Millennium Challenge Goals—will extreme world poverty end by 2= 015

Will Globalization Bring Economic Prosperity to

Continental Sub-Saharan Africa?

F. Phillip Peche=

Political Science

Globalization signifies the triumph of capitalism over all other economic systems. Free market capitalists such as Ja= gdish Bhagwati believe that a world run by ‘market forces’ to be the bearer of development and prosperity for all. Open economies allow countries to benefit from comparative advantage, direct foreign investment and aid,1 which facilitates the movement of= the undeveloped world up the development ladder. However, 770 million of the approx= imate one billion people in extreme poverty live in sub-Saharan Africa.2 Reasons for this are numerous and include: nature (disease, geography, and limited natural resources), coloni= al legacy, bad governance (specifically corruption and instability), tribal/ethnic/religious conflicts, and economics (IMF “structural adjustment” or fiscal austerity and lack of financial norms and investment in domestic capital).3

Among economists and political scientists there are two competing theories regard= ing continental sub-Saharan Africa’s inability to benefit from globalization. Jeffrey Sachs,= Paul Collier and George Ayittey champion a “holistic” theory, which argues that the combination of the factors listed above trap sub-Saharan Af= rica in poverty, thereby preventing these countries from developing and benefiti= ng from globalization. Several o= ther economists and Africanists, notably William Easterly, propose that “b= ad governance” is the root cause of poverty in sub-Saharan Africa, and b= ad governance can be fixed (so development is possible through globalization).= 4 An alternative explanation is that tribal/ethnic/religious hatred within these countries has led to war, genoc= ide and instability, and this factor eliminates any possible path to economic prosperity. What is evident i= s that there are 39 countries in continental sub-Saharan Africa, and each country’s challenges are unique.&nbs= p; Therefore, it is unlikely that any generalized theory will fully represent the complete situation for each and every country. This paper will attempt to r= esolve if present day continental sub-Saharan Africa is able to achieve development through the economic forces of globalization. The scope is limited specifically = to continental sub-Saharan Africa because economic dynamics of island countries are divergent from those of continental countries. The methodology used is both quali= tative and quantitative. The qualita= tive analysis applies the competing and alternative theories to two specific case study countries (Botswana – middle income5 and Central African Republic – low income)6 and the eleven middle income countries.&nb= sp; The quantitative metric used to determine if a specific country is benefiting from globalization is if it has achieved the World Bank’s = 2006 middle income status.7 The specific measurement is the macroeconomic indicator of GNI per capita, Atlas method (US dollars). This methodology proves that the most important determinates regarding economic development through globalization are a country’s ability to transiti= on to a stable form of government shortly after independence and its capacity = to export its natural resources.

This paper is divided into four parts. Part one briefly presents the benefits of globalization. Part two outlines the theories for= why it is or is not working in continental sub-Saharan Africa, specifically elaborating on the “bad governance” explanation posited by East= erly and the “poverty trap” argument posed by Sachs et al; this sect= ion applies these theories to Central African Republic and Botswana. Central African Republic, a former Francophone colony, is an example of the average land-locked failing African state, which is characterized by chronic political and economic corruption, natural resource deficiencies, rampant diseases, and it does not appear to = be benefiting from globalization (pro “poverty trap” example). Botswana, a former Anglophone colo= ny, is an example of a land-locked sub-Saharan African country that established go= od governance immediately after independence, reinvested and diversified domestically after the discovery of diamonds, and it is benefiting from globalization (most cited pro “bad governance” example). Part three quantitatively and qualitatively applies the methodology to both the case studies and the midd= le income sub-Saharan African Countries. Part four is an analysis and conclusion of the arguments and case studies, proposed development solutions for continental sub-Saharan Africa = and suggestions for further study.

Global Capitalism Is the Answer

Essentially the argument is that market forces (specifically supply and demand and comparative advantage), private direct foreign investment and government foreign aid (i.e. the tools of global capitalization) will lead to economic development. Most economists = agree that countries did not move beyond subsistence until the Industrial Revolution. In the last 200 y= ears market forces have led to a historically unprecedented level of human technological development. Ho= wever, most of the development has been achieved exclusively by the countries that took part in the Industrial Revolution.&nb= sp; Hence, these countries are coined “developed countries”.= 8&= nbsp; It follows that comparative advantage coupled with an open world mar= ket would also allow less developed countries to find a niche in the global marketplace.9 For example, as technology has advanced in the developed world so too has workers’ sk= ill levels. A rise in skill level= leads to a rise in wages. In the de= veloping world, worker wages are lower as are costs to produce less technologically advanced goods. If a developi= ng country moves beyond the point of subsistence and exports, then their produ= cts would arguably be cheaper than identical products produced in the developed world. Competition in a devel= oping market will lead to technological innovation just as it did in the developed world in order to satisfy domestic consumer demands and international deman= ds for cheaper goods. An increas= e in a country’s domestic profits will facilitate increased investment in hu= man capital (making its citizens more skilled).10 In this way developing countries will move up the development ladder. Furthermore, since finances have b= ecome more liberalized transnational banks lend more money to businesses in developing countries. In other words, the developing world will not be hindered by the limits of their own financial institutions.11<= /a>

The pro-globalization argument extends to actions in the political sphere. For example, to invest in a develo= ping country, one wants to know that the country will not collapse. If it were to collapse, then most = likely businesses and sources of profit would collapse too. In fact what is most important to = direct foreign investment is transparency, lack of inflation and responsible fiscal policy.12 A stable country will likely meet these requirements, but a country on the brink of civil war surely will not. Along these lines, it is= in the economic interests of developed countries to both help protect the inve= stments of their citizens and open new markets.&nb= sp; One means for developed countries to do this is to provide aid to developing countries. Aid to = these countries would stimulate development and hopefully provide stability so th= at private investment would pour in.13<= /a> In sum, the economic forces of globalization (i.e. market forces, private dire= ct foreign investment and government foreign aid) will lead to development in emerging countries.

Globalization in Continental Sub-Saharan Africa

Scholars arguing that globalization is or is not leading to economic development in continental sub-Saharan Africa specifically point to the importance of non-economic factors.14<= /a> The following explanations illustrate the competing answers to this dilemma.

Bad Governance

Diagram 1 – Bad Governance

Bad governance &= nbsp; Failing State

and ipso facto

Good governance = Developing State

“Bad governance” propon= ents argue that bad governments create instability, which is unattractive to for= eign investment, steal instead of re-invest in their countries, which negates bo= th the potential of foreign aid and discoveries of single-source natural resources, and do little to build infrastructure and educate their people.<= span style=3D'mso-spacerun:yes'> The “bad governance” t= heory does not specifically account for either colonial legacy or domestic factors endemic to sub-Saharan African countries (i.e. geopolitical/geo-economical considerations and disease). = The “good governance” corollary states if a country develops a “good government”, then the forces of globalization will lead to economic development. However= , the “good governance” corollary does not account for “timing”. Over three-forth’s of the sub-Saharan African countries have endured at least one civil war or military coup 15 (i.e. over 75% of sub-Saharan Af= rican currently have or have had bad governance), and considering the volatile na= ture of military coups, it is highly probable that good governments have a limit= ed time window to produce development before they are ousted by another govern= ment.

Botswana is an example which appears to support the “good governance” corollary. At the time of independence, Botsw= ana chose a parliamentary democracy based on a multi-party system.16 Additionally, Botswana retained = its major indigenous political process of “kgotlas” (chiefs and councilors meet “under a tree” to reach a consensus on important decisions).17 As a result, it= has enjoyed political stability, and democracy has fostered freedom of expressi= on and the peaceful coexistence of a multi-ethnic society.18 This is in spite of the fact tha= t at independence 75 percent of the country was desert, and most of its citizens were illiterate.19 Its neighbors, South Africa, Namib= ia and Rhodesia, were less than supportive of a “black” independent country in the white controlled region of South Africa. Despite these factors BotswanaR= 17;s GDP growth rate from 1966-present has averaged between 6.5 – 8%, whic= h is one of the highest growth rates in the world.20 In 1967 De Beers discovered diamon= ds in Botswana, and the first mine was opened in 1971.21 Unlike several other African count= ries (ex: Nigeria and Democratic Republic of the Congo), the discovery of a single-source natural resource did not lead to government corruption in Botswana. Instead the governm= ent used export earnings to both develop its cattle and meat processing market = and industrialize (58% of the population lives in urban centers vice 36% in the rest of sub-Saharan Africa).22<= /a> While Botswana appears to support the “bad governance” theory this= may not entirely be the case. Wou= ld Botswana have prospered if it had “bad governance” when it discovered diamonds? It is en= tirely possible that a corrupt leader would have pocketed the riches from the diam= ond yields and not invested in the country.&nb= sp; Botswana is the most commonly cited continental sub-Saharan African success story by the “bad governance” theorists, but timing and early good governance definitely were crucial factors is its development. Therefore, it may not necessarily = be the case that the good governance corollary applies to a country with a long history of bad governance.

The “Poverty Trap”

Diagram 2—Poverty Trap<= /o:p>

= &nb= sp; = &nb= sp; Colonial legacy / geographic limitations = ; &n= bsp; = ; Poverty

Early chronic bad gove= rnance (conflict & embezzlement of aid/loans/resources) Trap

Diseases

“Poverty trap” scholars argue that the cumulative effects of colonial legacy, geographic limitations, early and chronic bad governance, and crippling diseases left continental sub-Saharan African countries in a predisposed condition which will not allow them to benefit from the forces of economic globalization. Early and chro= nic bad governance has resulted in conflict and corruption, which has negated t= he positive forces of development aid, loans and the trade of lucrative natural resources such as oil and diamonds.23 European “colonial legacy= 221; and the resultant geographic limitations it imposed on newly independent African countries prevented these countries from developing through globali= zation. Lastly, diseases, such as malaria, HIV/AIDS, and waterborne pathogens have decimated the African population and work force.24

Early and Chronic Bad Governance

The “bad governance” aspect of the poverty trap argument is similar= to that posed by Easterly. It varies in that good governance generally cannot overcome the cumulative effects of decades of bad governance. Central African Republic represent= s the prototypical example of this phenomenon.&n= bsp; This country’s first leader, David Dacko proved to be weak and corrupt, and he was removed through a coup on January 1, 1966.25 This coup propelled Colonel Boka= ssa to power; in turn he rescinded the constitution, dissolved the national assemb= ly, and placed all legislative and executive powers in the hands of the Preside= nt.26 He then declared himself Emperor Bokassa I — Bokassa represented the archetypical African dictator.27 In 1979 Docko led a successful military coup and unseated Bokassa, but he was overthrown in 1981.28= In 1986 it appeared that CAR was on a path towards democracy. Its new leader, President Kolingba, spearheaded the drafting of a new constitution emphasizing the creation of a multi-party system; however, his inability to improve the dire economic situation in the country led to his ouster in 1993.29 His successor, Preseident Patass= e was also unable to change the country’s abysmal economic situation, and in 2003 general Bozzie led a successful coup to seize power.30 General Bozzie declared himself president, suspended the constitution and dissolved the national assembly.31 If history holds true to form, t= hen he has a limited time window to produce economic results before he is overthrown. In CAR periods of potential good governance have not overcome the cumulative effects of chron= ic bad governance.

Colonial Legacy

The specific factor to determine is if European colonization contributed to a l= ack of economic development in sub-Saharan Africa. Germany, Belgium, Spain, France, Britain, Italy and Portugal colonized portions of Africa. Britain and France were the primary colonial forces; their reach extended to 38 of the 48 modern continental countries, and thus their influences require close analysis. The British treated their African = colonies as separately entities, whereas the French considered their colonies collec= tive “providences”.32<= /a> The British adopted a political strategy of “indirect rule” in which they allowed indigenous chiefs and kings to govern.33 The French adopted a policy of “association”, which was a strategy to neutralize indigenous ru= lers and inculcate French values.34<= /a> If “indirect rule” provided a more stable situation for newly independent countries than French “association” did, then colonial legacy impacted early governan= ce in African countries.

The Anglophone/Francophone colonial legacy link to early good governance is not distinguishable in all sub-Saharan African colonies, but it is evident in t= he two case study countries. The Central African Republic, or the former francophone colony of Oubangui-Char= i, was part of French Equatorial Africa (AEF), which included present day Chad, Congo and Gabon.35 The most lucrative Francophone hol= dings were in French West Africa (AOF), which was where France sent most of its e= xperienced government officials.36<= /a> Due to manpower limitations AEF co= lonies were governed by the dregs of the French African governing bureaucracy.37 To make matters worse, the French adopted a concessionary system modeled after Leopold’s Belgian Free Congo, which required its colonies to become self-sufficient.38 The combination of these decisio= ns devastated AEF colonies as both companies and government officials brutaliz= ed the indigenous peoples, forced them to produce rubber, the primary cash yielding product of that region, and overly taxed and/or killed them if they did not produce enough of it.39<= /a> Also, the French conception of decolonization was not geared toward independence. Instead its goa= l was ideally to assimilate its African colonies into an empire, or its worst-case scenario was that these colonies would become dependant “client-states”.40<= /a> As colonial independence became inevitable, the French decided that, “domination of the overseas possessions was made easier by splitting = them up into many weak and financially dependant countries.”41 Even in spite of the desires of = the French appointed African leaders of the four AEF colonies to form one feder= al central African country, France granted independence individually to all of= its AEF and AOF colonies.42<= /a> As a result, when Central African Republic gained its independence in 1966, its landlocked and resource scarce boundaries left it in a virtually helpless economic position.

Botswana, on the other hand, was a British colony situation north of South Africa. It benefited from “indirect rule” until is gained its independence in 1966. The British allowed indigenous tri= bal leaders to directly govern the colony with very minimal supervision, and at independence its “African” government was essentially in place. Arguably, Britain did = not design its African colonies to be dependant “client-states”, and therefore Anglophone colonies were better postured to succeed after their independence than Francophone colonies were.

Geography (indirect colonial legacy argument)

Figures 1 and 2 visually present African geopolitics and geo-economics within a colonial legacy context.

Figure 1 – 1914 Colonial Africa

Source: http://users.erols.com/mwhite28/afri1914.htm

Figure 2 – Present Day Africa

Source: www.nationsonline.org/maps/africa_small_map.jpg

Figure 1 outlines the European colonies, which all have access to sea ports and are large enough to encompass diverse resources. Figure 2 displays the states as th= ey exist today; of note, fifteen sub-Saharan African states are landlocked. More so than any other reason, bei= ng “landlocked with poor neighbors” is exclusively an African problem. To interact in the g= lobal economy, a country must be able to export.= To grow economically, land-locked countries either need to trade with neighbors or have access to regional infrastructure to transport goods to p= orts in order to trade globally.

The Central African Republic is a landlocked country bordered by Cameroon, Chad, Sudan, Democratic Republic of the Congo (DRC) and Republic of the Congo (Congo). Of its neighbors, on= ly Cameroon is a coastal country. Cameroon and Congo have recently emerged as middle income countries = but Chad, DRC and Sudan are three of the lowest income countries in the world.43 Moreover, Cameroon, Chad, and DR= C are rated by the UN as low human development countries (measure considers human righ= ts, political and economic freedom and laws).44 The Oubangui River flows along CAR’s southern border, and it is a tributary of the Congo River, which flows into the Atlantic Ocean through DRC and Congo. Use of the Oubangui River for trad= e has been restricted due to 30 years of political and civil instability in the D= RC.45 The Central African Republic is a p= oor landlocked country surrounded by poor neighbors. Regional trade is limited, and poor regional infrastructure restricts global trade—it is geographically trapped.

Botswana appears to be an exception to t= he geography trap rule, but two of= its neighbors, South Africa and Namibia, have been middle income states countri= es since Botswana’s independence.46 In addition, Namibia, South Africa and Zimbabwe (its other neighbor) rank as medium human development countries on the UN human development index.47= Botswana has been able to export its goods globally through developed South African infrastructure (approximately 83% of its exports travel through South Africa).48 Geography, while posing difficul= ties, has not prevented Botswana from developing, but it has not been surrounded by poor countries, so it does not dispr= ove the geography aspect of “poverty trap” theory.

Disease

Paul Farmer argues that diseases have a much greater effect on the poor than the affluent.49 People in the d= eveloped world have access to drugs which can negate the effects of most of the world’s diseases. This = is generally not the case for people in the developing world. Africa is home to the world’= s most deadly form of malaria, percentage estimates of HIV/AIDS exceed 20% of the adult population in several countries, and contaminated water sources lead = to a significant amount of parasite-borne illnesses.50 In Africa, diseases have three effects.&nb= sp; First, they incapacitate the workforce. With insufficient workers, it is difficult to produce goods and take advantage of growth opportunities. Second, diseases kill parents. The AIDS pandemic has produced a generation of “AIDS” orphans.&= nbsp; Third, chronic diseases directly prevent children from attending school. Building a skilled workforce requires education. If children are too sick to attend school, then achieving long-term economic development is problematic. Diseases do not plague developed nations, but they cripple poor nations.

How has Botswana handled the disease trap?&nbs= p; The World Health Organization estimates that up to 32% of the adult population of Botswana is HIV positive.51 This is the second highest HIV/AIDS rate in the world. However, at its independence in 19= 66, it was in the high risk malaria region of Africa, but by 1994 it had become a = low risk malaria country.52<= /a> Additionally, 95% of the population has access to an improved water source = and child malnutrition is 13% (much better than the sub-Saharan African average= of 56% and 30% respectively).53<= /a> While it has not avoided the HIV/A= IDS pandemic, it has controlled diseases caused by malaria and water-borne parasites. Expect that Botswa= na will continue to use the fruits of its economic development to treat and prevent HIV/AIDS as it did with Malaria.

In contrast, Central African Republic has not overcome the disease trap. The US State Department classifies= the risk and prevalence of malaria and waterborne diseases in Central African Republic as “very high”.54 Situated equatorially and blanketed by a tropical climate, CAR is home to s= ome of the deadliest strains of malaria in Africa.55 Furthermore, limited access to improved water sources results in a populace= weakened by waterborne diseases.56<= /a> To make matters worse, HIV/AIDS is migrating north from southern Africa, and estimates for infected adults in CAR range from 10.7-17.2% of the populatio= n.57 Consequentially, Life expectancy= is 39 years and infant mortality is 115 per 1000 live births (as compared to 96 f= or all of sub-Saharan Africa).58<= /a> By and large, CAR has not been able to overcome the disease trap.

In review, the poverty trap advocates conclude that the cumulative effects of colonial legacy and geographic limitations, early and chronic bad governanc= e, and crippling diseases prevent continental sub-Saharan African countries fr= om benefiting through globalization. Might it be the case that tribal/ethnic/religious hatred within Afri= can countries has led to war, genocide and instability, and this factor is real= ly what eliminates paths to economic prosperity? In the last 20 years conflicts and genocide in Sudan, Rwanda, Uganda, DRC and Chad have garnered world media attention, but the reality of the matter is these events, while tragic, are isolated incidents. Economic development in these countries and spillover into neighboring countries most certainly was impacted, but these specific cases do not apply to the vast majority of African countries which have not endured genocide. Therefore, this alternative explan= ation is specific rather than generally applicable to continental sub-Saharan Afr= ica.

An alternative method for measurin= g the two theories

The following tables highlight specific data necessary to analyze the validity = of these theories. The categories listed are 2006 GNI per capita (Atlas method), geography (land locked/coast= al), government (history of stability or instability and corruption), colonial legacy (primary colonizer), date of independence and primary export. GNI per capita (Atlas method) and = not GNP/GDP per cent growth is used to measure positive or negative globalizati= on for three reasons. First, 2006 World Bank middle income status reflected by GNI per capita indicates a sus= tained level of economic growth over time, whereas GNP/GDP % growth is easily skew= ed by the time interval examined. Second, GNI per capita accounts for country population, whereas GNP/= GDP per cent growth does not. Las= t, 2006 GNI per capita is the most current and accurate statistical measurement available. In terms of GNI per capita, 28 of the 39 continental sub-Saharan African countries fall into the low income aggregate ($905 or less),59 and the remaining eleven countries are in the middle income aggregate ($906-11,115).60 Table one displ= ays Botswana and its neighbors, Table two displays Central African Republic its neighbors and Table three displays the eleven countries in the middle income aggregate. =

Table 1 – Botswana & Its Neighbors 61

Co= untry	GN= I per capita	Ge= ography	Go= v’t	Co= lonial Legacy	In= dependence	Pr= imary Export
Botswana	5,900 (middle)	landlocked	stable	British	1966	diamonds & value added services
South Africa	5,390 (middle)	coastal	stable	British	1910	value added services
Namibia	3,230 (middle)	coastal	stable	German / S. African	1990 (from S. Africa)	diamonds & uranium
Zimbabwe	340 (low)	landlocked	stable & corrupt	British	1980	value added agricultural services

Table 2 – Central African Re= public & Its Neighbors 62

Co= untry	GN= I per capita	Ge= ography	Go= vernment	Co= lonial Legacy	In= dependence	Pr= imary Export
Central African Republic	360 (low)	landlocked	instable & corrupt	French	1960	agriculture
Cameroon	1,080 (middle)	coastal	stable	British & French	1960	oil
Congo, Rep	950 (middle)	coastal	instable	French	1960	oil & value added support services
Sudan	810 (low)	landlocked	instable & corrupt	British	1956	oil & agriculture
Chad	480 (low)	landlocked	instable & corrupt	French	1960	oil
Democratic Republic of the Congo	130 (low)	coastal (37 km only)	instable & corrupt	Belgian	1960	agriculture

Table 3 – Middle Income Aggr= egate Countries 63

Co= untry	GN= I per capita	Ge= ography	Go= vernment	Co= lonial Legacy	In= dependence	Pr= imary Export
Equatorial Guinea	8,250	coastal	stable