Europe sneezes, Africa catches a cold?

2012-02-25 10:15

On the face of it, all the “sturm und drang” which has attended the euro crisis is merely a West ­European commotion which the Europeans should address – and good luck to them!

However, more sober reflection must tell everybody else in the world, and especially those of us who call Africa home, that a ­serious economic crisis in the ­eurozone, as would be occasioned by the collapse of the euro, would have an immensely negative effect on the global economy.

In truth this means that because of the level of integration of the world economy, described as the process of globalisation, the euro crisis is in fact a global crisis.Despite this reality, which ­suggests the need for united European Union (EU) action, British Prime Minister David Cameron decided to be the contrary voice.

Driven by the imperative to protect the interests of the financial capital domiciled in the historic City of London, a leading world ­financial centre perhaps as important as New York’s Wall Street, Cameron in December rejected the proposal that the City of London should be subjected to regulation by the EU Commission as a European inter-governmental agency.

He was determined to ensure that financial capital, based in his country, but operating throughout Europe and globally, would negotiate its future only with the British government, rather than a collective of European governments.

Obviously, the pivotal point of the common-currency argument was that the countries concerned would gain more than they would lose.

Given the scope of the challenge and the threat to the global economy, it is important for all of us that this common fiscal regime strategy be implemented successfully – including building a credible firewall that prevents the crisis from spreading, strengthening European banks, charting a sustainable path for Greece and tackling the structural issues at the heart of the current crisis.

For economic regions such as the eurozone to succeed, they must aim at effective economic and ­political integration, understanding that any defined loss of elements of national sovereignty would be compensated by larger foreseeable economic gains.

Such regions should understand that they are part of a global economy.

Accordingly they must accept that what they do in terms of ­addressing their challenges must be consistent with the objectives and interests of the global economy, which would intervene to guarantee the achievement of the goals of the larger, global whole.

It was ironic that on the very same day that Prime Minister Cameron addressed the British House of Commons, the country’s Financial Services Authority ­issued its long awaited report about the near collapse of the ­Royal Bank of Scotland (RBS), which, like some of its US counterparts, was saved by large injections of public funds.

After an admittedly relatively hurried reading of the report, we have no choice but to draw a variety of important conclusions relating to the global financial crisis to which we have referred.

These conclusions reaffirm that:

» An important part of the world economy consists of an interconnected global financial system dominated by a few players which, certainly in their localities, are “too big to fail”;

» There is a continuous process of concentration and centralisation of capital which takes place through mergers and acquisition and other activities resulting in the expansion of market share, and which create financial behemoths which are “too big to fail” even in the global context;

» Financial capital plays an ­increasingly dominant role in the functioning of the economy within individual economies and with ­regard to the global economy, even as it gets further detached from the real economy;

» The global operations of this ­financial capital can and will destabilise the real global economy, ­producing a disequilibrium that would lead to economic instability, recession and possible depression;

» To guard against this, it is ­important that both individual ­nations and the international community as a whole should regulate the operations of financial capital;

» Experience has confirmed that extant regulatory regimes, certainly prior to the 2008 crisis, have proved too weak in this regard and therefore need to be strengthened;

» At the same time it is important to take into account that the financial sector will continuously demonstrate greater agility than any regulatory regime and will therefore objectively undermine any ­regime put in place to regulate it;

» In responding to this challenge, it is important that any regulatory regime should not work in a manner which kills the ability and the will of the financial sector to provide the finance (credit) which oils the economic wheels; and,

» It is necessary to put in place a global regulatory system, given the reality of the global functioning of financial capital.

As the global economy has developed, accompanied by the effective deregulation of the capital markets, even without the latter-day instrument of international agreements in this regard, financial capital has continuously ­increased its share as an effective factor in the system of international economic relations.

For at least two centuries, the globalisation process has originated from and has been driven by economic rather than political ­actors.

Throughout this period, the ­political actors in the various countries of the north, the domestic countries of the economic drivers of the globalisation process, whatever its form, have been content to speak out and act as representatives of this process.

The fact that we are now in the 21st century has not changed this reality. Ineluctably, financial ­capital will continue to lead the process of ­globalisation.

It will therefore continuously ­demand both the deregulation of the financial markets and the ­establishment of the global ­political conditions which would guarantee its freedom with regard to its operations, and its possibility to appropriate all its profits ­especially in US dollars and other readily convertible currency.

In this regard, there is no reason to suppose that the political representatives in the countries of ­origin of this capital will act in ways different from those in which their predecessors have acted in ­response to the dictates of the ­major segments of the international capital of their time.

As Africans we must remain closely interested in the resolution of the eurozone crisis.

The eurozone is a vitally important destination for African ­exports and a source of foreign ­investment, and generally an ­important player with regard to the integration of our continent in the global economy.

Many of our citizens who work in other countries, including the eurozone, export into our ­countries significant inflows of foreign exchange in the form of ­remittances.

The West Europeans, many of whom are our former colonisers, continue to pay especial attention to our continent, as demonstrated by their recent interventions in the Ivory Coast and Libya.

In this context we must assess the effect the eurozone and European crisis will have on our ­relations with these countries.

We must follow closely the ­evolution of the eurozone crisis, knowing that if it worsens, perhaps leading to the demise of the euro, this would have an immensely ­negative effect on the global ­economy, with a similarly negative effect on our economies, which might very well create great social instability in our countries.

It is obvious that the eurozone crisis will further deepen the ­already prevalent view among the Europeans that Africa is peripheral to their global strategic posture, except as a part of the world which they can wilfully dominate as their “natural” backyard.

This signifies that the European “establishment” will be even more dismissive of the

African voice, which will reinforce its sub-conscious – and perhaps conscious– understanding that its own voice, rather than ours, should be the ­determining factor with regard to our future.

Accordingly, we must honestly engage one another as Africans about what we should do in this context, together, and in ­co-operation with the historic friends of Africa in Europe, who have constantly stood with us to help ensure that we achieve our dignity as human beings.

We must abandon the misguided notion that the eurozone and EU crisis has nothing to do with us.

In this context we must understand the nature of the process of globalisation in all its complexity, and fully appreciate the naked fact that it encompasses us as well.

The globalisation process will continue as an objective manifestation of the very existence of ­capital, and therefore the development of society, which nobody can stop.

Obviously what we must resist is the attendant ideological proposition that human society has no choice but to accept that the nature and content of this globalisation must be informed by the most primitive instincts of capital, which has led to the disastrous ­co-habitation with the philosophy and practice of neo-liberalism.

To achieve our own renaissance, we must determine our place ­within this system and therefore what we have to do to claim and hold this space.

»The full version of this article appears in the next edition of The Thinker. See www.thethinker.co.za

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