Rutsching towards a precarious and slippery 2014
We may not all be wearing ice skates but the transition from this year to next certainly feels for many people as if they are on a slippery slope, sliding towards a year that may turn out to be just another same old same old. Or it may become the year in which the chickens come home to roost, with dozens of governments finding out the chickens are a rather large crowd, and they are demanding their scraps.
Lawmakers in the developed world want their constituencies to believe that overheated stock markets are a panacea for unemployment, a lack of spending power, declining real disposable incomes, almost zero income for fixed income investors, looming disinflation, and world-wide economic stagnation. They do not want their voters to see another crippled government kicking the can down the road, yet again.
There is a score of unresolved issues hampering global growth. These ails are discussed almost daily by a bevy of experts across a spectrum of fora, each with his own solution, but time and again, political leaders fear facing the real issues and pass the buck, as they are so adept at doing.
Economic growth rates in the developed world are dismal. And despite all the efforts of pumping liquidity into the international financial system, the two leading economic blocks, the USA and the Euro Zone, just can not get their economies to ignite. Typically, five years after severe recessions, advanced economies are firing on all cylinders, expanding at a respectable rate, employing their workforce, and growing so fast, the recession is only a distant memory. Not this time.
I am amazed at the stubbornness of leaders to acknowledge one fundamental problem of the world economy at large and that is that the world is technically bankrupt. Sovereign debt is so high, the chances of it ever being repaid, are basically non-existent. I am of the school that proposes a type of debt forgiving so that we (the world) can start over, but I am also realistic knowing that if the Euro Zone has failed so far to find workable solutions to their debt disparities, a universal debt write-off will probably take the better part of ten years just to lay the groundwork.
And if we find enough honest people prepared to face this reality that two thirds of the world economy is drowning in debt, how do we go about concocting a dispensation that will also have a commensurate benefit for us in Africa? If the world is forced to go the debt write-off route, surely then those principles must also apply to African countries, otherwise, in theory, it only becomes a devaluation exercise.
A part of me suspects that devaluation is exactly the solution seeked by central bankers in Europe and the US, because, in reality, whether you devaluate through inflation or by active policy, essentially it remains the same. So, when I say that I favour a form of debt forgiving, I do not mean it must be only to the benefit of those economies that now suffer most.
Take as a counterpoint the example of a reunified Germany. For more than ten years, the former West Germany had to struggle to absorb the exponential losses incurred when they accepted their communist brothers back into the fold of prosperity. This was a heavy burden to carry, even for Europe’s largest economy, but eventually, they managed to pull through, in the process becoming super efficient, and super stingy.
I can understand why German policymakers are so exasperated by their smaller and weaker Euro partners, but, same as the Germans, I realise that the catching-up process can not be expedited without finding some sort of solution for the immediate problems first.
Five years ago I projected that the malaise of the financial crisis will remain with the global economy for at least ten years. That was a conservative view. We are now halfway through but still without any tangible and/or feasible solutions.
Again, I am not convinced by stock market movements in Japan, for instance. I think Japan has reached the end of the road in more ways than one and will only remain as an economic case study, very much like the UK.
However, I am deeply concerned for our own future. I support those who see an African renaissance and, purely from an analytical point of view, I also think we are the continent of the future. It is just that I do not think that future will present itself in 2014. There are simply too many unresolved issues and we are at the receiving end.