Sunday, August 8, 2010

Frontiers in securitization

The prospect of industrialization in Africa is certainly thrilling. That's perhaps the part of the world where the need for (and meaningfulness of) economic growth is clearest. It would be nice to see the term "developing" go from a bad joke to a neutral descriptor.

And, the questions Rajiv Sethi raises about history and convention (or expectations) as two distinct alternatives to an equilibrium approach to macroeconomics are very interesting.

But I can't help it, the proposal to "securitize" future foreign aid flows makes my skin crawl. It's not just doubts about whether the one-time windfall would be used to finance "big push" public investments, as opposed to tanks and palaces and Swiss bank accounts. It's not just a suspicion that the foreign exchange earnings of most African countries are more than sufficient to finance the capital-goods imports needed for industrialization, if they were simply allowed to impose exchange controls (as almost all late industrializers have.) It's not even the general observation that when the previously non-marketable assets of the poor are commodified, the usual long-term outcome is simply the transfer of those assets to the rich, without any additional cash in the hands of the poor. (There's a reason we don't allow people to sell kidneys.)

No, it's just the idea that whatever hold Africa's poor have on the world's conscience is supposed to become one more natural resource, to be stripped off and sold to the West. Because what else does securitizing aid mean except, Give us the money upfront and then, if people here still end up starving, you don't have to feel guilty?


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