Fekadu Bekele (PhD)
July 22, 2025
“The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived
by economists.” Joan Robinson
Introduction
On the 17th and 18th of March this year the G-20 Finance Ministers and Central Bank Governors met in Baden-Baden, in southern part of Germany and discussed among other things about Africa and how to create favorable atmosphere for foreign investments in different African countries. The initiative came from the German government that hosted the conference. Accordingly, the G-20 finance ministers “acknowledged their responsibility” to combine forces “to tackle” the economic crises that many African countries are facing. This kind of initiative is good for many African countries as long as the policy makers and the policy itself could address the burning issues that many African countries are being confronted. However, in order to get rid of all the problems that many African countries are facing, the aim of the policy and its theoretical and philosophical foundations must be known. It is clear to anybody that without theory there cannot be any praxis. If one looks at the document that was produced and presented to the conference, and those institutions that were assigned to formulate a framework that can serve as a guideline for investment, one cannot know, however, the scientific and theoretical basis of such kind of a framework.
The two institutions, the IMF and the World Bank, as a matter of fact did not have good records in the past in dealing with Africa’s economic crises. Practically over the last 50 years these two institutions formulated the economic policies of many African countries, and dictated the governments how to implement the policies. Since political independence many African countries were not allowed to formulate their own economic and social policies that reflected the real situations that did exist on the ground. Neither were there debates about the merit and demerit of the economic policies that were imposed by these institutions. Intellectuals of various African countries did not have the chance to discuss and debate about the policy issues that touch the lives of millions of Africans. While West European countries, including Japan and South Korea formulated and implemented their own economic policies without foreign interventions, African countries were not allowed to formulate their own economic policy. The political and military construction after the Second World War while favored many West European countries, including Japan and South Korea to reorganize their societies and build their economies on firm foundation, for various reasons African countries did not get the same kind of chance. Though they became nominally independent, they were compelled to pursue the old division of labor that threw them in weak position. Until today all economic policies have been imposed by the Bretton Woods institutions and the international community. As studies show and the realities on the ground prove that all those economic policies that were implemented as prescribed by the Bretton Woods institutions could not solve the economic and social problems of the continent. The economic policies rather inflicted heavy damages to the African societies. Instead of a coherent, an integrated and dynamic economic and social system, we observe fragmented economic structures that could not raise the living standards of the majority of the people in various African countries. The policies as such did not have the capacity to create true national wealth with multiplier effects. Therefore, the various policies of the last 50 years rather deepen the economic and social crises of many African countries. Still today many African countries are dependent for their income on one or two exportable commodities. Most of the commodities are being exported without being processed.
In the year 2017 African countries should not still formulate their own economic and social policies. As if they are not independent, they must accept and implement again and again the policy prescriptions of the IMF and the World Bank. This time to0 the continent and its people should not expect something fruitful that can address their abject situations. The fact that the African Development Bank could participate this time to formulate a policy document, does not imply that the Bank has a say in bringing its own version of economic policy that really touches and analyzes the economic and social crises of the continent. Since the African Development Bank itself advances the same ideology like that of the IMF and the World Bank, the disparate African people should not expect something new. From this vantage point let’s look at the merit and demerit of the document that was prepared by the International Monetary Fund, the World Bank and the African Development Bank.
Problem of Identifying the Causes of the Crises!
The three institutions that were assigned to write the document focused on three major areas, namely, (i) the Macroeconomic Framework (ii) the Business Frame Work, and (iii) the Financing Framework. From the document it is not clear whether these three frameworks can be seen as the main causes of the African predicaments or not. At the same time, one cannot understand whether these three frameworks are being regarded as solutions or not for the burning issues of the continent that millions of Africans are facing. Therefore, it is not clear for us to identify the three frameworks whether they are solutions or causes of the economic and social crises of the continent. On the other side, the document asserts that growth in many African countries has weakened since 2014. This implies, however, that before 2014 many African countries were in a good position. Only for one reason the economy that was “stable” until 2014 fall apart like a house that is constructed on sand. However, the growth that these two institutions and the international community tell us, is not based on science and technology. Until today many African countries do not have integrated economic and social structures that are based on broader manufacturing activities. Therefore, it is not surprising for us if the economy cannot regenerate itself and creates conducive atmosphere for those millions of Africans that desperately search for job opportunities with reasonable wages to guarantee their lives and the lives of their families.
If one studies point by point the three main frameworks, it is very difficult to understand whether these three aspects could be instruments of economic policies by which one could tackle the crises of the continent. The other point what one could ask is, do such kinds of problems exist as the three institutions believe or the problem of the continent lies somewhere?
From the point of view of any society and the problem it faces, if one wants to solve those identified problems one must understand the causes of those visible problems before one formulates an economic policy that may solve the existing problems. Not only to any educated person, even to any layman any society is complex, and as such has different categories that are interwoven with each other that must be studied well. It is therefore very important to scrutinize the three frameworks whether they do exist in the form as they are believed by the IMF, the World Bank and the African Development Bank.
Let’s begin with the concept of Macroeconomic parameters. When the IMF and the World Bank, or for that matter the international community repeatedly talk about Macroeconomic policies, or Macroeconomics framework, what do they mean by that? Do they mean that Macroeconomics framework do exist in various African counties? And what are the constituent elements of Macroeconomics framework? Do the different parts of Macroeconomics exist in many African countries like in the Western capitalist countries? Can this concept be used as instrument of economic analysis everywhere irrespective of the differences of the economic and social structures that exist in different countries? What does the concept Macroeconomics mean? These and other concepts must be answered before we come to the real problems of the African continent.
It is not new that the IMF and the World Bank have been using the concept Macroeconomics since immemorial. On the phenomenal level the concept Macroeconomics deals with the general performance of a given economy. As such the concept has various categories on a phenomenal level. These are the unemployment and employment level of a given economy, general inflation, money and capital market, balance of payments, labor market and others, general output and aggregate level of consumption. The word Macro drives from the Greek, and means large. On the other hand, for the existence of Macroeconomics independent producers and households serve as its foundation. In other words, Microeconomics is the foundation of Macroeconomics. In turn the ideological basis of Micro and Macroeconomics is Neoclassical or Neo-Liberal theory. That means there must be Microeconomics structures that operate independently in any given country, and households that deliver workforces to the production sector. The competitive nature of these independently producing micro sectors and their organizational structures determine the level of employment and the wages that workers earn per hour. In other words, the buying power of the workers depends on the organizational structures, the degree of the technological development and the productivity of each firm, and generally seen the interconnectedness of all the economic sectors with each other. From this perspective the concept Macroeconomics does not tell us about the internal organization and structure of a given economy, the degree of technological development. Neither tells us the concept Macroeconomics whether a given economy operates on the basis of science and technology, and broad manufacturing activities that are based on vast division of labor. If we analyze further the concept, it does not tell us the production relations that exist in any given country, and other aspects like the existence of efficient institutions, and the existence of well-organized cities and villages, and whether the various parts of a given country are interlinked each other by various types of transportation systems. From this vantage point the concept Macroeconomics as has been used and applied as policy instruments by the IMF and the World Bank does not tell us whether a given country possess broad and transparent market structures that are organized on clear-cut division of labor across a given country.
When the IMF and the World Bank propagate and insist that each country should apply Macroeconomics policy, they simply assume that each country possesses macroeconomics structures. As a matter of fact, many African and other Third World countries do not have integrated and dynamic economic structures that resemble that of the economies of the capitalist countries. However, if we accept the concept Macroeconomics, it can only apply for those highly developed capitalist economies that operate on the basis of science and technology, and that have well-organized market structures across a given country. Being this is the case the economies of many capitalist societies is oligopolistic, while small and medium size firms produce spare parts of various types for those big firms that operate on a global scale. These big companies that are vertically and horizontally organized and interlinked, and that have hundred thousands of workers across many countries, and the big banks and insurance companies are dominating most of the capitalist societies. That means the concept Macroeconomics cannot analyze the true nature of capitalistic production and reproduction system. Neither tells us the inner logic of the system. Therefore, the concept Macroeconomics cannot incorporate all the social and historical process that capitalism has gone through. However, from the perspective of the IMF and the World Bank capitalism is not the outcome of historical and social process, but it is fallen from above like Manna. The problem we have here is that the forces that advocate neoliberalism, and hence Macroeconomics do not want to think in terms of social, historical, and cultural processes. In their beliefs there are no other alternative theories and policies that can serve as guideline to tackle the existing economic and social problems in many African countries other than applying macroeconomics policy instruments. Like in the Middle Ages, when the Catholic religion as the only accepted and dominating belief was, and when that time critical minded persons were chased and harassed, this time too those who oppose neoliberalism and try to present an alternative theory and policy are not welcome. Even those who pretend that they are opposing neoliberalism, when Africans present to them alternative ideas or argue differently, their ideas will not be accepted or will be mistrusted. Poor Dante, and all Renaissance men and up to the German philosophers, thinkers and poets that made great efforts to shape the human mind so that he becomes human and self-reflective, it is sad when their efforts remain in vain. Those forces that advance the neo-liberal ideology and struggle to convert the world into a neoliberal supermarket for the sake of power and profit making are fighting against these humanistic values and ethical standard that were developed by those great European thinkers of the 14th century up to the 19th century.
If we want to apply the Macroeconomics policies in such backward economic and social conditions that exist in many African countries, as a matter of fact the various features of Macroeconomics policies do not exist, like that of the capitalist economies that operate on high degree of scientific and technological level. Generally seen, the economies of many African countries are being characterized by scattered economic activities that operate independently without clear-cut division of labor. As such the market structures of many African countries are not transparent. The subsistence and the informal sectors are the main reproduction base of many African societies, and because of the very low level of technological development they cannot generate national wealth. Neither produces surplus products that can help them to expand their economic activities by introducing better technologies. Because of this bottleneck they remained condemned to produce year after year with the same kinds of backward technologies without ever changing their lifestyles. The two sectors are byproducts of global capitalism that has penetrated in many African countries at the end of the 19th centuries, and expanded throughout the 20th century and determined the phase of the economic structures of many African countries. Without altering or revolutionizing the production relations and the production systems, the penetration of capitalism could perpetuate underdevelopment and poverty. Therefore, the system can be manifested more as a monetary phenomenon rather than as a commodity production on the basis of wage labor and manufacturing activity. Such a system of production activity as we observe in many African countries lacks all the necessary attributes of capitalism as we experience in many highly developed capitalist societies. Simultaneously the system has compelled many African countries to specialize in cash crop production while neglecting cereal production for self-consumption. Since the beginning of the 90s many African countries, especially East African countries extended their activities to that of flower and sugar cane plantations. In this way global capitalism has converted many African countries into a plantation economy by deforming the attitudes of the people and changing them into ordinary workers without having any right to bargain for the improvements of their work places and better wage payments. The new plantation economy that was being manifested in this way is part and parcel of the world capitalist accumulation process that enriches the west while perpetuates underdevelopment in those countries that practice plantation economy. As such this kind of capitalistic infiltration into the African economy is by itself the main cause of underdevelopment and widespread poverty across many African countries. That means capitalism instead of raising the consciousness of the African people and brings improvements in their lives, has destroyed their thinking capacities. Instead of making them creative and achievement oriented, makes them dormant, and hence they do not understand the essence of life. Accordingly, the macroeconomic policies of the IMF and the World Bank that become instrumental of expanding plantation economy across many African countries created chaotic conditions in these countries. By wrongly advising various African governments to apply macroeconomic policies, the IMF and the World Bank prevented the countries and their governments to introduce systematic industrialization that is based on manufacturing activities across each country. Due to the pressure and aggressive behavior of the international community and its institutions, African governments and the academic community are very much confused in choosing the right policies that are effective to cope with the economic and social crises that millions of Africans are facing.
With this the so-called import substitution industrialization that was installed in many African countries in the 1950s and 60s for the production of consumer goods for the new social class, millions of Africans were pushed from the rural areas to the cities in search of job opportunities. Unable to absorb the growing workforce, this reserve army was forced to engage itself in informal economic activities that are completely detached from the so-called modern sector. Since then, the two sectors and the cash crop activities that are spread in many African countries and the extraction of mineral resources characterize the features of many African societies. Here too we observe that how capitalistic infiltration in many African countries that is manifested in the form of import substitution industrialization corrupted the entire production system of many African countries. By introducing artificial needs, like the production of Coca Cola, Sugar, Cakes, Cigarettes, and other consumer goods that cannot fulfil the basic needs of the masses, the production potential of many African countries is practically destroyed. Instead of advising African governments to concentrate more on the production of necessary basic needs that are essential for human life, and systematic city buildings, and systematic cultivation of handicraft activities, small and medium size industries that can grow organically, experts from the west advised African governments to focus on import substitution industrialization that cannot expand either vertically or horizontally. Such kinds of productive activities that exist side by side with the subsistence and informal sectors hinder the transformation of the economy to Macroeconomics like that of the capitalist west. In other words, the systems cannot be transformed to that of capitalism that is being manifested into pure commodity production, which is interlinked with money and operates on the basis of wage labor, and science and technology. While the capitalist economy in each European country is associated with broad and transparent market economic structures, and since the systems needs well-organized cities and villages for the production and reproduction of commodity production on higher scale, the market economy that has been applied in many African countries is unable to create such kinds of structures.
From the above analyzed facts, the African economies do not possess all the necessary aspects of Macroeconomics. Many African countries do not have integrated market structures. The majority of the African people is being employed in the subsistence and informal sectors, and earns very low income that does not enable them to buy all the necessary basic needs.
If we try to understand the other two frameworks it is not clear for us what the IMF, the World Bank and the African Development Bank try to tell us. Let’s try to scrutinize the concept Business framework, whether it gives us any sense, and serves as point of analysis to understand the problem of the African economies. First of all, the word business implies nothing else than simple trading activity without production activity. In other words, the three institutions want to create an atmosphere for more business activities rather than expanding production activities on the basis of broad manufacturing activities. That means the three institutions are not interested in creating suitable atmospheres for the development of a coherent internal market that is based on diversified economic activities, and yet interlinked to each other so that the reproduction base of each particular society rises in scope and quality. That means, if one understands the intention of the three institutions, intentionally or not they create from the outset impossible situations so that countries that accept the compact program could not develop organically in all sides, and will have difficulty in developing new technologies that can create job opportunities for the majority of the people in each country that become part of the program. However, the problem in many African countries is not to broaden first of all business activities but stimulate production activities by introducing small and medium size industries that produce a variety of products that the people in each country really need, and can buy and consume them. In this case what must come first of all is not to stimulate business activity but production activity that can serve as the basis of ever-growing business activity. As a matter of fact, without production there cannot be trading activity. It seems that the three institutions confuse between cause and effect.
Let’s come to the financial framework. Like the business framework we remain here too in darkness. As a matter of fact, finance depends on the development of money circulation in any given economy and the degree of its velocity. The problem in many African countries is not as such finance, but the problem lies somewhere. The fact that the economies of many African countries depend on the bases of subsistence production and informal sector, the velocity and the strength of money is hampered by these two aspects that hinder the transformation of money into money capital that can serve as a source of investment. Many African countries do not lack money, what they lack is organized production activities on clear-cut division of labor. In addition to this, those wealthy people and the political elite that are integrated into the capitalist market spend their money for consumer goods that are imported from capitalist and other Asian countries. These aspects corrupt the development of an internal market in each African country, and hence the circulation of money from those money holders to the production sectors. This means as the velocity of money is very low, and those people that are being engaged in production activities do not get the necessary financial resource they could not expand their production activities and upgrade the technologies. In addition to this the very low-income base of the majority of the people, and their dependence on the subsistence and informal sector hampers the development of a money economy that is based on real commodity production.
Money as a means of financing investments confuses many African governments. Many African governments think and believe that they cannot develop their economies without Dollar and the Euro. They believe that their money is worthless, and hence cannot serve as means of finance capital to finance investments. The problem in many African countries is that like that of the production sector, the concept money is misunderstood and corrupted. The infiltration of capitalism into the African societies has destroyed the slow and organic growth of money economy that is based on an expanded accumulation. Hence the different metamorphoses of money cannot grow and being manifested like that of the capitalist economy that developed from commodity form into a pure token money as we see it and use it today. Today Dollar and the Euro are simple paper monies that do not have intrinsic values. The fact that they become international trading and reserve currencies confuse many Third World governments, especially African governments that they cannot develop their economies without Dollar and the Euro. This misunderstanding of money can be eliminated when each African country alters its production activity, and introduces an economic system that is solely financed by creating credit mechanisms. With this if each African government is in a position to control the movements of foreign currencies and allocate them only for the importation of machines and other essential goods that are needed by the majority of the people, the problem of money will be overcome. That means African countries do not need any kind of help and credit from capitalist governments and capital market.
From this perspective the financial framework that the three institutions try to explain to us must be understood differently so that we can analyze the causes of the African economic crises step by step. As I said above as long as we cannot understand the real causes of the African economic crises that are structural and endemic by nature one cannot simply work out a plan that cannot address the fundamental problems of the African people.
The Real Causes for African Economic Crises!
Why is it a problem for the three institutions to identify the economic and social crises in many African countries as we see today? In the social science there are different schools of thought that help someone to understand and analyze the social formations and economic relationships of a given country. The way different scholars brought up, and according to their inclinations to this or that kind of value system, they perceive and interpret social conditions differently. Hence there are two ways of apprehending social realities. The one is the essentialist method, and the other one is an empiricist way of perceiving social realties that prevail in different societies. The difference is that essentialists or those who use this method to analyze social realities try to apprehend all aspects that govern a given society. Therefore they try to understand and analyze the logical structure of a given social condition, by examining the constituent parts of a given social reality, like politics, social, cultural, and economic aspects. Since all these parts are interwoven, they influence one another. Therefore the entire system must be analyzed in its totality. The empiricists on the other hand focus on the phenomenal aspect of “social realties”, by excluding cultural, political and social aspects that govern a given society. For the empiricists power and economic relationships are not known, and therefore they are not objects of analysis. Social and historical processes play no role in shaping the human mind. The empiricists think that everything is given and no alteration through times is possible. Therefore, societies are static rather than dynamic processes. From this perspective they try to construct their theories and draw models that are detached from realities. In many cases they overlook social realities, and therefore poverty, hunger, and generally seen the lack of basic needs are no more arenas of scientific investigation. This kind of approach which is accepted everywhere is the main source of confusion that drives many societies into catastrophic conditions. As such empiricism overshadows the thinking and abstraction capacities of individuals, and makes individuals not to see things beyond the “perceived realities”. Hence, they are condemned not to search the real causes of social realties that prevail in each society. Though things on the ground are unbearable, and are not conducive for human life, the majority of the people think that such kinds of conditions are God given, and cannot be altered by human imagination. All things that what one sees on the ground can only be solved by market forces, if each individual pursues its own egoistic interest. From the empiricists point of view economics must be seen independently, and as such it has its own “rules”. Economics must be understood as an end by itself and not as a means to solve human problems. However, both Heinrich Pesch, and Georgescu-Roegen in their books, “The Teaching of National Economics”, and “Analytical economics”, respectively, insist that the primary objective of economic activity is the self-preservation of the human species. Contrary to this the empiricists or positivists preach that everything must be left to market forces, and governments should not interfere in the market processes. Otherwise, market forces will be forced out to leave the market. This is the empiricist or positivist way of thinking that is dominating the world, and that becomes everywhere the causes of underdevelopment, inequality, injustice, mass poverty, and all kinds of conflicts, and including wars. Since many African governments apply economic policies that is based on this kind of school of thought they inevitably create chaotic conditions. Governments that are compelled to apply an empiricist economic policy while they are shifting resources through various policy instruments to few people, they at same time destroy human and natural resources. In other words, human and natural resources could not be allocated to generate real social or national wealth.
According to the degree of the social systems that prevail in different countries, more or less all societies have different parts that hold the entire system together. These are political, economic, social, cultural and other value systems. The efficient and inefficient organization of a given society depends on the political and state systems that exist in different countries. Since political and state systems do not fall from above, historical, cultural, social and intellectual process that each country has passed through determine the organizational nature of these systems. Likewise, the intellectual and social movements that are being manifested in different forms determine the democratic and non-democratic nature of the state and the political system in each country. In other words, societies that have not experienced deep-rooted social and intellectual movements, and state systems that are not confronted by scientific debates will have difficulties to understand their roles and the meaning of a given society. Societies that have experienced different phases of modernization will inevitably have positive impacts on the minds of the political and social elite. In this case the political and economic elite understand its role in organizing its society so that democratic value systems slowly expand and engulf the minds of certain groups. However, the process of democratization and the emancipation of the state from old value systems depend on the social consciousness of certain groups that can develop from below upwards. In addition to these the industrial and technological changes that have become common aspects of most advanced capitalist countries could emancipate the masses so that it can challenge the suppression that come from the state and from those groups that control the economic system. In other words, the social differentiation that is induced by industrialization and technological transformation has positive impacts in shaping the minds of individuals. That does not, however, mean that each individual can understand himself and his role in his society. Since social systems are complex and different groups fight to exert their interests on the political system, the one that is economically strong can influence the economic and social policies of the capitalist state. This proves that there is an ongoing struggle in all areas.
Undoubtedly Renaissance, Reformation and Enlightenment have played decisive roles in shaping the political and state systems in Western Europe. Such processes and the introduction of mercantilist economic policies of the 16th and the 17th centuries could have positive impacts in the emancipation processes of then European societies. With this the process of industrialization and technological changes compelled state systems to modernize themselves so as to support the new accumulation process that was instigated by capitalistic production and reproduction process. When we study the emancipation process in Western Europe, the rationalization process of the mind is altered towards more of economic activities. The system of production and reproduction that has developed over the last one hundred year could eliminate other human attributes, like humanism and intuition. The fact that the humanistic movement was defeated, the inevitable process of such kind of development is to colonize other nations and subjugate them so that they become producers of cash crops. That means the rationalization process in Western capitalist countries that had started since the 15th centuries must undergo different phases of development to reach the present stage. That is why we see and experience full of contradictions in the system. In the era of globalization and neoliberalism, especially the economic elite that dominate the world economy tries so that things remain unchanged. As such the political and the state systems in many capitalist countries, though they hold the society together by Welfare system, they dominantly advance the interests of the oligopolistic class. Against this background many African countries will be having difficulties to confront such a system and seat together with the representatives of the governments and regional organizations like the EU and discuss on economic issues as equal partners. As a matter of fact, African governments must accept what the international community, and the Bretton Woods institutions decide.
When we come to African countries things are entirely different. The fact that the historical and social processes of many African countries were disturbed by slavery and colonialism, political and sate systems could not be evolved or develop like that of Western capitalist countries. During the colonial time foreign forces have done everything to corrupt the minds of the elite. Schools’ systems were organized so that enlightened elite cannot be produced. After political independence many African countries did not have the chance to formulate new curriculum that reflects the social realties of each African country that can be taken as a guide line of holistic development. Those political leaders who tried to go their own ways and attempted to industrialize their countries they were not welcome, and in the worst case they were forced out of office by means of coup d’état. Being this is the case many African states and the political system could not be stable. Every time foreign forces have tried to destabilize African governments and install forces that are favorable to their strategy. Under this atmosphere it is practically impossible to formulate an independent economic and social policy that can tackle the problems on the ground. Globalization of the 1990s has worsened this situation, and many African governments were compelled to militarize the state apparatus in the name of fighting terrorism, rather than modernizing the political and economic system. Therefore, the rise of dictatorship across many African countries, and lack of good governance is the product of all these processes. In other words, present day dictatorship, civilian or military in many African countries is a byproduct of global capitalism. It is not as such that African leaders are by nature dictators, but the production and reproduction system of global capitalism and its ideology has compelled many African leaders to behave like this. Global capitalism has also corrupted the minds of the academic class. Such an academic class is no more in a position to enlighten the masses so that they should struggle for social transformation and technological changes. Therefore, many African governments instead of advancing the interests of their countries and their people they become promoter of underdevelopment. The negative side of such kind of policy is chaotic situations across many African countries, and looting out the mineral resources. African governments in collaboration with foreign companies and other forces are stealing the resources of their countries and shipping them out to foreign countries. From this perspective the IMF, the World Bank and the African Development Bank could not see this aspect as one of the factors for the economic and social crises that prevail in many African countries. In their eyes and understandings political and state reforms are not necessary. The two aspects must be accepted as facts, and as such they cannot be points of debates, and analysis. Neither are they being considered as one of the causes of poverty and deep-rooted underdevelopment.
The political history of Europe, teaches us, however, a different story. Without genuine freedom that can free the minds of the individuals there cannot be real economic and social development. From Friedrich Schiller to Wilhelm Humboldt and others that shaped the minds of the political elite in Germany and other West European countries we learn that only true freedom is the main driving force of real human social and economic progress. States that do not guarantee true freedom and suppress their societies prolong the miseries of their own people. According to Wilhelm Humboldt who formulated the general education system for Germany, and the pathbreaker of true German civilization, any state has only one function; that is to secure freedom and prevent its people from any kinds of outside intervention that obstruct true development. Many African countries cannot guarantee true freedom and security for their people. Since they themselves become the victim of global capitalism, they must hold their people where they are. The people of Africa must remain in permanent darkness and poverty.
From this vantage point it is not that much hard to understand the economic, social, religious, ethnic, cultural and political crises that prevail in many African countries. These crises are the products of misconceived economic and social policies, which have more ideological character than solving the real conditions that prevail on the ground. All economic policies starting political independence were introduced and implemented in the name of a market economy. The Macroeconomics policies of the international institutes which are also supported and advanced by the Economic Commission for Africa and the African Development Bank couldn’t help the African people to come out of poverty. The policies have the sole purpose of cementing the existing social inequalities, while they enrich the rich ones. In addition to this, the various policies create a situation so that resources come out of Africa. African governments in collaboration with multinational companies plunder the resource of the continent. Tom Burgis in his book, “The looting Machine” shows how the continent is being plundered. To this, through unequal exchange the continent loses billions of Dollars every year. The importation of luxury products for the well-to-do class, and capital flight has impoverished the continent. Besides these, those African countries that are heavily indebted pay compound interest rates, when their debts are being scheduled. Therefore, when Macroeconomics policies are being applied in many African countries, have two negative effects. While they foster from within inequality and unequal development in any given country, on the international level the development gap between the capitalist countries and Africa will be widened. At the same time the social class that becomes rich distances itself from the masses, while it serves the interests of the capitalist west. In this sense it becomes socially, politically, culturally, and ecologically unaware. To use André Gunder Frank’s terminology, instead of a cultivated class that is industrious, such a center periphery relationship produces a lumpen bourgeoisie.
If we examine the various economic policies that were applied in the name of market economy, since the 1950s starting from Import-Substitution Industrialization, to Basic Needs Program, to the Green Revolution, and the so-called Structural Adjustment Programs (SAPs) of the 1980s, all these programs were formulated to confuse the African political and economic elite. If we look at the programs point by point all the programs do not have the merit of solving the basic needs problem of the African people. The first and fundamental aspect of any economic policy is to tackle the basic needs problem of a given population. Foods of all types that entail minerals, vitamins and proteins are issues that must be urgently solved, and must be addressed by any kind of economic policy. Clean water, housing for shelter, health care facilities, and proper education that can elevate the thinking capacity of a given population are the first priorities to be answered by any government. The next step is to systematically build cities and villages so that people come together and live. Without properly organized cities and villages it is not possible to create conducive atmosphere for creative activities and industrial locations of all types. As a matter of fact all villages and cities must be interlinked by transportation systems of all types so that the movement of man power, goods and capital can easily be facilitated. In short, any country must be organized according to certain rules and logics so that a dynamic and creative society could develop.
Unfortunately, all the programs of the IMF, the World Bank, in short the international community could not address all these issues what every country needs to develop as a nation-state and give a sense of living to its people. Instead, African governments were and are still being advised to implement economic policies that cannot create true national wealth, and that disperse their energy and weaken them. The economic policies of the IMF and the World Bank were and are not designed to make the African continent self-sufficient on all sides. Neither were the policies planned to introduce scientific and technological revolution in the continent by laying the necessary foundations like research and development center across a given country. As we observe, and numerous empirical studies prove that after the application of all these programs the continent could not advance on the path of science and technology. No single African country would be able to develop a coherent and an integrated market economy on the basis of manufacturing activities and expanded division of labor. In short, the IMF and the World Bank, and global capitalism are the main causes for African underdevelopment. The continent is the most tortured of all the continents across the globe. As long as the continent is not free from this kind of bondage, there cannot be genuine development. From this perspective this time too with “Compact with Africa” things won’t be better. Now let’s see the contents of the program and examine them whether they can deliver something that can help each country that has agreed to be part of the program, to develop an internal market on the basis of manufacturing activities and expanded division of labor.
What kind of investments, why for and to whom?
The funny thing about the “Compact with Africa” program is that the same institutions that perpetuate underdevelopment and poverty in the continent, this time too they are assigned to formulate such a plan. One cannot go to a doctor who repeatedly prescribes to his patient the wrong medicament that worsens his illness instead of curing him.
The program focuses on two main aspects, namely, infrastructure and foreign investment. In page 6 of the program, it is stated that the parties will discuss about a “stable macroeconomic framework”. As I have tried to show above many African countries do not have an integrated and well-developed internal market. As such all the necessary elements of macroeconomics are either in their infancies or do not exist. As long as the necessary elements do not exist, it is unscientific to talk about things that do not exist. That means there is nothing to be stabilized; instead, what the participant countries need is real development on all sides so that they develop an internal market that is transparent and manageable. Therefore, in an atmosphere of very chaotic conditions what one needs is systematic organization so that real division of labor can develop. Unfortunately, the Compact program does not address such an issue and starts from something that is practically absent.
If we look at the two aspects of the program closely, they will be mainly designed to attract so-called foreign investors and not to develop the participant countries. The planners speak generally about the need of developing infrastructure without specifying this aspect point by point. As a matter of fact under infrastructure one understands many things. But from the perspective of the planners what important is roads for foreign investors. From the scientific point of view if we expand this aspect, especially from the perspective of the African continent, the continent needs basic infrastructures on all sides. The development of cities and villages, institutions of all types that can mobilize human and natural resources for holistic development purposes, like sanitations, roads of all types for various transportation purposes, rail roads, trams in the cities, and subways, clean water, land management and agriculture, schools of all types, health centers, including alternative medicine, vocational schools, research and development centers, sport and recreation centers, theater and drama centers, etc. All these and other aspects that are vital for the development of a given society as a nation-state are not within the scope of the infrastructure program of the “compact with Africa”. From this vantage point the supposed infrastructure that the three institutions suggest will not help any African country to develop as a coherent and self-proud nation. Therefore the plan is worthless, and African countries could develop by making special agreements with those countries that have experience in city and infrastructure buildings, and really want to see a developed Africa. This can only happen on bilateral basis without the involvement of international institutions. What African countries need is railroad systems, trams for cities and villages, subways for big cities and their surroundings, and what important is the development of well-designed cities and villages that can serve as living environments for the African people. Since the planners plan from the perspective of private investment that generates profit, all the aspects that I have analyzed are not within the framework of the institutions. Therefore in the plan the meaning of societies and social systems are not mentioned. As a matter of fact, though in any country individuals live, these are social beings, and as such any country must also be seen as a society that should have all the necessary attributes so that the entire system functions like a metabolism.
When we come to the other aspect, it is not clear about the type of investments and their outcomes. It is well-known that foreign investors come to Africa or go somewhere not to develop the continent or another country, but in search of cheap labor, raw materials, and possibly market, not for the masses but for the elite. If foreign investors invest, the products are mainly for foreign markets; they are not and will not be produced to satisfy the needs of the majority of the people. It is well-known that in countries where the buying power of the majority of the people is very low it is very hard to sell the products in the invested country. If we see the types of investments, foreign investors invest only on those products that they can earn extra profit. Such kinds of investments that will be undertaken by any foreign investor do not follow the necessary steps of investments, like founding or the first investment, enhancement investment and rationalization investment that can help a given country to develop organically. As the investors do not make research and development, and do not make scientific experiments, such kinds of investments will not help the continent to develop science and technology. Neither is competition possible that can trigger further developments and that can force private investors to introduce new technologies. Because of the nature of investments, and as experiences show, foreign induced investments will not develop the necessary linkage effects, like backward linkage, forward linkage, consumption and fiscal linkages. In the absence of such kinds of linkages, and in the absence of internal competition, countries that are already part of the program could not develop an internal market. In this case the installed industries cannot create adequate job opportunities for those who seek jobs. The other aspect to be considered is such kinds of foreign supported investments cannot develop relations with the banking sector. When industries will not tend to take credit from the internal banking sector, and if they transfer the profit to their homeland the velocity of money will be hampered, and the existing money cannot be transferred into finance capital. This will automatically hinder the development of capitalism. Again, as researches show foreign investors have different mechanisms, they have developed to make the costs of production high so that they do not pay income taxes from profit. Such kinds of transfer price mechanisms are very difficult to detect, and they are the sources of hidden wealth transfer from underdeveloped countries to the capitalist west.
From this point of view the Compact with Africa is not a new development agenda that can help the African continent to develop fully on all sides. It is rather a new neo-colonial scheme with the aim of controlling the resources of the continent, including land. Like in other countries, where multinational companies are being engaged, foreign induced investments bring unequal development and resource plundering, rather than an integrated development that is based on science and technology. Citizens in each host country will be seen as second-class citizens, and in most cases, they will be deprived all their rights. In countries where the rule of law is not firmly established, and where civil society organizations are not well-developed, and practically intellectual movements are absent, multinational companies in cooperation with host governments can do whatever they like. Therefore, it is easy to bring the resources of each country under the control of the investors by buying them with paper money that the central banks throw in the market, and other accumulated money that private people possess. Since many African countries do lack consciousness, and do not have strong states that advance the interests of their own people, the above analysis is a realistic scenario. Historical experiences prove also that one of the main characteristic features of capitalism, among other things is to dominate other countries and make them its appendage, and not to bring balanced development in each country. Capitalistic globalization of the last 30 or more years prove that many Third World countries are advised to plant sugar cane, flower, straw beery, sesames for the various capitalist countries, while they neglect food cultivation for their own people. This being the case in the rural areas, African governments build hotels and other apartments for foreigners in the capital cities, while they throw their people in slum areas. This is especially the case in Addis Ababa, and in other capital cities like Nairobi and elsewhere. This is the true nature of present day global capitalism.
From this vantage point, in order to attract foreign investment other methods must be created. Those who want to invest in any African country they should have the intention to contribute for the development of that country. They must bring all their know-how with them, and show Africans to develop new technologies. The technologies they bring with them must have the capacity to produce all the necessary instruments and technologies each country needs to develop in all areas. Such investors must be integrated within the social and economic process and feel that they are part of the society where they live. They are not allowed to transfer their profits; instead, they must reinvest it in the country where they reside. Such investors can apply for citizenship, and as the citizens of that country they will have all the rights and obligations like the rest of the population. Only so foreign investors are welcome.
All in all the propaganda that African countries should be integrated in the value-added chain of the world market is simply a fiction. The problem is not only processing the different products, but also to bring into the continent real scientific and technological revolution that enable each African country to develop all kinds of instruments and machines that are really needed for holistic and sustainable development. Each country must be able to develop and produce all kinds of instruments that are needed to prevent all kinds of natural catastrophes and in case if damages occur to cope with the damages. This can only possible not by foreign investments that produce simple products, but by constant scientific researches and developing new technologies. Therefore, the supposed foreign investment could not help the development of the continent. It rather becomes an obstacle for real and holistic development that can address the continents need. The majority of African countries have ample opportunities to develop swiftly and organically if they avoid foreign involvements.
An Alternative Approach to Compass with Africa!
The full and genuine development of a given country is the affair of the government that rules its country and its people. As experiences teach us foreign countries have never helped to develop other countries. The example of Japan, South Korea and other Tiger states prove that because these countries have rejected the proposals that presented to them by the Americans after the Second World War, they could successfully develop in all areas. First the Japanese have rejected the neo-liberal agenda of the Americans, and others follow suit to pursue the right strategy of development.
From this perspective any African country needs political and state reforms. The reforms in these areas are needed to guarantee true freedom to the people. When the people get the right to express their ideas and organize themselves, they can become creative. In an atmosphere of suppression and police state there cannot be genuine economic and social development. This again needs the avoidance of foreign forces from all state organs. If elements that advance the interests of foreign forces are integrated in the state machinery of each African country there is always instability, and underdevelopment. This has been the case over the last 50 years. African bureaucrats have never felt that they are true citizens of their countries, and they forget that they have the obligation to serve their countries and their people. Under such conditions state organs and the governing class could not develop economic and social plans that can advance the interests of their people.
The main problem in many African countries is that after the first generation of rulers have gone, successive African leaders from the 60s onwards couldn’t develop real social awareness and consciousness. They become simply compradors that advance the interests of this or that capitalist country. Especially in Francophone African countries, the political system and the currencies of these countries are under the total control of the French government. Successive French governments have never allowed these countries to develop freely. Many French companies control the resources of these countries without bringing any tangible development for each Francophone country. This being the case, state and political systems in many African countries are being considered as private properties of the ruling classes, rather than being seen instruments of proper administration and wealth creation. The ruling classes of many African countries think and believe that resources of their countries belong to them rather than to the entire people they govern. Therefore, presidents and prime ministers of certain African countries sell the resources of their countries, including land for multinational companies. The money that is being generated in this way is being accumulated in foreign banks to finance the development of other countries. In this way many African countries are being plundered in many different directions, and this becomes a major obstacle of genuine development. These and other several issues are not mentioned by the IMF, the World Bank and the African Development Bank that formulated the Compact with Africa program. Without having clear ideas on all these things, and without having understood the meaning of real social and economic development the situation for many African countries is very bleak. However, there are still possibilities to overcome all these obstacles. Since we have not arrived at the end of history, and since history is a dynamic process Africans have the chance of developing their continent. They have the intuition, the intelligence and the will to develop their continent to bring justice to the continent. In order this to happen, African governments and the intellectuals must take bold actions in the following areas.
- Proper Education: Professor Klingholz and Professor Lutz, the two prominent demographic and development experts published a new study that shows how different nations could develop easily and become self-sufficient after they have taken the necessary steps in the area of education. Their studies begin from the Greek Civilization to the 1970s of the last century. In their book, under the title “who canexist in the Future? Education decides over the future of humanity “, showed that without the Greek Civilization that was supported by a special type of education system, that could shape the human mind, without Renaissance type of education of the 15th century, and without Martin Luther’s reformation, there could not have been such kinds of scientific and technological development in Western Europe. The late comers, like Germany in the 18th and 19th century, America during the 19th century, Japan during the Meiji dynasty, the Scandinavian countries, and other East Asian countries, all have pursued a unique type of education system that was appropriate for real development that is based on science and technology. Therefore, African countries must focus on mechanical and electrical engineering, physics and chemistry, vocational education, city planning and architecture, on sociological studies and philosophy, and others that bring genuine development, while they must discard macroeconomics and microeconomics from their curriculum. The so-called Development Economics that is being taught at many universities is not helpful in understanding the true meaning of economic and social development. It confuses students rather than bringing to them clarifications. In none of the textbooks it is being taught about the genesis of capitalistic development, and the scientific and technological revolution, that are the foundations of genuine economic development. When the great Prussian King, Friedrich the Great asked Voltaire for advice what he can do to develop his country, the philosopher Voltaire gave him as an advice to concentrate on arts and science. By following the advices of Voltaire, the great Prussian King had introduced major reforms that helped his kingdom to march on the path of science and arts. By concentrating on science and arts, African countries can also integrate into their curriculum’s parts of economic teachings, like industrial economics, organization, accounting, controlling, finance and management.
- The need of Institutions: As everybody knows many African countries do not have the necessary institutions that can mobilize human and natural resources. The institutions that are existing are not efficient, and in most cases they are backward and are not suitable for a holistic type of development. The technocrats and bureaucrats do not feel that they are accountable for their societies and countries. Most of them work for the interests of foreign countries, and as such they block real social transformation and economic development. In the absence of efficient institutions and persons foreign forces and companies come to Africa and plunder the resources of the continent. In many cases they advise bureaucrats to investment in areas that could not create real social wealth and perpetuate underdevelopment. Most of the investments that are being implemented have damaging consequences on the social, economic, cultural setup of the countries, the environment and psychological make of the people. Therefore, a well-educated bureaucratic class that is conscious in all areas is necessary for real scientific and technological revolution.
- Physical Economy: Physical economic principle is the opposite of monetary economic policy. It is merely based on the creative capacity of the human mind. Not monetary policy that brings real development, but physical investments of all types that are supported by internal credit systems. The foundation of such a strategy is machine industry that can be permanently upgraded by constant scientific researches and technological developments. From this perspective priorities must be given in the area of rail road systems, or what Schumpeter calls it Railroadization, that has greater multiplier effects. Since a railroad system entails so many aspects, like machine industry, design, planning and the productions of wagons, and other spare parts, focusing on this sector brings the quickest development for any country. Especially highly populated countries like Nigeria and Ethiopia need such a system.
Besides this, without the development of well-designed cities and villages the principle of physical economy cannot be materialized. Well-organized spaces for building houses, shopping centers of all kinds, including book shops, recreation center’s industrial location centers especially for small and medium size industries, etc. are prerequisites for physical economic development.
- Development and Research: Without constant researches in all areas there cannot be real development. African countries should first of all give attention in the areas of physics and mathematics. Without these two aspects any country cannot develop the necessary instruments of production and other instruments for studying the property of materials and plants. In short Physics is the source of true wealth. All other aspects like Biology and Chemistry can be studied and applied for development if the necessary instruments can be produced and presented. For all these physics is the foundation to real knowledge and development. No country can ever develop if it does not give priority to physics, and make continuous efforts in research and development.
- Agriculture: The development of agriculture depends if a given country could produce the necessary farming instruments. Though many African countries have ample opportunities to produce all kinds of crops, vegetables and fruits for internal consumption and as raw materials for the industries they mainly focus on cash crop production that hold them down, and which is one of the causes of permanent hunger and poverty. Therefore, the connection of manufacturing activities with the agricultural sector helps a given country to develop in all areas. As a matter of fact countries that neglect the production of all types of agricultural products they cannot maintain a healthy society. If a given country focuses in this area, it can reduce costs that can be allocated for other areas. It is well-known many African countries import food items that are not compatible to their dieting systems and that are not healthy. Due to globalization and free trade agreements, some countries import unhealthy foods from different countries that have damaging effects for their people. Diabetes, heart problems and fatness have become common in many African countries. One can avoid such unhealthy situations if one relies on its own resources for food.
- Energy: Only with efficient energy systems can a given country develop. Without efficient energy system one cannot move machines and mold iron and steel. In many African countries the main source of energy is charcoal. In order to produce charcoals hundreds of trees must be cut that have damaging effects on the fauna and flora of a given county. Because trees are being indiscriminately cut by the people themselves who do not have other alternatives, and by foreign companies that rob the continent’s wealth many African countries are being converted into deserts. Therefore, foreigners should not be allowed to rob the continent’s wealth, and there must be strict control in this area, and no foreign company is allowed to go to rural areas. By in large to solve the energy problem African countries should develop another energy resource, like Coal, water power by building small and manageable dams, sun and wind energy, and small types of nuclear energy. The combination of all these types of energy resources reduces depending on charcoal. The available of various and efficient energy systems is the foundation is systematic industrialization and an integrated economic system.
- Small and Medium size Industries: Small and medium size industries are the basis of systematic industrialization. If countries do not give priorities in these areas they cannot develop organically. Decentralized industrialization is more important than big industries, and true aesthetical industrialization is the foundation of humanistic development. Besides these, encouraging handicraft activities, like producing different types of music instruments, book binding systems, porcelain and glass manufacturing and various types of production activities of such kinds bring a healthy and real development for any African country.
- Reorganizing the Banking Sector to finance Development: Financing development is not an easy task. As experiences of the last 35 years teach us industrialization strategies that are based on international debt mechanisms are not the best options of development strategy. Countries that have borrowed from the international capital market whenever they are unable to pay, they must undergo through debt scheduling processes that increase the amount of debt that the particular country has borrowed. With such kinds of mechanisms banks earn compound interest rates that increase their wealth, and at the same time pauperize a given country. International debt system is one of the mechanisms that absorbs too much wealth from underdeveloped countries and transfer it to the capitalist west. It is part and parcel of the international capitalistic accumulation process. The case of Brazil, Mexico, Argentina and other Latin American countries prove that all these countries must fall under the control of international financial system, and because of the austerity programs of the IMF, especially millions of people in these countries had to pay heavy prices. The political, social, economic, and cultural impacts of international debt mechanism are incalculable. The system is brutal and ruinous. One of the strategies of the “Compact with Africa”program is to lend the money that is deposited in the form of pension funds in the Banks, here in the capitalist countries. Because of the very low interest rate that exists here at the moment this huge amount of money cannot be invested in capitalist countries. It is therefore necessary to invest the money somewhere in order to get extra profit. The ideal place is now Africa, though the risk is not yet well known. In order to avoid all this each country must organize its own banking system so as to generate internal financial resources. Central governments, local and municipal administrations by issuing special bonds and securities they can borrow from their people. At the same time governments themselves in cooperation with their central banks can create credit mechanisms that can be allocated for infrastructure projects, like bridges, canal systems, dams and other big projects. Besides this one can organize food for work program that can be financed through the contribution of all the citizens including those who live in foreign countries. Such a program should have a minimum duration of at least 30 years. If each citizen contributes a certain amount of money, monthly or annually each country can finance special projects that help the majority of the people. In this way one can avoid external credits.
In short if African countries want real development, they must reject any kinds of advices from the so-called international community and its institutions. No country has ever developed by applying macroeconomic policies. Conscious mercantilist economic policies that are based on theoretical, scientific and philosophical knowledge are the basis of genuine economic and social development. State supported development policies with private initiative, and with the active participation of the masses African countries could march on the path of true development. On the other hand, countries that always follow the advices of the IMF and the World Bank are condemned to permanent poverty and underdevelopment. Studies that are conducted by many critical economists, and edited by Doug Bandow and Ian Vásquez, in their book under the title “Perpetuating Poverty”, show that how the policies of the IMF and the World Bank have brought incalculable damages in many underdeveloped countries, especially in many African countries. This case also is confirmed by Professor Erik Reinert, in his book under the title, “How Rich Countries Got Rich… and Why Poor Countries Stay Poor”. These and other numerous studies show that these two institutions and the international community will not have the intention of developing the African continent. It is also an illusion to expect something good from these countries, while they are pursuing neo-liberal economic policies that foster inequalities in each country. Therefore, African countries must rely on their own intelligence and resources.
Dr. Fekadu Bekele is specialized in development economics. He has published numerous articles on various topics about development economics and international political systems. He advises various institutions and gives lectures on economic development. He is the author of “African Predicaments and the methodology to solve them effectively“
He can be reached at fekadubekele@gmx.de
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