Globalization as a threat to Africa’s prosperity creation

GLOBALIZATION PRESENTS SEV ERAL opportunities. Some of these which are on the economic side, include the facilitation of international trade, offshoring and internationalization of production. Others have the opening up of the interconnectedness in social and economic relations among countries, the opportunity of leapfrogging into the information age and improved access to international finance and technology. Globalization has enhanced the interconnectedness of markets across countries than ever before. Products that hitherto were available only in particular countries are now readily available and disseminated in several other countries around the world. This market-connection is evident in the sheer scale of Africa’s importation of products and services from several countries around the world, particularly Asia.

Another apparent opportunity is the offshoring and internationalization of production. Manufacturing processes are now easily decomposed and carried out in different countries, depending on the dynamics of efficiency. Aspects of production are outsourced offshore to those countries with the least cost production advantages than its primary location. Through that process, the entire structure of production becomes more economically organized. Many multinational organizations adopt this model. The interconnectedness of markets consequently reveals the interconnectedness in social and economic relations among countries. This social factor is another crucial opportunity provided through globalization. Since it is difficult to divorces successes in market relationships from meaningful social relationships, the discovery of mutually profitable market opportunities invariably leads to the opening of social interconnectedness among such countries. Thus beyond economics are other social considerations that latch on to the back of market discovery. Examples include intermarriages as well as the importation of religion.

Globalization also holds the key to leapfrogging into the information age. Today, information technology provides the core platform for intercountry and transnational economic relationships.

Taking maximum advantage of opportunities across borders therefore requires getting savvier with information technology. Experience also shows that this gets better with each passing time as modern technologies for communication and information dissemination gets more efficient in business deployment. It is also at the very heart of international finance. To that extent, globalization is key to facilitating access to privately owned capital in different parts of the world. Through this process, globalization enhances transborder entrepreneurship and its funding for prosperity promotion.

These outlined benefits present elegant reasons for globalization. Although economic openness and liberalization appear to stay, African countries still need to be substantially circumspect in their hook, line, and sinker acceptance of its underlying structures and models. In its simplistic application in the African context, globalization is the competition for markets between the substantially industrialized countries and Africa. While we know the former to possess the capacity to massproduce things of value that are even higher in demand in Africa, the latter cannot satisfactorily produce even the things it needs.

The structural adjustment program which many African countries adopted in the mid-1980s contains most of the critical elements of globalization. The structural adjustment program [SAP] came as a cure for the mediocre performance of most African economies. The international economic ‘Trinity’ namely the World Bank, the International Monetary Fund and the World Trade Organization [then known as General Agreement on Trade and Tariffs] considered that structural economic reforms would revitalize most of the beleaguered economies of sub-Saharan Africa. The primary planks for these structural reforms were trade liberalization besides other factors such as the reduction in fiscal deficits. The ‘Trinity’ and other donor countries and institutions denied these economically asphyxiated countries of Africa access to aid and grants. That denial of support was to subsist except they accept those prostructural reform conditionalities. Examples of the terms include the weakening of the currency, privatization of the public sector, trade liberalization and the introducing export processing zones as well as the abolishing of subsidies and agricultural inputs. Virtually all African countries have now practised these pro-globalization and liberalization reforms over the past two decades. The results across the continent were not cheering. On the contrary, it appears as if there has been a deterioration.

Globalization and the structural reforms seemed to be a subtle way of undermining the sovereignty of the African continent after decolonization. The end of colonialism has only signalled that the West’s fingers are off the shoulders of Africa in political governance alone. And because economic imperatives always piloted the direction of political control, the foundations for the integration of the continent within the global capitalist system became necessary. Through the international economic Trinity, it became easier to lay the foundation. Despite holding political power, globalization through structural economic reforms also consciously weakened the role of the state in the management of economic activities. They advocated openness as well as the unbridled reign of the market. Newly independent African countries still depended on their colonial masters. Up till now, most of the African countries colonized by France are completely economically tied to the country. Such a level of dependency watered the soil for the eventual liberalization and economic globalization that followed afterwards. Although the poor performance of the structural adjustment program in most African countries may not be entirely due to the program, but partially because of the flawed governance framework, the reform itself considerably rendered the state helpless. Many firms that were hitherto doing very well buckled against the difficulties that came with the unequal terms of competition between the firms within the continent and those from the industrialized world. Because the structural economic reforms were not contextualized and adapted to the realities of the continent, it weakened its competitiveness against the industrialized world.

By allowing free and indiscriminate operations of international businesses, they consciously turned the continent into a dumping ground for goods and services from several foreign countries. Africa has practically become the dumping ground for goods made in China and surrounding Asian countries. And because these countries have already gained technology advantages and built institutions of governance, their industries can manufacture most of these products quite efficiently. It is a unique situation in Africa where we are still grappling with the technology and the development of the industries, and the governance institutions that would enable us also to produce competitively. Unfortunately, globalization makes attaining this desirable competitiveness position even more tedious. Some even deliberately undermine our economic institutions to dump these goods. China, for instance, in collusion with some of our customs officers, has gained some notoriety for smuggling textiles, footwear and electronic equipment into the country. Thus, with no duties on their goods brought into the country, combined with the fact that they produce more efficiently, they end up impressively pricing competitive. Sometimes the prices of the goods from China are 20% of the same quality of products made in any of the African countries.

The implications are apparent. Our industries shut down because of insufficient demand. It can only take a spiritually fortified level of patriotism to purchase goods of the same quality and quantity for five times the price of its substitute. Goods produced in Africa are uncompetitive on account of some of these ripple effects of globalization. That is the primary underlying reason for the indiscriminate importation of foreign-made goods by Africa. Practically everything is imported. Until recently, Nigeria imported its toothpicks.

It has been suicidal for Africa to have accepted globalization the way it crept in through the crevices of the structural adjustment program. That rendered the continent even more vulnerable and compelled to compete with the rest of the developed world without consideration for its nascent stage in industrial progress. Three factors would have put Africa in much better stead to be part of the globalization process. The first is sound political governance, which would have ensured that corruption is minimal within the continent while the rule of law is maximized. That would also have guaranteed powerful institutions that would equally facilitate more robust economic management. The second is a reasonable level of industrialization that would ensure that African countries could produce the right quality of products at an efficient scale. However, that was not the case as poor governance, and deficient institutions only resulted in the further vandalization of economic prospects and deindustrialization. Because of the consequent macroeconomic challenges arising from currency devaluations and depreciation and inflation, many industries could not continue to exist. The third factor is the availability of capital or at least ease of access to international capital. International capital lies considerably outside of Africa and is primarily in the hands of the international economic Trinity that designed the globalization agenda. To succeed as a participant in the global economy requires healthy access to international capital. The more access a nation or a continent has, the greater the propensity for prosperity. Since Africa does not possess a firm stand on all three factors, it has found it considerably challenging to compete within the global economy.

While globalization provides industrialized countries unfettered access to African markets, the reverse is not the case. Foreign governments have, over the decades, deployed a variety of barriers to prevent African entrepreneurs from accessing their markets. Regardless of the supported incentives provided, for instance, by the United States to promote African trade, many deliberately erected barriers are preventing many African manufacturers from leveraging those windows successfully. The United States, Europe and China, for instance, always have a field day offloading their manufactures in our markets. The terms of trade have been perpetually unfavourable. First is that while substantially industrialized countries which are also better connected with the international economic Trinity have better access to finance and technology for least cost production, Africa does not enjoy such privileges. Second, Africa’s exports are primary commodities such as cocoa, rubber, oil palm and an array of solid minerals whose prices are also principally determined by these foreign buyers. They fix the prices based on their own quality choices and the quantity that they will stock. Africa cannot choose the prices of most of the products from the substantially industrialized foreign countries.

Finally, the foundation of these relationships is the obnoxious comparative advantage theory which promotes the notion that countries should forget about developing and acquiring market advantages in areas where perhaps they lack natural advantages. Unfortunately for African leaders and scholars who have bought into this catastrophic ideology, our natural advantages are in natural commodities and solid minerals. So, while the developed and substantially industrialized country has comparative advantages in hightechnology manufacturing, they advise us to concentrate on the planting and harvesting and sale of oil palm and cocoa seeds. Until we scrap this thinking and deliberately protect some industries that would enable us to take part in the globalization agenda on equal terms with the developed world, the future of Africa will continue to be bleak.