virtually identical in Africa and Asia.

That said, in the next five years Africa is set to take the top spot from Asia as the fastest-growing region in the world, writes The Economist. "Standard Chartered forecasts that Africa’s economy will grow at an average annual rate of 7 percent over the next 20 years, slightly faster than China’s."

Ironically, much of Africa's growth can be attributed to China's investment and demand for raw materials in the region. And more recently, another of the BRICS, Brazil, has been competing for assets in Africa, writes Fast Company.

The Economist also notes growing success in Africa's manufacturing sector, which Standard Chartered predicts will become "significant."

Even with challenges such as political instability, corruption and weak rule of law, the African lions have been able to compete with the economic prowess of the Asian tigers.

But before Africa's growling economies can dream of surpassing Asia's roaring ones, those structural problems will have to be fixed.

"Without reforms," The Economist says, "Africa will not be able to sustain faster growth."

Santosh Ostwal saw a problem and spent half a lifetime trying to fix it until he finally found the solution in an unlikely place — his cell phone. According to an article in The Economist , as a boy, Ostwal would watch his grandfather walk miles a day, back and forth, to turn on and off the irrigation systems for his crops. The walks were dangerous. Alone at night, farmers faced muggings, wild animals and snakes in what Ostwal saw as an unnecessary journey.

Ostwal knew that life could be easier for Indian farmers and began devising a way to set the water pumps on a timer. In an interview with The Economist , he explains the need that he saw.

There are 3.1 million official connections of water pump sets in Maharashtra alone. The all-India figure is more than 1 billion. While farmers didn’t mind too much with the drill of walking up to the farm to switch on their motor pump sets and then head back home, I found that there was a strong resistance to walk back all the way to the farm to switch off their pump sets. A lot of water and electricity would be wasted.

The road to success was long and difficult. It began with a cheap alarm clock to trigger the system, which, according to The Economist, provided half an answer. It was possible to use the alarm clock to start the water pumps, but it couldn’t then be used to turn them off. While it certainly decreased the amount of walking, it did nothing to improve the water waste or soil erosion damaging crop outputs.

His next solution was to tap into existing radio frequencies using a remote control. This proved to be immensely expensive and difficult to get clearances to work on. Finally, after investing so much money that Ostwal, his wife, and two children were forced out of their apartment, he realized that he could instead tap into the wireless phone network. Within 15 minutes, Ostwal got the result for which he had been searching for nearly two decades.

The cell phone solution, which he has dubbed Nano Ganesh, provides the perfect answer. It uses already existing, cheap technology to start and stop the water flow from anywhere, sparing the farmers their long, dangerous walks. It also prevents soil erosion from excessive watering, which increases crop output for the more than 10,000 farmers across India. In fact, the technology has proven so useful that it is now being used in Egypt and Australia. And it's such a simple fix that it could continue to spread and ease the lives of farmers around the world.

For a full podcast interview with Santosh Ostwal, click here.

A representative from Brazil (right) signs an agreement with the World Bank detailing Brazil's contribution to reconstruction efforts in Haiti. Photo: World Bank Photo Collection (flickr)

Fiscal austerity may be forcing some countries to cut spending on foreign aid, but this isn’t the case everywhere. In fact, Brazil has actually tripled its official aid budget over the last two years, and according to the Guardian, the South American country is quickly becoming a leader in aid to the developing world.

Brazilian generosity is helping to offset falling donations from other countries, says The Economist. A study by Oxfam that appeared in Newsweek found that between 2008 and 2009, foreign aid from wealthy nations decreased by $3.5 billion. But a table in The Economist shows that through a combination of programs and loans to developing countries, Brazil’s 2010 contributions could total around $4 billion, though this figure includes involvement by private contractors.

And Brazil's status as a country that can empathize with developing nations gives it an advantage when designing aid programs. For example, The Economist points out that Brazil can help other countries design successful tropical agricultural programs because they've already done it themselves. The same goes for providing low-cost HIV/AIDS treatment or setting up cash transfer schemes that work.

Brazil tends to finance social programs or agriculture projects around the world, but Africa seems to be a particular focus. The Economist mentions Haiti as an example, where the Brazilian government runs a program that gives families free meals if they take their kids to school. In Angola, Brazilian contractors are building the water supply. And in Mali, Brazilian researchers run an experimental cotton farm. These efforts are even more remarkable when you consider that Brazil is still a recipient of international aid.

But if that's the case, should Brazil really be donating all this money? According to both The Economist and The Guardian, Brazil has actually benefited from increasing its foreign aid. The Guardian states that the economic ties Brazil has built with developing countries helped it escape the worst of the financial crisis, while The Economist suggests that foreign aid could boost Brazil's credibility with other nations.

But no matter what, Brazil's commitment to helping poor countries in the global south might pay big dividends in the future.

Add banking to the growing list of things your cell phone can do.

A September special report in the Economist took a look at the expanding use of mobile banking in Africa and explained how it could play a large part in improving personal financial stability in the region. In essence, here's how it works:

You take your cash to a mobile banking agent and tell the agent that you want to send money to a friend or family member. They credit your mobile banking account. Once the funds are available, you transfer money by sending a text message to whomever you want. The recipient then goes to his or her local agent to access the transferred money. People can even pay utilities or pay for cab rides with the service.

There is a strong correlation between the increase in a developing nation's cell phone use and it's rise in GDP, notes the World Bank. Mobile money offers similar effects on the individual level. A study by researchers at the University of Edinburgh found that users of the Kenyan mobile money service M-PESA have seen a 5 to 30 percent increase in their incomes since the service began in 2007.

One reason for this is the increased convenience that M-PESA offers. Like many men in Kenya, Nairobi resident David Omuchilili used to have to take time off from work and pay for travel costs to deliver money to his family, whose village is nearly 200 miles away. With M-PESA, he is now able to avoid the traveling and can be more available for work, as he explains to Business Week.

Mobile money transfers also offers a safer, more reliable way to send cash. Citizens without the means for traveling no longer have to take the risk of giving an envelope full of cash to a middleman — like a bus driver — and telling him where to deliver it. In the aftermath of the 2008 Kenyan election, M-Pesa was used to send money to those trapped by the rampant violence.

One thing is for certain. As mobile banking continues to grow in popularity and scale, users will find opportunities for better financial stability.

The July 18 issue of the Economist. Photo: The Economist

During the boom years of the 1990s, economists like Alan Greenspan became celebrities. Their speeches and writings were closely studied by those hoping to know where the market was going next. But thanks to the collective failure of economists to predict the worst economic crisis in decades, those shining reputations are now tarnished.

Now the profession of economics is hurting. The July 18 issue of The Economist cautions against an economist backlash, warning against the logic that "if economists got things wrong, then politicians will do better."

In its crudest form — the idea that economics as a whole is discredited — the current backlash has gone far too far. If ignorance allowed investors and politicians to exaggerate the virtues of economics, it now blinds them to its benefits. Economics is less a slavish creed than a prism through which to understand the world. It is a broad canon, stretching from theories to explain how prices are determined to how economies grow. Much of that body of knowledge has no link to the financial crisis and remains as useful as ever.

Despite the vigorous defense of the discipline, the Economist goes on to note that two sub-fields of economics do require reform. Macro-economists, who study the impact of factors like unemployment and inflation on economic growth, use quantitative models to forecast economic trends. The most common models failed to take into account potential failures of the financial system and therefore failed to predict the scale of the recession. Some economists are using complex computer simulations to test and improve existing models.

Financial economists, those that examine the prices of financial instruments like stocks and bonds, need to focus on how risk impacts the financial system, according to another Economist article. The increasing use of psychology in economics provides one opportunity for these economists to better understand risk.

As the recession takes hold, the fed continues to cut interest rates, and countries around the world cut growth forecasts, the Economist warns of another looming danger for the global economy: protectionism.

For the first time in more than a generation, two of the engines of global integration—trade and capital flows—are simultaneously shifting into reverse. The World Bank says that net private capital flows to emerging economies in 2009 are likely to be only half the record $1 trillion of 2007, while global trade volumes will shrink for the first time since 1982.

This twin shift will force wrenching adjustments. Countries that have relied on exports to drive growth, from China to Germany, will slump unless they can boost domestic demand quickly. The flight of private capital means emerging economies with current-account deficits face a drought of financing as well as export earnings. There is a risk that in their discomfort governments turn to an old, but false, friend: protectionism. Integration has less appeal when pain rather than prosperity is ricocheting across borders. It will be tempting to prop up domestic jobs and incomes by diverting demand from abroad with export subsidies, tariffs and cheaper currencies.