Africa’s role in the World Economy can be viewed in terms of a sleeping dog in the midst of lions. Africans are faced with widespread poverty, ill health, and lack of educational opportunities. Despite the positive political developments of the late 20th century, many African governments have been unable to improve their peoples’ standards of living. The foundation of Africa’s disadvantaged position has been its economic role in the world trading system.
Since at least the mid-19th century African economies were increasingly reworked to meet the needs of industrial Europe. Virtually all economic infrastructures were geared toward the export of Africa’s raw materials to Europe. Economic transaction and communication between neighboring states stopped if they were ruled by different colonial powers. African manufacturing was discouraged, and even banned, if it was likely to compete with the interests of European manufacturers. Indigenous African industry dwindled, and Africa was forced to import virtually all of its manufactured consumer goods. This was the economic system that Africa inherited at independence.
Making Africa even more dependent, the prices paid for its exported raw materials were set in the major financial markets of the world: New York City, London, Paris, Frankfurt, Hong Kong, and Tokyo. The prices on African commodities rose and fell according to the needs of the industrial world, bearing no relationship to the costs of production or the economic needs of Africa. The full implications of this were powerfully demonstrated during the energy crisis of 1973. As oil prices quadrupled, the Western world went into recession and African commodity prices tumbled. Although North African oil producers benefited, sub-Saharan Africans were not yet oil producers on a significant scale and they too suffered from the hike in oil prices. The industrial world paid less and less for African commodities, while at the same time demanded higher and higher prices for its manufactured goods, which Africans needed to import. In this way Africa helped subsidize the industrial world’s economic recovery while most African countries spiraled into debt, poverty, corruption, and political instability, from which they have spent decades trying to recover.
Since the 1980s the industrial world’s financial tools, the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank), have proposed solutions to Africa’s chronic indebtedness. These solutions have been based upon the economics of developed economies, however, rather than upon the specialized needs of developing countries. They have directed African development plans to increase raw material exports, in order to generate the foreign exchange to pay back Africa’s debts. But as Africans export more coffee, for example, the price of coffee falls. Thus, Africans work harder and receive less for their efforts. The ultimate goal of the IMF and World Bank has been to enable Africa to pay its debts rather than to enable Africa to develop the self-sufficient ability to compete on equal terms with the industrialized world. They have succeeded in their goal: Africa pays back more in debt servicing than it receives in direct aid. But this means that governments have less to spend on health and education, leading to falling living standards.
African leaders are striving to establish regional trading groups to strengthen their position in the global market. In 2002 they inaugurated the African Union, an organization intended eventually to establish a common economic market and political union across the entire continent. Achieving this goal, which would make Africa a formidable world power, remains Africa’s primary task for the 21st century. Up till the early part of the 21st century Africa’s role in the world economy continued to be commodity based except for some countries like south African where some sort of machinery are designed.