Reminded to remember: Africa is in danger
• This is the first of a series of articles by Lukas I Nantanga in which he writes about
‘Fallacies of logic’ deliberately designed by rich countries to prevent African countries from manufacturing. I have been asking myself for many years regards to as to why some countries are rich and others are poorer? Which paths did rich countries use in order to get rich? What possible mistake did poor countries do which made them poor? These questions and others made me dig deeper into the economic history or the ‘history of capitalism’. Erick Reiner’s (2007) seminal book entitled: How Rich Countries got Rich and Why Poor Countries Stay Poor and his entire literature on the subject opened my eyes to see how I should tackle these questions. Equally, I found Ha-Joon Chang’s (2007) book Bad Samaritans: the Myth of Free Trade and the Secrets of Capitalism, and his entire literature on the subject are very interesting. Through the process of reading, literature researching, I discover that Africa should re-start the economic game.
Economic development issues are like a sport game. This economic ‘game’ in Africa was started with Ghana‘s independence in 1957. South Africa‘s democratic government in 1994 completed the number of ‘game players’ when it closed the colonial chapter on the continent. Africa is a home of about 54 independent states that form the ‘African team’. Africa is expecting to welcome the Saharawi Republic to her folds when Morocco comes to her political sense to free the Saharawi people.
This article is divided into two Parts. Part one deals with economic barriers or what I call ‘fallacies of logic’ that are put by the Now Developed Nations (NDCs) to prevent African countries from manufacturing. Ideas and practices to prevent other countries from manufacturing is not new in the history of economic development. Africa is reminded to remember the dispute between England and her possibly first colony, North America over manufacturing issues during the 1770s. Prof Ha -Joon Chang gives Africa the following historical evidence:-
(1) High value-added manufacturing activities were outlawed or banned by colonial masters in the colonies. The British protectionist policy, outlawed the construction of new rolling and
slitting steel mills in North America, which forced the North Americans to specialise in low value-added pig and bar iron, rather than high value-added steel products
(2) Robert Walpole, British prime minister for 21 years, (1721-1742) abolished import duties on raw materials produced in the American colonies (such as hemp, wood, and timber). This was done in the belief that encouraging the production of raw material would “divert them from carrying on manufactures which interfered with those of England” (Chang, 2005:75).
Part one continues to discuss the Washington institutions’ conditionalities and their devastating impact on the African economies. Part one is the longest and consists of eight fallacies of logic: forced free trade and free market; infant industry protection; catching up way behind: distrust in free trade and free market; specialisation in raw materials; trade liberalisation- ‘kicking away the ladder’; ‘bad’ and ‘good’ economic policies; Sustainable Development Goals (SDGs): palliative economics; and de-industrialising of the African continent.
These fallacies of logic are interlinked because they all form part of the ‘Bad Samarians’ conditionalities.
Part two deals with the way forward. This article is very ambitious. The way forward will present good and practical economic models. Models which made rich countries rich.
What is striking today is, why Africa or the African states opt to finance their development projects with money borrowed? One reads from media headlines such as ‘Africa’s debt spree’ or ‘The new debt treadmill’ (African Business, May 2017). The increasing culture of borrowing money either from the Washington institutions: the International Monetary Fund (IMF), World Bank (WB), World Trade Organisation (WTO) or recently ‘soft loans’ from China is a great concern. Africa’s debt is estimated at $57 billion (African Business, January 2017).
The three money lending institutions: the IMF, World Bank (WB) and the World Trade Organisation (WTO) form what Chang (2007) calls ‘Unholy Trinity’. The unholy trinity’ is considered to be ‘unholy’ because behind their intentions are tacit signs of wickedness. From the Biblical parable of the ‘Good Samaritan’, Prof Chang draws his analogy to label developed nations ‘Bad Samaritans’. Why?
The United States of America and Britain were behind the formation of the IMF and World Bank. The IMF and the World Bank were established at the New Hampshire resort of the Bretton Woods in 1944. They are known as Bretton Woods’s institutions.
In this article they are referred to as the Washington institutions because after the fall of the Berlin Wall in 1989, these institutions’ policies were re-sharpened and became ‘unholy’ to most of the world’s poorest countries (Reinert 2007). The IMF was set up initially to lend money to countries which face problems with their balance of payment.
For example, Zambia in 1965 requested the IMF to assist her in her temporary ‘balance of payments’ predicament. The IMF argued that Zambian government’s budget deficits were the cause of balance of payments problem. The liberalisation of the economy led to, among other things, privatisation of the state-owned enterprises which is at the heart of neo-classical economic orthodoxy. The relationship between the fund and Zambia reciprocally continued for years because the fund felt it was formed to fulfil such mandate and the Zambian government thought it required the fund for financial support. But after 30 years this relationship between the IMF and Zambia became asymmetric relationship. Listen to the voice from Zambia: “The USA, which is several times more developed than Zambia, still has restrictions on external trade in order to protect its industries and local jobs’ at home (Zambia: Condemned to debt Report 2004). Due to the heavy IMF liberalisation programmes on the Zambian economy, the following conditions were imposed that included:’ (i) the abolition of quantitative import restrictions resulting in the liberalisation of import licensing system (ii) removal of price controls (iii) interest rate liberalisation (iv) restrictions on government expenditure, Zambia’s economy became disastrous than it had been at independence in 1965 (‘Zambia: Condemned to Debt: how the IMF and World Bank have undermined development’, 2004).
The Zambian economy became one of the African economies which were and are adversely and practically “run by the IMF and the World Bank over the past quarter of a century”.
The World Bank was set up to financing projects in infrastructure development such as roads, bridges or dams. The World Bank is also known as the International Bank for Reconstruction and Development. The concerns of Africa’s debts are real in abundance of Africa’s natural and human resources.
‘Africa is borrowing as if there were no tomorrow’
The concerns make one to dig deeper into the economic history, history of capitalism, unearth secrets of capitalism, questioning the African economic and policy structures. What went wrong? This is an attempt to finding ways which would assist Africa to get out of her vicious cycles of poverty, perpetual debt crises and diminishing returns activities (specialisation in raw materials production). Debts are not always bad, the problem is only when debts exceed their levels and become difficult to manage. It is equally a problem when money borrowed do not yield and generate increasing returns to pave the way for timely repayments.
The borrowed monies in African countries from the international money lenders covered infrastructures such as shopping malls, motorways (roads: highways) and rail lines. This point was clearly observed by Kwame Nkrumah in his book on Class Struggle in Africa (1970), when he reminded Africa to remember that only 10% of the US ‘aid’ to Africa is spent on industralisation, and the rest is spent in the interests of money lenders’ (capitalists). This article is not criticising or being arrogant to the past, present and future of Africa or respected African leaders.
The paper sees only one side of the coin, but it may not see the other.
The paper is written in a humble African spirit. It gives respect to all of our African leaders. It is dedicated to the Africa ancestors such as Nkrumah in Ghana, Nyerere in Tanzania and other respected African ancestors on the continent. Africa has achieved a lot. Africa needs to do a lot on economic freedom and liberation.
Africa should continue the journey with vigour in the spirit of umoja (unity and oneness) for the economic freedom. Economic freedom and liberation is the envisaged final destination of the African continent.
There is no magic about it. We Africans are also funny. We tend to sign the international agreements even those that tie our hands. WTO’s rules are one of the good examples. WTO is considered to be the custodian of the most notorious trade laws that humiliate Africa and developing countries.
Did Africa sign these laws, perhaps out of desperation? Out of fear? Or do African countries say ‘dhoyendji kadheehama okulila’ that can be literally translated: ‘if you are lamenting (crying) in a group, it is not harmful’, because you are many.
There are 43 WTO African member States. This means that all these nations by way of being full members of WTO, their hands are tied-up.
Through their membership status in WTO, they are all convinced that they shouldn’t protect their infant industries in their own countries.
They are convinced by the Bad Samaritan countries: Free trade is good. Infant industries protection is bad, oh.
England and the US protected their infant industries for more than 500 years.
Both countries embarked on free trade policies after and when they realised that their industries were matured enough and were able to protect themselves.
Africa is rich.
This article agrees with Baffour Ankomah’s statement and Africa listen: “A continent of 55 nations. ..we are supposed to be the richest continent in the world in terms of natural resources…you shake your head in sadness every time you think about it. “(New African, June 2017:29). But why is Africa creating a persistent culture of borrowing? Why borrowing money from the Bad Samaritans that will never develop Africa, but humiliate the continent? The Structural Adjustment Programmes (SAPs) were created in 1980 as part of the IMF. The Morgenthau Plan was created in 1947. Briefly, the Morgenthau Plan is named after Henry Morgenthau Jr, the US Secretary of the Treasury from 1934-to 1945.
The original ideas of the Morgenthau Plan was to de-industraliase Germany as ‘punishment’ after the Second World War. The Morgenthau Plan imposed serious economic devastating effects on Germany in few years of operation.
Through this plan, Germany was reduced to just a “pastoral” country and the Morgenthau Plan was called off.
The Morgenthau Plan and SAPs are designed to humiliate and de-industraliase Africa. Why does Africa or African countries ignore this clear historical fact and truth?
These days the SAPs are baptised with a new label: poverty reduction and growth facility. IMF appears as if it were caring about poverty issues in Africa in particular and developing countries in general. But this is a fallacy.
• Lukas I. Nantanga is a farmer and part-time lecturer at the University of Namibia, School of Public Health, Oshakati Campus. Ideas in this paper are his own. This article will be continued next week.