In recent years, economists with as much acumen as
astrologers predicted that Africa was on the threshold of an economic boom.
Pointing to a decade of high growth and increased foreign investment, this
argument held that the continent was finally on track to leave its long years
of poverty and under-development behind. Some even prophesised that Africa
could become the next global economic powerhouse, following in the footsteps of
East Asia. Africa was rising. Of course, socialists argued that Africa’s growth
was not be real, lasting or beneficial for its people and the economic
forecasters shouldn’t focus upon the number of mobile phones people possessed
or count the new African billionaires.
Some more astute economists suggested the media in search of
what was going on should look to see if manufacturing was increasing as a
percentage of GDP, if the goods African countries exported were becoming more
valuable — finished products rather than raw materials. In 2011, a UN report looked into these very
questions, and found that most African countries are either stagnating or
moving backwards when it comes to industrialization. Oil and commodity prices
are plunging, China’s demand is slowing down, and GDP growth rates across the
continent are in steep decline. Reflecting these trends, the IMF has cut its
2015 projection for growth in sub-Saharan Africa from 4.5 to 3.75 per cent,
concluding that the decade-long commodity cycle that had raised African export
revenues “seems to have come to an end”. With increasing numbers of young,
better educated people, experts now worry about how Africa will produce enough
jobs. In November, the Economist commented that “many African countries are
de-industrialising while they are still poor, raising the worrying prospect
that they will miss out on the chance to grow rich by shifting workers from
farms to higher-paying factory jobs.”
Nigeria and South Africa, which together account for 55 per
cent of the 48 sub-Saharan African nations’ GDP, and which have both been
particularly hard hit by falling mineral and oil prices. Nigeria’s growth rate
has slumped to 2.4 per cent in the second quarter, the slowest pace in at least
five years, while South Africa’s economy contracted by an annualised 1.3 per
cent as power shortages curbed output. The fall in commodities prices has hit other
oil producers, too, such as Angola and Ghana, while Zambia, the continent’s
second-biggest copper producer, has suffered as copper prices have plunged to a
six-year low. The end of commodities boom, has now been laid bare the actual
failure of Africa’s development.
One reason Africa faces difficulties is that it followed the
advice of other economists looking in their crystal balls. The World Bank, the
IMF, and the university economics academics over the last 30 years advocated
the free market and free trade, denouncing the use of policies such as
temporary trade protection, subsidised credit, preferential taxes, and publicly
supported Research and Development. They said state intervention in the economy
does more harm than good, because governments shouldn’t be in the business of
trying to “pick winners,” and that this is best left to entrepreneurs and
market forces. African politicians s were told to simply privatise, liberalise,
and deregulate, to get the so-called economic fundamentals right and the
capitalist system would take care of the rest. This advice from the economists
neglected the actual history of how rich countries themselves have effectively
used industrial policies for 400 years, beginning with the UK and Europe and
ending with the “four tigers” of East Asia and China. This inconvenient history
contradicted free market maxims and so has been largely stripped from the economics
curriculum in most universities. The London School of Economics’ Robert Wade
noted that, by the way, industrial policy never really went away in the rich
countries, even if the right-wing in the US refuses to acknowledge its own
federal programmes such as the Defence Advanced Research Project Agency
(DARPA), the National Institutes of Health (NIH), or the National Institute of
Standards and Technology (NIST), as “industrial policy.” As a result, African
countries abandoned these key tools, which they could have used to build up
their domestic manufacturing sectors. Both North America and the EU have
adopted more industrial policies in recent years. Now, belatedly, the African
Union, and the UN Economic Commission on Africa (ECA) have been promoting what
it calls “smart protectionism,” suggesting that trade policy in Africa should
be “highly selective”, with special treatment for certain sectors to advance
national development goals.
However, regardless of this new approach, many African
countries have foolishly signed on to World Trade Organisation rules that have
clearly restricted their “policy space” for using such policies. And while WTO
rules still afford them some limited provisions, this is not the case under a
raft of other newer and further-reaching regional free trade agreements and
bilateral investment treaties promoted by rich countries over the last 15
years. And even more are on the way: Some of the biggest deals on the immediate
horizon are the Trans-Pacific Partnership (TPP), the Trade in International
Services Agreement (TiSA), and the EU’s free trade deals with several African
regions, known as Economic Partnership Agreements. Despite seeing a renewed
appreciation of national industrial policy, trade negotiators from the rich
countries are twisting arms, cajoling developing countries into signing new
treaties and agreements that will restrict their use of industrial policies.
Many developing country leaders either buckle under such pressure or willingly
sign on in the hope that they can export more of their primary commodities into
rich country markets in the short-term, even if this means foregoing long-term
industrialisation.
African nations who are serious about pursuing industrial
development will have to back-track, renegotiate, and re-design their previous
international trade commitments, and refuse to sign new ones that put them at a
disadvantage. Offending more powerful trading partners and big foreign
investors would likely invite serious short-term consequences, including
lawsuits, threats to cut off foreign aid and trade preferences, and possibly
lower foreign investment. That is a definite. You don’t need a doctorate in
economics or the ability to tell the future to foresee that happening.
No comments:
Post a Comment