African poverty and the failure of local capitalism – massive misgovernment


Karl Marx Haunts Africa

Why are most Africans in Sub-Saharan Africa getting poorer while most people in the rest of the world are becoming better off? In its seminal study, Can African Claim the 21st Century? the World Bank made the following observations about Sub-Saharan Africa: “Despite gains in the second half of the 1990s, Sub-Saharan Africa (Africa) enters the 21st century with many of the world’s poorest countries. Average per capita income is lower than at the end of the 1960s. Incomes and access to essential services are unequally distributed. The region contains a growing share of the world’s absolute poor, who have little power to influence the allocation of resources.”

All modern schools of political thought, from Karl Marx and Vladimir Lenin on the left to Friedrich Hayek and Milton Friedman on the right, are agreed on at least one thing: the private sector is the driver of modern economic development.

In a quest for greater security and comfort, the theory goes, private individuals and their households are driven to seek more and more material wealth. This process in turn compels these private individuals to produce more and more, and exchange what they produce with other individuals who are also seeking greater security and comfort. The sum total of these acts of production, exchange and consumption constitute the modern capitalist economy. The capitalist economy is therefore inherently driven to produce more and more, so that its denizens may get greater and greater security and comfort.

For the private individuals to produce more and better, they must generate savings that they plough back into the production process as new and improved techniques, processes and products. This enables them to constantly produce more, better and diverse products capable of exchange with other private individuals who are doing the same.

This is the inexorable logic of capital accumulation. The more you produce the more you must produce, the cheaper you must produce and the better products you must produce, because if you do not, others who are seeking greater security and comfort will displace you in the marketplace and you will therefore suffer reduced security and comfort. The key words of this system are therefore production, exchange, markets, savings, improved techniques (research and development), medium of exchange (money), and economic growth.

Africans are no different from other human beings in the quest for security and comfort. However, the great majority of Africans are today experiencing the opposite; less security and comfort, hunger, homelessness, violence and starvation on a daily basis.

Africa, however, has arguably one of the largest private sectors in the world today. Most Africans live and work in private households that populate the African countryside. Theoretically, if we refer to the model described above, Africa should be a hive of economic activity and growth driven by the logic of these private individuals and households attempting to maximize their security and comfort. What has gone wrong?

In the model described above, the underlying assumption is that private individuals are free to pursue their search for security and comfort and they, therefore, own and control the means of achieving their objectives. They are assumed to be free to exchange what they produce without hindrance and that where they are able to make savings, they are free to retain those savings and plough them back in improved techniques or in other investment avenues as they may wish.

This is not the case with the private sector in Sub-Saharan Africa, which is predominantly made up of peasants and subsidiaries of foreign-owned multinational corporations. Neither of these two groups have the complete freedom to operate in the marketplace because they are both politically dominated by others – non-producers who control the state. Herein lies the weakness of the private sector in Africa that explains its inability to become the engine of economic development. Africa’s private sector lacks political power and is, therefore, not free to operate to maximize its objectives. Above all, it is not free to decide what happens to its savings. Let us start with the situation of Africa’s peasants.

According to Marx, peasants are not able to form an independent political force that can represent their interests; they are therefore open to exploitation by other social groups that dominate them politically. Africa’s peasants are prey to the forces that have the ability to form political organization and therefore control the state.

Fundamentally, the political elite uses its control of the state to extract the surplus or savings that if the peasant were free to retain, they would have invested in improving their production techniques or diversify into other economic activities. Through marketing boards, taxation systems and the like, the political elite diverts these savings to finance its own consumption and strengthening of the repressive instruments of state. The Economist on July 17 made the following observation about Ethiopia’s dependence on foreign food donations: “By law, all Ethiopian land is owned by the state. Farmers are loath to invest in improving productivity when they have no title to the land they till. Nor can they use land as collateral to raise credit. And they are taxed so heavily that they rarely have any surplus cash to invest.”

A great deal of what Africa’s political elites and states consume is however not produced locally but rather imported. This does not create a significant market for African producers but instead acts as a major drain on national savings that would otherwise have gone into productive investment in Africa. This is the secret to Africa’s growing impoverishment, despite its large private sector. The more the African political elites consolidate their power, the more they strengthen their hold over the state, the more the peasants are likely to become poorer, and the more the African economies are likely to regress or, at best, mark time.

The most graphic illustrations of this iron law of African underdevelopment is the role the oil industry plays in Africa.

Oil revenues make it possible for the political elite to literally become detached from the local population and economy and, therefore, to live in an oasis. When this happens there is therefore no need for the political elite and the state it controls to invest in mass education, health care, housing and transportation infrastructure that the population at large needs.

Everything thus goes into a state of decay, except of course for the welfare of the political elite and the repressive machinery of the state.

Nigeria provides a good example of this phenomenon. The number of Nigerians living below the poverty line increased from 19-million in 1970 to 90-million in 2000. This was accompanied by a massive rise in inequality. In 1970 the top 2% of the population earned the same income as the bottom 17% but by 2000, the income of the top 2% was equal to that of the bottom 55%.

By Moeletsi Mbeki
South African businessman and political analyst.