Deep-rooted commodity trap lies behind Africa's poverty

[papau]

http://www.guardian.co.uk/globalisation/story/0,7369,1169341,00.html

Deep-rooted commodity trap lies behind Africa's poverty

Kamran Kousari
Monday March 15, 2004
The Guardian

<snip>Faulty economic logic has had its most damaging impact on Africa, where all these outcomes have been accompanied by a drop in the share of world exports from 6% in 1980 to 2% in 2002. But far from reflecting a reluctance to embrace globalisation, Africa has posted the highest trade to GDP ratio of any region outside east Asia.

The problem is rather that growth depends on one or two primary commodities whose prices have seen a secular and persistent decline, placing a permanent pressure on foreign exchange earnings, frustrating investment-led recoveries and adding to the debt overhang.

If terms of trade had remained at their 1980 levels, the share of the sub-continent in world exports would have been double its present level, its investment ratio would have been six percentage points higher and per capita income would be as much as 50% higher. In short, behind the poverty trap in Africa lies a deep-rooted commodity trap.

That trap has all too often been fastened tight by the policy actions of the rich countries who have been extending a very visible hand to their own farmers through huge subsidies and market barriers to deflect the adverse impact of price movements, even as they have argued against similar instruments to protect far harder-hit rural communities in the developing world. <snip>

And at the national level, many African countries undergoing structural adjustment and reforms have had to dismantle marketing boards that provided extension services to farmers and guaranteed minimum prices, leaving poor farmers alone to face increasingly concentrated markets and frequent shocks, both natural and policy-made.

President Chirac of France recently called for an end to "the conspiracy of silence" on commodity issues. A new study of Africa's trade performance by the United Nations Commission for Trade and Development (Unctad) has heeded this call and suggested a series of changes to the policy stance of the international community towards commodity-dependent economies. This should begin with a renewed commitment to an international commodity policy to address not only price fluctuations but also the long-term decline in prices. This commitment would entail significant new funding targeted at improved supply management, economic diversification, as well as the building of much neglected infrastructure. <snip>

[Sinistrous]

1. Wasn't this the issue that brought the last WTO meeting to an impasse?

.

[papau]

2. yes- the US was not about to give an inch!

:-)

[rapier]

3. notes

Commodity/resouce based economies do not create wealth. Never have, never will. Oil perhaps being a sort of exception but even in that case the wealth inevitably is highly concentrated, which in itself leads to poor overall growth.

The 20+ year bear maarket in commodites is probably ending. This might give some respite to Africa in general but that will be short lived as short boom and long term bust is the rule.

Yes, trade patterns and practice by the first world make conditions in the third world worse. Yes, these things should be addressed. Even if they are it will not be nearly enough to fix the problems of the third world.