AFRIPOL.ORGIDEAS HAVE CONSEQUENCES
AFRICA : ON THE ROAD TO ECONOMIC SERFDOM
By Emeka Chiakwelu, Director of Afripol Organization
In the negative part of Hayek’s thesis there is a great deal of truth. It cannot be said too often collectivism is not inherently democratic, but on the contrary, gives to a tyrannical minority such powers as Spanish Inquisitors never dream of
-George Orwell on F. Hayek’s book - ON THE ROAD TO SERFDOM
Friedrich Von Hayek, one of the greatest libertarian economists of 20th century, wrote the book - ON THE ROAD TO SERFDOM, which emphasized an economic liberation principle based on free market and abandonment of economic collectivism. Hayek argued that centralized government and economic planning were inherent threats to liberty. Hayek did not have Africa on his mind when the book was written . But he must have as well had Africa in his thought and motivation, for he is an economic prophet Africa desperately needs at this juncture.
Africa having finally begun to dismantle the shackles of colonialism and legacy of slavery; have already commenced to imbibe the poison of serfdom probably without grasping the ramification. And this serfdom is a dogma of collectivism and central planning, devoid of market forces and free enterprise.
Africa is at perilous stalemate, for the time has come for Africa to make the big decision. To yield to democratic capitalism and rule of law. Or to wallow in the sea of outdated economic paradigm of centralization and collectivism.
ON THE ROAD TO SERFDOM, a classic work of Hayek in political economy, he warned us about the danger of state control over the means of production. A state with an economic model rooted in central planning is doomed to become a totalitarian state. Where tyranny of the people becomes the order of the day, human decency is destroyed and human creativity is supplanted and stifled.
Collectivism and central economic planning are pandemic in African countries, the affinity for this economic paradigm and organization have its anatomy on European colonialism in Africa. The so-called European panglossian view of economic outlook was attractive to African countries. The consequence is a disaster in economic productivity and economic order.
West African countries, Nigeria and Ghana for example inherited their fabian socialism disposition from her colonial Britain. During the era of colonialism in Nigeria, the destination of Nigerian students for higher education was Britain and the impact of the sociology of the status quo on the young minds were inevitable. When they returned back, their re-engineered minds were felt heavily on the methodology of their governance and management. They bought the ideology of collectivism and central planning.
The ambition of socialism to make a new man and to engineer an economic model that is absolutely fair is not feasible and not sustainable, for it is antithesis of mankind experience and make up. Human beings are born to be free and adventurous, and any process, system or mechanism that seeks to limit our spontaneity will have a perennial effect on us. The peril of central planning is rooted in its elitist functionality, for the common man is not found fit to pursue his life ambition without the big brother regulating all aspects of his economic life.
When the state is in control over the means of production, the forces of market disappeared. The law of supply and demand are no more appreciated nor given a chance to operate. The market is being tinkered from the top. The laissez faire of the market economy is muted and private enterprise is literally abolished, competition the soul of market is destroyed. Monopoly will become dominant order when competition has been demolished. Then , price control will be introduce and ration of goods and services will subsequently follow put.
One of the greatest evils of collectivism, is the destruction of human potentials, to dream big and to be ambitious. Once creativity is destroyed and private enterprise over regulated with taxation and decrees, the impact on the GDP and lower productivity becomes a reality. When the market is not given a chance to function, the economy suffers because it is not operating at its optimum capacity.
Central planning of the economy has its political implication, for once one controls the economic life of a state, one must also control the political and sociological aspect of the nation. In the words of Ludwig Von Mises, "In exclusively controlling all the factors of production, the socialist regime controls also every individual's whole life."
This is where dictatorship of people comes in and the tyranny of the massed will be deepened. When choice as a word and a economic functioning tool cease to exist in a society, then a totalitarian system of governance will easily find a suitable home in that given society.
So what do all these mean for AFRICA ?
At interim it begins to appear that some African countries are moving towards market economy and democracy. But the configuration and destination are still foggy and dim. The journey towards democratic capitalism must be a deliberate, diligent, compassing and judicious process.
The fundamental of a economy must be sound. Fiscal and monetary policies must be prudently managed. Free enterprise and ownership economy must be encouraged and economic paternalism shunned. Most of all, states will stir away from means of production and inhibits corruption. A legalistic framework must be instituted because laws of economics and economy must be implemented.
Competition which is the essence and core of free market economy must be encouraged by breaking the government’s jar of monopoly. The re-engineering of the market is necessary if this free market paradigm will have a chance of surviving. The white elephant projects, where public funds are wasted without any return to the taxpayers must be terminated.
In the name of incubation of infant industries, great wall of protectionism were unnecessarily erected and subsidies were thrown on the feet of inefficient industries. One cannot continue to appease this monster of dormancy at the expense of taxpayers. At a point the so-called infant industries must mature and graduate to compete without asking for the big brother’s aid. The over bloated industries must be allowed to find their course in the economy. If they cannot make it, so be it! Without not being loquacious about capitalism nor dogmatic, laissez faire is probably the way which is crystal clear for Africa to succeed in 21st century. Africa can be laboratory of true capitalism with developed and efficient economies.
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COMMENTS:
What is a Corporation?
An organized body, especially a business that has been granted a state charter recognizing it as a separate legal entity having its own rights, privileges, and liabilities distinct from those of the individuals within the entity.
The most important aspect of a corporation is limited liability. That is, shareholders have the right to participate in the profits, through dividends and/or the appreciation of stock, but are not held personally liable for the company's debts.
Societal Virtues: Justice, fairness, equity, rule of law
Will you allow a corporation to determine these virtues and avoid taxes or will you allow your government to enforce those?
How you answer the above question determines how you feel about the economic theory of Dr. Von Hayek.
Dr Hayek was a defender of classical liberalism and a proponent of free market capitalism: a doctrine stressing individual freedom. This includes the importance of human rationality, individual property rights, natural rights, the protection of civil liberties, constitutional limitations of government. The neo liberals (Milton Friedman, Ludwig Von Mises, etc) revive this theory and exist today as globalization.
Globalization refers to the increase integration of the economic, social, technological, cultural, political, and ecological aspects of the global village. Neoliberals and their opponents believe that by creating a “free market” economy which reduces governmental barriers in conducting business and the fast reduction of the cost of doing business, this will help in developing economies around the world. On the surface this may look good but this ideology doesn’t make claim to fairness or justice, the concept of justice and fairness is built into the operations of the market. What you get through the market reflects what you deserve and the market presumably is the best distributor of what people deserve instead of a political system that will intervene for the sake of justice and equity
The World Bank introduced globalization to Africa from recommendations by the Berg report (1981) which was then implemented by the World Bank and the IMF through loans and Structural Adjustment Programs (SAP). The sap was designed to reduce the debt owned by African economies, stimulate internal economies, and fix the economic imbalance of the African nations. The result became a more failed economic state, loans were then defaulted, and the continent was in worse despair.
Why Globalization Failed in Africa
The number one reason why globalization is failing in Africa is that tenets of neoliberal policies has never been proven to work, ask Mexico, Russia or Argentina. Secondly, the conditions of trade accepted by African nation didn’t remove tenets that maybe destructive to the economy. Keep in mind that these policies affect macro trade, agriculture, tariffs, education, government spending on social services, etc. Africa markets where left wide open, unprotected, and ripe for multinationals to take advantage of.
Thirdly, Foreign Direct Investment (FDI) = Foreign Capital Flee. Foreign companies enjoyed duty free privileges while enjoy public utilities like roads, light, water, etc. So if you worked a “Tax Free Zone” in Central America or Asia, you were paid peanuts while the company increased her profit margin, government couldn’t collect taxes so the burden was left to the masses.
Fourth, did Africa need loans or fair market value for her commodities?
Fifth, The African states which were all less than twenty five years old had not and are still not develop to the point of benefiting from a free market economy.
The African farmer who used to get subsidies, price protection, and help from government was left on his own. If he was not wealthy enough to make money from the prices set in Chicago then he’s out of luck. Dr Hayek will say that the market determined him not fit to operate in it. Mind you American farmers enjoy the benefit of having the highest subsidies in the world. If you are importing coffee, Steel, or Honey into any Western state from Africa, good luck fighting special interest groups and companies. Free market is for the wretch of the world, the “advanced” countries still protect their interest. My advice to African Leaders is to do as they do, not as they say.
Comment by Gideon Nyan
What have Hayekism has to do with the incomprehensible Africa ? Comment by Michael Greens