Globalization in Africa

Incorporation of African economies into the global capitalist system produced profound changes on African societies. New globalization has also begun to impact African societies in significant ways. The literature on Africa's incorporation, however, has not drawn a distinction between the continent's incorporation into the capitalist system and its incorporation under globalization. The lack of distinction may be due to the fact that, despite their differences, both types of incorporations have been painful to the continent. The distinction, however, has to be made, as there are significant differences.

At least four different phases of Africa's incorporation into the global capitalist system can be identified. The first phase took place prior to the era of colonization roughly between the middle of the fifteenth century and the middle of the nineteenth century. This phase itself had at least two stages, including the early commercial incorporation and the pillage of Africa during the era of slave trade, when roughly 22 million slaves were exported out of Africa between 1500 and 1890 (Ogot, p. 43). The second phase of incorporation took place during the period of direct colonial domination roughly between 1884 and 1960. The pillage that took place during the era of the slave trade was devastating for African societies, but it did not produce the broad fundamental changes in African political and economic systems, culture, and institutions that old globalization's incorporation of the continent through colonialism did. Africa's present political map, economic structures, and its place in the global division of labor were all formed during this phase to best serve the interests of European powers.

The third phase of Africa's incorporation took place during the three decades between the beginning of its decolonization in the early 1960s and the end of the Cold War in 1991. Due to many factors, decolonization did not give African countries the level of sovereignty necessary for determining their own terms of integration with the global system. Nevertheless, decolonization meant a marked loosening of the monopolistic grip on African economies by European colonial powers, resulting in some diversification of the trading partners of African countries. The Cold War rivalry between the superpowers and the welfare state ideology of compromise between social classes that prevailed during the Cold War era also allowed African states to expand public services, such as education and health care, to their populations and to initiate some level of industrialization behind protectionist policies. Despite these benefits, the Cold War context of decolonization subjected African countries to ideological cleavage and frequent external intervention from both ideological camps. Civil wars in the Congo, Mozambique, Angola, and Ethiopia are the most obvious examples. Many of the post-decolonization African political elite were also co-opted in order to preserve the old economic structures, fragmenting postcolonial African political systems.

The fourth phase of Africa's incorporation corresponds with the advent of new globalization and represents significant reduction of the limited sovereignty African countries mustered at the time of decolonization and modification of the Cold War era terms of incorporation of African economies into the global system. As noted, with new globalization, retrenchment of state involvement in economic activity, along with policies of liberalization that foster openness of the economy, has become a condition for integration with the global economy for African economies as well as for those of other developing countries.

African perspectives on globalization are diverse but mostly apprehensive. Many African leaders are publicly critical of it but few have dared to oppose its implementation. African leftist scholars are highly critical of globalization. Even scholars of the liberal persuasion, who are sympathetic to globalization, are critical of the rigid conditionalities international financial institutions impose on African countries. A 2003 survey by the Pew Research Center, however, shows that 58 percent of Nigerians, 46 percent of Kenyans, 44 percent of Ugandans, and 41 percent of South Africans view globalization very positively. At the same time, the survey shows that more than 80 percent of African respondents view globalization as a serious threat to African traditions.

Proponents argue that globalization promotes economic growth and diversification and by so doing fosters political stability, gender equality, and cultural development in African societies. Economic diversification, for example, is expected to accelerate the absorption of women into the modern economy, which has a strong positive gender equity effect. Economic prosperity is also expected to promote cultural development by expanding leisure opportunities for the population. Proponents contend that openness and liberalization of trade allow local opportunity costs of resources to be reflected more accurately. Decontrolling interest rates also raises rates and thereby encourages savings and the adoption of appropriate technology. Liberalization of capital mobility is also expected to stimulate foreign investment, and it is anticipated that privatization of banks will allow banks to allocate funds to finance private investments in industry.

However, each of these policies can also produce adverse results depending on the prevailing conditions. Lifting protectionist policies can, for example, lead to loss of revenue and the destruction of potentially competitive local infant industry by cheap imports. Higher interest rates and tight credit may also hurt industry, which tends to have higher working capital needs, while privatization of banks may discourage investments in industry, which tends to have longer duration and higher risks. Deregulation of capital mobility may also destabilize monetary systems, as has occurred in several developing economies.

In contrast to the optimism of proponents, the adverse impacts of liberalization have been severe in many African countries. According to the United Nations Development Programme (UNDP, 2002), for instance, twenty-two sub-Saharan African countries had lower per capita incomes in 2000 than they did in the period between 1975 and 1985. Industries of a number of African countries have also suffered significant losses due to cheap imports. The textile industries of Nigeria, Mozambique, Malawi, and Tanzania, for example, have been devastated by cheap imports triggered by premature and indiscriminate free trade. Beyond the identified examples, the overall picture of Africa's industry since the implementation of liberalization policies beginning in the middle of the 1980s has been rather grim. Average annual growth rates of value added in industry in sub-Saharan Africa have declined from 2.2 percent for the 1975–1984 period to 1.7 percent for the 1985–1989 period and to 1.3 percent for the 1990–2000 period. Annual average gross national savings as percentage of GDP have also declined from 20.6 percent in 1975–1984 to 15.7 percent in 1985–1989 and to 12.8 percent in 1990–2000 (World Bank, 2002).

Another globalizing mechanism promoted through the structural adjustment programs is retrenchment of public expenditures to reduce budgetary deficits. This policy is intended to restrain the growth of money supply and thereby lead to stable prices and a climate conducive for investment. Obviously unrestricted budgetary deficits are unsustainable as they are likely to lead to economic instability undermining the development process. However, in the African case, where the level of human development and development of infrastructure is extremely low, retrenchment of public expenditures is likely to limit investments in human development and development of infrastructure, curtailing the long-term prospects for overall development of African countries. With a human development index of less than 0.500 for 2000, sub-Saharan Africa ranks the lowest of all geographical regions in terms of human development (UNDP, 2002). All twenty-four countries at the bottom of the index and thirty out of the thirty-four countries at the bottom of the index are in sub-Saharan Africa. The number of the destitute—people living on less than one U.S. dollar per day—has also increased from 241 million in 1990 to 329 million in 2000. Many sub-Saharan African countries have also retrenched their expenditures on public services since adopting adjustment mechanisms. Public expenditure on education has, for example, declined from 4.5 percent of GDP in 1992 to 3.3 percent in 1999 (World Commission on the Social Dimension of Globalization, 2004).

The globalization mechanisms also fail to address some of the serious external constraints African countries face, including the ever-increasing debt burden, Africa's limited access to the markets of developed countries, the paltry foreign investment flows to Africa, and the continent's persistent unfavorable terms of trade, which have declined from 0.6 for the 1974–1984 period to 3.8 for the 1985–1989 years and to 0.5 for 1990–2000 (World Bank, 2002). Sub-Saharan Africa's total external debt service payments (long-term loans and International Monetary Fund credit) have averaged $11.643 million annually for the years 1990–2000. Farming subsidies in rich countries have also made it difficult for African countries to compete in the markets of rich countries. Even more damaging to African countries is that subsidized agricultural exports from rich countries are driving small farmers out of business.

In the absence of the expected growth and economic diversification, retrenchment of public expenditures and state involvement in the economy is likely to lead to perpetuation and exacerbation of gross inequalities that are rampant in the continent, including gender inequalities. Transformation of the subsistence sector, which is essential for internal integration of the economy, is also likely to be adversely affected by state disengagement. Regional and ethnic inequalities in access to public services are also likely to linger without active state engagement, fueling internal conflicts. Cultural fragmentation is also more likely than cultural development to take place.

Globalization certainly is not the only culprit for these problems. Many factors, including poor governance and widespread political unrest, along with poor infrastructure, eroding educational systems and human capital, and lack of diversification of the economy have contributed to Africa's economic ills. Such domestic factors in fact prevent African countries from taking advantage of some of the limited opportunities globalization creates. However, the hegemonic ideology of globalization blocks the search for alternative development strategies that may address these factors and undermines the limited autonomy that African states were able to muster at the time of their decolonization. New globalization has thus integrated African economies in terms of ideology and policy, but in terms of participation in global production it has perpetuated their relegation to the peripheral margins of the global capitalist system as suppliers of primary commodities.