Restoring Africa's Free Market Tradition

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Restoring Africa's Free Market Tradition

July 6, 1988 19 min read Download Report
George B.N.
Senior Associate Fellow

(Archived document, may contain errors)

661 July 6,1988 RESTORING AFRICA'S FREE NIARKET TRADITION INTRODUCTION Africa is a resource-rich continent that by all rights should be economically prosperous.

Yet Africa in fact is the poorest continent on earth, with millions of its inhabitants facing malnutrition and starvation. Why is Africa so poor today? Is it. thefault of colonialism? Of the post-colonial world economic system? Of "adverse" terms of trade?

According to this theory, before the coming of the white man, Africans enjoyed a benevolent tribal communism that allowed .the natives to survive without exploiting each other. Then the Europeans introduced such supposedly alien institutions as property rights free exchange, and the profit drive. When Africa finally gained independence from its colonial masters, according to this theory, modern socialism was the only system suited to Africa's traditional communist institutions. P overty is said to persist because of the tremendous difficulties that the continent's new leaders have had in overcoming the damage caused by colonialism One theory, widely held, is that colonialism is the root of Africa's current poverty African Entrepre n eurs. This view is a myth. The fact is, before European colonial rule most of Africa had local free markets where goods were bought and sold for mutually agreed upon prices. Trans-regional trade linked distant parts of the continent. And the colonial lead e rs did not do away with these institutions. Since independence, in the very late 1950s and early 1960s, Africans individually have shown that they can be as effective entrepreneurs as any people in the world. The problem is that their governments have imp osed rigid systems of centralized economic control that drain most of their economic energy. It is this centralism, based on socialist models, that has contributed enormously to Africa's impoverishment.

Economic progress, in a sense, requires Africans to b e allowed to be Africans, to return to their free market traditions If the United States and other industrial nations genuinely I want to help lift Africa out of poverty, they will devise policies that resuscitate indigenous African market economies THE M Y TH OF PRIMITIW AFRICAN COMMUNISM Europeans began trading with Africa in the 15th century. By the late 19th century, most of the continent was ruled directly or indirectly by European powers. The underdeveloped conditions in Africa, when contrasted with th e industrializing economies of Europe, led to much misunderstanding concerning the nature of African society. Contributing to the misunderstanding was the popularity in academic circles of Marxist.economic.theory,.which maintained that pre-civilized societ ies were characterized by primitive communism As such, it has been widely presumed that before and during much of the colonial period Africa was dominated by tribal communism. It is said that private property did not exist.

Food and the necessities of life supposedly were produced through non-competitive cooperation and allocated to members of the tribal "family" on the basis of need. It is further believed that most tribes produced just enough for their own consumption and that the commodities produced by the various tribes were similar. And the continent's vastness combined with environmental obstacles, meant that littlestrade took place aniong the Africans themselves False Antidote. This idyllic state supposedly was destroyed by Europeans who introduced trade and a market economy. Natives, it is said, were forced to abandon self-sufficient communal production and sharing of goods and instead to sell their labor for money and engage in production for exchange.

These notions had become conventional academic wisdom in the West by the 1920s and 1930s, when many future African leaders were studying in Western universities. They accepted as fact that there never had been a free market tradition in Africa and that colonial powers had imposed an alien system on t h e continent. The obvious antidote to this they concluded, was that only a socialist system would suit African social and economic traditions AFRICA'S FREE MARKET TRADITION To be sure, the economy of primitive Africa differed in many ways from that of Euro pe.

Tribes that survived through hunting did not have a conception of individual property titles in land. Since the animals that provided food for such tribes roamed over vast tracks of land, there was little point in dividing the land into small, individu al parcels. Yet even in these tribes important private property existed: the weapons used to hunt animals were owned by individuals 2 In areas where Africans survived through agriculture, land was ultimately the possession of the tribe in the sense that e x clusive title often could not be sold to individuals outside the tribe. (There were even exceptions to this rule.) But by custom, families occupying land had the right to farm the land, sell or trade the resulting produce, and pass the land down to later g enerations of the family Village Markets nearly every part of the continent, especially in West Africa Domestic free markets and inter-regional free trade were part of economic tradition in Village markets were weekly or biweekly fairs, varying in length from two to eight days.

Where there was a cluster of villages, market days were rotated among them..Individuals and tribes did not all produce identical goods. Thus markets offered opportunities-for individuals, families, and tribes to acquire goods that t hey did not produce themselves.

Since different regions and groups tended to specialize in different products, markets were usually situated on the border between such different geographic zones as deserts savannahs, and rain forests, or between different ethnic groups, such as Kenya's pastoral Masai and the Kikups, a tribe that cultivated the land Promoting Competition. The markets were well structured and organized. Some specialized in certain product lines, such as agricultural produce or handicrafts, w hile others carried a more general variety of wares. But each market had its own customs and rules regarding the settlement of disputes and the quality of products offered for sale. Each also grouped vendors according to product. Example: all tomato selle rs were seated together in one section of the market. The object of this was to promote competition.

Trading activity was dominated by women affectionately called in English "market mammies Rules were generally enforced by the "market queen who was usually elected by the market women, not appointed by'chiefs, Africa's traditional rulers.' Any African regardless of tribal origins, was free to engage in trade if he or she obeyed the rules governing the particular market. Nigerian traders, for example, were a n d still are found in virtually every local West African market outside Nigeria today Price Gyrations. Prices in this market fluctuated in accordance with the forces of supply and demand. When tomatoes were "in season for example, the price fel1:l'andSvice v ersa These price gyrations were understood by the peasants. Most of the chiefs of Africa did little to interfere with the day-to-day operations of the market, nor did they impose controls or other stifling regulations. The African village market, to all i ntents and purposes, was an open free market, however "primitive."

In addition to the exchange of goods, the market provided an indispensable avenue for social interaction: to meet people, to gossip, or to discuss and keep abreast of local affairs 1 The te rms "market mammies" and "market queens" are indicative of the active and predominant role played by women in the rural trade in Africa today. Some 80 percent of Africa's peasant farmers are women 3 Foreign observers often wondered why some vendors were c ontent with the sale of a few bananas per day. The reason is that they went to the market mainly for social interaction.

In Africa there was also an important historical and cultural link between the place where free exchange of goods took place and where exchanges of opinion and, ultimately governmental decisions occurred. The market area often served as the site for village assemblies convened by the traditional rulers. Among the Ibo of Nigeria, for example, the Ama-ala, the traditional Council of Elders , ruled by decree .and proclamation. However when disputes arose, the Council would convene a Village Assembly to place the issues before the people for debate and resolution Inter-regional Markets trade routes. On the Trans-Saharan trade route were Timbuk t uin Mali, Salaga in Ghana and Kano in Nigeria. On the trade routes along the Zambezi River and Sabi.Valley were Mombasa in Kenya and Ivuna in Tanzania The inter-regional market operated continuously. Most tended to be situ'ated on regional Many of these f r ee trade routes existed many centuries before the arrival of the Europeans. In the 10th century, trade across the Sahara byxaravan, conducted by the Sanhaja, a nomadic desert people, and the Berbers of North Africa, linked black Africa with the Arab world . Their main route ran from Sijilmasa in the oasis of Tafidelt in southern Morocco to Awdaghost in Mauritania. Because of the prevalence of tsetse flies in the rain forest, caravans went no farther south than the fringes of the Sahara where such famous ent r epots as Timbuktu grew up. Goods traded from the North included horses beads, figs, dates, tobacco, iron bars, and salt. From the South came gold, ivory, yams goats, dried fish, kola nuts, shea butter, gum, ostrich feathers, cloth and slaves Primitive Mon e y." Initially, barter was the primary form of exchange. But as trade developed, certain commodities began to circulate as "money Commodity monies included sea shells, salt, iron bars, firearms, mats, gin, beads, gold, and gold dust Primitive money as comm o dity currencies are often called,.was. a decisive improvement over the cumbersome, time-consuming, and economically inefficient barter system. The use of primitive money facilitated trade and prompted economic growth long before European money was introdu c ed. The fortunes of many ancient African empires; suchas the Mali, Songhai, Ghana, and Great Zimbabwe were built upon trade 2 In such gatherings, every Ibo had the right to speak without fear for his life. Popular proposals were applauded and egregious on e s hooted down. While such assemblies may have been "primitive and backward they allowed freedom of expression a fact often ignored by contemporary analysts of Africa and most current African leaders. The Council of Elders, in most tribal systems, was a re p resentative body composed of the heads of the various clans in the village. This Council could veto any arbitrary or capricious decisions by the chief and could remove the chief should he prove unpopular to the people. In contrast to this "primitive syste m , the 41 dictatorships governing most of black Africa today deny their own people the right to vote their heads of state out of office. Botswana is the sole exception 4 The importance of trade was long recognized by the traditional rulers of Africa. One o f the chiefs traditional responsibdities was not only to seek greater opportunities for trade but also to provide a peaceful atmosphere for his people to engage in it.

Tradeaas the engine of econoniic growth was also recognized. In fact, control over the lucrative transcontinental trade was a constant source of friction between African tribes.

Frequent war s between the Fanti and Ashanti of the Gold Coast region, for example, were waged in the eighteenth century to prevent the control of coastal trade from falling exclusively into the hands of either tribe. Trade also was the means by which a tribe's member s could acquire weapons to defend themselves against marauding neighboring tribes Taxing Every Palm Tree. On occasion, there were attempts to control..all aspects. of commerce. The results were disastrous. In the late 18th century in the Kingdom of Dahomey , for example, state regulations and controls were so pervasive that every palm tree, goat, and pig was counted and taxed. Each village chief had to report the number of pigs slaughtered, while the butcher's guild had to keep all the skulls of pigs sold in the market. Both reports went to the King, who sent out market inspectors to make periodic checks and to fix prices.

Food crops were similarly controlled. Products like honey, red and black-pepper, and ginger were declared royal monopolies and produced in restricted areas under supervision.

Dahomey was the most centrally planned economy in West Africa with taxation taking an estimated one-third of the annual production. After some forty years under this system, so many subjects had fled to neighboring ter ritory administered by the French that the I Kingdom collapsed under the weight of its own regulations and taxes Native African Businessmen Even after the arrival of the Europeans, as Africans turned more to production for trade and commerce, there was a n otable absence of state controls and ownership. For example in the Gold Coast, which is present day Ghana, gold mining was open to all subjects of the states of Adanse, Assin, Denkyria, and Mampong. Some chiefs taxed mining operations at the rate of a fif t h of the annual output. In some states, on certain days, all gold mining revenues were ceded to the throne. But the mines were not owned and operated by the chiefs? Rather, the chiefs granted mining concessions to enterprising subjects Between 1877 and 18 8 3, over'100 such concessions were granted by the chiefs in the Tarkwa area of the Gold Coast on which they drew rents and royalties. There is little historical evidence to suggest overt discrimination in granting these concessions. The natives and the Eur o peans were treated equally by the chiefs. By 1880, native Africans formed the Wassaw and Ahanta Gold Mines Syndicate in the Tarkwa area to compete with the European mining operations. The Fanti Syndicate, the Gold Coast Native Concession 3 The Asante stat e , with its royal mines, appears to have been the exception in the 19th century. Even there however, the gold mining and refining were not reserved exclusively for the state; there were private diggers and goldsmiths 5 Purchasing Company, was set up in 188 2 by native Africans. There were many indigenous small-scale operators who panned alluvial gold. The profits were theirs to keep and were not expropriated by the chiefs Profit-sharing. In such fields as agriculture and fishing, the practice was essentially the same. Africas native fishermen and farmers were free entrepreneurs who went about their activities on their own initiative, not at the behest of their chiefs, and sold their produce on open, free markets. Nor did the chiefs operate tribal government f arms and fishing boats the equivalents of modern state enterprises.

African natives also had their own profit-sharing schemes. Under theabusa system among Ghana cocoa farmers, a third of any profit went to the owner of the farm, another third went to hired labor, and the remaining third was set aside for farm maintenance and expansion. The profits did not go to the chief THE COLONIAL PERIOD European countries began to trade with Africa in the 15th century. .While some colonies were established early on, no t ably the Dutch colony at the Cape of Good Hope in southern Africa, it was not until the late 19th century that Belgium, Britain, France, Germany, Italy Portugal, and Spain divided up the continent and establishedhtheir sovergignty. Colonial political and economic institutions differed under the different sovereigns. Some ruled directly. Others ruled indirectly through the local chiefs.

While the Europeans often sought to control indigenous economic activities to their advantage, they failed as often as the y succeeded. In any event, Africas vast distances and underdeveloped communications and transportation networks would have made complete control of native economic activities by any colonial administrator impossible. The extraordinary cost in time and mon e y for any sort of control was a main reason that the British adopted the colonial policy of indirect rule. This generally left intact the indigenous economic activities Traditional Activities. After the decline of the slave trade in the 19th century, the c olonialists introduced plantations and cash-cropping, a departure from traditional African agriculture. But the traditional economic activities such as peasant agriculture=and fishing went on as before. The village markets survived during the colonial era . While there were serious abuses of the natives by various colonial powers such as restrictions on movement and places of residence, for the most part the natives were free to carry on their economic activities.

Attempts by the colonial powers to exclude natives from newer forms of economic activity encountered problems. In the Gold Coast, for example, European mining companies sought, without success, legislation from the British government curtailing the 4 Polly Hill, Development Economics on TnaI (Camb ridge: Cambridge University Press, 1986 6 native mining operations. As a result, the two operated side by side throughout the colonial era.

Notably absent during that era were state or colonial government enterprises A few large European firms and companie s dominated the various sectors of the economy, but no indigenous economic activity was reserved exclusively for the colonial government or European companies Rich African Shopkeepers. Small village shopkeepers emerged. Native businesses competed with Eur opean firms? Many were successful. There were rich African shopkeepers, timber merchants, transport owners, and farmers during the colonial period.

Given the opportunities and access to capital, the natives proved that they could compete with the foreigner s In fact, the success of native Africans was one reason why South African whites favored apartheid. Write Frances Kendall and Leon Louw of the Free Market Foundation of South Africa The freedom that characterized tribal society in part explains why black South Africans responded so positively to the challenges of a free market that, by the 1870's they were outcompeting whites, especially as farmers.'6 One reason colonialism lasted so long in Africa was that it did little to upset violently the traditional way of life. Had it done so, its demise would have'come sooner. Resistance to colonialism came largely from the educated class in the urban areas where economic disparities and discrimination were more glaring I POST-COLONIAL SOCIALISM After independence, free markets and free trade were viewed by African leaders educated in the West and influenced by socialist and Marxist ideology, as alien institutions imported by the colonial powers as a means to exploit the natives. Post-colonial economics were formed by an emotional anti-imperialism, which saw Africa's salvation in complete state control of the economy.

Kwame Nkrumah of Ghana, widely regarded as the "father of African socialism was convinced that "only a socialist form of society can assure. Ghana of a rapid rate of economic progress without destroying that social ustice, that freedom and equality, which are a central feature of our traditional life He added that "socialist transformatiomwouldi. 8 6 eradicate completely the colonial structure of our ec o nomy."8 Nkrumah believed Capitalism is too complicated for a newly independent state; hence, the need for a socialist i 5 Lack of capital and managerial skills often hampered the natives in this regard, but few fields were overtly closed to them an import a nt distinction 6 See Frances Kendall and Leon Louw, After Aptheid. The Solution (San Francisco: Institute for Contemporary Studies, 1983, p 3. One reason for this performance, according to the authors, was the cbngruity between their traditional ways and t he market economy p. 18 7 Seven-YearDevelopment Plan(Accra: Government of Ghana, 1963) p. 1 8 See Kwame Nkrumah, Revolutionary Path (New York International Publishers, l973 p. 189 7 society He sought nothing less than ''the complete ownership of the econo m y by the State Transforming Tanzania. Julius Nyerere of Tanzania misread the African tradition of helping family and friends as an indigenous socialism, a philosophy to which he was first exposed during his schooling in Scotland. He criticized capitalism o r the money economy because it "encourages individual acquisitiveness and economic competition He saw this money economy as foreign to Africa and "catastrophic as regards the African family social unit As an alternative to ''the relentless pursuit of indi v idual advancement N cere insisted that Tanzania be transformed into a nation of communal village farms. 1 Typical of African leaders' hostility to economic freedom was Anne de Lattre, director of the Club du Sahel, a regional group of West African governm e nts organized to promote agricultural development. She would start her meetings declaring Well; there is onething we all agree on: that the private traders should be shot State control of the economy usually was accompanied by one-man dictatorship or rule by a small elite that soon became corrupt. Often an "ideology" was invented, centered on the country's leader, to give rhetorical support to his denial of democracy, individual rights, and the rule of law. Julius Nyerere's U

maa (a Swahili word for familyhood or socialism) is a vague amalgam 3f Marxism, Christian socialism, and humanitarianism. Leopold Senghor of Senegal called liis rule Negritude. Kenneth Kaunda expropriated the word humanism to just

his dictatorship of Zambia. Marien N'Gouabi of the Co ngo (Brazzaville) decreed scientific socialist" policies. The Nkrumaism (conscience-ism) of Ghana's Nkrumah, whose followers called him the Redeemer, and the Mobutuism of Mobutu Sese Seko of Zaire attempted to buttress personality cults. Malawi's Hastings Banda preferred to be called Conqueror and Saviour. Only one black African country, Botswana, currently has a democratic, multiparty system Con trolling 6,000 Prices: After independence, most African countries took strict control of all economic activitie s . Industries were nationalized; prices and wages were set; foreign investments were confiscated; and markets were closed to imported goods. After Ghana gained its independence in 1957, for instance, the European companies were taken over by the state. Nat i ve African mining operations were expropriated by the government, and indigenous gold mining declared illegal. By 1970, the gyjernment of Ghana controlled nearly 6,000 prices relating to more than 700 products. By 1983, the.govenunent.-hadno idea how many prices it controlled. Nevertheless, it jailed farmers and food traders who violated the controls. Local free markets were burned and blown up by government troops amid accusations of violating price controls and harboring "neo-colonial agents and saboteur s 9 See Kwame Nkrumah, Ghana:An Autobiography (London: Nelson, 1957 10 See Julius Nyerere, Freedom and Unify(London: Oxford University Press, 1966 11 See West Africa, January 26,1987, p. 154 12 Word Development Report (Washington, D.C The World Bank, 1987 p. 114 8 Agriculture was collectivized in many African countries. Tanzania is an example.

Millions of small farmers were uprooted and sent to collective farms. Government marketing boards for agricultural products were established in Tanzania and in many o ther African countries. Farmers were paid only a fraction of the world market price for their products, often less than the cost of production. Distribution and marketing by nongovernment agents were prohibited The Nyerere regime conducted widespread arre s ts of especially Asians. Forced labor was the lot of those who did not fit in Nyerere's new order Markism in African Clothes In Guinea, President Ahmed Sekou Toure, who served from 1958 when Guinea gained its inde endence until his death in 1984, proclaim e d what he called "Marxism in African clothes The result, according to a New York 'limes dispatch 8 Unauthorized trading became a crime. Police roadblocks were set up around the country to control internal trade. The state set up a monopoly of foreign trad e and smuggling became punishable by death. Many farms were collectivized. Food prices were fixed at low levels. Private farmers were forced to deliver annual harvest quotas to "Local Revolutionary owers.tll 1 The freedoms that characterized traditional Af r ica vanished in many countries. Bishop Desmond Tutu of South Africa told the December 1987 All-Africa Conference of Churches in Nairobi, Kenya, that It is sad that South Africa is noted for its vicious violations of human rights. But it is also very sad t o note that there is less freedom in some independent African c untries than there was in the much maligned colonial period l SELF-INFLICTED ECONOMIC WOUNDS The results of socialism for Africa's economic development have been disastrous. African countries h ave progressed little since independence; Most are actually worse off. A 1985 World Bank study found that Africa's per capita Gross Domestic Product in 1983 was 4 percent below its 1970 level. Countries such as Tanzania and Guinea, which had been food exp orters in colonial times, now rely on imports and still cannot feed their people.

Agricultural production has dropped as governments deny farmers the right to sell their 13 This declaration illustrates the general absence of cognitive pragmatism in many black African leaders.

After independence, many hauled down the portraits of European monarchs and erected and saluted those of Man and Lenin (another set of white aliens) and called themselves Free and independent under black rule."

Today, portraits of Man and Lenin still grace the capitols of Angola, Ethiopia, and Mozambique 14 The New Yo& 7imes, December 28,1987, p.28 15 The Wall Street Journal, January 7,1988, p. 18 9 products at market prices, nationalize land, and divert resourc e s into money-losing industrialization projects. On a human misery index developed by the Population Crisis Committee in Washington 25 of the worlds 30 worst off countries are African Spurring Massive Corruption. Infrastructure has deteriorated. At indepen d ence in 1960 Zaire (then the Belgium Congo) had 58,000 miles of passable roads; today fewer than 6,000 passable miles remain. Air travel between various African countries on state-owned airlines is so unreliable that it is quicker to fly first to Europe o n a Western carrier and back on a Western flight to the country one wishes to visit. And telephone service between African countries and even within countries is so poor that routing calls through Europe or the U.S is the most efficient approach to communi c ations The attempt to control entire economies predictably has given massive graft and corruption. Africans have to bribe their way through the arcane maze of stifling state controls. In Ghana, the standard bribe for the procurement of an import l icense was fiied at 10 percent. Upon the payment of a bribe, some foreign suppliers are able to unload useless and obsolete equipment in Africa on credit. Under Mobutuism, the president of Zaire has amassed a personal fortune that some observers estimate t o be over $8 billion; this exceeds his countrys entire $5 billion foreign debt. In 1977, Jean Bedel Bokassa of the Central African Empire had himself crowned Emperor Bokassa I in a ceremony meant to imitate I the coronation of Napoleon. The cost of the ev e nt: around $30 million, or one fifth of his countrys gross national product. His crown, containing 2,000 diamonds; cost $2 million. A minister in the Cabinet of Zimbabwes Prime Minister Robert Mugabe blunt1 stated: In Zimbabwe, socialism means whats mine is mine but whats yours we share. IIlJ FOREIGN AID FIASCO Africa has received more thari $70 billion in foreign aid since 19

60. But this has not spurred growth or arrested economic degeneration. Part of the aid money was misused. In Zaire, according to Af rica scho1h.r David Lamb, 20 cents of every dollar coming into the country is skimmed by officials for their personal cut, regardless of whether it is a foreign aid grant, business contract, or export earnings. In September 1981, Nguza Karl I Bond Zaires f ormer Prime Minister and Foreign Minister, testified before the U.S. House of Representatives Foreign Affairs Committee about the reckless misuse of Western military aid to Zaire. C-130 transport planes supplied by the U.S. were routinely used for illegal private transactions and smuggling; communication equipment was often used by military officers to communicate with their private plantations.

Even International Monetary Fund and World Bank loans have not been exempt from misuse. On December 6,1986, Bank of Tanzania officials were summoned to the State House and ordered by the government to release part of the foreign money coming into government coffers, including IMF funds, to support the Marxis\{ ,FRELIMO Government of Mozambique in its war against RENAM O freedom fighters 16 Cited by Pierre Dostert,Aficu 1986 (Washington, DC Stryker-Post Publications, 1987 17 African Events, JanuaryPebruary 1987, p. 5 10 CONCLUSION Despite the myth to the contrary, Africa has a tradition of local free markets and trans-r e gional trade. Natives bought and sold goods with little interference from their chiefs long before the coming of the Europeans. Even under colonial rule, indigenous market institutions survived and many black Africans competed successfully with foreigners . With 20th century independence, however, Africas socialist leaders proceeded to brutally destroy economic freedom. This was accompanied by political repression and a denial of basic human rights Treating Africans Like Children. Foreign aid money has been wasted-onmoney-losing state enterprises or stolen outright by corrupt politicians. This must be stopped and reversed. Today, the most effective aid that the U.S. and the world can give Africa is help to rebuild, reinstitute, and modernize Africas indigeno u s institutions of political and economic freedom. These now-tattered institutions have demonstrated in the past that Africans are as capable as any people of earning their own living and trading freely with others. Paternalistic controls that treat Africa n s like children only serve to continue the worst aspects of the colonial attitude towards that continent; If Western nations truly wish to eliminate the poverty and misery that is the lot of most Africans today, they must insist that Africas leaders begin pursuing policies to restore Africas traditional economic and political freedoms.

Prepared for The Herita e Foundation by George B.N. Ayittey, Phf6 I George B.N. Ayittey is Associate Professor of Economics at Bloomsburg University, Bloomsburg, Pennsylvania.

A black African native of Ghana, he received his Ph.D. from the University of Manitoba, Winnipeg. Dr. Ayittey is grateful to the Earhart Foundation for research support that led to this study 11


George B.N.

Senior Associate Fellow