30 Years from Today, Africa, as a Bloc, Will Become the World Third Economic Power Behind the US and China, Provided… (Part 2, first published on Jan. 9, 2011), M. Frindéthié

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Despite the fact that trade liberalization and openness to competition are widely believed by experts to constitute one of the principal factors of growth, nonetheless, trade liberalization should not be approached with the blindness and naiveté that Africa has too often displayed in this matter. There is an inexperienced belief that, in sub–Saharan Africa, where small informal industries requiring a low level of skills occupy most of the private local entrepreneurs, whereas sophisticated skills-demanding industries remain the provinces of foreign investors, foreign investments are the magic wand for creating “the missing middle” in industrialization. This messianic outlook on foreign investments propagated by the World Bank and adopted by many sub–Saharan African governments tends to spread the artificial wisdom that joint foreign-local industrial ventures would be the ideal nurseries whence a local entrepreneurial bourgeoisie could spring. As demonstrated by Navaretti’s study of Côte d’Ivoire, it is misleading to think that joint foreign-local industrial ventures would necessarily be propitious to the development of a dynamic local entrepreneurship by way of gradual transfer of skills and decision-making.

In fact, the predominant importance of foreign interests in joint ventures will tend to “limit learning by doing and the development of indigenous skills.” The profit-driven technologies of foreign industries allow little time and patience to train local workers for high-level positions, and expatriates will have little motivation and few incentives to delegate decision-making to locals. Furthermore, because foreign firms are more likely to be managed according to strategies defined abroad or in the home country, expatriate managers will more likely trust their compatriots than they would local workers, which would limit the transfer of decision-making and technologies to local workers. Africa need a level-headed liberalization policy that gives primordial role to government in the liberalizing enterprise. China and India, we believe, have given Africa enlightening paths to follow in this regard.

Trade liberalization should be undertaken with much vigilance and prudence. In the case of China’s and India’s respective experiences, it could be argued that regulations have not always carried only negative effects on growth. On the contrary, a certain level of protectionism and regulations has been propitious to shielding sensitive sectors of the economy from predatory foreign investors, to judiciously identifying regions of the country and sectors of the national economy that need more stimulation than others, and to promoting a strong middle class ready to compete with external investors before are dismantled the levees against the voracious multinational corporations that cannot wait to submerge Third World countries.

In China, for instance, rural industrialization, which constitutes one-half of the country’s industrial output, and which is the secret to China’s industrial miracle, is entirely owned by the country’s farmers. Farmers’ ownership of rural industrialization would not have been possible under unbridled liberalization and without some level of government intervention that had discouraged savage individual profit driven capitalism, encouraged collective ownership, outfitted the Township and Village Enterprises (TVE) with logistic means, set growth targets for rural industries, and utilized rural industries as means for correcting regional economic disparities and reducing city and countryside discrepancy. China was able to achieve success in these various areas by a mandate of the central authority to government departments to formulate policies barring discrimination against TVEs and purging favoritism toward state-owned enterprises in matters of contracts and procurement.

Before 1992, foreign direct investments (FDIs) in China were limited and only concentrated on textile products and light industries. Commerce, finance, and insurance, for instance, were forbidden to FDIs. When the Communist Party of China Central Committee finally requested the opening up of the country’s regions to foreign investments, China had already made a full assessment of its needs, had a relatively high level of savings, and was ready and strong enough to diversify its partnership rather than cave in to the demands of intransigent core countries. Though FDIs were allowed in the country, China, nonetheless, established preferential zones for FDIs in particular areas identified as needing more development, such as Beijing, Shangai, Tianjin, Guangzhou, Dalian, Qingdao, and five special economic zones. In these areas, preferential provisions were made available for foreign-funded enterprises. It thus appears that as regards openness, China is not different from any other industrialized country. No industrialized country has ever opened its borders to uncontrolled trade, and no industrialized country has ever opened its environment to either internal or external businesses without restrictions or regulations. Likewise, China has sought to protect its sensitive state-owned enterprises and orient FDIs to targeted areas. Obviously, China’s alleged “highly regulated” economic and political environment has not prevented the proliferation of European and American businesses in the country. The rhetoric about China’s highly regulated economic environment could sometimes strike as too puffed up. It looks rather like bullying gestures by the core states, which are intended to intimidate China into doing what the core states would be unwilling to do at home. So far, China has not budged in response to the coercion to open its economic environment to uncontrolled capitalism, and there is little chance that it do so in the future.

Nigeria, for instance, has provided us with telling illustrations of what happens when, too hurry to accumulate foreign exchange, states fail to implement internal regulations prior to the arrival of greedy multinational corporations that are driven by the allure of maximum returns. Remarking on Nigeria, Terry Lynne Karl makes a disheartening revelation: peripheral countries that are rich in oil and minerals do worse in their development than those that do not have oil or minerals. In mineral rich countries, the core states’ multinationals descend like vultures concerned with no other issue but maximum wealth accumulation. There, multinationals connive with country officials to siphon the country’s wealth, leaving the masses in extreme poverty. A country like Nigeria, which has been sitting on rich oil fields since the early 1960s, still has 70 percent of its population living below the poverty line, while a minority of overfed government officials roams impudently in the company of multinational CEOs and core states’ government officials. In the early 1990s, Shell’s destructive operations in Nigeria were being challenged by the Movement for the Survival of the Ogoni People (MOSOP), a non-violent movement organized by late Nigerian writer Ken Saro-Wiwa. Shell’s extraction of oil in the Niger Delta area had caused environmental degradation in the region. The Ogoni people’s livelihood and living condition were disrupted by Shell’s unregulated oil exploitation. Fishing areas, farmlands, and drinking water were contaminated. Extreme poverty lurked: malnutrition and infant mortality rates skyrocketed. So, Saro-Wiwa organized his people to force Shell to be more environmentally conscious. Apparently, the MOSOP was winning against the oil giant, for, in May 1994, a memorandum sent from the internal security forces in the Ogoni region to the Nigerian military sounded a panicky alarm. “SHELL OPERATIONS STILL IMPOSSIBLE UNLESS RUTHLESS MILITARY OPERATIONS ARE UNDERTAKEN FOR SMOOTH ECONOMIC ACTIVITIES TO COMMENCE.” It was paradoxical that “ruthless military operations” should be the precondition for “smooth economic activities.” Months after the memo was received, the Nigerian military ruthlessly attacked several Ogoni villages, killed villagers, and destroyed homes. Saro-Wiwa and his close collaborators were arrested, tried in a kangaroo court and executed on November 10, 1995. This was a punitive expedition ordered by Shell in connivance with the Nigerian dictatorship, which was a partner in the oil extraction business.

Had a minimum of strict internal regulations existed to which local businesses had to learn to conform before the arrival of Shell in Nigeria, Shell would not have considered the need to support a ruthless dictatorship and obliquely engage in human rights abuses in order to operate successfully. Dictatorships endure in Africa because they are often supported by powerful multinational corporations from the core states which, in the absence of regulatory measures in peripheral countries, prefer cheap bribes to expensive humane operations. Following China’s example, Africa ought to implement a certain level of governmental intervention, which would protect sensitive sectors of the economy, such as the environment, healthcare, education, power, water, and communication, until such time when a trained body of local investors is able to vie for stakes against external competitors. These local investors should be in great part constituted by a body of middle class and not, as is too often the case in Africa, by a tiny body of ministers, CEOs and government workers who have built their fortune on embezzled public funds and corruption. The example of Côte d’Ivoire, where the middle class is mainly constituted by corrupt government officials and shady party leaders, is an indication that when the middle class’s interests do not lie in transparent regulations, even attempts to bring about institutional changes beneficial to the country could unleash direct violent interventions by the core states and their multinational corporations supported by their militaries, the latter always ready to respond to the call of business operatives. In fact, as has been noted by Rowe, the imperial pattern indicates that military interventions do not precede trade negotiations. It is the other way around. It is usually when the idea of free trade as propounded by the metropolis in its relation with the colony fails that the military intervenes to force its application or simply removes and replaces unforthcoming nationalist leaders with lethargic marionette leaders. In 2002, the socialist government of Laurent Gbagbo in Côte d’Ivoire experienced this pattern of “free trade imperialism” when it attempted to divorce itself from the corrupt Western perception of development that is grounded in the “assumption that the only way to move to a market economy is to sell the state sector … the quicker the better,” and which, under Prime Minister Ouattara’s auspices, had permitted the reckless sale of strategic state-owned enterprises to French predatory speculators. Before opening its economy to a downpour of savage capitalists, Africa should first privilege an endogenous liberalization that gives governments a reasonable power of regulation.

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