Africa and the prisoner’s dilemma
Socio-economic analysts have for many decades talked about “the race to the bottom”.
This is the theory that less developed countries will outdo each other in opening up their economies and environments to exploitation as they compete to attract the attentions of developed countries and their FDI.
As such, countries will fall over each other to relax corporate taxes, ease labour regulations and ignore environmental protection so that the costs of production go down and profits for investors increase.
Needless to say, under-developed countries become even less developed while the rich get richer.
The race to the bottom theory has been adopted by those opposed to the form of globalisation favoured by advocates of free trade, liberalisation/deregulation.
However, it probably has its origins in Adam Smith’s “The Wealth of Nations”, the capitalist bible so to speak, in which the philosopher said: “The proprietor of stock is a citizen of the world, and is not necessarily attached to any particular country.
“He would be apt to abandon the country in which he was … assessed to a burdensome tax, and would remove his stock to some other country where he could either carry on his business or enjoy his fortune more at his ease. By removing his stock he would put an end to all the industry which it had maintained in the country which he left.”
It is this threat of dis-investment that is hung like an axe over the heads of any people in less developed countries whenever they try and upset the apple cart by calling for reforms to global trade, or by agitating for greater local control and beneficiation of natural resources.
And many people in less developed countries succumb to the threats, and thus engage in a fierce race to the bottom.
In those efforts, they are no different from flesh peddlers in a dog-eat-dog red light district who will sell their services to the lowest bidder.
What you get then, to quote again from Adam Smith, is a situation where markets organise our societies for us, instead of societies organising markets to suit their own developmental aspirations.
He said in “The Great Transformation” that: “To allow the market mechanism to be sole director of the fate of human beings … would result in the demolition of society… Nature would be reduced to its elements, neighbourhoods and landscapes defiled, rivers polluted, military safety jeopardised, the power to produce food and raw materials destroyed.”
This is a warning coming from a man – who perhaps along with Keynes – was most responsible for defining and structuring capitalism as we know it today.
The race to the bottom works in tandem with what is sometimes referred to as “beggar-thy-neighbour” policies. This is where developed countries, when they are in a fix or want to get ahead, pivot themselves by worsening the economic situations in less developed countries.
Forgive me for referring again to Adam Smith, but he is the guru on the matter. He said the economic policies of the developed are hinged on “beggaring all their neighbours”.
This “beggaring” is by way of imposing quotas, duties and taxes on goods from other countries so that the developed countries can protect their own industries.
So, on the one hand, you get the developed countries telling the less developed to “liberalise”, while they themselves impose protectionist policies.
Talk of doing as I say and not as I do.
A good example of this is the huge, huge subsidy that the EU awards to its agricultural sector.
Under the Common Agriculture Policy, a good 40 percent of the EU’s budget goes to subsidising European farmers, and yet agriculture contributes a minute two percent of the bloc’s GDP.
At the same time, African governments are told to “liberalise” agricultural production.
The effect is that production costs in Africa become very high and we cannot compete on global markets.
But because we fear loss of meaningless FDI, we engage in a frenetic race to the bottom to deregulate production and please the EU.
When one African leader or society attempts to get out of this race to the bottom, we then lock horns in what has been referred to as the “prisoner’s dilemma”, where we rush to bargain with the West in the hope of getting a “good” deal.
It is something two prisoners do when the authorities approach them with a plea bargain, where their prospective prison sentences will be cut short if they turn state witness against their accomplices. The prisoners often outdo each other in snitching against everyone else.
What they forget is that they are still going to go to prison.
It’s a Faustian bargain, and our only hope is unity in helping each other out of the race to the bottom and ditching this prisoner’s dilemma.
In short, Africa needs its own protectionist policies to grow its industry, and to hell with whatever the developed world may say!