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Opinions Thu, 18 Nov 2010

Is Africa Emerging? (Part II)

Prologue:

Since the first part of this article appeared here, I’ve received encouraging emails to bring the second part this week. Given my own rather tightening schedule, I’d hoped to do so a couple of weeks later, so I’m going to offer a fleeting response to the questions I raised in Part I and take up the substantive issues later. But before I do so, let me comment on an observation I made in the emails I received: many more people read articles posted on Ghanaweb (or elsewhere) than actually find time to respond. So they shouldn’t worry, my compatriots who emailed to suggest that, perhaps, it was pointless posting articles here because only a few were interested in engaging in serious debates. However, the suggestion about putting up a blog is something I’ll seriously consider.

The Questions:

In Part I, I argued that Africa was on the verge of emergence and wondered what undrpins Africa’s newfound traction and self confidence? Is it that the decades of often painful Western-sponsored economic and political reforms are now beginning to bear positive results? Or is what we are witnessing the result of a novel approach to development co-operation brought by the Asian powers? Or, perhaps most importantly, is Africa getting better at managing its own affairs? And to sustain the recent growth and ensure that Africa competes in the 21st Century, what policy options ought to be pursued?

My Opinion:

Africa’s gradual emergence is most likely the result of all three variables above, although I am less sanguine of the third. Although at times painful, the economic reforms introduced by the Washington-based financial institutions have helped sanitise African markets and brought down inflation in many countries in the region. In itself, this reduces risk to business and fluctuations in consumers’ real incomes. But it is not enough to generate economy-wide growth, if critical infrastructure- such as roads, power, railways, and water supply systems- is absent or in short supply.

Similarly, inadequate investments in education limit a country’s potential for generating higher levels of productivity. And in poor societies, with all the constraints of access to capital, infrastructure services, and markets, entrepreneurs may need a little bit of cushioning here and pushing there to invest. This has been the weakness of the so-called Washington Consensus: the failure to acknowledge the importance of accumulation and the complementarities between state and private activism that lead to increasing returns to national scale. In the absence of this, the Washington Consensus, until very recently, turned out to be an exchange-distribution-consumption model. Especially in the 1990s, it had no plan for growth. From then on, Africa has seen humanitarianism rise to all time high, often in response to rising complex emergencies.

East Asian Factor:

By focusing on investments in transport, telecoms, energy, and educational infrastructure in their engagement in Africa, the Asian giants are helping plug the gaping holes left by Western donors (and African governments). Asian business networks are also helping remove constraints to the emergence and growth of local, and transnational, African capitalism. Today, there is a lot of can-do-business attitude in Africa, from street hawkers to manufacturers to high street banks. African banks are setting up camp in Chinese cities, while Chinese banks have become major players in Africa. But like the Western powers before them, the Asian donors and investors come with their own interests, which may often clash with local interests. For example, Chinese aid and investments deliberately draw on inputs, equipment, labour and other supplies, all of which facilitate Chinese exports to Africa. The Chinese model often lands like a container, with everything in it. Without a sensible policy to break into, and benefit the container, it can be a deus ex machina, working its miracle and suddenly disappearing without much benefit to the local people themselves. Worse, it can leave its toxins behind in the form of exterminated local industry and jobs.

Policy Options: Initial Comments

How should Africa deal with these contradictions? Is shutting the door on the Chinese the answer? No, shutting the door is what you do when you cannot think of solutions. So is lying supine and watching the Asians do their own thing. Unfortunately, the rhetoric often heard from African politicians and policy makers oscillate between the two. The “China as a responsible stakeholder” argument often reinforces this passivity. Surely, in the interest of long-term gains, China must play it clean in Africa. But Africans have an even greater responsibility in ensuring this. The good thing about the contradictions brought by China’s rise in Africa is to force African governments to begin to think hard about policy, informed by local needs and concerns.

Thanks to the Washington Consensus, which allowed foreigners to think for Africa under the guise of its universal applicability, many African governments stopped thinking and making policy. But now there can be no room for a laissez-faire policy stance, if Africa has to benefit from the exchange with the Asians. Africa needs sensible industrial policies, the kind that allowed Alexander Hamilton’s America to borrow and learn from European manufacturing capabilities; the kind that allowed Germany to borrow and learn from European and American industrialisation; the kind that allowed Japan to learn from America and Germany; and the kind that allowed Japan’s own neighbours to learn from its experience of industrial development.

In all these cases there was a deliberate effort, often state-led or state-guided, to mount an ambitious learning effort. Each successive learner tried to shorten the time for transformation and catch up through hard work. So it was not simply state affair, but a societal effort. The so-called East Asian ‘miracle’ is described as such because in the 1950s and ‘60s even leading economists had written them off because of their resource poverty. Similarly, even with its resource wealth, few expected communist China to be able to orchestrate a dramatic turnaround within a single generation. But these East Asian transformations have happened not by chance, but by design, hard work and daring ambition. Recently the world was startled by news that a Chinese construction crew in the city of Changsha had built a 15-storey hotel within just six days. Changsha is the capital city of Hunan Province. If you know Chinese history, Hunan should already mean something to you. It was the hometown of Mao Zedong.

In spite of all his faults, Mao left his country a gift that has proved crucial for its transformation: revolutionary can-do heroism. But he built on an ancient tradition. Get on the escalator of history and you would find that the feat of the construction crew was not particularly unique. You would find the grand canals that unified China; the stupendous great walls that offered protection against foreign invaders; oil wells in Daqing that were discovered through sheer manpower; the Three Gorges Dam that is the largest water control project on earth; and then in Africa you would find the Tanzam Railway that was built at great human cost to the Chinese for Tanzania and Zambia for the same of friendship and Mao’s global revolution. Only hard work can produce such a civilisation.

Emulating & Competing with Asia:

Now can and should we emulate the East Asians and even compete with them? In the 1980s and 1990s, the World Bank persistently told African countries that they were so stupid they could not emulate the East Asian success story because it required skilful leadership and institutional organisation that were lacking in Africa. To be fair on the World Bank, they were vindicated by the persistent leadership failures in Africa. Within just a decade after taking over Singapore, Lee Kuan Yew had more than ably demonstrated where he was taking his young and ‘micro’ state. Within just a decade after taking over leadership in China, Deng Xiaoping had orchestrated China’s agrarian revolution, making it possible for the Chinese to produce enough to feed the world’s most populous nation, and put China firmly on a path to industrial transformation.

In Africa, some leaders had two decades or more, they achieved nothing comparable to the 10-year transformations in East Asia, but they still have the audacity to refuse to give up power or run around making loud noises. Even Deng Xiaoping was forced to give up power for what some of his party members saw as his poor handling of the Tiananmen Square protests in 1989. So, even in the area of politics, there seem to be something we can learn from the Chinese: make the most of your time in office to improve your nation and when you leave, especially if you fail to bring about transformation, shut the hell up, unless you have a serious advice to give for national development!

But learn we must; and compete we should. As pointed out above, each successful late industrialisation has been a story of successful emulation of the most recently successful story. There are some Africans who, perhaps still awaiting manner from the West after centuries of it not falling or because they are enjoying some grants from the West, do not even want us to relate with the East Asians, let alone to emulate anything they have done. But for two reasons China, more than any other country today, offers Africa the most important development lessons.

First, it is the developing country that has achieved the fastest rate of industrial transformation in the age of free market economic globalisation, the age that MIT professor Alice Amsden has described as ‘hell’ for most developing countries. The other East Asian nations, from Japan to Singapore, did so during the Cold War, when the international policy space was fluid enough to allow them to experiment with their best options. (Of course, you should be wondering if we wasted the Cold War years what we could possibly do now!) Any developing country that is yet to hit industrial take-off at the turn of this century should better look at China for lessons.

Second, in the most recent times China is the developing country that has proved most successful in growing with the burden of abundant natural resources. Conventional economic theory suggests an inverse relationship between abundant natural resources and economic development, what is called the ‘paradox of plenty’. But China has shown that this need not be. When in the 1970s Japan wanted China’s oil, Beijing made sure that the Japanese invested heavily in industrial and communications infrastructure in China in return for the oil. Imagine that since the 1960s Western resource companies had been criss-crossing Democratic Republic of Congo (DRC) with roads, railways, telecom systems, industrial plants, school buildings, and health centres, what would be DRC’s status in world affairs today? At least, the rebels would have had a hard time finding somewhere to hide, and given improved conditions there might have been no rebels at all. One of the striking things about China’s presence in Africa has been its willingness to export its own resource development model to Africa. You cannot accuse such a model of being mercantilist, not when Beijing also actively encourages, and funds, the relocation of industries to Africa, not for Africa’s sake but for profits.

And better these hardscrabble entrepreneurs than the salvation army, NO? If Africa is not able to come up with a strategy to compete in, and profit from, the engagement, it is entirely Africa’s fault. No one told the Chinese to reform; they did on their own account; as did the Japanese before them since the Meiji Restoration in the late 19th century. When the Chinese opened to the West, the West said wider, and they beat the West to the game. Africa always sits on the fringes expecting salvation from others. Well, we will not get it from the East Asians. They are not salvation workers, but hard-nosed entrepreneurs. And yet at the moment they offer us the best partnerships.

We are not helped by silly arguments that question why African governments should deal with the Chinese or the oil-rich Gulf states because they are communists or Arabs. India is the world’s largest democracy. While priding itself of this fact, it has often looked across the border for important lessons on how to go beyond its narrow specialisation in IT services and biotech. Since the 1980s, India, like many developing countries that fell under the Washington Consensus, followed a mistaken view of the proper role of the state which impeded consensus building and collective action, especially on the provision of public goods. That is the view of Pratap Bhanu Mehta, author of the Burden of Democracy and President of the New Delhi-based Centre for Policy Research. Much of India’s IT boom, thus, occurred without the state.

But India’s IT boom has brought far less jobs than has China’s industrial boom. Not to be left behind by its arch-rival Delhi has decided there is no shame at all to learn a few tricks from China on how to grow a more diversified industrial economy through indicative state policy and infrastructure investment, just as Deng Xiaoping reckoned there was no shame at all for Communist China to learn from capitalist America or accept investment from imperialist Japan. Similarly, although the U.S. has been discouraging India from dealing with, including buying oil from, Iran, Delhi has largely ignored the U.S. on this because it knows that while aspects of Iran’s policies may be troublesome, there are other issue areas in which co-operation will benefit India, just as the U.S. dealt with Pakistan’s Musharraf and continues to deal with Equatorial Guinea’s Obiang in spite of its avowed policy on democratic enlargement. And just as Obama is running to Asia in search of jobs for Americans, we too want jobs for our people. It is time for Africa to tell foreign powers and their local hirelings to cut the crap. We too have interests! But we must also cut the crap at home, especially on the political front.

East Asian growth may have unique local characteristics, but the idea that at lower stages of development the state must play an active role in the economy is not unique. It was, in the words of one scholar, the “obligatory passage point” for Renaissance Europe and for all presently industrialised nations. Today, there are emerging in Africa libertarian think tanks which, often sponsored by US-based conservative organisations, oppose government activism in any shape or form, due to an ideologically-manufactured fear of government. These drink from the grave of Central European economists and philosophers like Friedrich Hayek and Peter Bauer, who fled totalitarianism and fascism and, understandably, opposed any form of state-led activity, including welfare policies.

For most of Africa, in spite of previous or present experience of varying degrees of dictatorship, both totalitarianism and fascism are unknown. And while Africans must vehemently oppose, and guard against the emergence of, such atrocious political tendencies, we cannot allow our development to be held hostage by the fears of some defunct economists. Welfare policies in continental Europe have not led to “serfdom”; nor has state activism in East Asia. Sensible, pragmatic policies, with inbuilt reward and punish mechanisms, are what Africa needs to compete in the 21st century and engage beneficially with China.

Kobina Idun-Arkhurst ( kobkurst@gmail.com)

NB: In subsequent instalments, I shall take up policy issues on labour, trade and investment. My views on some of these, especially on labour, may be quite provocative. But I hope they help open up a discourse.
Columnist: Idun-Arkhurst, Kobina