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 West’s affairs’ insidious nature in Africa and 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.” These two organizations look promising at an uninformed glance – they give out money to help poor countries build schools, hospitals, and housing. In actuality, they only further the misery and exploitation experienced in the underdeveloped world.
The IMF, WB, and other IFIs assume the role of a “development” investor in underdeveloped countries. However, these investments usually come with a catch; the structural adjustment of economies upon receiving investment or aid. Structural adjustment briefly entails the privatization of state-owned assets, causing the reorientation of domestic production in favor of cash crops and natural resources. As a result, considerable investments are made in the private sector, bypassing local governments, and workforce cuts occur in the public sector and eliminating import tariffs, which gives corporations free rein. The process that follows creates climates reminiscent of slavery and colonialism.
The underdeveloped countries become appendages to the imperial metropoles. They are exploited as a source of cheap labor, 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 centralized 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 favorable deals to exploit resources labor 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 benefits the people in these countries in the short or long-term.
The elimination of import tariffs encourages foreign investment. 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, the foreign product can come in at cheap 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 organization acting in people’s best interests in underdeveloped countries. The IFC at the time of writing, 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 to exploit the local workforce or “unlimited labor” by multinational and foreign state-owned corporations. In light of the historical and present destruction of economies, extreme poverty 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. The vast sums of capital generated by this labor further show the extent of this exploitation.
Some of the very many examples of multinationals that have exploited labor 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 six 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.
It isn’t unusual to see production focused on cash crops (sugar, coffee, cocoa, etc., for exportation) in countries dominated by foreign investment. Nor is it uncommon to see extremely high percentages of national income generated from natural resources. Poor populations remain despite these high capital generating activities, with corporations able to acquire large bulks of the crude product from the local “landowners” for low 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. Still, the sector provides nothing for the poor people when the private sector owns the bulk of fertile land, or unfavorable terms are accepted to secure deals with multinationals.
The reorientation of crop production away from food crops towards cash crops 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. This is a huge blow for local businesses. Foreign imports of former widely produced domestic foods 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. The Nigerian textile industry was 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 another crop. Ghana had to import rice. Jamaica (an island) had to import fish. The British supplied Cadbury with land in the Gold Coast (Ghana) during colonialism, Africans were not allowed to develop industry at this time and 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. African natural resources generate massive foreign interest because they encompass the most sought-after commodities on the planet. 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 privatized. Corporations that wish to acquire these resources can receive funding from the IFC, which simultaneously encourages 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 privatization 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 to the people. These corporations are normally registered in their country of origin (meaning none of the taxations occurs within the African country that houses the resources) or use networks of holding companies and offshore accounts to avoid paying tax altogether. Interestingly, the amount of tax avoided by resource multinationals in underdeveloped countries outweighs the so-called total aid given by Western IFIs – immediately dispelling the myth of generosity enacted by the West who keep Africa poor. 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 industrialization. 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., it doesn’t scale with price fluctuation or further discovery of new natural resources.
The country’s only income 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 and 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 the 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 its 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-industrialization” of the underdeveloped countries that it affects (if industrialization has started, the process is halted and reversed). Without the finance or technology to process their unrefined resources, these countries lose massive profits and employment generation. A cycle of economic addiction sets in the decay of other parts of the economy and increases the dependency on natural resource exportation.
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 does 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 IFIs are amalgamations of White supremacist solidarity, providing the economic assault to complement the social violence of EU nation states, the United Nations, and NATO. Their actions and ideology are based on protecting the interests of White world supremacy 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. On the contrary, Western IFIs will continue to restrict African development. They will continue to facilitate the murder, rape, and exploitation of Black people. Africa remains the most significant source of capital for the West and increasingly the industrialized East (Chinese investment projects, representing one-third of all Chinese overseas investment and two-thirds of all African foreign investment, outspend all Western IFIs).
It is only logical that institutions are set up to protect White people’s most significant interests. Whether the methods are violent, political, psychological, or economic, the West always ensures it maintains its brutality alongside the suffering of Africa.