IMOTEP: The prospects of global recovery

During much of 2009, the world went through an upheaval such as has never been seen since the Great Depression. Once venerable banking giants went under, as stock markets plummeted and firms once regarded as ‘too big to fail' suddenly went bust. Losses in assets were estimated at a staggering US$13 trillion; a figure that falls into perspective when we realise that the total US gross domestic product stands at about US$14 trillion.

And it is not the material losses alone that are the issue. Millions of jobs have been lost while livelihoods have been wiped out, with an estimated 40 million people in low-income countries having fallen back into conditions of absolute poverty as internationally defined. Worsening poverty is fuelling social tensions and exacerbating collective angst in politically fragile societies.

There are a few green shoots indicating that, we may, at last, be turning the corner. Recent macroeconomic indices point to modest recovery in North America, Europe and Japan. Manufacturing in the USA has increased by a modest 0.5 percent, while declining output in Europe's industrial powerhouse, Germany, appears to have bottomed out.

We in Africa managed to avoid the worst due to what I would term ‘the paradox of marginality'. Our continent accounts for a paltry 5 percent of global output and contributes a mere 4 percent to world trade. This means that tremors in the heartland of capitalism may translate into mere ripples in the periphery. The exceptions are the open and relatively advanced economies of South Africa, Egypt and Mauritius and large monocultural export-dependent economies such as Nigeria.

By early December, South African manufacturing showed evidence of recovery, even though unemployment - at over 25 percent -- appears to be getting worse. Until the recent Dubai crisis, Egypt was showing strong signs of a rebound. We in Nigeria are expected to post modestly strong growth of least 6 percent, aided by improved petroleum prices and increased investments in infrastructures.

Brazil, Russia, India and China (the BRICs) have weathered the storms rather admirably. The BRICs will serve as the main engine for the much-needed boost on world aggregate demand over the next decade.

But there are no guarantees. The recent financial turmoil in the Gulf does show that global recovery may follow the pattern of a ‘W' rather than the ‘V' that pundits had hoped. Sadly, G-20 governments have not lived up to their financial pledges on the global stimulus package agreed at the London Summit of April. Much will also depend on whether world leaders will live up to expectations in confronting climate change, the most critical challenge of our epoch.

Equally worrisome is the decline of American leadership. In spite of the euphoria that greeted the election of Barack Obama, there is already some evidence of creeping disillusionment. His reforms in health and other sectors are being scuttled by the vested interests that dominate Congress. While the rhetoric is grandiose, the administration appears more adept at throwing money at problems rather than working within a coherent framework of strategic policy. The poetry is lyrical, but the political thought is hardly one that would disturb the sleep of his ancient ancestor Thomas Jefferson. There is the abiding geopolitical challenge of battling Al-Qaida on two theatres, where America's lugubrious behaviour reminds one of Shelley's boastful Ozymandias in the desert.

My good friend Niall Ferguson of Harvard recently wrote a powerful article in Newsweek pointing to the imminent decline of the American republic, driven by the twin follies of imperial overstretch and fiscal prodigality. The precipitate fall of the dollar has been stemmed only by the restraint of Asian investors who have hoarded over a trillion dollars of US treasury bills.

According to the theory of ‘hegemonic stability' popularised by economic historian Charles Kindleberger, an international equilibrium prevails when there is a leader or ‘hegemon' who is both willing and able to underwrite the system. What we face today amounts to a power vacuum. The Chinese clearly prefer to pursue world power by indirect means, an approach that has been part of their political tradition as far back as Sun-Tzu. Europe could have filled the lacuna, but, like Henry Kissinger once declared, with that multinational bureaucratic behemoth, you never know who is in charge.

Alyosha, the saintly character in Dostoevski's Brothers Karamazov, once prophesied that the world will be saved by beauty. I believe our salvation lies in another kind of beauty - that of wisdom and statesmanship. We must commit to rigorous collective efforts to rebuild national economies, restore the broken confidence of mass publics, forging a new international architecture that guarantees welfare, solidarity and peace. That is the task of our millennium.