What should Washington's relationship with the developing World be?

[Dayuhan]

Chinese merely see us as business partners, and that works out quite well in the long run.

It's worked out well in the short to medium run. The long run still hasn't come around.

It's important to recognize that the net capital flow between China and Africa is still inbound: the Chinese are putting more in as investment than they are taking out as ROI. That won't last forever: the Chinese are there for business and they intend to make a profit. As those investments mature the net capital flow will reverse, which is when we'll see how sustainable the relationship really is.

That's particularly true of the deals exchanging today's infrastructure for tomorrow's production. Getting a road in exchange for 20 years of cocoa production seems like a great deal at first: the road gets built and no money goes out. Down the line the cocoa will be going out and no money will be coming in... so who pays the farmers?

It will be very interesting to see how the Chinese respond when an African government unilaterally abrogates a contract with a public or private Chinese entity, or when an African government fails to pay the piper.

It is of course possible that all these things can be worked out and everything will be cozy... or not. Most likely it will work out different ways in different places. It's still way too early to reach conclusions.

[KingJaja]

David,

It's worked out well in the short to medium run. The long run still hasn't come around.

It's important to recognize that the net capital flow between China and Africa is still inbound: the Chinese are putting more in as investment than they are taking out as ROI. That won't last forever: the Chinese are there for business and they intend to make a profit. As those investments mature the net capital flow will reverse, which is when we'll see how sustainable the relationship really is.

That's particularly true of the deals exchanging today's infrastructure for tomorrow's production. Getting a road in exchange for 20 years of cocoa production seems like a great deal at first: the road gets built and no money goes out. Down the line the cocoa will be going out and no money will be coming in... so who pays the farmers?

It will be very interesting to see how the Chinese respond when an African government unilaterally abrogates a contract with a public or private Chinese entity, or when an African government fails to pay the piper.

It is of course possible that all these things can be worked out and everything will be cozy... or not. Most likely it will work out different ways in different places. It's still way too early to reach conclusions.

How did the US, UK and other European nations get African nations to pay up their debts?

I lived through it, it was the formative experience of my youth - 1980s/90s. It was tough, but we paid - and we just finished paying last decade. Real household incomes dropped 80% in Nigeria during the 80s. I lived through it.

The Chinese aren't stupid - African govts will pay; the beauty of this approach is that it is left for African govts to manage their finances - some will, some won't, but the smarter ones won't make the mistake of repeating the mistakes we made with the West in 1980s/90s. Chinese financing is a lot cheaper - and they ensure the roads are built - not like the West that simply hands in the money to the Dictator who swiftly moves it to Switzerland - and the entire nation has to pay at 20 - 30% interest rate (compounded).

Nobody is doing this kind of barter trade - exchanging a road for entire 20 years worth of cocoa production. That would bankrupt the nation and yield no benefits to the Chinese.

In addition, you haven't figured out this - the Chinese are also looking out for consumers in Africa. There are a billion people in Africa & the Chinese are dealing with a demographic crisis at home - they need more consumers and where to site new factories, 10/20/30 years down the line - Africa suits them quite fine - especially in coastal regions where literacy is quite high.

You heard Chinese already have factories in Ethiopia? Productivity isn't as high as at home - but in a few years they'll figure out how to make this thing work in Africa (logistics, supplies, partners & stuff) - & they take it up in a very big way. (Chinese are building a free trade/industrial zone in Lagos Nigeria).

As an African, I see the West stubbornly stuck in the past, while the Chinese are constantly redefining and adapting to new realities (consider how they adapted to South Sudan).

For instance, you see Africa as primarily a natural resource driven economy far into the future - Chinese are betting that consumption will be huge & light industry will pick up (hence the massive investment in electricity projects).

Chinese also know (by actually being on the ground, interacting & doing business - not "writing news stories") that Africa is not monolithic!

The Chinese KNOW that labor issues & support for dictators is a challenge, but from what I've learned from them in Africa, they're not going to simply sit down twiddling their thumbs - they are going to do something about it.

Meanwhile, the West isn't bring anything new to what has been a 400 year old dysfunctional relationship with Africa, no new thinking, no nothing - just blame the Chinese.

But it won't work.

[Dayuhan]

I don't think anyone is blaming the Chinese for Africa's current situation... more a matter of watching curiously to see how it all turns out. I personally suspect that things may get a bit messy down the line, but that's mainly disinterested observation: I don't think the US has anything much at stake one way or the other.

I think you may be overlooking a significant part of the difference between the Chinese and Western approaches: the Chinese can deploy state-directed investment as a tool of policy; the west cannot. Western States can direct aid, but investment in enterprise, whether light industry or resource extraction, is purely in the hands of the private sector. The US government can provide some incentives, which are not necessarily followed, but the bulk of the US private sector doesn't seem particularly interested in the African market. That may be at least in part because manufacturing of consumer goods, especially low priced consumer goods, is not a specialty of US industry: even the US gets them from China.

The Chinese model of state-directed investment as a policy tool cannot be replicated by the West; it's fundamentally incompatible with the Western economic structure.

[KingJaja]

David,

I think you may be overlooking a significant part of the difference between the Chinese and Western approaches: the Chinese can deploy state-directed investment as a tool of policy; the west cannot. Western States can direct aid, but investment in enterprise, whether light industry or resource extraction, is purely in the hands of the private sector. The US government can provide some incentives, which are not necessarily followed, but the bulk of the US private sector doesn't seem particularly interested in the African market. That may be at least in part because manufacturing of consumer goods, especially low priced consumer goods, is not a specialty of US industry: even the US gets them from China.

What do you think the French have been doing for the past 50 years? Or do you think Total (the major French oil company) - is not some form of state-directed investment?

Europe has advantages in Africa that the Chinese cannot even dream of - French have preferential rights to Niger's Uranium mines & control the money (CFA) of fourteen African nations - these are advantages the Chinese wouldn't even dream of.

I'm not going talk about preferential trade policies/tariffs (a colonial legacy) that Europe & the USA benefit immensely from.

Western media has done a great propaganda campaign on how the Chinese have a great advantage over the West doing business in Africa - that it is believed by many, doesn't make it true. It is not.

Most mining companies in Africa still come from the West - Rio Tinto does big business here - but Western media makes it look as if only the Chinese are gobbling up everything.

[davidbfpo]

Citing Bill (due to my length):

What is Europe's current approach to developing nations? What are the lessons for the U.S.?

Yesterday's prologue: Europe, especially as the EU gained momentum alongside increasing trade flows within the EU, in effect largely turned inward. Yes there were frequent summits, diplomacy meandered along, sometimes military might was deployed - for short periods, some trade, a lot of aid, holidays in the sun (in a few places) and growing immigration. It is remarkable how many of the rich and powerful, plus those in opposition, frequent some cities in Europe - not that governments talk to them much (Islamists from Tunisia are cited as an example).

OK, Europe's approach is a mix of national and EU priorities. As a number of EU members were never colonisers that helps; the Irish gain being a former colony in their easy access.

Firn no doubt knows far more, but many ex-colonies have very little non-natural resources to trade with us. Oil and gas is the exception, which affected the UK's stance on Biafra's attempt to secede from Nigeria (France covertly took a different stance).

Aid I think remains large, although in the UK three times more is provided via charities & NGOs. Remittances, no idea. I suspect many former immigrants keep their money here.

Very few colonies are significant to national security. Terrorism is often cited, although rarely impacting back here. India has a major internal issue, but rarely impacts here. The ex-colonies in the Sahel are large and thinly populated.

For the USA and developing nations then.

The USG must take into account a good part of the relationship is not controlled by the USG, i.e. private companies particularly in oil & gas. Multilateral financial and trade institutions maybe influenced. I know from a little reading that the prescriptions of the IMF, World Bank and development banks are often unacceptable.

'Think small, act small'. Limit USG actions to small things. In the economic and aid field that is already happening. Clearly state the agreed objective, engage in partnership and have an end date.

Wherever possible use locals, contractors and not USG staff. Westerners are often seen - by the public - as unwelcome intruders, riding around in 4x4s, staying in expensive hotels, lack language skills, empathy and don't stay long (many of these vices are very understandable form a Westerners viewpoint).

Assume that one day the public and politicians at home will be disgusted or frustrated with USG actions. Breaching human rights is one "big hole" to fall into. Always be prepared to exit quickly, painful I know.

Look at how many countries in East Africa prefer Western involvement to be restricted. Kenya appears to be moving that way, Tanzania has long followed this and Ethiopia is a "half-way house".

[davidbfpo]

KingJaja,

I don't dispute your remarks and my knowledge of Africa does not include knowledge of trade.

Now three decades ago I recall a conservative South African journalist remarking that sub-Saharan Africa had been written off by the West except for natural resources. It is hard now to disagree.

As for the French I know not. I would have expected after the Ivory Coast debacle that many expat French nationals calculation about life in Africa changed; were there not 50k French nationals living there IIRC.

[KingJaja]

David,

KingJaja,

I don't dispute your remarks and my knowledge of Africa does not include knowledge of trade.

Now three decades ago I recall a conservative South African journalist remarking that sub-Saharan Africa had been written off by the West except for natural resources. It is hard now to disagree.

As for the French I know not. I would have expected after the Ivory Coast debacle that many expat French nationals calculation about life in Africa changed; were there not 50k French nationals living there IIRC.

The two most important French colonies in West Africa are Ivory Coast & Senegal. I call them colonies because the relationship between France and Francophone Africa would be unthinkable in the Anglophone world.

But I need to add that trade was the driving factor for colonization & the Scramble for Africa. Trade has ALWAYS been central to the West's relationship with Africa - and we need to understand it from that foundation.

It was the oil palm of the Niger Delta (which fed the British Industrial Revolution - used as soaps, lubricants for machinery) that led to the Royal Niger Company which eventually led to the colony of Nigeria.

It is a pity that the US got to Africa in a big way when ideology, not trade was the major policy issue in Africa. (Carter spent half of America's aid budget to Africa on Mobutu - topic for another day).

For France & Britain (Shell in Nigeria), trade has always been the primary focus.

I think US finds it difficult to deal with China in Africa because this is not a battle of ideology, this has to do with trade - and US cannot compete with China on trade in Africa.

A common accusation leveled against the Chinese is this: "the benefits of Chinese trade aren't trickling down". To which the Chinese can very easily respond: "show us the benefits of US trade"? And truth is, there are next to none.