We Must Go the OPEC Way, If Necessary

By Duodu, Cameron | New African, February 2004 | Go to article overview

We Must Go the OPEC Way, If Necessary


Duodu, Cameron, New African


Our economic "under-development" is not a curse of nature but a man-imposed act of injustice. If the OPEC countries, with all the intrinsic social conservatism that plagues many of them, have made the intellectual leap that has freed them from the dictatorship of the rigged market-place, then we have our own selves to blame if we refuse to do likewise.

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Africans who understand economics tend to resent being presented with bald figures cited to indicate--for instance--that Africa is under-developed because it "only contributes about 3%" of world trade. Or that, as the World Bank put it in a paper published on 26 February 2001 entitled The International Development Goals: Strengthening Commitments and Measuring Progress: "Africa is now the region with the largest number of people living on less than US$1 per day."

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Unexplained and devoid of context, such figures, accurate though they might be, present a picture of Africa and Africans that is unflattering, to say the least. Africa is the second largest continent and yet produces only 3% of world trade? Ipso facto, the people must be lazy, or stupid, or both. When you know that you are neither lazy nor stupid, but are generally taken to be both, it is rather painful.

To understand why Africa's contribution to world trade constitutes a puny 3%, for example, you have to appreciate the yardstick being used to determine "world trade". The 3% in fact refers to the value, in US dollar terms, of Africa's exports. But Africa has no control over the value that is placed upon its exports. Africa is a price taker and therefore accepts whatever price is offered by the consumers of its products--mostly raw materials--which Africa cannot, as yet, process into finished goods at home.

At the same time, Africa buys not raw materials from its trading partners in Europe and America but finished goods whose prices are often determined by the vagaries of domestic demand. If Africa refuses to buy German cars, Germany will sell them at home or export them to Holland. So Africa cannot influence the price of German-manufactured cars. But Germany, together with its EU partners and the US and Canada (the G7), does determine what price it wants to pay for the coffee, cocoa, tin, iron, bauxite, manganese, copper, titanium, tantalum, uranium, timber, diamonds, gold and other products exported by Africa.

Not only that--because Africa's exports are bulk products (timber logs alone account for a huge amount of money earned by shipowners in Europe and America; as do cocoa, coffee and unprocessed ores like bauxite and manganese), Africa contributes a lot to the invisible earnings of Europe and America--through payments obtained in respect of shipping, insurance, brokerage and stevedoring. If you add that to the profits of, and wages paid by, the European and American firms that process African exports into finished goods before they export the goods, you can see how untrue the statement that Africa "only contributes 3% to world trade" is.

An even more important consideration is this: the prices paid for African exports could be far better if the G7 were interested in the fair trade to which they often pay lip service. Two events that are intertwined in a rather ironical way will clarify what I mean.

After the 1973 Arab-Israeli war, the Organisation of Petroleum Producing Countries (OPEC) increased the price of petroleum from $2.50 per barrel to $11.50. Since then, it is OPEC that has been controlling petroleum prices, which, as we know, have sometimes risen as high as $34 per barrel. How did this happen, especially since OPEC only controls 40% of global crude-oil production (although it does possess 77% of the world's proven reserves)?

The answer is political. OPEC was able to do it not only because oil is such a crucial commodity in the modern industrial world, but also because the oil giants that make huge profits from oil have a big political clout in the G7 countries and would not want their governments to do anything that would set the OPEC countries on a path of anti-Western defiance that could wreck the OPEC oil-fields. …

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