Challenging the Myths of Poverty
In recent years initiatives such as the New Partnership for Africa's Development (NEPAD) and the G8 Africa Action Plan have pushed the development challenges facing African nations to the top of the international community's public agenda. And yet we have seen little concrete evidence that northern governments and international financial institutions, such as the World Bank, the International Monetary Fund and the World Trade Organization, are prepared to make the significant policy changes needed to allow for diverse strategies to promote sustainable human development in Africa. Instead, they continue to reinforce policies and structures that undermine the efforts of African countries to implement their own economic and public policy priorities.
African states, carrying unsustainable debt burdens, have been disempowered as fiscal managers and providers of essential social services. Many African economies remain internally weak and linked to a global economy that continues to extract resources to the detriment of their citizens. Two and a half decades of unfavourable terms of trade have resulted in a further loss of the continent's resources and poor economic performance. 1
The stereotype persists that Africa is aid-dependent and impoverished, unable to manage its finances or compete in the global market. So pervasive is this stereotype that we rarely question the degree to which international financial structures are responsible for the failure of many African governments to respond to citizens' needs and aspirations.
Confronting these stereotypes is an important step in changing the current system. For example, there are three popular, but false, perceptions about current international efforts to reduce poverty in Africa.
MYTH: Money flows from the north to the south, as industrialized countries generously provide aid and loans to countries in Africa to promote development.
REALITY: Sub-Saharan Africa pays approximately US$15 billion in debt servicing every year to the World Bank, IMF and rich country governments. 2 In 2001, the continent received $13.5 billion in official aid - $1.5 billion less than was transferred to the north. 3
For every dollar owed in 1980, developing countries have paid out $8.35 in debt service. These debts have been repaid almost nine times over. In 2001 alone, the net outflow of debt payments from the south in excess of new loans amounted to over US$116 billion. 4
MYTH: Northern donors and international financial institutions have cancelled much of the debt owed by African countries.
REALITY: In 2002, African countries paid US$4 billion more in debt service than they received in new loans. Despite some debt cancellation through the Highly Indebted Poor Countries (HIPC) initiative, Zambia, Mali, Niger and Sierra Leone will pay more in debt service this year than they did prior to the HIPC initiative. 5
MYTH: African countries are dependent on aid from the north. Inefficiencies in their markets mean that they cannot compete in the global marketplace.
REALITY: In many African countries, the loss of market shares for cotton and sugar is largely the result of high subsidies and domestic support for producers in the United States and Europe. For example, the U.S. is the world's largest exporter of cotton thanks to huge cotton subsidies. In 2001-2002, these subsidies amounted to $3.9 billion, double the level in 1992, and $1 billion more than the value of total U.S. cotton production during the season at world market prices. The International Cotton Advisory Committee (ICAC) estimates that the cost of producing a pound of cotton in Burkina Faso is 21 cents compared to 73 US cents in the U.S. According to the ICAC, market prices could have been about 70 percent higher in the absence of government subsidies for the cotton industry in 2001-2002. 6
In reality, the flow of wealth is to the north, not to the south. The majority of African countries remain tied to usurious debt burdens that impede investment in health care, education and other social services. Unfair trade and investment policies and practices prevent African nations from further developing their national economies and competing on an equal footing in the global marketplace.
Inter Pares will continue to collaborate with our counterparts to build on citizens' initiatives to address structural and systemic inequalities within the global governance system.
1 Economic Development in Africa: Trade Performance and Commodity Dependence, United Nations Conference on Trade and Development, 2003, p. 20.
2 Halifax Initiative, No Reason to Celebrate - Action Alert
3 World Development Indicators 2002, World Bank
4 Kairos Statement against Debt Domination, December 2003
5 Halifax Initiative, No Reason to Celebrate - Action Alert
6 Economic Development in Africa: Trade Performance and Commodity Dependence, United Nations Conference on Trade and Development, 2003, p.8.
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