Africa is DESIGNED to stay underdeveloped by neo-colonialism | Talk w/ African scholar Fadhel Kaboub
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https://www.youtube.com/watch?v=k0Blvfgltdc&t=454s35,951 views 30 Aug 2024 Podcast: Talk It Out with Li Jingjing
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Why many African countries are still facing struggles like poverty, malnutrition and instability decades after independence? In this episode, Tunisian scholar Fadhel Kaboub, senior advisor with Power Shift Africa and Associate Professor of Economics at Denison University joins me to analyze the structural traps that Africa has been put in.
Timestamp:
00:00 - 01:20 Highlights of this episode
01:21 - 03:03 Intro
03:04 - 11:08 Colonial legacy put Africa in a structural trap.
11:08 - 17:01 Why Western Aid hasn't solved problems for Africa
17:02 - 27:08 Differences between China's companies and Western companies
Fadhel Kaboub's Twitter:
@FadhelKaboub
Fadhel Kaboub's newsletter on Subtack:
https://globalsouthperspectives.subst...
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https://www.youtube.com/watch?v=k0Blvfgltdc&t=454s
International Finance, Lecture 24 - Fadhel Kaboub | Decolonise to Decarbonise | January 2024
https://www.youtube.com/watch?v=XosrN5DTT90
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The climate crisis, inequality, poverty, exclusion, and injustice call for urgent, bold, and radical action.
The mainstream economic policies are too weak, slow, expensive, ineffective, and dangerous.
A realistic plan for structural transformation and decolonisation requires a fundamental restructuring of the global economic architecture. A Global South transformative vision is possible, desirable, and affordable.
Connect with Fadhel on Twitter / fadhelkaboub or at Global South Perspective Substack https://globalsouthperspectives.subst...1,241 views 1 Feb 2024
https://www.youtube.com/watch?v=XosrN5DTT90
/ fadhelkaboub or at Global South Perspective Substack https://globalsouthperspectives.subst...Transcript
Follow along using the transcript.
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Transcript
Introduction
um our sixth speaker in our January series Fadel Kaboub is an associate professor of Economics at Denon
University and president of the global Institute for sustainable Prosperity he
is a senior advisor to Powers shift Africa in nirobi which is an organization designed to mobilize
climate action in Africa amplify African voices through increased visibility in media and public Communications and
leverage this voice internationally he has held number of research affiliations with the levy
economics Institute which is where I first saw Fidel a long time ago the John F Kennedy School of government at
Harvard University the economic Research Forum in Cairo and the center for strategic studies on the mreb in Tunis
as a teacher scholar and policy adviser during the last 20 years and more fadel's work has focused on designing
public policies to enhance monetary and economic sovereignty in the global South build resilience and promote promote
Equitable and sustainable Prosperity he's an expert on Modern monetary theory on the green New Deal on the job
guarantee and on reparations and he has a Blog that you might like to check out on substack
called Global South perspectives he's also an honorary Adjunct professor at our partner
University Torrance and we hugely appreciated his support and encouragement as we put our degree
together and launched it a year or two ago so it's a very great pleasure to have joined us today and over to you
f thank you Stephen and thank you Gabby and and thank you everybody for for
joining us today it's a it's a pleasure to uh to speak to you uh this uh this
afternoon this evening this morning depending on on where where you are uh so I'm going to go straight into uh
presentation mode I suppose if I can just make this uh full screen uh just
bear with me just one second and then we'll get started there you go so are you able to
see my uh my screen correct yep it's perfect wonderful uh so uh we we wanted
to have this uh this presentation this conversation to be centered on the
intersection between uh climate and and development and and to have this
discussion from from a global South perspective from an African perspective to be more precise and of course we'll
put an mmt lens on the analysis uh and then we'll open up for uh for questions
and and comments uh at the end so with that uh I'll I'll go ahead with uh with the first uh uh slide which is you know
inviting you to to check out the just transition africa. org website which is where you'll find the report that we
released last May called just transition a climate energy and development vision for for Africa and it's published by the
independent expert group on just transition and development which is a a group that was convened by Dr Yuba
sakona of of Mali who is the outgoing Vice chair of the ipcc and the main
contribution of this of this report is really to break the silos uh between the
climate policy uh conversations the energy policy conversations and the
development and debt conversations in the in the African uh context and the
global South in in general and the idea here is to put forward a coherent
comprehensive long-term strategy uh that simultaneously addresses climate energy
development and and debt issues on the continent and I'll be uh using quite a bit of this uh report and the ideas from
it in uh in this presentation so to start with with a
A simple message
simple message which is the following if you don't have a long-term strategic Vision or strategic plan for yourself I
guarantee you you're already part of somebody else's strategic Vision here I'm talking about countries uh and
clearly there is there's a handful of economic blocks that have long-term strategic Visions for themselves and
everybody has a right to have a vision for themselves and everybody has every right to use their economic diplomacy uh
the economic incentives they have to nudge everybody to where they want to see them on that on that map for the
next 100 years and Beyond and since this is not a a un meeting I can name the
countries so we can be very clear it's the US it's China uh and it's uh the
European Union of course with with few other countries belonging to uh whichever satellite you want to refer to
including you know Russia um belonging most likely to the Chinese satellite and
then you have us allies around its its satellite and and Beyond um the question
is what is Africa's vision for itself uh and and unfortunately the the role that
Africa has played historically or I should say the role that was imposed on Africa historically is the following
we're viewed as the the place for cheap raw materials uh we're the place where
industrial output from the global North is is dumped into a large consumer Market uh we're viewed as the place for
lowcost tourist destinations and we call that development uh and most importantly
were viewed as the place where obsolete Technologies assembly line manufacturing that is no longer needed in the global
North is Outsource to us under the label of development and cooperation and job
creation and all of that but effectively what it does is that it locks Africa at
the bottom of the global value chain and I'll come back to this point because it's extremely important in this vision
for for structural transformation and here this role that was was imposed and
continues to be imposed on on the continent I'm not talking just colonial times I'm talking also postcolonial
times and unfortunately moving forward this seems to be the vision that the
rest of the world has for the continent uh and it's interesting that we're having this conversation today this is
just a couple of days after the Italy Africa Summit uh took place in Rome uh
over over the last few days uh and it's yet again another European
power uh that happens to be this year the the president of of the
G7 uh summoned essentially every African president prime minister and Minister of
Foreign Affairs to a European Capital to be told this is our vision for
development in Africa right this is not an African vision for its own
development this is Italy saying this is our plan for you uh and and and I'll be
writing a Blog in the next few hours about the outcome of that Summit to to give you more detail but it's yet
another confirmation of of what you see on on this slide uh of course dressed up
in in new uh shiny PR language that this is not meant to be paternalistic this is
not meant to be predatory and this is not meant to be charitable either this
is partnership but you dig under the details and you find out that it's precisely the same strategy uh for for
for Europe you know greenwashed with a with a little bit of renewable energy
projects um uh I I should also highlight here that this role that was imposed and
continues to be imposed on the continent falls under what we would call the
global economic architecture and when I say global economic architecture it includes Financial architecture trade
and investment uh architecture and Taxation architecture and of course
these days there's a lot of conversation about reforming the financial architecture but the blind spots are the
trade and investment architectures and all of this architecture was not designed by us and was not designed for
us so it can't be the same architecture that will deliver a just transition or
or sustainable prosperity for Africa or the global South so we need to be very
clear about the transformation that is needed in this global economic
architecture uh and and to be more precise the Breton Woods institutions they were created when almost the entire
African continent was still colonized so why are we surprised today that the
colonial architecture that was designed by the economic superpowers of
1945 uh that architecture is delivering results that are extractive that are
abusive that are locking the the global South in a position that that's that we
find our El in today to me it's no surprise the system was designed for a
particular purpose and it's producing the results that it was designed for so in that sense that system is very
successful um but of course it's not just and it's not the system that we want to see continue moving moving
forward um a couple of key messages here that that you've seen in in the title of
this presentation and I'll unpack uh in the next few slides as I said we can't
decarbonize a system that hasn't been structurally decolonized yet and I mean the economic structures of colonialism
that still persist number two similarly we can't democratize A system that still
has Colonial economic structures and I and I see this in my own country in
Tunisia After the Revolution and we had tremendous progress with the new
constitution with freedom of speech and human rights and and freedom of the press in elections that are transparent
with multiple parties participating and so on all of that is wonderful and great
but we've neglected to address the economic structures the engines of the economy
that produced the massive unemployment that produced the inequality that
produced the socioeconomic exclusion all of which led to the revolution so few
years after the revolution we find those engines of economic
uh growth producing the exact same results and that meant that you have a
democratically elected president and prime minister and president who are sitting with the Mandate from their
people to deliver uh on on Justice uh on the on the economic front but they
realize that the economy that they govern is not a sovereign economy it's
an economy steered from abroad it's an economy that is constrained by these Colonial structures that persist so
that's why I say you can't democratize without decolonizing those economic structures and similarly for countries
who are now having these conversations about dollarization uh again you can't dollarize the global economic
architecture that hasn't been structurally decolonized yet that doesn't mean we should start with decolonization and then do the
decarbonization and later do the democratization and theorization no what I mean here is that these are
simultaneous processes that need to happen uh as we decolonize the process
will also allow us to decarbonize properly and a layout uh the the framework for this in the next few
Mass migration from Africa
slides just to put things in in in context I mean the the the Italy Africa
Summit that happened a few days ago was precisely uh triggered by Italy's
concern uh about Mass migration coming from the African continent um we're
talking about hundreds of of thousands of people already crossing the Mediterranean uh thousands of them uh
dying uh in in the in the Mediterranean let alone those who who die before they even make it to the Mediterranean so
this is a world Bank report that was uh published two and a half years ago or three years ago that essentially says by
2050 the World Bank estimates that 216 million people will be displaced
internally because of climate events and this is the World Bank this is not your most radical climate organization so
these are very conservative estimates and they make it very clear that they're talking about internally displaced
people uh not displaced across borders because once you do that once you say that then you're talking about climate
refugees and climate refugees is a legal term that has very serious legal and
financial consequences uh and that's why the UN is very uh worried about using
that label and they keep telling us constantly uh not to refer to them as as
refugees um but use any other label uh but it is what it is you know it looks
like a dock it quacks like a dock it is uh it is a dock and here as you can see
the African continent uh you know about half the the internally displaced people
will be on this continent and every time there's internal displacement because of climate events uh it adds additional
pressure on housing on food on jobs on on education on on resources that States
uh on the continent simply don't have because of the fiscal policy space that's been you know eaten up and
destroyed by external debt so this is a little bit what motivates this uh this
research and and this uh conversation today uh and of course Italy's vision
for development in Africa to their credit they want to go to the roots of of this migration so they want to um you
know uh invest in the continent uh with the idea of creating jobs and and
creating uh better livelihood for people so they don't have to be displaced in in
the because even if a small fraction of of this number ends up you know making
it to the Mediterranean this this is going to be the the the biggest Refugee crisis that that the world has has in
2050 on on the climate calendar is the day after tomorrow
Structural deficiencies
essentially uh so external debt is clearly one of the
major issues that we're uh that everybody's centering their attention uh on and and and here I'm going to be
unpacking the structural deficiencies um when I talk about decolonizing economic structures these
are the structural deficiencies that I want to I want to highlight but of course external debt is actually a
symptom of these deeper structural issues that can be summarized in three points number one energy deficits number
two food deficits and number three manufacturing deficits what I call low
value added industrialization let me unpack these when I say energy deficits
here I include even the biggest oil exporters on this continent the top
three are Nigeria Angola and Libya all three are energy poor all three import
all three of them export crude oil but import gasoline and kerosene and all the
petrochemicals they need to fuel their economy Nigeria Imports 100% of its gasoline
uh Angola Imports 80% of its gasoline and Libya is somewhere up there 60 or
70% I believe the last time I I checked so this is not by accident this is by
Design and I'll come back to this number two food deficits uh this continent used
to be the Bread Basket for for France for England for Portugal and and Italy
and Beyond during colonial times uh in less than 100 years we turn into a food
deficit continent according to bad Africa Imports 85% of its food and again
not by accident by Design yes droughts and climate change contributed to some
of the challenges but it's the rules of international trade that immediately
turned the continent into a food importing continent right after uh our
countries became independent it started in 1955 with the the first building
block of the European Union the the Treaty of Rome where Europeans recognize
that they have a food security problem that they're dependent on Africa and the rest of the global South so that
triggered a series of meetings and conversations and strategies that culminated in the uh introduction of the
European Union common agricultural policy cap which was introduced in 1962
so this is uh an agricultural subsidy system uh that prioritized food
sovereignty prioritized producing core crops uh wheat corn uh barley soybean
rice and and so on and of course it wasn't just Europe in 1962 around that
time that that prioritized food sovereignty it was of course the US Australia Canada Japan all of these
countries had very uh clear agricultural uh subsidies to prioritize core crop
production and it also included by the way the former Soviet Union which is why Russia and the Ukraine are so dominant
in in the uh industry and we're so dependent on them here in Africa in particular and
what that process triggered is the following our Farmers couldn't compete
with the cheaper corn and wheat coming from Europe and the US and uh and the former Soviet Union so our Farmers had
to switch to producing cash crops for exports and here the concept of food
security was invented and it's a very dangerous concept even though it sounds great I
mean who against food security except food security means the following food security means you can secure the
nutrition of your people either by producing the food or by buying it from abroad or by borrowing money to buy it
from abroad or even worse by receiving it as food Aid which is exactly what happened in the late 60s and early 70s
because of this disruption in our grain production system because of the very uh
cheap import that were coming from Europe there was there was a huge disruption in in in in the market uh in
on the African continent that led to several famines in and near famines in many countries and of course the US came
in and and the Soviet Union came in and and Europe came in with food Aid food Aid is the worst thing you can do to
your Farmers because they can't compete with a price of zero for corn for wheat
and and and for animal feed and so on so that was essentially the last nail in
the C often of food sovereignty in the global South and that triggered a process of
prioritizing exporting cash crops and as soon as you do that you trigger a very dangerous process ecologically that
we're dealing with today which is once you focus on your customers in the global North you have to plant the kinds
of crops that they want so you start using non-native seeds that require a
huge amount of water that we don't always have uh seeds that are not acclimated to to
our climate seeds that require fertilizers that we must import and pesticides also imported pesticides so
the the tomatoes can survive the journey all the way to a supermarket in Vienna or somewhere else uh and you do that for
10 20 30 years and you've just burnt the fertility of your soil and now you have
to double down on more potent seeds and pesticides and fertilizers and and
that's how we get to to the food deficit situation that we have here and the food insecurity that we have here um and then
finally the industrialization point is extremely important the type of manufacturing that we ended up you know
uh specializing in that was imposed on us is where you have to import the machines the fuel to power the factories
the intermediate components to assemble with lowcost labor and even the packaging is imported so the value added
content of what we export is low the value added content of what we import is high so you can double triple quadruple
your exports you're always locked at the bottom of the value chain so these three major structural deficits and there are
other structural issues I'm just highlighting the most important ones here they create structural trade
deficits and every time you have a trade deficit it applies downward pressure on
the value of your currency so you have currency uh depreciation uh that is uh
imposed on you and that means anything I need to import the next morning with the weaker currency I'm going to import it
with a higher real cost so this is the imported inflation that we talk about
and when it's inflation related to food items Fuel and pharmaceutical products
you have the danger of social and political instability so that immediately puts our governments in a
defensive position to protect the most vulnerable to avoid social unrest
because we've seen bread riots in my own country in Tunisia and Egypt and across the global South when these events
happen so governments learn to play defense before things get out of control
so what is the defensive strategy the Band-Aid solution number one you subsidize food and fuel and and medical
products to protect the most vulnerable and number two we ask our Central Bankers or the Ministry of Finance uh to
do whatever they can to help us stabilize the exchange rate and typically the central bank will do that
by borrowing dollars and euros and British pounds in order to artificially
stabilize the exchange rate so that the things that we import are not as expensive and that triggers the Vicious
Cycle of external debt so we can eliminate the entire debt of the global
South today I guarantee you in 10 years we're going to have another debt crisis unless we address these root causes the
energy deficits food def deficits and the industrialization deficits so just
Africa as a whole
to show you some of some of the numbers this is Africa as a whole uh you can eyeball the problem right there exports
of crude uh petroleum um raw materials and cash crops and low value added uh
manufacturing notice the volume is 585 billion now notice the volume of our
Imports 737 billion so structural trade deficit and again you can eyeball the
composition of what we import it's refined petrochemicals uh core uh food items
like rice and wheat and and corn and high-tech products Pharmaceuticals and other high-tech products so that's the
structural issue I can go country by country and and show you the the same
problem this is this is Ethiopia uh the volume uh right there is $7.7 billion I
I picked two 2019 by the way just to avoid the co disruptions but it doesn't
really change change year to year it's the same structural issue you can see the composition of of Ethiopia's exports
coffee a major cash crop um uh oil seeds cut flowers uh and this is by the way
this is a country that has 20 million people today who are dependent on food Aid it's a country that exports coffee
and cut flowers instead of you know producing the core crops that are needed for people's uh actual food security um
so this is this is not unique to Ethiopia I'm in Kenya here Kenya is the
same situation coffee tea and cut flowers exports as opposed to producing
maze which is the main staple uh here now look at uh Ethiopia's Imports notice
the volume 17 billion so you have a structural uh trade deficit and notice the composition of of Ethiopia's um
Imports again high value added products refined pet chemicals and and core crops and you see the The Source there the
website you can go in and look you know compare this to Japan compare this to Australia and you can clearly see uh the
difference so this puts um uh Ethiopia in a in a structural
trade deficit that it's actually accelerating over time you can see that Gap widening and of course the result of
that is constant pressure on the Ethiopian B on on Ethiopia's currency
when the line is going up at means the Ethiopian bed is getting cheaper or weaker relative to the US dollar so it's
not related to the current government it's not related to covid it's not related to the crisis in the Ukraine
this is constant pressure that's been going on for decades right A lot of people tend to focus on on the recent
events and crisis yes they do matter but this is beyond kind of temporary issues
that um that you know dissipate over over time a lot of people in in different countries tend to focus on
who's the president or who's the Prime Minister and blame you know the currency crisis or the death crisis on them this
is clearly much more structural this is not to say that presidents and prime ministers don't make terrible mistakes
but this is beyond that uh and of course the flip side of it is the external debt
in Ethiopia just a few weeks ago defaulted on on one of its uh main uh
external debt uh commitments and and many many countries Kenya Tunisia Egypt
others are are on the verge of of default especially uh this year um
notice how much of Ethiopia's exports are actually destined just to service
the debt on uh on Ethiopia's debt and here we're looking at you know uh
countries that go through phases where sometimes 50% of your export revenues are going directly to service the debt
so where is the fiscal policy space to invest in development or climate adaptation or health or anything else so
there is something fundamentally wrong with with the system here so we take this to a global scale Beyond Ethiopia
Global Financial Architecture
Beyond Africa divide the world into Global North and Global South and net out all Global Financial transactions
then that includes exports Imports foreign direct investment remittances
from workers even debt relief and cancellation interest payments everything illicit Financial flows
included everything in here here you get that green line which translates to the
following $2 trillion are moving from the poorest countries to the richest
countries from the global South to the global North $2 trillion moving in the wrong direction and notice that green
line has been accelerating over time when I first started looking at this when I was in grad school it was $500
billion so you can date where I went to when I went to grad school $500 billion and we thought it was outrageous now
it's two doll so if we don't do anything about this global economic architecture
that I described earlier that is the financial architecture the trade and investment architecture and the taxation
architecture I guarantee you that number will continue to accelerate in the years
ahead and that does not serve anybody's interest North or South um so to
Climate Finance Summary
summarize where we are in the climate Finance space you have2 trillion moving in the wrong direction you have the
hundred billion dollar promised from you know more than 15 years ago and not
delivered and whatever was delivered was mostly loans that contribute to the debt trap you have the green climate fund
which with the latest replenishment from a couple of months ago barely reached 122 billion and then you have that tiny
tiny little Dot from the loss and damage fund that was created a few weeks ago at cop 28 that's $700 million with an M so
the picture that we have here summarizes what what our financial plans
are for climate action and this is nowhere near what is needed so cancel
all the debt and and keep this picture keep the2 trillion dollars moving in the
wrong direction we're still not going to be able to meet any of the major challenges that we're dealing with
Structural Solutions
so um the structural solutions that are that are needed um from a panafrican
perspective from a Global South perspective is what I'm arguing here is strategic cooperation not at the
national level I'm talking about panafrican and Global south or at least Regional blocks level for very important
reasons I'll explain now number one investments in food sovereignty and agroecology not food security remember
what I said earlier about food security investments in renewable energy sovereignty not renewable energy for
exports which is what the Italy proposal for Africa is to accelerate renewable energy Investments for Europe's energy
security not for Africa's energy needs and number three most importantly a
different kind of industrial policies panafrican industrial policies that prioritize high value added industrial
production not just high-tech assembly for export for other people to to consume and here we need to prioritize
three key building blocks of our industrial policies number one renewable
energy infrastructure because we have all the Strategic minerals needed for renewable energy uh industrialization on
this continent for all the high-tech uh equipments that are needed we have all
the renewable energy to uh potential to deliver to the 600 million people that
we have on this continent and to decarbonize the rest of the continent so this is what I mean you can't
decarbonize without decolonizing so these three components food sovereignty
energy sovere Y and industrialization this is the process of true
decolonization and that coincidentally happens to be a transformative Vision on
the economic front but it's actually a climate action and a climate adaptation strategy because all of these things are
also climate problems so deliver to the 600 million people without electricity
and create millions of jobs to industrialize properly right um we have
950 million people people mostly women and children inhaling toxic fumes on a daily basis because there's no clean
cooking infrastructure on this continent the number globally on the on the global South is three billion people this is a
massive industrialization opportunity all the resources to manufacture and deploy the clean cooking infrastructure
we have on this continent we have the market at scale which is what you need for industrialization no country with a
small population can properly industrialize because you need economies of scale for manufacturing and we do
have that on a continental level on a global South level at least on a subregional level so clean cooking
infrastructure is a key industrial policy for the continent and of course Green
Transportation we have all the resources we need to put in place uh public
transport system highspeed rail to connect the continent and again hundreds
of millions of jobs potentially created to manufacture and deploy the the clean
Transportation uh system that we need and here I'm not talking about every African having their own Tesla I'm
talking about public transport and High-Speed Rail to connect the the continent just these three industrial
strategies alone can radically transform the continent on the economic front and
all of these are climate adaptation Solutions so it's a win on the climate front it's a win on the development
front and what this does is effectiv effectively re reposition the African
continent away from the bottom of the global value chain reposition the continent as a as a proper economic
Powerhouse side by side not on top of side by side with the US with China with
Europe in a in a new multi-polar world that that delivers on the climate front
that delivers on on Justice and on peace and prosperity because uh we we all know
how how unbalanced and and dangerous a world that is unipolar or or bipolar um
has been in the past uh and of course we can't do any of this and all of this
without addressing what I said earlier the global economic architecture we've made some progress a few months ago at
the UN with the introduction of the US tax Convent the UN tax convention which
was a huge victory for the global South for Africa in particular and that is to take the rules of international taxation
away from the oecd and put it into the UN system with one country one vote uh
the same needs to happen to the current blind spots that we have in this conversation which is the rules of
international trade and investment especially internet intellectual property rights the trips uh agreements
and of course there's these conversations now with the World Bank and the IMF to reform the financial
architecture and I underline they're talking about reform not transform uh and that is that is still controversial
and I've written about this quite a bit in the last year um so how do we pay for
Monetary Sovereignty
this radical structural transformation right do we have the fiscal policy space
this is where this is where mmt comes in and of course we those of you are familiar with mmt we're talking about a
spectrum of monetary sovereignty some countries have a high degree of monetary sovereignty and other have no monetary
sovereignty whatsoever on on this end of the spectrum we're talking about countries like Ecuador that dollarized
uh its economy completely or countries uh like small Pacific Islands close to
Australia and New Zealand that use either the US dollar or the Australian dollar uh so that's one end of the
spectrum the majority of the global South are somewhere in the middle with either limited or to some extent
adequate degree of monetary sovereignty so what determines where where you sit on that spectrum is not a decree that
the government uh announces on on social media saying today we declare our
monetary sovereignty monetary sovereignty is something that you acquire with strategic transformative
Investments that allow you over time to move on that spectrum and this is the
process of decolonization that I'm talking about and this is this is a very
uh important process uh and very strategic process that can't happen just by accident it has to happen with a very
clear um uh set of strategies uh in in mind and to to summarize quickly what
gives a country a high degree of monetary sovereignty uh it's it's the
following once once you're a country like the us or Australia or Canada on that high end of of the spectrum it
means you have your own National currency check that's very easy most countries have number two you tax your
population with the same National currency check most countries can do that but most importantly um two
additional features of a high degree of monetary sovereignty number one it means you're not forced to and you don't have
to issue debt that is denominated in a foreign currency some countries do it by
choice for a variety of reasons in very very small amounts but it's unnecessary but the majority of the global South is
actually compelled to do that in a defensive way the way I explained it earlier when you have these structural
deficits on the food and energy and industrialization front if you don't
play defense to protect the most vulnerable immediately and you do that by borrowing then you have social unrest
and political unrest potentially so the question is how do you get yourself to a
position where you don't actually have to borrow foreign currencies and the answer is very clear you invest in food
sovereignty in agroecology and in renewable energy sovereignty in a different kind of industrialization so
you escape the bottom of the global value chain so your central bank doesn't have to constantly defend the exchange
rate so those levels of degree those high levels of monetary sovereignty can
only be achieved if you've secured your economy on the core front
on food and energy and Industrial manufacturing uh some countries you know
have happen to have high degrees of monetary sovereignty because of unique circumstances uh that can disappear in
in the next few decades here I'm thinking of a country like Saudi Arabia yes issues its own currency has very low
taxation levels although it's increasing in recent years and it has a fixed exchange rate that it constantly defends
uh fixed exchange rate with the US dollar which the us or Australia or the UK don't necessarily have to have a
fixed exchange rate and and most importantly Saudi Arabia happens to have this massive reserve of foreign
currencies of of US dollars because of its massive exports of uh of petroleum
uh products and as soon as that goes away you'll immediately see the vulnerabilities of the Saudi economy it
will resemble the economies of the rest of the global South so you can defend the exchange rate with the with a
reserve fund of almost $700 billion but once those revenues disappear you can't defend that exchange rate so the
MMT Framework
question becomes how do we pay for this you know massive transformation in in
the
global South and of course we can talk about climate reparations and
all of that and I'm and I'm happy to engage in that conversation but
let's let's get
into the mmt framework a little bit to see what can be done at the domestic level uh in in this process the the
mainstream approach tells us well there's there isn't really much you can do you know we're told that governments
need taxes and maybe they can borrow a little bit up to whatever the markets allow them to but mmt tells us that
there's this additional spending capacity that bright yellow space and mmt tells us it's not infinite it's
constrained by the risk of inflation that red barrier right there of course the size of that bright yellow space
varies from country to Country countries that have a high degree of monetary sovereignty we have plenty of fiscal
space and countries that have limited monetary sovereignty will have very limited bright yellow space if if any so
the questions that motivate my my research in in this space is what
determines where that inflation barrier is that inflation risk and are there
ways that we can do that we can use to strategically increase the fiscal policy
space available to us so as most of you in the mmt space are familiar with this
uh analysis what determines the risk of inflation is a couple of things one is the lack of productive capacity
Logistics supply chain disruptions and and so on and of course everybody learned all of these lessons over the
last few years after the covid disruptions and and the Ukraine conflict disruptions and in the global South the
productive capacity that we underline is food and energy primarily there's other
categories of course the good news about productive capacity is that it's producible especially if you have the
raw materials for it especially if you're blessed with the fertile soil and the massive water resources that we have
in countries like Ethiopia I told you 20 million people are dependent on food Aid Ethiopia is blessed with the most
fertile land and with the Nile River and massive resources and and yet it's uh it
finds itself in this situation number two what constrains us and what determines the risk of inflation is what
I call abusive Market power and price setting behavior and again this is a lesson that we in the mmt community
we've been talking about for years and as soon as we've seen the supply chain disruptions and the abusive Market power
that emerged and became very visible and actually you know pronounced publicly by
corporate CEOs on on live TV uh we we've seen what price setting behavior of
corporate um um Power uh means uh not just in the global North but but also in
in the global South so in other words the one way that we we can't L the one
thing that we can't lose sight of in this structural transformation is these
constraints so as we invest strategically in food sovereignty and
agricology and all of this you cannot ignore the abusive Market power of your
domestic um uh vested interest and international vested interests so this
is a process of democratization of the economy right where if you have you know
governments of the the People by the people for the people because who sets the rules of the game who regulates
corporate power it's our MPS and and senators and and representatives in in
governments and if those individuals are serving the corporate power rather than
the national interest then then we have a blind spot there and and we can't make
progress so uh that is the the the radical transformation of
Mainstream Approach to Inflation
course the reference quickly to the mainstream approach to inflation most of you and in this program are are familiar
with this and and this is from a few years ago the FED essentially acknowledging that they didn't have
really a reliable theory of inflation and this is you know their their approach to inflation targeting the
targets keep moving uh and and and they think that they they will hit the target with with higher interest rates when the
source of your inflation especially in the global South is related to food imports or fuel Imports how can you say
as a central Banker I'm going to raise interest rates domestically to fight inflation when the source of inflation
is determined by OPEC when the source of inflation is a conflict in the Ukraine can a central Banker in Kenya or in
Ethiopia or in Tunisia stop the conflict in the Ukraine to stop the source of uh
inflation of course not can a central Banker in Africa convince OPEC to lower
oil prices of course not but the Ministers of agriculture and energy in
Africa and the Ministers of trade and investment in Africa they can help us
fight inflation by building the productive capacity domestically and that is the the real um the approach to
to fighting inflation this is the ECB forecast for for more than a decade you know anticipating what inflation is
going to be uh this is usually circulated as a as a joke but it's but it's
real um so the the traditional approach of austerity debt restructuring
Traditional Approaches
privatizing uh state-owned Enterprise these these are all the policies that we've been told in the global South we
should pursue labor market flexibilities keep racing to the bottom of of the global value chain with low lowcost
Labor uh rely on on more extractive foreign direct investment and export-led
growth of the kind I I described all of these things have have kept us there of course there's this idea of you know set
up a mini Wall Street Maybe inv s will come to your country well look at what happened in South Africa look at what
happened to any country that tried to liberalize its financial markets tourism is also another um you know false
solution because it looks great right you bring millions of tourists they create millions of jobs they bring
foreign currency reserves they help you you know pay for your external debt uh except you know in addition to the EC
ecological burden of of the type of Tourism that we pursued when you bring 10 million tourists you have to feed
them so you import more food that we don't have you have to transport them heat and cool the hotels for them so you
import even more energy that we don't have so it tends to exacerbate those those structural issues remittances from
from workers uh abroad of course this is a huge brain drain for the continent so we end up with with a raise to the
bottom more external debt and we're told there's no alternative right this is what uh Margaret Thatcher told us many
many years ago there is no alternative to these options now let me set up a a
Mainstream Approach
scenario here two scenarios one a mainstream scenario for financing say
strategic Investments say in health and education let's say these are our priorities let's say Ethiopia is going
to spend in its domestic currency 50 billion Ethiopian bit in its own
National currency and this is what the mainstream approach tells us mainstream approach tells us if Ethiopia does this
it's going to backfire it's not going to work don't even try here's why they say you're going to import more food and
energy and medical equipment yes you're going to have a larger trade deficit a weaker exchange rate even more
devaluation of the currency you're going to have this inflation pass through effect everything you import will be
more expensive if you do this for many years you'll you'll have hyperinflation potentially so you end up with more
external debt and the IMF and other foreign lenders will mandate spending cuts so you're back to austerity you're
back to square one less investment in health and education more unemployment brain drain social economic and
political tensions and yes there is no alternative like marget thra says so this is the mainstream approach the mmt
approach I'm going to use the exact same hypothetical scenario 50 billion
Ethiopian beer spent but now spent more strategically in a transformative way
here's what we have if now we spend 25 billion on health and education the national
priority and the other 25 we spend it on increasing domestic productive capacity
for food for renewable energy and Energy Efficiency and crack down on corrup coruption abusive price Setters and
importers of luxury goods via Taxation and regulation which is the Sovereign right of of the government so $25
billion of spending but spent differently and more strategically here's what happens you're going to have
fewer Imports of food and and and energy because you're producing more domestically a lower trade deficit a
stable or even stronger exchange rate no inflation pass through effect a lower external debt and even higher credit
rating because now you're less of credit default risk uh and you're going to increase the foreign currency
Reserves at the Central Bank you have more resilience to external shocks related to food prices and energy prices
a lower carbon footprint because you're investing in in sustainable agriculture and and energy more employment less
brain drain and improved quality of life for all and this is just the beginning
Constraints
now we're talking now the question becomes from an mmt perspective is Ethiopia's fiscal policy space only 50
billion Bill maybe it's 100 maybe it's 200 how do we know right what we know is
what determines the risk of inflation so it's not the size of the deficit that determines how much Ethiopia can invest
in its own development but it's rather the constraint does Ethiopia has the
logistical capacity to administer and govern a larger intervention in the economy does
Ethiopia has the capacity to tax and regulate and monitor abusive Market
Behavior does Ethiopia have the physical resources the technical capabilities to
deploy larger Investments those are the real constraints but not the financial
constraints and that's been consistently the the mmt message so to conclude the
Time to act
time to act is is now uh the climate crisis and all of these crisis that we're talking about require urgent bold
and radical action radical I I mean it in the literal sense of the term not the
political though you can take it in the political too what does it mean to be radical in the lital literal sense of
the term it means going to the roots of the problem so if the Italy Africa uh
partnership doesn't address the root causes of Africa's problems then it's
not going to help anybody right so if I'm not radical in that sense then I'm
operating at the surface level and if I'm at the surface level means my intervention is literally superficial
and superficial interventions reproduce the status quo and make things worse so
that's why I insist on this radical intervention in in this sense and the
the mainstream policies that we've seen over the decades they're too weak too slow too expensive and they don't even
work right they're making things worse and and that's what makes them dangerous economically socially politically and
and and ecologically uh and I truly believe that a realistic radical plan
for structural transformation of I of the kind that I described here requires
that decolonization of the economic uh global economic architecture and I
insist on radicalizing going to the roots of the problem and and I always you know refer to Martin Luther King Jr
who was a radical in in that sense because he he he he said in the context
of the Civil Rights Movement I have no time for the tranquilizing drugs of
gradualism and incrementalism and all of these false Solutions and and dangerous distractions similarly this is the kind
of mindset we need to have today in a global South transformative vision of of
this kind I truly believe is possible desirable and affordable thank you so
much happy to answer questions thank you Fidel that's that's
a beautiful slide to finish finish with could we just go back one i' would love to see that again yes
absolutely um I've got a some background noise on and off where I am so I wonder
if Stephen might be able to read the questions for everyone tonight um sure I I I I can I the the
first thing that comes to mind and this is linked to one of the questions is
that when so many countries threw off col ISM in the 50s and 60s there was
there was a lot of optimism yeah and what
happened how did neocolonialism come about how did countries that had were
not I mentioned yeah I I mentioned one of the things that happened very quickly
which is the the the the invention of the concept of food security yeah um
that that really put the continent uh on on a very dangerous path
and and now we're dealing with the consequences of it but there's also not just during that transition after
Independence um the the the rules of the game were were set up to benefit the
industrialized world the rules of trade uh when when the Gat agreements were being negotiated the the clear language
that was frequently used is that we believe in free trade and everything but arms and Farms weapons and food right so
that was very clear setback for the global South and immediately in the in
the 1960s some countries were not even independent yet when those rules were were established um then you have this
uh Playbook of the fossil fuel industry on the continent the extractive industries in general but especially oil
companies and it's still being used to this day uh the fact that you have the major oil producers on the continent
that were never allowed to have sufficient refining capacity to serve
their own internal Market that is in and of itself a trap and it translates into
a debt trap uh Uganda is is currently uh stepping into that trap one of the
latest countries Uganda is a landlock country that recently discovered uh huge
oil reserves so total shows up and they say okay we want to build a pipeline the
East Africa pipeline EOP Uganda to their credit they said no no no we don't want
just a pipeline we want a Refinery that serves 100% of our needs because we're a
landlock country and we have this oil we want to use it to develop internally to fuel our economy to deliver energy and
and so on now we can set the the the fossil fuel and climate issue aside here we're talking about the Playbook of uh
of of this industry and initially you know total said well you know 100% you
know don't even think about it maybe maybe 50% capacity to serve your economy
uh and then you know after a few uh months of back and forth and and misleading the government and of course
Moving Straight Ahead with with a pipeline building got the government to borrow you know a massive amount of
money to build an airport in the middle of nowhere so we can you know ship in their equipment and and set up their
their shop there in the middle of uh in the middle of an of an ecological um uh treasure essentially
that we have on this continent um long story short in eventually total said
well that 50% refining capacity we can't really do it but maybe if you can raise
$3.5 billion do yourself maybe in a few years we'll consider building it for you and that's that's essentially it so now
what's going to happen the pipeline is going to be built Uganda is going to generate some oil revenues and people
are desperate for investment in health in education and infrastructure everybody from you know the highest
official in the country all the way to the the average citizen so what's going to happen is that uganda's energy
consumption because of this development that's going to happen is going to increase which means it's fuel Imports
are going to increase and and now you have to service the debt for building
the infrastructure before you even earned a single dollar and now you have to meet the demands and aspirations of
this add development and all of which is going to require more energy Imports
more equipment Imports and More food imports because the economy is going to grow over time um so it's a classic trap
that was used in every single African continent and this is what extractivism did did to the continent it wasn't by
accident it was by Design um so there are lots of other issues also that
happen in the 60s Regional conflicts a lot of them uh instigated from from
abroad uh lots of coups and and things like that so there there were you know a handful of leaders who had a very clear
vision for decolonizing those economies uh some were eliminated literally
eliminated assassinated others were co-opted into submission uh and others
had to just leave the continent and and live in Exile because uh they they came
under very severe pressure and some U risk their their own lives so this none
of this happened by accident this is a geopolitical um game uh that's been in
place for a long time uh and and and as we talk about this transformation we
have to be cognizant that none of this was H is going to happen easily there will be resistance to this so we have to
um you know be very very clear about the challenge of decolonizing these but at
least what we can do is is identify the structures identify what needs to be
done organize mobilize educate and Empower people to uh reposition uh
ourselves in in the global economy thanks very much fedel Wayne had
India or China
a question Wayne said should sub Sahara and Africa follow in the economic direction of India or or China I
appreciate uh Africa is a a big continent with lots of countries so
they're not exact parallels but how would you answer that question uh very good question so India
and China they're they're slightly different um so India especially the current India the the way it's it's
governed um the bricks in general actually uh not just India and China uh
there there are certain things that we can learn from from the chinesee experience the Indian experience uh on
the industrial front which is economies of scale matter and both India and China
have that internally no African country has those economies of scale but
Regional blocks can have those economies of scale um the uh the the Investments
That India and China both put in place so that they got to a point where they can actually attract a lot of the
foreign direct investment the higher quality foreign direct investment over time uh that infrastructure had to be
built first and both India and China did that investment in education investment
in infrastructure um that happened especially in in China more so than than
India um but there are also things to learn from uh from the mistakes that the
the Chinese and and Indian model pursued which is export-led growth uh
um the what we have on this continent is plenty of export-led growth and that contributed to that entrapment what we
need is to industrialize and manufacture and deploy the resources that we need on the continent first the infrastructure
that China had to build first the infrastructure that India had to build first that doesn't exist on the
continent yet uh and the levels of investments in education uh and
technical skills that happen in both India and China over the last several decades that needs to happen on the
continent um uh still um but again the the outline that I that I put together
in in this presentation tells us that it's that industrialization that I'm talking about can't happen without
investment in education and technical skills uh as a matter of fact it can't happen rapidly enough with that transfer
of technology so we can leap frog uh into that and and that's why I always
argue for panafrican industrialization with joint ventures that involve
transfer of technology and and joint ventures financially with willing
Partners uh that willing partner can be China can be Germany can be the US Japan
like prime minister Mia mle of Barbados always says friends of all satellites of none uh we're not in any confrontational
relationship with any of the superpowers we want to partner on reasonable terms
not on neoc Colonial extractive abusive terms and and that's really the
the uh the tricky diplomatic and geopolitical uh strategy that African
leaders must put together if any of this is going to materialize and uh are a significant
proportion of African um governments um actively participating in in the sort of
things you're discussing I wouldn't say uh large portion but but a few uh there are a few
who clearly understand what I've presented to you today in Africa and and
other parts of the global South and we're probably at early stages of
building that critical mass of leaders who understand what needs to be done and most importantly who understand that
they cannot do it alone right all industrial policies on the continent are
n very uh little has been done to form these Regional industrial uh plants for
for variety of historic reasons but if if you if you allow me to give you just a classic example to to illustrate this
uh when Boeing dominated its industry and Airbus didn't exist at the time
there was no way for Germany alone to create Airbus or France alone or the UK
alone the only way for Airbus to to uh to be created and to compete with uh
with with Boeing is for this joint venture that European countries put together with the complementarity of
their resources and capabilities and the market at scale because France alone didn't have the market at scale to
actually invest in an Airbus and similarly the UK or Germany but as a block as a joint venture they had the
market at scale they had the complementarity of resources and capabilities and that's the argument we
we're making in the global South that no country alone can create this type of
industrial
transformation at scale that we're talking about we're not talking
about competing with Boeing and Airbus we're talking about manufacturing
renewable energy clean cooking clean Transportation infrastructure uh so it has to be done at scale which means at
least Regional blocks it has to be done with transfer of Technology with partnership with countries in the North
or the east or the West it doesn't matter Whoever has the technology and wants to partner as in Partnership we
have the market we have the resources and it's a win-win on the decarbonization front and as I said it's
a win-win also in terms of the the multi-polar um world that we want to to
live in that is fair and Equitable and Balan and and
just thanks for that answer Fel that's a terrific answer um if we were looking at
one country how much can one country uh in particularly we're not talking
about an economy the size of South Africa or Nigeria somebody's asked about Ethiopia um what can one country do on
its own and how do you figure out how much fiscal space in a country like Ethiopia actually
hes very good question uh as I as I said in a few slides ago for for a country
like Ethiopia all you have to do is start small and start identifying you know where that inflation risk is where
it emanates from um because sometimes there there will be blind spots that you're not cognizant of uh every metric
ton of wheat you produce domestically saves you the equivalent in dollars that
you have to borrow to import that food and then interest you have to pay for for many years so start with what you
think you can handle with domestic resources reallocating maybe some of the resources from producing cut flowers for
exports to producing core crops right every Green kilowatt hour you produce
domestically with renewable energy saves you the equivalent in dollars that you
had to borrow and interest you had to pay for decades so every single country can definitely start immediately and
start small and then start scaling up but I'll give you an example of blind spots in the case of Nigeria because
Nigeria a few years ago decided to have uh a food sovereignty plan saying we can
produce plenty of rice domestically why are we importing almost all of our rice
and the government allocated resources and went straight ahead with this strategy and it backfired because they
did not take into account that there's a handful of individuals in the country
who have the exclusive import license for importing rice and those individuals now you're cutting into their market
share and you're stepping on their toes and they will use every ounce of
economic power and political power to destroy your strategy and they did so
before you engage in these things you want to identify where is the abusive Market power that is lurking under the
surface and it's going to pop up immediately as soon as you say we have an energy policy a food sovereignty
that's going to cut into their market share right and and you have to be ready and prepared and and maybe planned for
how do you incorporate and rechannel this economic power and this political
power in a way that allows you to actually engage in these transformative
policies so very good question are you finding allies in the global North or
are these changes that can be done regardless of attitudes in Washington
and London and Paris and places like that uh there's there's definitely
allies in in the intellectual community in the Civil Society space and even in in the labor space uh when it comes to
governments yes some individuals but I wouldn't say there's a
country that's that's going to be you know 100% partner on this front um but
we wouldn't completely know until we actually test this and when I say test this I'm not referring to you know
something like what happened in Rome a few few days ago with with the European
government inviting Africans and telling them what Europe thinks they should do
uh I'm I'm talking about things that should happen on this continent first where we actually design our
comprehensive uh strategy and policy not at the think tank and Civil Society level I think we've done that but at the
heads of States level at the African Union level then we go with that strategy and vision saying here's our
industrial policy here are the resources here are where we're going to build all of these manufacturing units for the
entire value chain from refining minerals all the way to producing solar panels we as Africans we already have
agreed on who's going to produce what and how we going to deploy this on what schedule and then we go to our partners
in China in Europe in the US and Japan and say we're looking for joint venture
Partnerships and transfer of Technology te ology for climate action for
transformation then you'll get the real answer and then you'll know who's your real partner in that transformation and
if somebody said no no no we're not interested in that particular Vision you have instead we have this vision for you
then you know the difference between true partnership and neocolonial
relations well thank you f I can't tell you how much I admire what you're doing
and um how important it is G Gabby did are there any other questions that
you've seen that you'd like to there are actually dozens of questions um I I don't think we'll get
to them no get to them all um but save them well this is a good database I I
will save them yes actually that's that's a great idea I'll have that I'll download the chat file and people can
can ask me for it if they want H would you be happy to share the slide presentation too with people if they ask
it they yeah excellent um so maybe we'll
just finish with um uh a question uh from Susan which African countries are
most capable in your in your view of leading by example by economic and
political power oh now you're asking me to reveal
my cards very good question um so the the
countries that you know I I have no secrets I'm not in in any secret plans
but the countries that we as uh as African civil society and think T groups
are trying to you know engage with the most are countries that have the uh
resources and capabilities and the potential but also countries that have political
leadership um that uh what's the right word to use that has guts and and and
has courage to to actually lead um so if you if you map out the the African
continent and political leadership you'll identify you know a few leaders
that that are not afraid to speak up uh that are not afraid to think differently
that are not afraid to to listen to a different narrative uh and and of course
you can you know clearly see what what happened in in the last few months with
with South Africa leading world not just leading Africa and going to the icj and
challenging the powers to be on on the genocide that's happening in and Palestine uh Namibia uh leading also in
in challenging its biggest economic partner Germany uh on the
genocide um uh question on the the reparations that are owed uh to the
people of of Namibia um we clearly have you know a leader here in Kenya who's
leading in the conversation on on the climate front uh on restructuring the
Global Financial architecture so there's a handful of of African leaders um who
who have at least made a name for themselves of not being afraid to to say
things that are not necessarily welcome by the global North and and and calling out it doesn't mean that they have you
know this coherent Vision that I'm describing but these are the people that were trying to educate Empower and and
engage with and it's not sufficient by the way to have one president or one prime minister in each country lead this
work so the the the work that we're doing is engaging at the high level but also engaging at the technical level the
bureaucrats who will stay after every president is is long gone right the the people in ministries but most
importantly with uh African civil society and think tanks to decolonize
our thinking and research and and engagement and with the with journalists with the media so decolonizing reporting
also because as as Stephanie Kelton once said you don't change the world by asking the same questions you change the
world by asking different questions remember she said this at one of the mmt conferences a couple years ago and
journalists play a key role in in in changing the narrative helping us change
the narrative as they start engaging with issues with with the set of
questions uh and and a lot of the work that we're doing Believe It or Not uh I'm sure some of you who who pay
attention to what uh what powers shift Africa and other you know uh Civil Society groups are doing you can see
hidden in in in the and the footnotes of of the narrative a lot of the the mmt uh
perspective uh and approach kind of blended into this without it being labeled mmt or anything else but that's
that's the kind of you know know changing the narrative that we need that you know forget about the label it's
really the issues that matter and when you hear um um you know uh individuals
across the continent who are you know vocalizing and verbalizing a lot of this
analysis in their own words without using any economics language uh it it
gives you hope that that we're making some progress towards this kind of transformation that we're talking about
thank you that's a really hopeful note note to end on I think there are there are lots of people who didn't get their
questions answered um but perhaps they could connect with fedel on on social
media or on Twitter or um yes and please send me questions and send them to me
also yeah great excellent that that's very very generous of you there's a great one here from Tom about um
football as a soft power and he says sorry about tunisia's result by the way way well or there's there's a campaign
happening right now during the afcom uh to call out the the main
sponsor of of uh of of the our football tournament so decolonizing uh African
football yeah I can get behind that
absolutely thank you very much um it's been a wonderful wonderful presentation and a wonderful Series this January
Series so thank you all for being part of it and joining us on this journey um
I might um just stop the recording there but I've I've really loved uh hearing
from all of our speakers and and this is a great way to finish so thank you we'll perhaps we'll do it again next
year thank you
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