The rules, institutions and operations of global markets, unchanged since the end of formal colonialism, are among the greatest obstacles to the development of individual African countries.
Global market rules are either in favour of or are frequently bent to benefit industrial countries. Or, different, more restrictive market rules are often applied to African countries; while industrial countries are accorded more leeway to implement these in ways that will benefit their companies, labour and economies.
The first of these is that industrial countries have more power to determine the rules of the market, than African or developing countries.
Many industrial countries following the 2007/2008 global and Eurozone financial crises nationalised failing banks, but if African countries do so, they face market, financial outflows and global media scrutiny.
Many industrial countries, for example, can come up with monetary policies to ostensibly improve their export competitiveness, such as artificially keeping the value of their currencies and interest rates low.
The US, the EU and Japan have been doing this for years.
In the aftermath of the 2007/2008 global and Eurozone financial crises, the US, because interest rates there were already close to zero, introduced quantitative easing (QE), the strategy of injecting money directly into the country’s financial system. This is printing new money electronically and buying government bonds, which increases the circulation of money in the financial system, in order to boost consumer and business spending.
However, such industrial country unilateral monetary policy has undermined the competitiveness of African countries, by causing see-sawing capital flows, currency volatility and destabilisation of financial markets. Such actions by industrial countries, of course, destabilised African economies.
African countries do not have the economic power to introduce their own quantitative easing – and even if they had, there are likely to be market, investors and industrial country backlashes against them.
Industrial countries argue for free trade, but most have high tariff barriers for manufactured and processed goods from Africa. However, industrial countries insist that African countries open up their markets to both agricultural and manufactured goods from industrial countries.
Industrial countries frequently have non-tariff barriers such as high barrier quality, health and environmental standards for products coming from African countries. African countries do not have the same freedom to enact similar non-tariff barriers for products coming from industrial countries.
Furthermore, industrial countries heavily subsidise their own sensitive industries, such as agriculture. Yet, African countries are punished when they want to protect their own infant or sensitive industries. The US Africa Growth and Opportunity Act (AGOA) or the EU Economic Partnership Agreements (EPAs) for example, allows US and EU governments to subsidise their strategic industries; but both the US and EU forbids African countries to do the same, or loses out on “benefits” from AGOA and the EPAs.
Industrial countries insist that African countries allow industrial country companies unfettered investment freedom in African economies, often with disregard for the local environment, labour standards or good corporate governance. Again, if African countries do not allow the free entry of industrial country goods – they are likely to face market, investors and industrial country political backlashes.
The international currency in which trade takes place is either the US dollar or other industrial country currencies, such as the European Euro, British Pound or the Japanese Yen. The raw materials that most African countries export to industrial countries are usually traded in these industrial country currencies. Fluctuations in these industrial country currencies impact disproportionally on African economies, particularly because the economies of most African countries are heavily dependent on the export of one commodity.
The prices, exchanges and bourses of all African commodities are set in industrial countries. This means that astonishingly, African producers, even where they are the global dominant producers of a specific commodity, have no say in the price of that commodity.
In the global market, labour from industrial countries can move freely to African countries; yet African labour movement to industrial countries is increasingly restricted. The arguments for free markets rings hollow, without the free movement of labour.
Industrial countries also control the supporting structures of global markets: the credit rating agencies, transport and logistics, insurance agencies and the banks and the global communications systems.
Industrial countries dominate the global transportation, insurance and finance markets needed to export African products to industrial countries. Major global credit rating agencies are controlled by industrial countries that are often biased against, lack knowledge of, or generalise African economies on a one-size-fits all basis.
Global markets are increasingly underpinned by communications technology, with trading, financing and business done digitally. Industrial country companies dominate communications technology industries.
The global public institutions that support global markets are all controlled by industrial countries, their appointees and their dominant views. Some of these include the ‘public’ global institutions such as the US and European Union-led World Bank, the International Monetary Fund (IMF), and its private sector affiliate, the International Finance Corporation (IFC), and the World Trade Organisation (WTO).
African countries must push for the global public institutions which support global markets such as the World Bank and IMF to give them a greater say in decision-making.
African countries must forge better coalitions to push for the improvement of the governance of global markets, allow individual African countries with the same policy space to ‘govern’ markets. African countries must as a bloc, introduce appropriate industrial, development and trade policies in their countries. This will make it tougher for industrial countries, global public institutions and global markets to punish individual African countries, for policies which industrial countries are implementing, but are not being punished for.
African countries could then introduce the very same supposedly economic policies – if appropriate for African countries – which industrial countries are implementing, but which, if implemented by African countries are seen by industrial countries, global markets and supporting public and private institutions as anti-market, if introduced by African countries.
Despite many African leaders, governments and thinkers rightly since the end of colonialism criticised industrial country hypocrisy in industrial countries telling Africans not to implement policies which they themselves have implemented. African leaders and governments have then themselves never come up with coherent, well-thought out and pragmatic economic policies.
A case in point is that for over a century since the end of colonialism, of the 54 African countries, arguably only two African countries have ever come up with an industrial policy on the scale of that of a South Korea, Taiwan or a Singapore over the same period. African governments, leaders and civil society groups have more often than not come up with criticisms (rightly so) of how industrial countries and global public and private market institutions and markets, are undermining African development.
However, African governments, leaders and civil society groups have often never came up with pragmatic, well-thought out development policies, beyond slogans, such as “return the land”, or “return the mines”, or “nationalise foreign companies”, without detailed industrial plans, using all their countries’ talent, empowering the largest number of people, and using the best of what industrial countries and other developing countries are doing, but appropriate to the African context.
African countries must also pool their own resources to create, in partnership with other developing countries, alternative, fairer and more equitable global public institutions which underpin global markets, if the current ones remain dominated by industrial countries.
African producers of commodities must attempt to set up coordinating agencies, like the Organisation of the Petroleum Exporting Countries (OPEC) for the commodities they produce, in order to have a bigger influence in determining the prices of these commodities.
African countries must diversify the products they produce, and move away from overwhelmingly depending on commodity exports. They must also add value to their commodities by producing manufactured and processed products.
African countries must pool their markets and genuinely begin to trade with each other. They must introduce industrial policies to diversify their markets away from industrial countries, to other developing countries.
But African leaders and governments must govern their countries better – poor governance by African countries, further weakens their powers against global public institutions, markets and industrial countries.
African countries that are corrupt, mismanaged and with poorly thought-out policies, undermine their own independence, not only to come up with independent policies more appropriate for their circumstances, but to bargain with both industrial countries and emerging powers such as China, and to resist destructive interferences from global public institutions such as the World Bank and IMF, and prudent domestic policies, which does not have the approval of industrial country-based global markets, and global markets supporting public and private institutions.
*This article was published in SABC News. To view the article on their website click here.