African finance chiefs lash out at market system

26/05/2010 | Sid Verma

The African state must play a larger role in the economy and seek to protect fledgling industries – or globalization will torpedo the continent’s huge development challenges, leading experts warned in Abidjan on Wednesday

The African state must play a larger role in the economy and seek to protect fledgling industries – or globalization will torpedo the continent’s huge development challenges, leading experts warned in Abidjan on Wednesday.

Nigeria central bank governor Lamido Sanusi said: “The state needs to be a powerful last line of defence against the capitalist system.

“We need a new paradigm to defend our interests, and challenge the paradigm that has been imposed upon the third world by the West.”

African policy-makers are taking stock of the region’s development model after the financial crisis turned economic orthodoxy on its head.

Sanusi said the West has lost moral authority, after decades of preaching to the developing world the virtues of conservative economic policies and then ripping apart their free market bibles in the crisis.

He blasted the neoliberal policies advocated by the so-called Washington consensus, which touts free markets, fiscal prudence and financial liberalization.

The comments, at an AfDB seminar on Rebalancing the Role of the State and Markets, were a shot across the bows of politicians and businessmen who have pointed to Africa’s economic outperformance in the past year as evidence of its rise in the global pecking order.

Sanusi said: “World trade has grown and Africa has benefited. But this growth has been disproportionately skewed to the rich, creating huge [income] disparities and our whole development strategy needs to be reconsidered.”

Alioune Sall, executive director at African Futures Institute in South Africa, said: “The crisis has shown that Africa needs to develop its own growth model and neo-liberal model no longer holds sway.”

Sanusi said the liberalization of Africa’s young industries has exposed and destroyed local manufacturing capacity and exacerbated the continent’s unemployment.

“We have exposed our young, immature industries to mature markets, and we get battered. The Chinese will batter our markets; the Indians will batter us. The Americans will batter us. It is time to ask: why are we sending our young forces to battle with these bullies?”

But the irrepressible power of globalization will force African policymakers to pay homage to market forces and enforce greater liberalization, said Gudrun Kopp, parliamentary state secretary to Germany’s federal minister for economic cooperation and development, told the seminar.

“It’s not a question of state or private sector. We need to balance the two,” she added. “The most important challenge is good governance.”

Africa’s lack of fiscal and monetary capacity limits the state’s ability to be a provider of goods and services, AfDB chief economist Mthuli Ncube said. Rather than ideological debates, he advocated stronger public financial management and beefing up tax revenue collection.

The state in Africa has historically been vilified as either weak, over-dominant, repressive, or too dependent on foreign powers. But in the global bull run, a growing pack of economies embraced conventional macroeconomic policies. Sanusi said post-crisis fallout should trigger a structural shift in Africa’s economic model.

Related stories

  • LatAm must look to private finance to fill yawning infrastructure ...

    Huge. Massive. Vast. Pick any of these words and it would more than adequately describe the need for infrastructure in Latin America and the Caribbean. But having failed to take advantage of the boom years to finance major projects, governments now need to look to the private sector to fill the gap.

  • LatAm local bond markets enticing buyers to beat illiquidity

    Mexico has taken the lead when it comes to attracting new investors to domestic bond markets. But with rising rate expectations set to make dollar markets less attractive, there are several positive signs in the region's other local bond markets

  • Brazil IPO pipeline the latest victim of Petrobras scandal

    Brazil’s IPO cupboard is empty thanks the worsening Petrobras scandal. Only when the Lava-Jato inquiry is complete and debt markets can reopen will equity deals flow again in Brazil.

  • Robust growth remains elusive for Peru

    Ambition and reforms, Peru has aplenty. But despite getting many things right, it is not being rewarded with strong growth. In the year before the next presidential election frenzy, can Peru get moving again?

  • China to turn off tap of easy credit to 'errant' LatAm states

    Chinese officials in Beijing are growing increasingly unhappy with the government’s policy of offering cheap loans without conditions to troubled Latin American states that might never be able to repay them.


Editor's Picks


In Focus

  1. No pain, no gain: Argentina gears up for necessary adjustment

  2. Deepening Petrobras scandal dogs Brazilian hopes of recovery