Informality and international trade: The case for an African customs union

Keith Hart

Keynote address for a World Customs Organization/World Bank conference on ‘Informality,

international trade and customs’, Brussels, 3-4 June 2013.

A short version of this argument was published at OpenDemocracy (2015).

Hear also an MP3 lecture (50 minutes, 2014), ‘Waiting for emancipation: The prospects for
liberal revolution and a human economy in Africa’.

Abstract

In this lecture, I will first explain what I mean when I say that the informal economy, a
concept I was associated with coining in the early 1970s, has taken over the world, largely as
a result of neoliberal deregulation over the last three decades (pp. 1-3). After a brief
account of my own early exposure to West Africa (pp. 3-5), I turn to the question of how
and why Africa has long been a symbol of global inequality. Even after independence,
Africans are still waiting from emancipation (pp. 5-10). Even so Africa’s development
prospects in the 21st century are brighter than for a long time (pp. 10-12). In the 20th
century, regional differences in the forms of African political economy converged on the
model of agrarian civilization that was once known as the Old Regime. The antidote to the
Old Regime is a liberal revolution (pp. 12-15). Accordingly I next consider the role played by
free trade and protection in the revolutions that made modern France, the United States,
Italy and Germany, with particular reference to the latter’s Zollverein (customs union) in the
19th century (pp. 15-16). Turning to the Southern African example, which includes the oldest
extant customs union in the world, I examine the organization of international trade there
(pp. 16-18). In conclusion I review the prospects for greater integration of trade regimes in
Africa. Is an African customs union possible or desirable? How might it come about? (pp. 18-
19). I look forward to the light our discussions in this conference might throw on these
questions.

1
How the informal economy took over the world1

Soon after the millennium I learned of an illegal trade that had grown up in the southern
French cities of Marseilles and Montpellier. It supplied stolen cars and car parts to Africa
and was staffed mainly by North Africans. Some of them dreamed of reclaiming the
Mediterranean for Islam and they all ignored official paperwork, relying on word-of-mouth
agreements, mainly within a religious brotherhood. This traffic grew so big that elements in
the French car industry were drawn South to meet a demand of which there is no trace in
the official record. An army of policemen, customs and tax officials were allegedly part of
this remarkable machine. Russian and Latin American mafias became involved and the gang
added Brussels and Hamburg as bases for their world strategy.

Nor is mainstream French politics without its criminal side. President Mitterand’s office
apparently ran a slush fund supplied by petrol companies and licenced distributors in Africa
from which, among other things, he transferred election funds to his friend, Helmut Kohl in
Germany. President Chirac’s corruption charge from his days in the Paris mayor’s office is
still going through the courts. Now there are more scandals involving wholesale tax evasion
by the controller of the government budget and allegations of corruption by the head of the
IMF when she was Minister of Finance. Meanwhile the Tuareg tradition of smuggling
everything from smartphones to bazookas across the Sahara on camels has been
interrupted by a French army invasion to save the Mali government in the name of the ‘war
on terror’. All of this pales into insignificance next to the City of London which converted a
failed colonial empire into a network of tax havens that would probably surpass in scope
Swiss private banking, if either could be measured.2 At the other end of the world, a major
Japanese information technology corporation, NEC, discovered not long ago a parallel
criminal company using the same name, accountancy methods, suppliers and customers,
but with the advantage of paying no tax because it was entirely off the books.3 This is known
as brand-jacking.

Informality has come a long way since I provided an ethnographic account of income
opportunities available to the urban poor in Ghana four decades ago.4 Then I was interested
in revealing unrecorded activities that existed between the cracks of the state-made
economy. It never occurred to me that these added up to much, but I thought they might be

1
Keynote lecture for the 24th Conference of the Societa’ Italiana di Economia Pubblica: Informal
economy, tax evasion and corruption, Pavia, 24-25 September 2012.
2
Nicholas Shaxson Treasure Islands: Tax havens and the men who stole the world, London: Bodley
Head (2011).
3
Adrian Johns Piracy: The intellectual property wars from Gutenberg to Gates, Chicago: University of
Chicago Press (2009).
4
‘Informal income opportunities and urban employment in Ghana’, Journal of Modern African
Studies 11.3: 61-89 (1973).

2
relevant to current debates concerning rampant unemployment in Third World cities. These
people were working, but often for meagre and erratic rewards. I was careful to distinguish
between legal and illegal activities, but this was often blurred. I have since identified three
ways that the formal and informal may be combined. What I have been talking about so far
reflects the first of these: negation, breaking the rules, crime; and we are reminded that this
takes place at every level of the economy. Second, informality is built into abstract rule
systems as unspecified content. Workable solutions to problems of administration invariably
contain processes that are invisible to the formal order. For example, employees sometimes
‘work to rule’. They follow their job descriptions to the letter without any of the informal
practices that allow these abstractions to function. Everything grinds to a halt. Third, some
activities exist in parallel, as residue. They are just separate from the bureaucracy. The logic
of the formal/informal pair is stretched to include peasant economy, traditional payments
and domestic life as being somehow ‘informal’. Yet these social forms often shape informal
economic practices and vice versa. Is society just one thing – one state with its rule of law –
or can some spheres of social life be left by bureaucracy to their own devices?

The idea of an informal economy arose at a turning point in world history in the early 1970s.
At that time it was universally assumed that only the state could engineer significant
development on behalf of its citizens. The United States’ losing war in Vietnam, however,
provoked a global financial crisis which led to the dollar being depegged from gold in 1971.
The next year money futures were invented in Chicago in response to wild currency
fluctuations and the world of derivatives was launched; the Bretton Woods system of fixed
exchange rates unravelled. The formation of OPEC and the energy crisis of 1973 brought
about a world depression, the consequences of which we are still living with. By the end of
the decade neoliberal conservatives were installed in power throughout the West and the
post-war Keynesian experiment in regulated public economies was over. The seeds of the
current crisis were sown then.

The informal economy’s improbable rise to global dominance is a result of the mania for
deregulation in the following three decades. This was linked of course to the wholesale
privatization of public goods and services and to the capture of politics by high finance.
Deregulation provided a fig leaf for corruption, rent-seeking, tax evasion and public
irresponsibility. Nowhere was this more evident than in the culture of the Wall Street banks
from the 1980s. This was no secret at the time. Each major bank spawned a tell-all book
written by undercover reporters or disillusioned former employees.5 The removal of official
restraints on financial practices generated a culture of personal excess from the trading
floor to boardroom politics; moral responsibility towards clients was replaced by predation.

5
For example, Michael Lewis Liar’s Poker, New York: Norton (1989); Frank Partnoy F.I.A.S.C.O.: The
inside story of a Wall Street trader, New York: Penguin (1999).

3
Yet, during the credit boom, celebration of unending prosperity drowned criticism. Even
after the bust, the political ascendancy of finance has hardly been challenged.6

Apart from the main financial houses, the shadow banking system — hedge funds, money
market funds and structured investment vehicles that lie beyond state regulation – is
literally out of control. Tax evasion is now an international industry that dwarfs national
budgets. The Silicon Valley giants that now dominate world economy – Apple, Google,
Amazon, Facebook – pay next to no taxes. The Cambridge economist, Sir James Mirrlees,
won a Nobel Prize for proving that you can’t force the rich to pay more than they are willing
to.7 None of this touches on the blatant criminal behaviour of transnational corporations
who now outnumber countries by 2 to 1 in the top 100 economic entities on the planet.8
Where to stop? The drug cartels from Mexico and Colombia to Russia, the illegal armaments
industry, the global war over intellectual property (“piracy”), fake luxury goods, the invasion
and looting of Iraq, 4 million dead in the East Congo scramble for minerals. The informal
economy was always a way of labelling the unknowable, but the scale of all this goes
beyond comprehension. Yet we often talk about the international rule system as if we were
all still living in the regulated national economies of 1970. And what can it possibly mean to
assert – as is often the case – that Africa’s economies are 70-90% ‘informal’? The ubiquity of
the informal economy today is a powerful symptom of the endemic causes of and failure to
address the world economic crisis.

An old man’s prayers

It is hard to recall what I was really thinking about when I set out for Accra in 1965 to do
field research towards a PhD in social anthropology. Audrey Richards wrote to my
supervisor, Jack Goody, who was already there: “God knows what Keith is going to do when
he arrives, but he doesn’t”. My plan was to study the politics of independence by
investigating how migrants from the savannah interior learned how to be citizens through
voluntary associations, political parties, broadcasting and the like. Ghana was then a police
state and I soon found that no-one wanted to discuss politics with me. So I turned instead to
the street economy of the slum where I lived. The rest is history, as they say. I became
dissatisfied with the idea that the state was the only vehicle for development and, as I have
said, drew attention to informal economic practices in the cracks of the state-made
economy. This ethnographic intervention made visible what had largely been invisible
before. I did not anticipate that a concept would be coined to define these multifarious

6
Keith Hart Why the euro crisis matters to us all, Scapegoat: Architecture, Landscape, Political
Economy 04 (2013).
7
This is a loose translation of his use of the principles of “moral hazard” and “optimal income
taxation”.
8
John Perkins Confessions of an Economic Hit Man, New York: Plume (2004).

4
activities9 or that deregulation would eventually render all levels of the world economy
substantially informal.

Although I was an apprentice career academic at the time, I was influenced by the Zeitgeist
of the 1960s. Western youth rejected the authority of our parents’ generation – unwisely as
it turned out. We chanted the names of the heroes of the anti-colonial revolution – Ho Chi
Minh, Fidel Castro, Che Guevara, Mao Tse Tung and the rest – and believed that the defeat
of colonial empire had major implications for humanity as a whole (civil rights, the women’s
movement, the anti-nuclear campaign, even world politics). In the course of the 1970s, we
saw this dream unravel. By the end of that decade I wrote a book on West Africa10 that
sought to explain why post-colonial state formation had failed in societies that were still
predominantly rural. It was an angry book, perhaps because I took the failure personally. I
argued that modern states had been erected on backward agriculture. Either some sectors
of the economy had to raise productivity levels by adopting machine methods or the state
would devolve to a level compatible with that of production. I called this “Haitianization”,
after C.L.R. James’s great account of the slave revolution in San Domingo.11 This recognized
the role of foreign financial pressures; and it was prophetic, since the 1980s saw the Bretton
Woods institutions pull the rug out from under African governments and before long failed
states became commonplace in the region. At much the same time, I joined James himself
and began a belated education in Pan-Africanism.

As Hegel said, an old man repeats the same prayers he learned as a child, but they are now
coloured by the experience of a lifetime. This lecture might be an attempt to prove that my
youthful aspirations were not misguided. Or, to put it another way, we need to ask now
whether the international and national bureaucracies that regulate the movement of
people, goods and money around the world, within and beyond the African continent, serve
the interests of the vast majority or just the powerful few who can hold the rules of
democratic states in contempt.12 Hernando De Soto is a controversial figure; but he has a
point when he argues that, whereas developing countries like Peru were once stuck in a
colonial mercantile system, they are now constrained by an international bureaucracy that
works only for the developed countries (and their corporations) who would never have
developed in the first place, if their infant capitalist economies had been saddled with

9
This is a murky story involving International Labour Office Incomes, Employment and Equality in
Kenya, Geneva: ILO (1972). See Keith Hart Bureaucratic form and the informal economy, in B. Guha-
Khasnobis, R. Kanbur and E. Ostrom (eds) Linking the Formal and Informal Economies, Oxford
University Press, Oxford, 21-35 (2006); The informal economy, in Hart, Laville and Cattani (eds) The
Human Economy: A citizen’s guide, Cambridge: Polity, 142-153 (2010).
10
The Political Economy of West African Agriculture (Cambridge, 1982).
11
The Black Jacobins: Toussaint L’Ouverture and the San Domingo Revolution (London, 1938).
12
Joseph Stiglitz Globalization isn’t just about profits. It’s about taxes too, The Guardian, 27th May
(2013).

5
similar encumbrances.13 The imposition of customs duties and other taxes on the profits of
international trade goes to the heart of this crisis for democracy today. Politics is still mainly
national, but the economy has gone global and is both over- and under-regulated at the
same time. Nowhere is this problem more urgent than in Africa.

Waiting for emancipation in an unequal world

We live in a racist world. Despite the collapse of European empire and the formal adoption
of a façade of international bureaucracy, the vast majority of black Africans are still waiting
for meaningful emancipation from their perceived social inferiority. The idea that humanity
consists of a racial hierarchy with blacks at the bottom is an old one. But the Caribbean
economist, W. Arthur Lewis, made a strong case that the formation of a world economy
divided between rich manufacturing exporters and poor raw material exporters belongs to
the decades before the First World War, when Africa was carved up by the imperial
powers.14 That bipolar economic order has been shifting for some time now, largely as a
result of the emergence of Japan and then China and India as engines of capitalist growth.

Now there is talk, much of it overheated, of economic growth in Africa. In the present
decade, 7 out of the 10 fastest-growing economies (as conventionally measured) are
African.15 In 1900 Africa was the world’s least densely populated and urbanized continent
with 7.5% of the total. Today it is double that, with an urban share fast approaching the
global average. According to UN projections, Africa will contain 24% of all the people alive in
2050, 35% in 2100. This is because its annual population growth rate is 2.5% at a time when
the rest of the world is ageing. The Asian manufacturing countries already recognize that
Africa is the fastest-growing market in the world. This could provide a long-delayed
opportunity for Africans to raise their collective profile in international negotiations. If they
succeed, it will be a world revolution, the death knell for a racist world order, no less. And
that is a prize for us all to wish for.

For centuries Africa was a source of slaves shipped across the Atlantic, but also to the Indian
Ocean and Arab worlds. The movement to abolish slavery was officially completed in the
late 19th century. But emancipation is rarely as simple as that. In West Africa, abolition was a
disaster. The internal drive to capture slaves continued apace and, despite a shift to their
use in domestic production, supply soon exceeded demand and the price of slaves fell

13
The Other Path: The economic answer to terrorism, New York: Basic Books (1989); The Mystery of
Capital: Why capitalism triumphs in the West and fails everywhere else, London: Bantam (2000).
14
The Evolution of the International Economic Order (Princeton, 1978).
15
According to The Economist (6th January 2011), Africa had six of the top ten fastest-growing
economies in 2001-2010 and is expected to have seven in 2011-2015. The latter consist of Ethiopia,
Mozambique, Tanzania, Congo, Ghana, Zambia and Nigeria in that order; the other three are China,
India and Vietnam.

6
drastically, leading to their widespread abuse. Colonial empires were subsequently justified
by the mayhem in West Africa and by the drive to abolish the Arab slave trade in East Africa.
But colonial regimes still relied on indigenous slave masters in several places. Much later,
when these regimes fell, Africans were offered emancipation once more, this time through
national independence. This was followed by the regression of most African economies for a
half-century. Ghana had an economy bigger than Indonesia’s in 1960 and per capita income
on a par with South Korea’s. Now, despite Ghana’s recent partial economic recovery, for
both indicators the Asian countries are more than twenty times larger than Ghana’s.
Apartheid was defeated in South Africa, but two decades later the country is more unequal
and unemployment is massive, while the government shoots its own people if they
complain. Writers coin metaphors for misrule throughout the continent: “The Postcolony”,
“Politics of the Belly”, “Architects of Poverty”.16 Africans are still waiting for a freedom that
would secure them equal membership of world society. But they have never encountered
more favourable conditions than now. When Africa had only 2% of global purchasing power,
the whole continent could be dismissed as irrelevant to the world economy. That is no
longer the case and rapidly becoming less so.

For too long Africa has stood as the world’s most vivid symbol of inequality, one reinforced
by most of its inhabitants being identifiable by the colour of their skin. ‘Africa’ is either a
continental territory separated from the Eurasian landmass by the Mediterranean and Red
Seas or the place that black people (and for that matter the human species) come from. But
“the land of the blacks” is hard to pin down and “Subsaharan Africa” may make sense from
a European perspective looking South, but not if you focus on the Northeast region, where
the Nile links Egypt to Sudan, Ethiopia and the Lakes further South. The African continent is
divided into three disparate regions — North, South and Middle (West, Central and East
Africa); but a measure of convergence between them is now taking place. A preoccupation
with Africa’s post-colonial failure to ‘develop’ – or to ‘take-off’ — has obscured what really
happened there in the twentieth century. The rise of cities has been accompanied by the
formation of weak and venal states, locked into dependency on foreign powers and leaving
the urban masses largely to their own devices. These have generated spontaneous markets
to meet their own needs which have come to be understood as an “informal economy”.17

For some four decades now, Jack Goody has tried to explain why the institutions of Africa
South of the Sahara diverged so strongly from the Old World civilizations of Eurasia and
North Africa, turning later to refute the idea of Europe being exceptional in relation to

16
Achille Mbembe On the Postcolony (London 2001); Jean-François Bayart The State in Africa:
Politics of the Belly (Cambridge, 2009); Moeletse Mbeki Architects of Poverty: Why African capitalism
needs changing (Johannesburg, 2009).
17
Keith Hart Africa’s urban revolution and the informal economy, in V. Padayachee (ed) The Political
Economy of Africa, Routledge: London, 371-388. See also Note 10.

7
Asia.18 He based his explanation of Africa’s divergence on low population density, so that
people were scarcer than land there, intensification of production was weak and the
property foundations of a class society were never developed, as they were in Eurasia. But
Goody did not investigate whether and how this was changing in the modern period. In
order to make sense of the extraordinary transformation of this highly variegated continent,
I distinguish between three broad types of social formation: “egalitarian societies” based on
kinship; “agrarian civilization” in which urban elites control the mass of rural labour by
means of the state and class power; and “national capitalism”, where markets and capital
accumulation are regulated by central bureaucracies in the interest of citizens as a whole.
These oversimplified categories allow me to indicate some broad historical trends.

In 1900, Africa had less than 2% of its inhabitants living in cities. By 2000, a population
explosion saw the urban share rise to between a third and a half, compressing into one
century what took much longer elsewhere. This urban revolution does not just consist in the
unprecedented proliferation of cities, but also in the installation of the whole package of
pre-industrial class society: states, new urban elites, intensification of agriculture and a
political economy based on the extraction of rural surpluses and the city bazaar.19 Africa has
a more complex history than is captured by my typology; but its dominant institutions
before the modern period may be understood in terms of the classless type based on
kinship in the main. The second type, agrarian civilization, covered most of Europe, Asia and
North Africa for the last few millennia. National capitalism has only taken root so far in
South Africa, until recently for the benefit of whites only. Middle Africa has made a belated
transition to the Old Regime of agrarian civilization in the course of the twentieth century,
while Europe and North America, followed by Asia, embraced national capitalism. This
brought North and Middle Africa closer together as pre-industrial class societies, while
South Africa has drawn closer to the rest of Africa in its political form since the coming of
majority rule. At the same time, the fastest-growing economies are from West, Central, East
and Southern Africa, not from the North (where popular insurgency has now taken hold) or
South Africa (which currently shares the economic weakness of the metropolitan economies
of Europe and North America).

The anti-colonial revolution unleashed extravagant hopes for the transformation of an

unequal world. These have not yet been realized for most Africans. But the model of
development they were expected to adopt was ‘national capitalism’. Development in this

18
The first volume of a score of books was Production and Reproduction: A comparative study of the
domestic domain (Cambridge, 1976). See the first Goody lecture of the Max Planck Institute for
Social Anthropology, Halle: Jack Goody’s vision of world history and Africa’s development today, 1st
June 2011.
19
Childe’s ‘urban revolution’: V. Gordon Childe What Happened in History (London, 1954).

8
sense never had a chance to take root across Africa. For the first half of the twentieth
century, African peoples were shackled by colonial empire and in the second, their new
nations struggled to keep afloat in a world economy organized by and for the major powers,
then engaged in the Cold War. Africa’s new national leaders thought they were building
modern economies, but in reality they were erecting fragile states based on the same
backward agriculture as before.20 This weakness inexorably led them to exchange the
democratic legitimacy of the independence struggle for dependence on foreign powers.
These ruling elites first relied on revenues from agricultural exports, then on loans
contracted under dubious circumstances, finally on the financial monopoly that came from
being licensed to supervise their country’s relations with global capitalism. But this bonanza
was switched off in the early 1980s, when foreign capital felt that it could dispense with the
mediation of local state powers and concentrated on collecting debts from them. Many
governments were made bankrupt and some countries collapsed into civil war.

Concentration of political power at the centre led to primate urbanization, as economic

demand became synonymous with the expenditures of a presidential ‘kleptocracy’. The
growth of cities should normally lead to enhanced rural-urban exchange, as farmers supply
food to city-dwellers and in turn buy the latter’s manufactures and services.21 But this
progressive division of labour requires a measure of protection from the world market at
first and it was stifled at birth in post-colonial Africa by the dumping of subsidized food from
North America and Europe and of cheap manufactures from Asia. For ‘structural
adjustment’ meant that Africa’s fledgling national economies had no protection from the
strong winds of world trade. A peasantry subjected to violence and political extraction was
forced to choose between stagnation at home and migration to the main cities or abroad.
Somehow the cities survived on the basis of markets that emerged to meet the population’s
needs and to recycle the money concentrated at the top. These markets are the key to
understanding the economic potential of Africa’s urban revolution.

Africa’s urban informal economy everywhere supplies food, housing and transport;
education, health and other basic services; mining, manufactures and engineering; and
trade at every level, including transnational commerce and foreign exchange. But its scope
varies. In West/Central Africa, where white settlement was minimal, the cities were
substantially an indigenous creation and their markets were always unregulated. Foreign
middlemen like Lebanese traders flourished outside colonial administrative controls. The
great ports of the Atlantic seaboard enjoy a degree of mercantile freedom that now
underwrites their contribution to Africa’s commercial growth. Today Angolan women jump

20
See Note 11.
21
This focus was advocated by Sir James Steuart Principles of Political Economy, Edinburgh: Cadell
(1767); but he was soon upstaged by Adam Smith’s free trade arguments.

9
on planes heading for London, Paris, Dubai and Rio, where they stock up on luxury goods for
resale in the streets of Luanda. In Southern Africa, however, cities were built by a white
settler class who imposed strict controls on the indigenous population’s movements. South
Africa’s informal economy today is hedged in as a result by rules designed to promote
modern industry. Elsewhere, in Zimbabwe, Mozambique and Kenya, the state has long
played a more controlling role than would be considered normal today in Lagos or Dakar.

African nation-states have learned the hard way that they are not free to choose their own
forms of political economy. When the world was divided by the Cold War, state ownership
of production and control of distribution seemed to offer the best chance of defending the
national interest against colonial and neo-colonial predators. From the 80s, the mania for
privatization often led to ownership being ceded to foreign corporations. Structural
adjustment forced governments to abandon public services, lay off many workers and allow
the free circulation of money. In the Congo, Angola, Mozambique, Somalia, Chad, Liberia,
Sierra Leone and now Mali, failed states and civil wars encouraged informal mining and
trade, concentrating wealth and power in the hands of warlords and their followers. The
restoration of peace sometimes restored limited bureaucratic controls over distribution. The
situation is highly dynamic and variable.

Tax collection in Africa never attained the regularity it has long achieved in Europe and Asia;
and governments still rely on whatever resources they can extract from mineral royalties
and the import-export trade. The new urban classes control and live off these revenues,
usually under a patrimonial regime propped up by foreign powers. This constitutes an Old
Regime ripe for liberal revolution; and the Arab Spring that began in North Africa during
2011 carries great significance for the continent as a whole.22 The new states and class
structures of Africa’s urban revolution are entangled in kinship systems that remain
indispensable to the informal economy as a means of social organization. The middle classes
pass off exploitation of cheap domestic labour as an egalitarian model of African kinship;
while ‘family business’ has never lost favour and child labour is still acceptable. Formal
bureaucracy, on the other hand, is hostile to kinship, where it is normally viewed as
corruption. In the absence of a welfare state, Africans must rely on kinship to see them
through the life cycle of birth, marriage, childrearing, old age and death; and this reinforces
the power of rural elders who control access to the land in the face of emigration by the
youth and women.

The prospect of rapid economic improvement soon in Africa seems counter-intuitive to

many, especially given Africa’s symbolic role as the negation of ‘white’ superiority. Black

22
See a prescient study of the Ben Ali regime’s techniques of domination, Beatrice Hibou The Force
of Obedience: The political economy of repression in Tunisia, Cambridge: Polity (2011).

10
people have long been the stigmatized underclass of an unequal world society organized
along racial lines; but the shift of global economic power from West to East makes this
situation highly dynamic now. Rather than face up to a decline in their economic fortunes,
the North Atlantic societies prefer to dwell on the misfortunes of black people and on what
they imagine is Africa’s permanent exclusion from modern prosperity. Failed politicians and
ageing rock stars announce their mission to ‘save’ Africa from its presumed ills. The western
media represent Africa as the benighted battleground of the four horsemen of the
apocalypse: conquest, war, famine and death. It all goes to reassure a decadent West that at
least some people are a lot worse off than themselves.

Africa’s development prospects in the 21st century

Every person of African descent, whatever their actual history and experience – they could
be Barack Obama, for example — suffers the practical consequences of being stigmatized by
colour in a world society built on racial difference. This situation will only be ended when
Africans are economically ‘developed’ to a level that guarantees them political and cultural
equality in our world. The Victorians called it ‘evolution’, but ‘development’ is much the
same thing, even if many citizens of the rich countries believe that growth is no longer a
priority and should be reversed. So what does development mean in the African context and
how is it to be achieved in the century to come?

In 1800 the world’s population was around one billion. At that time less than 3% lived in
cities. The rest lived by extracting a livelihood from the land. Animals and plants were
responsible for almost all the energy produced and consumed by human beings. A little
more than two centuries later, world population has reached 7 billion. The proportion living
in cities is about a half. Inanimate energy sources converted by machines now account for
the bulk of production and consumption. For most of this period, the human population has
been growing at an average annual rate of 1.5%; cities at 2% a year; and energy production
at around 3% a year. Many people now live longer, work less and spend more as a result.
But the distribution of all this extra energy has been grossly unequal. A third of humanity
still works in the fields with their hands. Americans each consume 400 times more energy
than the average Ugandan, for example.

‘Development’ thus refers in the first instance to this hectic dash of humanity from the
village to the city. It is widely assumed that the engine driving this economic growth and the
inequality it entails is “capitalism”. Development then means trying to understand both how
capitalist growth is generated and how to make good the damage capitalism causes in
repeated cycles of creation and destruction. A third meaning refers to the developmental
state of the mid-twentieth century, the idea that governments are best placed to engineer

11
sustained economic growth with redistribution. Pioneered by Fascist and Communist states,
this model took root in the late colonial empires around the Second World War, was
adopted after the war in the leading Western industrial societies and became the norm for
developed and newly independent countries afterwards until the 1970s.

The most common usage of ‘development’ over the last half-century, however, refers to the
commitment of rich countries to help poor countries become richer. In the wake of the anti-
colonial revolution, such a commitment was real enough, even if the recipes chosen were
often flawed. But after the watershed of the 1970s, this commitment has faded. If, in the
1950s and 60s, the rapid growth of the world economy encouraged a belief that poor
countries could embark on their own enrichment, from the 80s onwards ‘development’ has
more often meant freeing up global monetary flows and applying sticking plaster to the
wounds inflicted by this system. Development has thus been the label for political relations
between rich and poor countries after colonial empire, for some decades defined by “aid”,
but the preferred term nowadays is “partnership”.

There are massive regional discrepancies in development since the collapse of the European
empires. After the anti-colonial revolution, many Asian countries installed successful
capitalist economies, with and without western help, eventually bringing about an eastward
shift in the balance of global economic power. But other regions, especially Africa, the
Middle East and much of Latin America, stagnated or declined since the 1970s – a pattern
from which Africa now seems to be rebounding. These divergent paths have led to the
circulation of a variety of development models, with an Asian emphasis on authoritarian
states being opposed to Western liberalism and radical political alternatives coming out of
Latin America.

There are two pressing features of our world: the unprecedented expansion of markets
since the Second World War and massive economic inequality between (and within) rich
and poor nations. Becoming closer and more unequal at the same time is an explosive
combination. Forbes magazine reported in March 2009 that the top ten richest individuals
had a net worth between them of $250 billion, roughly the annual income of Finland
(population 5 million) or of middle-ranking regional powers such as Venezuela (28 million),
South Africa (49 million) and Iran (72 million). The same sum of a quarter trillion dollars
equals the annual income of 26 Sub-Saharan African countries with a combined population
of almost half a billion. Providing adequate food, clean water and basic education for the
world’s poorest people could be achieved for less than the West spends annually on
makeup, ice cream and pet food. Car ownership in developed countries is 400 per thousand
persons, while in the developing countries it is below 20. The rich pollute the world fifty
times more than the poor; but the latter are more likely to die from the pollution. A report
published just before the millennium claimed that world consumption increased six times in

12
the previous two decades; but the richest 20% accounted for 86% of private expenditure,
the poorest 20% for only 1.3%. Africa, with a seventh of the world’s population, then had
2% of global purchasing power.23

Africa’s advantage in the current crisis is its weak attachment to the status quo. The world
economy is precarious in the extreme, but Africans have less to lose; and the old Stalinist
‘law of unequal development’ reminds us that, under such circumstances, winners and
losers can easily change places.24 To speak of a possible economic upturn begs the question
of what Africa’s new urban populations could produce as a means of bringing about their
own economic development. So far, African countries have relied on exporting raw
materials, when they could. Minerals clearly have a promising future owing to scarce
supplies and escalating demand; but the world market for food and other agricultural
products is skewed by western farm subsidies and prices are further depressed by the large
number of poor farmers seeking entry. Conventionally, African governments have aspired to
manufacturing exports as an alternative, but here they face intense competition from Asia.
It would be more fruitful for African countries to argue collectively in the councils of world
trade for some protection from international dumping, so that their farmers and infant
industries might at least get a chance to supply their own populations first.

The evolving rural-urban division of labour which I identified earlier as the mainspring of
development was frustrated in the case of post-colonial Africa. Fragmentation of
sovereignty leaves Africa’s 54 countries in a poor bargaining position when it comes to
negotiating mineral revenues, for example; and any appeal for great protection would have
to be backed up by serious political coordination of a kind that is hardly visible at present.
The world market for services is booming, however, and perhaps greater opportunities for
supplying national, regional and global markets exist there. The fastest-growing sector of
world trade is the production of culture: entertainment, education, media, software and a
wide range of information services. The future of the human economy, once certain
material requirements are satisfied, lies in the infinite scope for us to do things for each
other — singing songs or telling stories — that need not take a tangible form. The largest
global television audiences are for sporting events like the World Cup or the Olympic
Games. Any move to enter this market will confront transnational corporations and the
governments who support them. Nevertheless, there is a lot more to play for here and the
terrain is less rigidly mapped out than in agriculture and manufactures. It is also one where
Africans are well-placed to compete because of the proven preference of global audiences
for their music and plastic arts.

23
United Nations Development Program Human Development Report (1998).
24
Neil Smith Uneven Development: Nature, capital and the production of space (Athens GA, 1984).

13
Classes for and against a liberal revolution

The liberal revolutions that launched modern western society between the 17th and 19th
centuries were sustained by three ideas: that freedom and economic progress require
increased movement of people, goods and money in the market; that the political
framework most compatible with this is democracy, putting power in the hands of the
people; and that social progress depends on science, the drive to know objectively how
things work that leads to enlightenment. For over a century now an anti-liberal tendency
has disparaged this great emancipatory movement as a form of oppression and exploitation
in disguise; and this is partially true, as with many social revolutions. Africa today must
escape soon from varieties of Old Regime that owe a lot to the legacy of slavery, colonialism
and apartheid; but conditions there can no longer be attributed just to these ancient causes.
The peasant and worker revolutions of the 20th century – and the ideologies that sustained
them – are less relevant to Africa’s current circumstances than classical liberalism,
reinforced by endogenous developments in economy, technology, religion and the arts.25
These would have to be built on the conditions and energies generated by Africa’s urban
revolution in the 20th century.

We all know that power is distributed very unequally in our world and any new movement
would soon run up against entrenched privilege. In fact, world society today resembles quite
closely the Old Regime of agrarian civilization, as in eighteenth century France, with isolated
elites enjoying a lifestyle wildly beyond the reach of masses with almost nothing. It is not
just in post-colonial Africa where the institutions of agrarian civilization rule today.26 Since
the millennium, the United States, whose own liberal revolution once overcame the Old
Regime of King George and the East India Company, is now a rent-seeking plutocracy and
regressed under George W. Bush to presidential despotism in the service of corporations
like Halliburton. It is no longer the case that immense riches are principally acquired through
selling products cheaper than ones competitors; access to rents secured by political
privilege -- such as the patents awarded to Big Pharma, monopoly rents from movie DVDs
and music CDs or the use of tax revenues to bail out the Wall Street banks -- now guarantee
much greater profits and more reliably.27

25
A fuller treatment of these and related issues may be found in ‘Two lectures on African
development’ (2007).
26
The classical source is Alexis de Tocqueville (F. Furet and F. Mélonio eds) The Old Regime and the
Revolution (Chicago, [1856] 1998).
27
Dean Baker The End of Loser Liberalism: Making markets progressive (Washington DC, 2011).

14
In The Wretched of the Earth,28 Frantz Fanon provided an excellent blueprint of how to go
about analysing the class structure of decadent societies that are ripe for revolution, in his
case the anti-colonial revolution. He pointed out that political parties and unions were weak
and conservative in late colonial Africa because they represented a tiny part of the
population: the industrial workers, civil servants, intellectuals and shopkeepers of the town,
a class unwilling to jeopardize its own privileges. They were hostile to and suspicious of the
mass of country people. The latter were governed by customary chiefs supervised in turn by
the military and administrative officials of the occupying power. A nationalist middle class of
professionals and traders ran up against the superstition and feudalism of the traditional
authorities. Landless peasants moved to the town where they formed a lumpenproletariat.
Eventually colonial repression forced the nationalists to flee the towns and take refuge with
the peasantry. Only then, with the rural-urban split temporarily healed by crisis, did a mass
nationalist movement take off. This compressed summary offers one model of how to
analyse the potential for another African revolution now.

The African states brought into being by independence likewise rely on chiefs to keep the
rural areas insulated from the more unruly currents of world society. Where the state’s writ
has been fatally undermined, warlords take their place. Since the ‘structural adjustment’
policies of the 1980s, international agencies have systematically preferred to approach rural
populations through NGOs, the missionaries of our age, rather than the departments of
national government. World trade is organized by and for an alliance of the strongest
governments and corporations. Some of the latter, especially in remote extractive
industries, operate as independent states with the state. The cities, although massively
expanded in size, still sustain a very small industrial workforce, since mechanized production
is poorly developed in post-colonial Africa. The civil servants have been ravaged as a class by
neoliberal pressure to cut public expenditures. This leaves us with the informal economy of
unregulated urban commerce, a phenomenon that is not best summarized by the pejorative
term, lumpenproletariat. Clearly, trade and finance are not organized, in Africa or the world
at large, with a view to liberating the potential of these classes. It is not likely, therefore,
that a liberal revolution could succeed by relying solely on a popular economic movement
from below. There are larger players on the scene and their influence too must surely be
felt. If Africans want to have a say in what happens to them next, they will have to tap old
and new social forces to develop their own capacity for transnational association, in the face
of the huge coalitions of neo-imperial power mobilizing to deny them that opportunity for
self-expression.

Frantz Fanon The Wretched of the Earth (New York, [1961] 1970], chapter 2 ‘Grandeur and
28

weakness of spontaneity’.

15
Pan-Africanism gave way to aspirations for national capitalism half a century ago because
world society was not organized then to accommodate it. When the anti-apartheid
movement led to African independence in South Africa, global thinking took second place to
the non-racial nationalism that the ANC had always espoused. But, as a result of neoliberal
globalization, one of the strongest political movements today is the formation of large
regional trading blocs: the EU, NAFTA, ASEAN, Mercosur. This is a good time for Africans to
renew the movement towards greater continental unity, at first in economic affairs and as a
complement to, not replacement for national governments, since the rest of the world is
doing the same thing and they will inevitably lose out again if they fail to do so. If we
needed any reminder of the contemporary salience of Pan-Africanism, we have only to note
the USA’s recent establishment of a unified African military command, with the aim of
controlling access to mineral resources there in competition with China and Europe.

It was never the case that a national framework for development made sense in Africa and
it makes even less sense today. The coming African revolution could leapfrog many of the
obstacles in its path, but it will not do so by remaining tied to the national straitjacket worn
by African societies since they won independence from colonial rule. Perhaps comparative
history might open fresh perspectives on this question.

Freedom and protection in the early modern revolutions29

In 1793, the French revolution turned to the Terror, a campaign whose main target was the
Girondins, a moderate faction whose base was in the Atlantic region, notably Bordeaux. At
the same time, the Bretons raised a ‘Royal and Catholic Army’, supported from the sea by
Britain, against which the Republic sent out an army of its own to fight in what became
known as the War of Vendée.30 The port city of Nantes, at the mouth of the Loire, was
France’s largest and was heavily involved in slavery and trade with the Caribbean. It stood
out for the Republic and was besieged by the Royalist army. The battle that led to its relief
was considered decisive for the revolution, as was the shippers’ financial support for the
Republican army. In the same period, some 4,000 Catholics and presumed Royalists were
publicly executed by drowning inside the city, an episode that came to be known as ‘the
national bathtub’. The obvious question is why the Nantes bourgeoisie risked so much for
the revolution. One reason undoubtedly is that France, although centrally administered by
the monarchy, was then a patchwork of local fief-holders, each of whom exacted what they
could from people and goods moving through their territory. The republic promised to end
all that. It was after all a liberal revolution whose main premise was to abolish restrictions

29
This section to be annotated more fully at a later stage.
30
Victor Hugo’s last novel, Ninety-three (1974), reconstructs these events.

16
on freedom of movement. The Nantes shippers had an interest in reducing the costs of
moving their trade goods inland and so they allied themselves with anti-monarchist forces.

What the American, French and Italian revolutions had in common was mass insurgency
linked to an extended period of warfare over attempts to remove fragmented sovereignty,
unfair taxes and restrictions placed on movement and trade. Apart from their initial
resistance to British imposition of an East India Company tea monopoly and of taxes to pay
for the crown’s military costs, the American revolutionary government faced more than one
rebellion of its own as a result of imposing excise duties on alcohol production. The Italian
Risorgimento too was backed financially by the industrialists of Milan and Turin who wanted
to replace Austrian protectionism and control of a jumble of territories with a unified
national home market and unrestricted access to world trade. In all three cases, the power
of merchant and manufacturing capital played a decisive part in the revolution, whatever
else animated the overthrow of the Old Regime.

Perhaps the most notable example of a customs union that served as a precursor to political
unification – before our own post-war European Common Market -- was the Prussian
Zollverein, launched in 1818, culminating five decades later in the German Empire. This
started out piecemeal as a way of harmonising tariffs, measures and economic policy in
scattered territories controlled by the Prussian ruling family. In the aftermath of Napoleonic
conquest and British commercial expansion, the Germans felt vulnerable because of their
extreme political fragmentation. Prussia’s main aim was to expand a protected zone of
internal free trade and to exclude the Austrians. By the 1860s, most of what subsequently
became Germany had joined the customs union. Some middle-sized states tried to break
away to form their own union because of Prussia’s dominance, but they failed. The process
was informed by the arguments of their leading economist of the day, Friedrich List, whose
‘national system’ of political economy was designed to prevent Germans from becoming
just “drawers of water and hewers of wood for Britain”.31 List emphasized the scope for
innovation within an expanded free trade area protected from the cold winds of the world
market. Americans such as Alexander Hamilton and Henry Clay were highly susceptible to
such arguments.

The Southern African example

The Union of South Africa was founded in 1910. Like other British dominions, its structure
was federal, bringing together provinces with highly disparate histories, geography and
populations, as well as being linked to a patchwork of territories under British rule within
and beyond its boundaries. As part of the aspiration to coordinate and rationalize this

31
Friedrich List National System of Political Economy: Volume 1 History (New York, [1841], 2005).

17
patchwork, a South African customs union (SACU) was formed in 1889, the oldest of its kind
extant, involving eventually what became Botswana, Lesotho, Swaziland, Namibia and South
Africa itself.32 This union was tightly controlled from Pretoria; but, as part of President
Mbeki’s push to make relations with South Africa’s neighbours more equal, democratic and
consensual, SACU headquarters were moved to Namibia in 2004 and members were
granted more independence in their dealings with other countries. This arrangement is now
in disarray since the smaller countries have signed separate agreements with the European
Union which in effect allow them to act of ports of trade for European goods, subverting
South Africa’s attempts to control their entry and draw revenues from their importation.
Now relations within SACU are at a low, proof, if any were needed, that moves towards
greater regional integration will have to acknowledge South Africa’s unequal weight.

At the same time, the Southern African Development Community (SADC) has been
expanded since the fall of apartheid to include Angola, Botswana, Democratic Republic of
Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South
Africa, Swaziland, Tanzania, Zambia and Zimbabwe. This makes SADC potentially the largest
regional economy in Africa, one that is again naturally dominated by South Africa. But the
reality within the region at present is a maze of national restrictions on the movement of
people, goods and money, crosscut by bilateral deals of bewildering variety. Under the ANC,
South Africa has increased, rather than reduced a sense of division between its own citizens
and the many Africans who come there to live and work. Nevertheless, SADC remains the
best chance for South Africa to coordinate economic policy with its neighbours. This would
mean breaking with ‘capitalism in one country’ and its plethora of confusing and
contradictory bilateral deals. In fact, under President Mbeki, nothing much happened at the
level of SADC, since his attention was firmly focused on reforming regional cooperation at
the continental level.33

Thabo Mbeki’s idea of an ‘African renaissance’ expressed the reasonable belief that a black
majority government in South Africa might be a leading catalyst for an African economic
revival based on greater political coordination between what have been, since
independence, isolated nation-states that constituted easy pickings for the world’s great
powers. His diplomatic energy was unstinted and, as a result, the Organization of African
Unity in Addis Ababa was reconstituted as the African Union (AU), with the New Partnership
for Africa’s Development (NEPAD) as its economic arm based in Johannesburg and as its

32
Keith Hart and Vishnu Padayachee South Africa in Africa: from national capitalism to regional
integration, in V. Padayachee (ed) The Political Economy of Africa (London, 2010), Chapter 22. I am
grateful to Professor Padayachee for permission to draw on this chapter substantially in the last two
sections of this lecture.
33
Christopher Clapham, G. Mills, A. Morner and E. Sidiropoulos Regional Integration in Southern
Africa (Johannesburg,2001).

18
political arm the African Peer Review Mechanism (APRM). A Pan African Parliament (PAP),
composed of representatives nominated by member states, also sits in Johannesburg. The
principal measures anticipated were a single currency for Africa as a whole, a continental
central bank and trade harmonization.

South Africa’s economic relations with the rest of Africa now are not so different from what
they were under the apartheid regime, which was not as isolated as it seemed at the time.34
The main innovation has been an increased emphasis on a bilateral alliance with Africa’s
other great power, Nigeria, mainly an exchange of oil supplies for manufactures and
services. South African investment has diversified in the last two decades, especially in East
Africa, where communications, hotels, retail, security and minerals have been the main
sectors. Although names like MTN and Shop Rite are now familiar in East, West and Central
Africa, most outward investment is still within the expanded SADC. Half of South Africa’s
African investments are in Mozambique, with Mauritius next, mostly at the expense of
Zimbabwe. Exchange controls on South African firms have been relaxed for African
investments. The Johannesburg Stock Exchange is now linked to Nairobi. South African
banks now finance oil exploration in the DRC, Nigeria, Angola and Gabon. Some firms have
been active in the DRC, notably the huge energy project of the Inga Dam led by the power
utility, Eskom.

Finally, India, Brazil and South Africa have formed a South-South alliance (IBSA) aimed at
increasing trade and investment between them and perhaps influencing world economic
councils. This was followed by South Africa’s admission to the BRICS. Such initiatives are
inconsistent with regional integration and African unity; and South Africa’s economic
policies have been haphazard as a result. Above all, Thabo Mbeki’s leadership was aimed
exclusively at the very political class that has failed Africa so often since independence and
he did not factor the forces of civil society into his plans.

Towards greater integration of African trade

As Daniel Bell once said, “The national state has become too small for the big problems in
life and too big for the small problems”.35 One answer is to rely more on subsidiarity. This is
one of the features of federalism, whereby sovereignty is constitutionally divided between a
central governing authority and constituent political units (like states or provinces). The
principal of devolving power to the lowest effective authority is one condition for wider
political association among previously sovereign entities. Federalism has been around for as

34
John Daniel, V. Naidoo and S. Naidu The South Africans have arrived: post-apartheid corporate
expansion into Africa, in J. Daniel, A. Habib and R. Southall (eds) The State of the Nation, 2003-2004
(Cape Town, 2003).
35
The Winding Passage: Sociological essays and journeys (New Brunswick, 1992:225).

19
long as the nation-state, if not longer; but the assumption of a national monopoly over
political economy is deeply rooted in contemporary civilization. Most of the largest
countries are federal in constitution, but this has not prevented them from behaving like
nation-states of late.

Africa currently suffers from a labyrinthine confusion of regional associations which do little
to strengthen their members’ bargaining power in world markets. The situation on the
ground is rather different, where African peoples have for centuries developed patterns of
trans-border movement and exchange which persist despite their rulers’ attempts to force
economy and society into national cages. This is one major reason why so much of the
African economy is held to be ‘informal’: state regulations are routinely ignored, with the
result that half the population and most economic activity are criminalized and an absurd
proportion of governmental effort is wasted on trying to apply unenforceable rules. The
answer to this chaos is classical liberalism, the drive to establish the widest area possible of
free trade and movement with minimal regulation by the authorities. Unfortunately, the last
three decades of neoliberal globalization have done much to discredit this recipe; but the
boundaries of free commerce and of state intervention, for South Africa’s sake and that of
its smaller African neighbours, should be pushed beyond the limits of existing sovereignties.

The first step should not be to seek economic coordination at the most inclusive level of the
African continent. A single currency and central bank are inappropriate to this stage of
Africa’s development, given the disparities between member states. The global economic
crisis has shown up vividly the limitations of such institutions for the Eurozone.36 The
existing pattern of regional associations needs to be rationalized with the aim of simplifying
administration and abolishing conflict between rules at different levels. In South Africa’s
case, this should probably mean abandoning SACU in order to concentrate on building up
SADC as a customs union with one set of rules for all members. At present visas are still
required for travel between many SADC countries and a maze of bilateral deals and tariff
barriers make a mockery of the idea of an ‘economic community’. A new model of
integration within the Southern African region (eventually extending to East Africa) would
have to break with the historical constraints imposed by existing bodies. Selective tariffs
need urgently to be reduced within SADC, but this would not prevent protectionist
measures being introduced at the regional level, where necessary. A consistent policy of
trade liberalisation would free up the movement of people, goods and capital within the
region and allow existing informal practices to conform more closely to economic rules.
Only then does it make sense to reach out to other African regions such as the Economic
Community of West African States (ECOWAS). The political elites can’t be kept out of all this,

36
See Note 6.

20
but the driving force for regional integration on this scale would have to be a broad-based
social movement. My emphasis here differs from Thabo Mbeki’s.

‘Africa’ is still a significant category in world affairs and these piece-meal steps towards
regional integration would benefit from a revival of the Panafrican impulse that President
Mbeki tried to kindle. The AU and especially its economic arm, NEPAD, might try to
persuade the rest of the world that Africa’s poverty is a drag on the growth of the global
economy. If the continent’s infant agricultural, manufacturing and service industries are to
have a chance to develop, there must be agreement at the level of multilateral institutions
such as the WTO that Africa deserves special protection, at least for a period. Such
arguments are unlikely to be persuasive coming from an Africa as irrationally divided as at
present. The continental and regional strategies need to be pursued side by side. This
lecture has pointed towards an African Customs Union as one possible vehicle for a more
integrated trade policy. I have only hinted by analogy about how that might develop; but for
Africa’s and the world’s sake, I hope that something along these lines starts soon.

21