Why Africa needs to protect its primary industries
• This is the second instalment by Lukas I. Nantanga, who argues that “fallacies of logic” deliberately designed by rich countries prevent African countries from manufacturing. He also argues that Africa needs to protect its primary industries.
In reviewing the historical economic thought of the ‘now developed countries’ (NDCs) from 1300s to 1945, I was reminded to remember J. L. Austin’s (1962) seminal book How To Do Things With Words. Written or spoken words (utterances) are powerful. Words change the ways we do things, including economic development. Economic theories and policies are made of words. Therefore How To Do Things With Words can lead a nation either to create wealth or to create poverty. The good example is the WTO which ‘commits’ its member states not to enact protectionist trade measures in their countries. WTO article XXIV:8 (a) (i) and 8(b) is the clear manifestation to this effect(The General Agreements on Tariffs and Trade 1947:p.59).
WTO uses words and words are powerful to tie hands of the African countries. Most of the African countries leave their infant industries unprotected. The result of such liberalisation is chaos to the African economies. Africa listen to Chang’s suggestion that “WTO rules and other multilateral trade agreements should be re-written in such a way that a more active use of infant industry promotion tools such as inter alia tariffs and subsidies should be allowed’ (Chang, 2003). This is indeed a voice of reason to the economically desperate African countries.
It is indeed the NDCs using the Washington institutions: the IMF, the World Bank and United States Agency for International Development (USAID) which are keeping Africa, in particular, and developing countries in general in the state of vicious cycle of poverty. Walter Anthony Rodney in 1970s reminded Africa to remember in his book: How Europe Underdeveloped Africa. The question, do rich countries underdevelop Africa on purpose? Today Africa is sure to answer this question with an amount of certainty due to the accumulated economic historical experiences.
‘Bad Samaritans’ (Chang, 2007)’ undeveloped the African continent on purpose. Surely either they did and continue to do it out of ‘ignorance’, of ‘evil’, of ‘egoism’ or of ‘self-interest’ (Reinert 2007). Africans must remember the eight fallacies and take actions or act in the name of the Africa revolutionary spirit to rebel against the fallacies imposed on her by the now rich developed countries. Ankomah asked a good question: ‘Can Africa rebel against unfair WTO rules as the US in 1770s rebelled against unfair England’? History tells us that the English prohibition of most manufactures in North American colonies (now the USA) resulted in the American Revolution of 1776. The North American colonies freed themselves from political and economic colonial yoke of the mother country (England) in 1776. This strategic ‘rebellion’ was started by the North American colony. The rebellion suggested by Ankomah in the New Africa magazine is the best viable option left to Africa today and tomorrow if African countries are determined to get out of poverty. In this context, the eight fallacies of logic are discussed below.
1. Forced Free trade and free market
• Industries in developing countries will not survive if they are exposed to international competition too early. They need time to improve their capabilities by mastering advanced technologies and build effective organisations’ (Chang, 2007:50).
Africa listen to what neocolonial orthodoxy tells developing countries. Thomas Friedman (2000) in his interesting book The Lexus and the Olive Tree, argues that “the driving idea behind globalisation is free-market capitalism, the more you let market forces rule and the more you open your economy to free trade and competition, the more efficient and flourishing your economy will be”. He further tells us that “globalization” means the spread of free market capitalism to virtually every country in the world. Therefore, globalisation also has its own set of economic rules, “rules that revolve around opening, deregulating and privatising your economy in order to make it more competitive and attractive to foreign investment”. This is a very powerful fallacy that misled Africa to become (1) a specialist in raw materials (2) supporter of the Washington institutions’ policies of trade liberalisation and (3) perpetual foreign debtor.
Free trade and free market are demands and core principles of the neoclassical economic orthodoxy. The concept of free trade is difficult to define, but one would say that it originated from the works of the English economists: Adam Smith (1723-1790) and David Ricardo (1772-1823) in 1770s. Africa you are fully aware of Adam Smith’s Invisible Hand economic theory of 1776. Now we are bombarded with Thomas Friedman’s Electronic Herd concept of 2000. Like Adam Smith, Friedman further argued that “the global marketplace today is an electronic herd of often anonymous stock, bond and currency traders and multinational investors, connected by screens and networks”. He defines “globalution” (global+revolution) to mean that “the global market will force upon us business practices and disciplines that we cannot generate internally” This is a powerful voice of globalisation. Such powerful classical and neoclassical orthodoxies. This article reminds Africa to remember, to march forward and go straight “to imitate centuries-old economic development models and policies for increasing-returns activities [manufacturing]”. “Outlawed” models which made developed countries rich, needless for Africa, continue as part of humiliating neo-classical economic theory, the theory which is controlled and directed by the Washington institutions and the neoclassical economists. The post-global or post-modernist agenda is a way Africa should persist as a way forward.
The history of economic thought, free trade is defined in terms of “non-discrimination” and “non-coercion principles” or refers to the removal of “trade barriers” or “trade restrictions”. Africa must remember that the free trade and free market are in fact “fallacies of logic”. They are purposely and deliberately designed by the NDCs to confuse and mislead Africa to remain in poverty.
Is it a human weakness, even Africa lives in abundance of a wealth of historical experiences and evidence to draw upon, but Africa does not bother to learn from them? Africa appears to unquestioningly accept and internalise the prevailing myth and fallacy that today’s bad Samaritans develop through “free trade and free market” policies. Africa listens to one of the neoclassical principles which obscures African mind that states as follow: free trade is the ‘goal per se even before the required stage of industralisation is achieved. This principle is in direct contradiction to the historical evidence.
This article intends to show the historical evidence on free trade and protectionist policies using England, “officially” from 1485 to 1945 and US “officially” from 1790 to 1945. What is a magic behind or about ending with the year 1945? There is no real magic about the year 1945, but Africa you know better than me.
Before 1300s, England was a poor country. But its inhabitants were industrious. The Britons started to indigenise and hybridise their livelihoods as early as the fifth century after the departure of the Roman occupation of England circa 460 AD (cf. Medieval settlements studies in England: Region and Place, 2006). Despite its indigenisation and hybridisation of ideas and livelihood practices, we are told that around 1300s “England had been a relatively backward economy, relying on exports of raw wool to finance its imports”. King Edward III (1312-1377) realised that his kingdom was in poverty by exporting raw wool to Bruges and Ghent cities respectively in present Belgium. He poached skilled workers to come to Britain and started manufacturing clothes from the British wool. History tells us that king Edward III “increased the tax on the export of raw wool and banned its export in order to encourage further processing of the raw material at home”. In 1485 king Henry Vll continued the legacy started by his predecessors to transform his country from poor to rich country. He realised that England was in “wrong business” by exporting raw materials to foreign countries. England learnt important lessons from Venice and the Dutch Republic. Venice in particular based her manufacturing on salt. Her salt was the first non-luxury long-distance commodity trade and thus the Venetian Republic defended its saltpans (Reinert 2003). The Dutch Republic concentrated on fish. The Dutch Republic invented a factory ship. It embarked on fish processing at sea. The Dutch Republic reported that “salting fish at sea remained at sea for up to eight weeks”. This ship-built technology was fully developed by 1600 and remained stable for the next 200 years (van der Woude 1997:244). What did Henry Vll do in order to stop exporting raw materials from his country? In 1489, he banned the export of unfinished cloth in order to promote manufacturing efforts at home. History informs us that his son Henry VIII continued the policy and further banned the export of unfinished cloth in 1512, 1513 and 1536’ (Chang 2007.24). Henry Vll knew that industralisation and manufacturing was a step-by-step process. Listen to Daniel Defoe, the writer of the novel Robison Crusoe, when he writes in his economic work entitled A Plan of the English Commerce (1728), he says:- That the Flemings [lived in present Holland] were old in the business, long… experience’d, and turn’d their Hands this Way and that Way, one Sorts and Kinds of Goods, which the English could not present know, and when know, had not Skill presently to imitate: And that therefore he must proceed gradually’(A Plan, p.96). When “free trade” is discussed, what comes to mind is the notion of “infant industry protection” History is clear on this point. Africa listen. King Henry Vll in 1485 until the end of Tudor era in 1603, England protected vigorously her “infant industries” from external competition for more than 200 years. One should understand that England was the first country on earth to launch a large scale of infant industry protection and promotion strategies. England is known as “the mother country and bastion of modern protectionism” (Bairoch, 1993). England in 1820s introduced high tariffs barriers between 45% and 55% in her early stages of economic development. Countries that maintained constant tariffs barriers were Germany in 1820s to 1950s with its highest 26% tariffs barriers in 1950, France and Spain in 1931 their highest were 30% tariffs barriers. Italy in 1931 her highest 46% tariffs barriers. The very interesting point to observe is how England strategically protected her infant industries. From 1485 to 1800s protectionist policies were constant. But in 1870s and during 1910s, England re-introduced free trade policies and re-introduced tariffs barriers again in 1950s with 23% tariffs barriers. Why is Africa ignoring to heed to or refuse to imitate this historical evidence about infant industry protection? The US extensively have used protectionist policies as from 1790s to the present. The US, too, protected its infant industries against unfair trade practices of England and other competitors. In 1820s the US introduced between 35% and 45% of tariffs barriers. The high tariffs barriers between 40% and 50% were reintroduced in 1870s (Chang 2003: 23). The first systematic arguments for infant industry protection in the US was developed by Alexander Hamilton (1755-1804). Economic history tells us that Hamilton ‘climbed to power due to his brilliance and boundless energy’. At the age of 22 he was appointed ‘an aide-de camp to George Washington’ after the War of Independence in 1776. In 1789 at the age of 33, he became the country’s first treasury secretary (Chang 2007:33). He was the first USA Treasury Secretary through his famous: Report on Manufactures submitted to the Senate on 5th December of 1790. His 1791 report contains eleven measures and included inter alia the following (i) protective tariffs, (ii) import bans, (iii) pecuniary bounties (subsidies), (iv)the encouragement of new inventions and discoveries at home and protective duties, and (v) export ban on key raw materials regulation of products standards’ (Chang, 2007:34). Africa listen, if Hamilton were a finance minister of an African country today, the IMF and the World Bank would have refused to lend money to his country. • 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.