Indonesia and the United States “Pivot to Asia”

This post was originally written as the final paper for a course on Global Business Practices and Asia.  The course is a specialty course taken as a part of my pursuit of a Doctorate Degree in International Leadership. 

 

Abstract

Indonesia is the fourth most populated country in the world and the third largest in Asia.  It has a long history of cultural development that was underdeveloped during colonial domination.  As a country it had to find and develop a new identity.  After more than sixty years since becoming an independent country, it appears that Indonesia has finally been able to successfully reinvent itself.  It relationship with the US has often been contentious but since 2009 the relationship experienced a complete turnaround.  The change was directly related to the election of President Barack Obama.  Having spent a portion of his childhood in Indonesia and being the son of a Muslim immigrant, he was an instant hero in Indonesia.  His presidency has coincided with that of President Susilo Bambang Yudhoyono in Indonesia.  Yudhoyono appears to have figured out how to effectively integrate the traditional value of “deliberation and consensus” into a modern democracy.   His leadership is leading to improved relationships with China and the US and greater prosperity for the people of Indonesia. 

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Indonesia is a very unique country in many ways.  Geographically it is made up of several archipelagos spanning a region between the Pacific and Indian Oceans.  It is the fourth most populated country in the world and the third most populated country in Asia behind China and India.  The United States is the third most populated country in the world.  Indonesia is a former Dutch colony and most of the developments in its relationship with the US have occurred since independence in 1949 (Country Profile: Indonesia, 2004).  .  Since independence Indonesia has struggled to find an enduring balance between contemporary political structures and traditional cultural practices.  Overlaying this struggle is the fact that Indonesia has more Muslim citizens (88%) than any other country in the world yet it is not a “Muslim State.”  Like many Asian countries, in spite of its struggles to establish healthy political stability, its economy has seen dramatic improvement since independence. Quality of life indicators such as average life span, healthcare availability, and poverty levels have also substantially improved.  With foreign assistance it has managed to keep its head above water but it has not yet fully capitalized on its potential.  Under President Obama the US has expanded its relationship with Indonesia as a part of the “Pivot to Asia.”  Indonesian public opinion of the US improved dramatically after the election of President Obama.  This shift in receptiveness has been referred to as the “Obama Effect” and paved the way for an improved relationship. 

This paper discusses the developments in the relationship between the US and Indonesia.  Indonesia’s current economic and political conditions have been heavily influenced by the impact of over a hundred years of colonial domination.  Indonesia, like many former European colonies in Asia and other parts of the world, appears to be subject to a double standard in academic and non-academic writings.  It is as if an attitude that the people of Indonesia should be satisfied with the “improvements” in their country in spite of the fact economic conditions continue to lag far behind those of the US, Japan and Western Europe. Finally, strengths and challenges for future development in Indonesia are also discussed.

Historical Overview

There is evidence that modern humans lived in the area now known as Indonesia 40,000 years ago (Country Profile: Indonesia, 2004).  By 5,000 years ago the cultures originating in the cultures of the interrelated archipelagos began to spread and have a significant impact on an area as far west as Madagascar and east into the Pacific. Cloves, found only in the Maluku Islands of Indonesia, had made their way to the Middle East as early as 4,000 years ago.   However, specific artifacts which might tell the story of trade and interaction between the peoples of the Indonesian archipelagos and other parts of the world have been hard to come by.  Artifacts discovered that provide concrete information about the people and their activities date back only to 400 B.C.  Such evidence confirms the development of well-organized societies and trade with India.  Additional evidence is available indicating the presence of well-developed kingdoms based on Buddhist and Hindu traditions beginning around 550 A.D.  Islam entered the archipelago by the eleventh century but did not begin to make significant gains in converts for about two hundred years (Country Profile: Indonesia, 2004). 

Contact with China increased between the tenth and fourteenth century.  Mongol attempts to dominate Indonesia during this period all failed.  During the Ming Dynasty (1368-1644) several attempts to exercise significant influence and control over Javanese power all failed. attempts failed.  It was around this time that Europeans began to express a significant interest in the Indonesian archipelagos starting with Marco Polo and then by the Spanish and Portuguese.  The Dutch and the English began to become involved in the area around 1600.  Europeans had a significant impact on trade and politics in the region, but colonial rule was not established until the mid-nineteenth century (Country Profile: Indonesia, 2004).     

The Colonial Period 

Establishing a Dutch Colony in Indonesia was not the primary goal of the Dutch government in Amsterdam, but the economic realities for the Dutch led to a dependency on the resources of Indonesia and the need to exercise greater control over the region to maintain its trade and economic position among the countries of Western Europe.  The economic reality combined with the popular view of Europeans as being a superior variety of humans made it easy to justify the forcible domination of the people of Indonesia. 

Initially, the Dutch Colonial Rule incorporated a great amount of tolerance for dissident opinion and allowed the development of several indigenous political parties.  Around 1900 with the development of the student organization, Budi Utomo, dissident opinion took a sharply nationalistic turn and increasingly the demand was for Indonesian independence.  The early nationalist leaders (many of them Dutch educated) believed that independence could be achieved through negotiation with the Dutch government.  The cultures of the region are based on beliefs that consensus is always the preferable option.  Early nationalist groups represented different segments of the Indonesian population and included a variety of religious and political beliefs.  Political parties interested in independence included Islamic reformists, Marxists, and social-democrats.  Operating on the principle of consensus being the priority these groups initially worked together to confront the Dutch.  The motto became “one land, one nation, one language.”  In 1926 and 1927 uprisings against the Dutch in West Java and West Sumatra led to the Dutch becoming less tolerant and repressive towards calls for independence (Guan, 2006).  The repressiveness only served to radicalize the independence movement.  Leaders such as Sukarno and Muhammad Hatta were exiled by the Dutch only to return as an Independent Indonesia’s first President and Vice-President. 

As World War II began the conflict between Indonesian Nationalists and the Dutch government was heating up but interrupted with the occupation of Indonesia by the Japanese.  At the end of the Japanese occupation the Sukarno and Hatta returned to declare independence for the Republic of the United States of Indonesia on August 17, 1945 (two days after the atomic bomb fell on Nagasaki, Japan).  However, the Dutch attempted to reclaim Indonesia as a colony.  After a period of additional struggle with the Dutch, Indonesia’s independence was recognized by the United Nations on December 27, 1949 (Guan, 2006).     

The Challenge of Independence

A common thread that runs through the various cultures of the people of Indonesia relates to the value placed on reaching agreement through “deliberation and consensus.” Guan (2006) has suggested that this egalitarian value that is intended to be inclusive and promote political stability may have actually contributed to increased division.  The initial governmental structure adopted by the new independent government of Indonesia was a parliamentary democracy modeled after the Dutch system.  The basic rule for decision making in such a democracy is 50% + 1.  The result is that instead of being more inclusive, political maneuvering could actually leave smaller groups disenfranchised.  The early leaders of the newly independent Indonesia attempted to combine such a system with the traditional value of “deliberation and consensus” with disastrous results.  Several years of parliamentary democracy failed to lead to the political stability and economic development that was anticipated by Indonesian citizens.  With this failure President Sukarno began to call for what he called a “guided democracy” that could more easily incorporate traditional Indonesian values related to “deliberation and consensus” (Guan, 2006). 

Up until the 1960’s the Indonesian Communist Party (PKI) had a seat at the table within Indonesia.  However, Indonesia considered itself a non-aligned country.  As the Cold War began to intensify the pressure grew for Indonesia to pick a side.  According to Guan (2006) the events leading up to the failed coup attempt and the ouster of Sukarno was triggered by the CIA.  One view of the series of events that took place in 1965 was that the CIA facilitated the failed coup attempt by communist sympathizers in the military to provoke a counter coup that would remove Sukarno and replace him with a leadership structure that was very favorable to the US.  With the support of the US, Major-General Suharto, Commander of KOSTRAD, the military’s Strategic Reserve force, lead the counter coup that saved Indonesia from becoming a communist regime.  Sukarno was implicated as a supporter of the communist and discredited.  The military action taken by Suharto, resulted in the massacre of about 500,000 Indonesian communist and suspected communist with many others being arrested and jailed.  Suharto was given the authority to do whatever was necessary to restore and maintain order.  He established what he called the “New Order” that emphasized economic and social growth while discouraging mass participation in the politics of ideology that was encouraged by Sukarno (Guan, 2006). 

Suharto’s New Order was embraced by the US and Western European countries resulting in a substantial increase in foreign aid and investment.  The new capital stimulated economic growth in Indonesia and its citizens began to experience visible improvements in their lives.  Aid from the US alone increased from $200 million in 1967 to $4.8 billion in 1992.  The substantial increase in oil prices after 1970 also helped stimulate economic growth (Country Profile: Indonesia, 2004).  An average GDP growth rate of 4.3% gave credibility to Suharto’s New Order which lasted for 30 years.

The collapse of Suharto and his New Order was due to fact that in spite of significant economic growth and development in Indonesia, the primary beneficiaries of the growth were an elite class of business people and government officials.  By the 1990’s the amount of civil unrest increased and with the collapse of the Soviet Union in 1989 there was less motivation to turn a blind eye to Suharto’s often brutal use of military force against civilians.  International support for Suharto evolved into international criticism of his heavy handed tactics in maintaining political stability.  The final blow to Suharto’s New Order was the Asian financial crisis of 1997.  Political repression, the war in East Timor, increasing levels of inequality within society and finally the economic downturn saw an end to support for Suharto both domestically and internationally.

In 1999, parliamentary elections were held in Indonesia for the first time since 1955.  The change in leadership reopened the door to foreign aid and investment.  The US began warming up in its relations with Indonesia but did not make any significant overtures to expand the relationship.  Anti-American sentiment during the Bush administration at the beginning of the 21^st century grew to an all-time low in Indonesia.  America was seen as anti-Islam and as having launched a war against Iraq mainly because it was a Muslim country (Guan, 2006).  However, as will be discussed later in this paper a dramatic and unprecedented turnaround in Indonesian public opinion was about to take place as America Inaugurated a new President in 2009.

Current Indonesian Economic Status

Today Indonesia employs a market economy and is very active in pursuing healthy economic relationships with the US, China, India, Japan and others.  In spite of a near complete financial collapse at the end of the 20^th century Indonesia has managed to reestablish growth and development within its economy.  Since 2000 it has made gains in several categories such as GDP, GNI, percent at or below poverty level, and life expectancy at birth (World Bank, 2013). 

Indonesia’s 2012 GDP was $878.0 billion.  Its population was 246.9 million resulting in a per capita GDP of $3,557.  In 2012 the GDP for the US was $16.24 trillion, with a population of 313.9 million resulting in a per capita GDP of $51,749 (World Bank, 2013).  The Indonesian economy has established a more favorable position globally and it is expected that their economy will continue to experience growth.

Indonesia’s main trading partners are Japan, the European Union, the United States, Singapore, and South Korea.   Indonesia recently has been experiencing a 65% trade surplus.  It is one of the world largest producers of liquefied natural gas and has a substantial petroleum industry as well.  The manufacturing sector accounts for about 40% of GDP and employs about 20% of the workforce.  Another 40% of GDP is accounted for by the services sector and employs about 40% of the workforce.

The last ten years has in Indonesia has seen improved political stability with a functioning democracy.  Outside investment and foreign aid is increasing and inflation has slowed.  Corruption has been a significant problem for Indonesia but its anti-corruption efforts appear to be having an impact.  The level of corruption has been decreasing steadily for more than ten years.

US-Indonesian Relations

In 1961 the US became the UN appointed mediator in a dispute involving West Papua.  The dispute involved a plan by the Netherlands to grant West Papua it independence and the Indonesian opposition to the plan claiming that West Papua was a part of Indonesia.  Confronted with the possibility that Indonesia might seek the assistance of the Soviet Union in annexing West Papua, the US position leaned toward support of the Indonesian government.  President John F. Kennedy in explaining why he supported the annexation stated that as the West Papuans were “living, as it were, in the Stone Age,” they would benefit by the modernization the would come as a result of the annexation (Rutherford, 2013).  The reality was that West Papuans were not actually living in the Stone Age.  However, such rhetoric was useful at gaining public support for a position that denied self-determination to the people of West Papua. 

The attitude was similar to the attitude the Dutch had as they began to dominate the people of Indonesia and subject them to a long period of colonization.  Only in the case of President Kennedy the rhetoric was used in favor of an independent Indonesian government.  The US involvement in the negotiations between the Netherlands and Indonesia marked the beginning of an often contentious relationship between the two countries.  President Kennedy was assassinated two years later and Indonesian President Sukarno was removed from office in 1965.  However, with the Cold War raging, Indonesia’s next leader capitalized on the conflict between the two super powers gaining favor with the US and being rewarded with military aid, foreign aid, and US investment (Country Profile: Indonesia, 2004).        

Sukarno’s replacement Suharto demonstrated his strong anti-communist views by completely destroying the Indonesian Communist Party (PKI).  In doing so he endeared himself to the US and other Western European countries.  As a result the US and others became willing for many years to turn a blind eye to the heavy handed authoritarian regime of Suharto.  In 1975, the day after a visit by President Gerald Ford and Secretary of State Henry Kissinger, Indonesia invaded and annexed the former Portuguese colony of East Timor where a leftist leaning political party had become the leading political force.  Thus began East Timor’s long struggle for independence from Indonesia (Timeline: US-Indonesia relations, 2010).

At the end of the Cold War the US and others stopped looking the other way when it came to Suharto’s tendency to use military force against his own people.  In 1991, in response to the Dili massacre the US Congress stopped International Military Education and Training (IMET) assistance to Indonesia.  This action marked the beginning of a long period of contentiousness between the US and Indonesia.  However, with the departure of Suharto in 1998 and the reestablishment of parliamentary elections in 1999 the US attitude toward Indonesia began to warm (Murphy & Suryodiningrat, 2010). 

The next major turn of events that impacted US/Indonesian relations was the terrorist attack in the US on September 11, 2001.  Initially, the Indonesian government came out in support of the US and condemned the attack.  However, when the US invaded Afghanistan and launched a pre-emptive strike in Iraq, President Bush and the US government were accused by the Indonesian government as favoring the attack and invasion of Islamic countries over non-lethal diplomatic solutions.  Public opinion of the US and President Bush fell to an all-time low.  In spite of the antagonism from the Indonesian government the Busch administration worked consistently to improve the relationship (Timeline: US-Indonesia relations, 2010). 

On December 26, 2004 a devastating Tsunami in the Indian Ocean impacted Indonesia.  The US responded with 25 warships and over 13,000 people to assist in relief efforts.  In 2005, the US also removed nearly all restrictions regarding military aid and effectively restored normal relations on the military level.  As a result of the relief efforts and the removal of restrictions on military aid, the relationship between the US and Indonesia warmed up considerably.

The next major event in the improving relationship between the two countries was the election of Barack Obama as President of the United States.  Not only had President Obama spent part of his childhood in Indonesia but he was the son of a Muslim immigrant to the US.  Public opinion in Indonesia of the American President went from an all-time low under Bush to an all-time high under Obama.  The shift in public opinion in Indonesia became known as “the Obama Effect” and it paved the way for improved cooperation between the two countries (Murphy & Suryodiningrat, 2010). 

In 2010, the final military restriction still in place was removed.  Also, that same year President Obama and Secretary of State Hillary Clinton announced sweeping policy adjustments in the US relationship with Indonesia that are designed to support the continued social and economic development of Indonesia and have a positive impact on American business as well.  In December of 2010 the US opened the @america Cultural Center in Jakarta.  It was developed in partnership with American tech companies and is designed to inform Indonesians about America, Americans, and American products (Onishi, 2011).   Whether such centers can further impact Indonesian public opinion of Americans is yet to be seen.

US Public Opinion of Indonesia

While it is very easy to find documentation of Indonesian public opinion of Americans, finding documentation of US public opinion on Indonesia is another story.  American seem to know very little about Indonesia other than the fact that President Obama lived there as a child.  Some have used this fact to make the argument that he was actually born there and is not legally the President.  Others have concluded that since his father was Muslim and he spent time in Indonesia that he must be Muslim. 

American public opinion about Muslims in general is far easier to find.  Perhaps such opinion is exemplified by the woman at a McCain Town hall meeting during the 2008 Presidential campaign, who stated that Obama was a Muslim.  It was stated as if being a Muslim was equivalent to being a terrorist.  McCain’s response did not refute the connotation that being a Muslim was a bad thing; he chose to simply affirm that Obama was not a Muslim and was a good man.  The exchange between McCain and his supporter is a reflection of the opinion of many Americans.  This automatic negative opinion of Muslims has been described as Islamophobia.  Islamophobia is described as; An exaggerated fear, hatred, and hostility toward Islam and Muslims that is perpetuated by negative stereotypes resulting in bias, discrimination, and the marginalization and exclusion of Muslims from social, political, and civic life (Ali, Clifton, Duss, Fang, Keyes and Shakir, 2011).

However in the case of Indonesia, in spite of the fact that it is 88% Muslim and has the largest Muslim population of any country in the world, it is not always perceived as a Muslim country.  Americans tend to be aware that Bali is in Indonesia and perceive it as a great exotic place to visit.  On the other hand, Indonesia’s first President and Vice-President consciously chose not to make Indonesia an Islamic Republic.  As a result, the Indonesian government does not present itself to the world in the same way the leaders of Iran, Saudi Arabia, and the United Arab Emirates would present themselves.  Indonesian cultural tradition tends to be more open than the culture of many other Muslim countries. 

Indonesia, Asia and the World

Indonesian leaders during the past ten years have managed to accomplish what both Sukarno and Suharto desired to do but failed.  Susilo Bambang Yudhoyono, Indonesia’s current President is finding a finding a way to effectively incorporate “deliberation and consensus” into political practice (Spranz, Lenger & Goldschmidt, 2012).  President Yudhoyono entered into a strategic partnership agreement with China in 2005 (Hadi, 2012). Entering into such an agreement with country that could easily over power you is perhaps risky and provides no guarantees of continued compliance.  Then in 2010 President Yudhoyono entered into a strategic partnership with the US.  In doing so agreements with both the US and China are strengthened.  With the possibility of pushing Indonesia closer to the US and away from China, Chinese leaders must be willing to follow through on their agreement of Indonesia.  Likewise, the US would not desire to be left out or excluded of the process in Indonesia’s relationship with China. 

Developing such relationships and remaining very active in the leadership the Association of Southeast Asian Nations (ASEAN), Indonesia has placed itself very strategically in the middle of the not only the Asian market but has garnered a place on the global stage as well. 

Strengths, Weaknesses, Opportunities and Threats for Indonesia

As Indonesia continues its development in the 21^st century it has become acutely aware of the fact that it is in a position to play a very active role in the development of Asian and global development.  Indonesia struggled in the years shortly after independence with being able to implement effective democratic processes that did not deteriorate into political gamesmanship and conflict.  In the early days after independence Indonesia had to struggle with internal conflict among its people and skepticism and doubt from the international community.  However, it appears now that the current government has found the path to balancing traditional cultural beliefs and contemporary economic and political realities so that progress can be sustained.  Indonesia’s idea of “deliberation and consensus” is definitely a strength.  It has used this concept to establish a reduction in domestic conflict and to develop and expand key relationships at the international level. 

Corruption is definitely a weakness.  Indonesia has enacted new laws to assist in combating corruption.  Indonesia has a strong military but must be careful to not use its military capability in a self-destructive manner, such as to quiet dissidents.  The concept of deliberation and consensus can go a long way when attempting to settle disputes and complex issues. 

One of Indonesia’s greatest opportunities relates to its location in Asia and its proximity to India and China.  India and China have been two of the fastest growing economies in the world.  Strategic partnerships with China and India can only strengthen its position in Asia.  Strategic partnerships with the US and the EU can only strengthen its position on a global scale.  Our world is changing.  The old colonial and chauvinistic ways of thinking are gradually disappearing.  Opportunities for developing interdependent relationships that are not exploitive will abound if approached with an attitude of openness.

The greatest threats for Indonesia are likely to come from within.  An atmosphere transparency and openness must be created by the government.  Another internal threat relates to making promises and not delivering.  The people of Indonesia expect their leaders to develop, promote and implement processes that result in real economic development that can be experienced by the majority of Indonesians.  If the government fails to deliver the people will once again demand a change.            

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References

Ali, W., Clifton, E., Duss, M., Fang, L., Keyes, E. and Shakir, F. (2011). Fear, inc.: The roots of the Islamophobia network in America. Center for Progress America.  Retrieved from http://www.americanprogress.org/issues/2011/08/pdf/islamophobia.pdf.

 Country Profile: Indonesia (2004).  Library of Congress – Federal Research Division. Retrieved from http://lcweb2.loc.gov/frd/cs/profiles/Indonesia.pdf

Guan, Kwa Chong (2006). Rewriting Indonesian history: The future in Indonesia’s past.   Institute of Defence and Strategic Studies, Singapore. Retrieved from http://www.rsis.edu.sg/publications/WorkingPapers/WP113.pdf

Hadi, S. (2012). Indonesia, ASEAN, and the rise of China: Indonesia in the midst of east Asia’s dynamics in the post-global crisis world. International Journal of China Studies, 3(2), 151-166.

Murphy, A. M., & Suryodiningrat, M. (2010). US rapprochement with Indonesia: From problem state to Partner. Contemporary Southeast Asia, 32(3), 362-394.

Obama announces U.S.-Indonesia comprehensive partnership. (2011). Foreign Policy Bulletin, 21(1), 148-181. doi:http://dx.doi.org/10.1017/S1052703611000104

Onishi, N. (2011).  U.S. updates the brand it promotes in Indonesia. New York Times. Retrieved from http://www.nytimes.com/2011/03/06/world/asia/06indonesia.html?_r=1&

Rutherford, D. (2013). Living, as it were, in the stone age. Indonesia, (95), 1-7,189.

Spranz, R., Lenger, A., & Goldschmidt, N. (2012). The relation between institutional and cultural factors in economic development: The case of Indonesia. Journal of Institutional Economics, 8(4), 459-488. doi:http://dx.doi.org/10.1017/S1744137412000124

Timeline: US-Indonesia relations. (2010). Contemporary Southeast Asia, 32(3), 395-398.

World Bank (2013).World Development Indicators. Retrieved from http://data.worldbank.org/country/indonesia

Economic and Political Development: Comparing China and the US

When discussing the political and economic development of China in comparison to the political and economic development of the United States one must first acknowledge that from a US perspective the cultural reality is that China has been largely demonized while the US has been largely glamorized.  If the intention is to engage in an accurate assessment of China’s development, then one must thoroughly engage the process of critical thinking.  Stark realities must be acknowledged for both countries that strip away, as much as possible, the distorting veils of evil or heavenliness that might tend to bias our evaluation.  To accomplish the task of an honest and critical comparison, the first order of business will be a brief review of the political and cultural histories of the two nations.  The histories will be followed by an overview of economic development in both countries, with a focus on the period since World War II.  Finally, the question will be asked “How Free is Free?”  This question refers to numbers imprisoned in each country as a measure of “freedom” and economic disparities that are widening as a result of “free” market expansion.

Historical Patterns in Culture and Politics

For many centuries China came under the rule of dynasties.  Changes in dynastic order occurred sometimes occurred within a dynasty and would result in changes in the ruling family, with little change in political policy or structure.  Thus, there could be a degree of change while the dynasty itself is maintained.  On the other hand, a change to a new dynasty would most often involve violent conflict and sweeping changes in political structure.  The Chinese dynasties followed the Confucius principle that emphasized the restoration of an ideal system of governance when the actual practice had slipped into something that was far from what was desired (Starr, 2010).  The result was a cyclical historical pattern that sought to reach and maintain ideals of governance and prosperity.  The last dynasty (Qing) collapsed in 1911.  The next 38 years proved to be very tumultuous for the Chinese people and was filled with war and bloodshed stemming from internal conflicts among those vying for power after the collapse of the Qing Dynasty and from external attacks, especially from Japan (Starr, 2010).

The dust began to settle in 1949, under the leadership of Mao Zedong.  Although China was now under a very different political structure under Mao and the Communist Party, the principles of Confucius relating to governance seemed to reemerge.  Consistent with Confucius principles, Mao’s goal was to establish an ideal government that capable of bringing stability and prosperity to the masses.  However, instead of identifying Confucius as the foundation of his ideas, as in dynastic rule, Mao cited the writings of Marx and Engels as the foundation for the development of a Communist China.  Changes in China’s political and economic policy since 1949 also seem consistent with the Confucius notion of reaching for ideal governance.  Clearly, economic changes that have taken place in the last thirty years are not at all consistent with the philosophy of Marx and Engels.  China’s move to increased privatization and market economy structures are actually a contradiction of the course of the socio-economic development that would have been predicted by Marxists.

The history of the political and economic development in the United States is in stark contrast to China.  The US originated as a number of British colonies in a foreign land.  The colonies operated under a market based economy but saw itself at odds with the indigenous peoples whose land they were now occupying.  The general approach was to expand control of territory via treaty and military conquest. This approached continued after the colonies became independent.  While the US Constitution proclaims very high ideals of human freedom and basic rights, the reality was that only 7% of the white male population was permitted to vote in the first presidential election.  Most of those voting owned human beings (mostly Africans) whom they enslaved and then profited from the labor their slaves provided. Indigenous people were not eligible for citizenship in the newly formed republic.  Interestingly, membership of the Chinese Communist Party as a proportion of the entire population of China is not very different than proportion of those eligible voters to the population of the United States at the time. 

Since then the US has experienced many wars and internal struggles.  Post World War II saw an economic boom for the White majority but intensified discrimination for African Americans and other non-Whites.  A pivotal point of contention was actual participation in the democracy and voting rights.  In the US political power is based on two things: financial leverage and winning elections.  Thus, US history is replete with efforts to influence (legitimately and illegitimately) the outcome of elections.  Full participation in the economy of the US has also been very restrictive throughout its history.  Groups that are generally favored benefit far more from economic development than groups that have been discriminated against.

China and the US since World War II

For China and its more than one billion residents, the period since World War II has been the most prosperous period in its history.  Mao’s initial focus on the rural farmers and peasants saw equalization in salaries between rural and urban dwellers (Starr, 2010).  Later when economic development stalled, Deng Xiaoping instituted economic reforms further globalized China’s economy.  The reforms, however, have had a disproportionate impact.  Urban areas, where 45% of the population lives have benefited far more than rural areas, where 55% live (Starr, 2010).  

In the US income disparities exist between urban and rural dwellers as well.  The economic expansion that took place after World War II was largely in urban areas.  Since World War II, the US population has shifted from being a majority living in rural areas to a majority living in urban areas.  China’s goal is to follow this same path.  In fact, all of the most prosperous countries of the world have majority urban populations.  The disparity that has stubbornly persisted in the US is one based on ethnicity and not location.  Economic statistics for African Americans as group continue to resemble that of a Third World country than that of a developed country.  Full participation in the economy of the US has been a serious challenge for African Americans who continue to experience significantly lower per capita income and significantly higher unemployment than the mainstream of America.

How Free is Free?

One of the main images involved in the demonizing of a Chinese authoritarian regime is one involving imprisoning dissidents.  On the other hand one of the images that is glamourized about the US is the freedom to speak out against our government without fear of reprisal or imprisonment.  The reality is not so clear cut.  Yes, there are many documented cases of arrest and imprisonment of Chinese citizens who have spoken out against the Chinese Communist Party (CCP) or Chinese government.  These arrest and imprisonment largely target those have been involved in what the CCP identifies as threats to the political stability of the China and range from arrest after the Tiananmen Square protests in 1989 to a number of arrests and imprisonments related to a Falun Gong peaceful protest in 1999 (Starr, 2010).

However, a closer look at international imprisonment statistics paints a different picture when comparing the China and the US.   The US ranks #1 in the rate at which it imprisons its citizens at 716 per 100,000.  China ranks #126 with 121 persons imprisoned per 100,000.  In raw numbers during 2011 the US imprisoned 2,239,751 adults.  China imprisoned 1,640,000 during the same period (ICPS, 2012).  In the US when the rate is broken down by ethnic group a very disturbing picture develops.  In 2011 the rate for African Americans imprisoned was 3,023 per 100,000.  In raw numbers that is 873,502 or 39% (Carson and Sabol, 2012).  African Americans are only about 12% of the US population.  Such numbers are sufficient to disrupt the economy of entire communities by removing a significant number of able body males from participation.  The above statistics when viewed objectively would suggest that it is the US that has a greater problem with unfair treatment and the restricting of freedom of its citizens.

Conclusion

We in the US often brag about our economic prosperity and economic opportunities while belittling a country like China for its limited opportunities, high level of poverty, and authoritarian regime.  While it is undeniable that the US is a prosperous country with much freedom, it is also true that large segments of the population have been and continue to be denied inclusion in the prosperity and freedom that so many brag about.  China’s traditions and priority of political stability appear to us in the US to be almost paranoid in their implementation.  Yet, China in spite of its restrictive policies related to religious and social expression, is attempting to expand the development of economic prosperity.  Perhaps there is something that both sides can learn from each other.

References

Carson, R. A. and Sabol, W. J. (2012). Prisoners in 2011.  Bureau of Justice Statistics. U.S. Department of Justice, Office of Justice Programs. Retrieved from http://www.bjs.gov/content/pub/pdf/p11.pdf.

International Centre for Prison Studies (ICPS). (2012). World prison brief. Retrieved from http://www.prisonstudies.org/info/worldbrief/wpb_stats.php

Starr, J. (2010). Understanding China (3^rd ed.). New York: Hill and Wang.

Economic Development in Africa: An Analysis of Both Sides of the Coin

Economic development in any country or region is not an isolated process.  Globalization has resulted in a high level of interdependency (Stonehouse, Campbell, Hamill & Purdie, 2004).  The development of the European Union (EU) after hundreds of years of conflict has opened the door to increased political and economic stabilization and growth (McGiffen, 2005).   When China opened its doors to foreign investment and increased its involvement in the global marketplace, it altered the trajectory of its economy (Solso & Chinyanta, 2010).  For Africa, involvement in globalization has historically been one sided.  The wealth and resources of Africa have often been exploited in one way relationships based on dependence and not interdependence (Rodney, 1973).  However, more recently, African countries are beginning to step out of the shadows of dependency and are attracting a new wave of investment from inside and outside of the continent (Nibbe & Sita, 2013).  The literature, though, is largely one sided in its analysis.  Either articles or books are written from the perspective of the foreign investor or, they are written from the perspective of Africans.  The reality is that successful economic development in Africa will be a result of the development of mutually beneficial interdependent relationships.  Any analysis of the status of African economic development must include both perspectives.  Any meaningful plan for African development must result from a synergy of efforts and ideas coming from all perspectives.

This paper represents an attempt to exemplify a synergistic analysis regarding the economic and political development of Africa.  The objective is to glean from a sample of the available literature, ideas from the perspective of Africans and of persons elsewhere.  To do this, two very different, but highly regarded African countries (when it comes to investment attractiveness) will be analyzed.  Rwanda, after the devastating genocidal rampage that occurred in 1994, has experienced nearly two decades of economic growth and development (Hernandez, 2013).  Nigeria, one of the oil giants of Sub-Saharan Africa, is the most populated country on the continent and is also growing economically while showings signs of increasing political stability (Nibbe & Sita, 2013).  

The Historical Context

In the thousands of years prior to consistent European contact with Africa many great kingdoms rose and fell (Rodney, 1973).  However, much of Africa’s political and economic structures were based on highly localized village kingdoms that related to each other both economically and socially.  Most parts of Sub-Saharan Africa continue such structures up to the present day.  In modern society, village rulers exist side by side within the structure of democratically elected representatives. Such ancient structures continue to be highly respected and relied upon for leadership at the village level.

At the same time that European contact with Africa was increasing, respected European scholars such as George Cuvier of France had already developed a science of the superiority of the white race.  He wrote: “The Negro race ... is marked by black complexion, crisped or woolly hair, compressed cranium and a flat nose. The projection of the lower parts of the face, and the thick lips, evidently approximate it to the monkey tribe: the hordes of which it consists have always remained in the most complete state of barbarism” (Cuvier, 1835, p. 50).   Many scholars supported what were considered scientific conclusions that Northern Europeans were the genetically superior race among humans.  Africans were often categorized as barely above apes.  Thus, the entry of Africa into the modern global economy (that was largely controlled by Europe) was characterized by attitudes and beliefs that did not view Africans as deserving of being equal partners.  In the earliest days of trade involving Europe and Africa, human beings, bought and sold as slaves, were the most valuable commodity.

As the slave trade was slowly coming to an end, the major European powers carved up Africa into colonies under the jurisdiction of each respective government.  The dissection of Africa, in 1844 by European powers meeting in Berlin, was done without regard to how the various ethnic groups were organized geographically.  The only interests that were considered were those of the European nations involved (Rodney, 1973).   In the 19^th and first half of the 20^th century the role of Africans in the global economy was reduced primarily to that of laborers working for companies that were now getting rich from products and natural resources extracted from Africa. 

By the early 1960’s nearly all African countries had achieved “independence.”  However, as the British, French, Belgian, Portuguese and Dutch turned over political control, they did not turn over economic control.  The major extraction industries that had been established in Africa remained in the control of the colonial companies.  Thus the practices of exploitation and unfair partnerships with indigenous peoples continued. 

Kwame Nkruma became the first elected President of Ghana after its independence in 1957.  At the time, the British were cooperating with Nkruma to build a major dam on the Volta River.  Nkruma believed that the dam would generate enough electrical power to support significant industrial and infrastructure development in Ghana.  Unfortunately, the British withdrew from the project long before its completion.  Undaunted, Nkruma sought other sources of financing and was able to get the support of the World Bank and other foreign investors after a deal was negotiated with Kaiser Aluminum.  The dam was finally completed in 1967, but Kaiser (the biggest consumer of electricity from the dam) demanded ultra-low rates that resulted in residential consumers increasingly subsidizing the operating expenses of the aluminum company.  Fifty years after Ghana’s independence, the country’s aluminum sector has helped US-based companies Kaiser and Alcoa profit while showing little benefit to the country’s economic or industrial development (The Drop Squad, 2013).  Such unbalanced contracts were typical in post-colonial Africa and have had a lasting negative impact on economic development and political stability. 

The view of Africans as less than human gradually abated but did not evolve into a view of Africans as equals or deserving of the same treatment given broken economies and political systems in Europe and Asia after World War II.  Instead there was seemingly an intentional strategy to keep Africa poor (Iheriohanma, 2010).  Intense poverty became the way of life for the majority of Sub-Saharan Africans after independence and soon the societal destructiveness of that poverty began to boil over as leaders made promises that they couldn’t or were not allowed to keep.  A pattern of military coups and civil war became the norm for nearly three decades throughout Africa.  Yet, many leaders of the struggling African countries did not allow their hopes for a better Africa to be dashed.  They pushed on. 

Today, Africa is still recovering from over a century of abuse and neglect from outside of Africa and many self-inflicted wounds.  In spite of all the damage and underdevelopment, many African leaders of today are implementing strategies to more effectively engage the global market while lifting its citizens out of poverty.  Leaders like Paul Kagame, the President of Rwanda, and Ngozi Okonjo-Iweala, Finance Minister of Nigeria, have demonstrated a clear understanding of the need to reduce their country’s foreign debt and dependency on aid (Building Rwanda, 2012; Keating, 2013).

 

The African Worldview

Ntibagirirwa (2009), in his discussion of the need to incorporate African cultural values into any meaningful plan for economic development, argues that neoliberal views of economic development have been generally assumed to be universal.  He points out that the cornerstone ideas of great European thinkers like Descartes, Rousseau, Locke, Hume, Adam Smith and others have formed the foundation of theories of economic development that are thought to be applicable to all human societies.  An initial flaw in this line of thinking is that these great thinkers did not view Africans as equal to Europeans or capable of development in any way similar to Europeans.  It has not been until relatively recently that European scholars began to widely accept that Africans are human beings on the same footing.  Even now there are a few remaining detractors.  Nevertheless, Africans are in fact human beings on the same footing with all other humans.  Our differences lie in our cultural beliefs, values, and worldviews.

Ntibagirirwa (2009) goes on to identify the basic components of the cultural value system common throughout Sub-Saharan Africa.  In short, he describes what has become to be known as “Ubuntu.”   Ubuntu can be described by the saying, “I am human because we are human” or simply “I am because we are.”  This idea of self/group-awareness is in contrast the Descartes statement of, “I think, therefore, I am.”  With Ubuntu, the individual and the group are interdependent.  Traditional European philosophy and cultural values are more individualistic.  The community is made up of a group of independent individuals. 

Another aspect common to the African worldview relates to the relationship between the material and spiritual realms.  The idea of interdependency is carried onto the relationship between material and spiritual.  Material and spiritual are interdependent and inseparable.  Everything that is material has a spiritual component and everything that is spiritual has a material component (Jackson & Sears, 1992).  The entire universe is seen as dynamic web of interdependent energy patterns.  Thus, the individual is seen as an inclusive part of a single spiritual/material universe.  Everything and everybody is connected and interdependent.  Ntibagirirwa (2009) suggests that a meaningful and effective plan for economic development in Sub-Saharan Africa must be based in the cultural values and worldviews of Africans. 

In the struggle for independence, and shortly after, it appears what was known at the time as “African Socialism” may have been an early attempt to incorporate African cultural values and worldview into the developing economic and political systems of several African countries.  Unfortunately, this attempt occurred in the middle of the Cold War.  In the US and in Western Europe, ideas resembling communism or socialism were largely demonized.  Thus, African leaders that espoused such ideas were viewed as being on the wrong side of the Cold War and perceived as possible threats. 

An interesting side note is the term “Third World” developed out of the Cold War rivalries.  The “First World” was the US, Western Europe and its committed allies.  The “Second World” was the Soviet Union and its allies.  The “Third World” was the designation for non-aligned countries which included most of the countries of Africa.  However, before the end of the Cold War, “Third World” became synonymous with poverty and underdevelopment.

In an increasingly interdependent world, the question remains regarding what exactly would an economic and political system consist of that is firmly based in African cultural values and an African worldview?  The need for African leaders and for governments of African countries would be for them to have the ability to be both African and “global” at the same time.  African government and business leaders must be able to communicate and effectively connect to both the citizens in their countries and their global partners.  However, such relationships depend not just on the skills of the African leaders but also on the openness and receptiveness of other world political and business leaders.

Perception versus Reality

Africa has been known as the “Dark Continent” not because of the dark complexion of its people but because so much about Africa is unfamiliar or unknown to the rest of the world.  Even at the present time much of the perception of Africa, its countries and its people is clouded by unflattering bias and racism.  However, there appears to be hope.  With increased exposure, old biased perceptions are giving way to a more realistic view (Nibbe & Sita, 2013).   Even when taken as whole, perceptions of Africa as a place for future investment have been steadily improving.  What is most striking is that when the perception of companies currently doing business in Africa is compared with companies not currently in Africa, the differences in perception is very clear.  Those established in Africa tend to evaluate the attractiveness of Africa for business nearly twice as high as those not established in Africa (Nibbe & Sita, 2013).   The conclusion is that those established in Africa are basing their perceptions on actual experience while those not established in Africa may be basing their perceptions on old biases and stereotypes.

On the other side of the coin is the perception of Africans about Africa.  In discussing the result of a Gallup Poll on the perceptions of Africans regarding governance and institutions, Rheault & Tortora (2011) reported that people generally had more confidence in religious institutions and the military than in the government and judicial systems.  Many governments in Africa experience a credibility gap with its citizens.  Perhaps part of the problem relates to what was discussed in the previous section. African leaders must be skilled at communicating with Africans from the perspective of African cultural values while also being able to communicate effectively with global partners. 

Finally, related to issues of perception, it is also important to understand that in spite of the many biases and misperceptions that may be present regarding Africans, the individual African tends to view him or herself as a human being who is a part of this world just like everyone else.  It makes no sense to an African that there should be a bias against them simply because of where they come from or how they look. 

Rwanda and Nigeria

To explore the topic of African economic development further it would be helpful to evaluate the examples of Rwanda and Nigeria.  The two countries are very different in many respects.  While Nigeria is the most populated country in Africa with over 170 million people, Rwanda has only 12 million people.  Nigeria is rich in natural resources especially oil and is a member of OPEC.  Rwanda has little in the way of natural resources.  Nigeria’s GDP (PPP) is $485.194 billion with a per capita rate $2,866.  Rwanda, with its much smaller population has a GDP (PPP) of $16.937 billion and a per capita rate of $1,592.  These numbers represent vast improvements for both countries over the past 20 years and are the result of very active economic development plans by their governments.  Nigeria has had successive democratically elected governments since 1999 and Rwanda has had democratic elections since 1994. 

Both Nigeria and Rwanda rank near the middle of the pact when it comes to ease of doing business there (Nibbe & Sita, 2013).   Nigeria ranks second to South Africa regarding the amount of capital invested for infrastructure improvements.  Both Nigeria and Rwanda have dramatically reduced the size of external debt in relation to gross national income.  Rwanda went for a high of 63.1% in the 1990’s to a 14.2% in 2010.  Nigeria went from 118% down to 4.5% during the same period (Nibbe & Sita, 2013).     

It is probably no coincidence that such improvements in the economies in of Rwanda and Nigeria have all came after the end of the Cold War.  Attempts to manipulate internal politics and foreign policy are no longer as urgent for either of the former Cold War foes.  It appears that it has resulted in giving Africa some breathing room to develop on its own and garner greater interest in global investment that actually leads to growth and not dependency. 

While economic conditions are improving for both countries they are still very far from being comparable to any country in Europe or North America.  Yet, with so much room for additional growth it appears investors are beginning to recognize many golden opportunities and the governments are better prepared to manage the growth (Solso & Chinyanta, 2010). 

Since 1994, Rwanda has experienced relative political calm.  There have been no military coups and the current President, Paul Kagame was re-elected with overwhelming support.  That is not to say that Kagame’s government is not without its critics.  Desrosiers & Thomson (2011) attempt to make the case that Kagame is actually no different than his dictatorial predecessor.  They claim that Kagame has established a system of fear and repression.  He is controlling his own people and fooling the international community.  However, the World Bank and many other international observers do not agree with their assessment (Hernandez, 2013).  On the contrary, the World Bank views Rwanda under Kagame’s leadership as having established a sustainable path for economic development and moving its citizens out of poverty.

Nigeria too, is heavily criticized for corruption and “sectarian” violence.  Royal Dutch Shell is constantly victimized by extremely organized and capable thieves that still thousands of barrels of oil per day from pipelines (Shell Global, 2013).  It is often speculated that Nigerian government officials are paid off as a part of keeping the scheme going.  In the North, Nigeria is attempting to deal with the Boko Haram, an Islamic extremist group that has been responsible for the deaths of about 10,000 Nigerians (mostly Muslim) during the past 12 years.  Violence in the North may cause investors to pause, but companies familiar with Nigeria continue to recognize the potential there and know how to steer clear of hot spots.   

Rwanda and Nigeria are more of the norm in today’s Africa rather than the exception.  They represent the enthusiasm and optimism of many African countries in spite of more than century of tragedy, internal conflict, foreign abuse, financial manipulation, unfair trading practices, exploitation and more.  While there are many challenges still to meet, there is cause for optimism and foreign investors are beginning to agree (Solso & Chinyanta, 2010). 

A Comment about Corruption

Whenever there is a discussion about economic development in Africa the mention of corruption is not far behind.  However, very often the term is used without adequate quantification.  A policemen taking a bribe at a check point that may amount to a couple of dollars is put into the same category as the high government official that embezzles millions.  In a review of the book Corruption in Africa: Causes, consequences and cleanups, Abdul-Korah (2010) indicates the book even identifies school children as culprits in the problem of corruption.

When discussing corruption it must be quantified in terms of the amounts of money involved and the potential damage to economic development.  The most damaging types of corruption are those that result in the extraction of billions of dollars out of the home country.  A distinction should also be made between corruption and confidence schemes.  In much of the literature all of these distinctly different activities are grouped together as corruption (Ebegbulem, 2012).   Additionally, when large amounts of money are being embezzled and being taken out of the country, it most often requires the cooperation of foreign banks.  Should these banks be identified as being involved in the corruption or theft from the home countries?  Or should they be allowed to take advantage of the large deposits and be held harmless? 

Most recently many of the biggest acts of corruption in history have been committed by some of the world’s largest and richest banks.  Earlier this year HSBC agreed to pay $1.9 billion to resolve charges it enabled Latin American drug cartels to launder billions of dollars.  HSBC was accused of failing to monitor more than $670 billion in wire transfers and more than $9.4 billion in purchases of U.S. currency from HSBC Mexico, allowing for money laundering (Smythe, 2013).   If such numbers were associated with an African leader it would mean utter disgrace and severe damage to the economy of his country.  HSBC paid the fine and continued with business as usual.  No criminal charges were filed for any HSBC executive involved. 
Also, notable is JP Morgan's involvement in making illegal representations about mortgage securities to investors.  Their deception, involving 100 of billions of dollars, contributed to the financial collapse that reverberated around the globe in 2008 and 2009.  Economies in the US and Europe were all damaged severely.  Consequences have been limited to fines totaling into the billions of dollars, with no criminal charges having been filed to date.  The fact that, after doing so much damage on an international scale, companies like HSBC and JP Morgan are allowed to continue to exist suggests that much of our global economic system continues to be vulnerable to a level of corruption that dwarfs anything that has ever occurred in Africa.

In Africa, there is a direct link between corruption and poverty. The desire for money when it is limited creates temptation in some people and they succumb.  Others have bad intentions from the beginning.  However, there is evidence that high level governmental corruption in Africa is on the decline (Abdul-Korah, 2010).   As economies improve and more people are able to make a decent wage, the motivation for small time corruption will decrease as well.

Conclusions and Recommendations

When a long look is taken of the Africa’s history and underdevelopment it is amazing that the current possibilities that are surfacing are coming to fruition.  Economically and politically Africa is finally facing what she has been dreaming of for decades.  In modern times, Africa, especially Sub-Saharan Africa, more than any other region of the world has faced attack and atrocities that have cut to the core of her being.  Yet, she has survived.  Like an adult with a history of trauma and abuse, she has been scarred and sometimes the distortion of those wounds has resulted in further self-inflicted damage.  At present in some parts of Africa those suicidal tendencies continue, but in other parts the healing has taken root.  World economic events of the past four or five years have created the opportunity for Africa to be highlighted as a good place for future investment.  While most of the world was falling into recession, Most African nations were exhibiting healthy growth.  As a result, the world is now taking a new look at Africa and the possibilities for economic development.  A growing Africa could mean huge profits for many global companies as well as many Africans coming out of poverty. 

When evaluating where to go from here, a couple of new realities must be recognized.  First, nearly all Sub-Saharan African countries have substantially decrease its proportion of debt compared to Gross National Income.  That means that Africa is finding its way out of dependency and rapidly moving toward true financial independence.  Second, the investment in to Africa will also be from within.  Countries like South Africa and Nigeria, while focused on their own development, are also looking for good investments in their own neighborhood.  The size of the middle class in many African countries is increasing, that means an expanded consumer base for many consumer products. 

As the world increases the attention it is paying towards Africa in a very favorable way, so too must Africans look at themselves with more favor and confidence.  Over a century of foreign domination, decades of poor governance, economic exploitation, war and instability have traumatized many Africans to the point of perpetual pessimism.  A new reality is dawning that will require the citizens of the countries of Africa to respond with hope and optimism.  One of Africa’s strengths as it goes through this economic transformation is that it has a very young population.  Half of the population of Sub-Saharan Africa is under the age of 18.  That means the potential for an energetic, enthusiastic, and optimistic workforce that spans all professions is a reality.  However, the challenges of all this potential must be met by current political and business leaders in Africa.  Ideally, they will have the honest and sincere support of governments and business leaders from around the world that recognize the current potentials and seek to nurture their development and not simply exploit for their own gain.  The cooperation among European nations and the expansion of the EU has benefited the populations of many countries.  If that same atmosphere of cooperation is established in Africa it too will thrive.

Finally, the leaders of Africa must become skilled at speaking the language of the global marketplace, while also connecting to their people from the perspective of an African worldview; sharing and living traditional cultural values that support coming together to make all of Africa and the world a more livable place for everyone.

 

References

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