Centenary bond: An intergenerational justice perspective on Chinese overtures, natural resource use and public debt.  By Victor Azure

In 2016, China became the world’s largest economy, overtaking the United States of America, at least in purchasing power parity terms. China’s economy has grown in leaps and bounds over the last thirty years, in addition, its stature in world affairs has grown and so has its sphere of influence. Nowhere outside Asia is this new China visible like in Africa. Major Chinese funded projects in Africa include major rail links in Nigeria and Tanzania, oil pipelines in Sudan, the African Union headquarters in Addis Ababa among others. It has been widely noted that aid from Africa’s traditional development partners has taken a nose dive at a time Africa’s need for credit is growing. This has resulted in a gap between Africa’s financial needs and what traditional partners can or are willing to provide. China is closing this financial gap for Africa and hence its strategic relevance. Following the China-Africa Summit, an idea of a centenary bond between Ghana and China, worth 50 billion dollars in which Ghana might collateralize its bauxite reserves for Chinese money. If this bond materializes, it will clearly bring in more financial resources to the disposal of the government, but it will also balloon   Ghana’s public debt at the same time it could put precious bauxite reserves beyond the access of future generations of Ghanaians. Are there any justifications for so burdening future generations? This essay contributes an intergenerational justice perspective to natural resource use and public debt within the context of Chinese monetary overtures to the developing world.

China’s rise and its economic diplomacy has stirred considerable controversy. For some, Chinese funds are debt traps, others less charitable have described China’s diplomacy towards Africa as a new form of colonization. Nonetheless, more optimistic views about China’s relations with Africa exist, and are held by the decision makers on the continent. The recent China-Africa Summit which was attended by a majority of African heads of state is evidence of Africa’s strong interest in Chinese assistance. This positive view of China’s role in Africa holds that China understands the needs of Africa and is meeting those needs in a mutually beneficial manner. Key among the people who hold this view is the President of Rwanda, Paul Kagame. Earlier in September, Ghana’s president Nana Akufo-Addo re-echoed similar views, describing China as a strategic partner, capable of walking hand in hand with Ghana and Africa into accelerated development. Yet, there are many unanswered questions about Chinese funds in Africa, principally, whether Africa is a net beneficiary of Chinese partnership. The question rings even louder where partnership agreements like the proposed centenary bond that portends serious burdens on the future are in the offing. Meanwhile, as African leaders clamor for Chinese money, in Malaysia, the new administration is cutting down that country’s intake of Chinese debt by putting billions of Chinese funded projects on hold until a time the country is able to carry on such debt on a sustainable basis. In explaining his cancellation of Chinese deals from the previous administration, Prime Minister Mahathir Mohamad said “it’s about borrowing too much money, which we cannot afford, we cannot repay and also because we don’t need those projects for Malaysia at this moment”. The African approach as distinct from the Malaysian approach brings up questions concerning the obligations of present generations to future generations on a range of issues not least; resource use, environmental sustainability and debt.

An issue of justice

Professor Clark Wolf presents a strong case for the adoption of the logic of intergenerational justice as applied to issues of climate change to national debt. This is because the growing discourse and international action on behalf of future generations is seen largely on issues that border on environmental sustainability and mitigating the impacts of global warming as embodied in the Paris Accord for example. Wolf’s thesis, essentially holds that present generations have a responsibility towards future generations as trustees of the earth and the nations within it and this responsibility extends to public debt. The notion of intergenerational justice is anchored on the notion that actions of present generations results in both benefits and burdens on future generations. Thus, if you will, the notion of reasonable foreseeability ought to apply as regards actions of present generations towards future ones in the way natural resources are used and debts are incurred.

Arguably, the notion of intergenerational justice has not received the attention it deserves in substantive law but as a matter of public policy it has animated the bases of government and international action and has indirectly shaped laws. As a legal concept, intergenerational justice is ontologically precarious but at best, it can be read into many preambles to national constitutions of many countries. But that is not the focus of the present discussion.

Former US president and founding father, Thomas Jefferson wrote, “the earth belongs in usufruct to the generations of the living”.  African proverb also has it that “we have not inherited the earth from our forebears, we have borrowed it from our children”. Thus, as usufructuaries or trustees, usage of the resources available at every point in time must be cognizant of the rights of future people who possess an ultimate and perpetual right of reversion. Therefore, where a previous generation hands over more burdens than benefits to the next generation there is intergenerational injustice.

The preamble to the Constitution of Ghana, 1992, says among other things:

“We the people of Ghana, in exercise of our natural and inalienable right to establish a framework of government which shall secure for ourselves and posterity the blessings of liberty, equality of opportunity and prosperity.”

Reference to posterity in the preamble points to a perpetual commitment of present generations to act in ways that are beneficial to future generations. In this sense a debt of 50 billion US dollars, to be paid over the course of a century cannot be fully assessed without considering its intergenerational consequences and whether or not there is an obligation at all to factor in such considerations.

The Jefferson-Madison dialectic.

At the founding of the United States of America, two of the founders wrote at length in the Federalist Papers on the issue of public debt and intergenerational justice.  Thomas Jefferson and James Madison considered the question of limiting the actions of present generations on the basis of the consequences it has on the future. Jefferson was concerned that, if not constrained, present generations could engage in profligate expenditure and mortgage the future to pay for their profligacy. In order to guard against this, Jefferson recommended among other things, that a new constitution be adopted every nineteen years—the period it took for a new majority (generation) to emerge per the calculations of that time. This was to allow a succeeding generation to break from the past and start anew. Failing that, Jefferson proposed law that required an outgoing generation to retire their debt before a new one emerges. In part, Jefferson believed that this could prevent unnecessary wars since it is always easier for present generations to go to war if future generations will bear the cost.

Madison for his part thought differently, although he agrees with Jefferson that an outgoing generation should not pass on too much burdens to future generations, he argued that if future generations can be beneficiaries of the actions of past generations, it stands to reason that they assume some of those burdens. Madison notes that debts could actually be incurred for the benefit of future generations. If so, for Madison that is sufficient justification for passing on debts to future generations. From Madison’s perspective therefore, compensated debts are not burdensome and can   justly be borne by future generations.

A Synthesis

The hardline Jeffersonian position that suggests a strict balancing of the books at the end of each generation is at best theoretically sound but almost incapable of implementation. Modern day imperatives of economic management of a country’s resources definitely require that long term decisions, or decisions that have long term consequences be taken. For policy purposes, Madison’s argument presents a more practical framework for ensuring that decisions of present generations are just in relation to future generations. This framework is underpinned by the view that, it is not wrong to bequeath burdens on future generations, the answer to the justness of the actions of present generations lies in whether there is a net benefit on all future people who will be bearing the cost of those actions. Therefore, if debts are incurred for today’s purposes, it must be accompanied by policies that will ensure that future generations are aggregate beneficiaries of that debt incurred, anything less will be selling future generations short.

The Madison benefit/burden test appears to resolve the thorny question of how present generations can be just towards future generations. Yet, nothing stops future generations from regarding as misguided in their time, the best intentions of past generations. Moreover, what a benefit means within this framework at best is indeterminate. But as the basis for today’s policy decisions, given that future people are not presently represented, what will be beneficial now or the future falls within the hands of governments and people to determine for better or worse. In Malaysia, the pendulum swings towards restraint in actions that could bind future people, in Africa the pendulum is swinging towards taking a chance on behalf of the future. The future, as always, will have the last word.