Make It Plain is opening up to new voices in the community. The first of our “People Everyday” is Jaron, and this is his take on the insidious impact of Western International Financial Institutions on the African continent.
With Theresa May’s African tour just finishing, the development of a colonial post-Brexit relationship with Africa has begun. With promises of an increase in aid and a strengthening of Commonwealth ties, it is now more than ever necessary to reveal the insidious nature of the West’s affairs in Africa and to shed light on the role of Western International Financial Institutions (IFIs). The alleged role of the International Monetary Fund (IMF) and World Bank (WB) in Africa is to help encourage development and investment, with the intentions of “…securing financial stability, facilitating international trade, promoting high employment and sustainable economic growth, and reducing poverty around the world” , as well as providing “…a wide array of investments in such areas as education, health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management. Some of our projects are cofinanced [sic] with governments, other multilateral institutions, commercial banks, export credit agencies, and private sector investors.”
At an uninformed glance, these two organisations look promising - they give out money in order to help poor countries build schools, hospitals and housing. In actuality, they only further the misery and exploitation experienced in the underdeveloped world. The International Monetary Fund, World Bank, and other IFIs, assume the role of a ‘development’ investor in underdeveloped countries. These investments usually come with a catch; the structural adjustment of economies upon the receipt of investment or aid. Structural adjustment briefly entails privatisation of state-owned assets, causing the reorientation of domestic production in favour of cash crop and natural resources. Big investments are made in the private sector, bypassing local governments, and workforce cuts occur in the public-sector, as well as the elimination of import tariffs which gives corporations free reign. The process that follows creates climates reminiscent of slavery and colonialism.
The countries become appendaged to the imperial metropoles and are exploited as a source of cheap labour, a market for capitalism, and a pool of natural resources. Once this structural economic change has been imposed, the real role of the IMF and WB becomes apparent. Capital becomes further centralised around local corrupt elites, removing the need for taxation of the population and therefore the need to represent them. Foreign states and multinational corporations are able to make favourable deals in order to exploit resources, labour, and determine domestic political affairs. These structural changes leave the country independent only in name. Indeed, the only promises fulfilled by the IMF and WB are the bolstering of private sector development, the facilitation of international trade, natural resource ‘management’ and the perpetuation of so-called corrupt regimes; nothing that actually benefits the people in these countries in the short or long-term.
The elimination of import tariffs encourages foreign investment, though at the same time it undermines the efforts of local businesses to build a sustainable economy and create employment – contrary to the IMF and WB promises. With no import tariffs, foreign product can come in at extremely low prices, undercutting local products and dominating the domestic economy. On top of this, multinationals are given financial support from the International Finance Corporation (IFC), an extension of the WB that can bypass underdeveloped companies and directly invest in the private sector, making it impossible for local businesses to compete.
The IFC was founded on a bold idea: that the private sector is essential to development. It is easy to see the IFC is not an organisation acting in the best interests of people in underdeveloped countries. The IFC as of 2013 had assets worth $78 billion, consistently making profits of over a billion per year from projects in a hundred countries.
Unemployment increases and with the addition of public-sector cuts ushered in by IFIs as part of investment deals, the effect is multiplied. The high unemployment rate creates a major opportunity for the exploitation of the local workforce or “unlimited labour” by multinational & foreign state-owned corporations. Extreme poverty in the light of historic and present destruction of economies creates a need for employment amongst the disenfranchised working population. The wages paid by corporations (if they are paid at all) may as well not be wages. They rarely cover the cost of living and the vast sums of capital generated by this labour further show the extent of this exploitation.
Some of the very many examples of multinationals that have exploited labour or resource in underdeveloped countries include; Newmont Mining (Canada) receiving $125 million from the IFC to construct a new mine in Ahafo (Ghana), which recently collapsed in April 2018 killing 6 workers, Walt Disney’s use of sweatshops in Haiti with wages of 11 cents per hour, and the destruction of the Haitian creole pig population by the USA (under the premise of preventing the spread of swine flu) where over a million pigs were slaughtered which in turn opened up the market to US companies to import pigs. It is worth mentioning that the slaughter of the creole pig population had knock-on effects for the rest of the economy – school attendance dropped, unemployment increased, and internal migration into urban areas in search of work occurred.
In countries dominated by foreign investment it isn’t unusual to see production focused on cash crops (sugar, coffee, cocoa, etc. for exportation). Nor is it uncommon to see extremely high percentages of national income generated from natural resources. Poor populations remain in spite of these high capital generating activities, with corporations able to acquire large bulks of unrefined product from the local ‘landowners’ for cheap prices by paying a relatively small rent (known as resource rent) to the state, or by acquiring the land themselves for next to nothing. Cash crop production is a major concern in underdeveloped countries. The industry can generate meaningful income for so-called poor communities, but when the bulk of fertile land is owned by the private sector or unfavourable terms are accepted to secure deals with multinationals, the industry provides nothing.
The reorientation of crop production away from food crop and towards cash crop also opens up underdeveloped economies to foreign food imports. As food crop production is neglected in light of the more profitable alternative food shortages occur and a new market becomes available for multinationals, dealing a huge blow for local business. Foreign imports of former widely produced domestic foods come in to dominate the market, restricting local products increasing unemployment. A few cases that are not specific to these countries and are replicated across the underdeveloped world are: Nigerian textile industry being destroyed by illegal imports that account for 85% of products available on the market, with 325,000 losing jobs alongside 500,000 cotton farmers forced out of work or into other crop; Ghana having to import rice; Jamaica (an island) importing fish; the; British supplying Cadbury with land in the Gold Coast (Ghana) during colonialism, Africans were not allowed to develop industry at this time & therefore had to buy processed goods from multinationals. It is safe to say, economically speaking, underdeveloped countries are still in situations strangely resembling those of the colonial era.
Encompassing the most sought-after commodities on the planet, African natural resources generate massive amounts of foreign interest. The extraction of minerals and ores such as tantalum (coltan) for our mobiles, gold for our chains, diamonds for our wedding rings, gas for our electricity, and oil for our cars occurs under the same conditions generated by structural adjustment. Investment or aid is promised on the condition that the country’s natural resources are privatised. Corporations that wish to acquire these resources can receive funding from the IFC, who simultaneously encourage underdeveloped countries to accept the under-priced deals offered by these corporations. Underdeveloped countries lacking the resources to oppose unfair terms drawn up by IFIs more often than not have to bend to their will. The IMF and WB have been known to withhold aid until terms benefitting the West have been accepted. Even after the deals are accepted, the choice of allocation for the aid money still resides with the IFIs. If ventures such as funding schools, healthcare or increasing minimum wage are deemed unacceptable - as was the case for Haiti under Jean Bertrand Aristide - then aid money will not be allocated. This means that alongside the ramifications of privatisation of state-owned assets, underdeveloped countries are faced with the inability to use the aid money that has cost them their modes of production. When multinationals do gain access to natural resources, again, there is no benefit.
These corporations are normally registered in their country of origin (meaning none of the taxation occurs within the African country that houses the resources) or use networks of holding companies & offshore accounts to avoid paying tax altogether. Interestingly, the amount of tax avoided by resource-multinationals in underdeveloped countries outweighs the total so-called aid given by western IFIs - immediately dispelling the myth of generosity enacted by the West. The value adding processes such as refinement and manufacturing take place in the metropoles, which were developed during slavery and colonialism when the vast sums of capital gained were employed to finance the emerging technologies of industrialisation. Notable capital accumulation and skilled employment subsequently became uncommon in the countries we now call underdeveloped. When the extraction of natural resources is taxed within the underdeveloped country, the percentage is usually fixed i.e. doesn’t scale with price fluctuation or further discovery of new natural resource. The only income the country generates from this extraction is in the form of resource rents, bribery or signature bonuses and small taxation – all of which are only available to those who control the state. The money gained by elites and state officials is used to reinforce and perpetuate their rule; government spending in corrupt regimes is skewed towards military and security as well as luxury imports.
As exports of natural resources increase, countries become subject to a phenomenon known as ‘Dutch Disease’. The increase in exports causes an increase in the value of local currency and imports become cheaper relative to the domestic product, which is detrimental to local businesses as imports can easily undercut them. Additionally, the agricultural sector suffers as the cheaper imports remove the need for their role in the local economy. Workers are drawn to the specific sector of Western interest, which causes a sharp decline in other sectors. Dutch Disease also contributes to the ‘de-industrialisation’ of the underdeveloped countries it affects (if industrialisation has started the process is halted and reversed).
Without the finance or technology to process their unrefined resources, these countries lose out on massive profits and employment generation. A cycle of economic addiction sets in: the decay of the other parts of the economy increases the dependency on natural resource. Structural adjustment policies create conditions that encourage the decline of underdeveloped countries into states where the people are not represented. Resource accounts for high percentages of national income meaning the public do not need to be taxed; states do not need to rely on the public for income, therefore they do not need to represent them - no taxation, no representation.
Western International Financial Institutions (IFIs) are amalgamations of white supremacist solidarity, providing the economic assault to complement the social violence of EU nation states, the UN and NATO. Their actions and ideology are based on protecting the interests of the white world and maintaining the global status quo. They therefore cannot be expected to present any change or development in respect to the situation of our people living in Africa and the Caribbean. Western IFIs will continue to restrict African development and they will continue to facilitate the murder, rape and exploitation of Black people. Africa remains the biggest source of capital for the West and increasingly the industrialised East (Chinese investment projects, representing one-third of all Chinese overseas investment and two-thirds of all African foreign investment, out spend all Western IFIs). It is only logical that there are institutions set up to protect white people’s biggest interest. Whether the methods are violent, political, psychological or economic, the West always ensures it maintains its brutality alongside the suffering of Africa.