Foreword

Foreword: Exported To Death — the World Bank and Africa

The World Bank walks on two legs. Though such a Maoist metaphor would doubtless displease the neo-classical economists of 1818 H Street NW, Washington DC, it nonetheless encapsulates the truth. The first leg is reliance on the marketplace, which is believed capable of satisfying virtually all humankind's needs, both economic and social. The second leg is integration — all countries should participate in the world economy to the fullest possible extent. Standing on these unvarying principles, the Bank has, for nearly half a century, straddled the world. They are part of the Bank's structure and the pillars of its doctrine: the technical measures the Bank implements in one country or another all derive from them in some way. Asking the Bank to ‘change’ them would be about as realistic as expecting a horse to canter on webbed feet. Although the twin doctrines — market forces and maximum integration — are usually presented in the abstract, without reference to particular historical or geographical circumstances, it is clear that they are not preached in a vacuum. In the late twentieth century, and whatever the talk of ‘level playing fields’ or ‘the international community’, it is also clear that some participants in the world economy are more equal than others. The stronger members of this ‘community’ can observe whichever parts of the doctrine suit their purposes while ignoring the rest. The weaker ones are not afforded this luxury. Thus, for example, powerful countries can maintain tariff and nontariff trade barriers against competition from goods manufactured in weak countries, while still dumping their own industrial or farm products on more vulnerable countries.

Various international institutional arrangements exist for the implementation of the basic doctrine. The standard wisdom proclaims that goods should flow freely across frontiers. Ensuring the proper conditions for such flows and providing them with a legal framework is the specific task of the General Agreement on Tariffs and Trade (GATT). Today, however, with increasing frequency, countries may be hampered from full participation in the world economy for sheer lack of cash. In such cases, the International Monetary Fund (IMF) exists to provide — at a financial and political price — ‘balance of payments support’. Its loans come with increasingly strict conditions attached as a country's deficit and consequent borrowing needs increase. The IMF is not supposed to be a ‘development’ organisation and its Articles of Agreement make clear that its vocation is to finance trade. In the free market, integrationist worldview, merchandise — whether in the form of goods or services — and money must, then, be free to cross borders. The same rules do not apply to all factors of production, however, for example, stopping noticeably short of demanding the sa me freedom for labour. Where does the World Bank come in? In the present International Division of Labour, wherein GATT takes care of making rules for trade and the IMF takes care of financing it, there is an unstated prior condition: countries must trade. They must, to that end, agree to devote substantial resources to the sector of what economists call ‘tradeables’, even though that may be to the detriment of resources for ‘non-tradeables’ which are more immediately useful to the population. Governments, that is, should be protected from the temptation to concentrate on satisfying the needs of their own people — for food, shelter, transport, and so on. The Bank's particular role is to make sure that all the countries under its tutelage take inaximum advantage of market integration opportunities whether they want to or not. The mechanism for forcing potentially reluctant participants to engage in the world market is the set of economic policies called structural adjustment; a vital component of structural adjustment is the insistent implementation of the doctrine of exportled growth. About five dozen countries, a great many of them in Africa, are now applying structural adjustment programmes under the guidance of the IMF and the Bank. The easy-money decade of the 1970s led many countries to overborrow; in the 1980s they were caught in the squeeze when debts came due at the same time as interest rates soared. As a result, they certainly needed to ‘adjust’ — their outlays ironically exceeded their incomes — but they were given little choice as to how to go about it. Because the 'seal of approval' gra nted by the Fund and the Bank can alone give access to credit - not just to loans from the Bank and Fund themselves but from all other sources as well — the Bank can stride into the country on its two legs and set about applying its doctrine. The ‘adjustee’ has little choice in the matter. A standard requirement is that the debtor must export at all costs The ultimate goal of structural adjustment is to restore a positivc balance of payments so that the debtor government will have spare cash on hand to service its debts. For a country whose currency is unacceptable in international financial transactions — which means virtually all ‘developing’ countries — the only option is to earn cash through exports.

In pursuing this objective the Bank and the Fund act as billcollecting agencies for the creditor countries. The creditors, particularly the United States, take a hard line on debt, no matter how poor and indigent the debtor, insisting on total repayment except in a handful of cases. The social and ecological consequences have been devastating. These consequences are, furthermore, well known and have been documented in any number of books, articles, films etc., some of them by TNI Fellows 1. They are perhaps best summed up in a single UNICEF figure: an extra half million children die every year as a direct result of the debt crisis. Neither the Bank nor the Fund has tried to press home to the creditors, their major shareholders, the obvious point that substantial debt relief would be the best — indeed the only — initial step to prevent the total economic and social collapse of sub-Saharan Africa in particular. Greatly reduced debt would imply greatly reduced interest payments which, according to the OECD, in both 1989 and 1990 averaged US$1 billion (100000 million) a month for the miserably poor countries of sub-Saharan Africa. This figure may seem barely credible but it is based on the creditors' reporting systems; it tells us what they themselves declare they have received 2. Greatly reduced interest payments would, in turn, mean far less pressure to stress exports. Without debt and the structural adjustment programmes it entails, without the need to invest so heavily in the export sector, Africa could put its resources into building infrastructure; into feeding, educating and caring for its own populations. Such choices would, however, serve only Africans and, even more serious, would violate the doctrine of maximum integration into the world economy. Sub-Saharan Africa's debt more than doubled between 1982 and 1990, when it reached US$164 billion. In a world where five times that sum can easily be lost on Wall Street in an afternoon without undue stress, where total Third World debt stands at $1,450 billion (nearly nine times as much as sub-Saharan Africa's), it may seem particularly sadistic to have maintained such a burden whose repayment the creditors could easily do without.

One hears Auden's words:

Every farthing of the cost all the dreaded cards foretell Shall be paid…

No one can count the real cost Africans have paid so that, from 1982 through 1990, over US$100 billion could be remitted to their govc rnments' creditors, not least to the World Bank. Did these creditors cven register this crystallised sweat and tears as anything more than a blip on their computer screens? This Transnational Institute (TNI) study examines the consequences of the World Bank's assumption that the more a country can he integrated into the world economy, the better off it will be. TNI Fellows have, over the years and in a variety of research projects, publications, films etc., developed an ongoing general critique of structural adjustment. This is not, however, the goal of this book. More modestly, perhaps, but definitively, the TNI research team proves here that, at least where Africa is concerned, one of the Bank's ‘legs’ has serious case of gangrene and should be amputated forthwith. We set out to explore the export-led growth strategy for Africa, to assess its track record and its effects, and have kept precisely to this focus. This book has a clearly defined, single target; it has no pretensions to being a general treatise on Africa nor on the current phase of Third World ‘development’. One consequence of this choice is that although it is impossible to write about Africa without some reference to the history of colonialism which has shaped present political structures and economic patterns, we nowhere present — even in outline — a systematic economic history of Africa. Any assessment of Africa's predicament, however, and even more so any effort to define ways out of it, must acknowledge the weight of history. Africa has been used as a source of cheap labour during the centuries of the slave trade and, in the past century, as a source of cheap raw materials.

The World Bank's economic strategy for Africa fits this latter tradition, emphasising the export of primary commodities such as agricultural products and minerals. The consequences of the Bank's policy prescriptions have left Africans as impoverished and disempowered as they were by the wave of colonial landgrabbing in the 1880s. Formal independence and aid, however, did to some degree provide a framework which gave the newly independent governments room for manoeuvre and some possibility of generating greater prosperity. Many if not most African leaders squandered this opportunity, but in any case this framework was demolished in the 1980s by the World Bank and the IMF. The debt burden forced African governments to turn to multilateral financial agencies, who would only make new loans or delay repayment of old ones if their economic prescriptions were followed. African governments cannot be exonerated from mismanaging their debts, but they were still defenceless faced with this financial onslaught. The export-led strategy Africans have been obliged to adopt quite simply has not worked, does not work, cannot work. Repeated reports emanating from Washington announcing light at the end of the export tunnel are either lies or illusions and in either case tragic for the countries and the peoples of sub-Saharan Africa. Normally there should come a time, especially among Bank strategists who pride themselves on their grasp of economic ‘science’, when even they recognise that their dogged persistence is destined to go unrewarded. All the signs, for anyone willing to examine them impartially, point to failure. The Bank should be willing to reexamine its premises and admit their inadequacy. Instead of trying to fit the poorest of all continents to the Procrustean bed of its theories, it should be seeking genuine ways to help Africa out of its present predicament. This study supplies overwhelming evidence that new approaches are long overdue. African countries, almost without exception, rely for their foreign exchange on run-of-the-mill commodities — and all too often on just one, two or three of them. These commodities are increasingly produced as well in Latin America and especially Asia. As the traders we quote in these pages explain, in no uncertain terms, these products are often obtainable there with less fuss and bother than in Africa. Prices for these commodities are dire and show no signs of recovery.

The ‘market’ — in the sense of the level playing field or even of the control over any aspect of the earnings from one's own production — is non-existent. In spite of its efforts, sub-Saharan Africa's trade amounts to less than 2 per cent of total world trade. So long as it is forced to concentrate on ‘tradeables’ to the detriment of the ‘non-tradeables’ which alone can cater to people's basic needs — poverty will be compounded. TNI is immensely grateful to the DDA (the Swiss Development Cooperation Authority) and to ISCOS (the Third World cooperation arm of the Italian trade union, CISL for generously providing the necessary funds for this enquiry — but our budget, by any standards, was not lavish.

TNI is furthermore proud and pleased to contribute this work which we believe will be important to the debate on exportled growth, a debate which should — indeed must — take place. Still, we wonder why TNI should have had to do this work at all. Could not the World Bank, which according to its Annual Report in 1991 had a net income of US$1.2 billion, have devoted some of its resources and its handpicked staff to an examination of export-led growth in sub-Saharan Africa? Could it not have questioned at least partially the success of its prescriptions? Or, if the Bank's attention was otherwise engaged, could not the UN-appointed and well-staffed ‘Fraser Expert Group’, also charged with examining the future of African exports, have done so? We find it hard to believe that both the Bank and the Fraser Expert Group were somehow unable to obtain the necessary research materials. Had they obtained them, as TNI's team did, we find it hard to believe they would not have been obliged to reach exactly the same conclusions we have reached here. The problem is neither money nor staff. It would seem, rather, to be one of refusal on ideological grounds to confront reality. The Bank has a ready answer to its critics. The doctrine, it claims, is correct, the principles are inviolable, but the application is faulty. Consequently, export-led growth must be pursued with renewed vigour. There is no alternative. Before we begin working on alternatives in the next phase of the study, TNI challenges the World Bank's experts to read the following pages and to challenge, if it can, our conclusions, not by simply repeating its doctrines but by marshalling evidence of similar scope and quality. Although our means are puny compared to the Bank's, we have, so to speak, covered the waterfront, not to mention the commodity traders' wharves. The next battle will be to force the Bank and the other structural adjusters who follow its lead to take these conclusions seriously. This will be a formidable task because we are not dealing with rational argument, dressed though it maybe in technical language, but with dogma. If, however, present strategies remain unchallenged, if the Bank persists in its present practice, if it remains deaf not only to its critics but to Africa's suffering, we will know for sure that the continent is in for a painful, forced march into the twenty-first century.

Susan George
August 1992