4.5 Adjustment and Development in Africa - YouTube

In the last lecture we examined the international financial institutions and their role in development.

We discussed structural adjustment programs and the challenge of financial speculation.

Now, we'll examine in greater detail how structural adjustment—and more broadly, neoliberalism—has

played out on the African continent.

Now remember that structural adjustment programs were rooted in the theoretical model espoused

in the Washington Consensus.

The common policy prescriptions of structural adjustment—applied broadly regardless of

the specific economic conditions of a given country—included currency devaluation, increasing

interest rates, cutting government spending, liberalizing and privatizing the economy,

and emphasizing production for global markets.

It's also important to remember that this approach to development, popularized in the

context of Africa in the World Bank's 1980 Berg Report, represented a radical departure

from pre-1980s approaches to development that placed the state as the primary agent of development.

Indeed, before 1980, the World Bank often provided loans for the development of "parastatals"

or government-owned businesses that provided particular services.

Parastatals were common across Africa, particularly in the agricultural sector.

After 1980, though, parastatals were framed as obstacles to market-led development, and

were sharply cut and often disbanded.

Collectively, these policies were encompassed under the philosophy of neoliberalism, which

advocates support economic liberalization, free trade and open markets, privatization,

deregulation, and decreasing the size of the public sector while increasing the role of

the private sector in modern society.

These policy prescriptions were enacted across the continent sometimes by choice, but more

under the rubric of structural adjustment.

Indeed, between 1985 and 2010, only five countries on a continent of fifty four countries total

escaped IMF conditionalities.

And even in these five countries, national programs emphasizing market liberalization

and reducing social protections were sometimes voluntarily implemented by the national governments.

Over that 26 year period, the "Average" Sub-Saharan African country experienced 15 years of conditionality.

This graph illustrates the breadth and depth of adjustment on the Continent.

A red cell indicates the country was under one or more IMF conditionality-based program

for that year.

Black indicates that the country did not have an independent government during that period.

Conventional approaches to African development frame the problem of development in Africa

as a function of the continent's exclusion from the global circuits of capital and global

markets.

The challenge is thus to liberalize the economy, establish greater transparency, and ensure

the security of capital.

The solution, in short, is to expand Africa's integration into the global economy.

However, this solution fundamentally misdiagnoses the problem.

Africa is, in many ways, already deeply embedded in the global economy.

Africa's historical development was deeply shaped by both the slave trade and colonial

intervention, both of which were processes driven, at least in part, by demands of the

global economy.

Today, African economies are more dependent on global markets than any other region of

the world.

If we define globalization in terms of global market dependence, that is in terms of international

trade (exports plus imports) as a percent of gross domestic product, some interesting

findings emerge.

At the global level, for the average country, imports and exports represent about half of

the GDP of the country.

Sub-Saharan African countries are even more globally connected.

Nearly two-thirds of all economic activity in the region is destined for global markets.

The United States, by contrast, depends on the global economy for just one-quarter of

all economic activity, considerably higher than the 10 percent level in 1960 by still

considerably less than the world (let alone the African) average.

Structural adjustment was imposed in an effort to head off a growing debt crisis by increasing

global connections in an effort to spark development.

Remember that the idea of liberalizing markets was, at least in part, to generate economic

activity by attracting foreign direct investment.

But something interesting happened across Africa.

As structural adjustment programs were imposed across the Continent beginning in 1980, economic

growth (measured in this chart by per capita Gross National Income, or GNI) slowed and

debt (as a percentage of GDP) increased.

Despite the widespread adoption of structural adjustment and the corollary liberalization

of African economies throughout the 1980s, the continent had little to show for it.

Indeed, the 1980s widely came to be termed Africa's "lost decade of development."

In place of economic growth and social progress, socio-economic conditions within most African

states declined steadily throughout the 1980s and 1990s, such that, by 2000, many African

states were actually only returning to levels of per capita GDP that they had achieved by

the late 1970s.

And while liberalization was intended to attract more foreign direct investment, or FDI, most

countries received very little.

Less than half of all African countries received more than a billion dollars in FDI in 2010,

and only 7 (of 53) received more than the world average rate.

Remember that foreign direct investment refers to private investment into production or business

operations in another country.

FDI can include acquiring assets in a company based in another country, building production

facilities in another country, or establishing a joint venture with a company in another

country.

In Africa, though, foreign direct investment is confined largely to extractive industries

in a small number of countries.

These countries, noted in yellow, boast large reserves of oil.

And more generally, the top ten recipients of foreign direct investment on the continent

account for more than 80 percent of all FDI.

Nearly all those countries are home to sizable oil reserves (for example, Nigeria, Sudan,

Angola, and Equatorial Guinea), or possess significant quantities of other primary resources

(e.g., South Africa's diamonds and gold, the DRC's coltan, and Zambia's copper).

Thus even as some countries experienced an economic turnaround in the 1990s, Africa's

economic recovery was highly uneven.

A handful of countries—mostly those with key strategic resources—improved their position.

Most, however, continued to face ongoing developmental challenges.

African development and the continent's position in the global economy remain uneven.

On the ground, this uneven pattern of foreign investment results in the creation, as James

Ferguson (2006) observes, of two Africas.

Barrowing from French colonial discourse, Ferguson classifies these two Africas as "Useful"

Africa and "Useless" Africa.

"Useful Africa" is targeted for foreign direct investment and exploitation of its natural

resource base.

But the vast expanses of Africa without significant strategic resources—"Useless Africa"—is

impacted by global neoliberalism but remains largely peripheral to it.

These regions continue to be subject to all the dictates of IMF conditionality but receives

few of the purported development that is supposed to accompany it.

As noted in the previous lecture, the most controversial element of Structural Adjustment

centered on privatization and liberalization.

More generally, countless services traditionally performed by the state have been transferred

to private companies and contractors.

Responsibility for providing basic public utilities like water, electricity, telecommunications,

and transportation, has been transferred wholesale to the private sector.

The state has withdrawn much of its support for the delivery of social welfare, for example,

in the areas of health care, education, and pensions, either to the private sector or

to individual consumers.

In the developing world, requirements to cut public spending and privatize state-run enterprises

in the name of promoting efficiency generated considerable resistance among those who depended

on those services.

Although South Africa largely escaped structural adjustment, the post-apartheid South African

government embraced the central tenants of the Washington Consensus.

Remember that apartheid was the system of white minority rule that existed in South

Africa until 1994.

While blacks comprised the vast majority of the population, South Africa's racist political

and economic system ensured they were marginalized.

Popular uprisings, including the 1976 Soweto uprising pictured here, were violently repressed.

But ultimately South Africa's majority black population was able to force an end to the

apartheid regime.

However, even before it took power in 1994, the African National Congress' progressive

policies were coming under challenge.

A series of World Bank reconnaissance missions between 1990 and 1993 were intended to pressure

the ANC to move away from a policy framework focused on redistribution to one focused on

privatization.

This pressure culminated symbolically in the ANC's October 1993 announcement that it would

assume responsibility for more than $25 billion in odious apartheid debt.

Behind the scenes, the International Monetary Fund was also working to (re)commit post-apartheid

South Africa to a neoliberal policy path.

After assuming responsibility for the apartheid-era debt, the ANC reached an agreement with the

IMF to an $850 million loan conditioned on cuts to public sector wages, government spending,

and privatization of many state industries.

The ANC also committed the South Africa to a course of privatization and market liberalization,

and rescinded many of the restrictions formerly placed on the economy.

As part of this broader package of reforms, water and electricity service delivery was

increasingly subject to the logic of the market.

In some cases, service delivery was contracted to private companies.

The French water company Suez, for example, secured the right to water service delivery

in Johannesburg.

In other areas, like Durban, water continued to be delivered by the municipal government.

But water service boards increasingly operated like private companies, guided by principles

of full cost recovery and pricing structures that favored large scale users.

The state increasingly shifted responsibility for securing service delivery to the individual

consumer.

Payment for services was framed as a responsibility of citizenship.

Indeed, the ANC's Masakhane (meaning "Standing Together") campaign sought to recast boycotts

as an irresponsible action in a "culture of nonpayment."

Rent and service boycotts had been a central part of the anti-apartheid struggle culminating

in a series of campaigns by the United Democratic Front in the 1980s—campaigns which helped

to bring an end to apartheid.

Now, demands for the provision of basic services which had been denied then unequally provided

by the apartheid state were now being unevenly afforded by the ANC government itself.

Such policies highlighted the limitations of the political transition from apartheid,

and generated concerns over economic apartheid.

Opposition to privatization had become, in short, the focus of a new struggle for poor

South Africans.

In an interview with the Washington Post in 2003, Anti-Privatization Forum member Agnes

Mohapi commented that, "For all its wretchedness, apartheid never did this.

It did not lay me off from my job, jack up my utility bill, then disconnect my services

when I could not pay.

Privatization did this."

More recently, Richard Mokolo, an anti-privatization activist, put it another way.

"Privatization is a new kind of apartheid," he said "Apartheid separated whites from blacks.

Privatization separates the rich from the poor."