Thursday, July 23, 2009

It's Africa's Downturn Next

In what he described as an impending ‘economic tsunami’ , Britain’s Development Minister Douglas Alexander has called upon the developed world not to forsake their promises and obligations to the world’s poor, regardless of the current state of the world economy. Speaking to the BBC yesterday Alexander warned that as many as 90 million people would be ‘pushed back’ into extreme poverty and that the very real gains in economic progress that many African countries have experience over the past few years would be in peril. His suggestion for action, in a move similar to one announced by Robert Zoellick, President of the World Bank, would be to set up special funds that would, in effect, be a special stimulus package for the world’s poor. Alexander also warned the developed world about the perils of protectionism and to encourage aid-on-top-of-trade to countries in the developing world.

These are bold and encouraging words coming from Britain, a country which has pledged to maintain its foreign aid commitments. The question for leaders of the G20 meeting London in April is whether the political risks of continuing their foreign aid outflows will be accepted by their constituents. Obviously, as the global crisis deepens, it will be harder and harder for Western politicians to continue to push foreign aid transfers through their legislatures, no matter how much pressure Bono or Jeffrey Sachs put on them.

On the ground in Africa, the effects of the global downturn were already being felt by the end of last last year as commodity prices fell and work was slowed or halted in Zambian copper mines and bauxite pits in Guinea. In countries with no social security or unemployment insurance and where private companies, not governments, supply essential services like energy, housing and health-care, the shutting of even a single mine can dramatically effect the lives of thousands of people.

We can certainly forgive the leaders of the G20 for turning their short-term focus on solving the international banking crisis and on stimulating their own economies. However, it must be said, that a real stress test of the moral character of the Western free-market system will take place when new aid budgets and trade policies are decided upon and announced in the coming years. After years of pounding the principles of free market economics and the glories of globalization into the heads of African leaders, it would be morally bankrupt to now turn our collective backs. Opponents of current policies might argue that this is a great opportunity for African leaders to wean themselves of foreign aid and begin to focus on developing real economies. There would certainly be nothing wrong with this outcome except that their dependence on natural resource exports and a lack of economic diversification make such a leap all but impossible in a world where commodity demand is shrinking and where trade barriers might start growing again.

Average Africans have much more to fear than fear itself. Who has the courage to stick by them?

(First published by the Harvard International Review, March 10th 2009)

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