Joseph Stiglitz, like many other professors, has no idea about life on main-street.

Sir, Joseph Stiglitz writes that in Africa “even countries that have introduced reforms and achieved high growth have not generated enough formal sector employment to absorb the growing labour force” and suggests that “the US should encourage foreign direct investments into labour intensive light manufacturing and agro-processing industries” “A new American strategy for business in Africa”, August 4.

Sadly professors, like Stiglitz, often lack one vital qualification when it comes to giving this type of advice… namely any personal real life experience of what it takes to get a business going.

For instance, Stiglitz has probably never accompanied a small entrepreneur to a bank to apply for a loan, and seen how hard that is, and seen how the applicant is often forced to distort facts to even have a chance to get that loan he believes might change his future. And Stiglitz has most certainly no idea of how those travails have been made even harder by the introduction of the risk-weighted bank capital regulations.

And I hold that as a fact because the Report of the Commission of Experts of the President of the United Nations General Assembly on Reforms of the International Monetary and Financial System, and of which Stiglitz was its chairman states “Variable risk weights used to ascertain appropriate capital adequacy standards can have strong incentive effects. Regulators need to be aware of distortions in capital allocation when provisioning and capital adequacy requirements do not accord well with actuarial risks”.

And that indicates they have no understanding that these capital requirements distort even though actuarial risks have been perfectly indentified, for the simple reason that these actuarial risks are already being cleared for by interest rates, size of exposure and other terms… and which translates directly into an added regulatory odious discrimination against the fair access to bank credit of those perceived as risky.

If Stiglitz understood how risk-taking is the oxygen of development, and knew how many African countries have or are in the process of implementing a developing strategy that is based on making banks more risk-adverse than they already are, he might cry… but as I said, for that, you must get out and do some walking on main street first.

PS. By the way, as rough as things are on many main-streets right now, I would not be that fuzzy about jobs having to be formal… even informal jobs will do for the time being... who knows, even informal jobs can carry the seed of a formal job.

More than sovereign credit ratings we might need sovereign ethic ratings.

Sir, last week in an Op-Ed I published in Venezuela titled “Creditors of Venezuela, read our Constitution!” I wrote: “In the same way there are international conventions that help foreign investors to collect what governments duly owe them, there should be agreements that help citizens not to be saddled with the payment of debts incurred by governments who violate their constitutions.”

That is exactly what should happen to those that Michael Holman refers to in “Investors in corrupt ‘new Africa’ repeat old errors”, April 9.

Neither creditors nor investors should receive any help to enforce their commercial rights if it can be proven they did not fulfill their moral duties of making reasonable sure human rights violations and acts of corruption were present. More than sovereign credit ratings we might need sovereign ethic ratings...and to make these count.

To reduce the too many cars it might be better to eliminate some infrastructure, like some roads.

Sir you use as an illustration for Mathew Green’s report on lacking infrastructure a photo from Lagos from which one could conclude that it is not infrastructure that is lacking but the cars that are too abundant, “Crisis puts the brakes on”, April 2. Have this financial crisis already made us forget the energy and climate change crisis?

Purposeless human sacrifices.

Sir you are absolutely right saying that “Zimbabwe needs a political solution” December 8 and which should be nothing short of Mugabe’s resignation. The current sufferings in Zimbabwe, which have nothing to do with religious or cultural traditions but just with the mad ineptitude of an autocrat that wants to hang on to power no matter what, are not the kind of offerings that could be justified on the sovereignty altar of any country. And most of the African leaders know it, which makes the inaction of so many of them even worse.

While an Executive Director at the World Bank 2002-2004 I gave my unlimited and heartfelt support to the African countries in the issue of more voice to them and more freedom to apply their own criteria and country systems. Today I pray all Africa makes it very clear that a Mugabe represent neither an African voice nor an African country system

Remember the bottom billion will also afford less a Zimbabwe

Sir Bob Geldof, in all honesty believes that the current crisis is the result of a runaway laisser faire fundamentalism and he is wrong. There is no laisser faire in having some bank regulators decide on their own upon some minimal capital requirements for banks based on a vague concept of risk and which places a regulatory de-facto tax on risk taking. Neither is there any laisser faire in the empowerment of some few credit rating agencies to act like the world guides on matters of risks, and which has made of them the largest propagators of the subprime virus. This though does not take away one iota from the correctness of many of Geldof’s proposals in “Remember the bottom in our brave new world” November 14, especially since most of what he argues was just as valid before this crisis.

Now unfortunately the reality of the crisis is such that even if the needs for help will increase the availability of resources and the willingness to help will decrease and that, whether you like it or not, will also require diminishing the laisser faire attitude implied in “allowing governments to determine their own agenda”. I have always fought for the right of countries to have their own unencumbered voice but the underlying assumption is of course that the quid pro quo is a more responsible behaviour. In this respect, a continent, like for instance Africa, needs now to be much more forceful in handling their Zimbabwe, if it wants to maintain its credibility.

Donors should cap aid concentration in Africa… and everywhere

Sir, coming from an oil cursed country (Venezuela) and knowing too much about having to live with governments that are made wealthy independently from their citizens, I absolutely agree with the general concept that Adrian Wood expresses in “How donors should cap aid in Africa” September 3, though I cannot understand why he makes a specific exclusion in the calculations of the revenues from oil and minerals.

If we are to have sustainable democracies, where governments are accountable to their citizen, then a rule that caps all the revenue that the State obtains, whether from aid, oil or whatever not paid directly to it through non-coercive means by their own citizens, to a certain percentage of GDP, for example 5 percent, and otherwise obliges that all aid (and hopefully oil revenues too) is distributed directly to the citizens would seem like a much better alternative.

You should not impose a limit on how much help donors want to give, not with the many needs at hand, nor at how much a citizen could receive, not with the many needs at hand, and I do not know of any such limit that has helped a developed country to develop, but, you sure could help to impose limits on how to avoid to concentrate the aid given and received in too few gubernatorial hands. Please go ahead!

Send China’s surplus to Africa!

Sir, somehow I felt that a question mark was missing in the title of Martin Wolf’s “The Right way to respond to China’s exploding surpluses” May 30, since after reading it I must confess I did not feel much wiser. Yes, agreed, China is accumulating much capital now, but that perhaps this is only so because we are using very short yardsticks to measure, like years instead of decades or even centuries. Yes, it seems that China should be able to spend more on such praiseworthy items as health and education, but we also know that it is not possible to spend in a contained way without having it slip over into other demands, like for instance more cars for teachers and doctors which then will require more oil. The real answer to China’s surpluses must be helping them to come up with a long term investment plan that makes sense. For instance, in a world where the energy/carbon-emission factor is clearly going to impose constraints on growth, there might be many preparatory investments that China could do. But if we start looking at it from that angle let us not forget that the US could also be better of doing some of these investments instead of using Chinas savings in dollars for consumption, or for postponing fundamental health and education reforms.

In a global world there will come a moment when we need to start analyzing the global marginal return of projects (GMR), and, from this perspective, perhaps Glenn Denning and Jeffrey Sachs’ article “How the rich world can help Africa help itself” and that coincidentally appears next to Wolf’s might be faulty titled too and should read “How China should reallocate their savings and help Africa help itself.”

Please, pick the cherries!

Sir, Andrew Jack reports that “World Bank agency seeks to create African health funds” April 30, and that one concern about one of its agencies, the International Finance Corporation, launching an equity fund is to “ensure that for-profit healthcare services supported by the debt and equity funds in Africa do not simply back businesses that “cherry pick” richer patients but instead reach the poorest in rural areas in the lower income countries that suffer the most.”

Clearly we should try to find the ways to bridge the horrible needs of the poor in Africa, but while doing so let us not ignore that “cherry picking” is exactly one or perhaps the most important tool for achieving sustainable economic development. If the world had used more its development funds to help Africa to persistently service the health needs of their sweetest cherries, instead of having these go to Paris or London for their health treatments, then perhaps we would have allowed many more sherry seeds germinate into cherry trees and there would be more cherries in Africa.

It is amazing how sometimes development agencies are hindered from using what has proven to be good development tools in developed countries.