Global Economic Crisis: Part XVII

The current recession unlike others before it, was caused by a change in business spending whereas all recessions in economic literature, were caused by a change in consumer spending which brought a number of economies to a stand still (ie investments-led as opposed to others which were consumption led recessions). This is type of cause of recession poses serious challenges to policy makers in developing economies, for the usual monetary tools available to the monetary authorities are rendered inadequate to mitigate its effects. This is not true for western economies, for when monetary tools were exhausted (including reducing interest rates up to zero, which not solve the same, as this works best for consumer-led recessions) they had to resort to giving stimulus to their financial systems to spur domestic investments. Developing countries do not have the means to apply these measures effectively. Although causes of recessions are well documented and measures to resolve them known, the problem always lies with the pace, and the coordination with which policy makers react. Bureaucratic tendencies are the usual culprits in such a situation. This is even worse in developing countries where lack of data which is critical during this period (as it is in other times to inform decision making process) drags the entire decision making process as to what can be done and when. This then pushes these economies deep into the recession before they can act/re-act to the same, which keeps such economies in economic limbo. And although the current one is said to have hit the trough (lowest point of the recession), the question is, is it true for developing economies too? This is not the case, judging by the way our policy makers have took to manage the current recession. The display of lack of understanding as to the impact of such recession, and modest ways of mitigating the same is for all to see in most of our countries. Thus for instance information on investments/consumption spending in such economies is not available, and where it is, it captures variables of urban economy, which may not necessarily be representative of the entire economy. Mean while, the G 8 meeting (which will be increased to become G 14 soon to accommodate emerging economies of China, Brazil, India, and South Africa) which took place last week in the Italian town of L’Aquila agreed to increase and coordinate their stimuli packages so as to restore financial soundness of their economies. Africa was also on the table but as a by the way. A few African leaders were invited for “side meetings’ and photo session, but the fate of the continent had already been sealed. 20 billion dollars were pledged to support agriculture and ensure food security for our continent. One only hopes that, these funds are disbursed and used for the intended purpose. President Obama put it in proper perspective when he said “we believe the purpose of aid must be to create the conditions where it is no longer needed, to help people become self-sufficient, provide for their families and lift their standards of living”. The political economy in Africa, should take his message for what it is, for it is a reminder for what they have failed to do, so far. What is needed on the part of donors, is to demand from African leadership, the timeframe work when they expect to graduate from aid. This will require that, any aid given is used sustainably that, after time t, no more aid will be given to a particular sector/economy if it has not graduated. Open ended donations will have to end (if our political leaders are to create conditions where aid is no longer needed). A collective message sent to our political economy, that, donors will end their handouts, and seriously so would suffice. This will send signals to such leaders to develop internal financial mechanism to finance their development agenda. Expecting such leaders (who are used to free handouts which in most cases are used for their own purposes), to graduate themselves from aid syndrome is unrealistic. Otherwise aid is here to stay, and our development illusive, for no country has ever developed (been developed) by exogenous resources/ forces. However, existing economic literature negates the potential of aid as a development strategy, although such literature does not label it ‘dead’. It views aid (that should have end period) as complementary to local resource mobilization, but not its substitute, as is the case in most African economies. Nonetheless, G 8 also debated the issue of food security, which is in most part attributed to wrong policies/policy mix, although other factors account for this. The surge in populations, and urbanization which has swept most developing economies and which has changed peoples feeding habits, while reducing the numbers of those who are engaged in active farming adds weight to failed agricultural policies. UN now has pointed out that, we shall need two earths to feed world’s growing populations which amplifies the seriousness with which food security should be taken by policy makers. But this challenge will also pose an opportunity for those countries which can respond to the mismatch between demand and supply of food, and do so fast. As pointed out in earlier articles, agricultural industry is recession resilient, and agriculture is one sector of the economy that has not been hit hard by the current global financial meltdown. It is also one sector that takes short time lags to fix in an economy, that our policy makers can not have any excuse for not executing their responsibility to that end. While in Ghana, President Obama also reminded African leaders that, “development depends upon good governance…that is the ingredient which has been missing in far too many places, for far too long. And that is the responsibility that can only be meet by African”. One can not expect a better message to our polity. That the development of our countries is our sole responsibility, and that it has to be home grown is not a thesis. That our development is own business is a stark truth/reality for no other stakeholder(s) has an obligation/incentive/duty/benefit/imperative/ name it, to develop our economies except ourselves. Blaming the others (colonialists/imperialists/neocolonialists-the list is long) is not only escapegoatism, but also does not in any way demean this responsibility. We share the same history with Asian Tigers, who in the past 40 years have demystified western development models, while China is doing it as we watch. What it is nonetheless, is that, even in age where Africa is not short of resources (its has never been) and with modest human capital, it is seriously short of visionary leaders. Countries, like corporations thrive when they have the best managers. Our problem is therefore to find these managers, and elect them to office where they can serve selfless to propel our development. A fundamental impediment to our development is that; we don’t have strong institutions which can hold such leaders accountable for their development record, and even where such leader, lead their countries to bankruptcy (see Zimbabwe) their counter parts cover them, for some of them, perhaps most are no better. Expecting our economies to develop without strong institutions is but utopia. Commenting on Asian development (where countries like Malaysia had less GDP per capita than countries such as Kenya at independence in 1957) Roddrick (1997) points out that, the relative measure of institutional quality discriminated very well between winners and losers in Asian growth. Thus, for instance, where as the two countries (Kenya and Malaysia) inherited similar institutional framework from British colonial regime, Kenya’s deteriorated from 1970s on wards (while Malaysia strengthened its own). Incase of Kenya (like many other African countries at the time) this saw the rule of law compromised, and the legislature and executive became almost synonymous. This then lead to institutionalized corruption both political and economic resulting from broken checks and balances, and these countries have not been the same since then. Global Economic Crisis: Part XVII The current recession unlike others before it, was caused by a change in business spending whereas all recessions in economic literature, were caused by a change in consumer spending which brought a number of economies to a stand still (ie investments-led as opposed to others which were consumption led recessions). This is type of cause of recession poses serious challenges to policy makers in developing economies, for the usual monetary tools available to the monetary authorities are rendered inadequate to mitigate its effects. This is not true for western economies, for when monetary tools were exhausted (including reducing interest rates up to zero, which not solve the same, as this works best for consumer-led recessions) they had to resort to giving stimulus to their financial systems to spur domestic investments. Developing countries do not have the means to apply these measures effectively. Although causes of recessions are well documented and measures to resolve them known, the problem always lies with the pace, and the coordination with which policy makers react. Bureaucratic tendencies are the usual culprits in such a situation. This is even worse in developing countries where lack of data which is critical during this period (as it is in other times to inform decision making process) drags the entire decision making process as to what can be done and when. This then pushes these economies deep into the recession before they can act/re-act to the same, which keeps such economies in economic limbo. And although the current one is said to have hit the trough (lowest point of the recession), the question is, is it true for developing economies too? This is not the case, judging by the way our policy makers have took to manage the current recession. The display of lack of understanding as to the impact of such recession, and modest ways of mitigating the same is for all to see in most of our countries. Thus for instance information on investments/consumption spending in such economies is not available, and where it is, it captures variables of urban economy, which may not necessarily be representative of the entire economy. Mean while, the G 8 meeting (which will be increased to become G 14 soon to accommodate emerging economies of China, Brazil, India, and South Africa) which took place last week in the Italian town of L’Aquila agreed to increase and coordinate their stimuli packages so as to restore financial soundness of their economies. Africa was also on the table but as a by the way. A few African leaders were invited for “side meetings’ and photo session, but the fate of the continent had already been sealed. 20 billion dollars were pledged to support agriculture and ensure food security for our continent. One only hopes that, these funds are disbursed and used for the intended purpose. President Obama put it in proper perspective when he said “we believe the purpose of aid must be to create the conditions where it is no longer needed, to help people become self-sufficient, provide for their families and lift their standards of living”. The political economy in Africa, should take his message for what it is, for it is a reminder for what they have failed to do, so far. What is needed on the part of donors, is to demand from African leadership, the timeframe work when they expect to graduate from aid. This will require that, any aid given is used sustainably that, after time t, no more aid will be given to a particular sector/economy if it has not graduated. Open ended donations will have to end (if our political leaders are to create conditions where aid is no longer needed). A collective message sent to our political economy, that, donors will end their handouts, and seriously so would suffice. This will send signals to such leaders to develop internal financial mechanism to finance their development agenda. Expecting such leaders (who are used to free handouts which in most cases are used for their own purposes), to graduate themselves from aid syndrome is unrealistic. Otherwise aid is here to stay, and our development illusive, for no country has ever developed (been developed) by exogenous resources/ forces. However, existing economic literature negates the potential of aid as a development strategy, although such literature does not label it ‘dead’. It views aid (that should have end period) as complementary to local resource mobilization, but not its substitute, as is the case in most African economies. Nonetheless, G 8 also debated the issue of food security, which is in most part attributed to wrong policies/policy mix, although other factors account for this. The surge in populations, and urbanization which has swept most developing economies and which has changed peoples feeding habits, while reducing the numbers of those who are engaged in active farming adds weight to failed agricultural policies. UN now has pointed out that, we shall need two earths to feed world’s growing populations which amplifies the seriousness with which food security should be taken by policy makers. But this challenge will also pose an opportunity for those countries which can respond to the mismatch between demand and supply of food, and do so fast. As pointed out in earlier articles, agricultural industry is recession resilient, and agriculture is one sector of the economy that has not been hit hard by the current global financial meltdown. It is also one sector that takes short time lags to fix in an economy, that our policy makers can not have any excuse for not executing their responsibility to that end. While in Ghana, President Obama also reminded African leaders that, “development depends upon good governance…that is the ingredient which has been missing in far too many places, for far too long. And that is the responsibility that can only be meet by African”. One can not expect a better message to our polity. That the development of our countries is our sole responsibility, and that it has to be home grown is not a thesis. That our development is own business is a stark truth/reality for no other stakeholder(s) has an obligation/incentive/duty/benefit/imperative/ name it, to develop our economies except ourselves. Blaming the others (colonialists/imperialists/neocolonialists-the list is long) is not only escapegoatism, but also does not in any way demean this responsibility. We share the same history with Asian Tigers, who in the past 40 years have demystified western development models, while China is doing it as we watch. What it is nonetheless, is that, even in age where Africa is not short of resources (its has never been) and with modest human capital, it is seriously short of visionary leaders. Countries, like corporations thrive when they have the best managers. Our problem is therefore to find these managers, and elect them to office where they can serve selfless to propel our development. A fundamental impediment to our development is that; we don’t have strong institutions which can hold such leaders accountable for their development record, and even where such leader, lead their countries to bankruptcy (see Zimbabwe) their counter parts cover them, for some of them, perhaps most are no better. Expecting our economies to develop without strong institutions is but utopia. Commenting on Asian development (where countries like Malaysia had less GDP per capita than countries such as Kenya at independence in 1957) Roddrick (1997) points out that, the relative measure of institutional quality discriminated very well between winners and losers in Asian growth. Thus, for instance, where as the two countries (Kenya and Malaysia) inherited similar institutional framework from British colonial regime, Kenya’s deteriorated from 1970s on wards (while Malaysia strengthened its own). Incase of Kenya (like many other African countries at the time) this saw the rule of law compromised, and the legislature and executive became almost synonymous. This then lead to institutionalized corruption both political and economic resulting from broken checks and balances, and these countries have not been the same since then. Global Economic Crisis: Part XVII The current recession unlike others before it, was caused by a change in business spending whereas all recessions in economic literature, were caused by a change in consumer spending which brought a number of economies to a stand still (ie investments-led as opposed to others which were consumption led recessions). This is type of cause of recession poses serious challenges to policy makers in developing economies, for the usual monetary tools available to the monetary authorities are rendered inadequate to mitigate its effects. This is not true for western economies, for when monetary tools were exhausted (including reducing interest rates up to zero, which not solve the same, as this works best for consumer-led recessions) they had to resort to giving stimulus to their financial systems to spur domestic investments. Developing countries do not have the means to apply these measures effectively. Although causes of recessions are well documented and measures to resolve them known, the problem always lies with the pace, and the coordination with which policy makers react. Bureaucratic tendencies are the usual culprits in such a situation. This is even worse in developing countries where lack of data which is critical during this period (as it is in other times to inform decision making process) drags the entire decision making process as to what can be done and when. This then pushes these economies deep into the recession before they can act/re-act to the same, which keeps such economies in economic limbo. And although the current one is said to have hit the trough (lowest point of the recession), the question is, is it true for developing economies too? This is not the case, judging by the way our policy makers have took to manage the current recession. The display of lack of understanding as to the impact of such recession, and modest ways of mitigating the same is for all to see in most of our countries. Thus for instance information on investments/consumption spending in such economies is not available, and where it is, it captures variables of urban economy, which may not necessarily be representative of the entire economy. Mean while, the G 8 meeting (which will be increased to become G 14 soon to accommodate emerging economies of China, Brazil, India, and South Africa) which took place last week in the Italian town of L’Aquila agreed to increase and coordinate their stimuli packages so as to restore financial soundness of their economies. Africa was also on the table but as a by the way. A few African leaders were invited for “side meetings’ and photo session, but the fate of the continent had already been sealed. 20 billion dollars were pledged to support agriculture and ensure food security for our continent. One only hopes that, these funds are disbursed and used for the intended purpose. President Obama put it in proper perspective when he said “we believe the purpose of aid must be to create the conditions where it is no longer needed, to help people become self-sufficient, provide for their families and lift their standards of living”. The political economy in Africa, should take his message for what it is, for it is a reminder for what they have failed to do, so far. What is needed on the part of donors, is to demand from African leadership, the timeframe work when they expect to graduate from aid. This will require that, any aid given is used sustainably that, after time t, no more aid will be given to a particular sector/economy if it has not graduated. Open ended donations will have to end (if our political leaders are to create conditions where aid is no longer needed). A collective message sent to our political economy, that, donors will end their handouts, and seriously so would suffice. This will send signals to such leaders to develop internal financial mechanism to finance their development agenda. Expecting such leaders (who are used to free handouts which in most cases are used for their own purposes), to graduate themselves from aid syndrome is unrealistic. Otherwise aid is here to stay, and our development illusive, for no country has ever developed (been developed) by exogenous resources/ forces. However, existing economic literature negates the potential of aid as a development strategy, although such literature does not label it ‘dead’. It views aid (that should have end period) as complementary to local resource mobilization, but not its substitute, as is the case in most African economies. Nonetheless, G 8 also debated the issue of food security, which is in most part attributed to wrong policies/policy mix, although other factors account for this. The surge in populations, and urbanization which has swept most developing economies and which has changed peoples feeding habits, while reducing the numbers of those who are engaged in active farming adds weight to failed agricultural policies. UN now has pointed out that, we shall need two earths to feed world’s growing populations which amplifies the seriousness with which food security should be taken by policy makers. But this challenge will also pose an opportunity for those countries which can respond to the mismatch between demand and supply of food, and do so fast. As pointed out in earlier articles, agricultural industry is recession resilient, and agriculture is one sector of the economy that has not been hit hard by the current global financial meltdown. It is also one sector that takes short time lags to fix in an economy, that our policy makers can not have any excuse for not executing their responsibility to that end. While in Ghana, President Obama also reminded African leaders that, “development depends upon good governance…that is the ingredient which has been missing in far too many places, for far too long. And that is the responsibility that can only be meet by African”. One can not expect a better message to our polity. That the development of our countries is our sole responsibility, and that it has to be home grown is not a thesis. That our development is own business is a stark truth/reality for no other stakeholder(s) has an obligation/incentive/duty/benefit/imperative/ name it, to develop our economies except ourselves. Blaming the others (colonialists/imperialists/neocolonialists-the list is long) is not only escapegoatism, but also does not in any way demean this responsibility. We share the same history with Asian Tigers, who in the past 40 years have demystified western development models, while China is doing it as we watch. What it is nonetheless, is that, even in age where Africa is not short of resources (its has never been) and with modest human capital, it is seriously short of visionary leaders. Countries, like corporations thrive when they have the best managers. Our problem is therefore to find these managers, and elect them to office where they can serve selfless to propel our development. A fundamental impediment to our development is that; we don’t have strong institutions which can hold such leaders accountable for their development record, and even where such leader, lead their countries to bankruptcy (see Zimbabwe) their counter parts cover them, for some of them, perhaps most are no better. Expecting our economies to develop without strong institutions is but utopia. Commenting on Asian development (where countries like Malaysia had less GDP per capita than countries such as Kenya at independence in 1957) Roddrick (1997) points out that, the relative measure of institutional quality discriminated very well between winners and losers in Asian growth. Thus, for instance, where as the two countries (Kenya and Malaysia) inherited similar institutional framework from British colonial regime, Kenya’s deteriorated from 1970s on wards (while Malaysia strengthened its own). Incase of Kenya (like many other African countries at the time) this saw the rule of law compromised, and the legislature and executive became almost synonymous. This then lead to institutionalized corruption both political and economic resulting from broken checks and balances, and these countries have not been the same since then. Global Economic Crisis: Part XVII The current recession unlike others before it, was caused by a change in business spending whereas all recessions in economic literature, were caused by a change in consumer spending which brought a number of economies to a stand still (ie investments-led as opposed to others which were consumption led recessions). This is type of cause of recession poses serious challenges to policy makers in developing economies, for the usual monetary tools available to the monetary authorities are rendered inadequate to mitigate its effects. This is not true for western economies, for when monetary tools were exhausted (including reducing interest rates up to zero, which not solve the same, as this works best for consumer-led recessions) they had to resort to giving stimulus to their financial systems to spur domestic investments. Developing countries do not have the means to apply these measures effectively. Although causes of recessions are well documented and measures to resolve them known, the problem always lies with the pace, and the coordination with which policy makers react. Bureaucratic tendencies are the usual culprits in such a situation. This is even worse in developing countries where lack of data which is critical during this period (as it is in other times to inform decision making process) drags the entire decision making process as to what can be done and when. This then pushes these economies deep into the recession before they can act/re-act to the same, which keeps such economies in economic limbo. And although the current one is said to have hit the trough (lowest point of the recession), the question is, is it true for developing economies too? This is not the case, judging by the way our policy makers have took to manage the current recession. The display of lack of understanding as to the impact of such recession, and modest ways of mitigating the same is for all to see in most of our countries. Thus for instance information on investments/consumption spending in such economies is not available, and where it is, it captures variables of urban economy, which may not necessarily be representative of the entire economy. Mean while, the G 8 meeting (which will be increased to become G 14 soon to accommodate emerging economies of China, Brazil, India, and South Africa) which took place last week in the Italian town of L’Aquila agreed to increase and coordinate their stimuli packages so as to restore financial soundness of their economies. Africa was also on the table but as a by the way. A few African leaders were invited for “side meetings’ and photo session, but the fate of the continent had already been sealed. 20 billion dollars were pledged to support agriculture and ensure food security for our continent. One only hopes that, these funds are disbursed and used for the intended purpose. President Obama put it in proper perspective when he said “we believe the purpose of aid must be to create the conditions where it is no longer needed, to help people become self-sufficient, provide for their families and lift their standards of living”. The political economy in Africa, should take his message for what it is, for it is a reminder for what they have failed to do, so far. What is needed on the part of donors, is to demand from African leadership, the timeframe work when they expect to graduate from aid. This will require that, any aid given is used sustainably that, after time t, no more aid will be given to a particular sector/economy if it has not graduated. Open ended donations will have to end (if our political leaders are to create conditions where aid is no longer needed). A collective message sent to our political economy, that, donors will end their handouts, and seriously so would suffice. This will send signals to such leaders to develop internal financial mechanism to finance their development agenda. Expecting such leaders (who are used to free handouts which in most cases are used for their own purposes), to graduate themselves from aid syndrome is unrealistic. Otherwise aid is here to stay, and our development illusive, for no country has ever developed (been developed) by exogenous resources/ forces. However, existing economic literature negates the potential of aid as a development strategy, although such literature does not label it ‘dead’. It views aid (that should have end period) as complementary to local resource mobilization, but not its substitute, as is the case in most African economies. Nonetheless, G 8 also debated the issue of food security, which is in most part attributed to wrong policies/policy mix, although other factors account for this. The surge in populations, and urbanization which has swept most developing economies and which has changed peoples feeding habits, while reducing the numbers of those who are engaged in active farming adds weight to failed agricultural policies. UN now has pointed out that, we shall need two earths to feed world’s growing populations which amplifies the seriousness with which food security should be taken by policy makers. But this challenge will also pose an opportunity for those countries which can respond to the mismatch between demand and supply of food, and do so fast. As pointed out in earlier articles, agricultural industry is recession resilient, and agriculture is one sector of the economy that has not been hit hard by the current global financial meltdown. It is also one sector that takes short time lags to fix in an economy, that our policy makers can not have any excuse for not executing their responsibility to that end. While in Ghana, President Obama also reminded African leaders that, “development depends upon good governance…that is the ingredient which has been missing in far too many places, for far too long. And that is the responsibility that can only be meet by African”. One can not expect a better message to our polity. That the development of our countries is our sole responsibility, and that it has to be home grown is not a thesis. That our development is own business is a stark truth/reality for no other stakeholder(s) has an obligation/incentive/duty/benefit/imperative/ name it, to develop our economies except ourselves. Blaming the others (colonialists/imperialists/neocolonialists-the list is long) is not only escapegoatism, but also does not in any way demean this responsibility. We share the same history with Asian Tigers, who in the past 40 years have demystified western development models, while China is doing it as we watch. What it is nonetheless, is that, even in age where Africa is not short of resources (its has never been) and with modest human capital, it is seriously short of visionary leaders. Countries, like corporations thrive when they have the best managers. Our problem is therefore to find these managers, and elect them to office where they can serve selfless to propel our development. A fundamental impediment to our development is that; we don’t have strong institutions which can hold such leaders accountable for their development record, and even where such leader, lead their countries to bankruptcy (see Zimbabwe) their counter parts cover them, for some of them, perhaps most are no better. Expecting our economies to develop without strong institutions is but utopia. Commenting on Asian development (where countries like Malaysia had less GDP per capita than countries such as Kenya at independence in 1957) Roddrick (1997) points out that, the relative measure of institutional quality discriminated very well between winners and losers in Asian growth. Thus, for instance, where as the two countries (Kenya and Malaysia) inherited similar institutional framework from British colonial regime, Kenya’s deteriorated from 1970s on wards (while Malaysia strengthened its own). Incase of Kenya (like many other African countries at the time) this saw the rule of law compromised, and the legislature and executive became almost synonymous. This then lead to institutionalized corruption both political and economic resulting from broken checks and balances, and these countries have not been the same since then. Ends