cc We need a new financial system that is transparent and accountable to all, writes Dani Nabudere, as G20 leaders meet in London to tackle the current global economic ‘meltdown’. The G20's task, he says, is to expose all that has gone wrong, including the role the African leaders have played in the crisis, through the externalisation of billions of pounds intended for the development of their countries. These activities, Nabudere notes, have helped position Africa as a net creditor to the world, with the external assets of 40 African countries outstripping their external liabilities over the period from 1970–2004. In other words, says Nabudere, despite the widely held view that Africa was 'decoupled' from the global economy, African leaders have contributed to the activities of ‘shadow banks’ being used to create ‘toxic debt’, their wealth contributing to the global economic turmoil.
The leaders of the G20 now assembling in London have only one African amongst them. Their self-imposed task is to try to formulate programmes to deal with the current global economic ‘meltdown’ and to try to formulate a new global ‘financial architecture.’ Many of them are fixed on the idea that what they are dealing with is a ‘financial crisis.’ The more sophisticated ones, such as Gordon Brown, are prepared to refer to the crisis as a ‘global economic’ one, but no-one is prepared to talk of the crisis as being a capitalist systemic crisis, except President Nicholas Sarkozy, who thinks that it is ‘American’ or ‘Anglo-Saxon’ capitalism that needs reform towards a ‘New Capitalism.’
The magnitude of the problem is so big that some leaders are just blaming one another for the crisis. Remember when the crisis blew up, there was an attempt to blame it on the ‘sub-prime mortgagees.’ These were poor home-owners who had been induced into the financiering game by the financial oligarchy. Later these leaders were able to adjust their words and were prepared to call it a ‘credit crunch’ when Northern Rock bank in the UK began to struggle as a result of ‘shadow banking’ activities that had undermined its credit. President Silva da Lula of Brazil has gone as far as correctly blaming the crisis on the ‘white, blue-eyed bankers.’ Many, although they are not prepared to accept the racial slur, agree with him.
When the crisis became pronounced for all to see, it was said by some leaders in Africa that Africa would not seriously be affected, because the view was then widely held that Africa was ‘decoupled’ from the ‘global economy.’ President Museveni of Uganda had gone as far as assuring Ugandans and investors that there was no need for them to panic because Uganda’s financial system was strong and sound: ‘Our financial sector has been effectively regulated and banks have been following prudent lending procedures.’ He had even gone further to state: ‘We are now in a position to advise our development partners who are facing a crisis, because some of the reasons for this crisis are well-known.’ Very soon however, these brave declarations were abandoned as the pinch began to be felt, with a fall in prices of commodities such as coffee by over 40 per cent, as well as a reduction in transfers from Africans working outside the continent. This was already clear by October 2008.
The better view to take on the part of African leaders on the crisis should have been that they were not blameless and that Africa was part of the global economy. They should have also accepted their negative role in that system. Studies that had previously been made had revealed that African leaders have all along been externalising financial resources intended for the development of their countries by stealing these resources and banking them in their private accounts. One of these studies, carried out by the United Nations Economic Commission for Africa and the University of Massachusetts and reported in the East African of 13–19 October 2008, revealed that capital flight from 40 African countries surveyed between 1970 and 2004 amounted to US$607 billion including interest earnings, compared with a total of US$227 billion external debt owed by those countries.
These researchers concluded that what was happening was that Africa was in effect ‘a net creditor to the rest of the world in the sense that external assets, as measured by the stock of capital flight, exceed external liabilities, as measured by the stock of external debt.’ In other words, the African leaders were part of the activities of those ‘shadow banks’ being used by the banks to create more and more ‘toxic debt.’ In short, African leaders’ wealth was contributing to the global economic turmoil. The World Bank’s own Stolen Assets Recovery Programme had estimates that the cross-border flow of the proceeds from these criminal activities, corruption and tax evasions amounts to between US$1 trillion to US$1.6 trillion per year, about half of which, according to the same estimates, comes from developing and transitional economies of Eastern Europe. Therefore the problem was clearly a ‘global’ one in every sense.
Therefore, the task for the G20 is to expose all that has gone wrong including the role the African leaders have played in the crisis. There is no point in ‘reforming’ the financial architecture when everything else will remain in place. There is no need to call for strong ‘supervision’ of the banks, when those using their political power are still in a position to manipulate them for their own interests. The real question is: ‘Who will supervise the supervisors?’ Therefore we need recognition of alternative credit systems that the people have built up in their ‘informal’ activities to be the basis of new credit systems and not the ‘old boys’ networks’ that will continue the same old game. We need a new system that is transparent and accountable to all.