American Economic Nationalism Hurts Developing Countries | by Kyle Hanby

 Pic by Neil Palmer (CIAT). A farmer at work in Kenya's Mount Kenya region. From Wikipedia, sharing according to the Creative Commons Attribution-ShareAlike 3.0 Unported License https://creativecommons.org/licenses/by-sa/2.0/

The idea that the United States should operate as a self-sustaining nation and non-reliant on the production of goods from foreign countries would not only be disastrous for the United States but could create huge road blocks for developing countries. When the ideas of protectionism and economic nationalism rise to the forefront of public policy discussions within the United States, only the harm or benefit to the United States is mentioned. There is no shortage of commentary from experts and economists that discuss these effects. What is not often discussed is the damage protectionist policies have on the economic growth of developing nations.

Perhaps the reason people rarely ever comment on the effects of American economic nationalism on foreign economies is because that might come across as putting the well-being of another country before the United States. The truth is, when one country works its way through the development stages it does not come at the expense of other countries.

An “America first” approach to our economy is actually harmful. Acton Institute Director of Research Samuel Gregg frequently writes about this. One of his more recent articles at The Stream titled ‘It May Sound Good, But Economic Nationalism Will Not Make America Great’ discusses all the ways that a move toward economic nationalism will only damage the U.S. economy in the long-run. But not only will it hurt the United States, it will also put every developing country that benefits from free trade with the United States in a worse situation. To countries that are still developing, this could be detrimental.

The United States has formal trade relations with more than 75 different countries around the world. A lot of those countries are in Africa and South America and several of them are by no means first world developed countries. What is the best thing the United States can do to help them develop? Trade with them.

There is no doubt about the contributions that free trade has on the development of a country. Ghanaian software entrepreneur Herman Chinery-Hesse stated this fact well in the Acton Institute’s Poverty, Inc. documentary: “I have never heard of a country that developed on aid. If you have heard of one, let me know! I know about countries that developed on trade, and innovation, and business. I don’t know of any country that got so much aid that it suddenly became a first world country. I have never heard of such a country.”

Of the $34 billion of foreign aid that the United States is planning to give out in 2017, $3.6 billion will be earmarked for economic development. It is clear that the U.S. government does not understand Chinery-Hesse’s message.

Free trade generates economic growth and economic growth is the key to the development of any country. This is why developing countries rely on free trade to develop and if the United States decides to withdraw from this trade then we are sending a message to those countries that we do not want to partner with them in their development.

Trade is a mutually beneficial activity and protectionist policies are mutually harmful.  If the United States really wants to help developing countries we should open our markets to them. And as Christians, we should be eager to engage in economic activity with our brothers and sisters across the globe, because when we do, it gives them greater opportunities to flourish.

Photo for Acton Announcement

Kyle Hanby is a Liberty@Work Associate at the Acton Institute.  He is a former University Relations Intern at the Charles Koch Institute in Arlington, Virginia.  He holds a bachelor’s degree in economics and finance from Bethel College in Mishawaka, Indiana where he chaired the American Enterprise Institute Executive Council and was a 4 year member of the men’s varsity tennis team.

**Picture by Neil Palmer (CIAT). A farmer at work in Kenya’s Mount Kenya region.  From Wikipedia, sharing according to the Creative Commons Attribution-ShareAlike 3.0 Unported License https://creativecommons.org/licenses/by-sa/2.0/

6 replies
  1. David Barber
    David Barber says:

    I hate to disagree with such a well-argued article, but history proves the complete opposite and free trade has been disastrous at least where African nations are concerned (I can only talk about Africa because that is my area of knowledge, although I suspect that my reply will equally apply to all developing nations).

    Where Africa is concerned, what are the facts? According to World Bank figures, 91% of sub Saharans live on less than US$5 a day. 43% – close to half the population, and equating to almost half a billion human beings – live on less than US$1.90 a day. That is dreadful enough. But what is not publicised is that the income gap between Africans and Westerners is THREE TIMES WIDER now than it was in 1960 (based on figures from the Centre for Research on Globalization and Economy Watch, itself using (inter alia) the IMF, World Bank, UN, OECD and CIA World Factbook). And free trade is one of the major causes.

    Free trade may arguably be beneficial among countries of equal economic strength and commercial ability. But making developing nations compete head-on with powerful foreign countries is a disaster – it is like putting a hyena into a pen of goats and, where Africa at least is concerned, Western-, Chinese- and Japanese-owned companies and MNCs have taken full advantage of it, with products and services from these (and other foreign countries) heavily dominating virtually every market pan-Africa, as anyone who has been to Africa will have seen for themselves.

    Indeed, Western and Chinese Commercial Colonialism in Africa (because that is what it is) could not exist without free trade because that is what allows foreign business and financial interests to dominate African markets and undermine or destroy African businesses. It is free trade that allows repressive African governments to encourage foreign businesses (which do not threaten their power) while repressing their own entrepreneurs (who will sooner or later become a threat to them). It is free trade that allows foreign business interests to exploit the lower educational standards and lack of professional business experience of Africans, and to take advantage of another vulnerability of Africans: they have not spent their lives immersed in the highly commercial atmosphere of the West so it is not part of their DNA, and it shows in a naiveté about business and a lack of grasp of what success in business requires.

    I would also refer you to Myth 5 in the report ‘Dangerous Delusions’ by the NGO Global Justice Now, and there is plenty of other evidence available. Not to put too fine a point on it, free trade can be a killer for a developing nation.

    Free trade has worked so well for global powers that, since 1980, they have halved the percentage share of world trade of poor countries—which include almost all African nations. This according to the NGO Trade Justice Movement. According to the UN Economic Commission for Africa MDG Report 2015, Africa with 16% of world population, has only a tiny 3.3% share of world trade, and it’s dropping.

    While an economy is poor, importing is actually evil. By buying foreign products, the citizens of African nations are actively supporting jobs and wealth in the developed world while actively depriving their own countries of jobs and wealth, and this helps to keep themselves, their families and their local villages or communities in extreme poverty.

    You make the point that developing countries rely on free trade with the USA (and of course the rest of the developed world) to develop. That is true where national GDPs are concerned, but it is a myth for African citizens because the African export model relies on paying its African employees and workers at incomes that are well below what would be acceptable in the West for doing exactly the same jobs. And if you pay employees below poverty incomes, you aren’t helping to eradicate poverty, you are actually helping to perpetuate it. In other words, free trade is being used to keep African citizens in poverty. In fact, in no African country that has shown increases in GDP (or for that matter, GNI) per capita has the incidence of poverty decreased.

    Until Western powers became strong enough to compete internationally, they did not open their borders to free trade. They used import tariffs and restrictions to protected their businesses and industries. It is no accident that the two greatest Post War commercial successes—China and Japan—stayed protectionist until they were strong enough to compete globally. Indeed, had they been open to free trade and Western MNCs and businesses from the start, it is very unlikely they would have achieved business success so fast—if at all.

    Even in the developed world, free trade may not be the boon it appears to be. In the USA and UK, it is becoming increasingly obvious that free trade is directly responsible for depressing workers’ pay, pushing increasing numbers into poverty and widening the gap between a tiny rich elite and the rest of society. Yes, GDP goes up but neither this nor GNI per capita give any indication at all of poverty, and it is mostly the wealthiest who benefit. The effect on developing countries is even worse.

    Ever since the end of colonialism, the official Western aid agencies have pursued a policy that, whether by accident or design, has had the effect of making Africa aid-dependent. They have also used aid and loans to help incompetent or repressive regimes to stay in power, and these are the very governments least able or willing to help their citizens escape poverty. Instead, had African nations become protectionist on independence and the aid agencies put all their efforts into helping African citizens to develop their own strong business bases, we would be seeing a very different continent today. After all, we have had give-or-take fifty years in which to achieve that.

    Reply
    • Kyle Hanby
      Kyle Hanby says:

      David, thank you for your well thought out reply. It appears that you have a great knowledge on Africa which is an area where I cannot speak to with much expertise. My training is in economics so I will do my best to respond to some of your points from that perspective. Please keep in mind that there are several areas where it appears we clearly disagree but it looks like we definitely do agree on some things.

      Several of the national governments in African nations are filled with political corruption making it very difficult for people to start their own businesses and become successful entrepreneurs. Much of the aid coming from countries outside of Africa has only enabled these corrupt regimes. In order for any country to develop, there needs to be the right institutions of justice put in place such as the rule of law, private property rights, and access to markets.

      If you have seen our PovertyCure DVD series or our film, Poverty, Inc. you would realize that we are agreement with you on the fact that the way international aid is done is very destructive to developing nations. We are advocating that model of aid be abolished.

      I think where we see things differently is when it comes to economics. It appears that you are placing the blame for a lot of Africa’s problems on free trade and in the blog post, it is clear that I believe free trade is not only beneficial but necessary to the development of any country. It might help if we are working with the same definition of free trade. I understand free trade as international trade left to its natural course without tariffs, quotas, or other restrictions. This also means there should be an absence of subsidies, which allow countries like the United States to dump artificially low-priced (not the market price) products on developing economies, which destroy local economies. This is not free trade by any means and we oppose such actions.

      With that being said, a lot of trade you would define as “free trade” is nothing of the sort. To be clear: not all trade, indeed most trade, is not truly free trade. Free trade is a two way street, it requires both parties involved to leave the transaction to its natural course. In the blog post, I am critical of the United States for making moves away from free trade but I believe that if free trade is truly going to be beneficial to developing countries there needs to be cooperation from their end as well. You claim that developing African countries are hurt by free trade. My question for you is which developing African countries practice free trade? According to the index of economic freedom put out by the Heritage Foundation, there are only two Sub-Saharan African countries that are in the top 30 most economically free countries in the world: the small island of Mauritius and Botswana. Both have experienced recent drops in poverty rates.

      It also seems that you may have a misunderstanding of the concept of comparative advantage when it comes to trade. Countries should export the products and services they can provide more cheaply than everyone else, and import the products and services that would be too expensive for countries to create themselves. It would not make any sense for countries to produce all products and services for themselves, because it would be way too expensive to do so.

      You also claim that developing countries can’t compete with large economic powers on a global market. Of course, if Ethiopia had to compete with the United States in the design of smart phones they would be dominated. That is why countries should trade with the goods that they have a comparative advantage in.

      You have cited many statistics and data points that highlight the problems of many developing African nations. While I do not doubt the accuracy of the numbers, I find it very difficult to link them as a result of free trade. There are several other factors at play that could have caused those same numbers to be where they are. This is why it is so necessary to use economic theory whenever possible.

      Reply
      • David Barber
        David Barber says:

        Thank you very much for your reply, Kyle, and for taking the trouble to reply so fully. I didn’t realise you are connected with PovertyCure, as an Associate. I entirely agree with PovertyCure that ‘that model of aid should be abolished’. In fact, I am writing a book in support of the proposal, and a while ago PovertyCure gave me permission to refer readers to one of its web pages (as well, of course, to PovertyCure itself). I am also instancing PovertyCure as one of the very few ‘good guy’ NGOs where African poverty is concerned.

        My understanding of the definition of free trade is exactly the same as yours. But your comments have been of real value to me because they made me realise I have ‘lumped in’ free trade with one of the big obstacles to poverty eradication in Africa. This isn’t important in practical terms because it doesn’t affect any conclusions or outcomes. But where it matters is that I risk academics dismissing my arguments not because they are wrong, but because I appear to have confused the causes. So in view of your comments, I must check the three books I am writing on the solutions to African poverty to make sure I am not guilty of that.

        The big obstacle I refer to above is the foreign or non-indigenous-owned commercial and financial interests which have so much power over the African commercial scene that progressive Africans commonly see it as continuing colonialism (I call it Commercial Colonialism). Free trade is not responsible for that because foreign commercial interests had far too much power in Africa well before free trade became the global aim. So to get back to your point, you are right and I did in my response to you unfairly blame free trade for certain ills when, in fact, it has nothing to do with them.

        I agree when you said that foreign aid has ‘enabled [African] corrupt regimes’, but where your interest as an economist comes in is that foreign commercial and financial interests have played at least as big a part in enabling them. Another example of the destruction caused by them is that nowhere have I seen it said that many Western MNCs could RIGHT NOW pay their African workers and staff at full Western rates for doing exactly the same jobs as their Western counterparts – or if not that, then at least a great deal more than they pay them now. Even worse than that, some of them could have done so right from the end of colonialism, which means give-or-take for the last half century. That is a truly horrifying thought and it would have totally transformed the situation in Africa.

        Returning to free trade, I do have some problems with it specifically in terms of dealing with extreme poverty in the developing world. I’m not saying there aren’t examples where developing nations can’t take advantage of free trade, especially in predominantly low ticket product categories, but the overall effect is negative for them, in that free trade unquestionably makes it easier for strong trading nations to dominate them. And if we genuinely want a fair global society which means all peoples having parity of lifestyle, what we really need is a system that does the reverse, one that if anything tips the balance in favour of developing nations.

        It is possible that any differences we may have not only about free trade but also in general about how to tackle poverty in Africa arise out of having different perspectives. First, economic, aid and development thinking about Africa is dominated by Western thinking but, in practice, that doesn’t necessarily produce the right answers for eradicating African poverty – so far it hasn’t, as you rightly made clear where aid is concerned. The right answers require seeing the problem from the African perspective, which is the direction I come from. James Shikwati, the Kenyan economist, is another example of many.

        Second, most academics, both Western and African, focus heavily if not exclusively on how to make African nations wealthier. But I come from an opposite perspective: my sole concern is with how their citizens can climb up the ladder to Western standards of living as rapidly as possible. Each perspective produces an entirely different approach to poverty eradication. The first leads to top-down solutions, i.e., action by Western governments or their official aid agencies (UN, World Bank, IMF, WTO etc), and/or African governments. These have heavily dominated the history of poverty eradication in Africa, but surely by now everyone must realise that neither the Western powers nor African governments will do what needs to be done, for a variety of reasons. However, my approach leads to a bottom-up solution. Despite, historically, this having proved to be by far the best way in almost every advanced nation for the citizens to escape poverty and achieve affluence, it has not even been discussed as the solution in Africa. We haven’t space here, but my books explain in detail why top-down solutions haven’t worked, and won’t work now, and how and why the bottom-up solution is the only way realistic (as opposed to theoretical) forward.

        Your example of Ethiopia shows how the two perspectives differ. Looked at from the nation’s point of view, one cannot deny that its booming textile, clothing and footwear export trade is a success story. But from the point of view of its citizens (in this case represented by its textile, clothing & footwear workers) it isn’t, because they are being paid around US$40 a month and this doesn’t even reach the World Bank’s threshold for extreme poverty of US$1.90 a day. The argument put forward in favour of this type of business development is that it creates jobs. True. But when one looks at the reality of what happens on the ground, by paying poverty wages, organisations aren’t helping to eradicate poverty, they are actually helping to keep people locked into it. This is one reason why workers’ incomes in Africa have scarcely risen since 1960.

        This leads to another of my concerns about free trade, which is that the natural consequence of, as you say, ‘leaving the transaction to its natural course’ is the tendency for production to move to where labour is cheapest, and therefore it has the effect of depressing workers’ wages. For example, Ethiopia is taking textile, clothing & footwear work from China and Bangladesh almost certainly only because its workers are paid less. The problem is that Chinese and Bangladeshi workers were already earning well below the legal minimums permitted in the UK and USA. To China, the loss of this work is not critical (except that it is probably a disaster for the poor workers and their families), but it is to Bangladesh, and the only way it can get this work back is by slashing workers’ pay – i.e., going back to the beginning and starting again at the bottom of the ladder where poverty eradication is concerned.

        I agree with your comment that one must take account of theory, and most of the proposals dealing with poverty eradication are sound in theory in so far as I can tell. But they all seem not to take account of realities on the ground. So, again, I have come from the opposite direction by starting with the realities, and then finding solutions that take account of them. This is the business approach as opposed to the academic’s approach.

        You are right to point out that perhaps even the majority of the numbers I have quoted do not link with free trade, and that there are several other factors in play in perpetuating African poverty. I suspect we would be in broad agreement on most of these, and I have covered them in my books. But the two we have mentioned have inter alia to be dealt with if we genuinely want to see the majority of African citizens climbing up the ladder to Western standards of living as rapidly as possible.

        It may sound as if I don’t believe in free trade, I do. For instance, in my books I advocate a pan-African free trade area as part of the solution for raising living standards in Africa. But like all theories, it only works correctly in practice when the circumstances are right. It is interesting that all the advanced nations stayed protectionist until they were strong enough to compete on the international scene. This is also true of the biggest economic success stories since the last War: China, Japan, Korea, Taiwan and so on. We should be helping African nations to follow suit because, if we don’t, I believe we will simply help to keep extreme poverty going for much longer than it should have done.

        Reply
  2. Andrew
    Andrew says:

    David, you mention that workers in Ethiopia only make $40 a month and that this is a problem. Let’s take a closer look at that. First of all, why is it that workers are willing to work for that amount? Isn’t it because that is the best option available for them that they can see? After all, if they could make more money at another job I’m sure they would take it. No one is holding a gun to their head and saying, “You must do this job!”. I assume they are there by there own free will.

    Following that further, companies will naturally go to the country where labor is the least expensive- the very place where there is the most poverty. After all, that’s why the company was attracted to that location- cheap labor. So if you are a worker and you are offered $40 a month at a job, the only reason you will take it is because it’s your best option. So already this company is helping you out. But it’s obvious that other companies will also want to come to this same location. Now the worker has options: they can work for this company or that other one. So who do they work for? The company that offers the best compensation. This location has some options for workers. There is competition. So now the wage will naturally have to rise to attract workers.

    This is how free trade works. Businesses will naturally flow to the most impoverished areas for cheap labor. In doing so, the wage will naturally go up. It will continue to go up… until it rises above other areas that end up being the next most impoverished. Then companies will go to that location.

    This is the beauty of free trade. It’s the great equalizer. Businesses will give the most needy locations on earth the jobs because they want to hire the least expensive workers. In turn, the most needy people receive the jobs which give them the opportunity to grow their economy.

    And history has shown that free trade always works better than protectionism. Protectionists have their theories, but not much else. Free traders have all of human history to show that free trade is what works.

    Reply
    • @povertycure
      @povertycure says:

      Andrew,

      Thanks for reading the blog and thanks for your comments. You make some excellent points. There is no doubt that true free trade, not trade in the vein of crony capitalism, has done wonders in reducing poverty.

      Reply
  3. David Barber
    David Barber says:

    Thank you for your comments, Andrew. Regarding free trade, I suspect the main difference between us is that you see it as the right policy in all circumstances and I do not. But I fear I have not made my case, and to do so I’ll need to give you some background, particularly in regard to Africa which is my main interest. So can I ask you to bear with me?

    My start point is that virtually all of us who are genuinely interested in seeing a fair global society for all peoples are coming at it from the wrong angle. I hope you agree that, among other things, a fair global society must mean by definition that everyone has a lifestyle comparable with that enjoyed by the average Western citizen now – otherwise it is not being a fair global society for all peoples. My contention is that the way to achieve that is not to focus on eradicating poverty, which has always been the Western approach. Instead, we should be focusing on ways to close the income gap between the citizens of developing world and those of the affluent West, and, to save the huge unnecessary suffering and death in the developing world caused by poverty, we should be aiming to achieve that as rapidly as possible.

    Had we started from that perspective, we would have realised long since that Africa has a massive problem: the income gap between Africans and Westerners has not closed at all since the end of colonialism. On the contrary, it has widened by a massive 300% since 1960. The current picture is that the average income in OECD countries is $34,466 a year while, according to the World Bank, 91% of Africans earn less than $1,825, and 43% less than $694. So the typical Westerner will earn between 19 times and a staggering 50 times the typical African. Even if you make Africa’s comparison with the UK/USA average minimum wage, the Westerner still earns between 15 and 41 times more than a typical African.

    Why this has happened is because the West (and, in fairness most progressive Africans) has simply ignored the lessons of history, not found out what took the citizens of almost every developed country from poverty to affluence, and then applied the same lessons to Africa (as well, of course, to the rest of the developing world). Generally, in what are now the developed nations, there were three common elements to taking citizens from poverty to affluence:
    (1) The mobilisation of the citizenry. Except in those countries where the government was already ‘on side’ with taking its citizens into affluence (only a few), it was rarely governments that initiated and led the move out of poverty and into affluence for their citizens. It was a critical mass of the citizenry itself, and it often had to overcome violent, even brutal opposition from a ruling elite.
    (2) The economy was not heavily dominated by foreigners.
    (3) They went through a period of protectionism until they had built strong home business-bases, and this included the UK, USA and most developed countries.

    Had this route been followed in Africa, African lifestyles would have dramatically improved in the half century or so since the end of colonialism – and, of course, along the way extreme poverty would have disappeared or at least been heavily reduced.

    Protectionism! The word fills free traders with horror! But that is a Westerner’s view of protectionism. If you talk to the big new economies such as China, Japan and South Korea, they will tell you that starting by being protectionist was a major – perhaps THE major – factor in their incredibly fast growth because it allowed them to develop their businesses and experience with little outside competition and at their own pace. Post-war Japan, for example, was put under great pressure by the USA to drop tariffs on American products. The Japanese negotiators told the Americans that they wouldn’t be reduced to exporting tuna while the USA got to export high value goods like automobiles. Given the huge support the USA had given to Japan to rebuild itself after the war, this took courage. And also given Japan’s war-torn economy which could hardly have been more desperate at the time, it took foresight. Japan’s results since then speak for itself, as do those of China and South Korea.

    (You will also note that Japan saw the flaw in the argument for comparative advantage because, in practice, all this does is swop high profit products that generate high incomes for workers for low profit ones that are based on paying extreme poverty wages to workers – at least where developing nations are concerned – a very suspect policy when one is looking for ways to close the income gap between Africans and Westerners.)

    None of these three elements has been promoted by the official agencies tasked with (inter alia) dealing with poverty in the developing world (UN, World Bank, IMF etc). Most readers of this blog will know why: these agencies are de facto Western controlled, and it is not in the West’s commercial and financial (and, therefore, political) interests to do so, especially where points (2 & 3) is concerned. Indeed, as far I can ascertain, they are also not being promoted by any aid or development organisation or NGO, certainly not in such a clear and simplified form.

    Although the next few paragraphs are outside our discussion, I include them because we need to appreciate how badly off course the official agencies are, and the reason that is important is because they heavily influence Western governments, the rest of the aid community and, indeed, African governments themselves. The development policy for the developing world was dictated by the UN’s Millennium Development Goals (MDGs), recently replaced by its 2030 Agenda. These three elements are scarely mentioned, if mentioned at all, in either of these documents, and this goes a long way to explaining the dreadful failure of the MDGs when measured against the official agencies’ OWN specific targets.

    There is, however, one major organisation that is seriously promoting these three elements, and that is the African Union, specifically the AU Commission. For anyone who may not know, the AU is by far the most important official voice for Africa, and in its Agenda 2063 it sets out the only official African plan for pan-African development. In it, the AU devotes a great deal of space to the vital importance of getting African citizens mobilised to take personal responsibility for creating Africa’s future (point (1) above), presumably because it knows that the current crop of largely self-seeking and repressive governments will not act on the Agenda 2063 unless their own citizens force them to. And it also heavily promotes Africa becoming ‘self-reliant’, which of course means becoming free of foreign control or aid, and it covers such things as financing its own future with African-owned businesses, reducing the reliance on foreign capital (in other words, implementing points (2) & (3)) and aiming to have foreign aid reduced by 75% by 2023.

    The AU’s Agenda 2063 also sets as its objective that ‘African countries will be amongst the best performers in global quality of life measures [i.e., standards of living]’. In other words, it, too, is aiming to close the income gap between Africans and Westerners. I have so far been unable to find that anywhere in official agency or Western aid literature, but maybe you will have more luck.

    Given that this document lays out what Africa wants for itself, you would have thought the official agencies would have bowed to Africa’s wishes. Not so. Where Africa is concerned, they are insisting on following their own 2030 Agenda in which there are only two passing references to the AU’s Agenda 2063. Surely, our job is to help Africa achieve what it wants for itself, and not impose on Africa what the West (which heavily dominates the official agencies) thinks it ought to want.

    The point I want to stress is that the AU’s Agenda 2063 will work because it is following the lessons of history in how to take citizens from poverty to affluence. The 2030 Agenda will not work, partly because it has ignored the lessons of history but, more important, because it is pretty much only the MDGs rewritten and enlarged, and if they failed, why should the 2030 Agenda do any different? Yet despite this, the Agenda 2063 has been largely if not completely ignored by both the official agencies and the aid community at large.

    The purpose of my book and the initiative that will accompany it is to correct that by publicising and promoting the Agenda 2063 as the solution to closing the income gap between Africans and Westerners, but presenting it in a much simplified and easily digestible form for any African or Westerner who genuinely wants this to happen. It also shows exactly what each of us can do to help ensure that objective is achieved.

    Coming back to our discussion, where does free trade fit into all this? Certainly into an intra-African free trade area. But outside Africa it is a different matter. One of the failings of the free trade concept is that it does not appreciate the real effect of the huge gulf in commercial and financial power, expertise, experience and ‘know how’ between the strong trading nations and the weak ones, in areas where they are simply not ready to compete. The consequence is that, by its very nature, free trade loads the odds heavily in favour of the strong nations when, if we are serious about wanting to close the gap in incomes between developing peoples and Westerners, we need a system that, if anything, tips the balance in favour of developing nations. Given this scenario, Africa has to be able to protect its vulnerable and largely fragile home-grown businesses and industries, just as China, Japan and South Korea did to great effect in their early days.

    One of the benefits you claim for free trade is that when businesses flow to the most impoverished areas for cheap labour, ‘…the wage will naturally go up. It will continue to go up…’. This has simply not happened in Africa, which pretty much explains why the gap in incomes with the West has widened so dramatically. There are two reasons for this. First, the African commercial scene is so heavily dominated by powerful foreign commercial and financial interests – mainly Western and Chinese – that Africans refer to it as Neocolonialism, but I prefer the more descriptive Commercial Colonialism. And a feature of colonialism, as I’m sure you are aware, is to keep workers in as close to a state of extreme poverty as you can get away with, something that African-owned businesses are happy to go along with.

    Second, even without the effect of Commercial Colonialism, the prediction that wages will go up will not happen when labour is plentiful because, then, businesses do not need to put wages up. Wages will only rise when labour starts to get short and businesses have to compete for it (or, a far better solution, regulation forces businesses to pay their employees properly). At the present rate of progress, it will be many years before Africa reaches this stage. As it is now, paying extreme poverty wages to workers and staff does not help them to escape poverty. On the contrary, it actually helps to KEEP them locked into poverty. And the proof is, as I said before, that many Western MNCs and businesses could pay their African employees at Western rates RIGHT NOW, or, if not that, then a great deal more than they do now. But the fact is they don’t need to. The official agencies and the Western governments in which these businesses are domiciled could force them to do so, but they have no interest in doing that.

    I also think one needs to question the morality of a concept that encourages businesses to throw people out of work in their own country and gives those jobs to people in another country, a process that reduces the status of employees to expendable pawns in the global game. When too many businesses do this, it causes the gap between the ‘haves’ and the ‘have nots’ to widen at home and initiates the ‘Race to the bottom’ which is clearly apparent in the UK and the USA. Because of his strong business background, the USA’s new President has recognised the serious dangers of this, and not just for the working classes. One can argue about whether his solution is the correct one, but one cannot argue that, if we all want a fairer society both at national and international level, something must be done about plugging these adverse effects of free trade, particularly but not exclusively on the working classes.

    Finally, can I comment on what came across as a very hard approach to an Ethiopian earning US$40 a month? I’m sure you didn’t mean it this way, but the fact is that the vast majority of us Westerners operate a double-standard. If a Westerner was being paid $40 a month for a full-time job, there would be a huge public outcry. But because it is an African in Africa, it is OK. In fact the Ethiopian does have a metaphorical gun held to their head: it is ‘Take this job or starve’ because there are no state benefits if you are out of work. But not just him or her, an African in work is likely to have up to 15 dependents relying on them. Jobs are not plentiful and the great majority that exist come with what should be viewed as completely unacceptable pay, and in general Africans have to take what they can. So to suggest they have a choice in the matter (‘I assume they are there by there[sic] own free will?’) is to not understand what it is like for them.

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