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Libor and Africa: Nothing New Here

by KALUNDI SERUMAGA

While Africa’s rulers have become world famous for rigging elections, Europe’s’ financial class are acquiring their own reputation for rigging financial results. Both acts will have the effect of weakening democracy worldwide.

Greece’s’ democracy is still reeling from the results of being let into the European Union on cooked figures that led to the collapse of their economy, and then their governments. Another emerging crisis-related scandal ids the accusation that the height of the western 2007 -2009 “credit crunch” financial crisis, UK’s Barclays’ Bank had sweetened its performance record so as to get other banks to lend cash to it at a more favorable rate.

In the ongoing Parliamentary hearing, the ex-head of the Bank –who had to quit because of the scandal offered a two-part explanation.

On the one hand, he explained that the full extent of the data-rigging was not known to senior management, but on the other, what little of it senior management may have known and approved was due to a combination of pressure from the then government, and fear of being “nationalized” if they failed to comply.

One interpretation of all this is that a technique that began as an unethical government intervention to manipulate its economic performance figures so as to prop up a dying economy, was later privatized and used by the bank for its own gain.

Certainly the hearing was told that after Barclays received new funding as a result of these manipulated figures, then bank-to-bank lending rates went down across the financial market.

What makes the outrage from the UK political circles so puzzling is that the western model of banking has always been a conspiracy, but a well-shielded one. Its first victims were the trading classes and artisans of medieval Europe who began to depend on first the physical security and credit access that moneylenders provided.

Through the practice of charging interest -something frowned upon by most cultural codes- the banking business was able to build up its own reserve of the very money and credit it had invented, and use that to make its own interventions into the world of commerce and trade to which it had previously simply been a service provider.

Using the language of the previous era of independent mutually competitive businesses, the bankers then began to pretend that their capacity to direct business and public policy through the creation of indebtedness was some form of continuation of the capitalist “free trade” system they had in fact supplanted.

Every major global venture since then has in essence, had a coterie of banks at its heart. The slave trade and it related sugar industry were early examples of this, as was the overall colonial project, which saw even European emperors seeking loans from banks to finance exploration and colonial expeditions.

Their influence was reflected in the changes in religious thinking and public morality that became necessary for the maintenance of this project. The policymakers and philosophers were compelled to declare some people inferior to others so as to justify enslaving them, and even to declare other peoples non-existent so as to seize their land. Meanwhile, companies acquired the rights and status previously only held by individual human beings under the emerging corporate legislations, even as people were being demoted.

The West’s current problems stem from the rise and spread of mass democracy in Western Europe, and the push-back against colonial subjugation in the empires. The first had the effect of demanding greater transparency and morality in the global activities of the dominant corporations, while second raised the cost of maintaining control of the areas of exploitation.

The net result was a global financial system with a lot less room to maneuver than before, a higher cost for doing it, and more people to whom it was answerable when it did. This is real reason why these crises and malpractices are now coming to light, because they are nothing new in themselves.

Under donor direction, Uganda’s banking regime has been maintaining high banking lending rates for the domestic economy, while allowing Western business to come in with capital borrowed at much cheaper –less than half of ours- rates in their home countries.

Through this scandal our planners may now be learning that these rates are not as scientifically arrived at as they have been led to believe, but may have been subject to many previously secret political considerations.

Our donor-advisor-partners also saw to it that those of our local banks  that could possibly make interventions into this racket, were quickly eliminated. Thus the Uganda agricultural sector –which remains the mainstay of our economy-, lost both the state owned behemoth known as the Uganda Commercial Bank, as well as the Co-operative banking system.

The official reasons given for the dissolution of the Uganda Commercial Bank were that is had too many toxic unrecoverable debts; its management was corrupt a; it was simply too big and that its interest rates were not based on sound fiscal calculations. Ironically, these reasons are identical to the ones given for the exact opposite policy approach to the European banking crisis, where the EU is lending some $125bn of taxpayers’ money to Spanish banks that made bad investments and are in danger of collapse.

Indeed, Spain is not Uganda. And competition is not free.

Kalundi Serumaga is a film-maker and journalist living in Uganda. He can be reached at: kalundeed@gmail.com.

 

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