The global financial crisis and implications on Africa – Mutumwa Mawere
OPINION – The global financial crisis that has left the Washington consensus seeking for cover as the left wing attempts to assert its viewpoint on financial architectural issues regarding the role of the state as shareholder, referee and corrector of market failure; has important lessons for post colonial Africa whose policies and programs have been shaped by an ideology that was framed on the notion that a market system is superior to a planned one.
Indeed, many would argue that the jury is out on the efficiency and effectiveness of a market system in allocating resources.
In a post-Cold War era in which the worldview of the West seemed to dominate global economic thinking, the collapse of the global financial system necessarily calls for a rethink about what kind of Africa do we want to see, how should the continent be governed and what kind of institutional framework can promote the continent’s cause.
Some have naively concluded that this marks the end of a market system without applying their minds about the viability of a non-market system alternative.
Notwithstanding the challenges facing the global capitalist system; it cannot be argued that the state can provide an alternative system that captures human ingenuity, innovation, entrepreneurship and creativeness; particularly in a continent that has not been able to create an enabling and conducive environment for growth.
The development of new financial instruments by the global financial system that has led to the current financial meltdown has to be understood in its proper context.
The global financial vocabulary has been greatly enriched by the crisis and new terms like subprime are part of the daily conversations among not only the world’s rich but also the world’s working people and the poor.
Africa has been largely insulated from the crisis principally because of the state of its own development. However, its access to global capital will continue to present a challenge. Equally, some of the innovations in global finance like securitization and collaterized debt obligations that are now being blamed for the meltdown could provide answers to the continent’s development challenges but such answers will not be forthcoming if the system that has produced phenomenal change is rejected in its entirety in response to a complex crisis.
The majority of Africans have no access to shelter and the financial system in the continent has not been a reliable ally in reducing the frontiers of poverty. The depth and breath of the continent’s capital and money markets is an issue that continues to challenge many African policy makers.
Issues related to access and cost of financing for basic things like housing have to form part of African conversations as we try to digest the fallout from the global financial crisis. Some have concluded that the future global financial architecture will need more regulation and less greed.
To what extent is greed the cause of the financial crisis will continue to be an issue for debate. However, state actors who are never directly accountable to their market i.e. citizens, have been given a window to intervene and the consequences may not be in the interest of human progress.
I have often argued that even the rich have not found a mechanism for taking their wealth to heaven or hell as the case may be.
Money is nothing more than an illusion and, therefore, it would not make sense to argue that the elimination of greed from the system would necessarily advance the cause of the poor.
A market system is modeled on the principle of exchange of value and those who become rich in such a system do so on the basis that there are willing market participants.
It has often been argued that an equitable and just world is desirable but humanity has failed to devise a system that cannot be subject to manipulation that can energize people to supply goods and services in a sustainable and predictable manner with minimum friction.
Financial engineering has been blamed for helping cause the crisis but what is not being discussed honestly is what would have happened to the working poor without the introduction of new instruments through which access to financing became easier.
To the extent that the collapse of the global financial system is seen as a verdict on the viability of the market system, many African governments who were finding it increasing difficult to play their hands in nation building as shareholder, referee and market corrector now have an opportunity to argue that there is nothing fundamentally wrong in state intervention or nationalization of assets.
While the world system is trying to come to terms with the crisis, the Chinese people are engaged in a more critical conversation on property rights and the viability of a state capitalist system that is underpinned by citizens that are denied rights to property.
The government of Zimbabwe (GOZ) stands out as one of a few African governments that must feel vindicated by the developments in the global financial system in so far as the use of quasi-fiscal activities.
The Central Bank Governor, Dr. Gono, must be a happy man to find out that his colleagues in the West are now using the very instruments for which he has been criticized for doing.
However, it would be naïve to argue that Gono’s medicine is appropriate for the patient given the unique Zimbabwean circumstances and the fact that the last 5 years of experimentation by the RBZ has not yielded the kind of results expected.
Africa’s citizens have been excluded from shaping their own future both during the colonial and post colonial eras to provide any hope for change arising from the corrections that may take place in the global financial system.
The decision by the most powerful countries to intervene in their economies must be properly contextualized not only in terms of locating the state where it should belong i.e. as an actor of last resort and not a permanent substitute to a market-based system.