Africa needs less, not more, World Bank intervention


“Robert Zoellick, who has been nominated to become the president of the World Bank, said that he would make Africa his top priority”, The International Herald Tribune recently reported.  “Clearly, there needs to be a big focus on Africa”, Zoellick said in an interview.  “This isn’t new.”(1)

These statements are ominous ones for the world’s poorest continent.  As Zoellick’s words imply, the Bank – and its sister institution, the International Monetary Fund – has an extensive history in Africa.  “Africa has seen the most intense and recurrent application of structural adjustment programs over the past two decades”, the UN Conference on Trade and Development (UNCTAD) reports, referring to the notorious ‘free market reforms’ imposed on countries across the global South (“third world”) by the Bank and Fund.(2)

This “big focus” has had catastrophic results, and there’s no evident reason to believe that Zoellick’s new push will end up any differently.  Despite its rhetorical commitment to ‘fighting poverty’, ‘supporting good governance’ and ‘promoting development’, the World Bank is still fundamentally a Trojan horse used by rich countries to gain access to and to then exploit the economies of the global South.  Its policies have played a major role in locking Africa in the prison of underdevelopment and dependency; their destructive nature is revealed by the fact that rich countries running the Bank systematically ignore the same prescriptions they force on the poor.  If authentic, sustained economic development is the goal, history shows that Africa should seek less, not more, intervention from the Bank.

Africa’s recent economic history is mostly, but not uniformly, bleak.  The two decades after the late 1950s, when the first wave of decolonization swept through the continent, were characterized by steady economic growth and appreciable improvements in economic and social indicators for millions of Africans.  Many of the first independent governments pursued a development strategy known as import-substitution industrialization, which stresses government support of domestic products over foreign imports in order to create conditions conducive to the growth of domestic industries and the achievement of technological advancement.

During what are often called the ‘development decades’, economic growth was consistent at roughly 4% a year, while manufacturing increased by 7% annually.  Educational enrollment and life expectancy shot upward while infant mortality and illiteracy plummeted.  Between the late 1960s and mid-late 1970s, GNP per capita in sub-Saharan Africa grew by nearly 20%.(3) Multinational banks in the global North (“first world”), flush with petrodollars after the oil price increases of the 1970s, eagerly lent money to the equally-eager but cash-strapped African regimes pursuing industrialization – who, in consequence, grew progressively indebted.

The heady optimism of the development decades quickly dissipated in the late 1970s.  The oil shocks eventually triggered a harsh recession in the North, causing demand for African goods to dry up while commodity prices tumbled.  The timing was especially bad for Africa – the slowdown took place at a time when the region was especially desperate for foreign earnings – which began to see its modest improvements in economic development and living standards sink under the weight of economic decline.  International private creditors became less eager to lend and more eager to collect the debts of poor countries.  They were greatly assisted in this by the World Bank and International Monetary Fund, to whom many African governments had to turn to receive much-needed money.  The problem is that these loans came at a significant price.

The year 1980 is generally considered the beginning of the era of “structural adjustment”, which stretched through the 1990s and, quite arguably, continues to the present.  The appellation refers to the programs the World Bank and IMF forced Africa and most of the global South to undertake in order to qualify for loans.  Interestingly, the 1980s (and, less frequently, the 1990s) is also widely known as the “lost decade”, due to the economic misery endured by the global South – thanks in no small part to Structural Adjustment Programs (SAPs).

Broadly speaking, the goal of SAPs was to reform Southern economies along harsh “free market” lines.  The mandated reforms usually involved the opening of poor country economies to Northern imports and investment; the privatization of state-run enterprises; drastic restrictions on government spending on social programs; and substantially withdrawing government support for domestic industry.  The World Bank claimed that these measures would stimulate rapid economic growth and, by extension, reduce poverty. 

The Bank’s grandiose promises failed to materialize.  Citing the Bank’s own figures, UNCTAD notes that, after two decades of “structural adjustment”, the number of people in sub-Saharan Africa living in absolute poverty (on less than one dollar a day) had increased from 217 million to 291 million. The average per-capita income of normal Africans decreased by 10% in the same period; the poorest 20% saw their incomes plunge at twice the rate of the population generally. (4)

According to the Filipino economist Walden Bello, head of  the think-tank Focus on the Global South, the average GNP of sub-Saharan Africa shrunk by 2.2 percent annually in the 1980s; by 1990, the continent’s per-capita income had receded to its level in the 1960s.(5)  In 2000, two decades after the advent of “structural adjustment”, the UN Economic Commission for Africa reported that the continent “has the worst income distribution in the world”, with 59% of rural and 43% of urban dwellers surviving on less than one dollar a day.(6)  A World Bank report published at the turn of the century found that, internationally, the gap between rich and poor countries had become ten times wider over the course of the preceding three decades.(7)

Furthermore, rapid trade liberalization – a central tenet of structural adjustment policies – has exacted a ghastly economic price on the continent.  A Christian Aid study demonstrated that these measures cost sub-Saharan Africa $272 billion during the first two decades of adjustment, roughly the same amount the region received in aid.  Had they not been forced into dismantling trade regulation, countries in the region would have saved enough money to “wipe out their debts and…pay for every child to be vaccinated and go to school.”(8)

Arguably the most thorough examination of Structural Adjustment Programs ever undertaken was that of the Structural Adjustment Participatory Review International Network (SAPRIN), a joint initiative of international civil society, the World Bank, and national governments.  Supported by such thoroughly mainstream institutions as the European Union, the UN Development Program, the Kellogg Foundations and others, SAPRIN’s report is as damning as it is thorough, which probably explains why the Bank attempted to suppress the initiative and its findings.(09)

Documenting the consequences of SAPs for the South generally, SAPRIN writes that “The concentration of income has increased markedly as wages and employment among the lowest-income groups have dropped significantly”, while poverty has “been intensified and expanded by privatization” of state-owned industries.  The tight regulations on government spending demanded by the World Bank – partly intended to free funds for debt repayment – exacted an especially devastating social cost.  “Declining public investment in education and health care are relegating the poor to another generation of poverty”, while “user fees for education and health care have been instituted during a period when the suffering of the poor has intensified and social services are most needed.”

Citing a UN Economic Commission for Africa study, former senior IMF economist Davison Budhoo notes that “expenditures on health in IMF-World Bank programmed countries declined by 50% during the 1980s, and spending on education declined by 25%”, reflecting a broader trend in the global South.(10)  The consequences are discussed by Bello, who cites a UN study from the late 1980s showing that health care systems throughout the continent were “collapsing from lack of medicines”, while “schools have no books, and universities suffer from a debilitating lack of library and laboratory facilities.” Meanwhile, the WHO warned that cholera emerged resurgent, spreading at a ‘catastrophic pace’ as a result of the breakdown in water and sewage systems triggered by the economic crisis.(11)

The effects were similar for much of the poor world’s healthcare systems.  As “more people now seek medical attention only when their illness is already severe”, SAPRIN notes, there has been a corresponding “increase in the number of people who die in their homes from curable diseases, often creating public-health hazards by spreading disease in their communities.”  Fiscal belt-tightening and the introduction or increase in school fees caused dropout rates to increase “in most countries, particularly among girls”, SAPRIN continues. 

These are just some of the results of the World Bank’s “big focus” on Africa, to use Zoellick’s phrase.  Although it would obviously be incorrect to lay the continent’s misery exclusively at the Bank’s doorstep, it is equally obvious that the Bank’s policies have had catastrophic economic and social consequences for Africa’s poor.  Rather than stimulate intense economic growth, as was promised, they’ve accelerated the continent’s slide into misery and reinforced its state of financial dependency on rich countries.

Some analysts might argue that the dark days of structural adjustment are now behind the Bank and the Fund.  Prompted by an international mobilization against the consequences of SAPs, the institutions have been forced to shift track; both claim to have drastically reduced their use of specific economic policy conditions in lending programs since the year 2000.(12)  Now it is said that they’re used only when two safeguards are met.  First, the conditions must be part of a broader development strategy ‘owned’ by the recipient country; secondly, they must be rooted in an analysis of their likely impact on poor people.(13)  This is said to be part of the institutions’ intensified focus on ‘good governance’ and poverty reduction.

Oxfam, Christian Aid and UNCTAD (14) have all studied – and roundly dismissed – the Bank and Fund’s claims to have retreated from the use of conditions.  Christian Aid and UNCTAD have each documented the continued attachment of SAP-style demands to loans, in addition to wholly “new” varieties.  Oxfam argues that recent years have actually seen an increase, not decrease, in the amount of specific economic policy conditions attached to Bank and Fund loans.   

As for the Bank and Fund’s commitment to good governance and poverty reduction, the example of Mali shows that each institution is actually rather uninterested in both objectives, and that their main priority is still the expansion of corporate power and ‘free market’ economics across the global South.  To demonstrate this, Oxfam compares the World Bank’s policy toward Mali and Senegal. 

In a recent Bank and Fund assessment, Mali, one of the poorest countries in the world, was ranked the least corrupt of all the Heavily Indebted Poor Countries.  Senegal, meanwhile, is both more corrupt and wealthy than Mali.  Therefore, if the international financial institutions were seriously committed to poverty reduction and good governance, it would follow that Mali would receive more funding than Senegal.  In fact, Mali receives half a much as its neighbor.

The reason?  Mali has refused to privatize its cotton industry, which is integral to the country’s social and economic well-being.  $72 million worth of aid is being withheld from the country (in which 90% of people live in poverty) for this reason.  In 2004, the Bank withheld $50 million because of the Malian government’s refusal to end price support systems for cotton farmers, designed to mitigate the impacts of price decline fueled in no small part by rich country subsidies of their own industries (see below).  When Bamako finally caved in and agreed to expose its poor farmers to the unjust international system, prices immediately dropped by 20% and poverty increased by 4.6%.(15)

 

One of the most fundamental requirements for long-term, sustainable development in Africa is the creation of equitable economic relationships between the continent and the rest of the world, carefully managed in such a way that supports the needs of the disadvantaged.  The Bank and Fund have failed to deliver constructive economic integration for the continent.  Instead, their mandated cutbacks in state intervention in economic affairs have exposed it to a set of ludicrously unjust trade rules that favor rich counties.  The results have been, unsurprisingly, disastrous.
 
Many of the most fundamental and well-known exits from the African tragedy could be opened immediately, if the rich countries and international financial institutions were interested.  In a major 2002 report on the international trading system, titled “Rigged Rules and Double Standards”, Oxfam wrote that “If Africa, East Asia, South Asia, and Latin America were each to increase their share of world exports by one per cent, the resulting gains in income could lift 128 million people out of poverty.”  Africa would generate an extra $70 billion in revenue – about five times as much as it receives in aid and debt relief annually.(16)

As Africa has come under greater influence from international financial institutions, however, its position in the world economy has continued to slip.  In 1950, the continent accounted for more than 3% of world trade; the most recent figure is 1.2%, if South Africa is excluded.(17)  Africa’s share of world exports dropped from 6% in 1980 to 2% in 2002; during the same period, its share of world manufactured exports remained stable at 1%, while their value grew at only half the average developing country rate.(18)

To facilitate genuine development, African exports of all varieties need to be granted privileged access to markets in the global North, and African countries must simultaneously be allowed to erected barriers to protect their own struggling industries from unfair outside competition.  Poor country governments must also be allowed to support farmers with price supports and other measures to guard against fluctuations in the world commodity market.  In short, Africa (and the rest of the global South) should be permitted to use the same policies that rich countries employed to fuel their development.(19)

Unfortunately, Africa’s exit from economic disaster is currently sealed by rigidly protectionist policies in the global North.  The same rich countries that force poor ones to open their economies without protection retain draconian restrictions which serve to shut out developing country exports from their lucrative markets.   “Northern governments reserve their most restrictive trade barriers for the world’s poorest people”, Oxfam writes in “Rigged Rules and Double Standards”.  While the US imposes a miniscule tariff of 0-1% on major imports from Germany, Britain, Japan and France, taxes of 14-15% are reserved for poor countries like Bangladesh, Cambodia and Nepal.(20)

The international financial institutions have forced sub-Saharan Africa and South Asia to cut their average tariffs in half, and Latin America and East Asia to do the same by 2/3rd.  Nevertheless, when exporting to rich countries, poor countries still encounter, on average, tariffs that are four times higher than rich countries do when exporting to poor countries.  These barriers cost the global South $100 billion annually – twice the amount it receives in aid.  Sub-Saharan Africa, the world’s poorest region, suffers disproportionately.(21)

Rich countries also arrogate themselves the privilege of heavily subsidizing their agricultural industries; yet, as the example of Mali (above) graphically illustrates, poor countries are often systematically deprived of the same opportunity by the World Bank.  In recent years, the US has spent roughly $19 billion on its farm sector, (22) while the European Union annually dishes out some $47 billion – 40% of its total budget.(23)  This happens despite the fact that only four percent of the EU’s workforce, and less than one percent of America’s, is employed in agriculture.(24)  In comparison, the livelihoods of billions of the world’s poorest people are dependent on farm revenues.

Its stated devotion to ‘free trade’ notwithstanding, the Bush administration rolled out “the most generous farm subsidy package in US history” in 2002, The Financial Times reported. (25) The new funds were worth roughly $83 billion over ten years, representing an overall spending increase of 80%.(26)  The vast majority of this money goes to the wealthiest growers; the richest ten percent of US farmers receive 2/3rds of all subsidies, (27) while in Europe, 80% go to the richest 20%.(28)

The major problem with agricultural subsidies is that they encourage overproduction of crops, and in turn surpluses.  Rich countries frequently dump much of their excess yield in the pried-open economies of the global South, causing commodity prices to tumble.  As their governments are prevented from intervening to help by policies imposed by the international financial institutions, and since Northern governments often simultaneously exclude poor country exports from their markets, farmers in the South find themselves unable to compete and fall deeper into poverty. 

Cotton, again, is a case in point.  In recent years, the US has spent roughly $5 billion annually subsidizing our 25,000 cotton farmers.(29)  As with agricultural subsidies generally, the overwhelming majority goes to the very rich; citing US Department of Agriculture figures, UNCTAD notes that the wealthiest 10% of farmers receive more than 73% of all cotton subsidies.(30)  These funds depress world cotton prices by as much as 30% (12% on average), and their elimination would raise prices between 6 and 14%, according to a recent Oxfam study.(30)  Some estimates go even further.   The International Cotton Advisory Committee has estimated that prices could have been 70% higher in 2001-2002% without government support of the industry.(31)

These subsidies cause terrible suffering for many of the 20 million African farmers who depend on cotton for a living.  When you live on a dollar a day, as many African farmers do, even slight decreases in prices are enormously significant.  Lost earnings from depressed prices cause several million West African children to go hungry and without education every year.  If the price slump was reversed, these children could be fed and educated, and higher incomes “could pay for life-saving medicines, hospitalizations, and consultations for four to 10 individuals” in many West African households, Oxfam writes.(33)

Given the track record of the World Bank in Africa, and the nature of the international trading system constructed by the rich countries that control it, Zoellick’s “prioritization” of Africa doesn’t bode well for the continent’s poor.

Jake R. Hess, a graduate student at Brown University, welcomes feedback at JakeRHess(at)gmail.com

Sources

(1)  Christopher Swann and Janine Zacharia, “Africa tops priorities for Zoellick”, The International Herald Tribune, June 11, 2007.

(2)  UN Conference on Trade and Development, “Economic Development in Africa: From Adjustment to Poverty Reduction: What is New?”, 2002.  Nicolas Van de Walle, a leading Africa scholar, has written that “By 1989, more than half of the countries in Africa were in the middle of Bank-funded structural adjustment programs, and in all some 36 countries in the region had signed a total of 49 adjustment program loans, plus an additional 41 sectoral adjustment program loans with the Bank.”  See Van de Walle, “Africa and the World Economy”, in Harbeson and Rotchild (eds.), Africa in World Politics: The African State System in Flux (Westview, 2000), p. 274.

(3)  See Frederick Cooper, Africa Since 1940: The Past of the Present, Cambridge University Press, 2002.

(4)  UNCTAD (2002), ibid.

(5)  Walden Bello, Dark Victory: The United States and Global Poverty, Pluto Press (second ed.), 1999.

(6)  UN Economic Commission for Africa, “Transforming Africa’s Economies: Economic Report on Africa 2000″, 2000.

(7)  See Paul Hofheinz, “Economy: World Bank’s Economists Recommend Broader Approach to Fighting Poverty”, The Wall Street Journal, September 26, 2000.

(8)  Christian Aid, “The economics of failure: The real cost of ‘free’ trade for poor countries”, June 2005.

(9)  SAPRIN, The Policy Roots of Economic Crisis and Poverty: A Multi-Country Participatory Assessment of Structural Adjustment, April 2002.  The report is published in book form by Zed and available for free download online.

(10)  Davison Budhoo, “IMF/World Bank Wreak Havoc on Third World”, in Kevin Danaher (ed.), 50 Years is Enough: The Case Against The World Bank and International Monetary Fund, South End Press/Global Exchange, 1994.

(11)  Bello, ibid.

(12)  See Christian Aid, “Business as usual: The World Bank, the IMF and the liberalization agenda”, September 2005.

(13)  Oxfam, Kicking the Habit: How the World Bank and the IMF and still addicted to attaching economic policy conditions to aid”, November 2006.
(14)  For Oxfam, see note no. 12; for Chistian Aid, see note no. 11; and for UNCTAD, note no. 2.

(15)  Oxfam, “Kicking the Habit”, ibid.

(16)  Oxfam, “Rigged Rules and Double Standards: Trade, Globalization and the Fight Against Poverty”, March 2002.

(17)  Cooper, Africa Since 1940, ibid.
 
(18)  UNCTAD, “Economic Development in Africa: Trade Performance and Commodity Dependence”, 2003.

(19)  See, for example, Ha-Joon Chang, Kicking Away the Ladder: Development Strategy in Historical Perspective (Anthem, 2002).

(20)  George Monbiot, “The worst of times”, The Guardian (England), September 02, 2003.

(21)  Oxfam, “Rigged Rules and Double Standards”, ibid.

(22)  Elizabeth Becker, “A New Villain in Free Trade: The Farmer on the Dole”, The New York Times, August 25, 2002.

(23)  The Economist, “Europe’s farm follies”, December 10, 2005.

(24)  Figures taken from the CIA World Factbook.  Prior to the Romanian and Bulgarian accessions to the EU, the figure was less than 2% (The Economist, ibid.)

(25)  Edward Alden and Deborah McGregor, “A cash crop: The US farm bill has upset other countries by reversing past efforts to encourage agricultural free trade”, The Financial Times, May 10, 2002.

(26)  David E. Sanger, “Reversing Course, Bush Signs Bill Raising Farm Subsidies”, The New York Times, May 14, 2002.

(27)  Alden and McGregor, The Financial Times, ibid.

(28)  The Economist, ibid.

(29)  Oxfam, “US must reform agricultural subsidy program”, September 01, 2006.

(30)  UNCTAD (2003), ibid.

(31)  Oxfam, “Paying the Price: How US farm policies hurt West African cotton farmers – and how subsidy reform could help”, June 21, 2007.

(32)  UNCTAD (2003), ibid.

(33)  Oxfam, “Paying the Price”, ibid.

 

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