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Transposing Frederic Bastiat’s thoughts on Opportunity Cost to the situation in Africa: The case of Cameroon, By Chofor Che 24/11/2011

24 Nov


Frederic Bastiat shows that, every time we make a choice, we give something up.[1] Bastiat adds that, in the economic sphere, an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.[2] African governments still fall short, when it comes to making decisions preferred by their people. These actions give rise to several effects such as unemployment, effects which are not seen in the short run. Despite cries on the need for the participatory role in development policies whereby development initiatives are conceived with the involvement of the local populace, many governments in Africa still continue to conceive policies and impose them on local communities. This accounts for the increasing poverty levels, poor entrepreneurial initiatives, poor social amenities, weak decentralisation policies, corruption as well as porous development initiatives. By focusing on the case of Cameroon, this contribution therefore seeks to identify three areas were the respect of individual liberty falls short. This contribution first of all delves into philosophical concepts surrounding opportunity cost, individual liberty and limited government in a free society. Examples are analysed in the case of Cameroon with respect to Bastiat’s point of view including poor governmental action in the country’s cement industry, poor privatisation of the road sector to the detriment of the domestic air transport sector and finally a poor policy in the energy sector. A conclusion is then advanced identifying other countries that have to also revisit some of their policies like Chad, Mali and Nigeria. Credit is also given to countries like Botswana and South Africa, for these countries have gone a long way to uphold the principles of free markets, individual liberty and limited government interference.

 

Philosophical concepts of opportunity cost and the purpose of limited government in a free society

When economists refer to the “opportunity cost” of a resource, they mean the value of the next-highest-valued alternative use of that resource. Scarcity of resources is one of the more basic concepts of economics. Scarcity necessitates trade-offs, and trade-offs result in an opportunity cost. While the cost of a good or service often is thought of in monetary terms, the opportunity cost of a decision is based on what must be given up (the next best alternative) as a result of the decision. Any decision that involves a choice between two or more options has an opportunity cost. In relation to government decision, choices have to be made with respect to its available resources. The resources we are referring to here are land, labour and capital. Once a country decides to increase production in relation to a good or service after obeying the principles of opportunity cost, ways to achieve this include borrowing, technological advancement or more taxation. When a government decides to increase taxes to achieve this aim, then individual liberty is trampled upon. The people bare the brunt of certain government decisions.

Government is a legalised entity. One of the most perplexing problems of the ages seems to have been that of finding the proper place of government in society. The purpose in having a government with certain powers is not to concede that the scope of governmental power over the affairs of individuals should be all inclusive, or that one power justifies another.

In order for individuals to benefit from living together, they require a society that respects individual rights. The sole purpose of government is to protect these rights. A government possesses a legal monopoly on the use of force, which it must use only in retaliation against those who initiate force. Government protects individual rights by placing the use of retaliatory force under objective control. To carry out this mission, a government performs three basic functions: the police, to protect individuals from domestic criminals; the military; to protect individuals from foreign threats; and a court system, to enable individuals to settle disputes without resorting to force. The government of a free nation does not regulate its citizens, provide them a social “safety net” or try to influence their (non-coercive) behavior in any way.

On the other hand, the absence of Government allows anarchy to rob the people of their liberty, where as at the other extreme, the government itself becomes the robber. The task in a liberal society therefore is to find that point where all the people will enjoy the greatest possible degree of liberty especially economic gains. It will allow full enjoyment of liberty by all who refrain from going beyond their right to and imposing on the liberty of others.

Having defined opportunity cost and provided arguments on the purpose of government in a free society, it is now important to review certain examples of actions carried out by the government of Cameroon, actions viewed as suspicious by a majority of the populace. It should be noted that these examples do not only relate to Cameroon alone, but to several African countries.

 

Focus on Cameroon’s cement industry

The tribute that the people pay to business is what is seen. The tribute that the people would have to pay to the state or to its agents in the socialist system is what is not seen. What is this so-called tribute that people pay to business? It is this: that two men render each other a service in full freedom under the pressure of competition and at a price agreed on after bargaining.[3] This thought propounded by Bastiat pushes us to question the paradox surrounding market competition in the cement sector in Cameroon.

The cement sector in Cameroon is suffering from numerous government restrictions. The country’s lone company has produced and marketed cement for the past 30 years. This action is indeed viewed by many as suspicious. Not only are business operators interested in the cement industry left out of the market, but government owns monopoly of this sector by imposing exorbitant taxes on those who venture to get into the industry. Despite news that there is no longer monopoly in this sector, free market principles are still to prevail in the scenario of Cameroon’s cement industry. There is a contention that if this sector is opened to free trade and not over regulated, then free trade will prevail.

Success stories in the cement sector in Africa can be drawn from countries like South Africa and Botswana. A county like South Africa was able to afford ‘state of the art’ infrastructure during the 2010 World Cup competition due to her growing cement industry. This country was able to mobilise and construct hotels, stadia and distraction sites for visitors during the 2010 World Cup competition, due to the presence of numerous cement producing competitors. This effort was amplified by neighbouring countries with a success story in cement production like Botswana. A great part of this success is owed to free market principles and the encouragement of competition within the domestic and international circles.

Bastiat is therefore of the view that if we were to take into consideration what is not seen, because it is a negative factor, as well as what is seen, because it is a positive factor, we should understand that there is no benefit to industry in general or to national employment as a whole. This school of thought also applies to the cement industry in Cameroon. There is therefore a need for the government of Cameroon to encourage local as well as international actors to delve into this industry.

 

The effects of privatisation on the road and domestic air transportation sectors in Cameroon.

Nothing is more natural than that a nation, after making sure that a great enterprise will profit the community, should have such an enterprise carried out with funds collected from the citizenry. But I lose patience completely, I confess, when I hear alleged in support of such a resolution this economic fallacy: “Besides, it is a way of creating jobs for the workers.”  This is a position Bastiat advances in the domain of public works. He goes further to add that, the state opens a road, builds a palace, repairs a street, digs a canal; with these projects it gives jobs to certain workers. That is what is seen. But it deprives certain other labourers of employment. That is what is not seen.[4]

The Republic of Cameroon closed down a number of airports concerned with domestic air transportation in the 1980s after the economic crisis. The government argued that in so doing, more resources would be shifted to the road sector. Unfortunately, this sector remains deplorable today. Resources were not only shifted to the road sector but this sector was privatised. Not only were airports shut down all around the country but many people lost their jobs. The country lost some of her finest pilots. Today government has admitted that ten years after privatising the road sector, things have instead gone from bad to worst. The reason for bad results following such privatisation policy is because the process was imposed by the World Bank and International Monetary Fund (IMF) on most African countries including Cameroon. Moreover, the Government of Cameroon continued to interfere in the process.

Resources which are being wasted in the road sector due to porous budgeting at the Country’s Parliament should be ploughed back into the domestic air sector. Many airports are wasting away in many parts of the country. Moreover, reopening these airports would create employment for many Cameroonians.

 

Issues with the energy and power sector in Cameroon

Society is the aggregate of all the services that men perform for one another by compulsion or voluntarily, that is to say, public services and private services. This is a view realistically observed in our day to day lives, a view projected by Bastiat.[5] The first, imposed and regulated by the law, which is not always easy to change when necessary, can long outlive their usefulness and still retain the name of public services, even when they are no longer anything but public nuisances. The second are in the domain of the voluntary, that is., of individual responsibility. Each gives and receives what he wishes, or what he can, after bargaining. These services are always presumed to have a real utility, exactly measured by their comparative value. That is why the former are so often static, while the latter obey the law of progress. These thoughts hunt the energy and power sector in most African countries, especially Cameroon.

Access to energy is essential for economic, social and political development. It encourages individual development via an improvement in educational and sanitary conditions. It makes economic development possible through the mechanisation and modernisation of communications. It plays a role in improving the economic environment by opening the way to more resourceful public sector intervention, greater respect for the environment and a strengthening of democracy. Despite its enormous potential in fossil and renewable energy sources, however, Africa and Cameroon in particular suffers from major energy deficits. Most governments especially the Cameroonian government has made a choice to continue allocating a fabulous amount of money to poor electricity supply.

The continent’s resources are underexploited or exported in raw form or wasted in the course of extraction or transport. For instance hydraulic basins are found in Central Africa. The Republic of Cameroon is based in Central Africa. The truth is that Cameroon still suffers from chronic power failure due to unexploited power sources. The hydraulic basins of Central Africa, the Rift Valley fault and the sunshine from which the continent in general benefits provide sources of hydraulic, geothermal and solar energy which are rarely equalled elsewhere in the world. At present, however, only a tiny part of this potential is exploited: 7 % of hydraulic capacity and less than 1 % of geothermal capacity, while photovoltaic development is embryonic. With what is being used by the Cameroonian government for electricity supply, a sustainable option could have been thermal energy. This source of energy is not exploited. This would cause the government less, in terms of energy supply and resources could now be diverted to the agricultural sector which needs to be mechanised. With the situation at hand, Cameroonians suffer from black outs and the electricity bills are exorbitant. The government of Cameroon needs to start rethinking her policy strategy and opt for more sustainable energy venues. Resources equally need to be focused on agriculture. The picture in the minds of Cameroonians today is that the privatisation process especially in the electricity sector, has failed woefully. Privatisation is a beautiful concept which propels development but when such a process is meddled in by government interference, then the principles of free markets and individual liberty are trampled upon.

 

Recommendations and Conclusion

            In actual fact, this contribution did not set out to criticise the government of Cameroon nor the policies of similar situated countries. The Republic of Cameroon has been credited for several policies that work. Policies that encourage free markets and individual liberty. What this contribution did was to criticise some government policies which stifle the creation of jobs and free markets in Africa.

Thus the recommendations furnished above are not only limited to a country like Cameroon. For instance, a country with huge potentials like Nigeria may want to reconsider her power and energy supply strategy. A vast majority of Nigerians still suffer from power failure. Despite a great production of fuel and an efficient human resources bank, a lot of entrepreneurs especially those depending on sustainable power supply for efficient business success, remain helpless. These recommendations can also be proposed to countries like Chad, Mali and Burkina Faso. Chad faces problems of transportation like Cameroon. There is need for this country to also revisit her domestic transportation industry and divert some attention from the road sector to the domestic air transport industry.

Despite concerns raised above, there are several countries in Africa that respect the principles of free markets and individual liberty. Such countries include South Africa and Botswana. These countries have been able to reminisce on Frederic Bastiat’s thoughts on opportunity cost and apply them sustainably. South Africa and Botswana have been able to expand their cement supply industry, improve on their domestic road and air transport sectors and diversify their power supply industry. Evidence from South Africa remains incredible. South Africa has been able to prove to the whole world that she is a growing economic power. Most of this success is owed to the respect of free markets, individual liberty and limited government interference.

What government members, public policy actors, economic planners and economists in Cameroon and other African countries should do is to start revisiting strategies of improving on certain government action which stifle the creation of jobs. Ideas propounded by Frederic Bastiat must therefore be encouraged amongst policy actors, academics and even students for sustainability and economic growth in Africa and Cameroon in particular.


[1] Seymour Cain, trans. / George B. de Huszar, ed. Frederic Bastiat ‘What Is Seen and What Is Not Seen’ in  Selected Essays on Political Economy accessed at http://www.econlib.org/library/Bastiat/basEss1.html# Chapter%201

[2]  Ibid.

[3] Ibid Ft 1 above.

[4] Ibid Ft 1 above.

[5] Ibid Ft 1 above.

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Posted by on November 24, 2011 in Uncategorized

 

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