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Most Africans Still Live on Less Than $2 a Day, Here's What the U.S. Can Do

To facilitate long-term economic growth in the African continent, the U.S. should leverage its influential stance in global politics as well as its domestic economic policies in a three-fold strategy: (1) widen the African Growth and Opportunity Act (AGOA); (2) adopt the Extractive Industries Transparency Initiative (EITI); (3) disable undisclosed bank accounts within U.S. borders from facilitating fraud in Africa; and ultimately encourage other countries to adopt similar measures. 

Over the past ten years, six African nations comprised the world’s 10 fastest-growing countries in terms of annual GDP per capita. For many years, Africa as a continent has even grown faster than East Asia. This recent economic windfall in Africa is a product of: higher revenues from natural resources, favorable demographic trends, and the emergence of domestic manufacturing and service economies. Despite these advances, however, African countries are fraught with despotism, corruption, and institutional discord. These institutional weaknesses foster less effective development: most Africans still live on less than $2 a day, food production has fallen since the 1960s, the average lifespan in several countries is still below 50, and drought and famine persist as climate change worsens. To mitigate social conditions, Western nations often provide aid, however, aid has proven to be a short-term solution to structural problems in developing countries. 

Analysis 

To facilitate long-term economic growth, the United States should leverage its influential stance in global politics as well as its domestic economic policies in a three-fold strategy that opens up trade and increases transparency. Implemented in 2000, the purpose of the AGOA was to improve economic relations between the U.S. and sub-Saharan Africa by providing trade preferences for quota and duty-free entry into the U.S. for certain goods, most notably for textiles, increasing the prevalence of apparel jobs. Although a step in the right direction, AGOA should be expanded to include additional goods and the one-sided agreement should be improved through collaboration with various officials from African nations. 

Secondly, the United States should draft legislation that aligns with the EITI, which calls for companies and governments to disclose natural resource payments in order to increase transparency between countries and among citizens. When a country agrees to follow the EITI standard, public access is granted to payment figures. Increased global transparency will enable African governments to compare what foreign companies pay for licenses to exploit natural resources in  developed countries versus within domestic borders. Although transparency will not ensure optimal management of natural resources, it will mitigate money laundering. 

Thirdly, the United States should not allow undisclosed bank accounts within their borders to facilitate high-level fraud in Africa. For instance, secret bank accounts by African nationals or leaders can protect stolen money and enable tax evasion. 

Ultimately, these three measures should set a high institutional standard that encourages other nations to follow similar paths. The costs associated with these three measures include minimal impact on the domestic economy. A more encompassing AGOA would affect imports from India and China due to higher competition of similar goods, whereas legislation compliant with EITI and stricter banking regulations will have associated administrative costs. 

Next Steps 

To facilitate long-term economic growth in Africa, it is important for the U.S. to set a high standard for institutional practice, ultimately to illustrate to other Western and non-Western nations that profitability does not necessitate a lack of social consciousness. An improved AGOA should be drafted in collaboration with key policymakers from every concerned African nation and its 2015 expiration should be extended in order to institute long-term change. In September 2011, President Obama announced that the U.S. will implement the EITI and legislation is being drafted. The purpose of the EITI aligns well with President Obama’s Open Government Partnership Action Plan, thus interest groups should encourage policymakers to efficiently institute the relevant legislation, while companies with heavy natural resource extraction investments will attempt to hinder the process. Lastly, stricter regulations on bank accounts from foreign nationals will help trace funds to prevent tax evasion.

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