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Episode 200 – Africa’s Place in the Multi Polar Order with Fadhel Kaboub

Episode 200 - Africa's Place in the Multi Polar Order with Fadhel Kaboub

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In this, our 200th weekly episode and Fadhel Kaboub’s tenth, we look at the problems facing Africa and the global South and the multi-level track that will make them whole.

**Thank you to our listeners! Can you believe this is our 200th episode? Crazy, right? Well, it wouldn’t have been possible without the efforts of a dedicated team. Our sound editor and engineer, Andy Kennedy, has spent thousands of hours (literally) producing these weekly gems. Then there’s the diligent band of copy editors—Brad Sandler, Jonathan Kadmon, Jay Spencer, and yours truly, Virginia Cotts, (plus, in earlier days, Rose Ann Rabiola Miele and Rob Baxter)—who pore over every AI-generated transcript, correcting mistakes and fixing punctuation for clarity. Julie Alberding, the RP website’s reigning eminence, created the layout. Each week she meticulously formats and posts the transcript, show notes, and extras. And let’s not forget our inimitable host, Steve Grumbine, who invites us along on his personal quest for knowledge. It has resulted in some unforgettable interviews, invaluable content, and a few “aha!” moments.**  

It’s fitting that our 200th episode is also Fadhel Kaboub’s tenth. Fadhel is the non-economist’s economist. You don’t need a new language to learn from him. In this episode he revisits some familiar themes, expands upon them and draws conclusions that… well, they just make so much sense. 

He looks at global changes, post-2008, post-Covid, and post-Russia/Ukraine. To avoid future disruptions to the supply chain, the three major power blocs—the US and North America, the EU and western Europe, and China, with Russia and central Asia in the hub—are looking to repatriate strategic industries. They are consolidating their sovereignty in terms of food, energy, high-tech manufacturing, strategic industries, and geopolitical, geostrategic sovereignty within each region. That leaves the global South as the place all three blocs perceive as the source of cheap raw materials, the dumping-ground for surplus output, and the site for low-cost assembly line manufacturing. 

“So that’s the world that is emerging. The question for me and for the global South in general, and for Africa as a continent in particular, how do we position ourselves on this new map? And I think I said it before to you on the show, Steve. If you don’t have a long-term strategic vision for yourself, you’re going to be part of somebody else’s strategic vision.” 

Fadhel proceeds to describe the structural deficiencies that neocolonial nations must overcome and then lays out his vision for the solution. 

“And that’s been one of the most important things that I’m trying to convey to global South activists, academics, public intellectuals, and people who have influence in government policy on the African continent, is formulating that coherent pan-African vision for economic sovereignty, food sovereignty, energy sovereignty, technological sovereignty, and then leveraging that coherent vision—on African terms—to partner with anybody, including China.” 

He talks about the IMF and its debt traps. He talks about the built-in roadblocks on the path to energy independence. He talks of the need for truth and reconciliation commissions and looks at what post-colonial reparations must include. If you made a diagram of this discussion, there would be arrows connecting each piece to all the others. Sounds dialectical, doesn’t it?  

Dr. Fadhel Kaboub is an Associate Professor of Economics at Denison University and President of the Global Institute for Sustainable Prosperity.    

@FadhelKaboub on Twitter

Macro N Cheese – Episode 200
Africa’s Place in the Multi Polar Order
November 26, 2022

 

[00:00:05.110] – Fadhel Kaboub [intro/music]

If you don’t have a long-term strategic vision for yourself, you’re gonna be part of somebody else’s strategic vision. And we know, for sure, what the long-term strategic vision of the US is, of western Europe is, and certainly what China’s long-term strategic vision is.

[00:00:25.610] – Fadhel Kaboub [intro/music]

I’m not 100% in favor of decolonizing the African continent in terms of delinking its neocolonial relationship with Europe, for example, and replacing it with a new extractive neocolonial relationship with China.

[00:01:35.140] – Geoff Ginter [intro/music]

Now, let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.

[00:01:43.080] – Steve Grumbine

All right, everybody, this is Steve with Macro N Cheese. We bring him back. Fadhel Kaboub. Fadhel has been on the show many times. Very good friend of the program, brilliant mind. I want to keep digging in on the theme that we’ve been focusing on with more of an international flavor. The results of this pseudo-cold war, possibly hot war with China and Russia and the Balkanization of the world turning it multipolar has really created a whole new game at play.

And Fadhel focuses his time in Tunisia, in Africa with Ndongo Samba Sylla and others. And it just felt like it was important. The idea of focusing some of our energies on US stuff feels a little hollow right now, given the hollowed out halls of democracy that we keep hanging on to, as if there’s someone there that’s going to vote us a job guarantee or take care of ending student debt or take care of a Green New Deal.

And it’s nice to see China laying out the welcome mat for others in cooperative space to expand and to create an alternative to this neoliberal hellscape that the United States is determined to force on the world. And so with that Fadhel, welcome.

[00:03:09.310] – Fadhel Kaboub

Thank you. Thanks for having me back on the show. It’s a pleasure to be here.

[00:03:13.020] – Grumbine

Absolutely. I guess I set the stage here, but it is particularly alarming. We’ve got Joe Biden saying that Pakistan is the most dangerous nation on the planet. After talking with Aqdas Afzal, he’s begging for support. They’ve been ravaged by floods, and instead of us lending a hand, we’re calling them the most dangerous nation on Earth. China is now the biggest foe of ours, and we’re into Cold War making, while China is building roadways connections, ports, commerce, cooperative arrangements, as opposed to predatory ones. What do you make of this shift?

[00:03:58.460] – Kaboub

Yeah, the world map geopolitically, economically, is being redrawn as we speak. And it’s been happening and accelerating over the last few years for a number of reasons. So think post 2008, think post COVID and think especially post Russia-Ukraine conflict and all the economic consequences that it’s done. You notice major disruptions to the old vision of globalization, this lean and mean type of supply chains, just in time supply chains and all of that.

And shifting towards more repatriating strategic industries back home. The Europeans have even spelled it out for you. They’re referring to it as technological sovereignty, high tech sovereignty, not just food sovereignty and energy sovereignty. The US is doing the same with all the intel investments here in Ohio, actually, where I live, bringing strategic industries back home with the Inflation Reduction Act and its focus on renewable energy production and especially electric vehicles manufacturing with specific incentives to build more of the content of those vehicles here in the United States to take advantage of those.

So you have the emergence of three major hubs globally because of all of these shifts. And those hubs will be Western Europe with the EU dominating that bloc, North America with the US and Canada to some extent dominating this part of the world, and with an Asian bloc dominated by China, with satellite partners all the way to Russia and Central Asia in that hub.

And that leaves the rest of the world, meaning primarily the African continent, as the place or the region that all three of these blocs perceive as the place for cheap raw materials, the place for dumping the surplus output produced by the three major blocs, and as the place for low cost assembly line type of manufacturing.

And the three blocs that we’re referring to, north America, Western Europe and Asia, they see themselves as increasingly focusing on consolidating their sovereignty in terms of food, energy, high-tech manufacturing, strategic industries, and geopolitical, geostrategic sovereignty within the region. With the US dominating Latin America, China dominating the entire region, with the exception maybe of Japan and Australia, although there’s a lot of back and forth pushing in that territory that will be unfolding over the next couple of decades.

And with Western Europe dominating to some extent its traditional colonial territories in North Africa and the rest of Africa. So that’s the world that is emerging. So the question for me and for the global South in general, and for Africa as a continent in particular, how do we position ourselves on this new map. And I think I said it before to you on the show, Steve.

If you don’t have a long term strategic vision for yourself, you’re going to be part of somebody else’s strategic vision. And we know for sure what the long term strategic vision of the US is, of Western Europe is, and certainly what China’s long term strategic vision is. And those three major blocs, when they think of long term strategic vision for themselves, they have a plan for each small country to contribute to that long term strategic vision.

And they’re going to use their economic diplomacy and their soft power – in some cases hard power – to nudge every small player into the piece of the puzzle where they want them to fit. So knowing what those three blocs are and what they see for themselves in the next 50 to 100 years, that’s the starting position for knowing how to wiggle yourself into a more favorable position.

And it’s going to be really hard to do it as an individual country, as a small country in the global South. You can only do it as a bloc, and you can only do it with long-term strategic visions for yourself so you can get the most out of these partnerships. And as the Prime Minister of Barbados, Mia Mottley, has said repeatedly, she refers to the strategy that all small developing countries should have, which is “friends of all, satellites of none”.

In other words, you want to have your own vision for what is important to you as a country, as a region, as a bloc. And then you partner with anybody in the global North, whether it’s China, whether it’s England, Germany, the US. Friends of all, satellites of none. You partner on equal terms. You partner as in partnership, not as in hierarchical relationship.

So here to go back to your question, Steve, in terms of the role of China in the global South, on the African continent, in particular, with its Belt and Road initiative, I’m not 100% in favor of decolonizing the African continent in terms of de-linking its neocolonial relationship with Europe, for example, and replacing it with a new extractive neocolonial relationship with China.

[00:09:59.860] – Grumbine

Sure.

[00:10:00.450] – Kaboub

And that’s why it’s important for the African continent to recognize, number one, that it’s still colonized by a global North extractive economic relation. And number two, to escape that colonial relationship, you have to develop your own independent vision and then partner with China or partner with Germany or partner with the US. Or with Japan.

It doesn’t matter who the partner is going to be, but it matters the terms of that relationship. And to some extent, we’re not seeing that coherent vision emerge yet. And that’s been one of the most important things that I’m trying to convey to global South activists, academics, public intellectuals, and people who have influence in government policy on the African continent, is formulating that coherent pan-African vision for economic sovereignty, food sovereignty, energy sovereignty, technological sovereignty, and then leveraging that coherent vision – on African terms – to partner with anybody, including China.

So if China is interested in African natural resources for its Belt and Road initiative, for its new industrial policy – because China’s industrial policy right now is very different in terms of its stages of industrialization, very different from China in the 1990s or the early 2000s. China is really kicking into higher gear right now in terms of industrialization.

And as a result, the internal composition of its economy is changing. And that doesn’t just shift the composition internally, it also influences how China expands its role in the global economy moving forward. So that’s kind of where I start with thinking about this. And this whole shift of global strategic positioning of the US and Europe and China – you’ve heard it from President Biden repeatedly that he’s not mincing his words.

This is a pretty competitive adversarial borderline, as you indicated, new Cold War-ish type of moment. And it’s pretty dangerous when you start escalating into that kind of language. And we’re sort of lucky, in a sense, that the other side of this adversarial relationship, China, tends to be very patient and very calm when it comes to not falling into this trap of escalation.

Because China historically and today in particular, doesn’t really worry about immediate short term outcomes. They’re really thinking long term, whether it’s economic, whether it’s territorial like in the issue of Taiwan. China is in no rush. They’re thinking, not today, not in a decade, not in two decades. Three decades, four decades? Sure. So they’re not going to worry about Biden, who’s just a president passing by the White House.

[00:13:11.996] – Grumbine

[laughs] Uh-huh.

[00:13:12.860] – Kaboub

They’re thinking much longer term.

[00:13:15.940] – Grumbine

It’s funny. I used to be a senior sales engineer at Verizon years ago, and we were always on these long duration sales cycles. The sales cycles take between six months to a year to achieve. And then the powers that be within the corporate structure shifted it from annual revenue to monthly revenue, and it fundamentally changed everything that we did.

We no longer were thinking strategically how we could service the clients that would come to us. We were now thinking, how do we get enough circuits installed this month to meet our quota? And that seems to be the US approach to just about everything. And it’s got to be baffling to people who are not accustomed to that kind of longterm patient strategy when they’re used to just being reactionaries.

Reactionaries are the ones that create wars. That lead to really negative outcomes. And we’re a declining superpower, a wounded beast, and that’s a pretty terrifying thing. And you wonder to what extent the US will go to keep Africa in play for itself. At what cost? The structural adjustments that the IMF has imposed.

The US has no problem imposing the most austere conditions on external actors. They have no problem being a cavalier colonialist. How does Africa prevent itself from being gobbled up in another proxy war like Ukraine? How does Africa avoid that outcome?

[00:14:54.710] – Kaboub

For me, it starts with knowing how we got here, knowing what happened during the colonial times and knowing what happened in the postcolonial times – which you would think, technically, once the colonial authority leaves you’re independent, you’re sovereign, things will get better. But clearly things didn’t because we didn’t truly end economic colonialism.

We just ended the physical presence of foreign troops, not the control of the economy. And as a result, if you don’t have economic sovereignty, monetary sovereignty, you don’t really have political sovereignty. And when you’re in an external debt trap, then your lenders impose economic policies and strategies that tend to benefit them rather than benefit the country.

So you’ve heard me say this before, I’ll say it again very quickly. The key traps that the African continent struggles with is the external debt trap, which comes from three structural deficiencies. One is the lack of food sovereignty. Africa imports 85% of its food today, according to UNCTAD. Number two, lack of energy sovereignty. Just one example Nigeria, the biggest producer of fossil fuels on the continent and the presumed savior of Europe today, with exports of natural gas piped all the way from Nigeria to Germany and beyond.

Nigeria imports its own gasoline. It doesn’t have any refining capacity for a single drop of gasoline. All of its gasoline is imported. And the third component, the third structural deficiency. So, food sovereignty, energy sovereignty. And the third one is the value-added content deficiency in terms of manufacturing. So we tend to import high-value-added content manufacturing, and we tend to export low-value-added content or simply raw materials.

So think of Nigeria exporting crude oil and re-importing the refined version of it in forms of gasoline and kerosene and other petrochemicals. So these are the structural traps and all the proposed solutions that countries have been told by the economics profession, by the IMF, by the mainstream political establishment, the economic, quote/unquote solutions are false solutions.

They tend to reinforce those traps. So the so called IMF structural adjustment programs, there’s nothing structural about them other than deepening the structural deficiencies. So I’ll give you an example. They say, “export your oriented growth will allow you to get more dollars and euros to pay your external debt.” But if you’re only exporting crude oil and importing the more expensive version of it, you’re never getting out of that trap.

If you’re exporting low value-added manufacturing with low cost labor and subsidized wages and subsidized industries for export oriented manufacturing, you’re importing the capital, you’re importing the intermediate components, and you’re importing the fuel to produce electricity for that manufacturing, and you’re only exporting low value added output, you’re never getting out of that trap.

Foreign direct investment, they tell you that FDI is going to get you out of poverty. Well, FDI is worse than export-oriented growth because at least export-oriented profits that are generated are retained within the country, reinvested, possibly. But FDI profits are repatriated to the global North, so it’s even more extractive than your domestic export-oriented manufacturing.

Tourism, again, is extractive, because if you don’t have food, if you don’t have energy, the more tourism you have, the more food and energy you have to import, the more high tech equipment you have to import for hotels and entertainment and transportation for tourism and all of that. So it’s all of these things that are supposed to bring foreign currency reserves to get you out of the debt trap, they tend to actually push you further and deeper into debt.

So these are the first things that the African continent, country by country, but also at the African Union level, on the Pan African level, we need to recognize that the current solutions are actually false solutions deep in those traps. Then the next step, once we agree that this is not working for us, this is actually working for the global North in general.

And if we continue with the same economic model, just shift in terms of de-linking from Europe and linking into the Chinese economic development engine is still going to be extractive. So that’s the danger of blindly decoupling with one part of the world and saying, well, China is better and more friendly. Are we going to link to their engine? It’s still going to be extractive.

But there’s an opportunity in that delinking and saying, okay, now we can start with a fresh partner that comes from a global South perspective, and we have a better chance of negotiating partnerships that are more balanced, let’s say. I’ll give you an example in terms of what a Pan African partnership with China would look like, at least the way I would like to see it.

And if that partnership, by the way, looks too threatening, say, for Germany or for the US, then offer us anything better. Offer a non-neocolonial relationship, and we’ll take it. And let’s compete. Isn’t this all about competition? We would love to have Germany and the US and England and China and Japan and Russia compete truly for partnership with African countries on African terms, not on neocolonial terms.

That’s what we would like to see. But I’ll give you a practical example that you could technically kill three birds with one stone. The lack of food sovereignty, lack of energy sovereignty, and the deficiencies in the type of industrialization that we have. If you look at the energy crisis on the African continent, I’m not talking about the current energy crisis in Europe and the rest of the world.

The African continent has been living an energy crisis for decades, that culminates today in the fact that 600 million Africans don’t have any access to electricity. Which means you don’t have electricity, you don’t have transportation, you don’t have education, you don’t have health, you don’t have pumping water, you don’t have sanitation, all kinds of other problems. It’s such a critical pillar of economic life.

So let’s tackle that problem, and from it we’ll tackle a whole bunch of other things. How do you do that? The entire African continent as a bloc has all the natural resources and human capabilities needed for a renewable energy revolution, for producing the solar panels and the wind turbines and the geothermal energy. All the raw materials are literally there. The human capabilities are there.

What’s lacking is access to the actual manufacturing technology. So this is where you would want to partner with, say, companies in China, companies in Germany, and Japan and other countries to manufacture renewable energy capabilities on African soil. So you build a Pan-African industrial policy that captures value-added, uses the raw materials and then deploys the output to produce renewable energy for the African continent.

So would that trigger a different kind of industrial policy with technological partnership from the global North, from China, from whoever, now you have the first pillar of a transformative economic policy for the African continent. So now you’re industrializing, you’re building economies of scale. So you’re lowering cost per unit and you’re deploying the production of clean electricity on the African continent.

Now that your industrialization has kicked in and manufacturing capabilities have kicked in, you move straight into the next strategic choice that you have, which is food sovereignty. As part of your industrialization policy, you start manufacturing – not for exports, not to assemble widgets for the global North – you start producing the agricultural equipment that you actually need for your food sovereignty strategy on the African continent.

You start manufacturing the water pumps, you start manufacturing the irrigation systems, you start manufacturing whatever is needed to build the second pillar in your Pan-African strategy. And with that coherent vision, all of a sudden you have a strategy for industrialization that is sovereign and that uses and leverages your resources and capabilities in complementary ways.

Number two, that same strategy allows you to tackle the energy deficiency that you have. And number three, you leapfrog into using your industrial base to tackle the lack of food sovereignty. And now you’re off to the races. Because with every dollar you spend, you invest in these areas, is the equivalent of many, many multiples of it in terms of external debt and dependency, and as a result, geopolitical external influence on how you manage your resources and how you deploy your economic capabilities.

So, easier said than done. But we have to start with the vision, with the strategy and then pull the momentum of civil society, of pro-democracy forces, of the climate activists, to convince African leaders first before we convince the rest of the world that we need to negotiate these Pan-African strategies. Let’s call them global South strategies, because it doesn’t stop on the African continent.

These partnerships would include Pacific Island nations, will include Latin American countries, any partner, whether it’s a global South and global North country, as long as it’s on these terms, to build this level of resilience in the global South and to allow us at the same time to tackle the climate crisis. Because we’re not going to tackle the climate crisis by exporting more fossil fuels to save Europe from its current energy crisis.

[00:25:37.610] – Grumbine

Yeah. So while we’re trying to bring Africa into a more modern production environment where they are able to produce value-added services without being predated upon by the global North and building a Pan-African union, how do we keep an eye on degrowth and climate reparations and making right wrongs while not advancing the very things in a burgeoning African market that creates the conditions that got us in this place we’re in now.

Jason Hickel made the strong case that without a strong push for an ecosocialist ideological approach to building these sorts of systems and frameworks, democratizing the colonial mind out of the picture and bringing in this new vision, how do you see that playing out? It feels like you’ve got an enemy that you can target. It’s the United States.

And our allies and our extractive practices. How do you prepare that framework? It seems so hostile to any kind of a democratic reform. I wonder how you develop sovereignty without getting picked apart in some sort of war. How does a relatively defenseless Africa fend off a demon like the United States?

[00:27:16.240] – Kaboub

Well, the simple answer is just the numbers don’t add up. And what I mean by that is when we think of decarbonizing the global economy and eventually shifting everything to electric vehicles and solar and wind and geothermal and green hydrogen electricity and all of that, which sounds great, we simply don’t have enough of the raw materials to actually decarbonize the entire global economy at the level of energy consumption that the global North is consuming right now.

And to bring electricity and so many other energy-intensive activities to the global South, to the 600 million people in Africa who don’t have electricity, we simply don’t have enough of those resources. And those resources are primarily on the African continent. So there’s going to be a competition over those resources.

And what I described a few minutes ago is a Pan-African renewable energy industrial policy that would use those resources to produce clean energy and propel economic development on the African continent. That means if we succeed on the African continent of producing that Pan-African strategy and start producing, there wouldn’t be enough raw materials to decarbonize Europe and the United States and Japan.

Unless the global North starts to go through a process of degrowth, which is what Jason Hickel and our colleagues in the degrowth literature have been saying for years. In other words, degrowth means you actually start reducing your energy consumption. You start tackling consumerism. In other words, you start rethinking this obsession with consumption, obsession with economic growth.

And that becomes a fundamental attack on the core of capitalism. So we must rethink the entire economic system and the political system that goes with it that says, oh, we need the resources. We’re going to apply pressure on the African continent or on country XYZ. We’re going to start a conflict to make sure that we continue to extract those resources for our economic development, for our job creation and so on.

So that has to be tackled. And that’s why we can’t just assume that the decarbonization efforts of the global North, especially of the European Union, are benign. I’ll give you an example. Germany in particular over the last decade, has mastered and perfected the green hydrogen technology, they can finally get it to the point where it’s actually economically, quote/unquote, practical.

Except for the fact that in order to produce green hydrogen, as opposed to blue hydrogen, which is fueled by natural gas, or gray hydrogen, which is fueled by fossil fuels, green hydrogen is fueled by solar and wind energy, primarily solar. So how do you produce enough solar energy to produce the green hydrogen?

In Germany, you don’t get a lot of sunlight, so you need to move somewhere where you actually have much more access to sunlight. And that will be the African continent. North Africa. South Africa. Namibia. So that’s where you see a lot of the German green hydrogen investment plans happening there.

There’s a couple of problems with this technology, which is the massive amount of land space that it uses to produce enough solar energy to eventually produce the green hydrogen. But even a bigger problem, which is the massive amount of water needed to actually produce green hydrogen. And we’re talking about countries like Tunisia, Morocco, Namibia, that don’t really have much water to begin with for agriculture or for drinking water, let alone for producing this green hydrogen – which is for export to Germany, by the way, not for consumption in Tunisia or Morocco or in South Africa.

So it’s a new form of colonial extractivism under the green label of “decarbonizing the economy.” And then a third major ecological problem related to this, which is the proposed solution that Germany is putting on the table: “Well, you don’t have enough water, so no problem. We’re going to build even more solar capacity to desalinize seawater, which is very energy intensive, and now we can have enough water to produce the green hydrogen and cool off the systems and all that.”

Except that when you filter out seawater, you end up with a lot of brine. The salt, basically – what do you do with it? Typically, it’s dumped back in the ocean, and that makes the next batch of seawater that you want to filter out even more expensive and energy intensive to filter out, because the salt concentration is higher.

And with most countries around the Mediterranean, around the world, investing even more and more in desalinization plants, the concentration of salt in the Mediterranean is rising. And that has tremendous negative impact ecologically, not just the economic impact of making it more difficult and more expensive to filter out the next batch.

So all of these are considered non-issues, as long as you can extract the green hydrogen to decarbonize the German economy or the European economy. I’ll give you a second example, just to see how bad our decarbonization plans are in the global North, which is, let’s say we switch to electric vehicles in the next ten years, and Europe, the United States, everywhere else.

We’re excited to build these industries, bring this technological sovereignty back to Europe, back to the US. All the tax incentives with the Biden Inflation Reduction Act to incentivize electric vehicle production and consumption in the US. All the combustion engine vehicles that we’re going to take off the roads – do we have a plan for what we’re going to do with them?

I tell you what the plan is: the plan is to dump and export those to the global South. So from a global perspective, whether this truck is burning fossil fuels here in the US. Or in Canada or in Germany or in Lagos or in Delhi, it doesn’t really matter from a global perspective where the emissions are coming from. Which means we can’t just decarbonize the global North and assume that we’re making progress, because we’re not.

So we have to have a serious conversation about decarbonising transportation globally, meaning we need to build not just more Teslas for everybody on the planet, because that’s not sustainable. We don’t have the natural resources to produce Teslas and electric vehicles for everyone on the planet. But what we need to do is investment in clean public transportation, both in the global North and in the global South, because most people want to get from point A to point B in a convenient way, in an affordable way, in a safe way, and an efficient way.

And the Tesla view of the world is that everybody should get a Tesla and drive on their own. And that is not a vision for humanity. We need public transportation investments here in large cities, but especially public transportation investments in the global South. And that’s where technological transfers, that’s where reparations – which for me is not just financial compensation, it’s not just debt cancellation, but it’s also transfer of in-kind transfers, technological transfers to build the capabilities around the world.

And that’s where I go back to Pan African industrial policy on equal terms, on African terms. That has to include that transportation strategy. Otherwise the fossil fuel burning assets that we have here in the US, we’re dumping them in the global South and celebrating that we’ve reduced emissions in the US or in Germany, when in fact we haven’t reduced global emissions.

[00:36:15.560] – Intermission

You are listening to Macro N Cheese, a podcast brought to you by Real Progressives, a nonprofit organization dedicated to teaching the masses about MMT, or Modern Monetary Theory. Please help our efforts and become a monthly donor at PayPal or Patreon, like and follow our pages on Facebook and YouTube, and follow us on Periscope, Twitter, Twitch, Rokfin, and Instagram.

[00:37:06.710] – Grumbine

It sounds to me like one of the things that could be done, which won’t be, by the way, the US government could, in fact, rather than subsidize fossil fuels, could subsidize the depreciation and sacking of the fossil fuel burning vehicles. Intellectual property is a big deal, and in order for Africa to be even remotely sovereign, they need to be able to bypass some of the Bill Gates style patent games that rob them of access to vaccines.

And do so many things because of intellectual property rights and the way that we police those rights and the lack of a sharing economy in general. Help me understand how Africa could in fact, overcome those IP and patent rules and laws that prevent them from being able to take that leap forward. You would think it would be in everyone’s best interest. Clearly, somebody’s got a different motive. How do you deal with that?

[00:38:16.760] – Kaboub

So the biggest obstacle, as you correctly point out, is these TRIPS agreements. TRIPS is the trade related intellectual property rights agreements that came out of the WTO a couple of decades ago that are the major obstacle to transfer of technology. But there are exceptions. And this is where we need a small army of progressive lawyers and the international system and here in the US and beyond within the WTO, if we’re going to stay within the WTO system to challenge the viciousness of this.

In international law, there’s a few principles that can be used to legally get you out of a contract, to get you out of an agreement, international agreement, or even in domestic law. And these are, for example, the principle of impossibility or the principle of necessity. And these are legal principles that are used in international law. In other words, when you have a human rights issue, a life and death issue, that can only be prevented by violating private property or violating a legal contract, international law tells you you can use the principle of necessity to do that.

And here the life and death issue that we’re dealing with is people starving to death because of the lack of food sovereignty, burning the planet with fossil fuels. It’s a question of life and death for current and future generations. So it’s a question of life and death. So we have to develop a coherent legal argument to get countries out of these TRIPS agreements and allow for the transfer of technology in the global South to get us out of these traps.

The classic example that lawyers use here in the US, not even internationally, is when you’re walking by and you see a burning house. You see a fire that just started inside, and you see a child trapped inside. You can see them through the window. It’s a private property. You’re not allowed to break into somebody’s house unless you’re going to save somebody’s life.

So you’re actually allowed to break the window and go save that child. If you see a baby in a car seat and the car is locked and the parents forgot them in the car, you’re legally allowed. The principle of necessity says, break that window and save that child. And we accept that in court. The principle of impossibility, which is different but fits this context as well. Principle of impossibility means if I signed a contract with you, Steve, that says, you have a band, you’re on tour, and I have this venue, it’s fantastic venue that’s going to host your concert with 5000 fans cheering for you.

We signed the contract three months ago. Everything is planned, the tickets are sold, everything is ready, and you’re on your bus driving with your band. And the concert is tomorrow evening. And for whatever reason, there’s been a fire this morning and the building is gone. Literally, the entire structure is gone. So you show up and you say, Where’s my venue? We signed a contract, I paid a deposit.

I have 5000 fans who bought tickets. You sue me. You say, “You’ve just ruined my concert”. Well, I go to court to say, well, it’s impossible for me to deliver a venue today. It’s been burnt. The principle of impossibility means you can get out of a legal contract. It’s not your responsibility. You deal with it in other ways.

So that principle of impossibility means when there is a global phenomena that is unstoppable, unless you start violating certain, quote/unquote rules of the system that have been established, we’re not going to be able to save humanity or deliver XYZ. So there’s plenty of room within the existing international law system that allows us to wiggle ourselves out of these extractive neocolonial legal systems that have been established over the decades to benefit the global North.

So we need, again, a small army of not just progressive economists and scientists and lawyers and policymakers. We need to mobilize and organize in a coherent way so that we’re all pushing in the same direction for climate reparations, for colonial and neocolonial reparations for debt cancellation for the global South. And that’s the momentum that needs to be built.

[00:43:13.460] – Grumbine

How do you bring a reparations package to the global South? Is this a treaty that would need to be drawn up? Is this a United Nations resolution? How does one create the apparatus that provides for a legally binding reparations package?

[00:43:34.240] – Kaboub

I think when you look at the reparations framework, at least in the literature, it always starts with telling the truth. As in truth and reconciliation type of commissions that we’ve seen in South Africa, we’ve seen in other parts of the world after major genocides and conflicts and things like that. Except this Truth and Reconciliation global network of truth and reconciliation commissions will have to deal with so many issues not just the climate damage to communities, to indigenous people and so on, but the colonial damage that was done by colonial authorities the British, the French.

You’ve seen me probably post this the other day, this very little known fact that France, for example, when they were occupying Algeria, and even after they left Algeria, they continued to do nuclear tests in the desert. They didn’t really care about the radiation and the leakage. And we have data that shows that there’s at least 26 African countries, plus a little bit of Italy and Spain that have been affected by those repeated nuclear tests that were not controlled in the desert.

And France, to this day refuses to even disclose the exact location of where they buried the nuclear waste that is still in Algeria today, still killing children all over the region. So we need a truth and Reconciliation commission about that. And once you have the truth, then the next step is to say, well, how do we repair the damage and who’s responsible for it?

Well, it’s clearly France in this case, but the US has its own issues, England has its own issues, Belgium has its own colonial issues. So all of that damage has to be told in the public space so that we know what we have to deal with and then we start repairing, because we’re all in this together. It doesn’t mean that the reparations will have to drive France or England into extreme poverty, which is the assumption that people have, that when you repair the damage, you impoverish yourself.

This is the sound finance framework, but I come to it from an MMT perspective that actually says reparations don’t have to be tax this to pay for that. Reparations doesn’t mean you give less to the people of France or the people of England so that you can afford to repair the damage in Algeria and other places. It can actually be a win-win from an economic perspective.

And here’s how I think about it. You know how I think about the spectrum of monetary sovereignty with some countries with a high degree of monetary sovereignty, in countries with a low degree of monetary sovereignty. What determines your position on that spectrum of monetary sovereignty is the level of external debt. The more external debt you have, the weaker your monetary sovereignty.

And how desperate your central bank is to fix the exchange rate to gold or silver or the dollar or to the euro, whatever. So most of my work is to think about how can we get a country from the weaker end of the spectrum of monetary sovereignty to gradually move to a higher degree of monetary sovereignty? And the reason for that is because with a higher degree of monetary sovereignty, you have a larger fiscal policy space to invest in your national priorities.

So the good news is that countries that happen to be responsible for climate damage happen to be responsible for colonial and neocolonial extraction. They already have a high degree of monetary sovereignty. Well, except in Europe. They need to figure out the euro constraints. But that’s fixable. We can have another conversation about that.

But essentially you already have the research and development capabilities, the high degree of fiscal policy space, and now we need to think about how far you can go with deficit spending. What’s the fiscal policy space’s ultimate constraint? It’s the risk of inflation. Well, now we’re talking. So the risk of inflation from an MMT perspective comes from two things. One is the lack of productive capacity.

And two is the abusive market power of corporations that you have domestically or internationally. So let’s tackle the risk of inflation, say, for a country like England. So the risk of inflation, meaning your fiscal policy space, how much England can spend, say, on reparations to India, reparations to African colonies. Meaning, do we have enough productive capacity in England to deliver in-kind transfers and to generate the economic activity and wealth for the reparations?

And if we don’t, the good news is that productive capacity is producible and you create more jobs and you partner with former colonies to help them build their own productive capacity, which gives them more economic sovereignty and more monetary sovereignty. The next thing, which is the abusive market power.

This is something that England can participate in doing, which is tackling the abusive market power of London, the financial district, the abusive market power of multinational corporations – and in collaboration with the US with the EU to tackle the abusive market power of big pharma, big tech, big oil, all of those. And if we as a globe have a coherent vision for how England, how France, how the US can expand their fiscal policy space with these policies, then we’re halfway through reparations.

Because now we talk about how do we expand the fiscal policy space for the global South when it’s very limited, very constrained by the risk of inflation? You realize, well, the reason why their fiscal space is so limited is because, number one, their productive capacity has been stolen and continues to be extracted by the global North.

Number two, the external debt constraint is another reason why their fiscal policy space is constrained. And the abusive market power of global multinational corporations with the TRIPS agreements, with all of those constraints, make it impossible for countries in the global South to expand their fiscal policy space with all of those external constraints.

So reparations means you literally transfer some of the productive capacity from the global North to the global South to help expand their fiscal policy space by investing in what? In food sovereignty, in renewable energy sovereignty, and a different kind of industrial policy to get out of those structural traps. And all of a sudden you have expansion of productive capacity in strategic areas, food, energy, high tech and all the basic necessities both in the global South and the global North.

And you have a true democratization of markets by going after the abusive market power of multinational corporations and rearranging the global financial architecture, the international trade architecture, so that it’s not so abusive and extractive like under the current system. So to me, that framework of reparations is a win-win for everybody, including for global North consumers and citizens and so on.

But if you think from a sound finance perspective, then in order to transfer resources and transfer monetary compensation to former colonies, you’re going to have to tax the hell out of British and French and Belgian consumers into poverty in order to transfer wealth. That’s the old gold standard, colonial way of thinking. That’s how colonialism was so vicious in destroying resources and economic systems in the global South in order to enrich the global North. We can do better than that.

[00:51:46.690] – Grumbine

I couldn’t agree more. It comes down to the current economic thought that is seen as the orthodoxy. And this was the original concept that I wanted to attack this podcast with. But then I realized that the real story was Africa, the global South, and this new multipolar world and trying to get a better understanding of it. I remember few years back during the pandemic, many of us within the MMT space…

I don’t know that I would call it a victory lap, but I would say that we certainly said “proven right.” Folks like Jason Furman of Harvard and others from Princeton and other elite schools that maintain the stranglehold of the orthodox thinking within the academia. They’ve institutionalized fake knowledge to serve as the common sense approach to solving all problems.

And you can see that clearly with their response to anticompetitive monopoly abusive market powers. Instead penalizing the poor with interest rate hikes, austerity in terms of reducing deficits, and also, as Clara Mattei talks about, industrial austerity, which is the layoff that they’re seeking through these interest rate hikes with the Fed.

These are things that are beyond the debate. They have institutionalized these concepts so much that they’ve depoliticized them and put them in a position where “how could you possibly disagree with us?” How do we deal with this academy that has institutionalized so many lies yet they continue to be in power? How do we overcome that?

[00:53:33.190] – Kaboub

Yeah, very good question. On multiple fronts. You have to keep fighting these ideas in academic circles, but that can only go so far. I think, as I say sometimes, we have to take it to the streets, so to speak. In the public domain. And what I mean by that is by addressing this on the public policy front, with policymakers who you would hope would be a little bit more pragmatic, you would have to engage with mainstream media that has a little bit of leverage to challenge these ideas, at least partially.

And you have to do this in the public policy space with NGOs and think tanks and citizen groups who are mobilizing for particular issues, say health care or climate or jobs or inequality or social justice. Those are the allies that need to be better informed, better empowered with alternative ideas. Because we tend to get this reaction of: “Oh Princeton says,” or “a Harvard economist said,” or “former advisor to Presidents said,” and that’s taken like the gold standard.

We need to do a better job at challenging those and building these alliances with people who are on our side, who are fighting and pushing in the same direction, but have been convinced and coopted into thinking in terms of sound finance approaches… And accepting the blame. We have relatively progressive-leaning people who accept the fact that inflation can only be fought with higher interest rates.

Because somehow higher interest rates are going to stop the root causes of inflation. Like the conflict in the Ukraine, or the abusive market power of pharmaceuticals or Big Tech or Wall Street, or as if a higher interest rate in the US is going to undo the disruptions to the global supply chains that we’ve seen in the last couple of years. That’s nonsense.

What higher interest rates are going to do is possibly fuel inflation, but certainly throw millions of people under the bus. And this is not me saying it. This is the Fed, this is the ECB saying we’re willing to cause a recession and throw millions of people into unemployment to fight this inflation, instead of recognizing the actual sources of inflation and saying that we central bankers have very limited role in tackling those actual sources of inflation.

And it’s actually your Congress, your Senate, your parliament in different countries who have the regulatory jurisdiction to tackle the abusive market power of corporations, who have the fiscal power of the purse to actually build productive capacity to undo the logistical and supply chain disruptions in the global economy. All of that is on the fiscal side.

And speaking of victory laps, so to speak, let’s not let this moment pass without acknowledging that if we had this inflation period, say ten or 20 years ago, the only response and the only discourse that you will hear is let’s hand the keys to the central bank. They’ll raise the interest rates like they did in the seventies and let’s ask governments to please balance your budgets and stay in your lane and don’t increase public spending.

That would have been the response. But because of the MMT work and the MMT narrative – not just in the economics literature, but in the public domain and on the policy front pushing centrist and establishment thinkers in Washington, DC – we’ve achieved a mini-victory in the form of an act of Congress called the Inflation Reduction Act.

That would have been impossible under the mainstream theory. Mainstream theory says inflation reduction is the central bank’s jurisdiction, not Congress. And what’s in the Inflation Reduction Act? It’s a tiny, tiny mini version of a Green New Deal, when you think about it, which says we’re going to tax and regulate some of the abusive market power of pharmaceuticals, for example, by negotiating prices of 25 drugs.

This is something that the federal government will be doing. Again, not my approach to a Green New Deal, but it’s a tiny, tiny mini-version that says we do recognize there’s abusive market power right there. We’re going to go after it by taxing excessive wealth and by taxing abusive, ill-gotten wealth. Again, not to the level that would have seen in a Green New Deal, but it’s a tiny recognition that it’s there.

But most importantly, investing in productive capacity, strategic productive capacity in renewable energy, in electric vehicles, all of those things that are part of, again, a mini version of a Green New Deal. All of that work that we didn’t get to celebrate the achievement of a Green New Deal or even a build back better, which was a much smaller version of a Green New Deal.

We got a little bit of it through the current policies. Not a full victory, but a victory nonetheless in shifting the terms of the debate about what actually causes inflation and how you tackle it. So a lot more work needs to be done. And some of this work has been co opted, as in, oh, the reason we’re taxing those corporations is to balance the budget so that the Inflation Reduction Act is…

[00:59:25.630] – Grumbine

Paid for. Budget neutral.

[00:59:28.460] – Kaboub

Yeah, well, we can wrestle with that nonsense, but we did shift the terms of the debate in terms of what causes inflation and how we tackle it. But at the same time, we still have the mainstream dominating and the Fed forging ahead with massive interest rate increases at least to five and 6% apparently, and saying it publicly we’re willing to cause a recession if that’s what it takes. So a lot more work needs to be done here in the US. And Europe and beyond to undo the grip that mainstream economics has over public policy.

[01:00:04.800] – Grumbine

Fadhel Kaboub, thank you so much for this. This is an absolutely eye opening discussion.

[01:00:10.140] – Kaboub

Thank you.

[01:00:10.810] – Grumbine

I appreciate your thoughtful responses to my sometimes barbed questions. I really appreciate the fact that what you just told me – I hope everyone hears that. The idea that we’re so far in the hole. Milton Friedman said all inflation is caused by government spending. And here we are passing a bill right, wrong, or indifferent called the Inflation Reduction Act that’s targeting sources of inflation as opposed to interest rates from the central bank. I do see the victory in that. Thank you so much for stating that so eloquently, sir. And with that, Fadhel, where can we find more of your work, sir?

[01:00:55.540] – Kaboub

Well, thank you again for this wonderful conversation and for this opportunity. You can find me on social media, on Twitter, on LinkedIn and beyond. Just Google my name and I’m sure it will be linked in the show notes. But most importantly, let’s keep mobilizing, educating, empowering people to build this momentum right here in the US and beyond, because our lives depend on it. Thank you again.

[01:01:20.380] – Grumbine

Amen. Thank you so much. All right, this is Steve Grumbine with Fadhel Kaboub on Macro N Cheese. We are outta here.

[01:01:34.460] – End Credits

Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts, and promotional artwork by Andy Kennedy. Macro N Cheese is publicly funded by our Real Progressives Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.

Fadhel Kaboub is an Associate Professor of Economics at Denison University and President of the Global Institute for Sustainable Prosperity.  

Global Institute for Sustainable Prosperity (GISP)   

@FadhelKaboub 
@GISP_Tweets 

Articles, papers, and talks by Dr Kaboub 

Africa’s Path towards Resilience and Sovereignty: the Real Wakanda is within Reach (March 2021) 

Stockholm+50 Pre-Summit Address on Global Just Transition from Fossil Fuels (Speech, June 2022) 

(Excerpt) I’m going to give you a few messages to start the conversation.   

The first message: we cannot decarbonize a system that has not been decolonized yet. Similarly, we cannot democratize a system that has not been decolonized yet. I am talking about colonial and neocolonial economic structures that are still alive and well. They are still sucking resources, wealth, and causing so much economic pain. The fossil fuel system is part of it. Extractivism is part of it. That is the first message. 

Africa’s Pandemic Response Calls for Reclaiming Economic and Monetary Sovereignty: An Open Letter (September 2021) 

Why Government Spending Can’t Turn the U.S. Into Venezuela (article, August 2019) 

Modern Monetary Theory: A Tool for the Global South? (interview, November 2019) 

Roundtable: MMT and Policy Design (A Tale of Four Unwasted Crisis), (Video, July 2022) 

People, ideas, and actions mentioned in the episode 

Jason Hickel, is an economic anthropologist whose research focuses on ecological economics, global inequalityimperialism and political economy. He is known for his books The Divide: A Brief Guide to Global Inequality and its Solutions (2017) and Less Is More: How Degrowth Will Save the World (2020). 

Degrowth 

What Does Degrowth Mean? By Jason Hickel 

Eco-socialism (also known as green socialism or socialist ecology) is an ideology merging aspects of socialism with that of green politics, ecology and alter-globalization or anti-globalization. 

Why Ecosocialism: For a Red-Green Future (publication) 

European Colonialism Helped Create a Planet in Crisis (article, January 2022) 

Mia Mottley, Prime Minister of Barbados since 2018 and leader of the Barbados Labour Party since 2008 https://en.wikipedia.org/wiki/Mia_Mottley 

Friends of all, satellites of none 

“’We will be friends of all, satellites of none.’ These words, uttered as Barbados joined the United Nations, (1967) were finely tuned to the heat of the Cold War, as the United States was intensifying undeclared war against communist Vietnam. It was fulfilling a policy of containment of the communist hegemony through its fourth succeeding presidency: Truman, Eisenhower, Kennedy, now Johnson.” Editorial, Barbados Today (January 2020) 

UNCTAD The United Nations Conference on Trade and Development (UNCTAD) is an intergovernmental organization within the United Nations that promotes the interests of developing countries in world trade.  

TRIPS agreements, trade related intellectual property rights agreements that came out of the WTO (World Trade Organization) 

Global Law Reform and Rent-Seeking: The Case of Intellectual Property (paper) 

 Sound Finance, the claim that governments need to balance their budgets 

Quote from Fadhel Kaboub on the sound finance position opposing a federal jobs program: Economics and Dr King: collecting on the ‘bad check’ 

‘Sound finance’ prevents available climate solution with massive jobs potential (Bill Mitchell blog entry, July 2019) 

Truth and Reconciliation refers to restorative justice  

Reconciliation Needs Truth (article, January 2021) 

Green hydrogen, fueled by solar and wind energy; blue hydrogen, fueled by natural gas; gray hydrogen, fueled by fossil fuels 

The Colors of Hydrogen: Why Do We Care? (article, November 2021) 

Green hydrogen beats blue on emissions and financial cost, Australian study finds (article, November 2021)

Inflation Reduction Act (Legislation)

Macro N Cheese episodes featuring related topics 

Episode 175 – Neocolonialism and the Unholy Trinity with Fadhel Kaboub 

Episode 152 – Understanding Inflation with Fadhel Kaboub 

Episode 84 – African Sovereignty and a Global Green New Deal with Fadhel Kaboub 

Episode 40 – The Spectrum of Monetary Sovereignty in Developing Nations with Ndongo Samba Sylla and Fadhel Kaboub 

Episode 22 – Climate Refugees and the Economic Solution to Xenophobia With Fadhel Kaboub

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