Franklin Cudjoe : How can poor countries help themselves?

in The Star 26/07/2005

Franklin Cudjoe, Director of Imani: the Centre for Humane Education in Ghana, points out that the Make Poverty History (MPH) campaigners have used the Gleneagles meeting of the G8 to publicise what they believe has perpetuated poverty in Africa: debts, free trade and insufficient aid.

Although the US government has announced that it will scrap cotton subsidies to US farmers as the WTO has ruled these are illegal, MHP campaigners are urging poor countries to erect their own trade barriers to protect their home industries. Cudjoe asks if this is wise.

He says the 1950s and 60s saw governments of many countries in Africa and Latin America erecting trade barriers in order to protect their industries from outside competition. As a result, after a short period of growth, lack of competition allowed inefficiency to creep in. Imports were very expensive or unavailable so costs of production rose and technology became outdated. Without market forces to determine what consumers wanted, demand dropped although production remained high. Consequently, industries needed to be subsidised by the state. This was achieved by taxing farmers (either directly or by forcing farmers to sell to marketing boards) and by borrowing – one of the reasons why so many African and Latin American countries have such large debts.

Some governments, such as Brazil’s, printed money to pay off the debt and this led to hyperinflation, reduced confidence and caused massive disinvestment. Cudjoe says that the obvious lesson here is “that governments should not try to create national champions by protecting them from competition or by subsidising them.”

Brazil turned around after good economic governance in the 1990s, but Cudjoe wonders if it is not going to revert to the old days. Brazil’s government recently announced that it plans to break patents on Aids drugs. It claims that it wants to reduce the cost of providing drugs to 180 000 people with HIV by producing the drugs locally. Cudjoe suggests it would be better to negotiate a price differentiation scheme with the manufacturers.

He reckons that the incidence of HIV/Aids in wealthy countries will decline, and the demand for new drugs in those countries will wane. If all poorer countries choose to break the patents on Aids medicine, there will be few, if any, new Aids medicines produced. Already research-based drug firms are taking notice of unfavourable market conditions for Aids medicines thanks to the efforts of Brazil and some other countries. Over the past six years the number of HIV/Aids medicines and vaccines in the pipeline has decreased by over 30 percent.

Instead of pursuing dubious industrial policies by breaking patents, Cudjoe says that governments of middle-income countries should be paying a fair price for the medicines they buy – otherwise there will be no more medicines with which to treat Aids patients in the future.

According to Richard Tren of Africa Fighting Malaria, South Africa (supported by others in the Nepad secretariat) is keen to increase the number of generic drugs. Cudjoe points out that simply producing something locally does not mean that it will be cheaper or more accessible than importing it. Setting up lots of local production units may not necessarily guarantee good quality or good prices.

Instead, Cudjoe says poorer countries should ask what they can do to help themselves? He suggests they can concentrate on such issues as

  • excessive government regulations,
  • poor education,
  • punitive local taxes on drugs
  • poor health infrastructure in terms of personnel and resources.

He declares that most HIV/Aids victims in Africa cannot afford decent meals, or clean water to help swallow anti-retrovirals.