# 3 : Bust Not Boom

# 3 : Bust Not Boom

10000shteacherThe terrifying decline in energy prices will set the Third World back a half century, and this is the #3 Story of 2014 in Africa.

This one is hard for Americans to understand and it came quite late in the year. [For the summary of all Top Ten Stories in 2014 click here.]

The decline in energy prices is caused in large part by America’s boom in energy production both at the resource level (oil) and production level (wind and solar). Good thing, right?

What we didn’t realize was how quickly we were outpacing the rest of the world, and global impediments to trade and wealth distribution coral virtually all the benefits in North America.

Look simply to Europe to see how the decline in energy costs seriously threatens a new European recession and at the very least a partial breakup of the Eurozone.

The decline does have some negative effects here, mostly the stock market, but benefits like growth and consumer spending render a net positive.

It’s seriously different in Europe, India and China; and in the Third World it’s nothing less than terrifying.

During the Great Recession, countries like Kenya were proudly expounding that their growth rate year-to-year – which was much higher than the U.S. year-to-year – actually presented a horizon when the countries would achieve economic parity.

Before the Great recession in 2005, Kenya’s overall economy was about .14% of the U.S. That’s right, the U.S. economy was 700 times bigger than Kenya’s.

By last year Kenya had more than doubled its growth vis-a-vis America. America was only 300 times bigger. At this rate it would be only about a half century before Kenya caught up with America.

Many of us didn’t think this was a pipe dream. It seemed like the logical extension of a globalized economy based on capitalism. I’m no economist, but economists made the same mistake I made: we presumed this trend was fixed.

This year proved anything but, and next year will be stultifying. It’s likely that Kenya’s 300 times smaller than the U.S. economy this year will become 400 next year and perhaps return to 2005 by 2016.

Kenya is a perfect example for the entire Third World.

What does this mean?

I might not like capitalism, but I know that political progress, human freedoms and basically overall social happiness are in today’s world linked to an increasing economy. Whether it should be or not, doesn’t matter for this discussion. It just … is.

The Arab Spring can be explained with these metrics. The breakup of the Soviet Union, the expansion of Europe, the growing peace in Asia … all can be explained with these economic metrics. Even today’s possible reversal of the situation in the Ukraine, or the management of Iran’s nuclear threat can be postulated with these metrics.

So, the reverse?

Doesn’t take a rocket scientist to answer: increasing social instability, more war and civil disturbances, more refugees and massive global instability.

From America’s point of view an actuarial could attempt to predict the tipping point: when will America’s profound growth begin to eat itself because the rest of the world’s suffering becomes so profound it somehow effects us?

What a horrible assignment. Yet that’s the question, today, for Americans. And if you’re a Kenyan rather than an American it’s not an assignment worth waiting for.

Today Kenyan teachers are on strike. That in itself is nothing new. Public sector employees often strike in Kenya, especially teachers.

But note the issue, today: a starting salary of Ksh 10,000/month. That’s $111. A decade ago it was twice that, not because the shilling value was different but because the exchange rate – the value vis-a-vis America – was twice as good.

What does a government do when it has no money to pay teachers? The expected oil and gas revenues in Kenya declined by 50% this year while the price of energy doubled.

“The arrest, prosecution, and jailing of [social media bloggers criticizing the current Kenyan regime on] foolish Facebook posts acts as proof of the intolerant and dictatorial regime we are drifting into,” writes Kenyan activist, Gaitho, today.

Hunger. Then, Dictatorship. Then, finally a return to Ignorance. One follows the other as certain as I and my children begin to buy SUVs again because they’re now so affordable.