[lbo-talk] G8 debt plan

Wojtek Sokolowski sokol at jhu.edu
Mon Jun 13 12:48:42 PDT 2005


Patrick Bond:
> It's not either/or but both/and, you'd agree Wojtek. By following the
> WashCon/WorldBank/Oxfam logic of export-led growth, gluts and
> overaccumulation set in, and the prices of most cash crop exports from
> Africa plummeted.

No quarrel here, I said that the cause are multiple. My point is, however, that weak domestic demand is the principal structural cause - because with a strong domestic demand, export at rock bottom process would not be profitable. Of course, one needs to take institutional factors into account to explain weak domestic demand, and the foreign pressure to dramatically reduce state spending plays a big part in that explanation.

But the deeper problem, imho, is why government spending in Africa failed to produce results similar to those in Eastern Europe, for example. Methinks that Keynesian policies (which is a weaker version of macroeconomic planning) work only if the productive infrastructure is already in place - so the boost in demand merely "activates" dormant productive potential.

But if that productive potential is altogether missing, Keynesian stimuli will not "activate" anything but instead will be consumed or rather wasted on inflated prices of consumer goods (or goods in general whose prices are inflated by increased demand due to government investment). Eastern European central planners understood that very well, and that is why they introduced a stronger version of planning, that involved not just government outlays, but also strong control of prices, especially for consumer goods. This was to assure that the government outlays would be invested in building of the means of production instead of being wasted on overpriced (due to shortages) consumer goods.

I do not think African states went as far, but they should. This is the argument for a return of state socialism and planned economy to Africa, as the only mechanism that can lift it from its current state of poverty.

In sum, methinks that Africa is now paying the price for not instituting central planning and state sponsored development many years ago.

Wojtek



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