Someone posted this on facebook and I sort of can’t stop thinking about how bad it (and the report it’s based on) is. Not in an it’s-wrong-about-literally-everything way, but in the conceptual and mathematical dog’s breakfast of a calculation that is the hook of this article.
Anyway, I suspect some of my mutuals might enjoy tearing it apart.
I was expecting generic anti free trade stuff, but the article I’m reading here is about tax dodging, noxious debt practices, and outright theft.
“Theft” is hyperbole. Tax dodging and predatory lending are legit problems where foreign interests are at fault. Others are problems that are not fully or at all attributable to “us.”
There are some more particular issues with the analysis, but the general point is that the calculation is pseudomercantilist nonsense, confusing currency with wealth.
For instance, it puts direct investment on one side of the ledger, and profit repatriation on the other, notes that the profit is greater than the investment, and calls that theft. But, like, that’s what capital is–you put in some, you get more out. Anything else is not capital, it’s aid.
The neoliberal point is that investment creates wealth, much of which will stay in Africa. That wealth is hard to quantify, but includes money paid to local employees and that money’s movement in the local economy, the resulting upward pressure on salaries, the provision of necessary products and services, the multiplying effects that these products and services might have on the local economy (e.g. IT, transportation, automation), the know-how that foreign companies bring into the local market, and quite a bit more. I can’t speak for Africa in particular, but I’ve seen it happen in Brazil.
(The same logic works for loans–you pay more than you take. And while some of those are in fact abusive, there’s no inkling in the paper of the idea that loans are not universally abusive and might have a role in creating wealth.)
Not to mention that much of what is lost is not about outside powers but rather the failure or nonexistence of local institutions. Leftist analysis of how foreign economic interests have undermined the formation of these institutions is important, but insufficient.
Overall, I’m against the simplistic but pervasive idea that all that needs to happen for countries to develop is for foreign “plunder” to stop. Foreign powers can help by policing tax evasion, by policing the trade of illegal extractivism, by policing damage to the environment and by providing fair loans, sure. But most of the work is internal–in the development of local institutions and economy.
When I say ‘theft’ I am referring to their complaint of “illegal logging, fishing and trade in wildlife.“
And your description of “profit“ works equally well for theft‘ or fraud, you get more money out than you put in for those as well. They are describing how wealth can leave in that amount, and you have to ask. “Is ordinary profit sufficient to get that level of return?“ Or is it theft and fraud going on there?
And loans can create wealth, but one of the nice things about ordinary lending is bankruptcy. With sovereign debt it’s a bit harder, and the US has a whole industry talking foreign leaders into large debts that cannot be repaid and cause crisis, and can end with IMF programs that force reforms on countries that they are now admitting do not work.
And is this debt used to finance productive investments? A lot of these projects are not. A lot of these are the product of bribery and fraud. But that’s OK, because then you or the next dude can sell off bits of the country to pay them off. That’s how this type of debt can work.
They need more to develop than the stoppage of plunder, yeah, but it’s hard to do that when you’re being plundered.
Calling illegal logging, fishing and poaching “theft” is exactly what I was referring to as hyperbole. The harm is in lost tax revenue and environmental damage–there is no outright theft going on.
(Also, most products of illegal extractivism, by far, go to China. Does that make it less “our” fault?)
The issue is that the logic of the calculation is that all loans and all investment are going to be net-negatives. The only logical conclusion is that Africa is better off with zero debts (business and sovereign) and zero investment.
Taking this further–let’s talk a little about Brazil, because it’s a case I know well. Brazil basically eliminated its foreign debts. It did this essentially by converting that debt into government bonds. By all accounts, this has worsened the situation. The financial market is far less forgiving–defaulting would tank the economy, no relief of forgiveness programs possible because the bonds are distributed, so there’s no single entity to negotiate with.
We’re embroiled in a historic corruption scandal that involves the President, most of his cabinet, the leaders of both houses of Congress and most of the congresspeople therein. This involves extensive graft schemes, largely connected to a meat conglomerate, a construction giant and a publicly-administered oil and gas company–Brazilian-owned and -run companies all.
Where I’m trying to get at is this: a kleptocracy is a kleptocracy. If foreign companies are knee-deep in corruption, then local companies and politicians are chin-deep. Africa is not poor because it’s being plundered, Africa is poor because Africa does not have the institutions and local conditions to be rich. Forgiving debts and policing corruption in foreign multinationals will help, but will not lift Africa out of poverty.
(The study points to a yearly deficit of $41 billion, which sounds like a lot, until you realize that’s less than 40 bucks per person per year. Even if those figures made any kind of sense, this is definitely not what is impoverishing Africa.)
What else can help? Exporting Western institutions is called colonialism and it’s a bad scene. What we have left apart from aid (much of which is counter-productive) is loans and investment, while hoping for the best as institutions develop locally.
“Removing without the permission of the legal authority“ is the
goddamn definition of theft. You can argue that it’s not the government
that’s being stolen from, but rampant theft tends not to improve the
economy even when it’s not the government’s property being stolen. And those resources are what those governments
could use to get capital rather than loans.
You are arguing that kleptocracy retards development. I can argue that it’s development that retards kleptocracy. While the US was developing we were a massively corrupt nation, we had whole political systems based on giving political jobs to friends and the transcontinental railroad was an amazingly corrupt endeavor from start to finish. But we developed, and now we are less corrupt.
The thing about debt is that, it can prevent development. It prevents it because instead of building schools and roads or even just pay off troublemakers to shut up, you have to scrape together everything you can sell for foreign exchange. It means that, rather than attract kleptocrats who benefit from a growing pie, you attract kleptocrats who extract and cheat to get money. And you get your country taken over, previously by armed forces, now by the IMF. Then the measures they need to take to develop become even more impossible.
Given the poverty that many people in Africa are living under 40 bucks per person per year ain’t nothing, that’s a good start on roads and school that they can then use to make more money to build more roads and schools. I don’t claim that that they’ll instantly industrialize, but I think it would help.
And the argument is not so much that loans are net-negative, but that loans should pay for themselves. The fact that those countries remain creditors suggests that they are not. You may believe this is the result of good faith attempts at investment, I think that’s bullshit.
I think it’s both kleptocracy and lack of development that empower each other. Low trust society is a sort of local stable equilibrium that makes everything more expensive at once. Suggesting that it’s just lack of development is reducing humans to economybots. It also suggests that societies with lower levels of technology - basically every society before 1950 - must necessarily have been more and more corrupt, and that managing corruption was something essentially impossible in some place like ancient China or feudal Japan.
Within this consideration, I’m not sure on how to manage this. I have some ideas that a more ideal nation could execute, but hooooo boy most modern Liberals and Leftists would not like it.
