THE POLITICAL DIMENSIONS OF THE WORLD ECONOMIC CRISIS: AN AFRICAN PERSPECTIVE By Andie Davis “Unless this crisis is handled urgently, the Millennium Development Goals will be unattainable, Africa will be further removed from development objectives and security will be worsened.” Benjamin Mkapa Former President of Tanzania Club of Madrid Member The economic crisis that gripped rich countries with increasing severity throughout 2008 has undoubtedly engulfed Africa as well. Early forecasts of containment within Western financial markets, or of a mitigating surge in oil and commodity prices, now seem myopic in the light of the complex range of reactions being experienced across the continent. African financial institutions that had steered clear of toxic assets nonetheless have felt the effects of evaporating global liquidity. Commodity-producing countries have seen the price of oil fluctuate and those of other commodities stall or plummet below pre-crisis levels, even as the costs of essential inputs have increased steadily. Compounding the challenges with which African governments were already contending in shoring up food security and responding to the effects of climate change, the economic crisis has come to bear down particularly hard on some of the world’s poorest and most vulnerable people, those furthest from its epicenter. In development terms, the consequences are daunting. Decreases in trade, aid and investment mean fewer resources available for health, education and basic service delivery. And contracting job markets in rich countries inevitably shrink remittances to poorer ones – with potentially dire repercussions. After half a decade of steady increase, remittances are now projected to drop by over 8 percent. This shortfall would have a major impact on poverty alleviation in places like Ghana and Lesotho, a country of which remittances comprise 28 percent of GDP. These setbacks, in addition to hindering progress toward achieving the Millennium Development Goals and other development objectives, also carry the potential to incite civil unrest. On the whole, the current situation brings into sharp relief a paradox that, while perhaps not unique to Africa, is certainly egregious in the African context: that deeper integration into the global economy has coincided with a relative diminution in African influence over the setting of the global economic agenda. Two decades of expanding democracy, rising incomes, resourceful responses to pandemics, and sound policies for open and inclusive growth, trade and development have done little to alter the continent’s status as a bit player in the fora and institutions that govern its economic fate. Despite multiplying demand for its natural resources, and rates of growth unparalleled anywhere in the developed or developing world, Africa remains a continent relegated to the sidelines of the discussion, often spoken for or lectured to but little heard from and less heeded. A quantum shift is needed in the nature of Africa’s role in the global community. There is a clear call for a new paradigm, consisting of truly democratic multilateral institutions that afford Africa a strong and effective voice and decision-making capacity. Africa should insist on much stronger representation and on being a more central force in the international governance architecture. GOOD GOVERNANCE FOR GROWTH AND STABILITY “A story is being told here. And no one but Africans ourselves will be able to determine its direction.” John Kufuor Former President of Ghana Club of Madrid Member One of the most striking lessons of the global economic crisis is the importance of governance. The lingering repercussions of profligate deregulation and lax oversight in Western banking and financial sectors serve as grim reminders that responsible governance remains both a challenge and an imperative for rich and poor nations alike. For African governments, that imperative has taken on a renewed urgency. Now more than ever, African leaders need to articulate and execute a clear vision for the continent’s development. The articulation will call for lucid analysis that prioritizes long-term sustainable progress over short-term political expediency; the execution will be a function of the capacity to design, implement and monitor solutions, particularly at an institutional level. When institutions such as the judiciary, press, academia, parliament and electoral systems are able to withstand (and even mitigate) the effects of political and economic change while remaining free of inappropriate influence, they rise to their highest purpose as the tools by which ordinary people can better their lives. The current crisis may be reconfiguring existing challenges in new ways, but the strategies to address them must be grounded in a deep investment in institutional integrity and in the long- established basics of good governance: accountability; investment in human capital; respect for human rights and the rule of law; preservation of security; and an unwavering commitment to democracy and broad-based political engagement. Even during the best of times, these fundamental principles can be easier to aspire to than to achieve. In the current climate, therefore, African governments must undertake an open and honest appraisal of their capacity to deliver, and of the political, economic and social costs involved. Such an appraisal begins with a thorough understanding of the mechanics of globalization and of the strategic advantages it affords the continent. From this perspective, African leaders must be proactive in seeking out the information and partnerships that further the development interests of their people – and in weighing the risks and opportunities inherent in partnerships initiated by others. African countries need a clear sense of what they can achieve on their own and what can be achieved only in collaboration with regional and global partners, both traditional and emerging. Regional institutions can play an essential role in ensuring that good governance transcends borders. Organizations such as the African Union must be vigilant in holding member states to high standards of accountability. Sub-regional economic communities must coordinate efforts to stimulate growth and development (including by establishing free trade areas and facilitating the circulation of goods and services), implementing policies that can enhance the continent’s appeal as a high-opportunity, high-return business environment while also advocating for favourable treatment for Africa in bodies such as the European Union and the World Trade Organization. Fortunately for leaders faced with dwindling resources, good governance is largely a matter not of money but of political will. African countries can look within the region to examples such as Rwanda, which against global trends continues to record impressive growth and to rapidly upgrade its physical, technological and regulatory infrastructure. Its drive to lay the foundation for its people to make the most of their domestic assets – decimated by years of conflict – reflects the view that economic and social stability are mutually reinforcing conditions. Rwanda’s success points to another principle worth recalling: that the democracy flourishing across the continent is a process, a means to development, and not simply an event or an end in itself. Free and fair elections, once held, are merely the preface to a sustained discourse between civil society and its chosen leaders. Democratic processes set the terms whereby a well-informed leadership serves the interests, needs and aspirations identified by those it has been entrusted to serve. However, delivering effectively on those terms depends as much on the acuity, capacity and integrity of the leaders as on the degree to which citizens are empowered and engaged. The more robust the engagement between government and society, the better equipped both will be to navigate periods of difficulty. It may be tempting to focus prescriptions on sweeping macroeconomic reform when responding to a crisis of the current magnitude and complexity. But in the African context, there is much to be said for thinking small as well, for cultivating practices and building institutions to local scale. African governments should incentivize savings among the populace – however paltry such sums may seem against today’s deep deficits – and broaden the tax base by closing loopholes and enforcing existing tax provisions. Governments would also do well to channel the resourcefulness and ingenuity of the vast informal sector, where most economic activity occurs and to which many in the formal sector seek recourse in times of economic hardship. Informal sector assets need to be monetized, including through establishing rights to land and other property, as a means of legally empowering the poor and expanding opportunities in the formal sector. These efforts should be supported by improving infrastructure – roads, telecommunications and border controls – to encourage the flow of goods, services, information and ideas throughout the region. As Africa continues to advocate for due voice and influence in an altered economic paradigm, one hobbled in part by ineffective global governance, its leaders on the home front must recognize that those whom they have been tasked to serve are themselves entitled to no less. NURTURING RECOVERY, BUILDING RESILIENCE “Structural adjustment… What were we adjusting?” Olusegun Obasanjo Former President of Nigeria Club of Madrid Member “If you can’t