Thursday, 20 November 2014

On Africa & Trade

So, Alex Salmond publicly announces he is going to donate his annual pension to charity after stepping down as Scottish first minister. That's good of him, sure, but I can't help being suspicious that it's very much based on courting publicity and reputation mongering. If he wants to give to charity, why not do so quietly, as though the cause is what's important, not the attention? As a wise man once said, "When you give to the needy, do not let your left hand know what your right hand is doing" (Matthew 6:3).

Things aren't that way, of course, for Bob Geldof - he relies on a public persona to get the British public donating money. Reports say he may have got the hump with Adele and other performers for not joining him on his latest version of Band Aid’s patronising charity single. Not to worry, she probably couldn't give two hoots what Bob Geldof thinks - and as Bryony Gordon reminds us in her Telegraph articleLater, we learnt that Adele had quietly made a private donation to Oxfam. But in the shallow, self-promoting world of celebrity, the simple and silent act of handing over money to charity is not the done thing.” I say Geldof ' may have got the hump' - it seems uncertain whether he did, although he denies it publicly - but he's certainly calling for us all to give more to charity, and in the process he's dividing opinions regarding how he goes about it.

Of course, despite Geldof's apparent arrogance, and the crassly condescending song lyrics and over-inflated egos of so many of the slebs involved, any money raised is most welcome (perhaps they could give it to the DEC or Oxfam to ensure maximal good is done in fighting Ebola). But whatever good is done to fight Ebola, and whatever help is given to those beset by its plight, the big questions about Africa continue to be raised - with the reality of the bigger picture being that what Africa needs more than aid is trade - and we prosperous nations don't help as much as we could. As well as the many internal problems that hold back Africa’s progress, the CAP denies Africa many vital trading opportunities with their barriers to Europe’s market for (in particular) agriculture and their EU subsidies, which deny Africa the ability to compete in a global economy. As I said a while back in this Blog post:

“Government subsidies and high tariffs on imports are two examples of how richer countries are distorting the free market by preventing poorer countries from competing to sell their resources. The European Union subsidises European farmers and the American government subsidies American farmers, placing African, Asian and South American farmers at a huge disadvantage, because they cannot easily sell their own produce as they are unable to compete with richer countries in the price market. When George Bush affords American farmers 180 billion dollars in subsidy deals to buy American votes (which he did when he was President), he depresses prices across the globe, which robs unsubsidised (and much poorer) Africans Asians and South Americans of their ability to be able to sell their crops competitively in the global market. This costs poorer countries tens of billions of dollars in lost revenue.

In subsidising farmers, the governments in question don't just disadvantage those struggling in developing countries, they retard innovation locally too. Stopping the subsidies helps farmers explore new market potential; it incentivises them to innovate, to diversify their output, and to generally be more economically prudent without government funds to fall back on. When a government subsidises farmers it removes some of the need to run a business in accordance with market demands and price fluctuations. Non-subsidised business owners are much more alert to profit and loss signals, just as any business that makes decisions with other people's money tends to make those decisions less prudently than with their own money. Furthermore, business owners who receive subsidies try to curry favour with the politicians handing out the cash, when they should be trying to win the customers by providing a good business practice and competitive prices. Farm subsidies in the shape of the very rich giving to the relatively rich at the expense of the relatively poor are a disgrace - and no nation can claim any kind of moral accomplishment in the global scene while they continue to engage in this egregious policy of subsidising their own at the expense of those desperate to get a stronger foot in the free market.”

It's good to hear the trade policy adviser for Oxfam agreeing with this, and being fully seized of what needs to change:

"Not only does the Common Agricultural Policy hit European shoppers in their pockets but strikes a blow against the heart of development in places like Africa. The CAP lavishes subsidies on the UK's wealthiest farmers and biggest landowners at the expense of millions of poorest farmers in the developing world. The UK Government must lobby hard within the EU to agree an overhaul of the CAP by 2008 to put an end to the vicious cycle of overproduction and dumping. The £30bn-a-year EU agricultural subsidy regime is one of the biggest iniquities facing farmers in Africa and other developing counties. They cannot export their products because they compete with the lower prices made possible by payments."
It should be remembered - and this is so often forgotten - that poverty and material hardship is not an unusual thing for humans to experience. In the middle ages we in the UK were about as poor as the poorest countries are now. We gradually crept out of our plight to become prosperous, and we did so by finding out that prosperity comes from a combination of material resources and human resources (including education). During the time of long working days, low life expectancy and severe hardship we also found out that the fundamental key to increasing prosperity is conflating those material resources and human resources to create value through innovation.

Once we reached the inceptive stages of our scientific and industrial enlightenment, it took us about 250 years to go from severe hardship to wealth and prosperity - and being one of the first nations it naturally took longer than it would in the modern day when if you are a country plighted by severe hardship you are in a world in which many countries are prosperous and able to help with aid and investment. Don't forget that even as late as the 1970s China's GDP still resembled the GDP of England pre-Industrial Revolution. Just 40 years later China is one of the world's biggest economies and looks set to be the biggest in a few decades (although prior to this happening I predict that China's recent rapid growth will slow down in the short term future while it sorts out its internal contradiction of having a communist state whilst relying primarily on its exporting of consumer goods). The upshot is that when lots of countries become wealthy, poorer countries increase the speed at which they join them. Don't get me wrong, there is still lots more that needs to happen, but as well as China one can see this expedition with the likes of South Korea, Taiwan, Hong Kong and Singapore, all of which were mired in poverty a few decades ago but are now rising in prosperity and stability.

All this prosperity, though, won't happen for the current poorest countries without at least one other vital change - the end of political corruption and oppression. It doesn't take a genius to work out that when a dictator or political party wins a huge majority in a country in which they are vastly unpopular there is corruption at the heart of it. And, of course, if you are a political oppressor running a nation it's no use pillaging a country to its total demise. That is to say, if these dictators are to exploit their citizens and take a proportion of their earnings, they need to keep them at a level that doesn't destroy the economy but keeps everyone poor enough and regulated enough so that they lack the powers to engender revolutionary changes.

It's easy to see why such an effect keeps people poor. Under such a tyrannical regime, there is little incentive to innovate or progress when the State takes much of your earnings and fails to protect your basic human rights. It is the kleptocratic people in charge that keep their citizens in their plight and deny them the ability to trade properly. Prosperous countries begin to be prosperous when the conditions facilitate it - and those conditions rely on people taking actions that benefit others, not just themselves – namely through the vehicle of free trade. Citizens that are forced by their corrupt State to practice the kind of self-interest that only has negative effects on other citizens (directly or indirectly) are going to find it difficult to climb out of their poverty trap.

Given the foregoing analysis, it's not hard to believe the contentions that much of the aid money that went to Ethiopia in the mid-1980s was used to entrap starving citizens into state camps, from where over half a million were said to have been deported and where tens (probably hundreds) of thousands are thought to have died. How much of Somalia's, Uganda's and Zimbabwe's aid finds its way into the hands of corrupt officials and warlords? It wouldn't be surprising to find out that the answer is the vast majority. Thus the onus is on us to research well and ensure that the charities to whom we choose to give are ones that are going to do the most good

It was primarily trade that made the Western world prosperous, and it will be, and is, primarily trade that lifts Africa out of poverty. The forecast for Africa looks brighter with every passing decade – and what will expedite this process is a reversal of the things that have retarded the continent for so long, namely the engendering of more stable governments, the lifting of trade restrictions, and the improved ability for Africa to compete more propitiously in the global market economy.