Talking-shop-on-Thames

BIG ECONOMIC POWERS DECIDE THE FATE OF THE GLOBAL ECONOMY “LIKE King Charles II, the Economic Conference is taking an unconscionable time to die,” lamented The Economist in 1933, halfway through an epic—and ultimately fruitless—gathering of world powers in London to prevent the spread of protectionism in the depths of the Depression. That conference lasted more than a month, with the dollar sinking and tempers rising the longer it dragged on. At least there is no danger of interminable drift when leaders of the Group of 20 gather in London next month to address the worst economic crisis since the 1930s. They have set themselves just one day, April 2nd, to do what their predecessors failed to accomplish in weeks: tackle the crisis and consider ways to remake the rules of finance. This weekend G20 finance ministers and central bank governors attending a preparatory meeting in London may well attempt to limit expectations. More pressingly, they will have to heal an awkward sense of transatlantic disunity that has emerged in the run-up to the meeting. The tensions were exposed at an assembly of European finance ministers on March 9th and 10th. The ministers responded sharply to a call by Lawrence Summers, the White House economic adviser, for everyone in the G20 to focus on boosting global demand. Such calls were “not to our liking,” sniped Jean-Claude Juncker, Luxembourg’s prime minister and the chairman of the meeting. The cause of harmony may not have been helped when Britain’s most senior civil servant was quoted as saying the shortage of staff in Barack Obama’s two-month-old Treasury was making preparations for the summit “unbelievably difficult”. (Tim Geithner, the treasury secretary, disputes that.) In reality, the tensions appeared more symptomatic of the opening of bargaining than of a disastrous rift. The G20’s agenda focuses on three broad areas: sorting out the crisis through fiscal and monetary means and by encouraging banks to lend; medium-term regulatory reforms; and strengthening multilateral bodies such as the IMF so that they can give more help to crisis-hit developing countries. Everyone has different priorities. America feels its counterparts are not doing enough to boost demand. It would like them to pledge a fiscal stimulus equal to 2% of global GDP this year and next, and for the IMF to monitor compliance. Some countries would also like the European Central Bank to make better use of its monetary arsenal, as the Federal Reserve and the Bank of England have. America has indeed done a lot to stimulate growth (see table). The IMF, however, notes that taking into account automatic stabilisers, such as welfare payments to the unemployed, Germany’s fiscal response is not as far behind America’s as it appears. Not only does Germany feel its spending package is big enough, it is pressing for a quick return to balanced budgets when the crisis is over. Although transatlantic differences have emerged over fiscal policy, they are narrowing over regulation. Germany and France have long battled to persuade America and Britain to regulate hedge funds, which are clustered in the financial centres of New York and London. America is now prepared to countenance regulation of systemically important ones. Since the G20 leaders first met in November, their deputies have laboured on reforms to the stricken global financial system, in particular through the Financial Stability Forum (FSF), a Basel-based group that met in London this week. These include reforms that would affect bank regulators, supervisors and accounting standard-setters, and cover bankers’ pay, derivatives trading and rating agencies. America, chastened by its own regulatory failures, is now more supportive of tougher, co-ordinated global regulatory standards but only to a degree: it is unenthusiastic about uniform standards for executive pay pushed by Britain. In addition, the FSF is expected to propose to the G20 ways to make bank regulation less pro-cyclical, by making forward-looking provisions against bad loans rather than the “incurred-loss” method now in use—though not so that banks can use the provisions to massage earnings (see article). It will suggest incorporating a leverage ratio into bank-capital requirements, to supplement the existing risk-weighting of assets. It is also helping set up cross-border supervisory colleges to share information about 30 global banks. Illustration by S. Kambayashi There is general support for doubling the IMF’s resources to $500 billion, but America would like it to have even more. It is not clear how the increase would be funded. Reserve-rich countries like China could contribute more, as Japan did with a $100 billion pledge in February. But some fear that strings might be attached to such money, such as less criticism of China’s exchange-rate policy. Mr Geithner has proposed the IMF’s credit line with 26 rich member countries be dramatically raised to $500 billion from $50 billion. Some of the trade-offs will be driven by political considerations. French and German voters, for example, lay part of the blame for the crisis on hedge funds and tax havens, even though both played minor roles compared with the highly regulated banking system. Likewise, Mr Geithner is pressing for higher global capital standards for non-bank financial firms (such as American International Group, a big insurer), in part to reassure taxpayers that this sort of crisis and the accompanying bail-outs will not be repeated. Given the importance of the summit to the reputations of Gordon Brown, its British host, and Mr Obama, on his first overseas trip since taking office, every effort will be made to trumpet such progress. Few expect a 1933-style fiasco, though participants believe that given the tensions exhibited this week, a narrowing of differences is more likely than any “grand bargain” to put the world to rights. The best that might emerge from the summit is proof that leaders of the world’s biggest economies continue to talk to each other. Given the urgency of the situation, and the immense capital that Mr Obama still holds abroad, the world might have hoped for more. Talk, like so much else in this financial crisis, is cheap.

A BETTER GHANA BUDGET

It probably is the most unanticipated budget in almost a decade and sure it was an unheralded affair. Right after the hurried transition there was a huge issue about the true state of the economy . whilst the out going NPP insisted they left a far better economic legacy than they met , the incoming government and the world Bank were shouting from the the rooftops about the worsening economic conditions. The ensuing debate led us to one conclusion : the economy was in dire straits and Ghanaian must brace themselves for the coming storm that was going to be very rough. Many Ghanaians get the message, the economy is in a mess and that they should expect very little from the government. The overarching theme of the budget was Fiscal discipline and austerity at all levels of governance with the most coming from the executive.There are so many initiatives and ,measures geared towards cutting out waste and monitoring how monies are spent in all the MDAs. It is dense of good governance initiative and waste -cutting. If all these initiatives will be implemented then it will mark the beginning of a new era of accountability and openness in governance. What the budget is short on is bold visions and initiatives that will give a clear direction to the nation.

The Sources of Growth

I have watched with keen interest the claims by this Government for the relative economic success this country is enjoying over the last decade. Mr Arthur Kennedy must be told that the best performing sectors that are driving the growth is the result of at least two decades reforms. The explosive growth in the Financial sector is the result of the various FINSAP reforms over the years coupled with the coincidence of good reforms in Nigeria. The growth in the service sector especially in the Tourism and Telecom sub sectors are the fruits of about a decade of persistent reforms and innovations which the NPP alone cannot claim for itself. Lets try and do a simple arithmetic of the $16bn nominal GDP being bandied about.Out of this figure , we are told $4bn comes from inwards remittances of underemployed Ghanaian living abroad while the telecom sector alone contributes not less than $3bn to the economy.The financial sector contributes not less than $3bn while the mining sector add about $1.5bn.These figures adds up to $11.5bn. These figures account for the lopsided nature of the growth which is the result of the widening income inequality as noted by the 2007 Human Development Report. the NPP has to be more ambitious and stop this glorification mediocrity.

Bush cheers “free enterprise” as US capitalism goes bust

US President George W. Bush came to Wall Street Thursday to deliver a speech extolling the virtues of the "free enterprise" system even as multiple economic indicators made it clear that the so-called "magic of the market" is spelling misery for millions more working people in the US and around the globe. Bush delivered his paean to American capitalism at Federal Hall, just a stone's throw from the New York Stock Exchange. The historic building was the site of the inauguration of George Washington and the first sessions of the US Congress. The august setting stood in stark contrast to the character of the select audience, which, in the gap between its ideological proclivities and socioeconomic reality, resembled a meeting of the flat earth society. A total of 175 people turned out for the session, organized by the Manhattan Institute, a right-wing think tank that specializes in demonizing the poor while promoting tax cuts, financial deregulation, the dismantling of social programs and the decimation of public education. The lame-duck president timed his speech for the eve of this weekend's G20 summit in Washington, which will bring together heads of state from the world's major economies for the ostensible purpose of working out a common agenda for confronting the global financial meltdown. Behind the banalities and boosterism, Bush's message to those assembling in Washington was clear: Nothing will be accepted that interferes with the unfettered accumulation of wealth by America's financial elite and the defense of their interests, regardless the cost to the world's population. Bush effectively acknowledged at the outset that the gathering of presidents and prime ministers this weekend will accomplish nothing—and that his administration will block any attempt to reach binding agreements. "The undertaking is too large to be accomplished in a single session," he said. "The issues are too complex, the problem is too significant to try to solve, or to come up with reasonable recommendations in just one meeting." Rather, he insisted, the summit should be dedicated to "developing principles," above all, the reaffirmation that "free market principles offer the surest path to lasting prosperity." Given the state of the economy, confronting its most profound crisis since the 1930s, Bush's remarks appeared delusional. He spoke in the wake of official figures showing that more than half a million American workers filed for unemployment benefits the week before, and over 85,000 homes had been foreclosed in October. The Treasury Department announced a record budget deficit of $237.2 billion for the month of October, and just a day before, its secretary, former Goldman Sachs CEO Henry Paulson, was forced to make an emergency announcement that the $700 billion approved by Congress to buy up "toxic" mortgage-backed assets must now be redirected to prop up not only the major banks, but also the failing consumer credit industry. Bush felt compelled to acknowledge that "in the wake of the financial crisis, voices from the left and the right are equating the free enterprise system with greed and exploitation and failure." While admitting some isolated failings, Bush rejected any indictment of the capitalist system. "The crisis was not a failure of the free market system," he proclaimed. "And the answer is not to try to reinvent that system. It is to fix the problems we face, make the reforms we need, and move forward with the free-market principles that have delivered prosperity and hope to people all across the globe." The "fixes" that Bush proposed were so vague as to be meaningless: "improving accounting rules," ensuring that "financial products are properly regulated" and taking a "fresh look at the rules governing market manipulation and fraud." His faith in the "free market," however, remained rock solid: "Like any other system designed by man, capitalism is not perfect [presumably, only the eternal free market created by God in the hereafter can attain such a state]. It can be subject to excesses and abuse. But it is by far the most efficient and just way of structuring an economy. At its most basic level, it offers people the freedom to choose where they work and what they do." He continued: "Free market capitalism is more than an economic theory. It is the engine of social mobility—the highway to the American Dream." "Freedom to choose where they work?" Whom does he think he's kidding? According to official figures, 10 million American workers are now out of work and cannot find jobs. Their ranks have been swollen by 1 million in the last year alone. If one counts those who are underemployed—involuntarily relegated to part-time jobs—and so-called "discouraged" workers, who have been dropped from the jobless rolls, fully one of eight not only can't choose where he or she works, but cannot get full-time work at all. And this is only the beginning, with mass layoffs being announced daily, threatening to create an army of unemployed larger than any seen since the Great Depression. As for free-market capitalism serving as an "engine of social mobility," this movement has increasingly been in opposite directions, with those at the top of the social ladder increasing their share of total wealth to unprecedented levels, while the vast majority, the working people, have seen their incomes stagnate and decline. The gap between wealth and poverty in the US is now greater than at any time since the 1920s. It is this amassing of wealth by those at the top that Bush is determined to defend. As the Washington Post pointed out Friday, among the proposals being put forward by other heads of state attending the Washington summit that "Bush and his aides do not favor" is the call for "restrictions on executive pay." Bush was forced to admit that even his commitment to the free market has limits. "We are faced with the prospect of a global meltdown," he said. "And so we've responded with bold measures. I'm a market-oriented guy, but not when I'm faced with the prospect of a global meltdown." These "bold measures"—backed not only by Bush but also by President-elect Barack Obama—have amounted to the looting of trillions of dollars in social wealth in order to bail out the country's biggest banks and Wall Street finance houses. Hundreds of billions of dollars of this money is flowing directly into bonuses for financial executives and dividends for wealthy shareholders, while facilitating the consolidation of banks and the further concentration of wealth. "Free-market principles" continue to apply in full force, however, to workers who have lost their jobs and to families facing foreclosure on their homes. For them there is no bailout, only the prospect of being forced to pay for the trillions lavished on Wall Street through further attacks on living standards, jobs and social programs. Earlier in his presidency, Bush restricted his public appearances largely to military audiences, bound by command discipline to treat him with respect. Now, in the waning days of his presidency, he apparently feels comfortable only in addressing small groups of right-wing ideologues like those assembled by the Manhattan Institute. For good reason. Outside of this rarified atmosphere, the popularity of capitalism and the "free market" is sinking to that of the outgoing president himself, whose poll numbers have plumbed depths never reached by any previous occupant of the White House. Millions are indeed beginning to identify the "free enterprise system" with "greed and corruption and failure." As the Obama administration takes office and seeks to defend this same system, popular anger over the social conditions created by capitalism must inevitably take the form of mass struggles against his government.

A NEW ARCHITECTURE WITHOUT THE MAJORITY

THE LEADERS SHOULD WEAR SACKCLOTH AND ASHES AND GO THERE WITH A HEAVY HEART.........Maynard Keynes before the first Bretton Woods

IT IS tempting to dismiss the upcoming G20 meeting as a piece of political theatre. Presidents and prime ministers from a score of rich and emerging economies will descend on Washington, DC, ostensibly to remake the rules of global finance. Several have talked grandly of a sequel to the 1944 Bretton Woods conference, which created the post-war system of fixed exchange rates and established the International Monetary Fund and World Bank. That is nonsense. The original Bretton Woods lasted three weeks and was preceded by more than two years of technical preparation. Today’s crisis may be the gravest since the Depression, but global finance will not be remade in a five-hour powwow hosted by a lame-duck president after less preparation than many corporate board meetings. Yet for three reasons it is still a meeting worth having.

The first is that this could mark the beginning of a better multilateral economic system. The G20, created after the emerging-market crises a decade ago, is not perfect for today’s problems. It excludes a big economy with an admired system of financial regulation (Spain) but includes a mid-sized country that has become irrelevant to global finance because of its own mismanagement (Argentina). Still, the G20 includes most of the key parts of the rich and emerging world, making it a better forum for global economic co-operation than the G7 group of rich countries, which has until now held the stage.

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Don’t just stand there

In the short term that co-operation, and this weekend’s meeting, should focus on the second good reason for the Washington summit: crisis management. Although the panic in the credit markets shows signs of abating, the economic news gets ever grimmer. Global demand is slumping as rich economies plunge into what, collectively, could be their deepest recession since the 1930s. Pernicious deflation, though still unlikely, is no longer an idle risk. Emerging economies are being hit hard by weakening exports and the collapse of private capital flows. The G20 summiteers cannot prevent this, but they can stave off a slump with zealous and co-ordinated action to prop up domestic demand and provide resources to cash-strapped emerging economies.

Some countries understand the urgency. China’s stimulus plan, even if it is a little less dramatic than first trumpeted, is an important step . Others, such as Germany, are being woefully timid. A collective commitment by those who can afford it will pack more punch than individual initiatives. Useful too, would be a pledge to cushion the slump in private capital flows to emerging economies, through both central-bank swap lines and the IMF. Countries with ample reserves, particularly China, Japan and the oil exporters, should promise now, and without preconditions, that they will lend to the IMF if it needs cash in the coming months. The G20 should also pledge its unequivocal support for free trade—a pledge that would gain credence if the leaders made a commitment to complete the Doha round of trade talks.

But what of the larger ambitions of “fixing” global finance? Here the temptation for hollow promises is greatest of all. The summiteers can make progress, but only if they temper their hyperbole with realism and humility.

International finance cannot just be “fixed”, because the system is a tug-of-war between the global capital markets and national sovereignty. As cross-border financial flows have expanded and big financial institutions have far outgrown their domestic markets, finance has become one of the most globalised parts of the world economy. At the same time, finance is inherently unstable, so the state has to play a big role in making it safer by lending in a crisis in return for regulation and oversight. Governments broadly welcome the benefits of global finance, yet they are not prepared to set up either a global financial regulator, which would interfere deep inside their markets, or a global lender of last resort. Instead, regulated financial firms are overseen by disparate national supervisors (in America they are sometimes state-based). The IMF helps cash-strapped countries, but the fund was conceived in an era when capital flows were restrained. It is puny relative to the size of global markets today.

This tug-of-war helped create today’s mess. Disparate rules led to loopholes and “regulatory arbitrage”. Many emerging economies sought to protect themselves against sudden outflows of foreign capital by building up vast foreign-exchange reserves. That fuelled the global credit bubble. Given today’s crisis, the incentives to amass reserves have only grown.

The contradictory desires for national sovereignty and global capital markets limit the room for an overhaul. For all the grand rhetoric, no politician is proposing to cede sovereignty to a global regulator, let alone create a true global lender of last resort. Nor is anyone proposing a wholesale effort to curb capital flows (which is just as well). With no great design on the drawing board, it is better to concentrate on the more modest goal of improving the current muddled contraption through a series of politically feasible enhancements that together could amount to a third justification for this meeting.

Refit the existing engine

One example is Gordon Brown’s idea of a “college of supervisors” to oversee the biggest financial firms. Another is a global set of norms on what should be regulated and how: from hedge funds to leverage limits, national regulators would do a better job if they acted in concert. By all means start to look at schemes to revamp the IMF by scaling back Europe’s presence and enhancing emerging economies’ clout. But it would be a mistake to rely only on the IMF. The Fed’s new swap lines with other central banks are an important reassurance for countries that face a liquidity squeeze; those swap lines deserve to be systematised and broadened.

Modest as they sound, such repairs will be difficult and time-consuming. This summit should get them off to a start. It won’t earn anyone a place in the history books alongside John Maynard Keynes and Harry Dexter White. But it would be a lot more useful than more gusts of grandiose rhetoric.

ANOTHER BRETTON WOODS

..... More winners this time?

AFRICA WILL NOT BE THERE BUT WE WILL BEAR THE BRUNT

This weekend President Bush will host an economic summit of the G-20 nations. This summit has been compared to the conference at Bretton Woods, NH that convened in 1944 to rebuild the global financial system after WWII. Unfortunately, the most important reform to come out of that conference so long ago does not appear to be on the agenda of this latest version.

The original Bretton Woods conference was convened primarily to structure the monetary system that would prevail after the war. The desire for a stable monetary system grew out of the experience of the 1930s competitive devaluations and high trade tariffs. Many at the time rightly came to associate these devaluations and high tariffs with war. Freer trade and a stable monetary system were associated with peace.

The result of the first Bretton Woods conference was a system that pegged the US dollar to gold with the other major currencies pegged to the dollar. This system, while having many flaws, was a source of economic stability for 26 years. Other periods of fixed exchange rates (primarily fixed to gold) also produced more stable economic systems than floating rate regimes. This stability can be observed in the low volatility of commodity prices during the fixed periods. During the period of the pure gold standard from 1880-1913 (when the Federal Reserve was established) the standard deviation of commodity prices was roughly 4.5. During the free float period from 1914-1926 the standard deviation at least doubled (there are differences depending on which commodity index is used). During the Bretton Woods era from 1945 to 1971 commodity price volatility was reduced again to a standard deviation of about 8. Since 1971 volatility has again risen to about 15.

If the goal is more stability in the economic system, this new conference must begin to address the exchange rate system. Reducing the volatility of exchange rates and therefore commodity prices is essential to reducing the risk associated with international trade. Billions of dollars have been lost over the last few months alone by companies attempting, unsuccessfully, to hedge exchange rate and commodity price risk. UAL reported a $544 million loss from fuel hedges gone wrong. Citic Pacific Ltd. Lost $1.9 billion from hedging activities related to the Australian dollar. Northwest Airlines took a $410 million write down from losses on fuel hedges. Verasun lost $100 million from hedging the price of corn and ultimately filed bankruptcy. Sadia, Brazil’s second largest food company posted a $410 million loss from currency hedging activities and had their credit rating downgraded. While some of these losses were due to actions outside company hedging policies, they wouldn’t have happened if the need to hedge were eliminated or reduced.

Expectations for the conference are being downplayed and the goals minimized with the strengthening of the IMF seemingly the only concrete expectation. Most of the participant countries seem more interested in regulatory reform and that is certainly necessary and desirable. Even during the stable periods previously mentioned, there were banking crises here in the US. Even in a stable monetary environment, fractional reserve banking has the potential to destabilize. Based on recent experience with leverage, one would think that increasing bank capital requirements is one item that could be agreed upon. Other ideas, such as closer supervision of hedge funds and credit rating agencies, may not be necessary if monetary reform and banking reform are properly addressed.

The global imbalances much discussed over the last few years are exactly what the IMF was designed to address. When the IMF was founded along with the World Bank, the first Bretton Woods conference placed them in the context of a stable monetary system. Reforming the IMF without reforming the monetary system will not yield a more stable system. We would have to depend on the IMF not only to anticipate problems but also to act on them in a politically charged environment. The performance of the IMF since the fall of the first Bretton Woods agreement suggests that is too much to ask.

Monetary reform will not be easy. China and most of the emerging Asian economies will fight hard to maintain a currency advantage that they see as vital to the growth of exports that have fueled their past growth. The US will be reluctant to agree to a system that weakens the role of the dollar as the world’s reserve currency. The Europeans will press for a greater role for the Euro in international trade. These three currency blocs will all have their own agendas but the current global economic slowdown may be the perfect opportunity to address the issue of monetary reform. Global economic cooperation is no longer optional; this crisis has affected every region of the world.

Over the last 60 years we have witnessed a movement toward freer trade, freer markets and freer movement of capital that has raised living standards around the world. That movement accelerated over the last 30 years and the reduction in world wide poverty during that period is nothing short of astounding. It is critical that we construct a global monetary system that provides a stable structure within which we can extend this record and realize the full benefits of the free market.

WHY NOT LET THEM FAIL

THE MORAL OF THE MIGHTY BAIL-OUT

As we goggle at the fluttering financial figures, a different set of numbers passes us by. On Friday, Pavan Sukhdev, the Deutsche Bank economist leading a European study on ecosystems, reported that we are losing natural capital worth between $2 trillion and $5 trillion every year, as a result of deforestation alone(1). The losses incurred so far by the financial sector amount to between $1 trillion and $1.5 trillion. Sukhdev arrived at his figure by estimating the value of the services - such as locking up carbon and providing freshwater - that forests perform, and calculating the cost of either replacing them or living without them. The credit crunch is petty when compared to the nature crunch.

The two crises have the same cause. In both cases, those who exploit the resource have demanded impossible rates of return and invoked debts that can never be repaid. In both cases we denied the likely consequences. I used to believe that collective denial was peculiar to climate change. Now I know that it’s the first response to every impending dislocation.

Gordon Brown, for example, was as much in denial about financial realities as any toxic debt trader. In June last year, during his Mansion House speech, he boasted that 40 per cent of the world’s foreign equities are now traded here. “I congratulate you Lord Mayor and the City of London on these remarkable achievements, an era that history will record as the beginning of a new golden age for the City of London.”(2) The financial sector’s success had come about, he said, partly because the government had taken “a risk-based regulatory approach”. In the same hall three years before, he pledged that “in budget after budget I want us to do even more to encourage the risk takers”(3). Can anyone, surveying this mess, now doubt the value of the precautionary principle?

Ecology and economy are both derived from the Greek word oikos - a house or dwelling. Our survival depends upon the rational management of this home: the space in which life can be sustained. The rules are the same in both cases. If you extract resources at a rate beyond the level of replenishment, your stock will collapse. That’s another noun which reminds us of the connection. The OED gives 69 definitions of stock. When it means a fund or store, the word evokes the trunk - or stock - of a tree, “from which the gains are an outgrowth”(4). Collapse occurs when you prune the tree so heavily that it dies. Ecology is the stock from which all wealth grows.

The two crises feed each other. As a result of Iceland’s financial collapse, it is now contemplating joining the European Union, which means surrendering its fishing grounds to the Common Fisheries Policy. Already the prime minister Geir Haarde has suggested that his countrymen concentrate on exploiting the ocean(5). The economic disaster will cause an ecological disaster.

Normally it’s the other way around. In his book Collapse, Jared Diamond shows how ecological crisis is often the prelude to social catatrosphe(6). The obvious example is Easter Island, where society disintegrated soon after the population reached its highest historical numbers, the last trees were cut down and the construction of stone monuments peaked. The island chiefs had competed to erect ever bigger statues. These required wood and rope (made from bark) for transport and extra food for the labourers. As the trees and soils on which the islanders depended disappeared, the population crashed and the survivors turned to cannibalism. (Let’s hope Iceland doesn’t go the same way.) Diamond wonders what the Easter islander who cut down the last palm tree might have thought. “Like modern loggers, did he shout ‘Jobs, not trees!’? Or: ‘Technology will solve our problems, never fear, we’ll find a substitute for wood.’? Or: ‘We don’t have proof that there aren’t palms somewhere else on Easter … your proposed ban on logging is premature and driven by fear-mongering’?”(7).

Ecological collapse, Diamond shows, is as likely to be the result of economic success as of economic failure. The Maya of Central America, for example, were among the most advanced and successful people of their time. But a combination of population growth, extravagant construction projects and poor land management wiped out between 90 and 99% of the population. The Mayan collapse was accelerated by “the competition among kings and nobles that led to a chronic emphasis on war and erecting monuments rather than on solving underlying problems”(8). Does any of this sound familiar?

Again, the largest monuments were erected just before the ecosystem crashed. Again, this extravagance was partly responsible for the collapse: trees were used for making plaster with which to decorate their temples. The plaster became thicker and thicker as the kings sought to outdo each other’s conspicuous consumption.

Here are some of the reasons why people fail to prevent ecological collapse. Their resources appear at first to be inexhaustible; a long-term trend of depletion is concealed by short-term fluctuations; small numbers of powerful people advance their interests by damaging those of everyone else; short-term profits trump long-term survival. The same, in all cases, can be said of the collapse of financial systems. Is this how human beings are destined to behave? If we cannot act until stocks - of either kind - start sliding towards oblivion, we’re knackered.

But one of the benefits of modernity is our ability to spot trends and predict results. If fish in a depleted ecosystem grow by 5% a year and the catch expands by 10% a year, the fishery will collapse. If the global economy keeps growing at 3% a year (or 1700% a century) it too will hit the wall.

I’m not going to suggest, as some scoundrel who shares a name with me did on these pages last year(9), that we should welcome a recession. But the financial crisis provides us with an opportunity to rethink this trajectory; an opportunity which is not available during periods of economic success. Governments restructuring their economies should read Herman Daly’s book Steady-State Economics(10).

As usual I haven’t left enough space to discuss this, so the details will have to wait for another column. Or you can read the summary published by the Sustainable Development Commission(11). But what Daly suggests is that nations which are already rich should replace growth (”more of the same stuff”) with development (”the same amount of better stuff”). A steady state economy has a constant stock of capital maintained by a rate of throughput no higher than the ecosystem can absorb. The use of resources is capped and the right to exploit them is auctioned. Poverty is addressed through the redistribution of wealth. The banks can lend only as much money as they possess.

Alternatively, we can persist in the magical thinking whose results have just come crashing home. The financial crisis shows what happens when we try to make the facts fit our desires. Now we must learn to live in the real world.

ECONOMICS DEDATE DROWNED OUT

In the current era of global financial crisis , its amazing how petty politicking has overshadowed the crucial concerns of ordinary people in the electioneering campaign. Instead of the the "clean and issue based" campaign we were promised what we have is the traditional mudslinging and dirty politicking by the 2 major parties. fanned by the media the whole nation is engrossed in the lowest common denominator game of who is doing most of the insulting and whose insult is worst.

THE GULF IS WIDENING

Inequality in the Ghanaian Economy is Getting Worse ...... and it Poses a lot of danger The 2008 edition of the Human Development Report gave some interesting illuminations on the direction Ghana is heading in its socio-economic development. One of the most critical concerns thrown up by the Index was the level of income inequality that characteristic the Ghanaian Economy. The non-redistributive growth we have had over the last 8 years have continued and even worsen. The HDI only confirms in scintific terms what we experince and notice arround us everyday in the streets and in the sqaulid villages and impoverished communities around the country.

GHANA BREAKS RANKS WITH ECOWAS OVER EPA

... Further Sign of the Excessive Western Orientations of Kuffour's administration

WHAT GHANA MUST LEARN FROM AMERICA ON CAPITALISM

... UNFETTERED FREE MARKET IS SUICIDAL Within a matter of i week the Republican(they are puritan capitalists) Governed US has dramatically moved against the tenets of their ideology and saved the American financial system by acquiring majority shares in Major banks that were in danger of failing. But here in Ghana the government does not protect business in trouble nor does it protect the economic interest of Ghanaian s o the pretext of " business is not the business of government" They even go further to divest well performing national assets to foreigners.

GHANA'S CRUDE FIND

How we intend to be Different

Oil is the most popular game in town. Over the last few weeks Ghana's media and public space has been inundated with a lot of oil talk. the topic is not about how we are going to cope in the face of the rise in crude prices to historical levels over the last few weeks, but the talk is all about the massive revenue that will accrue to this country in the coming years.

All these talk comes in the wake of further oil finds in Ghana's offshore oil block that will enable Ghana to produce the "black gold" in commercial quantities. The experts tell us that we have discovered about 3 billion barrels of oil .

This discovery has brought some unheralded excitement into the country with the over bloated government PR machinery over hyping and fanning the oil frenzy. If you just dropped from mars , you will think that this is the first time any mineral of any sort is being found in Ghana and that every Ghanaian will become a million dollars richer within the next hour. The hope of Ghanaians who are naturally optimistic has been raised to a very high level.

I feel happy that we have finally gotten our oil -it was only a matter of time before we discovered oil because our geology is no different from the one found along the west coast of Africa, stretching from Cote Divoire through Nigeria, Cameroon to Angola. I don't want to be a party spoiler or a killjoy but i cant help but be little bit skeptical. This is classic dejavu;we've been down this familiar road before and it did not take us where we wanted.Our experience with the exploitation of natural resources in this country is a bitter one and we(majority of Ghanaians) have been the worst for it. A trip to any gold producing area in Ghana is capable of making even the most hardhearted human weep.

The government tells us that this time things will be done differently. For this reason a huge and highly publicised Forum was organised where all the big and powerful in Ghanaian society were gathered to discuss how we can maximise the benefits of oil we have found. at the forum the people who ostensibly represented Ghanaian interests included the old politicians, minsters heads of Major corporations, Academicians and significantly "foreign experts". Conspicuously missing were representatives from the communities that will host the oil operations.This is typical of how we deal with such issues in this country;quintessential top-down approach.the foreign experts were drafted in to give advice on how best to exploit our resources........does this ring a bell? Its always been that way;white people come and tell us what to do when we have any challenge. That was the same way gold was handled and we ended up ceding control of our most valuable resource to white foreigners while we suffer the consequences of its exploitation.

At the forum it was resolved that Ghana will not go the way other oil producers have gone but rather we will make the oil discovery a blessing not a curse. I am waiting with baited breath for this to oil find to launch our country into a new face of development and economic justice. The beginning seems to be good and the prospects even better but without the proper monitoring and mass participation of the ordinary poor and powerless Ghanaian we will have to devote pages to write about our bitter disappointments 20 years down the line. this oil find is a potential good news but it is far from a done deal and much work needs to be done o make it a reality

A DARK DAY FOR GHANA’S ECONOMY

.....Stooge Government buckles under pressure from EU and big business. On Friday 14th December one more death nail was driven into the economy of Ghana when the Government of Ghana signed a version of the Economic Partnership Agreement (EPA) between the EU and ACP countries. Ghana is the second country after Cote de Voire to sign the EPA in the West African region. Against the backdrop of incessant and sustained pressure from the civil society on the government not to sign the deal they went ahead anyway. Over a period of two years a lot of protest has been organized by civil society organizations across Africa backed by solid research findings advising against entering into this trade trap. Led by organizations such as Third World Network, Action Aid, Ghana Trade and Livelihood Coalition, Christian Aid and OXFAM a lot of awareness was created in Ghana on the nature and possible impacts of the EPA and there was a massive consensus that it would spell doom for the Ghanaian economy especially in the areas of Fiscal Policy, Agriculture and Industrial Policy. The West African Economic Community the ECOWAS resolved to refuse to sign the EPA en bloc saying that the deadline of December 2007 was too short for them to adequately negotiate a favorable deal and conduct a comprehensive impact assessment study. It seemed that for the first time in many years our leaders will listen to the internal voices of reason and do what would be in the overall interest of Ghanaians and not consent to the parochial interest of the elite clientele. The Government of Ghana affirmed the position of ECOWAS and the reasonable voices of the majority of Ghanaians and made strong statements that it was not ready to sign the EPA. Up until the EU – AU summit in Portugal between 8th and 9th December. Cracks began to appear in the united front when Cote de Voire signed under pressure from the EU and the powerful French business interests (Cote de Voire is the biggest and the most significant economy in the UEAMOA currency zone.). After the summit the government performed an acute about turn after it had apparently been put on enormous pressure by the imperialist powers. The government has gone ahead to sign the deal knowing perfectly all the repercussions that the EPA will have on the economy. This was clear from the pronouncements of the negotiating team and officials from the Ministry of Trade who had declared on numerous occasions that Ghana was not ready to sign the EPA The deal will cost the government about $120m in lost tariff revenue yearly. This will rob the government of badly needed funds for infrastructure and social investments. The EPA will also mean Ghana will open its markets to competition from highly subsidized agricultural goods from the EU. Since Ghana was hurried to sign the EPA it had not apparently prepared to even negotiate some concessions from the EU. This led the government to stage a farcical tough stance by appearing to hamper the signing ceremony. The signing was done on 14th instead of the advertised 13th. Ghana has suffered under the pressure of “The Washington consensus” policies via the Structural Adjustment programs of the 1990s. The stuttering industrial sector is set to suffer further from the unfair competition from obviously advanced and highly competitive European industrial products. It is estimated that it will displace about 8% of the industrial sector in Ghana over the next five years. For a nation that is already experiencing deindustrialization (before it even started), this will definitely be the death of industry in Ghana. The Agricultural sector is the one at risk the most from the deal since it is already suffering from the effects of the first and second wave of the deadly trade liberalization in the previous decade. Due to the unfair competition from the highly subsidized agricultural product from the EU and the USA, the agric sector in Ghana has been driven to the point of extinction. The grains, livestock and poultry subsectors have especially felt the pinch leading to shrinking of their productivity. Rice production especially has taken a heavy hit since the trade liberalization in the early 1990s.Rice production has fallen by as much as 25% while poultry production has fallen drastically under the weight of the dumped and highly subsidized (about €1.25bn) poultry products from the EU. The EPA will be a challenge to the livelihood and food security of the poorest section of our already poor nation. Even the EU’s own Sustainability Impact Assessment report admits that ECOWAS region will be adversely affected by the EPA. There are even some studies that suggest that only about 23% of Ghana’s export to the EU will benefit from an enhanced access as a result of the EPA. 73% of Ghana exports to the EU is covered by MFN zero and GSP zero tariffs. It is clear that this government is incapable of taking policy that will be in the interest of majority of Ghanaians. Under pressure from their imperialist masters and the rent seekers (exporters of marginal products inconsequential to the overall economy) this incompetent government has taken this country into a deal that will be most damaging to the majority of Ghanaians.

MASSIVE DEMONSTRATION AGAINST HARSH ECONOMIC POLICIES OF THE GOVERNMENT

....Ghanaians slowly rising Against Harsh Living Conditions About 5000 Ghanaians braved a sweltering heat on Tuesday and took to the streets of Accra to protest thier disgust at the rising level hardships in the country.The attandence and public support was far beyond the expectations of the organisers (The Committee for Joint Action) who had underestimated the level of support for the protests. This was as a result of of the constant negative publicity by the enemies

A FURTHER TIGHTENING OF THE NOOSE

..........As Another round of Petroleum price increases is announced. In the mist of the unbearable hardship that Ghanaians are forced to endure, there has been another surge in the price of the all important petroleum products. This is the third increment since October.This time around theres is up to 7% increase in the price of premium petrol raising the price to nearly $5 per gallon. This makes petroleum product the priciest in the west African Region. This increment comes on the heels of a 40% increment in the tariff of water and electricity. Our insensitive government is pursuing a so-called policy of total cost recovery.This policy is bereft of any welfare considerations in a country with an absolute poverty level of 42%. Ghanaians are really going to suffer to make any meaningful stride towards prosperity with a government like the one we have now. The pass- through effect of a petroleum price increase is well documented in Ghana with food prices the most impacted .It will definitely not going to be aMerry Christmas for the average Ghana in.(Excluding the filthy rich politicians)