Skip to main content

Capitalism: Africa

Capitalism: Africa

Debates over capitalism in Africa revolve around the best means to rescue the continent from a prolonged period of stagnation and decline. Observers agree that the program, in the absence of a socialist alternative, must focus on capitalist development. There is disagreement, however, over the role of the African state in this process, as well as over whether to make raw materials exports or industrialization the main engines of growth. On the one side stand the Bretton Woods Institutions (the World Bank and International Monetary Fund, hereinafter the BWIs), who advocate a neoliberal approach based on freeing up markets for cash crop exports and reducing the state's control over national development. On the other side stand African scholars, mainly those representing the United Nations Economic Commission for Africa (UNECA), who argue for more industrialization and a much stronger role for the state. As the debate has continued, African leaders have moved closer to the BWI position with the establishment of the New Partnership for Africa's Development (NEPAD). Still, NEPAD has its critics, and the debate persists over the relative roles of the state and the market.

The Colonial Legacy and Uneven
Capitalist Development

These debates have not unfolded in a vacuum; they are rooted in the colonial legacy and the response to that legacy by the first generation of African leaders. The Atlantic slave trade and colonialism blocked the conditions for the development of capitalism in Africa. In dwarfing all other commerce, the slave trade interrupted the accumulation process necessary for capitalist development. Its abolition reversed this trend by creating an opening for "legitimate" commerce, which African producers pursued by increasing their production of raw materials (such as gum, hides, and palm oil) for expanding European markets. Most of the production, however, was based on noncapitalist labor regimes such as family and household labor or forced labor of various kinds. Colonialism did not alter this structure appreciably, because the colonial powers tended to block the development of private property and of wage laborwith the exception of migrant labor in the mining and plantation sectors. Although African industries appeared in the major cities, especially after World War II, the absence of land markets and the predominance of migrant labor ensured that capitalism did not develop fully during the colonial period. To make matters worse, the colonial powers discriminated against African capitalists in favor of nonindigenous entrepreneurs, and against women, the main agricultural producers. In sum, capitalism did take root during the colonial era, but its development was uneven, halting, and incomplete.

Independence, State-Led Development,
and Import-Substitution Industrialization

Between 1960 and 1975, the new African leaders pursued industrialization in order to overcome the colonial inheritance. Rooted in the anticolonial struggle, some of their programs were socialist (as in Ghana and Algeria), some more explicitly capitalist (as in Kenya). Others, such as that in Ethiopia, were more difficult to define. In practice, however, most African countries shared a commitment to modernization and industrialization. Many followed the model of Import-Substitution Industrialization (ISI), in which governments took control over national industrialization by protecting domestic industries from foreign competition. Rooted in modernization theory, the goal was for the state to mobilize enough investment in domestic industry to achieve the "big push" thought necessary for self-sustaining economic growth. State-led development became the norm in the 1960s.

Ghana and Algeria provide two examples of the socialist variant of ISI, with a high percentage of state-owned enterprises and a professed commitment to labor rather than capital. In Ghana, Kwame Nkrumah implemented a Seven-Year Development Plan (19571966) designed to develop domestic industry, infrastructure, and social welfare. Nkrumah mobilized investment capital export taxes, foreign borrowing, and the sale of electricity produced by the new Volta hydroelectric dam. Nkrumah's government took control of the country's major industries as well as the agricultural sector, but he also provided state-sponsored social services such as education and health care. In Algeria, after a nationalist revolution between 1954 and 1962, the country's first leader, Ahmed Ben Bella, pursued an orthodox Marxist program, setting out to smash the middle-class traders and bureaucrats. A military coup in 1965 brought a new leader (Houari Boumédienne), who declared a fusion of socialism, Islam, and Arabic culture. Although Boumédienne left education and cultural matters in the hands of politicians who emphasized Algeria's Islamic heritage, his economic vision was secular, technocratic, and socialist. Between 1966 and 1971, the state nationalized 90 percent of the country's industries, beginning with oil and gas and then extending to industrial production. The idea was to nationalize Algeria's natural resources and use the profits to develop state-owned industrial enterprises. Ultimately this vision failed to achieve its goals, and Boumédienne's socialist program gave way to the increasing "Islamicization" of Algeria.

Kenya and South Africa provide illustrations of a more capitalist road to national development. In Kenya between 1963 and 1978, President Jomo Kenyatta supported the African bourgeoisie with government intervention into agriculture, trade, and production. This program was not uncontested; a number of prominent trade unionists, including Bildad Kaggia and Fred Kubai, argued for a radical socialist alternative. Kenyatta purged these elements from the ruling party (the Kenyan African National Union, or KANU) and pushed ahead with a program of state-managed capitalism, although one of its most famous architects, Tom Mboya, referred to it as "African socialism." While there was an element of redistribution, the core of the Kenyatta-Mboya program is better understood as corporate capitalism, under which the state partnered with labor and capital (domestic and foreign) in the pursuit of capital formation and industrialization. Import-Substitution Industrialization provided the model, with protected home markets for consumer goods and agreements with foreign firms to import essential capital-goods inputs. By the late 1970s, Kenyatta had built up strong agricultural and industrial sectors. South Africa pursued capitalist development through ISI from an early date (the 1940s), with impressive economic results. Industrialization there, however, was racialized, and the post-1948 apartheid state ruthlessly exploited the black population, stripping them of the most basic human and political rights. This strategy worked economically until the 1970s, when the economy faltered and African resistance intensified. International sanctions exacerbated the downward trend in the 1980s, and apartheid finally met its end in 1994, when national elections brought the African National Congress to power under Nelson Mandela. Thirty years after Kenyatta had set out to Africanize the Kenyan economy, South Africa's black majority government faced pressures for similar Africanization, but the state-led option was no longer on the table.

In Ethiopia, the emperor Haile Selassie presided after 1935 over the conversion of feudal lands into private holdings, especially in the southern part of the country. Land sales accelerated between 1960 and 1974, producing concentration in the south, with farms as big as 200,000 acres. Using ISI as a model, the state invested in agricultural commercialization along capitalist lines; in industry the government attempted to develop textile and beverage production. These policies triggered the development of an agrarian bourgeoisie during the 1960s, as well as a small industrial sector, but these were dependent on foreign capital and insignificant in relation to subsistence agriculture, which remained under the domination of the big landlords. Peasant and student resistance to the landlords emerged during the 1970s under the slogan "land to the tiller." Grievances paralleled a wave of army mutinies, resulting in a revolution that swept away the emperor's government in favor of a Soviet-backed regime that ruled between 1974 and 1977. In the end, the ruling military council gave way to an authoritarian regime under Haile Meriam Mengistu, which allied with the Soviets in 1977 and pushed through a collectivization program in the countryside. This program succeeded in revolutionizing the social basis of power in the rural areas, but Mengistu's authoritarianism produced widespread resistance, and the regime finally fell in 1991.

Selassie's state-led development programs produced some significant successes during the 1960s, with growth in gross domestic product and comprehensive social welfare programs. As the decade progressed, however, it became clear that the gains would not be sustainable and that Africa had entered a period of economic stagnation. The oil shocks of 1973 and 1979, and a wave of drought in 1975 and 1976, worsened the crisis considerably. Flagging economic performance fed into a wave of unrest and military coups, including those in Algeria (1965), Ghana (1966), and Ethiopia (1974). As the 1970s progressed, stagnation worsened and African governments became less democratic; the decade witnessed the rise of one-party states presiding over a deteriorating economic climate.

During the 1970s, it seemed that "the African state had not been up to its 'historic mission' of ensuring capitalist accumulation"; as Thandika Mkandwire noted, the question for African analysts was whether this was a temporary phenomenon, which could be solved while retaining Africa's links to the world economy, or a permanent structural problem solvable only by delinking from the global system. In the 1970s several prominent dependency theorists, including Egypt's Samir Amin and Nigeria's Bade Onimode, took up the latter position in arguing for a radical program of African autonomy and self-sufficiency.

In the late 1970s the dependency school lost ground to a more reform-minded version of structuralism, which argued that developing nations could achieve capitalist development while retaining their links to a reformed world economy. UNECA exemplified this stance with its 1976 report entitled the Revised Framework for the Implementation of the New International Order for Africa. The Revised Framework led to the Lagos Plan of Action (LPA) of 1980, which emphasized external factorsespecially the continent's reliance on raw materials exportsas the main causes of Africa's economic stagnation. On this issue the LPA agreed with the dependency argument that declining terms of trade, which reflected the neocolonialist exploitation of the continent, posed a serious threat to African economic development. As a result, the LPA's goals for Africa emphasized regional and continental self-reliance and self-sustaining development, to be achieved through a greater focus on industrialization and economic cooperation. Exports would be pursued, but they would be subordinated to domestic industrial development.

The Lagos Plan of Action also placed gender on the development agenda, arguing that women were central to the development process and that their interests had to be considered in the design and implementation of development programs. This stance provided a welcome corrective to modernization theory, which insisted that women were impediments to development and should be confined to the domestic sphere. This view had been challenged in the 1970s by the Women in Development (WID) paradigm and the proclamation of the UN's International Decade for Women (19751985). In 1976, the Association of African Women for Development called for the integration of women into development programs. The LPA took up this call by demanding more support for women in agriculture and industry. Although they praised the LPA's stance as a step in the right direction, critics argued that the plan did little to facilitate a significant shift in African women's economic and political power. This criticism formed part of a larger movement during the 1980s to recognize issues of gender inequality in the design and implementation of development programs. This approach argued that development must address issues such as the sexual division of labor and power over reproduction if African women were to benefit from economic growth.

Neoliberalism, Structural Adjustment,
and the African Reaction

African recommendations between 1976 and 1980 set the scene for a protracted debate between African intellectuals and the Bretton Woods Institutions over the terms of capitalist development on the continent. In 1981, the World Bank rejected the LPA in its famous Berg Report (Towards Accelerated Development in Sub-Saharan Africa ), which attributed economic stagnation to poor government policies rather than external factors. In pursuing Import-Substitution Industrialization, Africa's leaders had turned their backs on the continent's comparative advantage in raw materials, in favor of propping up inefficient domestic industries and a bloated public sector. The Berg Report recommended returning to an outward-oriented program of raw materials exports, to be accomplished by rolling back state intervention and freeing up market forces. Specific recommendations promoted under the rubric of Structural Adjustment Programs (SAPs) included eliminating subsidies and controls (on imports, wages, and prices), devaluing local currencies, and letting the market determine the prices for raw materials exports.

In 1989 UNECA responded to the Berg Report by reaf-firming the Lagos Plan through the African Alternative Framework to Structural Adjustment (AAF-SAP). This rejected the outward-oriented, market-based strategy of structural adjustment in favor of an inward-looking, state-led program of African self-reliance. The report also recommended subsidies for exports, bilateral and multilateral trade agreements, and debt forgiveness. Finally, the AAF-SAP stressed the importance of human development, especially the provision of basic social services and education. In short, it advocated a modified version of ISI, with a greater emphasis on the export sector.

The World Bank accepted the need for human-centered development in its 1989 report, Sub-Saharan Africa: From Crisis to Sustainable Growth. Citing the LPA and UNECA, this accepted the need to consider human-centered development in creating an environment to enable sustainable economic growth in Africa. The report, however, clung to the bank's commitment to structural adjustment and export-led development. A subsequent bank report emphasized SAPs even more strongly, claiming that "adjustment is working" in countries that followed its prescriptions, in agriculture as well as industry. In 1999, African critics countered once again with a systematic critique of structural adjustment entitled Our Continent, Our Future: African Perspectives on Structural Adjustment, which modified earlier calls for African self-reliance by accepting the need to compete in the global economy on the basis of comparative advantage. This was not to be achieved, however, through SAPs and raw materials exports; instead, the study recommended a modified version of ISI in which African governments would nurture highvalue-added, labor-intensive industries producing manufactured exports for the world market. Thandika Mkandawire, coeditor of Our Continent, Our Future, subsequently argued for the creation of developmental states in Africaalong Asian lineswhich he believed could be socially engineered by political actors and civil society within the context of African democratization.

The World Bank has not accepted ISI in the early twenty-first century, but recent bank initiatives have made more concessions to African participation and social development, particularly through the new Comprehensive Development Framework (CDF). This moves beyond structural adjustment to focus on poverty reduction and social development; it also emphasizes local ownership of the development process. African leaders have responded to this shift by creating the New Partnership for Africa's Development (NEPAD), led by Thabo Mbeki of South Africa. NEPAD accepts the BWIs' neoliberal program for capitalist development as well as the need for peace, security, and good governance. To guarantee that Africa will benefit from globalization, however, NEPAD also seeks to reform the rules of globalization to guarantee equity as well as economic growth, by reducing Western protectionism and providing for African social needs. Separating itself from UNECA, the OAU (now reconstituted as the African Union) came out in support of NEPAD in 2001.

Several prominent African scholars have criticized NEPAD for rejecting the programs proposed by UNECA in favor of the neoliberal model of the Bretton Woods Institutions. This acceptance of neoliberalism threatens to reproduce African dependence on Western donors, which is especially dangerous in an age of shrinking Official Development Assistance. African critics of NEPAD argue that any concessions to Western donors must not compromise the principles of the LPA. Some of these critics call for a return of the developmental state. Other African scholars, such as Claude Ake, have tried to find a middle ground between this position and the neoliberal program. Ake proposes a populist alternative, drawing on "the energy of ordinary people" and geared toward the development of smallholder agriculture underwritten by popular democracy. Driven by farmer participation, this approach would increase the efficiency and productivity of small farmers and provide the basis for rural industries such as food processing and packaging. The result would be a bottom-up process of endogenous economic and human development. This process would have to involve African women, who appear to have been left out of the NEPAD blueprint, in what some critics consider a step backward from the LPA on the issue of gender and development.

Claude Ake's work illustrates that the debate over capitalism in Africa in the early 2000s revolves around three polesthe market, the state, and the communityrather than two. It remains an open question, however, which of these will emerge as the preferred trustee over African capitalism in the twenty-first century.

See also Anticolonialism ; Colonialism ; Development ; Economics ; Modernization ; Modernization Theory ; Neocolonialism ; Neoliberalism ; Socialisms, African .

bibliography

Ake, Claude. Democracy and Development in Africa. Washington, D.C.: Brookings Institution, 1996.

Amin, Samir. Delinking: Towards a Polycentric World. London: Zed, 1990.

. Neo-colonialism in West Africa. Harmondsworth, U.K.: Penguin, 1973.

Berman, Bruce, and Colin Leys, eds. African Capitalists in African Development. Boulder, Colo.: Lynne Rienner, 1994.

Goldsworthy, David. Tom Mboya: The Man Kenya Wanted to Forget. New York: Africana, 1982.

Kennedy, Paul. African Capitalism: The Struggle for Ascendancy. Cambridge, U.K., and New York: Cambridge University Press, 1988.

Leys, Colin. Underdevelopment in Kenya. London: Heinemann, 1975.

Mkandawire, Thandika. "Thinking about Developmental States in Africa." Cambridge Journal of Economics 25 (2001): 289313.

Mkandiwire, Thandika, and Charles C. Soludo. Our Continent, Our Future: African Perspectives on Structural Adjustment. Dakar, Senegal: CODESRIA; Trenton, N.J.: Africa World Press, 1999.

Onimode, Bade. A Future for Africa: Beyond the Politics of Adjustment. London: Earthscan, 1992.

. Imperialism and Underdevelopment in Nigeria: The Dialectic of Mass Poverty. London: Zed, 1982.

Organization of African Unity. Lagos Plan of Action for the Economic Development of Africa, 19802000. Addis Ababa, Ethiopia: OAU; Geneva, Switzerland: International Institute for Labour Studies, 1981.

Owusu, Francis. "Pragmatism and the Gradual Shift from Dependency to Neoliberalism: The World Bank, African Leaders and Development Policy in Africa." World Development 31, no 10 (2003): 16551672.

Parpart, Jane. African Women and Development: Gender in the Lagos Plan of Action. East Lansing: Michigan State University Press, 1985.

Sender, John, and Sheila Smith. The Development of Capitalism in Africa. London and New York: Methuen, 1986.

Shenton, Robert W. The Development of Capitalism in Northern Nigeria. London: J. Currey; Toronto: University of Toronto Press, 1986.

Women Waging Peace. "African Women Respond: Summary Report on G8 and Nepad Plan and the Impact on Women in Africa." Women and Developments International Magazine, no. 58/59 (spring 2003).

World Bank. Accelerated Development in Sub-Saharan Africa: An Agenda for Action. Washington, D.C.: World Bank, 1981.

. Adjustment in Africa: Reforms, Results, and the Road Ahead. New York: Oxford University Press, 1994.

Young, Crawford. Ideology and Development in Africa. New Haven Conn.: Yale University Press, 1982.

Jeff D. Grischow

Cite this article
Pick a style below, and copy the text for your bibliography.

  • MLA
  • Chicago
  • APA

"Capitalism: Africa." New Dictionary of the History of Ideas. . Encyclopedia.com. 19 Aug. 2018 <http://www.encyclopedia.com>.

"Capitalism: Africa." New Dictionary of the History of Ideas. . Encyclopedia.com. (August 19, 2018). http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/capitalism-africa

"Capitalism: Africa." New Dictionary of the History of Ideas. . Retrieved August 19, 2018 from Encyclopedia.com: http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/capitalism-africa

Learn more about citation styles

Citation styles

Encyclopedia.com gives you the ability to cite reference entries and articles according to common styles from the Modern Language Association (MLA), The Chicago Manual of Style, and the American Psychological Association (APA).

Within the “Cite this article” tool, pick a style to see how all available information looks when formatted according to that style. Then, copy and paste the text into your bibliography or works cited list.

Because each style has its own formatting nuances that evolve over time and not all information is available for every reference entry or article, Encyclopedia.com cannot guarantee each citation it generates. Therefore, it’s best to use Encyclopedia.com citations as a starting point before checking the style against your school or publication’s requirements and the most-recent information available at these sites:

Modern Language Association

http://www.mla.org/style

The Chicago Manual of Style

http://www.chicagomanualofstyle.org/tools_citationguide.html

American Psychological Association

http://apastyle.apa.org/

Notes:
  • Most online reference entries and articles do not have page numbers. Therefore, that information is unavailable for most Encyclopedia.com content. However, the date of retrieval is often important. Refer to each style’s convention regarding the best way to format page numbers and retrieval dates.
  • In addition to the MLA, Chicago, and APA styles, your school, university, publication, or institution may have its own requirements for citations. Therefore, be sure to refer to those guidelines when editing your bibliography or works cited list.