How markets undermine African development

African countries must pool their markets and genuinely begin to trade with each other. They must introduce industrial policies to diversify their markets away from industrial countries.

GLOBAL market rules are either in favour of, or are frequently bent to benefit industrial countries. Or, to put it differently, more restrictive market rules are often applied to African countries while industrial countries are accorded leeway to implement these in ways that benefit their companies, labour and economies.

The first of these is that industrial countries have more power to determine the rules of the market than African and other developing countries.

Many industrial countries following the 2007/2008 global and Eurozone financial crises nationalised failing banks, but if African countries try to do so, they will face restriction and criticism from markets, global media and financial institutions.

Many industrial countries, for example, can come up with monetary policies to ostensibly improve their export competitiveness, such as artificially keeping the value of their currencies and interest rates low. The US, the EU and Japan have been doing this for years.

In the aftermath of the 2007/2008 global and Eurozone financial crises the US, because interest rates there were already close to zero, introduced quantitative easing (QE), the strategy of injecting money directly into the country’s financial system. EQ is printing new money electronically and buying government bonds, which increases the circulation of money, in order to boost consumer and business spending.

Such unilateral monetary policies have undermined the competitiveness of African countries by causing see-sawing capital flows, currency volatility and destabilisation of financial markets.

African countries do not have the economic power to introduce their own quantitative easing — and even if they had, there are likely to be market, investor and industrialised-country backlashes against them.

Industrialised countries argue for free trade, but most have high tariff barriers for manufactured and processed goods from Africa. However, industrial countries insist that African countries open up their markets to both agricultural and manufactured goods from industrial countries.

Industrial countries frequently have non-tariff barriers such as high quality, health and environmental standards for products coming from African countries. African countries do not have the same freedom to enact similar non-tariff barriers for products coming from industrial countries.

Furthermore, industrial countries heavily subsidise their own sensitive industries, such as agriculture. Yet, African countries are punished when they want to protect their own infant or sensitive industries. The US Africa Opportunity Act (AGOA) or the EU Economic Partnership Agreements (EPAs), for example, allow US and EU governments to subsidize their strategic industries; but both the US and EU forbid African countries to do the same, or they will lose out on “benefits” from AGOA and the EPAs.

Industrial countries insist that African countries allow multinational companies unfettered investment freedom in African economies, often with disregard for the local environment, labour standards or good corporate governance. Again, if African countries do not allow the free entry of industrial country goods, they are likely to face market, investors and industrialised-country political backlashes.

The international currency in which trade takes place is either the US dollar or other industrialised-country currencies, such as the Euro, British Pound or the Japanese Yen. The raw materials that most African countries export to industrial countries are usually traded in these currencies. Fluctuations in these currencies impact disproportionally on African economies, particularly because the economies are heavily dependent on the export of one commodity.

The prices, exchanges and bourses of all African commodities are set in industrial countries. This means that, astonishingly, African producers, even where they are the global dominant producers of a specific commodity, have no say in the price of that commodity.

In the global market, labour from industrial countries can move freely to African countries; yet African labour movement to industrial countries is increasingly restricted. The arguments for free markets ring hollow, without the free movement of labour.

Industrial countries also control the supporting structures of global markets: the credit rating agencies, transport and logistics, insurance agencies and the banks and the global communications systems.

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