The current global financial crisis exposed governance crisis among financial institutions whose board rooms had been politicized to some extent that, board independence had been compromised.

This independence as pointed out in the previous article, was even more compromised by the remuneration regime of fat salaries, bonuses and share options to bank executives who managed these institutions to increase shareholders’ value, by increasing their bottom line.

The new financial model of mixing equity culture with credit culture, attracted such style of management to expand business with more profitable mortgage products driving their expansion and share prices which increased capital gains to shareholders who either sold such shares, or swapped these for other high yield securities.

The issue of corporate governance in crisis at this point in time, is even more critical for investment banking, most of which have gone bankrupt (eg Merril Lynch, Lehman Brothers, Northern Rock etc) and those surviving have seen their assets wiped off their balance sheets at rate unseen in financial history.

The culture of investment banking  is quite difficult to control from the board room mainly because their products are more difficult to understand than simple banking products which exposes risk controls measures used by these financial institutions.

As pointed out earlier, the issue of political pressure is coming to fore in a number of financial literature with regard to the extent to which the board rooms of these powerful financial institutions are controlled by powerful families which own substantial stake in these, and which wield political clout in these economies.

And although some commentators have questioned the idealism of market forces and the capitalist model as having a hand in this, there are many forces at work than could be explained by the economic model of capitalism alone.

After all, the beneficiaries of the capitalist model have been hit hard by the same crisis, considering that, this years’ list of billionaires has seen over 40% of world richest people dropped as a result of the current crisis.

Thus, it will take time to know the precise cause of the current crisis as it will take to quantify its consequences to most economies, and especially capitalistic.

In the meantime the developing economies which are not integrated with world economies continue to defy the waves of the crisis to some extent, with some posting impressive growth records, when the western economies are recessed to the core.

What is even more ironic is that, banking institutions in these very developing countries are reporting high revenues than can be anticipated during this period, when their counter parts in the western countries are posting losses that may take time to write off.

But what all this means is that, we are working within our own model of development that is so ‘unique’ that it does not accord to the norms and factors that are at work during the current crisis.

Either, this model is by plan or by default, although the later seems to make sense of our situation.

The realization that we in developing world can afford to live in such economic ignorance is so scary that, one wonders whether our political economy has an identity; for its identity is supposed to be defined/shaped by the economic destiny which seems illusive for now.

Put differently, uncontrolled economic destiny  questions the very existence of such economies and by extension their political economy’s sustainability.

Nonetheless, reports coming from western financial markets suggest that, the current crisis may be easing. Signs from major stock markets indicate that, they are recovering by some 25% to 35% of their capitalization values, key bond markets have recovered, with losses on residential mortgage securities (RMBS) a key financial instrument/derivative that hit major financial house’ balance sheets declining.

This is all due to the prompt response of policy makers in the western capitals, spearheaded by the US which put in place huge amounts of financial resources in stimulus package against which other western economies followed suit.

But the consequence was that, western financial systems received US $ 14 trillion in support or guarantees by central banks in the US, and EU a whooping sum of money, considering that, this is exactly equivalent to 50% of these countries’ GDP.

These unprecedented policy actions by governments and central banks prevented a disaster when world financial systems came close to collapse late 2008.

Such a collapse would have then led the entire world into depression that would write off many economies, and see many failed state even in the west.

The worst case of a failed state is economic rather than political, although they both have a causal/effect relationship.

This is the irony of economic blunders. Those who have no hand in its cause, must face its consequences.

Depending on when these economies will be out of recession, the fundamental challenge that is bound to face the same policy makers is the management of level of deficit/national debt accumulated during this crisis that is unprecedented in history of recessions, arising mainly out of the stimulus packages and quantitative easing (buying of government debt to boost lending and promote economic recovery) which brings another cycle of debt, mainly long-term.

This is so for there is only so much monetary policy can do to offset fiscal policy, and buying back these huge amounts of debt will be the responsibility of future generations. This is the irony of economic blunders.

Those who have no hand in its cause, must face its consequences. In the meantime, African Union leaders meeting in Libya have as their main agenda "Food security and Agriculture”.

Whether these leaders have been reminded by the current crisis that, this is a priority, or the current prescription of Bretton Wood Institutions, or Economic Commission for Africa (which houses AU conferences), one thing is certain.

This will be another declaration that only serves  as a reminder to many before it, that fills the archives of AU (African Union) and whose implementation is an enigma.

Like has been urged in previous articles, it takes backward political economy to imagine that, Africa’s agro sector that employs 80% of its population, and feeds their entire populations, can ignored, and expect development.

How do these policy makers even talk of poverty reduction when they can not address the issue of agro production?

All it takes is political will to design implementable policies that will address the structural problems of this industry from farm inputs, training (through demonstration farms of which we have a few in Rwanda), and stream lining their purchase and marketing channels.

In our East-African neighbours, the later was achieved through produce and marketing boards (eg, coffee, cotton, cereals, boards etc), and despite these being bedeviled by corruption, their earlier function was, but a success.

Rwanda, should succeed putting these in place, where the otherst failed.

Ends