Webinar Invitation: New Bretton Woods to Combat COVID-19 Africa’s Future is its Youth

June 6, 2020

I will be the lead speaker on the first panel at this webinar. Please register to attend and participate. Webinar Registration

Watch 14 minute video interview with Lawrence Freeman below (30 second introduction in French) 

Watch Democracy Grow Webinar Series on The New World Order ushered in by Covid-19

WHERE: TELECONFERENCE/WEBINAR CONFERENCE SERIES.

When: June 16th, 17th, 18th.

Time: 9.30 am – 12.30 pm (EST).

June 16, Panel 1: Prioritizing social Infrastructure Development on the continent (Hospitals, Rural electrification, and Clean water supply).

Time: 9.30-11.20am

1.Dr. Freeman Lawrence. (15 mins on presentation,5 mins Q&A).

2.Dr. Mutisya Masila Philliph. (15 mins on presentation,5 mins Q&A)

3.John Dickson. (15 mins on presentation,5 mins Q&A)

4.Dr. Abdiqadir Yousuf Abdullahi.

  *Moderator: Dr.Samuel Lee Hancock.(Closing remark by Dr.Ayobani )

 

 

Ethiopian PM Abiy Ahmed: Debt Cancellation for the World to Survive

Coronavirus testing supplies being unloaded at the Bole International Airport in Addis Ababa, Ethiopia, in March.
Credit…Tiksa Negeri/Reuters

Lawrence Freeman

May 1, 2020

Ethiopian Prime Minister, Abiy Ahmed, has made an audacious salient call for debt cancellation for low income countries. It was published in the Opinion section of the April 30, New York Times, Why the Global Debt of Poor Nations Must Be Canceled, (printed in full below). PM Abiy is correct, debt cancellation is absolutely necessary to save lives and for developing nations to survive the COVID-19 pandemic. To compel a nation like Ethiopia to spend almost half of its revenue on debt service, while its people are suffering from a perfect storm of Desert Locust swarms, food insufficiency, and a weak healthcare infrastructure, is immoral if not criminal. PM Abiy wrote:

“At the very least, the suspension of debt payments should last not just until the end of 2020 but rather until well after the pandemic is truly over. It should involve not just debt suspension but debt cancellation…

“These steps need to be taken with a sense of urgency. The resources freed up will save lives and livelihoods in the short term, bring back hope and dynamism to low-income economies in the medium term and enable them to continue as the engines of sustainable global prosperity in the long term.

“In 2019, 64 countries, nearly half of them in sub-Saharan Africa, spent more on servicing external debt than on health. Ethiopia spends twice as much on paying off external debt as on health. We spend 47 percent of our merchandise export revenue on debt servicing…

“The dilemma Ethiopia faces is stark: Do we continue to pay toward debt or redirect resources to save lives and livelihoods?”

PM Abiy’s analysis of the urgent need for the cancellation of debt service is relevant to the exacerbating effect of COVID-19 in Africa’s rising food insecurity.

image
Smoked fish produced in Ghana is sold all over the country and in neighboring Togo – as long as transport routes and borders can remain open for the movement of food to markets. Credit Jane Hahn/Oxfam America

COVID-19 Worsens Food Crisis

In the month from March 30 to April 30, COVID-19 cases in Africa rose from 4,760 to 37,296-800% increase, and the total of deaths from 146 to 1,619-1,100% increase.  Experts are legitimately concerned, that millions more may die from hunger and poverty as a result of the needed efforts to reduce the spread of the coronavirus. Closing borders, stay at home orders, loss of income, interruption of supply chains, and disruption of traditional animal migration cycles inauspiciously contribute to amplifying food insecurity.

“If the pandemic worsens, as many as 50 million more people could face a food crisis in the [Sahel} region,” according to Coumba Sow, Food and Agricultural Organization Resilience Coordinator for West Africa in her interview: FAO: COVID19: 50 Million in Sahel Could Face Food Crisis. Coumba Sow reports that across West Africa, 11 million people need immediate food assistance and that this number could rise to 17 million in the period from June to August. She says that it is “crucial to anticipate COVID-19’s impacts on agriculture, food security and the lives of vulnerable women and children. Ensuring that food systems and food supply chains are maintained is one of the most important action to take at national and regional levels.”

The World Food Programme (WFP) projects that the number of people facing acute food insecurity could rise from 135 million to 265 million in 2020 as a result of COVID-19.  According to the WFP, five of the countries that had the worst food crisis in 2019 were located in Africa; Nigeria, Ethiopia, Sudan, South Sudan and the Democratic Republic of the Congo.

Arif Husain, economist for the WFP said: “COVID-19 is potentially catastrophic for millions who are hanging by a thread. It is a hammer blow for millions more who can only eat it they earn a wage. Lockdowns and global economic recession have already decimated their nest eggs. It only takes one more shock—like COVID-19 to push them over the edge.”

Mauritanian herders (Courtesy of UN-FAO)

 A New Financial Architecture Required

While debt cancellation is essential, international and federal mechanisms are required to issue i.e. create new lines of credit to build up nation-wide advanced healthcare infrastructure, which all African nations lack. This endeavor should be part of a much larger undertaking to place African nations on a path to become developed industrialized economies.  I discuss the importance of emerging nations  to generate physical economic wealth in my earlier article: World Needs New Economic Platform to Fight COVID-19. Trillions of dollars of new credit must become accessible for African nations to address the dearth of infrastructure in energy, roads, railroads, and healthcare, that is literally killing Africans, every day. Successful transformation of African nations requires an urgent focus on nurturing combined manufacturing-agricultural processing industries. Speaking at a Johns Hopkins webinar on April 22, Gyude Moore, former Liberian Minster of Public Works (2014-2018) emphasized that creating manufacturing jobs is essential to transitioning to a more developed economy.

What has been glaringly brought to the surface by the combined COVID-19 pandemic and the malnourishment of Africa’s population is; that the global economic-political system of the last five decades has failed. A new financial architecture is compulsory to save lives and put civilization on the trajectory of progress. This new financial architecture should encompass the following essential missions in Africa:

  • Cancellation of debt
  • New credit generation for physical economic growth
  • Massive investment in hard infrastructure
  • Urgent mobilization to establish modern health infrastructure
  • Significant upgrading of manufacturing and agricultural sectors

It is unacceptable in the twenty-first century for every nation not to be equipped with advanced modern healthcare infrastructure.  One of the most egregious defects of globalization is that nations have become dependent on imported food from thousands of miles away because it is somehow construed to be cheaper than producing food at home.

Nations exist to foster the continuation of a human culture moored to the conception that human life is sacred. There is no equivalency between servicing debt and safeguarding human life.  Money really has no intrinsic value. Banks are mere servicing bureaus of an economy.  Governments legitimately create credit to generate future physical wealth to benefit their citizens. When borrowing or lending arrangements fail to benefit society then they should be restructured or cancelled. Such financial reorganizations have been achieved many times throughout history.

PM Abiy has brought to the attention of the world, a profound underlying principle that should govern all national and international policy: the promotion of human life is supreme, monetary instruments are not.

Delaying the repayments to the Group of 20 is not enough.

By rime Minister of Ethiopia. Nobel Peace Prize Laureate, 2019

ADDIS ABABA, Ethiopia — On April 15, Group of 20 countries offered temporary relief to some of the world’s lowest-income countries by suspending debt repayments until the end of the year. It is a step in the right direction and provides an opportunity to redirect financial resources toward dealing with the coronavirus pandemic.

But if the world is to survive the punishing fallout of the pandemic and ensure that the economies of countries like mine bounce back, this initiative needs to be even more ambitious.

At the very least, the suspension of debt payments should last not just until the end of 2020 but rather until well after the pandemic is truly over. It should involve not just debt suspension but debt cancellation. Global creditors need to waive both official bilateral and commercial debt for low-income countries.

These steps need to be taken with a sense of urgency. The resources freed up will save lives and livelihoods in the short term, bring back hope and dynamism to low-income economies in the medium term and enable them to continue as the engines of sustainable global prosperity in the long term.

In 2019, 64 countries, nearly half of them in sub-Saharan Africa, spent more on servicing external debt than on health. Ethiopia spends twice as much on paying off external debt as on health. We spend 47 percent of our merchandise export revenue on debt servicing. The International Monetary Fund described Ethiopia as being at high risk of external debt distress.

The dilemma Ethiopia faces is stark: Do we continue to pay toward debt or redirect resources to save lives and livelihoods? Lives lost during the pandemic cannot be recovered; imperiled livelihoods cost more and take longer to recover.

Immediate and forceful action on debt will prevent a humanitarian disaster today and shore up our economy for tomorrow. We need to immediately divert resources from servicing debt toward responding adequately to the pandemic. We need to impede a temporary health crisis from turning into a chronic financial meltdown that could last for years, even decades.

Ethiopia must spend an extra $3 billion by the end of 2020 to address the consequences of the pandemic, while our balance of payments is set to deteriorate. Increasing health care spending is essential, irrespective of debt levels, but we have less money on hand, and much of it is due to creditors.

A moratorium on bilateral and commercial debt payments for the rest of this year will save Ethiopia $1.7 billion. Extending the moratorium till the end of 2022 would save an additional $3.5 billion.

Low income countries can use the financial resources freed up by cancellation or further deferment of debt repayments to invest in our battle against the pandemic, from providing necessary medical care to our citizens to ameliorating our financial difficulties.

In October, the I.M.F. reported that the five fastest-growing economies in the world were in sub-Saharan Africa, which includes Ethiopia. In early April, the World Bank reported that sub-Saharan Africa would face its first region wide recession in over 25 years and the region’s economy could shrink by as much as 5.1 percent.

This is not a result of bad policies, mismanagement or any other ill typically associated with developing economies. The recession will be the product of the coronavirus outbreak.

Preventing or at least minimizing the recession is critical to maintaining years of hard-won economic gains across the continent. The current moratorium in bilateral debt collection until the end of the year will help, but it won’t be enough, given the gravity of the challenge we face.

The moratorium must be extended until the coronavirus health emergency is over or canceled altogether. The creditors need to do this unconditionally.

Official bilateral creditors are no longer the principal source of external debt financing for many developing countries. Private-sector creditors, including investment banks and sovereign funds, are. They should play their part in the effort to rescue African economies from permanent paralysis with a sense of solidarity and shared responsibility. It would help avoid widespread sovereign defaults and chaos in the market.

And it would be morally indefensible if resources freed up from a moratorium in bilateral debt collections were to be used to pay private creditors instead of saving lives.

Most of our countries managed to borrow funds on the back of solid economic performance and highly promising and evidence-based development programs and trajectories. Nobody foresaw this promise being derailed by a once-in-a-century event such as the coronavirus pandemic.

Under these circumstances, there is no room for traditional arguments such as moral hazard. Low-income countries are seeking relief not because we squandered the money but because we need the resources to save lives and livelihoods.

It is in everybody’s enlightened self-interest that the borrowers be allowed breathing space to get back to relative health. The benefits of rehabilitation of the economies of the hardest-hit countries will be shared by all of us, just as the consequences of neglect will harm all of us.

Lawrence Freeman is a Political-Economic Analyst for Africa, who has been involved in the economic development policy of Africa for 30 years. He is the creator of the blog: lawrencefreemanafricaandtheworld.com

 

 

World Needs New Economic Platform to Fight COVID-19

The World Needs A New Economic Platform to Fight COVID-19

Lawrence Freeman

April 5, 2020

Today April 5, the total cases of COVID-19-(coronavirus) in Africa are 8,536, deaths 360, and recoveries 710. On March 30, one week ago, the total cases were 4760, deaths 146, and recoveries 355. The diagram above shows the increased rate of the spread of COVID-19 across the African continent. In my March 30 article, New Economic Order Required to Combat COVID-19 in Africa, I concluded with a call for a New Just Economic Order, if humankind is going to effectively conquer the current pandemic.

We have come to a moment in the evolution of our civilization that we must acknowledge the failures of the present political-financial system. The Western-advanced sector nations, lacking an in depth and over-supplied health infrastructure have found themselves utterly unprepared to deal with the latest and most deadly zoonotic virus, COVID-19. The G-7 nations with a population of 750 million, and 39% ($34 trillion) of the world’s GDP are grabbling to muster the resources and capacity to defeat the coronavirus, while 90% of the world’s 7.5 billion people live with a frail health infrastructure, or none at all.

We have witnessed an increasing number of new zoonotic viruses (SARS, MERS, Swine Flu, HIV/AIDS) over recent decades. Humanity will only successfully defend itself by launching a global upgrading of healthcare including new scientific research into how human immune systems can become less susceptible to viruses that originate in animals.

Inadequate healthcare and impoverished living conditions in the developing sector cannot continue. It is a crime that has been perpetuated for decades, and the very survival of humanity screams out for a revolution in our thinking and practices. Ethiopian Prime Minister, Abiy Ahmed, stated eloquently the link between Africa and the advanced sector in this current crisis: “Advanced economies are unveiling unprecedented economic stimulus packages. African countries, by contrast, lack the wherewithal to make similarly meaningful interventions. Yet if the virus is not defeated in Africa, it will only bounce back to the rest of the world.”  (emphasis added)  PM Abiy “If Covid-19 is not beaten in Africa it will return to haunt us all” .The virus can only be overcome in Africa, and the rest of the developing sector, if we launch a new economic system, one that values human life above servicing debt and avariciousness.

Perilous Conditions in Africa

Dr. John Nkengasong, head of the Africa Centers for Disease Control and Prevention (CDC), said that COVID-19 “is an existential threat to our continent.” The Africa CDC and the World Health Organization (WHO) do not know the actual number of Africans infected with the virus, due to a lack of ability to test the population. Nor do they have an accurate count of the number of ventilators available in each African nation. Over a month since the appearance of the coronavirus on the continent, experts estimate that Africa is at the early phase of its proliferation.

The United Nations World Food Program warned that “the coronavirus pandemic threatens to cause food shortages for hundreds of millions of people especially in Africa,” according to Naharnet. “For many poor countries, the economic consequences will be more devastating than the disease itself.” Pandemic Threatens Food In Import Reliant States

An article published by Quartz, Africa Has About One Doctor for Every 5000 People cites a report by the (WHO), that Africa in 2013 “had a deficit of estimated 1.8 million healthcare worker that is projected to rise 4.3 million by 2035.”  One reason, according to the article is that: “Currently, there are only 170 medical schools serving the 47 countries of sub-Saharan Africa. Of those countries, 6 have no medical schools, and 20 have only one medical school.”

Statistics for the number of doctors per 1,000 population for African nations are horrifying. Physicians Per 1,000 People. When Compared to the figures for advanced sector nations that are now “hot spots” for COVID-19 to those of Africa, where the incidence of the virus is weeks behind Europe and the United States, Africa’s potential death rate is frightening.

Examine these estimates: U.S. has 2.3 doctors for 1,000 people, Spain 3.2, Italy 4.2, and South Korea 1.8. The average for sub-Saharan Africa (SSA) has an absurdly low 0.21 doctors for 1,000 people. Twenty SSA nations have .08 doctors or less to treat 1,000 of their citizens, with several at levels of 0.03 and 0.02 doctors. Two orders of magnitude less physicians than the nations that today are experiencing the highest mortality rates.

Governor Cuomo of New York, and Mayor de Blasio of New York City beg every day for more healthcare professionals, ventilators and PPEs (Personal Protective Equipment) to deal with the overload of coronavirus cases, Imagine what the potential death rate of Africa’s almost 1.5 billion population could be when one factors in extreme levels of poverty, weakened immune systems, and malnourishment, all prevalent on the African continent.

(Courtesy of SlideShare)

UNCTAD’s $2.5 Trillion Strategy

The March 30, 2020, statement by the United Nations Conference on Trade and DevelopmentUNCTADUN Calls for $2.5 Trillion Coronavirus Crisis Package for Developing Countries  is excerpted below.

“The consequences of a combined health pandemic and a global recession will be catastrophic for many developing countries and halt their progress towards the Sustainable Development Goals.”

UNCTAD’S strategy includes:

  • $1 trillion of debts owed by developing countries should be cancelled this year
  • $500 billion needed to fund a Marshall Plan for health recovery and dispersed as grants

Credit for a New Economic Order

Debt cancellation, and a Marshall Plan to build up health infrastructure for the developing sector nations are crucial for the survival of emerging nations. However, to break from the old political-financial system that has failed us, and to create a new economic platform, we must create credit for physical economic growth.

What is missing from UNCTAD’s proposal, and what is absent from all United Nations strategies, is the understanding of the importance of establishing a mechanism for the creation of credit. Following in the footsteps of President George Washington and his brilliant Secretary of the Treasury, Alexander Hamilton, we should establish a National Credit Bank. Nations Must Study Alexander Hamilton’s Principles of Political Economy. Wisely, the US Constitution provides for the federal government, not the states, to issue public credit to promote the general welfare.

Credit for production and infrastructure, unlike mere money, is the sine qua non for any healthy economy. This is not the same as printing trillions of dollars of money to bail out an over extended monetary system with a bubble of over one quadrillion of dollars in debt and derivatives.

Debts of developing sector nations must be cancelled to clear the decks for the issuance of new credit directed to fostering industrialized economies with healthy agricultural and manufacturing sectors. Extended credit with low interest rates must be issued for long term investments in vital construction of infrastructure. This is a life and death matter for the very survival of African nations.

Every government is obliged to create a national bank for the sole purpose of generating physical economic growth critical for the security and future health of that nation. Instead of relying on the present global financial institutions that dictate loan agreements at unnecessarily high interest rates coupled with arduous conditionalities we should create a new global economic system. One founded on the principles that promote the true shared common good for all nations and all peoples. Under this new system sovereignty is inviolate, and trade and credit agreements are premised on improving the material conditions of life for the people of those nations. All political and economic relationships between nations should be to benefit the general welfare of its citizenry.

Human beings are sacred, financial systems are not. We can and should craft new monetary systems to advance progress, not monetary profits. President Franklin Roosevelt created the Bretton Woods System, with the intention of uplifting the planet from the misery of World War II. He had magnificent ideas for promoting economic growth around the world, including greening the deserts of Africa.  Sadly, after his death, Bretton Woods was perverted, and became the opposite of what he intended.

While we must fight this deadly virus with all the resources that governments can assemble, we need to also think to the future; the creation of a more advanced economic platform. It is up to us create a new architype of relationships among sovereign nation states to transform the world out of the ashes of its present decayed state. Let us call this new paradigm by its proper name–A New Just World Economic Order

Lawrence Freeman is a Political-Economic Analyst for Africa, who has been involved in the economic development policy of Africa for 30 years. He is the creator of the blog: lawrencefreemanafricaandtheworld.com

 

How the Imperialist CFA franc Suppresses Growth in Africa

Africa’s ‘colonial’ CFA currency (courtesy dw.com)

The article in the link below is a detailed and useful expose of how the CFA franc, controlled by France, contributes to the suppression of economic development in Africa. We have now past a half century since many nations in Africa liberated themselves from colonialism. Yet the French banking system still exercises colonial domination over the finances of African nations that should be economically independent. African nations will never be truly independent until they are economically sovereign. This means having sovereign control over their own currencies and the issuing of credit for internal improvements of their economies. African nations should have National Banks and Development Banks for the issuing of credit, as first conceptualized by Alexander Hamilton. Hamilton’s concept of government-national credit was essential for the creation of an industrialized USA from thirteen agrarian based colonies.

Read: Towards a Political Economy of Monetary Dependency

For more analysis of Alexander Hamilton’s credit policy read: Nations Must Study Alexander Hamilton’s Principles of Political Economy

Celebrate Africa’s New Free Trade Agreement: Terminate CFA franc

With the initiation of the Africa Continental Free Trade Agreement on May 30, 2019, now is the time for African nations to finally jettison the CFA frank, a relic of French Colonialism. No longer should 14 African nations have their sovereignty infringed upon by a former European colonial country. Economic sovereignty is inviolate. For a nation to develop its full economic potential it must control its currency, which is a from of national credit. One of the great accomplishments of the President’s George Washington’s Secretary of the Treasury, Alexander Hamilton, was his creation of a National Bank, which unified all the currencies and debt held by the thirteen colonies. A nation that does not have sovereign authority over its currency and credit will never be truly free, and its people will suffer from underdevelopment..

Map showing those countries using the CFA franc
It’s used by Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali. Niger, Senegal and Togo in West Africa, and Cameroon, Central African Republic, Chad, Congo-Brazzaville, Equatorial Guinea and Gabon in Central Africa

Read: Africa’s CFA Franc Colonial Relic or Stabilizing Force

‘Investigate or Legislate’: What Will the Democrats in Control of the House of Representatives Do?

With control of the House of Representatives, the Democrats have the opportunity to provide leadership for the United States. They will have to decide. Do they want to make their primary focus attacking President Donald Tramp, by continuing their impotent investigation of his alleged collusion with Russia in the 2016 election? Or will they actually provide a vision for the future of the USA, by enacting bold new legislation.  Any attempt to impeach President Trump would be a farce that would virtually ensure the Democrats would be defeated in the 2020 presidential election.

President Trump has demonstrated that he lacks a comprehensive understanding of the scientific principles that created the USA. He has also displayed an unAmerican phobia to non-white foreigners from a multitude of countries arriving in the USA.  However, President Trump has distinguished himself in forming a close relationship with the President of China, Xi Xinping. He has also attempted to establish a working relationship with the President of Russia, Vladimir Putin. To the detriment of the USA (and the world) many Democrats, along with some members of his own administration, have adamantly opposed these positive initiatives by President Trump. President Trump has many shortcomings, but to his credit, he is not an ideologue, and he is not a devout follower of the geo-political doctrine on foreign policy. If President Trump took the audacious step to partner with China’s Belt and Road Initiative, the world could be transformed.

Important polices must be implemented now to provide for the welfare of our citizens, which will require bipartisan action in the Congress. For example. Both the Republican and Democratic parties have made verbal commitments to support a Glass Steagall banking reorganization, yet no action has been taken by the Congress or this administration. Another opportunity for bipartisanship would be the passage of legislation for a transformative infrastructure plan to rebuild the USA.

Below is a useful article discussing how President Trump working with the Congress could fund large-scale infrastructure projects. 

A New Opportunity for a National Infrastructure Agenda?

Nov. 7, 2018—One thing is definitive about the results of the U.S. mid-term elections: Neither political party put a solution to the country’s economic and financial disaster on the national agenda.  That doesn’t mean that many of the new Democratic members of Congress don’t have a strong commitment to address the economic crisis, however. They can potentially galvanize the veteran Congressmen into action. The question is, will competent, workable proposals be put on the table in the 116th Congress?

Statements from President Trump and the putative incoming House Speaker Nancy Pelosi in the immediate aftermath of the election were notable for addressing the possibility of bipartisan progress on infrastructure. Both statements were quite vague, however—and, as some will recall, Trump has offered cooperation on infrastructure before. One need only look at his current blackballing of the New York City Gateway project to see how hollow that promise was.

Rep. DeFazio in his campaign photo.

More substantive have been remarks from the incoming chairmen of two House committees. Rep. Peter DeFazio (D-OR) is expected to take over the Transportation and Infrastructure Committee. According to a Nov. 7 Reutersarticle, DeFazio is prepared to put forward his previous proposal for a $500 billion plan, which would involve issuing 30-year bonds, using funds from  raising gas taxes. He believes Trump would accept an increase in the gas tax.

“There has to be real money, real investment,” DeFazio said today. “We’re not going to do pretend stuff like asset recycling. We’re not going to do massive privatization.”

Rep. John Yarmuth (D-KY), who is slated to take over the House Budget Committee, addressed the infrastructure question a few days before the election, according to an Oct. 30 Politico Pro article. He said he would be making a proposal which “involves some very long-term bonding authority that would help finance an infrastructure bank.”

The Issue of Funding

The inevitable sticking point in Congressional discussions of an adequate infrastructure bill—which should ultimately amount to spending trillions of dollars to meet the infrastructure deficit—will be funding. President Trump has already indicated his preference for off-loading the cost to local and state governments, and proposes to even cut the Federal contribution from today’s 80% to 20%. That’s a formula for non-action. The Democratic plans have not been specific.

The danger lies in a potential “compromise” that pushes Public Private Partnerships (PPPs) as the solution to the funding dilemma. PPPs are presented as a means of reducing, or eliminating, public costs, by contracting with private companies to either build, manage, or both the needed element of infrastructure. The claim is that the private company can do the job cheaper and more efficiently, and the public will benefit.

Moving ahead on Gateway would be a good place to start.

Not so fast. First, some of the cheapness comes at the cost of labor—by violation of Davis-Bacon standards–and quality. Secondly, private contractors only enter PPP agreements on the guarantee that they will receive a revenue stream to cover their costs, and provide a profit. This can amount to tolls on a road, water bills for a water company, and the like. And if the stream doesn’t provide what the company considers adequate profit, what will it do?  Cut maintenance? Cut off people’s water supply? Both results have occurred! And they are unacceptable.

So, forget PPPs. The solution lies in taking the lead from Franklin Roosevelt and Alexander Hamilton. The Federal government has a unique capability (and responsibility) to create credit to modernize and rebuild our infrastructure. That credit can in fact be issued by turning current (virtually non-performing) government debt into bonds supporting an infrastructure bank, against which it would then issue new loans to help finance the long overdue infrastructure projects.  These would not only be short-term, but also long-term projects, such as the Gateway Project, California High Speed Rail, and the desperately needed water projects in the nation’s interior, for starters.  If the right projects are selected, the infrastructure constructed will pay back more to the economy in increased productivity than is expended–as well as creating millions of new, high-paying jobs.

For a modern proposal for such an infrastructure bank, click here

 

Don’t Listen to Propaganda & Gossip. Follow the Facts: China is not Creating a ‘debt-trap’ for Africa

A useful report, “Africa’s growing debt crisis: Who is the debt owed to?” by the British based Jubilee Debt Campaign, again belies the propaganda and gossip that China is manipulating African nations into a ‘debt-trap.’  This report excerpted below, using figures from the World Bank, and the China Africa Research Institute-(CARI) at Johns Hopkins SAIS in Washington DC, shows the percentage of debt owed to China by African nations is not the cause of a debt crisis. In fact, in many cases the debt owed to China is less than the total owed to Western nations and financial institutions.

It is clear that for strictly geo-political reasons many Western think tanks and various media have gone into overdrive demonizing China with false claims of a new ‘debt-trap.’ This has also led to increased attacks on African leaders, portraying them as weak and not acting in the interest of their citizens. They have been accused of succumbing to China, which has been dubbed, the new imperial power. Sadly, many Africans have been duped, or simply out of frustration and anger, joined this western orchestrated chorus.

Of course, the truth of the matter is quite different. From the early 1980s on Western financial intuitions such as the IMF, World Bank, and Paris Club, loaded up African nations with so much debt that they were unable to service the debt, forcing them into unpayable arrears.  The vicious irony, is that several hundred billion dollars of debt lent by the West was never meant to actual develop African economies. It was in fact, intended to create a real ‘debt-trap’ for Africa. It has only been in the last ten years that Africa’s huge deficit in infrastructure is being addressed in collaboration with China’s non-western model of development. As I have written over many years, debt is not the problem when it is used as credit to improve the productive powers of a society to increase its physical wealth. Technologically advanced infrastructure is an excellent, if not the premiere method to drive an economy forward. This is exactly what China is accomplishing through its Belt and Road Initiative, and is at the heart of the Forum on China-Africa Cooperation-(FOCAC).

Unfortunately, the dominance of the “geo-political” ideology since the death of Franklin Roosevelt has thoroughly contaminated the thinking of Westerners and Africans alike. Creating a culture (with few exceptions) of people unable to think strategically, and who cynically reject the idea that a powerful nation would extend itself to actually assist other nations. China, according to all accounts, has lifted 700 million of its people out of poverty. President Xi Xinping has pledged to help eliminate poverty in Africa, the continent with highest rate of poverty in the world. Yet, many Africans reject this offer as insincere, suggesting a sinister motive lurking behind China’s offer. This attitude, is in part, the result of today’s political culture, which has failed to understand one of the most profound universal principles: all mankind shares a common interest in the development of the creative potential of each and every human being.  

Let us all agree, now, that we will all act on the this principle of the common good, and affirm as did the Treaty of Westphalia, that the interest of the other is also the interest of thy self.

 

Forum On China-Africa Cooperation, Beijing, September 3-4, 2018

“Africa’s growing debt crisis: Who is the debt owed to?”

October 2018

(excerpts follow)

Summary
• African government external debt payments have doubled in two years, from an average of
5.9% of government revenue in 2015 to 11.8% in 2017
• 20% of African government external debt is owed to China
• 17% of African government external interest payments are made to China
• In contrast, 32% of African government external debt is owed to private lenders, and 35% to
multilateral institutions such as the World Bank
• 55% of external interest payments are to private creditors

Minimum amount of African government external debt owed to China as percentage of total debt is 18%

Creditor grouping, total debt owed, percentage of external debt owed, are as follows:
China $72 billion 18%
Paris Club $40 billion 10%
Other governments $18 billion 4%
World Bank $66 billion 16%
IMF $18 billion 4%
Other multilateral institutions $61 billion 15%
Private sector $132 billion 32%
Total $407 billion 

Maximum amount of African government external debt owed to China as percentage of total debt is 24%

Creditor grouping’Total debt owed, percentage of external debt owed, are as follows:
China $100 billion 24%
Paris Club $40 billion 10%
World Bank $66 billion 16%
IMF $18 billion 4%
Other multilateral institutions $61 billion 15%
Private sector (excl. Chinese
private sector)
$132 billion 32%
Total $417 billion

Checking these figures through country cases

Another way of identifying how much African government debt is owed to China is to look bottom-up at the individual data available by each government.

Of these 16 countries, 14 have figures on how much debt is owed to China (for the full analysis see Appendix 1.). Of these 14:

• 11 owe less than 18% of their debt to China (Burundi, Cabo Verde, Central African Republic, Chad, Gambia, Ghana, Mauritania, Mozambique, Sao Tome and Principe, South Sudan, Sudan and Zimbabwe).
• Three owe more than 24% -Djibouti (68%), Zambia (30%) and Cameroon (29%).
• The mean average amount owed to China is 15% of a government’s external debt, and the median average is 8%

Read Complete Report: Who Is Africa Debt’s Owed To?

The Debate On China’s Role In Africa; A Different Point Of View

The Council of African Security and Development-CASADE has published my article regarding the debate over whether China is forcing African nations into a new ‘debt trap.’ Despite the propaganda from some Africans and Westerners, China is not the new imperialist in Africa. You can read my analysis below.

CASADE: COUNCIL ON AFRICAN SECURITY AND DEVELOPMENT