Predatory Economics Not a Zero-Sum Game
The world economy is in trouble. Everyone knows that. It is important to understand that a gain for one individual or a small group can result in a greatly magnified loss for the global everyone.
A simple example – back in 1977 when I worked in Tanzania, one of our students took a Land Cruiser and driver on a 160 kilometre trip so that he could get his washing done free of charge. So he saved maybe $0.30 at 2011 prices but the University spent $25 to save him that 30 cents – a ratio of 80:1
Mugabe in the period 1998 onwards committed Zimbabwean troops and munitions to the War in DRC. He was paid in diamonds, which went into his own pocket and into his own bank accounts all over the world. The Zimbabwe People and Nation lost a vast amount of money financing that war. One can guess that he gained $1 bn but the Zimbabwean People lost $3 bn – a ratio of 3:1
John Githongo reckoned a few years back that in Kenya, the President disappears about 7% of GNP every year into his own pocket. My estimate is that because of the way all government processes are impacted, subverted and diverted by that extractive activity, the real effect is just like 21% of GNP disappearing, i.e. a multiplier of x3 or a ratio of 3:1. That kind of pattern is repeated in almost every Third World Country, whether governed by a pro-western or by an anti-western dictatorship – theft creates poverty.
Come to the global stage, Hedge Funds, Global speculation and Speculators, Investment banks, wealthy (and sometimes even charitable) personalities who mix with showbiz and politicians. Credit Default Swaps (CDS) and other nefarious and hardly understood financial instruments. A global casino. Huge stakes. Dangerous downsides. If we really examine what has been and what is still going on, we will find out that the world has been jeopardised of $10 Trillion so that a relatively few immensely rich people can gain $100 Billion – a ratio of 100:1. Theft creates poverty, even when and especially when that theft is legal and legalized.
It is no use for the rich and powerful (including Obama and Cameron) to pretend that the existing game can and should continue. Everyone can see that the King has No Clothes. But no one dare to say it. Economists and financiers – like IT people – like to baffle us with their big words.
The Game is Over.
It is not necessary to dismantle or discontinue Capitalism, but it IS necessary to tame and control it – a domesticated animal is immensely more productive and useful to mankind than a wild animal. The same with Capitalism. Playing with Capitalism in its present-day form is like waiting for another very very serious accident to happen.
Ha-Joon Chang, the respected Cambridge University Economist wrote an article recently with 5 recommendations:
1. Establish a UN Ratings Agency
2. Force creditors to absorb a percentage of Sovereign Bad Debts
3. Ban complex financial products
4. Render all tax havens illegal
5. Completely change the incentive structure within and throughout the financial industry to penalize risk-taking
Unless someone can make a very convincing case against one or all of the above, then I propose that they are all implemented immediately.
The rich will bitch. Tough shit. Desperate times need desperate – but carefully thought out – measures.
Alex Weir, Gaborone, Botswana, Wednesday 10 August 2011