Emerging economies are those that are considered to be the in-betweens of the global economic order. They are countries that are between the rich and the poor. In the parlance of ‘world systems analysis’, the rich are called the ‘core’ and the poor are the ‘peripheries’. The ‘semi-peripheries’ (Samir Amin) are the emerging markets. Since the semi-peripheries are halfway incorporated to the core, they tend to rely on western private capital for their general economic activities. The peripheries, unlike the semi-peripheries, depend on concessionary loans for most of their developmental needs. In both cases however, countries are systemically encouraged to go into massive debts, via concessionary loans or otherwise!
The primary preoccupation of the so-called ‘institutions of economic governance’ (Bretton Woods, etc.), as well as the major money-centered banks in the west is to make sure emerging countries amass continues debts. These debt levels are almost always unsustainable. How many ‘emerging markets’ crises have we witnessed only in the last three or so decades? The 1982 ‘sovereign debt crisis’ triggered the restructuring of the whole of the South along the ideology of neoliberalism. Then came the Asian financial crisis. The Tequila crisis of Mexico (1994) had to be contained at all cost to avoid contagion. To this end the US government and the IMF went out of their way to bail out Mexico. These crises were instigated, for the most part, by the imprudent management of financial affairs, both internally and externally. For instance, taking short-term loans, say denominated in dollars, to invest in long-term projects domestically, is what effectively caused the Asian financial crisis! When the core countries increase their interest rates, borrowers in emerging countries submerge, literally!
Currently, Argentina is trying hard to avoid another bankruptcy. It has been one of the regulars in this department. It has already defaulted in the early part of this century, to say nothing about previous ones. Turkey, South Africa, Brazil, India, Indonesia, etc. are all suffering from the collapse of their currencies, mostly caused by their half-baked economic policies imposed by outsiders. To be sure, these policies are dictated, directly or indirectly, by the reigning transnational monopoly capital. Any sensible person would ask; why not change policies that encourage the accruing of unsustainable debts that almost always lead to all sorts of crisis, financial or otherwise? This is easily said than done, as the simple answer is; most likely, lenders do not want borrowers to be prudent and question the very intention of the generously extended loans. The global financial crisis of 2007 did affect almost all the countries of our globalized world. The causes of the crisis were not looked at sincerely, as the desire to rectify the underlying structural problems would have ruined the very business of the banksters. Unfortunately, because of this maleficence, the financial world, by extension the whole world economy, will most likely face an even more severe crisis in the near future! To be honest, the world financial system is nothing more than a house of cards, where the slightest perturbation can bring it down.
Countries in Africa, including ours, are also facing difficulties due to their lack of economic foresight and more. Taking loans from abroad (money market) where rates of interest are always fluctuating and non-negotiable can only be construed as reckless. For example, Ethiopia used to have a history of prudent policy when it comes to financial management; to such an extent that it was only concessionary loans the country was accessing, not loans from the market. If our memory serves us right, it was only ‘Ethiopian Airlines’ and probably very few unique projects, like the gold mine in Lega Dembi, that were allowed to obtain loans from abroad on commercial basis. The rational was and still remains obvious. These enterprises generate hard currencies and hence are in a better position to fulfill their obligations to foreign lenders. Even parastatals like Tele, EELPA, Highway, etc. were not allowed to tap loans, directly or indirectly (suppliers’ credit, etc.), from abroad. Their various projects had to be preapproved by the central government, then the project loans were solicited from concessionary lenders by the central government via the Ministry of Finance. In the past two decades this policy changed, and well-connected oligarchs (to the ruling entity), let alone state owned enterprises, were allowed to take on massive loans from abroad, guaranteed by the state, to wit! The time of reckoning is now upon us. As usual, the Ethiopian sheeple is forced to make sacrifices and bail out the criminal oligarchs and their useless ‘white elephants’ projects. A case of grand corruption that resulted from lack of good governance!
(This editorial was first published on Capital in 2018)