Monday, September 28, 2020

Report the ‘credit crunch’ from an African perspective

Whilst this shall not be a work of academic economic analysis, it should serve to make the more important point that the journalists of the underdeveloped countries will be challenged with responsible reporting on international affairs.

In the past three to six months, the Botswana press, much like the global media, has been held hostage by the omnipresent system of information technology which has inundated all communications channels with speedy, voluminous and picturesque information on what is now glibly referred to as the ‘international economic crunch’.
The African journalists took to reporting on the subject employing the vocabulary of the western press, adopting the tools of analysis of the academics and reporters of the northern industrialised countries, making little or no effort to create and use instruments that are relevant to the African reality.
Even less effort was put into debating the issues from an African perspective.

Initially, the thrust of western reporting on the ‘credit crunch’ revolved around the notion that there had been careless lending to home seekers by the banks, acting together with the insurance companies in America, way beyond the capacity of borrowers to pay back, thus resulting in the collapse of the banking system.
Suddenly, there was a glut in the housing market resulting in the drop in value of the houses, compelling the banks to attempt to retrieve debt by repossessing homes at rates lower than the original investment, eating up the finances of the lenders who no longer had anybody to sell to.

To make matters worse, the banks lost trust in each other, sharing the mutual suspicion that none of them really had the money to pay back what they wanted to borrow.

The news broke at the tail end of the George Bush administration, on the eve of Barrack Obama’s ascendancy to the presidency although the economists were aware of the impending disaster a year or more before it struck, even if they had not anticipated the depth of the problem.

The imminent collapse of the American banking system at the centre of the movement of money between borrowers and lenders ÔÇô but most importantly, the investors that create jobs – compelled the president in waiting to initiate proposals worth over $750 million to save the financial institutions.

Several of the executives of the banks and insurance companies took advantage of the windfall to sponsor lavish parties and pay themselves bonuses, at the same time announcing massive job cuts in the large industries for which they applied for more ‘bail-outs’.
The Africans initially believed that the continent would not be affected by the financial crisis at the western banks, and the resulting collapse of the real estate sector there, because they were not in the direct line of influence of ‘the economies’ of the industrialised countries.

Nothing could have been farther from the truth. Clearly, Barclays Bank in the African countries could not be disconnected from the mother company in Britain. Caterpillar, in Africa, is entirely indebted to its principals in abroad for its operations, as is Kodak, Motorola, Sony and every other transnational on the continent.
The continental operations of the multi-nationals give the appearance of good governance and effective administration because they run smaller operations with more effective oversight than their mother organisations in the north.
More fundamentally, the prescriptions for the extent of the drive for profit are determined at the centre, which controls them by remote control so that waywardness in management is guarded by the strictest rules.

The incongruous relationship between the mother companies and their operations on the continent are inherent in the nature of the manner in which international capitalism ÔÇô more appropriately, imperialism ÔÇô operates, but it does not absolve the slave operations of the African companies from the excesses of the shenanigans of the managers and owners in America and Europe.

On the contrary, that unequal relationship will forever, under the rules of the operation of imperialism, hold the African businesses vulnerable to even the slightest of faults at the mother companies in America and Europe.
The vulnerability of the African countries will not necessarily exhibit themselves in the form of a parallel ‘credit crunch’ or ‘real estate collapse. Those are well beyond small operations of Africans on the peripheries of imperialism.

Rather, the Africans, most of them single commodity producers and exporters like Botswana, will feel the back end or turn-around effect of the credit crunch at the head.
The slave economies on the periphery will suffer from dampening of spending in the consumer markets of the west. In Bush’s time, the terrified citizens preferred to spend on safety and security rather than diamonds.
Homeless and jobless labour force under Obama will prefer the existentialist option rather than spend on exotics such as Botswana beef, diamonds or desert safaris.

What then appears as minimal trauma to the African economies in relation to the volcanic eruptions in America and Europe, nevertheless, portends astronomic suffering for the economies of the underdeveloped countries. In other words, what looks small for America is inordinately large for Latin America, Asia and most particularly the poorest continent, Africa.
Restoration of stability at the financial centres in Europe and America will require of the Africans: –
ÔÇó Sustenance of the super profits that will be taxed by the overseas governments and transferred to energise industry, also ameliorating the full impact of the credit crunch for the aristocracy of the international working class which must secure good severance benefits for the European and American workers.
ÔÇó Suppression of the trade unions and wages, retrenchment of workers without acknowledgement of the profits they generated in the recent past, and slave severance benefits.
ÔÇó Abolition of social welfare and other safety nets for the old, sickly, illiterate, students, the disabled and people living with HIV-AIDS.
ÔÇó Marginalisation of the informal economy, the arts, culture and other creative ventures aimed at supplementing household incomes.
ÔÇó Dampened expectation in trade relations with the northern countries and submission to unfriendly policies at the international financial institutions that are notorious for dictating conditions for the underdeveloped economies to suit the interest of the industrialised countries.

All of this makes for a potent recipe for political strife in the underdeveloped countries as more and more workers are pushed to the peripheries of the mainstream economy.
Increased unemployment resulting from indiscriminate retrenchments can only lead to rise in crime and the development of illegal and unregulated ‘parallel economies’.

Much more fundamental will be the deepening search for alternative theories of economy and development which will not submit to the shallow deceit about the efficacy of unbridled and unregulated pursuit of profit.
Already, the developed countries report heightened curiosity among students and academics about what the Marxist world view has to offer by way of an alternative to the chaos and irreparable damage that has been done to the livelihood of huge sections of the international community by unfettered submission to the profit motive.

Some of the European economists have started to argue that, in fact, the credit crunch represents the sounding of the death knell for international capitalism as expressed in the era of ‘globalisation’.

Wisely, the managers of the economies of southern Africa ÔÇô Baledzi Gaolathe of Botswana and Trevor Manuel of South Africa ÔÇô have deliberately refused to succumb to the tempting representations of the private sector, which seeks the earliest declaration of an ‘economic depression’ on the southern end of the African continent.

The business people, like their mentors abroad, want such a declaration in order that they should demand ‘bail outs’ from the government, sponsored by the already famished taxpayer.

The African economists of the south argue, as all Africans should, that the small banking systems of southern Africa and the underdeveloped world, though not immune from the behaviours of the mother companies in Europe and America, are small enough to effect good management that will restrict adventurous enterprise and exploitation of the gullibility of well meaning workers who want homes, jobs and a good education for their children.

Analytical reporting, from the African perspective, will help the economic planners, the economists, the parliamentarians and civil society to accurately identify the position of the Africans in relation to the problems created by the captains of industry in the West.

The Africans will be forced to be imaginative in their appreciation of the world economy which gives the impression of the unlimited success of capitalism.

The reality on the ground is that the Africans and the rest of the underdeveloped world have been disadvantaged by international monopoly capitalism. The Africans, the Latin Americans and the Asians are, and they have always been, the poorest of the world despite their fanatic attachment to theories and practices of economic development of the West and capitalism.
Proper reporting of the credit crunch will persuade the African economists to seek alternatives away from the western banking and lending institutions, and towards more empathetic organisations of the East in India, China and Latin America.

That will help to create economic cooperation in the southern hemisphere to mitigate the unbridled greed of the captains of capitalism in North America and Western Europe.

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Sunday Standard September 27 – 3 October

Digital copy of Sunday Standard issue of September 27 - 3 October, 2020.