Development economics first lecture: theories of economic growth: explanations of underdevelopment

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CENTRE UNITED. N~IPNS

AFRICAN INSTITUTE FOR ECONOMIC

DEVELOPMENT AND PLA.NNING

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DOCUMENTATION

IDEP/ET/VII/64 lst lecture

DAKAR Dr. Carney

DEVELOPMENT ECONOMICS First Lecture : Theories of Economie

Ex:Planations of Underdevelopment

1..· rhe Concept of Underdevelopment

A country may be said to be underdeveloped if.its per capita income is lower than it need be, given its actual and potential

~esources and the state of modern technology.

2. Indices of Underdevelopment in African Countries References

Higgins, Benjamin, Economie Development (Noton,

195 9)

part IV.

Nurkse, R., Problems of Capital Formation in underdeve- loped Countries (Oxford,

1953),

Ch. 1

The main indices are the following

i) Low aggregate demand for output as a whole, so that individual industries have a difficult time getting established.

ii) Low level of per capita incarne of the population, given the actual and potential resources and the technology available in the modern world.

iii) High consumption levels linked to high consurnption standards and patterns of the industrialized countries. This means a high marginal propensity to consume imports of consumer goods out of every increase in per capita income, against the background of the "demonstration effect" of higher standards of living abroad.

iv)

Law

level of per capita savings, as a corollary of (iii)

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v) Law level of dornes tic investment following froffi::(iv) .·and due to law inducement t o invest, the main elements of whiwh are high interest rates and a law schedule of marginal efficiency· of capital agaül:st a-·b·8:·ckgrei'Lifid-·of iow aggrega te demand.

The se first· ·fJ::ve ·factors ·c-onstîtti.te Nurkse ¹ s prototype of vicious circles ···: low-·income·E;-· .. :.: high 'èonsumption and law savings capaci ty - law level of investment - law output law incarnes

.vi) Unfavourable demographie factors high birth and daath (espe- cially high :infant mortality)rates with which are associated the diseases of undèrdevelopment malaria~ · tubsrculosis, dyscm- teries, dietary deficiencies and diseases of malnutrition

( ~V.i:(;?.,!]l_:Ï,.J?,O E?i.s, .. n:ti.t.r .. i.t.i.6nal. anaemias;: .at.c .• ) 1 ... o.ti.chocer~hiasi ^S, schistosomiasis, and so on.

A:lthough the high death and infant mortality rates may be lowered by modern medicine u.nd public health measures, the high birth rate· is· not -s·o ·easily controlled, wi th the resul t that

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every increase in output i f3 t:füickly swallowed up by a rise in the population, and per capi ta incarne ::md savings continue to be law. This is often refeJBred to as the "law level equilibrium trap".

vii) Law level of indu.strial skills : in agriculture, in particular, non-optimal size of farms, land tenure problems, rudimentary techniques, low yield per acre, lack of credit and marketing facilities, are the major difficulties.

viii) Predominance of extractive industries in

a) Employment pattern, with disguised unemployment as a feature. The proportion may range from sixty to eighty per cent '(Table F) .

b) Gross Domestic Output, >-Thich means. that most of the

Afric~ countries are primary producers of food, fibre and mineral products (contrast Table E with Table A).

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ix) High ratio of exports and of imports to Gross Domestic Product.

··This ratio may range from one-fifth (or 20

%)

to one-half (or 50

%) •

(Table I).

x) Low percentage of intra-African trade to total external trade of the various countries. Industrialized countries conduct a larger percentage of trade with one another than with primary producing countries, and than primary producing countries conduct with one another (Tables G

&

H).

xi) High dependence of fisc~l system and public revenues on foreign trade, that is, on customs duties (chiefly import duties) as a re sul t of the fact tha.t par oapi ta income.s are low and cannat

. yeld much by of incarne tax (Tables C & D).

3.

Choice of Per Capita Output (or Income) as an Index of Development and Underdevelopment

The main justification is that is a measurable concept, and does not necessarily involve welfare implications or considerations of

happiness, although it may be an important factor in these.

4·

The Concept of Growth

Following from our definition of the concept of underdevelopment our concept of growth may be defined as an increase in average per capi ta income (Y +~Y) /(P + ~P) assurning .that total· population i~ ...

not declining.

5.

Explanations of Underdevelopmetit

A. Geographie Determinism : i) The climatic factorsof heat and humidity sap the energies in tropical under- developed countries, and are therefore not conducive to vigourous exertion as compared to the cooler and drier temperate zones. (As

against this argument, norethe improvement that air condi tioning equipment may make possible - except in the fields - so that this argument could .not be a permanent one.)

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ii) Condition of Soil - Subject to leaching and erosion once vegetation is cleared and humus disappears. Not much soil. Renee wasteful clearing of land practised in tropical countries is destruc- tive of productivity land. (Conservation and

better use of land is the answer, so that this could not be a permanent factor).

iii) High rainfall and ieaching of soil

.make application of inorganic fertilizer difficult.

(Hmvever, a reversal of the usual order of agri- cultural activity₉ so that farming could be done in the dry instead of the vret season, using water control and irrig~tion mothods to supply the land mois ture and facilitate ·better n -xing of fertilizer in the soil, would ·overèome-thts dïfficulty which, therefore, ccmld not be a permanent factor).

iv) Tfuen the prevalence of mono-cul ture or one-crop systems, is added to the preceding factors the low ~~d uncertain yield of agriculture is reinforced.

Note : The geographie fact0rs are not permanent or i mmutable.

B. Sociological Theories~

These theories emphasize the following elements:

(a) Land tenure system (communA-l land holding.). as destructive of the incentive to proper land-utiÜzation an.~. increase of output. Cf. Enclosure movement in agriculture in 18th century Britain, and the Homestead Acts of the late l9th century in the United States. (Note, however, that ownership of lc=md is not necessary to i ts use, as systems of

concession and lease make clear. Hm·rever, there is a point in tho argument, even though communal land tenure does not necessarily obstruct mechanization).

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B. Sociological Theories (contd.)

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(b) Absence of Entrepreneurship~ The modern spirit of

'enterprise which goes with private ownership is lacking in cor:1munal systems and entrepreneurs have to come from outside (e.g. Europeans and Levantines in Africa).

(Note, however~ that no one knows for certain where

entrepreneurship cornes from. But certain social regulaticms may obstruct the de~elopment of entrepreneurship- e.g.~ the Usury Laws which~ in the Middle Ages₉ gave opportunities to Jews in banking and commerce).

(c) Limited Needs and Backward Sloping Supply Curxe of Effort:

It is argued that lack of growth in sorne underdeveloped areas may be traced to the limited needs of their societies, so that the efforts of their populations are directed to satisfying only those needs and no more. Thus, it is argued workers leave the reserves in the Rhodesias and the Union of South Africê to work in the rriinës for specifie objectives in terms of a fcw household goods~ a bicycle, a sewing

machine, money for taxes, and so on. Having earned enough to meet these needs~ they leave their jobs and return to their communities, and no amount of increase in wages would tempt them to remain and earn more incarne.

(This argument, it should be noted, is spurious in the light of the following ~

(i) the impact of external contact and the demonstration effoot of higher consumption standards abroad;

(ii) the backward sloping supply curve of effort (a reduction in the supply of labour with an inorease in wages beyond a certain point) to the extent that it is true is logical and justified to the extent that, in the circumstances stated, the earning of further income in order to acquire additional goods would not be justified owing to the lack of complernentary goods and facilities -

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Why try to earn more incoilie îh arder' "fo buy···/3:" refrigerator when there is no ··ehrctricity sUpply, or a mo tor cycle when there is no supply of gasoline in the villages and reserves ?

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(iii) But this phenomenon is not confined to underdeveloped countries. A steeply progressive system of taxation produces a disinc0ntive to effort : e.g., in Great Britain during the Second "1-Torld ifar the high marginal rates of income tax discouraged workers from trying to earn more income, and promoted a lot of absenteei sm, because marginal income after tax was too small.. to make additional effort worthwhile.

(iv) The argument is frequently employed, or used to be so employed, dishonestly by mine employers in th<'3 Union of South Africa Y as an excuse for paying miserable wages to African workers and refusing to raise them).

(d) Dualistic Systemg This explanation emphasizes the coexistence of two unrelated economie systems, one a monetary sector producing cash crops for export and managed by foreigners -.rho provide all the capital and the technolog<J~ tho other, the indigenous sCJctor with limited needs and subsistence farming with primitive

technology and without tho use of money, The two sectors are said

·to be in conflict, the characteristics of the indigenous sector being regarded as an explanation for lack of economie growth in that sector, as compared with the so-called monetary sector.

(Note:The distinct between subsistenco and monetary economy is artificial, in theory and in fact, for the following reasonsg

(i)

^{The major part cf} production in all countries is for subsistence or domestic (home) consumption, and the presence or absence of monay in exchang9 makes no difference to this utimate result.

(ii) There is sorne form of money in indigenous econowies iron, copper (e.g., manillas of Eastern Nïegeria in use until

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their withdrawal from circul~tion in 1948), cowrie shells, beads, etc. These :perform the functions of money, except that there is no monetary m~agement or regulation of the volume of the money su:p:ply and th~t .their physical characteristics in sorne c~ses (e.g. iron ~d copper) discourage accumulation and hinder ease of transportation by the user.

(iii) Subsistence economy is ·not, as is implied in the argument, a way of life but a consequence of the lack.of transportation facilities to move production to the market. This, naturally, discourages the production of an exchangeable surplus above the requirements for immediate consumption. "Division of labour is limited by the scope of the market" (Adam Smith, Wealth of Nations) and so is the use of money in exchange as well as the volume of production. Therefore, the provision of transportation facilities·leads to the enlargement of the market, increases production;·:promotes monetary exchanges and indirect consump- tion. It follows, therefore that so-called subsistance economy, is not a cause or expl~ation of underdevelopment, but a

consequence of it.

c.

^{Colonialism and the} "Backwash" Effects of International Trade (Mill, Myint, Myrdal, Prebish, Singer)

Colonialism involves (a) special measures to hamper the growth of indigenous industry for the benefit of metropolitan and foreign industry (Myrdal);

(b) investment in the export sector by metro- poli tan business whioh, ho-v:ever, is not really a pl'l,rt of the colonial oountry's eoonomy b~t an extension of the eoonomy of the metropolitan country which derives all the profits and benefits ("spread effects") - (Mill, Singer);

(o) s:peoialization in primary :production for the benefit of the trade and industry of the metro:politan country; this has two m<1in adverse effeots ("backwash effects") :

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(i) fluctuations and long-run d~cline in priees of primary products ;

(ii) terms of trade tend to move against primary producers and in favour of industrialize~ metropolitan countries, the net result of which is to jeopardize the .incarnes of producers as well as the exoort surpluses of the producing countries.

D. Historical Explanation

Simon Kuznets ~ The industrial revolution of the l8th and l9th centuries by-passed the areas that are currently underdeveloped, including Spain and Portugal and Southeastern Europe. Renee their technological backwardness.

References Higgins, E., Economie Development (Norton, 1959), Einzig, P., Primitive lVIon~

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IDEP/FJr/VII/62

.oo~ONWEALTH ~;tsu!!!. EtJP.OPE!:.N cm.NON MtLRIŒT

by Davi·d Carnay

The desire of B.ri t~in to enter .the European Common Market (ECM) ha.s ore~ted,.

a

flurry of discussions both a.mong,the original six members of the ECM ·and à~ong the_ Commohw.ealth Countties ass.oci.ated with Brita.in. · It is worth noting tha.t among the most v:oca.l oppo~ents of Brita.in's proposed move have been two ex-colonies, Ghana and Nig.eria., · which one should ·have thought would be indifferent to the issue in view. of thei.r past unequal economie relations with the-metropolitan country. The view has g~ined ground in- orea.singly in recent months both in Brj tain and ou.t.Side it, .. il) the Common- wealth, tha.t the move to .)oin the ECIVI would pe disastrous both

to:

Bri tain and i te Comlnonweal th pa.rtners, poli tically as welL as· economic1'l,lly •

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The major poli tical. argument in favo;ur of Bri t:ain' s ·entry irito ECM sèems to have been the belief tb.at Br1tain would imprut_.-é\: s.tabilizing influence on the Western European scene in view of the ambitions, jealousies .and ha.treds lying concealed, between the two )llajor partners - France _g.nd ··aermany ·- and bet1veen the reniliining members a.na·aerma.:ny, ail as a result of. the circumstanoes of the Second World Wa.r • . The unco.mfortable feeling existing among all the members has in no wa;{ been lesseried by the rapid economie rise of Wes.t Germany, their former aggressor :md defeated enenzy-. ,. ·

Much of Wèst Germany's re~:val has bee.n due. to the liberal economie treat- ment ll.coordecf i t after i ts defeat by the western allies, especially the United States, one of the main ~easons for this liberal treatment having been a desire to build up western Europe with an integrated West Germany ~s a counterweight to the westward spread of the poli tical and economie influence of the Soviet

Union~ For a long timo until rece:ritly the United States has continued to be!\r the main burden of weste,~n European defence, but this burden has :proved increa- singly irksome as West G$rmany continues to prosper at the expense of equili-

.brium in the United· st~tes_balance of payments. Furthcrmore, the continuing

prosperi ty of West Germw.y a..."l.d ··western EUrope accords ill wi th the fact of in- defini te fou~power occupation of that country and its formGr capital, Berlin.

The additional fact of ^th~ possession of p.uclear weapons by the two m1.jor powers,

-the U.S.A.~ :md the U.S.S.R., and its imminent spread to France and possibly other

western Europea.p. countries introduces a dangcrous complication into a situl3.tion a.lready suffioiently coro:plicated, to the extent that the issue of Berlin has -become an 9.tU1Ual. suiiîmer festi va~ among the occupying power.

Naturally, auch a situation cannat long endure and, while vigorously denying

'.atlY intention of p15.lling out of weste:rn--Europ~, the. United State·s hàs been casting

about for ll-1 ternati ve solutions which · would both <md the porennial drain on i ts rosources and lassen i ts inval vemeni; in. a poli tico-mil-itary si tul3.tion whic·h threa- tons to explode at any.time Under the continuing atmosphere of tension and strain both within Germany and betwe~n Germany and the western allies, on the one hand, and between the four oocupying powers on the.other.

It is for these reasons that the United Sta.tes has sought to shift the

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major"· burden ·of the economie and mili t.a.ry defonce of Euro:pe on to western . ·: ..

Europeans themselves, while trying to maintain a controllirig ha.nd and a control- ling voice in decisions concerning the initiative and use of nûclear weapons in a much-feared Elropean conflict - . muoh.,to the .. irri tati or:. of -14'est.arn Europe, in pa.rticular · France. A.t the same timo the United State0- ' ~s gi ven encouragement

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to the strengthening of the ECM and to Britain's involvement with it in the hope that preoccup~tion with the building up .a widened European community would provide channels for the release of constructive effort among its p~rtners and help them submerge and forg~_:\i_}h,ej,~-.:ri yÇ!,lri<:ls and hatreds in. a common united effort. The stability which it is hoped will thus ensue should be considerably heightened by the sti1id ch"l.racter ·of the British who would, from thenon, pley the leading

role in European .. politics. This, in turn, should afford the U.S.A.. a breathing sp'3.cei ftom .Eu-ropean inval vements and eri~ble i t t.o ~ssume the distÙ1guished· role of umpire r1.mong "the warring Europeans and, if matters should progress· to the worst and a conflict ensue between th.e di vided Iùropeans and the Soviet Uni to:n, the , U.S.A. could thEm fulfil the twice-tested role of "saviour of Europe" •.

From the point of view of Britain this development would spell ~ marked change in i ts role from that envisaged for i t by Sir rünstcn Chur_chill at the time of the 1\.tlantic Charter when he drew his three fl!l.mous intersecting circles representing Europe, the Commonwealth, and the 1\.mericas, with Britain 11t the centre of the intersection of the three circles. Now one of the three circles, that representing the Commonwe'3.lth, is to disappear or at best become submerged

·in

a

rouch wider European circle representing Europe, the Commonweaith and the as.sociated countries of the French· Communi ty. From 1\ central rcile in_ ·western affairs a transition would be m~de to the role of leading partner in

a

buffer bloc between the U.S. 't. ·and the U.S.S.R. Thus Britain is being cist, one~ again, and for the third time, for the role of pulling the chestnuts out of'a European conflagration which, econo~cally, has alw~s been to the benefit of the United States and to the detriment of Bri tain, and could w.ell resul t in the virtual elimination of Bri tain from intern'ltional affairs, should a th:ird world catast- roJ:he occur.

This poli tic al analysis is mo ti vated nei ther by dislike of _the United St"Ltes nor a love of Britain, but is merely the view of an outsider reading (perhaps misre~ding) contemporary events in the light of recent history.

The ^m~jor economie "'.rgument which h"Ls been ^~dvanoed in favour of Britain's entry into the Common Market with, it is hoped, guarantees for its Commonwealth p"l.rtners, is the prospect of a l::trgé mass market av~ilable in Europe to British goods for the first time, wi th promises of a revi val of Bri ttiün' s _economie for-

'tunes. In i ts present economie circumstances i t is understandable th at Bri tain

should set out seriously to explore this possibility, '111 the more so ·if equal

_guar~ntees could be obtained for its Commonwealth p'lrtners. ~d the .British

Government is understandably irked by the vocifercus .criticism =md 1'3-Ck of sym- pathy for its position bath within Britün and, outside, within the Commonwealth.

The circumstances. of recent his tory, however, indic~ te_ cleariy that the_.

proposed entry of Bri tain into the Common M~rket is likeiy to be a pm'1cea . ' rather than a cure for Britain's deep-seated èconomic difficulties; 'md is moet likely to end as a short-lived will-oi-the-wisp, and for reasons whiçh will appear presently.

From the point of view .of the Commonwe13.lth the consequences of the devel- opments outlined in the foregoing analysis augur ill in terme of the demise of time-honoured preferential arrangements· 13.11.d dis:tppoin-ted hopes of eoonomio- development wi thin the Co.mmonweal th. The position of the more eco.aomically . de.:veloped members of the Commonwealth in. this respect has. been welL out;lined in contemporary discussions, and is rather weli. known. ~ot so th~t of the unq,er-· developed members l-Those interes·t in the matter ·h~s rècei ved seant . ~tten~ion in

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both official discussions and the western press. These members have, unfor- tun'ltely, been l'lrgely t3ken for granted, in spite of the protesta of sorne of them, not:J.bly India, Nigeriq, and Ghan:J.. But Indiq,'s position is not as pre- C"l.rious q,s that of the .'lfrican members of the Commonweq,l th, since India has been the fortunate recipient of massive economie aid from bath East and '·fest in the contemporary struggle for the domin:J.tion of the ~\sian l'lndmass by the United St"l.tes and the So~et Union~ African countries, q,s a whole, enjoy no such good fortune since, in the MIT-Rostovi:J.n scheme of things they rank low in the five stqges of economie growth, being mostly at the "preconditions" staee By contrast India, "l.t the "t.'tke-off", off ers immedi"l.te promise of the ten plus per cent of gross n~tional product going into productive investment, a vital Rostovi"l.n condition for the take-off into sust:J.ined growth "l.nd the ultiro"l.te drive to maturity and beyond. By the achievement of the take-off into sustained growth through western aid, the superiority

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capitalist" to "communist"

economie development >vould be clearly demonstrated, and the contrast wi th the difficulties "l.nd disappointments of the forced-dra!t methods of Communist China 1vould automq,ticlllly determine the outcome of the East-West struggle in 'l.si3. and turn its vast hordes of people to the winsome ways of the capitalist and demo-

cratie ~fest.

Such is the rationale in the western position towards India, while the Soviet Union tq,kes a similar stance, mutatis mutandis, with Communist China as the king-pin of Soviet \sian policy, to which Soviet aid to India is "l-n appendage.

tlliile the ration'lle of the Rostovi:J.n thesis, from the western point of view, serves for the time being to keep ~frica out of active involvement in the cold war, the m"l.jor objective being to divert the attention of the new leaders of the transformed traditional societies of \fric'l from external wars of aggression to the constructive tasks of modernizing their societies and to- wards the benefits of compcund interest, what is the impact of the Common Market on \frican countries and its consequences for their economie development?

It is here necessary to examine the fq,vourable and the adverse consequences in turn, of involvement of African countriGs (including members of the British Commonwealth) as associate members of ECM. The arguments, for practical pur- poses, concern m'linly the !\fric an members of the British Commomreal th, since African members of the French Community are already actively involved.

Firstly, it is argued, will be the "l.dvantage of an assured market for the export products of \frican countries- oils and oilseeds, coffee, cocoa, etc., and any new export crops that. they might develop in the future. If they refused ta join it would be hard for them to compete in simil"l.r products with the African Community countries which, in any c'lse, are not happy q,t the prospect of sharing the privileges of the Common Market with other ~frican countries that at present do not belong to the Ccmmon Market.

Secondly, the Common Market Economie Development Fund, available to asso- ciate members, facilitates not only the development of new export crops 3.nd expansion of production of existing ones, but also investment in infrastructure such as roads, schools, hospitals, etc. The significance of the Rrnd lies in the need of 1\frican countries for infrastructure and to exp'lnd exports in arder ta obtq,in funds for economie development.

Thirdly, associate members enjoy a privileged tariff position in the form of free entry of their products in the Common Market, while having the right to impose tariffs on manufactured importe from industri:ü countries of the

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Market, thus safegu~rding their domestic infant industries •

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_ Fo.urthly~ ^FL. refu~~l to join tJ~e -Co.mmon. MFLrket, wi.th ·whose members a cor:ciderable: ~mÔlint of ,trade is al'refl.dy ~trans-:1-cted, will close the door to a la_;;.ge -"l.ctu'lf .. ari.d P.9tèntial .ma.rket,. thereby re_ducing the range of accessible worlci m'1rk~t8; :- ' - ''

. on'the debit side itmaybe pointed.out,- firstlyt th!lt the i!nportant

thipg for non~ECM 'i.f:dcan countries is not merely the accumul~tion of an export surplus for ,e,conorriic dovelopment,_ but i ts ~ccurnulR.tion wi th those countries th':'!.t h3.ve investm.ent capital:' to spare. Since thé-Economie. Development Fund is

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to the exp'Ùlsion of primary production R-nd infrastructure there will be obVious difficulties in obt<Ùning capitÙ goods for investment 'iri 3:reas outside of-the~e.

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et_, b,ai.r:lng no expor.t s:u:rplus wi th capi tal-su:pply countries, outside of the ___ ECN., such A.s the U. S.·A .• ·, the Soviet Union, J,q,pan, Eastern Europe !Uid Sc3.ri:di_nA.viA., they might experi<mce <iifficul ti es in turning · their Couimon Mà.rket expOrt surpluses _to account in these c.ountries.

- Sëcondly, invol vement wi th the Common Market will make· i t d.ifficult to êxpA-iJ.d prcicessing '3-Ctivities in the primary sector because of direct· competition with similar A.ctivities in ECM countries- ^!l repetition of the previous coloniA.l experience o:f ,'\..fricA.:p. countries in, this respect. 'i.ddiÜonally, the·èxistence of '3. gui3;:tant.e_ed m~rket for, ;primary products ~would tend to le~-sen ·-èoncern wi th the urgent nèed .fè'r estabtîshirig''fuid -·ëxpanding processing ·industries' ·in \fric an

:· 'countries' thùs lullirig them into ~ false sense of securi ty.

'rhird;t.y;, the grc.:ttest danger: liés in the fact thÙ' primary ojnimodi ty priees h"ive been declining for a long time a.nd"are likelyto continue to do soin: the foreseeable future,._ a .trend which the guaranteed priees of the Common :Market must in:evi t::1J)ly reflect. unless action is taken to res tri ct-outpùt of primary commod- i ties~ _-tl.t the S81il~ ,tirne

the

industrialized countries arc every day ma.ldng' ad- va.nce_s 'in thë substitution o:f ,synthetics for natur::tl products and reducing the prirn:::try cominodi ty content of their m'lnufactured goods. This process contin- U'llly lessen$ their depand(3nce on,prim1.ryproducers, sothat with the advance

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_of· technol,ogj ?-nd the progress of substitution: \frican ëolintries are likely to

'find-thèmselyes _wi th <1 b~g of primary· c.ommodities which they hàve not-le'arned to proce'ss or use in other ways, 'llld the oxternal demand for which would hive ::;hrunk.

Their la.st sta.te would be worse th'lll their first.

The Common Market is there.fore likely to be a hindri:tnco, r'lther · than a help towards the achievement of tlle tr<ms:forma.tion of. the 'i.fric'ln economy from depen- dence on

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material produ'c·Üon 3Jld export to induétrializaticin through the establishment of processing ~nd mA.nuf1.cturing industries. For i t 1üil tend to .. · pe-rpet'-ntè just .. that. very pattern of res ource .Use ànd. commodity, trade .which h'lS

'beenso 9-~~rl.me!ft~l :to oconomic growth !'l.nd frotn which '\fricA.n countries are try- irtg to break q,way. ~/hat is needed i!l order .. to assist the desired economie trans- formation is to orient the various economies of '\.frica towards the 'lfricA.n market, to encourage i!ltra-1\.fri.can specia].iz.:ttion. and trade wi th special attention being --gi ven to tlie .. ï;lxpans·iqn of con;tinent.al road and communic::~.tions networks, <1nd t.o

coordinats dev-:;1oJ:>nient and. ind'!-lstrial programmee on

a

regional ~d contl.nental b'3.sis -_ all of thesê belng important·steps tcrw::J;rds thé development of the econo- mie polenti.q,l cif' a m:l.rket of. at lea.st. 200 million people, a in'lrket ].arger than thA.t of the coritin.ental United States.. .

-i.t this point it i~. a.ppropria.te to showthe'illusory na'ture of British hopes for entry into the Common Market.. If the ·experience of· Burope under the :r.~arsh~;:Lll

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·~lan is any guide at all to the present situ~tion, it should be remembered that the major obst"'.cles among western European count:des · consisted in their inability to sell to one a.nother becA.use of the competifive rather thllrl comple- montary nA.ture of their production llrld therefore of their economies, the un- willingness of the United States to f~cilitate entry of their goods into its market by lowering its tariffs, and the difficulties of operating a payme~ts

1-rrangement. There is no reason why thesè obstacles should again prove i,hsuper- :=tble, for the Common Market idea in i ts European aspects, b·uring i ts co_!l!Pli-

c~tions with, ~nd '3-dverse conseq_uences for the aoonomic development of, /tfrica, is an excellent idea and, gi ven the will to opera te i t, c::tn be. m-~e to work successfully. Eq_ually sa, however, there is no reason why the competitive nature of production and the payments problem should not once again present difficu1 ti es-, al though, wi th differenti8.tion and speci~lizati():p, in production and adequ:=tte payments mechanisms, thesè difficulties need nat ·recur. If, how- ever, th·ey do recur only France would tènd to gain from the Colnmon Market arrange- ments by reason of its greater degree of cbntrol over the raw materials and

m?-rkets of 'l.frican members of the French Goniinunity, whose government budgets it subsidizes directly in a number of c"'.ses. --

Unfortun~tely, however, the ECM as iii related ta ·\fric::t is pregnant wi th adverse conseq_uences, as already shown, and there is therefore no r~ason to

e~pect_, th;i..s "Eur.afriC:a" type of arrangement, wi th i ts bias in faveur of the out~od~d, 99n.Pept of natural or geographical specialization, to endure for long once .!1f.rican associ.::tte members begin to find the arrangement intolerable, nor C!'l.n there be any·,t~.ssurance that the !lfrican members of the FrenchCommunity who ~lr~?-dy chafe under the financial thumb of France would not see~ ways and means out of a situation so degracling to their sense of nationalism-arid self- rGspect, and t o which membership of ECM is ::tn ::tutom"l.tic -1-nd clos ely A:llied _ necessity. Once, hovTE:iver, for ;:;.ll these adverse rG"l.Sons the 1\..frican associate members begin to opt out of the ECM its nakedness will become revealed. For so Lmg . as the_ ECM rem::tins rooted in the ho-1-ry concept of geogr-1-phical speci'lliz- ation And until the point is re"iched at which a considerable a'egree of inde- pendence of primary produots becomes a reality, the Common M~rket will rem"l.in inoperable .wi tbout lfrican markets and raw materials "!.nd wi thout t\.frican parti- cipation.

It is towards such conseq_uences th-1-t Britq,in is headed in its desire to join the Common Market, as though i t did not possess a b·etter ::t~ ternati ve.

This 'llternative, to be shortly outlined, it fFl-iled to seize a lbrigtiœe ago, possibly through l~ck of foresight or through des pair of building. up s'o'Çmd. economie relations with its former colonial territories. Certainly, Britiiin was C"l.ught unprepq,red at the time of '\frican independence wi th no plan for a continu:ttion of its economie relations with its former wards on a more satis- factory basis of mutual interdependence and mutual respect.

The thesis which is here being developed, and the altern"l.tive which it holds, is that "l.t the ti me when poli ti cal independance for -'\.fric a bGg,an t~ be- come <1 reality Brit::tin failed to <1lter the pattern and to take ::tdvanta.ge of its economie rel a ti ons wi th /l.fric"l.. ~fuat the !\.fric an members of the Commonwealth needed, and still need, is economie development through industrializa.tion, as a means of ensuring more :l}rofi table employment for their excess farm popul:üion and transforming the nature of their economies so precariously balanced on the uncertainties of international trade in primary products. '.fuat Brita.in needed, on its yart, was a new lease of life to revive its declining economie fortunes and its industries ravaged by war and the fierce competition of the post-war world. Since Britain's domestic m::llrket was too small to sustain the m'iss output

IDEP /ET/VII/ 62

Page 6

•

>-r:tlich mod.ernization of i ts. industries. would ent"Lil i t w!'l.s necessary, therr.

as

n01·T, :for ;tt.~ to b,(3.,V8 ~cce.ss to .a ID3.SS mR-rk'?t• Such a mR-rket it,h!3.d reR-dy to }:land in· the·. Coininorïwea1 th, wi th all its prefarential arrangemen'ts1: but· fl'liled to. e~pJ,.oi t through a peculiar 1::tck of :i,.magin<J.tion.

. .

· It is · clëar that s~nce the· Hric<tnm~mb~r~ · ~f the Commomw!'l.lth needod industriali,~<ttion smd enrployment _:J.nd th:J.t international investment w!'l.s sc"l.rce ànd · still is, in the f!'l.ce of expAnding demRnds of underdeveloped count:i-ias;

and

^thâ.t since BritR-in needed awide market to serve as

a

bn.sis for:modernizing

. i ts ancïent industries, i

t,

would b,ave .been mutually profitable to her-· and the

Comm~nweal th i f 'i CCJmmonwe<Ù th Confê:rence of representatives of governrtient and business _had been called under .the ^q .gis of the British Government and the Fed- eratiort 'of British Industries, t o t<tke stock of the economie resources of V!'l.rious memb~l.'s of the Commonwealth qnd t o decide on .the strategie l oc<ttion -of British invesÙlèr{t throughout the Commonwealth on the b:tsis of resource =1vailàbili ti es.

It should theri. .h"tve been possible for British industriilists ta invest in one or two major industries in e:1ch Ce>mmonwe.<tl th country wi th ,,q, view to producing for the en tire Commonwealth m::trket, since the indi vidu!3.1 !T18rkets 1rere · sm':!.llèr than that of Bri tain and therefore un"l.ble to n.bsorb in each. c,q,se the .mass output . whicl:llarge-scale production -vrould h1.ve ent?.ilod.

·-·

.

. . · Thus, manufacture of aiuminium and aluminium products, textiles, ·cooking

oils and fats, iron an.d steel products; oi l exploration and refining, dianiond cutting ~nd dressing, and so on, e ould pave been estahlishGd on a. large scale in 3.pptopri"Lte C·:>untries throughout the Commomre::ü th. This l·muld have' created

just th!'l.t opportuni'ty vrhich i.frican. COJJ.ntries needed for industri:üization

· and·employment w:itb maximum effect on their economies, as well !'LS provided

·British capi t"Ll wi th. investment outlets and profits, along ui th the opportuni ty to !'!'l.tion'ilize _{. :} old industries _. and establish _. nevr ones in Bri tain i tself •

Such strategie dispersal of British' investment, geared to production for the entire Commomr?'Ü th market as well as the en tire .'\..fricq,n continEmt, could have rèvi ved the golden er<t of British investmont prior and ùp to 1914, ^{'vri th}

. mutualiy satisf!'l.ctory results to '111 members of the Coil'imonwealth, their n!'l.tional economies and ievels of living. (France, of course, h<td a simil"l-r ·opportiiiù ty in the French Communi ty but was t oo precccupied with :ke.c;:i.:p.ing i ts former coloniûs in their p1'1ces, ~ith th(3 hoary concept of nqtur'll geographical speci,q]liz.ation and'the ecoriomie~:f of priinâry commodities t o see its oppo:rtunity,) . It is this golden opp_ortuni ty that is apparently being cast qway by Bri téh.n" ,in Îavour of the uncertaipties of the Common Market as at present devised. Is it

t oo

late for Bri tain· to · take action bef ore the op_portuni t;y entirely melts awey? One

·snouid pope not.

'l.ddis ·'lbabg,, Ethiopia · July 1262

l ~~ ; .

1.