This is the translation of an article that was published April 27, 2015 on flassbeck-economics. We are publishing one article in English every week to allow more readers to follow closely our analysis of global and European events. However, translation is not free and we have to ask for a contribution from our English speaking readers also.
We do not know exactly from which African countries the people who drowned in the Mediterranean came from. From the point of view of an analysis, it is not important. The failure of the North to help and guide economic and human development in Africa spans all of North Africa and almost everywhere South of the Sahara.
Nothing exemplifies the failure of Westerns policies better than the refugees that are currently dying at sea or end up on the shores of Europe as human wreckage. To the rich countries, these casualties are nothing more than a nuisance. It is only when the human catastrophe becomes disruptive in political terms (potential votes for the extreme right) that they can no longer look the other way. What is being done? A few million euro is made available for humanitarian help. Much more goes to early detection and to what cannot be called anything else than the militarisation of the situation. No one deals with the causes. These days, the German media publish heroic studies (for example in the Frankfurter Allgemeine) about German companies that are creating jobs in North Africa. Some jobs here and there, yes, but for which wages? Do they offer people a perspective to a decent quality of life? The journalists do not say.
The collective ignorance in the North about the structural problems of the so-called developing countries has many faces. In all naiveté, a distinction is being upheld between ‘genuine’ refugees – people who apply for asylum on the grounds of political persecution – and others who (‘only’) flee their countries for economic reasons. The first category is recognised by international law. Economic refugees have be warded off by any means. This distinction became pointless a long time ago already. People will leave if the economic situation and living conditions in their countries deteriorate while their governments are increasingly less able to respond to increasing desperation. People flee because of hunger, misery, lack of perspective, because they are trying to save their lives, political persecution or not.
It is no longer only economics. Higher temperatures will further affect agricultural, thereby adversely affecting food security. There will be prolonged and severe droughts in Africa. Agricultural yields and nutritional quality will drop (in combination with growing populations) while under-nourishment, increases in childhood stunting, malaria and other diseases will increase. According to a report of the World Bank, 30 per cent of agricultural land in Africa may be lost by 2030. That is in fifteen years from now. If this happens, millions of people will flee their regions. They will be displaced persons in their own country or end up in refugee camps. International law does not recognize the existence of economic or ecological refugees. It protects indigenous people, but if the ecosystem of people collapses, there is no protection. This is really incredibly unfair, especially since poor countries contribute the least to climate change. There is only one way to solve this problem: we need to radically change our development policies.
People flee, hitting the walls of fortress Europe. It is as shameful as it is irrational. Last Monday, Jean-Claude Juncker, the head of the EU Commission, explained in a lecture at the University of Louvain that Europe, given its demographic evolution (its aging population) needs immigrants. We need young people for our economy. Perhaps we can educate people, integrate them, give them chances. It would be to our benefit. But that is not how the mainstream thinks: the people who die at sea are considered to be a threat. It is not clear what sort of a threat. Are they a security threat, an existential threat?
Those who build up a fortress Europe are fighting a lost battle. Information is spread all over the globe. It is no longer possible to keep the hungry and the disposed in their home countries. The seduction is just too big. People who have absolutely nothing to lose will take almost any risk. It is rational behaviour. Gran Canaria, where European tourists go to forget about the troubled world, is less than 200 km away from the African coast. There all the misery begins. A world of deprivation, risk, discrimination and failed development. The Africans know the distances too. No fortress will hold.
Other barriers also no longer exist. For decades, most North African countries were governed by dictators. Their regimes functioned as a bulwark against the flow of immigrants from Africa. If you came from Sub Saharan Africa and you were trying to get into Europe, it was better for you not to come through Libya. But this barrier is gone too. There is uproar in Algeria and in Tunisia. Lybia is a failed state. It is no longer being governed in any rational meaning of this word. The West bears responsibility for this too. We watched and were confused as political contestation and demands for democratisation – fair political representation, human rights, redistribution, development – swept through much of the Arab world. We did basically nothing. We did not much of anything again when the old regimes crushed the Arab spring. But this is not the worst. Our worst failure has been in the domain that is pompously called development policy. My colleague Jean Feyder provides an excellent analysis of it in his book Mordshunger (published by Westend). I will not repeat his arguments. But let me make some comments on development.
What is wrong with your development policies? These policies are primarily the responsibility of the International Monetary Fund and the World Bank. They are called the Washington institutions. The IMF and the World Bank forced developing countries to accept free trade and free movement of capital. Countries are forced to open their borders, to compete on global markets, to ‘liberalise’ their financial systems. Western banks create market economies. In theory, increased competition will benefit everyone. This is not even theory, it is mere ideology. The specific conditions of local economies and the specific characteristics of small and medium businesses is of no interest to anyone. When I was at UNCTAD, I tried to find out more about the conditions that apply for financing investments in Africa. What are the interest rates? The picture is truly catastrophic. In most African countries, the lending rates for companies and farmers are between 15 to 20 per cent in real terms. This is even true for the so-called micro-credits that have been regarded for a long time as a silver bullet in development aid. Everyone understands that such interest rates make investments completely impossible. Such interest rates stifle investment and innovation and literally everything else everywhere. For developing countries it is nothing but a death sentence. But this is what the West did during the last thirty or forty years. Why did we let the ‘institutions’ act in our name in such a way?
It is even worse than that. Instead of taking grievances from the developing countries seriously – for example the lack of real competition in the banking sector that is dominated by Western banks – the institutions implement neoclassical and neoliberal policies in these countries with a zeal and a radicalism that they would never apply to their own countries. In theory, totally different policies are possible: unorthodox monetary policies, state-owned banks, and public investments. The IMF and the World Bank make all of this impossible.
Developing countries are told, in all seriousness, that they either have to import capital from the West (when debt rises, the IMF comes in and demands ‘structural reforms,’ destroying the public sector) or, else, wait until the wealthy in the country accumulate sufficient savings in order to kick- off the process of investments and development. To this absurd doctrine, vast inequality and elite formation are seen as necessary conditions for development. It sounds like a bad joke, but it is all very serious. I took part in conferences at the United Nations where Western ‘experts’ lectured neoclassical growth theory to the representatives of the developing world.
It is not that we do not know how to do it. We know that the most countries of the West became rich because they protected their growing industries and services until free trade became a reasonable option. But the market fundamentalism of the Washington institutions outlaw this passage point in the history of all presently developed countries for poor countries. For developing countries, free trade does not necessarily mean development. In many cases it means that the fruits of their labour are passed on to their customers abroad in the form of lower prices and they see themselves falling behind. For many developing countries, their share of world exports declined, food production per capita decreased, their infrastructure deteriorated and most of them were more dependent on agricultural-commodity exports than ever before. And that is before the effects of climate change started to kick in.
The first step towards fundamental change and development lies in breaking with the dogmas of neoclassical economies. But up to now it is nowhere more dominant than within the international institutions that deal with development policies.