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Aquiline
Tarimo, SJ Introduction Cancellation of the African debt alone is not enough. This is because the African debt crisis is linked with an unjust set-up of both national and international economic structures. If we are interested in searching for a permanent solution, then we have to know the root causes and be willing to change those structures that perpetuate this condition. This essay reflects on the consequences of the ongoing phenomenon of debt cancellation as a way of motivating Africa’s economic growth. This discussion brings into focus three areas, namely, causes of the African debt crisis, cancellation of the African debt and the role of the Catholic Church, and what could be done in order to shape the future. Causes of the African Debt Crisis There are various causes of the African debt crisis. First, African countries, after independence, inherited from their colonial masters undemocratic institutions and styles of governance which had historically created a great deal of wealth in Europe. The models of governance and the policies practised in the colonies were not constructed in Africa’s interests. This situation predicted an institutional crisis. What happened is that after independence the African leaders had many traditional options available to help them design effective governments, but they ignored most of them and entrenched themselves in the undemocratic structures of their colonial masters. By such a move they failed the African peoples and frustrated the realization of their dream for freedom, justice, and prosperity. This is what Basil Davidson calls "institutional crisis".1 This reality affected not only the political but also the economic institutions. The colonial economic structures were not changed after independence. African countries continued exporting basic raw materials to feed industries in Europe. According to Sina Odugbemi, about 51% of African exports go to Europe, while about 27% go to developing countries.2 Intra-African trade accounts for only 7.5%.3 This situation affects African economies so deeply because most of them depend on cash crops for foreign earnings. In addition to that the prices of these crops have been irregular and often low on the world market. Added to this is the problem of domestic savings. The problem is that a typical African country does not have sufficient domestic savings to raise the necessary capital for local development. Most countries fund their internal budgets with money borrowed from outside. This money comes from international donors in the form of loans and aid. To pay these debts the countries rely on money raised from exports. As already noted, however, the majority of African countries have only raw materials to export and this does not generate the necessary cash inflows. The amount of money raised cannot cover the costs of the imports of the intermediate products needed to run the farms nor the country’s budget as a whole. In fact, some countries are no longer able to produce raw materials for export. Lack of structural transformation does not, however, shift the blame entirely to the outsider. Corruption and mismanagement have continued to contribute to the deteriorating situation. Second, the growth of the African debt reached disturbing proportions in the 1970s. Between 1970 and 1979, the external debt of developing countries increased by 400%.4 Two factors for this rapid increase were international lending policies and local mismanagement. What happened in the 1970s was that surplus dollars made during the oil-hike were invested in banks both in Europe and in the United States. These "petrol-dollars" were given as loans to the poor countries (PC). The trade imbalance between Europe and the United States of America also produced a surplus of dollars in Europe. These Euro-dollars were also invested as loans.5 The growth of the petrol-dollars and Euro-dollars made loans readily available to the poor countries on easy terms at flexible interest rates. According to Claude Ake, "African countries took advantage of the availability of credit, borrowed enthusiastically, and made poor investments with their easy credit. Between 1974 and 1982 the normal dollar value of the debts of [many] countries rose from $140 billion to $560 billion".6 A number of African countries found themselves borrowing in big amounts. As much as one can blame poor countries for this unreasonable borrowing, one must not lose sight of the fact that borrowers are impotent without the lenders. In other words, if the lenders had not made such monies so easily available, the borrowers might have contracted for the loans with more caution and less frequency. Thus William Darity and others have argued that these loans were pushed on PCs to increase the profit margins of the banks in the United States and in Europe.7 In an effort to dispose of their surplus from the petrol and Euro-dollars in the 1970s, the banks pushed loans to PCs through a drastic softening of terms. In so doing the banks played a role of implementing strategies which created the financial crisis found in Africa today.8 The desire for profits ignited the rapid growth of PCs. This situation made things even worse when it overrode export earnings and coincided with a great deal of internal mismanagement. Social upheavals after the disillusionment of independence produced many dictators and military leaders. These leaders were the ones who contracted the loans. Many of the loans contracted at that time went into the wrong hands and were often misused. In several cases loans were used to buy weapons to quell political opposition within their countries. Third, the debt crisis of the 1980s was related to the response of the International Monetary Fund (IMF) and World Bank (WB). Frantic efforts were undertaken by the financial community to bring African countries back to the system. There is no doubt that the international financial institutions played an important role in this crisis. The writing off of debts was not a point of concern. Such a step would lessen the dividends of banks in North America and Europe and could in the long run lead to a total collapse of the financial markets around the world. This situation then led the IMF to implement what has been called the Structural Adjustment Programme (SAP). The 1980s were thus the years of the SAP in Africa. Its primary goal was not the alleviation of the economic problems of the PCs as may have appeared. It sought to stabilize world financial markets without affecting the economies of the rich countries. Despite all the arguments being made today about the positive effects of SAP, especially by the IMF, one can argue that it did not have the PCs or the human person as its central focus. The truth is that financial institutions placed an unbearable burden on PCs. This meant more debt and more suffering for the PCs. In addition to that loans given to Africa during this period targeted mainly security affairs and the stopping of communism rather than humanitarian needs. Fourth, in order to understand fully the impact of the SAPs on the economies of the African countries we have also to examine the long-term effects of the SAP. The 1980s saw a major crisis for African PCs which had been started by increasing costs for imports and a decline in export earnings. This trend resulted in the policy of SAP in the hope of alleviating this crisis. SAP is a financial strategy which is "aid-based reliance on capital input growth".9 What were the fruits of SAP? The SAP brought untold hardships to ordinary people and explained that such hardships were necessary for a better future. Among the conditions imposed were the restructuring of the public enterprises, the lifting of controls on retail and producer prices, the liberalization of trade and exchange systems, and the broadening of the tax bases.10 These conditions affected the ordinary person more than the rich investors from abroad.11 For the people of Africa, this meant an increase in prices of basic goods like food and medicine. In other words, the burden of this exercise is laid upon the borrowing countries while the lending countries and their institutions refused to shoulder an equally needed adjustment in international financial arrangements. The lending countries and institutions retained their advantages and remained in charge of setting the rules. What is clear is that the SAP strategy was unrealistic because the economic capacity of the poor countries had not increased; instead there was a growing dependency on foreign aid.12 A repeated devaluation of local currencies further exacerbated this situation. Governments could do nothing more than urge their people to "tighten belts". On the surface, the policies of the IMF and WB were laudable, but considering the continuous devaluation of the local currencies and the suffering of the masses, the effects of such policies were tragic. The SAP encouraged trade liberalization and fostered the increase of Trans-National Corporations (TNC). These corporations take advantage of low wages and weak government regulations. One might argue that the TNCs create job opportunities and boost capital in the countries where they establish themselves. This situation may be true theoretically, but the overall effect is disadvantageous to the PCs.13 Due to poverty and the need for capital, little is done to check the activities of the TNCs. Labour conditions are often neglected and the environment is abused. TNC profits are rarely reinvested in the country. Most profits are shipped back to the TNCs’ countries of origin. The effects of TNCs on local industries is also disastrous. Local companies cannot compete with the TNCs. They do not have the capital resources nor access to the international markets of the large TNCs. Many local industries head for bankruptcy and ultimate collapse. The IMF and TNCs often deprive PCs of much needed financial resources. In 1986, for instance, "forty-five Sub-Sahara African countries paid out $895 million more to the IMF than they took in".14 In 1993, the debt of Sub-Saharan Africa increased by 354 % while the First World experienced an increase of wealth.15 This wealth is increasingly concentrated in the hands of a few. The 1992 report of the WB and IMF affirms that "the richest 20 % of the population controlled 83 % of total income, while the poorest 20 % had to survive on 1.4 %".16 This reality is mirrored on the local level. More and more TNCs are taking advantage of the situation and making huge profits, while a majority of the people wallow in poverty.17 These realities raise questions of justice such as: Will African countries be subjected to a new type of economic slavery? Do African governments have the power to pursue projects for the benefit of their people with limited external interference? What we have seen so far in this discussion affirms that the debt crisis, beyond doubt, will affect the future of the African economy, both in the short and long terms. Fifth, in searching for solutions it is appropriate to consider the impact of the growing global market, political marginalization of Africa, and prospects for the African economic future. The survival of the African economic future depends so much on the world’s political and economic strategies. The pace and scale of what is happening now in the global market suggests the marginalization of Africa. The African economic marginalization concerns the "economic regression of Africa relative to other regions of the world and the diminishing importance and relevance of Africa to the global economy, particularly to the industrialized countries".18 One can also account for the problem of the marginalization of Africa as essentially a restatement of what Walter Rodney calls the "problem of underdevelopment".19 Today, Africa has become stagnant, unattractive to foreign investors and donors, and unable to elicit the interest of the other regions in the world. This situation makes Africa a non-entity in world trade and forgotten in economic considerations. Such a deepening crisis of underdevelopment is referred to as marginalization. Thus, the discourse about the African marginalization concerns explicitly the strategies of the world market, financial institutions, and private donors who do not take enough interest in Africa. I would also like to argue that the growing concern about the global market will not benefit Africa. This is because Africa is unable to integrate itself into a global trading system. The global trading system will only open up African markets to foreign goods, thereby aggravating its situation. Meanwhile, what is needed is to support Africa’s efforts to reform its economic infrastructure by pursuing meaningful structural adjustment programmes. Such programmes must include the process of strengthening grassroots structures and enforcing the rule of law in view of establishing a culture of respecting human rights, democracy, equality, and social justice. There is no doubt that "powerful forces, including technological change, the dismantling of trade barriers, and financial liberalization are transforming the shape of the world economy".20 Moreover, financial institutions like the IMF and WB are increasingly acting as if the global economy consists of a single market with regional sectors rather than as national economies linked by trade.... Perhaps, the most acute is that the caravan of global growth will exacerbate inequalities and leave the world’s poor even poorer. The evidence so far seems to justify some anxiety. Huge private investment flows are now pouring into developing countries. Only 6 % went to Africa.21 How will Africa survive if it continues to depend on such a declining aid flow? This question is important for us. So far there is no programme designed to integrate Africa into the process of market globalization. Justin Ukpong argues that "globalization of the world economy whereby the originally weak, agrarian non-technical economies of the Third World countries have been merged into the strong technological economies of Europe and America must be seen as a form of economic oppression".22 The fact is that the structure of global market benefits only rich countries. My argument here is that as the global market system takes shape, Africa seems to be forgotten. This is because Africa lacks the ability to enter into this competition. Furthermore, there is no guarantee that there will be fair play for there are no clear guidelines to motivate the participation of poor countries. The invention of a global market will, therefore, marginalize the African economy in the short- and long-terms. In order to justify this conclusion, it is appropriate to analyze carefully the change of strategies of the world economy. It is now difficult to see anything that can keep Africa on the international scene. Such a dramatic change resulted from the end of the Cold War and the emergence of the global market. The reality is that Africa has been marginalized by the developments in technology and strategies of the world economy. The rapid advancement in technology in recent years must be considered as a significant factor. Technology has made the industrialized countries replace primary raw materials with synthetic materials. This means that the highly industrialized countries of North America and Western Europe are no longer dependent on primary producers of raw materials as they used to be. Furthermore, the deliberate manipulation of the world market and politics leave Africa on the verge of total socio-economic and political disaster. These changes, without doubt, put Africa in a situation of marginalization. Unfortunately, the force of monetarism makes people believe that once financial institutions set the monetary incentives and policies, everybody will do the right thing and the economy will automatically bring forth the intended results.23 It is not just a matter of reordering policies, but rather of transforming the whole infrastructure and creating an "enabling environment".24 Another point to bear in mind is that the loans received between the 1960s and the 1990s were without transformative strategies. The WB Report of 1988 addresses this same issue when it emphasizes the need to transform the economic structures found in Africa by creating an enabling environment.25 The question of creating an enabling environment requires effective governance and political renewal. Better governance includes policy-making, good administration, enforcement of the rule of law, maintenance of juridical independence, honesty, and accountability. African countries have failed to produce political and economic systems that can guarantee these conditions. In other words, basic structures are not organized in such way that they can promote a process of creating economic wealth. Looking at the political situation of Africa today, a genuine change will take a long time because political leaders are more interested in retaining political power than in building stable economic infrastructures. For example, most African leaders use public funds to buy political supporters and luxury items for themselves. The possibility of linking political forces with economic logic will, therefore, depend on the context and cooperation of different institutions. Taking into account the enormous obstacles confronting African countries today, a positive change must be integral and foster grassroots structures. Let us now evaluate briefly the role played by the Catholic Church in this crisis. Cancellation of the African Debt and the Role of the Catholic Church Since 1995, the entire Catholic Church and especially the Western Catholic Church and Catholic organizations have been advocating very strongly for the cancellation of the African debt. The lobbing has been done in various international fora. One could say that in the history of the Catholic Church there has been no other issue related to Africa upon which the Universal Catholic Church has been so united as in the search for immediate solutions to this problem. Certain fruits are now seen since the debts of many countries are in the process of being cancelled. This is indeed a credit to the Western Catholic Church. Nevertheless, if the Church aims at promoting an awareness that could lead to the full elimination of this form of global injustice and poverty in Africa, more steps have to be taken quickly for the sake of securing the future of Africa. This effort must provide practical suggestions that can lead to structural transformation of the economy both at the national and international level so as to enable Africa to participate fully in the global market, enhance equality, and further self-determination. In the end, however, much will depend on individuals who work with a will to change the structures that are at the roots of this crisis and that determine the policies of these institutions. The African crisis must be understood in such a way as to reassess the role of the State, civil society, the economic sector, and the global economic order in which they must all operate. In search of a way to establish an enabling environment, the worst thing Africans can do is to put too much emphasis on the question of debt cancellation. Debt cancellation alone will not change the real situation. Only structural change will create a new environment whereby participation, self-reliance, and creation of wealth are encouraged. My opinion is that even if all of Africa’s debts were cancelled, it will not make much difference due to the following conditions which continue to persist: poor planning, inefficient leadership, corruption, misappropriation of public funds, lack of civil society and participation, power struggles, overdependence, exodus of intellectuals, and manipulation of the poor. What Should be Done? The causes of the African debt crisis are numerous and they vary from one country to another. Consequently, solutions should also vary and depend on the contexts and conditions pertaining to each country. In search for a way forward it is appropriate to ask ourselves this question: What should be done in order to change the situation? For the sake of shaping our future, this discussion provides a few suggestions that I believe can promote justice on the global market as well as overcome administrative problems on the part of the African governments. In order to be brief it is appropriate to sum up my suggestions in ten points. First, a genuine analysis of the African debt crisis must be situated within a wide range of causes, both internally and externally. Internal causes which are at the heart of African economic crisis include social organization. Poor social organization is portrayed by the lack of civil society, insecurity, institutionalized corruption, and ethnic conflicts which arise from the attitude of exploiting ethnic consciousness for political gain. Internal causes are compounded with the mentality of dependence and parternalism which are enforced by international systems of trade, finance, and manipulative politics of rich nations. Such a situation calls those examining this crisis to make an effort to go beyond ideological biases which tend to limit this problem to the issue of overpopulation. Second, we have to acknowledge that the debt crisis is part of the global injustices that we all are part of as long as it deprives people of their basic needs. This affirmation presupposes that a burden must be shared. It does not, however, advocate the outright cancellation of all debts. Instead it challenges us to be considerate when a burden is injurious to the life of the community or State. If the debt is such that it threatens the basic needs of the poor like food, shelter, and clothing, then payments should be suspended. The question that emerges is: Since various countries and institutions contributed a portion of the loan, who should correct the situation of indebtedness? Third, loans should be given on conditions that respect the minimum rights of the citizens. The conditions I have in mind here are accountability of governments, recognition of rights in the country and participation of the citizens in the decision-making. Developmental projects are a first priority. African countries should promote economic growth by involving the citizens more in local projects of development. Genuine economic projects must begin from the capacities of the people. The caring approach aims at converting misused capacity into productive activity so that people can provide for their own needs. This approach includes caring for the common good, at the national and international level. This means making people practice critical thinking by allowing them to see their own interests and linking them to the well-being of others, this ensures that the priorities of the majority are not neglected. Priority should also be given to programmes that are for development and are people-oriented, rather than loans that are for buying weapons, luxury items, and political supporters. Fourth, policies of economic reform should be scrutinized. The current situation of the African economy needs a significant rethinking. It is a situation that demands a broad analysis and reflection on Africa’s past and current economic relationship with Western countries, so that together a new relationship based on mutual responsibility can be formed. Such analysis will open our eyes with a view to challenging the common tendency whereby a donor-recipient relationship favours the donor through an asymmetrical reciprocity in trade policies and an unequal responsibility which is more likely to lead to dependency instead of development. In the African context, the aim, the persons and institutions involved, and the conditions in which foreign aid is given and loans contracted is not made public. What is made public is the accumulation of debts and conditions of payment. The knowledge of the conditions in which foreign aid is given and loans contracted is important because foreign aid, for example, has never been intended to be purely altruistic. Sometimes foreign aid and loans are given as a diplomatic gesture to maintain a long-term economic interest. It is true that foreign aid and loans are important complements to the reconstruction efforts for those countries that need them. However, these countries must constantly be encouraged to lessen their degree of dependency. In addition, donors and financial institutions are called to change their attitude of supplying aid which functions as chloroform. Foreign assistance should be directed to the efforts intended to readjust the economic infrastructure. In this way, foreign assistance can help to mobilize small projects and the private sector for income-generating and job-creating enterprises. It is important to strengthen grassroots economic structures because they play a more visible and basic role in the process of implementing proposed programmes. Fifth, the mentality of excessive dependency on foreign aid should be discouraged. Africa’s total dependency on foreign aid has made the continent fall farther behind. The fact is that foreign aid has created a culture of permanent dependency. This situation is sometimes referred to by economists as the "dependency syndrome". The giving of aid, as an economic assistance, has proven to be a model that is outdated and it cannot change the reality of poverty in Africa. What is needed is the political will to look at human needs as a global problem to be solved together by establishing structures of partnership that give technical assistance. Sixth, for the sake of securing the future, African countries should invest in their own people through education. Since independence, the "major goal of formal education has always been the production of workers for the salaried job sector".26 Since the 1980s, this kind of education (i.e., education oriented toward employment) is becoming more and more irrelevant because there are no jobs. This situation, therefore, demands a change in the educational system. This change necessitates the formation of people who can challenge themselves to be open to new insights that promote integrity, commitment, creativity, and self-reliance. Furthermore, I would like to point out that the economic development of Africa will also depend on the status of women. African women are the pillars of African socio-economic life. If their status were improved through education, then it would positively affect the economic life of African countries. A relevant education will encourage them to overcome their tendency to endure rather than to challenge the hardship. Seventh, African skilled workers and intellectuals are morally obliged to contribute their skills to their respective country instead of going abroad in search for economic and professional advancement. Since the 1980s there has been a brain-drain from the African countries. This phenomenon has been caused by low wages, corruption and mismanagement, nepotism, lawlessness, and dishonesty on the part of leaders. My conviction is that there will be no significant change either politically or economically as long as the exodus of intellectuals continues. Eighth, there is a need to strengthen intermediate associations. For about four decades, the one-party system and military regimes suppressed the role of trade unions, cooperatives, and professional associations. Today, the remaining associations do not have the ability to assert autonomy or challenge the repressive governments. Most governments continue to treat leaders of associations as their agents. This attitude is sustained by the practice of making sure that leaders of associations are controlled by the government. It is through this system that most governments find ways to reward associations that conform with them and harass those that try to assert their autonomy. Intermediate associations are important because they play the role of shaping economic policies by providing alternatives and mobilizing people from the grassroots level. In the African context, the idea of strengthening such structures would be one step toward the process of transforming economic infrastructures. Apart from overcoming totalitarianism, this process will improve the economy by making people co-responsive and go beyond the crisis-oriented approach which dominates economic planning in Africa. Associations can play the role of promoting the idea of the common good, human rights, participation, and creativity. This is done by ensuring that there is a sense of reciprocal obligations and expectations that prevail among groups of different interests. These organs promote the sense of the common good by articulating a mechanism that defines the relationship between the State and civil society and safeguards the separation between them. The structure of intermediate associations can overcome bureaucracies and monopolies of socio-economic and political power concentrated in the hands of the "predatory élite". Instead of allowing the political sphere, which is dominated by the élite group, to dictate everything in the socio-economic sphere, civil associations will act as guardians of people’s opinion, and will encourage participation and new ideas. This is done by helping the poor to defend their basic rights. In collaboration with the skilled workers like lawyers and human rights activists, victims of economic justice will be able to decide for themselves how to improve their life standard. The process of developing such awareness will be effective because the assertion of rights is derived from the peoples’ sense of justice expressed in terms of strategies initiated and sustained by the people themselves. The call to strengthen intermediate associations reminds us that verbal pronouncements alone are insufficient. Verbal pronouncements must be action-oriented. In the African context, verbal pronouncements alone create an insignificant impact. This is because there are no relevant structures that can convert such pronouncements into social action. It has to be clear that there will be no effective way of talking about socio-economic justice and human rights in Africa if intermediate associations are not strengthened. In other words, socio-economic and political success will not occur in a vacuum. The appearance of multiparty elections in recent years should not distract people from continuing to search for concrete ways in which the economy can be reformed. Multiparty elections, in themselves, do not guarantee democracy or economic prosperity. Ninth, the Catholic Church can play a significant role in changing the current situation. This is possible if it collaborates more effectively with other Churches in influencing the process of policy-making, moulding of the public conscience, and promotion of human rights and social justice. "It is, therefore, no longer possible for the [Church] in Africa, and for that matter the universal Church in place to look on the poor and the situation of poverty as something it may or may not take on as the central focus of its mission".27 Tenth, many development theories have been borrowed from abroad and imposed on people, but the life standard of the people has remained the same. Such an outcome shows that there is a need to analyze thoroughly our cultures and to come out with a developmental framework based on African cultural values and context. This approach entails critical evaluation of each individual and group in order to identify the strength which we could build upon. Such an adjustment needs associations. Associations provide people a platform where they can dialogue creatively and identify problems which affect them. They recognize people’s culture, interest, and potentiality. Recognizing people’s potential provides self-confidence and courage to search for practical solutions to their own problems. It is a process which makes everyone in local communities act responsibly knowing that their actions affect their own lives. Human development is what begins with a person and spreads through the family and to the community. Conclusion What is important in this discussion is the response given to the African debt crisis with a specific orientation. More than that the African debt crisis finds its answer in the African people who are the future of the African continent. Notes: 1Basil
Davidson, The Black Man’s Burden: Africa and The Curse of the Nation-State,
New York, Times Books, 1992, p. 12.
Ref.: Text from the Author.
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