Africa and the Global Economic Crisis

By Tim Newman, Campaigns Assistant, International Labor Rights Forum

While the global economic crisis began in the US, it is of course affecting people all around the world.  In developing global strategies to address the crisis and institute a just recovery, we need to examine how various groups of people around the world have been impacted by the economic policies that led to the crisis.  Yesterday, I attended a roundtable discussion in DC focused on the impact of the global economic crisis on Africa.

There were a lot of interesting ideas, analysis and solutions discussed.  Keep reading to find out more!

The first speaker to present at the event was Jose Gijon, chief Africa economist and head of the Africa desk at the Organization of Economic Co-Operation and Development (OECD).  Jose discussed how the economic crisis has negatively affected world commodity prices and exports of resources from countries in Africa.  This downturn in prices for natural resources hurts farmers in Africa who rely on exports for their livelihoods and their countries in general who rely on these exports to fund the government and social programs.  The countries that have been most negatively impacted are those that rely heavily on just one or two commodities.  Jose said that many African countries have seen significant economic growth over the last 8 or so years, but the growth is now reversing due to the economic crisis.  More analysis from the OECD is available in their African Economic Outlook website.

Briggs Bomba, Associate Director of Africa Action, also mentioned the negative impact that the collapse in commodity prices has had on African farmers and workers.  Briggs highlighted how workers across Africa are facing workplace closures and unemployment all while facing a diminishing social safety net in many countries.  The negative impacts of the economic crisis are building on years of dislocation and decreased social investments that have been imposed on many countries by the World Bank (WB) and International Monetary Fund (IMF) for years.  The burden is especially strong on women because they are often expected to work more when their husbands lose jobs in the formal sector in order to keep feeding the family.  Children are also deeply affected because they have to work to support their families when they face a loss in income, especially since many countries had to impose user fees on education as a condition on accepting IMF and WB loans.  At the same time that people are facing these difficult circumstances, Briggs highlighted that social struggle is growing as well.  Workers are protesting cutbacks and closures all over the continent.  Briggs concluded by mentioning that it was time to suggest new approaches to economic security: for example, by increasing regulation, instituting exchange controls and controls on capital flight, ending dependence on exports and increasing local and regional integration in Africa.

Regina Amadi, a former head of the Africa desk at the International Labor Organization, focused on how women are being impacted by the economic crisis.  She began by highlighting how globalization is not new to Africa.  From the slave trade to colonization to the current period, foreign forces have imposed their own models of "development" on Africa.  While many countries are currently encouraged to focus on exporting natural resources, these countries could reap more benefits if they were able to add more manufacturing and processing of resources within their borders.  Due to the decreasing social safety net in African nations, women are particularly impacted because they often have to take on the social responsibilities.  She also mentioned that we need to be aware that growing unemployment could lead to increasing violence against women.  Regina said that we currently have an opportunity for a dramatic shift in global economic policy that puts women and youth at the center.  We need reform of international financial institutions to include more voice for African states.  Women need policies that are truly enforceable related to gender equity.

Tony Avignan of the Global Policy Network at the Economic Policy Institute began by reminding the audience of the limitations of using Gross Domestic Product (GDP) as a true indication of growth.  For example, GDP can go up while the top 5% of the population reaps all the benefits while the poor actually get more poor since GDP does not address the issue of income distribution.  For example, South Africa is now the most unequal country in the world because Thabo Mbeki's policies favored a small number of billionaires while poverty increased.  In terms of developing policies moving forward, Tony recommend checking out a book his organization published called Alternatives to Neo-Liberalism in Africa that was developed through consultation with a range of partners in Southern Africa.  One of the major recommendations is to reduce the total reliance many countries have on exports.  Tony also cautioned that while some commentators are proposing that we might have already seen the worst of the crisis, even if that were true, African countries would probably still see the downturn continue for several years and without a strong social safety net, the suffering would be great.  Additionally, Tony mentioned that we need better statistics on a range of economic issues in Africa, especially labor and unemployment figures in order to develop good policies.  Tony concluded by stressing the importance of protecting the freedom of workers to form unions.  He also mentioned that Africa governments might be able to learn from some of the innovative policy programs some Latin American countries are implementing -- especially in terms of regional integration.

Leonce Ndkumana, a researcher at the African Development Bank, mentioned that many African governments have already taken action to reduce the impact of the crisis and have developed stimulus packages or are offering support for major economic sectors.  However, to reach the pre-crisis growth rate, more stimulus is needed.  Leonce highlighted lack of trade financing and targeted aid to the lowest income countries as a necessary area of focus.  He also noted that Africa faced major development challenges even before the crisis and now these challenges have increased.  African governments should focus on long-term growth policies like increasing investment in infrastructure development, more capital in-flows, more democratization and making remittances from the African diaspora cheaper and easier.  Leonce mentioned that the global economic crisis should be used as an opportunity to challenge the marginalization of Africa in the global discussions around political and economic policies.

The discussion was extremely useful in thinking through how the crisis is affecting average people in Africa specifically.  A common theme among all of the speakers was how relying so heavily on export-oriented production leaves many countries in Africa extremely vulnerable to changes in the global market.  Focusing on exports is a policy that was pushed by many international financial institutions like the WB and IMF for years and it needs to be changed.  The WB and IMF policies of reducing social spending as well as regulation have also proven to be disastrous both in terms of leading to the global economic crisis as well as harming the ability of many countries to provide a safety net from the workers and communities that have lost jobs and income due to the crisis.  Because of this role the WB and IMF have played, it is a major concern that many policymakers are looking to the IMF to facilitate lending to many countries to support stimulus packages.  Some analysts have said that the IMF will change their lending policies so that countries accepting loans will not face the same burdensome policy prescriptions, but Tony pointed to the very recent case of how Latvia was forced to make massive reductions in health spending as well as cutting back on wages and pensions for workers in order to qualify for an IMF loan.  The measures to cut health budgets which will lead to hospital closures earned cheers from the IMF, but the health minister resigned in protest.  These cuts came at the same time that many countries like the US are doling out generous stimulus packages and bailouts and going in to deficit spending.

Briggs also mentioned that workers in many African countries have been harmed over the years by changes in labor laws over the years that have lead to increasing job insecurity.  Many of ILRF's partners all around the world have been experiencing new employment schemes that lead to larger numbers of workers who are on short-term contracts or other arrangements that are referred to as labor flexibilization or casualization or precarious work.  These schemes are a violation of workers' freedom of association, because they are usually put in to categories where they are not eligible to join unions and are not offered the same protections under certain labor regulations.  As a result, these workers are particularly vulnerable to the impacts of the economic crisis because they do not have the same protections, are not entitled to the same benefits and do not have the protection of a union behind them.  Any policy initiatives developed to address the economic crisis need to include strong protections for workers' rights as well as reverse the trend of precarious work.

This discussion was a great opportunity to start learning and talking about the impact of the crisis on Africa and there is still a lot more to discuss.  Thanks to Emira Woods from Foreign Policy in Focus at the Institute for Policy Studies for doing an excellent job moderating this important discussion!

Comments

[anonymous]

Thanks for a great post. As you mentioned, it seems like the most harmful economic policies are those that encourage export-based economies and discourage diversification. The casualization of labor is also an incredibly dangerous trend. Any coincidence that the big financial institutions and large multinational companies (with the complicity of countries like the U.S.) encourage exactly these conditions?