Volcker shares concerns
World-renowned economist Paul Volcker has expressed some suspicion about the billions of dollars that China was pumping into Africa as “development” assistance.
The former chairman of the United States Federal Reserve went so far as to say that China did not always “play by the rules”, though he did not expand on the statement. Addressing a full house at Frank Collymore Hall with the audience spilling into the foyer and the Grande Salle, Volcker explained that China, with its 1.3 billion population and quickly growing economy, was on a quest for natural resources.
The eminent economist, who was in Barbados at the invitation of Government, was responding to a question from the audience about China’s growing influence.
He said the Asian country was really worried about a continual flow of raw materials for its powerful economy.
Many of those raw materials, such as oil, gold and other metals, can be found in Africa, and China was basically “buying” influence on the African continent.
“That could create some problems,” he noted, but conceded that African countries could benefit from their relationship with China.
According to the Princeton and Harvard-trained economist, policymakers in his country should have undertaken adjustments in the China/United States relationship when they realized just how much China was holding in American reserves.
At the moment, China holds more than US$3 trillion in United States reserves.
“Any country that was absorbing that much reserves or a country that was losing that much reserves should have caused them to relook their policies,” he told the large audience that included many public and private sector leaders and academics. In his advice to Barbados, Volcker said the country had to be “fast on your feet”.
The 85-year-old respected economist urged Barbados to advocate for a strong monetary system, saying that small countries should be the biggest proponents of change. At the same time, Volcker expressed concern about what was happening in his country where average incomes had fallen over the past two decades.
“There has been no increase in average income of average American families for 15 years. That is not supposed to happen in a growing economy. Productivity increased and the theory was that it would be spread through the economy but that has not been the story of the last 15 years in the United States,” he told the captive audience.
“It helps to explain some of the political tensions that you may have been hearing about in my great country.
“Beyond the lack of increased income for the average family, there is a small sliver of people at the top who have had a very, very large increase in income. The top one per cent account for 40 per cent of all the increase in the last ten years. One-tenth of one per cent accounts for 12 per cent of all the income of the country,” Volcker revealed.
According to him, “The last time we had any income distribution of that sort was in 1929 . . . . What’s happening is that we have had very large imbalances in economies.”