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The World’s Emerging Political Economy Risks

Posted on Jul 21, 2014 in Development, Economy, Featured, Politics

The World’s Emerging Political Economy Risks

As the world economy is recovering from the prolonged recessionary consequences of the 2008 “great recession” new geopolitical risks have surfaced rapidly, and somewhat unexpectedly. The military developments in Syria-Iraq in the form of the rise of ISIS militia, the instability and social issues growing in Nigeria, the widening reach of Al’Shabab in East Africa, the continued instability in Ukraine, and ongoing tension in the Middle East, together with territorial disputes between China and some other countries of the South East Asia region are the key and high profile sources of risk and instability in the world economy. Alongside these visible risks are the subterranean activities of cyber attacks, and other threats based on digital technology across the world.   This has thrown the world economy into a new era of rising uncertainty and potential instability. Once again the world resources are spent proportionally more on military and defence expenditure rather than on other socio-economic needs. This means limited global resources are being spent more on less productive, counter-productive and/or destructive ends. As this process takes roots, global productivity falls. The upshot of it all is a material decline in the world potential GDP.   At the same time, the rise in military and defence expenditure leads to a worsening of the quality of public services as public resources for such socio-economic programmes typically contract. At the end of the day, the poor suffer because the poor are more reliant on public services. In the face of an already high disparity of wealth and income within the world economy, and within most societies, the new trends are likely to worsen the relative position of the poor within the society. There are clear and predictable socio-political consequences for this trend.   For Africa, in particular, these new global developments have far-reaching consequences. It is critical that Africa’s growth and development remain on sustainable path. Yet the rising level of insurgency and military actions on the continent is bound to divert the resources from socio-economic ends towards military hardware. In this manner, the continent’s resources and surpluses are channeled to the armament manufacturing countries in the east and in the west. In the process, the inaction by the African Union structures is highly problematic. The ineptitude of the AU with regard to safety and security remains the most obvious fault-line of the organization.   A similar fault-line is evident at the UN structures. The existing global safety and security infrastructure is woefully inadequate and inappropriate for today’s world circumstances. Much has changed since 1945, and yet the UN system has remained largely intact. More importantly, the nature of international threats has evolved considerably. The emergence of global terrorist groups spanning different territories and regions of the world has made the old style inter-state hostilities less of a threat. The regional and global multilateral organisations, therefore, need to respond to the changing circumstances. For such responses to be effective, national leaders ought to reconsider some of the age-old notions of “self-interest” and “national interest”.  In such re-definitions, new realities of limits to national actions towards safety and security need to be recognized. At the same time the very notions of ‘safety and security” need serious re-definition.   Optimum and cost-effective measures of safety and security in today’s world call for a considerable re-think of the trade-offs between national and regional/international structures. As the nature of global risks changes, effective responses require creative and new measures of regional and global coordination. Unless the new risks are effectively mitigated, the world economy will remain vulnerable to underperformance. This is not good news for...

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Social Capital: The Critical Factor for Developmental Success

Posted on Jun 9, 2014 in Development, Economy, Featured, Infrastructure

Social Capital: The Critical Factor for Developmental Success

Developmental success of nations, broadly speaking, depends on two forms of capital. One is the natural and inherited capital, the other ‘made-capital” accumulated over time.   As important as the natural resources are the human-made resources and capabilities too collectively constitute a critical and dynamic ingredient of the nations’ success. In econometric literature this is often referred to as the “made-capital” of a nation, in contrast with the natural endowment of the country. For each generation, then, the national resource (or capital) endowment is made of the natural endowment plus the inherited “made-capital”.   In this regard each generation’s heritage subsumes vital components such as culture, knowledge, socio-economic and political institutions, logistical infrastructure, and the effective governing legal paradigm. It may be argued that without this mad-capital, the development process is doomed to dawdle or even fail.  Social capital is a critical component of made-capital.   Much like the other forms of capital, social capital is subject to a dynamic evolutionary process, and over time it may be augmented or destroyed, depending on the choices that a given nation makes. More specifically, each generation’s political economy and ethical choices either builds upon the historic stock of social capital or dilutes it to the detriment of the developmental process.   The reality of the social structure and its evolution over time is that both benefits and costs of political economy decisions are, more often than not, externalised. This means, neither the full benefits nor the entire costs of a given generation’s decisions are born by it or by its members. Thus, the substance of sustainable development and intergenerational equity is complex, and its operational requirements are made of both tangibles and intangibles. Importantly, the implications are not merely theoretical and academic: the future trajectory of the society’s developmental path is largely defined by an appropriate mix of the two forms of capital. Therefore, sustained commitment to the augmentation of social capital is indispensable.   Prosperity of nations thus requires a blend of pecuniary and non-pecuniary            variables. Important as the pecuniary variables are, so too are the                                 non-pecuniary investments for the sustainable of development and prosperity. At one end non-pecuniary variables pertain to foundational institutions of               the socio-political and economic institutions, and at the other end, they relate   to the significance of promoting social and personal value systemsthat help lay      the ground for defining the nation, its  social culture, its  internalised moral and ethical codes,  and its national welfare objectives.   Through the interplay of these two sub-systems of the non-pecuniary network of variables, social capital, may be created or destroyed. Contemporary research has underscored the importance of social capital as a critical ingredient of a sustainable political economy framework. The promotion of trust among diverse stakeholders is a key ingredient in the process of social capital formation. This is particularly so in heterogeneous societies where religious, tribal, cultural and racial differences abound. The accumulation of social trust augments intergenerational social capital via an array of interrelated processes that, inter alia, include trans-generational conversations within the family structures, the workplace, the community initiatives and not-for-profit enterprises. The promotion of reciprocity for the common good is a vital element of intra-generational and intergenerational social capital accumulation.   A significant contributor with long term impact on sustainability of social development and human prosperity is the embedded value system that prevails within society’s operations. Such values and codes of conduct need not be legislated or somewhat formalised; rather they need to be internalized within the society’s political economy organs.  With the help of such values, social trust is engendered and over time social capital...

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South Africa’s Evolving Democracy: Beyond Elections May 2014

Posted on Jun 9, 2014 in Economy, Ethics, Featured, Infrastructure, Politics

South Africa’s Evolving Democracy: Beyond Elections May 2014

SA national elections on May 7th 2014 marked the 20th anniversary of the country’s constitutional democracy. Whilst the ANC maintained its control over the national government with a 62% majority, it had much to worry when examining the details of voting patterns across the 9 provinces and the major metropolitan centres. Nationally, the ANC lost just over 3% of the votes compared with the previous elections five years ago. The party also maintained control of 8 of the 9 provinces, albeit with a declining majority in every single one of them. More revealing was the fact that the ANC’s majority in the Gauteng Province was reduced to 53% of the votes. This was the shocking revelation for the ANC.   The significance of Gauteng is three folds. Firstly, it is SA’s most populated province, it contributes over 1/3 of the country’s GDP and as the country’s only metropolis region, it has by all measures the most informed and diverse population. ANC’s loss of considerable support in Gauteng almost overshadows the party’s continued success nationally. Overall, ANC is shown to have lost much support amongst the middle class in the country.   A number of factors have led to this outcome. Most detrimental has been ANC’s own organizational in-fighting and precipitous moral decay. Continuous allegations and revelations of corruptions and misuse of public resources have tarnished the image of the party, and its top leadership. The party leaders at local, provincial and national levels appear oblivious to the damage that their misconduct and abuse of public resources are bound to raise the ire of the citizens. Given the rapid rate of urbanization, and accessibility to real time information amongst the citizens, gone are the days that the political leaders and their administrative stooges, could obfuscate their abuses of power or extraction of public resources. Yet, the ANC leaders over the past five years appeared determined to swim against the tide!   Both on the right and on the left of the political spectrum, the ANC found itself under pressure. The emergence of Economic Freedom Fighters (EFF), led by the ANC’s previous youth league leader, Julius Malema, was a game-changing phenomenon during the 2014 elections. The EFF is the political voice of nearly 4 million youths in the country. The bitter reality is that ANC’s education policy failures since 1994 have left the youths unemployed, unemployable, marginalized and radicalized. This lethal cocktail compounds the structural and widespread poverty left behind by Aparthied twenty years ago. Although EFF managed to garner only 6% of the votes in the 2014 elections, this understates the party’s inherent appeal and widespread political support. If properly resourced and appropriately structured, the EFF could well increase its actual voter support by a factor of 3 to 4 in the next election cycle. For as long as unemployment rate of over 25% persists, the EFF has a fertile ground for consolidating its power base.   From the viewpoint of economic policy, the ANC has made considerable errors of judgment over the past few years. Nearly five years have been squandered in dabbling in contradictory and counter-productive policy positions within the government. Under the rubric of “developmental state’, the government policy has become a great deal more interventionist, at times contradictory, and by extension operationally ineffective. Ministerial involvements in corporate operations, supply chain management, and organizational issues have risen sharply. State-owned enterprises have lost much of their technocratic capabilities and have been reduced to proxy political agencies for supporting crony capitalism and political agendas. Enterprises such as Eskom, the Industrial Development Corporation (IDC), and The Development Bank of Southern...

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Intergenerational Equity and the Political Economy of South Africa

Posted on Feb 24, 2014 in Economy, Ethics, Featured, Politics

Intergenerational Equity and the Political Economy of South Africa

To watch the full keynote address video by Dr. Abedian go to the following link: http://youtu.be/oC5lseYIgxk Intergenerational equity is a complex issue in public policy. The complexities may be compounded when one views it through the lenses of political economy, philosophy, applied ethics as well as in public policy. More often than not, the notion is invoked in discourses around environmental sustainability and or in politics of public debt. The concept, however, is much deeper and wider in scope. There is a range of sub-issues that are embedded in the term “intergenerational equity”. This is so because society is the intermediary among past, present and future generations. All social processes, be they political, economic, technological, ethical, or environmental have a systemic and dynamic impact upon the overlapping generations’ welfare. In the meantime, human beings are predominantly “present-oriented”. In effect, they discount the future heavily the more distant it is or is perceived to be. In effect, the present is more important than the near future and the near future is more important than the distant future. Furthermore, human activities and enterprises are, more often than not, subject to uncertainty and imperfect information. These simple but factual realities do have profound and far-reaching consequences for the success and failure of nations.  Moreover, our use of the natural resources, our approaches to the ecosystem, and the political economy institutions, the social and ethical framework we promote and the ease with which we commit resources to social and human integrity are all affected by our implicit or explicit regard for the principle of intergenerational equity. These issues have preoccupied philosophers since time immemorial and entered classical economic thought. However, the modernist pursuit of economics as a value-free “technical” science, particularly within the framework of neoclassical economics, effectively marginalized the intergenerational topics. The contemporary emergence of institutional economics coupled with environmental concerns and globalization, has repositioned intergenerational issues at the centre stage of the global political economy discourse. For the discipline of Economics, this offers an interesting, but challenging, vista. In reality, ethical values are implicit and exogenous in virtually all models. Economics is yet to fully internalize this fact. For South Africa, at this juncture in its social democratic evolution, intergenerational equity has an added significance. Nearly twenty years into the foundational years of its new democratic dispensation, compelling evidence and complicated syndromes of disregard for intergenerational equity are emerging. From the utter failure of the public basic education system, the widespread collusive and extractive conduct amongst the business corporations, to the near collapse of the public sector administrative and management capabilities, particularly at the local government levels, glaring and worrisome signs are in evidence that social welfare across generations is being disregarded, or even compromised. In the remainder of this chapter, the concept of intergenerational equity will be explored in more detail in Section 2, followed in Section 3, by an analysis of the patterns and trends in resource allocation across generations in South Africa. The analysis of non-pecuniary investments in future generations will be examined in Section 4. Section 5 will look into the challenges of intergenerational equity rebalancing. The final Section will end with some conclusions.   2 – Intergenerational Equity: Definition, Application & Significance Intergenerational equity is a principle of distributive justice which concerns the relationship among past, present, and future generations. We could conceptualize the basic contours of an equitable relationship among generations in many ways. From a social contract perspective, it is instructive to imagine that all generations are partners in an implicit social contract defining rights, duties, and obligations among generations.   The contractarian approach, however, ignores...

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Today’s Global Uncertainties, Tomorrow’s New World Order

Posted on Nov 11, 2013 in Ethics, Featured, Politics, Spirituality

Today’s Global Uncertainties, Tomorrow’s New World Order

Honourable and distinguished guests, honoured members of the National Spiritual Assembly of the Baha’i’s of Swaziland, eminent members of the Auxiliary Board of the Continental Counsellors for Africa, ladies and gentlemen, dear friends, I am most grateful, indeed honoured, for being invited to share some thoughts on the subject of the prevailing global uncertainties and their possible and ultimate outcome’ on this auspicious occasion.   As we gather here to celebrate the birth of Baha’u’llah, the founder of the Baha’i Faith, it is befitting to pay homage to His message of love and unity, peace and prosperity for the entire human race. His mission is to establish a worldwide community, whose hallmark is ‘unity in diversity’. Back in the second half of the 19th Century, Baha’u’llah foretold the inevitability of the emergence of a global society, driven by the quest for the world peace, inspired by the divine vision of a united humanity imbued by spirituality, sustained by the eternal covenant, and founded upon justice and fairness.   At the first glance, the vision that Baha’u’llah offered  could hardly be more in contrast with the prevailing socio-economic and political circumstance in which we find ourselves, in every land on the planet. The prevailing uncertainties, the grinding poverty of so many of our fellow human beings in the midst of the opulence  and the plenty that the “other half” displays, the public and increasingly aggressive and demeaning manner in which societal issues are debated and often not resolved, the growing worldwide emergence of the extent of tyranny against children, youths, and the women, and the pervasive spread of corruption in the use of public and private resources across the international economic and financial system, all these are deeply unsettling and indeed emotionally depressing.  I am sure you have followed on the recent report about the prevalence of slavery, estimated at around 30 million in 2013! It is almost unthinkable that in this day and age, a global ‘slavery map’ highlights the fact that over 5 million slaves live on our continent of Africa, and even a larger number lives in the Indio-China sub-continent[1]. Equally disturbing is the reality that no region of the world is free of slaves! Modern slaves include women, children and men. This of course is but one of the manifestation of our prevailing moral crisis of humanity. There are many other social, emotional, and political manifestations. The upshot of them all is a rising level of despair for a considerable proportion of our fellow human beings.   The world is indeed in the throes of one of the most profound transitions in history. Not only do technological and economic changes have world-embracing effects, but also the prevailing socio-political dynamics has no historical precedence. This is not to say that in the past the world has not had periods of deep and game-changing transitions. For example the advent of industrialization in the 17th and 18th century culminated in the dawn of a new world order in which the West emerged as a dominant economic, military and colonial power. The ancient civilizations of India, Africa, China, Ottomans and Persians were subjugated for a few centuries to come. Yet in comparison with the contemporary transformative forces, the industrial revolution had limited reach and its impact was slow.   The many forces of contemporary transformation in human and social life may be broadly divided into two categories. One group tends to integrate socio-political, economic, and cultural life across regions and continents. Such integrative forces tend to narrow the gaps across communities and nations, build bridges within and across cultures, and...

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Africa Within a World in Transition

Posted on Nov 6, 2013 in Development, Featured, Infrastructure, Politics

Africa Within a World in Transition

The world is indeed in the throes of one of the most profound transitions in history. Not only do technological and economic changes have world-embracing effects, but also the prevailing socio-political dynamics has no historical precedence. This is not to say that in the past the world has not had periods of deep and game-changing transitions. For example the advent of industrialization in the 17th and 18th century culminated in the dawn of a new world order in which the West emerged as a dominant economic, military and colonial power. The ancient civilizations of India, Africa, China, Ottomans and Persians were subjugated for a few centuries to come. Yet in comparison with the contemporary transformative forces, the industrial revolution had limited reach and its impact was slow.   The many forces of contemporary transformation in human and social life may be broadly divided into two categories. One group tends to integrate socio-political, economic, and cultural life across regions and continents. Such integrative forces tend to narrow the gaps across communities and nations, build bridges within and across cultures, and create rising levels of social capital even in the midst of very diverse and segmented groupings.  The emergence of a global and fully integrated financial market is a case in point. Within the socio-political arena, the rise and growth of “borderless associations” such as ‘doctors without borders’, or ‘environmental activists without borders’ (Green Peace), and the like are all but part of the same dynamics.   The other category of forces is inherently disintegrative. Whether in socio-political arena, or within the religious, cultural or economic sphere, such forces are inherently disruptive and conducive to the spread of mistrust within human communities. More often than not, such forces are driven by historic and failed ideologies of narrow self-protection and deep-rooted fear of “otherness”- I call this “otherphobia”.   At present, the integrative and disintegrative forces are at play in every land simultaneously. Interestingly, modern communication technologies and social media platforms have facilitated the spread of both these forces and processes. Access to the worldwide web in real time across the globe, the international availability of technology nearly in all sectors, and the rising awareness of what is possible, viable and desirable, have helped create a variety of new communities- mostly virtual. Such virtual and deeply connected communities are a real threat to the establishments across the world. Globally, financial, economic, cultural, religious, social and political establishments are vulnerable to attacks by these virtual communities.   Fairness and transparency, accountability and value-consistency appear to be the watchwords of the majority of these emerging virtual movements worldwide.  Increasingly, to them the national boundaries and the conventional sovereignty considerations are of little importance.   In this milieu, Africa is facing a multi-layered challenge. The continent’s economic growth has taken roots for the first time, and all indications are that industrial diversification could lead to sustainable growth. Yet on many other fronts the continent is struggling to establish institutions that are the effective conduits for channeling growth into social development and human welfare. Far too often, the post-colonial political establishments clash with the emerging social quest for accountability and transparency. A few exceptions aside, political institutions on the continent are largely extractive by nature. This means political leaders regard the machinery of the state as a means of self-enrichment and control. This, of course, they do in the name of sovereignty and political leadership. Legal and judicial institutions are equally and far too commonly bureaucratic, slow, and at time politically compromised. Economic and financial establishments are likewise typically dismissive of social and environmental care. Often...

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