UBC Theses and Dissertations

UBC Theses Logo

UBC Theses and Dissertations

Stabilization of export proceeds in Tropical Africa Egner, Edward Brian 1964

Your browser doesn't seem to have a PDF viewer, please download the PDF to view this item.

Item Metadata

Download

Media
831-UBC_1964_A8 E4.pdf [ 5.06MB ]
Metadata
JSON: 831-1.0058339.json
JSON-LD: 831-1.0058339-ld.json
RDF/XML (Pretty): 831-1.0058339-rdf.xml
RDF/JSON: 831-1.0058339-rdf.json
Turtle: 831-1.0058339-turtle.txt
N-Triples: 831-1.0058339-rdf-ntriples.txt
Original Record: 831-1.0058339-source.json
Full Text
831-1.0058339-fulltext.txt
Citation
831-1.0058339.ris

Full Text

STABILIZATION OF EXPORT PROCEEDS IN TROPICAL AFRICA BY EDWARD BRIAN EGNER B.A., The University of B r i t i s h Columbia 1957 A THESIS SUBMITTED IN PARTIAL FULFIIMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS i n the Department of Economics We accept t h i s thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA A p r i l , 1964. In p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t of the requirements f o r an advanced degree at the U n i v e r s i t y of B r i t i s h Columbia, I agree that the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r reference and study. I f u r t h e r agree that per-m i s s i o n f o r extensive copying of t h i s t h e s i s f o r s c h o l a r l y purposes may be granted by the Head of my Department or by h i s r e p r e s e n t a t i v e s . I t i s understood that;copying or p u b l i -c a t i o n of t h i s t h e s i s f o r f i n a n c i a l gain s h a l l not be allowed without my w r i t t e n p e r mission. Department of The U n i v e r s i t y of B r i t i s h Columbia, Vancouver 8, Canada ABSTRACT This study contains an attempt; to define and analyse the elusive concept of "stabilization"' i n i t s application to the export production of countries im A f r i c a south of the Sahara* The writer has found i t hard to place his analysis in; a s p e c i f i c a l l y African context. This d i f f i c u l t y arose partly from the lack of data and the paucity of general reference works based upon African economic conditions.. But i t was also due to his desire to treat the subject of s t a b i l i z a t i o n against a broad background of the social and economic factors which t y p i -c a l l y bear upon policy-making i n A f r i c a . The Introduction contains a methodological discussion of the means by which an economic analysis might take e x p l i c i t notice of African social* p o l i t i c a l and administrative conditions* The conclusion i s reached that i t i s impossible to blend a l l these factors into one analysis. The primarily non-economic background material i s therefore consigned to Chapters I and I I , with the discussion of the main theme following i n Chapters III and IV. Chapter I contains f i v e numbered sections. (l) The reader i s introduced to the newly-independent 'Country X', an expositional device for lending coherence to material drawn from several different African countries* (2) Under the heading ' P o l i t i c a l Factors* there i s a discussion of Pan-Africanism and of the "Mobilization' 1 form of p o l i t i c a l organization. (3) Under 'Social Factors', there are brief outlines of several representative social problems, followed by an interpretation of the economic rationales underlying the 'hoarding' of cattle and the 'extended family system'. (4) Under 'Public Adminis-tra t i o n * are discussed standards of morality i n public a f f a i r s and the need for eliminating bureaucratic r i g i d i t i e s . (5) The summary points to the "confused and confusing"' general situation i n "X", and enjoins caution and a "piecemeal" approach to the application of economic theory. Emphasis i s placed upon the social disruption which inevitably attends economic development of primitive societies. In Chapter I I , to i l l u s t r a t e the importance of social and p o l i t i c a l factors i n economic policymaking, there are brief reviews of three questions. ( l ) The use of psychological indoctrination to speed economic development. (2) The pros-pects for comprehensive planning i n the l i g h t of the physical and conceptual d i f f i c u l t i e s experienced i n compiling s t a t i s t i c s . (3) The "export-bias" doctrine, HUa Myint's refutation, and h i s alternative formulation. The conclusions are broadly similar to those of Chapter I. i v Chapter III analyses the case for a general international commodity price s t a b i l i z a t i o n scheme. Following a review of the supply and demand factors responsible for the present pattern of international trade, i t i s concluded (a) that such a s t a b i l i z a t i o n scheme would be administratively, p o l i t i c a l l y and economically unworkable. (b) that the proposal i s essen-t i a l l y one for achieving disguised income transfers from r i c h to poor countries, and (c) that s t a b i l i z a t i o n of producer prices can equally well be achieved by domestic action. The discussion of domestic s t a b i l i z a t i o n policy i n Chapter IV centers upon the marketing of Ghana cocoa. The ambiguities of s t a b i l i z a t i o n , which may refer to different periods of time, and to either prices* money incomes or real incomes are f u l l y discussed. The effect of low prices upon production incentives i s treated at length, as i s the use of the s t a b i l i z a t i o n authority to extract "forced savings" from peasant producers. The conclusion i s generally i n favour of nationals s t a b i l i z a t i o n schemes, provided their objectives are s t r i c t l y defined. Chapter V summarizes the conclusions already set out for the preceding chapters. ACKNOWLEDGEMENTS I am greatly indebted to my supervisor, Professor I. I. Poroy for his valuable c r i t i c i s m s , suggestions and encouragement. I should l i k e also, to acknowledge my obligation to the Canadian Common-wealth Scholarships Committee for making my M.A. programme possible. V CONTENTS TITLE PAGE i ABSTRACT i i TABLE OF CONTENTS v i ACKNOWLEDGEMENTS v i i v i TABLE OF CONTENTS CHAPTER Page INTRODUCTION 1 1. Methodology 2. Conceptual Framework (a) The 'Model" I "COUNTRY "X": SOCIAL AND POLITICAL 7 1. General Description 2. P o l i t i c a l 3. Social 4. Public Administration 5. Summary II THREE EXAMPLES OF THE IMPORTANCE OF SOCIAL AND POLITICAL FACTORS IN THE ANALYSIS OF ECONOMIC POLICY QUESTIONS . 30 1. Psychological Indoctrination 2* Comprehensive Planning 3. 'Export Bias" III INTERNATIONAL STABILIZATION SCHEMES 49 1. Definitions 2. Patterns of Trade 3. Supply and Demand Factors 4. International S t a b i l i z a t i o n Schemes 5. Summary and Conclusions IV DOMESTIC STABILIZATION SCHEMES 67 1. West African Marketing Boards 2. S t a b i l i z a t i o n of What? 3. The Bauer/Paish Analysis 4. Extension of Production at the Margin 5. World Cocoa Market Conditions 6. S t a b i l i z a t i o n and Forced Savings 7. Summary and Conclusions V SUMMARY AND CONCLUSIONS 102; APPENDIX: STATISTICAL TABLES 1065 BIBLIOGRAPHY 113 INTRODUCTION This paper deals with "applied economics", i . e . the question of s t a b i l i z a t i o n policy, with particular reference to the export production of countries i n A f r i c a south of the Sahara. The main theme i s not, however, developed at the outset. The f i r s t two chapters w i l l be found to consist mainly of background material, for reasons which w i l l be d i s -cussed below. The investigator who wishes to examine economic policy matters i n a meaningful way should f i r s t ask himself what people are going to do, and why. He should, i n fact, t r y to define his frame of reference. At f i r s t sight i t may well appear that economic theory by i t s e l f cannot t e l l him much about the working of an underdeveloped economy. Irrational behaviour i n economic terms i s not necessarily seen as such by the people concerned, or by p o l i t i c a l s c i e n t i s t s , anthropologists and administrators, amongst others. These individuals may well claim (ex post) that, i f consulted, they would have forecast that " i t wouldn't work". The ideal conceptual framework would apparently be a synthesis of detailed empirical studies made by social s c i e n t i s t s of a l l persuasions i n a single underdeveloped country and directed solely toward the solution of a single economic problem. But for obvious reasons* t h i s ideal i s un l i k e l y to be realized. In these circumstances* two main methods of 'clearing the ground 1 for economic analysis can be discerned. The f i r s t i s that of the generalizing sociologist who explains and pre-d i c t s on the basis of 'broad movements' or 'salient features' which have been revealed to him i n the course of his encyclopaedic studies. This approach i s , so far as economics i s concerned 1 a mile wide and an inch deep'. The writer does not propose to be drawn into the error of trying to depict and explain an underdeveloped society as a 'whole*. The second and more respectable approach proceeds by defining the nebulous 'characteristics of underdevelopment* i n purely economic terms. This method i s i both l o g i c a l and con-venient* but i t s usefulness i s limited by the fact that analysis based upon general tendencies has to be undertaken at a rather r a r i f i e d level of abstraction. This i s inevitably so, because the d e f i n i t i o n a l framework i s at once too broad for treatment of specifics and too narrow to allow important social and p o l i t i c a l factors to be taken into account; the analysis, at least from the viewpoint of the other social sciences, as well as the layman, appears to take place i n a vacuum. And i t should be stated at this point that we are searching for a conceptual framework which w i l l be acceptable to economists and non-economists a l i k e . It may reasonably be asked why a "generally acceptable" framework should be sought. Obviously} i t may be said, a theo-r e t i c a l exercise i n economics should s a t i s f y economists, not laymen or anthropologists. A possible answer to this statement i s that one can no more sat i s f y a l l economists than a l l men. Furthermore, the writer i s i n a fundamental sense more i n sym-pathy with anthropologists and laymen than with a certain class of development economists. He has, therefore, been led to seek a frame of reference with general v a l i d i t y . To explain: some c r i t i c s of the method of economics appear to be obsessed with "facts"; t h i s obsession i s generally said to be due to a f a i l u r e to distinguish between the inductive method of economics and the deductive nature of the other social sciences; the economist starts with a p r i o r i , i n t u i t i v e l y known, pr i n c i p l e s , whereas the others attempt to deduce their prin-c i p l e s from facts. Hence c r i t i c i s m of economics by social s c i e n t i s t s who mistake the nature of the inductive method. There i s much truth i n this explanation, but i t begs the more basic question of the res p o n s i b i l i t y for advocating p o l i c i e s which may c o n f l i c t with widely-recognized humanitarian or ethical p r i n c i p l e s . The very preoccupation of the non-economist with fa c t s , rather than the abstract principles of economic science, may enable him to visu a l i z e with greater c l a r i t y the effects i n 4 -terms of human suffering, or perhaps enslavement, of the adoption of certain economic p o l i c i e s . So far as this i s true, the re-sentment vhich undoubtedly exists amongst anthropologists and others against abstract economic theorizing about underdeveloped countries, i s wholly understandable and cannot be discounted by reference to a methodological s p l i t . The economist who wishes to avoid being labelled inhuman, ignorant, or totalitarian-minded, would be wise to give e x p l i c i t recognition to the social and p o l i t i c a l factors which bear upon the application of economic analysis to the problems of the poorer countries. To deal d i r e c t l y with the topic of th i s thesis, sta-b i l i z a t i o n i s a policy matter. As such i t f a l l s within the province of p o l i t i c i a n s , who practice 'the art of the possible'* I t therefore seems that a pragmatic and comprehensive discussion of s t a b i l i z a t i o n policy i n A f r i c a should include d e t a i l s of some of the specific factors which define the l i m i t s of 'the possible' for the policymakers concerned. The trap here i s that introducing social and p o l i t i c a l factors into the economic analysis would take us back to the obsolete method of the generalizing sociologist. The search for a generally acceptable framework for analysis of economic po l i c y measures must therefore lead us to a compromise. The framework adopted should preferably avoid introducing extraneous - 5 -matters into the economic analysis, at the same time acknowledging their existence and importance. The expedient adopted f a l l s far short of the i d e a l . Nevertheless i t appears to have some ad-vantages for treatment. Chapters I and II contain as background to the more formal and purely economic analysis of Chapters III and IV, a p a r t i a l "composite picture" of a newly independent African country. This 'model' which i s l i k e l y to draw cries of " d i l l e t -antism." from a l l quarters, i s not aimed at comprehensiveness. It i s rather an attempt to sketch a few of the factors which t y p i c a l l y affect the application of economic theory i n similar countries. Perhaps i f i t i s clearly understood that no grandiose description of A f r i c a i n general, or of any African country i n particular, i s intended, the 'model' w i l l provide a suitable background against which to assess the a p p l i c a b i l i t y or otherwise of the analysis of the later chapters. If i t does this even moderately well the writer w i l l be s a t i s f i e d . A l l names for the 'model' would seem to someone to be either too frivolous or too pompous, so i t i s named simply "Country X". Most of i t s characteristics are shared by a dozen or more real countries i n A f r i c a and none i s to be found i n fewer than f i v e . I t must be pointed out, however, that the composite picture i s greatly oversimplified, i n the sense that - 6 -the writer i s aware of no real country i n Af r i c a south of the Sahara which has fewer major problems than this one; e.g. the governments of many real African countries would consider their worries over i f they only had two tribes and two languages to reconcile; the postulated scales of cash crops, water resources and infrastructure development are also on the generous side. L i t t l e remains to be said by way of introduction* I t i s hoped i n the course of the description of Country "X" to throw l i g h t upon some of the circumstances i n which i t i s probable that economic p o l i c i e s such as those analysed i n Chapters III and IV w i l l have to be made to work. I f , after a l l that has been said, the material contained i n Chapters I and II s t i l l strikes the reader as having l i t t l e relevance to the main theme, the writer can only beg indulgence for his own peculiar viewpoint, which abhors the p o s s i b i l i t y of judging African problems i n the l i g h t of any but African conditions. CHAPTER I: COUNTRY "X": SOCIAL, POLITICAL AND PUBLIC ADMINISTRATION I The chief characteristic, of "X" from the Western point of view i s poverty: per capita annual income of the population does not exceed f i f t y d o l l a r s . F r o m the local inhabitants 1 standpoint* the most important thing about their country at the present time i s not poverty, but the attainment of p o l i t i c a l autonomy, which i s expected to conquer many e v i l s , of which poverty i s only one. "X" has recently emerged from about sixty years of colonial rule, which was devoted mainly to the establishment of an e f f i c i e n t and f a i r l y humane system of internal security. During the ten years before "X" gained independence, the system of internal security took the strain while the colonial regime i n i t i a t e d a certain amount of infrastructure development, involv-ing additions to medical, educational, and agricultural extension services, and elaboration of the f a i r l y extensive communications network which already existed to serve the needs of the forces of law and order. ( l ) Ghana's per capita income of $156 i n 1955 was probably the highest i n tropical A f r i c a . See W. A. Hance, African Economic  Development, New York, Harper, 1958, p.2. - 8 -At the time of which we write, "X" i s under the leader-ship of a group of sincere and dedicated men, whose struggle against the t r a d i t i o n a l i s t leadership of the chiefs occupied most of the dying years of the colonial regime, and ended with absorption of both antiprogressive and 'modernizing autocratic 1 elements of the chieftainship by their mass p o l i t i c a l party* They now command an overwhelming measure of support throughout the country. With popular acclaim s t i l l ringing i n their ears, they have announced a rather ha s t i l y drawn-up "Plan for Economic Development of X". I t i s hoped "to double real national income within ten years, quadruple i t within twenty". Although we are interested primarily i n the p o s s i b i l i -t i e s of economic development for "X", we must know something of the aspirations, fears, standards and a b i l i t i e s of both the leaders and the rest of the population before we can say anything about their potential for development. Before moving on to purely economic questions we shall therefore take a glance at the p o l i t i c a l and social framework of "X". Treatises have been written about such matters, and i t would obviously be unwise to attempt any sort of summary. Since our interest i s primarily economic, we can perhaps p r o f i t most by trying to gain insights from some of the conclusions of experts i n the respective f i e l d s of p o l i t i c a l science, antfaro-- 9 -pology and public administration. The remainder of t h i s chapter, under the headings " P o l i t i c a l " , "Social" and "Public Administra-ti o n " , w i l l be devoted to a selection of such recent findings as may bear d i r e c t l y upon the analysis of economic development i n A f r i c a south of the Sahara. II POLITICAL FACTORS The p o l i t i c a l leaders of "X" are heavily imbued with pan-Africanist sentiments. Backed by a mass party drawn from a l l sections of the populace, they have created a p o l i t i c a l system of the "mobilization" type. A word about both these concepts i s i n order. Pan-Africanism i s , as yet, "neither a r e l i g i o n nor a (2) f u l l y developed ideology." x ' I t does not represent a trans-cendental system of be l i e f compelling man's allegiance to a system of moral imperatives, nor does i t advance a particular code of ethics. In i t s p o l i t i c a l aspect, i t argues for p o l i t i c a l independence and i t points to the s i m i l a r i t i e s of the tasks of p o l i t i c a l leaders i n developing their countries; i t r e l i e s , too, on similar sympathies born of a common colonial heritage. A l l these, united by a bond of colour, are expected to produce (2) D. E. Apter, The P o l i t i c a l Kingdom i n Uganda, Princeton University Press, 1961, pp. 6-7. - 10 -new unities i n a free A f r i c a . But "pan Africanism i s not a new c i v i l i z a t i o n " ; v ' i t i s therefore at the mercy of traditional factors i n African society and i s vulnerable to the p o l i t i c s of parochial nationalism. I ts chief aim i s that people of colour be free to make their own choices* psychologically through the achievement of independence* and s o c i a l l y by using p o l i t i c a l means to material development. Fan-Africanism i s essentially a p o l i t i c a l movement. I t i s bred out of the needs of nationalism* and i t s f i e l d of action i s circumscribed by those needs* Faced with traditional r e l i g i o n * belief* and practice* i t feels i t s e l f i n danger* for i t cannot substitute one be l i e f for another; rather " i t offers (4) emancipation from be l i e f i t s e l f . " Hence there i s an i n -creasing reliance on the state as more than just a p o l i t i c a l form. "The state aquires a special meaning and a mystical In) revelance when pan-Africanism i s the ideology of nationalism". v ' Pan-Africanist leaders t y p i c a l l y create p o l i t i c a l systems of the "mobilization" type. Dr. Apter considers the chief characteristic of such systems to be "ideological s p e c i a l i -zation," which he describes as follows; (3) Loc. c i t . (4) Loc. c i t . (5) Loc. c i t . - 11 -Although i t tends to have very pronounced ideological vievs on the main issues of development, a mobilization system i s i n a peculiar sense less i d e o l o g i c a l than Utopian. Funda-mentally, the party or the state w i l l most often act on grounds of expediency and necessity, using ideology to give perspective and j u s t i f i c a t i o n for what already appears necessary. Thus the immediate tasks of the day, whether to build a dam, change the tax structure, or modify the p o l i t i c a l arrangements i n government, are put i n the context of ideological slogans as a form of communication. A moral component i s brought i n by our assuming some future new society which the acts of government and party are supposed to induce. Nevertheless, except where p o l i t i c a l leaders feel called upon to j u s t i f y t h e i r decisions and actions, opportunism remains more com-pe l l i n g than ideology. The p o l i t i c a l "culture" of the members i s based on their common organizational a f f i l i a t i o n . Men of diverse views w i l l have as their overwhelming "ideological" commitment devotion to the organization i t s e l f . The party the views of Thomas Hodgkin, are worth quoting at length for his; more sympathetic interpretation of the rationale underlying the mobilization systems. Hodgkin says: ...democracy, i n the context of an independent African state, also implies centralization. The mass party, having concentrated i t s efforts during the colonial period on chal-lenging, attacking, and detaching popular support from the old regime, i s faced with the problem of strengthening the power of the new regime. Moreover, i t has to undertake this task without being able to make use of many of the techniques which were available to the old regime. I t cannot enjoy the prestige of a conquering minority, and inculcate habits of subordination i n the governed, since i t preaches equality, and the doctrine of 'the common man' .... I t cannot i n s i s t that a respectful social distance should be preserved between governors and governed, since i t i s by i t s nature a fraternal party. I t normally lacks a corps of highly trained c i v i l servants. I t cannot r e l y on a system of alliances with well-disposed pashas, amirs, chiefs, notables, and marabouts. (6) Apter, op. c i t . , p.23. (or the state) Without disturbing the v a l i d i t y of Apter's analysis, - 12 -If i t s authority i s threatened, there are no large reserves of metropolitan armed forces on which i t can draw. Hence, i n i t s efforts to strengthen the central power, the party i s bound to depend, to a very large extent, on the effective-ness of i t s own organization, the main new source of power at i t s command.V7) Hodgkin's further comments are of direct relevance for economic policy: There are other reasons why mass parties are inclined to i n s i s t that 'democracy implies centralization*. Colonial regimes attempt, unsuccessfully, to maintain some kind of social equilibrium. Mass party governments, on the other hand, are committed to speeding up the process of economic and social change. Again, this i s partly what 'democracy' means i n the contemporary African context: opening up new p o s s i b i l i t i e s of satisfaction for 'the people' .... 'democracy' has to be understood as involving a variety of economic and social objectives: the expansion of national output and national income; a more effective mobilizing of labour; a more rapid development of power, industry, and communications; the elimination of i l l i t e r a c y and 'backwardness' through mass education; the provision of universal, free, primary education; and, especially i n Muslim areas, the emancipation of women. The need to carry out a wide range of new and d i f f i c u l t tasks tends further to stimulate the reinforcement of the central power. (8) Much more could be said of the role of the p o l i t i c a l system i n Country "X" , but we shall now pass on to review some of the social factors which are important from the economic point of view. (7) T. Hodgkin, African P o l i t i c a l Parties, Penguin, 1961, pp. 159-160. (8) Hodgkin, op. c i t . , p. 160 - 13 -SOCIAL FACTORS (9 "X" i s big, and, l i k e most African countries, empty. Population densities, so far as tbey are known - there has never been a f u l l - s c a l e census - vary from 5 to 300 per square mile. There are two coastal towns, the "powerhouses"' of the p o l i t i c a l system, former centres of the colonial administration, now respectively the seat of Government and the main port of "X". Here l i v e many urbanized Africans, perhaps too many. Squalor and unemployment are r i f e . A high proportion of the educated population of "X" i s among the urban unemployed. Manpower i s apparently being wasted. From the economic point of view, that i s a l l we need say of the urban population, although much more could be said about the p o l i t i c a l and social aspects. In the hinterland, the population i s divided almost equally as to numbers between the two main tribes of "X". One of these, generally acknowledged to be the more "progressive", i . e . westernized, inhabits only one-eighth of "X", but this area i s composed of the two main river valleys of the country, where the land i s f e r t i l e , f i s h are a staple item of diet, and cash crops - more about these later - are grown. Of the social (.9), Myrdal• s assertion i n International Economy, p. 193, that ' a l l underdeveloped countries are overpopulated,' i s simply untrue of most parts of A f r i c a . - 14 -conditions of this t r i b e , we shall have occasion to write i n a la t e r section. A quarter of the area of "X" i s tsetse f l y habitat. Governmental measures i n this direction have concentrated upon containment of the f l y within the area i t presently occupies. Eradication of the f l y and reclamation of this land w i l l have to await a s c i e n t i f i c b r e a k t h r o u g h . I n the meantime, neither humans nor domesticated animals can l i v e i n th i s area, because of trypanosomiasis, or 'sleeping sickness'* The other main tr i b e , which has existed upon amicable terms with the r i v e r dwellers for centuries, i s composed of settled pastoralists, who l i v e i n villa g e s but maintain their herds at "cattle posts" which may be as much as 100 miles from the v i l l a g e s . Theirs i s the drier part of the country, with good grazing but l i t t l e surface water during the greater part of the year. Land i s p l e n t i f u l , water i s not. Land i s also "public property" i n the s e n s e that i t belongs to the entire p e o p l e . T h e chiefs perform the function of allocating land among the people. In recent years the colonial regime has (10) I0f> of the area of Southern Rhodesia and Kenya i s occupied by tsetse f l y and therefore v i r t u a l l y uninhabitable by people or domesticated animals; figures for Uganda, Tanganyika and Northern Rhodesia are 32#, 60^ and 60^ respectively. (W. A. Hanee, African Economic Development, M.Y., Harper, 1958, pp. 160 and 189.) I t i s frequently estimated that discovery of a low-cost insecticide for tsetse f l y would release an area of A f r i c a of the same size as the United States for grazing and human occupation. ( l l ) M. J . Herskovits, Economic Anthropology, N.Y., Knopf, 1952, ?p..324. - 15 -provided them with boreholes for their c a t t l e , which have multiplied as a r e s u l t . Newly-trained agricultural demonstrators have arrived to help them increase their subsistence production of sorghum and maize, which, together with game meat form the staple items of di e t . I t i s estimated that at present only 5$ of the potentially arable land i n this part of the country i s under cul t i v a t i o n . But the people are preoccupied with (12) c a t t l e : agriculture i s women's work, herding and hunting are for the men, who help their womenfolk only with the ploughing. They have adopted new iron ploughs which are clearly superior to the old implements, but only a few of the more modern-minded have yet accepted the hybrid maize seeds which they have been pressed to try by the agricultural demonstrators. I t has been well said that "the pastoralist's scorn for agriculture and i t s practitioners i s of the same order as an eighteenth-(13) century gentleman's scorn for commerce". Government veterinarians have had l i t t l e success i n persuading the people to improve the quality of their livestock, and less i n inducing them to put the cattle to market. How much of this f a i l u r e i s due to the Government's own cumbersome machinery of stock routes and quarantines i s hard to say. Certainly i t seems unwise to (12) 'Among the Baganda alone, i n almost a l l A f r i c a , has a balanced and effective fusion between agriculture and pastoral a c t i v i t i e s been achieved.' (C. D. Forde, Habitat, Economy  and Society 15th Ed.) London, Methuen, 1957, p. 398. (13) Ibid., p.406. - 16 -blame the conservatism of the people u n t i l t h i s machinery has been thoroughly overhauled. True, many more cattle are sold now than i n the past, but their absolute numbers have continued to grow i n far greater proportion than the sales. Some estimates put the numbers of cattle at twenty for every man, woman and child i n the t r i b e ; s t i l l there i s no willingness to s e l l . Overgrazing around the boreholes, deterioration of pastures, increasingly evidence of malnutrition i n the c a t t l e , these were the problems which eventually led the colonial regime to attempt to impose compulsory lim i t a t i o n of livestock i n denuded areas, and to try by means of punitive taxation to induce the people to market at least ten per cent of their (14) cattle each year, instead of their present fiv e per cent. x ' The attempt to override on economic grounds the soeial factors which made retention of cattle de rigneur for the tribesmen had the unexpected result for the colonial regime of hastening i t s own demise. The natural exasperation of the pastoralists at the attempt to deprive them of their "unearned increment" was enough to make them p o l i t i c a l l y conscious at l a s t . This result, which the nationalist p o l i t i c a l leaders had been unable to accomplish unaided, was to lay the basis for the countrywide mass party which dominates "X", at the present (14) This compares with 10/& -15^ from European-owned farms i n A f r i c a . (Basutoland, Bechuanaland Protectorate and Swaziland: Report of An Economic Survey Mission, London, HMSO, 1960, p.56.) - 17 -time* Thus: the chiefs supported the colonial regime i n the matter of reduction of cattle densities; the nationalists supported the people against the chiefs and the colonial regime. Today the leaders of "X", are faced with the problem of persuading the people that livestock limitation, which was unpatriotic yesterday, i s today a necessary economic measure. But what of the social attitudes which underly t h i s ' i r r a t i o n a l * conduct of the pastoralists? Perhaps they a l l come under the broad heading of "social security"? The i n s t i t u t i o n of lobola, bogadi, or "bride wealth," whereby cat t l e are handed over by the bridegroom's family to the bride's family as a bond for good performance, can certainly be inter-preted i n these terms. But the cattle are also the basis of a legal marriage. Thus, unless the animals have been: trans-ferred, the man may have no legal claim to the children of the marriage. The cattle are contributed by various members of the bridegroom's family; upon receipt, they are allocated to the proper relatives of the bride, to be held i n trust to meet such contingencies as desertion by the husband, funeral expenses, and so on.^ 5^ Customs of this sort naturally affect willingness to s e l l cattle which are held i n trust. Nevertheless, they (15) I. J . Schapera, A Handbook of Tswana Law and Custom, London, 193a, pp. 125-147. - 18 -have economic aspects i n that they both affect the dis t r i b u t i o n of vealth and involve the exchange of two goods of great impor-tance to the primitive economy - cattle and women* who are the chief source of labour i n agriculture. Thus we may hazard that a returnable marriage payment i s a form of investment i n return for which the groom obtains a claim on the services of his wife and of her children by him. Whichever interpretation may be adopted i n particular circumstances* however, we may postulate that the central assump-t i o n of economic theory - that of the economic disposal of resources - i s i n no way v i t i a t e d by the unfamiliar nature of cultural patterns i n an African community. Whilst the uses to which cattle are put may seem strange to a Western observer, a herd of cattle i s certainly not squandered by an African owner. On the contrary, a l l evidence points to the fact that he most: carefully weighs the uses to which his animals might be put; some w i l l be used for a s a c r i f i c e , some for a wedding portion, some to relieve a necessitous r e l a t i v e , some as g i f t s ( i . e . taxes) to the chief. It no mere form of words to say that c a t t l e are highly valued among the Bantu; this statement points to one of the central facts of their l i v e s , and i t s meaning l i e s i n their behaviour, which carries out an extremely careful d i s -posal of these objects of wealth. - 19 -Thus i n the primitive society the economic management of c a t t l e i s guided by their power to s a t i s f y a series of wants, both present and future* Their simplest use i s that i n which they give milk as food. The chief u t i l i t y of milk i s i n the nourishment of young children; but even here the milk serves as more than as a mere consumption good. In keeping children a l i v e , or making them strong i t i s serving i n a sense as a producer good or c a p i t a l , because the main hope of economic security for the tribe l i e s i n the maintenance or increase of i t s working capacity. The milk given to the children i s thus invested i n future production. ' Cattle are able to satisfy other complex wants. Their slaughter for food has from time immemorial been associated with the ploughing and harvesting seasons* Here the decision i s to provide fuel so that more human energy w i l l be available to produce more grain. Even when cattle are given to a r a i n -making wizard i n payment for expected services, this i s investment, whether wise or not. In a l l the manifold uses of cattle i n a traditional society, we can detect the element of provision for the future. I t i s apparent that the high valuation on cattle has resulted (16) D. M. Goodfellow, Principles of Economic Sociology, New York, The Humanities Press, 1950, pp. 12-13. 20 -largely from their a b i l i t y to contribute to the production of future supplies. This i s clearly the function of ca p i t a l , and from the economic viewpoint we may regard the cat t l e as producer goods. I t appears l i k e l y that when closer acquaintance with the market economy has convinced the cattle owners that pro-v i s i o n for the future can safely be made by other means, they w i l l become more w i l l i n g to send their cattle to market i n exchange for goods of more immediate u t i l i t y . A favourite object of v i l l i f i c a t i o n by economists i s the "extended family system". I t may be admitted that where neighbours or relations, however distant, can always be depended upon to lend a helping hand, incentives are l i k e l y to be diminished. Conceptually too, the interdependence of v i l l a g e l i f e presents great d i f f i c u l t i e s : Anyone who has ever t r i e d to c o l l e c t family income and expenditure budgets i n a central African v i l l a g e w i l l have been struck by the complications of the g i f t pattern and the d i f f i c u l t y of analysing i t i n Western economic concepts. Time and again i n answer to t h e q u e s t i o n i 'And what did you give i n return for such-and-such a good or service?* comes the reply 'Nothing. He did i t to help me.' Rarely, i t seems does the average v i l l a g e r build his house alone. I t i s generally b u i l t with the assistance of neighbours and not necessarily always with a beer party to cheer his helpers. Even where a beer party i s held i t i s by no means certain that i t i s a "quid pro quo" rather than a celebration for which the j o i n t labour pro-vided the occasion. In effect, to decide whether an a c t i v i t y i s a g i f t or represents a contribution to economic - 21 -output, i t i s necessary to decide whether or not i t i s made i n reasonable expectation of a corresponding return: or whether i t establishes a claim (however qualified) to such a return.(17) The social obligation to extend indiscriminant hos-p i t a l i t y to rel a t i v e s , friends and co-villagers w i l l probably not survive the t r a n s i t i o n to a f u l l money economy. I t i s apparently a legacy of a subsistence economy i n which surpluses could not be marketed regularly, and the obligation therefore emerged to distribute them to r e l a t i v e s , guests, retainers and so forth. Observations i n areas at intermediate stages of social change show a tendency for the African who wishes to acquire possessions to escape his kinship obligations by migrating temporarily to another area, where he w i l l work for wages u n t i l he has accumulated enough money to achieve his limited objective. This practice weakens the t r a d i t i o n a l forms of authority and security i n the v i l l a g e and contributes to such social problems as temporary family break-ups i n the v i l l a g e s and the growth of (18) pr o s t i t u t i o n i n the towns. Economically, however, the increase i n migratory wage-labour w i l l benefit the economy, since the opportunities for employment must exist before such a prac-t i c e can arise. (17) P h y l l i s Deane, Colonial Social Accounting, Cambridge, CUP, 1953, p.126. (18) For det a i l s of this process, see H. Fearn, An African  Economy, O.U.P. 1961, p.230. - 22 -The general subject of labour motivation i n economi-cally-backward areas would appear to be one on which the advice of anthropologists might usefully be sought. Turning to Herskovits, we find that "motivations to labour l i e i n the realm of values". The study of value systems i s "one of the most delicate and d i f f i c u l t operations i n anthropological f i e l d research". Despite the admitted fact that this i s "an area of anthropological research where r e l a t i v e l y l i t t l e work has been carried on", however, Herskovits feels able to state that "the data from the nonliterate societies makes i t clear that con-siderations other than those of economic best advantage dictate (19) labour and thus production". ' This unqualified conclusion, dated 1952, i s supported by numerous examples taken from anthro-pological works published between 1904 and 1938.^*^ The tendency of anthropologists to emphasize cultural differences i n t h e i r attempts to discredit the v a l i d i t y of economic theory i s an observable phenomenon. Yet, " a l l over the world, people are not free to dispose of their resources, as i t were, de novo. Everywhere the main lines of expenditure are l a i d down; the aim of the individual's choice i s to rea l i z e (21) the maximum satis f a c t i o n along these l i n e s " . (19) Herskovits, op. c i t . , pp. 110-111. (20) For a critique of Herskovits' approach to 'Economic Anthro-pology' see F. H. Knight, "Anthropology and Economics", i n JPE, A p r i l , 1941 (Vol. XLIX, No. 2). (21) Goodfellow, op. c i t . , pp. 15-16. - 23 -We may close this section with the observation that what appears to be s t r i c t l y required of the development econo-mist i s s u f f i c i e n t adaptability at least to recognize social change, together with enough understanding to discriminate between i t s f e r t i l i z i n g and i t s transitory or s t u l t i f y i n g tendencies* IV PUBLIC ADMINISTRATION The new rulers of "XH have inherited a small and f a i r l y e f f i c i e n t c i v i l service* which i s s t i l l largely manned by foreigners. We may note at this stage, however, that the Western system of public administration i s not the only, or even necessarily the best, one for "X"'. One student of public administration has pointed out that whilst there i s a tendency to generalize from the Western experience and to raise i t s r e l a t i v e l y new l o y a l t i e s to the level of universal moral impera-tives* primary l o y a l t i e s d i f f e r , and " i t can bring only confusion (22) to judge one group of persons by the standards of another". ' Thus, as a U.S. Senate subcommittee put i t several years ago: "Low standards i n the conduct of public a f f a i r s are a symptom (22) M. Berger, Bureaucracy and Society i n Modern Egypt, Princeton University Press, 1957, p. 115. - 24 -(23) of low standards i n the country generally." v ' According to Berger, t h i s i s true only i f the standards are similar or grow out of the same traditions, as those which guide the conduct of public a f f a i r s . I f , as so often happens, "the o f f i c i a l standards of government are developed or imposed with l i t t l e regard for the nature of the l o y a l t i e s that command the general public, then immorality i n the government does not imply immorality i n the society. The measures are simply different.»^ 2 4^ It may be postulated, however, that a r a t i o n a l l y -based system of public administration of the Western type i s an absolute necessity for any state which undertakes an economic development programme. In fact, whether or not such a system i s i n harmony with the existing social values and social structure, i t has to be made to work. Even a f a i r l y modern and e f f i c i e n t administrative apparatus which serves the needs of a slowly changing agrarian society may be quite inadequate to cope with the added strains of a development programme, where government a c t i v i t y becomes more complex and positive (23) U.S. Government, Ethical Standards i n Government, Report of a Subcommittee on Labour and Public Welfare, U.S. Senate, Committee Print, 82d Congress, 1st Session, Government Printing Office, Washington, B.C., 1951, p.7., quoted i n Berger, op. c i t . (24) Berger, l o c . c i t . - 25 -than ever before, reaching into areas of the economy previously ignored by the c i v i l servants, and involving technical and fin a n c i a l problems out of a l l proportion to anything they may have been trained to deal with. Thus, i n Pakistan, "while government p o l i c i e s have a clear and definite bias i n favour of development, the administration, wedded as i t i s to the status  quo i n i t s approach as well as i n i t s organisation and procedure, tends to pull i n a different direction. Measures for eliminating bureaucratic r i g i d i t i e s are l i k e l y to affect morale i n direct proportion to their severity, and may compound already severe staff shortages, especially where expatriate staff recruited from overseas i s involved. Whether such r i g i d i t i e s are more important than simple inefficiency or dishonesty i s a d i f f i c u l t question to answer. Hanson has remarked that: the in e f f i c i e n c y of the administrative o f f i c i a l i s often equalled by his lack of public s p i r i t . It i s not that the peoples of underdeveloped lands are by nature less honest, or more ready to tolerate dishonesty i n their o f f i c i a l s , than are the peoples of the West. What we call'dishonesty' arises from the fact that the country i s i n a state of transition, i n which the standards of a primitive agrarian society have been disrupted but not yet replaced by those of a more advanced one. During t h i s transitional phase, o f f i c i a l s suffer great temptations to abuse their powers (25) Government of Pakistan: The F i r s t Five Year Plan 1955 -1960 (Draft), Karachi, 1956, v o l . 1, p. 99. (Quoted i n A. H. Hanson, Public Enterprise and Economic Development, London, Routledge, 1959, p. 54.) - 26 -for personal and sectional ends* and many of them, recently 'detribalised', have not yet acquired the capacity to r e s i s t such temptations that a sense of "public" r e s p o n s i b i l i t y brings with i t . The disintegration of tra d i t i o n a l "mores" inevitably releases among both rulers and ruled a crude individualism that i s h o s t i l e to the development of a pro-fessional conscience, and the supersession of ancient forms of social organisation by 'novelties' such as mass p o l i t i c a l parties and trade unions gives a new and si n i s t e r significance to the granting of privileges and favours, which i n former days was regulated by the comparatively wholesome customs of the t r i b e , clan, or extended family. In these circum-stances even the most beneficient of institutions can be easily transformed into an instrument of i l l e g i t i m a t e personal gain and p o l i t i c a l influence.\26) Here we come to the essential recognition that the public adminis-tr a t i o n problem i s "only one facet of the greater problem of p o l i t i -(27) cal and social change". Although the public service may have to alter faster and more r a d i c a l l y than the society i t represents, and i t may even be necessary for i t to act as a "stalking-horse" for change, i t i s l i k e l y to remain an a l i e n -and rootless organization u n t i l i t s goals have been adopted by at least a majority of the people who make up the society. V In this chapter we have examined a few of the starting points from which p o l i t i c a l s c i e n t i s t s , anthropologists, or (26) Hanson, op. c i t . , p.55. (27) Ibid., p.56. - 27 -spe c i a l i s t s i n public administration might begin their analyses of countries such as "X". A l l the factors discussed have a considerable bearing upon economic policy questions* In dealing with the more purely social factors, we f l i r t e d b r i e f l y with a kind of "economic determinism" by suggesting that, the r e l a t i v e slowness of social change among the pastoralists might (28) be due to the limited spread of the market mechanism. ' Since i t would be equally v a l i d to claim that the reverse was true, we dropped this l i n e of approach. It i s apparent that the p o l i t i c a l and social picture i n "X" i s both confused and confusing. This knowledge enjoins caution i n the application of economic reasoning. Without invalidating the theory i t s e l f , the element of confusion does appear to make i t less defensible to advocate a wholesale application of the theory instead of a cautious step-by-step approach to a problem with so many.indeterminate factors* Here we are at the heart.of an African dilemma - on the one hand are governments committed to wholesale reconstruc-tion of society i n order to "increase the range of human choice", (28) 'The method of production i n material l i f e determines the general character of the s o c i a l , p o l i t i c a l and s p i r i t u a l processes pf l i f e . ' (K. Marx, Capital, London, Everyman's, 1933, Xtfl.) See also M. J . Herskovits, Economic Anthropology, N.Y., Knopf, J952, pp. 487-502. (29) W. A. Lewis, The Theory of Economic Growth, London, Allen and Unwin, 1955, p. 420. - 28 -yet forced to regard t h i s c r i t e r i o n , for the present, as a Western humanistic abstraction of l i t t l e relevance to t h e i r nations; on the other, two opposed groups of economists, one enjoining caution and a "piecemeal"' approach to development; the other urging " f u l l steam ahead." The enthusiasts might do worse than to heed S i r Robert Hall's warning that "there i s a danger that underdeveloped countries w i l l expect too? much of the economists rather than too l i t t l e : so that perhaps we ought actively to be engaged i n reducing our image to proper proportions". Following this digression on confusion i n economic a f f a i r s , we end this chapter with a quotation which might have originated i n Accra on Conakry, but which i n fact comes from Stellenbosch, the i n t e l l e c t u a l centre of Afrikaner nationalism. With the general view expressed, very few social s c i e n t i s t s , especially economists, would disagree:-Economic development of an underdeveloped people by them-selves i s not compatible with the maintenance of their t r a d i t i o n a l customs and mores. A break with the l a t t e r i s a pre-requisite to economic progress. What i s needed i s a revolution i n the t o t a l i t y of s o c i a l , cultural and religious i n s t i t u t i o n s and way of l i f e . What i s , there-fore, required amounts i n r e a l i t y to social disorganization. (30) "Reflections on the Practical Application of Economics" (Presidential Address delivered to Annual Meeting of the Royal Economic Society, July 9, 1959), reprinted i n Economic Journal, Vo l . LXIX, Dec. 1959, p. 645. - 29 -Unhappiness and discontentment i n the sense of wanting more than i s obtainable at any moment i s to be generated* The suffering and dislocation that may be caused i n the process may be objectionable but i t appears to be the price that has to be paid for economic development; the condition of economic progress. (31) (31) J . L. Sadie, "The Social Anthropology of Economic Under-development," i n Economic Journal, June 1960 (No. 278, Vol. LXX), pp. 294-303, p. 302. CHAPTER II: In the l a s t chapter we examined some significant findings of s p e c i a l i s t s i n p o l i t i c a l science, anthropology and public administration. Our aim was to i l l u s t r a t e the f u t i l i t y of adopting any r i g i d formula for measuring the quality of l i f e or b e l i e f i n A f r i c a . By way of i l l u s t r a t i o n of the theme that e x p l i c i t recognition of p o l i t i c a l and social factors i s necessary before economic analysis can begin to do useful work i n A f r i c a , we shall b r i e f l y review i n this chapter some aspects of the vexed question of development planning and policy formulation where p o l i t i c a l , social and economic factors w i l l be found to be i n -extricably mingled. We shall continue to use the semi-fictional device of "Country X" to give continuity and coherence to our background material. At the end of this chapter, with the background completed, we shall dispense with "X" and proceed to deal with specific questions rel a t i n g to the meaning and implications of " s t a b i l i z a t i o n " as a policy aim for underdeveloped countries. We have already mentioned that, with popular acclaim s t i l l ringing i n their ears, the leaders of "X"! have.-announced a rather hastily-drawn-up 'development plan' for their country. 31 The details of the plan need not concern us. We shall t r y instead to discuss three fundamental assumptions about planning i n "X". These are: 1. That there i s a correspondence between p o l i t i c a l and economic "dynamisms;" 2. That advanced economic and s t a t i s t i c a l programming techniques are capable of application i n countries such as "X"; and 3. That "X" i s the posessor of a 'colonial economy' which therefore suffers from a 'bias' i n favour of primary production for export. If there i s one aspect of "X'"'s economic development plan which might strike an uninformed observor as curious, i t i s the heavy reliance upon increased productivity as a result of the "psychological shock of national f e e l i n g " , w h i c h i s expected to follow the attainment of independence. Unfortunately ( l ) "Survey of Development and P o l i c i e s i n Selected African Countries and Areas", i n United Nations. Economic B u l l e t i n  for A f r i c a , Vol. I, No. 1 (January, 1961), pp. 74-89, p. 82. - 32 -this crucial factor does not lend i t s e l f to economic analysis. However, given a p o l i t i c a l system of the 'mobilization' type described on pages 10-12 above* i t may be inevitable that there w i l l be an optimistic reliance upon na t i o n a l i s t i c fervour as one of the main driving forces behind economic development. For example, according to the account given by the United Nations Economic Commission for A f r i c a of the 1960 Development P l a n o f t h e R e p u b l i c o f M a l i , " t h e a t t i t u d e o f t h e m a s s e s t o development must be transformed from a passive to an active one* As traditional education works too slowly to that end, the change must be accompanied by p o l i t i c a l action.. Accession to independence should give the masses, 85^ of whom are i l l i t e r a t e , a psychological shock of national feeling, through which th i s end may be achieved. The existing well-organized p o l i t i c a l party should, according to the Government, be the instrument (2) i n this action". ' In the U.N. publication, cited above the Mali Plan i s referred to with approval, as representing "a more funda-(3) mental view of development programming"v ' than that found elsewhere. There i s no comment about the interesting suggestion (2) United Nations, l o c . c i t . (3) Ibid, p.81. - 33 -that the national psychology should be changed, not through education (and the fostering of independent thought), but by " p o l i t i c a l action". These are strange matters for the student to dabble i n : nevertheless, they are necessary for an appreciation of 'development economics' i n A f r i c a today, since reliance upon the psychological shock of national feeling i s common i n the development plans of many African countries. I t i s possible, of course, to avoid agonizing by stating that psychological 'aggregates' are outside the scope of economics* or, at least, that their economic aspects cannot be measured. This leads naturally to the question of what can be measured. II Comprehensive planning involves the use of two techniques: a "programming"' or a "project" approach. The programming approach starts from overall targets of national income, and then estimates the concomitant levels of consump-tio n , capital formation, imports, exports and other relevant economic aggregates. In a further analysis these totals are broken down into sectors. Exchanges and relationships between the sectors are then calculated and f i t t e d into a consistent - 34 framework. Thus a more or less detailed description of the economy during a certain period i s derived* Certain assump-tions may have to be made regarding external factors as well as the coefficients of the system. The picture of the future economy thus obtained serves as a detailed guide to the p o l i -cies which have to be followed i f the economy i s to reach the targets fixed and maintain the desired equilibrium. A further a n a l y s i s o f t h e s e c t o r s l e a d s t o a d e t a i l e d f o r m u l a t i o n o f t h e (4) projects to be carried out i n the context of the plan. ' The other possible approach, the project approach, involves starting at the other end, from individual projects proposed which can be worked into a comprehensive plan. Cost-benefit calculations regarding the direct and indirect impact of such projects on the economy are added together to give an overall picture of the changes to be expected i n the economy. The aspects of the projects which have to be taken into account are, on the one hand, increases i n production, income, employ-ment, exchange earnings, tax receipts and the l i k e , and, on the other, requirements of ca p i t a l , material, labour of varying types of s k i l l , foreign exchange, and extra demands put on public f a c i l i t i e s . This approach, which would i n theory result i n the same kind of plan as the programming approach, i s rather (4) United Nations, Economic B u l l e t i n for A f r i c a , v o l . 1. no. 1. Jan. 1961, p. 74. - 35 -rarely put into practice. ' An atmosphere of pained disapproval permeates some contemporary discussions of development planning i n A f r i c a . This i s v e i l i l l u s t r a t e d i n the United Nations publication referred to previously, where i t i s pointed out that develop-ment plans i n A f r i c a are usually not comprehensive, being "mainly public capital expenditure programmes containing no projections, objectives or targets for the private sector". It i s said that even though they contain l i s t s of projects, these plans ought not to be confused with the "project approach"- to development programming, because they take no, or very limited, account of the impact of the projects on the economy. I t i s true that, as far as demands on resources are concerned, the only aspects usually assessed i n such plans have been capital costs, although i n recent years, the effects on current budgets have also been estimated and taken into consideration. I t i s claimed there-fore that the only benefits normally estimated have been direct benefits, i . e . "no e x p l i c i t account has been taken of the wider repercussions on the economy." As a consequence, i t has always been d i f f i c u l t i n these plans to establish proper p r i o r i t i e s and make rational comparisons between projects. The plans con-cerned are therefore "more tru l y government capital expenditure programmes than development programmes proper."^) (5) Loc. c i t . (6) Ibid, pp. 74-75. - 36 -I t sometimes appears that the reasons for the lack of " r a t i o n a l i t y " i n the "capital expenditure programmes"1 of African countries receive less emphasis than they deserve. Regarding the most obvious of these reasons* i t w i l l be unnecessary to enter into the merits* real or assumed, of comprehensive planning, per se» I t i s hoped even without such a discussion, to demonstrate that the comprehensive approach i s , at least i n the short run, impossible, since i t i s apparent that nothing more than a rudi-mentary (and purely non-operational) beginning can be made on. (7) such an approach i n the absence of detailed s t a t i s t i c a l data* We shall therefore look at the state of African economic s t a t i s t i c s . Writing of her five year's work on the social accounts of Nyasaland and Northern Rhodesia, P h y l l i s Deane said that her experiment i n national income measurement for colonial t e r r i t o r i e s had a very limited success. I t resulted i n the construction of a series of articulated but necessarily incomplete social accounts which within the l i m i t s of such crude accounts were as r e l i a b l e as the existing stock of data would permit. I t set up a framework which could be useful for general descriptive and analytical purpose but was by no means s u f f i c i e n t to form; the basis for a detailed national budgeting* Miss Deane remarked (7) The remarks which follow apply a f o r t i o r i to the exhortations of the writers who urges use of input-output tables, so far as these remarks are intended to apply to African countries* See, for instance, D. Dosser, "Development plans i n B r i t i s h Colonies". In Economic Journal, Vol. LXIL, June 1959. pp. 255-266. - 37 -inter a l i a that; "The s t a t i s t i c a l material i s inadequate for the purpose of precise and i n t e l l i g e n t analysis* and the con-cepts which are applicable to a money-exchange economy mean r e l a t i v e l y l i t t l e i n the context of a subsistence economy". She found no simple economic magnitudes which would express the movements of a serai-subsistence economy with any degree of re-l i a b i l i t y * and no economic indicators which could safely be s e t up a s guides w i t h o u t a f a i r l y detailed map of t h e a c c o m -panying economic and social context Following her work on the rather better documented and largely cocoa-producing economy of the Gold Coast (Ghana)* Polly H i l l had this to say: i n the present state of ignorance, 'totals* have very l i t t l e value. I t would be nice to know, far more exactly than we do, how many cocoa farmers there are i n the Gold Coast; i t would be nice to know how many labourers they employ; i t would be nice to know a great deal about the size-distribution of the farmers, i n terms of loads of cocoa produced.. But unless a good deal were also known, about, say, the systems of labour employment for different kinds of cocoa farming work, the total employment figures would lack interest. I f i t were known, that farmers who produced 40 loads annually accounted for T$ of the Gold Coast's cocoa and numbered jfi of a l l the Gold Coast"s farmers,- one would s t i l l be no nearer answering the question of whether a r i s e i n the cocoa price up to £p a load would result i n increased output.in either the short of the long run.(9) (8) P. Deane, Colonial Social Accounting, Cambridge, University Press, 1953, p. 288. (9) Polly H i l l , The Gold Coast Cocoa Farmer, London, O.U.P. 1956, p . l . - 38 A noted pioneering attempt to apply modern s t a t i s t i c a l techniques i n African conditions vas that of Messrs. A. T. Peacock and D. Dosser, who attempted to construct an i n t e r -industry input-output table for Tanganyika.^ 1 0^ They divided! the economy into eighteen sectors. This meant that a possible 306 inter-industry flows could be i d e n t i f i e d . They found that:-i t was possible to f i l l only 23 c e l l s i n the production matrix with quantities which were significant i n amount. Further, a l l the sectors i n the production matrix taken together delivered only £3.8mn of output to other sectors, compared with deliveries of £181.6mn to f i n a l demand. The largest flow shown was an (imputed) purchase of grain by "Craft Industries", which meant brewing, from "Staple A g r i c u l t u r e " . ^ * ^ The^empty boxes" of: the Tanganyika input-output table are explained by the lack of interdependence between various sectors i n a largely peasant-farming economy. Labour i s r e l a t i v e l y p l e n t i f u l i n Tanganyika, and the returni to capital i s usually large, but inputs of these factors are not shown i n a conventional production sector matrix. Yet labour i s almost the only input in.subsistence agriculture, and wages and p r o f i t s (10) A. T. Peacock and D. Dosser, The National Income of Tangan- yika. 1952-1954, London,. H.M.S.O., 1957, Chapter 11, table 2. (11) A. T. Peacock and D. Dosser, "Input-Output Analysis i n an Underdeveloped Country? A Case Study," i n Review of Economic  Studies, Vol. XXV, 1957-1959, no. 66, p. 22. - 39 -account for almost a l l costs even i n cash-crop agriculture. In those industries where there are substantial inputs other than capital and labour* these are mainly imported goods* which againi come from outside the production sector matrix. On the output side* the export industries obviously s e l l to a sector which i s outside the production sector. And even staple-crop agriculture s e l l s direct to the consumption sector. Peacock and Dosser concluded that "input—output analysis must be of very great potential use to j u s t i f y the expenditure of large s t a t i s t i c a l resources on i t . But, at (12) least i n Tanganyika, uses at present seem to be s l i g h t " . 7 The handicaps of comprehensive development planning i n tropical A f r i c a are well i l l u s t r a t e d by the evidence set out above for Northern Rhodesia, Nyasaland, Ghana and Tanganyika. I t appears that, even i f such planning were thought to be i n -t r i n s i c a l l y desirable, most African countries would have tot-divert resources to building of adequate s t a t i s t i c a l services over a period of several years before even the preliminary data could be assembled. Further, for as long as;predominantly subsistence economies are the rule, sophisticated s t a t i s t i c a l techniques of the order of input-output analysis w i l l not work. (12) Ibid.* p. 24. - 40 -One may or may not agree with Professor W. A. Lewis's dictum that "the case against detailed central planning i s that i t i s undemocratic, bureaucratic, i n f l e x i b l e and subject to great (13) error and confusion. I t i s also unnecessary"'. 1 But i t seems that for years to come i t s cost and s l i g h t usefulness i n African conditions w i l l be prime factors i n ensuring that com-prehensive planning i s not adopted on any widespread scale. Certainly there appears at the present early stage of development to be a much better case for "piecemeal planning," 1 i . e . for concentrating on a few of the "commanding heights" of the economy, such as' the level of exports, or capital formation, or food production, and for leaving the rest of the economy to adjust i t s e l f to demand and supply. "Piecemeal planning" does not imply an absence of forethought or r a t i o n a l i t y , nor does i t imply rejection of the use of s t a t i s t i c a l techniques. I t does comprehend interference with the market mechanism where this i s necessary, i . e . where i t i s a p r i o r i t y objective to modify the results that would be yielded by market forces operating alone. But i t stops far short of the wholesale (and non-operational, as we hope we have shown) prescriptions of the proponents of comprehensive planning for tropical African countries. (13) W. A. Lewis, The Theory of Economic Growth, London, Allen & Unwin, 1955, p. 384. I l l Lastly/ we come to one of the basic assumptions which appears to guide the formulation of development plans i n many of the poorer countries* The 'export bias' doctrine has acquired a certain vogue through i t s association with n a t i o n a l i s t i c a n t i - c o l o n i a l -ism. In i t s simplest version, the doctrine merely states two undoubted facts; that colonial economic po l i c i e s were directed mainly towards encouraging production of primary products for export, and that this was usually to the benefit of the metro-politan countries. From these premises, however, a variety of more or less sweeping conclusions have been drawn. The commonest of these i s that either through malice or ignorance, colonial p o l i c i e s retarded general economic development, and, worst of a l l , b u i l t into the colonial economic systems a pernicious form of bias i n favour of primary production f o r export. We may question whether African chiefs, amongst others, would i f l e f t to themselves have pursued conscious p o l i c i e s of economic development. The most effective refuta-t i o n of the 'export bias' doctrine, however, i s contained i n a - 42 -1958 a r t i c l e by the Burmese economist, Hla Myint, entitled "The 'Classical Theory' of International Trade and the Underdeveloped (14) Countries". Dr. Myint provides a consistent alternative explanation of the present high degree of concentration of ex-colonial t e r r i t o r i e s on primary production for export. In order to do this he has gone back to Adam Smith and has pointed out that the Smithian theory of international trade contained two leading ideas. The f i r s t , which i s familiar ton students everywhere, i s that international specialization! improves the divi s i o n of labour and thereby raises the general lev e l of productivity within a country. This aspect of: c l a s s i -cal theory, says Myint, provided the rationale for the 19th century "export drive"' p o l i c i e s of many colonial governments, and to the debatable extent that such p o l i c i e s may have meant "warping" the ' productive structures of some countries to meet export demands, criticisms of "colonial economies'" may, i n this context, be granted to have a certain limited v a l i d i t y . However, the second, and more generally neglected, aspect of Smith's trade theory, redresses any debit balance established by the f i r s t . Myint points out that Smith viewed trade as providing a "vent for surplus"', i n the sense that i t created an outlet for (14) Economic Journal, v o l . 68, no. 270. June 1958, pp. 317-337. - 43 -surplus land and labour where there was no domestic demand. The following paragraphs contain a sketch of the analysis with, which Myint applies this aspect of Smithian doctrine to the conditions of both 19th century and present-day underdeveloped countries. The author begins by drawing a comparison between the (15) Ohlin version of the comparative costs doctrine, and the "vent for surplus" theory. The former assumes, f i r s t l y , that the re-sources of a country are f u l l y employed at the time i t enters international trade, and, secondly that there exists perfect internal mobility of factors. Smith's theory assumed on the contrary, that resources were not f u l l y employed on entering into trade ( i . e . that the country possessed a sizeable surplus pro-ductive capacity), and also that there was a considerable degree of internal immobility or s p e c i f i c i t y of factors.. These assump-tions appear to f i t the fact of both the l a s t century and today, especially where sparsely-populated countries are concerned. Thus, Myint writes that i n dealing with a sparsely-Populated underdeveloped country newly entering into trade, Ohlin would "equilibrate-away" the i n i t i a l disparity between land and labour by assuming a f u l l y developed money economy i n which (15) B. Ohlin, Interregional and International Trade, Cambridge, Mass, Harvard University Press, 1933. 44 -land was cheap and labour dear. But the tr a n s i t i o n from a subsistence economy to a fully-developed money economy takes place only after the country enters trade* and for so long as transportation remains primitive and specialization i n pro-duction non-existent* both land and labour are l i k e l y to be cheap because there w i l l be no incentives for s e l f - s u f f i c i e n t peasant economic units to produce more than their own require-ments* The role of trade i s therefore to provide both access to a market and incentives to induce people to respond to the market's demands* The real importance of international trade for countries which s t i l l have large pockets of subsistence pro-duction* therefore* l i e s i n the incentives i t provides for extension of communications* capital formation*, economic develop-ment, and the breakdown of outdated social i n s t i t u t i o n s through  u t i l i z a t i o n of already existing surplus productive capacity. No-one who has understood.this simple fact i s l i k e l y to sub-scribe to the "export bias"* or "colonial economy" doctrine* especially since i t s corollary i s that the real choice facing 19th century colonial governments "was not so much: between using resources for export production or for domestic production as between giving employment to the surplus resources i n export production or leaving them i d l e " . ( * ^ (16) Ibid.* p. 334 - 45 -Myint quotes Indonesia as an example of the a p p l i c a b i l i t y of bis analysis. Production of r i c e by peasants of Java and Sumatra for export has t r a d i t i o n a l l y been carried on, not as a specialized separate branch of production, but i n addition to the c u l t i v a t i o n of subsistence crops. Rice for export has been grown on surplus land, and the income derived from th i s crop has been regarded by the peasants as a surplus over their subsistence needs. Today, however, population pressure has resulted i n exhaustion of the surplus land. Export pro-duction i s f a l l i n g off as more and more land i s drawn back into subsistence use. Despite Indonesia's undoubted compara-tive advantage i n r i c e production, the limited spread of the money economy has combined with the peasants' desire to secure their subsistence needs at a l l costs, and the result has been that both r i c e exports and foreign exchange earnings have been reduced. In Myint's view, given the social and economic condi-tions prevailing i n many underdeveloped countries even today, i t i s f a i r to conclude that the trend i n their export trade w i l l be nearer to that suggested by the surplus-productive capacity approach than to that suggested by the theory of comparative costs.. He also points out that i n the absence of an overnight t r a n s i t i o n to a fully-developed money economy, coercion by the state may be the only means of maintaining Indonesia's export - 46 -production i n the face of population pressures* We may add an example of our own to i l l u s t r a t e Myint's approach to the beneficial effects of trade i n i t s impact upon outdated social i n s t i t u t i o n s * We referred i n Chapter I to the so-called "extended family system", under which there exists a t r a d i t i o n a l social obligation of the possessor of a surplus to d i s t r i b u t e i t at ceremonial feasts to a swarm of dependants and retainers. And yet, i s i t not obvious that t h i s obligation i s a r e l i c of a subsistence economy, i n which surpluses could not regularly be marketed? There i s abundant evidence to suggest that, once trade begins, the economically advanced sections of the community w i l l take steps to avoid incurring such "outdated" social obligations* A defect of the Myint approach i s that i t provides at best a clumsy tool for economic analysis* But the student of economic development i s dealing with some very "clumsily" organized economies, and the Myint approach appears to be con-ceptually preferable to the type of analysis which i m p l i c i t l y assumes the h i g h l y - r e s t r i c t i v e Ohlin preconditions to have been met at least i n part. The true importance of the "vent for surplus" approach i s twofold: i t provides a viewpoint of international trade i n connection with economic development,, by drawing attention to the role of trade i n creating social external - 47 -economies i n backward societies; and i t focuses attention upon the actual* as opposed to idealized, social and economic condi-tions of underdeveloped societies. This short resume of the Myint position by no means disposes of the multitude of arguments concerning the 'unfair-ness' of the present pattern of international trade. I t pro-vides merely a foretaste, since we shall have occasion to refer to such arguments i n greater d e t a i l i n the following chapters, where we w i l l discuss the economic merits of commodity price s t a b i l i z a t i o n schemes. We have attempted so far to provide a f a i r l y compre-hensive background against which the discussion of s t a b i l i z a t i o n p o l i c i e s can be brought into focus. Thus, whilst we shall from here on be c h i e f l y concerned with economic analysis of t h i s s p e c i f i c policy question, i t i s hoped that the preceding chapters w i l l i l l u s t r a t e some of the ways i n which the analysis may have to be modified i n operational circumstances. For example, micro-economic analysis should allow for the peculi-a r i t i e s of a predominanatly subsistence economy with poor trans-port f a c i l i t i e s ; welfare judgements may have to be suspended to take account of the r e a l i t i e s of 'mobilization' types of p o l i t i c a l organization, with their emphasis upon the psychological rewards - 48 -of reorientation of economic a c t i v i t y ; problems of measurement may be seen as being rooted i n the real d i f f i c u l t i e s encountered i n compiling s t a t i s t i c a l data i n backward economies; and recom-mendations for government action can be viewed i n the l i g h t of the dichotomy between:the ambitions of the governments and the low level of th e i r resources i n the f i e l d of public administration. CHAPTER III: For the purposes of this chapter* "underdeveloped countries" are defined as those countries i n Africa* Asia and La t i n America with levels of real income and capital per head of population which are low by standards of North America* Western Europe and Australasia; they are countries i n which there i s no large-scale application of modern technology to agriculture and industry; subsistence production i s generally important; home and foreign markets are comparatively narrow; and exports of primary products are the major source of foreign exchange.^ "Primary products" are defined as "those commodities which are entering the economy for the f i r s t time and which have undergone l i t t l e or no processing, other than that required to obtain them i n their original form and to prepare them for (2) marketing," 7 including agricultural products of a l l kinds, fishery and forest products, minerals and mineral fu e l s . From the many generalizations which are made about underdeveloped countries, only one has been selected for d i s -cussion i n this chapter. The argument which i t i s proposed (1) P. T. Bauer and B. S. Yamey, The Economics of Underdeveloped  Countries, Cambridge University Press, 1957, p.3. (2) T. W. Schultz, "Economic Prospects of Primary Products," i n H. S. E l l i s , ed. Economic Development for Lati n America, London Macmillan 1961, p. 309. - 50 to examine i s based upon the following propositions:-(a) that underdeveloped countries depend for their imports of capital goods on foreign exchange earned by exporting primary products* (b) that because short-run demand for these exports i s highly variable, being an " o v e r s p i l l " from the indu s t r i a l countries, and since short-run supply i s r e l a t i v e l y i n e l a s t i c , highly variable prices r e s u l t . (c) that the average prices received for the exports are unfair; they are sometimes too high, i n -ducing over-investment, but more often too;low, leading to foreign exchange problems reduced (3) capacity to import, and a sluggish growth rate. From these premises, deductions similar to the f o l -lowing have been made: (d) "International action i n the f i e l d of commodity price s t a b i l i z a t i o n i s necessary to a l l e v i a t e the acute problems facing exporting countries". x ' (3) A. K. Cairncross, Factors i n Economic Development, London, Al l e n & Unwin, 1962, pp. 211-213. (4) See, for instance, United Nations Economic B u l l e t i n for  A f r i c a , v o l . 11, (January 1962), p. A-40. - 51 -It i s the purpose of this chapter to examine the v a l i d i t y of this proposition. I t w i l l f i r s t be necessary b r i e f l y to discuss the propositions (a), (b) and ( c ) , upon which the main proposition rests; (a) i s true by d e f i n i t i o n ; (b) w i l l be examined i n the course of the chapter, although there i s no dispute as to i t s essential truth (we assume that, i n international trade the excess demand of the importing country always represents the net of t o t a l demand and domestic supply ( i . e . " o v e r s p i l l " ) , whereas the excess supply offer of the exporting country i s derived from total supply and domestic demand); (c) i s vague and sub-j e c t i v e with regard to price levels but clear as to the alleged effects of "high" or "low," prices. These effects are thought to be subjects for domestic, not international, action. They are treated toward the end of t h i s chapter, and i n a more detailed fashion i n the following chapter. A f i n a l note on method and content. "Stabilization"' i s essentially a short-run concept when used i n connection with the export proceeds of underdeveloped countries. This chapter i s not intended to deal with long-run factors, and the discussion w i l l be confined as far as possible to short-run considerations. A glance at the directional pattern of the trade in. primary products serves to demonstrate the extent to which - 52 -the underdeveloped countries rely upon the level of aggregate demand i n the in d u s t r i a l areas* In I960* according to the United N a t i o n s , ^ the advanced industrial countries took of the to t a l exports of the primary exporting countries; trade between the primary exporting countries absorbed another 25/*; the remaining 5$ went to the countries of the Communist block. ( 6> The commodity pattern of the trade i n primary products suggests that not only are the underdeveloped countries vulner-able and highly dependent upon aggregate demand i n the Western in d u s t r i a l economies* but they are able to offer only a few of the products which these economies want. Thus* according to (7) Professor Cairneross, ' 75^ of the exports of underdeveloped countries consists of seven commodities or groups of commodities] which are, i n order of importance, petroleum, beverages, t e x t i l e fibres,; base metals, sugar, oilseeds and fats, and rubber* Limited as a group to a small variety of products, the primary exporting countries are often found to be even more vul-nerable to price fluctuations when taken i n d i v i d u a l l y . Ini 1953 there were t h i r t y countries, a l l underdeveloped, that depended on a single product for at least half of th e i r export. (5) Ibid, p. 2-6. (6) I t i s not stated whether these figures include exports fromi such countries as the U.S.A., Canada and Australia. I f so, the proportion of exports from underdeveloped countries going to i n -d u s t r i a l areas would probably be higher than 70^. (7) Cairneross, op. c i t . , pp. 225-226. - 53 -earnings, and between them these countries accounted for 40f> (8) of a l l exports from the three poorer continents. Few of these exports are consumed at home i n the exporting country or produced abroad i n the importing country, which reduces the e l a s t i c i t y of net supply i n the exporter, and net demand ini the importer. Where, as with sugar beet and tobacco, com-peting producers exist i n the importing countries, supply i s frequently highly e l a s t i c for price increases, thus setting a c e i l i n g to prices obtainable for such exports* The following figures give some idea of the extent, to which the export earnings of individual underdeveloped countries can fluctuate; according to Professor Higgins, ' during the nine year period 1948 - 1956 the actual (price) fluctuations averaged 10 — 15J& for Thailand r i c e , for Ceylon tea, for Indonesian and Malayan t i n , and P h i l l i p p i n e s abaca. For Burmese r i c e , P h i l l i p p i n e s copra, and Pakistani jute the' range was 15-20$. Rubber prices showed an average fluctuation of 30$. I t must be remarked, however,, since Professor Higgins does not do so, that these figures include the Korean war period, and may therefore tend to r e f l e c t abnormal conditions, (8) P. Lamartine Yates, Forty Years of Foreign Trade, London, Al l e n & Unwin, 1959, p.180. (9) B. Higgins, Economic Development, New York, Norton, 1959, p.555. - 54 -which were extremely favourable to primary producers at that, time. Whatever may have happened at other times* Ragnar Nurkse has estimated that the s h i f t i n the terms of trade i n 1950 benefited the underdeveloped countries to the extent of two b i l l i o n dollars i n 1951 alone. As far as we have gone i t appears that the under-developed countries are i n a vulnerable - or perhaps a better word would be "speculative" - position; they depend upon a narrow range of products, and both the volume and price of t h e i r exports are l i k e l y to be determined by market demand conditions. The long-run implications i n favour of d i v e r s i -f i c a t i o n of their economies are f a i r l y clear, but we s t i l l have to discuss the factors affecting the supply of primary products. The supply of primary products from the under-developed countries i s generally considered to be i n e l a s t i c . Indeed, the propositions which we are examining i n t h i s chapter explain price fluctuations i n terms of an i n e l a s t i c supply curve facing a r e l a t i v e l y e l a s t i c demand curve, which i s "highly variable", i . e . l i a b l e to s l i p suddenly to the l e f t or right* In such a situation we should expect a leftward s h i f t i n the demand curve, with supply remaining constant, (10) Ragnar Nurkse, Problems of Capital Formation i n Under- developed Countries, Oxford, Blackwell, 1953, p.97. to result i n a small reduction i n quantity accompanied by a larger drop i n price. This i s i n fact what appears to have happened during the 1957/58 recession, which affected a l l the leading i n d u s t r i a l countries. According to the United Nations Economic B u l l e t i n (11) for A f r i c a , ' "the volume of exports from primary exporting countries i n 1958 was p r a c t i c a l l y unaffected by the depression, while the average export unit value: dropped sharply". "The combined effect of the unchanged volume of exports and of a lower unit value was a decrease i n the average (sic) level of proceeds of 5-6$," compared with 1957. On the other hand, the import unit value of the primary exporting countries showed the greater resistance of prices of manufactures to c y c l i c a l downswings and declined by a considerably smaller percentage; the result was "a deterioration i n the terms of trade of the primary-exporting countries of approximately 4 $ . " ^ ^ I f the evidence i n the f i r s t part of the previous paragraph i s accepted for discussion purposes as typical (even, though i t implies am absolutely i n e l a s t i c , i . e . v e r t i c a l , supply curve, thereby demonstrating the basic weakness of the aggre-gate approach to single commodities), the effect of c y c l i c a l recessions i n the i n d u s t r i a l countries upon incomes i n the primary (11) Vol. 1, No. 1, (January 1961), p.5. (12) Loc. c i t . - 56 -countries can be acknowledged without further ado. Although supply i s unlikely to be as i n e l a s t i c as the aggregate calculations above would indicate, there are sound reasons for assuming that i t cannot easily be varied i n the short run. The problems of persuading peasants to change to a new staple crop are usually mentioned, and also the prepon-derance of long-maturing perennial crops i n which increased capacity cannot easily be reversed. Mineral production i s said to continue during recessions because of high overheads, and the need to keep a trained labour force intact. The fact seems to be that, i n developed countries, entry and exit i n manufactures are r e l a t i v e l y easy; i n underdeveloped countries, however, entry i s easy for primary products, p a r t i c u l a r l y i n agriculture, but exit i s d i f f i c u l t because of the d i f f i c u l t y i n reversing increased capacity i n s t a l l e d during periods of high prices. And entry i s d i f f i c u l t i n most kinds of manu-factures. The result i s that when the price f a l l s , the supply of primary products f a i l s to contract; but when prices promise to r i s e , the supply of primary products r i s e s , whereas the supply of manufactured imports does not., This provides a strong basis for the tendency i l l u s t r a t e d above, of the terms of trade of primary exporting countries to worsen during c y c l i c a l recessions. - 57 -One influence of the supply of primary products often goes unmentioned. Many treatises on economic development either ignore or make only passing reference to the weather as a cause of severe fluctuations i n supply. Yet "there are hundreds of millions of people i n the world whose incomes de-( pend primarily on the amount of r a i n f a l l i n the growing season." v To the extent that the supply of agriculture products i s l i a b l e to fluctuate from natural causes* a diminished quantity would r e s u l t i n a higher price where the exporting country pro-vided a substantial part of the world's needs of a particular commodity. The amount of the price r i s e would depend upon the e l a s t i c i t y of demand for the commodity, and upon the e l a s t i c i t y of supply from alternative sources. Only a detailed breakdown by countries and commodities could i l l u s t r a t e this effect, but i t does appear that when some primary exporting countries have been hard-hit by natural hazards they can expect to be cushioned by an improvement i n their terms of trade. The discussion so far has tended to show that there i s some substance i n the second of the propositions under re-view: price fluctuations do occur; demand i s variable and appears to s h i f t according to c y c l i c a l conditions i n the i n -d u s t r i a l countries; e l a s t i c i t y of supply i n the face of a (13) Higgins, op. c i t . p. 546. - 58 -price drop i s small ( i n the example taken, a leftward s h i f t i n demand appears to have resulted i n the market being cleared at a lower price); and we have introduced another factor - supply-i s also variable, because of natural hazards* I t seems, then, that the question of whether primary commodity prices i n general are determined by supply or demand factors can only be settled i n individual cases. We therefore leave propositions (b) and (c) above with the comment that they contain some truths but that there i s no evidence to support the implication that de-mand factors are wholly, or even mainly responsible for the economic woes of particular underdeveloped countries* Some l i g h t may be thrown upon the main proposition i n favour of an international commodity price s t a b i l i z a t i o n scheme i f a digression i s f i r s t made to discuss some background aspects of the proposal* A number of p o l i t i c i a n s and economists, p a r t i c u l a r l y from L a t i n America, appear to support such a scheme; some development economists i n the United Nations Organization and elsewhere also favour the idea* I t seems that a certain hint of "blame"' for the operation of the mechanisms of international trade permeates the discussions which take place on this subject; thus, demand conditions are said to be "responsible" for commodity pr i c e fluctuations: ergo the industrial countries, who have - 59 -allowed their demand to f a l l below an acceptable l e v e l , should "do something about" the situation - that i s , they should sup-port an international s t a b i l i z a t i o n scheme, presumably by pro-viding funds for the support of an international scheme of the buffer-stock or buffer-fund type. I t i s normal and at times even praiseworthy for p o l i -t i c i a n s to demand action by foreigners instead of c a l l i n g for painful and unpopular effor t and adjustment at home, but to the extent that economists may have acted from the same motives, the situation has i t s ludicrous aspects. In the case of c y c l i c a l •fluctuations i n demand due to business recessions i n the indus-t r i a l countries, the c r i t i c s should take comfort from the know-ledge that recessions are unpopular everywhere. As for f l u c -tuations i n supply due to natural causes, i t i s clear that price s t a b i l i z a t i o n w i l l not change the weather. Two warnings w i l l be sounded at th i s stage of the discussion of the proposition for international action i n the f i e l d of commodity price s t a b i l i z a t i o n . F i r s t , the present pattern of international trade does involve some inequities (which need not be discussed here), and i t may contain certain long-run implications i n favour of economic d i v e r s i f i c a t i o n as the only solution for some countries. There i s a danger that these implications might be obscured by the operation of a - 60 -s t a b i l i z a t i o n scheme, which would then have served only to de-lay adoption of the correct long-run remedies for the basic economic d i s e q u i l i b r i a from which some countries are known to suffer. Second, the p o l i t i c a l f e a s i b i l i t y as well as the economic need for s t a b i l i z a t i o n schemes on the international l e v e l i s open to question. As already noted, they depend upon the co-operation of the industrial countries, i n the sense that the buyers are expected to assume some, i f not a l l , of the s e l l e r s ' r i s k s ; i n terms of neo-classical allocation economics, action of this sort might be held tantamount to " s o c i a l i z i n g " international trade, since* amongst other things i t would tend to obscure the market signals which guide the allocation of resources* Professor Haberler may have had these considerations i n mind when he said at a Conference on Economic Development for L a t i n America which took place i n Rio de Janeiro i n 1957 that: instead of learning to l i v e with a certain amount of i n -s t a b i l i t y , making the economy f l e x i b l e , and evolving methods to offset some of the consequences of the fluctuations i n international demand and export proceeds, administratively and p o l i t i c a l l y , i f not economically, hopelessly unworkable schemes of price s t a b i l i z a t i o n are being proposed and discussed. (14) The consensus of the discussion on s t a b i l i z a t i o n of (14) G. Haberler, "Terms of Trade and Economic Development", in. H. S. E l l i s , ed. op. c i t . , p. 296. - 61 -export proceeds which took place at this conference was that. although s t a b i l i z a t i o n of incomes was an important objective. e f f i c i e n t methods of achieving i t through international co-d s ) -operation were unlikely to materialize. ' At one extreme was Professor Haberler, who said that "the existing international credit machinery, together with the maintainance of a high level of business a c t i v i t y was as much as was needed from the side of the indus t r i a l countries". At the other were two South American economists who supported an international s t a b i l i z a t i o n scheme but feared that the prices fixed would be too low "because the United States might take advantage of i t s position as a monopo-(16) l i s t i c buyer to keep prices low".-(17) I t emerged i n the course of professor Wallich's paper* ' and the discussion that followed that the chief purpose of s t a b i l i -zation agreements from the point of view of the underdeveloped countries was not so much price s t a b i l i z a t i o n as to effect improvements i n the terms of trade, i . e . to effect income trans-f e r s . There are other means of effecting such transfers, and it appears to the writer that there can be few methods more d i s -(15) Discussions of paper by Henry C. Wallich, " S t a b i l i z a t i o n of proceeds from Raw Material Exports"* i n i b i d . , pp. 361-365. (16) Loc. c i t . (17) Ibid., pp. 342-365. - 62 -tortionary i n their effects than the one proposed. The choice before those developed countries which wish to help the poorer countries to s t a b i l i z e their economies, i s i n essence one between price support through s t a b i l i z a t i o n schemes or straight income transfers i n the form of international aid.. S t a b i l i z a t i o n schemes are i n fact analagous to the price supports which are preferred by American and European farmers - although not by economists - to the alternative system, as practised in. the United Kingdom, of income guarantees combined with freely-fluctuating prices. The l a t t e r has the advantage of not obscuring market signals; i t therefore helps to make the economy more f l e x i b l e by encouraging the removal of resources from un-stable or unprofitable lines of production. Where under-developed countries are concerned, this effect i s important, because, as we have seen, much of their "vulnerability" i n international trade springs from the tendency of their supply of exports to be highly i n e l a s t i c with respect to price de-creases i n lines of lagging or declining demand. I t would of course be naive to ignore the p o l i t i c a l factors underlying the preference of the poorer countries for in d i r e c t aid through s t a b i l i z a t i o n schemes; they are motivated, as are American and European farmers, by the fact that there are fewer potential "strings" to price supports than to income subsidies. Neverthe-l e s s , the purely economic j u s t i f i c a t i o n for prefering income - 63 -subsidies effected through international aid i s clear. The conclusion appears warranted that even where individual com-modity price s t a b i l i z a t i o n agreements exist, they should be regarded as emergency measures, p a r t i c u l a r l y to assist the one-crop producers, and should be coupled with aid to assist i n the necessary d i v e r s i f i c a t i o n and expansion of other lines of output. If international income transfers are ignored and a l l that i s required i s s t a b i l i z a t i o n of producer prices and incomes, t h i s can, as w i l l be discussed i n the next chapter, be achieved by purely national action. A country can adopt the technique of the West African Marketing Boards or some refinement of i t , s e l l i n g i t s commodities on the world market for whatever they w i l l bring, paying or taxing i t s producers according to the difference between the stab i l i z e d and the world market prices. I t can accumulate exchange reserves i n good times and draw them down i n bad. A country following this policy would not stabilize the world price, but i t s domestic economy and i t s imports would behave as though the price had been s t a b i l i z e d . In concluding the discussion of the case for an int e r -national commodity price s t a b i l i z a t i o n scheme, we return to the assertion that the context of a l l modern discussions of under-developed countries i s that of capital formation for development. Once i t i s placed firmly i n th i s context, i t i s easy to see that - 64 -the chief merit of an international commodity price s t a b i l i z a t i o n scheme would be as a device for avoiding painful but necessary economic and p o l i t i c a l adjustments i n the underdeveloped countries themselves* An increase i n a country's export proceeds through improvement i n i t s terms of trade can by i t s e l f contribute l i t t l e or nothing to development. The extra foreign exchange must be used to finance imports of capital goods. Unless the whole of the increase i n income is; channelled into savings, and thence into capital investment, i t may even hamper future growth by causing i n f l a t i o n and increased demand for consumer imports resulting from a combination of higher incomes and higher domestic (18) prices. Given the desire for rapid economic development, i t i s for individual governments to decide whether voluntary savings out of export surpluses can be r e l i e d upon to finance develop-ment; i f the answer i n a particular country i s that they can-not be so r e l i e d upon, then the government may have to use i t s powers to extract forced savings; particular circumstances?will determine whether f i s c a l or monetary p o l i c i e s or devices l i k e the West African Marketing Boards, or a combination of a l l three, are used. But on no account can the present situation, i n which (18) Nurkse, op. c i t . p. 102 - 65 -stringent p o l i c i e s for mobilizing capital and controlling i n f l a -t i o n are non-existent i n many underdeveloped countries, be allowed to p e r s i s t . In essence then, the proposed international commodity price s t a b i l i z a t i o n scheme would treat a symptom without affect-ing the disease. The biggest problem for many, i f not most, underdeveloped countries l i e s at home, and i t i s for the govern-ments of these countries to ensure that their present export proceeds are applied for development purposes. A country with sound internal p o l i c i e s should have l i t t l e d i f f i c u l t y i n obtaining a measure of security through the existing international credit machinery. The immediate res p o n s i b i l i t y for internal s t a b i l i -zation i s one which can neither be shared with nor shifted to an international price s t a b i l i z a t i o n authority. In summary: the discussion of th i s chapter has covered some aspects of the demand for and supply of primary commodities; i t has been noted that severe price fluctuations occur and that some underdeveloped countries are i n a speculative position, which varies from year to year, from country to country, and from commodity to commodity. The possible long-run implications i n favour of economic d i v e r s i f i c a t i o n for those countries which tend to speculate unsuccessfully have been mentioned, and the view had been expressed that international action which might - 66 -tend to obscure these implications i s undesirable. I t has been observed that, to the extent that international price fluctuations result from c y c l i c a l recessions i n the industr i a l countries, the most important s t a b i l i z i n g contribution these countries can make i s the maintenance of a high and sustained l e v e l of business a c t i v i t y i n their home economies. F i n a l l y , extreme doubts have been cast upon the p r a c t i c a b i l i t y , necessity or d e s i r a b i l i t y of international action i n the f i e l d of commodity price s t a b i l i z a t i o n ; such action i s not well-designed for effecting international income transfers; to the extent that i t would shelter i n e f f i c i e n t governments from the consequences of their short-sighted p o l i c i e s , i t i s undesirable; and whilst i t might protect local producers from price fluctuations i n world markets, this end can equally well be achieved by domestic action. In the next chapter we shall discuss some types of domestic action which might be included under the broad heading of " s t a b i l i z a t i o n " . CHAPTER IV: We have examined the meaning and implications of " s t a b i l i z a t i o n " i n the international f i e l d , and shall now deal with the same concept as i t applies to the domestic p o l i c i e s of tropical African countries* The particular aspect of s t a b i l i z a t i o n policy selected for treatment i n this chapter i s the marketing of agricultural export surpluses by means of statutory export monopolies* Such monopolies, or marketing boards, handle a l l important export crops i n the former B r i t i s h colonies of East and West Africa* With the actual organization of the Boards, which has changed considerably during the course of the l a s t few years, we shall be l i t t l e concerned. Suffice i t to say that each i s predominantly ' o f f i c i a l 1 1 In composition, and that a l l work under the close policy supervision of the governmental authorities. They have l i t t l e or no autonomy except i n matters of detailed administration; any further degree of autonomy would be inappropriate i n view of the large part of the economic welfare of the countries concerned which i s tied-up with the Boards' a c t i v i t i e s and methods of operation. As late as 1954 the financial resources of the West African Marketing Boards exceeded those of the governments they s e r v e d . T h e d i s -(1) P. T. Bauer, West African Trade, C.U.P., 1955, p. 263. - 68 -posal of their large reserves has been a major factor i n the p o l i t i c a l and economic situation i n these t e r r i t o r i e s . The best-documented and most important single crop under control of a Marketing Board monopoly i s Ghana cocoa. We sha l l as far as possible draw upon examples from this crop, which can be regarded for purposes of analysis as t y p i c a l . Cocoa accounts for approximately 60$ of Ghana's exports by v a l u e . G h a n a grows approximately 72$ of Africa's cocoa, and i s the world's largest producer, with 38$ of total world production i n 1960/61. ' The average annual price fluctuation of cocoa on world markets during the seven years 1954-1960 was 2 5 $ . ^ The contribution of cocoa export duties (levied on a s l i d i n g scale on a l l Marketing Board surpluses) to the national revenue has varied between 55$ i n the exceptional year of 1954 and 20$ i n the bad year 1 9 5 7 . ^ The importance of the crop i n Ghana's economy i s evident. The Cocoa Marketing Board, the successor to a wartime Produce Control Board, was founded i n 1947, following the issue of a B r i t i s h Parliamentary White Paper i n 1946.^ The White (2) For detailed s t a t i s t i c s for Ghana and other West-African countries, see S t a t i s t i c a l Appendix, Tables I and I I . (3) See Tables III and IV, Appendix. (4) Table V, Appendix. (5) P. Ady, "The Economic Position of Ghana," B u l l e t i n of the  Oxford University Institute of S t a t i s t i c s , V.20 (Nov. 1958), p.316. (6) Statement on Future Marketing of West African Cocoa. Cmd. 6950, 1946. - 69 -Paper stated that wartime experience had shown that the Govern-ment could achieve s t a b i l i z a t i o n of seasonal prices paid to cocoa producers. After noting that wartime price s t a b i l i t y had been "generally welcomed" i n preference to the fluctuating prices of the pre-war era, the White Paper stated that "the remedy for many of the e v i l s a f f l i c t i n g the West African cocoa industry l i e s i n imposing a buffer between the producer and the international market which w i l l protect him from short-term fluctuations of world prices and allow him a greater s t a b i l i t y of income." As envisaged i n the White Paper, i n seasons when world prices were high, the price paid to the producers would be less than the average r e a l i z a t i o n on sales of the world market. When world prices were low, the Board would pay a higher price to producers, out of surpluses accumulated during the boom years. I t was expected that transactions would approximately balance over a period of years, with the producers having received an average price "substantially equal to the average net price re-alized on world markets."' I t w i l l be noted that the White Paper drew no d i s t i n c t i o n between income s t a b i l i z a t i o n and price s t a b i l i -zation, and that i t was vague as to the time period over which "averaging" was to be achieved. It i s unnecessary to go into the detailed reasons why wartime price s t a b i l i t y had been "generally welcomed" by - 70 -producers. Frequent and vide fluctuations i n the prices and incomes of producers entail important s o c i a l , p o l i t i c a l and economic disadvantages wherever they occur. Where the impact of the money economy i s comparatively recent, understanding of the economic forces which are at work i s correspondingly limited, and the population are apt to blame adverse price changes on the 'exploi-tation* of merchants. Sharp short-term variations i n prices may also lead unsophisticated producers to bring about changes i n capacity which are not j u s t i f i e d by the long term trends. The effec t of discontinuous fluctuations i n income on the propensities to save and to import i s also important. There i s no doubt that insulating the home economy from fluctuations of world market prices was an important policy objective. The d i f f i c u l t i e s a l l lay i n achieving the objective. As Professor P. T. Bauer has pointed out, s t a b i l i z a t i o n policy i n West A f r i c a suffered, at least i n i t s e a r l i e r stages, from the f a i l u r e to define the objectives of the policy i n an un-ambiguous way. The concept of s t a b i l i z a t i o n may refer to s t a b i l i z a t i o n of prices, money incomes, or real incomes. Sta-b i l i z a t i o n of any one of these may destabilize the others; and i n certain l i k e l y circumstances, such as a r i s e i n import prices (7) A useful detailed description of the organization of cocoa buying before the war i s presented i n the Report of the Commission  on the Marketing of West African Cocoa. Cmd.,5845, 1938, (the Nowell Report) . " ' • •• - 71 -or a crop f a i l u r e * i t w i l l necessarily do so, The White Paper quoted above assumed as self-evident that fluctuations i n prices and incomes are the same thing. But where fluctuations i n output due to natural causes are concerned* this i s not so, pa r t i c u l a r l y where the producing country i s an important supplier on the world market* We remarked i n Chapter III on the "cushioning" effect of a r i s e i n world price when a "country had experienced a crop f a i l u r e . To s t a b i l i z e prices i n such circumstances i s actually to de-s t a b i l i z e incomes* Moreover, i n conditions of a general r i s e i n prices and costs the s t a b i l i z a t i o n of money incomes would mean a f a l l i n the real incomes of cocoa producers, although: th i s would not necessarily be the case with other groups of income-earners i n the economy. The cocoa-producers might then find themselves singled out by their s t a b i l i z a t i o n scheme for specially unfavourable treatment." This ambiguity appears again when we consider the concept of s t a b i l i t y over time, which appears to be meaningless (8) Bauer, op. c i t . , p.272. See also P. T. Bauer and F. W. Paish* "The Reduction of Fluctuations i n the Incomes of Primary Producers", Economic Journal Vol. LXII, no. 248, December, 1952; Pol l y H i l l , "Fluctuations i n Incomes of Primary Producers", Ibid., Vol.'LXIIIt -o. 250, June 1953; P. Ady, "Fluctuations i n Incomes of Primary Producers; a Comment," Ibid. Vol. LXIII, no. 251, September 1953; Milton Friedman: "The Fluctuations i n Incomes of Primary Producers; A C r i t i c a l Comment;" Paish and Bauer: "the Reduction of Fluctuations i n the Incomes of Primary Pro-ducers Further Considered"; B.M. Niculescu: "Fluctuations i n Incomes of Primary Producers: Further Comment", Ibid. Vol.LXIV, no. 256, December 1954. - 72 -without reference to a specific period over which the accumulated surplus of the Board i s to be disbursed. The lack of a clear policy directive led to the accumulation by the Ghana Cocoa Marketing Board of huge surpluses within a few years of i t s inception. As Bauer remarked) When there i s no stated or even contemplated f i n i t e period over which stable prices are to be achieved, the continuous accumulation of increasing reserves could provide i t s own. perpetual su p e r f i c i a l j u s t i f i c a t i o n . In these circumstances even the most austere producer price policy could be j u s t i f i e d by postulating an i n f i n i t e l y large and prolonged f a l l i n market price i n the undefined future.(9) I f disbursement of the surplus i s considered over time, some further conceptual d i f f i c u l t i e s appear. Output i n every region of Ghana varies considerably from year to year, sometimes i n the opposite direction from the t o t a l o u t p u t ; i t i s only to be expected that variations i between, individual farmers within the various regions w i l l be even more random. There are also considerable geographical s h i f t s i n production, with new farms coming into bearing for the f i r s t time, and old farms going out of production. I f the funds were distributed i n proportion to present-day production, the old farmers who have been wiped out (9) Bauer, op. c i t . , p. 272. (10) See Appendix, Table VI. - 73 -by swollen-shoot disease would receive nothing and would i n e f f e c t be subsidising the new farmers who have just begun to produce. This i s not s t a b i l i z a t i o n of incomes; i t reduces the incomes of some producers and adds to the incomes of others. I t i s v i r t u a l l y impossible to find an income s t a b i l i z a t i o n for-mula for the individual farmer. There are obviously fundamental ambiguities i n con-nection with the specific d e f i n i t i o n of s t a b i l i z a t i o n as a p o l i c y aim. We have seen that the announced purpose of the Ghana Board was simultaneously to s t a b i l i z e prices and income} although the two are by no means the same thing. The process of accumulating surpluses for s t a b i l i z a t i o n i n the event of a price drop i n the undefined future has appeared to be one which may be largely self-perpetuating. And. the disbursement of surpluses accumulated over a number of years seems to present insurmountable problems of equity i n income d i s t r i b u t i o n . Quite apart from these ambiguities, the d e s i r a b i l i t y of s t a b i l i z a t i o n (whether of prices, money incomes or real i n -comes) can be questioned on other grounds. The aim of the policy i s not to ' f i x * producer incomes at their present levels, but to remove or reduce random fluctuations about the long-period ( l l ) For a detailed account of the attempts to control this virus disease which caused cocoa production'in the Eastern Region of Ghana to drop from 116,000 tons for 1937 to 38,000 tons i n 1956, see J . B. Wills, ed., Agriculture and Land Use i n Ghana, London, O.U.P., 1962, pp. 306-314. - 74 -trend of world prices. There i s a serious r i s k that the s t a b i l i z a t i o n measures w i l l lose contact with this trend, since i t i s not possible to say u n t i l well after the event whether a particular price change was a short-term fluctuation or a phase of a long-term change. I f the world market price i t s e l f i s comparatively stable, then the price s t a b i l i z a t i o n scheme w i l l work' - but then there w i l l be no need for the scheme. A large-scale long-period change i n one direction could not be "evened-out" by a s t a b i l i z a t i o n scheme* except by extreme luck i n forecasting, and then only for a few years. I t would i n any case be unwise to try to fight against a persistent trend, up-wards or downwards. This leaves drastic short-period changes due to c y c l i c a l disturbances of the world market. S t a b i l i z a t i o n of producer incomes i n Ghana even i n these circumstances would probably be out of the question. Cocoa producers are one-tenth of Ghana's population, and cocoa income contributes at least one—third of (12) the to t a l cash income of the country - possibly more. ' I t i s possible to subsidize an economically small section of the community for a short time, but no country can possibly subsidize such an important cash-earning group. "To imagine that i n a (12) Niculescu, op. c i t . , p. 741. 75; -time of depression, when the whole income of Ghana, as a primary producer would have been cut down d r a s t i c a l l y , any stabilization, funds i n existence could be used solely for bolstering up the income of the upper tenth, while the rest of the country would meekly look on and accept to do without, i s to expect too much (13) of human nature."' Any large accumulated funds could be used at such times only for the benefit of the country as a whole, and not for that of a small part of the population. Again, when the rate of exchange with the outside world i s fixed, an improvement i n the terms of trade should lead to a r i s e i n lo c a l prices and wages re l a t i v e to import prices; i f s t a b i l i z a t i o n i s r i g i d l y interpreted, no improvement i n the terms of trade resulting from a r i s e i n export prices can be transmitted to the local population. In fact, with export prices controlled and import prices free to r i s e , the result i s l i k e l y to be a deterioration i n the living-standards of pro-ducers. By the same token, however, the balance of payments effect of the Board's operations, especially when combined with the levying of export duties, i s wholly favourable, and i s achieved through witholding domestic purchasing power and thus (14) r e s t r i c t i n g the level of imports. ' (13) Loc. c i t . (14) See A. Hazlewood, "Trade Balances and Statutory Marketing im Primary Export Economies," Economic Journal, v o l . LXVII, no. 265 (March 1957), pp. 74-82. - 76 -The role of prices and incomes i n resource allocation cannot be overlooked. S t a b i l i z a t i o n may remove incentives for expansion and contraction i n certain lines of output, and may thus actually tend to destabilize the long-period allocation of resources within the economy. This i s , of course, the p a r a l l e l objection to that put forward i n Chapter III against an inter-national commodity price s t a b i l i z a t i o n scheme, which might also> tend to obscure the market signals which guide resource allocation. The objection, as far as national governments are concerned, f a l l s away i f the economy i n question i s highly centralized and closely administered, i . e . i f the p o l i t i c a l system favours this type of organization and the administrative resources of the government are equal to the task of directing resources i n accordance with a comprehensive development plan. Messrs. Bauer and Paish's objections to the price p o l i c i e s of the West African Marketing Boards during the early 1950's^*^ were largely based on the assumption that price sta-b i l i z a t i o n at a level below world market price .would inevitably a f f e c t the volume and dir e c t i o n of e f f o r t put forward by produ-cers, with consequent effects upon "the maintenance and extension of capacity and the volume of output." The effect would be "to reduce both output and consumption and thereby reduce the world's (15) Bauer and Paish, Loc. c i t . - 77 -standard of l i v i n g . " 1 ' We may say with hindsight that time has f a l s i f i e d Bauer and Paish's expectations with regard to the overall competitive situa t i o n of West African cocoa producers. Since 1953. despite the onset of swollen-shoot disease, Ghana has maintained and Nigeria has increased i t s percentage share i n a greatly expanded (17) t o t a l volume of world cocoa exports. ' In view of the fact that a declining long-term trend i n world consumption of cocoa and consequently i n cocoa prices has apparently begun to show i t s e l f during the l a s t decade, i t i s probably fortunate that West African capacity has not expanded at any faster rate. The non-fulfillment of the Bauer/Paish predictions pro-vides an interesting incentive to examine their analysis and find out where they went wrong, i f indeed they did go wrong. The price policy of a Marketing Board i s unlikely to have any short-term effects where cocoa i s concerned as i t takes some seven years for a young tree to come into bearing. How-ever, i n maintaining i t s proportionate share of the world cocoa market at a time when world supply has been steadily increasing, t o t a l Ghana production has obviously increased since 1953. Pro-(16) Loc. c i t . , p. 765. (17) See Tables III and IV, Appendix. - 78 duction i n the 1959/60 season i n fact reached the record figure (18) of 316,00 tons. ' This was despite the price policy of the Marketing Board, which i n combination with a sliding-scale export duty, had ensured that producers received only between two-fifths (19) and three-fifths of the commercial value of their crop. ' I t i s of course, impossible to say with accuracy what level Ghana's cocoa production might have reached i f producers had received the f u l l value of their crop throughout the period under review. We may however, obtain some indication of the actual income and price e l a s t i c i t i e s of supply of cocoa by looking at some of the underlying conditions. Three sig n i f i c a n t facts appear: l) One-third of Ghana's estimated national income of £150 m i l l i o n i n 1951 was attributed to cocoa, although only one-tenth of the population (220,000 out of 2,300,000 aged 16 (18) Agriculture and Land Use i n Ghana, op. c i t . , p. 193. (19) Bauer, West African Trade, op. c i t . , p. 294. The export duty i s levied d i r e c t l y upon the price received by the Marketing Board on world markets. Producers therefore receive a price which i s net of export duty and the amount added to or withdrawn from the Board's reserves for s t a b i l i z a t i o n purposes. Although the two deductions amount to the same thing for producers, i t i s clear that the gap between world market and internal cocoa prices i s largely due to f i s c a l , not s t a b i l i z a t i o n , policy. Bauer and Paish certainly knew t h i s . I t therefore appears that their c r i t i -cisms of "the p r i c i n g policy of the Marketing Boards" concealed an i m p l i c i t attack upon the f i s c a l p o l i c i e s of the then Gold Coast Government. Professor Bauer has been more e x p l i c i t elsewhere, and the basis of his criticisms i s discussed later i n this chapter. - 79 -or over) was engaged i n cocoa production. The cocoa farmers are "the f i r s t to admit that they are much better off than any of the other major occupational g r o u p s " ^ ^ i n Ghana* They can f a i r l y be described* from the point of view of income as the "upper tenth" of Ghana society. Niculescustates that they are also f u l l y aware of the fact that their high present day income i s not due to greater i n i t i a t i v e * or to harder work than the rest of the popu-l a t i o n but i s mainly "the result of a combination of ... ( world demand, and of favourable climatic and s o i l factors," for which they can hardly claim credit*. This being so, i t seems that the higher incomes of the cocoa producers are largely made up of rents, and that the relevant opportunity costs are not those of the producers themselves, but the alternative rents which cocoa farms are capable of pro-ducing under diff e r e n t crops* 2) A f a i r indication of the r e l a t i v e shares of wages and rents i n cocoa producers' incomes can be obtained from F o l l y H i l l ' s account of the Ghanaian abusa labour system. Miss H i l l says that most of Ghana's cocoa may be plucked by abusa labourers, about whose numbers there i s l i t t l e (20) Niculescu op. c i t . , p. 731. (21) Loc. c i t . - 80 -(22) information. ' The significant aspect of the abusa system i s that the Twi word abusa means t r i p a r t i t e d i v i -sion; an abusa labourer i s paid a one-third share of the value of the cocoa he plucks and prepares for market: for his employing farmer, who i s i n fact the landowner. The abusa labourer i s frequently assisted by members of his family, who then l i v e with him on the farm* He always does the fermenting and drying as well as the plucking of the cocoa; he frequently markets the cocoa as well. He has a duty to weed the cocoa farm at least once a year. "As he does nearly a l l the work, i t i s to a large extent he, not the farmer, who determines how much (23) cocoa i s produced i n any one season." ' Thus i n many areas the effective cocoa price, so far as quantity of cocoa i s concerned, i s one-third of the o f f i c i a l buying price. 3) The third s i g n i f i c a n t fact about the conditions under-l y i n g price e l a s t i c i t y of cocoa supply i n Ghana i s also attributable to Miss H i l l , who i s here quoted i n f u l l : Although the present siiding-scale export duty i s the main-stay of the Gold Coast economy, inquiry and observation have shown over and over again that the ordinary Gold Coast farmer i s usually unaware that he i s being taxed at a l l - l e t alone that when world cocoa prices are high he i s probably taxed more heavily than any other primary producer i n the world.(24) (22) P. H i l l , The Gold Coast Cocoa Farmer, London, O.U.P. 1956, p.9. (23) Loc. c i t . (24) Ibid., p. 112 f f . - 81 -The cocoa export duty has been i n existence since 1916. What bearing does the evidence assembled above have on the Bauer/Paish prediction of 1952 that the low prices paid to cocoa producers by the Ghana Marketing Board would adversely affect incentives and hence the level of production? I t appears, f i r s t l y , that the cocoa producers have higher incomes as a group than any other occupational group i n Ghana* The only evidence available on their alternative earning opportunities i n farming i s provided by Niculescu, who estimated i n 1953 that the actual average annual cash income (after taxation and Cocoa Marketing Board retentions) of active adult participants i n cocoa-growing was £150, as compared with £30 - £40 for the rest of the farming community, £160 for s k i l l e d workers, and £80 for unskilled (25) workers. Most cocoa farmers would be c l a s s i f i e d as unskilled,, and wage earners have to pay for lodgings, and for much of the food normally grown for farmers by themselves, i n addition to working twelve months of the year, where cocoa farmers have a great deal of leis u r e . I t i s apparent that the cocoa producers' income would have to drop much further than i t had done i n 1953 before there would be any s h i f t to other occupations. It further appears l i k e l y that, even i f such a s h i f t were to begin, i t would for some time be untraceable i n production (25) Niculescu, l o c . c i t . , p. 734. 82 -figures* since i t s f i r s t effect would presumably be f e l t i n a decline i n the number of abusa labourers. Many of these men are immigrants from the poorer Northern T e r r i t o r i e s area and Togoland,^^ and their remuneration would have to f a l l ( i n the absence of alternative employment for unskilled immigrant labour) to a lev e l s u f f i c i e n t to induce them to return home. Productiom would then decline only i n the proportion i n which the farmer-owners were unable to perform the abusa's work by themselves. Lastly, i t appears that the farmers as a group know very l i t t l e of cocoa prices or of the taxation which i s levied on them. I t may not be too fanc i f u l to assume that i f they are so l i t t l e aware of their own economic best interests, they are unlikely to gear production to price. We therefore f a u l t the Bauer/Paish analysis on three grounds: there are no closely comparable alternative occu-pations for cocoa farmers; the effective price ruling i n abusa areas i s one-third of the Marketing Board price; and the pro-ducers may not yet have entered into the money economy to the extent of allowing their entrepreneurial decisions to be guided by pr i c e . A simple explanation, which i s not inconsistent with our argument, i s that the cocoa producers are so much wealthier (26) H i l l , op. c i t . , p.24. - 83 -than other occupational groups within the Ghana economy that they simply do not find i t necessary to consider either alternative occupations or prices* Even i f hard times come, many of themi can obtain a 50$ increase i n income by themselves doing the work: they now employ abusa labourers to do. As for the purely theoretical aspects of the Bauer/Paish analysis, two points only require mention. The f i r s t i s that the analysis i m p l i c i t l y assumes a positively-sloped supply function throughout the entire range of prices payable by the Marketing Board. This i s perfectly reasonable, provided most of the Ghana cocoa farmers respond to economic incentives l i k e 'economic men'. No conclusive evidence i s available on t h i s point, and i t would therefore be equally v a l i d to postulate that within certain price ranges, and for certain groups of individuals, there w i l l be a tendency for the supply function to be discontinuous*, at time perfectly i n e l a s t i c and at other times even backward-sioping. We may agree with Bauer and Paish's analysis so far as the whole country i s concerned, with the reservation that where individuals and even regions are the economic units under analysis, only detailed factual study could enable judgements to be formed as to the effect of higher or lower producer prices on incentives and consequently on the level of total J production. 84 The second point of interest about the Bauer/Paish analysis i s that i t nowhere mentions the effect of increased Ghanaian production of cocoa on the world price* Since Ghana i s an important producer (38$ of world output)* increased output would only benefit producers i f the e l a s t i c i t y of world demand for Ghanaian cocoa were greater than one at the price being considered. The writers present no evidence* or even discussion. to establish that this i s i n fact so. The figures of Tables III* IV and V suggest that the increased world production between 1954 and 1961/1962 has met with a more than: proportionate decline i n the world price of cocoa* There i s some evidence also> to suggest that e l a s t i c i t y of world demand i s greater than one for a drop i n (27) price, but less than one at a l l other times* The developed countries appear to buy large quantities for their stockpiles i n (28) years of low price and to r e s t r i c t demand when; prices are high. ' Such stockpiling can only exert further downward pressure on cocoa prices from any one supplier. We may therefore claim that even i f i t could be f u l l y established that the Cocoa Marketing Board's pricing p o l i c i e s were responsible for r e s t r i c t i n g Ghanaian "V"' output of cocoa after 1947, t h i s r e s t r i c t i o n may have been bene-f i c i a l i n view of the fact that cocoa was headed for a period of overproduction and for a drastic f a l l i n price. (27) See U.N. Economic B u l l e t i n for A f r i c a . Vol. I I , no. 1 (1962) op. c i t . , p. A-40. (28) Loc. c i t . - 85 -There are however, other economic effects of the Cocoa Marketing Board's price p o l i c i e s which are easier to assess; i t may well have been these which Bauer and Paish had i n mind when they c r i t i c i z e d the low producer prices* The factors with which we have so far dealt refer almost exclusively to the economic decision-making of established cocoa growers* We have produced evidence which tends to show that the majority of established growers hold comfortably inframarginal positions, drawing a large proportion of their incomes from rents and that they are therefore unlikely to respond to price incentives* But the position i s far different when we consider the potential cocoa growers on the extensive margin of production. Even i f the established producers were to grow less cocoa as the result of a higher price, total', supply could increase, because prospective growers who previously had not cultivated tfe crop might be induced to do so>by the higher price. This applies with particular force i n a country with poor communications and heavy transport costs, where there i s a large element of subsistence production. In these circumstances, we should expect that a considerable price d i f f e r e n t i a l would be necessary to persuade conservative peasants to move into cash crop production. The empirical v e r i f i c a t i o n for the process of extension of capacity at the margin i s provided by the h i s t o r i c a l evidence of the establishment and growth of the large tropical peasant - 86 industries) including cocoa, where increased production has been achieved by the gradual and often rapid extension of the area (29) under cash crops at the expense of subsistence production. ' We suggested at the end of Chapter II that the chief importance of international trade for countries which s t i l l have a large element of subsistence production may l i e i n the exten-sion of communications and the creation of social external eco-nomies through the provision of new economic incentives. Per-haps the low producer prices of the Ghana Cocoa Marketing Board have resulted i n a diminution of incentives at the margin, and have consequently prevented the spread of the money economy into the remoter areas of the country. And i t should be borne i n mind that i n Ghana approximately 60$ of the male population i s s t i l l engaged i n subsistence production. It appears that higher producer prices for Ghana cocoa would i n a l l likelihood have resulted i n increased extension.of (29) For an account of the connection between the changeover from subsistence to cash crops and the development of transpor-t a t i o n i n Ghana, see Agriculture and Land Use i n Ghana, op. c i t . , pp. 173-178. (30) Ibid., p.192. - 87 -(31) cocoa producing capacity. ' We have, however, already seen that an absolute increase i n production of Ghana cocoa might well have induced a more than proportionate f a l l i n the world price, with consequent unfavourable effects on the country's external position. Assuming this to have been the case, the only policy open to the government i f i t had wished to take action to extend the margin of production would appear to have been to attempt to reduce production i n the established areas, perhaps by taxing the older growers more heavily i n order to subsidize the new marginal producers through a d i f f e r e n t i a l price or tax structure. The objections to such a policy are obvious, p a r t i c u l a r l y i n a monoculture where dependence upon one crop i s already a source of danger, and where d i v e r s i f i c a -t i o n of production i s quite properly a prime aim of policy. On d i s t r i b u t i o n a l grounds, i t would be impossible to j u s t i f y a policy of taxing the more e f f i c i e n t producers i n order to provide income subsidies for a group of potential producers. (31) The fact that higher prices could have been paid, as opposed to whether they could be paid i n the future, i s not in-dispute. The Board's surplus i n 1958 stood at over £53,000,000; far from 'averaging'' good and bad years, the Board has added to i t s surplus i n a l l years since 1947, with the exceptions of 1948, 1956 and 1957, i n which the producer prices were supported by £100,000, £lir m i l l i o n and £6& m i l l i o n respectively. See Bauer and Paish, op. c i t . , p. 757; F.M. Bonrret, Ghana, The Road to  Independence 1919 - 1957, London, O.U.P., 1960, p.204. The losses i n 1956 and 1957 were i n a sense nominal from the point of view of the economy as a whole» since Export Duty paid by the Board to the Central Government, never f e l l below £9 m i l l i o n , event i n 1957. There were, however, balance of payments d e f i c i t s i n both years, and foreign assets f e l l correspondingly. See P. Ady, "The Economic Position of Ghana", B u l l e t i n of the Oxford University Ins t i t u t e of S t a t i s t i c s , v o l . 20, Nov. 1958, p.315. - 88 -If the price were freed to fluctuate with every vagary of the world market* t h i s would be no solution. I t would i n fa c t involve a return to the chaotic conditions of pre-war cocoa marketing, already discussed. Whilst the majority of the estab-lished producers could probably survive such a drastic measure, i t TOuld be l i k e l y to cause p o l i t i c a l discontent on a large scale, and the position of the marginal producer would be lacking i n even minimal security. The remaining solution i s the d i f f i c u l t one from the Board's point of view of f i x i n g seasonal prices at a level closer to the world market price. Not even the severest c r i t i c s of the Board's p o l i c i e s have suggested that the advantages of i n t r a -seasonal s t a b i l i t y can be dispensed with, but the d i f f i c u l t y l i e s i n achieving this objective. I t i s clear that the Board would s t i l l need to hold substantial reserves i f a policy of paying higher prices even from one season to the next were adopted, i n order to guard against the ever-present p o s s i b i l i t y of a drastic f a l l i n the world price i n the middle of the season, i . e . after the minimum price had been announced. I t i s apparent that the Board's pricing p o l i c i e s since i t s inception i n 1947 have been extremely conservative, i n the sense that i t has paid producers at a rate well below the average world price* The alternative of a more adventurous policy would, however, have exposed i t to a l l the risks of a commodity speculator - 89 -on world markets* Since i t s terms of reference were ambiguous from the start, and i t s r e s p o n s i b i l i t i e s extend to the general welfare not only of the producers as a group, but of the economy as a whole, i t i s only natural that the Board sees i t s responsi-b i l i t i e s as stretching beyond the intra-seasonal s t a b i l i z a t i o n of prices and into the realm of guaranteeing at least medium-term ( i . e . possibly 5 - 1 0 year) s t a b i l i t y i n cocoa revenues. In order to effect such s t a b i l i z a t i o n i t needs very much larger reserves than would be necessary for intra-seasonal operations. I t i s t h i s ambiguity i n the Board's terms of reference which, led Professor Bauer to assert that the continuous accumulation of reserves can become a largely s e l f - j u s t i f y i n g process. Given that the Board sees i t s responsibilites as stretching over a period of several years at a time, i t i s apparent that uncertainty about the long-term trend of world cocoa prices must play a considerable part i n i t s decision-making. As for this trend, there are indications that United States and European per capita consumption i s either stable or declining, but there i s a r i s i n g market for cocoa i n those Far Eastern countries with increasing per capita income, notably J a p a n . O n the other hand, new producers (e.g. F i j i , Borneo) are entering the world market. The long-term trend i n cocoa (32) U.N. Economic B u l l e t i n for A f r i c a , op. c i t . v o l . 1, no. 1, pp. 38-39. - 90 -prices i s very hard to forecast, since i t w i l l ultimately depend upon the re l a t i v e strengths of the presently-declining Western demand and the as-yet-unrealised potential demand of those underdeveloped countries whose per capita income i s r i s i n g , i n combination with the potentially large increase i n world supply from new producers. We thus see that the Ghana Board's i n a b i l i t y to pay a higher price to producers i s largely determined by uncertainty as to the world market price from day to day, and p a r t i c u l a r l y for any considerable period ahead. Its need for large reserves, i s largely dependent upon i t s duty to safeguard the Ghana pro-ducers for more than one season at a time, and upon uncertainty as to the long-period trend i n world prices. To return to our original point ( i . e . the question of whether Ghanaian-cocoa production should have been increased by paying a higher price to induce extension of capacity as the margin) we may say that there i s no evidence that such extension would benefit the overall external position of the Ghanaian economy.-We may also say that achievement of such extension, which i s de-sir a b l e from the point of view of extending the money economy, would involve either uneconomic subsidies to one group of pro-ducers by another or a pricing policy on the part of the Board which might not be j u s t i f i e d by the present long-term prospects of the world cocoa market. - 91 -The mention of subsidization of one group of producers by another leads us to the larger question of the subsidization of the entire Ghanaian economy by the cocoa producing group. We have already mentioned that cocoa income constitutes approximately one-third of the national income of Ghana* that between 20$ and 55$ of the national revenue i s attributable to cocoa export levies, and that cocoa producers as a group con-s t i t u t e only 10$ of the population. We also quoted Niculescu to the effect that the cocoa-farmers were f u l l y aware that their high present-day income was due more to a combination of favour-able geographic and climatic factors than to greater i n i t i a t i v e or harder work on their part. The same writer remarked that the cocoa-farmers as a group within, the Ghana economy were "the equivalent of the super—tax group i n the United Kingdom", and that they are on the whole ready to see some of their group's earnings redistributed among the other nine-tenths of the popu-l a t i o n . ' Dramatic confirmation of this statement was pro-vided i n 1959, when the Ghana Farmers Council voluntarily decided to make a s t i l l bigger contribution to development, asking the Government to reduce the price guaranteed to the farmer from £112 to £134 a t o n J 3 4 ^ (33) Niculescu, op. c i t . , pp. 731-732. (34) P. Ady, "The Economic Position of Ghana", op. c i t . , p.318. - 92 -Since the Ghana farmers themselves, have demonstrated their willingness* at least as a group, (and presumably because of their p o l i t i c a l enthusiasm for development) to share their earnings with the rest of the population, the issues involved become somewhat academic so far as the Ghanaian position i s con-cerned. They are i n t r i n s i c a l l y both important and interesting,, however, and the general principles involved w i l l be discussed below* The choice facing the Ghana Government has been between extracting forced savings from the cocoa producers through accumu-( 35) l a t i o n of Marketing Board surpluses and through export duty, ' or of allowing the producers themselves to reap the f u l l benefits of their crop. Professor Bauer has put his own view of the West African Marketing Boards and their surpluses somewhat, acidly, as follows: For good or e v i l the boards must be seen as instruments for the s o c i a l i z a t i o n of savings and for a large measure of government control and s o c i a l i z a t i o n of peasant production i n West Africa* Suggestions that they are devised for / flv price s t a b i l i z a t i o n ... only obscure their nature and function. ' (35) The duty i s levied on a s l i d i n g scale on the price obtained by the board on world markets, and has consequently not d i r e c t l y affected either the producer price or the Board's s t a b i l i z a t i o n operations. (36) Bauer, West African Trade, op. c i t . , p. 316. - 93 -We have seen that there i s i n fact a good deal to be said about the s t a b i l i z a t i o n function, per se, of the Ghana Cocoa Marketing Board, but i n order to get to the heart of Bauer's position we must make two assumptions* Either he believes as an economist concerned with economic development that the peasants would themselves have saved and invested the agr i c u l t u r a l surplus from their production, and that Government intervention i n the operation of the market economy i s therefore unnecessary; or he i s taking an ethical position from which he judges that i t i s right for the farmer to be i n a position to consume the whole f r u i t of his labour, plus any rent he may acquire on the way, and wrong for the Government to take his (37) ' surplus away. • We may b r i e f l y examine both of these positions, but the reader i s warned at the outset that such scanty evidence as i s available i s mainly h i s t o r i c a l * and therefore cannot be used as a basis for prediction or for saying what "might have been". Niculescu stated i n 1954 that "The large increase i n the personal incomes of the Gold Coast population has been almost ent i r e l y used so far ... on consumption expenditure." Imports (37) We dismiss the third p o s s i b i l i t y - i . e . that Professor Bauer has written a book and several a r t i c l e s merely to protest against c o l l e c t i o n of forced savings v i a marketing boards, instead of through some other type of f i s c a l instrument - as t r i v i a l . - 94 -of food, drink and tobacco increased from £1.9 m i l l i o n i n 1946 to £13.6 m i l l i o n i n 1952. Imported cloths jumped from £3.1 m i l l i o n i n 1946. to £11.7 m i l l i o n i n 1952, whereas the greater part of the increase i n the import of building materials and of in d u s t r i a l equipment (cement, e.g. going up from £0.4 m i l l i o n to £1.8 m i l l i o n ) , was due to increased a c t i v i t i e s by the Govern-(38) ment or by the large, almost a l l foreign-owned, firms. There i s thus a prima facie case leading to the conclusion that l i t t l e saving for investment can be expected from the farmers, event though their income i s greatly increased. Niculescu does, however, point to some evidence to show that even i n 1952 some sections of the population were taking an interest i n the p o s s i b i l i t i e s of productive investment, e.g. the import of trucks, which are "mainly" operated by African owner-drivers, climbed from 492, worth £0.2 m i l l i o n i n 1946 to 2,987, worth £2.2 m i l l i o n i n 1952. Timber-sawing equipment and small power-operated grain m i l l s are further examples, as i s the tendency towards building of new "modern"' houses i n the richer farming d i s t r i c t s . B u t the fact that these develop-ments were taking place at a time when the Marketing Board was rapidly building i t s surplus reserves and when the export duty • i (38) Nicul escu, op. c i t . , p. 735. (39) Loc. c i t . - 95 -was making a substantial contribution to revenue, i s surely an indication, especially when combined with the absolutely much larger expansion i n consumption spending, that the private sector was by no means being starved of funds to carry out such expansion as was within i t s power* 2nd when we learn that more than 1,000 miles of all-weather roads and many bridges were constructed by the Government between 1946 and 1956,^^' . . . . . . . | the increase i n vehicle imports i s not surprising. Nor does Niculescu state what proportion of these imports can be attributed to government or larger foreign-owned firms. Comparison of the figures for consumer goods given by Niculescu with those for vehicle imports and cement can only lead to the conclusion that the producer-goods component of Ghanaian imports would have been even smaller i n the absence of substantial taxation, which must at least have had the effect of damping down the pressure for consumer imports. The evidence that private capital formation was increasing i s interesting, but i s only s i g n i f i c a n t i n the unlikely circumstance that the Ghana Government would be prepared to wait for an indefinite period for the growth of entrepreneurship i n the private sect,or to lead to a s h i f t from largely consumer-oriented to ..largely producer-oriented imports. That i t was not so prepared follows (40) F. Bourret, Ghana; The Road to Independence 1919-1957. (op. c i t . , ) p. 209. from the existence i n Ghana of a s o c i a l i s t p o l i t i c a l system. The Government's lack of f a i t h i n the growth of private entre-preneurship i s evidenced by the fact that the levy on cocoa (41) exports was increased from £112 to £134 per ton i n 1959. ' The success of the government's policy of forced saving for development i s graphically i l l u s t r a t e d i n Table VII, Appendix, by extrapolation from which (at $2.80 : £l) i t appears that i n the seven years to 1959, imports of machinery and trans-port equipment had jumped i n value terms by approximately 1170$ to £25.6 m i l l i o n , whereas food and tobacco increased only 72$ to 23.4 m i l l i o n and t e x t i l e s by a mere 53$ to £17.9 m i l l i o n . Unfortunately supporting data i s unobtainable for the years 1952 - 1959, and our conclusion that the vast increase i n imports of producer goods i s due i n the main to government action and not to the growth of private entrepreneurship, must rest on the evidence already quoted as to the nature of the Ghanaian p o l i t i c a l system and the fact that the process of extracting forced savings from the peasant producers has actually beeni accelerated during the period under review. Professor Bauer says that although the habit of i n d i -vidual saving and investment "has not yet taken firm root"' i n Ghana and Nigeria, there i s evidence that the habit has been (41) P. Ady, The Economic Position of Ghana, op. c i t . , p.317. - 97 -developing. He again points to house building as an example* and also to the increase i n the sales of agricultural and trans-(40) port equipment to African customers. ' His chief objection to the process of forced saving i s . however, summarized ini the statement that: The severe obstacles to the further growth of private saving serve to prevent the development of a prosperous and i n -dependent peasantry which might have a s t a b i l i z i n g effect i n the highly charged p o l i t i c a l atmosphere of West A f r i c a . Our problem can now be said to s h i f t from the economic to the p o l i t i c a l arena; ought Ghana to tend toward development of a society with a strong, dynamic, bourgeois' element or should i t move towards an egalitarian society where the Government (and perhaps some large foreign firms) w i l l be the only owners of capital s u f f i c i e n t for large-scale development i n the industrial and trading fields? We cannot answer this question, which i s beyond the scope of a primarily economic paper, with any degree of di r e c t -ness. We may state the obvious fact that i f a society with a strong bourgeois element i s desired, the simplest way of achieving such an objective i s to allow an accumulation of capital i n the hands of a f a i r l y large group, e.g. the cocoa-producers. And (42) Bauer, West African Trade, op. c i t . , pp. 314-315. (43) Loc. c i t . - 98 -we may also point to the p o l i t i c a l and social factors which we discussed i n Chapter I, and indicate that Ghana's leaders are i n fact imbued with Pan-Africanist sentiments, that their p o l i t i c a l system i s of the "mobilization" type, and that they have a burning'desire to modernize and enrich their society as quickly as possible. We have seen, as a matter of fact, that the leaders of many of the newly-independent African states have strong leanings toward theoretical socialism of one kind or another. They consequentlyyhave p r e d i l i c t i o n s for central d i r e c t i o n of economic and p o l i t i c a l a c t i v i t y , as i s shown by the fact that a l l but fiv e of the 36. independent African States have already abandoned any pretence at practising parliamentary ( 4 4> democracy. ' I t would therefore seem that the creation of a dynamic bourgeois element i n African society i s not a policy aim of many African governments. Given the direction i n which the govern-ments intend their societies to develop, the process of forced saving, whether coupled with s t a b i l i z a t i o n measures or not, appears to be l o g i c a l , necessary and e f f i c i e n t . We now summarize some of the more important conclusions of this chapter. I t appears that domestic s t a b i l i z a t i o n schemes (44) Colin Legum, "Africa: What's gone wrong?" In the London Observer, no. 9004, January 26, 1964. - 99 -are well able to s t a b i l i z e the intra-seasonal prices paid to producers of primary products* and that t h e i r a b i l i t y to achieve a leveling-out i n producer prices over a period of years depends d i r e c t l y upon the size of their accumulated reserves* the direc-t i o n of the trend i n world prices* and the violence of fluctua-tions i n prices received from abroad. The j o i n t effect of accumulation of reserves by the s t a b i l i z a t i o n agency and simultaneous levying of export duties has been noted as favourable i n that i t both safeguards the country's external position through damping domestic demand for imported consumer goods* and provides an e f f i c i e n t method of obtaining capital for development*. At the same time we have noted that the policy of paying low prices to producers has probably resulted i n a diminution of incentives at the margin of production* with consequent adverse effects upon the potential increase i n volume and upon the spread of the money economy into the marginal areas*. The p o s s i b i l i t y that on balance this may be an advanta-geous effect where production i s of the monoculture variety* has been mentioned, and this applies p a r t i c u l a r l y where the country concerned i s an important producer with the potential to turn world market prices against i t s e l f through overproduction. - 100 -The handicaps of domestic s t a b i l i z a t i o n schemes have been shown to be c h i e f l y associated with f a i l u r e rigorously to define the purposes which the s t a b i l i z a t i o n p o l i c i e s are them-selves designed to serve* Thus, s t a b i l i z a t i o n may refer to prices, money incomes, or real incomes, and s t a b i l i z a t i o n of any one of these may actually destabilize the others* The concept of the time-period over which s t a b i l i z a t i o n i s to be achieved i s also extremely important. As already mentioned, the choice appears to be between holding a f a i r l y low level of reserves and achieving intra-seasonal s t a b i l i t y or holding very large reserves and attempting to achieve longer-period s t a b i l i t y * The longer the period! which i s aimed at, the r i s k i e r the policy becomes, and the larger the reserves need to be. Such reserves are capable of use for other than s t a b i l i z a t i o n purposes, and would constitute an ever—present temptation to the p o l i t i c a l authority. Strengthening the j u s t i f i c a t i o n for "embezzlement" of the reserves would be the fact that d i s t r i b u t i o n of the accumulated funds would rarely be equitable, since those producers who drew out i n hard times would not necessarily be the same ones who had paid i n at e a r l i e r dates* Given the d i f f i c u l t i e s of the more ambitious schemes, then, our conclusion i s that an ideal s t a b i l i z a t i o n scheme would - 101 -have the s t r i c t l y limited objective of s t a b i l i z i n g the price paid to producers* ( i . e . not their money or the i r real incomes) during the course of one season at a time. Chapter V: C O N C L P S I O N S The analysis i n the l a s t two chapters of this paper has dealt with ' s t a b i l i z a t i o n ' as a policy aim for governments i n A f r i c a south of the Sahara* Before beginning this analysis* we sketched i n the opening chapters a number of the p o l i t i c a l * administrative and social factors which t y p i c a l l y affect the implementation of economic policy* including s t a b i l i z a t i o n ! policy* i n these countries. From this background analysis we may con-clude that the tendency i n most African countries w i l l be toward creation of equalitarian societies i n which the economies w i l l be to a greater or lesser degree centrally controlled and directed. The adoption of the s o c i a l i s t route to development w i l l imply an expansion i n the number and quality of State employees. This i s a process which; w i l l take many years to complete* A more fundamental d i f f i c u l t y i s the fact that, for- so long as the type of social organization appropriate to the sub-sistence economy survives, there w i l l be l i m i t s to the extent to which control of resource allocation can be achieved. A primary objective of African governments i n pursuit of economic growth w i l l therefore be the financing and carrying-out of those infrastructure developments with maximum impact upon the t r a d i -- 103 -tiona l forms of social organization* This w i l l * of course* involve heavy taxation of a l l groups within the economy, as well as considerable social upheavals* Taxation of marginal producers of cash crops,' however, i s l i k e l y to have adverse effects upon the extension of the money economy. I t may be necessary to devise special p o l i c i e s to overcome this s e l f -defeating tendency of government f i s c a l p o l i c i e s aimed at over-coming social backwardness* I t i s probable that, during this t r a n s i t i o n a l phase, the governments w i l l be forced to attempt to maintain, p o l i t i c a l and economic s t a b i l i t y by placing heavy reliance upon the 'psycho-l o g i c a l shock of national feeling' to which reference was made e a r l i e r i n t h i s paper. In t h i s context, the crucial factor i n the process of Africans economic development may well turn out to be the success or f a i l u r e of individual governments i n generating and maintaining a s e l f - s a c r i f i c i n g s p i r i t of enthu-siasm for development i n the minds of the present generation. We have seen an example of the kind of s p i r i t of national unity which i s required i n the action of the Ghana'Farmers* Council i n requesting a reduction i n the producer price of cocoa. Volun-tary s a c r i f i c e s by the possessors of surpluses are, however, com-paratively rare. Of more fundamental importance i s the passive (or active) acceptance of such heavy levies as the Ghana Cocoa - 104 -Export Duties* which w i l l have to serve for many years as a < main source of government revenue* In countries whose revenue i s very heavily dependent upon exports of primary produce* such devices as the West African Marketing Boards are desirable i n order to ensure a measure of s t a b i l i t y i n the production sectors of their economies* S t a b i l i z a t i o n at either international or national levels i s a worthwhile objective of policy, but we have seen that the obstacles i n the way of a general international s t a b i l i z a t i o n scheme are so great as to be v i r t u a l l y insurmountable.- Such schemes suffer from handicaps which are not only p o l i t i c a l , but pr a c t i c a l and economic as well* National s t a b i l i z a t i o n schemes, on the other hand, have been shown to be p o l i t i c a l l y , administratively and economically quite feasible* The West African Boards have performed their functions of price s t a b i l i z a t i o n adequately, and have moreover made important contributions to the external s t a b i l i t y of the economies they serve. Their drawbacks are a l l connected with the f a i l u r e rigorously to define at their inception the purposes which the s t a b i l i z a t i o n authorities were required to serve. There appears to be no real reason why such handicaps should permanently lessen the Boards' a b i l i t y to play useful roles i n economic develop-ment. Nor does there appear to be any reason why stabiliz a t i o n ! - 105 -policy should not be coupled with measures to c o l l e c t forced savings for development, always provided, of course, that the p o l i t i c a l climate i s favourable to the carrying-out of such a policy* S T A T I S T I C A L  A P P E N D I X - 106 -TABLE I Percentage Share of Cocoa i n Total Exports of Selected African Countries, 1955-59 Country 1955 1956 1957 1958 1959 Ghana 68.9 59.4 55.9 60.0 61.0 Republic of Camerouni 49.1 34.53 38.4 43.5 41.4 Togo • • • 20.7 16.5 39.1 34.3 Nigeria 20.2 18.1 21.0 20.2 23.2 Sierra Leone 7.5 4.8 2.6 5.3 • • • Ivory Coast • • • 32. 0 26.0 20.3 31.3 Source: U.N. Economic B u l l e t i n for A f r i c a , v o l . 1, Jan. 1961. - 107 -TABLE II GHANA: Major Exports of Commodities 1950-1960 In thousand U.S. .$ 1959 1960 Percen-... Value Percent Value Percent, tage Commodity of Total, of Total Change 1959/60 Cocoa beans 1?2,562;: 61.0 186,015 58.1 - 3.4 Diamonds (uncut & unworked) 24,245 7.7 27,549 8.6 13.6 Timber: Logs 22,319 7.1 29,170 9.1 30.7 Sawn 14,860 4.7 15,347 4.8 3.3 Manganese and Concentrates 18,978 6.0 14,493 4.5 - 23.6 Bauxite and Concentrates 1,025 0.3 1,540 0.5 50.21 Copra 574 0.2 532 0.2 - 7.3 Palm kernels 325 0.1 348 0.1 18.2 Other commodities 9,458. 3.0 14,266 4.5 50.8 Gold 31,360 9.9 31,049 9.7 - 1.0 Total 315,706 100.0 320,345 100.0 1.5 Source: U.N. Economic B u l l e t i n for Af r i c a , v o l . I I , no. I. - 108 -TABLE III Production of Cocoa, 1953/54 - 1959/60 Designation 1953-54 1954-55 1955-56 1956-57 1957-58 1958-59. 1959^60 1960-61 A. - Indices World production! 100 104.4 109.1 116.9 101.5 117.3 131.1 125.7 B. Percentages Af r i c a 61.0 61.3 61.6 64.8 58.8 62.7 64.8 67.1 South America 28.3 27.3 28.8 25.4 29.2 26.8 25.8 22.0 Br a z i l 20.1 18.8 20.4 17.9 20.8 19.3 18.5 15.5 Rest of the world 10.7 11.4 9.6 9.8 12.0 10.5 10.7 10.9 Source: U.N. Economic B u l l e t i n for Africa, vol.1, January, 1961. - 109 -TABLE IV: African Production of Cocoa, 1953/54 - 1960/61 Designation 1953-54 1954-55 1955-56 1956-57 1957-58 1958-59 1959-60 1960-61 A. Indices African Production 100.0 104.9 110.2 124.2 97.7 120.5 139.3 137.2 Percentages Ghana 47.9 48.6 45.1 45.9 45.8 45.9 49.3 48.2 Nigeria and B r i t i s h Cameroons 21.0 18.6 22.4 23.5 19.6 25.2 23.6 23.3 Republic of Cameroun 11.5 11.4 10.5 10.3 14.2 10.7 9.5 10.9 Ivory Coast 11.2 13.4 13.7 12.3 9.9 9.8 8.9 8.9 Spanish Guinea 3.8 4.4 3.8 4.0 4.6 3.7 4.2 4.0 Other Countries 4.6 3.6 4.5 4.0 5.9 4.7 4.5 4.7 Source: U.N. Economic B u l l e t i n for Af r i c a , vol.1, January, 1961. - 110 -TABLE V: International Market Prices of Cocoa, New York Annually 1964 - 1960, Average and monthly 1960 - 1961 Period Spot Accra US cents Spot Bahia per pound 1954 57.8 555.7 1955 37.4 36.2 1956 27.3 25.5 1957 30.6 30.5 1958 44.3 43.3 1959 36.6 35.4 1960 28.4 26.8 Monthly Averages 1960: Jan - June 28.5 27.0 July - Dec . 28.2 • 26.4 1961: Jan - June 22.2 22.3 July 22.0 22.0 Source: U.N. B u l l e t i n for A f r i c a , vol.11, January, 1962. - I l l -TABLE VI; Cocoa Production, Ghana, by Regions ( i n Tons) -Crop Year. Ash. W.P. C P . E.P. T.V. Total 1939/40 73,780 10,396 34,843 105,548 17,261 241,743 1940/41 82,290 8,332 28,906 100,757 16,706 236,991 1941/42 89,572 9,079 32,509 101,608 17,952 250,720 1942/43 72,029 7,222 24,124 87,202 16,772 207,349 1943/44 78,155 5,482 23,758 73,867 14,813 196,075 1944/45 91,324 8,164 33,594 76,998 18,649 228,729 1945/46 94,854 9,562 25,481 64,782 14,616 209,393 1946/47 79,606 9,956 34,195 52,158 16,201 192,116 1947/48 105,935 11,243 24,890 45,531 19,960 207,559 1948/49 125,866 15,162 44,093 66,793 26,458 278,372 1949/50 116,016 14,044 39,107 54,435 24,229 247,831 1950/51 122,667 16,613 42,161 56,147 24,635 262,223 1951/52 97,669 11,773 30,068 47,585 23,568 210,663 1952/53 118,297 12,391 38,138 50,247 27,909 246,982 Note 1: Crop year runs from October 1 to September 30. Note 2: Ash - Ashanti. W.P. - Western Province. CP. - Central Province. E.P. - Eastern Province. T.V. - Trans Volta. Note 3: A l l cocoa production figures have been compiled from Cocoa Marketing Board returns. Source: B.M. Niculescu,"Fluctuations i n the Incomes of Primary Producers: Further Comment," i n Economic Journal,vol. LXIV, Dec; 1954, p. 733. - 112 -TABLE VII: GHANA: Imports by Categories 1959 - I960 i n thousand U.S. Dollars percent;, of Total Food, beverages & tobacco 65,479 20.7 69,418: 19.2 Basic materials & Mineral Fuels 19,099 6.0 20,590 5.7 Chemicals 25,162 8.0 25,815 7.1 Textiles 50,026 15.8 55,152 15.2! Machinery & transport equipment 71,696 22.7 94,406 26.1 Other manufactures 80,472 25.4 91.662 255.3 Miscellaneous 4,528 1.4 5,037 1.4 Total 316,462 100.0 362,080 100.0 Source: U.N. Economic B u l l e t i n ' f o r A f r i c a , v o l . I I , no. I BIBLIOGRAPHY CHAPTER Is BOOKS Apter, D. E. The P o l i t i c a l Kingdom i n Uganda. Princeton, University Press, New Jersey, 1961. Berger, M. Bureaucracy and Society i n Modern Egypt. Princeton, University Press, New Jersey, 1957. Deane, Phyllis.. Colonial Social Accounting. Cambridge University Press, H953. Fearn, H. An African Economy: A Study of the Economic Develop- ment of the Nyanga Province of Kenya, 1903-1953. London, Oxford University Press, for the East African Institute of Social Research, 1961. Forde, C. D. Habitat, Economy and Society. 15th ed., London, Methuen & Co., 1957. Goodfellow, D. M. Principles of Economic Sociology. New York, Humanities Press, 1950. Hance, W. A. African Economic Development. New York, Harper & Brothers, for the Council on Foreign Relations, 1958. Hansen, A. H. Public Enterprise and Economic Development. London, Routledge & Keegan Paul Ltd., 1959. Herskovits, M. J . Economic Anthropology. New York, Alfred A. Knopf, 1952. Hodgkin, T. African P o l i t i c a l Parties. Penguin Books Ltd., Harmondsworth, Middlesex, 1961. Lewis, W. A. The Theory of Economic Growth. London, Geo. Allen and Unwin Ltd.,, 1955. Richards, A. I., ed. Economic Development and Tribal Change. Cambridge, W. Heffer & Sons Ltd., 1954., Schapera, I. J . A Handbook of Tswana Law and Custom. London Oxford University Press, 1955. - 114 -ARTICLES, etc, Basutoland, Bechuanaland and Swaziland; Report of an Economic  Survey Mission, Her Majesty's Stationery Office, 1960. H a l l , S i r R. "Reflections on the P r a c t i c a l Application of Economics."' Economic Journal, v o l . LXIX, (December 1959), pp. 639-652. Knight, F. H. "Anthropology and Economics." Journal of P o l i t i c a l  Economy, v o l . XLIX, no. 2, (April 1941), pp. 247-268. Sadie, J . L. "The Social Anthropology of Economic Development." Economic Journal, v o l . LXX, no. 278, (June I960), pp.294-303. - 115 -CHAPTER H i BOOKS Deane, P h y l l i s . Colonial Social Accounting. Cambridge University Press, 1953. H i l l , P o l l y . The Gold Coast Cocoa Farmer. London, Oxford University Press, 1956. Lewis, W. A. The Theory of Economic Growth. London, Allen & Unwin, 1955. Peacock, A. T., and Dosser, D. The National Income of Tanganyika, 1952-1955. London, Her Majesty's Stationery Office, 1957. ARTICLES, etc. Dosser, D. "Development Plans i n B r i t i s h Colonies." Economic  Journal, v o l . LXIL, (June, 1959), pp. 255-266. Myint, Hla. "The 'Classical Theory 1 of International Trade and the Underdeveloped Countries." Economic Journal, v o l . LVIII, no. 270. (June, 1958), pp. 317-337. Peacock, A. T., and Dosser, D. "Input-Output Analysis i n an Underdeveloped Country: 1 Case Study," Review of Economic Studies, v o l . XXV, no. 66, pp. 21-24. United Nations Economic Commission for A f r i c a . Economic Bulletin! for A f r i c a , 1960, v o l . 1, no. 1, Addis Ababa, 1961. Ditto, 1961, v o l . I I , no. 1, 1962. - 116 -CHAPTER III: BOOKS Bauer, P. T., and Yamey, B. S. The Economics of Underdeveloped Countries* Cambridge University Press, 1957. Cairneross, A. K. Factors i n Economic Development. London, Allen & Unwin, 1962. E l l i s , H. S., ed. Economic Development for Lati n America. London, Macmillan, 1961. 1. Nurkse, R. "International Trade Theory and Develop-ment Policy". (pp. 234-275) 2. Harberlen, G. "Terms of Trade and Economic Develop-ment", (pp. 275-308). 3. Schultz, T. W. "Economic Prospects of Primary Pro-ducts", (pp. 308-342). 4. Wallich, H. C. "S t a b i l i z a t i o n of Proceeds from Raw Material Exports". (pp. 342-366) Higgins, B. Economic Development. New York, Norton, 1959. Nurkse, R. Problems of Capital Formation i n Underdeveloped  Countries. Oxford, Blackwell, 1953. Yates, P. Lamartine. Forty Years of Foreign Trade. London, Allen & Unwin, 1959. ARTICLES, etc. United Nations Economic Commission for A f r i c a . Economic Bulletins  for A f r i c a , 1960. v o l . I, no. 1, Addis Ababa, 1961. United Nations Economic Commission for A f r i c a . Economic Bulletin, for A f r i c a , 1961. v o l . I I , no. 1, 1962. - 117 -CHAPTER IV: BOOKS Bauer, P. T. West African Trade. Cambridge, University Press, 1954. Bourret, F. M. Ghana, The Road to Independence 1919-1957. London, Oxford University Press, 1960. H i l l , P o l l y . The Gold Coast Cocoa Farmer. London, Oxford University Press, 1956. Wills, J . B., ed. Agriculture and Land Use i n Ghana. London, Oxford University Press, 1962. ARTICLES, etc. Ady, P. "The Fluctuations i n Incomes of Primary Producers; A Comment"; Economic Journal, v o l . LXIII, no. 251 (September, 1953), pp. 594-607. "The Economic Position of Ghana". B u l l e t i n of the Oxford  Institute of S t a t i s t i c s , v o l . XX, (November, 1958), pp.313-324. Bauer, P. T., and Paish, F. W. "The Reduction of Fluctuations i n the Incomes of Primary Producers". Economic Journal, v o l . LXII, no. 248 (December, 1952), pp. 750-780. "The Reductions of Fluctuations i n the Incomes of Primary Producers Further Considered". Economic Journal, v o l . LXIV, no. 256 (December, 1954), pp. 704-729. Friedman, M. "The Fluctuations i n Incomes of Primary Producers; A C r i t i c a l Comment'*. Economic Journal, v o l . LXIV, no. 256, (December, 1954), pp. 698-703. Great B r i t a i n , Colonial O f f i c e . Report of the Commission on the Marketing of West African Cocoa. London, Her Majesty's Stationery Office, 1938, Cmnd. 5845. Statement on Future Marketing of West African Cocoa. London, Her Majesty's Stationery Office, 1946, Cmnd. 695©. - 118 -ARTICLES, e t c , (cont'd) Hazlewood, A. "Trade Balances and Statutory Marketing i n Primary Export Economies". Economic Journal, v o l . LXVII, no. 265, (March, 1957). pp. 74-82. H i l l , P o l l y . "Fluctuations i n Incomes of Primary Producers". Economic Journal, v o l . LXIII, no. 250, (June 1953), pp. 468-471. Niculescue, B. M. "Fluctuations i n Incomes of Primary Pro-ducers: Further Comment". Economic Journal,? v o l . LXIV, no. 256, (December, 1954), pp. 730-743. United Nations Economic Commission for A f r i c a . Economic B u l l e t i n  for A f r i c a , 1960, v o l . I, no. 1, Addis Ababa, 1961. United Nations Economic Commission for A f r i c a . Economic Bulletin' for A f r i c a , 1961, v o l . I I , no. 1, Addis Ababa, 1962. 

Cite

Citation Scheme:

        

Citations by CSL (citeproc-js)

Usage Statistics

Share

Embed

Customize your widget with the following options, then copy and paste the code below into the HTML of your page to embed this item in your website.
                        
                            <div id="ubcOpenCollectionsWidgetDisplay">
                            <script id="ubcOpenCollectionsWidget"
                            src="{[{embed.src}]}"
                            data-item="{[{embed.item}]}"
                            data-collection="{[{embed.collection}]}"
                            data-metadata="{[{embed.showMetadata}]}"
                            data-width="{[{embed.width}]}"
                            async >
                            </script>
                            </div>
                        
                    
IIIF logo Our image viewer uses the IIIF 2.0 standard. To load this item in other compatible viewers, use this url:
http://iiif.library.ubc.ca/presentation/dsp.831.1-0058339/manifest

Comment

Related Items