The causes of African poverty...

[Boerseun]

Being a much debated topic under the economists of the world, I thought of placing a thread here, dedicated to it.

 

We all have our pet theories, but serious studies have not resulted in a definite conclusion to date. Physical barriers to trade like the actual layout of the continent, the vast desert seperating north from south, the vast impenetrable rainforests in the center stymiing transport and communication through the heart of Africa, the legacy of colonialism, tribalism, education, infrastucture, kleptocracies, despotism, climate, all of these were considered as root causes - but more likely, a comprehensive combination of all of these is responsible. Fact is, we're faced with a largely failed continent.

 

Interesting articles abound on the internet on this specific issue.

 

But I was amazed by the following in the Yale Economic Review, citing that Western domestic policy (that's right - Domestic policy) is costing Africa more than twice the amount received in aid annually.

 

The West gives/loans Africa ten bucks, but through protecting its own agricultural sectors through massive subsidies that bring maize, wheat and other staples to Western tables at less than 40% of actual cost, Africa loses more than thirty bucks in trade. But next year we'll do the same, and Africa'll be deeper in debt. How do you figure this?

 

Is it fair?

 

Forget about the fairness. Considering that every time an American takes a big ole' bite out of a corn cob, it's costing the government money; is it sustainable?

 

Let's say you're an American, and you just bought ten bucks worth of corn. It costed the American taxpayer more then twenty for your priviledge. But you, along with the other US taxpayers, will still foot the bill for African aid. Which could have been negated through fair trade practices. You're now paying for an unsustainable domestic agricultural sector, and hauling out bucks for helping African countries, whilst kneecapping their economic growth at the same time.

 

I'm not saying it's the root cause. But I reckon there are plenty to be said for it. Unfortunately, I'm too few and far between to make any sort of difference. So - anybody got a job for a computer engineer-turned farmboy-turned advertising designer-turned magazine editor in your neck o' the woods?

 

Checkit: (From the Yale Economic Review)

 

To date, aid policies to Africa have generally fallen into one of two categories. In the first, the West has extended compassion without fully inviting or enabling Africa to participate in world markets. For example, in times of famine, violent ethnic conflict, or natural disaster, the West, through both governmental and NGO action, has sent millions of dollars to provide immediate relief to suffering Africans. Yet simultaneously, the domestic policies of both the United States and the European Union provide substantial subsidies to domestic farmers which cripple Africa’s efforts to create self-sustaining economies. According to Barry Nalebuff, Milton Steinbach Professor of Management at Yale’s School of Management, “agricultural subsidies create excess supply and depress prices” for African farmers in economies where Agriculture is one of the few, if not the only, means of internally generating capital.

 

Effectively, these subsidies “undermine the ability of third-world farmers to compete where they have a comparative advantage.” Currently, U.S. corn is sold on the world market at 20% below the actual cost of production. Wheat is sold at 46% below production costs. Clearly, African farmers cannot participate in a world market where prices are so artificially deflated. According to a recent OXFAM report, Western subsidies and import barriers cost developing nations about $100 billion a year – twice the amount they receive in aid. Not only do these policies significantly curtail African economic development, but also they prevent African nations from developing the resources to combat significant domestic challenges. Thus, the West feels compelled to relieve immediate suffering but fails to consider the impact of its domestic policies. This compassion-only approach has, to some degree, bred a paternalistic view of Africa in the west and created an “us and them” mentality toward both the countries and people of Africa.

[Cedars]

And here is a counter point to the issue you raise.

 

Food First/Institute for Food and Development Policy | For Land, Liberty, Jobs and Justice

 

*the percentage of total domestic production that is exported and the US’ overall share of total world exports are either constant or falling for almost all major US commodity groups since the early 1980s—including the period after 1996.

 

*inflation-adjusted prices for several major US commodity crops over the last sixty years, two facts stand out: that these prices have declined steadily over sixty years; and that the price decline since 1996 has been far less severe than in previous periods, such as the years 1973 to 1986

 

Removing Subsidies would increase farmer income:

 

*Even the best case would lead to modest price increases and very limited benefits to select farmers. (read corporate farms)

 

*The farm sector is very different. Many individual farmers supply a given market. No single farmer controls enough of the total market to influence price by adjusting his or her own supply. Instead, farmers have to take the market price as given and adjust their output accordingly.

 

*confronted with falling prices, farmers will attempt to increase output in hopes of offsetting falling per-unit revenues by a higher total volume of unit sales. Failure to do so will put them out of business—sooner rather than later.

 

*the demand for most food goods is relatively unresponsive to price, a significant decline in price may be required to clear the market of excess supply. Thus the overall price level tends consistently downwards.

 

*the large commercial growers—set the market standard for price: as their costs fall, market prices can fall below the average farmer’s cost.

 

*Large growers’ ability to “beat the market” means that removing subsidies could actually improve their competitive advantage.

 

The US has made huge strides in the ability of farmers to output product per acre via technology and consolidation. Approximately 2% of the population supplies the entire nation with raw food material and produces excess to sell. There are also those other countries which havent been torn apart by wars, drought, ect that offer stable supplies out to the world market. That is what Africa is competing with. Not subsidies.

 

During the last 10 years, the milk subsidies were decreased significantly in the USA. What was projected via the news was a loss of 10 cents per gallon for farmers. What happened in the stores was an immediate 80 cent increase in price per gallon. Smaller dairy farmers did go out of business. Milk imports did not increase. Rich farmers bought up neighbor properties, or the properties were developed in the housing boom. And now I think the rise per gallon has been around 1.20 since the decrease of subsidies.

 

And Africa did no better in the world market for dairy products.

 

Physical barriers to trade like the actual layout of the continent, the vast desert seperating north from south, the vast impenetrable rainforests in the center stymiing transport and communication through the heart of Africa, the legacy of colonialism, tribalism, education, infrastucture, kleptocracies, despotism, climate, all of these were considered as root causes - but more likely, a comprehensive combination of all of these is responsible.

 

Not only does this combination stymie within, it discourages investment from outside. Africa is considered too risky of an investment for outside corps to build within the borders. So you wont have places like General Mills setting up shop there, employing people, buying product from farms to convert into foodstuffs.

[gribbon]

We all have our pet theories, but serious studies have not resulted in a definite conclusion to date.

 

As I've said before, it is far too general to apply any one theory to a continent of 44 nations.

 

Look at Botswana, a country that, according to many economists would evaporate/collapse in no more than three years, yet is amongst Africa's most sucessful nations. What did they have at independence? Hmmm....5 miles of tarred road, three factories, a handful of university graduates, a late blooming diamond industry, a largely illiterate population, a social strata comprising of nine different ethnic groups, a largely infertile land mass cursed by an erratic rainfall, and all this to be compounded by thousands of refugees spilling over it's borders fleeing war in neighbouring Angola and Mozambique.

 

Yet this turns out to be one of Africa's most succesful nations. All of the main theories we hear about have been discarded.

 

To prove it was no fluke, we'll look at Libya.

 

People say corruption is a big problem and label it as being responsible for everything.

 

Libya has a no adavantages other than large oil reserves. It has been under a military dictatorship for four decades, less than 1% of it's land is suitable for agriculture, it has had armed conflicts with it's neighbours, vast amounts of money wasted through sponsoring terrorism and WMD programs, and worst of all, sanctions imposed by several countries, only to be lifted recently.

 

Yet it is doing far better than virtually every other Afrcian country. We can discard all those theories, especially the corruption one.

 

One theory for 44 nations isn't going to fit.

[Boerseun]

Look at Botswana, a country that, according to many economists would evaporate/collapse in no more than three years, yet is amongst Africa's most sucessful nations.

Classic misconception. Botswana is one of the poorest, most miserable countries on the planet. The figures you see in print for Botswana's per capita GNP is simply the taxable turnover for the de Beers corporation, who for all practical purposes own Botswana, its government, its public services and most of its private sector, lock stock and barrel. If de Beers quit Botswana, that'll be the end of that.

What did they have at independence?

Besides everything you say they have, they also had almost two million more citizens than they have today. They now have a population of about a million, largely due to AIDS and large-scale emigration because of serious unemployment. There is simply no success story to Botswana, regardless of what anybody will tell you. Their only mitigating factor is the fact that their population consists out of 99% Tswanas, meaning that tribalism is a very small factor in political disputes - a factor that's screwing up the rest of Africa. If it wasn't for the fact that they've got a largely homogenic society, and that the de Beers corporation carries forth Ruth and Seretse Khama's visions of grandeur, there would be absolutely nothing worth writing home about Botswana today. Trust me.

Yet this turns out to be one of Africa's most succesful nations. All of the main theories we hear about have been discarded.

Once again, not true. Define success? Is it lack of conflict or economic progress? Because lack of conflict and stagnation also goes together, as Botswana will testify.

[Boerseun]

Libya has a no adavantages other than large oil reserves. It has been under a military dictatorship for four decades, less than 1% of it's land is suitable for agriculture, it has had armed conflicts with it's neighbours, vast amounts of money wasted through sponsoring terrorism and WMD programs, and worst of all, sanctions imposed by several countries, only to be lifted recently.

 

Yet it is doing far better than virtually every other Afrcian country. We can discard all those theories, especially the corruption one.

Considering that just the metropolitan areas of, amongst others, Cairo, Cape Town, Johannesburg, Durban, Lagos, Alexandria and Port Elizabeth, each, individually, have a bigger GNP than the whole of Lybia, I don't quite follow your logic there.

[gribbon]

I haven't got time to go really into detail, but I'll come back later....sorry if there are any typo's...

 

Classic misconception. Botswana is one of the poorest, most miserable countries on the planet. The figures you see in print for Botswana's per capita GNP is simply the taxable turnover for the de Beers corporation,

 

Botswana’s income is comprised of industries other than De Beers diamond mining. The country also has industries that extract copper, nickel, salt, soda ash, potash. Furthermore, there are livestock, and processing plus a textiles industry. Of the total industrial output, only 36% is mining.

 

Economy of Botswana - Wikipedia, the free encyclopedia

 

their population consists out of 99% Tswanas

 

Ummm…actually it’s 79% Tswana (or Setswana), 11% Kalanga, 3% Basarwa, and others, (including Kgalagadi and white) taking up 7%.

 

NationMaster - Statistics > Ethnic groups by country

 

Once again, not true. Define success? Is it lack of conflict or economic progress? Because lack of conflict and stagnation also goes together, as Botswana will testify.

 

Economic success more than lack of conflict.

 

Let’s compare some stats:

 

HDI in Africa

 

Botswana comes 12th out of 44 with 0.565, despite AIDS.

 

Inflation 2002-2003

 

6.3% for Botswana

 

The average (excluding Zimbabwe) is about 8%

 

Considering that just the metropolitan areas of, amongst others, Cairo, Cape Town, Johannesburg, Durban, Lagos, Alexandria and Port Elizabeth, each, individually, have a bigger GNP than the whole of Lybia, I don't quite follow your logic there.

 

Well that’s hardly a surprise seeing as metropolitan areas always do generate the vast majority of a countries income. Even more so, you chose some of the richest cities in Africa. How can that be proof of an unsuccessful economy? You take all the richer cities and economic powerhouses, add up their combined income, and surprise surprise, it adds up to more.

 

Let’s compare some stats - numbers never lie.;)

 

ECONOMY

 

HDI in Africa

 

1st is Seychelles

2nd is Libya

 

Real Growth rate

 

8.7% for Libya

 

…and about 1.5% for the rest of Africa….

 

HEALTH

 

Drug access

 

#3 Swaziland: 95%

#23 Algeria: 95%

#42 Libya: 95%

#54 Djibouti: 80%

#57 Lesotho: 80%

#61 Namibia: 80%

#68 Comoros: 80%

#69 Botswana: 80%

 

 

Libya and Botswana again I’m afraid…

 

Infant mortality

 

#35 Botswana: 69.98

#36 Namibia: 69.58

#37 Cameroon: 69.18

#41 Mayotte: 64.19

#42 Kenya: 62.62

#45 Senegal: 56.53

#48 Gabon: 54.34

#51 Ghana: 52.22

#55 Sao Tome and Principe: 44.58

#56 Morocco: 43.25

#63 Egypt: 33.9

#66 Algeria: 32.16

#78 Libya: 25.7

#96 Saint Helena: 19.85

 

Looks like Libya (and to a lesser extent Botswana) are not the losers…

 

% of population using adequate sanitation facilities > Total by country

 

#40 Comoros: 98

#41 Egypt: 98

#43 Libya: 97

#55 Algeria: 92

#57 Djibouti: 91

 

Libya seems to be doing fine here as well…

 

Botswana came about 19th in the African countries list….a touch better than the average…

 

Education

 

Literacy rates are far higher in Libya and Botswana than elsewhere in Africa.

 

NationMaster - Statistics > Literacy > Total population by country

 

And, InfyNow, if you're reading then here’s my main source:

 

NationMaster - World Statistics, Country Comparisons

 

:) ;)