The ninth year of the second millenium is over. As we look back, 2008 will be remembered for many momentous events. In Africa, Thabo Mbeki was forced to resign as President of South Africa and formation of the Congress of People signaled the end of the ANC’s monopoly on political power; Guinea’s strongman Lansana Conte died after 24 years in power and history repeated itself when a little known Captain Moussa Dadis Camara staged a coup and named himself President at least until December 2010; the post-election violence in Kenya that started in 2007 continued but some how the shaky coalition survived and made progress in finding some real answers to the problems that lead to the crisis; Zimbabwe had indecisive elections and the power sharing negotiations that called for a unity government was left hanging on a thread; violence and displacement continued to reign in the Sudan and it accelerated in the Democratic Republic of the Congo; the west coast was dubbed the “coke coast” and Guinea-Bissau classified as a narco-state and piracy in the Gulf of Aden became the entry-point for many discussions of the anarchy in Somalia.
Globally, Barack Obama made history by out-organising, out-spending and overcoming Hillary Clinton in the Democratic party primaries and trouncing John McCain and his off-key VP pick Sarah Palin, to become the first African-American President-elect; the Russian army invaded Georgia; Castro celebrated fifty years in power; terror struck and killed at least 192 civilians across India’s financial capital and symbol of opulence and escalated tensions between nuclear rivals Pakistan and India; Iran continued to pursue its ambition to acquire nuclear weapons; the Taliban insurgency continues to grow in strength in Afghanistan and the Israeli-Palestinian conflict remains as intractable as ever.
There was some hope in Iraq as the surge seems to have worked. Radovan Karadzic finally faced justice in the Hague and Ingrid Betancourt, the Colombian-French anti-corruption activist, held by Farc guerrillas for six-and-a-half years in the Colombian jungle was finally freed. China endured earthquake pain and basked in Olympic glory as Usain Bolt and bionic swimmer Michael Phelps made the headlines in Beijing.
But the most memorable event in 2008 was close collapse of the world’s financial system. The failure of Lehman Brothers, the 158-year-old Wall Street investment bank, triggered panic in markets. The authorities in leading markets in New York, Washington, London, Frankfurt and Tokyo looked on helplessly. Over 20 banks collapsed in the US. Britain’s high street banks had a near-death experience. Two British bank giants, HBOS and Royal Bank of Scotland, were on the verge of collapse. Iceland’s three largest banks collapsed and it triggered an implosion of Iceland’s entire financial sector. In October, it became the first Western nation to go to the IMF for support since 1976. The Great Credit Drought, caused by banks hoarding capital, threatened to trigger multiple corporate bankruptcies. The Big three US carmakers, General Motors, Ford and Chrysler, were on the verge of filing for chapter 11 bankruptcy. More than 500,000 Americans lost their jobs in November the highest monthly total in more than 30 years.
Financial and commodity prices soared and then tumbled. Oil ended the year at about $44 a barrel after reaching an all-time high of $147.27 in July. Metals like aluminum, copper and nickel have declined by a third or more. As oil and food prices soared in early 2008, World Bank President Zoellick warned the world was entering “a danger zone,” threatening to undo the gains made in overcoming poverty over the last seven years. Economists warned of a Depression as confidence evaporated in the banking system.
As the crisis deepened, a new term entered our vocabulary bailout. At a time when the world has heralded the demise of communism and was hailing the victory of capitalism, most western governments including the Republican administration of George W. Bush found themselves drawn into advocating a rescue package for the financial sector which had hitherto projected an air of invincibility. By year’s end, the US rescue was headed well above $1 trillion which included committing taxpayers to bailout mortgage corporations, Fannie Mae and Freddie Mac to Bear Stearns and AIG.
The US intervention was not unique. In the new age of fragility, governments around the world reasserted their role. In Argentina, the government has nationalised the country’s 10 private pension funds, putting it in control of almost $30bn of investments. The government in Australia announced it would guarantee all bank deposits with financial institutions over the next three years. In Belgium, the largest banking group, Fortis, needed the intervention of the Belgian and Dutch governments and the sale of some of its assets to French giant BNP Paribas, to stay alive. Following negotiations, the UK government injected $64bn of taxpayers’ money into three major banks.
The chicken had finally come home to roost in the capitalist west. The innate superiority of the western model of market capitalism and the inevitable progress of globalisation was finally called into question. China and Russia felt vindicated. Both countries had long pursued the path where the state enjoys a commanding role in the economy.
In 2008, they marched further in that direction, consolidating control over sectors deemed vital to national security, such as energy and commodities. French president Nicolas Sarkozy, summed it up excellently when he proclaimed: “Laissez-faire is finished, the all-powerful market that is always right, that’s finished … ” Adieu capitalism.
By Edward Olu Wright