African Reserves Loans

The role of the West in Africa’s quest for economic freedom

President Biden enacted the “Juneteenth” law on June 19e a federal holiday in the United States. It is a symbolic recognition, once again, of the end of slavery and the emancipation of slaves in America.

Slavery is about the economy, not about racism

Make no mistake, slavery is about economics. Labor is a key factor in production. If a nation has more labor to carry out farming or mining activities, then that nation can produce more food, trade that food, and get rich. Slavery was a way to increase the productivity of a nation or business by eliminating the cost of labor. Slaves did not need pensions or medical benefits, they were not depreciated, and they did not have paid vacation.

Take apartheid in South Africa for example, gold and diamonds have been discovered but have been found in very deep veins in the earth which required labor to extract them. Thus, investing in a mine, extracting gold at a high cost, and selling at an economically viable price was only possible by eliminating the cost of labor. British mine owners created a two tier pay system where white miners became managers and earned more than black workers who were designated as laborers and earned less.

In the 1920s, the price of gold fell, reducing margins at South African mines. Gold mine owners tried to cut costs by hiring more lower paid black miners as managers. In response, the white miners rebelled and took up arms in what became the “Rand Rebellion”. This rebellion was only suppressed by the South African government which deployed air force bombers and 20,000 troops. Deeply frightened, South Africa‘s new government passed the Mines and Works Amendment Act 1926, which cemented color divisions and recognized white miners as superior to blacks, the seeds of apartheid were sown.

America is in an economic apartheid system

After being proclaimed free, the struggle for civil rights in America during the 1960s with Dr. Martin Luther King won for African Americans the political right to vote and not to be discriminated against on the basis of their color. This is good but the discrimination today is not manifest, no American bank will reject a mortgage application because the applicant is African American, but this bank will reject an application because of low credit scores… this credit barrier rate has kept many blacks in America in poverty.

According to Mckinsey & Co, the global consulting superpower, “The median annual salary of black workers is about 30% or $ 10,000 lower than that of white workers. Blacks also make up 12.9% of the population but only 9.6% of total American wages. “ McKinsey considers a “A $ 220 billion annual gap between the wages of black people today and what they would be in a full parity scenario. If this parity were closed, it would increase the total wage of blacks by 30% and attract around 1 million blacks to employment. “

The US Federal Reserve’s Survey of Consumer Finances (SCF) is conducted every three years and explores the finances of specific groups and specific demographic groups. In 2019, citing the Fed:

“The wealth gap between black and white families remains significant. The typical non-Hispanic black family had around $ 23,000 in wealth compared to the white family with $ 184,000. White families are 13% more likely to hold the top 10% of the wealth distribution, compared to 1% of blacks. Black families, on the other hand, are 75% more likely to be in the bottom half of America’s wealth distribution, compared to 41% of white families.

Less income earned by black families means they cannot buy or own an asset like houses. Home equity (home equity less the mortgage) is the most important asset. According to Federal Reserve Bank of New York, At $ 15 trillion, homes account for 16% of total US household wealth, white households have a homeownership rate of 73.1% versus 40.6% for blacks. See figure 1.

The real tragedy of the end of the slave trade in the West was a no man’s land where black people were nominally free, literally priceless but without the legal or illegal means to adhere to the American dream of buying a house. , with government subsidized loans, get credit or start a business. So while slavery ended, economic slavery did not end.

How to overcome economic slavery?

Economic slavery cannot be solved by small measures like banning redlining (denying someone a loan or insurance because they live in an area considered to be of low financial risk) but by large bold and color conscious spending. Much like the Marshal Plan when the United States invested in a failed Europe and damaged credit by offering cheap, long-term loans to enable them to rebuild, so too, the United States and the West must invest in damaged minorities in the United States who have been denied to accumulate and transfer wealth from generation to generation. The United States has many options in this regard. It can eliminate the need for credit scores and down payment to buy a home and eliminate capital gains if a home is sold to a minority. It does not add anything to the deficit or the debt of the United States. The United States can also go further and make direct payments of up to 75% of the cost of new homes purchased by minorities, which not only bridges the gap in property and wealth, but also creates jobs for all Americans.

New York is already implementing a plan to create “baby bonds” (direct cash payments to certain demographic groups), universal scholarships, and four-year $ 2,800 scholarships for black and low-income families.

I can’t ignore Africa

The African continent is the last refuge in the world for poverty. It is common to blame Africans themselves for wars and corruption, but it is a continent that began to be politically independent in the 1960s but remained largely under economic slavery. France, for example, since the 1960s has demanded that its former African colonies hold their reserves in Paris.

Debt has been a burden on African nations, forced to import goods using US dollars and borrowing in foreign currencies as well, thus being exposed to imported inflation and man-made poverty via devaluations. local currency. The US government has passed the African Growth and Opportunities Act (AGOA), but African businesses cannot take advantage of large US markets due to huge infrastructure deficits. While countries like Ethiopia fill these gaps with clusters dedicated to exports to the West, Ethiopia alone owes $ 24 billion (see Table 1) in external loans valued at UD dollars, requiring service in USD. For the African continent, it is estimated that $ 417 billion is collectively owed in 2018 before COVID destroys these countries’ sources of income.

Economic slavery ends when, to begin with, these debts, especially the negative capitalized interest (charging for late payments and interest on the loan principal) are simply removed.

It took the visual of George Flloyd dying on a street to spark calls for racial justice in America, but while symbols and hashtags have some use, they can’t create wealth. Real justice comes when the wealth gap represented by the unpaid labor spent by the ancestors of today’s black community is closed. Homeownership and debt cancellation costs nothing but money, and America is spending more on nuclear-powered Aegies Carrier battle groups.

So on June 19e The holidays, as Dr. Martin said, are a down payment, but now is the time for America to do bigger things.

There can be no real freedom until there is economic freedom.

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