JABULANI SIKHAKHANE: Ramaphosa should be mindful of US’s self-interest when meeting Biden

The end of the British Empire, which overlapped with the beginning of Queen Elizabeth’s reign, is a reminder of the lengths to which the Americans will go to secure their economic interests and get rid of a political rival. It’s a lesson President Cyril Ramaphosa must bear in mind when he engages with US President Joe Biden later this week.

Of course, SA is no British Empire. It’s a small, open economy that depends heavily on the rest of the world for its sustenance, a world in which the US still packs a lot of economic and financial heft. By contrast, SA’s economy has been stagnant for more than a decade.

Historian Peter Clarke writes that at the peak of the British Empire: “Enormous areas of the world’s surface were painted red on the map, from arctic Canada to tropical Africa, from the specialist plantation-crop zones of the West Indies and India to the temperate grasslands of Australia and New Zealand, from the Canadian prairies to the SA gold mines — the produce of the world came to British tables, the riches of the world lined British pockets.”

Naval supremacy (with a string of key bases around the world), the empire and the gold standard, which Clarke describes as interlocking and mutually supportive, “were at once the three symbols and the three pillars of British power and pre-eminence”. The three were shaken and their fragility exposed by World War 1 and by the Great Depression in the 1930s.

The empire’s trade and economic arrangements, writes Clarke in Hope and Glory: Britain 1900-2000, were “a world wide web based on free markets, with their multilateral transactions delicately regulated through and by the City of London”.

It’s access to these markets that Americans coveted, so much so that they used Britain’s desperate need for military and economic assistance during World War 2 to pry open the empire’s markets. The legislation that underpinned American aid to Britain, famously referred to as Lend-Lease, contained a clause, article VII, that called for the elimination of “all forms of discriminatory treatment in international commerce, and to the reduction of tariffs and other trade barriers.”

As American economist Benn Steil has pointed out, Lord Maynard Keynes, the famed British economist who was the British frontman for the negotiations at the Bretton Woods conference where the IMF and World Bank were born, understood that article VII was in reality a code for an end to the trade preferences that existed between Britain, its colonies and the dominions.

These preferences were put in place at the Imperial Economic Conference held in Ottawa, Canada, in response to the Great Depression. SA agriculture benefited from these arrangements, which provided for quotas of meat, wheat, dairy goods and fruit to enter the British market free of import duties. 

Steil is author of The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order. The book shows how Bretton Woods was in reality an “ambitious geopolitical agenda hatched within president Franklin D Roosevelt’s Treasury and aimed at eliminating Britain as an economic and political rival”.

Steil explains that American bitterness towards the economics of the British Empire had been building up long before the beginning of World War 2. Already short of dollars by 1940, Britain negotiated agreements with countries that formed the sterling area, including SA, to pool all their dollar earnings from exports in London and to only use these for essentials from America.

In addition, Britain also struck agreements with neutral countries in Europe and Latin America to pay them in pound sterling, earnings that could only be used to pay for goods and services bought from sterling-area countries. The net effect of all of this, which was to block the conversion of pounds into US dollars, was to keep demand for American goods low.

“This naturally mobilised American exporters and congressmen to clamour for full and equal access to Britain traditional export markets,” writes Steil. That explains the inclusion of article VII in the Lend-Lease, which Keynes would later describe as the “lunatic proposals”.

And the Americans squeezed Britain hard during and after World War 2. At the end of the war, Clarke observes, Britain was left with a sterling area that “was a scaled-down simulacrum for the international gold standard as London had once managed it”. For Britain, he adds, waking up to the new realities proved a painful experience. If not careful, SA might too.

•  A sin of omission: in last week’s column I should have given auditor-general Tsakani Maluleke credit for her courage in asking for the allegations against her to be investigated.

• Sikhakhane, a former spokesperson for the finance minister, National Treasury and SA Reserve Bank, is editor of The Conversation Africa. He writes in his personal capacity.