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 Globalization and Economic Development: Can Sub-Saharan Africa Avoid Marginalization?

(Abstract)

The world economy has experienced remarkable integration since 1950. The last quarter of the twentieth century has witnessed an acceleration of the process of globalization. The revolution in telecommunication and information technology has facilitated the globalization of the world economy in which integrated cross border organization of economic activity including production, trade, investment, financial flows, technology transfer are increasing and expanding led by transnational economic actors particularly transnational corporations.

Africans perspectives on globalization is influenced by the fact that Africa's integration into the global economy since the 15th century is written by blood and fire of "slavery, military defeat, partition, colonialism, and economic exploitation and dispossession". The neo-Marxist and dependency school has influenced intellectual opinion of social scientists in Africa. Capitalism and the market economy have been associated with colonialism and dependence on primary products for export. Economic reforms and development strategy that initially focuses on exploiting Africa's comparative advantage in primary production was seen as condemning Africans to be hewers of wood and drawers of water for the industrial world. Liberalization of trade and investment and dependency on the private sector to promote growth and development was and is still seen as entrenching the control of the modern sector by transnational companies and foreign minorities.

The worldwide liberalization of trade and financial sectors has facilitated and accelerated globalization. Increasingly more industries, particularly unskilled labor intensive manufacturing, are becoming footloose. A slight shift in cost can lead to shifting comparative advantage. Not all countries and certainly only a few of the people in Sub Sahara Africa are participating in the global economy. Many rural Africans depend on subsistence production for the supply of food and housing. Lack of adequate physical and institutional infrastructure has drastically reduced opportunities for rural Africans to beneficially participate in the global economy. National markets in Sub Sahara Africa are not internally integrated. Poor domestic transport and communication system makes major ports and cities better linked with the rest of the world rather than with there own hinterland.

Is Sub Sahara Africa being marginalized from the global economy because of bad domestic policies or unequal and exploitative terms of integration into the global economy? Does globalization offer poor African countries an opportunity to leapfrog several decades of development if they combine their low wages with basic education; technical skills and export led growth-taking advantage of the rapidly opening global markets. Can globalization be managed to promote pro-poor growth that utilize abundant labor, generate employment and avoid ruthless growth that increases income inequality and the ranks of the poor?

To promote broad based growth and human development; Africa does not have a choice of disengaging from the global economy. Most countries that have achieved growth, structural transformation and human development had at least effectively utilized available trade opportunities. Countries that failed to promote exports and erected barriers against imports, like most Sub Sahara Africa, have fallen behind in terms of growth and human development. The challenge at the national level is to design policies that take advantage of the opportunities offered by the global economy while minimizing the risk of inappropriate exposure to global currents. Integration into the global economy where competition is the order of the day can heighten domestic inequities in countries where capability to participate in the global economy is highly skewed.

Since the early 1980s many African countries have adopted IMF and World Bank sponsored Structural Adjustment Programs (SAP). These programs have not achieved sustainable growth. The per capita income growth of most African countries that have received many structural adjustment loans have been zero or negative. Export growth have been low and budget deficits continue to be unsustainable. Inflation in non-CFA zone countries has decelerated only in the past five years. Structural and institutional reforms such as privatization, financial regulation and competition policy have lagged behind.

Many African countries continue to face unsustainable external debt. The HIPC initiative has yet to reduce external indebtedness to sustainable levels particularly given the collapse of African terms of trade.

Do African states facing unsustainable external debt crisis and under the tutelage of the policy conditionalities of the Bretton Woods Institutions have policy choices that can integrate into the global economy and at the same time promote broad based development that will reduce mass poverty? These are key questions that will be addressed in this study.

The paper discusses Sub Sahara Africa decreasing participation in the global economy largely focusing on its decreasing share in the global income, international trade and foreign direct investment. The small improvement in growth and export performance in 1995-97 that led the IMF to assert that Africa may have turned the corner to a better future has not been sustained. The global recession will worsen Africa terms of trade and growth prospects.

The paper will analyze policies to integrate Africa in the global economy while promoting poverty reducing growth. Broad participation of the population in the market economy by utilizing Africa comparative advantage in agriculture is an important initial step. Policies that support smallholder farmers to participate in a market economy and protect rights of peasants, including women, to access land, credit and improved technology is particularly important for broad-based development.

African countries mineral resources have not been fully utilized. Foreign investment is indispensable for the exploration and exploitation of these resources. It is however important to adequately tax the rents to support human development that is an end in itself but will also create new areas of more rewarding comparative advantage. Special efforts are however needed to attract FDI in export-oriented manufacturing. Investment in infrastructure including telecommunication, power, water supply, roads and ports is pre requisite. The private sector may provide part of this investment particularly in telecommunication, but the public sector will have to be responsible for the other investment particularly road infrastructure. A minimum basic level of human development in the form of universal basic education, health, nutrition and housing are necessary for a sustained integration into the global economy as demonstrated by Mauritius. The technological changes and information technology revolution challenges each country that to sustain beneficial participation in the global economy to establish a knowledge based economy with widespread opportunities for life long learning.

Last but not least, the paper will analyze what type of international support Africa requires to gainfully participate in the global economy and make globalization work for the poor. The discussion of the new International Financial Architecture ignores the problems of availability of development finance for African countries. The new round of trade negotiations should explicitly address problems of market access for agricultural products and labor intensive goods that are of interest to African countries.