The current economic situation on the African continent presents a disturbing picture. For the most part, power is represented by totalitarian, authoritarian regimes and military juntas, exploiting their uneducated people and the country’s natural resources. The continent is fragmented between states, the borders drawn by the former European colonial empires without regard to the ethnic and economic situation within the borders.
This creates perpetual instability within most of Africa, hampering integration into the world market and trade and economic relations between neighboring states. Thus, the situation on the African continent is only getting worse from year to year, and an important element of these processes is the widespread and strengthened resource economy. As Peter Coy calls it, the resource curse represents the state economy’s dependence on imports of resources and, accordingly, any fluctuation in resource prices. In his article for the New York Times, Peter Coy quotes Usman Zainab, a native of Nigeria.
Usman puts forward the idea that the approaches to the economic development of the African continent, applied in the past, have shown their effectiveness, for example, in East Asia, but not in Africa. The matter is about the policy of regulation and increasing regional tariffs for trade and taxation of small businesses, replacing imported goods with government ones, and protecting nascent industries within the country.
These methods were ineffective for quite clear reasons: the local barely nascent industry, as a result, did not receive most of the resources due to corruption. In turn, lobbying of their goods by foreign companies through local elites killed any private initiative due to their absolute non-competitiveness. Usman herself proposes to level out state duties on trade within Africa, thereby increasing the competitiveness of local enterprises and goods in opposition to imports. She also proposes to increase support for small and medium-sized businesses to consolidate them in the general economic African space. This is a clear demonstration of the ideas of state-forming economic initiatives and the influence of foreign direct investment.
Usman Zainab argues that resources in and of themselves are not harmful to the economy. Still, he speaks of a good example of the United States, Canada, and Australia with their resource fevers of the past centuries. Although this example looks rather contrived, the phenomenon of the gold and oil rush are private initiatives that are not a state-forming economic phenomenon. It should also be borne in mind that resource dependence is a clear example of an almost widespread crisis of economies subject to it. Countries in Africa, Asia, Eastern Europe, and South America often have rich deposits of valuable minerals in their territories.
As a rule, the same situation is observed, namely, political interference in trade and industry. The coming to power in the country of the resource oligarchy and the authoritarian government supported by it and the low level of economic growth despite the colossal export of resources is a widespread phenomenon. It is also important to consider the influence of foreign companies seeking to expand their sales markets and gain control over resource exports and production in the territory of resource-dependent countries. All this is a consequence of cross-cultural business and globalization in general, affecting the countries of the economic periphery destructively, destroying the local economy.
Despite Usman’s good intentions in solving the economic problems of the African continent, her multi-stage development plans are tied to the integrity of the authorities, who are often military and former revolutionaries. The power of these people lies in key economic agents: foreign investors, resource companies, and syndicates. Domestic elites are also key, living off the exploitation of cheap, uneducated labor and exporting resources. Fueled by constant competition for foreign investors and territories with resources, hostilities between neighboring states often boil down to wars and border conflicts.
Thus, Usman’s ideas aimed at solving problems with inter-ethnic trade within Africa are as unlikely as ideas for raising the population’s skills. The resource curse implies that the country’s authorities are not interested in qualified competitive production, which implies the need for resource-extracting personnel, unskilled miners, and workers. According to the World Bank, in which Usman is an employee, in theory, free trade could improve the standard of living of 30 million people in extreme poverty. This sounds extremely optimistic, but optimism faces several difficulties when looking at the situation in detail.
On the territory of Africa in 2018, when the information was published with a forecast of 30 million wealthy inhabitants of the continent, there were about 1.2 billion people. Based on the World Bank data, 2.35% will be able to get rich in the future, and this could be a good result in increasing the growth of the African economy if we do not take into account politics and corruption. The African states dependent on resources, as mentioned earlier, cannot and do not want to give up their main commodity, natural resources. The increase in trade, industry, and the availability of consumer goods leads to an increase in skills and education among the population.
This poses an impressive threat to the state and its economy sitting on a resource needle. Based on this, it can be understood that Western ideas of free trade will not help solve the political and socioeconomic issues on the African continent. The correct position here seems to be the systematic provision of more favorable conditions for industrial development directly to the economic and political elites of the target economies.