Oslo Terror Attacks: Whither Globalization?

…Cruelty is necessary…you should kill too many, not too few…” are some of Anders Behring Breivik’s murderous recommendations for a European cultural renaissance of sorts that would prevent the “Islamic colonization” of Europe, listed in his manifesto: “The European Declaration of Independence”. In said manifesto, Breivik – the ultra right-wing, white supremacist cum terrorist – detailed the meticulous preparation for his murderous carnage on July 22nd in Norway which left over 70 people- mostly teenagers – dead. Such far-right terrorism, along with the global economic crisis the world is still “recovering” from, is another blow to globalization and its core neo-liberal values and a crude wake-up call for developing countries especially in Africa.

Globalization generally refers to increased interconnectedness of economies, societies, people, culture and ideas across borders and boundaries through communication, transportation, trade and migration. The term came into popular usage in 1970s and 1980s with the breakthrough or revolution in Information, Communications and Transport Technologies (ICT) making the world a “global village”. This was spurred by the general economic boom in the post World War II era, especially in the 1960s, known as the development decade not only in the developed world – North America, Western Europe and Japan – but also in many parts of the developing world, including the newly decolonized African countries, the East Asian Tigers and other places.

At the heart of globalization is the free market approach to economic management, the core of neo-liberal values. This approach forms the basis of the economic model of the industrialized world characterized by limited government intervention in the economy; the liberalization and deregulation of trade, finance and capital and privatization of public enterprises. These, according to the argument, would enable market competition and innovation, would spur economic growth, lead to greater integration of economies around the world and usher in unprecedented prosperity for countries interconnected in the global economy. For instance competition and innovation ushered in the information age with advances in transport and communications technology mobile telephony and the Internet; faster and more efficient means of transportation and breakthroughs in medical and bio-science technology. Most importantly, such economic prosperity is believed to have aided has aided in the universalization of liberal democratic ideas and values as the most prevalent and pervasive system of government. Democracy and representative government are favoured against autocratic governments, dictatorships and military rule.

In the socio-cultural realm, a more diverse world is bound together by common values and respect for fundamental human rights for all and equality, tolerance and respect for all peoples of the world. To an extent we have seen this happening not only in the unprecedented economic growth and development of some developing countries like the East Asian Tigers such as Taiwan and South Korean; the assortment of new communications technology like mobile phones and the Internet; but also the near-global spread and persistence of the values of democracy and representative government. The interface between new means of communication and democratic values is embodied in the ongoing ‘Arab Spring’ where citizens of Middle-Eastern countries, after being subjected to decades of authoritarian rule, are now demanding representative government through mass protests facilitated by Facebook, Twitter and other social media tools, and have succeeded in Tunisia and Egypt.

In my opinion, this is about where the benefits of globalization end as the global financial crisis of 2008 and the global recession it has spawned has plunged many countries of the world into near-bankruptcy. This crisis in many respects can be attributed to the interconnectedness and integration not just between different parts of the world, but between the volatile financial sector and other parts of the economy.  As mentioned earlier, from the near collapse of the Irish, Portuguese, Spanish and Greek economies and the large financial bailouts negotiated with more European countries possibly in tow; the future of the EU, the monetary zone and even the existence of the Euro is hotly debated. Bigger countries like the UK which are not on the verge of collapse are growing at a snail pace of just 0.25% in the second quarter of 2011. Elsewhere, the US is racked by its growing debt, financed mainly by Chinese investments in US Treasury securities and bonds. The global financial crisis and its aftermath have exposed the fundamental weakness of the core neoliberal values of globalization which have played a large part in bringing about the crisis in the first place.

More importantly, with economies continuing to shrink, politicians have responded accordingly with austerity policies. With the global recession, governments in Europe and other parts of the developed world have been made to cut-back on public spending in such areas as education and healthcare, they have increased taxes and are now increasingly reducing net immigration and inflow of foreigners. In the UK, the Coalition government recently said it would reduce migration to the UK from 200,000 per annum to “tens of thousands” because of increased pressure to the “society, economy and public services”. At the individual, group and societal level are some nationales of European countries who are of the view that it is those “bloody foreigners” who, with their hordes of dependents are not only: out-breeding their hosts, taking up all the jobs and claiming benefits but are also disturbing the delicate demographic balance in Europe. For instance, in Norway, a recent poll conducted showed that half of all Norwegians favour restricting immigration, or that immigration “had gone too far”.

It is from this perspective that there has been a resurgence and growing popularity of not only (moderate) right-wing politics but even extremist, ultra-right and far-right ideas which blame all economic woes on foreigners and immigrants. Thus, far-right movements in places like Italy; Switzerland, and Sweden;  parties like the National Front Party in France and the Dutch Freedom Party headed by the fiercely anti-Muslim Geert Wilders are gaining momentum and sympathy from ordinary people. These parties and movements “blame multiculturalism for the destruction of Western culture”and very much like Breivik, they blame previous left-wing governments such as the UK Labour Party and the Norwegian Labour Party for allowing such multiculturalism by enabling the influx of foreigners.

These parties have capitalized on a growing uncertainty brought about by recession and the economic difficulties people are going through, and have used a convoluted mixture of populism, thinly veiled racism and neo-fascist tendencies to resuscitate a feeling of nationalism or as The Guardian aptly captures the situation, a “nostalgia for a conservative, traditionalist, whites-only Europe of a bygone age combined with blind fury at its dissolution in a globalised world”. Logically and understandably, some of the citizens are transferring and directing their pent-up anger at the “foreigners” or the “immigrants” with whom they are competing for scarce economic opportunities which could explain the growing sympathy for right-wing policies and ideas in the industrialized world. Furthermore, foreigners and immigrants are increasingly equated with non-Europeans particularly with Muslims from the Middle-East and Pakistan and as well as African immigrants.

Most Africans would readily understand this situation, for the struggle for economic resources and opportunities is the bane of most inter-ethnic conflict and crisis in many sub Saharan African countries. From the indigene-settler issue which periodically erupts in Plateau state Nigeria between the Hausa-Fulani “settlers” and the Berom indigenes to inter-ethnic conflict in regions in Kenya like Western, Rift Valley, Nyanza, Coast and Nairobi. Unlike Breivik, it is hoped that few far-right zealots would go so far as to kill innocent teenagers in a bid to protect and maintain the racial purity of Europe from “Islamic colonization” or “Muslim takeover”, but as Nobel Peace Prize chairman, Thorbjørn Jagland rightly noted, extremists like Breivik are exploiting rhetoric used by European politicians to propagate their neo-fascist views. His comment was in response to British Prime Minister David Cameron’s statement in February 2011 on the failure of integration and multiculturalism in Britain which he said is “fostering extremist ideology and directly contributing to home-grown Islamic terrorism”.

As Europe tightens its borders to non-Europeans, the implication for poor countries particularly African countries is that even brain-drain –a major developmental challenge where skilled Africans emigrate en-masse to developed countries in search of greener pastures – will be greatly reduced for the pasture is not-so-green these days. For instance, some European countries like the UK have revised their   immigration policies such that from 2012, the UK will close its  borders to long-term settlement by foreigners, except for those of “exceptional talent” , the well-to-do who can go afford to go for holidays or give assurances that their stay will not be permanent.  The difficulties faced by poor people from developing countries to migrate, live-in, work or settle-in developed countries questions the unrestricted movement of people and goods across boundaries which globalization proponents had assured. On the one hand, it could be a blessing in disguise, for those who earned their qualifications in developed countries could go back home and utilize those skills in developing their respective economies. Of course this depends on political and economic stability, job opportunities in African countries and most importantly when African leaders decide they are ready to provide desperately needed transformative leadership.

As the industrialized world struggles towards a painful recovery from the global financial crisis further exposing the flaws and weaknesses of the core neoliberalism and free-market system, it shouldn’t be surprising if more aspects of globalization unravel. Therefore, as more jobs are cut, taxes increased and the cost of living becomes higher, people are naturally bound to retreat to a comfort zone and heap blame on the foreigner. As competition for scarce opportunities intensify, extremists like Breivik are lurking, waiting to exploit fear and uncertainty. It is hoped that African leaders will take this cue and provide more opportunities for citizens at home in the wake of a shrinking global space.

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The West Doesn’t Always Know What’s Best


Source: http://www.canstar.com.au

It feels like ages since I last posted anything. Amidst tight schedules and deadlines for my coursework, a brief visit to Nigeria, a bout of the flu, it seems the past few weeks have gone by in almost a blur. In the fast-paced and dynamic world we live in so many things keep happening at such a dizzying pace – from the turmoil, civil-war, Western intervention folly in Libya; the political turmoil and madness in Cote d’Ivoire and the botched Nigerian parliamentary elections; to the earthquake in Japan, Sylvio Berlusconi’s salacious sexcapades’ scandal, the crash of the Portuguese economy and oh! Not to forget, the forthcoming royal wedding of Prince William and Kate Middleton. What a world we live in! And in all of that, I have chosen today (to my own uttermost surprise) to commend the Nigerian government today vis-à-vis the West. Surprise, surprise! Wait! Before you dismiss this as one of those clichéd anti-imperialism, anti-neocolonialism rants, it is far from that actually.

As you might have heard, or read about, the Portuguese economy has taken a nose dive and is on the verge of collapse. The country now requires financial assistance from the European Union (EU) and the IMF possibly. It is the third country in the EU following Greece and Ireland within the last one year to be bogged down by deficit, requiring financial assistance and now there are fears that that Spain might be next and that the crisis might spread to other countries.  The main point I am trying to make is that this is very much connected to the 2008 global financial crisis, the global economic crisis, the credit crunch, the economic downturn or whatever fancy name it is called. This financial crisis started in the USA, in the subprime mortgage sector, then it quickly spread to other sectors of the economy and before you could say Forex, dollars and pounds, it had spread to other parts of the developed world and even certain parts of the developing world. You are now wondering what all this has to do with me commending the Nigerian government right? Do tarry a little, I will get to that shortly. But before that, let us take a little trip down memory lane…

The global financial crisis which started in the US subprime mortgage industry and the financial sector was able to spread to other sectors of the economy and other parts of the world because different types of financial institutions performing different types of activities had become so interconnected with one another within and between countries. For example banks, the chief culprits performed all sorts of functions – a single bank was engaged in commercial banking (deposit and lend services), mortgage banking and investment and speculative banking (the abracadabra in currency and stock markets). In short they were mega banks (to all Nigerians, does this sound familiar?). In addition, there were shadow banks – such as hedge funds – which performed the functions of all these banks and more, but were not regarded as banks and as such they were not regulated as such, and in fact, some people are of the opinion that shadow banks were designed to elude regulation.

All this sounds pretty confusing and it is, because normal people hardly know what these bankers are up to. As for subprime mortgage, as the name suggests, it entailed giving mortgage loans to people who ordinarily would not qualify for these loans and who do not have to demonstrate their credit-worthiness. These loans were called “Ninja” loans – No Income No jobs No Assets – and the loans were repackaged and sold on several times (how do you sell a loan??) to other institutions in the US and around the world because with globalization, financial institutions and financial markets had become transnational and interconnected (that is the role of stock markets). Therefore when few people defaulted on their mortgages in Florida in 2008 it had a domino effect on a system that was essentially an air bubble waiting to burst.

In Nigeria,  a few years ago, Professor Charles Soludo, the immediate former Central Bank (CBN) Governor pushed for and implemented banking reforms that created “Mega” banks by forcing banks hitherto operating to recapitalize and ensure they had a minimum capital of N25billion ($160 minimum roughly). Notwithstanding the fact that many “small” banks that catered to small communities closed down because they could not raise the required capital, the “Mega” banks emerged, and emerge they did as they flexed their muscles, they extended their tentacles to not just commercial banking, but investment banking, pension services, insurance and life assurance, real estate, asset management and other financial services. The most interesting thing is they made most of their money (I will not call it profit, it is highly debatable) from sending their young, impressionable, enthusiastic staff, especially the female ones on “marketing” sojourns to increase their deposit and customer base. They engaged in massive recruitment of young, fresh graduates who were actively encouraged by many a manager to breach what little banking ethics they had in order to meet targets of bringing accounts or deposits of millions of dollars. One of my friends in her mid twenties was given an annual target of N480 million, roughly $3million and this was not an isolated case. As the money kept pouring in, so did the banks, the bankers and top executives became more opulent and brazen…branch offices kept springing up everywhere as they built many imposing structures and edifices existing side by side with abject poverty in communities. The bankers had fat salaries and bonuses, wore designer suits, drove flashy cars and just relished in lavish lifestyles very much like their counterparts in the US and Europe.

And just like their counterparts in the developed world, these Nigerian “mega” banks engaged in risky lending to risky customers, they gave loans to customers without collateral. But in true Nigerian fashion and very unlike the US where subprime loans were given to people, sometimes poor people who could not afford it, loans – which even had nothing to do with mortgages by the way –  were given to only the rich and well-connected – very ironic right? Why would someone rich require a loan in the first place, and even more astonishingly, a loan without a collateral? So in essence, people’s deposits which they had worked hard for and entrusted to the banks as the safest place for their hard-earned sweat and which young, hapless staff at the lower rung of the bank hierarchy had toiled mind, body and soul (literally speaking) to get for the banks were given out to friends, allies, family members, politicians and even to themselves, for themselves and by themselves ( the bank executives). Reports have it that one of the bank CEOs gave loans worth millions of naira to her housemaid!!

With all this going on, toxic assets in the banks kept accumulating; the share prices of these banks which, like their counterparts in the developed world were in a false bubble of growth kept soaring as people kept falling over themselves to buy and invest in these shares based on false and inflated value. Thus, when the credit crunch hit the US and spread all over the world, our oil-based-oil-reliant stock market was hit particularly as the price of crude oil plummeted. The share prices of banks were affected as they also crashed. Even at that time, when economies elsewhere were trying to come to terms with the extent of the crisis, Nigerians were told that our economy and financial sector were immune to the crisis because the “Mega” banks were very solid.

Fast-forward to August 2008, with a new management in CBN, the shady dealings of the “Mega” banks were unearthed. It was discovered that people’s deposits were squandered as loans given without collateral. In addition, the bankers’ manipulation of share prices resulted in massive toxic assets in these banks, just like their counterparts in the US which had acquired toxic assets from risky repackaged loans. All these shenanigans had placed the banks – which were now public limited companies with share holders’ money – teetering on the brink of absolute collapse and threatening to drag the already weak Nigerian economy with it. But this is where the similarities end.

While in the US, in the UK, in other parts of Europe and even in Nigeria, the government had to bailout these institutions in order to maintain some economic stability and sanity – $700billion in the US, 400bn pounds in the UK and N500billion ($2.6billion) in Nigeria – the difference is that in Nigeria, even before that money was given to the banks, the government via the CBN governor ensured it sacked the CEOs and upper echelon of the banks that were found to be most guilty and irresponsible in breaching their customer’s trust, squandering their deposits and acquiring toxic assets. They were not only sacked, but criminal cases and proceedings were instituted against them – like Cecilia Ibru former CEO of Oceanic bank who has been convicted and ordered to forfeit $1.2billion –  while others have their cases pending in court. This is a marked departure from what happened and is happening in the developed world where the bailouts essentially financed by tax payers was used by the financial institutions to give stupendous and obscene bonuses worth billions of dollars and pounds to their top executives at the expense of taxpayers.  For example, Goldman Sachs in the US received $10billion from the US government in 2008 , and paid $1.2billion dollar as bonuses to its executives for the first quarter of 2009.

I guess the differences in approach to dealing with the crisis stem from the type of economic systems in operation. In much of the developed world, the free market economic system is in operation, based on neoliberal values where economic activity is meant for the private sector with little control or influence by the government. Government’s role is limited to regulation, provision of law and order and an enabling environment for private businesses or big businesses to thrive. While this model leads to increased profit stemming from competitiveness, the problem is that as the private sector which enjoys unbridled freedom acquires more profit and grows into mega banks and mega institutions, they acquire more wealth and they become increasingly sophisticated, they use complicated financial instruments like hedgefunds and derivatives, making them more elusive to regulation. With such increased wealth inevitably comes political power and clout which they can mobilize in influencing the process of their regulation. Simon Johnson a former chief economist with the IMF states that there was a “flow of individuals between Wallstreet (the financial nerve center) and Washington (the seat of government)…it has become something of a tradition for Goldman Sachs employees to go into public service after they leave the firm”. In Nigeria as well, the former CBN governor was reported to have been too familiar with Bank CEOs. Furthermore, as economic activity is left to the private sector, the activities of financial institutions became so intertwined with the economy that they just have to be rescued with government bailouts while at the same time government could not really call them to order. To think that this is a system which a succession of governments have tried and are still trying to force down our throats – recall the shoddy privatization of NITELand the so far futile attempts at deregulating the downstream sector of the oil sector and removal of subsidies from other segments of the public sector – makes me shiver.

Furthermore in Nigeria, the N700billion bailout package that was given did not come from taxpayers per se or from external loans. As an oil-producing country, the bailout came from resource rents (oil money) and therefore, there hasn’t been any need to implement austerity measures – such as reduced government spending, budget cuts and increased taxes. However in developed countries which heavily rely on taxation as a main source of revenue particularly with the economic downturn which has severely affected productivity and economic growth, austerity measures have been put in place in much of Europe and the US – ranging from tax increases such as the recent increase in VAT in the UK from 17.5% to 20% and benefits cuts in child care, education maintenance and the very controversial increase in University tuition fees in the UK.

It seems incredibly unfair for bankers and financiers who as a result of speculation and risky behavior or what the late political economist Susan Strange calls “casino capitalism”, to cause financial turmoil for their respective countries, get billions of dollars in bailouts and then reward themselves with stupendous bonuses for such irresponsible behavior while the masses suffer at their expense – benefits cuts, loss of jobs and a generally struggling economy . At present, the 27 EU countries have only recorded an average 1.4% economic growth in 2010 a negligible improvement from the dismal negative 4.2% meaning that many economies actually shrunk or were in the reverse according to EU statistics, while countries like Greece and Portugal are still recording negative digits. This is probably why citizens in these countries, depending on the severity of the crisis have been protesting, in some cases violently particularly in response to the tough austerity measures (what we in the developing world know better as Structural Adjustment Program – SAP) .

Source: http://www.henrymakow.com
Over 50,000 people are reported to have taken to the streets in Nov 2010 in Ireland. Source:www.rss.msnbc.com

 

 

 

 

 

 

 

 

 

 

 

 

To think that this system which gives the private sector control and overbearing influence over vital sectors of the economy is what was pursued by certain policy makers and is still being pursued in some quarters in Nigeria through systematic privatization and deregulation, the consequences would have been absolutely horrendous for us. The reason why Nigeria was able to respond and rescue our ailing banks and even sack the top management is because we do not yet have in operation a full blown market economy, we still have vestiges of a state-led economy and I hope it remains so.

While there are a number of advantages of private sector led economy particularly in terms of service provision in the public sector and infrastructure like electricity, telecommunications and health services from innovativeness and efficiency and thereby improvement in service delivery, there are also evidently many pitfalls to that because the private sector easily succumbs to greed and resorts to all sorts of shenanigans inevitably resulting in financial crisis. There are so many things worthy of emulation from the West: we can improve our technological capability, our medical and healthcare system after the NHS for example, security of lives and property, ensuring a proper and efficient system of taxation which would help in making citizens demand for accountability and ensuring that things actually work, improving education at all levels and countless other things. But we do not have to copy everything, we have to find out what works for us before we consider wholesale importation of things particularly when it comes to complete liberalization and deregulation of the economy, I believe we are not ready for that.