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Divorce Africa from the World Bank and IMF: Reflections on an Abusive Relationship
By James Shikwati
james@irenkenya.org
March 31, 2009
About the Author
James Shikwati is the Founder and Director of the Inter Region Economic Network and The African Executive magazine http://www.africanexecutive.com/. He was named among top 100 most influential Kenyans by The Standard Group in 2007 and also named among the 245 Young Global Leaders of 2008 by the Forum of Young Global Leaders, an affiliate of the World Economic Forum.
Divorce Africa from the World Bank and IMF: Reflections on an Abusive Relationship
It is not “America” that buys champagne from “France”. It is always an individual American who buys it from an individual Frenchman. Ludwig Von Misses
Introduction
Attempts to push Africa to adopt a market economic policy framework by Western countries through the World Bank, IMF and their allied international agencies goes against the spirit of free choice enshrined in free market systems. To fully enjoy the benefits of a market economic system, Africa must divorce herself from the forced marriage to the World Bank and IMF — a legacy of colonialism. African countries must proactively seek to build their own market systems based on freedom of choice and exploitation of existing natural resources for the benefit of her people.
Defining Market Economics
The market economic system or ‘free market’ and ‘capitalism’ operates on the basis of voluntary exchange as opposed to planning or control by a central authority. In the market economy, decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country’s citizens and businesses with minimal government intervention.
Interrogating Market Economics in Africa
Markets are not new in Africa. In Africa, the means of production were privately owned. The profit motive was present in most market transactions. Free enterprise and free trade were the rule in indigenous Africa. Each region in Africa has a history of pre-colonial trade routes. Small or large, centralized or decentralized, no African society was an island to itself.
Debate on why Africans failed to leverage and develop their indigenous market systems have over the years been pegged on colonialism and its benefactor “market economics.” The market economy and recently neo-liberalism are perceived to have fed colonialism and continue to sustain neocolonialism in Africa.
Whereas the market economic system operates on the basis of voluntary exchange, in Africa, it doesn’t. Africa is poor, ultimately, because its economy and society have been ravaged by international capital and local elites who are often propped up by foreign powers. Wealthy nations force poor countries to adopt market economic policies in total disregard of the tenets of free will and choice.
Protectionism and its Impact on Africa
Protectionism has never been good for Africa. The continent is already groaning under wealthy nations’ protectionist measures supervised by the World Bank/IMF and their allies that range from skewed international trade policies, trade distorting subsidies, debt and aid.
According to the Tony Blair Commission for Africa, the trading relationship between developed and developing worlds is dominated by a web of rules, taxes, tariffs and quotas which tilt international trade in favor of the rich. The G8 and EU countries for example, subsidize their agricultural sector to the tune of $350 billion a year, 16 times the amount of aid they give to Africa, but expect free market competition with farmers in Africa.
African countries are faced with other types of protectionism such as inefficient producers in wealthy nations being guaranteed a market in poorer countries by virtue of aid driven-relations or colonial legacy; health and safety standards to bar products from Africa; and the emerging “green protectionism” barrier that use “carbon tariffs” to bar products.
A dispute between Tanzania and Kenya on the pace that regional integration should take best illustrates Africa’s predicament on protectionism. Whereas on the surface, it would appear that Tanzania’s main fear is Kenya’s bigger economy; the truth however is, they fear the power of outsiders who run Kenya’s economy, for after all, the “Kenyan” or “African” economy is largely not driven by indigenes but by companies from wealthy nations.
The African Policy Makers’ Dilemma
Should Africans protect their own industries or those of their aid doling allies operating on their soil? The ongoing financial crisis has helped expose the hypocrisy of western-engineered market economic system that has for long been forced down the throats of Africans.
According to the Report of the Commission for Africa, three contradictory dynamics dominate Africa’s relationship with rich nations: trade, debt, and aid. In the last few decades Africa has seen its share of world trade fall from six per cent in 1980 to less than 2 per cent in 2002. African countries were forced to open their markets and get integrated in the global economy and compete on equal footing with those who champion market economy and yet practice the complete opposite of what they prescribe as seen in Gordon Brown’s push for “British jobs for British workers” and America’s “Buy American.”
Africa should build its own Institutions
African policy makers are faced with a big challenge on how to implement market economic strategies, having simply copy-pasted their institutional framework from colonial powers. The continent is stuck with “organizations” as opposed to “institutions.”
The workings of these organizations partly explain why the existing institutional framework in Africa is perceived to serve the political elite and foreign interests. For instance, the violent use of machetes by ethnic groups to address land disputes in Kenya in 1991, 1997 and 2007 indicates that the masses do not recognize the executive, judiciary and legislature as just arbiters.
Two parallel systems run concurrently on the continent: the government (organization) and the community (ignored institutions which are older than existing governments). Such a predicament complicates the functioning of the market economy.
Governments in Africa must realize that they rule over silent ‘sovereign’ ethnic communities whose interests, largely ignored, have slowed down economic development. Consequently, the inherited government systems must renegotiate with ethnic community systems to enable the merging of ‘sovereignties’ that are accepted and respected by all. Africans must urgently build institutions that will enable them run a market economic system that unleashes the talents of each one.
African Commodities Exchange Market
Africa’s old allies, Europe and USA, face stiff competition from re-emerging powers such as China, Turkey, India and other Asiatic countries in the quest for her natural resource wealth. Africa must take advantage of the renewed competition to set up commodity market hubs across the continent that will usher in a one Africa commodity exchange market. Such a market would not only enhance the continent’s bargaining power, but also explore possibilities of exploiting the continent’s internal market. A transparent and open trading system backed up by Africa’s new institutions (not organizations) would attract financing, say from Central Bank of Africa and save Africa from resource-related conflicts.
Delink Africa from World Bank/IMF
African countries must delink their economic strategies from the World Bank/IMF driven goals and initiate their own market-driven relationships amongst themselves and the rest of the world. The World Bank and IMF force Africans to practice market economics under “constricted freedom.”
The World Bank/IMF operates in the arena of development like a one-party dictator, accountable to no one but themselves. They perpetuate the functions that colonial governments served; operate according to the dictates of their major shareholders; are not accountable to the African people and assist in Africa’s plunder. It is debatable whether they are accountable to tax payers in countries that finance them. The secrecy that shrouds their operations casts doubt on their ability to deliver a just and open market system.
According to WTO, trade among African countries amounted to only 8.9 per cent of total exports. Within the East African Community (Kenya, Uganda and Tanzania) trade grew from $778 million in 2004 to $1 billion in 2006. Trade within the Common Market for Eastern and Southern Africa (COMESA) increased from $4.5 billion in 2002 to $7.8 billion in 2007. The genuine spirit of market economy that ought to have unleashed Africa’s entrepreneurial spirit has for a long time been on the leash. The gains of a genuine open market system for Africa are evident in the expansion of regional markets for individuals, companies and through technological reach as evident in the cell phone and internet sectors.
A Gold Standard Approach to Africa’s Monetary System
Africa must set up its own monetary system by adopting a “Gold Standard” approach that may apply to the trading of selected minerals that have international market recognition. The standard will ensure long-term price stability in Africa; regulate the quantity and growth of respective countries’ money supply and guarantee a country’s external value of its currency.
Africa Should Move Away from Aid Paradigm
Aid (financial and technical assistance from rich nations to poor countries) serves the interest of the donor more than that of the recipient. For Africa, aid has destroyed the people’s confidence and abilities to confront their daily challenges. The market economic system will not work for Africa if it continues to rely on foreign aid to operate. Aid simply exports the attitudes of the donor to Africa.
Aid has led to an upsurge of NGOs as opposed to enterprises that ought to transform Africa’s natural resources to wealth. It begs the question as to whether it is in the long-term interest of NGOs to find long-lasting solutions to Africa’s problems.
Conclusion
In the absence of World Bank/IMF and with Africa’s own governance institutions; monetary policy and genuine market system, productivity will increase on the continent and make Africa a major player in the global economy.
Clearly, Africa is not part of the architects of the global economy. Africa must urgently divorce itself from the planned market system supervised by the World Bank and IMF and call for a new economic order.
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