Playing Hard Ball With Soft Power

Diana Johnstone

The FBI agents who broke the International Football Federation scandal in late May by getting a bunch of foreigners arrested in Switzerland are naturally convinced that their sole purpose is to combat corruption. American ideologues who advocate “R2P” – the “right and responsibility to protect” – have no doubt that U.S. armed intervention is a suitable way to protect human rights. Air Force officers who bomb people in Afghanistan, Pakistan or Yemen take it for granted that they are eliminating terrorism.

After all, bad things like corruption, violations of human rights, terrorism, exist in the world. Wasn’t the United States of America created by the Founding Fathers, if not by God, to rid the world of bad things? FBI agents, mainstream editorialists, Air Force pilots, all enshrouded like space-walkers in the isolating cocoon of American self-righteousness, are not equipped to doubt their own good intentions.

Trouble is, a growing majority of people in the world outside that cocoon definitely have their doubts.

Extraterritoriality

In its perpetual mission to impose virtue on the world, the United States has three major weapons: its overwhelming killer arsenal, ideology, and the U.S. dollar. More and more people outside the self-styled “international community” (the English-speaking world and the European Union) perceive only one main purpose underlying the use of those weapons: the preservation and enforcement of U.S. world hegemony.

Thus, while Americans congratulate themselves for moving to “clean up international sports”, much of the world simply sees yet another instance of the United States using its power advantage to bully the world and get its own way.

The dollar is the primary U.S. “soft power” asset. The vast majority of international financial exchanges are in dollars, and must be cleared by a compensation chamber in the United States, enabling the United States to require that all dollars transactions conform to United States law. This in effect gives the United States unique powers of extraterritoriality.

As an example, the United States recently imposed a whopping fine of over eight billion dollars on the French bank BNP-Paribas simply for having done business with countries under U.S. embargo: Cuba, Iran and Sudan. The French bank’s dealings were perfectly legal under French law. But Washington uses the dollar to require other countries to conform to U.S. sanctions and embargos.

Thus, aside from its almost infinite financial advantages, owning the world’s main international currency also gives Americans the occasional opportunity to play their favorite Hollywood role of virtuous sheriff who rides into town, breaks up the cheaters’ poker game, disarms the bad guys with a few well-aimed shots, and rides into the sunset with the leading lady and the oil contracts.

This time the Hollywood scenario took the form of FBI agents charging officials of the International Football Federation (FIFA) with illegal financial dealings in the designation of World Cup host nations.

Bread and Circuses

All around the world, it seems that little boys love to kick balls around. But it isn’t only fun. Thanks to the soccer business, skill at kicking balls arouses a dream of fame, fortune, luxury, among youth whose hopes are otherwise extremely slim. Football is a hope of escape for millions, while for millions of others it is a release from stress, a way to stimulate gratuitous excitement and strong emotions unrelated to real needs and dangers. For the players, it can means rags to riches. For the owners, it means riches to riches.

Football is the ultimate bread and circuses of the globalized world.

Only the United States remains relatively aloof. And the United States wants to run the show.

FIFA is a hugely rich segment of the worldwide commercial entertainment business. Lots and lots of dollars slosh around in it. Its advertising and television rights are worth billions. International soccer has been subsumed into the globalized economy, which is rife with dubious deals, tax evasions and corruption. Nobody doubts for a second that large sums of money are exchanged “under the table” in FIFA. The main target for potential bribery is no doubt the choice of the World Cup host country. Pressures of all kinds are used to influence an essentially arbitrary choice. The prize can cost the host country a lot, but brings in business, advertising, prestige – and even the fun of watching the games.

This is a very big business, but it is not regarded as an American business. Americans call the game “soccer” and have their own “football”, which looks more like rugby with padding. So – and this is the reaction in much of the world – what are the Americans doing barging into our game?

The West is Best, To Hell With the Rest

The hypothetic answer was not long in coming. Although reports of FIFA corruption have been circulating for years, especially concerning the 2010 games in South Africa, the timing of this sudden crackdown can only be used to discredit the two future World Cup events, scheduled for Russia in 2018 and for Qatar in 2022. Now, it so happens that the United Kingdom bid unsuccessfully for 2018 and the United States for 2022. At a time when the United States is doing everything imaginable to “isolate Putin’s Russia”, it looks very much as though the FBI has conveniently chosen to disrupt FIFA just in time to build a campaign to rescind, or boycott, the World Cup in Russia in 2018.

Non-Western commentators such as Sukant Chandan see the campaign to unseat Sepp Blatter, as yet another “regime change” directed from Washington.

The 79-year-old Swiss President of FIFA, Sepp Blatter, was never a loyal servant of the Anglo-American “international community”. By hook or by crook, his policy was to spread the football cult to the rest of the world, moving in the direction of the rise of the non-Western developing countries.

Blatter opened things up to the Third World, which would hardly be possible without monkey business somewhere. Europe with the US normally control everything “honestly”, or at least legally, because they naturally have the power and influence, as well as the lawyers.

Corruption is the way business is done in South Africa, as South Africans themselves are the first to admit and deplore. However, is it up to United States courts to punish the corruption that is endemic in African countries?

The choice of Qatar for the 2022 matches was asking for trouble, since only bribes could explain such a choice.   Here is a country with no football tradition, no players, no fans, nothing but heaps of money and above all, with a climate so inappropriate that it must be artificially cooled for the event. Plus the fact that the infrastructure is being built by semi-slave labor. It was the reductio ad absurdum of FIFA corruption. That one really gave the game away.

The choice was so weird that Swiss authorities opened an investigation last March 10. The United States might have settled for assisting that investigation instead of leaping into the spotlight. But that would avoid raising questions about Russia.

It may well be that money has passed “under the table” in every case of World Cup attribution. In France, by the way, there are serious suspicions about the use of Anglo-Saxon influence to attribute the 2012 Olympics to unprepared London against a perfectly prepared Paris. However, from the imperial viewpoint, the choice of Great Britain or the United States will always look “normal”, and any baksheesh would be considered superfluous. In contrast, one can expect great scrutiny in the search for some funny business in regard to Russia, even though Russia is a great sports nation equipped in every way to host the games.

What Is Corruption?

The United States has encouraged a certain “globalization”, meaning privatization and deregulation, giving financial institutions and major corporations endless opportunities to exploit and cheat countries in the global South, as well as their own citizens. The whole system is a breeding ground for bribes and corruption. It favors a vast and deadly arms trade, with its “percentages”. The drug trade flourishes, along with all sorts of illicit trafficking.

There is strong evidence that it took bribes to get the World Cup to South Africa. That’s corruption. But is it or is it not corruption when Coca Cola, Adidas and McDonald’s threaten not to sponsor FIFA if things don’t go their way? That is done openly, but isn’t it a form of corruption?

And speaking of corruption, is bribery only bribery when it is secret? What about the American electoral system, which has a much greater effect on the world than football games? What about an electoral system in which billionaires can openly “fix the game” thanks to perfectly legal campaign contributions?

What about the haste with which Congress changed its position last May 14 and hastily adopted the Trans-Pacific Partnership “fast track” legislation – without debate or amendments – as soon as Congress members had been generously sprayed with dollars from Goldman Sachs, UPS, Citigroup, FedEx, Coca Cola, Boeing, Pfizer, Northrop Grumman, Morgan Stanley, Walmart, Disney, Monsanto, etc., etc., etc. This vote will affect the lives of millions of Americans, their jobs, their quality of life. It is infinitely more important than where soccer games are played.

And what is the FBI doing about it?

The United States decides what is or is not corruption. It decides what are or are not human rights. Extraordinarily long prisons sentences are not violations of human rights because they are practiced in the United States, as an example. Big corporations buying “the people’s representatives” is not corruption: it’s called freedom.

The United States seeks to impose moral rules on the immoral practices it fosters. While waging wars all over the planet, Washington seeks to impose “humanitarian” rules on war by having its weak opponents branded as war criminals and hauled before international courts and tribunals (from which the United States itself is exempt).

By the same token, United States insists on imposing a system of global “free enterprise” that inevitably breeds all kinds of unmanageable corruption, but then tries to make it look good by cracking down selectively on corruption.

This American mixture of righteous crusade and self-interest risks giving virtue a bad name.

Obama and Osama

Ibrahim Bahati

Since Osama bin Laden’s death 2 May 2011, the official account of the Navy Seals’ raid has been challenged, most recently and cogently by journalist Seymour Hersh, alleging that “Washington’s official account of the hunt for Bin Laden and the raid that led to his death was a lie.” In fact, there have been more “conspiracy-factual theories” about this event than there are on Illuminati. Was OBL there? Was he even alive then? Is he still?

Indeed, mere days after the 9/11/01 attacks, on 18 September, 2001, George Monbiot wrote in the Guardian that “If Osama bin Laden did not exist, it would be necessary to invent him” since “his usefulness to Western governments lies in the power to terrify,” enabling the continuous unleashing of billions of dollars in military spending—on any given day, all year, the Pentagon spends almost $2 billion. No wonder the ghost of Osama rises from Pakistan, from Sudan, from Afghanistan, or from the open ocean. A lie to gin up demand for obscene profits and power? That is easy to believe. The truth? That is tougher to find.

Origins

Since the collapse of the Soviet Era in 1990, America found itself with all its threats seemingly neutralized. War, however, is always great business venture, not only for nation-states but for all manner of military contracting corporations, the gateway to amass profits at rates no legitimate business can produce. Enemies are required–real, imaginary, or manufactured.  In 1995, Ray Moseley wrote in the Chicago Tribune: Could it be that NATO discovered the Islamic threat because, after the demise of communism it desperately needed a new threat to survive as an organization?

Controversial lies in plain sight?

If the Pakistanis were left out of the operation as Obama alleged, where does this leave us with the notions by Pakistani Ex-Spy Chief General Asad Durrani that “ISI probably knew of the al-Qaeda chief’s whereabouts until his death”? The US has underwritten ISI by the $billions for decades. When will the US taxpayer start to wonder about the value of this?

And most interestingly, why has there come no vivid clinical information (rather than verbal claims) about Osama’s DNA, his death-in-combat pictures and his burial. Obama asserted that Osama was given a proper Muslim burial. Says who? Says which Muslim authority? Which Imam was present? Where is it written that proper Islamic burial takes place at sea? Nowhere! It is as if we have settled for a reality that might have scored as a poor episode of 24.

Now what?

Separating fact from fiction is an endless labor. Leaks by Edward Snowden that the NSA actually forced Google and Samsung to allow a Trojan horse to surveil Americans and international citizens shows the ongoing erosion of civil liberties. People are no longer citizens of their nations but instead are often “persons of interest” for entirely legal conduct. Are we an autocracy or a democracy? Dictatorial regimes like Saudi Arabia have been massively supported under the banner of ‘ally’ despite their bad record on human rights and governance issues. In fact today’s war on terrorism has played the total replica of the much worse unending, unfinished Cold War. We support state terrorists in the name of opposing non-state terrorists.

Whether events surrounding Osama death were a spoof or as Seal Team 6 claimed, questions continue and the US seems arrogantly proud of its “global manhunting machine.” Osama’s ghost has not rested. Seymour M. Hersh notes, “Obama today is not facing re-election as he was in the spring of 2011. His principled stand on behalf of the proposed nuclear agreement with Iran says much, as does his decision to operate without the support of the conservative Republicans in Congress. High-level lying nevertheless remains the modus operandi of US policy, along with secret prisons, drone attacks, Special Forces night raids, bypassing the chain of command, and cutting out those who might say no.” In 1969, Hersh was the young investigative journalist who broke the story of the My Lai massacre in Vietnam after the Army covered it up and lied consistently about it; he is still on point today.

Whatever happened to Osama bin Laden, his ghost may be found in the spirit of ISIS and all other US enemies, real and imaginary, urging the US empire to crack its hull on the rocks of war and militarism and join him in a watery, bloody grave. Will we let bin Laden’s ghost have the last laugh?

Big Oil’s Ethical Violence

Lara Montesinos Coleman

International attention has once again turned to the murky record of BP’s oil operations in Colombia. The High Court in London is to hear a case against BP, filed on behalf of Gilberto Torres, a former trade unionist who was kidnapped and tortured by state-linked paramilitaries in 2002. In a trial in Colombia, the kidnappers said that they took direct orders from pipeline operator Ocensa, in which BP had a 15% stake.  They stated that Ocensa paid them an extra $40,000 for the job.

Legal cases such as this are vital: they aim to hold corporations to account and to contest systematic impunity. Torres’s London-based lawyers hope the lawsuit will open the way to hundreds of other cases on behalf of community leaders, activists and trade unionists killed or ‘disappeared’. BP, which withdrew from the Casanare region of Colombia four years ago, denies any connection with paramilitary groups. It has said it will ‘vigorously’ defend the action and that Ocensa was not under its control when Torres was abducted.

The case is particularly significant because Casanare can be considered the birthplace of big oil’s concern with human rights. In the mid-1990s, BP faced extensive criticism for its links with the Colombian army and — by extension — with paramilitaries accused of assassinating environmentalists, community activists and trade unionists. The company was quick to ‘learn from mistakes’ and was one of the first corporations to establish a dialogue with international development organisations. In 1997, BP representatives sat down to discuss human rights with an ‘Inter-Agency Group’ comprising Oxfam, Save the Children, Cafod, Christian Aid and the Catholic Institute for International Relations.

BP went on to become a frontrunner in the recognition of human rights as a matter of concern for corporations. It has set the agenda by promoting corporate responsibility as an integral part of companies’ performance.  In 2000, BP became one of the original group of signatories of the Voluntary Principles on Security and Human Rights for the extractive sector. The UN Special Representative on Business and Human Rights, John Ruggie, visited BP’s human rights training facility for the Colombian army in January 007. He subsequently stated that the Voluntary Principles had been ‘implemented most extensively at the country level in Colombia’, with a positive impact on the ‘once notorious 16th Brigade’.

Meanwhile, in Casanare, the 16th Brigade was continuing to ensure it’s ongoing notoriety. According to a report by Colombian human rights organizations, soldiers killed Angel Camacho, just by BP’s Cupiagua oilfield, the very month of Ruggie’s visit. The report recorded over 30 extrajudicial executions at the hands of the 16th Brigade over the course of 2007 alone. I spent a year as a researcher and human rights volunteer in Casanare shortly after the UN Special Representative’s brief visit and witnessed directly how the 16th Brigade continued to carry out illegal surveillance of community activities around the oilfields. I spoke to numerous people who told me of children, partners and neighbours killed by the Brigade’s soldiers.

Even suspicion of being left-wing was a death sentence. During one community human rights meeting that I attended, Sergeant Ávila of 44th Battalion stated that his battalion had killed several people in the vicinity.  Ávila claimed that fault lay with the victims’ neighbours, who had ‘told us that they were left-wing’.

In November 2002, just months after Torres was kidnapped, the El Morro Community Association coordinated a civic strike near the Cupiagua oilfield. Surviving members of the Association said they had wanted a response from BP for ongoing ecological devastation, precarious and underpaid employment and the company’s continued failure to comply with agreements that it had reached with the community.

In the aftermath of the protest, Jorge Guzman, of BP’s community affairs department, was reported to have said that he was ‘tired’ of the El Morro Community Association, because they did not ‘let the company work’. Over the weeks and months that followed, members of the Association began to receive threats, including ‘stop fucking with BP’. In September 2004, on his return from a meeting with BP representatives, the Association’s treasurer, Oswaldo Vargas, was shot dead. Five days later, another leading member of the Association, Fasio Holguín survived an assassination attempt.

Investigative journalist Gearóid Ó Loingsigh interviewed the paramilitary commander Carlos Guzman Daza (alias Salomón) in November 2007. Salomón stated that ‘when peasants organized strikes or protested about any situation that they considered to be affected by oil companies, the paramilitaries went in to threaten the peasants…. As I say, the paramilitaries never did anything for free.  If they gave a service to someone, it is because this someone was financing or giving money or some bribe in exchange’.

Ó Loingsigh was also passed an internal email from BP. In September 1997, shortly before a visit of representatives of the Inter-Agency Group to Colombia, BP Policy Director David Rice wrote the following to a colleague who had been liaising with NGOs’ in Colombia:

‘Andres, Well done.  I agree with your view that we would benefit by working more with Oxfam in Colombia.  They have been a great heklp [sic] to us here and are getting closer to us all the time.  Your visitors have a lot of influence in the development ngo community in the UK, and hence in how allegations against [us] are picked up or not.  Good and closer relationships with Oxfam will be a significant factor in differentiating BP globally’ (1).

Meanwhile, BP representatives, the British ambassador in Colombia and anonymous ‘independent experts’ were quoted in the media saying that criticism of BP was a ‘smear campaign’ orchestrated by National Liberation Army (ELN) guerrillas.

Michael Gillard, the journalist who first broke the story of BP’s links with the Colombian military, has said that he too was the target of this line of argument: ‘For BP it was helpful to try and undermine my journalism by suggesting [that] one of Colombia’s guerrilla groups was pulling my strings. I was first alerted to this smear campaign in 1997 after talking to an oil journalist in Houston who’d been briefed by Roddy Kennedy, [then BP CEO] John Browne’s Chief Press Officer. I later heard through various sources that BP was smearing me as the ELN’s man in Europe’ (2).

‘In general, BP’s was a classic strategy of creating a division between so-called “reasonable” activists that they felt they could do business with and so-called “unreasonable” ones, who were subtly labelled as militants and guerrilla sympathisers, which in Colombia is a death sentence,’ he added.

Voluntary corporate responsibility is more than whitewash. It is a powerful means of disciplining dissent.  Unable to recognise the struggles of others who did not mirror their own understanding of ‘civil society’, the Inter-Agency Group unwittingly fed into a process of neutralising resistance. They encouraged BP to promote human rights, failing to apprehend how, for peasant organisations in Casanare, rights were demanded precisely to contest oil extraction and all its harmful consequences.

During their dialogue with BP, the Inter-Agency Group refused to publish a report they commissioned from Colombian researcher Pedro Galindo. The report included a critique of how royalties on oil were calculated so as to ensure, in Galindo’s words, ‘maximum profits to the multinational and minimal benefits to the population’. Galindo said his report aimed to ‘show how oil exploration represented the imposition of a culturally and economically alien model … and to put forward the idea that people in Casanare should be allowed to take responsibility for finding solutions to their own problems’ (3).

Voluntary codes of conduct purport to promote rights. What they actually do is reduce rights to precarious and private contract. The holders of corporate-fostered ‘rights’ do not have those rights as citizens, still less because of their humanity (the basis of notions of universal rights). They possess rights only as ‘stakeholders’, a figure premised upon the process of capital accumulation in which they can have a ‘stake’.

BP has placed great emphasis upon its work with ‘stakeholders’ in the vicinity of its oilfields. In practice, however, the reach of its community investment has been sparse. ‘We are of course very grateful to BP for giving us a ball for the children, but we would prefer genuine support’, one community leader commented.

In 1994, BP and other oil companies in Casanare established theFundación Amanecer. This development NGO runs a series of projects in the immediate vicinity of the oilfields, fostering competitive agricultural production and an ‘entrepreneurial culture’ among the population. One farmer summed up how she perceived the effects of this: ‘First BP destroyed the social fabric, now they are trying to build another one in their image.’

Where community organisations continued to mobilise around ongoing environmental damage, lack of social investment and the killing of their neighbours, representatives of the Fundación have turned up uninvited at their meetings and actively encouraged people to participate in their projectsinstead of protesting.

Protest, meanwhile, continues to carry high risks, as is made clear by the cases of Gilberto Torres, Oswaldo Vargas and documented killings as recent as 2014.  Outside the allocation of rights through corporate responsibility, the population has continued to be disposable. They can be killed with impunity — without anyone being held to account for a crime.

If oil companies are implicated in human rights violations, this is not because they are bad examples of corporate responsibility. Corporate responsibility is the other side of the armed elimination of dissent. It works its own, ethical violence, erasing experiences and struggles of those around the oilfields. By substituting law, corporate codes of conduct reinforce impunity for abuses. Rights are promoted as abstract values, tacked on to the existing state of affairs. Companies can claim to have ‘learnt from their mistakes’, and their operations can be affirmed as ethical from hereon in (4).

Legal cases such as that filed on behalf of Gilberto Torres defy this logic.To challenge impunity is not just to attempt to confine abuses to the past. It serves to expose crimes committed, to preserve memory of the past within the present, and to highlight contradictions between corporate recognition of rights and an economic model that has implied the systematic violation and dispossession of workers and populations around the oilfields. It is part of a process of re-building communities and social organisations wiped out by the violence.

Torres’ London-based lawyers are crowd-funding his case. They have teamed up with War on Want and Cos-pacc, an organisation established by displaced peasants from around BP’s Colombian oilfields, to launch the Oil Justice campaign.

Time to Jail Auto Executives?

Russell Mokhiber

More than 100 people have been killed in accidents caused by GM’s faulty ignition switches.

As many as 89 people have been killed in Toyota sudden acceleration accidents.

In 2014, the manufacturers of motor vehicles sold in America recalled sixty-four million vehicles.

A consortium of ten automakers led by Toyota have funded an engineering firm to develop a fix to the Takata airbag problem.

Federal prosecutors have launched criminal investigations at GM and Takata.

Rather than allowing these automobile industry debacles to float by without inspiring systemic change that will save lives, criminal prosecutions should become an integral part of — even a priority for — both federal and state governments.

That’s the take of University of Maryland Law Professor Rena Steinzor in a new article titled (Still) Unsafe at Any Speed — Why Not Jail for Auto Executives? (Harvard Law and Policy Review, Summer 2015).

“The regulatory system was intended to prevent such deadly outcomes, but it has failed,” Steinzor says. “Congressional action does not seem likely for the foreseeable future. Automakers have grown so complacent that they view billions of dollars in civil penalties and tort damages as unfortunate but routine costs of doing business.”

“When the corporation is targeted as solely responsible for fatal defects, the legal system fails to instill the wariness in top executives that is essential if senior and midlevel managers are to make consumer safety their top priority.”

Steinzor says that too many companies — and GM is a prime example — have internal cultures of going along to get along that make safety defects recede into the background.

“To reverse these troubling trends, individual executives with the power to establish early warning systems and repair defects quickly must perceive a personal threat if they do not act,” she writes. “Individual prosecutions are possible under both federal and state criminal law. Federal statutes authorize felony prosecutions for offenses such as lying to law enforcement officials that may well apply to defect cases. State criminal laws have a long tradition of punishing reckless homicide, also known as willful manslaughter.”

Steinzor wants criminal prosecutions of individuals in the automobile safety defect cases.

She wants the prosecutors to build on recent boomlet of such prosecutions, with U.S. Attorneys in five states obtaining indictments against individual corporate executives in six cases where corporate malfeasance killed and injured workers, consumers, or the environment.

The cases involve drinking water contaminated by a rusted chemical tank leak in West Virginia,  tainted steroid injections shipped nationwide by a small compounding pharmacy in Massachusetts, a massive explosion in an underground mine owned and operated by now-defunct Massey Energy, again in West Virginia,  cantaloupe infected with bacteria at a farm in Colorado,  peanut paste laced with salmonella and shipped from Georgia despite positive tests for the bacteria — and the infamous Macondo well blowout that destroyed the Deepwater Horizon oil rig and spilled 205 million gallons of crude oil into the Gulf of Mexico.

Steinzor reports that 136 people were killed in these incidents, and hundreds were sickened or injured.

She says that although the Department of Justice does not maintain a database that keeps tallies of such prosecutions, the cases are unusual, if not unprecedented, for four reasons.

They target individuals at the high end of the corporate chain of command.

They involve the criminal provisions of statutes that are rarely invoked, including ones that categorize crimes as misdemeanors.

And most importantly, she says, they have led to the consideration of criminal prosecutions in the automobile safety defect cases considered.

Economic Growth and the Environment

Dean Baker

Many environmentalists believe that there is an inherent contradiction between a capitalist system that is predicated on growth and the limits imposed by a finite planet. They point not only to the devastation from climate change, but also the increasing scarcity of water and other resources, and argue that we can’t continue on our current course.

That part is clearly true. However, the question is whether growth is the enemy or whether the problem is the specific course that growth has taken. I would argue that the problem is the latter and it is important to have clear thinking on the topic if we are to address both the immediate environmental crisis facing the world and the real economic problems facing billions of people daily.

When people hear the term “growth” they tend to think of physical objects such as houses, cars, and refrigerators. Growth can mean more of these products. While more cars and refrigerators are growth, this does not fully define the term.

Newer and better treatments for cancer and other diseases are also growth. So is an increase in the number of people going to college or other getting other types of education. Better software is also growth. More and better performances of music, plays, and other types of live entertainment are also growth.

All of these services, most of which involve little use of natural resources, are forms of economic growth. An economy that produces more of such services can be associated with a reduction in resource use and emissions of greenhouse gases, especially if these services substitute for the production of items that do harm the environment.

It is not just services that can be associated with environmentally friendly growth. Replacing cars, refrigerators and other appliances with newer versions that use much fewer resources are also growth. So is building transit systems that reduce the need for cars as transportation. Or better yet, Internet-based work, or teleconferencing, that reduce the need to commute to work or travel across country for meetings is also growth. So is the installation of solar panels and better insulation to reduce energy use.

Historically, growth has been associated with increased use of fossil fuels and other resources, but that link has gotten much weaker over the last 15 years. Furthermore, with the right incentives, such as carbon taxes and subsidies for clean energy, there is no reason to believe that the link between growth and environmental damage could not be severed altogether.

Obviously, there are considerable political obstacles to implementing environmental policies in the United States and other countries. But there are clearly much bigger political obstacles to putting in place a new economic system.

The fact that growth need not be bad news for the environment is not just a matter of logic, it is important for effective political action on environmental issues. For better or worse, “growth” has positive connotations for large segments of the population. They associate it with having a job and rising living standards. The latter could mean more things, but it may also mean families knowing that they can pay their rent or mortgage, that they can afford health care and that they can provide a decent education for their kids. Attacking “growth” is effectively telling an awful lot of people that their lives don’t matter.

The key to advancing policies to reduce greenhouse gas emissions and other forms of damage to the environment will be to structure growth so that more jobs are to be gained by reducing environmental damage than increasing it. We are already seeing this to a large extent with the growth of the solar and wind industries. There is no reason to believe that there cannot be more jobs, and profits, in producing clean energy than in digging up and burning fossil fuels. With the right polices, that crossing point need not be far in the future.

Just because growth can be consistent with a healthy environment doesn’t mean that it should be pursued as an end in itself. People in the United States work many more hours each year than people in other wealthy countries. Workers in other countries have shorter workweeks and have paid vacations and paid family leave and sick days.

The shorter work year translates into lower GDP, but there is no reason to view this as a bad thing. It is perfectly reasonable for workers to prefer having more free time to more income. In fact, this gap in hours is the main reason that the United States has a higher per capita income than the countries of West Europe.

Shortening work hours through guarantees of paid time off is a great way to increase employment that does not depend directly on growth. Insofar as this leads to more actual leisure time that people can enjoy, instead of disguised unemployment where people actually want to work longer hours, the shortening of work hours is a clean way of raising living standards.

In short, growth is not necessarily bad for the environment. And, as a practical matter the only way we will be able to advance environmental goals is by tying them to a growth strategy. At the same time, growth is not an end in itself. It is important for ensuring people decent standards of living, but more growth is not always better.

Financial Fallacies: Capital Growth is the Crux

JD (Koos) du Toit 

One of the common financial fallacies that keep ordinary salary-earning South Africans from building a financially-independent retirement is that 'capital growth is the crux' of investment success. And it is this financial fallacy that drives investors to try to achieve the impossible: accumulating enough capital during their remaining working lives to secure a comfortable retirement.

In reality, to secure enough capital for a reasonably comfortable retirement, you need to start saving at least 14% of your earnings every month from the age of 25, earn at least 5% above inflation on your investments every year, and never withdraw any funds until retirement. Given the soaring costs of living and the poor investment returns predicted by experts for the foreseeable future, saving 14% of earnings and earning 5% above inflation on investments are all but impossible for most. Furthermore, very few people started saving at age 25 and even fewer never withdrew any funds.

Even for the handful of South Africans who manage to follow all these rules, it may not be enough. This is because South Africans face another significant challenge: outliving their retirement funds. For each year you live longer than expected, you will need to have accumulated another 5% of your capital. And if you live for another ten years beyond the average life expectancy, you will need to accumulate 1.5 times more cash by retirement than the amount projected for the average life expectancy.

Fortunately, there is a simpler and more effective way of securing a comfortable retirement: investing in consistent, reliable income streams that will sustain you financially, not only in retirement - regardless how long you may live - but also well before and well after. Certainly one of the simplest ways to achieve this is to invest in income-generating assets, such as buy-to-let property.

In fact, income-generating property is the asset of choice of the world's wealthiest people, because it is an asset that produces a consistent, reliable income stream for as long as the property is held. It also delivers further benefits, such as offering a built-in hedge against inflation and capital growth over time as an added bonus.

"A small portfolio of buy-to-let properties in well-chosen areas with solid rental demand, and which are maintained properly over time, will keep generating an income in the form of rentals month after month, year after year, for as long as the properties are owned. In fact, if a property is acquired in the right structure, such as a trust, a well-chosen rental property can continue to generate a never-ending income for an investor's family beyond the investor's lifetime," comments Dr Koos du Toit, CEO of P3 Investment Group. "This passive monthly rental income also keeps pace with inflation, year after year, as the rental increases in line with inflation or the percentage stipulated in the lease agreement, offering a built-in hedge against the ravages of inflation."

In addition to securing an inflation-linked passive income stream for retirement and beyond, a portfolio of buy-to-let properties will also deliver steady capital growth over time, as an added bonus.

"This means by retirement, the buy-to-let property investor will not only have a consistent, reliable income stream, but also a significant nest egg of equity that has built up in the portfolio over the years, which can be accessed by refinancing a property, to pay for children's university fees, to start a business or even to take a well-deserved holiday."

Building a small but highly profitable portfolio of well-chosen and well-maintained properties is simpler and more affordable than most investors believe. "You do not need prior knowledge or qualifications, you do not need a lump sum investment or even substantial monthly contributions, nor do you need much time or effort to invest in buy-to-let property, if you follow a tried-and-tested system, with built-in risk management strategies," concludes Dr du Toit. "Don’t let the financial fallacy that 'capital growth is the crux' prevent you from building real wealth in 2015. Simply discover how buy-to-let property investment allows investors, even ordinary, salary-earning investors, to build a consistent, reliable income stream for a financially-independent retirement, and as an added bonus, to generate a nest egg of equity, even with limited monthly investments and limited time."

Giving Hope to Africa's Children

Donald Kaberuka

We all know that – even in some of the rich countries of today – at the turn of the 20th century up to 30% of children never reached the age of five. Along the way, economic growth, social policy,improved health care, advances in medicine (including vaccines and immunisation) and better living conditions (such as safe water and sanitation) have made a huge difference. However in many parts of Africa and Asia the conditions have worsened, from malnutrition, infant mortality, and illiteracy, to child labour and child soldiers.

Even in rich countries, children as young as six were still working down coal mines due to parental poverty, and inadequate or badly implemented labour laws. As recently as our own life times, children in rich countries were dropping out of school before the age of fifteen, to look for work to provide for their families. So much remains to be done everywhere to ensure children’s rights, protection and welfare, and to give them hope, opportunity and the ability to live in a better world.

It is therefore a source of satisfaction to note the dramatic decline in the deaths of children under five in the last decade in Africa and Asia. Perhaps this is the great – and uncelebrated –success of our times. Equally gratifying has been the real progress madeon universal primary education for both boys and girls, even though quality and learning outcomes remain an issue everywhere. This, we owe to the turn around in economic growth, better safety nets, improved nutrition, and especially to concerted global efforts and partnerships on immunisation and vaccinations, on malaria and tuberculosis.

This has been the work of many Governments and Organisations such as GAVI, UNAIDS, and the Global Fund for AIDS and Tuberculosis. However, between twenty-five and thirty million children worldwide still are not vaccinated, because vaccines are unavailable, and health services are poorly equipped or inaccessible. There are issues of how these achievements in the health sector can be sustained and self-financed.

Today, millions of children still are out of school and go to bed hungry – a hunger that in turn will stunt their brains and impact their educational scores and hence job prospects. Many children still labour under unacceptable conditions. Many are victims of human trafficking or death in fragile states, and in countries at war or in prolonged conflict. Since the turn of the millennium, there is no doubt that Africa has turned a corner. That may be fragile and incomplete, but it is a reversal in fortunes nonetheless.

Economic growth prospects are much improved in most countries, and there have been real social achievements. This includes progress on HIV/AIDS, due to available, cheaper antiretroviral drugs.

Tony Blair described Africa in early 2000 as the scar on the conscience of the world. Last month, he described Africa as the most exciting place on planet earth because of its opportunities. In this year alone, despite sluggish global recovery, lower commodity prices, slowing down of large emerging markets, twelve Sub-Saharan African countries will grow at over 7%, another dozen or so at above 5%. Africa continues to be the second fastest-growing region if the world, driven largely by investments, domestic demand and growing regional trade.

So children of Africa born in the last two decades of Africa face much improved conditions, and have better prospects. However hubris has never been a good counsellor. Stories of Africa rising are as misleading as their opposites, the Africa doomsday scenarios. Nothing is pre-ordained, and the future depends very much on what we do today. Economies may have reversed the years of negative real per capita growth of the 1980s and 1990s – the so-called ‘lost decades’ of Afro-pessimism – but we began from a very low base. It will take at least another decade and a half of sustained growth to change the continent’s living conditions irreversibly.

Then look at the demographic dynamics. Population growth in regions such as the Sahel remains very high, as high as 3.9%, while internal migration has accelerated with up to 40% of people now living in unplanned, poorly equipped cities and towns, amidst squalor and unemployment. Meanwhile the economic growth drivers remain very narrow; economic transformation is limited; and the share of agriculture and manufacturing has actually declined, with African economies still operating at the lower levels of global value chains.

As a result, young people – around 15 million of who enter the labour market each year – cannot find jobs,either because few are available, or because their skills do not match the needs. And in some regions, as they cannot find jobs or see hope for the future, they become easy victims to terrorist groups, or human traffickers promising them imaginary El Dorados, only for them to perish in the Mediterranean. This is not only an indictment on Africa’s leadership or on all of us, but it is also a clarion call.

So what is it that calls for action today to give the children, the young people of Africa, a hope? There are many things we have to do, but today I will pick only three. First, we have to create a peaceful, stable continent. The biggest challenge we face for young people ofAfrica is in fragile states or those recovering from conflicts. That is where a special effort is required. Not only because millions are trapped in those regions, but because of regional spill-over effects such as refugees and displaced persons. That is where all the systems – those of primary health care, of basic education and of infrastructure – are at crisis point. That is where our performance in meeting the Millennium Development Goals is poorest. That is where we have child soldiers, and other abuses.

Think of a young boy or girl born in Somalia in 1990. For twenty five years all they have known is war and death. The Ebola crisis was a clear demonstration of how an otherwise perfectly controllable epidemic could get out of control and become a disaster due to the breakdown in primary healthcare and capacities.

The second thing which calls for leadership is the fight against inequalities and the promotion of inclusion. That means ensuring that children of poor people, both boys and girls, get into quality school, and that no region, ethnic group or religious group isleft behind. This is the only sure way of breaking the intergenerational transmission of poverty. Economic growth is only a means to an end. Economic growth that is not shared is unsustainable socially and politically. It squanders talent, chokes economic prospects, and – by hindering social mobility – it undermines the very basis of harmony and peaceful societies.

In September at the UN, the Global Community will chart a course on the new Sustainable Development Goals. At the end of the year, hopefully, there will be an agreement on Climate Change. And between these two landmarks, we hope we will find a way forward on financing development. It is quite feasible to eliminate absolute poverty by 2030, if economies manage to grow at above 7% consistently. There will still be large swathes of poverty – especially in more affected countries – but this goal is achievable.

The key challenge in getting these economies to expand at more than 7% per annum is to close the deficit in infrastructure, in particular energy. We have here to deal with the energy constraints which place a major brake on the continent’s growth prospects.

Finally, an area where Africa is capable and indeed where it offers real opportunity is in the digital economy. The advent of and the accessibility of mobile telephony has already made a big difference in the lives of the poor. Think of the impact of financial inclusion. I dream of a day when every young person in Africa has access to affordable internet. In the 19th Century, people built railways to connectthe world. The global railway network of today is the internet. This is where knowledge is to be found; this is where jobs will be created; this where we can accelerate access to education, improve on health access, and markets.

As telecom infrastructure improves, I hope and expect that governments and the private sector willwork together to make this possible.These are all things central to what the African Development Bank does. They are all central to our new Ten Year Strategy for 2013-2022.

On September1, it will be my honour to pass on the responsibility for piloting that Strategy to my successor. I have no doubt that with stronger partnership between our two organisations, we can prevail. In spite of the global financial crisis and the complex geopolitical crises of today, I have heard that there hasn't been a better time to be alive.

I have often wondered about this. It very much depends on circumstances of your birth, of where you live, and under what type of government. What I am sure about, though, is that today the world has more than enough means to provide a better life for the children of the world.

Strengthening EU-Africa Trade

Cecilia Malmström

Trade is a key part of development. We have seen how this has worked in Asia but it is also working in Africa so this is an important way of strengthening the relationship between Europe and Africa at a very important moment. Because of course the continent is transforming so fast. Since the year 2000, growth has averaged at over 5% in Sub-Saharan Africa.

In the last fifteen years of the last century it was half the current rate. We have seen African success stories like M-Pesa and Ushahidi, who have ridden on the back of a huge deployment of mobile phones, a phenomenon few would have been able to predict a few years ago. We have also seen the success of companies in more traditional sectors, like Niger Lait.

There is still a long way to go of course. Gross national income in developing Africa may have doubled since 2005 but it is still only 15% of the global average. But the last fifteen years has shown us what is possible when a continent full of diversity, energy and entrepreneurship is given a chance to shine. The question here today is how trade can reinforce development.

Africa's development path will not take place in isolation in today's globalised worth. It needs trade. We have now entered a new phase in EU-Africa trade relations. A majority of African countries, covering 70% of the population and 80% of GDP, will soon have Economic Partnership Agreements with the EU. That means that Africans are no longer dependent on trade preferences granted by the EU, based on simple goodwill. These are real true partnerships between equals.

It allows us to ask new questions about how that development can work in practice and how we set out a new path for our relationship. And of course I think it's a little be too early now to say exactly what that path should be. But a vital part of the work is of course how we fulfil the promise of Economic Partnership Agreements. If we put them fully into practice, these deals will allow African companies to safely plan their future growth in Europe. That's because full access to the EU market of 500 million consumers is now guaranteed.

It will also make it easier for African companies to expand within their region. That will help them build economic alliances between themselves. That's because EPAs open regional markets. EPAs also have potential to make the business environment in general more predictable and more transparent.

That's particularly the case when it comes to customs administrations. And the rendez-vous clauses in these deals on services, investment and competition offer the potential to go much further. And EPAs will also help African companies to gain access to imports that can help them become more competitive. The deals will gradually and carefully open African markets to European exports as well. That's in our mutual interest. But all this can only happen if they are put into practice.

I hope that our partner governments across the region see that as a priority. And that they also help to develop the institutions, the infrastructure the governance that is necessary to support it and that's a core part of our relationship. We need to take a clear look at this. We need to look closely at the entirety of our economic relations. We must take account of the massive of the continent of course.

In order for this to work we must work together to strengthen democracy, human rights, good governance and to make sure that the infrastructure, the training is there to make full use of the EPAs, and that the benefits go hand in hand with sustainable development and that we find ways to distribute the wealth and growth created. That will deepen our relationship. That will deepen our trade and investment ties for everyone's benefit in Africa and in Europe.

Kenya: National Youth Service Can Curb Youth Unemployment & Radicalization

Collins Wanderi

On 1st June 2015 President Uhuru Kenyatta commissioned of a group of 7000 National Youth Service (NYS) service men and women for deployment into national youth empowerment programmes all over the country. Apart from engaging in national reconstruction programmes such as improving informal settlements; building water pans and drilling boreholes in Arid and Semi-arid Land areas; and carrying out vector control programmes, they are also expected to mentor and empower fellow youth and stimulate patriotism in their areas of operation.

This action by the president could not have come at a better time. Kenya is grappling with massive youth unemployment and there is genuine concern that Al Shabaab militants have exploited this situation to bolster their ranks and spread their extremist agenda. Leaders from the former North Eastern Province have publicly claimed that marginalisation and youth unemployment are the main reasons Al Shabaab is able to easily recruit members and spread radicalisation in the region.

The spectre of hordes of able bodied young people hanging around notorious neighbourhoods in Nairobi and other major towns of Kenya without something to do should be a cause for worry for everybody in government. Failure by national and devolved governments to establish deliberate and sustainable empowerment programs for youth who constitute a major segment of the population can easily generate feelings of marginalisation and social exclusion. Global statistics indicate that there is a direct correlation between youth unemployment and marginalisation; and crimes against property and political violence. In many countries of Africa politicians have exploited gullible unemployed youth to create ethnic militias and vigilante groups which have committed serious atrocities in sectarian violence fuelled by competition for political power.

When NYS was established in 1964 it was supposed to train young people in tasks of national importance, including service in the Defence Forces, national reconstruction programmes and disaster response. For about 20 years, it was compulsory for high school graduates to go through NYS before they joined university. The program was abandoned in the late 1980s at the height of agitation for political pluralism and not much was heard of NYS until May 2014 when Anne Waiguru, the Cabinet Secretary for Devolution and Planning announced that NYS was planning to recruit and train 21,870 youth annualy to curb youth unemployment, crime and radicalisation. On 18th July, 2013 Senate had unanimously passed a bill sponsored by Hon. Beatrice Elachi seeking to re-introduce compulsory national youth service in Kenya. It is not clear whether this law is related to this fresh effort by government to re-launch NYS.

Inability to access relevant and quality education is considered as the main cause for youth unemployment. However access touniversity and college education may not guarantee formal employment either. In most cases, formal education is not sufficiently designed to the requirements of industry. Global studies indicate a rising discrepancy between the skills graduates learn in college and those required in the workplace.

Mandatory post-high school or pre-employment national service can help bridge this gap. Whereas it may be considered undemocratic and oppressive by sections of the political elite and civil society, compulsory non-combat national service modelled in the system used in Israel and Nigeria may be Kenya’s only way out the dilemma of pervasive youth unemployment. In Israel, youth aged between 18 and 21 who do not wish to join the military are recruited into the national service and trained to provide services such as special education, public administration, legal aid, care for the old and destitute; horticulture, nursing, public health and sanitation; rehabilitation of drug addicts and national security inter alia. Israel has used this program to bolster its national security and transform its deserts into arable land through irrigation and the country is now a net exporter of staple food and horticultural products.

In Nigeria, University and National Polytechnic graduates are required to participate in the National Youth Service Corps (NYSC) program for one year. To enhance patriotism and national unity, graduates are deployed to areas far from their homes and are expected to learn the culture of the people in their areas of deployment. The program has helped young Nigerians to gain entry into the job market. Similarly, compulsory national youth service in Kenya can be used to empower young people who cannot access college education due to historical; economic or social disadvantages as well as graduates who lack practical skills suitable for the job market.

Kenya Shilling: What Is Happening?

Kosta Kioleoglou

Basic principles of economics say that for any country a widening current account deficit and a rising debt level will eventually herald a weaker currency. The Kenyan economy has been growing for the last years but its account deficit and debt level are growing fast as well. On top of that, the need to support growth which is pushing the Central Bank of Kenya to loosen its monetary policy, helped by the strengthening US dollar against other world currencies is leading the Kenyan Shilling to weaken.

A few days ago (May 28th) Kenya’s shilling weakened to head for its biggest monthly decline since September 2011. It is already trading at a 4 years low, with an exchange rate of 98.9 KES to the USD. The shilling is likely to weaken further this year to as low as 105 against the dollar, which was the support level of the currency back in 2011, experts say in a new report. The shilling is down 4.3 percent in May, falling for the third straight month, and the worst performer among 24 African currencies tracked by Bloomberg after Ghana’s cedi according to available reports.

The truth is that the Kenyan economy took off a few years ago and most of the people feel that nothing can stop this journey but what if expectations do not come through? Imagine you are inside a very shiny modern looking aircraft ready to fly; your mood is great and feeling relaxed as if nothing could go wrong. How would you feel though if, after taking off, you noticed one of the engines on the plane wasn’t working properly while the other engine was overheating as well? Now suppose the captain announces that you should buckle-up because the plane is about to meet an approaching hurricane?

This is what Kenya’s economy is currently going through. The country is in the middle of a "perfect storm" and the declining Shilling is the most visible manifestation of Kenya’s economic woes. Why has the Shilling been falling so much and so unpredictably, although we read in the news that the Kenyan economy is increasing and is one of the best in the world?

The main reason is that Kenya’s economy is increasingly imbalanced: the country is importing too much while exporting too little making it vulnerable to shocks and not ready to support internal or external effects. The gap between imports and exports needs to be financed by financial inflows other than export earnings. In 2014, imports have soared for one more year, while exports remained stagnant and tourism had declined. The gap between imports and exports, also called current account deficit, currently stands at above 9% of GDP – one of the highest in the world!

Today, Kenya’s main exports aren't even sufficient to offset expenditures for its oil imports (That being said, falling oil prices helped to push down the deficit of oil imports accounting for nearly a quarter of the country’s total import bill), not to mention all other imports beyond oil!. The money to pay for any additional imports needs to come from somewhere.

Anyone doing business that has even a small economic background and a little experience is already getting prepared to face the challenges that will come with a very weak currency to trade with. However any turbulence in the economy affects everyone, not just the business sector only. The shilling was expected to benefit from cheaper oil. However going forward we still see continuous depreciation since this movement has been driven by other fundamentals.

Fundamentally the shilling has been affected by reduced inflows from tourism and exports (agriculture and manufacturing), combined with the rising import bill especially on capital goods necessary for the increased infrastructure and development. At the same time, Kenyans continue to consume more and more goods mainly imported, trying to fulfill the thirst for a better lifestyle via new cars, phones, tablets etc.

The sector of the economy that had the most impressing growth over the last years is the Real estate Sector. It represents over 10% of the country's GDP. Although the real estate attracted initially foreign investments mainly from the Diaspora and the Somali Communities, the majority of the money invested in the industry comes from the internal market. The insufficient if not nonexistent industry and manufacturing force of Kenya gives no alternative but to import most of the materials required to construct buildings and infrastructure, increasing the amount of money spent to imports on a daily basis.

Kenyans, amazed from the possible large and easy returns of a real estate investment ignored all the other sectors of the economy and focused into the Property market. Life time savings have been invested into Land or Building projects around the country. The money actually is slowly going outside the country via consumption of goods and expenses to imports while ownership gets bigger and bigger. The available cash in the market becomes less and eventually the weakening of the Kenya shilling, if it persists will dampen growth in real estate sector because of imported building materials.

Did anyone ever think what is actually happening? When one buys an overvalued apartment from a developer, he becomes an owner but his money now is not in his account anymore. It is the developer - seller who holds the money. The price paid included a huge overvalue and a very big profit. The developer- seller now will enjoy his successful business returns by buying a new luxury car, a new watch, and travel with the family and will send the rest of his money to his private banking accounts abroad, in a US dollar account where his money will be safe. Most of the money spent are leaving the country since most of the goods that someone is using or buying are imported.

The same applies to almost every transaction in the market, every time we are buying something imported, most of the money we pay is going to another economy, another country, another market which is benefiting from Kenya's low production of goods. Of course Kenya has in theory the weapons to balance this. Exports and tourism have always been the solution. It is not easy and it will not happen fast but it has to happen in order to avoid a total collapse of the economy. (Same as when people tend to consume more than what they can afford they end up broke).

In the meantime, every economy shows signs of the problem and those who know are under alert. Initially we will see the inflation going up , then the currency's value slipping until it is officially devalued, followed by the country starting increasing its external and internal debts, unemployment starting to grow, the transactions in the market slowing down and finally daily life becoming harder and harder as everything becomes far too expensive.

A lot of people argue that a devaluation of a currency is the solution. Certainly, devaluations amid crisis can contribute too and are very often associated with significant economic contractions. History is quite clear on this point. The interesting question concerns what happens next. Take an economy that has been enjoying a boom backed by large capital inflows, and which then faces a sudden stop, capital flight, and crisis. Foreign lenders had been willing to finance a consumption and investment boom, but for one reason or another eventually they will stop financing and investing into a market that is not performing so well anymore. Sooner or later the time will come to pay back the loans.

To repay foreign loans, the once-booming economy must export more than it imports. To do this, it must raise exports, which requires an improvement in competitiveness relative to trading partners, which requires a reduction in wages and/or an increase in productivity. And it must reduce imports, which requires a reduction in purchases of foreign goods.

How will this adjustment take place? Certainly not painlessly, no matter how one proceeds. But the argument for devaluation is that the pain can occur relatively fast. A substantial currency depreciation instantly hits consumer purchasing power and reduces wages. Purchases of foreign goods fall because as prices of foreign goods soar. The pace of adjustment will depend on how fast domestic industries will pivot toward import replacement and exporting. But to analyze episodes of devaluation is to see a lot of steep lines: sudden plunges in output and fast, V-shaped recoveries, and sudden jerks in the current account from large negative numbers to near-zero or positive ones. Absent devaluation, the path is slower. When the party ends, domestic firms and households can no longer afford to buy domestic goods and services, and foreigners aren't interested in buying overpriced goods and labor. So firms go bust and unemployment rises.

With lots of unused industrial capacity and crowds of unemployed workers, prices and wages slowly decline. More flexible labor markets with lots of room for productivity growth will adjust faster than stodgier economies. But the pace of adjustment is likely to be slow. You get the steep side of the drop on the way down, and then you get a few years of sideways movement while unemployment drags down wages, and then you get the lift as exports pull the economy back toward potential.

The worry of course, is that the slower route will result in a lot of needless pain: that there are risks to devaluation, but they're likely to be worth the faster adjustment and that the pain of the slower route might be bad enough that the economy gives up on the hard road and devalues anyway. Or worse; long, grinding depressions have been known to produce nastier things than high unemployment which anyway exists already in Kenya. Hence, the argument is not that when a country faces a balance-of-payments crisis and devalues, it somehow gets off scot free. Rather, it's that adjustment is typically much faster and easier and carries less political economy risk (including the possibility that devaluation may ultimately be necessary anyway).

Today no one even thinks about currency devaluation and everyone prefers the silent sliding of the currency over the last months. At the end of the day too much analysis about the Kenyan reality is not the most popular topic, as it is better if we keep people living in a dream world where everything gets better and nothing could go wrong. It is a matter of time though until everyone will feel the consequences of an economy increasing imbalanced and of an over consumption of goods that will lead to economic stagnancy.

The last months the KES is falling against the dollar not because it was devaluated officially according to a plan but simply because it cannot support its value against foreign currencies in the markets. Inflation, fueled by the shilling’s slide, accelerated to 7.1 (nominal) percent in April respectively, near the top end of the government’s target range. If someone simply thinks what will happen if kes continues to slide and oil price return to where it was a year ago, then the dream becomes a nightmare.