Monday, January 18, 2010
By Emmanuel Martin
Many African intellectuals and activists blame globalization for the continent’s numerous ills. Setting out from the assertion that multinational companies can do what they want in Africa, they conclude that globalization must be the cause of African underdevelopment. In fact, it’s the lack of globalization that has hurt Africa’s development.
Many African intellectuals and activists blame globalization for the continent’s numerous ills. Setting out from the assertion that multinational companies can do what they want in Africa, they conclude that globalization must be the cause of African underdevelopment. In fact, it’s the lack of globalization that has hurt Africa’s development.
There is no doubt that a few multinational companies can sometimes impose some sort of monopoly, buy political influence or cover up misdeeds. But this is cronyism; it is not capitalism or free trade.
In order to get public contracts, some companies have to pay off officials. This feeds corruption at the top of states that do not respect the rule of law, props up unpleasant regimes and fosters the legitimate resentment of local populations. But is this really globalization?
Globalization, capitalism and free trade are about openness, competition, freedom of movement and of opportunities, all under the rule of law. This is quite the opposite of an oligarchic regime that benefits only a few multinational companies and their cronies.
Far from foreigners flocking to Africa to exploit its opportunities, the United Nations Conference on Trade and Development says Foreign Direct investment (FDI) in all Africa in 2008 amounts to only 3.42% of all FDI in the world: merely half of what goes to France alone.
Yet many in power in Africa and in the Western aid industry still blame globalization for Africa’s ills. They even argue that Africans are not ready for globalization, manufacturing and commerce—which would only make sense if Africans were too lazy or too stupid to improve their own lot.
In fact, Africans are more than ready, full of energy and innovative ideas. African roadsides often form a single big market for miles and miles. In Treichville, Abidjan, in Cote d’Ivoire, for example, a foreigner cannot walk around the streets without being hassled by young entrepreneurs offering foreign currency exchange services.
The myth that Africans do not have an entrepreneurial spirit is mainly spread by African bureaucrats, rulers and even economics professors, along with Western aid agencies, to legitimize paternalism and bureaucracy. In Africa, most governments and their bureaucracies are stifling, not protecting, of the people and the economy. Entrepreneurs cannot freely do business and develop their nation.
According to the World Bank’s Doing Business report, the administrative cost of launching a company in sub-Saharan Africa is about 100% of per capita income. A construction permit is nearly 2,000%—that’s 20 years of income. As a result, most entrepreneurs are forced into so-called informal markets. This lack of legal status prevents economic development, legal contracts, bank loans, letters of credit and foreign trade.
No wonder then that what in Africa is decried as globalization seems to benefit only the ruling cliques and big business. Amid such cronyism only big companies, often international ones, can afford to pay the high price of doing business—thus giving the impression that they can do whatever they want, while poorer people are excluded.
Many Africans would like to have a formal business and to benefit from global markets, but in many countries they are not allowed to. Hence the depressing figures: Exports of goods and services from Africa represent 2,87% and 2,52% of global trade. Trade within Africa is no better. Agricultural products face an unweighted average 18.6% import duty and trade overall faces 13% plus many non-tariff barriers. No wonder that less than 10% of African trade is within Africa. Removing these obstacles could unleash regional trade worth US$1.2 billion.
Another favorite culprit for Africa’s ills are the international organizations that have promoted globalization since the 1980s, such as the World Bank and the International Monetary Fund, which have sought liberalization and budgetary reforms. The idea was that the private sector would take over the failed job of building economies. But these reforms could not work without better governance, focusing on the ease of doing business, corruption and the rule of law. The job was only half done, and badly, with grave unintended consequences.
With more of the real globalization that Africa needs—not just international trade but local and regional free trade—there would be more competition, more local businesses, more wealth produced and shared. This requires the liberation of Africans’ energy and innovation. Unshackled Africans can then seize the opportunities they deserve.
Dr. Emmanuel Martin is an economist and Editor of the Francophone project www.UnMondeLibre.org.