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GLOBALISATION AND THE STATE OF AFRICA’S ECONOMY

globalisation

As part of the global economy Africa cannot help but play her part in it and seek answers and solutions to her problems by taking into account what is affecting the continent in the context of the world’s political economy.

The world economy is dominated by the industrialized nations. The international economic order is an exploitative arrangement whereby these nations benefit from the technological weakness and economic backwardness of African countries. And it is in the interest of the former to maintain the situation as it is. Africa has no power to change it since we can only change what is in our power to change and that is our own economies first – their structure and direction.

At independence, most African countries placed themselves under the sphere of influence of the West as junior partners and were in effect condemned never to see any serious development of the continent; collectively or individually. The modern world economic order was created soon after the Second World War with the establishment of the Bretton Woods System. Its declared objective was to stabilize international monetary and financial regimes which were disrupted in the pre-war period of the Great Depression, to help the Western world’s economic recovery and to combat socialism in the post-war era.

The main institutions created for the job were the World Bank, IMF and GATT (the General Agreement on Tariffs and Trade), all of which were designed, in addition to recovery, to strengthen the Western grip on the global economy. Soon after independence African countries became members of these institutions. The system has never worked to the advantage of Africa since she is greatly dependent on the West’s (and now China’s) massive exploitation of her human and material resources.

International finance is a major factor that lubricates the global economy. There have been three significant eras of international finance. The first was between 1870 to 1914 which was dominated by Britain. The second was between 1920 to 1929 when the centre shifted to New York, but it collapsed in 1930 with the Great Depression followed by the Second World War. The third era—the Bretton Woods era-- started in 1947 until 1985 when the USA itself was reduced from a creditor to debtor country as Japan replaced it as the world’s foremost creditor nation.

The decline of American financial hegemony cost Africa a lot owing to her dependence on the dollar. As foreign banks were eager to dispose their surplus funds, African countries borrowed recklessly and fell into the debt trap. Developed countries dumped loans and capital into the Third World, seeking a large return in interest. Secondly, inappropriate use of these foreign loans has resulted in poor performance and low foreign exchange earnings since these loans largely went into financing consumption—for example building ultra-modern airports, and so on—and hardly any went into the development of productive forces; which in turn weakened economic efficiency and earned no surplus.

Unequal trade terms cut into Africa’s export income, weakening her ability to service her debts on time. Thus the debt problem became the most significant one for Africa in the 1980s. The debt burden made African countries even weaker while the creditor countries, under the leadership of the IMF, gained strength through its insistence on conditionality and reliance on the old imperial policy of divide and rule over debtor nations, so that they would not form a united front of debtor countries and negotiate from the strength that position will have conferred. Under the existing conditions there is no way Africa can repay its external debt. The net flow of wealth from Africa to the industrialized countries continues to mount, leaving little or nothing for domestic capital formation and investments.

In the wake of the economic crisis and the debt problem which have put Africa in a serious socio-political situation, various economic recovery strategies such as The Lagos Plan of Action; the African Priority Programme for Economic Recovery; African Alternative Framework; Nepad, just to name a few, have been adopted all to no avail. They have failed because they start from the premise that Africa has no alternative except to go for an export-led development strategy. That is to say that Africa must rely on the export of its primary commodities to earn foreign exchange to enable it to import its domestic needs. The concrete reality is that this strategy is inapplicable to Africa’s current level of development based on its present production structure. Internal causes are the basis of change, while external ones remain only as conditions of change and not the other way round. Any country that tries to alter this reality is doomed to failure.

Africa has been forced into a world market system which is not free and is extremely imperfect, favouring the rich against the poor countries. Can there be any comparative advantage between the peasant producer of tea and the industrial producer of the tractor from whom the former has to buy his inputs? As long as Africa remains in this unjust global economic system from a position of weakness, there is no way we can attain any form of development beneficial to Africa.
Published: 2009-04-16
Author: gitau muthuma

About the author or the publisher
i am basically a lecturer at eelo american university, borama, somaliland but i do write on a freelance basis.

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