The political survival of ruling elites is one of the major determining factors behind their trade policy choices. But trade policy choices can determine whether a country’s economy diversifies to reduce dependence on the production of a few goods or services. This phenomenon is most pronounced in countries whose economies are heavily dependent on a few commodity exports.
To understand this phenomenon better, I have looked at the behaviour of ruling elites in West Africa since the early 1960s. I focused specifically on their choices of trade policy and relations. I chose West Africa because some of the countries in the region, including Burkina Faso, Senegal and Ivory Coast, have basically been in a trade partnership with the European Union and its predecessor, the European Economic Community, since independence.
The behaviour of ruling elites is informed by the fact that economic crises often threaten their survival, resulting in political crises. A government that depends on a particular commodity for its revenue will feel threatened when the price of that commodity drops to very low levels, especially over long periods of time.
The ruling elites can respond to the fear of this threat in two ways. The first option is to try to diversify their economies to reduce dependence on one or a few commodity exports. The second option is to enter into trade agreements that guarantee the price of key commodity exports. This is what some West African countries have done. But the second option is a trap.
My research shows that trade partnerships with the EU generally function as a system of extraversion for West African ruling elites. To ensure their political survival, they tend to fashion their trade relations with the EU as one of dependency. These amount to the continuation of a colonial economic system, a neo-colonial relationship. It comes at the expense of economic diversification.
The key feature of the trade partnerships addressed here is their prevention of economic change in West Africa.
Neo-colonialism at work
For this research paper, which spins off from my doctoral thesis, I focused on the Yaoundé Conventions (1963–1975). I chose Yaoundé because not all West African countries signed up to it. This made it easy to compare the performance of countries that signed up to the convention against those that didn’t. This comparison allowed a better understanding of the convention’s economic impact on West African countries that signed up to it.
Benin, Togo, Burkina Faso, Senegal, Côte d’Ivoire, Mali and Niger signed up to the convention. Nigeria, Ghana, Liberia, Sierra Leone, Guinea and Gambia didn’t.
The economies of the countries that signed the Yaoundé Convention grew twice as fast as those that didn’t. The economy of Côte d’Ivoire, a signatory to the convention, grew at an annual average of 8.1% between 1961 and 1975. Ghana, which was not a member, grew at an annual average of 2.1% during the same period.
Furthermore, countries that signed up experienced fewer political crises during this period than non-members. This finding applies across a range of proxies for political crisis. Non-members of the convention had on average twice as many crisis as the affiliated countries did. Collectively, Nigeria, Ghana and Sierra Leone experienced eight military coups during the period of the conventions, meaning the three had an average of 2.6 coups each. The three didn’t sign up to Yaoundé. Togo, Burkina Faso, Senegal, Ivory Coast, Mali and Niger had six, translating into an average of one coup each.
There were also wide differences in the diversification efforts of the members and non-members. By the end of the Yaoundé Conventions, only two of the affiliated countries had changed one of their top three main export products. All the non-affiliates had changed on average two of their top three export products. This difference has crucial implications for understanding the actual effect of the trade partnership.
Economic crises often threatens the survival of ruling elites, resulting in political crises. A government that depends on a particular commodity for its revenue will feel threatened when the price of that product reaches a critically low level. Subsequently, ruling elites will seek economic change to safeguard their power base. This explains the diversification undertaken by the countries that didn’t sign up to the Yaoundé Conventions.
For the signatories, the partnership with the EU provided price support that maintained the existing economic system. This helped the signatory countries avoid the political conditions that drove economic change in the non-signatory countries.
Let’s take a look at Ghana and Côte d’Ivoire. In the 1950s, Ghana and Côte d’Ivoire had similar export portfolios (predominantly cocoa beans). Both had roughly the same levels of product and market concentration. This remained the case until the early 1960s when the price of cocoa fell below a sustainable level.
The response of the two countries is telling. Kwame Nkrumah’s government in Ghana plotted an economic course away from cocoa, cancelling its pending investment in the sector. This attempt followed a political crisis that had threatened Nkrumah’s position. As in other unaffiliated countries during this period, diversification in Ghana was an attempt to regain political legitimacy.
Côte d’Ivoire, on the other hand, under Houphouët-Boigny’s government, negotiated with the European Economic Community for a guaranteed price that was higher than the world market price. This was done within the framework of the Yaoundé Convention of 1963. This enabled the country to survive the decline in the price of cocoa. But Côte d’Ivoire’s response amounted to a neo-colonial economic system, meaning the continuation of a colonial economic system.
Economic diversification, particularly diversification from unproductive into highly productive economic activities, has been identified as crucial to sustainable development in Africa. But such changes seldom occur spontaneously without state interventions in the form of production or industrial policies. The logic of such policies follows the pursuit of political survival.
Since the Yaoundé Conventions, ruling elites in West Africa have consciously negotiated trade partnerships with the EU to protect existing economic systems against crisis in order to guarantee their survival. As astutely noted in the mid-1980s by political scientist John Ravenhill in 1985,
Lomé is a form of clientelist relationship — an attempt by weak states to construct a particularistic arrangement that would preserve their position in the EEC market and provide insurance against the insecurities of the marketplace.
A proper understanding of the EU’s trade partnership with African countries, and how it affects the incentive structure of ruling elites, is needed to truly understand the problems of diversification and industrial development in Africa. While the recent trend towards intra-Africa trade, in the form of the recent African Continental Free Trade Area, is positive, the fact is that the EU trade partnership is more important to some African counties than regional or continental trade.