Contributing Author Dickson Igwe
Africa: land of the rising sun, is second story in a series of articles on an emerging global powerhouse. The following article juxtaposes a new African dynamism, with financial conundrum in Western Society that has slowed global economic growth
2007 saw the start of the Great Recession in the West, which began with the collapse of Lehman Brothers, an old, established, and powerful Investment bank on New York’s Wall Street. This collapse, the largest bankruptcy in US history, saw Lehman’s 600 billion dollars of managed assets turn to sand, when it was revealed the company was holding huge amounts of bad housing loans.
The crisis opened up a Pandora’s Box that exposed the feet of clay of the global banking machine. The contagion swiftly spread to the City Of London, and then other global financial centers, leading to a worldwide recession, chiefly in the West, that lasted up, and until, sometime in 2009. The Western economy continues to suffer the after effects of these two years of recession.
This was a financial meltdown in the Western banking system: chiefly the result of decades of a cowboy culture, and a self regulating banking and investment framework in the world’s most critical financial markets. A modus Vivendi championed by laissez faire type commercial thinking; thinking which determined that small government and deregulation, were panacea for all things bright and beautiful.
African market. Photo courtesy photographersdirect.com
This lack of regulation however, was a parody of commonsense, the inverse of economic wisdom, that led to unsustainable and crushing Western debt held by consumers, businesses, and governments, and running into trillions of dollars.
A culture of poker, a game of cards, in financial markets, characterized by greed, hubris, and a casino type economics, saw thousands of investors lose billions of their hard earned dollars, when the gravy train finally went over the proverbial precipice: the banking express had slammed into the buffers. And the train driver was found woefully ignorant of where he was going, and unable to keep the train under control. The already harassed taxpayer had to come to the rescue of an industry deemed, ‘too big to fail’ by the Western establishment: a double whammy for Joe Average!
Incredibly, after all the hard lessons of recent years, greed, hubris, and arrogance, is still a feature of the world of high finance. J P Morgan, the biggest bank in the USA, earlier in 2012, lost over 6 billion dollars in a ‘’bad trade,’’ this was the consequence of ‘’risky trades’’ that hearken back to pre 2007, and the carelessness over the management of other people’s money, and this may be just the start of something very rotten in that institution that points to the continued exposure of the global economy to mega bank incompetence. And this July, 2012, is seeing the start of a new banking crisis and scandal: the London Interbank Offered Rate matter-LIBOR.
‘’LIBOR, ‘’is a synonym for the illegal and deceptive, fixing and manipulation of bank interest rates, worldwide, by managers and traders of some of the world’s most powerful banks. Bankers and dealers in their ivory tower offices, playing the markets, and scooping the cream off of nearly one thousand trillion dollars worldwide in banking funds, a stupendous amount of money owned by depositors and investors, small and large.
The LIBOR matter may be about to trigger a further fall in consumer confidence in the global banking system, and a global investigation of some of the biggest banks. This is not good for the global economy. Hundreds of millions of average bank customers, Virgin Islands residents included, may have been swindled for years, suffering for the greed of the global banking establishment, and its army of financial mercenaries.
Average consumers, paying relatively exorbitant and inflated rates of interest, on home loans, car payments, and credit card debt, while getting ‘nada’ for their bank deposits. Victims of greedy men, who pocketed millions, illegally, off the back of the hard work and sweat of the consumer: a global scam!
Similarly, earlier, the banking crisis of 2007 was triggered by ill advised subprime mortgages that became bad debts, leading to millions of repossessions, and a drop in the Western house price. Again, greed was the motivator. It saw many homeowners in the USA living in homes with mortgages in excess of the home value. The housing crisis was to some extent mimicked in other Western countries.
Consequently, the Western economy plunged into a deep recession, and that has been followed by anemic economic growth ever since. The Western economy is paying for the sins of wealthy and unscrupulous bankers, and a culture of greed.
This is a new page in economic history, a Western idiosyncrasy of greed and deception, that has shifted the center of global economic and commercial gravity from Europe and the Atlantic, eastwards and towards the Pacific. Europe, the world’s largest market, is believed by the pundits to be in long term economic decline. And this is supported by some key demographics, social crises caused by austerity measures in countries such as Spain and Greece, including poor European economic growth that appears as a new normal.
Photo courtesy dealbook.nytimes.com
Add to that an unsustainable culture of welfare and entitlement supported by high rates of taxation, leading to high youth unemployment, and weariness to invest in job creating businesses, by businessmen. The future for Europe’s youth is not looking very rosy these days, with high unemployment among school and college leavers, aging populations, and long term economic stagnation.
But, while Britain, France, and other European nations have been scratching their collective skulls at the limp nature of their ‘post-the-Great-Recession-economic-performances, newly emergent powerhouses in Asia and Latin America, and a newly confident Africa, have been growing economically in leaps and bounds, and at rates the West can only dream of. However one caveat: this July 2012 is witnessing a slowdown even in emerging economies. China especially, is exports driven and weak growth in the USA, and the European Recession, is a drag on its economy.
Africa on the other hand has, and continues to grow strongly: the ‘Dark Continent’ appears to have turned a new leaf this 2012, and today, for the first time in hundreds of years, Africa may be sitting on the right side of social and economic history. This, according to the Economist of December 3, 2011: a Leader story titled, ‘’AFRICA RISING.’’
Apparently, ‘’after decades of slow growth, Africa has a real chance to follow in the footsteps of Asia.’’ Furthermore, ‘’ over the past decade, six of the world’s ten fastest growing countries were African. Africa has grown faster than East Asia, including Japan. The IMF expects Africa to grow 6% in 2012,’’ equal with Asia.
The story tells of shops that are, ‘’stacked six feet with goods, the streets outside jammed with customers, and salespeople sweating profusely under the onslaught. But this is not a high street during the Christmas shopping season in the rich world.
It is Onitsha, a market town in Southern Nigeria. Many call it the world’s biggest.’’ ‘’ Up to 3 million people go there daily to buy rice, soap, computers, and construction equipment. It is a hub for traders from the Gulf of Guinea; home to millions of highly motivated entrepreneurs, and increasingly prosperous consumers.’’ Onitsha is a portrait of African commercial dynamism that is being copied throughout Africa where an avant garde free enterprise culture, albeit of a peculiarly African quality has caught fire.
The Economist tells of some pretty interesting metrics coming out of Africa: ‘’ a commodities boom; growth from higher revenues from natural resources; favorable demography; with fertility rates crashing in Asia and Latin America, half of the increase in population over the next 40 years will be in Africa; and manufacturing and service economies have a lot to do with African economic growth.’’
This July 2012, in a world beset increasingly by gloom, Africa represents a renaissance in optimism: the African sun is clearly on the rise.
To be continued
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