‘The Elephant in the Room’: New World Bank Report Only Confirms Its Complicity In Sucking Resource-Rich African Nations Dry

For more than a decade, the World Bank — the international financial institution that provides loans to countries of the world for capital programs and development — has published an annual report gauging the comprehensive wealth of 141 nations around the globe. In doing so, it has relied upon a group of indicators beyond the traditional measure of gross domestic product (GDP) since GDP mostly provides an income-based assessment of a country’s economic progress. Given a nation’s income and well-being are anchored in its total assets or wealth, including its natural resources, labor force, production and net foreign assets, the World Bank report examines these important areas within the context of a country’s long-term economic growth and sustainability.

“Development is about managing a broad portfolio of assets —  produced, human, and natural capital,” stated World Bank CEO Kristalina Georgieva, in the foreword to the 2018 report. “Just as a company measures its value by looking at both its income statement and balance sheet, a look at comprehensive national wealth signals if GDP growth can be sustained over the long run.”

Among its primary findings, the report revealed that while global wealth grew significantly between 1995 and 2014, per capita (per person) wealth did not, especially in numerous African countries where population growth outpaced investment. This is particularly problematic given that human capital, a person’s earnings over their lifetime, is a critical indicator when determining global wealth and development. Ironically, one of the major issues fueling this ongoing disparity in wealth and human capital, said the report, is that these are actually “resource-rich” countries where nonrenewable natural resources like oil and minerals are extracted by private foreign interests who pay fees or “rent” to do so, but with little benefit to local economies.

“Resource-rich economies face unique development challenges to transform an exhaustible resource, such as oil, into assets that can continue to generate income and employment once the oil is gone,” stated the report. “Oil rents, for example, provide substantial revenues for financing development and moving a country onto a higher growth trajectory, but this goal can only be achieved with the right institutions and governance to capture the rents and invest them effectively in other productive assets.”

This so-called “resource curse” embodies the worsening poverty and lack of income and wealth plaguing many African nations amidst the ongoing extraction of their natural riches.

However, some maintain this curse is largely facilitated by the World Bank itself.

“This report shows the apparent paradox that a number of resource-rich countries, most of them in Africa, are getting poorer, which points to the continued looting of the poorest countries by vested foreign interests,” said Frédéric Mousseau, policy director for the Oakland Institute, an independent think tank on international policy. “In its usual schizophrenia, the Bank calls for better governance and stronger institutions while also advocating for pro-business policies that would allow the private sector to flourish,” pointed out Mousseau. “How can low-income countries build stronger institutions while the World Bank pushes them to deregulate, cut taxes and thereby reduce the resources available for public intervention in their economies?”

Such critiques are far from new. The World Bank and the International Monetary Fund (IMF) — U.N.-based organizations aligned to manage the global economy, with the IMF focused on economic stability and the bank on fighting poverty through development — have long been considered the puppet-masters of global economic inequity while promoting further impoverishment of resource-rich nations through policies of austerity, financial liberalization and privatization. Such harsh policies, which encourage unequal growth, prioritize wealth extraction for Western profits, and enforce foreign loan repayments, are what Guardian economist Larry Elliott characterized as “straight out of the structural adjustment playbook: reduce public spending, cut salaries and benefits, insist that state-owned enterprises return to the private sector, reduce minimum wages and restrict collective bargaining.”

Elliot further pointed out that tax havens, a common method used by wealthy international interests to avoid taxes without public scrutiny, were used by 51 of the 68 companies lent money by the World Bank’s private finance arm, the International Finance Corporation, to fund Africa-based investments in 2015. In addition, Mousseau’s Oakland Institute has consistently documented World Bank involvement in and facilitation of land grabbing in Africa by foreign interests, inequitable aid programs, and skewed continental agrarian policies.

“The World Bank is controlled by rich nations, especially its main financial contributors, the U.S. and U.K., which are also among the most active at extracting resources in resource-rich countries,” explained Mousseau, citing how “U.S. corporations control by far the largest share of DRC (Democratic Republic of the Congo) forest resources, with over 3.6 million hectares of land acquired for logging and palm oil.”

With its “financial power and its unique position to guide and ‘advise’ governments in the developing world, the World Bank is used in different ways to encourage this extraction of resources and continued exploitation of the poorest countries.” For instance, said Mousseau, “it co-finances projects through its International Finance Corporation, it provides insurance to corporations through its Multilateral Investment Guarantee Agency, and it provides ‘advisory services’ through its Facility for Investment Climate Advisory Services, Doing Business and Enabling the Business of Agriculture rankings, all put in place to push governments to remove social and environmental regulations, cut taxes, and take other measures to facilitate foreign investments.”

These inequities are further reinforced by puppet African regimes that secure or maintain power largely by enabling powerful Western interests by way of World Bank/IMF policy. Governments in the central part of the continent, in nations like the DRC and Rwanda, have facilitated the ongoing looting of the abundance of riches in the DRC by foreign interests. Given such foreign interests underpin their rule, these regimes are highly unlikely to prioritize domestic investment for the sake of human capital and needy citizens within their own borders.

The World Bank data reflects this, concluding that over $100 billion in adjusted net savings (ANS) — a World Bank-generated measure for changes in economic, ecological and educational wealth — has escaped the continent annually given “its development policies are not yet sufficiently promoting sustainable economic growth” and its “natural resource depletion is one of the key drivers of negative ANS in the region.”

Still, Mousseau does believe the report got something right. He backs the recommendation by the World Bank “rightly advocating for diversifying economies from resource extraction” and promoting investment and growth outside the resource sector. Such diversity would further support the development of human capital and wealth while curbing the dependence of African economies on natural resources.

But, apart from this, Mousseau feels the report has little to offer in terms of effective solutions. “In 255 pages, the World Bank economists fail to mention the elephant in the room,” said Mousseau, stressing “the wealth that is extracted from the poorest countries with limited returns for their populations is not going into a vacuum, but contributes to the wealth of rich nations and their corporations.”

Given the World Bank’s ongoing complicity in this inequitable process, Mousseau begged, “What is then the point of calling for good governance in the poorest countries when global governance is all about colonial exploitation and a power imbalance?

“Instead of being complicit in the theft of resources that local population depends on, the World Bank should fulfill its mandate, which is fighting poverty,” continued Mousseau. “This would mean concretely defending the interests of the poorest people and the poorest nations and standing by their side against exploitative and destructive foreign interests.”

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