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Franck Bertrand Ayinda is an African academic and a world peace activist who relentlessly works to empower people to express their full potential and pursue their dreams, regardless of their background. Franck is an Editor at The Moroccan Times, a world traveler and an avid reader of books. Franck’s ultimate dream is to open a world-class human potential development school across Africa. His interest are politics, economics, and social justice.[/symple_box]
When we talk about austerity, Africa can be considered as that patient who wrote the first textbook for such a vile idea. The tough economic measures being adopted today by the Greeks, Spanish, Irish, British and French government from the International Monetary Fund, European Commission and European Union are comparable to the austerity programs or “Structural Adjustment Programs” (SAPs) that several African governments had to embrace in the 1980s and 1990s. Yet these measures have brought no good to the economies of such countries. Indeed this is why I believe austerity economics is a failure of the free market neoliberal thought.
First, for those who don’t know the meaning of austerity in economics, I’ll define it as a set of measures taken by governments during a period of adverse macroeconomic instability, making use of a combination of cutting down spending and levying tax hikes in order to increase the government revenues and reduce public sector debts. These measures are sometimes politically and ideologically driven, or either aimed at demonstrating fiscal restraint to their creditors and rating agencies.
In macroeconomics, government spending cuts increases unemployment on the short run. This leads to a counterweighing effect of austerity, decrease in tax revenues, and increase non-contributory transfer programs seeking to prevent the poor or those vulnerable to shocks and poverty from falling below a certain poverty level also known as safety nets. Government expenditure adds to gross domestic product (GDP), so decreasing expenses may effect in a greater debt-to-GDP proportion, a significant measure of the debt problem carried by a country and its citizens. Greater immediate deficit spending (stimulus) adds to GDP expansion mostly when customers and industries are reluctant or incapable to expend.
These brief explanations brings me back to why I believe austerity is a failure. The riots we have been used to see these passed years on TV screens in Europe (Ireland, Spain, Britain, Italy, France, and Greece) have reminded me of similar sights in Ghana, Nigeria, Zambia amongst the many African countries who have adopted similar measures with technical names such as Structural Adjustment programs for disguised austerity policies.
To get a deeper understanding of the consequences of such policies, it is important to look back at the experience of austerity in Africa and Europe. The first consequence of Austerity is the erosion of the sovereignty of heads of states travelling to Washington D.C for a meeting with the I.M.F with the goal of overturning austerity measures, but everyone knows they are inglorious beggars with expensive suits and private jets funded by creditors. The leader of Ireland Brian Cowen owes allegiance to the Irish people, but also to the Washington financial elites and Brussels too. Jose Socrates, premier of Portugal, had declared that his country “has no need for any aid” and insisted that Portugal’s hitches are different from those in Ireland. This is classic bluster, but in the end the statistical health of the country has a voice of its own. Recently Alexis Tsipras, the leader of Syriza party in Greece, freshly elected into office to halt austerity measures, was candidly reminded by the Troika (I.M.F, European Commission, European Central Bank) and Germany that he should ignore his democratic mandate and stick to foreign-imposed austerity measures.
Secondly, the underlying logic of these austerity measures is designed by technocrats with little sensitivity for the social-political consequences. Cuts in social services are not just a “technical matter” but a human one and with potential to impact the future human capital of the nation and accelerate or undermine its recovery. A report led by professors at three leading British universities say International Monetary Fund policies favoring the repayment of international debts over social welfare spending contributed to the Ebola crisis by inhibiting an effective response by health care professionals in the three worst-hit African countries. Conditions for loans from the IMF prevented an effective response to the outbreak that has killed nearly 8,000 people, the academics allege in a report in The Lancet Global Health journal last month.
… “The IMF aims to become part of the solution to the crisis … Yet, could it be that the IMF had contributed to the circumstances that enabled the crisis to arise in the first place?” asks the study, whose lead author is Cambridge University sociologist Alexander Kentikelenis. Co-authors are Lawrence King of Cambridge, Martin McKee of the London School of Hygiene and Tropical Medicine and David Stuckler of Oxford University.
IMF lending requires governments to give priority to short-term economic objectives over investment in health, the authors said, citing IMF statistics that showed the terms of loans to Guinea, under an IMF austerity program for 21 years, Liberia, following one for seven years, and Sierra Leone, in one for 19 years.”
The most thrilling case is Greece. There, austerity measures set by the troika (I.M.F, European Commission, European Central Bank) has led to a public-health tragedy. Greece has cut its health system by more than 40% according to the former health minister who said that ‘these aren’t cuts with a scalpel, they’re cuts with a butcher’s knife,” before further stressing that the situation is worse as “those cuts have been decided not by doctors and healthcare professionals, but by economists and financial managers. The plan was simply to get health spending down to 6% of GDP. Where did that number come from? It’s less than the UK, less than Germany, way less than the US.”
The penalties have been intense. Cuts in HIV-prevention finances have been matched with a 200% upsurge in the virus in Greece, driven by a sharp increase in intravenous drug use alongside the background of a youth unemployment rate now successively at more than 50%, including a spike in homelessness of around a quarter. The World Health Organization suggested a funding of 200 clean needles a year for each intravenous drug user; groups that work with users in Athens evaluate the existing numbers accessible is about three for every user.
Real wages in Greece have decreased by 42% since 2009. An emergency property tax, costing each household several hundreds of euros, is collected via the electricity bill. It had been implemented in 2011, and will continue in 2015 .The resolve of all this austerity for Greece is to meet the requirements for a €31.5 billion foreign loan in order to carry on paying its bills. An essential portion of Greece’s expenses goes to debt facility instead of job creation and fruitful investments. Out of the €207 billion that have thus far conveyed to Greece in loans, €160 billion went to subsidy banks and capital owners
Thirdly, in many African countries that espoused SAPs, suburbanization together with the casualization of labor turn out to be a major surprising results of slashes in government expenses and the eradication of the minimum wage. Enormous social insecurities developed and irreversibly redefined the rural-urban undercurrents. For Europe, however, the impending is for miserable local manufacturing and the competitiveness of the agrarian sector. In Nigeria, the textile industry shrunken as a consequence of the reform actions, so did Senegal’s peanut economy.
Fourthly, there is more fundamental criticism of the IMF/Washington consensus approach to austerity: It does not acknowledge that development requires a transformation of society. Uganda grasped this in its radical elimination of all school fees, something that budget accountants who focus solely on revenues and costs simply could not understand. Pan of the mantra of development economics today is a stress on universal primary education, including educating girls. Countless studies have shown that countries, like those in East Asia, which have invested in primary education, including education of girls, have done better. But in some very poor countries, such as those in Africa, it has been very difficult to achieve high enrollment rates, especially for girls. The reason is simple: poor families have barely enough to survive; they see little direct benefit from educating their daughters, and the education systems have been oriented to enhancing opportunities mainly through jobs in the urban sector considered more suitable for boys. Most countries, facing severe budgetary constraints, have followed the Washington Consensus advice that fees should be charged. Their reasoning: statistical studies showed that small fees had little impact on school enrollment. But Uganda’s President Museveni thought otherwise. He knew that he had to create a culture in which
the expectation was that everyone went to school. And he knew he couldn’t do that so long as there were any fees charged. So he ignored the advice of the outside experts and simply abolished all
school fees. Enrollments soared. As each family saw others sending all of their children to school, it too decided to send its girls to school. What the simplistic statistical studies ignored is the power of systemic change.
It is important for recipient countries to shake up the engineers of these economic processes be held accountable for their results too. In Africa, the IMF quietly walked away from SAPs, rebranding them as Poverty Reduction Strategy Papers (PRSPs) an allegedly “African-owned” and much more refined variant of the original program. The jury is still out, three decades on. It is still difficult to establish the criteria for what constitutes a structural adjustment success story in Africa.
It would be biased to place the whole responsibility at the ladders of the IMF. Kleptomaniacs with Kalashnikovs became the leaders of states in 1970s and 1980s Africa and wreaked chaos on their economies. European governments involved in the more seductive but correspondingly damaging excess of out-of-control expenditure, untenable borrowing and the assurances of entitlements that couldn’t be paid for. Europe’s leaders have also miscarried in their prime obligation to speak candidly to their voters about the economic scenarios and realities that lie ahead something African leaders rarely do as they tend to spare candor for the donors who supply their regimes.
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Franck Bertrand Ayinda is an African academic and a world peace activist who relentlessly works to empower people to express their full potential and pursue their dreams, regardless of their background. Franck is an Editor at The Moroccan Times, a world traveler and an avid reader of books. Franck’s ultimate dream is to open a world-class human potential development school across Africa. His interest are politics, economics, and social justice.[/symple_box]
