By Jeremy Gaines and Christian Hiller von Gaertringen
Summer spells peak season for international conferences. Scarcely a week goes by without at least one major conference placing Africa or Africa and the Global South at the top of the agenda. This get-together marathon in business suits is invariably accompanied by the accusation that the Global North is preventing Africa from itself industrially processing its raw materials, be they metals (even gold) or agricultural products.
Yes, that is correct. One-sided trade agreements favor the import of raw materials into the European Union while imposing high tariffs on the import of processed commodities from Africa into the EU. Prime examples of this unfair practice are coffee, cashew, and cocoa.
This aspect should not be forgotten. But, and it’s as big but: That is not the real question. What needs to be asked first and foremost is: If this imbalance is so glaring, why aren’t African governments taking tougher action against it? After all, China managed to break free from the dominance of the industrialized West. So why doesn’t Africa?
Nevertheless, the goal should be clear. Africa doesn’t need to become Switzerland making chocolate. It just needs to stop being the entity that allows the beans to be shipped out, on ships it probably does not own.
Let’s be honest: The complaint about the Global North preventing Africa from establishing its own processing sector is not only an old chestnut, it is also only half the truth. The other half lies within Africa itself — for instance, in the fact that extraction-based economies invite and encourage mismanagement, rent-seeking, favoritism, insulated elites, and corruption.
Developing industrial manufacturing entails a shift in power: In Europe it was away from the aristocracy and toward the new middle class. In Africa it must be away from the person who run politics as a revenue stream (rather than in order to represent popular interests) and toward entrepreneurs who create businesses. Take a look at Russia: Has it fostered its industrial sector over the past 40 years? No. Has it nurtured an extractive economy driven by oligarchs? Yes. And this is probably why many African political leaders have just as little desire to emphasize local processing.
For this reason, in our assessment, the complaint about unfair trade remains too superficial. This system persists mainly because it is underpinned by economic criteria. In this blog, we intend to delve deeper and get to the root causes of the economic imbalance between North and South.
To do so, we’ll have a look at the economic theories of the 19th century, for this phenomenon is not new. At that time, it reflected the economic disparity between England and Germany: that is, between an established economic power and an emerging coal-and-steel region that had united politically and was no longer willing to accept such economic dominance.
What awaits you behind the paywall:
Why such dominance does not necessarily endure
Asymmetric trade relations reinforce colonial power dynamics
Free trade is an instrument of the powerful
How investors can participate in building a processing industry
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