The International Labour Organization (ILO) recently reported that over 12 million Malawians could become poor by 2030 if poverty reduction rates remain the same. This is despite Malawi’s slight improvement in GDP per capita since 2004, and the implementation of numerous measures to counter poverty, including increased government spendings on infrastructure and social welfare programs. Rather than reduce poverty and stimulate economic development, these policies have further impoverished the nation–half of its population earns below 687 Malawian Kwacha (less than one US dollar) per day.
This plea for aid recurs whenever the drought-prone country experiences famine.Unfortunately, donors have not helped Somalia prepare for long-term infrastructural sustainability. Rather donations have fueled corruption and further weakened Somalia’s economy.
Early this week, the South Africa Daily Maverickpublished an op-ed titled, “It’s not Zuma that we need protection from, it’s the market.” While the author rightly calls out the role of cronyism in destroying ordinary South Africans’ economic mobility, she doesn’t seem to make a distinction between economic freedom and crony capitalism.
This spotlights a crucial misunderstanding in the ongoing battle against capitalism in South Africa, and across Africa.The values of freedom will continue to take a back seat as anti-market forces demand more state control of the economy against “corporate” interests.
The Benefits Seem Unattainable
How is it that perceptions of the market are so negative on a continent with such a rich tradition of economic freedom?
It can be alleged that the arguments for capitalism have become too utilitarian to appeal to a continent that has been ravaged by the effects of slavery, colonialism, kleptocracy, ethnic genocide, crony capitalism, and extreme poverty. Indeed, in his 1999 book “Development as Freedom,” Harvard Professor Amartya Sen argued,
The discipline of economics has tended to move away from focusing on the value of freedoms to that of utilities, incomes, and wealth. This narrowing of focus leads to an under appreciation of the full role of the market mechanism, even though economics as a profession can hardly be accused of not praising markets enough.”
The American Congress recently passed the bipartisan Global Food Security Act, a $7 billion dollar project aimed at bolstering efforts to end hunger, malnutrition and poverty across the globe. Sounds noble, but this Act will most certainly not improve global food security, especially in Africa, because it fails to address a fundamental cause of food insecurity in the developing world: US agricultural subsidies.
If President Obama really wants to fix world hunger, he’d do well to truly liberalize American agriculture by removing subsidies for wealthy farmers. It has been well documented by the United Nations, the World Trade Organization, and numerous experts that subsidies go against the principles of free trade. They lead to “international dumping” – where products from developed countries are sold to consumers in developing countries at unfairly low prices that force out domestic producers.
Extensive economic studies show that it is wealthy farmers who benefit from subsidies, not poor ones.
As the global economic order currently stands, African farmers – and their governments – cannot compete with billions worth of American protectionism on essential crops such as tobacco, cotton, corn and rice. Since the 1950s, the IMF and World bank mandated that African governments liberalize their economies with Structural Adjustment Policies in order to qualify for loans. As a result, many of these countries can neither afford to subsidize their own farmers, nor can they put import duties on foreign produce. In other words, they simply cannot stand a chance on the global marketplace.