Tuesday, March 24, 2009

The Global Economic Crisis and Its Impact on Africa

The Global Economic Crisis and Its Impact on Africa

World Bank and others are predicting an international meltdown

by Abayomi Azikiwe, Editor
Pan-African News Wire
News Analysis

Since the fall of 2008, with the decline in financial markets, the collapse of the housing industry in the United States and the loss of millions of jobs and small businesses, the politicians in the western capitalist states and Japan have sought to remedy the problem through measures aimed at bailing out the same banks and corporations which are responsible for the meltdown.

Trillions of taxpayers dollars have been handed over to Wall Street in a futile attempt to stave off the impending failure of the financial sector. The government has allowed millions of working families to be evicted from their homes and apartments, while CEOs at AIG and other firms are allowed to collect billions in bonuses for their managerial incompetence and criminal activities.

With the situation reaching critical proportions in the United States and other industrialized states, the impact of the economic crisis is becoming more apparent in the so-called developing countries, particularly the African continent. Even though some western analysts consider the African continent to be a marginal region, this area has been thoroughly integrated into the world capitalist system since the 19th century.

It is the raw materials and labor power of Africa that has proven indispensable to the growth of the industrial regions of western Europe and North America. Today, with the decline of commodity prices and wages for workers and farmers in Africa, the potential exists for a total economic collapse and the intensification of the class struggle.

World Bank Report Predicts Global Economic Downturn

One of the U.S.-based capitalist institutions that has been blamed for the failure of Africa to achieve genuine development in the post-colonial period since the 1960s, is the World Bank. Formally known as the International Bank for Reconstruction and Development(IBRD), this agency was founded towards the conclusion of World War II in 1944 along with the International Monetary Fund (IMF). These two financial institutions grew out of the so-called Bretton Woods monetary system that sought to rebuild Europe and Asia in the image of U.S. economic interests.

However, by the 1970s, much of the focus of the World Bank and the IMF centered on lending to African and other Third World countries. The terms of these loans created major debt problems for many countries. During the 1980s, the World Bank and IMF set up Structural Adjustment Programs (SAP) that imposed conditions on how these post-colonial states could conduct their domestic and foreign affairs. The conditionalities effectively arrested any genuine development efforts among the majority of peoples throughout the world.

A surprisingly harsh assessment of the state of the world capitalist system was issued during early March 2009 in the form of a report entitled "Swimming Against The Tide: How Developing Countries Are Coping With the Global Crisis." The World Bank report sounds an alarm that the current decline in the capitalist economic system has the potential for creating a crisis not seen since the 1930s.

According to the World Bank report "The economic crisis is projected to increase poverty by around 46 million people in 2009. The principal transmission channels will be via employment and wage effects as well as declining remittance flows."

The World Bank report also says that "Global industrial production declined by 20 percent in the fourth quarter of 2008, as high-income and developing country activity plunged by 23 and 15 percent, respectively. Gross Domestic Product will decline this year for the first time since World War II, with growth at least 5 percentage points below potential.

"World trade is on track to register its largest decline in 80 years, with the sharpest losses in East Asia, reflecting a combination of failing volumes, price declines, and currency depreciation."

In late 2008, some analysts had predicted that the so-called "sub-prime mortage mess" would not have a dramatic impact on the economies of Africa. However, ideas to the contrary are gaining wider exposure in the African media.

In an article published in the Botswana Sunday Standard on March 22 by Rampholo Molefhe, entitled "Report the 'Credit Crunch' From an African Perspective," says that "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."

However, Molefhe continues by pointing out that "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 abroad for its operations, as is Kodak, Motorola, Sony and every other transnational on the continent."

Drawing a direct link between operations in Africa and the centers of capitalist decision-making, Molefhe states that "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."

Capitalist Reforms Are Not Solutions

There is much anticipation surrounding the upcoming G20 Summit in London scheduled for April 2. The leading capitalist countries and others from the nations of Asia, Latin America and South Africa will come together to discuss approaches to tackling the deepening economic crisis.

On its website, the organization states that "The G-20 is made up of the finance ministers and central bank governors of 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States of America, and also the European Union who is represented by the rotating Council presidency and the European Central Bank."

Even though the stated desire on the part of the summit is to address the economic crisis, the programs that are being put forward still preserve capitalist production methods and do not get at the root of the problem of over-production, militarism and unequal terms of trade. Consquently, the summit will be a focal point for mass demonstrations in London.

The British Stop the War Coalition has called for protests outside the summit. In a statement issued by the Campaign it says that "The G20 will meet at a time of world slump but they are spending more and more on war. Despite the disaster in Iraq and Afghanistan, the US and Britain are sending thousands more troops to Afghanistan. They are spending more and more in Iraq. The total cost of the war will be around 6 trillion dollars."

These increased expenditures on war by the imperialist states comes at the same time that millions more workers will be thrown out of their jobs worldwide. Trade union leaders are predicting that the worsening financial contagion will result in the loss of another 50 million jobs this year.

Australian Congress of Trade Union president Sharan Burrow is leading an international trade union delegation to the G20 summit in April calling for more effective and coordinated economic stimulus packages to bring about growth.

"You've got to look at where you can drive stimulus that will target employment growth, most efficiently, most speedily, and with a capacity to influence not just national economies, but indeed the global economy," Burrow said.

Workers and Oppressed Must Advance Own Program

On the African continent political unrest has been fueled by the economic crisis. In Mauritania last August, the military staged a coup against the existing government. These same developments occured in Guinea-Conakry in December and Guinea-Bissau in early March in West Africa and most recently, in Madagascar, off the southeast coast in the Indian Ocean.

Also there have been strikes and rebellions in Somalia, Kenya and South Africa over the last year. These actions are carried out in response to the rising cost of food and fuel and the decline in commodity prices and real wages.

All of these states are heavily dependent on export earnings from raw materials sold to capitalist states in the West. However, the replacement of civilian governments with military ones will not solve the economic crises on the African continent. The advent of the military seizure of power in Africa during the immediate post-colonial period between the 1960s through the 1980s only worsened the crises of underdevelopment and imperialist domination.

At the same time in the western capitalist states, anger is brewing over the fallout from the economic crisis. In France, workers have engaged in one-day work stoppages and rebellions. In the United States, workers and the oppressed formed a broad-based electoral alliance that brought the current Obama administration to power.

Yet the policies advocated by Obama in the U.S. and Sarkozy in France only reinforce capitalist production methods and regulatory measures. Any genuine reform or fundamental change must come from the self-organization of the workers and the oppressed within society. It is important at this juncture for workers and the oppressed to advance their own political and economic programs that are independent of the capitalist class and its political parties.

With the economic crisis becoming more pronounced in both the advanced capitalist states as well as the so-called developing countries, it provides greater opportunities for international solidarity and coordination of efforts. Workers and oppressed communities in the United States must not only struggle to improve their own economic and social conditions, but they must understand that the genuine liberation of the developing regions of the world is essential in creating the conditions for the real empowerment of the majority of the people in the industrialized countries.
Abayomi Azikiwe is the editor of the Pan-African News Wire. The writer has been closely following the global financial crisis.

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