Lessons from a global crisis

President Kagame has always been at pains to stress Rwanda’s commitment to privatisation as the key to economic development. Meanwhile, governments in the West, notably Britain, the birthplace of modern privatisation, are nationalising much of their banking industries. Other governments are re-regulating their financial systems. What lesson ought Rwanda to learn from all this? Amidst the global financial crisis, in the short term defending capitalism means, paradoxically, state intervention. A fact that does not sit well with many who believe that taxpayers’ money ought not to be spent on a highly rewarded industry. But critically state intervention is pragmatic and not ideological. Governments are not intervening as they have in the past because they believe they can run things better, but because they are needed to keep credit flowing So while Rwanda pushes privatisation, in many countries the public sector and its debt will take up a bigger portion of the economy. But crucially we ought to understand that capitalism has not failed. Over the past 25 years it has delivered wealth and freedom on a dramatic scale. Hundreds of millions of people have been dragged out of absolute poverty. Even allowing for the credit crunch, this decade may well see the fastest growth in global income per person in history. The lesson to be learnt is that finance needs regulation and because the rest of the economy cannot work without it, governments have always been heavily involved. While avoiding over-regulation (this would not immunise anyone against future crisis), what’s needed is not simply rules, but good rules. And as we strive for economic development and wealth generation, let us remember that the government’s involvement is for our own good. Ends