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Which African agenda for the 'nineties? The ECA/world bank alternatives

Which African agenda for the 'nineties? The ECA/world bank alternatives
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  Journal o International Development: Vol. 5, 93-106 1993) REVIEW ARTICLE WHICH AFRICAN AGENDA FOR THE ’NINETIES? THE ECA/WORLD BANK ALTERNATIVES TREVOR W. PARFITT Political Science Department, American University in Cairo African Alternatives to Structural Adjustment Programmes AA-SPP): A Framework for Transformation and Recovery Economic Commission for Africa, 1989) Sub-Saharan Africa: From Crisis to Sustainable Growth, World Bank Washington, 1989) Most commentators would probably agree that the predominant development philosophy of the 1980s was one of structural adjustment. Most of the countries in Africa agreed to undertake a structural adjustment programme zy SAP) at some point in the decade. As the 1980s wore on, and African states became more depressed, this approach became increasingly controversial. The proponents of structural adjust- ment, notably the World Bank, have remained vociferous in arguing that adjustment is an essential element of any attempt by the African states to achieve active growth and development. Other commentators, including the ECA and UNCTAD, are equally vociferous in their insistence that SAPS can be actively harmful to African development prospects. However, the ECA did not stop at criticizing structural adjustment, but went on to propose an alternative development strategy in its African Alternatives to Structural Adjustment Programmes AA-SAP) zyxw   Framework for Transformation and Recovery. Thus, a UN institution has gone on record condemning structural adjustment and has proposed its own strategy of structural transformation. This represents a major challenge to the existing hegemony in the development world. The World Bank has responded to criticism with its report, Sub-Saharan Africa: From Crisis to Sustainable Growth, which sets out an agenda for African development in the 1990s and beyond. This paper will examine these strategies with a view to assessing which of them gives Africa the best chance of recovering from its present crisis and attaining the elusive goal of development. zyxwv 1 AN AFRICAN ALTERNATIVE TO ADJUSTMENT? The ECA’s strategy is designed to meet a number of aims, ‘namely increasing the level of the standard of living of the majority of the population, ensuring sustained and 0954-1 748/93/01OO93- 14 12.00 f\Q 1993 by John Wiley Sons, Ltd.  94 T W. Parjtt sustainable economic growth and development and reduction of individual and collective external dependence’. Structural transformation can be differentiated from structural adjustment inasmuch as the latter addresses itself to selected macro- economic variables, whilst structural transformation is designed as what the ECA refers to as a holistic package. It is meant to bring about adjustment to, or transformation of, ‘the real and material structures and relations of production, consumption and technology; the socio-economic institutional structures; the domes- tic financial structures; and, international trade and finance structures’ pp. z -7). The ECA strategy is founded on a politico-economic analysis rather than the narrowly economistic basis of structural adjustment. It consists of a comprehensive package of policies designed to bring about radical change in the African political economy by transforming those structures within society economic, social and political) that currently block development. Whilst the ECA acknowledges that its proposed strategy will have to address many of the factors traditionally focused on in SAPS, such as fiscal and external imbalances and the need to curb inflation, it argues that most of the policy instruments traditionally used in Fund/Bank programmes to manipulate these variables should be dispensed with as having done more harm than good. Thus, excessive devaluations, doctrinaire privatization, drastic budgetary cuts, total import liberalization and indiscriminate promotion of traditional exports are to be avoided. The ECA has formulated a package consisting of three basic policy directions and a series of policy implements that are designed to attain its aims of economic growth, improved living standards and reduced external dependence. The major policy directions of structural transformation include strengthening and diversifying Africa’s productive capacity and investment; equalizing and enhancing the efficiency of factor income allocation; and adjusting the pattern of expenditure of income to ensure that the required needs of the populace are met. The policy implements to be used in achieving productive growth and diversifica- tion are as follows. Land reforms are to be implemented to increase production and employment opportunities. This measure will be complemented by devoting at least 20-25 per cent of public investment to agriculture and increasing the foreign exchange allocation for agricultural inputs and for essential imports for industry. Credit guidelines, investment codes and interest rates would be adapted to promote the food sector and small-scale industries rather than speculative activities. Productive and infrastructural capacity would be rationalized and rehabilitated through the creation of an effective national maintenance system. The ECA also proposes that parallel exchange rates be formalized as a system of multiple exchange rates and utilized to mobilize resources and to attract flight capital back. With regard to the aim of increasing income and equalizing its distribution, the ECA’s most controversial policy implement is reduction of state spending on the military by as much as possible. Other proposals are to reduce spending on the non- productive public sector and to eliminate subsidies other than those for the social sector and basic industries. Deficit financing would be used for productive and infrastructural investments in which the import content was minimized. Such financ- ing would be gradually reduced in order to maintain the fiscal balance as far as possible. A guaranteed minimum price would be maintained for food crops on the basis of managed food stocks.  Which African Agenda for the ’Nineties? 95 The measures designed to ensure the satisfaction of needs throughout society are to a considerable degree complementary to the policy implements for equalizing income distribution. Thus, the funding liberated by reduction in spending on the military and the non-productive public sector would be diverted to the social sectors in order to ensure that such services as health and education received an annual average of z 0 per cent of public spending. In addition, state funding could be raised through levying high tax rates on luxury items which could contribute to subsidization of essential commodities such as staple foods. Other policy implements to ensure satisfaction of needs would include use of export subsidies and incentives for selected industrial and primary commodities. Debt service ratios would be limited to manageable amounts and inter-African trade would be encouraged through such means as monetary cooperation and barter trade. The ECA also suggests that Africa should aim to negotiate bilateral and multilateral commodity agreements in the effort to enhance the balance of payments. It is envisaged that a number of institutional initiatives will have to be made in support of this comprehensive package of policies. Amongst them are promotion of agricultural research and extension; creation of easy credit systems for farmers; creation of institutions to promote rural industries; legislation to establish a frame- work for rural and other workers to attain a measure of participation in and ownership of the enterprises in which they work e.g. through such mechanisms as cooperatives); promotion of community development initiatives; and greater popular participation in policy-making and implementation for a full account of the structural transformation strategy see ECA, chapter 5). Clearly, the ECA initiative is very ambitious. It entails extensive state intervention in most sectors of the economy despite the weakness of the African state. It also sets out several aims that few African regimes have ever come close to achieving. Many states have formulated plans for a rural financial infrastructure and to promote research, which have remained on the drawing board. Similarly, there have been abortive schemes to create national maintenance systems and managed food reserves. It may also be noted that several of the ECA proposals are directly antithetical to the interests of elite groups in various African states, such as the resolutions to cut military spending; levy punitive taxes on conspicuous consumption; redistribute land; and modify interest rates, subsidies, investment codes and credit guidelines so that they favour small agrarian and industrial producers rather than the urban interests that have traditionally taken the lion’s share of such services. Viewed in this light, structural transformation seems all too reminiscent of the grandiose development plans of the 1960s and 1970s, many of which became white elephants. Indeed, Rimmer suggests that the ECA’s proposition of structural transformation as against structural adjustment is redolent of the positions rehearsed in the 1960s debate as to the most appropriate development path for Africa. He characterizes this debate as one between ‘economic policies that favoured exploitation of the current comparative advantages of African countries and policies that contrived transforma- tion of the economic structures of those countries through administrative regulation of their foreign trade and various forms of subsidization of domestic production’. Clearly, those that presently favour adjustment find their antecedents in the first school, while Rimmer would argue that the ECA’s proposals are essentially a restatement of the policies advocated by the latter school. He goes on to observe that  96 T. W ParJitt the transformation policies of the 1960s led to ‘decline or retardation in the growth of the volume of exports from many of the countries’, which led in turn to the external imbalances that drove such countries into the arms of the IMF Rimmer, 1990, p. 119 . Not surprisingly, Rimmer sees the ECA’s current initiative as being prone to the same weaknesses as the policies of the 1960s. He notes that the ECA puts an emphasis on the need for a self-reliant approach to development and economic diversification in order to correct what it terms ‘excessive outward orientation and dependence’. Rimmer’s response to this is that; Looking inward is literally reactionary-a reaction from the possibilities offered to Africans both as producers and consumers by the markets of the wider world Rimmer, 1990, p. 123). He also notes that structural transformation remains overly reliant on administrative discretion, commenting as follows; The ECA’s prescriptions are also elitist to the extent that they reserve discretion- ary powers in economic life to rulers and administrators and would even make the tastes of consumers conform to official views of what consumers ought to want Rimmer, 1990, pp. zyxwv 23-124). SAPs are to be seen as infinitely preferable to structural transformation, as it is through such programmes that ‘African peoples are being allowed to climb back into the world economy’. Rimmer accepts that SAPs may not make people better off while export prices stay depressed, but ‘taking advantage of what the rest of the world has to offer will make African peoples less worse off than they need to be’ Rimmer, 1990, p. 124). Whilst accepting certain of Rimmer’s reservations about the envisaged role of the state in structural transformation, it has to be pointed out that his account of the strategy is somewhat partial in two senses. He leaves out of account some fundamen- tal elements of the ECA’s argumentation and at times he quotes passages from the ECA report out of context in a somewhat misleading manner. Thus, he quotes the report to the effect that ‘African countries will not make a development break- through by exporting raw commodities like coffee, cocoa, copper, etc.’, in order to bolster his argument that the ECA report looks inward, but unaccountably he fails to take any notice of the very next sentence, which states; However, the whole tenet of re-examining the export sector does not mean that African countries should not export those products in which they have relative comparative advantage ECA, pp. 2-6). Similarly, Rimmer ignores the following passage, despite the fact that he quotes from the same paragraph; It should be pointed out that while there are certainly negative implications of the openness of the African economies, this should not lead to autarky as no economy in the present world order can survive in isolation. Indeed, a degree of openness that ensures mutual benefits from the interdependence of countries is useful pp. 1-16 . Neither of these passages is suggestive of a negative, inward-looking reaction against international markets. Certainly, the report argues for the reduction of African  Which African Agenda for the ’Nineties? 97 ‘dependence on producing a limited number of increasingly cheap primary commodi- ties for export’ and for an emphasis to be put on intra-African trade, but this does not constitute a simplistic advocacy of delinking from the world economy. The structural transformation strategy actually envisages a reformulation of Africa’s relationship to the world economy with a view to reducing the continent’s vulnerability to external shocks such as adverse movements in the terms of trade for primary commodities. Indeed, it may reasonably be argued that the ECA’s concern with economic diversification is timely given the declining primary commodity prices that have characterized the 1980s. Such arguments may be reinforced by reference to the findings of the ODI, which indicate that there are structural reasons underlying this decline. These include the move away from industry to services in the OECD states and technological changes that involve the substitution of synthetic materials for traditional primaries e.g. the replacement of copper wire by optical fibre cables in the telecommunications industry), both of which reduce demand for the Third Worlds raw materials. The OD1 also cites the protectionism of the EEC, Japan and the USA as a major factor underlying overproduction of agricultural products, which reduces world prices and squeezes the markets of Third World agrarian producers. These markets may be further reduced by advances in biotechnology that make it theoretically possible for the developed states to factory-produce tropical crops such as cocoa, butter, pyrethrum and tobacco. The OD1 concludes that the developing states face an increasing necessity to diversify in the face of the gloomy prospects for primary products. It identifies three broad options for Third World countries, these being; to diversify exports from traditional into ‘new’ primary products; to diversify exports out of unprocessed commodities altogether, concentrating instead on manufactures and services including tourism, and the processing of products previously exported as primaries) and to concentrate more on import-substitu- tion, including the promotion of greater food self-sufficiency ODI, 1988, p. 6). The OD1 points out that these options are not mutually exclusive, but notes that the states with the greatest room for manoeuvre are those with some established manufacturing base, whilst the least developed countries which are dependent on mining and agriculture are in ‘the most unenviable position’. Most African states fall into the latter category. Whilst this indicates that the task facing the majority of African states zyxwvu s more difficult than that of other developing nations, it does not make the admonitions of the OD1 and the ECA as to the necessity for some level of economic diversification less relevant to them. This still leaves the question as to the proper role of the state in African development. Rimmer objects to the structural transformation strategy because it entails an undesirable amount of state control. His central criticism is as follows; Absent from the ECA report is any recognition that its more realizable prescriptions have been tried before and found wanting, either because they were economically misconceived or because African governments were incapable of executing them efficiently and with probity Rimmer, 1990, p. 123). Indeed, there are all too many examples of development initiatives that have foundered because of factors such as gigantism, maladministration and corruption. To this criticism we may add Rimmer’s admonition that the ECA initiative is elitist to
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