Christian Aid calculates that over the past two decades, sub-Saharan Africa has lost $272bn from the effects of trade liberalisation. That money did not vanish. It was transferred to wealthy corporate pockets in the developed nations. It is worth noting that none of the developed nations achieved their economic status through free trade policies. Protectionist measures were essential for development, reports Gregory Elich.
SO OFTEN WE ARE TOLD THAT the free market is the path to economic prosperity. All an impoverished nation needs to do is privatise, deregulate, reduce the size and role of government, cut tariff protections and open its economy to foreign investors, and it too can become a developed model economy. This gospel is preached by the US and Western European nations and enforced through international financial institutions such as the IMF, World Bank and the World Trade Organisation (WTO).
The neoliberal economic model, it is claimed, is beneficial for all nations and in all circumstances. But is it true? These assertions never acknowledge the actual experience of developing nations that implement these policies. To do so would dispel such notions. The effect of free trade on agricultural development in sub-Saharan Africa provides a characteristic example.
Ghana faithfully enacted structural adjustment programmes in the 1990s in accordance with agreements it had signed with the IMF and World Bank. Subsidies to farmers were ended and the state-run seed company was closed down. The removal of subsidies caused the price of fertiliser to skyrocket, with a predictable fall in consumption and its consequent effect on agricultural production levels.
Government programmes that actively supported farmers were ended, and loans by commercial banks to agricultural producers nearly dried up. Import tariffs were dramatically reduced and in many cases eliminated altogether. This led to a flood of cheap imports from abroad. Domestic smallholders were compelled to compete with imports from subsidised large-scale Western agribusinesses.
In the US, Western Europe and Japan, many billions of dollars are provided to rice growers each year, allowing them to set an export price at well below the cost of production. Local growers in sub-Saharan Africa simply cannot compete on equal terms, especially as they must manage without subsidies due to IMF/World Bank strictures.
Such "free market competition" has brought only hardship to Ghanaian farmers. Surveys in 2002 and 2004 found that two-thirds of rice growers in Ghana operated at a loss. "Why are we suffering?", a Ghanaian farmer asked. "Maybe the international lenders want us to be totally dependent on them."
Heavily subsidised tomato paste imports from the US and Western Europe into Ghana increased by...