Home to one-sixth of the world’s people, but contributing only one-fortieth of world GDP, Africa is the most conspicuous victim of the global recession. After a half-decade of 5% growth, the continent’s growth rate is expected to halve in 2009. Some countries, like Angola, are contracting. Elsewhere, the crisis has swept away the benefits of several years of economic reform. Many Africans will fall back into desperate poverty.
Thirty years ago this month, Margaret Thatcher came to power. Although precipitated by local conditions, the Thatcher (or more broadly the Thatcher-Reagan) revolution became an instantly recognizable global brand for a set of ideas that inspired policies to free markets from government interference. Three decades later, the world is in a slump, and many people attribute the global crisis to these very ideas.
All epoch-defining events are the result of conjunctures – the correlation of normally unconnected events that jolt humanity out of a rut. Such conjunctures create what the author Nassim Nicholas Taleb calls “Black Swans” – unpredictable events with a vast impact. A small number of Black Swans, Taleb believes, “explain almost everything in our world.”
Earlier this month, the International Criminal Court (ICC) upheld the request of the court’s chief prosecutor to issue an arrest warrant for Omar el-Bashir, the President of Sudan, charging him with war crimes and crimes against humanity. Bashir responded by expelling foreign aid agencies looking after the refugee camps in Darfur.
“Enrich yourselves,” China’s Deng Xiaoping told his fellow countrymen when he started dismantling Mao Zedong’s failed socialist model. In fact, elites everywhere have always lived by this injunction, and ordinary people have not minded very much, provided that the elites fulfill their part of the bargain: protect the country against its enemies and improve living conditions. It is this implied social contract that is now endangered by economic collapse.
Testifying recently before a United States congressional committee, former Federal Reserve Chairman Alan Greenspan said that the recent financial meltdown had shattered his “intellectual structure.” I am keen to understand what he meant.
Economics, it seems, has very little to tell us about the current economic crisis. Indeed, no less a figure than former United States Federal Reserve Chairman Alan Greenspan recently confessed that his entire “intellectual edifice” had been “demolished” by recent events.