Monday, July 22, 2013

Poverty won't go away by itself
By Editor
Fri 12 July 2013, 14:00 CAT

MIKE Rees, Standard Chartered Bank group executive director - wholesale, says despite strong economic performance, many African countries are experiencing 'jobless growth', especially among the young.

Rees says "the current economic boom across the continent offers an opportunity to change this and lift millions of Africans out of poverty, but it won't happen by itself. Tackling this desperate issue, ensuring that growth produces a dividend of opportunity and jobs for people should be top of mind for anyone interested in Africa's long-term future".

This is a very big challenge and there are many honest African statesmen who are not sleeping because of the distressing difficulties they and their people face today. They have done everything they have been asked to do by those who control the world economy, but still the great majority of their people are wallowing in abject poverty and unemployment. They are being told that their economies are growing at five, six or seven per cent but the poverty and unemployment is not accordingly reducing.

So many concessions have been given to transnational corporations to invest in African countries but still poverty and unemployment persists. But probably there is need to examine and re-examine where this growth we talk about is coming from. Over 60 per cent of our countries' export revenues come from the marketing of commodities. They have the worst lot in international trade.

The fact that there are very few of our countries with significant exports of manufactured goods, and that oil exporters are also a very small group, gives a clear economic picture of how we are dependent mostly on commodity exports - agricultural raw materials, mineral raw materials.

The question of commodities continues to be significant for our countries. It is needless to repeat well-known facts, such as the increasing substitution of synthetic products for natural commodities, which poses a constant threat to our economies. Their negative price-trend can be observed in both the short term and long term, although the trends in real prices over long periods are especially revealing and definitely challenge certain optimistic short-term perceptions generally held by economists of the developed world.

It is also a well-known fact that the share of the final price received by our countries from the marketing of commodities is extremely low.

In recent years, various studies, some of them carried out by the United Nations, have penetrated to a certain extent into the intricate manipulations of the transnationals, disclosing their harmful operations and their sophisticated techniques of exploitation. Although we are not against foreign investors and we actually seek and welcome them, it is impossible to avoid referring to the particularly harmful role played by these corporations in this field.

These huge transnational conglomerates which seek to establish their own peculiar international economic order, are by no means innocent of the erratic fluctuations in commodity prices and the minimum share of the final price we in the producing countries receive.

It should be recognised firstly that transnationals exert tremendous control over commodity marketing. Though widely known, this fundamental fact does not always receive the attention it deserves. Actually, all international trade in primary commodities exported by our countries continues under the transnationals' control.

The decision-making power of these corporations over price setting is such that any demand from us for the reassessment of our trade with a view to coping with unequal exchange must include - in order to be coherent and to get to the root of the problem - the eradication of transnational control over marketing and the transfer of trade mechanisms to our nations.

This overwhelming control is exerted by a few corporations which trade in more than one commodity.

Actually, these huge corporations set a price, takeover production and sell it at the established price in any quantity the market may absorb. These are the so-called "managed prices", fixed by the seller to maximise monopoly profits and thereby compensate, through large scale operations, for eventual drop in profits from one product by increasing profits on others, and also by shrewdly taking advantage of the inter-relationships of different products.

In this context, the well-known terms of trade indicators, based on usual trade statistics, can hardly express the real economic benefits for our countries, since a price increase under the prevailing conditions without eliminating the intervention of transnationals would only contribute a marginal share to the national producers, and would instead widen the gap between such producers and the increasing share appropriated by the transnationals.

For many years we have been crying about adding value to our raw materials before we export them but nothing much is happening in that direction. It is very difficult now to create many and meaningful jobs from the production of raw materials. Technology has improved greatly. Even in the mining sector, fewer people are required to do a job because of the efficiency of the equipment being used. Mines are no longer employing as many people as they used to in the past. Even in large scale agriculture, jobs are not as many as they used to be. A few operators can plough, plant, weed and harvest an entire crop.

It is impossible to describe the international trade of our countries - be it in commodities or in manufactured goods - without finding in the transnationals and in the economic policies of the countries where the parent companies are based, the main obstacles to the development of our countries. To ignore the action of these conglomerates would be to follow the philosophy of an ostrich: burying one's head in the sand. Without a coordinated strategy and concerned actions vis-à-vis transnational corporations, little progress would be achieved in steering away from the present catastrophic course in terms of trade expansion and the use of trade as a development factor. We are busy competing with each other for transnational corporations to come and invest in our countries. Some of our countries have declared huge parts of the country as economic zones where nothing or very little is paid in terms of taxes. We are losing out on meaningful taxes; our people are not getting the jobs we thought they would get from such investments and the benefits from exports are very limited.

And as Rees correctly observes, the quest to lift millions of our people out of poverty will not happen by itself. At the deepest point of our worst crisis, it is historically imperative for us - now more than ever before - to break the vicious circle of our trade inferiority and turn international trade into a true element for independent national development.

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