Tuesday, April 12, 2022

Africa is the final economic frontier


Under the current model of outsourcing to China and other Asian nations, it will be, over the next two decades, increasingly difficult to keep store shelves stocked in America and other Western societies at price levels frugal shoppers appreciate.


As China has grown to a $15.9 trillion economy and their public policies have focused on enlarging their middle class, in turn making their economy more of a participant than solely a provider, the cost of doing business is quickly rising there and China won’t be as attractive for outsourcing as it has been since the push for offshore manufacturing really hit its stride in the late-1970s.

That doesn’t mean the jobs are coming back here.


Being someone who is in the trenches every day as a domestic manufacturer, I can tell you that as much as Americans savor the thought of goods being produced on US soil, the chances of reshoring happening in significant volume again are slim. Philosophy and finance are two entirely different things.


Even the past two years of supply chain woes and inflation won’t go far in reversing the trend. One need only to look at face masks for an example. Numerous producers popped up in the states early in the crisis, all of which hospitals, states, and the federal government had direct access to. Not long into the pandemic, those entities abandoned the domestic producers for cheaper masks made in the country that likely unleashed the virus. 


The reality of today’s world is that globalization is and will be the way to do business. Most consumers, and the purchasing and sales managers who fill up the warehouses and stores for them, demand cheaply-priced if not cheaply-made goods and many corporations are more than happy to oblige. American companies (and buyers) committed to domestic manufacturing are now rarities.

Most of the world, from agricultural South America to the industrialized Far East, has already been pressured by traders from the richest nations to meet their demands and, in many cases, the well is dry from a potential price savings standpoint as the cost of labor is rising just as it has in China.


The African continent’s people, on the other hand, have remained relatively unmolested by Western profiteers since the days of the slave trade. Other nations have focused more on taking Africa’s natural resources rather than using their human resources. Consider the pitifully-low gross domestic product per capita among some of the countries: Rwanda ($798), Chad ($614), Sierra Leone ($486), Burundi ($274). The US’s GDP per capita, by comparison, is $63,544.


The continent’s population is in excess of 1.22 billion. Of them, 282 million people are starving. To put that number into perspective, the entire US population is nearly 330 million.   


Despite its original ill-intent of capitalizing on the poor of Africa, over the rest of this century, outsourcing and globalization will help Africa rise from a poverty that, truthfully, makes America’s impoverished citizens look like kings. Given implementation of Western economic practices, following the quality of life trends that we saw in industrial Europe, US, and Japan, the long-term future is economically bright and politically/socially responsible for Africans.

Some might discount the current lack of political morality on the continent as something that could prevent development. That was – and still is -- the case for China. But, Americans are more than happy to either overlook or work in conjunction with one of the most horrid communist systems in the world, one that still - even 32 years after Tiananmen Square massacre - squashes freedom and criticism. For all their focus on improving economics, Chinese officials don’t see personal liberty in the same light.  


Many African leaders are just as oppressive. But whereas China’s political system is old and deeply entrenched, most African nations have fragile systems, so newly employed Africans who will have something that only the few now possess (money) will ultimately become a financially and politically empowered people who can turn away decades of evil rule.


Is Africa’s infrastructure ready for all this?


Not now.


But, by historical standards, China was a backwards nation until only relatively recently in regard to infrastructure.


Now they have quality roads, impressive electrical generation, and vast cities that seem to pop up overnight. Whereas that’s been a public-private venture to bring them into the 21st century, Africa’s nations are lacking in wealth so it will be a mostly private investment led by Western firms.


But, as capitalism goes, if the need and reward are there for electricity, water, ports, and roads, the necessary investments will be made. Nearly a billion potential workers make for very attractive numbers for capitalists focusing on thrifty consumers in America and elsewhere, especially for as cheaply as those workers can be had at this time.

Africa is ready to boom. By 2040 many of the “Made in China” labels you see on items now will start to be replaced by “Made in” labels from far-flung locales like Kenya, Tanzania, and Mali.

It’s an ever-changing – and ever-shrinking - world we live in.


From the 28 March 2022 Greater Niagara Newspapers, Batavia Daily News, and Wellsville Sun

No comments: