Maravi

(NEWZIMBABWE) How Africa can weather global melt-down

COMMENT - The author does not understand the nature of donor aid. DA is replacement taxation, it is not charity. By stopping 'donor aid', the West would force African nations to start taxing their extractive industries, which is why will maintain DA at all costs. They are not run by their own people, but by representatives of the same trillionairs who own the mines, the IMF/World Bank, and transnational banks.

Untaxed/Unshared Exports from Africa: $1000 billion
Donor Aid: $250 billion
Taxes paid: $0 billion
Charitable giving: $6 billion

No one gives away a quarter trillion dollars. It is a scam, with the misery industry functioning as cover and a disinformation device. Donor Aid is paid involuntarily by western middle class, working class and ordinary companies. Transnational corporations do not pay taxes anywhere, all they do is hoard wealth for their trillionair shareholders.

How Africa can weather global melt-down
30/12/2011 00:00:00
by Tafadzwa L. Chaunzwa

ALTHOUGH I am never particularly thrilled to be thousands of feet above the ground for any prolonged period of time, I have in the past few years learnt to love long flights. Not because of the additional, superficially free meals on the plane but rather the exceptional people I always seem to meet and converse with on these long trips. Except for the occasional obnoxious fella, I usually luck out and sit next to some of the most interesting people from all over the world when I take lengthy transcontinental flights.

From philanthropists coming back to America from a summer working in rural Zambia to a brilliant 21 year old Harvard graduate about to start her 2nd year at Johns Hopkins Medical School, I’ve had the opportunity to speak with some very intellectually engaging individuals. Through this, I have not only come to learn a lot from what these people have to say, but a lot more about my own perspective and stand point on various issues.

On one of my most recent trips – an Ethiopian airlines flight from Addis Ababa, Ethiopia to Rome, Italy, I was fortunate enough to sit next to a very pleasant gentleman from Germany. Reinhardt, as he introduced himself shortly after I took my seat, was on his way back home to Giessen, Germany after an African safari break in Zimbabwe.

With the still ensuing debt crisis in Europe preoccupying my concerns about the global economy, I knew if Reinhardt would be interested in discussing the economic situation in Europe at any point during the flight, the flight would not be so long after all. Surely only the naïve would disregard the profound implications of a European economic collapse on the world and the African continent in particular.

EU nations and their American partners are the major financiers of most international aid organisations and global financial institutions. Unfortunately, the Americans have gone through their own share of trouble lately, having only recently experienced their first ever credit down-grade in August of this year.

Further still their leaders have failed to reach a consensus on how they will deal with a massive budget deficit, a deadlock that has further perturbed the already volatile global financial markets. With the world’s largest economy going through this ordeal, a European collapse would not only serve to exacerbate the global financial crisis but also spell doom for institutions like the IMF, the Global Fund, WHO and even USAID should the Obama tabled sequestration go into full effect come 2012.

This would surely have dire consequences for many African countries which unfortunately rely on international aid to keep their own economies afloat. Anti-aid advocates like Dambisa Moyo – author of “Dead Aid” would be quick to point out that African nations should not be extending their hands out for this “aid” (which only brings corruption and further poverty to our shores) in the first place. However, looking at the situation on the ground, African countries (for the most part) are stuck with autocratic leaders that are neither willing to relinquish power nor re-orient the foreign aid arrangement that seems to benefit them so well.

While both sides of the isle seem to recognize this as a problem (for example in a recent political debate, my fellow Duke University alumni and US presidential candidate Ron Paul criticized American aid as taking money from poor people in America (a relatively “rich” country) and putting it in the hands of rich people in poor countries) no one seems to be willing to take major restructuring measures with regard to aid. Indeed the aid arrangement doesn’t do people on either side justice. Never-the-less, in an interconnected world, it is difficult to picture a scenario where Africa would not be directly and adversely affected by a European failure, even if aid was not in the equation.

Luckily these gloomy thoughts were somewhat put to rest (at least for the next few hours or so) by my very optimistic plane buddy who turned out to be a renowned economist at the prestigious University of Giessen. While he acknowledged that there is no easy fix to the predicament the world’s poorest continent finds itself in, he did suggest several approaches that may be followed to leverage and emancipate the African people.

Not much for solving a problem within a problem, Reinhardt quickly discarded the idea of throwing away foreign aid in its entirety as this is in all honesty just a child of the much bigger and ever deepening economic entrenchment Africa has been growing into since the days of colonialism.

Although I initially disagreed with much of his recommendations as I thought them to be pertinent only to large and industrialized economies, we were able to reach common ground on a number of points. Together, we were able to formulate a list of changes that we felt needed to be made in order for the African continent to become globally competitive. I list some of these measures in the remainder of this article, but this is by no means an exhaustive list. I deeply encourage the same level of discourse among all peoples; African and non-African alike, to come up with solutions for the continent’s problems.
Regional Blocks

While the problems faced by the Euro zone do not do this strategy justice at this point in time, creation of regional economic blocks may be the way for Africa to truly achieve self sustainable economic structures that have realistic chances of tangible growth.

Africa makes up a meager one percent of the global market and with 54 countries on the continent; the contribution of each country on average is laughable. But if you sum up the “negligibles” you will surely have a tangible. If African countries can bring their economies together we can have entities that are globally competitive. For instance a Southern African Union, where Angola helps bring in the oil, Zimbabwe the diamonds and brain power, South Africa the much needed industry and commerce and the other countries bringing what they can to the table, we would surely have a formidable economic force.

Again with the lessons of the euro zone, regional blocks may in the future help enforce fiscal discipline among member states. France and Germany have been at the fore-front of making sure weaker EU economies adhere to strict austerity measures before they can receive any bailout funds to dig them out of the holes they dug themselves into by careless spending and building up sovereign debt that far surpasses their GDP.

Should the Euro zone survive this phase, it is not unreasonable to anticipate appropriate reforms in Europe. These reforms may in turn lay down the basic ground work needed for a successful integrated economic block, be it in Africa, Europe, Asia or Latin America.

While it would be premature to lay down any additional guidelines for future economic blocks on the continent, I believe one of the greatest issues that are also key learning points from the euro crisis has been that of currency. If a group of nations is going to agree to use the same currency, they may as well be willing to get into some sort of political agreement that allows a functional federal system that undermines a great deal of their national sovereignty.

Looking at the cases of Greece and the US state of Michigan, which also went through an economic meltdown of comparable proportions, it is not difficult to see the importance of an efficient federal center to the success of any union.

Under normal circumstances a state would devalue its currency to make its products more competitive on the global market when faced with such difficulty. However because both Greece and Michigan were stuck in single currency zones (the Euro and US dollar respectively) they were not able to do this. Unlike Greece, however, Michigan happens to be part of an established federal union (The United States), and could be bailed out by the Federal Reserve relatively easily avoiding the same catastrophic failure that we have seen in Greece.
Smaller government

This is a non-starter in most African countries, but I will go ahead and mention it anyway. When it comes to small government, the American Republicans seem to get it. It is deplorable that as much as 97.8 percent of GDP in countries like Zimbabwe goes into government spending.

Governments, due to populist politicians often push socialistic agendas that allow excessive spending programs the countries simply CAN NOT afford. As countries like Spain, lreland, and again, Greece have come to learn in recent year, you can live outside your own means only for so long. Huge entitlement programs have plunged these countries into the crisis they find themselves in today and there should be no room for this in Africa.

While I believe governments should do the best they can to provide their citizens with the very basics like security law and order (excluding healthcare) African countries are simply too poor to have governments provide for their people without running their countries down.

Again take Zimbabwe as an example – in the mid to late 2000s the central bank had to resort to printing money to keep the government from shutting down, the same move that brought about the worst inflation run in the world’s history. Rather governments should look to privatize most sectors. This not only brings liquidity to an economy but encourages foreign investment, as businesses run away from excessive government regulation.
Individual as capital

A rather unorthodox look at the individual as capital may also be central to solving the African problem at the core. After all, society is merely a summation of individuals and just like everything else; reflects the quality of separate entities it’s made-up of.

That is, if your country has a low literacy rate, has most people living without access to any form of media, how then do you expect them to chose (if they even have this privilege) the right leaders. Intuitively an empowered and educated individual can do a lot more for their community than can one who is not. If African states sought to emancipate their populations at the individual level, the “African trajectory” would almost certainly change its course. In a nutshell - build a well educated generation and trust them to make good decisions.
Diaspora Bonds

To spear-head economic growth in the very countries where excessive emigration has led to economic depreciation, the African Diaspora itself may be the answer. People usually have a home country bias when it comes to investing. For instance, a Zimbabwean living in the United States may be more willing to overlook some risks associated with investing in a Harare business than would an American of equal standing.

African countries may take advantage of this inherent lack of objectivity that individuals have towards their countries (whether this is necessarily a positive or not is purely subjective) to have them buy bonds and provide the much needed capital necessary to keep an economy going.

As I mentioned before the list above is non-exhaustive and there are several other strategies that I have formulated or learnt from others, but thought these were worth mentioning in my first article here. I will in the future look to discuss issues of African development from as objective and informed a stand point as I can and encourage you to look out to this space in the future. I welcome your feedback and look forward to engaging in constructive discourse aimed at developing our homeland.
Tafadzwa L. Chaunzwa is a Zimbabwean research scientist at Harvard and MIT in the United States. He can be contacted at chaunzwa@MIT.EDU

Labels: DAMBISA MOYO, DONORS, GREAT DEPRESSION II

posted by MrK @ 4:56 PM