Why a joint German-American investment fund for Africa would solve several global challenges and would be a strong impulse for the German-American partnership
In April 1948, three years after WWII, the US Congress adopted a law that changed the world significantly: the European Recovery Plan (ERP). The commonly name used for this plan is deduced from its initiator and most important advocate, the General of the Army and Secretary of State, George Marshall. In the late 1940s, Europe has been destroyed economically, politically and socially. The continent needed impulses from outside to break “the vicious circle and [to restore] the confidence of the European people in the economic future of their own countries” as Marshall expressed in a speech at Harvard University in 1947. The plan followed the goals of promoting the economies, restore and maintain the currencies, budgets and finances and stimulate growth of international trade. An unexpected period of peace, sustainable growth and the emergence of a German-American friendship have been the result.
In consideration of the status of the world economy today, a comprehensive German-American investment fund for the development of Africa could be the right action to tackle several multidimensional problems in Africa and to give a new impulse to the German-American partnership.
Africa has immense problems to reduce its economic and political difficulties and could benefit, as Europe did after WWII, from a powerful support from outside. According to the IMF, Africa as a continent had a GDP of 2.18 bn USD in 2016. As a comparison, Germany had a GDP of 3.47 bn USD and the United States 18.57 bn USD. The continent is afflicted by wars, famines, natural catastrophes, terrorism and the resulting challenges of migration. Against the background of the change of climatic conditions and demographic changes (population is forecasted to double until 2050), these problems could even aggravate in the coming decades.
One could wonder why these issues are of importance in conjunction with the German-American partnership today. By having a look on the economic challenges of these countries, however, a direct focus on the African continent could be of an underrated value.
Africa with an area of 30.2 m km² (Germany 0.35 m km², USA 9.83 m km²) and a share of 16.3 percent of the global population has enormous growth potentials. The abundance of resources and free land has long been an obstacle (c.f. the resource curse) due to existing economic interest by the West and political problems within the African countries. The economic interests are, however, about to change or have already changed as the global economic and political framework of the 21st century is significantly different from past. The saturation of Western markets, the rise of China and India, the ongoing migration from and within Africa caused by war, terror and severe economic conditions and the challenges triggered by climate change should draw our attention on new approaches.
Economic growth in Africa could give the continent the possibility to improve the conditions of the population, could decrease the incentives for migration and could create new strong markets as a basement for impulses for international trade. The saturated markets in the Western world and especially the highly open economies of Germany and the United States need stable and developed economies to increase trade. If the West is not going to invest in the African continent and give the African countries the possibility to develop in a sustainable and stable way according their own strategies, other global players could fill the gap and follow their own strategies.
Germany has launched their version of a “Marshall-Plan” in January 2017. The German government published an initiative to increase cooperation and to decrease hunger and migration. The plan consists of three columns: Economic activity, trade and employment; Peace and security; Democracy and the rule of law. The initiative is an important starting point, but it is a matter of course, that the investments of a single country are just a drop in the ocean. If Germany does not get a significant number of partners, the investments will hardly have an impact. According to the African Union, Africa needs investments of around 360 bn USD until 2040, which exceeds the financial possibility of one single country. The AU has already initiated important steps by their own, with for instance the Agenda 2063 or NEPAD. Germany and the USA should appreciate these developments and support new approaches.
A joint investment fund with the shared power of the German and the American economies and endowed with clearly more capital could make the well-intentioned initiative of the German government a successful plan, which could change the world. Sending money without a clear structure and well-defined rules would not have a sustainable success though. A joint fund should orientate itself on the framework of the European pendant of 1948 and include specific commitments regarding the fulfillment of major production programs, a guaranteed reduction of trade barriers and the establishment of an international organization to coordinate the fund. In real value of 2017, the ERP had a volume of around 140 bn USD. A joint investment fund set of by Germany and the USA followed by several countries could pave the road to success.
In November 2017, the EU and Africa will meet for the fifth Africa-EU summit in Abidjan. This could be the perfect moment for the US and Germany to proclaim a joint initiative for Africa to set a good example for other European countries. The proclamation would be a superb demonstration of the actionability and will of the German-American partnership.
After the ERP, Marshall has been awarded the Nobel Peace Prize and later the Charlemagne Prize for his contributions to welfare and peace in Europe. Without his initiative, Europe could never have developed economically and grown together in such a short time. Today, the German-American partnership could seize the opportunity to start a Marshall-Plan again to create a wealthier and more stable Africa. Let’s force Africa to grow.