Ms. Dambisa Moyo is a well-accomplished economist and passionate writer on Africa’s development pathways and, particularly, how the continent needs to wean off from the woes that its countries’ economies face today. She advises on account of the excellent success of the many emerging Asian and Latin American economies. With an impressive background in international financial markets, she has been a staunch supporter of Africa taking full advantage of the global financial system to its advantage in its aspiration to make poverty history. In Dead Aid, she bluntly proposes the alternative to aid that will emancipate Africa from the bondage within aid dependency and the hooks that aid conditionalities impose on African governments to keep the taps of finance flowing for development.
Her counsel is for African governments to throw out the solicitation of the aid instruments that seem lucidly working against Africa’s development, and embrace a new era of substantial borrowing to invest in infrastructure and resuscitation of the sickly socio-economic sectors that can thrust forward human capital development.
Ms. Moyo knows there is a stash of big cash lying in foreign banks that is sucking the world of more cash through interest and yet not being invested in productive activity. Even the economist Yanis Varoufakis gives a nod of approval to this. Tapping into this overflowing well of cash, she posits, will not only create more vibrant African economies, but will also enable the prowess of the erected economic structures to amortize loans more sustainably and, perhaps importantly, with much less agonizing.
The state of international financial market liberalization in which Ms. Moyo sees the dangling carrot expected of African governments to seize happens to be the point of departure for Joseph Stiglitz’s concerns. Mr. Stiglitz is particularly worried about the susceptibilities of economically lean countries if they exposed their sovereignty to merciless financial markets. Although at the core of Mr. Stiglitz’ 2012 book, The Price of Inequality, is how countries can rid themselves of the yawning gap between the few rich and the numerous poor, he blows the trumpet on the supremacy of banks in circumscribing democracy that normally should hold the national interest as its dearest obligation. And Mr. Stiglitz, a Nobel Laureate in Economics, is also a passionate writer on development and economics.
Ms. Moyo’s viewpoint is one that persuades the reclamation of Africa’s sovereignty in financial markets by ensuring its nations are in control of their own resources and chart their destinies under the disciplinary judgement of a repayment plan. The advantages, she notes, are numerous and range from prudent fiduciary management (a.k.a. elimination of corruption) to spending in high-return, high-value investments.
Mr. Stiglitz does not think that democratic systems should just succumb to this. He argues virtuously on the bases that prevailing international financial regulations are giving financial institutions the power to withdraw their resources anytime they will it, randomly alter the level of interest rates, and/or award country ratings for creditworthiness in a fashion that works for rent-seeking instead of the democratic interest. He also qualms that the control that major international financial lenders devise on international capital flows erodes the public focus that the international financial and monetary regulator, the International Monetary Fund (IMF), as it yields to the credit ratings assigned on countries by private interests as Moody’s and Standard and Poors.
Malawi subscribes to both aid and credit schemes to finance her development. True to Ms. Moyo’s observations, the country has not developed at the pace of many emerging economies in spite of the decades of billions of dollars in aid that have been siphoned in. Instead, she has seen the better of negative real growth, and continues to drown in vulnerability to global economic shocks. Ms. Moyo makes the case for stronger sovereignty in jumping the ODA ship and taking to bed with us Goldman Sachs. In this wedding, as we will witness, the officiating priest is the World Trade Organization (WTO) and the counsellor is the IMF, two figures dressed immaculately by Goldman Sachs – not Malawi. Mr. Stiglitz’ mind gets fuzzy on this argument as he worries about the likelihood that one of the newlyweds will essentially be on the receiving end of a hegemonic bond for as long as it lasts. For such reasons just stated, he tends to think Malawi will be the losing party, with trampled opportunity to determine her fate and the terms of the marriage.
However, it is important to note he is not quite advocating that Malawi looks to aid instead, but perhaps this is one place where he might confluence with Ms. Moyo.
Mr. Stiglitz believes in the equality of opportunity and according an equal voice to both parties, and he suggests an overhaul in the rules of the game when it comes to cross-border financial flows. Primarily, it is important to nip some slackly fashioned language in the WTO’s Financial Services Agreement, which “requires governments to allow foreign banks into their countries and restraining the ability to impose regulations that would ensure the financial system is stable and actually serves the economy and society in the way it should.” A point to Mr. Stiglitz.
It is worth noting, however, that Malawi seems to lose its game either way. The question is why has the country persistently sucked at both aid and loans the way it has, for half a century? One way is to admit the rigged international political system that has triumphed at giving international banks the green card to freelance in delineating the terms of credit issuance. A related challenge would be the lack of collective understanding of the African family of countries that rule-setting by financial institutions is not a credible strategy in the face of all African countries uniting to renegotiate the rules. A job the outgoing Mrs. Zuma and the African Union (AU) ought to be doing. But, on the need to make a choice, we advise Ms. Moyo’s way. Frightening as it may be, is a chance worth taking. And so our point goes to her.
She scores another point, though, and the credit on this one relates to the inconsequential nature of Africa’s sovereignty under the AU. While the collective voice is essential, it would perhaps first have to be legally-binding to ensure the chorus from every country is sung to the same crescendo. Until this is reality, encouraging is the historical propensity of loans and ODA to be directed to countries in Africa where sanctions and other restraints have been imposed, as Ms. Moyo informs us in Dead Aid. Malawi can potentially, then, go it alone and ensure it negotiates its own terms on which others would emulate. In the face of all the considerations on the stronger strategy, there still remains much work to be done before we can take Ms. Moyo’s leap of faith towards exclusive credit-dependence, if financial markets are to work for the good of Malawi’s citizens. And, on this crucial note, Mr. Stiglitz gets another point from us.
If Malawi were to choose exclusive credit-dependence, our determination based on both experts' arguments would be as follows: Ms. Moyo matter-of-factly advises us what to do, that is, dive into the pool of cash highlighted in the second paragraph above. Mr. Stiglitz father-figurely chaperons us on how we can do it properly – essentially, how to stay afloat once in there.
For Malawians, the big question is why our dear Mr. Mutharika is absent in this debate. It is our sincere hope that he is not the little pawn in a chess game between ODA grantors and creditors.
NOTE: This is an imagined debate between the two experts. Our writers obtained facts and arguments from their books to interpret what these positions would mean for Malawi. Tiunike Online would like to clarify this for the sake of all who would have wished to see a real debate. We would also have loved to see such a debate!