In his recent Foreign Policy article, Rick Rowden makes the case that Africa’s low levels of manufacturing and industrialisation suggest the continent is not the ‘growth miracle’ that some commentators believe.
His piece, a response to bullish outlooks from McKinsey, The Economist and Time magazine among others, dismisses talk of Africa's rise as a "myth". Since African economies make up a very small share of global manufacturing, he argues, they cannot be spoken of in the same breath as the Asian economies.
But while Rowden rightly draws attention to the irrational exuberance common in the ‘Africa rising’ narrative, his argument is deeply flawed in both its analysis and prescriptions.
Firstly, Rowden gives a glossy, airbrushed description of the East Asian ‘growth miracle’. Rowden says this group – often referred to as the ‘East Asian tigers’ of South Korea, Taiwan and Singapore, followed by China – managed to rapidly build manufacturing capacity, creating jobs very quickly. Since East Asia’s industrial policies “worked so well”, Rowden argues, African economies should, by implication, follow suit.
While East Asia’s industrial policies certainly delivered rapid growth, however, they have been largely deployed via authoritarian, repressive frameworks that entailed frequent and sustained infringement of people’s rights.
We hear plenty about benevolent technocrats, generous subsidised credit, carefully designed export strategies, and industrial protection for domestic companies from advocates. But we hear much less about military rule, labour repression, opaque lending to industrial bigwigs, or mass protests against undemocratic constitutional changes, all of which were also integral features of this ‘developmental state’.
Imagine if an African government today imposed martial law and held down wages in the name of export-competitiveness, crushed labour rights and arrested union leaders, gave an amnesty to corrupt industrialists as long as their companies meet export targets, and allowed large-scale US food aid to sweep farmers off their land and out of their livelihoods.
Sound appealing? This is South Korea during its ‘miracle’ growth phase. And while South Korea’s land reform programme (initiated, it should be said, by the US military) led to greater equity in land distribution, some argue it did not improve the situation for farmers, whose debts had to be repaid in five years and who faced usurious interest rates to pay the government which was also keeping producer prices artificially low.
But even with repression and authoritarianism, the likes of South Korea and Singapore did not achieve transformation in a single decade, the period which ‘Afro-optimists’ are referring to in their analysis, and which Rowden dismisses on account that it has not delivered a structural revolution yet.
And this is a caution not just borne out by East Asia’s experience. Consider England - mentioned (normatively) in Rowden’s article as another (in fact, the original) example of the ‘development as industrialisation’ mantra. Let us refresh our memory about what England’s ‘industrialisation’ involved: enslavement and colonisation of half the world to deliver raw materials, exploitation of the domestic working class to deliver cheap labour, and the enclosure movement to privatise land for the purposes of lifting agricultural output, pushing all but the landed gentry out of their livelihoods and into the factories and mines where many perished.
Even if we focus purely on economic data, Rowden’s analysis is weak. His view of the continent’s manufacturing sector seems to be based on just two reports, one from the UN, the other from the African Development Bank (AfDB). Any AfDB analysis should be taken with a pinch of salt. This, after all, is an institution which recently claimed there were 300 million middle class people in Africa, classifying ‘middle class’ as those earning between $2 and $20 per day. 60% of this group earned between $2 and $4; barely out of poverty.
Based on such limited data, the critique misses on-the-ground advances in manufacturing. Industrial processing zones are emerging across many African markets, from Ghana to Ethiopia, providing assembled goods to a range of Western and Eastern firms including textiles, footwear, wood and furniture, leather, auto and consumer products. The Africa Growth and Opportunity Act, an item of US legislation, has resulted in the three-fold increase in US non-oil imports from Africa across a range of sectors, including textiles and apparel, processed agricultural products and footwear.
Rowden’s analysis is also limited because it seems to take manufactured exports as a simple proxy for manufacturing. This misses value-added in manufacturing to meet domestic needs. A recent study from Johns Hopkins University shows the rise in Chinese private, as opposed to state-backed, investment in Africa, with a focus on meeting domestic needs in larger markets like Nigeria and on labour-intensive manufacturing activities, followed by service industries. By primarily focusing on manufactured exports, Rowden misses this completely.
The export focus is further problematic because it propagates a simplistic view of manufactured items as ‘good’ and primary commodities and natural resources as ‘bad’ types of exports, stating that a heavy dependence on natural resource-based manufactures is an indication of a “low level of economic diversification and low level of technological sophistication in production”.
This is a long-standing view, famously articulated by economists Raul Prebisch and Hans Singer. But is it that simple? Some have already pointed out that on this narrow view, a country full of industrial sweatshops would be called ‘developed’ regardless of the quality of life for citizens.
More fundamentally, the idea that countries move from natural resource-based exports to manufactured ones is too simplistic when we look at how economies actually function. The trade profile of many of the now rich and industrialised economies of the world – including Canada, the US, Norway, Australia, and New Zealand – still includes major export shares of natural resources and commodities.
Emerging market powerhouses are often dominated by natural resource-based exports too, yet few people talk them down. Agricultural, fuel and mining products account for 63% of Brazil's exports, compared to 32.8% manufactured exports – and it imports 72% of its manufactured goods. While significantly reliant on natural resources, this is a country that - through its policy initiatives, especially in the areas of social protection - has reduced inequality at a steeper rate than almost anyone historically, and has achieved the highest improvement in wellbeing of any country over the last five years, according to the Boston Consulting Group.
Chile, now an OECD member, has an economy dominated by natural resources, notably copper. Manufactured items account for a mere 13% of its exports. And one of Africa’s most successful ‘developmental’ states – and one of the few globally that has a representative democratic model of governance – is diamond-rich Botswana.
Rowden seems to take natural resource-based exports as a proxy for development by noting that they dropped ‘‘as low as 13 per cent in 2008’ in East Asia and the Pacific, seemingly signifying success. That is simply an error. These economies have low shares of natural resource exports because they do not have many natural resources beyond what they consume, thus they are not major exporters. One only needs to look at the feverish efforts of even lower tier Asian national oil companies in Africa to know that these economies would be very pleased to have more of such assets under their feet at home if geological fate had so ordained it.
The point to make here is that countries do not necessarily ‘do away’ with natural resource-based exports once they become industrialised or head in that direction, like children discarding stabilisers on their bicycle. What matters for developmental success is not simply whether a country sells natural resources of manufactures. Success hinges on much more complex issues, surrounding institutions and the incentives they generate.
Bullish accounts of Africa may have fallen victim to irrational exuberance, with talk of soaring incomes, flat-screen televisions and a 300 million-strong middle class.
But glibly dismissing Africa’s rise as mythical will not do, especially on the grounds Rowden gives. If economists are to prescribe the East Asian model and advocate rapid industrialisation, they should not airbrush its social and political realities – the authoritarian power structures integral to rapid capitalist transformation – out of the picture. Moreover, much more fieldwork is needed to establish exactly how much value addition is occurring in Africa. Citing two reports will not do.
African economies will, of course, need to develop labour-intensive sectors, spanning assembly-based production, services and a range of manufactured goods. Indeed, this is already happening. But it may occur in a distinctive manner. ‘Rapid’ change is not a value-neutral term and if you advocate it, be prepared to accept the policy frameworks that have enabled it.
‘Developmental state’ advocates may argue that pain is the price of success, and that future generations will benefit. But we ought to keep in mind both the process and the goals, and not ignore the realities of the former. At the least, before pushing such models, we should accept Confucius’ charge: “Never impose on others what you would not choose for yourself”.
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For further reading around the subject see:
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