“The world is in the middle of a huge demographic transition that will have a significant effect on long-term economic trends”
– Mapping the Markets, The Economist (2006)
Part 3 of this series was concluded with the idea that a new benchmark index must be formulated by African societies that will serve the following purposes: first, as a basis for compromise during sector-investment negotiations and finally, as a guide for deeper integration with other emerging markets. The definition and adoption of a sound contextual framework are key steps in African economic policy development and should not be misconstrued as conspiratorial efforts to place the welfare of the African above that of her trading or investment partners. Instead, the framework should be viewed as a necessary underpinning that will highlight the foibles of the current system of doing business, correct them and move to guarantee 21st century mutual benefits for all parties involved.
Since the dawn of the 20th century, the demographic standing of any geographical region has become a critical economic factor in determining sector-resource allocation, the future directions of that region and the ripple effects of regional activities on the larger global economy. With the growth rate of the ageing populations of the developed world projected to continue northward (as a result of low infertility and increased life expectancy), there will be an unvoiced demand on Africa and other developing states to export her teeming youth to run and maintain the established systems of advanced economies. This demand arises from the obvious pressures of the generic African society, not necessarily from developed nations. The underlying mechanics of this human-capital export scheme are not novel. Noticeably, shifts in geographical locations have become unnecessary as technology becomes more interleaved with business activities – more young Africans are going to be working for multinational corporations of western origin domiciled in Afro-localities. Africa must grow and develop, but as long as the current structure that impels GDP growth persists, her prosperity will largely be determined by the business cycles of advanced economies, whose interests the multinationals represent (understandably), and emerging markets.
As mentioned earlier, the characteristic African growth trend is high GDP growth rates and meagre HDI growth. According to a 2011 economic report released by a synergy between the African Union and the United Nations Economic Commission for Africa,
The improved economic performance achieved over the last decade has not been translated into commensurate reductions in unemployment and poverty, nor significant progress towards the Millennium Development Goals (MDGs), especially in sub-Saharan Africa. The continent is experiencing a jobless recovery; apparently perpetuating a fundamental feature of its previous growth spell...the [African] development process has to be planned for several reasons. The changes required are substantial and therefore the decisions cannot be optimally made by free market forces...
Without trivializing the preceding sections of the AU-UN report, I choose to prey on the secondary clause that contains “free market forces”; this brings the Chinese to the fore again, albeit in a way that demands we take a superficial look at their economic growth model.
The Chinese system of socialism, interlaced with some features of free market ideology, has elevated her economy from the doldrums that resulted from the fall-out of the Cultural Revolution of the mid-sixties. 1983 circa, marked a year of opening for the Chinese market to the world when Deng Xiaoping reversed some of the debilitating policies of Chinese revolutionary, Mao Zedong. However, the state retained control of the economy and continued to counter Harvard economist, Joseph Schumpeter’s theory of “Creative Destruction”, as the state played a central role in allocating resources to sectors of the Chinese economy based on partisan prejudices. Hinging her economy on exports and being fully aware of the tides of floating exchange rates, China adopted a fixed exchange rate policy to encourage her local industries and keep her exports competitive on the international market. Discounting the relative closed-door, policy stance maintained by the Chinese economists, it is clear that China’s currently enviable, economic position cannot be diametrically attributed to the interplay of “free market forces”.
Without ambiguity, the required structure that will lift Africa economically and socially cannot be left to the whims of the global economic order. I do not, by this submission, suggest that African economies implement fixed exchange rates or close our doors to foreign trade – indeed foreign trade is in our best interest – but we must become proactive and act ‘offensively’ (rather than defensively) to the mercurial landscape of global economics. A major transition occurred in China’s economic fundamentals when more emphasis was placed on the intellectual evolution of the ordinary Chinese and the development of a strong knowledge economy while manual labour was and is gradually (but progressively) being relegated to the back-seat. The US and Japan have been the early champions at converting raw intellectual capital to great products and services, while the former imperialist machine – the United Kingdom – has been playing catch-up, choosing the financial services space instead. The global trend is clear; at a point in its economic history, the United States manufactured a great percentage of its goods in the US until China and other Asian economies presented themselves as cheaper manufacturing destinations, with great human populations and low-wage regimes playing the role of process catalysts. China’s dominance in the global outsourcing manufacturing sector can only continue for as long as the Chinese knowledge-economy reaches a globally competitive stage. As Chinese demographic data suggests, this is inevitable. In a few years, the Chinese economy will morph into a high-capacity service-based economy with mass goods manufacturing outsourced to Africa and other developing Asia-Pacific economies. Whether Africa will be able to play that role is a different matter altogether. Currently, however, Africa does not show any desire to follow this historical developmental trend. Another source of pressure for Africa will emerge as a consequence of the current economic crisis ravaging the industrialized world.
In coming to terms with her unfavourable demographics and dwindling reputation for innovation, the United States is making serious attempts at reviewing her immigration laws and policies; the idea is to strengthen the United States’ position on the pinnacle of innovation in the world. According to history, I believe the US will reassert that enviable position, by word and by action. Job growth and unemployment are major issues as the 2012 US election year looms. Some states have taken steps to increase the retirement age – putting more of the population to work and reducing social services expenditure. Everything will be done to attract the world’s best – again. Developing economies will have to work harder to keep their professional and skilled citizens or else they will be at the losing end of the intense global competition that will result when the current crisis is over. With the demographic data tilting towards an exponential growth of retirees in advanced economies like the US and the UK, the tendency is for a gradual but steady exodus to occur from the southern hemisphere to the northern hemisphere. The cerebral elite of many African states have become conscious global citizens. They cannot be pinned down to a distressing geographical location for too long, besides the legacy atmosphere of Afro-nationalism continues to wane by the day. They will, by choice or by the pressures of the environment, move to places in the world where their life and work are treated as assets of first priority.