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To all who read this message, I, Remi-Niyi Alaran, am sufficiently concerned about the future competitiveness of our people across Africa, to propose the following: To set up a privately funded institute for research and development of products that directly address the educational and economic needs of the masses of our people. The focus is to be on science, technology, engineering and medicine (STEM). The focus on STEM is intentional. This institute will aim to become an internationally competitive centre of excellence in the four research areas. To survive economically, the institute will aggressively aim to develop commercial enterprises based on its work. Your contributions can help make this a world-standard research institute. This will assist in giving our youth a target at which to aim their ambitions for academic and enterprise progress. Hopefully, its excellence will help pull talented youth through the tattered education systems we currently witness across the continent. A small plot of land in Western Nigeria has been donated to the institute: solutions must arise from the context of the problems we face, not from abroad. Also, a website is in progress. The Internet offers us a worldwide online forum for collaboration on the issues faced. It will be a medium for news and course content to be widely broadcast and received at relatively low cost. This will be my life's work. As the poet Fela Anikulapo-Kuti once said: "Condition don reach make I act". Please email to iyaalata@netscape.net to establish contact if you have the expertise or experience in: # STEM research or enterprise # Fabrication or manufacturing of machinery # Chemical engineering and process industries # Linux/network computer systems administration We can and must make this work. Africans need to be internationally competitive in STEM research and in the enterprises based on STEM research. Our future as a people depends on our ability and willingness to shape that future through investment in ourselves and our community. Contribute what you can, and be proud of your heritage. Remi-Niyi Alaran Print this article Print this article Thursday, November 18, 2004 The Strategic Interests in Ivory Coast vs France II The journey of cocoa from plantation to consumer reveals the extent to which African commodities underpin global trade. It also exposes the various nations that have strategic interests in the outcome of Ivory Coast vs France. Cocoa is grown on large plantations. The crops are intensely farmed, in mono-culture formation and with large use of phosporus fertilizer. Most of the planting, cultivation and harvesting must be done by hand. The plantations use large numbers of labour, many of whom are migrants into IC from neighbouring Burkina Faso, Gabon, Ghana and Senegal. The conditions of work are atrocious. Workers are badly beaten, poorly paid, and cast out at first sign of illness. Plantation owners borrow heavily from the international banks based in Abidjan. The loans are collateralised by a promise to deliver the physical crop in the future and to receive cash-flows on delivery. Plantation owners receive some money upfront to use in paying for seed, fertilizer, and other farming inputs. The cocoa farmer gets paid. Not all farms are big plantations. A big planter or a big wholesaler may have supply agreements with owners of small-holdings. On the basis of these anticipated cashflows, the headquarters of these banks create commodity derivatives such as options, futures, forwards and swaps. Commodity derivatives are financial instruments. They are bought and sold many times over in the commodity exchanges such as CBOT (USA), LIFFE (UK), Marche (France). Commodity derivatives are very, very big business in the international financial markets. Some of the buyers are cocoa processing companies such as Cargill, ADM and Phillip Morris (also a big tobacco processor). Other big buyers are end-users such as the chocolate manufacturers, including Switzerland's Nestle/Rowntree, Lindt and Barry Callebrut; USA's Hershey and Mars; UK's Cadbury, among others. Buyers usually intend to take delivery of the cocoa. However, nearly 98pc of international trade in commodity derivatives is purely speculative gambling. The speculators buy on expectation of increased prices and sell on expectation of lowered prices. Prices are volatile and change often because the quality and quantity of commodities produced in any one year cannot be predicted in advance. Excess rain during harvesting, excess exposure to sun during drying, crop pests and a thousand other risks may destroy the quality of any year's cocoa crop. Fortunes are made and lost due to the ensuring high price volatility. In order to limit their exposure to potential loss, many speculators and end-users buy insurance instruments or hedge their market positions. Not many international insurance companies and hedge fund investment companies even bother to refer to Ivory Coast in their marketing material. They still earn fortunes off the breaking back of the cocoa farmer. One such farmer visited Cardbury's processing plants in UK. He learnt that hardly any chocolate sold in the huge UK market for "chocolate" products actually contains cocoa solids. The typical 200g bar contains an average of 0.5g of cocoa solids. There are plans underfoot to replace even that small amount with vegetable fat. The big markets for real cocoa solids are the Swiss-Benelux manufacturers of luxury chocolates. The other big market are the manufacturers of cosmetics such as cocoa butter. The diminishing market for cocoa solids is a trend that reveals changes in the dymanics of strategic international interests across Africa. Ever since the slave trade, many of the continent's economies have been heavily dependent on exports of commodities. Most of the exports were to then-colonial, later-imperialistic, and now neo-colonial trading partners: countries such as UK/Britain, France, Belgium and USA. Europe and USA dominate global consumption of goods and services. Their markets are now close to saturation point. Their employees are living from paycheck to paycheck. They have too much of the everyday things they want to buy. They have little spending power left after deductions for bills and credit repayments. As consumption falls, so has competitive advantage in production. USA and many Europe countries can no longer compete with the nascent Asian countries in manufacturing, information technology or agriculture. Even as their incomes fall, they are faced with rising expenditure relating to unemployment support, foreign trade deficits, and domestic social obligations. The diminishing share of Africa's commodities in world trade is producing less slush funds both for the neo-colonials and for the local akotileta elite who rule the commodity-exporting countries on their behalf. With less slush funds, it is becoming more difficult for the neo-colonials to maintain the heavy military and diplomatic resources needed to provide "assistance" to the ruling akotileta. Scenting the opportunity, previously oppressed people are now rising to challenge years of misrule and corruption. The disaffection in France is particularly acute. For decades, France sold the concept of "one motherland, many colors". The motherland of course was France. The many colors were not equal. Nonetheless, Africans from Mali to Gabon professed to being "french first before African". Equally, religious brainwashing caused Islam worshippers to think themselves "muslim first before African" and the Christian worshippers to think themselves "christian, full stop". Their combined colomentality continue to waste many initiatives aimed at facilitating a regional market in West Africa. If nothing else, the recent events in Somalia, Rwanda, Sudan, Nigeria, Congo, Equitorial Guinea and Ivory Coast have helped remove the blight from the eyes of many Africans. By bombing the Ivorien military, France declared war on the country and compromised any "peace-keeping" excuses allowed their deployment by the UN. For its part, the UN has authorised France to use "any means neccessary" to contain the multi-tribal wars raging in IC. There have been six coups attempts herere since 1999. France now fights with its back to the proverbial wall. It is discredited with both government forces and rebel forces. Just like USA in Iraq, France will almost certainly win a front-end confrontation with IC. However, it may find the cost of administering any subsequent peace exhorbitant. The same costs will apply to any misadventurous neo-colonialists scheming to step into France's soiled boots. The unhappy economics facing Europe and USA is the driving force behind the recent wave of aggressive foreign policy unto countries that fail to protect themselves. France is acting under the auspices of the wretched United Nations. USA and Britain is acting irrespective of the UN. Eventually, the Africans will win encounters similar to Ivory Coast vs France. Then they still face the challenge of lopsided international markets. They can meet that challenge by building strong regional and continental trade among Africa's 700 million waiting customers. ___________________Links: http://www.internationalism.org/wr/262_ivory.htm = France shows its real face http://www.globalsecurity.org/military/world/war/ivory-coast.htm = Analysis of the crisis http://www.newint.org/issue304/farmer.htm = Cocoa farmer from Ivory Coast learns the economics of chocolate production http://www.wsws.org/articles/2003/may2003/ivor-m09.shtml = USA blocks intervention in Ivory Coast. Print this article Print this article Friday, November 12, 2004 Nigeria: governance, politics and oil revenues. This an excerpt from a letter to my cousin.________________________________Just focus your "findings" on estimates of revenues and expenditure since 1961 or whenever oil was discovered in Niger Delta. Let us assume some USD250BILLION been earned over the past 40 years. Then compare Nigeria's progress over that period with that of: a) South Korea, which was roughly at the same "development" stage 40 years ago. Adjust for the fact that SK does not have significant crude oil resources, has had military governance, is in a hyper-competitive region, is the leading information technology power. b) Brazil, which was roughly at the same "development" stage 40 years ago. Adjust for the fact that Brazil, while majority of African descent, has a small but socio-economically dominant "European" population. c) China or India, which have undergone similar experiences with colonisation and imperialistic trade, yet have largely retained their cultural heritage even as they grafted on hyper-competitive economics. d) Malaysia or Indonesia, which have significant crude oil or palm oil resources, multi-ethnic strife, rampant corruption, military dictatorships, and yet have largely retained a healhty socio-economic competitiveness. e) Somalia. Somalia? Yes, Somalia. A north-central African country next door to Kenya and Ethopia. Has had NO CENTRAL GOVERNMENT FOR AT LEAST 13 YEARS while torn apart by multi-ethnic strife. Suffered greatly from international sanctions after its people defeated US special forces sent in to help impose governments similar to those the rest of Africa had EVER had. Somalia is now Africa's most EVENLY developed country.Why? The warlords had to live as far from each other as possible, yet communicate with their troops in the various war-fronts. Effectively, powerful warlords set up feudal governance in their bases of power. Fighters had to be paid so local enterprise was left encouraged and "taxed" to fund the war efforts. Warlords who did not pay their way were usurped. Meanwhile SOMALIAN technicians built transport and telecommunications infrastructure to enable travel and communications across the country and across the borders into Kenya, Ethiopia, etc where the warlords kept their "investments". Today, Somalia has one government. They are entirely self-reliant in technology adaptation. They are wary of the interests serviced by "international aid" or "foreign direct investment", and most importantly, they have self-conviction in their ability to chart their own progress, irrespective of what the "international community" thinks. Influence on Governance: Nigeria became heavily centralised under two influences: a) The discovery of oil caused dissolution of the varying development agendas being pursued in the then-3 regions: Western, Eastern and Northern. Arguments about how to share the "national cake" still divide the country. The divisions have been physical (there are now 30+1 states, and ethnically. b) The resurgent military with their innumerable coups. The military destroyed the decentralised, and competitive, governments of the 3 regions and imposed a rigidly centralised "command and control" structure. The country is still under this structure. The 30+1 state structure has only put layers of bureaucracy and plenty of opportunities for corruption into the system. The state governments have very limited statutory powers, and are heavily dependent on the centre for funding, resource control or protection. Influence on Politics: Oil production is predominantly in the southern Niger Delta region. Some oil-yielding tar sands have been discovered in the northern Lake Chad region, but there are few reports on commercial production in this area. Nigeria used to be a British colony. There is evidence that Britain had advance seismic studies indicating large oil deposits in Southern Nigeria from 1950 onwards. The Westerners led by Obafemi Awolowo and the Eastern region, whose most vocal proponent was Nnamdi Azikwe, were strongly progressive and indicated the need for political and economic independence. Initially, the agitation was for separate nation-states but diplomatic discourse ensured complicity with one Nigerian country. The British made sure that political administration of the newly independent Nigeria was vested in the Northern region. The first coup was by military officers from the former Eastern region. They were protesting marginalisation of that region from national (read: oil) revenues by the Northern-dominated civilian regime of Ahmadu Bello. Riots erupted in the former Northern region in protest at killing of Bello and senior Northern military officers. The rioters targeted settlers from the Eastern Region. These events led parts of the Eastern Region to declare the independent nation-state called Biafra. Civil war. The Yoruba people of Western Nigeria were drawn into this war when they were attacked by Biafran forces. Post civil war, the Northern region has used dominance in national politics to ensure that region has disproportionate access to oil revenues. Their efforts led to the national capital being moved from Lagos in the former Western Region to Abuja, within easy access of the Northern power base. Significant oil revenues have been spent on building Abuja from near-virgin forest to a "federal capital city". Under the guise of "national quotas" (a form of proportional representation), the over-centralisation of government has also ensured that Northerners gain control of the national budget (70pc of which is funded by oil revenues), government spending (mainly by award of contracts), the civil service (the largest employer in Nigeria), and the military forces. Political strategies in Nigeria now focus almost entirely on "sharing the national cake" among the powerful scions of Hausa/Fulani (Northern), Igbo/Ibo (Biafra) and Yoruba (Western) regions. Elected politicians do not govern to empower their electorate. There is no need to. Rather, elected politicians govern to appease the powerful members or sponsors of their political parties. This is to ensure that access to government contracts continues on leaving office. See, USA-style democracy works in Nigeria ;-)! Hint: Me just keeps current on socio-economic issues and investment opportunities. Hint 2: By all means, enjoy your holidays. But Do Not Visit Nigeria With Any Intention Of Gathering "Statistics" Or Of Working With Government. Hint 3: IMF, EU, WB, etc, etc do not have accurate figures. They get most of their information from official figures released by Nigerian government. The many reports are usually guesstimates. But the Nigerian government cannot even ascertain how many Nigerians there are. Why? Consider that the current president will not confirm how many children he has, to Britain's BBC (he does not talk to "lowly" Nigerian journalists) because it is "bad omen to count one's children". This attitude is prevalent in Nigeria and prevents accurate census or other statistical information being gathered. Nonetheless, successive official "census" figures reveal demographics that are globally unique to Nigeria: that the semi-arid North is more densely populated than the tropical South. The political mathematics? Higher population = more National Quota = more allocation of oil revenues. To give such official figures some credibility, government usually quotes the IMF, WB . . Print this article Print this article Wednesday, November 10, 2004 The "strategic" national "interests" in Ivory Coast vs. France It was DAFT of the Ivory Coast government to put all their airforce hardware in one airport. But, had the entire fleet not been destroyed in one go, would the IC government have ordered a counter-attack on the occupying forces? Like many other colonial-era African states, IC has no meaningful military strength. There are naval, land or airborne special forces to speak of. The citizens are not militarilised. Now the airforce is shot to bits. That leaves the army, which was the reason France was in IC on a "peace-keeping" mission. The UN heartily approves French action in IC, although it opposes similar USA occupation in Iraq. The UN is headed an African, born in Ghana, a colonial-era neighbour of IC. The army had been resisting attacks from insurgents against the regime of President Laurent Gbagbo. The insurgents were at arms because they felt marginalised from economic development. Their candidate for president was disqualified from competing in IC elections on grounds that he is not a citizen of IC. Ivoriens had obviously not heard of globalisation, perhaps because the people were so busy being colomentally assimilated into what Franz Fannon referred to as "black skins, white masks", a phenomenom otherwise known as "coconut": brown-black on the outside, off-white on the inside. Those from the mainly desert north never forgot or forgave the decision by Houphouët-Boigny to allow France test their nuclear bombs in the Sahara. HB ruled this cocoa-colony from the time of "independence" (from France) to 1993. During this time the number of European, Lebanese and Indian economic migrants into IC grew so much that they once made up 25pc of the population in capital, Abidjan. Many of these were illegal emigres entered IC under the "one France" travel agreement that enables French nationals to travel unimpeded into "former French possessions". Human traffic in the other direction is restricted by EU law. Nigerians and Ghanians need not gloat: the British Commonwealth exerts the same effect. Being illegal emigres did not stop French farmers from privatising and controlling cocoa plantations established under HB. From these plantations, France (not Ivory Coast) supplies nearly half the global output of cocoa beans. Nearly all the profits are exported into buying respectability back in the French Riviera or deposited in Swiss-BeneLux bank accounts. Working conditions on the cocoa plantations have been compared to cotton plantations in the USA deep south, during the slavery era. HB reminded his fellow Ivoriens, time and again, "that their closest and best friend was France and that France made daily sacrifices for Côte d'Ivoire by offering protected markets and military assistance. He insisted that France maintained troops near Abidjan as a favor to ensure Côte d'Ivoire's security without impinging on its larger development plans." Many fellow Ivoriens were circumspect about his naivety but could not openly contest his reasoning. This mood shifted when the big man finally died. Discontent flared into tribal warfare. Laurent Gbagbo's faction won over the region that includes the capital, Abidjan, also the operations hub of many international trading companies active in West Africa. Those who perceive Nigeria as the 'giant of Africa' need to visit Ivory Coast. The more populous and English speaking Nigeria may have the potential to be a global economic and military super-power, if its government and people can sufficiently rouse themselves from colomentalist slumber. But the geographically smaller and French-speaking Ivory Coast is currently the international economic darling of the region. IC is of strategic interest because, under French's assimilation policy, it offers a backdoor into the Economic Community of West African States (Ecowas). IC is also the lynchpin in the France-dominated CFA currency zone with which the economies of ALL France's previous colonies are pegged to the European Euro (formerly pegged to French Franc, hence the name). In many ways, the CFA provided a testbed for the Euro. African progressives will need to deal with the facts of France controlling post-independence "french" Africa via CFA anchored by Ivory Coast; and with Britain controlling post-independence "english" Africa via the Commonwealth anchored by Nigeria; and with USA trying to unseat the two EU member states as Africa's new "protector of market access and provider of military assistance". The "great games" played by these three G8 members accounts for much of the stalled progress towards actualisation of cross-border trades in the ECOWAS region, and in Africa as a whole. But those who think that the Ivory Coast fracas is about rival Ivorien factions squabbling about whom to better service French trading interests, should "smell the cocoa". Cocoa, Coffee and Palm (vegetable) oil are the main exports of Ivory Coast. The journey of cocoa, from bean to consumer, especially reveals the true extent to which African commodities underpin global trade, and exposes the various nations that have strategic interests in the outcome of Ivory Coast vs France. Links: http://www.newint.org/issue304/farmer.htm = African cocoa farmer visits Cadbury UK http://www.icco.org = International Cocoa Association http://www.icco.org/questions/production.htm = the main cocoa producers http://countrystudies.us/ivory-coast/78.htm = the legacy of Houphouett-Boigny. Print this article Print this article Tuesday, November 09, 2004 Deconstructing the Sovereign Plantation (sorry, Protectorate) DECONSTRUCTING THE SOVEREIGN PLANTATION (sorry, PROTECTORATE) Better Life Shadow: Hey, Old Good Fellow ! How's life on your plantation nowadays. OGF: Fine, fine. We are surviving. Which one be plantation? This na independent place o. BLS: The plantation you live and work in. Do you not produce vegetable oil, mineral oil and cheap labour for the markets? What else do you make? OGF: Never thought of it as a plantation before. BLS; Do you not work all day and all night, for years on end, with very little to show for it? OGF: Not me! I am the head of the household staff. I crack the whip on the field hands and make sure our production levels are always up. BLS: Ah, you are the super on this plantation? OGF: Yes ke. I am the oga patapata. Apart from god above and our investors just beneath him. BLS: What does god do for you? What do your investors do for you? OGF: How dare you blaspheme the name of the almighty? Can you not see this plantation is very productive?! BLS: I see a lot of people toiling relentlessly in the fields. A lot are dying of hunger. But a lot of food is rotting. OGF: That one is not the fault of god or the investors. The ones dying are too lazy to work. The food is for export to our investor, One Across The Water. BLS: Chineke! Is OATW your god? What has she invested? Why waste food when people are dying? OGF: Mind yoursef before I discipline you. OATW brought me god, the almighty who shall never die. BLS: What capital or labour or anything tangible has OATW invested in this plantation, then? OGF: Questions, questions. I told you already: god was her only investment here. The people you see provide all the investment we need. BLS: (in disbelief) These people provide all the investment and they are dying of want?! Can they not use what they have to improve their own lives? OGF: And make me look bad when next I go into the house to meet OATW? God go punish you. BLS: (angry) Akotileta!! Who made you oga here? YOU should be careful the people do not mutiny and burn the house down and you with it. Old good fellow thinks about this. This better life seems to make sense. OGF: What should I do? The plantation owes OATW a lot of money. If we no pay, OATW will not buy our food and the people will starve even more. BLS: And so what? The people are already starving. Sell them the food. Anyway, how come the plantation owes OATW a lot of money? OGF: Even me sef, I no know. All the other plantations around here are in the same position. When OATW arrived here with god, my father's neighbours built the house for them with our own sweat and blood. OATW was very generous to our neighbours, sha. BLS: Generous to your neighbours? How? OGF: OATW added our land to that of the neighbours and put them in charge. She told everybody: "I will train your people in how to better manage your land, if you agree to make it a plantation for me. I will buy your everything you make, provided you agree to take my god as your own." My father did not think this was a good arrangement, and told OATW so. She became very angry and told her soldiers to rape, maim, loot and imprison my father's chiefs in the name of her god. Many died. Many were taken across the waters, never to be seen again (sobs). When the fighting finished, OATW said we owed her the cost of killing our people and taking our land for her plantation. She told my neighbours to appoint a good house-super and make sure the debt is paid in full. BLS: Laakuli, otherwise what will happen? OGF: Otherwise, she will ask the dogs of war to come back. BLS: So you must forever keep the plantation going in order to pay this bastard debt? Why not train your own dogs of war? Old good fellow thinks about this. This better life sure asks a lot of sensible questions. OGF: What should I do? The plantation is very beneficial for our neighbours and very profitable to OATW. They will not allow us to train our own dogs. BLS: Haba! Without your own dogs, you cannot burn the house or protect the people. You will be attacked by your enemies and forced forever to pay the debts that make the people poor. OGF: No worries. I have signed agreement with OATW to not attack me. I have agreed with my neighbours to give them bits and pieces of the plantation to add to their own plantations. We produce a lot of food and oil that OATW wants to buy. As long as the plantation delivers, no wahala. BLS: What will happen when the soil becomes tired and the well becomes dry and the debt is not yet paid? OGF: (Happy at his own foresight) That is not my problem anymore! BLS: Why not? Are you not the house-super, who is responsible for the well-being of the plantation workers? OGF: The soil is being given free to OATW's people to grow their own food. The well is already owned by OATW. Besides, we need not worry about the people by that time! BLS: Why not? Are the plantation people not agitating against this massive theft? OGF: NO, OATW allows those potential trouble-makers who think they have sense to go to OATW's country, where they to work as feudal wage slaves. The trouble-makers who no want go are dealt with. Most of the rest are delibrately undereducated, malnourished and allowed to die of curable diseases. BLS: You said most of the rest. What happens to the rest of the rest, then? OGF: They rely on my generous handouts or they believe in OATW's god. Either way, they help to keep the plantation running. We got debts to pay!! BLS: (mutters curses) Print this article Print this article Monday, November 08, 2004 Surviving the Political Economics of “Akotileta” Governance It will be beneficial to the general population of an oil-producing country, if the oil revenues are applied to improve the socio-economic lives of the people. Many citizens of oil-producing countries expect responsible governments to ensure that this IS what actually happens. Responsible governments use the monies received to create a domestic enterprise-enabling community. The empowered community raises domestic productivity, creates employment, and pays tax revenues back to the government. Popular economics is based on the theory that demand for produce and supply of produce determines the equilibrium market price of produce. This theory is falsifying because it is incomplete. It ignores the effect of demand for money and supply of money on the prices of goods. Money is a commodity, just like bread, suya, palmwine, rice or crude oil. Like any commodiy, money is used as a medium of exchange as well as a store of value. What makes money unique is the fact that it can be created by "fiat", an order enabling the creation of money, nowadays executed in most countries by a central bank. Most central bank actions are conducted as part of a government's monetary policy (decisions to control the demand of and/or supply of money). Responsible governments attempt to regulate the productivity of their economies via monetary policy and fiscal policy (decisions to control the production of and consumption of goods). The supplier of produce has a demand for money. The buyer of produce is a supplier of money. In any market transaction, these negotiations attempt to attain two equilibrum prices: one for produce and one for money. Two commodities are exchanged - produce and money - at the equating equilibrum price level. = Suppliers of money and produce are not created equal = Usually the supplier of produce sets the desired asking price that a buyer must meet. For example, Mr. Agbee may want Money1000 for his 1000kg of corn. If Mrs. Bureedi only has supply of Money600, some negotiations must begin or she walks, empty handed. However the total quantity he can offer for sale remains 1000kg: this reality represents the tangible bounds of physical commodities. Economists will say that if Mrs. Bureedi has higher wages, she may be able to afford money supply of Money800 or Money900. Economists will say the increase in Mrs. Bureedi's wages will usually cause Mr.Agbee to increase his prices (lead to inflation in market prices), and that inflation is a bad thing. If he expects market prices will go up, Mr Agbee will aim to supply more grain to the market next time. In an enterprise-enabling community, he goes to a bank to obtain the funds necessary to increase production. However, if Mr Agbee expects market prices to go down, he must still sell his product or watch it waste into rot. So, if the market is about to close for the day, Mr Agbee may despairingly drop the asking price to within Mrs. Bureedi's money supply. quantity of produce ^ |.......\..../ supply of produce (Sp) |........\../ |.........\/ * Equilibrium market price at intersection * |........./|......../..|......./....\ demand of produce (Dp) |_______________> prices of produce (market prices) =Money is different from other commodities = There are no physical bounds restricting the suppliers of money, previously identified as the central bank acting, presumably, on behalf of a responsible government. Banks will happlily make new loans (supply more quantities of money) if they expect higher interest rates. Making such loans is a matter only of entering records in a computerised ledger in this days of fiat currency. In the very olden days when physical commodities were used as money, "merchant-bankers" were at greater pains to "under-write" a loan. A responsible government can strongly regulate money supply in a local currency market. However, governments lose control of money supply in a "free" market with minimum capital controls. When uncontrolled money combines with weak domestic productivity, money supply then depends largely on the manipulations of the banks. Severe capital value devaluation in a highly consumptive political economy that has low physical productivity; high external debts denominated in foreign currency; and money markets with little capital controls. The government's own demand for foreign currency with which to repay the foreign-denominated external debt is matched by increased government supply of the local currency into the money markets. This will cause the value of local currency to fall with respect to foreign currency, resulting in a weaker exchange rate. Falling local currency values also mean lower interest rates. Borrowing is more affordable at lower interest rates for producers like Mr Agbee or consumers like Mrs Bureedi. Their demand for demand for money increases. Unfortunately, responsible banks will want to supply less money at the lower interest rates. Fiat currency money cannot rot and with weak capital controls in place, banks have no reality check that forces them to supply their money commodity even at low interest rates. So they try not to. Governments occasionally force banks to release money by conducting "mopping up" operations at the central banks. quantity of money ^ |.......\..../ supply of money (Sm) |........\../ |.........\/ * Equilibrium interest rate at intersection * |........./|......../..|......./....\ demand of money Dm) |_______________> prices of money (interest rates) = The role of a responsible government = A responsible government can do a number of things to stimulate DOMESTIC ENTERPRISES and to boost DOMESTIC PRODUCTIVITY. # Domestic businesses are stimulated, jobs are created, and longer term productivity is attained if government increases demand for domestically produced goods and services e.g by using domestic producers in construction of roads, housing, stadia, furniture, etc. Purchasing locally made goods and services by governments will cause the demand of produce (Dp line) to shift rightwards (along the Sp line) and cause market prices to rise. Eventually, increased domestic production (shift up the Sp line) and a higher equilibrum market price is achieved. Responsible government intervention MAY result in higher costs of living. # Likewise, domestic productivity is stimulated if a responsible government uses its fiat to make borrowing AFFORDABLE for domestic businesses. Two actions are possible: ## A naive government may demand more money from banks (e.g increased reserve levels), consumers (e.g increased minimum fuel prices), or businesses (e.g. as taxes or licenses). Interest rates will fall. But such an action will eventually bankrupt the community. This is because consumers, businesses and banks (!) must supply such money from earnings on sale of commodities, and neither have infinite source of those commodities. ## On the other hand, a responsible government may inject more money into the community e.g by lowering reserve levels for banks, lowering fuel prices, or lowering business taxes and other statutory costs. Interest rates will rise EVEN IF the increased government spending (shift up along the Sm line) IS NOT MATCHED by a increased DOMESTIC DEMAND (rightwards shift of the Dm line) to yield a higher equilibrum interest rate. The ensuring LEVEL OF INFLATION (rate of increase in interest rates) depends (in simplified terms, adjusting for complexities of elasticity in demand and supply) on the origin of rhe additional money supply and the purpose to which it is utilised. Inflation is MORE manageable IF the increased money supply originates from domestic consumers and enables domestic producers to produce more goods and services. Inflation is extremely damaging IF the increased money supply originates from consumption of foreign produce (which is what foreign direct investment is) or does not increase domestic productivity in goods and services. What then is the NET effect on domestic productivity and enterprise-capacity in a community when a government that does the following: # Increases the supply of domestic money through a combination of devaluation e.g selling domestic currency to purchase of foreign currency (= rightward shift along Sm line and increase in local interest rates) # Places high demands for money on domestic consumers, businesses and banks (= shifting the Dm line rigtwards and increase in interest rates). # Increases demand for foreign produce that are cheaper than equivalent local goods. This reduces demand for and supply of domestic produced goods. Lack of sufficient foreign produced goods or domestic prodced goods results in persistent high market prices. This situation is exacerbated by actions that impede market activity: persistent consumption of foreign produce by governments or the people; produce hoarding by businesses; and money hoarding by banks. The observed effect is a definate strangulation of domestic production (especially manufacturing) capacity, rampant unemployment, intense economic emigration, and a market concentration of domestic businesses into "non-tradable services" such as hotels, restaurants, schools, transportation, haircuts, unfulfilled contracs etc. = Surviving an irresponsible government = All governments have three core responsibilities to the general population they govern: # Create an enabling environment for domestic enterprises to grow and prosper; # Provide community services that to assist the needy; # Vigorously defend the property, territory and well being of the general population they govern. Only a bad government fails in ANY of these three responsibilities. Bad governments do not deserve to govern and should not be in office. By these measures, most modern governments do not deserve the people they govern. Yet, a general population deserves its government, whether strong or weak; good or bad. This is because no government exists in a vacumn. All are drawn from the general population. By implication, a weak government reflects the weakness of its people. A corrupt government arises from a corrupt mandate. A responsible government facilitates the enfranchisement of its people by performing its core responsibilities diligently. To enfranchise is to take control of the rule of law and of the markets in which one operates. The rule of law underlines the political system, which includes and defines the economic system of markets and payments. A bad government fails in these responsibilities. An akotileta government is not only bad, it goes further to actively impoverise, impede or attack the people it effects to govern. A government that disenfranchises its people can continue in governance only if the people have no self-conviction. The "values" of the population under bad government need to be restructured. Only when revalued, can the population restructures the government. The only way to survive a akotileta government is to recreate the failed responsibilities at the community level. This has the added benefit of decentralising and localising both the rule of law and economic markets. Observation indicates that people derive maximum socio-economic benefit from community-based policies and markets. Working examples range from large countries such as China and Germany (prior to the unifications), to the Scandivanian nation-states, to self-referencing tribal-states confined withing in larger country borders. The keys to these communities are strong domestic production efficiency and an effectively local currency. # Small, homogenous, and productive communities may have increased access to an export-oriented strategy but they often lack the population mass to sustain an effective local currency. # Larger countries can sustain a strong internal market for both local currencies and import-subsititution goods, provided they are not handicapped by foreign debt repayment obligations. # Those with large foreign currency repayment obligations need to implement strategies that protect the internal market, convert foreign debt obligations into the local currency, and induce the opening of foreign markets for domestically produced goods and services. Interestingly, these "beggar-thy-neighbour" policies are most often associated with contries that manifest a robust military strength. When enduring an irresponsible government, communities need also to protect themselves against attempts by such government to impoverise its own communities! An "akotileta" government has the particulary nasty property of focusing so much on meeting demands of foreign producers that it ends up suffocating domestic producers. =Self-help enterprises are essential= Communities need to be resourceful in order to control bad fiscal or monetary policy imposed by akotileta governments that are bent on destroying local productivity. These policies have historically included bans on organised labour, decentralised provision of infrastructure services, operation of local currencies or exhorbitant minimum prices in essential commodities. Businesses in such communities should consider associative or cooperative operating or organisational strategies. Rather than rules of law formulated by such governments, trading may organised by informal code of conduct which is enforced at community level. Rather than bank-based money transfers, market transactions are conducted via barter exchange or by interest-free local currencies. The essential glue of community-level businesses is communal trust. Crime and corruption are less likely when the family of potential culpits face the option of becoming ostracized from the community and subsequent difficulty in joining another. Even thefts are not so damaging in local currency economies as the stolen money must be spent within the same community. Best of all, community-level enterprises result in bottom-up prosperity and in enhancement of living standards at the local level. As the communities grow and prosper, businesses can expand to link across regions and nations. Such networks of businesseses retain loyalty to their roots and are more likely to engage in complementing (or conducting) the normal responsibilities of responsible governments. Print this article Print this article Wednesday, November 03, 2004 Poverty and the rule of law Uttar Pradesh is the largest and most populous state in India. This year, this very poor corner of this most racially bigotted country in the world has been given USD360million by USAid , an aid agency, to implement a population control policy that calls for the sterilisation of 930,000 people. The poverty has been a high level of crimes against humanity and a strong siege mentality among the rich. The government of Uttar has some interesting ideas on how to meet its target of sterilising the poor while parlaying the insecurty of the rich: Anybody who wants a handgun should submit 3 people for sterilisation; 5 people for a shotgun. So one rich farmer invited 5 of his workers for a meal. Thereafter, they felt dizzy and fell asleep, only to wake in great pain and distress. The five returned to the farm, glad that they still have a job to do because they have families to feed. One of the men is unmarried and without child. He will never father any of his own. Cradling his shotgun, the farmer says "There has been an investigation. The case is now closed". Few social critics, economic analysts, and policy wonks consider the reinforcing effect that the rule of law has on the prevalence of poverty, disease and ignorance around the world. In India, forcibly castrated people cannot get justice from the state because their castrator is powerful enough to rise above the rule of law. The rule of law can oppress nations just as severely as persons. Next door to India, countries are invaded because an invading set of countries are powerful enough to rise above international law. Perhaps, it is high time that poverty, disease and ignorance are classified as weapons of mass destruction. They certainly destroy the masses of the people even more effectively than even the bullets and bombs of the countless wars. It is estimated there are some 30,000 poverty-related infant deaths daily in Africa. Many children and women die yearly Africa from preventable diseases. Many women and children will live their lives in painful ignorance of basic hygiene, energy production or food preparation techniques. Yet, even as they scratch out such as squalid living within the constraints of the law, the poor must wonder how the hell of their lives can exist alongside the heavenly plenty of their compatriots. "Surely it is one law for us and another for them" goes the muttering. Disenfranchised people and deficient countries express this same feeling, the basis of which lies in the structure in which their daily affairs are governed. Had the rich Indian not been protected by the governing law in Uttar Predash, he would been properly "dealt with" by the retributive justice of his victims. Their poverty and ignorance prevented their ability to marshal the rule of law to their cause. Totalitarianism, feudalism, unrepresentative democracy and communism are forms of top-down government that accentuate the ability of the powerful to place suppressive binds on their people. The binds are drafted as the rules of law. Not to be disobeyed by the people. At pain of punishment by the ruler of law. In this manner, it becomes a crime to steal even if working your fingers to the bone does not yield sufficient income to feed your family. It becomes treason if you criticise an incompetent, corrupt and akotileta government. The shotgun quells mutinious ideas in farms across Northern India, just as the bullwhip silenced dissent in slave fields across the New World centuries ago, and structural adjustment policies dampen queries in many struggling households across the "developing" world. The rule of law made it lawful to use the shotgun, the bullwhip and the poverty-policies, and thereby permitted rulers to kill or cripple the prospects of those whose actions produce the wealth of their tormentors. In Africa, people are now becoming immune to destructive laws: it may be time for a severe dose of civil disobedience.
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Posted by Robot| 24.04.2008 09:51