BUSINESS & ECONOMY

Africa’s shift to Low-cost Manufacturing puts Women at Risk – 4 Lessons from the Asian Tigers

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7 months ago

March 8, 2023

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African countries are trying to wean their economies off mineral resources. They’re not a great development option and can come with a host of social, political and economic challenges. Another option that’s been touted: a shift to low-cost and export-oriented manufacturing. This is what spurred strong growth in the economies of Hong Kong, South Korea, Singapore and Taiwan – known as the Asian Tigers. But the Asian model had a downside – one that’s especially worth noting on International Women’s Day. As Niamh Gaynor writes, those economies were built on conditions that weren’t fair to women. African states should learn from the experience.

Economists have urged African countries to shift to low-cost manufacturing – the path that led countries such as Hong Kong, Singapore, South Korea and Taiwan – to industrial prosperity. These East Asian economies – which recorded high growth rates of at least 7% between the 1950s and 1990s – are commonly referred to as the Asian Tigers. Starting in the 2000s, many of Africa’s top economies achieved high growth rates through natural resource extraction. Mineral resources such as oil, natural gas and coal were the main export items.

Economists have cautioned that growth based on natural resources is vulnerable to global price fluctuations. Other limitations include weak linkages to domestic economies, low employment creation, negative impacts on local communities, tax avoidance by multinationals involved and climate change impacts.

By contrast, economists regard growth that is driven by low-cost export-producing manufacturing as more beneficial for development. This is because it is seen as globally competitive and able to create a lot of low-wage jobs. The Asian Tigers partly relied on it to achieve their economic prosperity.

As a result, economic commentators have been urging African countries to embrace export-led manufacturing. A recent book written by some of Africa’s influential leaders and advisors sums up the call:

The relevance of Asia’s example comes as Africa is facing a population boom, which can either lead to crisis or prosperity; and as Asia is again transforming, this time out of low-cost manufacturing into hi-tech, leaving a void that is Africa’s for the taking.

Many African countries have heeded the call, specialising mainly in the manufacture of textiles, cloth, food and beverages. They include Kenya, which has mainly been producing textiles at its export processing zones for sale to the US, and South Africa, where manufactured products, mostly food items, are key exports. Others include Botswana, which has been trying to diversify its mineral-driven economy, Mauritius, where export of services has taken root, and Madagascar. Between 2005 and 2014, manufacturing production across the continent more than doubled from US$73 billion to $157 billion. This was faster than the global average.

But the call to emulate the Asian Tigers could be ill-advised. As I argue in a recent paper, such a move has significant gendered implications. It can lead to increased discrimination, widening inequality and crises in family life. In particular, there are four lessons Africa’s fastest growing economies should learn from the four Asian Tigers.

Lessons from Asia

1. Exploitation and control of low-waged female labour. The Tigers have relied heavily on women’s labour as a specific asset which is cheap, productive and easy to control. Records show that low wages, poor working conditions, frequent layoffs and a lack of rights and union protection for women working in manufacturing industries have been rife in Asia since the 1980s. Rapid economic growth and wealth for a few have come at the expense of many, with wages often insufficient to support families and working conditions undermining family life.

2. Pushing more women into the informal economy. As women have sought to supplement the meagre incomes they get from their manufacturing work, female participation in the informal economy has surged. Studies from Asia reveal a direct correlation between growth in female participation in formal manufacturing sectors and growth in female participation in informal sectors.

In Africa, women already dominate the informal economy. In addition to the risks of unstable earnings and no access to health insurance or to other economic and social safety nets, women carry the double burden of informal work and care responsibilities in the home. They experience a disproportionate impact from lack of access to social protection. They are more likely to experience discrimination in accessing financial and other services. And they are more likely to be intimidated and abused by others in the informal sector.

3. Growing inequalities accompany growth. Tigers have succeeded in reducing poverty to varying degrees. But inequality has increased. A wide range of studies track the polarising impacts of changes in labour market and income distribution at both economic and social levels across the region. There’s a common pattern: highly skilled workers with more education see their incomes rise as those of low-skilled workers either stagnate or reduce. This trend is disproportionately felt by women. The pay gap is apparent even in countries where women have higher education attainment than men, such as Taiwan.

Widening inequalities are already a feature of many African states. In the absence of state policies to regulate wages, such inequalities are likely to deepen.

4. A crisis in social reproduction. The impossibility of juggling paid work with unpaid work at home and within the community has resulted in a crisis in social reproduction in Asia. Studies show increases in marriage age, decreases in fertility rates and growing numbers of divorces across the region. This may signal a newfound independence among Asian women – but it also represents a broader crisis in family life.

This crisis also threatens the very economic system which depends on it. African countries don’t usually have state support for family and community care. A similar crisis seems inevitable on the continent, where the nature and composition of families is already rapidly changing.

What can be done?

Asia’s labour-intensive and export-driven manufacturing path does provide an alternative to the environmentally damaging and socially dislocating natural resource exploitation which is also of limited benefit to Africa’s local economies. Yet not everyone stands to benefit from it equally. The overall lesson from Asia’s decades of experience is that export-led policy is not gender-neutral. The export-oriented manufacturing increases gendered inequalities and discrimination. African countries should not replicate Asian experiences, but instead learn from them.

African analysts and policymakers should promote fair and progressive pay and working conditions for all workers. Greater public investment in infrastructure and social services is needed. And there should be policies that support and redistribute unpaid domestic labour. As the Asian experiences have demonstrated, failure to act will worsen existing gendered inequalities and discrimination, and eventually undermine the essential social base of economic growth.

Niamh Gaynor is an Associate Professor of International Development, Dublin City University

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BUSINESS & ECONOMY

Argentina’s Economic Turmoil’s and IMF

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1 week ago

September 11, 2023

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By Prof. Engr. Zamir Ahmed Awan

The picturesque streets of Argentina are currently marred by a storm of economic instability, as the nation faces an chronic crisis characterized by soaring inflation, price hikes, interest rate fluctuations, currency devaluation, and an unsettling law and order situation marked by incidents of looting and social unrest. At the heart of this turmoil lies a contentious relationship with the International Monetary Fund (IMF), raising questions about the role of harsh IMF policies in exacerbating the nation’s economic woes.

Inflation and Price Hikes

Argentina’s economy, once a beacon of promise in South America, has been grappling with relentless inflation that has eroded the purchasing power of its citizens. Recent reports from the Argentine Central Bank indicate an annual inflation rate of over 50%, a staggering figure that has led to significant price hikes in essential goods and services. But some experts believe the actual inflation may have touched three figures (Above 100 %). The price of basic necessities such as food, fuel, and medicines has surged, pushing many vulnerable populations to the brink of survival.

Interest Rates and Economic Stability

The nation’s interest rates have been oscillating amid efforts to curb inflation and stabilize the currency. The Argentine Central Bank has undertaken measures to control the monetary situation, but these moves have led to fluctuations in interest rates. The Bank is stuck with INF conditions and cannot make policies in the national interest. These uncertain interest rate movements have not only impacted borrowing costs for businesses but have also discouraged investment, hindering economic growth prospects.

Law and Order Situation: Looting and Unrest

A distressing undercurrent of civil unrest has emerged in tandem with the economic crisis. Incidents of looting and protests have escalated, further straining the nation’s social fabric. Supermarkets and stores have been targeted by looters in search of essential supplies, painting a grim picture of desperation among the populace. Law enforcement agencies are working diligently to restore order, but the underlying economic distress continues to fan the flames of unrest.

The IMF Connection

Argentina’s history with the IMF is not new, and the current crisis raises questions about the impact of IMF policies on the nation’s economic trajectory. Over the past few decades, Argentina has entered into several agreements with the IMF, seeking financial aid to alleviate economic woes and stabilize its currency. However, the harsh conditions attached to these loans, often requiring austerity measures and structural reforms, have been sources of contention.

IMF Policies and National Economy

Critics argue that the stringent conditions imposed by the IMF in exchange for financial assistance have exacerbated the economic challenges faced by Argentina. A notable example is the 2001 financial crisis, where the IMF-supported policies were met with massive protests and political upheaval. These conditions are believed to have contributed to deepening economic woes rather than providing a sustainable solution.

A Complex Scenario

While the IMF’s policies have been a contentious point, it is important to recognize that Argentina’s economic challenges are multifaceted. A history of political instability, mismanagement of resources, and external shocks have also played a role in the nation’s current predicament. Experts emphasize the need for a balanced approach that addresses both the structural issues within Argentina’s economy and the role of international institutions.

Looking Forward

As Argentina navigates these turbulent waters, it is crucial for policymakers, international institutions, and citizens to work collaboratively towards sustainable solutions. A thorough review of economic policies, tailored to Argentina’s unique circumstances, is necessary. The nation’s rich potential and resilient spirit are assets that can be harnessed to steer the economy towards recovery and growth.

Argentina’s current economic crisis is a complex confluence of internal and external factors. The IMF’s role in this crisis remains a subject of debate, as the nation grapples with inflation, price hikes, interest rate fluctuations, and social unrest. Finding a way forward requires a comprehensive approach that acknowledges the intricate interplay of economic, political, and social dynamics, steering the nation towards a brighter future.

Lessons to be learned

Argentina is in IMF programs for several decades and could not revive it economy. The current disastrous situation is alarming not only for Argentina m but, also many other nation under IMF programs. Egypt and Pakistan are also typical examples of IMF regime. Till date, both have not made any breakthrough in their national economy and are facing heavy external debt as well as currency devaluation, inflation and interest rates. Although the law and order situation in both countries is still under control, but, is it we are following Argentina’s foot print? What will be future of these and other nations which are under strict IMF control? It is a time, where everyone need to think wisely and smartly. Should IMF require reforms, as, the current practices of IMF are proved counterproductive. Think twice!

Prof. Engr. Zamir Ahmed Awan, is a Sinologist (ex-Diplomat), Non-Resident Fellow of CCG (Center for China and Globalization), National University of Sciences and Technology (NUST), Islamabad, Pakistan.

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BUSINESS & ECONOMY

Is Brazil Heading Towards a Soft Landing?

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2 weeks ago

September 4, 2023

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By Shireen Mahdi

A “soft landing” is the difficult and often elusive feat of successfully lowering inflation after having tightened monetary policy, but without triggering a recession. When fighting inflation, policy makers raise interest rates to make credit more expensive. This dampens aggregate demand and takes some of the inflationary steam out of the economy. The challenge is not take-out more “steam” than is necessary and inadvertently induce a recession. It’s an outcome that requires skillful policy making and economic resilience, aided by the absence of adverse shocks.

Is Brazil heading in this direction? Inflation, now at 4% has come a long way down from its peak at 12% in April 2022. The latest labor market figures placed unemployment at 8% by June of this year, the lowest it has been since 2015. The number of underemployed (individuals working less than 40 hours a week) has also declined over the past year. These trends have prompted economic analysts to upgrade growth forecasts and lower risk ratings during the course of the year. Importantly, they provided the conditions for a shift in the monetary policy cycle, with a 50 basis point reduction in the SELIC in July, pointing to start of a cautious monetary policy easing cycle.

What helped Brazil reach this point? A strong harvest offered a cushion against slowing commodity prices, contributing to a stronger trade balance (the trade balance in June 2023 was up by 18% compared to the previous year). Household consumption, although dented by inflation, has been somewhat cushioned by a robust job market and transfers to vulnerable households.

Other factors are of a more institutional nature. A more flexible labor market supported a rapid recovery in job numbers as the pandemic eased, allowing the labor force to return to various forms of work in a context of high uncertainty. Prudent management of public finances, even as the country adapted and debated the form of its fiscal rules, was a source of macroeconomic stability (the primary balance stood at -0.24% in June 2023, almost 10 percentage points below its peak in 2020). And critically, Brazil’s early and credible monetary policy response to inflation would have been weaker in the absence of an independent and competent central bank.

These indicators provoke a sigh of relief , but it’s not all good news. The outlook also holds a set of important risks that could create turbulence along the way. Monetary policy is still tight, and it takes effect with a delay, meaning that its full impact on economic activity and jobs may not have been felt yet. Indeed, the recent signs of cooling in the pace of the labor market recovery (net formal job creation in the first half of 2023 was 26% below the same period last year) underlines the need to carefully manage this risk.

On the global front, a softening commodity price outlook and slowing momentum in global growth, including amongst some of Brazil’s main trading partners, can make for more challenging conditions. The El Nino weather phenomenon adds further potential obstacles. Problems of a more structural nature, the low-productivity economic model that has underpinned Brazil’s lackluster economic performance over the past two decades in particular, traps the country in a low growth scenario and limits its ability to confront shocks.

Cautious macroeconomic policy making will be essential to tackle remaining inflationary pressures, especially any remaining momentum in core prices, whilst also rebuilding fiscal buffers. But equally as important is advancing the structural reforms that have long eluded this economy. The indirect tax reform is a priority among them; securing this critical reform will help boost confidence and investment in the economy at a time when tailwinds might be receding. Also essential is shifting to a policy mix that stimulates competitiveness and job creation through greater competition in markets, deeper trade integration and by stimulating technological adoption. This will offer policy makers an alternative to the unproductive mix of tax incentives and “wars”.

Such measures would not only make a soft landing more likely but would also build a longer and smoother landing strip to soften the landings for future shocks.

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BUSINESS & ECONOMY

Beyond Economics: Assessing IMF Austerity’s Effects on Women’s Rights

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3 weeks ago

August 28, 2023

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By Rameen Siddiqui

In the intricate web of global economic policies, the International Monetary Fund (IMF) plays a pivotal role as a financial lifeline for nations facing economic turbulence. Austerity measures, a common prescription offered by the IMF to stabilize economies, have been a subject of extensive debate and analysis for their far-reaching consequences. While austerity policies are intended to restore fiscal balance, their impact is far from uniform, often exacerbating existing inequalities. This article delves into the intersection of economic policy and gender dynamics, exploring how IMF austerity measures can reverberate through societies in ways that disproportionately affect women. From the erosion of social safety nets to the undermining of women’s access to essential services, we navigate the intricate landscape of austerity and its intricate implications for women’s rights.

Introduction to IMF Austerity

The IMF engages in regular economic monitoring of nearly all nations through its Article IV consultations, frequently providing policy recommendations. These suggestions might be disregarded by more affluent nations but wield significant influence over the policy decisions of less economically developed countries. In instances where countries face a debt crisis and require financial assistance from the IMF, which acts as a lender of last resort, the IMF imposed even more forceful policy advice and requirements. Over the past four decades, the essence of IMF guidance has remained largely unchanged, starting from the introduction of Structural Adjustment Programmes (SAPs). However, this guidance is presented, characterized, and marketed in novel ways.

The prevailing model followed by the IMF has been rooted in neoliberal ideology for many years. This ideology advocates for a specific set of policies, including austerity, the liberalization of markets, the removal of capital and exchange controls, the privatization of public services and government-owned enterprises, as well as a decrease in direct tax rates alongside an increased reliance on broad consumption taxes, all justified under the banner of economic ‘development’. The IMF’s definition of ‘development’ is narrowly confined to economic growth, despite these policies consistently facing criticism for eroding human rights and livelihoods, as well as regularly falling short of achieving the elevated growth rates promised.

The concept of structural adjustment places emphasis on prioritizing ‘fiscal fundamentalism’ rather than focusing on achieving economic and social equity and ensuring the realization of human rights. Governments primarily target the reduction of their fiscal deficits as a primary objective. A significant portion of the critique directed at IMF policy recommendations stems from this conventional macroeconomic perspective. This approach advocates for a shrinking government budget allocation for services while giving precedence to fiscal responsibility, even if it comes at the expense of other factors such as social, economic, and gender parity.

Gender Lens on Austerity

These measures of austerity, also known as ‘fiscal consolidation,’ have the potential to influence women’s rights through diverse channels. Nevertheless, it is the combined effect of these policies that is exceptionally destructive. The reduction of publicly provided childcare services in nations intensifies the impact of higher consumption taxes and weakened enforcement of labor regulations against discrimination. This combination adversely affects women’s ability to secure equitable wages and satisfactory employment opportunities. Reductions in critical public sector positions, where women constitute a significant proportion, such as in healthcare and education, are experienced acutely.

Austerity measures entail various ways through which women’s economic security is directly and unfairly jeopardized. Austerity packages frequently involve wage freezes and significant reductions in the public sector workforce. Given societal norms and workplace segregation, women predominantly occupy sectors in the public realm, often targeted for cutbacks. This includes vital frontline roles such as nursing, teaching, and social work, along with lower-level administrative and part-time positions. Consequently, these measures push a considerable number of women into unemployment, precarious employment, or informal labor markets. This transition leads to enduring financial and asset losses, potentially exacerbating gender-based wage disparities while undermining women’s overall economic well-being.

Regressive Fiscal Consolidation: A Threat to Women’s Rights

Sufficient funding for the public sector and investments in social programs and public services have been crucial for women’s economic rights in recent decades, ensuring access to quality employment. In contrast, reductions in public spending linked to austerity have resulted in cutbacks to essential social and physical infrastructure, including education, healthcare, and transportation services. These actions distinctly affect women more than men and hinder advancements in gender equality. This is compounded by the historical context of gender inequality and bias, structural disadvantages, biological distinctions, societal norms, and disparities in the practical application of laws and policies.

i). Budget cuts directly impact women’s income and economic security

Reductions in public expenditure have an uneven and severe impact on women, manifesting through distinct pathways. Broadly, the consequences for women’s rights due to budgetary cutbacks occur through three primary mechanisms: i) direct income losses, ii) curtailed access to crucial services, and iii) heightened burdens of unpaid labor and time scarcity. These factors are interdependent, exacerbating the overall negative effects on women. The repercussions of budget reductions on women’s income and economic stability are extensive and multifaceted

ii) Diminishing Public spending impedes women’s access to crucial services

Among the most insidious consequences of reduced public spending, marked by enduring and disproportionate impacts, lies in how these reductions amplify the obstacles often faced by women when accessing vital public services of high quality. On occasions, budget cuts are directed straight at programs and services primarily benefiting women. Frequently, these cuts extend to services that cater to the wider populace, such as healthcare or vocational training, yet are of particular significance to women due to their economic disadvantages or specific needs (e.g., heightened reliance on healthcare services for pregnancy and maternity needs). An additional measure under austerity is the introduction of fees for essential services, purportedly as a ‘cost-saving’ strategy, which unfortunately escalates disparities in access to care. This disproportionately affects women due to the gender pay gap and limited control they may exert over household finances.

iii) Austerity-driven fiscal restraint intensifies women’s unpaid care work and deprivation

A third vital aspect is the profound significance of austerity measures in exacerbating women’s unpaid care responsibilities and their ensuing time scarcity. Unpaid care labor across the globe is overwhelmingly carried out by women, with one estimate suggesting that women contribute three times as much unpaid care work as men on a global scale (UN High Level Panel, 2016). Particularly for women and girls grappling with poverty in regions marked by inadequate infrastructure and under-resourced public services (such as limited or absent access to piped water, affordable childcare, or eldercare), this translates into a considerable depletion of their time, energy, and prospects, often commencing from an early age. This unequal and burdensome distribution of unpaid care labor has been acknowledged as a substantial impediment to women’s exercise of their human rights, encompassing political engagement, healthcare, employment, and education opportunities.

Labor Market Impact: Road to Women’s Unemployment

The IMF has unequivocally advocated for and endorsed essential measures aimed at elevating female labor force participation rates in developing nations. However, the IMF’s professed objective of promoting women’s employment is undermined by a pivotal element within its supported policies across all three countries: the reduction of the public sector’s scope, which primarily employs women, achieved by constraining public sector job opportunities and curtailing wages. The Fund contends that “elevated public employment has been a deterrent to labor force participation. Notably, higher levels of public employment have correlated with reduced labor force participation, both globally and regionally, particularly among women.”

According to the IMF’s perspective, this phenomenon arises from the presence of higher-paying and secure positions in the public sector that extend benefits to the entire household. This, in turn, might discourage other family members, particularly women, from seeking additional paid employment. Consequently, the assertion is that diminishing public sector employment and diminishing the protection (alongside rights) it provides could motivate women to enter the labor market, as they would be compelled to do so in order to compensate for the reduction.

Gender-Based Violence and Vulnerabilities

An analysis of austerity’s impact on women’s rights must encompass the intricate interplay between economic policies, social services, and the intricate fabric of gender-based vulnerabilities as it extends beyond economic realms, intertwining with increased vulnerabilities to gender-based violence. The reduction in public services and social safety nets often forces women to navigate precarious circumstances, amplifying their exposure to various forms of violence and exploitation. Austerity-driven cuts to essential services like healthcare and education can create conditions where women’s physical and psychological well-being are compromised. Moreover, economic strain resulting from austerity policies can escalate tensions within households, contributing to an elevated risk of domestic violence. The erosion of social support systems, coupled with limited access to resources, can heighten women’s vulnerabilities, further undermining their safety and impeding their ability to exercise their rights fully.

Policy Recommendations:

The persistent unwavering trust of policymakers in the ‘austerity-for-growth’ fiscal misconception carries genuine economic, political, and human rights consequences, which cannot be mitigated solely through band-aid social safety nets and targeted gender equality initiatives. To uphold the commitments of governments to human rights principles, ensuring human rights and advancing gender equality during times of fiscal hardship necessitates a broader approach than short-sighted financial restraint. It requires adopting a progressive strategy centered on redistributive measures that shift the burden of adjustments onto those with greater financial capacity, rather than penalizing low-income women and their families, who often lack representation in mainstream political spaces. More specifically, the IMF should:

1. Acknowledge within an officially sanctioned policy stance that achieving gender equality, encompassing the comprehensive realization of women’s human rights and the eradication of gender-based discrimination, demands substantial and continuous public investments. This includes investments in social and caregiving infrastructure, emphasizing that advocating for a reduction in state financial commitment might impede progress in attaining gender equality and fulfilling women’s human rights.

2. Persist in endorsing benchmarks for social expenditure, while guaranteeing that these benchmarks are adequately substantial to drive meaningful advancements in upholding women’s rights. These benchmarks should also be in line with the minimum essential public spending required to achieve pertinent Sustainable Development Goals. For example, allocate around 5 percent of GDP for healthcare (in accordance with WHO recommendations) and approximately 6 percent of GDP for education (aligned with the Education for All initiative’s recommendations).

3. Acknowledge that conventional macroeconomic strategies and loan programs possess inherent gender biases, affecting women’s roles in both productive and reproductive spheres. Incorporate a gender lens in the formulation of policies and programs, integrating it as a core aspect rather than an incidental addition.

4. Encourage governments to adopt legislation that is attuned to gender considerations, safeguarding women’s interests within the workforce. Ensure equitable working conditions in the private sector for both women and men. Engage women’s groups, workers’ unions, and other civil society organizations in shaping social and macroeconomic policies. In order to facilitate this and ensure the inclusion of women’s voices, it is essential for the IMF to confirm that its programs do not inadvertently contribute to constraining civic engagement.

5. Advocate for gender-responsive budgeting, facilitated through the participation of women-led civil society organizations. This approach empowers governments to allocate adequate resources for the effective implementation of laws, policies, and initiatives that promote gender equality.

Conclusion

In conclusion, the repercussions of IMF-led austerity measures on women’s rights are both profound and complex. The fiscal policies, often underpinned by the ‘cut-to-grow’ approach, inadvertently exacerbate gender disparities and hinder progress toward gender equality. While the IMF has acknowledged the importance of women’s empowerment, its policies, particularly those targeting public sector employment and social spending, can have adverse effects on women’s economic prospects, access to services, and vulnerability to gender-based violence. To truly advance gender equality and uphold human rights, a transformative shift is needed. This entails adopting a more holistic and gender-responsive approach to policy-making, focusing on robust social investment, inclusivity, and equitable distribution of economic burdens. By prioritizing women’s voices and needs, the IMF can play a pivotal role in not only mitigating the negative impact of austerity but also fostering sustainable development that benefits all members of society, irrespective of gender.

Courtesy: Modern Diplomacy

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