FEATURE ARTICLE

Chamberlain S. Peterside, Ph.DSunday, June 12, 2005
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New York, NY, USA

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THE GRAND BARGAIN DOCTRINE
...WHAT DO G-8 COUNTRIES OWE AFRICA?


…Basket Case

frica by some historical circumstance has become a poster child for economic mismanagement and political malfeasance, hence the issue of helping Africa get its act together - eradicate poverty, fight HIV/AIDS, wrestle hunger/disease and elevate the general standard of living, has been on the front burner lately.


There is indeed a myriad of problems facing Africa today and most of it is well documented in the international community. Simply put, everyone – politicians, academicians, celebrities and activists at last have something they can all agree upon; that Africa as the frontline of global backwardness needs help. For the most part all hands are now on deck, conceptually.

Achieving the UN Millennium Development Goal (MDG) of halving the number of people living in poverty in Africa by 2015 for now remains a pipedream, due to insufficient financial resources. It’s a well-known fact that more than 70% of the population (over half a billion people) in Africa survives on less than $1 a day. In some Southern Africa countries like Lesotho, Botswana, Swaziland AIDS has become the number one killer of able-bodied population, ravaging the livelihood of families. Infant mortality in most African countries is still at early 20th century level of Western Europe.

Available statistics reveal that as much people die in Africa every week that died in the Asian tsunami. Life expectancy in West Africa, notably Nigeria, Sierra Leone, and Liberia has been falling precipitously and averages less than 50 years. Going by UN quality of life index the continent is home to 33 of the world’s poorest countries. Violence and religious unrest in Nigeria, Southern Sudan (Dafur), Congo, Ivory Coast and Somalia, Rwanda continues to threaten the fabric of those nations according to US National Intelligence Report.

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Prime Minister Blair has often characterized the condition of Africa as a “ stain on the advanced world’s conscience”. So as United Kingdom prepares to host the G-8 summit, Africa’s issue is quite paramount on the agenda. Every G-8 leader concurs that Africa needs help, but not all agree on how to go about it. As UK proposes to funnel $25 billion in new aid annually and cancel the debt of poor countries, President Bush and Schroeder of Germany differ on who should be offered debt relief and more aid.

Only this week President Bush proposed over $600 million in new money to aid Africa. Something New York Times aptly called a pittance. US aid, as a proportion of GDP is one of the lowest amongst developed countries, according to Columbia University Professor and coordinator of the UN MDG program, Jeffrey Sachs.

…A Case For Global Action.
The question could be posed whether the G-8 and other advanced countries actually owe Africa anything. If the experience of the Marshall Plan after the Second World War (WWII) and Soviet Union after the collapse of communism is anything to judge by, the answer will be unequivocally - “YES”.

It is often said that it takes a village; so in the global village we now live, wealthy nations have a duty to either stimulate progress in less-privileged ones, one way or another otherwise risk their own peace of mind. It was during the G-7 summit in early 1990’s that the notable Russian economist Mr. Gregory Yevlinsky, now leader of the “Yabloko Faction” in the Russian Parliament first coined the phrase – “Grand Bargain”.

According to Mr. Yevlinsky, the West had the moral and political responsibility of ensuring that Soviet Union does not degenerate into anarchy by investing time and money; providing aid to support reform, propping up democratic/civic institutions, and helping build free market infrastructure or else, Europe will be saddled with enormous political and social crises that would exceed their wildest imagination in terms of human and financial toll. That scenario was avoided in Russia, but Yugoslavia in a way fulfilled the prophecy. In the ensuing years up until the financial melt-down of 1998, Russia witnessed a massive influx of both official development assistance (ODA) and direct foreign investment (DFI) by the IMF/World Bank, European Bank For Reconstruction & Development (EBRD), and European Union through the so-called TACIS – Technical Aid for Commonwealth of Independent States. Multinational corporations as well as rich foundations all participated in the restructuring effort. Since then, Soros Foundation alone is estimated to have sunk nearly a billion dollars in its “open society” initiative in the region.

As we speak, it is safe to say that Russia and most of former communist countries have turned the corner, thanks not only to bitter economic reforms, but also to massive investment/aid by Western countries. Africa is salvageable and currently confronted with similar problems as Western Europe after the WWII and Eastern Europe after the collapse of communism.

…Trade Not Aid.
The classic excuses that African regimes are corrupt or that civil unrest and political infighting does not create conducive environment for foreign assistance/investments, albeit true, is a “lame dock” excuse and not enough reason for inaction by developed countries. Democratic reform and market deregulation are on track today in more African countries than ever. Grassroots organizations, Micro and Small & Medium Enterprises (SME) are now sprouting all over the place. Empirical evidence suggests that African people are willing to embrace change and improve their life-standard. Unless rich countries genuinely support that drive the effort could be short-lived.

Offering food aid and medicine alone is not the panacea for Africa’s long-term problems, supporting political and market reforms with cash and promoting free society doctrines as well as offering fair and more balanced terms of trade to poor countries would go a longer way. Come to think of it, Africa is endowed with the same natural resources that were utilized to fire-up and sustain the life-style and economic infrastructure of advanced nations. The problem is that those resources are being frittered away unfairly through a lopsided trade relationship, marked by dismal and unstable prices of export produce/raw materials, thereby perpetuating the asymmetry of dependence. “Trade Not Aid” should be the watchword.

Those who understand the nature of international capital, know that investments would readily flow to a destination that offers an incentive, both from the internal and external angle. G-8 countries must be willing to play a "better game" by doing more to channel investments into the continent and alleviating the depressive debt burden. According to BBC Online, Africa has now paid back more than it originally borrowed - but still owes half as much. The angst felt by US and Western Europe against technology "offshoring" to India and export dumping by China thanks to cheap labor is exactly the same impact felt by African economies due to agricultural subsidies and trade barriers of rich nations.

The unfortunate reality is that in our day and age, the problems of illegal immigration, money laundering, human/drug trafficking, religious fanatism and global terrorism knows no color or boundaries. Unless there is a concerted effort to eradicate squalor in Africa and other regions, some parts of the continent could turn to breeding ground for these same scourges that might threaten the peace and tranquility of inhabitants in the Northern Hemisphere. It’s against this backdrop that one must applaud the Africa Commission Report empanelled by Prime Minister Blair. It now stands to be seen how other developed countries will reciprocate.

Chamberlain is the Founder & President of New Era Capital Corp. and MyCompleteFinance.com, a New York based financial services group. He was previously a Financial Advisor in the Global Private Client Group, of Merrill Lynch.