Although Adam Smith is credited for having contributed colossally to the current world economic knowledge, he missed a point especially when he postulated that the market would regulate itself. In his book: The Wealth of Nations, Smith observed that the market price of every particular commodity is regulated by the proportion between the quantity which is actually brought to the market, and demand of those who are willing to pay the natural price of the commodity, or whole value of the rent labour, and profit which must be paid in order to bring it thither.

In his time, this was right due to the fact that business depended solely on demand and supply. To date however, business depends on sophisticated means of selling and buying, legally and illegally. For instance, some lucrative business such extraction of gas and minerals from Africa does not abide by Smith’s theory of demand and supply.

Some business that involves rich and poor countries, for example, depends on the diktat of rich countries which set quotas and prices for trade commodities. Patrick Bond in, Looting Africa: The economics of exploitation discusses this. Africa and other exploited countries need a new theory which I might call, the theory of Market localization in that, poor countries should go all-out to establish their own Localized markets so as to survive. If they control and supply their markets, they’ll be able to cause demand in the economies they used to supply. Therefore, those they used to supply will be forced to come to their local markets.

Under Localization Theory, local markets should endeavour to discourage exporting commodities they can use locally such as gas and minerals which normally are processed abroad and exported back to Africa. This was noted by Jensen and Gibbon in Africa and the WTO DOHA round: An overview saying that “Industrialised countries’ agricultural policies lower international prices and lead to dumping of surplus products in, among others, African countries.” 

African countries need to form their own cartels of almost everything given that they are good consumers of processed goods they can process locally. For instance, Nigeria produces crude oil and imports processed oil at a very high price. Why can’t African countries raise capital under the African Development Bank to have their own processing plants in Nigeria that’ll supply them all as it pays back the loan? Why can’t say, Ivory Coast, the world’s largest producer of cocoa, be the home of the chocolate making factory?

Essentially, African countries need to copy what western countries did in “cartelization of the market.” As noted by Arora Ashish in Patents, licensing, and market structure in the chemical industry, “Cartels used a number of instruments, including patent licensing agreements, to maintain market shares and deter entry.” Under Localization of Market theory, just like the west, Africa needs to protect her markets as she “deters entry.”

When we talk about market, we must specify which market. The market forces set by players outside Africa will never protect the African countries they exploit. Smith was right when he said, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard of their own interest.” By localizing their markets, African countries will be protecting, “their regard of their own interest.”

Currently we’ve many exploitative and illegal markets operating almost everywhere in the world. We cannot talk about the commodity without probing if the said commodity is obtained legally or illegally. Although Smith was right in many aspects of the market, he forgot one important aspect: the legality of the market. Can the current exploitative system which sees African countries lose massive revenues be called a market? If it is, is it a principled one?

Africa needs to localize her market in order to protect her commodities and attract other markets to come and operate under her own rules. This way, Africa will practically forge ahead.

By Nkwazi Mhango
nkwazigatsha@yahoo.com