In DepthColumnsLagarde: Beating Greece with the Africa Stick


Posted on Wednesday, 11 July 2012 16:52

Lagarde: Beating Greece with the Africa Stick

Khadija Sharife


Christine Lagarde - the IMF's latest female figurehead – has declared that she holds more sympathy for Africans than dodging Greeks, facing the verge of economic crisis.


During a layover in the airport, African and Asian delegates from Nigeria to the Philippines told me, triumphantly, that Europe was finally being taught a lesson. But what broke Greece is the same cancer that has afflicted African nations.

Vampires: Brazil's Rio Earth Summit was a concert of mega-corporations and multilateral agencies who bleed the planet, and yet boldly sponsor and devise solutions for 'the global green'. Displaying vampire tendencies, they are draining life for their own insatiable sustenance.

So, when Christine Lagarde, the IMF's figurehead, claims to hold more sympathy for Africans than Greeks, demanding that the Greeks pay up, stakes necessarily come to the fore.

Let's consider 'Africa' – that homogenous "lump-of-bloated-bellies-poster-child-of--manufactured-poverty-fuelled-by-resource-curses-swopping-debt-for-nature".

For decades, the continent portrayed as incapable of 'development' was the patient of high doses of 'economic austerity' that, even in Hollywood terms, would be considered a starvation diet. The need to slim down just about every public budget was directly linked to the fattening up of looters. Those looters comprised of resource-seeking multinationals, geographies of power, and propped-up or self-serving native elites, who exploited public resources. Even the World Bank's own accounting of resource revenues in Africa show that countries like South Africa had a negative genuine savings from gold, diamond, platinum and other forms of mining.

This well documented reality was facilitated by World Bank and IMF-imposed structural adjustment programmes, offsetting the tremendous debt accrued by native elites who had looted and siphoned public funds to European secrecy jurisdictions such as the UK, Switzerland, Netherlands, Luxembourg, etc. Loans were to be granted on condition of a successful starvation diet.

It led to the 'opening up' of resources, as in Zambia, for pennies. As a result of these conditions, Zambia sold the biggest copper mine in the world 'for a song'. Now, the country is dying for aid, even as they 'lose' multi-billions annually to mispricing 'copper-importing' opacity havens like Switzerland.

They'll be able to put anything out there, get away with anything, because everyone will be too paralysed

This was coupled with an opaque global financial structure that did not allow Africans to see who was dining at their table. It should be noted that political corruption (also known as demand-side corruption) is minimal when compared to the corruption of the powerful: the former, at 5% of flight, and the latter, at 60% or more. The continent is conservatively estimated to lose about $200 billion annually, primarily through corporate tax avoidance and evasion.

But Lagarde's attitude is not limited to the institution that generated impoverishment, or the opacity systems and jurisdictions protected by the EU, accused of stealing lives and possibilities.

It is also, fundamentally, a problem of the EU's approach to itself, through the internal market designed around four pillars of 'free movement': trade, capital, labour and the right of establishment. The EU single market is legally overseen by the European Court of Justice (ECJ) that holds primacy of position over every member state's government and national laws, governing every citizen, legal or human. And yet, for all these market freedoms, very little has been done to protect the rights of those being looted. Overall, as Africa loses the equivalent of 97% of GDP potentially invested in healthcare, Europe loses 86%.

Laundry Service: In Greece, the shadow economy looms at 27.5% of GDP, haemorrhaging €19 billion annually long before the financial crisis. These days, €1 in every €4 in countries like Italy and Greece are based in systems of complete opacity. In Spain, the figure is 22% and in Russia it is a staggering 43%. Even 'regulated' countries, like Germany, the UK and France range between 12 and 16%. But for a country slowly being folded into an economic collapse, hundreds of billions through financial conduits such as Luxembourg, with assets shifted via, and into jurisdictions like Jersey, Guernsey and others. As Richard Murphy, the UK's leading investigative accounting specialist revealed, while Greece's entire government structure may soon collapse, it is largely indebted via tax havens.

The question then is whether the financial crisis awakens nations to the idea of economic nationalism - often a protective stance during times of hardship. After all, what is known as protectionism was the primary reason behind the rise of 'developed' nations through specific industries. Recovery - without loss of self - is impossible unless governments take their sovereignty back, within appropriate measures. The Single European Act (SEA), underpinning the single market, vastly reconceptualised the political (and political economy dynamics) within Greece; as well as the country's relations to other nations. On the basis of incentives, including financial promises proffered to nations outside geographies of power, Greece took the package. Every industry was penetrated, some for better, some for worse. For example, in 1992, 62% of Greek goods were classified as sensitive due to expected displacement once protection was removed. The pro-EU stance of Greece's PASOK's was, as one UK representative - Lord Cockfield - noted, considerably due to the promise of EU financial transfers from the Community budget (example, from the Integrated Mediterranean Programmes).

The Ladder of Rights and Laws: Beyond Greece, there are multiple precedents established in the ECJ leaning towards the trend of the classical internal market principle, above all else. Greece is no exception. And while the EU claims to uphold fundamental rights, it is the 'economic' (defined as 'intra market-access' with zero restrictions) benefitting an aggregation of values constructed around corporate trade and investor penetration that represents the conception of 'compliance' with the Law of Laws, that is justice served.

Not only has this state of affairs been normalised but non-compliance, from the outset, is anomalous. The most renowned landmark cases, such as Schmidberger and Omega, evidencing the EU engage the issue of fundamental rights, for the first time, evidences that contestation invoking human rights must always be justified and subject to proportionality. Thus, while not secondary, it is ancillary, defensive - and certainly not unconditional.

Neither the analysis developed in Schmidberger nor that adopted in Omega established the form of justification that such rights embody, within the framework of rules applicable to the free movements provision (Giacomo). Omega did establish, through precedent, that member states have an area of discretion, concerning how rights are conceived (successful invoking of Germany's Grundgesetz or basic law - Eeckhout), but the internal market has rendered many national laws impotent when set against the reach of the internal market.

Compliance is determined by the rulings of the ECJ through landmark cases, used as precedents. Such cases have evidenced that while mechanisms to exercise individual, social and other rights are presently lacking, public policy, based on the concept of the collective, does not find easy standing in individualised rights.

Other landmark cases, like Viking, bear witness to the effective marginalisation of collection action, especially from unions. In Viking, the ECJ held that the trade unions' collective actions constituted a restriction of the freedom of establishment, as well as a right. But rather than address the fundamental right to strike as the primary base of complaint, the ECJ..."took the objective pursued by the exercise of the fundamental right to collective action, the protection of workers, as the relevant legitimate interest and not the exercise of the fundamental right itself...." (Boer) In fact, by engaging the case in such a way, the ECJ rendered the collective action conditional on trade unions having no other less restrictive means available for the protection of workers, labelling....'industrial action is intended to cause harm to the employer...'

There are many cases that could be cited, contested, deliberated. But cumulatively, what many landmark cases reveal, and what cannot be negated, is that the single market holds primacy, and is fundamentally designed to promote the economic over all else.

All quiet on the Western Front: The single market, initially formed from the skeleton of the European Coal and Steel Community (ECSC), was designed, amongst other reasons, to make war impossible between nations. But the conclusion is that in the war for rights, the economic has already been crowned the winner. And back to Greece.... the EU has never made a serious move (beyond deploying jargon such as 'consider', 'by example' etc) to naturally sanction opacity jurisdictions, nor check the systems facilitating looting. This could easily be achieved by mandatory automatic information exchange. Instead, there is total freedom for capital blocs. But freedom is not free if the rights of some so brutally transgress that of others. Then, it is tyranny. And of course, it is a tyranny whose fabric reaches across nations, continents, through secretive and lethal webs. As Richard Murphy, one of the foremost investigative accounting specialists reveal, Greece's indebtedness via tax havens to a global financial system that hides behind the anonymity of the financial architecture, is a vain attempt to ensure that this banking structure survives.

And this is the full weight of purpose behind Lagarde's statement when she says Greeks must pay up.

"He's talking about a kind of meta-censorship. They'll be able to put anything out there, get away with anything, because everyone will be too paralysed, and overwhelmed, to pay attention," writes David Foster Wallace in The Pale King.

"Again, we have the mysterious they."

Well, no - we don't. The Financial Secrecy Index compiled by the Tax Justice Network – an international group of economic, social, political, environmental and other justice-based movements, was created by blue-fire men like John Christensen and Murphy. They have created a momentum that not only gives a name, but gives us – stakeholders – the stakes with which to slay those vampires.

Journalists have an important role to play – it is up to them, not the NGOs or politicians of the world, to put the world on record. Lawyers have the skills to take that knowledge, and hold them to accountable. Citizens have the right to demand that justice is served.

It comes down to framing: not the Africans as more deserving than the Greeks. Lagarde is being mischievous. No – it is all of us organised by a common system underpinned by a common set of indifferent actors. For real solutions to enter the equation, our common enemy must be called out by named, shamed and dethroned.

Last Updated on Wednesday, 11 July 2012 17:06

Khadija Sharife

Khadija Sharife

Khadija Sharife is a correspondent for African Business magazine, among others, and a commissioning investigative editor at Forum for African Investigative Reporters (FAIR). Affiliations include researcher for the Environment Justice Trade and Liabilities (EJOLT) project at the Center for Civil Society (CCS) based in South Africa; researcher with the Tax Justice Network; Africa project fellow at the US-based World Policy Institute; assistant Africa editor of "Capitalism, Nature, Socialism", and author of Tax Us If You Can (Africa), among co-authored works. Her work has appeared in African Banker, New African, Al Jazeera, Forbes, BBC, Le Monde Diplomatique, The Economist, Harvard International Review, London Review of Books, and others.

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