Wednesday, August 31

Vertical Integration

I read an article today about how nations in Africa should vertically integrate many of their industries and form strong cartels with other countries in order to manipulate world prices. For example, instead of selling cocoa beans at depressed world prices, Cote d'Ivoire should buy the technology and produce chocolate. Then, they can band together with Ghana and use their market power to put pressure on prices and earn more in the long run.

My thought: great idea. Africa should act like OPEC and force wealthier countries around the world to pay a fair price for commodities. It may help end international exploitation. But where is Africa supposed to get the capital to invest in vertically integrating their economies? I guess it takes money to make money, and without capital, this plan will obviously never get off the ground. But I like the thought that nations in the developing world could unite (as OPEC did) to raise world prices to a fairer level for coffee, cocoa, diamonds, etc. Unfortunately you can't control supply effectively with the unprocessed agricultural goods that Africa produces- if you hold back on exporting cocoa beans, they will simply rot.

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