Why Creditors should cancel...

Why Creditors should cancel All of Africas's Foreign Debt? Part I of III

This is the first time in my entire life time that I am witnessing a world socioeconomic system that is in shatters; humanity that is in great fear and in distress; and a global community that is uncertain of what would follow COVID-19. Global leadership and guidance on the most horrific pandemic since the Second World War are inadequate. My sense is that, the world community must change dramatically in the way that global or multilateral institutions are governed and future development is managed. The old economic system is, in fact, toxic and not community-oriented. Humanity should be at the center of growth and development. It is my firm and enduring belief that, the ultimate objective of socioeconomic-development is to improve the livelihoods of the vast majority of the population; and to establish institutional tools to maintain and improve resiliency. A system that favors community over private gain and greed has a better chance to do just that. On the other side of the development debate is the persistent push and requirement from multilateral and bilateral agencies, foundations, think tanks and scholars that the “free market” model works miracles and must be adopted. It is abundantly clear that the “free market” is not free. If one accepts the later in its entirety, then, cycles of uncertainty, depression, recession and COVID-19 like cataclysmic occurrences are accepted as part and parcel of development. I am afraid I may be among the few who disagrees with this flawed development paradigm. Among other things, such a toxic system diminishes human worth. It allows the concentration of incomes and wealth in a few hands and accepts it as natural. In poor and least developed countries, most of them in Sub-Saharan Africa, where horrendous conditions are imposed by predator creditors to lend capital, plutocracy, kleptocracy, theft, graft and illicit outflow of financial assets are accepted as part of doing business. This condition diminishes resiliency. I suggest that such a system is no longer responsive to the needs of most of the developing world, especially in meeting the hopes and aspirations of the growing youth population in Africa. A decade ago, I argued in my book, “Endemic Poverty that Globalization Can’t Tackle but Ethiopians Can” that competent, corruption free and community- oriented government leadership, humanity anchored development policies, institutions, programs and investments matter most. Sadly, policies and economic and financial structures remain almost the same. Regardless of the level of development, income inequality has risen and deepened. Inequality has been on the rise across the globe for several decades. Incomes and living standards between the few rich and the vast majority of other citizens is widening at an alarming level. The very few richest persons on this planet continue to amass wealth and riches at a pace that defies the

Page2 imagination. For example, in the United States, the richest 1 percent command the bulk of wealth and riches. With this skewed income and wealth, the I percent are able to determine policies and programs that affect the rest; and the entire globe. Recently, the Credit Suisse Global Wealth Report noted that, the world’s richest 1 percent, those with more than $1 million, own 44 percent of the world’s wealth. This report shows that people with less than $10,000 in wealth make up 56.6 percent of the world’s population but hold less than 2 percent of global wealth. Individuals owning over $100,000 in assets make up less than 11 percent of the global population but own 82.8 percent of global wealth. This income and wealth inequality across the globe lead me to my principal thesis that the global economic and financial architecture and governance is highly toxic and unsustainable. I say toxic because it favors predatory lending; creates income inequality and structural adjustments and the like that all harm the poor. I say it is unsustainable because it burdens the poor by imposing severe penalties when countries default. Highly indebted peoples and societies cannot thrive. In the light of the above thesis, the global system must be overhauled. I am especially concerned that Africa’s youthful population deserves investments in public services such as physical and social infrastructure---education, health, sanitation, water, shelter, electrification, small and medium sector manufacturing, modern farming…etc. that boost the participation, engagement and productivity of the largest number of people. This is a moral imperative that should guide the development platform. If it is committed to sustainable and equitable development in SubSaharan Africa, the global governance architecture must align itself to this gaping African need. For this to happen, Africa’s youth must demand change; otherwise it won’t happen. The rest of global youth must join Africans in demanding changes in their respective countries. The pandemic teaches us that we can surmount extraordinary problems only if we pull science, technology and resources together as a global village. It teaches us the imperative of global engagement that centers monetary and fiscal policy in enhancing and improving lives and not private and individual riches. Equally, each country must invest more in community oriented human development; and in life saving technologies. Governments must place a premium both on development sustainability and on equity. The UN system and multilateral development agencies such as the World Bank and the International Monetary Fund have an ethical responsibility to persuade, empower and equip nations to advance the common good rather than to enhance profiteering and predatory lending practices. More important, these same institutions should no longer be a burden on poorer nations by imposing terms and conditions and horrendous debt these nations cannot bear or afford to pay. The pandemic makes this argument more compelling. In my assessment, COVID-19 offers the world community to think through, learn and initiate dramatic changes in support of humanity. It is clear that, even in the richest and most powerful country on the planet, namely, the United States of America, there is incontestable mismatch

Page3 between demand in the provision of public health services and in the provision of essential personal protective supplies such as face masks. As a consequence, a disproportionate of African-Americans, other minorities and the poorest of the poor have become victims of the COVID-19 pandemic. Imagine then what may happen to the poor in Sub-Saharan Africa! The fiscal and monetary “stimulus” in the amount of almost $3 trillion in the U.S. has not reached the tens of millions of workers and the thousands of small businesses who need it the most. I ask the reason why; but do not find ready-made answers. A critical gap that I sense is the lack or the absence of political leadership that is anchored in the dignity of human kind, all human kind. For example, you can pump hundreds of billions of dollars into the economy; but you won’t make a dent unless resources target the right socioeconomic gaps thar are out there in the open to see and reflect. It seems to me that monies are quickly siphoned off by an invisible hand of the free market. The policy and structural deficiencies, for example, income inequality and lack of universal health insurance coverage that existed before the latest pandemic have been aggravated; and have become even worse. I do not know; and no one really knows for sure who will come out ahead in the coming years. Who will live and who will die because of the pandemic? For sure, billionaires are not dying. It certainly won’t be the poor and the weak who will come out better off at the end. It won’t be the marginalized and what are these days called “essential workers” either. The ripple effects of COVID-19 on the poorest countries of this planet, most of them in SubSaharan Africa will be huge. For example, the government of Ethiopia estimated this week that the number of people-- most of them working in the manufacturing and services sectors—who would be affected by the pandemic will 1.4 million people. This is huge. The question is whether or not the global community is committed to mitigate the loss in human life; and the adverse socioeconomic effects of the pandemic on poor economies? I would have thought that the pandemic in the United States would energize the country’s leadership to redirect national financial and technical resources where it is needed the most. Sadly, municipalities and state governments that have done an outstanding job in serving their communities are running out of money. I ask myself what they can and should do if there is a second wave of the pandemic short of a vaccine? Given this situation, the public appetite to help Sub-Saharan Africa is likely to be less. After all, the signal sent some time back that Africa is home to “shithole” countries shows that racism is still at play when it comes to Black and brown peoples. At the time, the governments of Botswana, Ghana, Haiti, Namibia, Senegal, and the African Union made formal diplomatic protests. One of the most successful and well managed economies in Africa, namely, Botswana, as placed in this category. Domestically, I do hope and pray that the federal government would change its ways and assist municipalities and states so that they can at least mitigate the enormous toll of the pandemic on innocent civilians, the poor, the elderly, the health workers, the police, the firemen and women,

Page4 the teachers and other essential workers throughout the United States of America. I believe these millions are the heart and soul of this Great nation. They have demonstrated that it is not billionaires that keep this country going; it is these unsung heroes and heroines that I too admire. I believe that the Post-COVID-19 socioeconomic system and world won’t be the same. Here I share Dennis Snower’s assessment and conclusions in a piece entitled “Global Economy and Development.” He observes rightly that “Once the pandemic is over, a more profound rethinking of decision-making—in public policy, business, and civil society—is called for. • First, decisionmakers will need to supplement the current focus on economic efficiency with greater emphasis on economic resilience and I would add humanity and human worth. • Second, economic policies and business strategies will need to focus less on incentives for selfish individuals and more on the mobilization of people’s prosocial motives. • Finally, to encourage people around the world to cooperate globally in tackling global problems, policymakers at local, national, and global levels will need to encourage people around the world to cooperate globally in tackling global problems, with the aid of two powerful tools that humans throughout history have used to coordinate their efforts: identity-shaping narratives and institutions of multilevel governance.” (Read “The socioeconomics of pandemics policy, Dennis J. Snower, Working Paper #138, Global Economy and Development, Brookings Institution, Washington, D.C). This leads me to my lead commentary, namely, the following. The world community, especially multilateral and bilateral lenders as well as commercial entities must now consider cancelling all debt to Sub-Saharan African nations, especially to countries with low incomes. Sub-Saharan Africa is not yet the epicenter of the global pandemic, COVID-19. WHO and others opine that the pandemic will spread more widely in June, 2020 and beyond? Regardless of the spread, the continent won’t be spared from its devastating socioeconomic effects. A major area of concern is the continent’s indebtedness to foreign entities; and how this can and should be addressed in a holistic; and not in a piecemeal manner. Sub-Saharan Africa is the world’s next development frontier with untapped potential. In 2018, the total population of Sub-Saharan Africa amounted to approximately 1.08 billion inhabitants. An estimated three-quarters or 75 percent of this population is below the age of 35. Ethiopia’s current population is estimated at 115 million; and at least 70 percent is below the age of 30. This energetic, creative and entrepreneurial population seeks empowerment, good governance and a conducive environment free of nepotism, tribalism, corruption and repression in order to succeed and produce. Like the rest of humanity, Africans want justice and a chance to improve their lives. Very rarely do we hear African youth saying that they need handouts or dependency on the donor community. What we hear most often is good, inclusive, empowering and democratic

Page5 governance free of nepotism and corruption. Those who enjoy these attributes are succeeding and those that lack them are suffering. Botswana is a good example. A two-world phenomenon at play The planet’s poorest of the poor live in Sub-Saharan Africa. SSA has a long way to go to reach a wealth status developed nations have achieved. In 2020, the entire world’s GDP was estimated at $95 trillion. The top nations with the highest estimated GDP consisted of the USA at $21 trillion; China at $14 trillion; Japan at $5 trillion; Germany at $4 trillion; India at $3 trillion; the U.K. at $2.8 trillion; France at $2.7 trillion; Italy at $2 trillion; Brazil at $1.85 trillion; Canada at $1.73 trillion; and Russia at $1.64 trillion. By comparison, the entire SSA accounted for $2.6 trillion. This fact alone suggests that SubSaharan Africa would be better-off if the entire continent establishes an integrated Pan-African economy and leverage its size and compete with global actors. Economic size matters. Rich countries have the resources to help poor countries. Among the means to help is cancelling Africa’s huge debt burden. Part II of III will discuss “Why worry about Africa at all?” and diagnose the core policy and structural problems facing this huge continent.