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Sunday, March 3, 2024

Industrialising Africa and the Bretton Woods Institutions – International Monetary Fund and World Bank

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By M Sajo Jallow

When Dr Akinwumi A Adesina campaigned for election to the post of President, African Development Bank (AfDB) Group, “Industrify Africa” was one of his “High Five” slogans.  He is now in his second and last term, a reminder of presidential term limit as a viable executive mandate, and industrialization as a priority.

In the 2017 AfDB publication on “Industrialize Africa – Strategies, Policies, Institutions and Financing” by eminent persons, the introductory remarks from Prof. Joseph E. Stiglitz, 2001 Nobel Laureat in Economics, are instructive. The ideology that “markets would solve all problems,” also known as the Washington Consensus, rejected the need for deliberate industrial policy-making.  Thus, it prescribed “one-size-fits-all policies … now largely discredited.”

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The 2008-9 global economic crisis, not to mention the hoarding of vaccines for the rich during the recent Covid-19 pandemic, reminded that “markets, in their own right, were neither efficient nor stable.” Among the factors contributing to de-industrialization in Africa were more precisely the structural adjustment policies imposed by the Bretton Woods Institutions (BWIs) – International Monetary Fund and World Bank.  Instead of eliminating so-called market distortions and fostering economic growth based on “principles of free and unfettered markets,” this ideology actually “discouraged industrial development and stifled growth ….” The result: “over the past 30 years, Africa has suffered from de-industrialization.”

By contrast, “East Asia had enormous success in industrialization” because it “did not follow the Washington Consensus ….” Likewise, Africa must abandon foreign-imposed ideologies. Africa and Diaspora must embrace own ideology, to guide the path to industrialization and democratic development in our free trade area.

Agri-industry cooperation

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We are in a living-space-crisis, and the impact on the majority of working people is the starting point. Agriculture remains largely subsistence-based and engages most of the workforce. Due to low productivity, however, the farmers, fisherfolk and pastoralists are unable to ensure food security for a largely urbanized and impoverished population. The solution for transformation lies with industrialization involving the working people themselves. Not through discredited ideologies from the east or west, but from millennia-old traditions of African cooperation. The resources of costly bureaucracies, especially the BWIs, need to be reallocated to grassroots instruments of cooperation, from ward or field level committees to apex organizations of the working people.

Full employment

How can growth and democratic development be achieved or sustained, when large sections of the population are either unemployed or underemployed, especially among women or young people, according to International Labor Organization and National Labor force surveys? It cannot work out, and that explains the mass misery. Thus, the policy direction is full employment, with the means required to achieve it. Inclusive access to education and vocational training is key, in this regard.

As Prof. Stiglitz has remarked on the impact on labor-saving innovation facing the world today-: “If employment does not increase, then inequality will, and if inequality increases, then aggregate demand will become weak. If aggregate demand is weak, then GDP [Gross Domestic Product] growth will be weak. This is a vicious circle.” And it must be broken, with full employment, however defined by political economists or multi-disciplinary panels.

Accessing finance

It is known that short-term and profiteering interests have long combined to stifle industrialization due to limited access to finance. Therefore, more development banking is needed to finance industrialization and energy access, at national, sub-regional and continental levels. Otherwise, trade deficits, foreign exchange crises and limited intra-trade will persist in Africa. Thus, establishing African financial institutions, including the African Investment Bank and Monetary Fund, should be fully supported, not frustrated by the BWIs, nor by the continent’s own AfDB. 

This is a sure way of reversing de-industrialization in Africa. Inclusive access to finance for productive value-addition cannot wait, amidst climate change damages, mass unemployment, food insecurity, and so on. That is, from the grassroots self-help osusus or mutual credit funds to micro-credit and apex credit institutions, at all levels, especially in the cooperative and public sectors. Indeed, to be enabled by financial technologies, including open-source blockchain and artificial intelligence.

For hope in the New Year 2024 and beyond. Rest in peace the departed.  

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