Franklin Cudjoe : Personal view: Rock-star economics are not helping poor Africans

17/04/2005 Telegraph.co.uk

Have you purchased your obligatory white band? Did Sir Bob Geldof send you an e-mail recently, reminding you to ogle his celebrity colleagues "clicking" away on television? Did you join the all-night vigil at Westminster Abbey to shiver in the cold and "wake up the government" about the need to "make poverty history"?

This year, the UK’s "development" charities have joined hands for a high profile campaign which claims that politicians have an unprecedented opportunity to eliminate poverty in the run-up to the G-8 meeting in July.

Rock stars and charities can be powerful advocates for good causes, and they generally have good intentions – but in many cases their lyrics do not genuinely rhyme with the silent hum of the very poor they seek to protect. Their economics are just plain wrong. They ignore history, peddling the misguided belief that poverty, famine and corruption can be solved with foreign aid, debt relief and other policies that have already failed Africa.

One pillar of their current campaign is to eliminate farm subsidies in western countries, a noble goal which indeed would help to achieve a level playing field for agricultural producers around the world. Yet this view is rife with hypocrisy: the same organisations promote subsidies (what they call "fair trade") for farmers and businesses in poor countries to shield them from the effects of competition.

Coldplay frontman Chris Martin has said that Ghana’s rice, tomato and poultry farmers need to be protected from cheap imports. Yet the problems of Ghana’s farmers lie elsewhere: they and other entrepreneurs are stifled by punitive tax regimes and the high cost of capital, not to mention our disarrayed land tenure systems which lead to low crop production.

Neither Mr Martin nor fellow celebrities have mentioned these problems: they claim that the world’s trade regime is "rigged" in the name of "free trade", harming poor countries like Ghana and benefiting interest groups in wealthy countries. The only solution, they say, is to protect local economic interests.

If we did ban rice and tomato imports, just how would we feed ourselves? Ghanaians depend on rice as a major staple in our diets, yet local production caters for only 30pc of the rice we consume.

Subsidies to local producers also mean fewer choices for consumers. The average Ghanaian has suffered because of shoddy goods made locally by protected industries that do not face any competition. Who can blame consumers for buying higher quality and less-expensive foreign goods?

Indeed, some savvy Ghanaian businessmen have helped both local farmers and consumers, for instance by providing locally produced rice in packages that ensure the rice isn’t stale when it reaches the consumer. Similarly, other Ghanaian entrepreneurs now collaborate with their Italian counterparts to produce tomato paste brands with Akan names, Ghana’s widely spoken language.

Protection for local producers also means that African countries trade very little with each other, as illustrated by the World Trade Organisation’s 2001 statistics. Africa’s share of intra- and inter-regional trade flows to western Europe alone was 51.8pc, while it was a paltry 7.8pc within Africa.

Development charities loathe international agencies such as the IMF and World Bank – many people would agree though that dealing with these agencies is like playing with loaded dice. They have empowered our politicians to engage in shady liberalisation deals, where international contracts are rigged to favour their cohorts with fat kickbacks.

Such agencies have often advocated ill-conceived policies in the name of market liberalisation – while they simultaneously push foreign aid and flawed development strategies onto us. Even the average Ghanaian knows that these "reform" programmes have achieved nothing other than to enable our bureaucrats to procure gold-plated Mercedes for themselves and their cronies.

But the real problem is not the IMF, World Bank or "rigged" trade rules. The problem lies with us as Africans and especially our leaders, to improve our own wellbeing, and to encourage economic growth through political and institutional reforms.

The solution to all that ails us is not aid, debt relief or "fair trade". It is to adopt institutions to harness the entrepreneurial spirit that exists in every African country, to enable Africans to trade with each other and anyone else in the world.

Establishing property rights would be an important first step; an effective, transparent and accountable legal system is another. Combined with respect for private property and the rule of law, these broad reforms would encourage entrepreneurship, trade, innovation and even environmental protection because they empower people – rather than the politicians.

As our economies grow and develop, people will be able to afford better technologies, clean water, superior energy sources, better healthcare, and insurance. But one is unlikely to hear such ideas from rock stars and development charities.

While these high-profile campaigns continue to blame western countries for our poverty, they simply give our own politicians more excuses to delay badly needed institutional reforms. Poor Africans would be far better off without rock-star economics.

Franklin Cudjoe is director of Imani. He will speak at the Global Development Summit in London on June 28

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2005/04/18/ccpers18.xml

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