How far has globalisation narrowed the policy space available within the countries of Sub-Saharan Africa?

Transcription

1 How far has globalisation narrowed the policy space available within the countries of Sub-Saharan Africa? Phil Green Copyright December 2008 Written as part of a MA in Globalisation and International Development at the University of East Anglia (Module: Perspectives on Globalisation)

2 Policy space is about freedom of choice. For developing countries, it is about their freedom to choose the best mix of policies possible for achieving sustainable and equitable economic development given their unique and individual social, political, economic, and environmental conditions. (South Centre, 2005:.1) In terms of achieving development, effective policies are essential (Leftwich, 1996). Therefore, concern has been expressed at the impact globalisation is having on the policy space available to individual countries (Ocampo & Vos, 2008). This essay addresses the question, How far has globalisation narrowed the policy space available within the countries of Sub-Saharan Africa? The first section will introduce globalisation, global governance and its impact on policy space. In the second section, examples from sub-saharan Africa (SSA) will be used to illustrate, evaluate and suggest solutions to the impact globalisation is having on policy space. The conclusion will draw together the evaluation and suggested solutions and emphasise the importance of developmental states. Globalisation, global governance and policy space Globalisation is the term used to describe the increasing interconnectedness of the different parts of the world (Roberts& Hites, 2007). Globalisation is a multifaceted term including the areas of economics, politics, technology and culture (Haynes, 2008). Although all four areas are interlinked (Lechner& Boli, 2000), the focus of this essay will be on how economic globalisation has impacted political globalisation. According to Lucas (2003:.261) economic globalisation is often defined as the ever increasing integration of national economies into one giant global economy through trade and investment rules and privatization, aided by technological advances and driven by corporate power. These economic changes have had a significant impact on governance. This situation can be effectively illustrated by Transnational Corporations (TNCs), one of the central actors within globalisation. Today there are in the region of 77,200 TNCs (Willetts, 2008), 42% of the world s wealth is controlled by 500 of them and just 27 countries have a larger turnover than Shell and Exxon combined (Bottery, 2000). Not only does this give TNCs significant influence in the political arena themselves, their existence gives rise for the need for governance that goes beyond the authority of 2008 Phil Green DEV-M071 (Perspectives on Globalisation) Page 1

3 individual states. Put simplistically, who should regulate the trading, accounting, employment and environmental practices of a corporation that operates in several countries? The state can no longer be the sole actor in governance, therefore other actors are now involved and a range of governance mechanisms have evolved. These include International Finance Institutions (IFIs) such as the World Trade Organisation (WTO) who deals with the rules of trade between nations at a global or near-global level, (WTO, 2007:.9). Civil society also now has a central role in the governing process as they seek to monitor and regulate TNCs and other aspects of globalisation. For example, in 1998 Amnesty International produced their Human Rights Principles for Companies (Scholte, 2005). These corporate codes of conduct, are becoming increasingly accepted by TNCs (Mulligan, 2002), this is partly due to successful attempts by civil society to enforce these voluntary codes through campaigns and boycotts (Williams, 2005). This example illustrates not only the need for global governance, but also begins to reveal the nature of global governance. As state authority declined there was increasingly a diffusion of authority to other institutions and associations (Stange, 1996a:.229), the result of this has been the creation of a wide range of overlapping governance mechanisms that embrace states, international institutions, transnational networks and agencies which, functions with variable effect, to promote, regulate, or intervene in, the common affairs if humanity. (McGrew, 2008:.25) The ultimate impact this will have on the state is debated. While Strange (1996b), in her book The Retreat of the State, speaks of the declining power of states, McGrew (2008:.28) argues that the power and authority of national government...is being transformed but by no means eroded. Global governance is complicated and as multifaceted as the globalisation it seeks to govern. These changes in governance, to a lesser or greater extent, for better or worse, are impacting the policy space of individual countries. It is this issue that will now be explored in relation to SSA. Figure 1 illustrates how this complex subject will be more narrowly defined in this essay. I will begin by investigating how the IFIs have significantly reduced the policy space that is controlled by states and then explore how the increasing influence of TNCs and civil society is further restricting policy space Phil Green DEV-M071 (Perspectives on Globalisation) Page 2

4 Figure 1: The state, IFIs, TNCs, civil society and policy space The history of restricted policy space Since the days of colonialism, Africa has been closely linked to the Western world. Although officially African states gained independence in the20th Century, through the promise of development, accompanied by loans to enable it, African states remained dependent on Western nations (Haynes, 2008). This accompanied by a considerable number of corrupt, unstable and otherwise ineffective regimes throughout the continent has meant that the policy space of most SSA countries have always been relatively narrow, for both internal and external reasons. According to Hamwey (2005:.3) internal limitations on policy space include inadequate financial, human, institutional and infrastructural resources. Therefore, although external influences might in one respect narrow state controlled policy space, if it forces a country to implement more effective policies, which in turn facilitate economic growth, the effective policy space available can actually increase (Hamwey, 2005). Structural Adjustment Programmes (SAPs), good governance reforms, and the various other forms of conditionally attached to aid and debt relief, were all intended to facilitate economic growth. However, significant and sustainable economic growth, as the norm, remained elusive (Aryeetey & Nissanke, 2003). Therefore, policy space narrowed, and didn t expand as a result of economic growth. It s important to note that this is not the case for all SSA countries. Botswana s economy has grown steadily for several decades (Sen, 1999) and potentially provides us with a counter example where a strong and relatively stable state has had policy space to stimulate and sustain development through implementing appropriate and effective policies (Holm, 1996) Phil Green DEV-M071 (Perspectives on Globalisation) Page 3

5 The example of Botswana and the past experience of now developed nations (Aryeetey et al, 2003) is the basis for the concern expressed by the African Union (2008) and United Nations Conference for Trade and Development (UNCTAD)(2007) at SSA s limited policy space. The concern is both significant and current, with much blame been directed at the WTO. It is therefore the effect of WTO on policy space that will now be explored. The WTO and restricted policy space in SSA The WTO was an outcome of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) Multilateral Trade Negotiation (Winham, 2005). Its scope is considerable, covering trade in goods (GATT), trade in services (GATS) and intellectual property rights (TRIPS)(Mortensen, 2006). In the short term these have had a quantifiable negative impact on SSA. Stiglitz (2006) claims that SSA is 1.2 billion a year poorer as a result of the Uruguay Round of trade agreements. Gallagher (2007) explains that according to the South Centre; Guinea, Madagascar, Sierra Leone, Swaziland and Uganda receive 40% of their tax revenue from tariffs. Therefore, reduced tariffs will impact government spending. In terms of TRIPS, concern is expressed at the impact such agreements will have on the access to affordable drugs (Stiglitz, 2006). This is particularly concerning for SSA given the HIV/AIDS epidemic the region is experiencing (Kates& Carbaugh, 2006). Reduced income and the inability to treat HIV/AIDS have serious ramifications on policy space. However, it s not just the effect of reduced income which is a concern. WTO regulations also have impact on a country s ability to use its policy space to stimulate development. In South Africa, as a result of WTO regulations, many tariffs and subsidies on agriculture products were eliminated, reduced or restricted. There is now the opinion that there is a need to reintroduce a degree of protectionism in order to assist the thousands of black farmers starting their careers after acquiring land from the land reform process. (Sanrey et al, 2008:.89) After an assessment of South Africa s policy space, Sanrey et al (2008), suggest that there is flexibility on just 19% of the countries imports and even these imports are still subject to WTO obligations, thus further limiting South Africa s ability to introduce protectionist measures Phil Green DEV-M071 (Perspectives on Globalisation) Page 4

6 This example illustrates a central concern that exists regarding the WTO s impact on SSA. Demanding reductions in tariffs and subsidies prevents countries from implementing policies that enable them to nurture infant industries (Gallagher, 2007; Akyuz, 2007). UNCTAD argue that, African countries will be the first in history of industrialization to face the challenge of developing industries without the benefit of protecting infant industries. (UNCTAD, 2000:.5) History has shown, with the examples of South Korea, Taiwan and China often being cited, that effective, state controlled, policies enable local industries to develop and facilitate a phased entry into the global economy (Rodrick, 2007). However, agreements within the WTO are making this increasingly difficult for SSA countries. History also reveals what doesn t work. In the 1990s, a failure to diversify accompanied Africa s attempt to integrate into world markets (Aryeetey& Nissanke, 2003). UNCTAD (2007) warn that specialisation is an expected consequence of market led integration and advocates state led investment in order to promote diversification. These measures would require a certain amount of state autonomy over their policy space, but would potentially prepare SSA countries to enter to global economy. Interestingly, in Ethiopia s PRSP (2002), a country who has yet to become a WTO member, the emphasis is on promoting, diversifying and nurturing local industries. Time will reveal the merits of this strategy. The evidence, suggesting the detrimental effects of WTO membership for SSA, raises the question, why did 39 out of 45 countries in the region become members? Firstly, SSA has little choice but to integrate into the global economy (Senbet, 2003) as non-membership would lead to increased marginalisation and have an even greater detrimental effect. Secondly, Yeo (2005:.12) explains that although the impacts we can quantify seem to be negative, but small in magnitude. The systemic changes are likely to have a positive impact, but one whose timing and size are uncertain. Yeo (2005) explains that potential benefits include gains in efficiency due to tariff reductions and improved terms of trade as trading partners lower their protection levels. Therefore despite the evidence revealing short-term losses, there is the potential for long term gains. This means that the key question is not whether SSA countries should be WTO members, it is, how can they be influential in negotiations and ensure their own policy space remains effective? In order to do this, significant hurdles need to be overcome. Currently, due to the expenses involved, at least 50% of SSA countries have no permanent representative based in Geneva, the location of the WTO 2008 Phil Green DEV-M071 (Perspectives on Globalisation) Page 5

7 headquarters (Blackhurst& Lyakuraw, 2005). This, along with a deficit in legal expertise, seriously impacts their influence (Mortensen, 2006). Then there is the exclusive Green Room process where draft policies are negotiated by representatives from selective states (Thomas, 2005). Therefore, often, by the time SSA representatives are involved in the process there is little room for manoeuvre. The WTO might be a democracy where one country has one vote, but it s far from fair playing field and continues to erode SSA states control over policies and impact their countries. The South Centre (2005), a Geneva based think tank, is pushing for a number of changes to take place within the WTO. These include a realisation that equal rules are not the answer because when applied to an uneven playing field...they will only favour the strong team (South Centre, 2005:.3). Therefore they, as is Stiglitz (2006), call for unequal rules, to ensure a fair playing field. There is already a system to enable developing countries to receive Special and Differential Treatment giving them room to use their policy space for their advantage (Akyuz, 2007). However, the South Centre (2005) is calling for these to be expanded and Rodrick (2007) explains they need to become more formalised. The South Centre (2005) also urges SSA countries to consider not agreeing to new regulations and would like several existing rules to be relaxed or removed. SSA countries cannot achieve this by themselves and will require support from the governments of developed countries. Civil society and their increasing role in global governance maybe extremely significant in ensuring the needs of developing countries are high on the WTO agenda. Their ability to be noticed is evidenced by the impact of their 1999 demonstration in Seattle (Stiglitz, 2006). However, as the Overseas Development Institute (2008) explains, SSA countries also need to help themselves. SSA WTO member countries need to unite, establish their core priorities and exert their influence together, not just as individual countries. These changes would enable the WTO regulations to be more conducive to development and enable SSA countries to retain an adequate amount of policy space. TNCs, civil society and their influence on policy space The WTO is limiting the options states have to implement effective development policies. However, the states control of a countries policy space has also been impacted by the increasing numbers of actors involved in global governances. I will briefly explore this by looking at Mulligan s (2002) case study on the challenges faced by Rio Tinto in Madagascar. This will introduce the complex dynamics between 2008 Phil Green DEV-M071 (Perspectives on Globalisation) Page 6

8 states, TNCs and civil society, particularly NGOs. Although this is a specific example, many of the principles can be evidenced throughout SSA. Madagascar is a poor country with approximately $3 billion in external debts, and Rio Tinto s proposed mining of titanium dioxide will contribute $400 million to the Madagascan economy over 40 years. Mulligan (2002:.160), points out that the sheer size of TNCs gives them enormous financial muscle. This is not a new issue facing SSA; corporate influence over states has been debated for several decades (Sklar, 1976:.180). The Madagascan government (2006) is keen to attract investment from TNCs, especially considering the potential benefits, including, infrastructure improvements, employment and social development initiatives. (Mulligan, 2002: 164) This could have a positive impact on the country s development and could enhance its policy space. However, at what cost? Questions have to be considered as to how much Rio Tinto, given the size of their investment, will be able to influence the government s agenda and this could potentially restrict policy space. Mulligan (2002:.169) explains that Rio Tinto s ability to influence the regional development plan in their favour must be recognized. However, one must not forget that mining is not, a footloose industry, as Rio Tinto can only mine where there are minerals. This gives the Madagascan government bargaining power, and the ability to keep a reasonable hold on their policy space. However, it s not just the relationship between TNCs and states that are significant. Civil society, particularly environmental NGOs such as the WWF (Mulligan, 2002), are key actors. There are both positive and, as I will explain, debated negative impacts of such NGO involvement. The mining project proposed by Rio Tinto will have environmental consequences. In many respects the involvement of NGOs is positive. As Mulligan (2002:.163) explains, it is not the national government that has the funds, experience or even motivation to deal with such environmental change. Therefore, with Rio Tinto s keenness to appear environmentally responsible, and NGOs who are eager to monitor the environmental impact and offer advice, it enables the Madagascan government to transfer responsibility. This situation has a potential positive impact on policy space as it allows experts to deal with environmental concerns while the Madagascan government can focus their energies elsewhere. However, this relinquishing of control raises other issues. For example, a component of Madagascan policy space is then controlled by, in this case, an NGO based in the developed world, 2008 Phil Green DEV-M071 (Perspectives on Globalisation) Page 7

9 rather than the democratically elected Madagascan government. Civil society is not particularly democratic and may simply represent section interests and make policy hostage to those that are better organized, have greater resources and are more vocal. (Clark, 2008:.570) This situation, as Scholte (2005:.192) explains is cruel irony ; the developed world promoted democratic principles, but once Madagascar becomes a democracy, the authority of the state, elected by the people, is potentially eroded by NGOs from the developed world. This issue raises a larger set of questions. In this case, who should set the environmental agenda? Is it acceptable for the Madagascan state to decide that economic growth is more important than rainforest preservation? Or should environmental issues like this be decided at a global level and override the priorities of individual states? If environmental issues are considered the priority, then there is further restriction to a state s policy space. This is not the place to discuss which approach is right, however, it does illustrate how global governance actors, impacts the control an individual state has over its policy space. Conclusion Globalisation has necessarily bought about considerable changes to governance. However, actors in global governance such as the WTO, TNCs and civil society are significantly impacting the policy space of individual countries. This is a serious concern for the countries of SSA as the evidence (e.g. Botswana, South Korea, Taiwan and China) suggest that policy space is essential to achieve economic development and a phased entry into the global economy. Due to the success of the previously mentioned countries, the idea of a developmental state is increasingly popular within development (e.g. Leftwich, 1996; Amuwo, 2002; UNCTAD, 2007). In a developmental state, the priority isn t about achieving a particular type of government (for example), it s a state where effective policies for development are of central importance. The instruments available within policy space were heavily used by all countries which are now developed (Akyuz, 2007); depriving SSA countries of them seems nonsensical. However, this is not to say that the role of the WTO, TNCs and civil society should diminish. As this essay has shown they all have the potential to help countries achieve development. However, state s need an adequate amount of policy space in order to help their unique country develop, and integrate successfully into the world economy, in an appropriate way Phil Green DEV-M071 (Perspectives on Globalisation) Page 8

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