The Global Economic Crisis and Its Impact on Africa

[XXPANTHAXX]

World Bank and others are predicting an international meltdown

by Abayomi Azikiwe, Editor
Pan-African News Wire
News Analysis

Since the fall of 2008, with the decline in financial markets, the
collapse of the housing industry in the United States and the loss of
millions of jobs and small businesses, the politicians in the western
capitalist states and Japan have sought to remedy the problem through
measures aimed at bailing out the same banks and corporations which are
responsible for the meltdown.

Trillions of taxpayers dollars have been handed over to Wall Street in a
futile attempt to stave off the impending failure of the financial
sector. The government has allowed millions of working families to be
evicted from their homes and apartments, while CEOs at AIG and other
firms are allowed to collect billions in bonuses for their managerial
incompetence and criminal activities.

With the situation reaching critical proportions in the United States
and other industrialized states, the impact of the economic crisis is
becoming more apparent in the so-called developing countries,
particularly the African continent. Even though some western analysts
consider the African continent to be a marginal region, this area has
been thoroughly integrated into the world capitalist system since the
19th century.

It is the raw materials and labor power of Africa that has proven
indispensable to the growth of the industrial regions of western Europe
and North America. Today, with the decline of commodity prices and wages
for workers and farmers in Africa, the potential exists for a total
economic collapse and the intensification of the class struggle.

World Bank Report Predicts Global Economic Downturn

One of the U.S.-based capitalist institutions that has been blamed for
the failure of Africa to achieve genuine development in the
post-colonial period since the 1960s, is the World Bank. Formally known
as the International Bank for Reconstruction and Development(IBRD), this
agency was founded towards the conclusion of World War II in 1944 along
with the International Monetary Fund (IMF). These two financial
institutions grew out of the so-called Bretton Woods monetary system
that sought to rebuild Europe and Asia in the image of U.S. economic
interests.

However, by the 1970s, much of the focus of the World Bank and the IMF
centered on lending to African and other Third World countries. The
terms of these loans created major debt problems for many countries.
During the 1980s, the World Bank and IMF set up Structural Adjustment
Programs (SAP) that imposed conditions on how these post-colonial states
could conduct their domestic and foreign affairs. The conditionalities
effectively arrested any genuine development efforts among the majority
of peoples throughout the world.

A surprisingly harsh assessment of the state of the world capitalist
system was issued during early March 2009 in the form of a report
entitled "Swimming Against The Tide: How Developing Countries Are Coping
With the Global Crisis." The World Bank report sounds an alarm that the
current decline in the capitalist economic system has the potential for
creating a crisis not seen since the 1930s.

According to the World Bank report "The economic crisis is projected to
increase poverty by around 46 million people in 2009. The principal
transmission channels will be via employment and wage effects as well as
declining remittance flows."

The World Bank report also says that "Global industrial production
declined by 20 percent in the fourth quarter of 2008, as high-income and
developing country activity plunged by 23 and 15 percent, respectively.
Gross Domestic Product will decline this year for the first time since
World War II, with growth at least 5 percentage points below potential.

"World trade is on track to register its largest decline in 80 years,
with the sharpest losses in East Asia, reflecting a combination of
failing volumes, price declines, and currency depreciation."

In late 2008, some analysts had predicted that the so-called "sub-prime
mortage mess" would not have a dramatic impact on the economies of
Africa. However, ideas to the contrary are gaining wider exposure in the
African media.

In an article published in the Botswana Sunday Standard on March 22 by
Rampholo Molefhe, entitled "Report the 'Credit Crunch' From an African
Perspective," says that "The Africans initially believed that the
continent would not be affected by the financial crisis at the western
banks, and the resulting collapse of the real estate sector there,
because they were not in the direct line of influence of ‘the economies’
of the industrialised countries."

However, Molefhe continues by pointing out that "Nothing could have been
farther from the truth. Clearly, Barclays Bank in the African countries
could not be disconnected from the mother company in Britain.
Caterpillar, in Africa, is entirely indebted to its principals abroad
for its operations, as is Kodak, Motorola, Sony and every other
transnational on the continent."

Drawing a direct link between operations in Africa and the centers of
capitalist decision-making, Molefhe states that "The continental
operations of the multi-nationals give the appearance of good governance
and effective administration because they run smaller operations with
more effective oversight than their mother organisations in the north.

"More fundamentally, the prescriptions for the extent of the drive for
profit are determined at the centre, which controls them by remote
control so that waywardness in management is guarded by the strictest
rules."

Capitalist Reforms Are Not Solutions

There is much anticipation surrounding the upcoming G20 Summit in London
scheduled for April 2. The leading capitalist countries and others from
the nations of Asia, Latin America and South Africa will come together
to discuss approaches to tackling the deepening economic crisis.

On its website, the organization states that "The G-20 is made up of the
finance ministers and central bank governors of 19 countries: Argentina,
Australia, Brazil, Canada, China, France, Germany, India, Indonesia,
Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea,
Turkey, the United Kingdom and the United States of America, and also
the European Union who is represented by the rotating Council presidency
and the European Central Bank."

Even though the stated desire on the part of the summit is to address
the economic crisis, the programs that are being put forward still
preserve capitalist production methods and do not get at the root of the
problem of over-production, militarism and unequal terms of trade.
Consquently, the summit will be a focal point for mass demonstrations in
London.

The British Stop the War Coalition has called for protests outside the
summit. In a statement issued by the Campaign it says that "The G20 will
meet at a time of world slump but they are spending more and more on
war. Despite the disaster in Iraq and Afghanistan, the US and Britain
are sending thousands more troops to Afghanistan. They are spending more
and more in Iraq. The total cost of the war will be around 6 trillion
dollars."

These increased expenditures on war by the imperialist states comes at
the same time that millions more workers will be thrown out of their
jobs worldwide. Trade union leaders are predicting that the worsening
financial contagion will result in the loss of another 50 million jobs
this year.

Australian Congress of Trade Union president Sharan Burrow is leading an
international trade union delegation to the G20 summit in April calling
for more effective and coordinated economic stimulus packages to bring
about growth.

"You've got to look at where you can drive stimulus that will target
employment growth, most efficiently, most speedily, and with a capacity
to influence not just national economies, but indeed the global
economy," Burrow said.

Workers and Oppressed Must Advance Own Program

On the African continent political unrest has been fueled by the
economic crisis. In Mauritania last August, the military staged a coup
against the existing government. These same developments occured in
Guinea-Conakry in December and Guinea-Bissau in early March in West
Africa and most recently, in Madagascar, off the southeast coast in the
Indian Ocean.

Also there have been strikes and rebellions in Somalia, Kenya and South
Africa over the last year. These actions are carried out in response to
the rising cost of food and fuel and the decline in commodity prices and
real wages.

All of these states are heavily dependent on export earnings from raw
materials sold to capitalist states in the West. However, the
replacement of civilian governments with military ones will not solve
the economic crises on the African continent. The advent of the military
seizure of power in Africa during the immediate post-colonial period
between the 1960s through the 1980s only worsened the crises of
underdevelopment and imperialist domination.

At the same time in the western capitalist states, anger is brewing over
the fallout from the economic crisis. In France, workers have engaged in
one-day work stoppages and rebellions. In the United States, workers and
the oppressed formed a broad-based electoral alliance that brought the
current Obama administration to power.

Yet the policies advocated by Obama in the U.S. and Sarkozy in France
only reinforce capitalist production methods and regulatory measures.
Any genuine reform or fundamental change must come from the
self-organization of the workers and the oppressed within society. It is
important at this juncture for workers and the oppressed to advance
their own political and economic programs that are independent of the
capitalist class and its political parties.

With the economic crisis becoming more pronounced in both the advanced
capitalist states as well as the so-called developing countries, it
provides greater opportunities for international solidarity and
coordination of efforts. Workers and oppressed communities in the United
States must not only struggle to improve their own economic and social
conditions, but they must understand that the genuine liberation of the
developing regions of the world is essential in creating the conditions
for the real empowerment of the majority of the people in the
industrialized countries.
-----------------------------------------------------------
Abayomi Azikiwe is the editor of the Pan-African News Wire. The writer
has been closely following the global financial crisis.