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Eddie Cross: This Interconnected World

When my ancestors landed on the Coast of southern Africa in the 19th Century they found a continent which was barely out of the stone age. Tribal wars were the norm as communities raided each other for whatever they could find. There were powerful kingdoms with well organised and disciplined armies, but their weapons were the spear and shield.

We subjugated the indigenous tribes and quickly, despite our small numbers, established control over vast swathes of country. Our religion, our law, our languages, our system of government were dominant. Little recognition was given to the culture or languages of the local people. We found diamonds and gold and started farming on land we simply took for ourselves. Immense fortunes were made by men whose names reverberate across the globe even today.

It could not have happened, even in those years, if this had not been an interconnected world. The old countries of Europe and the growing power of the United States had the resources, know how and appetite for the ‘new world’. When Rhodes finally appreciated the wealth of the gold discoveries on the South African highveld, it was to the bankers of Europe and the USA that he turned for the finance to build what became one of the greatest sources of wealth in world history.

Southern Africa went to war over these spoils in the Boer War when a tiny force of Afrikaners fought the first guerrilla war against the greatest power in the world at the time and tied down 500 000 men for three years. [To give you something to judge that by, Russia has just sent 200 000 men against Ukraine.]

But once we had settled our differences, this tiny community of perhaps 500 000 people of European descent quickly set about building up a modern economy in all the countries where they settled. Ports were established, rail lines snaked across the veld, build by hand at a mile a day.

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Even today these engineering achievements daunt. Towns and cities sprang up – Johannesburg doubling in size every six months. Driven by colonial zeal, these sturdy, enterprising and ruthless men drove northwards, the tide only stopping in the headwaters of the Congo River.

None of this would have been possible if we had not been operating in an interconnected world. Even then it was possible to travel by sea in ships that crossed the oceans.

We could send a telegraph and soon our road network together with railways enabled us to travel quickly across the land we now regarded as home.

When Rhodes decided in Bulawayo what to do about the gold discovery on the Witwatersrand he sent a man on horseback to the head of the telegraph in Kimberly to wire instructions to his broker in London.

When he saw the Victoria Falls for the first time, he resolved to build a bridge across the Gorge below the Falls but close enough for the spray to reach the bridge.

When he ordered this project, along with a thousand miles of railway line to the Congo, it was to Glasgow that he turned for the fabrication of the span. When it arrived by train from the coast, it was one centimetre short! A stunning achievement made possible by an interconnected world.

Some years ago, I visited a friend who was living in the University town of Oxford. While there I was given a tour of the University which is now one of the main centres of learning in the world.

I was struck by the sense that my part of the world, southern Africa, was so deeply embedded in the fabric of the University. Rhodes went there for a degree and bequeathed much of his very considerable fortune to the place. The Rhodes Scholarships are his creation and continue to influence the world today.

Most people do not know that an Afrikaner in the form of Jan Smuts was the intellectual founder of the United Nations and the Commonwealth.

When Europe went to war in 1914 and then again in 1939, southern Africa more than played its part; we sent troops and equipment to join the fight. After the Second World War, Rhodesian troops fought a guerrilla war in Burma. The only time a communist insurgency was defeated.

In return fresh waves of immigrants from Europe came out to the region to settle and brought with them new skills and experience. Southern Africa was within the Sterling Zone and benefitted by special trade and other agreements.

Under these arrangements massive infrastructure was established. The Kariba Dam, at the time was the largest single civil engineering project in the world. The Mazoe Citrus Estates were established, the tobacco, maize and beef industries flourished.

It was possible for us to borrow vast sums from the older banking systems of Europe using our colonial structures and connections.

In the post-world war era, Germany and Japan were able to rebuild and become the economic giants today because they were integrated to the global system. Free trade policies and access to global financial markets made it possible for them to recover from the devastation of the war and take their place today as main drivers of the global economy.

China, for centuries closed to the outside world, a cultured society that had thrived long before Europe emerged from its Feudal history, was plunged back into total isolation by the Communist takeover in 1949.

Until Deng Xiaoping became de facto leader of the Communist Party in 1977, China remained a relatively backward State with short life expectancy and low standards of living.

Today, after just 45 years, China has the second largest economy in the world and has reached levels of sophistication that rival older countries in the West. How was this achieved?

The key was revealed at Davos in Switzerland a couple of years ago when the President of China was the main proponent of a globally integrated world.

He called for the world to maintain the system that had enabled China to borrow trillions from the older economies with financial surpluses and become the industrial heart of the world economy. I can remember delegations of Chinese businessmen visiting factories with cameras and note books, searching for ideas and technologies to take home.

The past half century has seen reduction in global poverty on a scale never seen in history. The main driver has been global integration. Access to markets, infrastructure development to make it possible to secure raw materials at least cost, just in time technologies in manufacturing.

Integrated financial markets where money can move with the speed of light, the surpluses of one region can be employed by another and low costs of borrowing have driven growth across the globe.

No country has been more important in this process than the United States where a free market system backed by technologies, has created the greatest economy ever seen. The US dollar is used for three quarters of global trade. It is the worlds most trusted currency.

For this reason, when the United States imposes financial sanctions on a small country like Zimbabwe, as they did in 2001, it has very far reaching implications.

It cuts us off from the global financial system, makes it more expensive to borrow and increases the risks of investing and operating in this country.

Standard Chartered Bank – here since 1896, is closing shop this week, because its parent company cannot accept the risk to itself of owning a subsidiary in a sanctioned State. That says everything.

Eddie Cross is a former opposition MDC MP for Bulawayo South and a respected economist. You can follow his blog African Herd