I hope you have had a wonderful summer and are now preparing for an exciting 2008. As always, this newsletter aims to bring context to the many things happening within the world of XL, and how they may be relevant to you. While I was in America at the Clinton Global Initiative, this concept of context cropped up again as I came face-to-face with America’s preoccupation with the inequities in Africa. “What about Asia?” I asked. This month’s newsletter is about the answer to that question, and what things look like when we change our direction of focus.
Do you remember Bono, Live 8 and “Make Poverty History” in 2005? At the G8 meeting two years ago, the world’s richest countries agreed to write off $40 billion of debt owed by the poorest African countries. Yet in this year’s United Nations progress report on the UN Millennium Goals, the change in Africa’s poverty levels is almost non-existent. Asia, on the other hand has halved its poverty levels in many areas, driving down poverty averages globally. While Africa has seen little progress, Asia’s success story comes despite receiving little relief. What happened?
The answer can be found in Wuhan. It can be found in Chongqing, in Tianjin and in Shenyang. Each of these Chinese cities now have populations approaching five million. Each houses more people than the entire population of Singapore, and they are growing fast as more Chinese leave their farms and head for the city. By attracting global flow, China has been urbanizing its population at a phenomenal rate, and the rising productivity from farm to factory have taken over 300 million out of poverty.
While the 2005 Bono-and-Geldof-inspired $40 billion debt write-off generated press headlines around the world, China’s annual flow has mushroomed by over forty times that amount without the same fan fair. China’s global trade doubled from 2001 to 2004, reaching $1 trillion in 2004. It is on target to breach $2 trillion in 2007. Through this process, its population has been migrating from an agricultural economy to an industrial one. Steel production has grown from 140 million tons in 2000 to 419 million tons in 2006. Unwittingly, the West has done far more to take China out of poverty than Africa. And it has done it by simply buying more of China’s products.
“Be still like a mountain, and flow like a mighty river.”
- Lao Tsu
Why could the west not do the same for Africa? ‘Effective Giving’ is about following the path of least resistance: Following flow. As western countries have migrated from industrial economies to technological economies, they have naturally imported what they are migrating from – from industrial economies. This has been to the benefit of the industrial economies of Asia. Surely, then, this would mean that as Asian countries migrate from agricultural economies to industrial economies, they would also import what they are migrating from. This means importing agricultural goods and commodities from Africa.
If we follow flow then, it will be Asia – and not the West – that will take Africa out of poverty.
The flow has already begun. What was a trickle five years ago has already become a raging river. Trade between China and Africa quadrupled from 2000 to 2005, reaching $40 billion. Chinese Vice-Premier Huang Ju has now announced China’s plan to reach $100 billion in China-Africa trade within five years. This trend is not just with China. Exports from Africa to all of Asia have tripled in the last five years. This year, Asia overtakes Europe in trading volume with Africa and is likely to pass USA in the next year, making it Africa’s primary trading partner.
Last year, the World Bank published a report titled “Africa’s Silk Road: China and India’s New Economic Frontier”. The report’s author, World Bank Economic Adviser Harry Broadman said “If you take a snapshot of today, the overwhelming bulk of Africa’s exports to Asia is natural resources. But what’s new is there is far more than oil that is being invested in – and this is an important opportunity for Africa’s growth and reduction of poverty because Africa’s trade for many years has been concentrated in primary commodities and natural resources.”
Asian countries are ramping up not just their trade but their investment in Africa, enabling it to produce the goods needed within Asia’s production cycle. As Broadman says, “This is allowing Africa for the first time to enter into this network of more sophisticated third-country global exports.” This has led to an explosion in Africa’s enterprise culture. In just six years, the number of companies quoted on 14 stock exchanges in Africa has grown 800% to more than 500.
Last month, an IMF report titled “Drivers of China’s increasing intervention in Africa” by economist Jian-Ye Wang revealed direct investment by China into Africa is again on target to double in 2007, having increased 60% in the first six months alone. The case made in the report is that the power of commerce far exceeds the effectiveness of public aid in contributing to Africa’s wealth.
“The growing role of China in Africa is not transitory. Bilateral economic relations are increasingly dominated by commercial ties, rather than by public aid considerations.”
- Jian-Ye Wang
The power of redirecting global flow will always wash away the blocks that pressure groups often unwittingly reinforce. While much of the western media continue to shine a spotlight on the inequities in Africa, Africa will increasingly trade its way out of poverty by turning to the east. While the advocates who focus on trying to unblock blocks between the west and Africa will continue to chip away at brick walls, the entrepreneurs who accelerate the flow of wealth through Asia will wash away Africa’s inequity with equity.
Like a rising tide, the process won’t grab headlines, but like a rising tide this flow will float all boats. The $40 billion debt relief that resulted from all those Live 8 concerts and pressure groups, impressive as it appeared, was just matched by Asia’s trade volume with Africa in the last four months, and the four months before that, and before that.
Today’s sky-high commodity prices and the power of Asian trade may be causing headaches for the west, but it is exactly these factors that will lift the world out of poverty. American and European consumers and businesses are aiding Africa far more with dollars that flow not eastward to Africa, but westward around the globe – through Asia – and into Africa. Often it is not the shortest route which proves to be the path of least resistance.
So where should your efforts go? It should go in building the prosperity in the East, empowering Asia’s 500 million poor to lift themselves out of poverty and, in turn, lift Africa’s economies and 300 million poor to naturally follow. It should go not in canvassing for buckets of aid from the west, but in building a sustainable plumbing system of commerce from the east.
“I have come to believe, deeply and firmly, that we can create a poverty free world if we want to. I came to this conclusion not as a product of a pious dream, but as a concrete result of experience.”
- Muhammad Yunus
In our lifetime we will see an end to global poverty. We all have the power to accelerate the process – not by swimming upstream, but by digging downstream. We do not need to create flow. We simply need to go to the flow, and be the channel.
“Life flows on within you and without you.”
- George Harrison
PS from Roger Hamilton’s November 2007 Newsletter
