The speech Meles Zenawi gave at the 5th Meeting of African Ministers of Finance, Planning and Economic Development

The Late Prime Minister Meles Zenawi gave this speech at the 5th Meeting of African Ministers of Finance, Planning and Economic Development in Addis Ababa on March 26, 2012.

Your Excellency Mr. Soulaymane Cisse

Excellency Jean Ping, Abdoulie Janneh

Excellency Former Presidents Mr. Mkapa and Mr. Kohler

Excellences, Ladies and Gentlemen

I wish to start my address by welcoming you all to Addis Ababa and wishing you success in your deliberations.

It has now become rather fashionable to characterize Africa as a potential Pole of global growth and this is so because indeed the possibility of Africa becoming such a pole has become quite clear for everyone to see.

A number of factors are identified to show that Africa has indeed such potential and the excellent issues paper prepared for this conference correctly highlights the key ones. The enormous natural resources of our continent, the demographic advantages of the so called youth buldge, better macro- economic management are in particular identified as key sources of Africa’s potential as a pole of global growth.

While I agree that these are indeed the main sources of our potential, one has to ask why these factors have became sources of growth rather than the curses of the lost decades. After all Africa’s natural resources have always been there including in the dark days of the last decades of the last century. The Demographic advantage we talk of has also been there and indeed was until recently considered as an important source of instability and violence as the youth buldge was characterized by massive youth unemployment. The reforms in economic and political governance which Africa carried out more than three decades ago has generated not growth and transformation but deindustrialization, the enfeeblement of the African state and the associated malaise that has characterized our continent for far too long. The vital question to ask is therefore what has happened to transform these factors into potential sources of a possible global growth pole.

I can think of three important global developments that have matured in recent years and that have transformed the environment for growth in our continent.

First, over the past three decades a number of countries have grown fast and become emerging economic powers. In particular the phenomenal growth of China and later on of India each with over a billion people has dramatically transformed the demand for and prices of our natural resource product in particular that of the products of our mineral and agricultural resources. The global terms of trade in these commodities has shifted dramatically. As a result investments in developing these resources in Africa have increased and continue to increase significantly. The returns to such investments to our economies have also markedly improved. These trends are expected to persist for at least a few decades giving us a unique window of opportunity to use our natural resources as a vital factor for faster growth and transformation.

Secondly, the emerging countries have reached a stage where they have to shade some manufacturing jobs and seek investment opportunities for their massive savings. The current chief economist of the World Bank who happens to have intimate knowledge of China’s economy has stated in a recent study that China alone will have to shade some eighty million manufacturing jobs mostly in labour intensive manufacturing over the next ten years. That estimate may well be on the high side but is indicative of the scale of change that is underway. At the same time, many of the emerging countries including the main oil producing nations have trillions of dollars in savings that they are unable to productively invest in their countries or profitably park in the advanced countries.

As a result of these developments Africa which over the past decades was de- industrializing while a number of Asian countries were engaged in massive industrialization now has the opportunity to catch the emerging wave of industrialization and relocation of labour intensive manufacturing. Our youth buldge can thus become not a source of senseless violence and instability but the source of cheap and productive labour that may enable us to capitalize on the emerging wave of industrial re-location.

Third, as a result of these developments we now have a massive global imbalance. The emerging economies are growing fast and have massive savings that cannot be productively used in the emerging countries themselves or in the developed world. The advanced countries have entered a new phase in their development characterized by anemic growth, massive public and private debt and a rapidly aging population. All attempts to overcome these global imbalances through retrenchment in the advanced countries are doomed to failure because the emerging countries alone are unable to compensate for the loss in global growth that this implies. The world now needs a new pole of growth to allow the advanced countries to reduce domestic demand and to reform. Reform in the advanced countries will be politically and economically unsustainable unless it is backed by growth in demand in new poles of growth.

Africa with its over a billion people, massive demand for investment in everything from infrastructure to social services is the only untapped source of global demand that could potentially fill the gap. The massive global saving that has now become part of the problem could become part of the solution if it were to be directed to investments in Africa. The current global environment thus creates a unique opportunity for us to use our demographic and natural resources advantage to attract investments and catch this new wave of industrial relocation. This I believe is why the curses of the 80′s have now become opportunities for the future.

The key question that follows is are we Africans able to exploit this window of opportunity to become the new growth pole. There is no simple answer to that but we at least know what we have to do to exploit this opportunity all the key points of which are mentioned in the excellent issues paper.

First and foremost we have to build effective and pro-development states in Africa, massively invest in our infrastructure, adequately train our people, promote manufacturing investment and technological capacity building and encourage growth and investment in our Agriculture. Not all 54 African countries are likely to do all of the things mentioned in the issues paper but the hope is that some of our countries will do most of the things that need to be done to create a growth dynamics with continental spillover effects that could then transform the prospects of the continent as a whole.

I think it is only correct and proper for me to mention an underlying principle that is not adequately highlighted in the excellent issues paper and without which none of the things that we agree need to be done can be done. We have to liberate our minds from the neo-liberal ideological shackles that have impoverished our thinking and hindered our progress.

This bankrupt ideology insists that the African state should be enfeebled and limits its role to that of a night watchman. We are all agreed that we need an effective state that intervenes effectively but selectively where ever there is a market failure that hinders or slows down our growth. Such a state can only emerge if we discard the bed time stories of the ideology such as that of a night watchman state.

We all agree that we need to make massive investment in infrastructure mostly through public investments. This is how the infrastructure of nearly all of the fast growing countries and regions has been built and is being built. The ideology however insists that infrastructure has to be built by the private sector and the state should limit itself to making these investments lucrative and largely risk free for the private sector. This is a key reason why there has been very limited investment in infrastructure in our continent for the past thirty years. We need to discard the shackles of the ideology and engage in massive public investments in public infrastructure while at the same time encouraging the private sector to fill in the gaps where it can.

We all agree that we need to educate and train our people to exploit this rare window of opportunity. The neo-liberal ideology tells us that as governments we should focus on primary education and perhaps to some extent secondary education. The rest is for the private sector to take care of and for individual families to finance. This is a recipe for failure and the perpetuation of unjust distribution of wealth. We need to discard the neo-liberal prescription and massively invest in tertiary education and technical and vocational training in addition to primary and secondary education and encourage the private sector to fill in the gaps where it can.

I can go on and on. The key message is that the neo-liberal paradigm which has devastated our economies over the past decades and which has now come back home to roost needs to be discarded before we can do any of the things that we need to do to transform our economies. We know what that Paradigm has done to sustain misery and underdevelopment in our continent. We now know what it has done to transform the financial sector of many of the advanced countries into Casino’s that have played a vital role in the current crisis. We need to free ourselves from the constraints of that ideology and pragmatically select our own path of development based on an empirical evaluation of what works and does not work for us. With this few comments let me hasten to add that I agree with the issues paper prepared for your conference and would indeed recommend it for your consideration and approval.

I thank you for your kind attention.