The Law of Comparative Advantage is one law of economics that is easily understood by everyone. Everyone should produce goods they produce best and most efficiently, and delegate the production of other goods to others, which insures the most efficient goods are always produced and wealth is maximised. Easy.
A friend of mine in the financial industry recently said to me that South Africa has no Comparative Advantage and he is only partly correct. The entire continent of Africa is at a disadvantage because it cannot produce anything more efficiently than at least somewhere else.
Africa's trade with the rest of the world has declined steadily since most of its countries became independent in the 1960s, and that decline began immediately after World War II. It may never recover.
Why? Africa has been undercut consistently by other parts of the world and this trend is likely to continue. Latin America in particular has become a favoured trading partner of the West, even though Germans, for example, are still choosing to pay more for African bananas at the expense of Central American ones.
Coffee, fruit, and other exports are more easily and cheaply available elsewhere, most notably in Southeast Asia and Central America. Industrial production, needless to say, has never been an issue.
Two industries are available to Africa. Tourism and raw materials. These are the same two industries that Australia relies on. Spot the difference? Australia, foolishly in the view of many economists, exports raw materials to Japan, particularly timber, and then imports paper, even though they have the capacity to process it themselves.
Australia thus acts like an African country, but the difference between Australia and Africa is huge. Australia has both the culture and the supporting infrastructure to stave off what is known as the Dutch Disease. It is also Pro-Western, and does not carry the baggage of "post-colonialism" which glorifies traditional structures and abhors globalisation.
This difference cannot be underestimated and results in stagnation for almost all of Africa. Even Libya, probably Africa's "richest" country, is a desert in every sense of the word.
What does Africa have to offer the world?
In an age of Globalised free trade peoples have been forced to accept that they must trade for what they want, rather than try to take it by force. As a result (see link), death by war is at its lowest level for years.
But Africa has nothing to trade.
The Western aid industry has succeeded only in replacing revenues from lost trade since the War with handouts, turning Africa into the world's largest Welfare State.
If the West is no longer demanding products from Africa in exchange for money, which is the arrangement almost everywhere else in the world, what is it we are demanding?
The answer is absolution. What Africa exports to the West is alleviation of guilt (real or imagined, but I suspect the latter) and the proliferation of good feelings. This falls under the category of tertiary industry, as it is a service performed for money.
As a result, Africans have become the modern-day sellers of indulgences, peddling salvation to guilt-ridden foreigners, and their industry is in full swing.
As a result, to support this industry, Africa must do what it does best, which is to produce and almost endless supply of poverty, helplessness, squalor and destitution to meet what seems like an inexhaustible demand.
This may sound cynical, but it is a reality. And it is a reality that do-gooding Westerners are helping to perpetuate. By demanding nothing, we are creating limitless supplies of nothing, and this is making an economic disaster even worse.
Those who use Africa in this way are no better than the dealers of blood diamonds, as they need a constant supply of the resource was can call absolution, which is turn relies on an endless supply of misery.
A friend of mine in the financial industry recently said to me that South Africa has no Comparative Advantage and he is only partly correct. The entire continent of Africa is at a disadvantage because it cannot produce anything more efficiently than at least somewhere else.
Africa's trade with the rest of the world has declined steadily since most of its countries became independent in the 1960s, and that decline began immediately after World War II. It may never recover.
Why? Africa has been undercut consistently by other parts of the world and this trend is likely to continue. Latin America in particular has become a favoured trading partner of the West, even though Germans, for example, are still choosing to pay more for African bananas at the expense of Central American ones.
Coffee, fruit, and other exports are more easily and cheaply available elsewhere, most notably in Southeast Asia and Central America. Industrial production, needless to say, has never been an issue.
Two industries are available to Africa. Tourism and raw materials. These are the same two industries that Australia relies on. Spot the difference? Australia, foolishly in the view of many economists, exports raw materials to Japan, particularly timber, and then imports paper, even though they have the capacity to process it themselves.
Australia thus acts like an African country, but the difference between Australia and Africa is huge. Australia has both the culture and the supporting infrastructure to stave off what is known as the Dutch Disease. It is also Pro-Western, and does not carry the baggage of "post-colonialism" which glorifies traditional structures and abhors globalisation.
This difference cannot be underestimated and results in stagnation for almost all of Africa. Even Libya, probably Africa's "richest" country, is a desert in every sense of the word.
What does Africa have to offer the world?
In an age of Globalised free trade peoples have been forced to accept that they must trade for what they want, rather than try to take it by force. As a result (see link), death by war is at its lowest level for years.
But Africa has nothing to trade.
The Western aid industry has succeeded only in replacing revenues from lost trade since the War with handouts, turning Africa into the world's largest Welfare State.
If the West is no longer demanding products from Africa in exchange for money, which is the arrangement almost everywhere else in the world, what is it we are demanding?
The answer is absolution. What Africa exports to the West is alleviation of guilt (real or imagined, but I suspect the latter) and the proliferation of good feelings. This falls under the category of tertiary industry, as it is a service performed for money.
As a result, Africans have become the modern-day sellers of indulgences, peddling salvation to guilt-ridden foreigners, and their industry is in full swing.
As a result, to support this industry, Africa must do what it does best, which is to produce and almost endless supply of poverty, helplessness, squalor and destitution to meet what seems like an inexhaustible demand.
This may sound cynical, but it is a reality. And it is a reality that do-gooding Westerners are helping to perpetuate. By demanding nothing, we are creating limitless supplies of nothing, and this is making an economic disaster even worse.
Those who use Africa in this way are no better than the dealers of blood diamonds, as they need a constant supply of the resource was can call absolution, which is turn relies on an endless supply of misery.
****
The article was favourably received, bar a couple of commenters who challenged my understanding of Comparative Advantage. So let me reiterate. There is nothing that African nations can do better than at least somewhere else.
Except attract aid.
If the reader is interested and has 22 spare minutes, it is worth watching this BBC interview with Dambisa Moyo and Alison Evans. Moyo is one of Africa's finest experts, and lays out why aid is a hindrance, not a help, to the African continent.
My point in referring to Africa's comparative advantage as Poverty, is rather to suggest that Aid represents a trade of sorts, and in lieu of reciprocal exchange of goods, Africa provides another commodity in the form of redemption - in the same manner as African American author Shelby Steele, jnr. speaks of in relation to Affirmative Action in the United States.
Aid is a drain on Africa's economy in many more ways than described above, not least in having the Dutch Disease effect on their currencies and other industries. That is not to say that Africans cannot do anything; they can, but are being paid not to.
Africans may not ever develop to the level of the West, due to harsh climate, lack of infrastructure or other reasons, but it is also entirely possible they may not want to. But that's a subject for another discussion...
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