The African continent, due to underdevelopment, is pushed to the periphery of the world economy. The continued deficits are haunted by the ghost of free trade.
The Sahel has faced significant economic issues over the past decade, leading to stagnation in purchasing power and declining living standards. The link is undeniable. The average per capita GDP in West Africa has declined, showing negative prospects for future growth under the neoliberal mode. West Africa's economic challenges should be based on a rejection of this current economic model, better investment practices and trade practices that show finesse and understanding of Africa's current role in the world economy.
Purchasing power in the Sahel region has stagnated over the past decade, being strongly linked to the rising cost of living. In 2013, the average GDP per capita in West Africa stood at $1,905. Fast forward to 2022, we can see a GDP per capita of $1,690, indicating a very negative growth regionally. This trend correlates with an uptick of inflation in various Sahelian countries, as well as the surge in violence by bandits and jihadits groups.
To comprehensively analyse the reasons for these setbacks, we must revisit the various themes found in all of the governmental styles in the region. In the Sahel, we can observe a more relaxed neoliberal style of governance as commonplace and as a de facto mode of governance for most states. Alongside this, we can see that generally these states share the same trade positionality, as poor free market states with large trade deficits and we can also see a decline in investment in the latter years of the decade.
Neoliberalism
Neoliberalism, as aptly defined by David Harvey, is a "theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterised by strong private property rights, free markets and free trade."
As he argued, neoliberal frameworks, at the minimum, set up military, defence and legal structures that defend private property and allow, at its most basic, for the market to function. It helps create markets where they are not present (for example a for-profit health care system versus a single payer one). State intervention in the economy is discouraged, as the state is seen as a statist villain. Neoliberals argue that whatever the state can do, the market can do better. This has been a common form of economic thinking since the election of Thatcher in Britain and it was practiced in countries such as Chile under Pinochet. Deregulation and privatisation have been lauded in African think-tanks as prerequisites for development, when we can see the negatives of state agencies and the cost of living.
Africa itself transitioned into this type of economic model after the oil crisis of the 1980s. While neoliberalism is a typical West African economic orientation, this was modeled first with Sadat's reforms. Egypt, which had previously emphasised a developmental model of import substitution industrialisation, undertook the gradual privatisation of hundreds of public enterprises known today as Infitah. This greatly accelerated the inequities between rich and poor Egyptians and indigenous enterprises could not generally compete, causing mass unemployment and the slashing of wages. This was directly linked to the cost of living crisis, and the promised aid and assistance dried up, creating a poor class of people who could not afford the amenities that were promised from economic liberalisation. Many countries suffering from balance of payment problems found themselves in this conundrum and ultimately took to becoming much poorer due to the end of protecting their emerging industries.
There has been a net decline in investment in Africa, which has negatively impacted the economies of the Sahel. In general, more money flows outside of Africa than into Africa. Negative regional growth lowers the possibility of investment. In a lot of cases, the concept of labour power is stressed where it is seen that Africa, having a large population of manual labourers, could attract investment the way that China did in the 1970s.
Many African nations took these measures with the belief that public sector and governmental corruption would be offset by having a strong private sector that would avoid corruption and be profitable. But in most cases, this was a free for all; the people who were able to buy these enterprises were people from the government and the very rich. These private enterprises lost even more oversight and due to their institutional ties and wealth, they were able to lobby in a way that made corruption even worse for the government to tackle.
Despite declining GDPs and living standards, there have been little corrections in the face of economic crises in these African nations. These countries are encouraged to privatise their public enterprises, resulting in the displacement of thousands from public sector jobs. Subsidies, designed to assist the working class in affording essentials like fuel and consumer goods, are being reduced, leaving millions with diminished purchasing power. IMF conditionalities often hinder countries from using loans productively; instead, they are used as temporary fixes for perpetual budget shortfalls. For instance, in Ghana, which is grappling with soaring inflation and a cost of living crisis, the IMF demanded a freeze on public sector eagles and hiring in exchange for loans, leading to layoffs and heightened poverty among these workers.
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The current strategy of these governments, which prioritise expanding market mechanisms at the expense of workers, has proven to be unsuccessful and fails to generate the level of growth required for the countries to become rapidly developing economies.
Retreat in Investment
There has been a net decline in investment in Africa, which has negatively impacted the economies of the Sahel. In general, more money flows outside of Africa than into Africa. Negative regional growth lowers the possibility of investment. In a lot of cases, the concept of labour power is stressed where it is seen that Africa, having a large population of manual labourers, could attract investment the way that China did in the 1970s.
The main issue with this assessment is that capital invests primarily in sectors where the profit rate is much higher, meaning that it is more likely to invest in richer, more educated sectors of the world. In 2022, Africa only made $45 billion of foreign direct investments (FDIs) in comparison to the $1.295 trillion of total investments around the world, which is less than 3 per cent of the total FDIs. Capitalists prefer high wage countries where there is high purchasing power to afford products. With the developed world primarily in crisis, the demand for the products of African countries will decrease. FDI is a niche that only some rapidly developing countries can depend on but they are the exceptions. It is near impossible to facilitate growth from the "comparative advantage" of labour investment.
The African continent, due to underdevelopment, is pushed to the periphery of the world economy. The continued deficits are haunted by the ghost of free trade. For years, many have argued that Africa should use its position as a resource rich location of cheap labour to utilise its "comparative advantage" and invest in the relevant sectors. The argument by free traders began with Portugal and UK...and now this is being applied to the African continent.
In China and the Asian tigers, investment primarily came from Cold War political contexts, a lot of them focused heavily on obtaining an educated population. In China, this was facilitated through technology transfers and an industrial base originating from its communist political history. Viewing these specific conditions as being able to be copied is obscene, when comparing two different specific models of investment. Developed industries, even if rentier (like a majority of Third World Resource development) attract investment, not just "ease of trade."
Trade Positionality
The African continent, due to underdevelopment, is pushed to the periphery of the world economy. The continued deficits are haunted by the ghost of free trade. For years, many have argued that Africa should use its position as a resource rich location of cheap labour to utilise its "comparative advantage" and invest in the relevant sectors. The argument by free traders began with Portugal and UK (which ended up with mass unemployment in Portuguese industries and the deficits were only co-operated with colonial plunder) and now this is being applied to the African continent.
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What free-traders fail to see is that the theory of free trade does not co-equally benefit both partners in a free trade agreement. The countries that benefited the most from free trade have had cycles of protectionism in growing their industries, and allowing them to outcompete, outproduce and oversaturate market share, in comparison to the poor countries' specialisations. It is very difficult to grow via export-led development, as historically the era of free trade (1980s onward) has been marked by reduced terms of trade and poverty between Africa and the developed world.
Overall, high wage countries have more productive techniques and are therefore more of an advantage. Huge economic blocs like the EU can prevent countries from exporting what they would like by limiting their imports. African countries don't have the means to prevent this; for them, exporting to the West on negative terms of trade is better than having fewer markets to export too (which would cause even more unemployment and deficit issues). When free traders point to a global reduction in poverty, this can only be seen with China's heterodox political model. Poverty in Africa has not reduced significantly with this political model.
Conclusion
The Sahel has faced significant economic issues over the past decade, leading to stagnation in purchasing power and declining living standards. The link is undeniable. The average per capita GDP in West Africa has declined, showing negative prospects for future growth under the neoliberal mode. West Africa's economic challenges should be based on a rejection of this current economic model, better investment practices and trade practices that show finesse and understanding of Africa's current role in the world economy. The way to fight underdevelopment in West Africa should be based in a departure from the status quo and a commitment to addressing the average West African workers' concerns.
Damilola Ojikutu is of the Sociology and Journalism Department, University of Maryland Baltimore Campus, United States.
