Ever Onward and Upward, Until it Stops

I’ve just finished reading a rather interesting book. The global financial system – to Africans at least – seems like an immutable construct, designed to be little-understood and to keep Africans perpetually disadvantaged. But when you read about the beginnings of the modern global financial and economic system, you begin to understand that behind the curtains lie stories that illustrate how the world works far better than conventional wisdom would have it.

The Bretton Woods financial system, which was designed in 1944, gave birth to the IMF and the World Bank, and served as the precursor to the General Agreement on Tariffs and Trade (which in turn was the predecessor to the World Trade Organisation). By common understanding, the Bretton Woods conference in the United States came out of the desire to re-order the global financial system for a post-war world (the Second World War still had another year to run). The same common understanding holds that the conference held at the Mt. Washington Hotel in Bretton Woods, New Hampshire, was a model of smooth comity, with the allied nations largely in agreement about the shape of things to come.

‘The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White and the Making of a New World Order’ by Benn Steil, gives the lie to all this. By the summer of 1944, the British Empire was exhausted, both militarily and economically. It wasn’t just due to the war. The contradictions inherent in Britain’s hold over an empire in which some colonies were wealthier than the mother country, and an ascendant United States whose government was viscerally anti-imperial, meant that the conference was actually the occasion where the United Kingdom was told in no uncertain terms that the imperial dream was over. The Bretton Woods conference was a tale of a proud but broke nation being told that its turn at the top of the world economy was at an end. The British had to swallow the humiliation of being shown to be a penniless country, only held together by bonds of friendship and an unravelling empire.

Here’s a brief detour to the World Cup (you knew that was coming, didn’t you?). Have you noticed that, for the past forty or so years, the World Cup has been won by a country that cannot be placed in the front row of the world’s economic leaders? Actually, go back to the beginning, in 1930, and (except for West Germany in 1974), the Cup has been won by countries coming out of the throes of the most dire of straits (Italy under the fascists in 1934 and 1938; Argentina under or just coming out of military dictatorship in 1978 and 1986; West Germany just after the fall of the Wall in 1990; and Brazil just after the hyperinflation of the 1980s and early 1990s). Of course, coincidence is not causation, but it is a curious statistic.

Argentina is the best example to concentrate on. A century ago, the South American country was in the top ten of wealthiest countries in the world, on the back, mainly, of its lucrative role in the global beef trade. Before the First World War, the economy grew consistently at a rate in excess of 7% (sound familiar?), and was a darling of the international bond markets.

The United Kingdom, at the same time, was a paragon of mercantilist and colonial success. It took over a quarter of the world, and rapidly used the raw materials and cheap, coerced labour to become the world’s most successful empire. ‘The sun will never set on the British Empire’ was not just a statement of astronomic truth; it was also a statement of intent about colonies from India to Kenya; from South Africa to Canada.

What’s the point of these lessons? The decline of both these countries – Argentina was a basket case; and Britain reduced to a desperate beggar; by the 1940s – shows that there is no inevitability about the upward trajectory of economic development. The ‘Africa Rising’ narrative – the impressive growth that Kenya had registered in the last decade; the top economic position Nigeria has taken in Africa; can all be reversed by concerted carelessness or incompetent leadership.

Kenya’s economy, despite all our remarkable gains in technology, still partly rests on the pillars of agriculture and tourism. Agriculture, due to failed rains and declining yields (which some are blaming on the overuse of the wrong type of fertiliser, and a reluctance to adopt technology) is increasingly troubled. Tourism has buckled on the back of terrorism, the government’s botched response to it, and the resulting collapse in confidence.

Nigeria is in even worse state. The Jonathan government – going by its public pronouncements and its response to Boko Haram – looks like it’s utterly bewildered about how to govern the vast country. (Download and listen to the BBC’s ‘Hard Talk’ interview with Presidential spokesman Doyin Okupe, if you want to hear perhaps the most incompetent public official you’ll ever listen to).


It’s easy to coast on positive sentiment and progress that looks like inevitably ever onward and upward. But other countries and other eras show that there’s nothing preordained about what looks like a sure thing. Oh, and by the way, that is also why Brazil will not win the World Cup.

Also published in the Business Daily on 17 June, 2014 at http://www.businessdailyafrica.com/Opinion-and-Analysis/Africa-is-rising--but-positive-stories-alone-won-t-drive-growth/-/539548/2350540/-/wdvtigz/-/index.html

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