On the afternoon of Sunday, 15 February 1942, General Sir Arthur Percival walked up Bukit Timah Road in Singapore and surrendered to General Tomoyuki Yamashita.
Percival surrendered 86,000 well-fed, well-supplied British troops on their fortified island base with supplies, vehicles, planes, and weapons to 22,000 exhausted Japanese troops at the end of long supply lines. He surrendered his troops into brutal captivity of which only about 25% survived.
It was the largest surrender of British troops in history and was one of the most significant but little remembered events of World War II. It drove a stake into the heart of colonialism.
Within 20 years the 400-year-old system of European colonialism largely fell apart. As Europe recovered from the war, former colonies became independent countries responsible for their own affairs and prosperity. Many became known as “developing” or “Third World” countries.
Thus began a series of roughly 20-year cycles of aid, loans, and investments by the richer, industrialized countries, including former colonial powers, to help these countries develop their economies. About every 20 years these efforts mature into a developing-world debt non-repayment problem which needs “restructured.” In general, developing countries do not develop much, investments are not repaid, and a large part of the funding is lost to corruption. Development and prosperity remain permanently in dreams of the future.
As French President de Gaulle said about Brazil: It has great potential - and always will.
We are in such a late-cycle debt default situation now. This cycle has several interesting aspects not present during previous restructuring periods.
First, China, through its Belt and Road program, provides nearly as much investment, aid, and loans for developing countries as all other sources combined.
Second, the world’s supply systems for many commodities, particularly oil, gas, and food grains are undergoing significant re-alignment because of the Ukraine war.
Third, populations of advanced economies largely accepted predictions of dire climate change consequences from fossil fuel use. Thus the governments of these countries embarked on Energy Transition programs. Generally, these programs envision expansion of electricity use to replace fossil fuels by some unrealistic deadline.
Fourth, these Energy Transition programs were adopted with little planning or cost consideration. They mainly accept only wind and solar energy sources which are high-cost and energy inefficient. Massive investment will be required for new energy generation facilities, materials, and new heating and transportation equipment and facilities worldwide. These costs will generate large deficits, high inflation, and probably recessions in advanced economies. Further aid to developing countries will not be available. Such costs will condemn undeveloped countries to permanent poverty.
Fifth, the Energy Transition programs require a several-fold expansion of mining operations worldwide. Many of these resources are present in the developing world: e.g., cobalt, lithium, copper, rare earths, base metals, etc. Such expansion is opposed fanatically by the same populations which advocate for the Transition.
Sixth, in November 2020, the G20 finance ministers led by the US negotiated a new process for restructuring Third World debt called the Common Framework for Debt Treatments.
So we now have a new cycle of Third World defaults and debt restructuring. China’s Belt and Road program is not delivering expected benefits to the host countries. Its projects do not generate revenues to repay the loans. Many projects are poorly constructed and are literally falling apart. The Belt part of China’s program needs suspenders and the Road part is full of potholes.
Secretary of the Treasury Janet Yellen spent the last two weeks traveling around trying to deal with this latest debt problem. Yes; the same Janet who says she really does not understand how to deal with a crisis. First she went to Davos to meet with the Chinese economic adviser to President Xi to smooth relations for some reason. He was there for the World Economic Forum gabfest about the importance of doing away with fossil fuels.
Later she went to Africa and conferred with leaders of troubled debtor countries and learned they would not follow the General Framework because it took too long. So much for all the time to negotiate that; although Janet said she is focused on trying to get it to work. She asked China to forgive Zambia’s debts. She also threatened action against South Africa for not adhering to our sanctions against Russia.
In my experience, undeveloped countries mostly are in that state due to a combination of reasons which they cannot or will not change. Countries achieve a level of development consistent with their culture and ability; outside aid will not change much. They are aid and investment sinkholes. Their resources remain of no use to anyone including themselves.
In summary, the Great Energy Transition dream has now encountered reality. It should be the largest engineering endeavor in world history. Its willy-nilly design and implementation on a piecemeal basis by politicians, however, without consideration of resource requirements, availability, or cost dooms it to failure. In its current form it will soon reach a limiting point. Its costs will impoverish everybody. Many needed resources are in Third World countries and largely unavailable under current intractable financial and environmental conditions. Access will require imposing unacceptable forms of dominance on those countries; re-imposing colonialism is unlikely. As Europe learned this winter, it is better to continue using oil and gas to stay warm, keep the lights on, and move around while we calm down and develop realistic plans to revise our energy systems.
A great irony of the post-colonial world is the one former colony which grew rich, prosperous, modern, and safe without natural resources by relying on the skills, industriousness, and talents of its people and strict clean government is where it all changed: Singapore.