Posted on 09/23/2023 4:33:24 AM PDT by MtnClimber
It’s now more than sixty years since the independence movement in the late 1950s and early 1960s transformed nearly all of sub-Saharan Africa into independent countries. Hopes soared for a new era of progress and prosperity. But six plus decades on, with essentially no exceptions (maybe Botswana?), the 49 countries of sub-Saharan Africa are about as poor as ever.
The New York Times treats the subject in a big piece by Patricia Cohen a few days ago on September 18. Sorry if this is behind their paywall, but I subscribe to this stuff so that you don’t have to. In the treatment at the Times, this is just a case of the sad cruelty of nature, an extreme instance of “bad luck.” But we can learn a good deal about the true source of the bad luck by looking at clues that Ms. Cohen and the Times inadvertently drop in the course of their reporting, without even noticing that they are doing it.
The funny thing about the bad luck of sub-Saharan Africa is that it seems to afflict all 49 countries at the same time, even as elsewhere in the world at least a few countries (South Korea, Taiwan, Thailand) are able to find the magic recipe to rise out of poverty.
This week’s piece in the Times focuses particularly on the country of Ghana. The headline is “Crisis and Bailout: The Tortuous Cycle Stalking Nations in Debt.” The sub-headline is “The government of Ghana is essentially bankrupt, and has turned to the International Monetary Fund for its 17th financial rescue since 1957.” Seventeen financial bailouts in 66 years since 1957 would be more than one bailout every four years.
In Ms. Cohen’s reporting, the “tortuous cycle” of debt is just an inevitable fact of life for poor nations, one that somehow persists despite the best efforts of the very best and cleverest people. A few excerpts:
The government is essentially bankrupt. After defaulting on billions of dollars owed to foreign lenders in December, the administration of President Nana Akufo-Addo had no choice but to agree to a $3 billion loan from the lender of last resort, the International Monetary Fund. It was the 17th time Ghana has been compelled to turn to the fund since it gained independence in 1957. This latest crisis was partly prompted by the havoc of the coronavirus pandemic, Russia’s invasion of Ukraine, and higher food and fuel prices. But the tortuous cycle of crisis and bailout has plagued dozens of poor and middle-income countries throughout Africa, Latin America and Asia for decades.
The piece proceeds with heart-rending stories of Ghanaians seeing their lives up-ended as the currency collapses and the government defaults on its debts. For starters, here is the situation at a big construction project of an amusement park in the capital of Accra:
Emmanuel Cherry, the chief executive of an association of Ghanaian construction companies, sat in a cafe at the edge of Accra Children’s Park, near the derelict Ferris wheel and kiddie train, as he tallied up how much money government entities owe thousands of contractors. Before interest, he said, the back payments add up to 15 billion cedis, roughly $1.3 billion. “Most of the contractors are home,” Mr. Cherry said. Their workers have been laid off. Like many others in this West African country, the contractors have to wait in line for their money.
It’s a very sad story for the thousands of contractors who have done major work and are going unpaid. But wait a minute! The government is constructing an amusement park? And taking on upwards of a billion dollars of public debt to do it? Moreover, the full cost of the project must be well more than the $1.3 billion, since that is just the amount of unpaid bills currently outstanding. How could government financing of this project possibly make sense in an impoverished sub-Saharan country where the people lack for basic things like food, housing and electricity?
I would say it is completely obvious that no government should be in the business of financing and building amusement parks. Here in the U.S., I’m sure that a Disney or a Universal can hit up Florida or California for some tax breaks or other baksheesh from time to time for their big parks. But financing the whole thing with central government bonds? That’s ridiculous. And yet somehow Ms. Cohen and the Times don’t notice anything out of line.
Read a good deal farther into the article, and you come to this:
As Ghana’s foreign reserves skidded toward zero, the government began paying for refined oil imports directly with gold bought by the central bank.
OK, why is the government paying for refined oil imports? Does the U.S. government pay for the imports of oil products into the U.S.? Maybe yes for a tiny percentage, perhaps for an overseas military base; but almost entirely, oil imports into (or exports out of) the U.S. are done by private parties. Again, Ms. Cohen and the Times don’t evidence any awareness that government pre-emption of such an economic sector can come to no good.
Obviously the government is way too involved in what should be private sector businesses, running up debts for uneconomic endeavors and then inevitably defaulting when the government lacks the ability (as all governments do) to run the businesses profitably.
So Ghana is falling back into the suffocating embrace of the IMF for the 17th time since independence. After all, as the Times says, they have “no choice.” And we all know what is the universal prescription of the IMF for impoverished countries: more government spending and higher taxes.
How could that possibly make sense? If you don’t immediately grasp the logic, you need an education in IMF-speak. I had a post back on June 19, 2017 covering this subject. The title was “The Important Work Of International Agencies: Keeping The Poor Poor.” That post highlighted a quote from then IMF head Christine Lagarde as to how higher taxes and higher government spending are the magic elixir for alleviating poverty. Note Ms. Lagarde’s weird bureaucratic terminology:
[W]e are here to discuss an equally powerful tool for global growth — domestic resource mobilization. . . . [T]axes, and the improvement of tax systems, can boost development in incredible ways. . . . So today, allow me first to explain the IMF’s commitment to capacity development and second, to outline strategies governments can use to generate stable sources of revenue…
“Domestic resource mobilization” — that’s IMF babble for higher taxes and higher government spending. After all, you need to get the resources out of the hands of the layabout private citizens and into the hands of the brilliant government bureaucrats to make sure that they are “mobilized” appropriately. Multiple decades of this, and every one of the 49 sub-Saharan countries remains poor.
Meanwhile, Ms. Lagarde has failed upward to become the head of the European Central Bank. Her replacement at the IMF, Kristalina Georgieva, has not changed anything as far as I can discern. After all, if poor countries did not default regularly, and need bailouts, what would the functionaries at the IMF do?
I would not expect the “tortuous cycle” of debt and poverty for Ghana, or for other poor countries, to change any time soon. Too many well-paid people at international bureaucracies have a vested interest in keeping the game going just as it is.
With Bidenomics we are driving at high speed on the highway to Ghana ourselves.
Manhattan Contrarian ping
My experience with poor people is that most lack the skills to view money as a tool to build something. They can only think in terms of its immediate usage to buy personal bodily needs. They do not think in terms of using it towards the next step of building something.
Some say evolution.
Continuing its’ leftwing socialism (or other brand names) will continue their failed economic system.
Yours is a thoughtful observation. Cheers!
The only acceptable answer is the US caused the poverty. It doesn’t matter that the US has probably transferred more wealth to these countries than the sum of total wealth created natively since the beginning of humanity.
Corruption
Nearly all are “countries” solely as legacies of European colonial rule with borders drawn up on maps in wood paneled rooms thousands of miles away. They were happily spearing and chopping each other to bits before the pale strangers arrived and in most cases have or will revert to tribal slaughter and caste and once they’ve left. Some which were unified and functioning like nation states before the Europeans arrived and avoided being colonized (China, Thailand, and Japan for example) are doing rather well.
BECAUSE....The people. Take out the natives and put them in a rich place and take them rich people from there, and put them in the po’ place. Come back in 20 years or so and the formerly rich place will be the po’ one, and the po’ one will now be rich.
Mostly low IQ populations.
IQ.
The explanation I read about why sub-Saharan countries have such low average IQs is that the historical tribalism led to untold generations of inbreeding. And compounded by childhood malnutrition from growing up in low-IQ societies.
Interesting read; thank you for posting it.
Reflecting on it I started thinking about whether the premise applies on an individual or personal level and whether it can be applied to enduring poverty in some people in thriving countries. I think it can. The LBJ war on poverty of the 60s to dole out money to groups and individuals that can never be repaid, deepened the poverty of the group. Affirmative action, minority set asides, high levels of easy welfare, and other “free” money puts one into a cycle of being in a whirlpool that can’t be escaped. Now we have huge amounts of college loan defaults that only supported and bailed out the higher education sector of our economy.
Hmmm. Still thinking.
Gwjack
That’s why you see a person being killed for the $30 in their billfold. And, the killer isn’t using that money to stock their child’s college fund.
Poor people have no big picture view of life. They live for today.
Dysfunctional cultures breed dysfunctional habits.
Note the pattern of Asian, African, Latin American, and Eastern European nations.
They live like hell for the most part.
If you want some examples of Western society - see Chicago, NYC, Left Coast and all Democratic governed cities/states.
Grasshopper living is a sure way to live and die poor.
The funny thing about the bad luck of sub-Saharan Africa is that it seems to afflict all 49 countries at the same time
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Consult the Bell Curve for a clue to the answer.
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