One of the most conservative banks in the world has just stated that the fundamentals of liberal East African economies are better than the U.S.’ capitalist one.
I’m certainly oversimplifying Standard Charter Banks “Outlook for 2011” and I don’t pretend to suggest I’ve combed carefully its 128 pages. But there are certain conclusions this world economic expert was forced to make that beg any more complicated explanation.
Standard Charter is important, because its involvement in sub-Saharan and East Africa in particular is among the greatest of any world bank. There are, of course, many other analyses of the global recession and annual predictors of world financial situations. But Standard Charter is most relevant to East Africa.
The bank starts by predicting GDP growth world-wide: East Africa will grow between 6.5 – 9% per annum, while the U.S. will be between 2-3%.
“Emerging economies account for one-third of the world economy but are accounting for two-thirds of its growth. This shift in the balance of economic and financial power looks set to continue, driven by their better fundamentals, policy actions and increasing confidence,” the report contends.
The detailed explanation of what “better fundamentals” and “policy actions” are reads like a text book description of Marxist/Leninism:
— China seems to be doing everything right to stay on top by its capacity to shift economic policy at a moment’s notice, unburdened by democratic dynamics, even if it is “unfair” and risks collapse if its economic domination isn’t secured worldwide.
– Emerging economies like Kenya, Tanzania and Uganda are certainly benefitting from newly discovered and mineable natural resources, but also from an aggressive and liberal monetary policy that discounts the importance of inflation and prints lots of money so that banks can loan out infrastructure development.
There is, of course, much more. But even a stiff collar Scrooge sitting on Bank Street had to state the obvious. In this economic downturn, the economies that are doing best are those that could be maneuvered quickly in ways that are not popular with electorates. Ergo, non-electorate societies will prevail.
At least for now.
This is good news for East Africa, where fiscal and monetary policy is still tightly held by those in power and not really subject to the democratic process. Debt, interest rates, currency policy and even trade and tariff policies are simply not a part of the public lexicon in the way they are in the U.S. and the U.K. In fact these government policies are much more likely to be controlled by western institutions like the IMF than by local opinion.
And normally conservative IMF, like normally conservative Standard Chartered Bank, cannot now impose western values on economies that are doing two, three or four times better than western ones.
It remains to be seen if this is a global economic game changer, or just the anomaly of the sort that appears after a major world economic trauma.
And even if the latter, I believe the sacrosanct presumption that unfettered capitalism is the best the world can do — especially the developing world — is on its way to the proverbial graveyard of antique thoughts.