adminDevelopment theorists talk of a “race to the bottom”.
The postulation is that underdeveloped countries work hard to open their economies to attract FDI — setting the bar lower and lower as they try and outdo each other.
This sees poor countries systematically slashing taxation, softening labour laws to make it easier to fire locals and exposing the natural environment to degradation all in an effort to lure foreign capital.
In this race to the bottom we scramble to sell our souls to the lowest bidder. A Faustian bargain if ever there was one.
Poor countries get poorer, despite pretensions at development such as unchecked urbanisation without any meaningful industrialisation. Conversely, rich countries get richer.
The race to the bottom is a concept that likely has its origins in Adam Smith’s “The Wealth of Nations”, the capitalist bible, which says: “The proprietor of stock is a citizen of the world, and is not necessarily attached to any particular country.
“He would be apt to abandon the country in which he was … assessed to a burdensome tax, and would remove his stock to some other country where he could either carry on his business or enjoy his fortune more at his ease.
“By removing his stock he would put an end to all the industry which it had maintained in the country which he left.”
This threat of dis-investment is what makes many African countries jittery whenever ordinary people demand resource ownership and its natural predecessor, local beneficiation of those resources.
The race to the bottom works hand-in-glove with “beggar-thy-neighbour” policies, in which developed countries actively seek to grow their economies by killing those of other nations.
“Beggaring” includes imposing quotas, duties and taxes on goods from other countries to develop one’s own industries.
What you get is developed countries telling underdeveloped ones to “liberalise”, while they themselves impose protectionist policies.
Talk of doing as I say and not as I do. A good example of this is the massive subsidy that the European Union gives to its agricultural sector. Under the Common Agriculture Policy, as much as 40 percent of the EU’s budget goes to subsidising European farmers.
This huge outlay is for a sector that contributes less than five percent of the EU’s GDP.
The net effect is that production costs in Africa are higher than in Europe and our agricultural produce is less competitive globally – even as we claim to be agri-based economies.
Right now, Zimbabwe is preparing for the main cropping season.
These preparations have included allocating US$91 million to agriculture against aggregate requirements of US$1,7 billion for both crop and livestock production.
By any measure, this is a drop in the ocean.
Agriculture Deputy Minister Davis Marapira, as we report in this edition of The Sunday Mail, says the sector “contributes 70 percent of raw materials to our industries” and “these industries should plough back and strike partnerships with farmers. Government only comes in to lay policy and provide the right environment for the sector to flourish while guaranteeing the Strategic Grain Reserve”.
Surely, we cannot expect an economic turnaround when such an important pillar gets less than six percent of its budgetary requirement.
We are aware that Government is doing well to try and guarantee household food security via support schemes, but what of the 70 percent of raw materials that our industries require, where will those come from when money is not being put into agriculture?
Inasmuch as Deputy Minister Marapira is right in saying that the private sector should come in and support agriculture so as to get the inputs they require, the fact is that is not how the sector has been made flourish in other parts of the world.
Europe is putting billions to support what is a relatively small sector for them.
We, on the other hand, are bending until we break to try and conform to IMF staff-monitored programmes and other races to the bottom. Our salvation lies in putting our money where our mouth is and financing farmers.
Local resources must be harnessed to revive agriculture and, consequently, industry.
Government simply has to take the leading role in ensuring we fund our farmers.
Bongani Ndlovu
Online Reporter