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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