Globalization and its impact on Tanzania

By Rogate R. Mshana German-Tanzania Network, Frankfurt 30.11.02

© R. Mshana, WCC- JPC Nov. 30, 2002

What is Globalization? This concept was first used some forty years ago as the notion of “Global Village” • A stage in the historical evolution of humanity (levels of modernity) • Narrowing of physical distances between peoples (shrinkage of space and time) • Growing interdependencies of Countries • Development of Science, Technology and communication • Spread of human rights ideas • Progress in international law

© R. Mshana, WCC- JPC Nov. 30, 2002

What is Globalization? • A Political project steering the world economy in a particular direction. • The “Project” is global capitalism (neo-liberalism) • The application of ideas and institutions of the market economy. • The world as a whole. • This type of globalization is not moved by an invisible and benevolent hand. • It is shaped by powerful actors. • Influenced by multitude of forces not all operating in the economic realm. © R. Mshana, WCC- JPC Nov. 30, 2002

These two distinctions were made during UN summit Conference on Social Development in Copenhagen in 1995. The distinction is necessary to create space for human thinking and human action.

© R. Mshana, WCC- JPC Nov. 30, 2002

The Two meanings of Globalization has Impact on Tanzania • Tanganyika 1800-1961: Globalization through slavery (Yemen Arabs), plunder( Portuguese) and colonialism (German and British): – Introduction of cash crops by Germans (Coffee, Cotton, Tea, Sisal) – Africans used as cheap labour to produce for Industrial Europe. – Literacy at independence at independence only 45% – Industrial base at independence: 2 Factories: Beer and cigarette – Majority of Tanganyikans were very poor. © R. Mshana, WCC- JPC Nov. 30, 2002

Tanzania ( Zanzibar and Tanganyika 1964): Globalization by Neo-colonialism 1961-1985. • Politically independent but economically dependent. – Inherits the cash crops trade. – Trades mainly with former colonialists. – Declares a policy of Ujamaa and self reliance. – Nationalizes all means of production. – Creates 395 public companies for industry, agriculture and services. © R. Mshana, WCC- JPC Nov. 30, 2002

Tanzania ( Zanzibar and Tanganyika 1964): Globalization by Neo-colonialism 1961-1985. – The average annual growth rate between 1967 to 1972 was 4.9%. Per Capita income was USD 309, the highest in Tanzanian History. – The gap between the rich and poor narrows from 1:50 in 1961 to 1:15 in 1974. – Education is made free for all people. – Health is made available to all. – Safe water is guaranteed for all. © R. Mshana, WCC- JPC Nov. 30, 2002

1977-1985 The Economy experiences external and internal shocks External shocks: – Fall of commodity prices in the world market – The Oil crisis in 1983 draining 60 % of export earnings – Draught – The Breakup of East African Community and the demand for building new infrastructure. – War between Idd Amin of Uganda and Tanzania © R. Mshana, WCC- JPC Nov. 30, 2002

1977-1985 The Economy experiences external and internal shocks Internal shocks: – Huge government and party bureaucracy – Mismanagement of public institutions – Corruption

© R. Mshana, WCC- JPC Nov. 30, 2002

Globalization at the International Level (Deregulation, Deflation, Devaluationideology) was taking place. Reagan and Thatcher push the concept of liberalization and Privatization. This type of globalization based on the Washington Consensus has the following 10 key elements. © R. Mshana, WCC- JPC Nov. 30, 2002

10 Key Features of Economic Globalization Growth: Only through growth can countries grow but the engine of this growth has increasingly become private enterprise: There are four major problems with the economic growth fostered by globalization: environmental limits, persistent inequality, overproduction and debt. © R. Mshana, WCC- JPC Nov. 30, 2002

10 Key Features of Economic Globalization Free Trade: Governments have long protected their national industries from foreign competition by erecting trade barriers. These barriers usually consist of a Deregulation: Attempts to removing barriers on trade was followed by the dismantling of a good part of the regulatory structures built up in the twentieth century.

© R. Mshana, WCC- JPC Nov. 30, 2002

10 Key Features of Economic Globalization TNCs and Monopolies: Producing one- third of world output, transnational corporations (TNCs) control 70 per cent of world trade, 80 per cent of foreign direct investments, and 70 per cent of patents and technological transfers. Deregulation has clearly benefited these corporations with corporate power concentrating in fewer and fewer hands. Samuel Kim, “East Asia and Globalization: Challenges and Responses, Asian Perspective”, Vol.23,No.4(1999)p.346 © R. Mshana, WCC- JPC Nov. 30, 2002

10 Key Features of Economic Globalization Privatization: Economic development in the industrializing world of the nineteenth century depended to a large extent on government control of key enterprises such as transportation. In the 1920s and 1930s, a response to a global depression, political movements turned to state control of the economy as a way to employ people and restore productive capacity. During the Cold War the state began to lose favor as motor force for economic development © R. Mshana, WCC- JPC Nov. 30, 2002

10 Key Features of Economic Globalization Market Fundamentalism: The above elements - economic growth, free trade, deregulation, privatization and the global trade of corporate power - have been combined into a powerful ideology. According to this philosophy, the market can solve all problems. © R. Mshana, WCC- JPC Nov. 30, 2002

10 Key Features of Economic Globalization Technological Advances: Globalization has been accelerated by major advances in both computer technology and in communications. Computers have made the standardization of national economies easier; the fax, the cellular phone, and especially the internet have increased the speed with which companies and individuals can communicate with one another. There is a big gap here. © R. Mshana, WCC- JPC Nov. 30, 2002

10 Key Features of Economic Globalization Dependency: As the world become more interconnected, it also becomes more dependent.

© R. Mshana, WCC- JPC Nov. 30, 2002

10 Key Features of Economic Globalization Free Market and democracy: It has become a tenet of the new globalization that there can be no free market without democracy and no democracy without free market. According to this argument, the free market is inherently democratic by virtue of providing more choices, and democracy can only flourish where the “rule of law” supports private property and commerce. The tensions between the market and democracy - such as the influence of money on politics or the undemocratic nature of most workplaces - are rarely explored. © R. Mshana, WCC- JPC Nov. 30, 2002

10 Key Features of Economic Globalization Transparency: Related to this new consensus on the relationship between democracy and the market is the notion that the “rule of the law” is necessary for the proper functioning of the market.

© R. Mshana, WCC- JPC Nov. 30, 2002

The Impact of this Neo-liberal Globalization on Tanzania n

1986-2002: Introduction of Structural Adjustment Programs (Devaluation, Deregulation, Deflation) – Devaluation of the currency by 400% – Deregulation of trade and finance – Privatization of public institutions – Commitment to pay external debts © R. Mshana, WCC- JPC Nov. 30, 2002

The Impact of this Neo-liberal Globalization on Tanzania Effects • Health becomes expensive for the majority. • 34% of Tanzanians can not send their children to secondary school. • No more protection of local businesses from overseas imports. • The gap between rich and people in poverty widens. © R. Mshana, WCC- JPC Nov. 30, 2002

The Impact of this Neo-liberal Globalization on Tanzania n

51% of Tanzanians are categorized as living in poverty.

• Increasing unemployment due to the privatization of 333 public institutions out of 395 and retrenchment of government employees. • Farmers continue to receive low income due to lack of subsidies. © R. Mshana, WCC- JPC Nov. 30, 2002

Growth with redistribution

Growth

Pro-Poor Growth (PPG)

high

low low

Pro-poor

Income generation by poor

Growth Pro-Poor (GPP)

high © R. Mshana, WCC- JPC Nov. 30, 2002

Macroeconomic indices improve. n

Inflation falls from over 27% in the 1980s to the current 5.9%. • Annual growth rate is 4.9%. • Almost all economic indicators show improvement. • The currency falls against the dollar from 1to 7 in the 1960s to 1 to 975 today. • The percentage of poverty reduction is not mentioned. © R. Mshana, WCC- JPC Nov. 30, 2002

Peoples’ Initiatives • Farmers are still the main contributors to the GDP by 48.2%. • There are new non-traditional projects such as horticulture (flower farming). • Other initiatives involve expansion of hotels, restaurants and tour operators. • In the communication area: Internet Cafes have sprung up. They estimated to be 70-100 privately owned and holding between 20 computers. © R. Mshana, WCC- JPC Nov. 30, 2002

Peoples’ Initiatives n

So called informal sector is growing particularly in urban transport - Dala dalas, mama Ntilie, art curios small scale mining and apprenticeship.

• Main sources of peoples’ finance is from traditional micro-credit schemes and borrowing from individuals.

© R. Mshana, WCC- JPC Nov. 30, 2002

Peoples’ Initiatives n

By 2000, the Tanzania investment Centre approved 1,624 private sector investment projects estimated to create 241,250 jobs. In 2000, 166 projects were approved. 59 were locally owned, 49 foreign owned and 66 joint ventures.

© R. Mshana, WCC- JPC Nov. 30, 2002

Peoples’ Initiatives n

Most Tanzanians are worried that foreign investors are provided with more favourable conditions than the local investors. Tanzanians are also worried about the increasing privatization of public services such as water.

© R. Mshana, WCC- JPC Nov. 30, 2002

Peoples’ Initiatives n

There is an increasing feeling as well that Tanzanians are not benefiting from the ongoing liberalization and privatization of the public sector.

n

The increasing unemployment and poverty particularly for the youth who are the bulk of the population is particularly worrying. Policies should change to serve people in poverty by promoting pro poor Growth: © R. Mshana, WCC- JPC Nov. 30, 2002

Growth with redistribution

high

Growth Pro -Poor (GPP) Mining Tourism GPP PPG

Subsistence economy

low low

Pro-poor

-

Cotton

high

© R. Mshana, WCC- JPC Nov. 30, 2002

What to be done by Tanzanians to mitigate against economic globalization • The government should create policies which aim at addressing the problems of the farmers who live in the rural areas. • There is also need to ensure that all Tanzanians are accessible to public services especially education and health. • The government should also design policies for controlling capital flight. © R. Mshana, WCC- JPC Nov. 30, 2002

What to be done by Tanzanians to mitigate against economic globalization n

In order for Tanzania to compete in the world market, we need good trade negotiators in Geneva. Take fair trade initiatives seriously.

• We also need further debt cancellation if we are to improve health and education for all Tanzanians.

© R. Mshana, WCC- JPC Nov. 30, 2002

What to be done by Tanzanians to mitigate against economic globalization • The country should work for a comprehensive energy policy which will enable all Tanzanians to meet their energy needs. This could be done by increasing renewable energies and small hydropower plants in the rural areas. • The government should seriously involve the civil society in the overall development policy formulation, not only partially as in PRSP. © R. Mshana, WCC- JPC Nov. 30, 2002

What our Partners can Do • Campaign against economic globalization which forces poor countries like Tanzania to liberalize their economies against a world where rich countries continue to subsidize their producers. • Intensify the fair trade initiatives but begin to go beyond this program by enabling Tanzanians to have more capacity in trade negotiations. © R. Mshana, WCC- JPC Nov. 30, 2002

What our Partners can Do • Confront the World Bank and IMF who push liberalization policies in the South while the North continue to close their markets. • Use the 1953 London agreement on debt cancellation for German as a basis for putting pressure on IFI and G8 to cancel external debts for Tanzania.

© R. Mshana, WCC- JPC Nov. 30, 2002

What our Partners can Do • Work on the Debt Arbitration Mechanism within the auspices of the UN which will ensure that poor countries are not debt bonded for ever. • Identify multinationals in your country which are responsible for unfair investment in Tanzania including (repatriation of profits, human rights environment and labor standards) © R. Mshana, WCC- JPC Nov. 30, 2002