WHAT SHOULD BE THE RESPONSE FROM AFRICA?

The message from the lessons examined above is unambiguous: this is an opportune time for Africa to free itself from the shackles of neoliberal capitalism and explore new paths to an endogenous development by and for its people. Everywhere, in the rest of the world, countries and regions are moving away from the discredited neoliberal paradigm. Africa has been the main victim of ruthless neoliberal policies imposed by the IMF and World for nearly three decades, with catastrophic economic, social and political consequences that the African people are still witnessing.

Remaining within that paradigm and continuing to listen to the IFIs will only worsen the situation in Africa. Therefore, it is time for African countries to make bold and decisive moves toward an alternative development paradigm. Political will is the key to such moves. Without a leadership willing and able to explore alternative development policies, little will happen. So, the fundamental question is whether African leaders have learned enough of the current debacle of neoliberal capitalism. The other question is whether they are ready to break with it and explore an alternative development paradigm.

1) Discard failed and discredited neoliberal policies

The first step in that direction is to challenge and reject all the failed policies advocated and imposed by the IFIs and which have cost so much to Africa.
During its first meeting, the Stiglitz Commission stressed that ‘developing countries should have expanded scope for establishing policies and institutions appropriate for their conditions. This includes developing frameworks that help insulate themselves from regulatory and macroeconomic failures in systematically significant countries.’[7]

Everywhere, countries and regions are just doing that. In Asia and Latin America, they are taking monetary, fiscal and other measures to mitigate the impact of the financial turmoil on their economies. African countries should also heed this call and take any measures deemed necessary to protect their economies from external shocks.

In this regard, African countries should move to restore capital controls and reverse liberalization of the capital account. These policies opened the door to speculative capital flows, tax evasion and increased capital flight, thus contributing to lowering Africa’s domestic savings while increasing its dependence on external financing.

African countries should also discard fiscal and monetary austerity as prescribed by the IMF, because these policies tend to choke off economic growth by limiting public investments in key sectors and by drastically reducing social spending. The stimulus policies, adopted by the United States, Europe and other OECD (Organization for Economic Co-operation and Development) countries, show that in times of crisis, fiscal restraint has no economic logic. So why should African countries accept fiscal austerity when their countries are in an even worse shape than the developed countries?

Another imperative is the rejection of trade liberalization and the restoration of protection for domestic markets. In the name of ‘free trade’ and ‘comparative advantage’ African countries were forced to accept sweeping trade liberalization that has been very costly in economic and social terms. Trade liberalisation has increased Africa’s external dependence, destroyed domestic industries, accelerated deindustrialization and led to the deterioration of its terms of trade. While African countries were being told about the virtues of ‘free trade’, OECD countries were provided huge agricultural subsidies erecting disguised or open protectionist policies, all of which have made ‘free trade’ a joke.

Still in the name of ‘comparative advantage’, African countries were forced to give priority to cash crops at the expense of food production. The food crisis and Africa’s great dependence on food imports illustrate once again that the IFIs have misled African countries into adopting policies that are detrimental to their fundamental interests. The IMF and World Bank, which bear a great responsibility in the food crisis in Africa, are now all too happy to ‘assist’ African countries in proposing them ‘emergency loans’ to buy food from Western countries.

The same IFIs are behind the attacks against the state that translated into the destruction of the public sector to the benefit of foreign capital. They imposed the privatization of state-owned enterprises in the name of ‘private sector development’ and ‘efficiency’. And private sector development required engaging in a race to the bottom in order to attract foreign direct investment (FDI). To that end, African countries raced to sell off state-owned enterprises, mining industries and natural resources. In several countries, there were even ‘ministries of privatization’ whose main mission was to sell off some of the most profitable public assets with little positive return for their countries.

On the contrary, privatization translated into massive job losses and social exclusion. It may be argued that there is some correlation between the aggravation of poverty and the growing foreign control of resources and assets, because this control is associated with repatriation of huge profits and tax evasion. In a sense, privatization can be assimilated to a robbery of national patrimony – including strategic sectors – through the transfer to foreign control of assets built throughout years of sacrifices by the people.

Therefore, reversing privatization is necessary in order to restore people’s sovereignty over a nation’s resources. It is time for African countries to put back into public and collective hands the control of key sectors and natural resources. No genuine endogenous development is possible without control of a nation’s wealth. So Africa should learn from the lessons being given by capitalist countries, including the United States, which are nationalizing their banks and financial institutions. But more importantly, African countries should learn from the examples of other southern countries, like those of South America and Asia, where governments are taking back what was sold off to multinational corporations.

2) Restore the role of the state in the development process

Reversing privatization and regaining control of key sectors and natural resources requires a strong and active intervention of the state. Proponents of such intervention have been vindicated by the conspicuous failure of laissez-faire policies and the resurgence of state intervention in developed countries. In Africa, there has been a correlation between state retrenchment, poverty and social exclusion. In a sense, market failure is worse than state failure. The national security of a country requires a strong and active state. In fragile nations, state intervention is indispensable to the process of nation-building. African countries should defend public ownership and state-owned enterprises without stifling the private sector. This is one of the key lessons of the failed neoliberal policies and of the current financial crisis.

3) Reclaim the debate on Africa’s development

All the above policies have one single objective: Africa and Africans should reclaim the debate on their development. They should never accept again that others speak in Africa’s name. Genuine development is an endogenous process. No external force can bring development to another country. So, Africans should restore their self-confidence, trust African expertise and promote the use of African endogenous knowledge and technology. Since development should be viewed as a multidimensional and complex process of transformation, there can be no genuine development without an active state. However, the state is no longer the only player. It has to contend with civil society, which has become a key player in the debate on Africa’s development.

In the search for an alternative paradigm, Africa should revisit key documents, such as the Lagos Plan of Action (LPA), the African Alternative Framework to SAPs (AAF-SAPs), the Arusha Declaration on popular participation, and the Abuja Treaty, among others. An update of these documents and the integration of contributions made by the struggles of civil society organizations in the areas of gender equality, trade, finance, food sovereignty, human and social rights should help Africa come up with its own development paradigm.

Is it necessary to stress again that Africa’s regional and continental integration is one of the keys to its survival and long-term development? Because only a collective and concerted effort can help Africa overcome the multiple obstacles that lie on the road to an endogenous, people-centered, democratic and sustainable development. So Africa should learn from the experiences of other regions of the global South. The Chiang Mai Initiative in Asia has been strengthened and a new step has been taken to make it a full-fledged monetary fund. In Latin America, the Bolivarian Alternatives of the Americas (ALBA) and the South Bank are strengthening the solidarity of the region through closer economic, financial and political ties. These instruments help these countries to resist in a stronger position. Africa has wasted so much time in the process of integration. The crisis should once for all open the eyes of African leaders and citizens that the only way for Africa to survive is to move toward a genuine integration of states and peoples.

4) Financing Africa’s development

The external debt crisis, the declining trend of ODA and the low level of FDIs, all this shows that Africa cannot count on external sources to finance its development. Reclaiming its sovereign right to design its own policies goes with vigorous efforts to raise resources internally and shoulder a greater part of the resources needed to finance its development. The African Development Bank (AfDB) rightly claims that ‘The continent needs to boost domestic resource mobilization – through financial and fiscal instruments – to support growth and investment. Addressing these issues require strategic interventions at various levels.’[8]

So, the priority should be domestic resource mobilization. African countries should adopt new monetary and fiscal policies aimed at increasing domestic savings. And the potential is huge indeed, if African countries give themselves the means to achieve this objective. In a study, Christian Aid indicates that African countries are losing billions of dollars in tax revenues for lack of enforcement of agreements with foreign companies investing in various sectors, especially in the mining industry. Confronted with weak and ineffective states, these companies resort to various means to avoid paying taxes or pay lower taxes. It is estimated that African countries are losing close to US$160 billion each year, as a result of tax avoidance and tax exemptions.[9]

Therefore, to compel foreign companies to fulfill their obligations and expand the tax base, African countries need to reorganize their states and make them genuine instruments of development. In other words, they need effective states able to enforce agreements and mobilize resources for development. This is a key recommendation made by the United Nations Conference on Trade and Development (UNCTAD) in its report on Africa.[10] It argues that it is time to build developmental states and put them at the centre of the development process in order for African countries to recover the policy space lost to neoliberal institutions over the last three decades. The report says that such states should help African governments improve tax collection, formalize the sprawling informal sector, stop capital flight, make more productive use of remittances from African expatriates and adopt effective measures to repatriate resources held abroad.

Remittances from the African Diaspora have become a growing source of financing. In 2007, they were estimated at US$27.8 billion. They represent 3.9 per cent of GDP for North African countries and about 2 per cent for the rest of the continent.[11] But for some countries, remittances account for up to nearly a third (30 per cent) of GDP. In many countries, remittances are higher than ODA and FDIs.[12] In addition, they constitute a more secure source of financing for development, almost cost-free, while both ODA and FDIs are associated with political, economic and financial costs that are much higher than their potential ‘benefits’. So, integrating remittances into a coherent development strategy would reduce external dependence and make expatriates contribute more to Africa’s development.

Another channel through which Africa can find non-traditional financing is South–South cooperation. With the rise of new powers sitting on top of huge cash reserves and willing to build a new type of cooperation with African countries, it is an opportunity that should be used wisely. Already, several African countries are turning more and more to these powers, like China, India, Iran, Venezuela and Gulf countries, for loans, direct investments and joint ventures. South–South trade has increased from US$577 billion to US$1,700 billion between 1995 and 2005 and it keeps rising.[13] In 2008, trade between Africa and China was estimated at US$107 billion, with a favorable balance for Africa. By developing its economic and financial ties with the rest of the South, Africa will strengthen the policy space it needs to weaken the influence of ‘traditional partners’.

African countries should pursue more forcefully the call for the unconditional cancellation of the continent’s illegitimate debt. The multilateral ‘debt relief’ initiative (MDRI) is not an adequate response to Africa’s demand. Only a few countries are included and they have to comply with crippling conditions dictated by the IFIs. If Western countries and institutions do not heed the demand for debt cancellation, African countries should have the right to take unilateral actions to stop debt payments because they violate the basic human and social rights of their citizens.

Along with debt cancellation, African leaders and institutions should join civil society organizations in calling for reparations for centuries of slavery, colonialism, domination, exploitation and plunder of the continent’s resources. This is a protracted struggle, but one which can be won if Africa is willing to sustain that struggle for as long as it takes.

Likewise, Africa should launch another major struggle for the repatriation of the wealth stolen from the African people and illegally kept abroad with the complicity of Western states and financial institutions. Tax evasions, capital flight and transfer pricing have deprived African countries of billions of dollars that should be returned to serve the continent’s development. Therefore, Africa, through its regional and continental institutions, should launch a campaign for the repatriation of that wealth and seek the help of the United Nations institutions, the solidarity of the global South and the support of progressive public opinion in the North.