Notes on "Africa's Capitalist Revolution" by Ethan Kapstein
Africa’s recent success largely stems from their starting
point. With their borders artificially
drawn by the international community and ethnic groups and tribes split by colonial
machination (i.e. groups split between French and English colonies), the
geographic barriers were (and still are) formidable for the economies of most
African countries. Compounding these
issues was a very uneven and ill-conceived governmental and economic handoff at
independence in most states. Finally,
centuries of slavery had decimated the continent’s population and this decline
had only leveled and started to grow over the past 100 years or so.
Kapstein’s
article shows how all of these issues have directly and indirectly contributed
to the region’s recent economic success.
The largest trend that he identifies is an openness to international
trade and globalization. This has
enabled them to attract the investment they need for economic growth. That this trade is not limited to former
western colonial masters has also aided this effort. Investment and infrastructure development by
China (as well as India, Russia and others) has boosted and prompted much of
the development in the natural resource industry, especially due to their
neutrality on human rights issues. While
the United States may possess the higher moral ground on these issues, they are
most assuredly missing the larger economic opportunity.
Another
factor mentioned is that due to only a recent opening and burgeoning connection
to the international market, African banks have largely been sheltered and
insulated from the recent financial crisis.
This means they possess much less toxic assets and can be viewed as
ideal partners in investment and development.
This development has also witnessed the rise of national stock markets
across the continent. Since 1990, the
number of states with stock markets has tripled! Currently these markets are valued at $245
billion—a substantial capitalization in such a short time span.
Existing
infrastructure issues has also driven Africa’s growing population to the
cities. Unable to find work or unwilling
to squeak by on subsistence farming, these youths have flocked to the cities
with urbanization growing 30% since the 1990’s and projected to reach 50% by
2040. This urbanization has been crucial
to economic development since it connected greater proportions of the
population to a political system that never reached them in the
hinterlands. This has provoked a demand
for greater accountability as well as services.
It has also weakened the hold of traditional tribal power
structures—stoking modernization and galvanizing development. African urban entrepreneurship has produced
the privatization of many services and activities once provided by and run by
the government. This privatization has
further weakened tribal mechanisms, as well as providing a counterweight to
cronyism and clientilism. The political
stability prevalent through much of Africa is perhaps one of the greatest
contributing factors to Africa’s economic success. Peaceful transfers of power are great
assurances to investors as to the long-term economic viability of an African
state. While democratization still has a
considerable length to travel, it should only improve in the current
century.
Finally, technological
development and ingenuity plays (and will play) perhaps one of the largest
roles for their economic success. By
comparison an incredibly poor continent with much of the population steeped in
poverty, however, it still has over 80 million
cell phone subscribers. The internet
growth has also quadrupled since
2000. This has allowed many states to
leapfrog past normal development and growth models. It is also promoting regionalization and
globalization through its ability to connect people once forever divided by
inadequate infrastructure and non-existent transportation. One breakthrough has been the use of cell
phones by farmers to acquire the best price for their crops and livestock
(e.g., a cell phone app called ICOW).
Cellphone has also provided an avenue for people to bank. Cell phone money transfers are growing
exponentially each year with people able to
receive money on their phones via text and then load these amounts onto
debit cards.
All of this
growth must promote a thoughtful response from the United States. Central to this response must be
consistency. The U.S. can push and
promote economic development on one hand and then embrace protectionism on the
other hand. Much of Africa depends on
international trade and protectionism can effectively squash any hopes of this
for many states. To that end, policies
such as the Multi-Fiber Agreement and the African Growth and Opportunity Act
must be administered (and funded!) equitably to encourage continued growth and
development. The U.S. must take
advantage and invest in their robust banks and burgeoning middle class. Through our economic and political policies
we must promote regionalization so that land-locked impoverished economies can
one day reach the world market. Notably
our investment there must be focused on the local populace. We must employ local and focus on capacity
building. This focus on trade,
investment and job creation are the only things that will be able to break the
dependence of many African states on foreign aid. A great example U.S. companies would be
well-served to follow is that of SAB Miller.
They partnered with local companies and substituted barley for locally
available sorgurum to create a beer and support an entire farming
industry. The use of this local product
reduced import costs and allowed them to build more efficient factories in the
country itself. The trickle down effects of this type of investment are felt
throughout the country.
