Robert Bates, the Harvard Professor of African Political Economy, in his 1981 classic “Markets and States in Tropical Africa”, in explaining how political interference destroyed agriculture in Africa, helped to partly explain the perverse nature of the social contract in Africa. He began with the description of how the erstwhile marketing boards were mismanaged by African leaders. The marketing boards were set up during the periods of the great depression and World War II to be the sole buyers of agricultural produces – cocoa, palm produce, groundnut and cotton – with the aims of stabilizing prices of products and using the bulk of the surplus funds accumulated for the benefit of the farming community (according to the establishment laws, 70 percent of the trading surplus were to be used for price stabilization while 7.5 percent was to be used for the development of the agricultural industry. Surpluses were generated when the marketing boards used their marketing powers to keep the prices paid to farmers well below the prices set by the world market. Of course, since agriculture was the mainstay of the economy and generates the greatest volume of foreign exchange, these marketing boards became the richest single unit in the economies of the countries where they operated. Following World War II and the commodity boom that followed in the 1950s, these boards’ financial resources grew to exceed those of West African governments.
Nationalist leaders – who had by this time gained control of their regional governments but found it difficult to raise taxes to fulfil their campaign promises – naturally began to see in the marketing boards the solution to their financial problems. Obafemi Awolowo, Premier of the Western region, describes the regionalization of the marketing boards as ‘a miracle’. Hear him: “When as a result of the alliance between the Action Groups and the NCNC (its principal opposition) the Commodity Marketing Boards which were controlled by the Federal Government were regionalized, and allocation of revenue was made mainly in accordance with the principle of derivation. By means of the former, an accumulated reserve of over £34 million was transferred to the Western Region, and as a result of the latter our revenue rose from £6.39 [million] in 1953 – 1954 to £13.20 million in 1954 – 1955…since the introduction of these financial resources, our revenue has been on a steady increase.”
The moment the marketing boards were regionalized, the goals for which they were established – price stabilization and development of the agricultural sector – were abandoned and the finances of the marketing boards effectively became ‘trade taxes’. Through various draconian measures devoid of probity and accountability, the funds were diverted into public coffers by the various regional governments to execute their state-led development programmes such that even when the prices of commodity products fell drastically in succeeding years, the independent governments of Nigeria and Ghana for instance, instead of stabilizing producer prices from the huge surpluses earlier generated, passed on the full burden of the drop in price to the producers. Initially, it began as loans, but as the appetite of the local political elite expanded, the laws establishing the marketing boards were altered altogether to effectively turn them into fiscal arms of the governments.
This, however, did not stop with independence. As Billy Dudley noted, between 1957 and 1962, Nigeria, for instance, consistently recorded balance of payment deficits one year after another ranging from £35 million to £72 million. These were made up by a systematic whittling down of the reserves accumulated in the past by the Central Produce Marketing Board. This was the trend in most African states and it explains why most African economies and public finances collapsed with the collapse of commodity prices in the world market beginning from the 1960s.
It is for this reason that Frederick Cooper describes African states as ‘gate-keeper’ states – states unable to develop a modern taxation system and relying exclusively on policing the points of interface, as it were, between the domestic and world economies to raise revenues. The colonial powers built trading points on the coasts and railways into the interior to bring out export products. Since they were unable to raise taxes from the people, they relied on tariffs on imports and taxes on export products for revenues. Independent African states were sadly unable to change that structure and so continued with the ‘gate-keeper’ tradition. But unlike the colonial regimes who were there primarily for the benefit of the metropole, African leaders were supposed to develop their societies and were supposed to know that such ad-hoc measures were unsuitable or even detrimental to the development of a civic culture that is a sine qua non for building a modern and developed state.
Many Nigerians and indeed Africans are sentimental about their nationalist leaders. In Nigeria, for instance, many consider Obafemi Awolowo a social saint and one of the most visionary and influential leader Nigeria has ever produced. Same goes for Kwame Nkrumah of Ghana. This may well be true. But it is equally true that these leaders destroyed not only their agriculture sectors, but also the basis for the development of a modern and self-sustaining society. By appropriating farmer’s surplus and using them for the larger and mostly urban societies, the leaders only deepened the culture of dependency on the state, destroyed the basis for the establishment of a social contract, destroyed the economic base of their societies, and set up an unsustainable fiscal model regime (an unsustainable model of fiscal regime?) for their states. Of course, when commodity prices collapsed, the marketing boards could not stabilize the prices for the farmers. Farmers were obliged to produce and sell below production costs. It did not take long before the farmers also abandoned the farms. Although, crude oil came to the rescue of Nigeria, for the majority of Africa states, the economic and fiscal collapse was immediate and world-record breaking. They had no option than to go begging the International Financial Institutions (IMF and World Bank) for help. It started as a trickle, but later became a flood.
(To be concluded next week)
Christopher Akor
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