African countries must resurrect past economic models
This is the first article of a two-part series by Lukas I. Nantanga who argues for the way forward for Africa countries to develop and industrialise their economies.
African require to be reminded at length to remember important things which escaped their economic development policies during their catch-up periods.
I borrowed the word ‘catch-up’ from Prof. Ha- Joon Chang‘s seminal book (2007) Kicking Away the Ladder: Development Strategy in Historical Perspective. The catch-up period in this paper refers to a country when it strives to catch-up or imitates more advanced industrial and technological countries for it to excel. The main focus of this way forward is closely looking at the NDC when they were developing countries.
The way forward strongly argues that the African countries have not done it well on manufacturing during their catch-up periods. Currently, they are not doing it well either. Where are the problems? The previous article discussed eight ‘fallacies of logic’ deliberately designed by rich countries to prevent the African countries from manufacturing. These fallacies of logic are real. African countries need as individually and/or collectively to do something about this predicament. African countries have done a lot on economic development in their respective countries, but require to do more on manufacturing particularly during their respective catch-up periods.
This paper argues that most of the African countries have not taken care of their catch-up periods in terms of manufacturing, policy tools on infant industry protection, free trade, ‘borrowings’ of technologies from foreign advanced countries, poaching foreign skilled workers, and many practical policies that the NDCs did for them to become rich. The purpose of this way forward is to draw the attention of the African countries to these policy tools. The African countries are invited to “resurrect” these “past policies” in order for them embarking on the increasing-returns activities (manufacturing). They need to abandon the route to diminishing-returns activities (raw material specialisation).
Through reading and researching about why some countries grow rich and others remain poorer, it became necessary that this article should join many people of good-will around the globe, including Africans who try to find answers to this simple but complex question.
This way forward is based on systematic assessment of economic policies, classical economic ideas and economic models that were used by the NDCs when they themselves were developing countries. History of the economic thought informs us that imitation has been the way to go. The catch-up process starts with imitative innovation. All NDCs each on their own imitated advanced countries as discussed below.
This way forward argues that the NDCs were serious with manufacturing when they themselves were developing countries. They all embarked on manufacturing road. Each country constantly protected its infant industries particularly when it was threatened by the global competitors. Each country introduced free trade policies when it felt that its infant industries were well established. Each country emulated economic policies, poached skilled workers from advanced foreign countries. Through the process of emulation, each country further endogenised and hybridised their economic policies at home.
Africa should not feel shy or fear to talk over and over about manufacturing. African countries are too silent about manufacturing. AU Agenda 2063 fails to make manufacturing as its prime focus. The AU’s ‘The Africa We Want’ by 2063 document advocates very good programmes. These include issues such as ‘reduce and elimination of poverty’, ‘create jobs’, sustainable management of natural resources, land, water, forest and marine resources, and a good mini-focus on ‘revitalisation of manufacturing and industrialisation’. (Annex 2). This good document lacks a clear call to member states to focus on manufacturing. Is this clear focus deliberately left out or there is fear?
SADC’s Industralisation Strategy Roadmap is indeed a good document. It too, lacks the well-informed core pillars on manufacturing. Competitiveness became a buzz-word in the history of economic lexicon and particularly in most of the industrial policies.
In the ‘Africa We Want’, which type of competitiveness do we mean? Or how would SADC member states implement the competitive advantage proposed in the SADC Industralisation Strategy Roadmap (par. 2.3) when the African economies are under ‘siege’ of the Bad Samaritan countries? African countries need to be critical to the usages of the words competitive advantage. This way forward suggests that ‘real’ competitiveness is only achieved when the neo-classical law of ‘one-size-fits all’ Golden Straitjacket concept proposed by Thomas Friedman (2000) and Paul Samuelson’s (1949) notion practice of ‘factor-price-equalisation are being defied.
In other words, Africa should make a clear paradigm-shift from the prescription of neoclassical economists who favour perfect competition to the dynamic imperfect competition suggested by Joseph Alois Schumpeter.
Both documents are lacking the following: (1) technological sound emulation policies as innovation as it had been the case with the NDCs (Westney, 1987). In a conventional wisdom this process is normally known as assimilation: the learning to do what more advanced countries are doing (Reinert, 2004). This way forward reminds the African countries to remember that once the assimilation process has been taking place, the process of (2) endogenisation and hybridisation continues as discussed above. No wonder, the SADC document on Industralisation Strategy Roadmap was probably drafted and adopted in absence of this knowledge. Or is this knowledge ignored? This process does not require an evolution of transformation of industralisation, but it requires a clear-cut revolution similar to the minds of Alexander Hamilton who rebelled against the unfair England in 1770s on behalf of his country.
Individual African countries’ industrial policies tend to look ‘outward’ rather than ‘inward’-looking. For instance, Namibia’s Industrial Policy (2012) states that ‘the third principle underlying industrial policy is that the country will be geared towards openness’ (par. 11).
The “openness” in individual African countries’ industrial policies has created serious chaos in most of the African economies. The history of economic thought reminds Africa to remember that the NDCs used a formula as individual countries: each country first “protected” its infant industries and then gradually “open” to the free trade policies until its industries mature. We have numerous successful stories about countries that used this classic formula. The ‘protection’ of infant industries is deliberately ‘outlawed’ by the Washington institutions. This way forward recommends to the African countries first protect infant industry and when they become mature, gradually move to free trade policies. Bad Samarians hide their ‘bad’ intentions behind what they call ’things have changed’. This is an act of misdirecting and confusing African countries not to emulate them.
African countries must listen to what IMF’s liberalisation free trade policies have done to Zambia:
“. . . the IMF and World Bank in Zambia’s economic formulation and implementation has been undemocratic. It takes power away from the government, parliament and the people and gives it to unaccountable officials and industrialised nations ministers….the IMF has ignored a parliamentary vote opposing privatisation of Zambia’s national commercial bank and has forced the government to press ahead in return for further debt relief’ (cited from Zambia: Condemned to debt – How the IMF and World Bank have undermined development Report, 2004).”
These are the negative effects of the openness (free trade) policies enforced by the IMF and WB. Free trade reduces freedom of choices for poor countries. Namibia’s Industrial Policy further pledges its ‘commitment’ to WTO. This paper does not criticise this ‘commitment’ from Namibia to WTO, but critically questions: who is this WTO? Is it not the WTO under NAMA’s (Non- Agricultural Market Access) trade negotiations that constantly humiliated the African countries in particular and developing countries in general at Doha, Qatar, in 2001 and at Cancun in Mexico in 2003?
At WTO-NAMA global trade meeting at Doha in 2001, developing countries had seen that the multilateral trade system ‘is so against them’. This was indicated by the manner in which the developed countries run the WTO-NAMA trade negotiations were ‘undemocratic, corrupt and patronising developing countries’ (Chang, 2003: p.13). At Cancun, Mexico, in 2003, African countries were asked to ‘eliminate their industrial tariffs’ and were asked to surrender their power to regulate foreign investment’.
Listen to the following voice emanating from the WTO/NAMA trade negotiations. Willem Buiter, chief economist of the European Bank for Reconstruction and Development said to the African and developing countries negotiators at one of the NAMA trade negotiations:- “. . . although the leaders of developing nations rule countries that are on average poor or very poor, it does not follow that these leaders necessarily speak on behalf of the poor or poorest in their countries.
Some do; others represent corrupt and repressive elites that feed off the rents created by imposing barriers to trade and other distortions at the expense of their poorest and most defenseless citizens.”(Chang, 2003:p.8).
Buiter tells the African and developing countries the opposite. Developed countries are indeed arrogant and it is this arrogant view of the developed world which is the key cause of the continuous breakdown of the entire WTO trading system. Reinert (2007) suggests a good practical wayforward: when he says the ‘WTO trade negotiations’ through the NAMA . . . ” have been like a train going in the wrong direction… and the best thing to do in the short run is that it stops”.
Does this suggest the re-writing of WTO trade rules? If WTO-NAMA chief negotiators (in many cases are from developed countries) intend to revive the current multilateral trading system, developed countries should change fundamentally the way they view and run the global trading system.
The NDCs: their catch-up strategies
Before we look at the two economic models below, a brief presentation about the catch-up periods of each of the NDCs when they were developing countries themselves is discussed. In this way forward, a quick-look at the five NDCs is presented in order to trace how each country traveled from technology backwardness to full industralisation level. These countries are: England, the United States of America, France, Germany, and Japan. This quick-look is confined to the catch-up periods of each of these countries when they were developing countries themselves. Africa is humbly invited to listen. We start with England.
England catch-up efforts
England and Japan are discussed at length than the other three countries presented in this way forward. Closely looking at the British and Japanese cultures, both countries had open cultural systems during their catch-up periods. They knew what to borrow from foreign countries and for what purpose. This is endogenisation and hybridisation process better explained in terms of the add-substitute-graft discourses discussed below. All NDCs used this process for them to grow from technology backwardness to industrialised nations.
England was the first leader in industralisation and manufacturing sector as from 1485 to roughly in 1945. Therefore African countries are reminded to remember a lot of important things England did in the areas of manufacturing. Before 1300s England was a relatively backward country. Towards the end of 1400s England was a poor nation and was heavily indebted to the Italian banks (Chang, 2007). England exported raw wool, low-value added wool cloth to Bruges, Ghent and Ypres, parts of the present-day Belgium. King Edward lll (1327-1377) tried to develop local wool cloth manufacturing. He wore only English cloth to set an example to the rest of the country. He poached skilled weavers from Flemish and banned the import of woolen cloth. Within a space of 100 years, the country rose from being a poor farming country from the 1300s to an industrialised empire by 1820s (Reinert, 1994).
Daniel Defoe in his Plan of English Commence (1728), in a poetic language writes: (1) manufacturer supplies merchandise (2) manufacturer is the hospital which feeds the poor (3) manufacturer commands money from abroad (4) manufacturer is wealth (5) manufacturer creates wealth and richness (A Plan, 68). This wisdom was recognised by Alfred Marshall (1842-1924), an American neo-classical economist in his book (1890) Principles of Economics. Marshall highly advocated the importance of activity specific (manufacturing) and said that manufacturer focuses at the ability to create wealth (2) ability to create employment (3) ability to solve balance of payment problems (4) ability to increase the velocity of money circulation. Defoe tells us the following: Henry Xll did not immediately “prohibit exporting of wool to the Flemings, neither did he, till some years after, load the exportation of it with any more duties than he had before” (A Plan 1728: p.96). Henry Xll was deeply impressed by the prosperity in the low countries based on wool manufacturing. From 1489 and onwards, he put in place schemes to promote British wool manufacturing. Defoe tells us that King Henry Xll ‘set the manufacture of wool on foot in several parts of his country, at Wakefield, Leeds and Halifax and in the west of the country Yorkshire (A Plan, 1728: p.95). Defoe further informs us that Henry Xll realised that Britain’s technology was behind that of the low countries and knew that to fill this technological gap between her and advanced countries will take a long time. He undertook a gradualist approach. Gradualist approach enabled England to learn, emulate and protect its infant industries.
The Tudor monarchs (1485-1603) further gave impetus to development of this industry. The Tudor monarchs recognised that England was doing a ‘wrong business’. And thus, Tudor monarchs especially Henry Vll (1485-1505) and Elizabeth l (1558-1603 ‘transformed England from a country relying heavily on raw wool export to the Low Countries, to the most formidable wool-manufacturing nation in the world’ (Chang, 2007). Surely, this economic development was not as a result of free trade which England is preaching today.
Around 1720s England was trying to catch-up with advanced countries and promulgated laws that were to protect her infant industries. Robert Walpole in 1720s was a good example in defending the infant industry in England. England did not only protected her infant industries, but the entire flow of technologies from the British soil. During her catch-up period Britain embarked on stopping other nations from either manufacturing or banned all ‘technology out-flow’. History of the economic thought informs us that England prevented birth of manufacturing industries in other countries. Britain banned emigration of skilled workers to other foreign countries. Through the process of endogenisation, history informs us that Britain borrowed ‘emigration laws from the Venice-city state’.
The Venice Republic earlier on before England, imposed ‘death penalty to Veneciatians’ who had ‘sold’ the Venetian technology know-how to foreigners. Britain imitated Venice-city state in prohibition of skilled workers to emigrate abroad (Chang, 2007). Particularly those workers that were working in areas such as ‘wool, steel, iron brass and metal and watch-making industries’. The following laws were enacted (1) in 1750 an Act on ‘banning the export of tools and utensils in wool’ (2) in 1774 two years before US’s independence another act on controlling machines included linen industries was passed. This Act was revised in 1781 to include ‘any machines and engines, tools, press, paper’.
In 1785 Act ‘banning any mechanisation of industries’ was enacted including a ban on ‘export of many different types machines which include ban on suborning of skilled workers’. The law of ‘suborning’ was punishable by imprisonment or citizenship withdrawn’. France was involved in this illegal act of suborning skilled workers from Britain.
What lessons do African countries learn from Britain during her catch-up period? This way forward agrees with Reinert (2007) that ‘if all apples fall to the ground in England’, surely African countries presume that the same ‘apples will fall towards the ground’ in every African country. In other words, if manufacturing happened in England, USA or Japan, surely they would happen in every African country as well.
USA: Catch-Up Strategies
Preventing others from manufacturing is as old as humanity. England held a tradition to prevent other countries from manufacturing. William, Pitt, the Elder (1708-1778) was a prime minister of England twice, in 1756-1761 and 1766-1768. This was the time when the American colony of Britain tried to free itself politically and economically from the British political and economic control. The US emulated England in various ways. During the catch-up period, Alexander Hamilton did the following strategies that helped his country to develop. Alexander Hamilton’s Report on Manufactures (1791) shows that he read Adam Smith and knew the free trade doctrine. He was convinced that manufactures were a way to go and required encouragement. History of economic thought informs us that Hamilton was more influenced by Malachy Postlethwaith (1700-1767), an English economist before Adam Smith. The US emulated ideas, skills and policy tools formulation practice from England. Adam Smith in contrast appeared more global than national. His economic theories were more universalistic than local or national. Hamilton was more national than an internationalist in out-look. He concentrated more on the national state of the economy. Hamilton, in his Report on Manufactures (1791), defied Adam Smith who advocated free trade. Hamilton was the first US citizen who argued and promoted the practice of infant industry protection. When he drafted his report, the first manufacturing ‘principal’ was about ‘protecting duties’ (i. e. “industrial tariffs”). This clearly refers to infant industry protection. The second important principal was about ‘the encouragement of new inventions and discoveries at home … and the introduction into the United States of America, particularly those foreign inventions which were related to machinery’ (Hamilton, 1791). These were policy tools that were borrowed from Britain in order for the US to endogenise and hybridise its manufacturing sectors. There were also other important things, what he called ‘principals of circumstances’ that include (1) encouragement of manufacturing at home. The other important area he promoted was the (2) ‘emigration of skilled foreign workers’. He combined this ‘principal’ of circumstances with the promotion of encouragement of ‘greater scope for diversity of talents’ (paras.4&5).
In terms of neo-classical economic theories, knowledge of industrial fairness for humanity advocated by US forefathers was deliberately ‘forgotten’. Abraham Lincoln (1809-1865) was born shortly after the death of Alexander Hamilton in 1804. Lincoln inherited from his predecessors’ good economic system as the 16th US president. During the US catch-up period, he advocated protectionist policies and raised trade tariffs to the highest level. History tells us that Abraham Lincoln defended farmers. Particularly he raised tariffs in support of farmers as producers (Chang, 2010: 65). The point of trade protectionism admired by Abraham Lincoln is important. Africa should emulate other advanced countries despite the IMF’s and World Bank’s trade liberalisation policies. Abraham Lincoln advocated the principle of increasing return activities as it was identified by Antonio Serra in 1613. Reiner (2007) reminds Africa to remember that the US forefathers Alexander Hamilton, Abraham Lincoln and others ‘wanted to industrialise the United States (and did it) under the protection of infant industry doctrine. What African countries can learn from US during her catchup period? African countries must learn one important principle: infant industry protection. This has been the core principle in the US economic development since. The US industrial policy from 1820s to 1900s was the best example for African countries to follow. This policy has been based on the 500 years old past policies that made the NDCs rich listed in models 1 and 2 above.
l 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 represent his own views. He can be contacted at firstname.lastname@example.org.