AUSTERITY: Nigeria under former President Ibrahim Babangida faced far tougher economic conditions than recession-hit Britain
NOTHING SENDS a shiver down my spine faster than the initials IMF or the truly deceptive words ‘World Bank’. In order to understand why, you need to have a clear understanding of what a Structural Adjustment Programme (SAP) is. The acronym SAP may mean little to western audiences but in the ‘developing’ world it is infamous.
SAPs were a set of policies implemented in developing countries by the Bretton Woods Institutions i.e. the International Monetary Fund (IMF) and the World Bank as a condition of attaining new loans or reducing the interest payments on existing loans. As a persuasive technique these policies were described as having the effect of ‘liberalising economies’. Principle amongst these ‘liberating’ conditions was the privatisation of public amenities, devaluing of local currencies against the US dollar and the removal of so called ‘trade barriers’.
In simple terms: imagine you were in desperate need of a loan to feed your family and I happened to be the only bank in town. I also happen to be a member of a very wealthy family. I promise to loan you some money to feed you and your starving children if you put your family home up for sale at the lowest market price. And then, almost by default, you have to sell it to a member of my family. Adding insult to injury I keep forcing the clearly ludicrous notion on you that if you abide by my policies (which are of course designed to make me richer and you poorer) you will be as rich as me in no time whatsoever.
Apologies to those readers who are currently shouting that I haven’t factored in elements such as currency devaluation (i.e. manipulation), foreign control and political subjugation. Admittedly this is far from a perfect analogy, but hopefully it illustrates to some degree what a SAP is in practice. And if you saw the effects of them then you would understand my utter contempt and distrust for the IMF and World Bank.
So you thought David Cameron’s austerity measures were bad? Babangida’s Nigeria (1985 – 93), would consider Austerity Britain paradise. Nigeria, like many other developing nations, was subjected to some of the most brutal austerity policies you could imagine. In places such as Bolivia even the rain water dropping from the sky was privatised. And it was all induced by western- dominated, western-profiting supposedly global development and anti-poverty institutions like the IMF and World Bank. Needless to say this level of austerity would never be inflicted on a western state.
To take our previous analogy further: imagine the family down the street ignored my loan offer and the ludicrous terms and conditions. They emerged from the crisis as a wealthy family and decided to set up their own bank in direct and real competition with my bank in a bid to help other struggling families. The proof is in the pudding, but it should lead to better conditions for borrowers. Sounds great – right? Well imagine no more – this could be happening right now.
It has not been granted the media coverage it warrants, but the announcement that BRICS nations (i.e. Brazil, Russia, India, China and South Africa) are establishing their own development bank is something that should be both welcomed and celebrated. The hegemony that has been enjoyed by the World Bank and IMF since their establishment in the 1940s could finally be smashed. Poorer nations could now have greater options and hopefully lesser political interference as a result.
The BRICS nations have shunned almost everything that has gotten the West into severe economic problems and as a result are flourishing whilst the West struggles. Of course, the West remains much richer and more powerful than these countries but increased competition should only benefit all.
Where the West shows up with bombs, countries like China show up with building materials and business partnership. This is very welcome. I welcome plurality, competition and balanced power. For this purpose I welcome and celebrate the concept of a BRICS development bank and hope it is not long before it is fully functional.
The BRICS nations are paving a way for a new world and a new paradigm. The question everyone should be asking themselves is this: what is your position in the new world?