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Q&A: Global Crisis Is an Opportunity for Economic Renewal

Annelise Sander interviews HAKIM BEN HAMMOUDA, author of a new book on the global economic crisis

GENEVA, May 20 2009 (IPS) - The global economic crisis may spell the end of the Washington Consensus and the structural adjustment programmes imposed on the South and lead to the emergence of new economic powers, the so-called ‘‘Next 11”, of which some will be in Africa.

These are some of the provocative theses of ‘‘La crise” (The crisis), a recently published book by North African economists Hakim Ben Hammouda, Hédi Bchir and Mustapha Sadni Jallab that provides some fresh and encouraging perspectives on the current international situation. Annelise Sander asked one of the authors, Tunisian economist Hakim Ben Hammouda, some questions.

IPS: Africa will be one of the regions most severely affected by the global economic crisis. What are the solutions? Hakim Ben Hammouda (HBH): I have been one of the first to say that Africa would be badly hit by the crisis – which almost nobody believed at the beginning. Today it is a fact: the poor are suffering more than the others. Growth on the continent is estimated to be only two percent this year, compared with seven percent in 2007, which was considered insufficient to lift Africa out of poverty.

With two percent growth, the situation becomes catastrophic and it could even lead to greater political instability. Appropriate responses by Africans are needed, but these countries are poor and cannot afford to launch rescue plans. Financial flows from outside – official development assistance and loans by the African Development Bank – are more necessary than ever.

IPS: Is it the end of the Washington Consensus and the beginning of a new form of capitalism, more favourable to developing countries? HBH: The end of the Washington Consensus has been announced several times by now but liberalisation, privatisation and deregulation have always come back as solid bases of economic policy.

But this time it is finished once for all and the state is becoming again the investor and regulator, while for decades the market was supposed to play this role. It is a big change for the South because the Washington Consensus inspired the adjustment programmes of the 1980s and 1990s.

IPS: In the book you place a lot of hope in the ‘‘Next 11”, a group of emerging economies among which three are African: South Africa, Nigeria and Egypt. Is that realistic? HBH: The world economy has witnessed a major evolution since the beginning of the 1980s, when development was limited to the West and the South was considered impermeable to modernity, for cultural or religious reasons, and a magma of countries and peoples where conflicts, instability and violence dominate.

Since the beginning or the 1990s, consecutive waves of Southern countries have started to develop and some have even become members of the Organisation for Economic Cooperation and Development (OECD) club.

After the Asian Tigers in the 1980s (South Korea, Singapore, Taiwan and Hong Kong) and the BRIC (Brazil, Russia, India and China) in the 1990s, the Next 11 is a new generation of emerging economies. The perimeter of Southern countries that are better off is getting larger to include African ones like Egypt, Nigeria and South Africa.

To this group we can reasonably add Tunisia, Morocco, Algeria, Mauritius and Botswana. The whole question, today, is to see whether they will overcome the crisis that is severely hitting developing countries.

IPS: The book says that the South finances the North. What do you mean? HBH: A large number of Southern countries have been able to put aside important reserves after the rapid increase of commodities’ prices (particularly oil) and, for some of them, the accumulation of an important trade surplus.

They have created sovereign funds (funds that belong to the state and are invested for future generations) that have made significant investments in the North, particularly in international banks. But these sovereign funds have suffered important losses after the recent crisis.

IPS: Will Arab capital benefit Africa too? HBH: Some Arab investments are directed towards Africa, both North and Sub-Saharan. It is mainly in the building sector, with important projects that have, because of the crisis, been delayed or cancelled in mobile telephone companies and in the management of harbours.

Dubai Harbour is running several harbours, like Dakar’s. There is also a stronger presence of Gulf airlines in Africa. Dubai and Doha are becoming important hubs between Africa and Asia.

IPS: You say that the South is becoming a new trade power. Africa too? HBH: It is much less the case with Africa because it has a lot of difficulty to get out of marginalisation. Africa’s part of world trade is no more than two percent and the continent badly needs to diversify its economic structures to overcome the rent model inherited from colonisation. It must enter into much more advanced and sophisticated sectors, including industry and services.

IPS: Has globalisation benefited the North more than the South? HBH: Globalisation has been at the origin of an unprecedented extension of the crisis to the whole world, hence the need to regulate it. There have been two phases in globalisation: in the 1980s, it very much benefited the North and marginalised the South.

But, after the mid-1990s, it started to benefit a certain number of Southern countries that have become new trade powers, imposing greater competition with the traditional economic powers.