Obama-nomics For Africa

It's not looking good, people.

This cogent breakdown, by a leading political economist on the African continent, ran in the Durban Mercury on Wednesday.

Hangover From The Past

by Patrick Bond, Director, Centre for Civil Society, University of KwaZulu-Natal

A week and a half ago, United States president-elect Barack Obama declined to meet the Group of 20: the leaders of the world's 20 most advanced financial economies, including South Africa's.

Apparently wet-behind-the-ears South African President Kgalema Motlanthe, made no discernible impact at the Washington summit. A year ago, South African Finance minister Trevor Manuel could not persuade this elite club to reform the World Bank and International Monetary Fund, when he and former president Thabo Mbeki hosted the G20's annual gathering near Cape Town.

Nor is Obama likely to support the United Nations financing-for-development meeting in Doha on Saturday. 192 nations will be represented, and Manuel is a special UN envoy, as he was at the initial 2002 UN financial summit in Monterrey.

Two months ago, at a preparatory conference, Manuel observed that last year aid flows fell 8.4% (to $104 billion) while military spending was up 6% (to $1.3 trillion):

These cold facts suggest that since Monterrey we have done the opposite of what we said we would do, that we have chosen war instead of peace. The food and fuel shocks and global financial turmoil are a bellwether of the consequences of broken promises. They are a sign of our failure.

Absolutely true. Leading Africa economically, Motlanthe and Manuel appear weak at a time when the world crisis is suffocating the continent:

- crashing commodity prices,
- retracted investments,
- overall global stagnation,
- the freezing up of trade finance and project credit, and
- even sharper cuts in north-south aid flows.

Whereas African civil society, business and politicians alike, wildly celebrated Obama's November 4 victory, his announcement of new US economic managers on Monday was like a painful hangover.

Consider three whom Jubilee Africa debt activists, for example, already passionately distrust:

(1) Treasury secretary-designate Tim Geithner, a central figure in the present crisis because of his deregulatory yet pro-bail-out posture as New York Federal Reserve Bank president;

(2) National Economic Council director Lawrence Summers, the central figure in the previous world financial crisis a decade ago, when as treasury secretary he arm-twisted huge concessions from Asian countries suffering rapid decline; and

(3) Top Obama economic adviser Paul Volcker, who in the previous global crash, from 1980-82, imposed the infamous Volcker Shock, causing the Third World debt crisis.

My Centre for Civil Society colleague, Dennis Brutus, calls these men economic criminals, and for very good reasons.

Geithner served in Henry Kissinger's consulting firm during the mid-1980s, joined the Reagan-Bush administration in 1988, and then worked for Summers and Robert Rubin in the Clinton treasury department during the 1990s.

As New York Fed president, Geithner was implicated in both deregulation and the first round of ineffectual Wall Street bail-outs in 2008, in which he bailed out J P Morgan one day, and failed to foresee the devastating impact of the Lehman Brothers investment bank's demise on world finance the next.

A speech by Leithner in March last year is instructive about the United State's laissez-faire attitude to financial gambling:

Credit market innovation should help to make markets both more efficient and more resilient, and better able to absorb stress.

Hah. The opposite happened. But Geithner remained wilfully blind:

We cannot turn back the clock on innovation or reverse the increase in complexity around risk management. We do not have the capacity to monitor or control concentrations of leverage or risk outside the banking system. We cannot identify the likely sources of future stress to the system, and act pre-emptively to diffuse them.

Then why did both Bush and Obama give him such important jobs?

Summers, too, proved incompetent through consistent advocacy of financial deregulation. Although in US political circles, he is best known for the crude sexism controversy that cost him the presidency of Harvard in 2006 (he wrote that women cannot do maths or sciences), after extreme conflict with his university's leading African-American scholars.

Fifteen years earlier, Summers gained infamy as an advocate of African genocide and environmental racism, thanks to a confidential memo he signed as World Bank chief economist:

I think the economic logic behind dumping a load of toxic waste in the lowest-wage country is impeccable and we should face up to that. I've always thought that underpopulated countries in Africa are vastly underpolluted, their air quality is vastly inefficiently low.

And Obama's most esteemed adviser, the 82-year-old Volcker, has done more damage to Africa, its economies and its people than anyone in recent history. As described by the Wall Street Journal:

The cigar-chomping central banker from 1979 to 1987, he received blame for driving up interest rates and tipping the US into the deepest recession since the Great Depression.

Even the International Monetary Fund's official history cannot avoid using the famous phrase most associated with the Federal Reserve chairman's name:

The origins of the debt crisis of the 1980s may be traced back to and through the lurching efforts of the world's governments to cope with the economic instabilities of the 1970s (including the) monetary contraction in the US (the Volcker Shock) that brought a sharp rise in world interest rates and a sustained appreciation of the dollar.

Debts

Owing to the Volcker Shock, remarks journalist Naomi Klein in her book The Shock Doctrine, Africa was squeezed nearly to death:

On their own, the debts would have been an enormous burden on the new democracies, but that burden was about to get much heavier. Nigeria's debt in the short time period (during Volcker's reign) went from $9 billion to $29 billion.

Volcker's reaction? As he told interviewers:

Africa was not even on my radar screen.

Why did the then-president Jimmy Carter choose this man in 1979 to chair the Fed, which sets US (and by extension world) interest rates?

Carter's domestic policy adviser Stuart Eizenstat explained:

Volcker was selected because he was the candidate of Wall Street. This was their price, in effect.

Although he retired in 1987, Volcker is back at Obama's side, and according to the Wall Street Journal:

Conference calls and meetings of the Obama economic team are often reorganised to accommodate his schedule. When the team discusses the financial crisis, the most important question to Obama is: what does Paul Volcker think?

Geithner, Summers, Volcker and similar economists whisper for a resurgent US based on national self-interest, including a restored financial system again capable of colonizing world markets. (And to make that possible, Obama's main Africa adviser, Witney Schneidman, is on record as promoting military imperialism in the form of the Africa Command.)

Instead of this crew, there were plenty of other top economists with proven Africa sympathies available:

- Nobel laureates Joseph Stiglitz and Paul Krugman,
- Jeffrey Sachs (who advocates African debt repudiation), or,
- on the left, James Galbreath, Mark Weisbrot and Dean Baker.

None of them got even a look-in.

Obama himself has said his "fundamental objective" for his father's people is:

To accelerate Africa's integration into the global economy.

No matter the vast damage that strategy has done and is now doing.

Which Africans can stop Obama from tearing up his roots?

Patrick Bond is the director of the UKZN Centre for Civil Society.