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Session 4
Eyoh, Dickson and Richard Sandbrook (Chapter 8) in Kohli, Moon, and Sorenson, eds.
“Pragmatic neo-liberalism and just development in Africa”
Helena Choi
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The authors scrutinize in this essay the currently dominant development doctrine
in Sub Saharan Africa (SSA) of pragmatic neo-liberalism on its ability to deliver “just
development.” They are skeptical of its ability to offer sustained, equitable, and
democratic development because it has achieved poor results to date. Pragmatic neoliberalism only considers domestic reforms in African countries when external factors
also deserve attention. The authors argue that globalization itself needs to be reformed,
and that just development calls for changes in policies and institutions both at the global
and national levels.
The pragmatic neo-liberal development model
Pragmatic neo-liberalism, developed as a reaction to the limits of the free-market
fundamentalism, has a lot in common with the “Third Way.” It urges a more forceful
role for the state, directing government attention to improving education, training, and
research and development. This approach, now the dominant strategy for the developing
world, is endorsed by the World Bank, which has broadened its approach to development
from the pure neo-liberalism of the 1980s. The pragmatic neo-liberalism paradigm is
holistic, synergistic, complex (see Figure 8.1), is committed to maintaining
macroeconomic stability, and endorses deregulation and liberalization, and privatization
of land and state-owned enterprises. It was believed that these reforms, together with
foreign assistance, would set the stage for economic prosperity. Economic growth would
then provide a conducive environment for democratization, which would in turn support
a vibrant market economy by promoting state rehabilitation, creating a “virtuous” cycle
that would in time result in just development. This model of development has a
particular stronghold in SSA, whose countries have become heavily dependent upon
foreign aid. This dependence explains why African governments have ceded economic
and social policy reforms to external agencies.
Origins of the economic crisis, 1960-1980
Africa faced a dual challenge of nation-state building and economic development
at independence. African economies were dependent on the production and export of
primary resources as colonialism failed to generate indigenous entrepreneurs who might
have shaped post-colonial industrialization. Africa at independence was constrained by
limited development of human capital and the lack of modern economic sectors of
banking, insurance, commerce, and manufacturing. Africans also inherited states without
nations. To form territories into political, orderly communities, the elite groups now in
power adopted a top-down style. Strong states thus replaced earlier hopes of democratic
development. During the 1960s and early 1970s, this state-led top-down model was
moderately successful. However, by the mid-1970s, external shocks, including severe
droughts (Africa was largely dependent on agriculture), the oil shock, and the global
recession that ensued (which resulted in a decline in demand for primary commodities),
led to declining growth rates and increased external borrowing. Africa’s GDP per capita
declined by up to 1 percent per year during the “lost decade” of the 80s and the negative
growth rate continued into the early 1990s. The weaknesses of African states also
contributed to the economic decline. State deficiencies were manifested in inefficiency,
instability, and corruption, which discouraged investment. Economic and political crises
thus reinforced each other.
Era of economic and political adjustment, 1981-2000
The Western response to Africa’s crisis took the form of structural adjustment
programs, which initially required fiscal and monetary policies to reduce inflation and
budget deficits, wide-ranging market-oriented reforms, and an opening of economies to
foreign trade and investment. The scope has since broadened to include rehabilitation of
infrastructure, privatization of state-owned enterprises, poverty alleviation, enhancing
state capacity, restructuring financial institutions, improving governance, etc. These
structural adjustment programs have had only limited success, and progress in fiscal
adjustment and institutional reforms has particularly been lacking. A foreign investment
boom has not yet occurred, despite liberalization of prices and the promise of higher rates
of return. Poverty rates also have not improved much, and neither has state capacity.
The late 1980s and early 1990s saw many pro-democracy movements across
Africa, fostered by economic decline and the subsequent weakening of the neopatrimonial systems at the domestic level, and a new global order that regards democracy
as an integral precursor to development at the international level. Donors have assisted
democratization by aiding multi-party elections, strengthening civil society, and
stipulating political reform as another condition of aid. However, successive cycles of
elections have not altered inequalities of power, confirming the resilience of neopatrimonial networks. Western governments had demanded economic and political
reform in exchange for billions of aid, and the political elites have used the aid to
refurbish patronage networks. Foreign aid thus serves to reinforce the historical lack of
accountability of African governments. Civil society has failed to offer alternative
visions of the future. Furthermore, the resurgence of ethno-regional conflict threatens
national cohesion and the prospects for democratic development. The consolidation of
democratic and effective states are necessary for 1) forging of multi-ethnic approach to
nation-building and 2) balancing expression of local communities’ political values and
traditions with universal political and civil rights. Rather than focusing only on national
political and economic reform, it may make sense to look at the adjustments needed to
globalization itself to create a propitious external environment for just development.
Adjusting globalization
Globalization is both the irreversible outcome of technological progress and an impetus
to improved economic performance according to pragmatic neo-liberals. The proposition
that globalization, or opening up of economies, will augment growth is doubtful for
Africa after one or two decades of progressive trade, investment, and capital account
liberalization and little growth. Proponents for globalization also argue that openness
offers benefits only when governments adopt a set of institutional reforms, which are
needed because openness brings along destabilizing side-effects such as increased social
inequality. Thus, Africa will benefit from neo-liberal globalization only if they possess
what most of them lack -- sound institutions. Allowing global markets to determine the
allocation of resources will not solve Africa’s problems. Market forces should be
adjusted via globally negotiated rules to limit the negative side effects of unregulated
global markets, in a project labeled “socially-democratic” globalization. Africa has
accrued few benefits from global integration, and these few benefits have come largely in
the form of aid and the promise of debt relief.
However, aid has declined sharply after peaking at $17.3 billion in 1995, and
Western governments are unlikely to restore earlier aid levels. Debt relief is a necessary
condition for economic recovery in Africa, but it has been slow to materialize. Foreign
trade must be the engine of growth for Africa in light of its continuing debt burden and
declining aid, but prospect for export-led growth is bleak. SSA’s share of world trade has
declined steadily over the past 40 years. Africa’s main export is in the agricultural sector,
and non-oil commodity prices are projected to fall by an average of 2 percent per year
between 1995-2005. Global trade rules, such as barring of protection of infant industries
and the high tariffs on textiles and agricultural imports, have also created further
impediments to African development. SSA has not benefited from foreign investment
despite adopting reforms to attract investment. In the post-East Asian and Russian
financial crises era, new investments have flowed largely into the mining and petroleum
sectors, and portfolio investments are likely to be volatile and disruptive. All factors
considered, neo-liberal globalization is unlikely to generate sustained growth in SSA.
The authors believe that the global economy has been constructed from societal
choices and negotiated intergovernmental agreements, and therefore can be reconstructed
to suit human needs better. The choice is not between a neat dichotomy of globalization
or protectionism, but between neo-liberal globalization or a more regulated form of
global integration -- social-democratic globalization. The latter involves minimizing the
destructive side-effects of unregulated markets, reducing international and intra-national
inequalities, taming turbulence and insecurity created by capital, protecting basic labor
standards, etc. This movement has gathered momentum since the early 1990s and is
likely to continue in the context of global economic “bust “ or an environmental calamity.
Conclusions
The rhetoric of pragmatic neo-liberalism is kinder, gentler, and more complex, but
it retains its neo-classical core principles of the Washington Consensus. Pragmatic neoliberalism is not as people-friendly as it appears, since its policies and institutional
reforms aim to engineer a capitalist transformation in developing countries, the early
stages of which typically involve exploitation, inequality, and oppression. Although
pragmatic neo-liberalism intends to ease these negative side effects through market
exigencies, it is unclear whether this strategy has the means to accomplish this goal. The
harsh and inegalitarian phase of capitalist development can be mitigated by a proactive
state, such as in the Taiwan or South Korea example. However, recent experience of
SSA suggests that the model of a development state is not likely to emerge in Africa in
the next decade or two. Therefore, we are left with the conclusion that we must not
simply discard the neo-liberal model. Much of market-oriented adjustment and
macroeconomic stability makes sense as a long term program. But as the current pattern
of globalization is proving unfavorable to African economies, just development will
entail a reform of the existing pattern of neo-liberal globalization.