Wednesday, July 06, 2005

Vicissitudes of Globalization Hit Lesotho

This isn't about St. Louis, or urban issues, but it is depressing.

BBC News reports on the precipitous decline of the textile industry in Lesotho, the tiny mountain kingdom completely surrounded by South Africa.

Only three years ago, main concerns were about the rapid expansion of textile making in Lesotho. At that time, textile-making had becoming the number one industry in Lesotho, replacing the long-time tradition of Sotho men working as migrant workers in South African gold and diamond mines, whose fortunes were dwindling.

The blame for this sudden decline of nascent manufacturing, according to BBC, falls heavily on Chinese-American monetary policies, because "the Chinese and Taiwanese [factory] owners have now gone home, after China was given better access to US markets and a fall in the US dollar."

Of course, some blame probably falls on South Africa, too. Essentially, the Central Bank of Lesotho has very limited power, because the Common (Rand) Monetary Area (CMA) and Southern African Customs Union (SACU) ensure there can be no duties on most goods traded between SA and Lesotho, and that the Lesotho loti must trade one-to-one with the SA Rand.

While Lesotho benefits from these arrangements to some extent, South Africa is clearly the senior partner in the arrangement. Lesotho, along with Namibia and Swaziland, all countries with tiny populations, are pretty much along for the ride. Botswana has somewhat more leeway, as its currency is not part of the CMA, but it is part of the SACU. These relationships were established during apartheid, but they haven't really changed dramatically in ten years of multiparty democracy in South Africa.

This should be no surprise - it works out quite well for the SA government! As many readers may know, I spent a semester as an exchange student at the University of the Western Cape, a solidly and proudly leftist institution, almost five years ago. While I love that part of the world and many of its people, I recognize that no country or political system is perfect. While I applaud South African leadership of many beneficial activities for the African continent as a whole, they still wield a great deal of power over their immediate neighbors.

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