The Effects of Globalization in African Countries

1. The Effects of Globalization in African Countries Túlio Igor S. Pereira ECON 490: Contemporary Issues in Economic Globalization Professor Ramon Castillo-Ponce

2. Key Issues • In more than 200 years of Economic Development, how has Africa performed relative to other countries? How can this performance be explained? • How is Globalization helping in the development of African countries? • Are there special cases where Globalization seems to be working in Africa?

3. In this section I used interactive graphs with the Gapminder software which you can obtain for free at http://www.gapminder.org/downloads/ If you do not want to download the software, there is also an option to use it directly on the website (all you need in this case is a web browser with flash). The software has more than 600 indicators spanning over 200 years of data, so please feel free to play around with it! The ones I used were the following (Life Expectancy vs. Income per Capita and Life Expectancy vs. Children per Woman):

5. Economic Domination Exports: • The export of raw materials and cash crops to Europe accounted for most of Africa’s wealth during the European Rule. • Most explored natural resources: Copper, Gold, Diamond, Cotton and Cacao

6. Styles of Colonial Rule Varied • Africans had limited opportunities to take part In government • Wealth and power remained in European hands. Source: Encyclopedia Encarta

7. Post-Independence Economic Development • After Independence, countries were expected to side with one of the two superpowers: the U.S. or the USSR • Many countries in Northern Africa received military aid from the Soviet Union. Angola and Mozambique were also Soviet allies. • Countries had to borrow heavily to finance their economic projects: • By the 1980’s African nations owed more than $200 Billion to Western governments and International Organizations such as the IMF. • Africa’s resources still attract foreign countries, but the involvement of the countries in the Continent have often been dubbed to be a new form of Neo-Colonialism

8. Africa and the World / South-South Cooperation • “Horizontal” cooperation is increasingly higher between other developing countries and Africa. • More particularly, China’s involvement in the continent is noteworthy: China is now Africa’s largest trading partner – Bilateral trade grew more than 43% in 2010 ($115) • Chinese Direct Investment has jumped from $0.5 Billion to $9 Billon in 2009 • Growth in trading relationship is fueled by Chinas increasing demand for natural resources such as oil, gas, and minerals.

9. The China Dongfang Orthopedic Hospital in central Khartoum. With the exception of a local interpreter, all the staff at Dongfang is Chinese and cannot speak a word of Arabic. The investor is a Chinese businessman who runs several hospitals in the Sudanese capital. Source: Foreign Policy Magazine

10. Chinese workers stand in front of the Merowe Dam, a controversial Nile River project 220 miles north of Khartoum Source: Foreign Policy Magazine

11. Angolan factory workers stand behind their Chinese manager. China's Shanghai Urban Construction Group was recently awarded a $600 million contract to build four large stadiums in Angola for the Africa Cup of Nations (Africa's flagship soccer tournament). Source: Foreign Policy Magazine

12. A Case Study: Botswana • According to the World Bank, Botswana has had the highest rate of per capita growth of any country in the world in the last 35 years (average of 7.5%/year). • Economists such as DaronAcemoglu argue that good policies were chosen in Botswana because good institutions, which they refer to as institutions of private property. • Botswana is very rich in diamonds, which created enough rents that no group wanted to challenge the status quo.

13. Botswana: Opening Up for Business“Give me Trade, Not Aid” Source: http://www.youtube.com/watch?v=2_UyoP8BwuU

14. Concluding Thoughts • The colonial legacy hindered the economic development of Africa for too many years. • In most cases, post-colonial economic policies worsened the cases of many countries in the continent. • Economic liberalism and South-South cooperation may be one of the best paths to undertake in this new era of Globalization.