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DPMF Publications: |
A Reflective Summary of the Debate at the
Conference on ‘‘Democracy, Sustainable Development and Poverty Reduction: Are
They Compatible?’’
(Sipho Buthelezi) |
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Introduction: Recent
Development Trends in Africa
Africa’s deepening social, political and economic crises are a product of weak agricultural growth, the decline in industrial output, poor export performance, escalating external debt, deteriorating social conditions, domestic policy deficits, the decomposition of the state and its institutions of governance, and the worsening international economic environment.
In general, the global economic crisis is impacting on African economies through two main transmission channels: trade and finance. The 1999 African Development Bank Report has observed that large currency depreciations raised the prices and reduced the demands for imports from the rest of the world, including Africa. The continent’s export market share is also under threat from the intensified price competition in third markets for primary products arising from the Asian crisis. Africa’s economies encounter fierce competition from Asian producers in key primary commodity markets such as tea. According to the African Development Bank’s figures for cocoa beans, Africa’s global market share fell 20 percentage points between 1970 and 1993, while Asia increased its share by virtually the same amounts.
Meanwhile, 33 of the 48 countries that the United Nations classified as Least Developed Countries (LDCs) are on the African continent. These are the world’s poorest countries with per capital Gross Domestic Product (GDP) under US $900, and with low levels of capita and technological development. Although the 49 LDCs account for nearly a quarter of the world’s population, their share of the world GDP is less than 1 percent. In terms of their share in total foreign direct investment (FDI) inflows, there has been a decline in both absolute and relative terms.
Then, too, Official Development Assistance (ODA) and other development finances from the principal donor countries have declined since the beginning of the 1990s. Since then, LDCs that rely mostly on ODA have to cope with reduced aid flows as well as volatile and generally depressed commodity prices, while their access to private finance for investment remains limited. It is clear that if this trend persists, agendas aimed at poverty reduction and social and human development will be at risk. It is also clear that if these trends persist, Africa will suffer not only a development deficit, but a democracy deficit as well.
In response to the crisis, most African countries have embraced development strategies based on neo-classical development theory, which emphasises trade and comparative advantage in the export of raw materials and minerals; in short, export-led growth. Specific responses to Africa’s crisis from the Bretton Woods institutions came under a stabilisation programme known as Structural Adjustment Programmes (SAPs), whose standard prescription and conditionality include, inter alias:
• massive and repeated currency devaluation;
• exchange and interest rate liberalisation;
• monetary control, usually by setting ceilings on domestic credit expansion;
• trade liberation, including the abolition of state marketing boards and trading agencies;
• state budgetary reduction, including removal of subsidies on basic foods, essential services, and energy sources of the poor;
• public sector retrenchments, including removal of wage freezes;
• public enterprises privatisation, liquidation and commercialisation; and
• a generalisation curb on state intervention in economic processes.
The question marks surrounding the appropriateness of the Bretton Woods institutions’ conditionality are large. It has even been suggested that the World Bank’s conditionalities are much more pervasive and intrusive than those of the International Monetary Fund (IMF), and are sustained over a longer period of time, even though the two approaches are mutually reinforcing. Their objective, in this perspective, is nothing less than a wholesale revamping of the regime of accumulation in debtor countries, altering in a fundamental way the strategy and modus operandi of economic institutions, the distribution of income and the balance of class power. The policy instruments and measures undertaken by African governments in response to the crises have had severe consequences for the regional economies:
• One of these involved drastic budgetary reductions, especially with respect to expenditures and subsidies on social services and essential goods. The effects of this adjustment policy has been to undermine the human condition, the enabling environment and the future potential for development; and has necessitated massive retrenchment in the public sector.
• Another policy instrument has involved the indiscriminate promotion of traditional exports through price incentives offered only to the “tradables.” The consequences have included the undermining of food production and self-sufficiency, and have led to undesirable environmental degradation, and sometimes to oversupply and a fall in prices.
• Thirdly, there has been an across-the-board credit squeeze, which has led to the overall contraction of the economy, declines in capacity utilisation and the closure of enterprises, and an accentuated shortage of critical goods and services.
• Fourthly, generalised devaluation policies involving open exchange markets currency depreciations have serious social, political and economic consequences. These services raise the domestic cost of imported inputs and undermine capacity. Utilisation triggers general inflation; diverts scarce foreign exchange to speculative activities and exacerbates capital flights; worsens income distribution patterns; undermines growth; and can result in structural entrenchment of traditional exports through price incentives for such commodities or “tradables.”
• Unsustainable high real interest rates (inflation-adjusted nominal rates of interest) lead to shifts in the economy towards speculative trading activities by becoming a disincentive to productive investment, and fuel inflation.
• Total import liberalisation leads to greater and more entrenched external dependence; intensifies foreign exchange constraints; jeopardises national priorities such as food self-sufficiency; erodes the capacity of infant industries and thereby slows industrialisation.
• Another policy instrument involves excessive dependence on market forces for getting the “price right” in structurally distorted and imperfect market situations. The consequences of this are the worsening of inflation through sharp increases in production costs and mark-ups, deviations from desirable production and consumption patterns and priorities, and the possible derailment of the entire process of transformation.
• Lastly, African countries have followed doctrinaire privatisation, which undermines growth and transformation; and jeopardises social welfare and the human condition.
The economic policy that was adopted by the newly created states of Africa under the supervisory eye of the Bretton Woods institutions has as its objective ensuring internal price stability and bringing about a balance in their payments. This policy, in fact, has become the neo-colonial version of the former colonial policies of deflation, low wages, and low prices to the peasant class, of which the vast majority, 80 percent in some cases, are women, resulting in low prices of raw materials. In SSA these raw materials are mainly agricultural commodities produced by women under conditions of harsh exploitation. The policy arose out of the demands of international finance capital to maintain its profitability on the basis of monopoly prices for their manufactured products.
The last decade has been marked by a contrast between the rising consciousness of the importance of the women’s economic struggle and the deterioration of the world economy. For Africa, the 1980s and 1990s have seen not just low rates of growth, but absolute declines in many of the key indicators of economic well being. Real per capita incomes have continued to decline in SSA. Strategic responses to the general economic deterioration by African governments have been to adopt structural adjustments programmes sponsored by the IMF and the World Bank.
For the proponents of orthodox SAPs in the IMF and the World Bank, African governments are meant to accomplish two goals: to minimise the role of the state apparatus in economic development, and to implement economic reforms that would orient the economy toward export-led growth and a return to market forces. Since “adjustment” is a remedy reserved for the weak and the vulnerable, the least developed countries, the consequences of this bitter logic has been that the most vulnerable groups in these societies are the poor generally, and women and children specifically.
The key services that women and children benefit from are decimated by public expenditure cuts in health, education, nutrition and other basic welfare services that benefit primarily the poor. To counter the negative effects of SAPs for the rural poor, various forms of interventions have been attempted in several African countries. These have invariably centred on land reforms, resettlement schemes, special credit opportunities and training programmes. Although these specific immediate interventions share one common dimension—disastrous failure—it is worth noting that several African countries have tried them, namely Cote d’ Ivoire, Senegal, the Gambia, Mauritania, Central African Republic, Guinea, Equatorial Guinea, Sao Tome and Principle, Kenya and Tanzania.
The Poor: Bearing the Burden
of Adjustment
After undergoing tough austerity adjustment programmes, many African countries have found themselves with reduced real incomes, increased poverty, deteriorating social conditions and reduced growth potential, and often with no significant improvement in their external accounts. In the African region, export-led growth, advocated by the IMF and the World Bank, has meant intensified and tyrannical exploitation of primary commodity producers: the women.
Under the direction of SAPs, commodity producers have been encouraged to increase production. For example, both Ghana and Cote d’Ivoire have had programmes designed to increase cocoa production. This has led to an upward shift in production and a downward pressure on prices.
Also given the fact that demand elasticity is less than one for many commodities, the net effect may be to decrease gross foreign exchange earnings from some commodities, despite increases in production: increases which involved foreign exchange and other costs. Consequently, looked at in terms of their aggregate effects, the IMF programmes have contributed to the worsening terms of trade suffered by primary producers in the account of balances of many LDCs.
In relation to real GDP growth in 1999, Africa slowed to 3.5 percent from 3.7 percent in 1998. Moreover, growth performance in 2000 varied much among the different sub-regions. Growth was close to the continental average in Central, East and West Africa, whereas it was higher in North Africa, but lower in Southern Africa.
Democracy, Sustainable
Development and Poverty: Are They Compatible?
The theme of the conference was seen to be both timely and appropriate. There was general agreement that democracy, sustainable development and poverty reduction are not only compatible, but are indivisible. Good governance and democratic rule provide the setting for equitable distribution of benefits of growth and development, and simultaneously create the enabling environment for sustainable human development and for the eradication of poverty. Only by ensuring that the peoples’ interests, needs and human rights are addressed, can real progress be made in combating poverty.
Good governance, sustainable development and poverty reduction are closely related and are the core objectives of the United Nations. The UN member states believe that the world community must make advances on all three fronts simultaneously to ensure the very survival of the world community, and reduce the burden of 1.2 billion living in absolute poverty. The reduction of this social disease is, therefore, not only a developmental goal but also a challenge for democracy and sustainable development.
Notably, the strategy of accelerated economic development should be people-centred, equitable and sustainable, with two major priorities: the alleviation of poverty and hunger, and the development of human resources. The first United Nations Development Programme (UNDP 1990) established that the basic objectives of development assistance was to enhance the range of people’s choices, including access to income and employment opportunities, education and health, a clean and safe physical environment and freedom to participate fully in community decisions. It is also worthwhile to note that people do not act collectively without reason. They come together as a result of certain shared values, beliefs, goals, cultures and promises for the future, even if this future means life after death. It is as a result of such shared beliefs, cultures, values and ideologies that nations have gone to war against each other, that empires have been built, and that others have been broken, when no shared interests could keep them intact.
The second UNDP annual report (UNDP 1991a) emphasised that people must be at the centre of development, a point reiterated at the conference:
Human development must, therefore, be the development of the people investing in their education and health—for the people, generating adequate incomes and satisfying their basic needs—and by the people, offering sufficient employment opportunities and allowing them to participate fully in every process which affects their lives.
In adopting the International Development Strategy for the Fourth United Nations Development Decade (1991-2000), the UN General Assembly, while recognising that accelerated economic growth was the essential objective of the 1990s, also noted that special attention was required for poverty alleviation, human resources development, the environment, reducing population growth and eliminating hunger. A principle objective of the strategy was the strengthening of the relationship between economic growth and human welfare.
The conference on “Democracy, Sustainable Development and Poverty Reduction: Are They Compatible” re-emphasised many of these international policy frameworks, namely:
§ that commitment is necessary by African governments for the alleviation of poverty as the central objectives of their national development plans and programmes as a fundamental prerequisite;
§ that concerted efforts by African countries are necessary to effect democratisation and sustainable development processes to get rid of poverty in their societies;
§ that there are neither simple solutions nor quick fixes in poverty alleviation efforts, that co-ordinated action by African states, non-governmental agencies and aid programmes is essential; and
§ that anti-poverty programmes should use the community’s own resources, build on the talents and skills of community members, build on the people’s confidence and capacity to get themselves out of the poverty trap, and that better results can be achieved when flexible arrangements are adopted that let the poor organise themselves to overcome their own poverty.
Conclusion
The conference concluded that in the African context the simultaneous pursuit of economic growth and development, democracy, and poverty reduction is the appropriate direction to adopt and follow. This conclusion is based on the notion that poverty reduction and sustainable development are the key challenges facing our continent today, and that good governance is perhaps the most critical factor in development.
Democracy, and its accompanying rights, is the ultimate insurance of all the reforms African states are trying to implement, in order to create a better future for Africa and its peoples.
Democracy—through regular, free and fair elections—enforces the accountability of officials to respond to the interests and needs of the people they represent. Running public institutions in a democratic way ensures fair and transparent allocation of public resources and averts corruption.
And the people’s participation in decision-making through appropriate information and empowerment promotes democracy.
In the final analysis, the most fundamental goals of democracy are:
§ to make the rulers accountable and answerable for their actions and policies;
§ to make the citizens effective participants in choosing rulers and in regulating their actions;
§ to make the society as open and the economy as transparent as possible; and
§ to make the social order fundamentally just and equitable to the greatest number possible.
Accountable rulers, actively participating citizens, an open society and social justice. Those are the four fundamental ends of democracy. Greater democracy at all levels of the social formation is clearly linked to progress in economic development and poverty reduction.