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.
So their populations will have an excuse to break into America to rape and pillage. The Gringos don’t care if the illegals are going to steal steal them blind for “a better life” in the Land of the Big Free Stuff Piñata.
Government corruption, camouflaged by ideological trappings.
I read a story about a fellow in Senegal who was a highly motivated entrepreneur. He was western educated and knew that his hometown could use a store a bit like Walmart, smaller of course but offering everything from groceries to hardware. He got financing and opened up shop. He failed within six months.
He ran afoul of a cultural norm he should have expected. Among the Senegalese, property anyone in your family has is expected to be shared. His “family” including third, fourth and fifth cousins simply carted his inventory away. The authorities considered such appropriation to be a family matter.
There seems to be no way to operate a business in Senegal unless one is an outsider or an orphan.
Singapore was benevolent socialism/dictatorship. Read “Third World to First”, given to me in Afghanistan, by Singaporean whose Harvard education was 100% paid for by the Singapore government.
Hernando de Soto (economist)It is amusing you write, "But you can't graft these western principles on to closed minded tribal thinking." I think it might be true today that "these Western principles" have been abandoned by the DC politicians and administrative state bureaucrats...Capitalism is essentially the economic system of poor people.
Then, when a poor person comes into some money (inheritance, insurance payout, lottery, whatever) they immediately spend it on:
1)A brand new car
2)Latest most expensive cellphone
3)Big-screen TV
4)other crap/”bling”
They won’t use it to pay off their debts, which would improve their 400 credit score.
Also helps that there aren’t months of cold weather to help weed out the ones incapable of planning.
It’s called The Bell Curve and it’s real.
L
Lack of leadership... Lack of desire to become more...
Look at the ghetto as an example of the desire to become a poor country. No paint on the house but a Cadillac in the driveway... Smokin a ciggarello and looking around to see who is noticing them...
"The Birth of Plenty" is a term often associated with economic historian William J. Bernstein's book "The Birth of Plenty: How the Prosperity of the Modern World was Created." In this book, Bernstein argues that four key factors are necessary and sufficient for the emergence of widespread prosperity and economic growth. These factors are often referred to as the "Four Pillars of Prosperity." They are:
Property Rights: Secure and well-defined property rights are essential for economic growth. When individuals and businesses have confidence that their property (including land, assets, and intellectual property) will be protected from theft and expropriation, they are more likely to invest and innovate.
Scientific Rationalism: A culture that values and promotes scientific inquiry and rational thinking is critical for technological progress. This includes support for education, research, and the application of scientific knowledge to solve practical problems.
Capital Markets: Efficient and accessible capital markets enable individuals and businesses to access funding for investment and entrepreneurship. Well-functioning financial institutions, such as banks and stock markets, are crucial for allocating capital to its most productive uses.
Transportation and Communication: Effective transportation and communication networks facilitate the movement of goods, people, and information. Modern infrastructure, including roads, ports, railways, and the internet, plays a vital role in connecting markets and promoting economic growth.
Bernstein argues that these four pillars are necessary and sufficient because they create an environment conducive to economic development and innovation. When these conditions are met, economies tend to flourish and experience what he calls "The Birth of Plenty."
Because people like Bill and Hillary collect billions to give to poor nations and then abscond with the funds. It’s the ‘big secret’ behind foreign aid - our tax dollars are supposedly sent to secure clean drinking water or food etc. and then it either never leaves the US (divided among Deep Staters) or fans out to oligarchs all over the world.
Year after year - the same pleas for the villagers to have clean drinking water...
Inbreeding leading to low IQs across the population.
Singapore had and has elements of proprietorship, rather than socialism.
Of course, this distinction depends on what is meant by “socialism.” The word has been quite elastic since it was invented. Marx defined it as government ownership of the means of production. Toward the end of the 20th Century, after the fall of the Berlin Wall, socialism came to mean extensive government regulation of the private sector combined with extensive redistribution of the wealth. Now, people like Bernie Sanders say the Nordic countries are socialist, when according to the people who have been trying to measure the degree to which an economy is centrally-planned versus market-oriented, the Nordic countries are as or more market-oriented than the U.S. (Sanders, by the way, honeymooned in the Soviet Union, not in a Nordic country.)
Turning to Singapore, it is reckoned to be the most free economy in the world (by this measure, 83.9; notice, even though the freest in the world, the score is well below 100).
https://www.heritage.org/index/country/singapore
As to what I describe as “proprietary” elements, the founding and long-time dominant party of the country was and is highly-invested in the economy, and therefore highly interested in its success. For an island-country totally dependent on trade and international investment, this means keeping industry competitive and not regulated.
Add to the orientation of the country to success, the tendency of the government to censor dissent, including anything it deems injurious to the peace of the island-country, and it’s not exactly comparable to western democratic capitalist countries.
You can list those things but the number one reason societies flourish is the moral character of its citizens. What happens to a country without a conscience? We’re about to find out. Wake me when you see a criminal express remorse for their crimes!
Why do poor countries always stay so poor???? Because of the graft and corruption that is now happening in the US political system. With signs that it is only going to get worse. This is what happens when a country kicks THE GOD OF CREATION OUT.
The African elephant in the room.
Rd later.
Thanks for posting.
If only high school kids would read articles like this...
Race culture politics
Chicken egg
What’s downstream of what
Whites basically via Christianity culture and populations pressure and resource coveting and trade conquered or civilized the world more than anyone else
Folks used to understand this
Now we’re blamed for it even as they still depend on us
You can argue the whys forever but to any empirical observer you can see which groups have outperformed others even sub groups in the groups
The NWO types wish to erase all this with themselves as elite overlords
The dacha class
I heard Thomas Sowell say yesterday pretty much
“Human nature would prefer poverty and equal over some doing better than you”
Good performing groups have certain characteristics
Emphasis on family like where I live
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