THE END OF GROWTH
The tyranny of the West cuts through the heart of de-industrialised informal economies in Africa, but the grim consequences paradoxically foreshadow a world beyond growth, writes Malcolm Ray
In the autumn of 1991, the plaque on the door of former Harvard University provost Laurence Summers’ Washington office emblematised the chill winds blowing through the corridors of the World Bank, where he had just landed the coveted post of chief economist. In the chaotic dawn of the 1990s, the global balance of economic power was thrown into disarray.
For a man of Summers’ disposition, this was the promise of Western providence, famously described by Francis Fukuyama, the ideological impresario of neoliberal globalisation, as “the end of history”. Though wary of a rift among World Bank member countries, Summers didn’t pause; neither did the great majority of the Washington set, for whom mystic appeals to the economic wellbeing of poorer countries were meaningless without Western imperialism.
Summers began privately toying with a doubleedged challenge in the US: resolving periodic crises of excess supply and waste by expanding its economic interests in developing markets. Shortly after his appointment, an extract from his internal memo to a colleague found its way into the media: “Just between you and me, shouldn’t the World Bank be encouraging more migration of the dirty industries to the Least Developed Countries? The economic logic behind dumping a load of toxic waste in the lowest-wage country is as impeccable as extracting, and we should face up to that.”
As well as exposing Summers’ prejudices and embrace of a “growth-at-all costs” doctrine, the extract revealed the West’s attitude towards economic growth in Africa and other developing regions. But a handful of senior officials were opposed to the bank’s policy course for the very reasons Summers articulated in his memo. Chief among them was Stanford economist Joseph Stiglitz, who had been recruited in 1996 to chart a new course in developing countries, where the bank faced a backlash from the poor against neoliberal policies.
From the bank’s headquarters in Washington, Stiglitz came to the profound conclusion in the mid’90s that the Bretton Woods institutional architecture was moribund. The original purpose of the World Bank and International Monetary Fund was to lend money, first to war-ravaged West European governments and then to developing countries. But the reality Stiglitz began to see was far different.
It was a soggy January afternoon in 1999 when I travelled with him to Diepkloof, Soweto, during his Africa tour. Nearby was Mandelaville, a cesspit where, like thousands of impoverished squatter communities throughout Africa, the poor had simply stopped paying attention to the hollow policy tropes of officialdom.
Stiglitz saw not Mandelaville’s misery but its silent displacement from the growth economy. People survived in a carnival of wants, in the shadows of unrestrained market forces that served tiny elites in developing countries and powerful corporate interests in the West.
The question then being asked was: growth at what cost? Each year, the bank ranked countries on an investment metric that, paradoxically, could have been straight out of the neoliberal Washington Consensus 10-point manifesto. The answer led political economist Lorenzo Fioramonti to place real GDP growth between 1980 and 2006 at zero.
The picture wasn’t quite complete. If the World Bank growth doctrine was a response to the globalisation era, between its architects and African countries lay a vast economic chasm. Outwardly, postcolonial African cities are a sprawling edifice of rundown colonial buildings, with a necklace of overwhelmingly poor informal communities. The latter cut through the heart of Africa’s underlying condition of unfinished business. The colonial edifice fades out of the real African picture, but its grim shadow is spread across 80% of the African economy that remains informal.
The sheer scale of the problem was always hard to quantify because of porous data, but in 2002 economist Patrick Bond peeled back the layers of statistical legerdemain on investment and growth in Africa for the 1990s. For every percentage point increase in a country’s extractive-resource dependency, potential GDP declined by 9% against official calculations. His findings exposed a definition of GDP growth that did not fully calculate collateral damage to the local environment, to workers’ health and safety, and especially to communities around mines.
Stiglitz, meanwhile, argued that the disappointing outcomes had vindicated his concerns about the inappropriateness of the standard reform agenda in Washington. The more circumscribed role for the state in developing countries, he argued, guaranteed their failure. There was another, more profound, reason, besides an excessive belief in “market fundamentalism”, for the bank’s failure — the Washington Consensus. Liberalisation had opened the door to unregulated securities, wild finance and open trade within African economies that weren’t designed to handle the new trade regime.
In the aftermath of the East Asian market crash in 1998, Stiglitz seemed to be groping for a way towards what he called a “new consensus”, but without breaking the grip of GDP — a failure for which he carries some responsibility.
Long after exiting the World Bank, he took two fundamental and potentially far-reaching steps in his own effort to unwind the Washington Consensus experiment, or at least give growth a gloss of legitimacy in developing countries. The first was that of economic inclusion — the idea that, with the participation of local stakeholders, like the squatters in Mandelaville, you could change the way wealth is distributed.
But what each predicament and proposed solution, through the 1990s and 2000s, really spoke to was the exponential growth in the cost to African economies of propping up a fundamentally flawed system. Certainly, while the US Federal Reserve had been ploughing billions of dollars since the 2007 global economic meltdown into fortifying US banks and multinational corporations, the scale of investments in Africa was being systematically rolled back by diminishing returns to the continent as imbalances between growth and the social and environmental consequences of maintaining the system continued to mount.
By the second decade of the millennium, the continent’s share of world trade declined more precipitately than over the previous quarter-century, even though exports increased. The marginalisation of Africa occurred, hence, not because of insufficient growth but because of the depletion of natural resources and associated negative externalities.
The central question is whether any of the financial capital that returns to Africa is reinvested, or merely becomes the source of externalities and further capital flight. “It is logical to assume,” wrote economist Tim Jackson, “that the competitive drive by London, New York and Sydney shareholders for profits results in the accumulation of capital within Africa being systematically stymied.”
When in mid-2006 I asked Jennifer Blank, who authored the World Economic Forum’s annual Africa Competitiveness Report, why the report’s measure of growth seemed like a profitability index, she said the metric was a competitiveness measure, not a social index. “We’re not talking about clambering up the corporate ladder; we’re talking about economic competitiveness, or what sets a country up for growth.”
There is an ideological trope going on here — the mistake of measuring growth on a GDP metric. The deeper truth is that informal economies in Africa are being systematically and ideologically decamped in the global economy as externalities.
Inevitably, it seems dumping capitalism’s excesses in informal economies is not the only trap hobbling African economies within the ideological blandishments and economic protocols of the growth doctrine. Perhaps the most pertinent indictment on the West’s intentions is to be found in Summers’ 1991 memo: “The extractive power of our multinational corporations is as important a consideration as a pollutant that causes a one-in-a-million chance in the odds of prostate cancer because of deindustrialisation in Africa.”
If the growth model was always unstable ecologically, it has now proven to be unstable economically. De-industrialisation may, paradoxically, hold the key to redressing the blind pursuit of growth and its corollary, unproductive status competition.
Stiglitz seemed to be groping for a ‘new consensus’, but without breaking the grip of GDP