African Investments: Time to Hit Refresh
This month’s U.S.-Africa Leaders Summit ended with a promised $14 billion in investments. Adam Sneyd calls for new economic thinking going forward.
The U.S.-Africa Leaders Summit, held at the start of this month, fell at a time of rising concern over the sustainability of Africa’s economic emergence. In particular, many watch with excitement, as well as anxiety, at the ravenous investor interest in African debt and in new joint ventures that aim to serve the continent’s consumers. The boom in investment has been so striking of late that these flows could soon be Africa’s leading source of hard currency.
However, while these trends continue to inspire hope in some quarters, in many other circles faith in the idea that this capital surge will generate full employment, reduce inequality and eradicate poverty is waning. Instead, various commentators now worry about overheating, overreach, resource misallocation and non-performance. Meanwhile, stories such as excessively-indebted Ghana’s recent expression of interest in subjecting itself to another course of International Monetary Fund (IMF) medicine provide further fodder to those that emphasize the potential for bubble trouble south of the Sahara.
Nevertheless, the U.S.-Africa summit ended with a promised $14 billion in new U.S. private investments in areas such as energy and infrastructure. This was also served up with the potential carrot of extended trade preferences under the U.S. African Growth and Opportunity Act, and bathed in a thick glaze of philanthropic feel goodery sprinkled with a sugary, anodyne dash of corporate social responsibility. Africans might want to consider taking this meal with a lorry load of salt.
From the perspective of Corporate America, Africa offers a deep well of potential profits. Big U.S. energy players, for example, understand that Africa’s unmet power and electricity needs represent an unprecedented investment opportunity. In fact, U.S. agencies such as the Overseas Private Investment Corporation have already been tasked with cutting the costs of American efforts to maximize returns from African energy.
However, amidst this rush to profit from Africa’s energy needs, it ought not to be forgotten that U.S. economic thinking may have fuelled this problem in the first place. Many economic governance ideas linked to neoclassical economic models developed primarily in the U.S. and exported via the IMF and the World Bank have long been big stones in African shoes. And African public power and utility projects floundered in the 1980s as conditional or ‘policy-based’ loans pushed by the Fund and the Bank aborted Africa’s flirtation with the state-guided paths to development that Germany, South Korea, Taiwan and the U.S. itself once followed.
If Africa’s economies are to develop, they must do so not simply through the reanimation of misguided market fundamentalist orthodoxies. One clear way in which the continent could do things differently − and banish long and painful memories of the politics associated with Western economic ideas − would be through the newly-established BRICS New Development Bank, which is set to have $100 billion at its disposal. Disbursements from this Bank could speed up the development of private and public sector corporations and be used to support the public provision of education, electricity, healthcare, museums, parks, water or any other unmet public need.
The BRICS bank could be hugely significant, though how exactly it is to function remains to be seen. But the New Development Bank is not the only option available to Africa. Another route the continent could take which is worthy of great consideration would be to turn to the ideas of celebrated economist John Kenneth Galbraith.
Turning to JK
The first possible Galbraithian way forward is rooted in his efforts to call out the shaky foundations of ‘accepted’ economic beliefs. The Canadian-cum-American economist famously referred to the tendency for political and economic elites to unthinkingly regurgitate ideas or explanations that their audiences assumed to be true as conventional wisdom.
His searing critique of viewpoints that departed from reality but were nonetheless esteemed for their acceptability resonates in Africa today. For decades, adherents to the neo-classical approach have attempted to control the parameters for the production and application of ‘respectable’ economic knowledge. Leading hardcore believers have actively narrowed the range of African governance options or systems subject to serious debate. For too long, the theoretical preoccupations of this knowledge cartel have obscured or discounted the ideas, institutions and power relations that actually move and constrain Africa.
Take last year’s scholarly revelations regarding the apparently ‘poor’ state of African statistics on economic growth. This attention was well warranted, but lost in the hype over ‘poor numbers’ was the reality that figures such as GDP may be unhelpful to begin with. GDP, for example, does nothing to count the contributions that hundreds of millions of unremunerated women make at home and in their communities to keeping Africa moving day in day out. Africa would be significantly helped by better-resourced efforts to gather new kinds of numbers that would enable the continent’s genuine progress to be tracked.
A second application for Galbraith in Africa can be drawn from his insights regarding the power of big corporations. As more and more transnational companies setup shop across the continent, our reference points for understanding how power is exercised must shift. Multinationals increasingly contribute to the growth of industry and professional networks unconnected to domestic centres of political power. Many also provide services in the absence of effective public provision such as sanitation and schools, and as such, private corporations now play larger roles in African governance.
Galbraith documented many innovations that mitigated corporate power, including anti-trust laws and industrial policies, that permitted the U.S. to add more value to its exports and diversify away from its colonial-era specializations. Similar initiatives could prove hugely useful to African economies today.
Finally, Galbraith’s work on advertising and marketing could help African leaders better understand the forces that work against the sovereignty of African consumers. His writing on this topic challenged the notion that the U.S. was all about free choice. He showed that adverts cooked up by Madison Avenue’s ‘Mad Men’ were ultimately designed to make consumers serve corporate needs, and he detailed the centrality of advertising to the internal planning systems of consumer goods groups. In this light, corporations exerted increasing control over individual preferences over time, and underwrote the emergence of a fast food and mall culture that further entrenched their interests.
As Big Retail increasingly eyes the continent, Africa could employ these ideas to help the continent’s ‘widening’ consumers to avoid snatching underdevelopment from the jaws of emergence. The disbursement of resources that would enable whistles to be blown on false advertising and that could fund the promotion of healthy living choices would be a good start.
Galbraith is, of course, not a silver bullet. Without a doubt, there are many other wellsprings in Africa and elsewhere that could and should be tapped to refresh political economic thinking. But Galbraith does matter. And he certainly offers rising Africa a drink of political economic pluralism more revitalizing than the market fundamentalist Kool-Aid that has long passed its use by date and more energizing than the bogus PR that was imbibed so headily at the U.S.-Africa summit.
A version of this post originally appeared on Think Africa Press.