Introduction

De-Development and Imperialism: How Can We Fight Back?

Curated By

Amy Yang

Marxist-Leninist, anti-imperialist. No one is free until we are all free.

About this Collection

About this Collection

Development of productive forces has not been the centre of focus for many anti-imperialists. However, without de-development of the third world (Global South) in the past 500 years, capital accumulation in the imperialist core would have been impossible. Through developing productive forces, the third world countries can effectively cut the pipeline of imperialism, just as Amilcar Cabral said, “the objective of national liberation is to regain this right usurped by imperialism, to free the process of development of the national productive forces”.

It is hence crucial for us Marxists and anti-imperialists to understand how the imperialist West de-developed the third world, and how third world countries can break free from the curse of de-development and seek alternative paths to development for the people.

Read this collection online: https://unlearn.capital/collections/de-development-and-imperialism-how-can-we-fight-back

10 articles · 3 books · 2 videos

This ebook is about 155 pages long.

Table of Contents

Table of Contents

1. Delinking with Chinese Characteristics

9 pages

https://triconpoliticaleconomy.substack.com/p/delinking-with-chinese-characteristics

Tricontinental Political Economy

By Shiran Illanperuma

Publication Date: May 16, 2026

China achieved economic sovereignty by integrating into global markets while using state-controlled chokepoints in finance, land, infrastructure, and strategic commodities to subordinate external relations to internal accumulation, a process measurable by the Structural Dependency Index.

2. Who Owns the Chain

17 pages

https://triconpoliticaleconomy.substack.com/p/who-owns-the-chain

Tricontinental Political Economy

By Emiliano López

Publication Date: May 25, 2026

Control over productive chains, not just industrialisation, determines sovereignty: China captured the value-dense midstream of the lithium battery chain through planned state intervention, while peripheral economies remain trapped in extraction or assembly, exporting value and importing dependency.

3. Building Sovereignty from a Tricontinental Political Economy

8 pages

https://triconpoliticaleconomy.substack.com/p/building-sovereignty-from-a-tricontinental

Tricontinental Political Economy

By Emiliano López, Shiran Illanperuma

Publication Date: February 16, 2026

Marxist dependency theory, forged across three continents, offers vital frameworks for understanding structural constraints and building sovereignty in the multipolar global economy, as demonstrated by a new Dependency Map that charts pathways from subordinate periphery to non-hegemonic autonomy.

4. The dependency map and mechanisms that transcend national borders

12 pages

https://triconpoliticaleconomy.substack.com/p/the-dependency-map-and-mechanisms

Tricontinental Political Economy

By Emiliano López and Facundo Barrera Insua

Publication Date: March 5, 2026

Dependency is a measurable structure persisting across 28 years, and China's trajectory-driven by sustained fixed capital investment above 40% of GDP-demonstrates that comprehensive transformation can dismantle multidimensional subordination.

5. Where Does the Surplus Go? Peripheral Bourgeoisies and the Politics of Disinvestment

12 pages

https://triconpoliticaleconomy.substack.com/p/where-does-the-surplus-go

Tricontinental Political Economy

By Emiliano López

Publication Date: March 19, 2026

Peripheral economies generate substantial economic surplus, but peripheral bourgeoisies systematically channel it into luxury consumption, financial speculation, and capital flight rather than productive investment.

6. Africa's Faustian Bargain with the International Monetary Fund

23 pages

https://thetricontinental.org/dossier-faustian-bargain-imf-africa/

The Tricontinental

Publication Date: May 13, 2025

African nations' IMF agreements have cost them sovereignty without delivering promised development or growth.

7. Life or Debt: The Stranglehold of Neocolonialism and Africa's Search for Alternatives

27 pages

https://thetricontinental.org/dossier-63-african-debt-crisis/

The Tricontinental

Publication Date: April 11, 2023

Africa faces a neocolonial debt crisis perpetuated by IMF policies and Western creditors, requiring alternative solutions for genuine sovereignty.

8. How Neoliberalism Has Wielded 'Corruption' to Privatise Life in Africa

21 pages

https://thetricontinental.org/dossier-how-neoliberalism-has-wielded-corruption-to-privatise-africa/

The Tricontinental

By Grieve Chelwa

Publication Date: November 26, 2024

Examines how neoliberalism has weaponized 'corruption' narratives to privatize African economies and enable multinational corporations to extract wealth through legal financial manipulation.

9. How the International Monetary Fund Is Squeezing Pakistan

25 pages

https://thetricontinental.org/dossier-69-how-the-international-monetary-fund-is-squeezing-pakistan/

The Tricontinental

By Taimur Rahman

Publication Date: October 17, 2023

Pakistan's economy is being severely impacted by IMF austerity measures, causing inflation, debt crises, and reduced economic growth.

10. TRANSCRIPT: The Roots and Consequences of African Underdevelopment, Walter Rodney, 1979

1 page

https://blackagendareport.com/transcript-roots-and-consequences-african-underdevelopment-walter-rodney-1979

Black Agenda Report

By Walter Rodney

Publication Date: May 31, 2023

A 1979 lecture by Walter Rodney analyzing how colonialism and capitalism structured African underdevelopment, with enduring relevance for contemporary anti-imperialist thought.

Other Resources

Other Resources

This collection also includes other media types such as books, videos, podcasts, and more.

Books

Neocolonialism, the Last Stage of Imperialism

Marxists Internet Archive

By Kwame Nkrumah

Neo-colonialism, the final and most dangerous stage of imperialism, directs nominally independent states' economies and policies from outside, exploiting rather than developing them. Kwame Nkrumah contends that non-alignment permits foreign investment aligned with national plans, and that African unity through socialist continental planning is necessary to counter this threat and prevent world war.

How Europe Underdeveloped Africa

Resource Not Added

By Walter Rodney

Africa's underdevelopment was actively produced by European capitalism through the slave trade and colonialism, expropriating surplus and distorting economies.

Unequal Exchange: Past, Present, and Future

https://www.iskrabooks.org/books/p/ue-past-present-future

Iskra Books

By Torkil Lauesen

Industrialized countries transfer value by exchanging one hour of their labor for 5-15 hours of labor in underdeveloped nations. The work details mechanisms like global production chains, labor arbitrage, and ecological costs, examines political consequences such as the 'imperial mode of living' that fractures working-class solidarity, and shows how unequal exchange drives polarized development.

Videos

Building a New Development Theory from the Global South

https://www.youtube.com/live/2UBlY5VXrY8?si=3C0HqFWtYsTDji7Z

Resource Not Added

By Tricontinental Asia

Proposes a new development theory grounded in Global South experiences, critiquing Western-centric models and advocating for alternative frameworks.

Against Financial Imperialism: Economic Sovereignty in West Africa

https://www.youtube.com/watch?v=Un3SxQeWDFg

Dr. Radhika Desai

By Radhika Desai

The CFA franc, a colonial currency imposed by France on its colonies and persisting after 1960s independence, still subordinates former French colonies; the Alliance of Sahel States has opposed it and begun dismantling it.

Delinking with Chinese Characteristics

De-Development and Imperialism: How Can We Fight Back? — Delinking with Chinese Characteristics

Delinking with Chinese Characteristics

Article 1 of 10

Tricontinental Political Economy

By Shiran Illanperuma

Originally published at https://triconpoliticaleconomy.substack.com/p/delinking-with-chinese-characteristics

Publication Date: May 16, 2026

When China began its Reform and Opening Up process in 1978, scholars debated whether it was a capitulation to Western capital and neoliberal globalization, or part of a long-game to develop China’s productive forces so as to create the material conditions for economic sovereignty and common prosperity. Only history could bear out the answers to these questions, and only now do we have the data and empirical tools to begin to answer them.

China’s reform-era trajectory, from the marketization process that began in 1978 to the ascension to the World Trade Organization in 2001, has been one of the most impactful entries of any major economy into the world market. China went from contributing less than 1% of world trade in 1978 to becoming the world’s largest trading country. China is now the top trading partner for 120 countries. Over half of the world’s busiest ports are in China.

However, this process of trade integration did not turn China into a mere appendage of the economies of the Global North. China retained sovereign control over natural monopolies while increasing domestic value addition and indigenous technological innovation. Today, China leads in 90% of critical technologies tracked by the Australian Strategic Policy Institute. It is the only country with a complete industrial ecosystem – producing products across every industrial subcategory defined by the United Nations.

We argue that China has both integrated into the global cycle of accumulation and ‘delinked’, borrowing the concept proposed by the Egyptian Marxist Samir Amin. When Amin proposed the concept of ‘delinking’ (déconnexion) as the strategic horizon for peripheral economies, he was careful to specify that delinking was not autarky; it was the subordination of external relations to the imperatives of internal accumulation.

This is precisely what China has achieved, but that outcome has been contingent on a very specific social settlement and institutional structure within China’s political economy. We call this ‘delinking with Chinese Characteristics’.

This article tracks China’s delinking using the Tricontinental: Institute for Social Research’s Structural Dependency Index (SDI). We then explore the social and institutional settlement that enabled this process by deploying the theory of the ‘constructive market’ by Chinese Marxist economists Meng Jie and Zhang Zibin, first translated into English in the international edition of Wenhua Zongheng: A Journal of Contemporary Chinese Thought.

China’s Structural Independence

The SDI is the first serious data-driven attempt to operationalize dependency theory. It draws on Brazilian Marxist economist Ruy Mauro Marini’s analysis of the capital-accumulation circuit (M–C…P…C’–M’) in dependent economies and decomposes it into six dimensions: financial (the monetary or M phase), technological and productive (the production or P phase), commercial and distributive (the realisation or M’ phase), and network dependency – which captures whether an economy occupies a central or appendage node in global value networks. Each dimension is normalized between 0 (maximum autonomy) and 1 (maximum dependency).

China’s trajectory on the panel is an outlier in the Global South. Its composite SDI fell from 0.6492 in 1996 to 0.3140 in 2022 – a 51% reduction, unmatched elsewhere in the sample.

Figure 1. China’s declining dependencies.

The reduction is sharpest in commercial dependency (0.253 → 0.041), which now sits near the measurement floor. China is the world’s dominant high-technology exporter, with mechanical and electrical products accounting for 58.6% of total exports by 2023.

Meanwhile, network dependency collapsed from 0.442 to 0.255 – this took place mainly after China’s accession to the World Trade Organization in 2001, which enabled China to become a major trade-network node rather than an appendage. By contrast, technological dependency rose between 2001 and 2004 as China deepened its integration into global value chains as an assembly hub. It then fell from 0.543 in 2012 to 0.386 in 2023 as the domestic value addition of production caught up through conscious industrial policies.

While productive dependency fell from 0.716 to 0.413, it remains higher than in South Korea, Japan, or Germany. Distributive dependency is the one dimension that has barely moved, from 0.387 in 1996 to 0.363 in 2022. These outliers reflect a historical condition: China’s gross fixed capital formation – consistently above 40% of GDP for three decades – was initially built on wage compression of migrant labor under the hukou system and on assembly positions with thin domestic value capture.

Figure 2. China’s delinking relative to the Global South (1996-2023)

The contrast with comparators in the Global South sharpens the picture. India’s SDI sits at 0.562 on a period average (1996–2023); its highest scores are in the technological and network categories, reflecting a services-led model in which India remains a node in technology chains rather than a technology generator.

South Korea’s period-average SDI is 0.390 despite OECD membership and the global presence of companies like Samsung and Hyundai – corporate scale does not necessarily translate into systemic centrality. South Korea’s network dependency remains among the highest in the panel because the country produces components for US-led semiconductor and electronics chains without controlling final-market channels.

What the SDI data shows is that China alone had a unique trajectory of simultaneous, multi-dimensional reduction of dependency at scale and speed. We argue that this result is not just a technical achievement but a result of how thoroughly the social, political, and institutional conditions for autonomous accumulation were assembled in China.

Constructing the Socialist Market

The SDI quantifies what changed. It does not, on its own face, explain how. Chinese Marxist economist Meng Jie has spent decades conducting primary research across China’s factories and state institutions to theorize its unique development trajectory. Together with Fudan University economist Zhang Zibin, his theory of the ‘constructive market’ is one of the most rigorous analyses of the architecture of China’s development.

Meng and Zhang’s distinctive theoretical step is to refuse both the Hayekian account of markets as spontaneously emergent and the Soviet-bloc resolution in which the state replaces the market. The ‘market’ in ‘constructive market’ is derived not from neoclassical price theory but from Volume II of Capital: the sphere of capital movement, characterized by the unity of production and exchange. The state does not regulate this market from the outside; it participates within it as architect and operator.

The state’s development strategy introduces a use-value goal into the market, which interacts with the exchange-value objectives pursued by enterprises, placing the former, as Meng and Zhang put it, ‘in a relatively dominant position’. What this means operationally is that the state actively constructs markets on both the supply and demand sides simultaneously, and only in strategic and foundational sectors.

The constructive market is not picking winners within an existing market nor subsidizing private investment after the fact. It is a system in which the state coordinates state-owned producers, targeted credit, technology-transfer requirements, procurement guarantees, consumer subsidies, and regulatory mandates as the prior condition for the market’s existence.

China’s solar photovoltaics, electric vehicles, lithium-ion batteries, and high-speed railway are all results of this constructive market. They are markets that the state constructed before private capital could enter. More importantly, the constructive market prevents the escape of private capital into rentier and speculative ‘chokepoints’.

The Four Chokepoints

Meng and Zhang combine Marx’s circuit with German Marxist Rudolf Hilferding’s concept of finance capital to produce a formal expression of the state’s ownership and regulation of the financial sector: M – {M–C…P…C’–M’} – M’. State-owned financial capital enters productive capital with a primary aim other than profit. As they put it, ‘the primary goal of state-owned capital is to implement the objectives of socialist production and fulfill the tasks set by the national development plans and strategies’.

In this circuit, the state is able to direct M to the targeted sectors and collect M’ in a closed loop that denies private capital the ability to dominate the financial system. State-owned finance capital is the primary chokepoint that prevents private capital from dominating the accumulation process and crystallizing into monopolies – it also enables a long-term planning horizon.

Figure 3. Modified capital circuits with the state-owned finance capital

We add that this architecture is supplemented by at least three other institutional chokepoints that prevent capital from dominating the circuit of accumulation and locks it into competition within strategically defined sectors, thereby rapidly developing the productive forces. These three additional chokepoints are land, infrastructure, and strategic commodities.

In China, urban land is state-owned while rural land remains collectively owned at the village level. This arrangement places a hard cap on capital’s ability to flee competition in industrial sectors to amass wealth and collect rent.

Along with the land, the infrastructure built upon it – roads, railways, bridges, ports, power plants, telecommunication – remains under public control. This infrastructure is governed as a public good, helping keep production and transaction costs down, supporting the real economy, and once again denying private capital a natural monopoly from which to extract rents.

Finally, strategic commodities – from food grains to hydrocarbons and rare earth minerals – are predominantly produced, processed, and traded by state-owned entities. This is supplemented by a complex state-owned system of strategic reserves to stabilize prices during shortages and external shocks. Like other chokepoints, this prevents private capital from entering into an arena where it is incentivized to speculate and raise costs at the expense of downstream production.

The four chokepoints of finance, land, infrastructure, and strategic commodities discipline capital’s exchange-value orientation to the use values set by the state. This is what distinguishes the architecture from ‘developmental’ and ‘entrepreneurial’ states, where public investment generates private returns while equity stakes and operational control are absent. In the Chinese arrangement, state-owned finance capital retains both. The M – {M–C…P…C’–M’} – M’ circuit begins and ends with public capital.

Chinese Delinking in Action

The US-imposed trade and tech war on China provides a natural experiment to evaluate how China’s constructive market responds to external pressure. In one of our previous newsletters, we highlighted how the trade war of Trump 2.0 has created a tendency towards re-compradorisation in the Global South. We argued that the SDI data for countries such as South Korea, Malaysia, and India essentially foretold the capitulation of their elites in response to the threat posed by access to the US market and technology. But this was not the case with China.

Unlike its regional peers, China has not only withstood US tariffs and export controls but has actively built alternative markets and domestic technological capabilities in their place. To understand why this is significant, it helps to trace the specific pressure China was placed under – and what it produced in response.

The pressure began in earnest in October 2022, when the administration of US President Joseph Biden launched what former National Security Advisor Jake Sullivan described as a ‘small yard, high fence’ semiconductor siege: targeted controls on advanced chips, lithography machines, and chip-design software. Over the following three years, the restrictions expanded steadily, eventually placing more than 700 Chinese firms under the extraterritorial reach of the Foreign Direct Product Rule – meaning any product made anywhere in the world using US technology could be blocked from reaching Chinese buyers.

China responded through coordinated mobilization of its constructive market. State-owned finance capital scaled the China Integrated Circuit Industry Investment Fund by $47.5 billion in May 2024, channeling capital into the domestic semiconductor supply chain. Local experimentation across firms such as Semiconductor Manufacturing International Corporation, Naura, Advanced Micro-Fabrication Equipment, and SiCarrier began producing domestic substitutes for the equipment that Chinese foundries could no longer import.

The results have exceeded most outside expectations. In August 2023, Huawei released a smartphone containing a 7nm processor manufactured by SMIC – a feat widely considered improbable, if not impossible, given the restrictions in place. By late 2024, China’s mature-node chip capacity had reached 31% of the global total. Then, in December 2025, Reuters confirmed that a domestically assembled extreme ultraviolet (EUV) lithography prototype was operational and undergoing testing, with functional chip production targeted for 2028.

This is delinking in the sense that Amin meant it: not borders closed against trade, but the institutional capacity to reproduce – at scale and on demand – the technology that the imperial core treats as a monopoly.

Development Praxis for the Global South

The SDI measures delinking from the outside. The constructive market explains it from the inside. Two methods examining the same phenomenon, converging on a single proposition: sovereign industrialization based on autonomous accumulation is, in fact, possible.

Dependency falls when society retains structural authority over capital and subordinates the demands of external extraction to internal accumulation. Where these conditions hold, the SDI falls across all six dimensions at once, as in China. Where any are absent, dependency reproduces itself regardless of who is formally in power. India’s services-led integration and South Korea’s component-supplier integration are the comparator cases.

However, a precondition of China’s delinking and constructive market was the process set in motion in 1949 – the dismantling of private, rent-seeking, and comprador forces. This political process is the origin of the chokepoint architecture mentioned earlier. Where that dismantling has not happened – which is to say, across most of Latin America, Africa, and parts of Asia – the chokepoints are captured by comprador fractions of the domestic bourgeoisie and converted into instruments of dependency reproduction.

The chokepoints are not technologies that can be lifted out and installed. They are crystallised outcomes of a class struggle that elsewhere remains pending. Any account that reads the Chinese architecture without reading the political condition for its possibility repeats the central error of forty years of developmental-state literature.

The constructive market and chokepoint architecture replaces the question ‘what should (or shouldn’t) be nationalized?’ with a sharper one: where in the accumulation circuit does the surplus get captured, and how can the state retain authority over that node?

The IMF and World Bank conditionality across the Global South militate against the kinds of policies and institutional structures described above. Privatization and austerity have stripped states of anti-monopoly disciplinary capacity. However, the partial retreat from capital-account liberalization across the Global South – from Argentina’s currency controls (2011–2025) to Russia’s post-2022 emergency measures to the broader BRICS-plus reflection on alternatives to dollar clearing – is the most consequential institutional reversal of the neoliberal period. Whether that reversal becomes structural or remains episodic is the question on which the rest hinges.

Capital-account governance is the precondition for the other three chokepoints. Without sovereign authority over cross-border financial flows, the surplus that the chokepoints capture leaks out through portfolio repatriation, transfer pricing, and offshore reinvestment, and disciplinary architectures lose their bite, because monopoly capital can always exit. China’s SOEs would not have survived the 1997 restructuring had the renminbi been freely convertible.

Of course, we do not say that the ‘Chinese model’ has solved development for the Global South. Or that there is an easily replicable and transferable ‘Beijing Consensus’. During China’s reform process, Deng Xiaoping popularised the Chinese idiom ‘crossing the river by feeling the stones’. Our proposition is that feeling the stones that China crossed to get where it is today can provide us with the contours of what is to be done in other contexts.

Shiran Illanperuma is a researcher at Tricontinental: Institute for Social Research and a co-editor of the international edition of Wenhua Zongheng: A Journal of Contemporary Chinese Thought. He is a visiting lecturer at the Bandaranaike Center for International Studies.

Who Owns the Chain

De-Development and Imperialism: How Can We Fight Back? — Who Owns the Chain

Who Owns the Chain

Article 2 of 10

Tricontinental Political Economy

By Emiliano López

Originally published at https://triconpoliticaleconomy.substack.com/p/who-owns-the-chain

Publication Date: May 25, 2026

A truckload of lithium carbonate leaves a salar high in the Puna, on the border between Argentina and Chile, where the brine has spent eighteen months evaporating in turquoise ponds the size of small towns. It crosses the Andes, reaches a Pacific port, and sails to China. Some months later, a fraction of that same lithium returns to South America — not as a raw material but as the cells inside an imported electric car, or as the stationary battery in a solar installation, priced at many multiples of what it left at. The mineral made a round trip. The value did not. It got off the boat in Ningde and never came back.

This is not a story about a country that failed to build factories. It is a story about who owns the chain — and it is the productive question that the earlier notes in this series have been circling toward. We argued first that Marxist dependency theory remains the indispensable lens for reading the world economy from the standpoint of the three continents that produce its wealth and keep the least of it. We then showed, through the Baran Ratio, that peripheral bourgeoisies systematically divert economic surplus away from productive investment, and, through the financial leash, how what is not invested escapes as debt service, arbitrage, and capital flight. Each of those notes asked a version of the same question: where does the surplus go? This one asks what follows from it. Suppose a country could keep the surplus and invest it. What should it build — and why would building the wrong thing leave it just as dependent as before?

The high-technology paradox

Begin with a fact that the textbook story of development cannot accommodate. Mexico and Malaysia export far more high-technology goods than Brazil or Argentina. By every measure the World Bank likes to celebrate — export sophistication, manufacturing share, integration into global value chains — they have done what the periphery is told to do. And they are not less dependent on it. They are more.

In our Structural Dependency Index, Malaysia’s technological dependency reads 0.87 and Mexico’s 0.75 — among the highest scores in the entire sample, which here does not yet include the African economies — while China sits at 0.39 and South Korea at 0.40, though they ship just as large a share of high technology. The paradox dissolves the moment one stops conflating exporting a technology with producing it. Mexico and Malaysia assemble imported components into finished goods that cross the border stamped “high-tech.” The chips, the designs, the patents, the machines that make the machines: all of that value is created elsewhere and merely passes through. The country operates as a workshop inside someone else’s factory.

Figure 1. The high-technology paradox.

Source: authors from the project database Dependency Lab-Global South Insights.

Giovanni Arrighi, reading the longue durée of the world system, gave this its proper name: the peripheralization of industrial activities. Industrialisation produces the appearance of development while reproducing the substance of subordination. The factories, the jobs, the export figures are all real; what is absent is the chain — the dense web of suppliers, engineers, and high-value stages that turns a factory into a national productive system rather than a point of transit. The question that decides development, then, is not whether a country industrialised but whether the chain closes inside the national economy or leaks out at every link. There is no clearer place to watch that question answered than in the commodity the world is now fighting over.

Where the value lives

The lithium-ion battery is no longer a niche in the energy transition. Far from it: the battery market moved more than 235 billion dollars in 2023 and is expanding at 15 to 20 per cent a year, which places it among the largest of the emerging industries — ahead, in sheer money, of several sectors that command the business press. Electric vehicles alone account for roughly 72 per cent of demand, and one car in five sold on the planet is now electric.

Behind those figures lies something more consequential. The battery is emerging as the leading sector of a new long wave of growth — the technology, and the cluster of industries it pulls into being, around which a whole phase of accumulation reorganises itself. Kondratiev first charted these long cycles, Schumpeter tied them to surges of innovation, and Ernest Mandel recast the argument in Marxist terms; all of them saw that the economies which master the leading sector tend to dominate the era it defines. For most of the twentieth century, that sector was the automobile, with its oil and its assembly lines, and the industrial hierarchy of the age — from the United States to Germany, Japan and Korea — followed the capacity to build cars and the supplier base that supported it. New energy is now producing its successor, and the lithium-ion battery is its most likely core — the kind of cluster that Carlota Perez calls a techno-economic paradigm and that Arrighi reads as the opening of a systemic cycle. For the periphery, the stakes here are concrete. An economy shut out of the leading sector of a long wave loses the engineering and the supplier base that accumulate around it, and tends to spend the decades that follow importing what it never built the capacity to make.

There is value to be captured here; the real question is where along the chain it sits, and who holds that part. A battery’s worth is concentrated in the cell: cells account for roughly 79 per cent of the total, while final assembly of the pack — the visible, labour-intensive stage that looks most like a factory — accounts for only about a fifth, and a falling one. Within the cell, the active materials, and the cathode above all, account for between 53 and 61 per cent of the cost. For the periphery, the pattern is unforgiving. The two links it is usually invited to occupy — extraction at one end, pack assembly at the other — are the two that create the least value. The midstream, where ore becomes cathode and anode, and both become cells, is where the returns concentrate, and it is the stretch China set out to own.

Follow its share link by link, and a strategy comes into focus that no doctrine of comparative advantage can explain. China holds under 7 per cent of the world’s lithium reserves and extracts less than a fifth of the raw material; it does not have the resource. But climb from the mineral toward the value and its share rises at every step: lithium-carbonate refining near 65 per cent — with Chile at 15 and Argentina at 8, which is to say the triangle’s own brine is refined elsewhere — cathode materials around 85 per cent, anode materials around 95, electrolytes 80, separators 75, finished cells 83, and more than 80 per cent of world production capacity overall, running at over 300 per cent of its own domestic demand. The spherical graphite used as the anode is refined in China for the world market. This is the footprint not of cheap labour or natural endowment but of a deliberate ascent of the value-dense links of the chain — weakest where the value is lowest and strongest where it concentrates.

Figure 2. Where the value is and who holds it.

Source: author’s elaboration based on BloombergNEF, IEA, Avicenne Energy, and Benchmark Mineral Intelligence (2024).

And the advantage was manufactured, not inherited — the part that the development consultants cannot absorb. The price of a battery pack fell from 1,391 dollars per kilowatt-hour in 2010 to 131 dollars per kilowatt-hour in 2024, a collapse of more than 90 per cent, driven by scale and a learning rate — sharpest in cheap, cobalt-free lithium iron phosphate (LFP) chemistry — that competitors in Korea, the United States, and Europe never matched. China did not discover a comparative advantage in batteries and then exploit it. It chose the sector, directed credit and research into it, tolerated years of overcapacity, and built the advantage until it hardened into a fact the rest of the world now treats as natural, even eternal. The market did not produce this outcome; a sustained political decision did.

Figure 3. A manufactured advantage.

Source: author’s elaboration based on BloombergNEF and the IEA.

Set the three findings together, and the round trip of the lithium tells the whole story. The mineral is in the triangle and in other regions (Australia, for instance); the value is in China. The brine evaporates in the salt flats of Atacama and the Puna, ships out as concentrate, and returns — when it returns at all — as a finished cell at a price the exporting country could never capture. This is, in its purest form, the productive dimension of dependency within the dynamics of global value chains, and it is worth being precise about why it is dependency rather than misfortune. The lithium triangle does not lack the resource; it sits on roughly half the world’s supply. It lacks the chain: the refineries, the cathode and electrolyte plants, the gigafactories, the engineers, the supplier firms that feed each stage, the domestic demand that would pull the whole structure into being. Each missing link is a point at which value, employment, learning, and surplus leave the national economy. Extraction without the chain is the twenty-first-century reprise of digging silver from Potosí and watching it sail to Seville. The mineral has changed, but the structure is the same.

Marini’s unfinished circuit

Why does this happen, and keep happening, across one commodity after another? Dependency theory answered the question half a century ago, in language sharper than anything the growth economists have produced since. Ruy Mauro Marini described the circuit of capital in a dependent economy as a truncated circuit. In the classic sequence — money becomes a means of production and labour, which become commodities, which are sold for more money — the decisive moment is production, the phase in which value is actually created and a national economy either thickens or thins. In a sovereign economy, the circuit closes at home: the surplus generated in production is ploughed back into production, suppliers multiply, capability accumulates, and each turn of the cycle leaves the productive structure denser than before. In a dependent economy, the circuit is broken open and rerouted through the centre. The inputs are imported rather than made, the high-value stages occur abroad, and the surplus generated leaks out — through profit remittances, through the financial channels mapped in the previous note, and through the simple fact that the most lucrative links are owned and located elsewhere.

Figure 4. The truncated circuit.

What Albert Hirschman called linkages — the way one industry, planted in the right soil, calls others into existence upstream and downstream — fail to form, or form on the far side of the ocean. The economy industrialises in appearance and disarticulates in fact. This is why the productive lever is not, despite what the previous note might have implied, the investment rate. A country can sustain a respectable rate of investment and still be pouring capital into an enclave with no roots in the rest of the economy. The maquila does not suffer from too little investment; it suffers from too few linkages. The lever is the internalisation of the circuit, the investment that builds the missing links, forces the chain to close within national territory, and turns a node of assembly into an articulated system. What a country produces matters less than whether producing it weaves the rest of the economy together.

Delinking, in reverse

Here, the tradition has to be updated rather than simply repeated. Samir Amin supplied the strategic concept, and the first thing to say about it — because an earlier note in this series, on multipolarity and autonomy, already had to insist on it — is that delinking is not autarky. Amin was explicit: it means subordinating external relations to the logic of internal development, reversing the dependent relationship so that the economy faces the world on its own terms instead of organising its entire productive structure around the needs of the centre. It is a change in who sets the priorities, not a retreat behind a wall.

But Amin theorised delinking in the 1980s, as the Third World project was being dismantled around him, and the concept carried an unavoidable flavour of withdrawal, of stepping out of a hostile world economy. The twenty-first century forces a different reading. China did not delink by stepping out. It delinked by changing the form of its integration, and in doing so, captured the chain that Mexico merely lets pass through. This is delinking in reverse: not less integration, but integration reorganised so that it builds the national economy rather than draining it. The instruments are well documented, and read together they amount to a coherent doctrine — capital controls, so that the surplus could not simply take flight; technology-transfer requirements imposed on foreign investors as the price of market access; state ownership of the commanding heights, so that the most strategic links were never for sale; patient, directed credit from state banks aimed at the segments the country meant to capture; and a selective, conditioned engagement with global markets in place of the unconditional opening the IMF prescribed for everyone else. Isabella Weber has shown that this conditioning of integration — rather than its refusal — lay at the heart of China’s escape from the shock therapy that flattened so much of the rest of the periphery. Beneath all of it runs the old irony Ha-Joon Chang named: the very instruments the rich countries used to climb are the ones they now forbid to those behind them, kicking away the ladder after themselves.

And none of it was improvised. It was written down, plan after plan. China’s Twelfth Five-Year Plan, published in 2011 — before anyone spoke of Chinese dominance in batteries — already named new-energy vehicles, new energy, and new materials among the “strategic emerging industries” (战略性新兴产业) the state would deliberately build, instructing that the new-energy-vehicle industry “focus on developing plug-in hybrid and pure-electric vehicles” and creating dedicated state funds to finance them. Five years later, the Thirteenth Plan sharpened the aim. It set the strategic emerging industries as a target of 15 per cent of GDP and identified, as the technological frontier for new-energy vehicles, the very variable on which the global battery war would later be decided — battery energy density — together with the recovery and recycling of used batteries, the “second chance” we will return to. The next two plans stopped naming the prize and began fortifying it. The Fourteenth, in 2021, made the chain itself the object, and its language is concrete in the original: it calls to “supplement and strengthen the chain” of manufacturing (推进制造业补链强链) and to raise the “whole-industry-chain competitiveness” (全产业链竞争力) of new energy and adjacent fields, to build supply chains at once higher in added value and more secure, and to stand up a global early-warning system for the supply of critical resources. The Fifteenth, adopted in March 2026, closes the logic at both ends at once. It opens a dedicated line for “new-type batteries” (新型电池) — high-capacity electrode materials, high-conductivity electrolytes, composite current collectors, the next chemical frontier of the cell — under an explicit mandate to raise the “self-reliance and controllability” of the industrial chain (产业链自主可控), and it moves to lock the inputs that feed it: reserves of strategic minerals, an edge in rare earths and rare metals, and, once more, the recycling of spent power batteries. Name it, target it, secure it, push the frontier and lock the inputs: four plans across fifteen years, one unbroken instruction. What Western economists now describe as a comparative advantage that somehow emerged was, on the page and a decade and a half in advance, a decision. Read against the staircase of Figure 2 and the price collapse of Figure 3, the plans are not background. They are the blueprint, and each link China climbed had been named before it was taken.

The lithium chain is a socialist modernisation applied. China did not wait to acquire a comparative advantage in batteries; it used foreign minerals, foreign investment, and foreign demand as the raw materials for a domestic build-out, link by link, until the chain closed within its own borders and the advantage became a fact it had manufactured. Delinking did not mean refusing the lithium triangle’s resource. It meant ensuring that the triangle’s lithium was refined, turned into cathodes and cells, and sold at a profit inside China rather than in the country that produced it. The periphery ships out raw minerals and buys back the finished battery; China does the reverse, capturing every stage in between.

Two traps, not one

It would be easy — and it is the orthodoxy’s reflex — to turn all of this into a morality tale about countries that simply “failed to industrialise,” or, in the more sophisticated version, about good institutions and bad. That is the frame Daron Acemoglu and James Robinson made famous: some nations build inclusive institutions and prosper, others fall to extractive ones and stagnate. But the index locates the cause elsewhere. The distance between Mexico and China is not the distance between honest and corrupt institutions; both have run capable, interventionist states. It is a distance in structural position within the chain, and in the political decision to capture that position or let it pass. Institutions matter, but as the instruments of that decision, not as a substitute for it. And the data say something more precise than “failure,” because the periphery is caught in not one but two traps, and the two demand different cures.

There is the assembly-node trap, and Mexico, Malaysia, and Thailand are its clearest cases: high export sophistication, a chain that runs straight through the country and out the other side, technological dependency at the very top of the distribution because the production is real but the value is foreign. The statistical signature is the share of foreign value embodied in their exports: close to a third of the gross value of what Mexico and Malaysia ship abroad was produced elsewhere and merely assembled on their soil, compared with something nearer a sixth for China. These are the economies that look the most modern and rank among the most dependent. The cure here is the lithium cure: capture the value-dense links, condition the investors, build the domestic suppliers, force the chain to root, and so raise the domestic value added in what the country already exports.

Then there is the stagnant-matrix trap, and Brazil is its emblem. Brazil’s technological dependency is far lower than that of the assembly economies — 0.40 in 2023, compared with Mexico’s 0.75 — because Brazil actually built a relatively complete industrial matrix throughout the twentieth century. It is not a maquila. But the snapshot hides the warning the trajectory makes plain: Brazil’s score has climbed from 0.25 in the 1990s to 0.40, the matrix slowly hollowing out — under-invested, low in productivity, reprimarised as soy and iron ore crowd out the more complex sectors — over the very years China’s was moving the other way, from 0.60 down to 0.39. The same neighbourhood today, reached from opposite directions. Brazil’s dependency runs through other channels — the productive and distributive dimensions, the diversion of surplus the earlier notes traced — rather than through assembly. The lever it needs is a different one: not building a chain that was never there but re-dynamising and defending one that exists, arresting the slide back toward primary specialisation, rebuilding the investment and technological intensity that a generation of neoliberalism allowed to decay. But this, as an earlier note showed, requires command of the surplus at the national scale. One periphery has to grow the chain; the other has to stop losing it. Yet both need the same thing: a state capable of bending the productive structure against the grain of the market, and against the interests that profit from leaving it as it is.

Figure 5. Two traps, two shapes of dependency.

Source: author’s elaboration based on Dependency Lab-Global South Insights.

Where the chain is still open

If the argument stopped here, it would be a counsel of despair: the value-dense links are taken, the door has shut, and the periphery may as well resign itself to shipping concentrate. But the battery chain has not finished hardening, and the openings are concrete enough to name, which is what turns the productive lever from a slogan into a strategy.

Begin with the stakes, because they are existential rather than optional. Much of the semi-periphery built its manufacturing base on the internal-combustion automobile — the leading sector of the last long wave — and the dense constellation of parts and assembly plants around it. That sector is now in structural decline as the battery-electric vehicle, the leading sector of the next, climbs toward one car in five sold worldwide. To have built a manufacturing economy on the previous wave’s core, just as the next one arrives, is to face at the moment of transition a stark choice between reconversion and obsolescence. Standing still is not neutral. It is how the manufacturing periphery of one technological era becomes the stranded industrial base of the following one.

And the chain has seams. Concentration is overwhelming at the automotive-cell core, but it thins toward the edges, and the edges are where a state with modest capital and clear intent can actually take hold of a link. Stationary storage — batteries for the grid rather than the car — is the fastest-growing segment of the entire market, its global capacity leaping 77 per cent in a single year, and it is the least monopolised: China’s share sits closer to 55 per cent than to the 80 or 90 it commands elsewhere. It runs overwhelmingly on LFP, which needs neither cobalt nor nickel and favours the very countries that have iron and lithium, and its thresholds of capital and tolerance for error fall well below those of automotive cells. Recycling offers a second entry to the chain altogether: as the first great wave of batteries reaches the end of its life, recovered material will supply a rising share of the lithium, cobalt, and graphite the industry needs, at real margins and a lower technological barrier than primary manufacturing, fed by a domestic waste stream rather than an import bill. And micromobility — the e-bikes and e-scooters already saturating the Chinese market — is a segment worth some 360 billion dollars by the end of the decade, fragmented rather than oligopolised, LFP-compatible, and buildable at 10 to 50 million dollars a plant against the 1 to 3 billion a competitive automotive gigafactory demands.

Figure 6. Where the chain is still open.

Source: author’s elaboration based on IEA, BloombergNEF, McKinsey.

None of this is a fantasy of out-competing CATL head-on. The productive lever for a peripheral state is not a frontal assault on the captured core; it is the disciplined capture of the links where capture is still incomplete — refining its own lithium instead of shipping out brine, anchoring an LFP storage industry on its own iron and lithium, building recycling and micromobility capacity — and then using each captured link as the platform from which to reach the next. This is delinking in reverse, made concrete: not an exit from the battery chain but an entry into it on terms that force the value to stay and accumulate at home.

More than value: jobs and energy

Value capture, on its own, is too thin a basis for the case and understates what is at stake. Consider first what the captured value does. Hirschman’s linkages are, in the end, people working. The maquila employs assemblers and little else; a chain that closes at home employs miners, refiners, materials engineers, cell technicians, equipment-builders and recyclers, and the supplier firms that grow around each of them — work that is more skilled, better paid, and multiplied outward through the rest of the economy. The order of magnitude is telling: a developing country that genuinely builds the chain could move from fewer than 10,000 specialised technical jobs today toward 50,000 to 100,000 by 2030, before counting the indirect employment in suppliers and services that a real industry pulls into being. The difference between assembling batteries and making them is, finally, a difference in how many people the industry puts to work, and how well.

There is a second return the export-led framing misses entirely, and one the Five-Year Plans never lose sight of. In those plans, the battery is never merely something to sell abroad; it is the backbone of a national energy system. The Fourteenth ties new-type energy storage directly to “absorbing clean energy” (清洁能源消纳) and to coordinating “source, grid, load, and storage” (源网荷储) as a single system; the Fifteenth makes new-type storage and new solar cells pillars of a “new-type energy system” (新型能源体系). Set that beside a peripheral economy. Most of the Global South runs a chronic energy-import deficit: it buys its fuel abroad and pays for the privilege in hard currency and external vulnerability. A domestic chain of renewables, storage, and electromobility attacks that deficit at the root; the same build-out that captures value and generates employment also shrinks the fuel-import bill and the dependence that accompanies it. The battery is at once an object of industrial policy and an instrument of energy sovereignty.

Source: author’s elaboration. Storage data from the battery-market study (IEA, BloombergNEF, 2024); framing after China’s 14th–15th Five-Year Plans.

This is why the productive lever cannot be reduced to “industrial upgrading.” Pulled all the way, it moves three things at once — value, employment, and energy autonomy — and each reinforces the others. That convergence is what turns the battery chain from a sector policy into a question of sovereign development: it is one of the few build-outs that simultaneously thickens the productive structure, puts people to work, and loosens the energy leash. Which only sharpens the political question this series has been circling. A return that large is also a threat to someone.

The lever does not pull itself

Which brings us to the political heart of the matter, and to the point where this note hands off to the next. None of this happens by market signal. The market told the lithium triangle to export brine, and it did; it told Mexico to assemble, and it did. Left to itself, comparative advantage is a machine for freezing the periphery in the link it already occupies. Ricardo’s elegant theorem reads, from the underside, as a sentence. The chain closes only when a state decides to do so, overriding price signals, trade rules, and foreign investors, who would all prefer it to stay open.

Here, Amin’s hardest insight returns, the one mainstream development economics will never absorb because it is a class analysis and not a policy menu: the comprador bourgeoisie will not pull the lever. The fraction of capital that profits from exporting the mineral, running the assembly plant, and importing the finished good to sell at a markup depends on the chain staying open for its accumulation. It has no interest in refineries, cathode plants, or technology transfer, because those things threaten the arrangement that makes it rich. Whether it speaks the language of neoliberal technocracy or of national developmentalism, it will not lead to a genuine internalisation of the productive circuit with a sovereign and emancipatory perspective. That requires a different coalition, anchored in the social forces with something to gain from a thicker national economy, as part of a regional process, and nothing to lose from confronting those who keep it thin.

So the productive lever turns out to demand two things at once: an instrument and a hand to pull it. The instrument is the policy architecture China assembled, and the lithium chain makes legible — capital controls, conditioned foreign investment, public ownership of the strategic links, directed credit, and the patient capture of the value-dense midstream. The hand is a state with the autonomy and the class base to wield that architecture against the interests that grow fat on dependency. The transitional moment has widened the space for South-South cooperation and for alternative financing, and Chinese demand and technology now offer the periphery materials its predecessors lacked. But multipolarity supplies the opening, not the will. The lithium will keep leaving the salar as brine until someone with the power to decide otherwise decides otherwise.

None of this, in the end, is only about lithium. The battery chain is a worked example of the task the periphery has always faced: building productive capacity — taking a deposit, a crop, or a cheap-labour platform and turning it into an articulated system that holds the value it creates, and the capacity to keep creating it, at home. We opened with a truckload of carbonate, leaving the Puna and a value that never came back; the whole argument has been about what it takes for that value to stay: the patient closing of the chain at home, link by link. Lithium only makes the lesson legible. The same question waits behind copper, behind soy, behind every commodity the three continents still ship out raw and buy back finished, and who owns the chain is the question of who builds it.

This note has answered that question only halfway. It has mapped the lever and shown, in a single commodity, where it must be applied; what it has not settled is who can grasp it. That is the whole of the next one: the capacity of a state — and of the class forces that work through it — to mediate between the structural constraint and the developmental project, and to turn a lever no market ever will.

Emiliano López is a researcher at CONICET–Universidad Nacional de La Plata and Chief Economist at Tricontinental: Institute for Social Research.

Building Sovereignty from a Tricontinental Political Economy

De-Development and Imperialism: How Can We Fight Back? — Building Sovereignty from a Tricontinental Political Economy

Building Sovereignty from a Tricontinental Political Economy

Article 3 of 10

Tricontinental Political Economy

By Emiliano López, Shiran Illanperuma

Originally published at https://triconpoliticaleconomy.substack.com/p/building-sovereignty-from-a-tricontinental

Publication Date: February 16, 2026

Emiliano López

Shiran Illanperuma

Neoclassical economics had cast Marxist dependency theory (and other heterodox schools of thought) as a relic – a Latin American intellectual curiosity from the Cold War era, now superseded by globalisation, global value chains (GVCs), and the triumph of market-led development. This verdict, repeated in mainstream economics and political science, had acquired the status of common sense and conveniently erased the fact that dependency theory was not the property of a single region, but a Tricontinental intellectual project forged across Latin America, Africa, and Asia.

The dismissal of dependency theory served a very precise function: it cleared the ideological ground for neoliberalism in the periphery by marginalising classical concepts such as imperialism, structural transformation, and the international division of labour. With these concepts out of the way, there were only prices to get right, institutions to build, and markets to open. Underdevelopment became an original state, and modernisation a linear cookie-cutter path prescribed by the Washington Consensus.

When China’s rise – the most spectacular developmental success of our time – became impossible to ignore, Western academia and policy circles rushed to explain it with the neoliberal toolkit: openness to trade, integration into GVCs, and liberalisation. The fact that China’s trajectory rested on precisely what dependency theory prescribed – public ownership over the commanding heights of the economy, capital controls, conditioned foreign investment, and the subordination of external relations to internal developmental priorities – was systematically obscured. The success of the periphery had to be narrated as a vindication of the centre’s prescriptions.

As the twenty-first century unfolds, the neoliberal order is in crisis. In the core, neoliberalism has led to financialisation and deindustrialisation. In the periphery, integration into GVCs created new structural barriers to technological upgrading (often misdiagnosed as a ‘middle-income trap’). In both the core and the periphery, the result has been social polarisation and a crisis of political legitimacy for the ruling class.

The instability and unreliability of the US-led economic order have created cracks in the neoliberal order’s superstructure. The economic rise of China (now accounting for 30% of global manufacturing production), combined with new efforts at South-centred regionalism (ALBA-TCP, AES) and South-South multilateralism (BRICS+), reflects a new mood in the Global South. The unipolar moment is ending, regardless of Washington’s increasingly erratic attempts to resuscitate it through tariff wars, sanctions regimes, and military provocations. The gilded chains of the neoliberal era – free trade agreements, concessions to foreign investors, and the international intellectual property – are increasingly replaced by blunt instruments.

The peripheral economies of Africa, Latin America, and large parts of Asia remain trapped in patterns of subordination that Paul Baran, Samir Amin, Ruy Mauro Marini, and Theotônio dos Santos would have recognised immediately. Financial hierarchies still discipline peripheral monetary policy through the dollar system and the IMF. Technological concentration in a handful of transnational corporations still excludes the periphery from innovation frontiers. Profit repatriation, interest transfers, and the systematic compression of wages below reproduction costs – what Marini called super exploitation, the mechanism by which peripheral capital compensates for its structural disadvantages by squeezing workers harder than the centre ever needs to – continue to operate as the hidden architecture of global accumulation.

The difference is that these mechanisms now operate through what appear to be voluntary, market-driven processes. The compulsion is no longer primarily colonial; it is embedded in the financial architecture, in intellectual property regimes, in the institutional design of trade agreements, and in the structure of GVCs where peripheral firms occupy subordinate positions by design, not by accident. Yet the intensification of militarization and the open weaponization of tariffs, sanctions, and technology controls – particularly visible since the late 2010s – reveal that coercion has never truly receded. It has, rather, been held in reserve: the lead pipe behind the invisible hand, deployed whenever the softer mechanisms of financial and institutional subordination prove insufficient to discipline peripheral states or contain the rise of competitors. Dependency has not disappeared. It has been laundered – and when the laundering fails, the force behind it is made explicit once more.

For the past three decades, the twin concepts of ‘state capacity’ and ‘good governance’ have been invoked as the key to overcoming underdevelopment. Build better institutions, strengthen governance, reduce corruption, and improve the business environment – these were the mantras of the post-Washington Consensus. Even some heterodox economists embraced a version of this argument, pointing to the East Asian developmental states as proof that state capacity could overcome structural constraints.

What much of this literature refuses to confront is that what has been celebrated as ‘state capacity’ and ‘good governance’ in most of the Global South was often nothing more than the subordination of public institutions and policies to the interests of foreign capital and its local allies. This meant the depoliticisation of economic policy and governance, substituting ‘independent technocrats’ for political representatives. Thus, ‘good governance’ and ‘crony capitalism’ are not opposites but in fact twins.

The neoliberal state in the periphery was never weak or ineffectual. On the contrary, it was quite effective in disciplining labour, asset stripping public enterprises, privatising natural resources, deregulating financial flows, and dismantling industrial policy. State capacity did not fail but was built in the service of a class project; governance was, in fact, ‘good’ for a narrow ruling class.

The peripheral bourgeoisie, unable to directly compete with the more technologically advanced and financially wealthy firms in the core, often willingly entered a junior partnership in the chain of dependency. They embraced a programme of dismantling developmental institutions and smashing the local proletariat and peasantry to secure their domestic class position. They were satisfied playing the role of merchant mediaries to the financial-industrial combines of the core. The IMF may have provided the script, but domestic compradors were often eager performers.

The comprador bourgeoisies of the periphery – local capitalist classes whose profits depend not on developing the domestic economy but on brokering its subordination to foreign capital, what Vania Bambirra called ‘dominated-dominant’ classes – found in neoliberal restructuring the perfect vehicle for consolidating their own position within the global hierarchy of capital accumulation.

The institutionalist and developmental state literature, when uncritically applied to peripheral realities, mystifies this process by treating state capacity as a neutral endowment rather than a contested terrain shaped by class struggle.

Overcoming this impasse requires reconstructing Marxist dependency theory as the cornerstone of a Tricontinental political economy. The standard narrative reduces dependency to a Latin American affair of the 1960s – Raúl Prebisch’s terms of trade, the structuralism of the Economic Commission for Latin America and the Caribbean, and the disappointments of import substitution. Provincializing a dependency theory, a global intellectual project, severs it from its roots in classical theories of imperialism and from the sustained dialogue across Latin America, Africa, and Asia that gave it its analytical power.

One of the earliest analyses of colonial wealth extraction, in fact, originates in Asia, where Indian nationalist Dadabhai Naoroji analysed Britain’s drain of wealth from India – a scholarship that has been developed over time by Indian Marxist economists like Utsa Patnaik. In China, Mao Zedong identified the comprador class as ‘appendages of imperialism’ that actively ‘hinder the development of productive forces. For Africa, Egyptian Marxist Samir Amin analysed how local economies were structurally oriented toward serving external demand rather than internal needs, while Guyanese historian Walter Rodney demonstrated how Europe systematically underdeveloped the continent through centuries of colonial extraction and social restructuring.

These strands of thought constituted an integrated intellectual project, forged through a shared history of anti-colonial and anti-imperialist struggle, and encounters like the 1955 Bandung Conference, the 1966 Tricontinental Conference in Havana, and the 1972 Dakar Conference convened by Amin. Crucially, this tradition understood dependency not as a post-war anomaly but as a longue durée – a structural condition rooted in the colonial foundations of the capitalist world system. Dependency theory articulated a general theory of how global capitalism systematically produces and reproduces structural asymmetries through class configurations that are simultaneously domestic and international – and it did so from the standpoint of three continents, not one.

Building on this tradition, I have developed a dual analytical framework built around two indices. The Structural Dependency Index (SDI) measures objective constraints across commercial, technological, financial, productive, network, and distributive dimensions – capturing how contemporary dependency operates through the entire circuit of capital. The State Mediating Capacity (SMC) index measures the institutional resources available to navigate these constraints – from public-sector control over strategic sectors to capital-flow regulation and industrial policy intensity.

The intersection of these two dimensions generates what I call the Dependency Map:

At one end of this map, we find what I call Non-Hegemonic Autonomy – economies like China, Vietnam, and, to a lesser extent, Malaysia that have managed to subordinate their external relations to internal developmental priorities. What makes their autonomy distinctive is that it does not derive from imperial positioning at the apex of the global hierarchy, but from a deliberate political and institutional strategy: what Amin theorised as the condition for autocentric peripheral development. The hegemonic centres – the United States, Germany, Japan – also display low dependency, but for qualitatively different reasons that reflect imperial extraction rather than developmental achievement.

The most troubling configuration is that of the Subordinate Periphery – economies trapped in high dependency with depleted institutional capacity. Argentina, Chile, Peru, Honduras, Kenya, the Philippines: these are societies where decades of structural adjustment have dismantled the very institutions that might have enabled a different trajectory. The perverse logic here is self-reinforcing – the weaker the state’s developmental capacity, the deeper the dependency, the more difficult it becomes to reconstruct that capacity.

Finally, the most analytically significant – and politically contested – terrain is what I term the Contested Semi-Periphery. India, Brazil, South Africa, Indonesia, Turkey, Nigeria, and arguably Russia occupies this space, where significant state capacity coexists with persistent structural constraints. These economies possess institutional resources that could, under different class configurations, be deployed for genuine developmental transformation. But they remain trapped in contradictory positions: enough capacity to resist full subordination, yet insufficient political articulation to break the structural logic of dependency. It is precisely in this contested zone where the political stakes of the multipolar transition are highest.

The critical insight of this framework is not the static classification but the path of transformation it reveals. The decisive question for the Global South today is how to move from Quadrant III to Quadrant I – from Subordinate Periphery to Non-Hegemonic Autonomy. This is not merely a technical question but also a political one.

The first movement (from III to IV) requires the reconstruction of institutional foundations for autonomous action: rebuilding public control over finance, developing people-centred industrial policy, strengthening fiscal and monetary sovereignty, and regulating capital flows. This is the terrain of ‘state capacity’ and ‘good governance’, but not in the depoliticised sense of the mainstream literature. The state itself is a field of class struggle – rebuilding administrative institutions requires confronting domestic elites that benefit from the existing order.

The second movement (from IV to I) requires the strategic deployment of accumulated capacity to restructure domestic accumulation patterns – what Amin called ‘delinking’, understood not as autarky but as the subordination of external relations to internal developmental priorities. China’s trajectory demonstrates that this requires not isolation from the world economy but strategic conditioning of integration: capital controls, technology-transfer requirements on foreign investors, state ownership of commanding heights, and selective engagement with global markets under sovereign direction.

The contemporary multipolar conjuncture creates conditions more favourable for both movements than the unipolar moment ever did. The institutional architecture of South-South cooperation – BRICS+, the Belt and Road Initiative, alternative development banks, and bilateral arrangements outside the dollar circuit – provides material alternatives to Western-dominated institutions. But the capacity to leverage these opportunities varies dramatically depending on where countries sit in the Dependency Map. Countries in Quadrant IV can extract developmental benefits from new partnerships; countries in Quadrant III risk merely shifting the locus of their subordination from Washington to somewhere else.

This is why class analysis remains indispensable. The obstacle to peripheral development lies not in cultural factors or policy failures, but in the class configurations that peripheral capitalism systematically produces. Comprador bourgeoisies – whether they wear the mask of neoliberal technocrats or nationalist populists – will not lead a genuine process of delinking, because their accumulation depends on maintaining the dependent relationship. The transformation from subordination to sovereignty has never resulted solely from elite-led modernisation. It has always required broad coalitions from below – workers’ movements, peasant organizations, popular forces – capable of articulating a coherent political project that challenges the structural foundations of dependency.

The analytical categories of Marxist dependency theory – super exploitation, unequal exchange, the comprador bourgeoisie, and delinking – remain both relevant and vital today. They are the theoretical weapons forged by a Tricontinental political economy that helps us to understand the structural constraints facing the Global South and identify the political strategies capable of overcoming them.

The multipolar moment opens a door. But doors close. The question is whether the popular forces of the periphery – across Latin America, Africa, and Asia – can build the social movements and political leadership to walk through it.

Emiliano López is a researcher at CONICET-Universidad Nacional de La Plata and Chief Economist at Tricontinental: Institute for Social Research. His recent work develops renewed frameworks for dependency analysis as the cornerstone of the Global South political economy in the multipolar era.

Shiran Illanperuma is a researcher at Tricontinental: Institute for Social Research and a co-editor of the international edition of Wenhua Zongheng: A Journal of Contemporary Chinese Thought. He is a Visiting Lecturer at Bandaranaike Centre for International Studies. His current research focuses on development and industrial policy in Asia.

The dependency map and mechanisms that transcend national borders

De-Development and Imperialism: How Can We Fight Back? — The dependency map and mechanisms that transcend national borders

The dependency map and mechanisms that transcend national borders

Article 4 of 10

Tricontinental Political Economy

By Emiliano López and Facundo Barrera Insua

Originally published at https://triconpoliticaleconomy.substack.com/p/the-dependency-map-and-mechanisms

Publication Date: March 5, 2026

Our previous note reconstructed Marxist dependency theory as the cornerstone of a tricontinental political economy. That was the theoretical foundation. This note builds the empirical architecture.

If dependency is real, then it should be measurable. However, mainstream economics provides inadequate concepts and tools for measuring dependency. GDP per capita, debt ratios, and current account balances do not capture the multidimensional structure of subordination described by dependency theory, which operates across trade, technology, finance, production, global networks, and surplus distribution.

Three puzzles illustrate this point. Although Chile has a manageable fiscal deficit and per capita income that place it among “high-income” countries, it has one of the highest Structural Dependency Indexes (SDI) in the world. For its part, Brazil is the world’s tenth-largest economy, but it is more subordinate than South Korea. Finally, India has built a globally recognized technology services sector, yet it scores higher on technological dependency than Brazil.

Mainstream institutions cannot see these contradictions because they are not looking for them. For example, the IMF’s Article IV consultations routinely praise Chile for “macroeconomic stability” and “sound institutions,” yet our index places it in the peripheral range of structural dependency, with elevated scores across multiple dimensions. Peru and Colombia, which the World Bank often cites as reformist success cases with “improving business environments,” fall within the peripheral and hyper-peripheral range. South Korea, a country that supposedly graduated from the periphery, an OECD member, and the world’s twelfth-largest economy, registers a mean SDI of 0.390, well below the peripheral threshold but still far from the hegemonic centers rather than among the autonomous powers. The conventional toolkit cannot explain why a country with Samsung and Hyundai has not achieved structural autonomy, its network dependency score (0.678) remains among the highest in the sample, revealing that corporate scale does not equal systemic centrality. On the contrary, as we shall see below, our framework can explain this because it measures not the size of firms but the economy’s position within global networks of value extraction. Doing Business rankings, the Human Development Index, and per capita GDP at purchasing power parity: these indicators obscure the asymmetries because they measure symptoms, not structure.

A tricontinental political economy cannot remain at the level of theoretical denunciation. It must produce analytical instruments capable of distinguishing between economies that exploit multipolar conditions to construct genuine autonomy and those in which dependency mechanisms persist or intensify despite a favorable conjuncture. What follows is the construction and application of the SDI: a composite measure that captures dependency across six dimensions, applied to 31 countries over 28 years (1996–2023). The result is a cartography of the global hierarchy, built from 856 country-year observations.

Classical dependency theory understood that peripheral subordination does not operate through a single mechanism. Marini’s analysis of the dependent capital circuit (M–C...P...C’–M’) showed that external control is exercised at every phase of the accumulation cycle, from initial capital formation to production and finally to the realization and appropriation of surplus value. We translated this insight into a measurement framework. Each of the SDI’s six dimensions corresponds to a specific phase of the circuit and captures a distinct mechanism that constrains autonomy.

Regarding the first phase of the cycle (M-C), we present two dimensions. The technological dependency question asks: Do you innovate, or do you license? The Fourth Industrial Revolution has created new hierarchies of innovation capacity in which peripheral countries face systematic exclusion from research, design, and governance of technological systems. The issue is not the import of machinery per se, but the structural barriers to autonomous technological development that reproduce center-periphery relations in novel forms. We measure the extent to which an economy’s productive structure remains biased toward primary activities rather than technology-intensive ones, and the share of the value embodied in its exports that originates in foreign innovation.

Financial dependency measures an economy’s position within what Bonizzi, Kaltenbrunner, and Powell have called “subordinate financialization”: integration into global financial systems in a position of structural disadvantage. The currency hierarchy that places the dollar at the apex and peripheral currencies at the bottom enables the extraction of what Musthaq terms “new imperialist rent,” surplus appropriation through financial arbitrage made possible by the subordinate status of peripheral monies. This is the most complex dimension of our index, requiring multiple indicators that range from the degree of foreign ownership of domestic assets and the composition of external liabilities to the volatility of the exchange rate and the extent to which sovereign debt must be denominated in foreign currencies. One component deserves mention: the Exchange Rate Deviation Index, the gap between GDP at purchasing power parity and GDP at market exchange rates, which reveals the structural undervaluation embedded in the monetary hierarchy.

In the second phase of the cycle (C...P...C’), we will distinguish two dimensions: Productive and Network dependency. The first one captures the constraints on autonomous accumulation, and it is, as we shall see, the dimension that most sharply distinguishes economies that have transformed their structural position from those that have not. The issue goes well beyond “technological backwardness.” Even countries that have achieved significant industrial development continue to exhibit high productive dependency because the conditions under which peripheral industry operates (subordinate integration into transnational production networks, external determination of technological trajectories, financial pressures that divert surplus from fixed investment) structurally limit autonomous accumulation. We track cost competitiveness, productivity gaps relative to the global frontier, the degree of wage compression, and, crucially, investment deficiency: whether an economy is channelling its surplus into expanding its productive apparatus or diverting it elsewhere. That last indicator will prove decisive. As the data will show, the distinction between economies that invest and those that disinvest is the sharpest fault line in the global hierarchy.

Regarding Network dependency, we ask whether you are a central node or an appendage. Peripheral countries provide inputs and assembly services, while central countries control high-value activities and technological development. We measure this through the asymmetry of a country’s position in global trade networks and its capacity to function as an intermediary rather than as a terminal node. Most countries in our sample remain subordinated within global trade networks regardless of their other characteristics. The promise that “inserting into global value chains” would promote convergence has not materialized; insertion reproduces hierarchy.

The mechanisms that drain surplus from the periphery do not require visible plunder. Emmanuel demonstrated that unequal exchange operates through apparently equal market transactions: when wage differentials between countries exceed productivity differentials, an hour of metropolitan labor exchanges for multiple hours of peripheral labor, creating systematic value transfer even when commodities trade at equivalent prices.

Finally, in the third phase of the cycle (M’–D’), we distinguish between Distributive and Commercial dependency. Distributive dependency operationalizes these mechanisms of surplus appropriation concretely. We track the outflow of realized surplus through profit repatriation, interest transfers abroad, and the gap between the value a country creates in global markets and the value it captures domestically. We also measure the social reproduction deficit: how far public spending on health, education, and social protection falls short of levels needed to sustain the labor force. Contemporary patterns of superexploitation extend beyond traditional wage compression to encompass what Marini identified as the three tactics of peripheral capital: increasing labor intensity, extending the working day, and compressing real wages below the value of labor power, that is, wages insufficient to reproduce workers’ productive capacity, a structural feature of the dependent cycle of capital.

Commercial dependency answers the question: what do you sell, and what do you buy? This dimension captures external control over the realization phase of the capital cycle, where surplus value extraction depends on market conditions determined by core economies. It goes beyond the classical focus on commodity concentration. A country can achieve apparent export diversification while remaining trapped in low-value segments of global production networks, what recent scholarship calls the “peripheralization of industrial activities.” This involves manufacturing export growth coexisting with systematic exclusion from strategic value creation. We track how much of a country’s exports consist of primary commodities versus high-technology goods, how much of the value-added in its exports is domestic, and how dependent its productive apparatus is on imported capital goods.

A methodological note. The six dimensions are aggregated into a single composite score using a weighting method that preserves theoretical consistency: higher values always indicate greater dependency. All indicators are normalized to a common scale, ensuring the index ranges from 0 (maximum autonomy) to 1 (maximum dependency). A country scoring 0.20 retains substantial control over its accumulation process; a country scoring 0.80 has that process determined, in most dimensions, from outside. The detailed methodology, including variable construction, aggregation procedures, and robustness tests, will be presented in the forthcoming academic paper. Our dataset draws on TiVA-OECD, BACI, Penn World Tables, IMF IFS, World Bank WDI, and UNCTAD databases. The sample comprises 31 countries spanning 28 years and three major crises.

Table 1. SDI Dimensions and Operationalization. Source: own elaboration.

The global mean SDI is 0.494, indicating that most countries exhibit moderate dependency. The mean, however, conceals a dramatic architecture of inequality. A standard deviation of 0.201 reflects a world structured into qualitatively different positions, not one converging toward a common standard.

Figure 1. Country Ranking — Structural Dependency Index, Average 1996–2023.

Source: own elaboration based on World Bank, Penn World Table, BACI, and OECD TiVA.

The empirical results organize themselves into the four configurations we mapped in our previous note, defined not by income levels or geographic location but by the interaction between structural dependency and the state’s capacity to mediate it. The SDI captures the first axis of that interaction: the depth and breadth of structural subordination. The second axis, state mediating capacity, requires its own index, currently under construction. A comprehensive mapping of the transitions between quadrants will require both instruments to work in tandem. For now, we begin where the data are ready: the economic-structural plane. What follows is a reading of the data through that framework.

Figure 2. Structural Dependency in the Global Economy, 1996–2023.

Source: own elaboration based on World Bank, Penn World Table, BACI, and OECD TiVA. Countries are classified using the four-quadrant framework developed by López (2026).

At the end of the spectrum, the United States registers an SDI consistently near zero throughout the entire period (mean 0.029). Germany sits higher but still in the low-dependency range (mean 0.220). Japan, the United Kingdom, and France sit in the semi-hegemonic range. Their low scores reflect imperial positioning rather than developmental achievement, a distinction we drew in the first note of this series. What the data add is temporal precision.

Japan’s SDI has increased over the period (range: 0.086–0.520), the only major economy in this quadrant to exhibit rising dependency. The erosion is concentrated in the technological and financial dimensions, reflecting the loss of manufacturing leadership to China and South Korea and the consequences of three decades of stagnation. A position at the apex of the hierarchy is not a permanent entitlement. The data show it can erode.

The United States, by contrast, shows almost no variation. Its autonomy is structural, embedded in the architecture of the global system itself: dollar hegemony, technological control, network centrality. This is not a finding that requires interpretation. It is the baseline against which peripheral dependency is measured.

China registers a mean SDI of 0.334 over the full period. But the static position matters less than the trajectory. China’s SDI dropped from 0.528 to 0.164 over 28 years. Its standard deviation is among the highest in the sample (0.129), reflecting not instability but directional change, the dismantling of dependency across multiple dimensions simultaneously.

The productive dimension is the driving force behind this transition, with the investment component playing a decisive role. China’s gross fixed capital formation as a share of GDP has consistently exceeded 40%, reaching peaks above 45%. These are levels that are unmatched by any other economy in our sample. Our productive dependency dimension captures this directly: as China’s investment rate rose, its productive dependency score fell, dragging the overall SDI downwards. This is because fixed capital accumulation generates the technological capabilities, productivity gains, and domestic market expansion that reduce commercial, technological, and network dependencies in tandem. Investment in productive capacity is not just one dimension among six. It is the lever that moves the others.

The conditions for China’s transformation were historically specific. What the data add to the theoretical argument is precision: GFCF rates above 40%, sustained over two decades, combined with declining foreign value-added content in exports and rising domestic value capture. These are not abstractions. They are measurable policy outcomes.

Malaysia’s SDI trajectory shows the long-term dividend of rejecting IMF conditionality in 1997: preserved state control over the banking system and strategic enterprises translated into lower network dependency scores than Thailand, which accepted structural adjustment. But Malaysia’s greater openness to foreign capital in electronics manufacturing keeps its technological dependency scores elevated, the highest in the entire sample (0.946), a pattern the data make visible.

For its part, the contested periphery is where the data become most damning. In Brazil, the SDI is 0.602, with a standard deviation of 0.043. That number deserves attention: it is the world’s tenth-largest economy, with the largest industrial base in Latin America and a domestic market of 200 million people. Over the past 28 years, its structural position has barely changed. That low variation across 28 years of data is not stability. It is stagnation with a decimal point.

Regarding Argentina, the SDI is 0.763, placing it firmly in the peripheral range. But the headline number obscures a more important finding. Argentina’s distributive dependency score of 0.783 is among the highest in the sample and the dominant dimension in its profile. The surplus drainage is not cyclical. It is a defining structural feature of the economy, and it explains why a country with historical industrial capacity, an educated workforce, and abundant natural resources reproduces crisis after crisis without altering its position in the hierarchy.

At the same time, India’s SDI is 0.562. Here, the explanation is strongly related to technological dependence (0.624), which remains high despite its globally recognized IT sector. The specialization in services has not resolved technological subordination; it has coexisted with it.

At the hyper-peripheral extreme (SDI above 0.80), Thailand, Colombia, Peru, and Mexico exhibit elevated dependency in virtually all six dimensions. Chile, with a mean SDI of 0.711, occupies a position that is revealing precisely because it is counterintuitive: the standard-bearer of neoliberal reform in Latin America, a country classified as high-income, registers a level of structural dependency higher than both Brazil and India. The “model” produced macroeconomic stability and structural subordination simultaneously.

The contrast with China on the productive dimension is devastating. While China channeled surplus into fixed capital at rates above 40% of GDP, the major Latin American economies exhibit investment rates between 15% and 22%. These are insufficient to close productivity gaps, build autonomous industrial capacity, or develop the endogenous technological capabilities that would reduce dependency across the other five dimensions. Their productive dependency scores remain persistently high, not because they lack an economic surplus, they generate one, but because that surplus is systematically diverted away from productive accumulation. The question that our next notes will address is where this surplus goes: financial speculation, profit repatriation, luxury consumption, and capital flight.

The geographic pattern is unmistakable. Latin America is the most uniformly dependent region in our sample. Every Latin American country in the dataset except Costa Rica falls into the peripheral or hyper-peripheral range, and Costa Rica itself sits in the upper semi-peripheral band. This consistency, persisting despite significant differences in size, resource endowments, and policy orientation, suggests that dependency operates through systemic mechanisms that transcend national policy choices.

The contested semi-periphery is where the political question becomes sharpest. Within our sample, India and Brazil occupy this space most clearly: economies with significant state capacity and large domestic markets whose SDI scores nonetheless remain stubbornly high.

Their dimensional profiles tell the story. Brazil combines moderate technological scores with elevated productive, financial, and distributive dependency, the empirical signature of an economy whose surplus is drained through the very channels our distributive dimension measures: profit repatriation, interest transfers, compressed domestic value capture. The institutional capacity exists. The class configuration that would redirect it does not, or not yet. In turn, India presents a different combination: lower financial dependency but high productive and technological scores, reflecting an economy where the services-led growth model has not translated into autonomous industrial accumulation. In both cases, the question is the same: why does state capacity coexist with structural subordination? The SDI identifies the constraint. However, it does not explain the political choices that perpetuate it.

Disaggregating the SDI into its six components shows how different mechanisms of dependency operate with varying intensity and how they cluster.

Network dependency is the most universal constraint, with a mean of 0.624; most countries remain subordinated within global trade networks regardless of their other characteristics. This is the empirical refutation of the promise that global value chain integration would promote convergence. Productive dependency follows closely at 0.525, reflecting widespread constraints on autonomous industrial development even in countries with significant manufacturing bases.

Commercial and financial dependency show moderate mean values (0.400 and 0.337, respectively) but with high variation: these are the dimensions where national profiles diverge most sharply, reflecting distinct modalities of insertion into global markets and financial circuits. Technological dependency sits at an intermediate level (0.423), while distributive dependency (0.423) shows the greatest variation among the dimensions (standard deviation of 0.207), reflecting heterogeneous patterns of surplus appropriation across the hierarchy.

Figure 3. Maps of Dependency by Each Dimension, 1996–2023.

Source: own elaboration based on World Bank, Penn World Table, BACI, and OECD TiVA.

The dimensional maps reveal distinct geographic patterns. Commercial dependency clusters strongly in resource-rich countries. Technological dependency affects both resource exporters and some manufacturing-oriented economies. Financial and network dependencies exhibit more dispersed patterns, reflecting the complex architecture of contemporary global economic integration and the waning of US hegemony amid hyper-financialization in the US and other countries in the Global North.

At this level of disaggregation, the central finding is that dependency is never unidimensional. Countries rarely exhibit a single-dimensional dependency. Instead, it tends to cluster across related dimensions, creating systemic patterns of subordination that reproduce themselves across different historical periods and policy orientations. This is precisely why our framework insists on measuring all six dimensions simultaneously: partial analyses that focus on trade alone, or finance alone, or technology alone, will always underestimate the depth of the constraint. China’s trajectory suggests that overcoming these multidimensional constraints requires comprehensive transformation strategies that address productive, technological, and network dependencies simultaneously. This explains why, despite sustained efforts to grow and diversify, most countries remain locked in subordinate positions.

Our data settles the question. The first is empirical: dependency is not a metaphor from the 1960s but a measurable structure that persists across 28 years, three global crises, and radically different national policy orientations. The SDI hierarchy, from hegemonic centers to the hyper-peripheral extreme, has been remarkably stable for almost three decades.

The second is about possibility: structural transformation is possible. China’s trajectory from 0.528 to 0.164 is the proof. But the productive dimension tells us how it happened, through sustained investment in fixed capital at rates no Latin American economy has approached, generating cascading reductions in technological, commercial, and network dependencies. The lever is identifiable. The conditions under which it can be pulled are specific and demanding.

The third issue is the question that the SDI opens but cannot answer: why do some ruling classes reinvest the surplus into productive accumulation, while others divert it into finance, luxury consumption, and capital flight?

The index measures this constraint. However, it does not explain the decisions that reproduce it. To achieve this, we need a different kind of analysis: one centered on class configurations, domestic political coalitions, and the institutional arrangements through which surplus is allocated. We will develop that analysis in the next note, following the surplus, to see where it goes.

We have the map. Now, we will follow the surplus.

Emiliano López is a researcher at CONICET–Universidad Nacional de La Plata and Chief Economist at Tricontinental: Institute for Social Research.

Facundo Barrera Insua is a researcher at CONICET–Universidad Nacional de La Plata and an economist member at Tricontinental: Institute for Social Research.

Where Does the Surplus Go? Peripheral Bourgeoisies and the Politics of Disinvestment

De-Development and Imperialism: How Can We Fight Back? — Where Does the Surplus Go? Peripheral Bourgeoisies and the Politics of Disinvestment

Where Does the Surplus Go? Peripheral Bourgeoisies and the Politics of Disinvestment

Article 5 of 10

Tricontinental Political Economy

By Emiliano López

Originally published at https://triconpoliticaleconomy.substack.com/p/where-does-the-surplus-go

Publication Date: March 19, 2026

Paul Baran opened The Political Economy of Growth (1957) with a question that most development economists still refuse to take seriously: if peripheral economies generate an economic surplus — the difference between what society produces and what it needs to reproduce itself — why does so little of it translate into productive development? The surplus exists. In many cases, it represents a substantial fraction of national income. The obstacle is not scarcity. It is what the ruling classes do with what they extract.

Baran distinguished between the actual surplus — what is in fact saved and accumulated — and the potential surplus: what an economy could accumulate if the existing social order did not squander it. That squandering takes four forms: the excessive consumption of the propertied classes, unproductive labor, the irrational organization of production, and unemployment. In underdeveloped countries, the combination is crushing. Landowners spend their rents on luxury imports and urban residences rather than on improving agricultural productivity; merchant capital circulates in usury and speculation rather than in industry; foreign monopolies repatriate profits rather than reinvest them locally. Baran documented this with empirical care: “the bulk of this surplus is not used to expand and improve productive plant and equipment.” Large portions flow abroad, are consumed conspicuously, or are absorbed by financial operations with no productive content.

Baran and Sweezy extended the argument in Monopoly Capital (1966): under monopoly capitalism, the surplus tends to rise as productive investment outlets contract, pushing capital toward financial rather than productive deployment. What this framework still required was a class analysis, that is, an identification of the specific social agent whose choices produce these outcomes. Vania Bambirra, writing from within the Latin American dependentist tradition, supplied it. She undermined two illusions at once: the expectation of an anti-imperialist alliance with a “progressive national bourgeoisie”, and the CEPAL developmentalist conviction that industrial capital would organically drive national transformation. Both misread the class that actually existed in Latin America. The big bourgeoisie there was not a frustrated national bourgeoisie awaiting the right conditions to invest productively. It was a class whose accumulation was constitutively articulated with imperialism — dominant domestically, subordinate internationally — whose material interests ran against the kind of development both traditions hoped it would lead.

The Baran Ratio measures the share of the economic surplus — GDP minus total compensation of employees — that reaches gross fixed capital formation: machinery, infrastructure, equipment, and the material foundations of productive capacity. This captures something that investment-to-GDP ratios obscure: dividing investment by total output conflates the surplus controlled by capital with the wage income earned by workers. The question Baran was asking is not how much of total output a country invests, but how much of the surplus that ruling classes control gets redirected toward productive accumulation — and how much does not. The two things can move in very different directions, and, in the periphery, they do so systematically.

Figure 1. Baran Ratio by Structural Position (1996–2023)

Source: own elaboration using data from WB and PWT.

The global mean Baran Ratio across our 36-country sample is 50% — about half the surplus reaches productive investment. That average is less informative than what lies beneath it: a gradient that is not random, not the product of differential endowments or institutional accidents, but a structural expression of position in the global hierarchy of capital.

Over the full period 1996–2023, South Korea reinvests 70% of its surplus productively; China, 64%. But these full-period averages flatten a trajectory that has moved sharply. Since 2013 — the year China peaked at 98% and began stabilising at a new structural floor — the picture is substantially different: China has averaged 88%, South Korea 74%, India 73%. Western economies, meanwhile, have moved in the other direction. Germany averaged 67% in 1996–2012; since 2013, it has averaged only 60%. France held at 63% and has since risen to 66% — an outlier in a group that has generally seen productive reinvestment compress as financialization deepens. The United States has remained stable at around 53–54% across both periods, reflecting the particular structure of American capital accumulation. At the bottom, Latin America’s Subordinate Periphery has averaged 36% across the full period and has not meaningfully improved: Argentina moved from 25% to 32% between the two sub-periods, Mexico from 37% to 34%.

What makes this hierarchy analytically significant is that it does not align with output per capita, resource endowment, or even nominal investment rates. It aligns with the degree to which the state has historically subordinated surplus allocation to productive ends, and, behind that, with the class configurations that made such subordination possible or foreclosed it. The correlation between the rate of surplus value and the Baran Ratio across countries is r = −0.778, with exploitation highest and productive reinvestment lowest. In the dependent nations, high exploitation and low reinvestment are not independent tendencies. They are two faces of the same class strategy.

Figure 2. Structural Profile by Position in the Global Economy

Source: own elaboration using data from WB and PWT.

The radar chart makes visible what the aggregate numbers suggest but do not fully show: the structural profile of Western economies is not simply different from that of the periphery, it is constituted in relation to it. Arghiri Emmanuel’s theory of unequal exchange offers a crucial complement to the Baran Ratio. Where Marx analyzed exploitation at the point of production within a national economy, Emmanuel showed that exchange between nations with systematically different wage levels transfers value from low-wage to high-wage economies even in the absence of any explicit mechanism of coercion. The relatively lower surplus value rates in Germany and France, at 0.48 and 0.53, respectively, compared with 1.35 in Argentina and 1.73 in Peru, are not simply the result of more productive technology or stronger labour mobility in the centre. It is partly sustained by the terms on which Northern capital imports goods produced under conditions of super-exploitation in the South, capturing in the price differential a portion of the value produced under lower wage conditions. The low exploitation rate of the North and the high exploitation rate of the South are not independent phenomena — they are connected through the circuits of the world market. What Figure 2 shows as four distinct structural profiles is, from this angle, a single system with a hierarchical division of labour, surplus, and reinvestment.

Figure 3 ranks all 36 economies by their mean Baran Ratio over the period. The visual makes the regional clustering unmistakable: Latin American economies occupy the bottom of the distribution almost without exception, while East Asian and Western European economies concentrate at the top. The gradient is not a continuum — it has breaks that correspond to structural positions

Figure 3. Country Ranking: Productive Surplus Utilization (1996–2023)

Source: own elaboration using data from WB and PWT.

In 1996, China reinvested 29% of its surplus productively, below the Latin American mean at the time. The figure is worth holding for a moment: in the mid-1990s, Chinese workers produced a surplus that was, proportionally, less productively reinvested than in Argentina or Colombia. By 2008, the ratio had reached 60%, and by 2013, it peaked at 98% — virtually the entire surplus was redirected toward productive investment, a value unmatched in our dataset. By 2023, it had settled at 88%, still far above any comparable economy. What the trajectory describes is not simply growth but structural transformation: a threefold increase in the productive utilization of surplus over three decades, sustained across political cycles, financial crises, and shifting global conditions.

The mechanism behind this trajectory is not mysterious, but it requires careful specification. China’s Baran Ratio did not rise because of China’s transition from a socialist system to a capitalist system after the reform and openness. This is a Eurocentric explanation: all processes in the world must follow the logic of European modernity. China was not more efficient because market forces happened to favour productive investment. It rose because successive Five-Year Plans subordinated the allocation of surplus to explicit productive targets — not as technocratic exercises in resource allocation, but as instruments for integrating national value chains, developing domestic technological capacity, and progressively moving the productive structure up the ladder of complexity. Where Western economies since the 1970s channelled a growing share of surplus into financial valorization — shortening the circuit of capital, inflating asset prices, and progressively decoupling financial returns from productive activity — China’s state maintained the long circuit: surplus into productive investment, productive investment into expanded capacity, expanded capacity into a deeper integration of the national productive structure. The result is visible not only in the Baran Ratio but in the composition of Chinese exports, which moved from low-value assembly to high-complexity manufacturing over precisely the period in which the ratio climbed.

Giovanni Arrighi, in Adam Smith in Beijing, attributed China’s rise to the Smithian logic of the division of labour and market expansion. What the Baran Ratio shows is something different: the Chinese trajectory is driven not by exchange but by the systematic direction of surplus toward fixed capital investment — a logic that is closer to Marx’s analysis of expanded reproduction than to Smith’s account of commercial development.

This matters for the broader argument of this article because it illustrates what the framework that we have developed in our previous article, Building Sovereignity, captures through the productive dependency dimension of the SDI: the degree to which an economy controls its own productive structure, rather than occupying a subordinate position in value chains controlled from outside. China’s ascent was simultaneously a rise in the Baran Ratio and a reduction in productive dependency — the two processes are not independent. The capacity to reinvest the surplus productively and the capacity to develop an autonomous productive structure reinforce each other: investment deepens the value chain, and a deeper value chain generates the productivity gains that expand the investable surplus. This is the developmental dynamic that dependency theory predicted was possible under specific political conditions, and which the data confirms was achieved in China over three decades.

Figure 4. Baran Ratio by Geographic Region (1996–2023)

Source: own elaboration using data from WB and PWT

The 2008 crisis marked a visible inflection in the regional trajectories. For Western economies, the exit from the crisis did not restore the productive circuit; it deepened its disarticulation. The response of central banks and treasuries channelled extraordinary liquidity not toward productive investment but toward a new cycle of financial expansion, initially through quantitative easing and near-zero interest rates, and subsequently through the leveraged growth of technology platforms whose valuations rest less on productive capacity than on monopoly rents over data, attention, and digital infrastructure. The interlocking of big tech valuations with financial markets — and, increasingly, with the arms industry through defence contracts and dual-use technologies — has produced a form of capital accumulation that is simultaneously highly concentrated and structurally disconnected from the production of goods and services. The internal productive chains of Western capitalism, progressively outsourced since the 1970s and never reconstructed after the crisis, cannot absorb the surplus generated by financial expansion. The result is visible in the data: Western Baran Ratios, already declining before 2008, continued to compress afterward, while the financial sector’s share of corporate profits expanded. The surplus is being reinvested — but into circuits that inflate assets rather than productive capacity.

Figure 5. Baran Ratio Trajectories: Three Structural Patterns (1996–2023)

Source: own elaboration using data from WB and PWT

Argentina reinvests 28% of its surplus productively over the 28-year period, the lowest in the sample. Peru sits at 33%, Colombia at 34%, Mexico at 36%, and Chile at 38%. Germany averages 64% over the same period. France 64%. The United States 54%. Argentina allocates less than half of what Germany does, proportionally to the surpluses each economy generates, in a country that has spent half a century trapped in cycles of stagnation, debt, and deindustrialization. Brazil, at 42%, is the strongest performer in the region, and the gap with Argentina and Peru reflects the partial state capacity that Brazil has managed to preserve — public banking, Petrobras, BNDES — rather than any fundamental difference in class structure.

What makes these figures structurally distinct is not only the low reinvestment rate but the combination. Argentina’s workers produce 1.35 units of surplus for every unit they earn, an exploitation rate nearly double that of German or French workers (0.48 and 0.53, respectively). Peru is more extreme still: a rate of surplus value of 1.73, meaning workers generate almost three times their own wage in surplus, while the economy directs only 33% of that surplus toward productive investment. Colombia (RSV 1.56, Baran 34%), Mexico (RSV 1.35, Baran 36%): the pattern repeats across the region with a regularity that rules out coincidence.

Ruy Mauro Marini’s Dialéctica de la dependencia (1973) identified the mechanism connecting these two facts. In dependent economies, local capital faces a structural disadvantage against the technological superiority of foreign firms. It compensates through what Marini called super-exploitation of labour: the intensification of work beyond its normal limits, the extension of the working day, and the reduction of wages below the value of labour power itself — not just the extraction of surplus value, but the compression of wages below what workers need to reproduce themselves. Super-exploitation magnifies the surplus extracted. But this enlarged surplus does not return to expanding productive capacity. Because dependent production is oriented toward external markets rather than the domestic consumption of workers — who are simultaneously the primary producers and the systematically excluded consumers — the circuit of capital in the periphery separates production from the realization of value. The surplus finds its outlet in exports and in the luxury consumption of the classes that appropriate it, not in expanded reproduction of the domestic economy. The wages compressed by super-exploitation cannot sustain an internal market, and the surplus magnified by super-exploitation does not fund productive investment. Both mechanisms reinforce each other in a self-reproducing loop that our data registers across thirty years.

Figure 6. Structural Dependency and Productive Surplus Utilization

Source: own elaboration using data from WB and PWT

Figure 7. Rate of Surplus Value and Baran Ratio by Country

Source: own elaboration using data from WB and PWT

This is not exclusively a Latin American story. Walter Rodney’s How Europe Underdeveloped Africa (1972) showed that the systematic extraction and misdirection of surplus from colonised economies was the historical foundation on which both European development and African underdevelopment were simultaneously constructed. The colonial social structures that emerged from that process — classes whose wealth derived from resource extraction and intermediation rather than productive development — carried the same logic into the post-independence period. South Africa’s Baran Ratio of 41%, alongside an RSV of 0.77, registers the accumulated weight of a class formation shaped by that history. The Double Drain, in this sense, is not an economic phenomenon with a political dimension; it is a political-historical construction that expresses itself through economic numbers.

The wage share across the Subordinate Periphery averages 46%, compared to 61% in advanced Western economies. More is taken from labour than in the centre. Less reaches the productive apparatus than anywhere else in the sample. And the productive backwardness that results from low investment perpetuates the conditions that make super-exploitation necessary — closing the circle that Marini described as the dialectic of dependency.

The standard explanations — institutional weakness, policy uncertainty, unfavourable business climates — treat symptoms as if they were causes. The data shows a class pattern, and the class pattern has a logic.

Baran documented where the surplus goes when it does not go into productive investment. Foreign monopolies operating in underdeveloped countries, he showed, do not reinvest their profits locally: “that portion of which the monopolist combines takes the largest share is not used for productive purposes. It is not reinvested in their own enterprises, nor does it serve to develop others.” What does not flow abroad “is used in almost the same way as the landowning aristocracy uses it — luxury consumption, urban real estate, and financial speculation. And: “strong sums are taken abroad, held as protection against currency devaluation or as a reserve to ensure a decent retirement in case of social and political disturbances.” Capital flight is rational behavior given the structural position of the class that practises it.

The domestic bourgeoisie operates by the same calculus. Its accumulation does not depend on developing the national productive apparatus but on intermediating resource extraction, brokering foreign investment, and managing the financial circuits through which surplus exits. Bambirra showed this was not bad luck or misguided policy but the structural outcome of how capitalism was inserted into Latin America from the beginning. The propertied classes that emerged from that history have no organic interest in productive national development — they have an organic interest in the conditions that make their existing accumulation possible: the conditions of dependency.

This is why associated development has produced the same result across different political cycles. Argentina’s 28%, Mexico’s 36%, and Colombia’s 34% are not the consequence of bad policy choices. They are the consequence of treating as a subject of development a class whose power rests on the combination of domestic dominance and international subordination that development would dissolve. Keynes observed, from a different political position entirely, that capital responds to the cold calculation of short-term advantage rather than to national projects. In the periphery, that calculation runs against productive reinvestment with a consistency that no incentive structure has managed to disrupt.

The data also shows the other side. Under different political configurations, the surplus has been redirected. What separates the trajectories at the top of our distribution from those at the bottom is not resources, geography, or endowment. It is the degree to which the state has developed the capacity to impose a different logic of surplus allocation — and the social and historical conditions that made that capacity possible or foreclosed it.

Samir Amin called this delinking: not withdrawal from the world economy, but the subordination of external economic relations to internally defined developmental priorities. The concept operates simultaneously as a diagnosis and as an orientation — it names what successful cases have in common and identifies the structural condition that autonomous development requires. Where states have retained or built institutional instruments to condition how capital uses its earnings — public banking, capital flow regulation, strategic industrial policy, public ownership in commanding sectors — the surplus has consistently reached productive investment at higher rates. The framework that we are developing captures this through the State Mediating Capacity index, which operationalises the degree to which state institutions can act with relative autonomy from the immediate interests of the dominant fractions. An autonomy that is never given by institutional design but won through the specific configurations of social forces that particular historical moments produce.

The Contested Semi-Periphery — Brazil, India, South Africa — occupies the most analytically significant terrain precisely because it demonstrates that the outcome is not predetermined. Brazil at 42%, India at 66%: these are not accidental. They reflect the partial survival of developmental state instruments alongside the persistent constraints of peripheral insertion. These economies have enough institutional capacity to redirect the surplus differently, yet not enough to do so consistently — caught between the possibilities their state apparatus opens and the class configurations that narrow them. That tension is not a transitional phase on the way to resolution. It is the permanent condition of this position in the hierarchy, where the balance of class forces remains genuinely open in ways it is not at either extreme.

The bourgeoisie’s systematic failure to lead productive national development in Latin America is not a character defect or a cultural trait; it is the predictable expression of a class whose position in the global hierarchy is organised around extracting and transferring value rather than expanding the productive basis on which all other possibilities depend. Bambirra understood this not as a moral judgment but as a structural analysis: a class constituted through dependency cannot become the agent of its dissolution without ceasing to be what it is. This does not foreclose alliances or coalitions with specific capitalist fractions under specific conditions, but it places those alliances in their proper subordinate position — as instruments of a developmental project whose direction and social content must be defined by other forces if it is to be defined at all.

The Baran Ratio measures, year by year and country by country, the outcome of these struggles over the destination of the surplus. What the data cannot resolve is the open question of the present: whether the partial institutional capacities that still exist in parts of the Global South will be expanded, consolidated, or progressively eroded. That depends on processes the ratio does not capture: on organisation, on coalition, on the political intelligence of forces that understand what the numbers mean. Thirty years of evidence across 36 economies establishes the structural baseline. What gets built on top of it, or against it, remains to be determined.

Emiliano López is a researcher at CONICET–Universidad Nacional de La Plata and Chief Economist at Tricontinental: Institute for Social Research.

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Africa's Faustian Bargain with the International Monetary Fund

De-Development and Imperialism: How Can We Fight Back? — Africa's Faustian Bargain with the International Monetary Fund

Africa's Faustian Bargain with the International Monetary Fund

Article 6 of 10

The Tricontinental

Originally published at https://thetricontinental.org/dossier-faustian-bargain-imf-africa/

Publication Date: May 13, 2025

The artwork in this dossier illustrates the Faustian bargain that all African countries have to make, which comes at a cost to their financial, industrial, agricultural, and political sovereignty. The images are created by members of Tricontinental’s art department.

On 20 June 1960, Senegal won its independence from France. Two years later, on 31 August 1962, Senegal became a member of the International Monetary Fund (IMF). Almost two decades after independence, in 1979, Senegal entered into an arrangement to gain credit in exchange for more IMF control over Senegal’s economy. From 1979, Senegal’s many governments have sought IMF assistance over twenty times over the forty-six years since then. The IMF arrangements have had different names: Extended Fund Facility, Extended Credit Facility, Standby Arrangements, Structural Adjustment Facility Commitment, Enhanced Structural Adjustment Facility, Concessional Facility Arrangement, Poverty Reduction and Growth Facility, Exogenous Shock Facility, Rapid Credit Facility, Rapid Financing Instrument, and Standby Credit Facility. But their essence is the same: in exchange for the IMF’s help, including accessing funds from the private and public credit markets, the government of Senegal has had diminished sovereignty over its fiscal policy (Senegal’s power over its monetary policy has already been lessened by its use of the CFA franc).¹

It was a Faustian bargain that all African countries made at some point in their history. Countries that had no established exchequers, poorly funded central banks, barely any control over their raw materials, and very low levels of industrialisation faced an uphill task after independence to build the integrity of their national economies and regional trade networks. They remained integrated in a neocolonial structure, which IMF interventions reinforced. They were discouraged from diverting their resources to build up human capacity or the industrial base of their economies.

At no point did the IMF interventions for Senegal, for instance, produce growth of a robust kind; an IMF study from 1996, after almost two decades of the same adjustment policies, noted, ‘While the policies pursued under these programs have contributed to a reduction in macroeconomic imbalances, economic growth has remained erratic and subdued, and savings and investment ratios have been relatively low’.² In other words, there had been no development. Where there was growth, these studies acknowledge, it was largely sporadic and due to the rise of commodity prices. This commodity price-driven growth was not converted into net fixed capital since it was frequently used to pay off exorbitant debt payments, and to finance social welfare to prevent the large-scale collapse of society.

In an important 2002 report, the IMF acknowledged the problems of what it called ‘prolonged use’ of IMF resources.³ The report features two Asian countries (the Philippines and Pakistan) and one African country (Senegal). In the chapter on Senegal, IMF researchers wrote that the policy from 1979 to 2002 had been marked by ‘an incentive to “overpromise” on the pace of restoration of sustainability that stemmed from internal guidelines requiring that there be significant progress toward external viability by the end of three-year arrangements’.⁴ Furthermore, the overoptimism was blamed on ‘the heavy weight given to export-based indicators’, which meant that IMF staff reports ‘tended to downplay the extent of Senegal’s debt problems’. The report concluded that Senegal could not export its way out of the crisis. Yet, despite this startling admission it did not inform subsequent IMF policy – certainly not in the Poverty Reduction and Growth Facility that ran from 2003 to 2006 in Senegal.

This dossier looks at the IMF’s long history with the fifty-four countries on the African continent, all of whom are IMF members. Here, we build on two previous dossiers on the general contours of Washington Consensus policy: Life or Debt: The Stranglehold of Neocolonialism and Africa’s Search for Alternatives (dossier no. 63, April 2023) and How Neoliberalism Has Wielded ‘Corruption’ To Privatise Life in Africa (dossier no. 82, November 2024). It also builds on our Inkani Books volume Can Africans Do Economics? (2024), edited by Grieve Chelwa.

In this dossier, we will turn our attention to the structural adjustment policies predating the first major bankruptcy in the Third World Debt Crisis (Mexico, 1982), and therefore, not in response to the financial chaos created by the rise of US interest rates after October 1979. The dossier draws on two case studies, from Kenya and Zambia, to illustrate our overall analysis, and the prolonged use of the same policies to stifle genuine development for Africans. While this dossier is largely critical of the IMF, our overall work from Tricontinental: Institute for Social Research is to build a theory of development that can produce genuine development. This theory is being built on the actual conditions that the African working class and peasantry require to drive forward their own dreams of emancipation, which are not the dreams of the IMF staff missions dispatched to our part of the world.

A Nightmare that Returns Every Night

From its formation in 1944, the IMF mainly focused on the provision of short-term finance to prevent countries, particularly in war-torn Europe beginning their reconstruction, from collapsing under the weight of balance-of-payments crises. This was illustrated by the IMF’s first loan, $25 million to France in 1947, which was intended to prevent a catastrophic devaluation of the franc. It was only after 1952 that the IMF began to consider longer-term financing, particularly in the Third World, but made this finance conditional on certain important changes in their policy orientation. For instance, through the newly developed Stand-By Arrangement (SBA), the IMF would provide short-term and longer-term funding to a Third World country if it would reduce its budget deficits (‘fiscal consolidation’), control inflation (‘monetary policy adjustments’), and conduct important structural reforms, such as privatising state functions and creating market conditions that favoured the private sector (‘enhance competitiveness’). The IMF grant to Chile in 1955 for $12.5 million was the first to be structured through the SBA and to demand conditions. Chile’s main revenue earner was copper exports, which were in high demand in those years due to rebuilding after World War II. Chile had little problem paying off this first SBA, which set an IMF precedent to demand payment and reject the strategy of debt forgiveness.⁵

The conditions imposed for taking IMF loans produced an almost immediate backlash from populations unwilling to accept austerity conditions for themselves to pay off badly structured loans. Anti-IMF protests took place in Greece (1953) and Argentina (1956), where governments put their relationship with Western creditors and the IMF ahead of their own people. It is important to absorb the politics of this moment: while the IMF set up a policy framework around conditions to enforce the modernisation of the Third World, it accepted fairer rules for Western allies such as the Federal Republic of Germany. It was detailed in the February 1953 Agreement on German External Debts that Germany was to reconcile its debts in its national currency, and it was forbidden from using more than 5% of its export revenues to service its debt. They also benefitted from a preferential interest rate capped at a maximum of 5%.⁶ It was clear by the late 1950s that the IMF policy logic was to ensure that newly independent countries, largely in the Global South, remained within a neocolonial economic structure. They could not try to enforce their sovereignty, and only those with fealty to the Western security apparatus would be given any leeway regarding the rules.

The IMF did not have an active role on the African continent until the decolonisation process fully set in. In 1962, the first SBA for an African country was a loan to Egypt. A string of SBAs followed, going mostly to North African states (Morocco, 1963; Tunisia, 1964; Algeria, 1966) and to the newly free states of Ghana (1966) and Kenya (1967). Ghana’s Kwame Nkrumah refused to engage with the IMF, understanding that it would interfere with national sovereignty; it was only after the coup d’état against Nkrumah that the new military government went to the IMF. Jomo Kenyatta, meanwhile, went to the IMF only because Kenya had emerged from colonialism through a bloody and destructive war that wrecked its economy. Immense fluctuations in the prices of tea and coffee, the country’s main exports, exacerbated a difficult situation. None of these states approached the IMF enthusiastically. They knew its problems from the first. In his landmark 1965 book Neocolonialism: The Last Stage of Imperialism, Nkrumah described multilateral aid through international organisations such as the IMF as a neocolonialist trap. ‘These agencies have the habit’, Nkrumah wrote, ‘of forcing would-be borrowers to submit to various offensive conditions, such as supplying information about their economies, submitting their policy and plans to review by the World Bank, and accepting agency supervision of their use of loans’.⁷

Due to the lack of credible alternatives, in some cases African countries have also sought long-term aid for large-scale projects from the World Bank and the IMF. Over the 1952–2023 period, almost half of the commitments the IMF made were to African countries, largely due to the lack of continental alternatives.⁸ By 2023, the continent’s total external debt was estimated by the African Development Bank to be $1.152 trillion, with annual debt service payments of $163 billion (up from $61 billion in 2010).⁹ The African Export-Import Bank’s State of Play of Debt Burden in Africa 2024 pointed to several key factors: already high debt levels, rising particularly fast from private creditors, and the cost of borrowing attached to external debt growing ‘markedly’.¹⁰ Compounding the situation, low domestic saving rates (mostly due to rising austerity and inflation) and a lack of control over raw material extraction and export have left many African countries in a serious monetary spiral. Each year, therefore, when the IMF study team arrives in any of the fifty-four capitals across the continent, the nightmare of IMF arrogance begins anew and the noose of conditions, austerity, low savings, more borrowing, and greater debt whips populations into despair.

Africa’s Institutions

To prevent the ‘neocolonial trap’, Nkrumah and others insisted upon the need to create robust African institutions both to generate political unity and to build economic integration across the rich African continent. The Organisation for African Unity (OAU) set the process in motion in 1963, followed by the Monrovia Declaration (1979), the Lagos Plan of Action (1980), the Abuja Treaty (1991), the Sirte Declaration (1999), and the African Union’s Agenda 2063 (2013). Central to this process was the recognition of the need for regional cooperation (through the building of Regional Economic Communities or RECs), a continental free trade area, and the creation of a system of monetary unification (including perhaps a continental currency). For monetary unity, African countries agreed to build an African Central Bank, an African Investment Bank (AIB), a Pan-African Stock Exchange, and an African Monetary Fund, with 2016 and 2018 being the target establishment dates for the latter three. None of these institutions have seen the light of day.¹¹

Given the grip of colonial powers on the African continent, monetary policy was not devolved to the colonies until the last decades of colonial rule. In some cases, as with former French colonies, this foreign grip persisted after independence. Very few African states developed central banks (the first was in South Africa – a country subject to colonialism of a special type – in 1921). In 1931, Emperor Haile Selassie closed the old, private Bank of Abyssinia and established a modern Bank of Ethiopia, which could have become an important initiative in central banking on the continent, but it was shut down after the Italian invasion in 1935. Following Ghana’s independence in 1957, the new government in Accra set up the Bank of Ghana, but its sovereignty was constrained by the IMF in 1966 (after the coup that removed Nkrumah). Given the paucity of funds on the continent due to colonial plunder, the early central banks became institutions to attract finance rather than nodes for either long-term monetary planning or for any direct social goal (such as to advocate for full employment). The experience of independent central banking has, therefore, not been significant enough and has partially led to a lack of confidence in creating an African Central Bank or African Investment Bank (AIB). It is important to record that the AIB was envisaged to be in Tripoli, Libya, with initial funds coming from the oil sales of a Libyan sovereign wealth fund. The overthrow of the government of Muammar al-Gaddafi in 2011 has suspended that conversation.¹²

Of the three institutions, the African Monetary Fund has held the most promise. In a key study from 1985 by the UN Economic Commission for Africa (UNECA), the authors wrote that because there is ‘no unified monetary system in Africa, individual central banks find it difficult to respond effectively to the vagaries of the international monetary situation’.¹³ Because Africa’s central banks ‘hardly consult each other on monetary policy’, the report continued, and there is an absence of any other mechanism for consultation, ‘the continent needs a regional institution’. The authors of the study went on to indicate six problems:

The diminishing power of domestic monetary policy to cope with the current economic crisis.

The growing influence of external factors on such policies.

The drastic decline in Africa’s export earning capacity and the consequent depletion of countries’ foreign exchange reserves.

Mounting balance-of-payments deficits and the resulting slowing or stopping of development growth.

Increasing interest rates and other charges on external borrowing.

Growing external debt, which has cumulatively created a vicious circle out of which many African economies have been unable to emerge.

Unless there are major changes, the report notes, ‘it is estimated that Africa’s economic situation will be worse at the end of this century than it is now’.¹⁴ This is a clearsighted message. Forty years later, an analogous statement about the 21st century could be made.

African Continental Free Trade Area

One of the most serious impediments to the creation of these continental arrangements is the low level of intra-African trade, itself caused by low manufacturing and processing capacity in most countries.¹⁵ Low levels of integration are caused by the high export levels of unprocessed and manufactured raw materials to other continents and the consequent import of goods from outside Africa. Africa’s share of global manufacturing fell from 1.9% in 1980 to 1.5% in 2010) and it is declining (in sub-Saharan Africa, manufacturing’s share of GDP fell from 13% in 2000 to 10% in 2017).¹⁶ The situation is so dire that the OAU (now the African Union, or AU) proclaimed in July 1989 that 20 November would be celebrated as Africa Industrialisation Day (which was then adopted by the United Nations).¹⁷ In 2012, the AU member states began to negotiate an African Continental Free Trade Area (AfCFTA), which was then agreed upon in 2018. There is immense enthusiasm for the treaty because its territorial area includes over 1.3 billion people with a combined GDP of $3.4 trillion.¹⁸ However, South Africa and Nigeria – Africa’s first and fourth largest economies – threaten the viability of the AfCFTA because they are putting their national interests ahead of continental interests.

The AfCFTA has an enormous task ahead. Currently, intra-African trade only accounts for 15% of total trade in the region.¹⁹ Some of this has to do with the colonial shape of the continent’s infrastructure, which was first understood to be an obstacle in the initial two decades of independence. In most African countries, roads and railways had been designed to carry goods from mines and fields to ports and to link provincial centres with colonial capitals. Little other infrastructure existed. Reconstructing transportation networks remains expensive, so a range of continental initiatives, such as Trans-African Highways Bureau (1971); Sub-Saharan Africa Transport Policy Programme (1987); Programme for Infrastructure Development in Africa (2012); and the African Integrated High Speed Railway Network (2013), have not been able to advance. The most credible estimate suggests that African countries will need to raise $130 billion to $170 billion per year to begin dealing with the infrastructure gap.²⁰ Despite the potential benefits of this investment, private investment is simply unavailable, and public investment has been squeezed dry. African countries have begun to rely upon various global initiatives, such as China’s Belt and Road Initiative (2013), the European Union’s Global Gateway (2021), and the G-7 countries’ Partnership for Global Infrastructure and Investment (2022).

Case Studies: Kenya and Zambia

Kenya

On 18 June 2024, mass youth-led protests broke out across Kenya, culminating in the storming of the Kenyan Parliament seven days later. The Finance Bill of 2024, a piece of legislation that proposed a slew of tax measures that would grant concessions to the wealthy and multinational corporations at the expense of Kenya’s poor, was being contested.²¹ The bill sought to raise government revenues by levying additional taxes on food (such as eggs, potatoes, bread, and vegetable oil), public transportation, sanitary towels, and mobile money transactions – the kinds of goods and services vital to the welfare of Kenya’s working class.²² Although the bill was ostensibly sold as being the brainchild of Kenya’s National Treasury, it was effectively the result of a financing arrangement that the Kenyan government had entered into with the IMF in April 2021. Many of the young protestors on the streets were aware of this fact and, therefore, in some circles, the protests were known as ‘anti-IMF’ demonstrations. On 27 June 2024, two days after the protesters stormed parliament, President William Ruto announced the withdrawal of the bill along with the dismissal of his entire cabinet, including Finance Minister Njuguna Ndung’u. President Ruto’s actions were unprecedented in Kenyan history.

Kenya’s historic anti-IMF protests flew in the face of many, including the IMF, which had been arguing for some time that it had reformed from its insistence on the anti-poor austerity that had been a defining feature of its interventions in the 1980s and 1990s. For example, in 2016, the IMF published a remarkable essay titled ‘Neoliberalism: Oversold?’, presenting a partial critique of the defining tenets of neoliberalism. The authors wrote:

There is much to cheer in the neoliberal agenda… However, there are aspects of the neoliberal agenda that have not delivered as expected. Our assessment of the agenda is confined to the effects of two policies: removing restrictions on the movement of capital across a country’s borders (so-called capital account liberalisation); and fiscal consolidation, sometimes called ‘austerity’, which is shorthand for policies to reduce fiscal deficits and debt levels. An assessment of these specific policies (rather than the broad neoliberal agenda) reaches three disquieting conclusions:

The benefits in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries.

The costs in terms of increased inequality are prominent. Such costs epitomise the trade-off between the growth and equity effects of some aspects of the neoliberal agenda.

Increased inequality in turn hurts the level and sustainability of growth. Even if growth is the sole or main purpose of the neoliberal agenda, advocates of that agenda still need to pay attention to the distributional effects.²³

The IMF concluded: ‘Policymakers, and institutions like the IMF that advise them, must be guided not by faith, but by evidence of what has worked’.²⁴

As one would expect, this publication caused a stir in the finance and economics world. The economist Rick Rowden argued that the IMF had dropped ‘a political bombshell’ and that their critique of neoliberalism was akin to ‘the Pope declaring that there is no God’.²⁵ Mark Weisbrot, the co-director of the Centre for Economic Policy and Research (CEPR), jokingly said it was as if Donald Trump had written an op-ed with the title ‘Insulting Your Opponents: Oversold?’.²⁶ More importantly, some came to see the IMF’s mea culpa as signalling a hopeful change in how the fund would conduct its affairs going forward. These hopes were urged on by comments from Kristalina Georgieva, the IMF’s managing director since 2019, who remarkably warned against ‘the suffocating force of austerity’.²⁷

In this section, we closely study two relatively recent forays of the IMF into Africa to determine whether the fund has truly reformed in ways that would support widely held aspirations for sovereignty. Specifically, we study the financial terms of two major programmes agreed with Kenya (in April 2021) and Zambia (in September 2022).

The IMF and Kenya

At the beginning of the last decade, Kenya’s economy was heralded as one of Africa’s rising stars by The Economist.²⁸ Encouraged by such positive press and IMF advice to diversify the sources of its credit, the country went on a borrowing binge that saw its external debt stock rise by over 300%, from $7 billion in 2010 to $34 billion in 2020.²⁹ The World Bank’s International Debt Statistics shows that debt service payments grew from $90 million in 2010 to $1.2 billion from in 2020.³⁰ With such an unsustainable debt profile, the Kenyan economy was predictably sent into an economic tailspin with the arrival of the COVID-19 pandemic in early 2020.

On 19 March 2021, Kenya’s Minister of Finance Ukur Yatani and Central Bank Governor Patrick Njoroge jointly wrote a letter addressed to the IMF’s Managing Director Kristalina Georgieva in which they pleaded for immediate assistance to weather mounting debt service costs, a declining economy, and the global pandemic. Their letter explicitly stated: ‘we wish to request a [three-year financing] arrangement under the Extended Fund Facility (EFF) and the Extended Credit Facility (ECF) [totalling] USD2.3 billion’.³¹

Yatani and Njoroge went on to argue that the loan, if granted, would fill Kenya’s ‘fiscal and external financing gaps’ and restore the country to economic health in record time. Georgieva promptly presented the letter to the IMF’s executive board for consideration along with a detailed report on the state of the Kenyan economy that had been prepared by IMF economists. Two weeks later, on 2 April 2021, Georgieva announced in Washington that they had favourably considered Kenya’s request and granted the country the full amount that had been requested.

However, lost in all the celebrations was the fact that the IMF had structured the loan so that Kenya would not receive the $2.3 billion in one fell swoop but would do so in instalments over a three-year period.³² Executive board approval meant that a sum of $307 million was immediately made available to the country, but the balance of some $2 billion would only be released after Kenya satisfied the IMF’s conditions.³³

What were these conditions? First, the lynchpin of the programme would be fiscal consolidation achieved through tax increases and spending cuts. On the spending side, the IMF wanted to see a drastic reduction in Kenya’s primary fiscal balance from a deficit of 5% of GDP in 2021 to a surplus of 0.2% of GDP by 2024, virtually wiping out billions of dollars in government expenditure over a very narrow window of only three years. On the tax side, the IMF wanted Kenya to increase its tax-to-GDP ratio, a measure of the efficiency of tax collection, from 12.9% of GDP in 2021 to 15.6% by 2024.³⁴ Generally, increases in tax collection efficiency are desirable as they can afford the state the necessary resources to invest in social sectors. In this case, however, the majority of the increases in tax efficiency would have to be borne by increases in taxes, such as on wages, VAT, mobile financial services, and so on, which disproportionately affect the working class. Taxes levied on Kenya’s private sector and on multinational corporations were left virtually unchanged.

The second part of the programme required so-called structural and governance reforms. On the structural reforms side, the IMF argued that subsidies to Kenya’s state-owned enterprises (SOEs) were adding an unnecessary burden to the country’s finances. Accordingly, the fund wanted to see reduced government support to the following SOEs: Kenya Railways, Kenya Airways, Kenya Ports Authority, Kenya Airports Authority, Kenya Power, Kenya Electricity Generating Company, and Kenya Ports Authority. Also earmarked for spending cuts were Kenya’s three largest public universities. The IMF also wanted the government to strengthen its anti-corruption framework, having identified corruption as a driver of Kenya’s fiscal problems.³⁵

The final part of the programme addressed monetary arrangements. The IMF required the Central Bank of Kenya to move from accommodative monetary policy (lower interest rates) to tighter monetary policy (higher interest rates) over the medium term. These conditions were to be strictly monitored via quarterly assessments by the IMF. Failure to deliver on some or all of them risked jeopardising the programme and the suspension of further disbursements. This point is important given the verbal sleight of hand. The programme was billed as the Kenyan authorities’ programme. Why did it require such close monitoring, and why was it tied to financial disbursements if it was wholly designed and owned by the Kenyan government?

As voluminous literature has established, the IMF’s conditions were anti-growth, anti-poor, and, importantly, anti-development. Unsurprisingly, even though the ECF/EFF was meant to run until April 2024 (three years), the Kenyan authorities requested an extension, additional funds, and a new loan facility under the Resilience and Sustainability Facility (RSF).³⁶ The RSF came with another round of conditions that were similar to the previous arrangements. In other words, even though austerity had not worked under the ECF and EFF, the Kenyan government bizarrely asked for more austerity in the hope that the additional dose would somehow work.

Zambia

Zambia was one of the countries that was seen as being on the verge of take-off at the beginning of the second decade of the twenty-first century. The forecast for the price of copper (the country’s mainstay) was hopeful owing to the increased demand for the commodity coming from a growing China. In 2011, Zambia obtained its first Fitch sovereign credit rating, giving it the license to borrow on international capital markets. Zambia’s external debt increased by an incredible 1,100% from $1 billion in 2011 to $12 billion at the end of 2019.³⁷ Debt service payments ballooned from $67 million in 2011 to $1 billion in 2019, consuming 16% of the national budget from just 2% in 2011.³⁸ Given the similarity of Zambia’s debt trajectory to that of Kenya, it was not surprising that when the COVID-19 shock arrived, Zambia’s economy, much like Kenya’s, plummeted. In November 2020, a couple of months after the onset of the pandemic, Zambia ceased interest payments on its external debt and became the first country in the COVID-19 era to enter into debt default.

Like Kenya, Zambia looked to the IMF for assistance. Two years into the default, on 8 August 2022, Zambia’s Minister of Finance Situmbeko Musokwatane and Central Bank Governor Denny Kalyalya wrote an urgent letter addressed to IMF Managing Director Kristalina Georgieva:

the Zambian Government requests the IMF’s support [under] this policy programme… The request is for financial assistance through a [three-year] arrangement under the Extended Credit Facility (ECF), covering the period 2022 to 2025, in an amount of [$1.2 billion] … This financial support and the catalytic impact of the Fund programme would help us address our pressing balance of payments needs (totalling $11 billion over 2022–25) and support our reform agenda. We intend to use half of the IMF financing as budget support and the other half to rebuild buffers by boosting the country’s international reserve position.³⁹

As in Kenya’s case, the request was approved. Two weeks later, on 31 August, the IMF’s executive board immediately gave the Zambian government access to $185 million, with the remainder of about $1.1 billion to be disbursed over three years and tied, like the Kenyan case, to conditions.

In deriving Zambia’s conditions, the IMF saw the objectives of the new ECF as follows:

The proposed ECF-supported programme aims to restore macroeconomic stability and foster higher, more resilient, and more inclusive growth… and is tailored to addressing Zambia’s most pressing macroeconomic challenges, namely (i) restoring sustainability through fiscal adjustment and debt restructuring; (ii) creating fiscal space for social spending to cushion the burden of adjustment; and (iii) strengthening governance and reducing corruption vulnerabilities, including by improving public financial management. The programme will seek to ensure that monetary and exchange rate policies support the restoration of macroeconomic stability, international reserves return to adequate levels, and the financial sector remains stable.⁴⁰

Zambia’s programme, like Kenya’s, had three objectives: fiscal austerity, structural and governance reforms, and, finally, monetary reforms. In terms of austerity, Zambia’s ECF was much more aggressive than Kenya’s, requiring ‘a large, front-loaded, and sustained fiscal consolidation’ between 2022 and 2025.⁴¹ Specifically, the IMF wanted to see the fiscal deficit reduced from 6% of GDP at the beginning of 2022 to a fiscal surplus of 3.2% of GDP in 2025.⁴²

This drastic fiscal consolidation had two sides: expenditure reductions and tax increases. On the expenditure side, the IMF wanted the Zambian government to reduce public expenditure in the billions of dollars from 2022 to 2025. They demanded an immediate stop to new capital expenditure (on public goods such as roads and power stations) and a reduction or elimination of expenditure favourable to the poor and working class. In the latter category, the IMF wanted the government to abolish fuel and electricity subsidies, although this would lead to cost-of-living increases.⁴³ Crucially, the IMF singled out the highly successful Farm Input Support Programme (FISP), which had been introduced in 2002 and had greatly aided Zambia’s food sovereignty by providing input support to millions of peasant farmers. The IMF required the government to reduce its funding to the FISP from 3% of GDP at the beginning of 2022 to 1% of GDP by 2025. A recent analysis has argued that this decision is largely responsible for the hunger crisis that enveloped Zambia in 2024 and continues to the present day.⁴⁴

Revenue increases accounted for the other side of the fiscal consolidation. Here, as in the Kenyan case, the burden of the increases was to be borne largely by the poor through higher taxes on wages and through a reduction in the number of goods that had been zero-rated for purposes of value-added tax (VAT). As is well known, VAT is a regressive tax in the sense that it impacts the poor more than the rich, and governments will often charge a VAT rate of zero on some necessities to protect the poor. In this case, the IMF recommended the removal of such exemptions. Taxes on corporate profits and especially profits realised from Zambia’s giant multinational mining houses were hardly changed and in some cases were reduced.

A second part of the IMF’s conditions focused on structural and governance reforms. As in Kenya, the IMF targeted Zambia’s SOEs. Key among these was the Zambia Electricity Supply Corporation (ZESCO), whose implicit subsidy the IMF wanted the government to eliminate, which would increase electricity tariffs charged to poor households. Further, the IMF wanted the government to begin drawing up plans for the possible privatisation of the electricity utility or, at the very least, unbundle it into smaller units that would be easier to manage.

A final part of the IMF programme, concerned with the conduct of monetary policy, encouraged monetary tightening (raising of interest rates), a scenario that would affect the cost of credit across the economy.

The above conditions were to be closely monitored via semi-annual reviews which tied satisfactory performance to the release of further disbursements of the ECF loan. Just as in the Kenyan case, the IMF referred to the programme of conditions as ‘homegrown’, another verbal sleight of hand meant to hoodwink readers into thinking the policy prescriptions were autonomously derived by the Zambian government. Unsurprisingly, the Zambian economy has struggled to recover during the life of the ECF loan. The current loan is set to expire in October 2025, and the minister of finance recently suggested that he would ask the IMF for an extension and augmentation of the loan in a similar fashion to Kenya.⁴⁵

The Kenyan and Zambian case studies show that IMF austerity is alive and well despite the organisation’s protestations to the contrary, a reality that is widespread across the Global South. A 2021 study from the International Labour Organization (ILO) found that the IMF was tragically still requesting austerity as a precondition for assistance during the worst months of the COVID-19 pandemic.⁴⁶ A new book from political economists Alexandros Kentikelenis and Thomas Stubbs entitled A Thousand Cuts (2023) has found that the only consistent aspect of IMF lending policy over the period from 1980 to 2019 has been its insistence on austerity, especially in the poorest countries.⁴⁷

Rather than engendering development and enhancing sovereignty, the IMF’s forays into Africa continue to impoverish the continent while eroding national sovereignty and its broader continental project. Senegal, where we began this dossier, sits at a crossroads. A government audit shows that the previous administration misreported data, which reflected far lower debt burdens and budget deficits. This means that the loans were secured on false presumptions.⁴⁸ The IMF, therefore, has suspended the $1.8 billion credit facility to the country. Now, the government of Diomaye Faye, which came to power with a progressive mandate, will seek a new IMF loan in June.⁴⁹ Will other paths open up for Senegal, or will it be fated to trudge through the IMF debt-austerity agenda that has plagued countries of the Global South for decades?

Life or Debt: The Stranglehold of Neocolonialism and Africa's Search for Alternatives

De-Development and Imperialism: How Can We Fight Back? — Life or Debt: The Stranglehold of Neocolonialism and Africa's Search for Alternatives

Life or Debt: The Stranglehold of Neocolonialism and Africa's Search for Alternatives

Article 7 of 10

The Tricontinental

Originally published at https://thetricontinental.org/dossier-63-african-debt-crisis/

Publication Date: April 11, 2023

The art in this dossier is based on still frames from the music video ‘IMF’ by Seun Kuti and Egypt 80 (Knitting Factory Records) featuring Dead Prez’s M1, directed by Jerome Bernard and produced by Duck Factory.

Seun Kuti is a member of the band Egypt 80 and the youngest son of the late Nigerian Afrobeat pioneer and political figure Fela Kuti, whose popular album Zombies, released in 1976, heavily criticised the military dictatorship that was in power at the time and inspired resistance among the Nigerian people. Nearly forty years after the release of his father’s album, Seun’s music video ‘IMF’ harks back to the continued assault against the sovereignty of the African people, featuring rows of growing zombie-like International Monetary Fund (IMF) officials chasing an African man and, finally, turning him into a money-obsessed, disfigured monster identical to themselves.

Before the pandemic was announced by the World Health Organisation in March 2020, the poorer nations of the world already struggled with seriously high – and unpayable – levels of debt. Between 2011 and 2019, the World Bank reported, ‘public debt in a sample of 65 developing countries increased by 18 percent of GDP on average – and by much more in several cases. In sub-Saharan Africa, for example, debt increased by 27 percent of GDP on average’.¹

The debt crisis did not take place because of government spending on long-term infrastructure projects, which could eventually pay for themselves by increasing growth rates and allow these countries to exit from a permanent debt crisis. Rather, these governments borrowed money upon borrowed money to pay off older debts to wealthy bondholders as well as to pay for their current bills (such as to maintain education, health, and basic civic services). ‘Among the thirty-three sub-Saharan countries in our sample’, the World Bank noted, ‘current spending outstripped capital investment by a ratio of nearly three to one’.² When the pandemic struck, countries that had adopted the World Bank-International Monetary Fund policy to grow their way out of the debt crisis floundered. Growth rates shrank, which meant that debt volumes ballooned, and so these governments decided to borrow more and adopt deeper austerity policies, which dramatically increased the debt burden on their populations.

Registering, in their own way, what is universally acknowledged as an intractable debt crisis in the poorer nations, the International Monetary Fund (IMF) warned that a serious banking crisis is likely to emerge (while ignoring the factors driving this scenario). ‘Our updated global bank stress test shows that, in a severely adverse scenario, up to 29 percent of emerging market banks would breach capital requirements’, the IMF wrote in October 2022.³ This means that the context of high debt, high inflation, and low growth rates (with lowered employment expectations) could lead to the collapse of a third of the banks in the poorer nations.

Neither the IMF nor the World Bank nor indeed any of the international financial institutions (IFIs) have any credible pathway out of this crisis. Indeed, the IMF report surrenders to reality as it tells central banks across the globe to ‘avoid a de-anchoring of inflation expectations’ and to ensure that ‘the tightening of financial conditions needs to be calibrated carefully, to aim at avoiding disorderly market conditions that could put financial stability unduly at risk’.⁴ The focus here is to keep ‘the market’ happy, while there is remarkably no care for the downward spiral of living conditions for the vast majority of the people on the planet. In its October 2022 Fiscal Monitor Report, subtitled Helping People Bounce Back, the IMF noted that while governments’ top priorities must be ‘to ensure everyone has access to affordable food and to protect low-income households from rising inflation’, they must not attempt ‘to limit price increases through price controls, subsidies, or tax cuts’, which would ‘be costly to the budget and ultimately ineffective’.⁵

In January 2023, the IMF’s World Economic Outlook predicted a slightly better, albeit ‘subpar’, growth forecast but warned of continued worries of debt distress in the poorer nations, writing that ‘The combination of high debt levels from the pandemic, lower growth, and higher borrowing costs exacerbates the vulnerability of these economies, especially those with significant near-term dollar financing needs’.⁶ The antidote to debt distress, according to the IMF, is ‘fiscal consolidation and growth-enhancing supply-side reforms’, namely more of the same old austerity-debt trap. If the governments of the poorer nations are told not to use these basic tools (which are used routinely in the richer nations), their only choice – as far as the IMF is concerned – is to borrow in order to provide even low levels of relief to the very poorest people in their countries. Effectively, the IMF has surrendered to the prevailing reality and offers the poorer nations no viable exit from a permanent debt crisis.

This dossier has been drafted with the knowledge that the permanent debt crisis besieging the poorer nations has not resulted from short-term market failures or from business cycles that will rebound, and that it is not fully a consequence of governments’ mismanagement of finances or deep-rooted corruption. Rather, our assessment of the debt crisis draws from an important speech given by Burkina Faso’s President Thomas Sankara (1949–1987) at the Organisation for African Unity in July 1987. ‘Debt’s origins come from colonialism’s origins. Those who lend us money are those who colonised us’, Sankara explained. ‘Debt is neocolonialism’, with the fiscal and monetary policies of many of the African states taken over by the ‘technical assassins’ of the IFIs. ‘Debt is a cleverly managed reconquest of Africa aimed at subjugating its growth and development through foreign rules’, he continued, with the IFIs setting policy by using the debt as an instrument to demand ‘structural adjustment’ of domestic finance ministries and central banks.⁷

Gro Harlem Brundtland, Norway’s former prime minister and then chair of the United Nations’ World Commission on Environment and Development (also known as the Brundtland Commission), came to the Organisation for African Unity meeting in Addis Ababa (Ethiopia) in 1987 to say that the entire debt of the poorer nations could not be repaid and should be forgiven. Sankara acknowledged the importance of the Brundtland Commission’s assessment and then said:

Debt cannot be repaid, first because if we don’t repay, lenders will not die. That is for sure. But if we repay, we are going to die. That is also for sure. Those who led us to indebtedness gambled as if in a casino. As long as they had gains, there was no debate. But now that they suffer losses, they demand repayment. And we talk about crisis. No, Mr. President, they played, they lost. That’s the rule of the game, and life goes on. We cannot repay because we don’t have any means to do so. We cannot pay because we are not responsible for this debt.⁸

One alternative to the debt crisis is a debt strike, which is what Cuba’s Fidel Castro began to raise in his speech at the Non-Aligned Movement meeting in New Delhi in 1983 and which was on the agenda for the Continental Dialogue on the Foreign Debt in Havana in August 1985. It is within this dynamic that Sankara spoke of the need for an ‘Addis Ababa united front against debt’.

The context for such a ‘united front against debt’ has returned, but the political will for it now is as low as it was then. However, the world is very different today than it was in the 1980s. Other alternatives have since presented themselves, such as those available through regional integration and through alternatives to the Western-backed IFIs (for example, financing from China and other large developing countries).⁹

This dossier opens with an introduction to the world of the IFIs – mainly the IMF – and their role in exacerbating the poverty brought on by colonialism and transforming it into a permanent debt crisis, and then moves into a deeper assessment of the contradictions of sovereign debt on the African continent. The final section carries a statement on the IMF-induced debt crisis by the Collective on African Political Economy and offers alternatives to IFI-led funding to manage the turbulence of debt.

The Fundamentalism of the IMF and the Permanent Debt Crisis

In 1919, John Maynard Keynes of the United Kingdom’s Treasury Department published a book that became a sensation. In the book, entitled The Economic Consequences of the Peace, Keynes observed that the Great War had ‘so shaken the system as to endanger the life of Europe itself’.¹⁰ The Treaty of Versailles, which ended the war, did not grasp the underlying problems that had led to the war and only cemented the victory of some countries against others. The treaty left structural problems intact, such as the ‘disordered finances’, in Keynes’ words, of many countries (not only Germany, which faced an enormous and unpayable reparations bill). The Wall Street Crash of 1929, the Sterling Crisis of 1931, and the Banking Panics of 1931–1933 revealed the underlying vulnerabilities of capitalism, with the ‘disordered finances’ being the spur towards the potential general collapse of the system. In 1936, Keynes published The General Theory of Employment, Interest, and Money, a manual to save capitalism by a theoretical plea for governments to use state resources to recycle profits and balance an unbalanceable system. Keynes, who dabbled in eugenics theory, did not extend his views on state intervention to protect the system in the British colonies and prevent the decline of their population’s living standards.

When the United States invited its allies to Bretton Woods (New Hampshire) in July 1944 to discuss how to manage the structural crises that contributed to the Second World War, Keynes – who was one of the main figures at this meeting – said that it would be ‘the most monstrous monkey house assembled for many years’, suggesting that ‘twenty one countries [that] have been invited’ – presenting a list of primarily colonised countries, from Guatemala and Liberia to Iraq and the Philippines – ‘clearly have nothing to contribute and will merely encumber the ground’.¹¹ Instead, Keynes preferred that the two founder states of the Bretton Woods Conference, the United Kingdom and the United States, ‘settle the charter and the main details of the new body without being subjected to the delays and confused counsels of an international conference’, as he explained a few years earlier.¹² In fact, Keynes (on behalf of the United Kingdom) and Harry Dexter White (on behalf of the United States) arrived at the meeting with two plans already drafted, which they put on the table and upon which the final Articles of Agreement for the International Monetary Fund as well as the International Bank for Reconstruction and Development (or the World Bank) were built. The other participants were largely onlookers.

Despite the limited input of most of the world, which was still under colonial rule, the purpose of the IMF as laid out in the Articles of Agreement was straightforward, none of it built to extend the power of the British imperial system. The main thrust of the articles was to assist the ‘expansion and balanced growth of international trade’ and to ‘contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy’.¹³ To establish these ‘primary objectives’, the IMF was tasked with preventing any short-term problems from becoming long-term crises, such as by maintaining exchange rate stability and facilitating loans to prevent balance-of-payments spirals ‘without resorting to measures destructive to national or international prosperity’. When the former colonial countries won their freedom, most of them became members of the IMF based on the Articles of Agreement, and in 1961, the IMF created its Africa Department. Until the Third World Debt Crisis that began to spiral with Mexico’s default in 1982, the IMF had primarily operated by providing short-term financing in a relatively modest fashion through the Compensatory Financing Facility (1963) and the Buffer Stock Financing Facility (1969).¹⁴

In the aftermath of Mexico’s default, the IMF conducted what its managing director, Michel Camdessus, called the ‘silent revolution’.¹⁵Against its manifest purpose, the IMF began to respond to requests for short-term bridge financing by demanding that countries radically change their domestic economic policies as a condition for approval. Through their new programmes, the Structural Adjustment Facility (1986), and then the Enhanced Structural Adjustment Facility (1987), the IMF put a singular recipe on the table: privatise the economy, including the state sector; commodify areas of human life that had up to that point been in the public domain; terminate any government deficit financing; and dissolve any barriers on foreign capital investment and trade (such as subsidies and tariffs). The IMF had experimented with these measures in Bolivia, Chile, and Peru in the 1950s with limited success before turning them into the basis for their policy not towards all countries, but specifically to be used against states in Africa, Asia, and Latin America, which struggled with an international economic system shaped by colonialism and capitalism. These were the countries that had championed the formation of the UN Conference on Trade and Development (UNCTAD) in 1964 to advance their own proposals to exit the neocolonial world order, proposals that were passed by the UN General Assembly in 1974 as the New International Economic Order (NIEO). The new IMF policy emerged in contest against the possibility of an NIEO, since rather than allow for a better deal for raw material prices or for tariff-subsidy arrangements, it demanded the withdrawal of all these anti-colonial schemes. Even Raghuram Rajan, the IMF’s own chief economist from 2003 to 2007, wrote in his book Fault Lines (2010) that the IMF’s policies appeared as a ‘new form of financial colonialism’.¹⁶

The IMF’s ‘silent revolution’ intensified the crisis faced by the poorer nations, driving them into a spiral of indebtedness and poverty. The general formula for this spiral is as follows:

Countries go into short-term balance-of-payments debt because of their lack of capital – much of it stolen during the colonial period – and their reliance upon borrowing to conduct (often expensive) capital improvements in their countries (some of which are in the raw material extraction sector, thereby operating as a subsidy for foreign mining companies).

The IMF arrives and informs the finance ministries that government spending for education, healthcare, and other social development projects must be cut in order to prioritise payments to wealthy bondholders (in the London Club) and to governments – mostly the old colonial states – (in the Paris Club) who have lent them money.

To pay the debt servicing on these loans, the poorer nations cut their government spending, thereby impoverishing their people further, and export more of their cheapened raw materials (rather than more profitable finished products). When countries start to export more and more primary commodities, this produces a price war that leads to a steep decline in the revenues gained from the volume of exports.

With weakened revenues from imports, the poorer nations must continue to cut their social spending, ramp up their sales of raw materials and public assets, and borrow more money from external private and governmental sources… just to pay off the interest on their ballooning debt.

The imperative of ‘exchange rate stability’ prevents governments in the poorer nations from exercising any effective monetary policy – including implementing capital controls – while their fiscal policy is already eviscerated by balanced budget demands from the IMF, social spending cuts, and pressure from wealthy bondholders to ‘reform’ (i.e., surrender) their tax policy.

In 2016, senior members of the IMF’s research department published an article called ‘Neoliberalism: Oversold?’, which argued that the ‘adverse feedback loop’ set in motion by austerity, followed by increased inequality and then yet more austerity, had to be broken by a less rigid, less fundamentalist approach to ‘liberalisation’ and neoliberalism.¹⁷ There was even a suggestion of ‘greater acceptance of [capital] controls to deal with the volatility of capital flows’. While there was a decline in the conditions that the IMF required to receive their loans over the course of the decade before this paper was published, there is no evidence of any qualitative change in IMF policy.¹⁸

Guinea, for instance – a country that has at least a third of the world’s bauxite – entered the IMF rollercoaster in 2011 and immediately became trapped in the debt-austerity cycle.¹⁹In 2014, the Guinean government of Alpha Condé wrote to the IMF that the ‘tight fiscal and monetary policy’ had led to a ‘reduction in spending, including on domestic investment’, which made it impossible for Guinea ‘to respect the indicative targets for spending in priority sectors’.²⁰ In other words, Guinea borrowed to try and exit a crisis, but the borrowing itself led to cuts in social spending and deepened its crisis. In 2019–2020, the country experienced a cycle of protests sparked both by Condé’s attempt to change the constitution as well as the worsened economic situation. A UNICEF report found that, in 2019, twenty-five very poor countries spent more on debt servicing than on education, health, and social protection combined. Sixteen of those countries are on the African continent.²¹

In the early months of the pandemic in 2020, the IMF offered to open up new windows for borrowing that they said would come without conditionalities.²²The G20 Debt Service Suspension Initiative and other such offers to pause debt payments suggested that the poorer nations would receive assistance to prevent total economic collapse and to gain access to vaccines. However, Oxfam found that thirteen of the fifteen IMF loan programmes during the second year of the pandemic (2021) required ‘new austerity measures such as taxes on food and fuel or spending cuts that could put vital public services at risk’.²³ The Commitment to Reducing Inequality Index reveals that fourteen out of the sixteen countries in West Africa planned to cut their budgets by a total of $26.8 billion in 2021 to contain haemorrhaging national debt crises and that these policies have been encouraged by the IMF’s COVID-19 loans.²⁴

The evidence is clear: the IMF not only engineers austerity-driven debt crises, but its policies are designed to ensure and manage a permanent debt crisis, not to erase debt.

Africa’s Sovereign Debt Crisis

In 2009, the Zambian-born economist Dambisa Moyo published the instant bestseller Dead Aid.²⁵ Moyo’s main argument in the book was that there was little to show for the hundreds of billions of dollars in foreign aid that had been given to the African continent since 1970. Rather than spurring development, she said, aid had financed grand-scale corruption and civil wars, which in turn thwarted economic growth on the continent. Moyo’s case against aid was not a new one. Her book’s arguments were inspired by the Hungarian-born British conservative economist Peter Bauer, in whose memory Moyo dedicated her book. Bauer made a career singling out foreign aid – not colonialism or neocolonialism – as the chief architect of Africa’s underdevelopment.²⁶

What was new about Dead Aid was Moyo’s prescription. In a chapter titled ‘A Capital Solution’, Moyo called for the substitution of aid with private market debt. That is, she called on Western countries to significantly reduce their aid to Africa and at the same time called on African governments to make up for the shortfall by borrowing from private creditors and bondholders such as hedge funds, banks, and so on. For Moyo, this was an elegant solution to the problem of corruption, which had historically bedevilled the foreign aid industrial complex. Money sourced from private debt markets was unlikely to fuel corruption in Africa because, Moyo argued, private creditors were sophisticated enough to not invest in countries likely to engage in corruption. After all, corruption acted as a drag on economic growth, which in turn threatened the prospects of debt repayment. On the other hand, to access much-needed private credit, African governments would need to demonstrate to private creditors that they were committed to fighting corruption and to investing the proceeds in growth-enhancing activities. Moyo’s policy solution was, therefore, a supposed win-win for all concerned.

Moyo’s ‘capital solution’ provided the intellectual cover for the financialisation of capital flows to Africa through the issuance of so-called Eurobonds (i.e., the issuance of bonds in US dollars and Euros), whose meteoric rise would engulf the continent in a new debt crisis by 2020. Ghana’s first issuance of a Eurobond in 2007 was a turning point for the continent. The country’s debut bond of $750 million was issued to much fanfare and was highly sought after by financial investors in New York and London.²⁷ In a quest to satisfy investors’ appetites, Ghana followed up by issuing two additional Eurobonds totalling $2 billion in 2013 and 2014. Other countries in Africa soon followed suit.²⁸ In 2011, Zambia obtained its first sovereign credit rating (a credit score of sorts) from the ratings agency Fitch. Shortly thereafter, the country issued two Eurobonds in quick succession in 2012 and 2014, a scenario that increased Zambia’s external debt by an incredible 300% in three years.²⁹Kenya likewise jumped on the bandwagon, issuing three Eurobonds between 2014 and 2019 that totalled around $5.5 billion.³⁰

Eurobond issuance on the continent grew at an incredible pace in the second decade of the twenty-first century: by 2020, twenty-one African countries had issued Eurobonds (several, in many cases). According to the World Bank’s International Debt Statistics handbook, the stock of Eurobond debt for sub-Saharan Africa grew from about $32 billon in 2010 to $135 billon in 2020, a 322% rate of increase.³¹In other words, the stock of Eurobond debt had more than tripled in just ten years.

The rate of increase in the stock of Eurobond debt between 2010 and 2020 far outstripped other sources of foreign currency debt in Africa. For example, multilateral debt from the World Bank, IMF, African Development Bank, and other institutions increased by about 144% over the same period, a rate that is less than half that of the increase in Eurobond debt. Similarly, bilateral debt from governments in countries such as China, France, the US, and the UK to governments in Africa also increased at a rate of 145%, which was also less than half the rate of increase in Eurobond debt.³²

This last point on bilateral debt is worth highlighting given the argument on ‘debt trap diplomacy’ that has become commonplace with respect to debt from China. The argument alleges that China is using debt to trap Africa in a perpetual cycle of indebtedness and servitude. However, the facts present a different picture. Though World Bank’s International Debt Statistics handbook does not provide a country-by-country breakdown of bilateral debt to Africa that would allow us to isolate the Chinese component, it shows that by 2020 Africa’s total external debt owed to bilateral creditors (i.e., countries) stood at $115 billion, compared Eurobond debt of $135 billion. Further, the figure for bilateral debt provided by the World Bank is for all bilateral creditors, implying that Eurobond debt outstripped all debt from bilateral creditors, which includes China. A careful analysis from Debt Justice shows that African debt to China was $83 billion in 2020, a number smaller than the $135 billon owed to private bondholders.³³ Figures on Chinese loans and Africa’s debt produced by researchers working at the China Africa Research Initiative (CARI) at Johns Hopkins University in the United States are often cited in support of the debt trap diplomacy argument (despite their own researchers having published articles debunking the Chinese debt trap narrative).³⁴However, they are not very useful in this particular case because, according to CARI itself, its database ‘does not track [debt] disbursements and repayments’.³⁵In other words, CARI only reports on newspaper announcements of loan contraction but does not track to see if the contracted loan left China and, if it did, if the recipient government in Africa subsequently paid it off or paid off portions of it. Therefore, CARI figures can be misrepresented in ways that vastly exaggerate the true stock of Chinese debt to Africa.

This goes to show that the current sovereign debt crisis currently engulfing the African continent is largely the creation of private creditors via the Eurobond craze that possessed and took hold of the continent in the second decade of the twenty-first century, helped along by the intellectual justifications of Dambisa Moyo and others. Eurobonds did not fix the problem of corruption that was said to be endemic with foreign aid, as Moyo argued they would. For example, hundreds of millions of dollars of Kenya’s first Eurobond issuance are said to have gone ‘missing’. In Zambia, questions have been raised about where the Eurobond money went.³⁶ In Mozambique, loans and bonds were illegally withdrawn and misused by state-owned enterprises (known as the Tuna Bond Scandal). As these cases illustrate, Western private bankers and creditors have facilitated this type of theft.³⁷

Finally, analysing the sources of debt in Africa casts doubts on current multilateral initiatives aimed at resolving Africa’s sovereign debt crisis. One example is the Debt Service Suspension Initiative (DSSI), launched by the G20 in May 2020, soon after the COVID-19 pandemic began to send shockwaves across the globe, to encourage bilateral and multilateral creditors to suspend interest payments on debt owed by poorer nations, including those in Africa, for a year. The DSSI was hardly successful, as many creditors – with the exception of a few, such as China – refused to suspend interest payments.³⁸ In addition, many analysts remarked that the DSSI was not fit for purpose, since it only applied to official debt (multilateral and bilateral), while the sovereign debt crisis was largely fuelled by a private bond crisis as shown above.

As the DSSI expired in June 2021 and the sovereign debt crisis got worse, the G20 launched the Common Framework for Debt Treatments, which would become the guiding mechanism for debt restructuring after the initial years of the pandemic.³⁹ Unfortunately, it is bedevilled by many of the same problems that afflicted the DSSI. First, the Common Framework only has mechanisms for resolving official credit. But, as the above analysis shows, a substantial portion (and by far the largest single source) of Africa’s sovereign debt is owed to private bondholders and creditors. Their absence largely confines debt restructuring discussions to the theoretical sphere, with little practical value. Second, the Common Framework lays the ground for an official creditor committee, which in the case of Zambia is co-chaired by France and China. France is seen to represent the old Paris Club of creditor countries, which together make up a sizeable portion of the official credit given to Zambia. China is a co-chair given its emergence as an important source of credit to Africa, and Zambia in particular. However, the structure and governance of Zambia’s creditor committee with the two co-chairs has opened the country to geopolitical manoeuvrings and, in the process, largely paralysed the prospects for genuine debt restructuring anytime soon.

A Permanent Solution to the Debt Crisis

The fifty-four sovereign African states are vastly different from each other, with distinct languages, histories, social and economic challenges, and possibilities. However, they are united by a political project that has been institutionalised through the African Union and its legal and organisational frameworks and by a neocolonial sovereign debt crisis.

This final section of the dossier is divided into two parts. The first is a statement made by the Collective on African Political Economy, which lies at the root of the analysis presented in this dossier. The second elaborates on the finance section of A Plan to Save the Planet, a document drafted by twenty-six research institutes from around the world.⁴⁰ These alternatives are provisional and require far more theoretical and practical elaboration, which is precisely the task of the Collective on African Political Economy.

The IMF Is Never the Answer: A Statement from the Collective on African Political Economy

Many countries across the Global South, particularly those in Africa, are currently in the throes of fiscal crises – largely the result of a perfect storm of global events. The COVID-19 pandemic triggered a global economic recession, which in turn impacted national economies. The ongoing war in Ukraine has disrupted vital global supply chains for food, fertilisers, and energy, thereby increasing many countries’ import bills and straining their budgets. The fiscal crisis is fundamentally a result of an unsustainable build-up of sovereign debt in the last decade, fuelled by cheap credit from Western economies and encouraged by international financial institutions, including the IMF. The COVID-19 pandemic and the war in Ukraine made what was already a tenuous situation worse.

Many poor countries are turning to the IMF as a credible source for finance in the present moment, largely egged on by claims that the IMF has reformed from its bad old ways and no longer demands crashing austerity as a conditionality.⁴¹ Back in 2016, IMF economists published a mea culpa in which they (sort of) confessed the sins of the past and promised that they had turned over a new leaf.⁴²The evidence, however, suggests anything but a reformed IMF. A study from the International Labour Organisation that carefully tracked IMF conditionality in 2020, when many countries were grappling with health and financial burdens related to the COVID-19 pandemic, found that in most of the 148 countries examined, the IMF still required austerity as a condition for granting assistance.⁴³

The government of Zambia, the first country to default on its debt as a result of the pandemic, recently concluded a financing deal with the IMF with the signature condition of ‘a large, front-loaded, and sustained fiscal consolidation’, as the IMF put it –
in other words, austerity in black and white.⁴⁴ The IMF wants the Zambian government to reduce its expenditure by billions of dollars over the next three years, which will be most acutely felt by the poor majority.⁴⁵ The government of Sri Lanka, a country whose debt-fuelled boom came to a spectacular halt earlier this year, is also seeking IMF assistance, with early indications showing that the conditions attached to the deal will be as indefensible as the Zambian deal.⁴⁶The Ghanaian government too is desperately seeking another IMF deal, this after the last one was celebrated as the deal that would ‘restore the lustre to a rising star in Africa’.⁴⁷

All this goes to show that the IMF cannot be the answer to the poorer nations’ economic challenges. Alongside its sister institutions, the IMF has provided ‘assistance’ to poor countries ever since its establishment in 1944, and yet many of these countries have remained poor in spite of this. The reason is that IMF assistance has never confronted the structural factors that have continued to consign many countries to the ranks of the poor. As diagnosed many years ago by scholars such as Walter Rodney and Andre Gunder Frank, development in the North is sustained by underdevelopment in the South.⁴⁸ Seen this way, the IMF, as the archetypical Northern institution, is duty bound to maintain and entrench this status quo. How else does one explain the IMF’s solution to Zambia’s financial woes, for example? The IMF prescription ignores the fact that the country’s foreign-owned copper mines continue to generate billions for their overseas shareholders yet pay so little in taxes in a country where the estimated annual income taxes for one mining project alone could have amounted to nearly half the 2020 national water supply and sanitary budget.⁴⁹

A new kind of institutional apparatus that fosters cooperation, rather than competition, is required for Africa’s economic liberation and that of the Third World more generally. This would mean, for example, establishing currency arrangements that bypass the US dollar, which is a strong lever of IMF conditionality and a weapon of US foreign policy. These kinds of long overdue proposals are already underway in parts of the world, such as in Latin America, where Brazil’s President Luíz Inácio Lula da Silva (known as Lula) and Argentina’s President Alberto Fernández have proposed the establishment of a regional currency, the sur, that could be used to settle cross-border claims and store reserves.⁵⁰ The hard work of figuring out the technical details related to the implementation of such regional currencies must begin in earnest.⁵¹ Africa, for example, needs a continental bank that is wholly owned by the people and will serve as a genuine tool to bolster sovereign industrial policies. The highly influential African Development Bank, with its significant Western shareholding, is not fit for purpose.⁵²

Furthermore, there is an urgent need to restore and reinvigorate the capacity and autonomy of the African state to deliver on its development agenda. State capacity and state autonomy depend on the ability to adequately mobilise tax revenues, an area in which the African state has continued to underperform. The tax-to-GDP ratio, a measure of resource mobilisation, has remained incredibly low in Africa largely as a result of illicit financial flows that continue to spirit away billions of dollars from the continent every year.⁵³ As a consequence, the adequate delivery of the kind of social services that underpin people’s dignity (social security, health, education, etc.) continue to be hamstrung.⁵⁴ Further, the low tax-take in the poorer nations forces many governments to seek the easy way out by borrowing on the international capital markets, setting into motion dangerous debt dynamics that ultimately lead governments back into the unloving arms of the IMF. Notably, IMF conditionality rarely confronts the fact that state capacity and autonomy have been eroded in Africa largely as a result of the tax dodging practices of transnational corporations.

Just as problematic is the leading role that the IMF and its allied institutions have taken in the fight to save the planet from climate change. The IMF’s answer to climate change, which is influential given its inordinate role in the world, points to the private capitalist sector as the solution to the planet’s problems.⁵⁵ All this is ironic given that the private capitalist sector’s insatiable appetite for profits at all costs has been responsible for the climate crisis.

The Third World must re-imagine a path out of our current crisis that doesn’t depend on the IMF, its allied institutions, and Western capital. The last seventy years or so have demonstrated that a reliance on these institutions only serves to trap the Third World in a perpetual state of underdevelopment. We need an emancipatory set of institutions and frameworks that will lead to the total independence of the Third World.

This is a task that the Collective on African Political Economy (CAPE) has decided to take on in a serious way. CAPE is a new grouping of Africans from different walks of life that are committed to the economic, and thus total, emancipation of the African continent and the Third World more broadly. CAPE hopes to recapture the emancipatory scholarship and politics of a previous generation of intellectuals that emerged from the post-independence movement in the 1960s and reformulate it to respond to the needs of today’s world. The lessons of that generation and the institutional infrastructure that it built have been forgotten largely as a result of IMF and World Bank-inspired structural adjustment programmes (SAPs) that began in the 1980s. The SAPs are responsible for widespread destruction, including the evisceration of progressive scholarly communities in Africa and much of the Third World. It is precisely such communities that CAPE hopes to bring to life to rebuild a present, and future, that centres the needs and aspirations of the majority.

Âurea Mouzinho
Peter Magati
Crystal Simeoni
Hibist Kassa
Brian Kamanzi
Ndongo Samba Sylla
Grieve Chelwa
Ihsaan Bassier

Constructing Financial Alternatives for a Sovereign Africa and Third World

Over the course of the past two decades, the stranglehold of Western-based bondholders and Western-controlled IFIs has weakened as other countries – mainly China – have emerged as the largest trading partners with African states and as the largest lenders to these states. Importantly, China’s public and private debt forgiveness during the pandemic has put pressure on IFIs to rethink the harshness of their debt repayment-austerity governance model.

The opening provided by Chinese funding is not an opportunity merely to borrow more: it is an opportunity for African states to construct genuine, and sovereign, development projects in this climate. These projects must seize multiple opportunities to raise funds, and the fragility of IMF power must also be utilised to advance fiscal and monetary policies that are built on an agenda committed to solving the problems of the African people, not facilitating the demands of wealthy bondholders and the Western states that back them. A number of mechanisms are on the table to avoid the IMF-driven debt-austerity trap. Some of them, expanding upon A Plan to Save the Planet, are listed below.

Invalidate historical debts and rescue stolen assets:

Renegotiate all odious external debts of the poorer nations. An ‘odious debt’ is a debt incurred by a country without the assent of its people, such as during the phase of a military dictatorship.⁵⁶

Seize assets held in illicit tax havens, which as of 2010 total at least $32 trillion.⁵⁷

Build progressive tax codes:

Build the capacity of tax departments in each country, including digital tax infrastructure.

Implement taxes on wealth and inheritance.

Implement higher rates of taxation on income, such as capital gains, that is made through financial speculation by all non-bank corporate entities.

Discourage the profit-shifting activities of multinational corporations and adopt a unitary approach to tax the share of global profits generated by subsidiaries of multinational corporations.

Reform domestic banking infrastructure:

Democratise the banking system by expanding the role and size of public banking and by implementing more regulations of and transparency for private banking.

Enforce ceilings as a percentage of liabilities on speculative banking activity by commercial banks.

Regulate the interest rates that banks charge for specific goods, such as housing loans.

Implement tight regulations for pension funds so that the savings of the people are not used recklessly for financial speculation and encourage the creation of public sector pension funds.

Build alternative funding sources to the IMF’s debt-austerity traps:

Set capital controls to prevent both foreign and domestic capital flight, policies that even the IMF argues are important.⁵⁸ As highlighted earlier, capital flight is not only deleterious for local financial markets: it also robs the continent of the resources needed to drive an autonomous developmental agenda. With capital controls, governments will be able to devise effective monetary policies in an environment that would not be buffeted by shocks and unexpected fragilities. Capital controls must be implemented alongside a robust wealth tax collection system, pro-labour distribution policies, and the prevention of dollarisation.

Attract investment from institutions that do not enforce structural adjustment conditions, such as the Belt and Road Initiative and the BRICS’s New Development Bank. The absence of SAPs-like conditions on these emerging and alternative sources of capital explains their growing popularity in the South and Africa in particular.

Take advantage of local currency central bank swap arrangements (such as those offered by the People’s Bank of China).

Adopt ceilings on the interest rates that commercial and multilateral lenders charge developing countries.

Enhance regionalism:

Encourage the creation of regional trade and reconciliation mechanisms.

How Neoliberalism Has Wielded 'Corruption' to Privatise Life in Africa

De-Development and Imperialism: How Can We Fight Back? — How Neoliberalism Has Wielded 'Corruption' to Privatise Life in Africa

How Neoliberalism Has Wielded 'Corruption' to Privatise Life in Africa

Article 8 of 10

The Tricontinental

By Grieve Chelwa

Originally published at https://thetricontinental.org/dossier-how-neoliberalism-has-wielded-corruption-to-privatise-africa/

Publication Date: November 26, 2024

The dossier was researched and written under the leadership of Professor Grieve Chelwa of The Africa Institute, Global Studies University, through Tricontinental Pan Africa.

The artwork in this dossier attempts to illustrate the true face of corruption on the African continent – from the brutal plunder of the colonial era to today’s legalised looting by multinational corporations through tax evasion and other illicit forms of accounting. The satirical images aim to subvert the racialised image of African corruption and highlight the true cost of neo-colonialism and the faces of the true culprits – the Western multinational corporations, banks, and accounting institutions who underdevelop Africa for their own profit.

In the years following the fall of the Soviet Union, the word ‘corruption’ increasingly began to appear in the reports of multilateral agencies and non-governmental organisations. These reports argued that corruption is rooted in the regulatory function of states, which control large-scale development projects and whose officials oversee the delivery of licences and permits; if the regulatory function of states could be minimised, many of these reports argued, corruption would be less pervasive. This kind of anti-corruption discourse fit neatly within the neoliberal drive to shrink states’ regulatory apparatuses, deregulate and privatise economic activity, and promote the idea that the freedom of the market’s invisible hand would create a moral foundation for society.

Yet, none of these reports – including those from the World Bank and Transparency International – offered a clear definition of corruption. In The Anti-Corruption Plain Language Guide (2009), Transparency International defined corruption as ‘the abuse of entrusted power for private gain’.¹ Three years later, the World Bank described corruption as ‘the abuse of public office for private gain’.² These definitions are similar, and they continue to be reproduced in reports from multilateral organisations and in academic scholarship. The key word here is ‘abuse’, and the main implication is that someone in the public sector entrusted with power or public office abuses their role for private gain, such as through bribery, nepotism, extortion, and embezzlement. This orientation argues that if the state were smaller or more disciplined, there would be little to no corruption in society. Even though the non-governmental organisation Transparency International added a concern about private sector corruption in 2010, this addition has been marginal to the overall focus on public sector corruption.³

The epicentre of this argument has been the African continent, where the idea of ‘corruption’ – meaning corruption of the state – has effectively been used to diminish the state’s regulatory functions and reduce the number of state employees. It is important to note that while 21% of the European workforce, on average, is employed in the public sector, that number is a mere 2.38% in Mali, 3.6% in Nigeria, and 6.7% in Zambia, which in turn limits these states’ capacity to manage and regulate large multinational corporations on the African continent.⁴ Furthermore, over the course of the 1990s and the 2000s, the International Monetary Fund (IMF) fought to reduce public-sector employees’ salaries, which certainly increases the likelihood of bribery. The IMF outlined this approach in its 1991 Public Expenditure Handbook, which makes reducing the wage bill for public-sector workers a central part of its agenda.⁵

In neoliberal literature, corruption primarily takes the form of bribery, extortion, and embezzlement – all of which refer principally to public sector corruption – while omitting concepts such as transfer mispricing, trade mis-invoicing, accounting irregularities, financial mismanagement, and tax avoidance – all of which are essential elements of multinational corporations’ accounting practices.⁶ There are a range of socio-psychological reasons for corruption, the most referenced one being greed. But greed is not a transhistorical concept or emotion; rather, it is shaped by the social formation in which it is allowed to grow. Capitalism has a special relationship to greed, since it fosters the ‘animal spirits’ (as the economist John Maynard Keynes put it) to reduce all human life to commodities and to centralise the profit motive as the economic motor.⁷ Yet, older forms of morality that are eager to set aside hypocrisy and overcome the dominion of money prevail in social consciousness across the world. This dossier is anchored in the popular sentiment against corruption in society, driven largely not by petty bribery but by industrial-scale corruption by private capital. The Malaysian sociologist Syed Hussein Alatas called this ‘tidal corruption’: the corruption that ‘floods the entire state apparatus involving those at the centre of power. Like the tide, it rises to cover wider areas and immerse the surrounding vegetation’.⁸ This dossier is not a defence of corruption; on the contrary, it argues for an understanding of corruption that is not rooted solely in the public sector but that appreciates the tidal corruption set in motion by the leading forces of capitalism. It focuses on the African continent because that is where agencies such as the IMF and the World Bank have most effectively wielded the idea of ‘corruption’ to undermine states’ sovereignty and subjugate the countries of the Global South to the extraordinary power of multinational corporations, particularly in the mining sector.⁹

Part 1: The Neoliberal Corruption Industry

In 1993, Peter Eigen, a German lawyer who worked at the World Bank in the legal department, registered an association in Germany called Transparency International. Eigen worked with Michael Wiehen (formerly of the World Bank) and Hansjörg Elshorst (formerly of the German Agency for Technical Cooperation) to establish Transparency International in German business and government circles as a legitimate organisation. Before going forward to discipline countries of the Global South, the association had to ensure that European states had built their own legitimacy regarding corruption. That is why they lobbied the governments of France and Germany to stop the policy of what, in Germany, is called Schmiergeld (bribe money); these countries not only allowed bribes to be paid in foreign jurisdictions, but then permitted companies to deduct these payments from tax obligations.¹⁰ This lobbying resulted in the passage of the 1999 Organisation for Economic Cooperation and Development (OECD) Convention on Combating the Bribery of Foreign Public Officials in International Business Transactions. By passing this convention, European officials and their counterparts in North America created a framework about corruption through which to adopt a morally superior position over governments in the Global South.¹¹ In 1997, Matthew Parris, a conservative South African-born member of the British Parliament, said, ‘Corruption has become an African epidemic. It is impossible to overstate the poisoning of human relations and the paralysing of initiative that corruption on the African scale brings’.¹² This phrase – on the African scale – defines an attitude toward corruption that embodies both the long colonial history of theft and the neocolonial present of corporate malfeasance on the continent.

Yet those who moralise about African corruption have little to say when it comes to the criminality of corporate corruption. Take, for example, the German-South African retail giant Steinhoff International (1964–2023). In 2015, German officials raided the offices of Steinhoff Europe Group Services as part of an investigation into accounting fraud. As the scandal became too big to contain, with new investigations by contracted firms such as PricewaterhouseCoopers, and with Steinhoff’s senior management forced to resign, the South African parliament opened its own investigation of the firm, which found that businesses such as Steinhoff rely upon public funds for their investments, including – in the case of South Africa – the Public Investment Corporation.¹³ These public funds lost billions in Steinhoff’s eventual collapse. In 2019, South Africa’s Financial Sector Conduct Authority imposed an administrative fine of ZAR 1.5 billion (US $95 million) on the company for false, misleading, or deceptive statements to the market. This fine was later reduced to ZAR 53 million (US $3.4 million), a minuscule amount compared to the approximately ZAR 124.9 billion (US $6.9 billion) involved in fictitious or irregular transactions that substantially inflated Steinhoff’s profits and assets between 2009 and 2017.¹⁴ In the service of ‘investor-friendly policies’, these scandals are either underreported or treated as the exception rather than the rule. Yet this is a familiar story, from the accounting debacles at Enron Corporation (2001) and Arthur Andersen (2002) – which led to the largest known case of corporate fraud in history – to the faked emissions scandal at Volkswagen (2015).

Before Transparency

In the period of decolonisation and then of the formation of post-colonial states, Western-driven modernisation theory argued that corruption was not a ‘poison’ but an asset that helped shape the relationship between the ruling class and the state apparatus. Drawing from the experience of the United States, Robert K. Merton’s Social Theory and Social Structure (1949) provided the basis for this line of argument: that corruption made the relationship between state officials and the ruling class more intimate.¹⁵ In the 1960s, a range of influential scholars published important articles based on fieldwork in Africa and Asia to substantiate the claim that corruption ‘humanises government’, as Edward Shils wrote in 1960.¹⁶ Indeed, in his classic work Political Order in Changing Societies (1968), Samuel Huntington argued that corruption (or what he defined as ‘patronage from above’) in Africa, Asia, and Latin America had contributed to the creation of ‘the most effective political parties and most stable political systems’.¹⁷ In this Western modernisation literature, which dominated the worldview of multilateral institutions, corruption was treated as an utterly normal – even beneficial – form of economic interaction.

Modernisation theory played a considerable role in the new post-colonial states, but it was not the only approach to economic development. In 1955, the Bandung Final Communiqué made it clear that the most predatory aspect of the world economy’s neocolonial structure was the role of transnational corporations (TNCs), as they were known then (later called multinational corporations, or MNCs). Many of these TNCs, which emerged during the colonial era, had built up their capital stock through colonial theft and structured world economic relations to gain privileged access to raw materials in the former colonies as well as captive markets to which to export their expensive finished products. That is why the new post-colonial states centred the role of TNCs as they developed the platform of the New International Economic Order (NIEO): if these states were to establish sovereignty over their own territories, they had to reduce the power of TNCs either by regulation or restriction.¹⁸ Since many of these states lacked the capacity to develop an in-depth analysis of how these firms were organised or how they managed their financial transactions, they urged the UN Conference on Trade and Development (UNCTAD) and other United Nations bodies to do so. In 1974, the UN Centre for Transnational Corporations (UNCTC) was created for this purpose and began to build a database on the major TNCs’ operations in order to understand what was seen as the institutionalisation of corruption through novel manoeuvres of accounting.

At the same time, the post-colonial states understood the grave limitations they had inherited from their old colonial masters all too well, such as a hierarchical state apparatus designed to terrorise the colonised population and a bureaucracy that had been trained to serve the ends of colonialism, not the people. With the departure of the colonial bureaucrats, the now independent states had to train almost an entirely new administration, many of whose cadre came from impoverished or near-impoverished backgrounds (material conditions that increased the temptation to accept bribes). These states opened public administration institutes to develop the capacity of their new employees and to encourage them to work with the spirit of the national liberation struggles that had won them independence. Each state’s attitude towards public administration varied based on its class politics: in states with a more landlord-bourgeois character, the public administration institutes inherited the old colonial forms of bureaucracy without much revision, whereas states with a higher socialist character (such as China and Vietnam) emphasised combatting the forms of hierarchy amongst state officials. In Vietnam, for instance, Ho Chi Minh called upon the new workers to lead by example rather than corrupt society with bribery and extortion (Thi đua là yêu nước, yêu nước thì phải thi đua, Ho Chi Minh said: ‘emulation is patriotism; patriots must emulate’).¹⁹ Since the material conditions to build a new kind of state simply did not exist, modern training and social pressure became the primary avenues through which to inculcate new values against a backdrop of low salaries and great temptations (the ‘creation of a new man’, as Ernesto ‘Che’ Guevara wrote).²⁰ Yet, in the era ‘before transparency’, under pressure from TNCs and from Western modernisation theory which justified bribery, post-colonial governments struggled to produce new state values.

The Age of Transparency

In the 1990s, a new argument emerged from the Western academy and multilateral organisations controlled by Western governments. This new theory, which moved from modernisation to neoliberal theory, suggested that the states in the Global South were the locus of corruption, that a smaller state would largely solve the problem, and that more pressure must be placed on these states in order to ‘discipline’ them. The idea that TNCs – now MNCs (multinational corporations) – could be corrupt completely vanished in this theory.

In 1992, under pressure from the US government, the UNCTC was integrated into UNCTAD, where its mandate was radically transformed. Instead of being a watchdog of these large corporations, the UNCTC put its resources toward helping MNCs enter southern markets. There was no more interest in producing a TNC Code of Conduct, the skeleton of which was relegated to a languishing draft from 1983 that is raised every few years and thereafter ignored in special sessions.²¹ In other words, the UNCTC became largely moot. What is truly remarkable is that the UNCTC and its code of conduct were sidelined by the West just when UNCTAD showed that 80% of global trade (in terms of gross exports) was linked to the international production networks of these mega corporations that operated across national boundaries, and that the market was becoming increasingly concentrated around these firms.²² That is largely why multilateral agencies make no mention of the private sector in their definition of corruption, which they describe as merely the ‘abuse of public office for private gain’.

In 1995, in place of the UNCTC’s TNC Code of Conduct, Transparency International released its annual Corruption Perceptions Index (CPI).²³ The CPI was measured by a group of ‘experts’ (often private businessmen) who offered their subjective assessment of public sector corruption in various countries. Even when the CPI redefined corruption in 2010 as ‘the abuse of entrusted power for private gain, encompassing practices in both the public and private sectors’, it still ranked countries based on the perception of corruption in the public sector.²⁴ The underlying neoliberal theory here is that corruption in the public sector corrodes the quality of investments in public goods, as corrupt officials seek to increase the volume of investments in order to increase bribes without considering how those investments align with broader national development goals. According to this theory, the correct course is more privatisation and less government oversight; its proposal for ‘transparency’ is merely to eviscerate regulatory state apparatuses and exaggerate the private sector’s ability to profit from public goods.

Under pressure from Transparency International and allied Western governments, the United Nations General Assembly adopted the UN Convention Against Corruption in 2003, which was replicated in the 2003 African Union Convention on Preventing and Combating Corruption. The UN and African Union (AU) treaties do not explicitly define corruption; rather, they make a list of offences that they suggest should be criminalised, which overwhelmingly focuses on the public sector (such as bribery of public officials).²⁵ The UN convention, AU convention, and Transparency International’s CPI treat various types of theft as perfectly legal, including the legal theft of surplus value from workers, the illegal deductions of fines and fees used to penalise workers, and corruption legalised by accountants. By turning a blind eye to corporate corruption and focusing, instead, on bribes of public officials, these entities normalise the structured criminality of capitalism. Furthermore, the Western-driven UN Convention and the Western-based NGO (Transparency International) that have taken charge of this discourse of corruption have made it appear as though the West has transcended corruption and that corruption is primarily a problem in the Global South. This narrative exculpates the Western-based MNCs from blame and erases the long anti-corruption struggles in the Global South, a rich ethical tradition that is rooted both in religion and in common sense.

Meanwhile, the world of accounting has developed a new form of theft called ‘sustainability reporting’, which is emblematic of a broader trend that seeks ways to hide money from tax authorities and legalise corruption. This form of greenwashing allows accounting firms to disclose what they are doing to incorporate environmental, social, and governance (ESG) factors in order to discount their taxable income, and in so doing often providing false or misleading claims about the environmental benefits of a product, service, or investment.²⁶ Furthermore, these accounting practices are not obligated to produce or follow a proper environmental assessment, nor are they concerned about the displacement of residents from an area of operation, degradation of ecosystems, misuse of agricultural land, consumption of fossil fuel energy, or harsh exploitation of labour. Despite rampant abuse by MNCs – the plastic pollution generated by Coca-Cola’s Africa branch; logging in Norwegian-owned Green Resources Mozambique, Tanzania, and Uganda; and wildly unethical harvesting of ‘ethical diamonds’ by De Beers, to name a few – accounting firms are allowed to investigate themselves and are absolved from accusations of corruption for this type of behaviour, which falls far outside the neoliberal understanding of corruption.²⁷

Part 2: The Big Heist

Glencore and Zambia

From 2003 to 2023, Zambia’s exports to Switzerland (almost entirely consisting of semi-processed copper) totalled $61 billion – nearly half of the country’s total exports during this period ($145 billion).²⁸ In other words, Switzerland, a tiny landlocked country thousands of kilometres away, has accounted for half of Zambia’s total export market for the last two decades. But it was not always like this.

From 1995 to 1999, for instance, Zambia’s exports to Switzerland, totalling $159 million, made up just 3% of the country’s total exports. This began to change in 2000, when a controlling stake of Mopani Copper Mines (MCM), which up to that point had been owned by the Zambian state, was purchased by Carlisa Investments, a company owned by the giant Swiss commodities trader Glencore AG and domiciled in the British Virgin Islands (itself a tax haven). Therefore, from a legal standpoint, MCM was not owned by Glencore, which allowed Glencore to comply with legal requirements to engage in ‘arm’s length transactions’ with MCM on paper (meaning that they are parties acting independently without influencing each other) while doing the opposite in practice. It is illegal for a company to purchase from and sell to itself (one of the few regulations in place to prevent MNCs from committing tax evasion). However, a company – such as Glencore – can create a subsidiary company – such as Carlisa – with whom it can carry out transactions as if it were a separate company ‘at arm’s length’ while still exercising full influence over the terms and prices in practice. Since it is the subsidiary – Carlisa, in this case – that owns a third company – MCM – Glencore’s transactions with MCM are technically between two independent entities. Efforts are made to ensure that there is no paper trail suggesting otherwise.

* We chose to refer to Glencore as the owner of the mine because in practice, and in common knowledge, Glencore is the owner of the mine. Since Glencore uses Carlisa to obscure its theft of wealth from Zambia, often by shifting its profits around to evade taxes through transfer pricing, we have chosen not to mirror their language of obscurity in this dossier.

As figure 1 shows, Zambia’s annual exports to Switzerland skyrocketed from virtually zero prior to Carlisa’s (i.e., Glencore’s) purchase of MCM in 2000 to nearly $4 billion in 2020. This pattern led many to suspect that Glencore was engaging in transfer pricing – shifting its profits from a high-tax jurisdiction (Zambia) to a low-tax jurisdiction (Switzerland) in order to pay the least possible amount of taxes and maximise its net profits. In other words, instead of having to pay 30% in corporate taxes on the sale of copper in Zambia based on the commodity’s true value, Glencore is able to price the value of copper sales near zero through its relationship with Carlisa and pay taxes on that artificially low amount. Then it pays corporate income taxes in Switzerland at a rate of 14.6% – nearly half the rate it would have had to pay in Zambia.²⁹

In 2010, the Zambia Revenue Authority took Glencore to court for engaging in transfer pricing. Despite arguing that its transactions with MCM were ‘arm’s length’ transactions between two unrelated entities – MCM and Glencore – (after all, MCM was owned by Carlisa, not Glencore), Glencore lost and was instructed to pay a penalty in addition to lost taxes due to transfer pricing.³⁰ After a costly, ten-year legal battle, the decision was upheld by Zambia’s Supreme Court – a landmark ruling that had wider implications for the future taxation of multinational corporations in Zambia and the region. Yet, even so, the penalty levied was a paltry $13 million – a far cry from the hundreds of millions, perhaps billions, of dollars that Glencore has spirited away from Zambia since 2000.³¹

Thabo Mbeki’s High-Level Panel on Illicit Financial Flows

In 2011, the United Nations Economic Commission for Africa (UNECA) established the High-Level Panel on Illicit Financial Flows, an outcome of a joint conference hosted by the AU and UNECA. In the words of the panel’s chairperson Thabo Mbeki, this was done in the interest of ensuring ‘Africa’s accelerated and sustained development, relying as much as possible on its own resources’ and ensuring ‘respect for the development priorities it had set itself’. After all, Mbeki said, ‘progress on this agenda could not be guaranteed if Africa remained overdependent on resources supplied by development partners’.³²

The panel conducted in-depth analytical studies, interviews, and site visits over the course of several years before delivering a 120-page report to the AU in 2015. The report suggested that, even by conservative estimates, Africa was in fact a net lender of capital to the world – not a net borrower, as is the common perception. In other words, if not for theft on this grand scale, Africa would have all the necessary capital within its borders to meet its developmental aspirations.

The very same multinational corporations that had been billed as partners in Africa’s quest for development were making off with most of the continent’s wealth.

The report focused on illicit financial flows out of Africa, which it defined as ‘money illegally earned, transferred, or used’. ‘In other words’, the report continued, ‘these flows of money are in violation of laws in their [country of] origin, or during their movement or use, and are therefore considered illicit’. Some activities, though ‘not strictly illegal in all cases’, the report explained, could be categorised as ‘illicit’ since they ‘go against established rules and norms, including avoiding legal obligations to pay tax’.³³

The report estimated that from 2000 to 2010, illicit financial flows out of Africa ranged between $30 billion and $60 billion per year, or a total of between $300 billion and $600 billion over the entire 10-year period. Yet, it was careful to state that the true magnitude of illicit financial flows were likely many orders of magnitude higher than the estimates provided, since, as Chairperson Mbeki wrote, ‘those responsible [for illicit financial flows] take deliberate and systematic steps to hide them’.³⁴ For instance, another report on illicit financial flows, produced by Global Financial Integrity in 2015, found that Africa lost $675 billion in illicit financial flows from 2004 to 2013 while the developing world as a whole lost $7.8 trillion during this period, with these flows increasing twice as fast year-on-year as global Gross Domestic Product.³⁵

Importantly, and perhaps without precedent for an inter-governmental analysis, the Thabo Mbeki Report, as it came to be known, revealed that the majority of illicit financial flows out of Africa (about 65%) were due to legally sanctioned commercial activities whose purpose was ‘hiding wealth, evading or aggressively avoiding tax, [and] dodging customs duties and domestic levies’.³⁶ Multinational corporations’ standard way of limiting tax liabilities, the report explained, was to make false declarations, whether about undervaluing export receipts, overvaluing the costs of business with the ultimate purpose of limiting profits, or, in the extreme case, falsely declaring losses. One intriguing example in the report was that of an unnamed telecommunications giant which was causing the host government to lose an estimated $90 million annually through methods such as ‘diverting international calls and transforming them into local calls, with operators then making fake declarations of incoming international call minutes to reduce the tax payable to the [host] government’.³⁷

Though many governments and multilateral agencies committed to implementing the reports’ recommendations when it was published in 2015, there is little to show for these promises as capital continues its unimpeded flight from Africa.

Part 3: Five Ways to Make Money from Africa

In his 1963 book Africa Must Unite, Ghana’s first President Kwame Nkrumah wrote, ‘We have here, in Africa, everything necessary to become a powerful, modern, industrialised continent. United Nations investigators have recently shown that Africa, far from having inadequate resources, is probably better equipped for industrialisation than almost any other region in the world’. Nkrumah was referring to the United Nations’ Special Study on Economic Conditions and Development, Non-Self-Governing Territories (1958), which detailed the continent’s immense natural resources. ‘The true explanation for the slowness of industrial development in Africa’, Nkrumah wrote, ‘lies in the policies of the colonial period. Practically all our natural resources, not to mention trade, shipping, banking, building, and so on, fell into, and have remained in, the hands of foreigners seeking to enrich alien investors and to hold back local economic initiative’.³⁸

How exactly do alien investors go about making money from ‘everything necessary’ for Africa’s sovereign development? We decided to put together a five-point guide that begins to answer that question.

Working with the IMF, World Bank, and World Trade Organisation to encourage (i.e., coerce) African governments to implement ‘investor-friendly’ policies. By ‘investor-friendly policies’, we mean the kinds of policies that make it easy to bring capital into Africa and use that capital to extract as much wealth as possible from the continent. Examples of such policies include privatising vital social services (health and education are key); enacting tax incentives that make it possible for investors to pay zero taxes; eliminating labour rights so that workers can be exploited as much as possible; and liberalising the host country’s capital account, which makes it easy to extract all the profits made in Africa.

Investing in the extractives sector, but not in manufacturing. The trick is to invest in those sectors that make it easy to make a quick buck while hiding behind a veil of opacity. There is no better sector to do this than extractives in Africa, whether drilling oil in Angola, collecting coltan in the Congo, or capturing natural gas in Mozambique. The sites of extraction in this sector are often in enclaves far away from capital cities and, therefore, away from the prying eyes of regulators and the citizenry, thus providing the necessary cover to extract as many resources as possible. Furthermore, investing in extractives rather than manufacturing promises the perpetual underdevelopment of Africa and, therefore, guarantees that the continent will forever be vulnerable to extractive capital – an investment that just keeps giving.

Engaging in transfer pricing. Transfer pricing is a time-tested technique developed by MNCs to expatriate as much profit as possible from the Global South. The subsidiary company in Africa ‘sells’ its products to the so-called parent company in the West, which subsequently sells the product to the ultimate beneficiary and, therefore, pockets the profits in the West. For example, a Swiss-owned mining operation in the Congo sells its cobalt to its parent company in Switzerland for a price that is nearly zero; the Swiss company then sells the cobalt to the ultimate buyer located at an electric car company in the US at the true value of the cobalt. The general idea with transfer pricing is to pay as little taxes as possible in Africa while booking the profits in the West and paying moderate taxes there.

Exaggerating production costs. Remember that since corporate taxes are levied on profits, anything that fictitiously reduces profits reported in Africa also limits the taxes that the corporation is obliged to pay. The example of transfer pricing is one way to reduce the profits reported in Africa. Another trick is to exaggerate costs incurred on the continent in ways that the authorities cannot verify. For example, a consulting company, located in the West, can provide expensive ‘consulting services’ to an African operation in a way that limits the profits in Africa and shifts them to the West. Another cost exaggeration gimmick is to grant a non-existent loan to an African subsidiary: interest payments on this fake loan serve to exaggerate production costs in Africa and, therefore, limit profits that must be reported there, instead shifting them to the West.

Hiring one of the Big Four accounting firms. The Big Four accounting firms – all British – are Deloitte, PricewaterhouseCoopers, Ernst & Young, and Klynveld Peat Marwick Goerdeler. Their stamp of approval is golden, and their audited reports are treated as legal documents. Instead of using information barriers (so called ‘ethical walls’) as they were intended – to ensure the independence and objectivity of the tax advice, consulting services, and auditing – these firms obscure the fact that, often, the same firm provides consulting services while also auditing the hiring company’s books – including auditing these consulting services. For instance, a firm proposes an operational optimisation plan or aggressive tax planning, and that same firm is the ‘independent auditor’ that oversees this plan and then issues an allegedly unbiased opinion that the financial statements are fair. Due to the reduction of state capacity, many African governments now rely upon the reports of accounting firms as uncontested statements of the truth about the operations of MNCs. The hefty fees demanded by the Big Four are very much worth the investment for MNCs, given the hundreds of billions of dollars that they save in taxes.

These five points allow MNCs to make off with Africa’s wealth while ensuring that the continent remains underdeveloped, and yet they are conceptualised as smart business strategies rather than a form of corruption or theft. These actions are legitimised by the hegemonic discourse of corruption, which has taken a decisively neoliberal direction that seeks to dismantle state regulation and protect MNCs. Actual corruption – which manifests both in the corruption of MNCs and the petty corruption of public officials – must be tackled head on, indeed with a clarity that does not exist at present.

Will there ever be an AU Convention on Corporate Corruption?

How the International Monetary Fund Is Squeezing Pakistan

De-Development and Imperialism: How Can We Fight Back? — How the International Monetary Fund Is Squeezing Pakistan

How the International Monetary Fund Is Squeezing Pakistan

Article 9 of 10

The Tricontinental

By Taimur Rahman

Originally published at https://thetricontinental.org/dossier-69-how-the-international-monetary-fund-is-squeezing-pakistan/

Publication Date: October 17, 2023

This dossier was produced in collaboration with the Research and Publications Centre (Lahore, Pakistan) and written by Taimur Rahman, associate professor of political science at the Lahore University of Management Sciences (LUMS), spokesperson of the band Laal, and general secretary of the Mazdoor Kissan Party and of the Left Democratic Front.

The photographs featured in this dossier are by Ali Abbas (‘Nad E Ali’), a visual artist based in Lahore, Pakistan, whose work explores themes of alienation, belonging, and the in-between spaces that exist in all cultures. The photographs are from the series ‘Hauntology of Lahore’ (2017–present), borrowing the term from philosopher Jacques Derrida. In Abbas’s words, ‘within the very landscape of Lahore, amidst its bustling streets, ancient structures, and vibrant communities lies a reservoir of untapped futures and unrealised potential’. This dossier sheds light on that reservoir of untapped futures and unrealised potential in an economic, political, and cultural sense, not only of Pakistan, but of the oppressed people of the Third World more broadly.

Pakistan has made international headlines repeatedly over the last year, unfortunately for almost all the wrong reasons. While the country has been associated with extremism and terrorism for over two decades, more recently Pakistan has become known for natural disasters and political upheavals. Catastrophic floods have displaced tens of millions of people while a controversial vote of no confidence in March 2022 forced Prime Minister Imran Khan and his party, Pakistan Tehreek-e-Insaf (PTI or ‘Pakistan Movement for Justice’), out of office.¹

Among the issues that deserve serious attention is the massive and unprecedented contraction of the country’s economy. The International Monetary Fund (IMF) has projected that Pakistan’s economy will grow by a mere 0.5% in 2023 and that the public will experience inflation rates upwards of 27%.² The government’s own data indicates that the Pakistani economy has only grown by about 0.29% in 2023.³ Given that Pakistan’s population is increasing at a rate of 1.8%, outpacing national economic expansion, the gross domestic product (GDP) per capita will shrink.⁴ In simple terms, the average Pakistani is going to be significantly poorer in the coming years.

According to the World Bank, between 8.4 and 9.1 million people in Pakistan likely slipped below the poverty line in 2022 owing to the combined effects of inflation and the destruction of crops by the floods that inundated a third of Pakistan’s agricultural land.⁵ Damages and economic losses from the floods have been estimated to exceed $30 billion, with a minimum of $16 billion needed for reconstruction.⁶

Pakistan’s GDP Growth Rate, 1961–2023.

Source: Macrotrends.⁷

Prior to the floods, the COVID-19 pandemic had already caused disruptions and contractions in almost every sector of the economy. GDP growth rates fell from 6.15% in 2018 to -1.27% in 2020. The decline was driven by a sharp contraction in the services sector, particularly in wholesale and retail trade, as well as the transportation and communications sectors. The pandemic increased unemployment and poverty, as many businesses were forced to close or reduce their operations due to lockdowns and social distancing measures.⁸ Crucially, the pandemic exacerbated Pakistan’s fiscal and external imbalances as tax revenues declined, spending on health and social protections increased, and exports and foreign remittances decreased. Owing to supply chain disruptions, hoarding, and panic buying, food prices rose and double-digit rates of inflation became the norm in 2021.

Although Pakistan recorded an impressive post-COVID-19 recovery, it was extremely short-lived. In 2023, the economy has struggled against adverse terms of trade. As the Pakistani rupee declines in relation to the US dollar, Pakistan’s import bill rises, causing massive cost-push inflation (i.e., when prices rise because of increasing production costs such as wages and raw materials). Rising import bills result in higher costs for electricity, transportation, and even raw materials, which means that local industries become less competitive in the international market. As such, the value of the country’s imports exceeds the value of its exports, leading to a growing current account deficit. The whole cycle repeats like the time loop in the film Groundhog Day (1993), but without a happy ending.

The current Pakistan Democratic Movement coalition government, which came to power in April 2022 after a vote of no confidence passed by a hair’s breadth, is experiencing enormous economic and political difficulties. The government has delayed provincial elections in defiance of rulings by Pakistan’s Supreme Court that such decisions were unconstitutional. Meanwhile, breadlines are growing longer, and desperately poor people have been crushed in stampedes at flour distribution centres.⁹

In sum, things are a mess. Why is this all happening?

Some allege that Russia’s Vladimir Putin and China’s Xi Jinping are to blame for Pakistan’s troubles.¹⁰ Although it strains credulity, according to this train of thought, the war in Ukraine and Chinese loans are responsible for the country’s debt problems. As US State Department Counsellor Derek Chollet put it during a February 2023 visit to Islamabad, ‘We have been very clear about our concerns not just here in Pakistan, but elsewhere all around the world about Chinese debt, or debt owed to China’.¹¹

This line of thinking is flawed in three key aspects. First, the balance of Pakistan’s trade deficit, which causes the government to ask for loans, long predates the war in Ukraine. Second, while China holds about 30% of Pakistan’s foreign debt, most of this debt is in the form of project loans connected to the China-Pakistan Economic Corridor (CPEC), part of the Belt and Road Initiative. In other words, this debt goes directly to improving the country’s infrastructure and prospects for economic development.¹² Most importantly, China has not dictated any specific economic model or policy to Pakistan. This is a sharp contrast to Pakistan’s long history of following IMF recommendations: in the 76 years since its independence, Pakistan has entered into 23 agreements with the IMF – that is, on average, an agreement every three years. Moreover, the present austerity measures that have cause electricity, fuel, and gas prices to skyrocket were recommended by the IMF.¹³

In 1995, Pakistan joined the World Trade Organisation (WTO), and the country’s average import tariffs decreased from 45% to 8.6%.¹⁴ For the last 20 years, foreign imports have been flooding the local market, and the new consumption economy that emerged from 2003 onwards has witnessed a severely declining balance of trade.¹⁵ Pakistan’s balance of payments problems have long been managed by the country’s main ‘export’ – its geostrategic value to Washington. When the United States invaded Afghanistan in 2001, it needed Pakistan’s support, and so it removed its economic sanctions against the country and provided it with economic, security, and military aid. In the same period, owing to Pakistan’s strategic importance in the ‘War on Terror’, the Paris Club rescheduled $12.5 billion out of the total of $13.5 billion of the debt that Pakistan owed to it.¹⁶ In addition, it also granted the country trade concessions.¹⁷ It was almost as if Pakistan had received a clean slate and could start all over again. But this was not to last.

From 2004 onwards, Pakistan’s imports began to outstrip its exports.¹⁸ To some extent, this was mitigated by workers’ remittances from abroad. However, between 2015 and 2018, Pakistan’s current account deficits skyrocketed from $2.8 billion to $18 billion.¹⁹ This predated the Ukraine war – the pretext used to divert attention away from facts and instead contribute to the New Cold War against China and Russia – and had little to do with CPEC. Rather, this deficit was driven by the fact that Pakistan is no longer competitive in the international market and has continued to import goods and services at a rate that it simply cannot afford.

Pakistan struggles to compete in the international market not because labour costs are too high, but because, despite receiving export promotion benefits, textile exporters have been unable to enhance labour productivity over the last four decades.²⁰ There has been no serious effort either in the public or private sector to improve the country’s technological infrastructure. As a result, over time, countries such as Bangladesh, China, and Vietnam have surpassed Pakistan in textile productivity and exports.

At the same time, the voracious appetite for imported luxury goods has become so high that Pakistan’s trade deficit now stands at $42 billion, about $30 billion of which is paid for by workers’ remittances.²¹ The country’s economy is transforming from one that primarily exported cotton and cotton-related products during the Green Revolution in the 1960s and 1970s to a country that is increasingly exporting mainly its workforce and labour power.

An Import-Dependent Economy

When the global neoliberal wave hit Pakistan in the 1990s, the country’s publicly owned power sector was unable to keep pace with rising demand. The government could not privatise this massive natural monopoly, so, instead, they created the 1994 Independent Power Producers Policy (IPP), which invited foreign investors to create power plants. The issuing of contracts to IPPs was a key component of Pakistan’s power sector reform programme in the mid-1990s, aimed at attracting private investment in electricity generation and reducing the country’s dependence on public sector power companies. Today, nearly half of Pakistan’s power is produced by these privately owned power producers called IPPs.

Under this arrangement, the government offers contracts to IPPs that have effectively guaranteed them profits in US dollars. Since the rates of fuel inputs and electricity outputs are predetermined by the contract in dollars, when the price of the dollar goes up, it barely affects the profit margin of IPPs, but it increases the costs to the government. IPPs have negotiated capacity charges so that, once energy plants are ready to produce power, the government must pay the private firms a certain amount of money, even if the government does not buy power from them. In other words, the government is saddled with the market risk and IPPs are assured an adequate return.

The agreement with these investors also allowed IPPs complete freedom to choose how they would produce electricity. They have opted to do so using furnace oil, liquid natural gas, and imported coal, leading the country to pivot from producing electricity through dams to burning fossil fuels. Not only is this terrible for the environment, but the per unit cost of production of electricity from these fuels is nearly eight times more than the electricity produced from water.²² Since Pakistan does not produce any significant quantity of oil, this has also resulted in an increasing bill for oil imports. As a result of this dynamic, roughly one-quarter of Pakistan’s imports are oil and gas.²³

Furthermore, privatised power distribution companies mainly rely on government subsidies to continue functioning.²⁴ This energy policy is one of the central reasons behind Pakistan’s cyclical debt crisis. When the government is unable to pay the IPPs, the country suddenly plunges into darkness. These frequent power cuts have destroyed several industries, especially the growing power loom sector in Faisalabad.

Due to these structural issues, when the price of oil rises or when the dollar shoots up in relation to the Pakistani rupee, oil imports become more expensive.²⁵ Consequently, transportation and electricity costs rise, exporters become less and less competitive, and the government goes into a deficit since it picks up the bill for IPPs as the demand for electricity diminishes. In fact, the state institutions that suffer the largest losses are the distribution companies that buy electricity from the IPPs and supply it to their respective regions.

In theory, rising dollar prices should make Pakistan, a country with a weaker currency, more competitive in the export market. Imports should become more expensive, and exports should become cheaper. However, this does not hold true in an import-dependent economy. Since the production of export commodities is linked to imports, rising dollar prices do not make for any easy restoration of the balance of trade. Pakistan’s industries cannot export locally produced goods or services without first importing necessary inputs or materials. If a country is heavily dependent on imports to produce its exports, the cost of production goes up when the cost of imports increases and the value of its domestic currency falls relative to the currencies of its trading partners. This can lead to higher production costs and ultimately reduce the competitiveness of the country’s exports.

Why Can’t Pakistan Boost Its Exports?

It is not easy to increase exports in the short term. A lack of private and public investment in Pakistan’s manufacturing sector has resulted in outdated technology and infrastructure, making it difficult for local manufacturers to compete with foreign companies. IMF-imposed conditions have further dried up the investment that Pakistan sorely needs to upgrade its infrastructure and accelerate industrialisation.

Another major obstacle to increasing exports is that the high price of fuel in turn increases the cost of transportation and other logistics that are necessary for doing business. These obstacles have prevented local manufacturers from operating profitably, leading to the closure of many factories and a decline in industrial output. Further cementing this reality are the conditions set by short-term IMF loans.

In order to increase exports, it is necessary to train larger numbers of workers, update technologies, and increase investment in the manufacturing of export commodities. It seems impossible for Pakistan to achieve all of these goals under a government that is tightening the country’s belt with an austerity agenda imposed by the IMF, which requires the government to liberalise international trade and refrain from using state controls to suppress the price of the dollar. This, in part, is why Pakistan’s officials, including Finance Minister Ishaq Dar, are constantly trying to lower the price of the dollar.

IMF-Imposed Privatisation of the Public Sector

The IMF has been pushing Pakistan to privatise state-owned enterprises (SOEs) since at least 1991. Despite privatising 172 SOEs between 1991 and 2015, yielding $6.5 billion, the country was unable to solve either its persistent budget deficit or the issue of long-term growth.²⁶ At present, there are 85 remaining SOEs, which operate in seven sectors: power; oil and gas; infrastructure, transport, and communication; manufacturing, mining, and engineering; finance; industrial estate development and management; and wholesale, retail, and marketing.²⁷ Two-thirds, that is, 51, of these SOEs are turning a profit. Roughly 80-90% of public sector losses stem from only nine enterprises: Pakistan Railways, Pakistan International Airlines, Pakistan Steel Mills Corporation, Zarai Taraqiati Bank Limited, and five electricity distribution companies.²⁸ In other words, the costly power sector is the main reason for Pakistan’s massive budget deficit, and its losses are directly related to the decision to privatise energy production.²⁹

The 1994 Private Power Policy was meant to quickly address load-shedding. It had the complete support of the World Bank and was lauded by then-US Secretary of Energy Hazel R. O’Leary as the ‘the best energy policy in the whole world’.³⁰ With such ringing support from capitalist institutions, the Pakistani government quickly and keenly adopted the policy. However, although the 1994 policy attracted $5 billion in new investment in the energy sector and expanded the country’s capacity to generate power by 4,500 megawatts, it had disastrous long-term consequences for energy and, as a result, for the entire economy.³¹

First, the rising cost of electricity resulted in decreasing rates of return across all industries. Second, the dollar-indexed return on equity guaranteed to IPPs shifted the entire burden of investment risk onto the Pakistani state. Rising fuel charges stemming from oil price or dollar fluctuations and capacity charges³² had to be borne by the Pakistani taxpayer. Third, as the Senate of Pakistan’s Report of the Subcommittee of the Standing Committee on Power (2020) shows, on several occasions IPPs made use of creative accounting to violate National Electric Power Regulatory Authority (NEPRA) rules and reap monopolist profits far in excess of the 15% return on equity allowed by NEPRA-regulations, placing a higher burden on public finance.³³ Fourth, higher electricity prices have made the country’s once-lucrative textile export sector less competitive on the international market. Recently, the All-Pakistan Textile Mills Association argued that high electricity bills threaten to completely shut down textile exports fabricated in Punjab. Fifth, the government’s inability to make capacity payments to IPPs on time means that the country experiences frequent and debilitating power outages. Businesses across Pakistan have set up alternative private sources of power to keep their plants running. Finally, IPP contracts have worsened Pakistan’s balance of trade deficit, forcing the country to return to the IMF for badly needed short-term loans. Ultimately, the privatisation of power has significantly exacerbated Pakistan’s budget and trade deficits.

Any government that comes to power in Pakistan has to immediately scramble to put out fires related to the current account deficits and falling foreign exchange reserves. As these reserves fall, the fear of default drives leaders to seek external financing. However, without IMF approval, other international financial institutions (IFIs) are unwilling to extend credit to the country. As a result, this fear of default has driven elected representatives into the arms of the IMF to beg for loans.

Months after former Prime Minister Shehbaz Sharif began his term in April 2022, the government negotiated a $3-billion Stand-by Arrangement (SBA) with the IMF. The administration paraded this deal as if it had conquered the ancient Persian empire. This is the twenty-third IMF programme that a Pakistani government has ‘negotiated’ with the IMF, which has already stated that Pakistan needs further programmes to achieve stability.³⁴ The release of this money was contingent upon the government taking the following measures: (1) removing all subsidies related to electricity, gas, and fuel; (2) raising the interest rate; (3) allowing the market to determine the exchange rate; and (4) restructuring SOEs. Pakistan had no choice but to comply with these conditions, with the inevitable result of more crippling inflation.

Pakistan’s National Budget Overruled

In June 2023, Finance Minister Ishaq Dar presented the government’s annual budget to Pakistan’s National Assembly. Though it was widely expected that the budget would be based on extreme austerity, with elections looming in October, the Pakistan Democratic Movement (PDM) decided not to raise taxes or lower state spending. Instead, it raised the salaries and pensions of government employees by up to 35%.³⁵ The new budget was premised on the tenuous assumption that Pakistan would be able to raise $22 billion from other countries and IFIs.³⁶ This would have increased Pakistan’s external debt obligations to nearly $150 billion, about half of the country’s annual GDP.

However, with the National Assembly’s approval of the budget, the IMF was unwilling to agree to the SBA. To secure the IMF deal, the finance minister unilaterally changed the budget by reducing government spending by Rs. 85 billion ($298 million) and added Rs. 215 billion ($735 million) in new taxes.³⁷ None of these measures were approved by the National Assembly, nor was there public debate over the new budget. Only after being assured that there would be a new budget did the IMF agree to the SBA. Finance Minister Dar’s circumvention of the Pakistani people’s elected representatives, essentially at the behest of the IMF, was the most flagrant violation of the country’s economic sovereignty in its 76 years since independence.

Countries such as Pakistan have completely lost all control over their economies. Further evidence of this is the fact that the State Bank of Pakistan is legally autonomous from the government and is often headed by former IMF economists. In order to secure an IMF agreement, the government is expected to accept IMF policies with respect to international trade, interest rates, taxes, government expenditures, and even the prices of necessary goods such as electricity, petrol, diesel, and gas. Hence, monetary policy, fiscal policy, or overall economic policy is no longer under Pakistani control. If the Pakistani government wanted to stimulate the economy by increasing public sector spending through an expansionary monetary policy (as Modern Monetary Theory suggests), it simply would not be able to. The governor of the State Bank of Pakistan has the power to refuse government directives to expand the money supply.

‘Live Within Your Means’

The IMF dictum for all Third World countries is to ‘live within your means’. This sounds like sensible advice, since, after all, any family, business, or country that spends beyond its earnings will go into debt. As such, governments should not spend beyond what they earn in taxes, and countries should not import more than they export. Nonetheless, Pakistan commits both of these ‘sins’, which begs the following questions: why can’t Pakistan control its imports? Why can’t the government’s highly qualified economists sit down and work it out? Since the country earns roughly $50 billion a year ($20 billion from exports and $30 billion from remittances), its imports should be in the range of $50 billion – not the current amount of $70 billion. If every household understands that you cannot spend more than you earn, how is it that these economists, who are equipped with the most sophisticated mathematic skills, cannot plan what and how much the government will import? If Third World countries could make these sorts of plans, they would never experience any balance of payment deficits, current account deficits, or dwindling foreign exchange reserves. They would never have to borrow money from any IFI. Why doesn’t this happen?

To answer these questions, let us delve deeper into the IMF’s four major recommendations to loan recipients as well as their impact on developing countries like Pakistan. First and foremost, the IMF recommends that Pakistan remove all barriers to exports and imports and allow the market to determine the rupee price of the dollar. This effectively means that the government is unable to regulate international trade to prevent trade deficits. Fluctuations in the rupee price of dollars are supposed to balance trade, but this is not what happens in practice: as the dollar goes up, so too does the price of inputs for export industries in Pakistan. Consequently, Pakistani industries fail to become more competitive and the economy experiences cost-push inflation.

The IMF tells Pakistan to live within its means, yet it will not allow the government to control its current account deficits by regulating the rupee-dollar exchange rate. During the period that the IMF was unwilling to extend credit to Pakistan’s government, the country was able to reduce its current account deficits by 75% by restricting letters of credit³⁸ to importers.³⁹

The government’s inability to regulate the dollar also has a significant impact on its foreign debt, which has been accrued in dollars and is sensitive to fluctuations in the exchange rate. For instance, if the rupee value of the dollar rises by 10%, that would in turn increase Pakistan’s external debt obligations by 10%, from Rs. 37 trillion to Rs. 41 trillion ($130 billion to $144 billion). Since Pakistan’s total debt obligations are more than six times its annual exports, even if it were able to increase its exports, this would be a drop in the bucket compared to what Pakistan loses from the growth of its foreign debts. This is how the country slips further down the ladder in the international division of labour.

The devaluation of the rupee also leads to dramatic increases in the price of vital commodities such as plastics, metals, steel, and industrial chemicals. For most of its history, Pakistan exported cotton to other countries, but, in a shocking reversal of this trend, it now spends close to $2 billion annually importing raw cotton that is used to produce textile goods for export.⁴⁰ Domestic cotton production has lagged far behind mainly because of the lack of development of new seeds and because the domestic market is incentivised towards the production of sugar cane. Naturally, when the dollar goes up, the price of raw imported cotton does too, further deteriorating the competitiveness of exporters. How can the technological base of Pakistan’s industries be improved if the dollar appreciates and increases the cost of importing more sophisticated machinery?

Further exacerbating these issues is the reality that private capital has been leaving Pakistan at a steady rate. The capitalist class has always kept its assets diversified outside of the country. So, while some assets are within Pakistan, much of the ruling class’s wealth is parked overseas in foreign banks and real estate in the Middle East. The free trade regime makes it easier for capital to move while labour is tightly regulated by immigration laws.⁴¹ Pakistan, as it turns out, is losing both capital as well as labour at a staggering rate. The IMF’s free trade regime takes away the power of Third World states to regulate capital flight.

The total capital flight from Pakistan between 1978 and 2018 amounted to $333 billion (at 2010 rates), and between 2013 and 2014 alone, Pakistanis purchased properties worth over $4.3 billion in Dubai, according to The Nation.⁴² The Pakistani state is unable to control this capital flight and promote domestic investment in the country. Given that the dollar keeps rising, even a high interest or profit rate in Pakistan cannot offset the money that businesses lose due to the devaluation of the rupee. Hence, even if Middle Eastern or Western banks offer lower interest rates, Pakistanis prefer to invest in these banks rather than risk investing their capital in Pakistan.

The exodus of skilled labour or ‘brain drain’ presents an additional problem. In 2022, 800,000 people left Pakistan to work abroad, a number that is expected to reach a million in 2023.⁴³ Many of these people are productive workers in the prime of their youth. Can any economy progress if it loses a million educated workers every year? Labour will go after capital, and so both are flying from Pakistan. What remains is a country that produces some clothes from an outdated textile industry, set up at a time when Pakistan had greater strategic value to the West, and has become a supplier of low-skilled labour power for the Middle East and Europe.

The IMF recommends that the government eliminate fuel and electricity subsidies, the latter of which makes up the lion’s share of the subsidies in the 2023 national budget.⁴⁴ Ironically, the privatisation of power is the main reason that the Pakistani government cannot balance its budget: out of the Rs. 1 trillion ($3.7 billion) given in subsidies, Rs. 677 billion ($2.34 billion) is paid to the power sector.⁴⁵ Though some IPPs are owned or operated by Pakistanis, many are foreign-owned or operate with sizeable investments from abroad.⁴⁶If subsidy payments are not made, IPPs can take Pakistan to court at the International Centre for Settlement of Investment Disputes (ICSID). Precedence for this course of action exists. In 2020, the ICSID awarded the Canadian-Chilean company Tethyan Copper nearly $6 billion in damages after Pakistan halted the Reko Diq mining project amid a lease dispute.⁴⁷

Despite the economic depression that the country is experiencing, the IMF recommends cutting expenditures, introducing new taxes, and maintaining an incredibly high interest rate to combat inflation (Pakistan’s interbank interest rate is currently 21%). In other words, at the very moment when aggregate demand is faltering, the IMF’s policy recommendations would destroy opportunities to stimulate the economy by reducing public investment and deterring private investment, inevitably deepening Pakistan’s stagflation.

Furthermore, the IMF recommends ‘restructuring’ SOEs. While these entities, which have been neglected for decades, certainly need serious restructuring and investment, that is not what the IMF means. Rather, the IMF is suggesting that the state consider privatising the ownership or management of SOEs while remaining adamant that the state make payments to IPPs, which account for the bulk of state subsidies. This stance is paradoxical: those SOEs that are already making a loss and require sizeable new investment to make a profit will not be bought by private firms. At the same time, the IMF’s policy recommendations do not allow the government to make the necessary investments to upgrade these enterprises so that they are able to perform efficiently.

Opening Pakistan up for Trade

In its mission statement, the IMF claims to ‘promote high employment and sustainable economic growth and reduce poverty around the world’. However, these are entirely secondary to its three primary objectives: first, to ‘foster global monetary cooperation’ – that is, ensure that the market determines the dollar rate; second, to ‘secure financial stability’ by eliminating the Keynesian policy of deficit fiscal spending to stimulate the economy; and third, to ‘facilitate international trade’ by removing import restrictions of any kind.⁴⁸

The IMF has a dogmatic faith in the market as a cure-all and rarely studies national economies in any detail before issuing their one-size-fits-all prescriptions. Its solution to almost every economic problem is quite simply to let the market determine all prices under the false assumption that everything else will magically fall into place. Rather than seeking to understand the varied realities of the countries to which it issues loans, the IMF is mainly concerned with ensuring that no country within its reach deviates from the following formula: liberalise international trade, eliminate the fiscal deficit, let the market determine the dollar rate, and privatise the economy.

The IMF’s strategy is not designed to increase growth in Pakistan, which at the very least would require low interest rates and/or higher public sector spending. Instead, it is designed to keep the country open for international capital to do business. Pakistan is by no means an extraordinary case; it merely illustrates the IMF’s general template for all economies, whether large or small, with little interest if its actions turn a cyclical recession into a depression.

Inflation and the Class Struggle

Together, these economic policy choices have had two devastating implications for the class struggle in Pakistan. The first relates to the differential impact of inflation on Pakistan’s working class and elites. Inflation has little impact on Pakistani elites, who retain liquid investments to run their businesses within the country and hold the bulk of their wealth abroad. Local inflation actually increases the value of their foreign-owned assets in Pakistan, as they are often held in dollars. It is an entirely different matter for the working class and those on the poverty line, who are hard hit by the effects of inflation. In Pakistan, inequality has worsened as the working class and poor only have assets within the country (if at all).

Second, inflation has exacerbated Pakistan’s central economic problem, namely that it cannot decrease its trade deficit. In the international market, those countries whose labour productivity does not rise or that do not have valuable natural resources to sell (such as oil, gas, gold, and minerals) inevitably slip further down the ladder in the global division of labour. Capitalism is a system of competition. Workers compete with workers, capitalists compete with capitalists, and countries compete with other countries. Those who cannot compete experience adverse terms of trade. As proponents of globalisation never tire of reminding us, nearly all countries are integrated into a world market, and so national economies simply cannot operate without international trade.

As Pakistan loses in the race to create products that the world requires, it experiences a debilitating cyclical crisis. The only short-run options recommended by the IMF ensure that Pakistan remains in this cycle in the long run. The IMF policy framework is a treadmill from which Third World countries can never disembark; it will keep Pakistan in an economically dependent configuration.

Neoliberal economists become outraged at mere suggestions that the market does not allocate resources efficiently, or that markets are volatile, and, most importantly, that so-called market equilibriums do not maximise output or growth but only maximise profits. Similar levels of outrage are expressed in the Pakistani media, directed at the government for not fulfilling its obligations to the IMF. But these perspectives completely ignore the fact that elected representatives have an obligation to the people. The economic and human costs of IMF programmes are so extreme that no political leadership that needs public support can carry them out fully because they are fundamentally anti-democratic. What the IMF is demanding can only be implemented by destroying representative democracy, even in its bourgeois parliamentary form.

The first steps that Pakistan can take towards economic independence would be to regulate international trade and the exchange rate, take back control of the State Bank of Pakistan, and reject any budget that has not been approved by the public’s elected representatives. While this is still a long way off from socialism, it would at least be a major step forward in the current context, where even the possibility of independent national capitalist development has been stripped from most of the world.

The Political and Military Ramifications of the Economic Crisis

The Pakistan Democratic Movement (PDM) coalition government, like every regime that has come to power in Pakistan, was desperate to start a programme of economic development. It launched a new initiative to attract foreign investment and rolled out a string of buzzwords such as ‘game changer’, ‘collective government’, and ‘one window operation’.⁴⁹ However, the dark reality is that the government has invited the army to manage the economy and ensure that all foreign investment will be managed, coordinated, and brought to completion. If environmental or labour concerns arise, or if the demands of a particular province interfere with business interests, the army will remove these so-called bottlenecks. We know from history, of course, that economic bottlenecks are often eliminated by axing human necks.

The PDM government’s military-centred approach is bound to put the federal government in conflict with provincial governments. Under the eighteenth amendment to the Constitution, many areas, such as education, labour, and the environment, now fall under the purview of provincial governments. As the military becomes responsible for the economic revival of Pakistan, any objection to mega-projects that impact inter-provincial relations is likely to be considered a direct challenge to the power of the military. This will cause greater tensions between the military-dominated central government and provincial governments, which are dominated by political parties.

This represents a tectonic shift that has gone almost completely unnoticed by most political commentators. The current PDM coalition initially came together in 2006 when the centre-left Pakistan People’s Party invited the centre-right Pakistan Muslim League (Nawaz) to sign the Charter of Democracy, which stated that neither party would collaborate with the military to overthrow the other’s government. It was notable that Pakistan’s two biggest parties had seemingly united against the role of the military in civilian matters, since for most of the country’s history the government has been run by military dictators or with the active participation of the military. Some progressives placed a lot of faith in this alliance, hoping that it signalled the Pakistani military’s exit from the political sphere.

It was precisely in the context of this ostensibly anti-establishment alliance of Pakistan’s largest parties that the military allegedly supported the Pakistan Movement for Justice (PTI), especially after 2014, when the Nawaz government and the military establishment had a major falling out. The PTI attacked other parties as corrupt and incompetent, and the media (largely controlled by the military) echoed this narrative. The PDM argued that the PTI’s candidate, Imran Khan, was just a frontman for forces that wanted to undermine the Charter of Democracy and bring the military back to power. The opposition referred to Khan as the ‘(s)elected prime minister’ and pointed out how military influence over the media, the economy, and political decisions had been growing during the PTI’s term.

Despite accusing the PTI of being a ‘hybrid regime’, since coming to power the PDM government has gone even further down the militarist road at every level.⁵⁰ Not only is the army managing the political situation in the country by suppressing the PTI and other opposition parties; it has also been formally invited to take over the country’s economic affairs. This reflects a broader trend in which the economic constraints that international capital imposes on Third World countries eventually push these countries’ political leadership to place the management of the economy in the hands of the military.

The notion that the military should be restrained within its ‘constitutional role’ has simply gone out the window as the PDM, beset by an economic crisis and challenged by the PTI, has found it easier to rely on the military not only to drive back the opposition, but even to help stimulate the economy and complete economic projects. The Charter of Democracy has become a dead letter. The real beneficiary in this conflict remains the Pakistani military, whose hegemony over the political, economic, and ideological domain is now solidly entrenched. The adverse economic conditions created by international capital and the IMF have created the conditions for an authoritarian state and society.

Conclusion: Whither Pakistan?

Marxists tend to think that history is inexorably moving forward. In the larger framework of the development of humanity, this is undoubtedly true. However, that does not imply that each individual village, territory, or country is always moving forward. Even while history marches forward, many societies are destroyed (as in colonial and settler-colonial projects), stagnate (the Byzantine or the Ottoman Empires), or regress. The latter two tendencies seem to apply to the current situation in Pakistan.

After making some real historical progress following independence, Pakistan has entered a period of pervasive social, economic, and intellectual stagnation, or perhaps even regression. The historic task placed before the people of Pakistan today, therefore, is to organise, mobilise, and struggle for economic independence, just as they did to win their political independence from British colonialism in 1947. This is not solely a task for Pakistan but for the entire Third World, which suffers from the grip of neocolonial international financial arrangements that destroy opportunities for economic development.

TRANSCRIPT: The Roots and Consequences of African Underdevelopment, Walter Rodney, 1979

De-Development and Imperialism: How Can We Fight Back? — TRANSCRIPT: The Roots and Consequences of African Underdevelopment, Walter Rodney, 1979

TRANSCRIPT: The Roots and Consequences of African Underdevelopment, Walter Rodney, 1979

Article 10 of 10

Black Agenda Report

By Walter Rodney

Originally published at https://blackagendareport.com/transcript-roots-and-consequences-african-underdevelopment-walter-rodney-1979

Publication Date: May 31, 2023

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Citations

Citations

Africa's Faustian Bargain with the International Monetary Fund

Notes

¹On the CFA Franc, see the tremendous book by Fanny Pigeaud and Ndongo Samba Sylla, Africa’s Last Colonial Currency: The CFA Franc Story (London: Pluto Books, 2021).

²Amor Tahari, Jules de Vrijer, and Manal Fouad, ‘Senegal, 1978–93’, Adjustment for Growth: The African Experience, Occasional Paper no. 143, edited by Amor Tahari, Michael Nowak, Michael T. Hadjimichel, and Robert Sharer (Washington, D.C.: International Monetary Fund, 1996), p. 33.

³IMF Independent Evaluation Office, Report on the IEO [Independent Evaluation Office] on Prolonged Use of IMF Resources (Washington, D.C.: International Monetary Fund, 2002).

⁴IMF Independent Evaluation Office, Report on the IEO, p. 179.

⁵The second SBA was to Honduras in 1957 for $5 million, which was repaid according to the schedule thanks to increasing exports of bananas. The only country that refused to adhere to the IMF demands in this period was Cuba after the 1959 Cuban Revolution. Cuba withdrew from the IMF in 1964 and has remained outside the IMF ever since.

⁶United Kingdom Government, German External Debts: Part 1 (London: Treaty Series No. 7, 1959), https://assets.publishing.service.gov.uk/media/5a7c93bf40f0b626628ad097/German_Ext_Debts_Pt_1.pdf.

⁷Kwame Nkrumah, Neo-Colonialism: The Last Stage of Imperialism (London: Thomas Nelson, 1965), 188.

⁸African Future Policies Hub, Africa Policy Research Institute, and Development Reimagined, ‘Inputs for Elements Paper on Financing for Development’ (Paper submitted for the Fourth International Conference on Financing for Development, Seville, Spain, 30 June–3 July 2025), 15 October 2024, https://financing.desa.un.org/sites/default/files/2024-10/AFPH%2C%20APRI%20%26%20Development%20Reimagined%20-%20Inputs%20for%20Elements%20Paper%20on%20FfD.pdf, p. 4.

⁹‘Annual Meetings 2024: Old Debt Resolution for African Countries – The Cornerstone of Reforming the Global Financial Architecture’, African Development Bank Group, 15 May 2024, https://www.afdb.org/en/news-and-events/annual-meetings-2024-old-debt-resolution-african-countries-cornerstone-reforming-global-financial-architecture-70791.

¹⁰Afreximbank Research, State in Burden Debt 2024. Africa and Dynamics Debt Vulnerability (Cairo: African Export-Import Bank, 2024), p. 3–8. For more information on global debt, see Marcos Poplawski-Ribeiro et al., 2024 Global Debt Monitor (Washington: Fiscal Affairs Department, IMF, 2024).

¹¹The appetite for regional integration has been met to various degrees of success in the regional economic arrangements West African Monetary Agency (1993), West African Economic and Monetary Union (1994), Central African Economic and Monetary Union (1994), Southern African Development Community (1996), and the East African Community (2001).

¹²In December 2023, however, Libya’s acting Foreign Minister Taher al-Baour met with the chairperson of the African Investment Bank’s Founding Committee, Mustafa al-Mana (of the Libyan Investment Authority), to affirm the country’s future commitment to the AIB.

¹³UN Economic Commission for Africa, Organisation of African Unity, African Centre for Development and Strategic Studies, African Development Bank, and the African Institute for Economic Development and Planning, The Establishment of an African Monetary Fund: Structure and Mechanism. A Technical Feasibility Study (Addis Ababa: UN Economic Commission for Africa, 1985), p. 1–2.

¹⁴UN Economic Commission for Africa et al., The Establishment of an African Monetary Fund, 2.

¹⁵This is the core message of the African Economic Outlook 2017. Entrepreneurship and Industrialisation (Abidjan: African Development Bank, Paris: Organisation for Economic Co-operation and Development, and New York: United Nations Development Programme, 2017).

¹⁶African Development Bank, African Union, and United Nations Industrial Development Organisation, Africa Industrialisation Index 2022 (Addis Abba: African Development Bank Group, 2022),
https://www.afdb-org.kr/wp-content/uploads/2022/12/africa_industrialisation_index_2022_en-web.pdf.

¹⁷United Nations, Resolution Adopted by the General Assembly, NR054996 (New York: United Nations, 1989), 162-163, https://documents.un.org/doc/resolution/gen/nr0/549/96/img/nr054996.pdf.

¹⁸World Bank, The African Continental Free Trade Area (Washington, DC: World Bank, 2020), https://www.worldbank.org/en/topic/trade/publication/the-african-continental-free-trade-area.

¹⁹Afreximbank, African Trade Report 2024: Climate Implications of the AfCFTA Implementation (Cairo: African Export-Import Bank, 2024), p. 2.

²⁰African Development Bank et al., Africa Industrialisation Index 2022, p. 11.

²¹Nanjala Nyabola, ‘The World Is Scrambling to Understand Kenya’s Historic Protests – This Is What Too Many Are Missing’, The Guardian, 1 July 2024, https://www.theguardian.com/commentisfree/article/2024/jul/01/kenya-protests-finance-bill-government-debt.

²²Derrick Okubasu, ‘Comprehensive List of all 16 Changes in Finance Bill 2024 After Ruto’s State House Meeting’, Kenyans, 18 June 2024, https://www.kenyans.co.ke/news/101755-finance-bill-2024-comprehensive-list-all-16-changes-after-rutos-state-house-meeting.

²³Jonathan D. Ostry, Prakash Loungani, and Davide Furceri, ‘Neoliberalism: Oversold?’, Finance & Development 53, no. 2, June 2016, https://www.imf.org/external/pubs/ft/fandd/2016/06/ostry.htm.

²⁴Jonathan D. Ostry et al., ‘Neoliberalism: Oversold?’.

²⁵Rick Rowden, ‘The IMF Confronts Its N-Word’, Foreign Policy, 6 July 2016, https://foreignpolicy.com/2016/07/06/the-imf-confronts-its-n-word-neoliberalism/.

²⁶Mark Weisbrot, ‘IMF Economists Discover Some of the Big Failures of Neoliberalism: About Time’, CEPR Blog, 2 June 2016, https://cepr.net/publications/imf-economists-discover-some-of-the-big-failures-of-neoliberalism-about-time/.

²⁷Efi Koutsokosta, ‘Don’t Suffocate Recovery with Austerity Policies, IMF Chief Georgieva Warns Europe’, Euronews, 8 December 2021, https://www.euronews.com/business/2021/12/08/don-t-suffocate-recovery-with-austerity-politics-imf-chief-georgieva-warns-europe.

²⁸‘The Hopeful Continent: Special Report’, The Economist, 2 March 2013, https://www.economist.com/sites/default/files/20130203_emerging_africa.pdf.

²⁹World Bank, International Debt Statistics 2022 (Washington: International Bank for Reconstruction and Development, 2021), https://openknowledge.worldbank.org/server/api/core/bitstreams/2d6b3d72-a763-5db8-bd8b-209a6a7fb384/content, p. 95. See also, Tricontinental: Institute for Social Research, Life or Debt: The Stranglehold of Neocolonialism and Africa’s Search for Alternatives, dossier no. 63, April 2023, https://thetricontinental.org/dossier-63-african-debt-crisis/.

³⁰World Bank, International Debt Statistics 2022, p. 95.

³¹‘Kenya: Requests for an Extended Arrangement Under the Extended Fund Facility and an Arrangement Under the Extended Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for Kenya’, International Monetary Fund Country Report no. 21/72, 6 April 2021, https://www.imf.org/en/Publications/CR/Issues/2021/04/06/Kenya-Requests-for-an-Extended-Arrangement-Under-the-Extended-Fund-Facility-and-an-50339, p. 48.

³²International Monetary Fund (IMF), “Kenya: IMF Executive Board Approves US$2.34 Billion ECF and EFF Arrangements,” IMF News, April 2, 2021, https://www.imf.org/en/News/Articles/2021/04/02/pr2198-kenya-imf-executive-board-approves-us-billion-ecf-and-eff-arrangements.

³³IMF, ‘Kenya’.

³⁴‘Kenya: Requests for an Extended Arrangement’, p. 11.

³⁵Tricontinental: Institute for Social Research, How Neoliberalism Has Wielded ‘Corruption’ to Privatise Africa, dossier no. 82, November 2024, https://thetricontinental.org/dossier-how-neoliberalism-has-wielded-corruption-to-privatise-africa/.

³⁶‘IMF Executive Board Concludes the Seventh and Eighth Reviews under the Extended Fund Facility and Extended Credit Facility and Review under the Resilience and Sustainability Facility Arrangement with Kenya’, International Monetary Fund, 30 October 2024, https://www.imf.org/en/News/Articles/2024/10/30/pr-24398-kenya-imf-concludes-7th-and-8th-rev-under-the-eff-and-ecf-and-rev-under-rsf-arrangement.

³⁷Grieve Chelwa, Ntazana Siame Kaulule, and Paolo de Renzio, ‘External Forces and Zambia’s Permanent Debt Crisis’, Development, February 2025, https://link.springer.com/article/10.1057/s41301-025-00431-z.

³⁸Chelwa et al., ‘External Forces’.

³⁹‘Zambia: Request for an Arrangement Under the Extended Credit Facility-Press Release; Staff Report; Staff Supplement; Staff Statement; and Statement by the Executive Director for Zambia’, International Monetary Fund Country Report no. 22/292, 6 September 2022, https://www.imf.org/en/Publications/CR/Issues/2022/09/06/Zambia-Request-for-an-Arrangement-Under-the-Extended-Credit-Facility-Press-Release-Staff-523196, p. 48.

⁴⁰International Monetary Fund (IMF), ‘IMF: Zambia’s Extended Credit Facility Arrangement,’ IMF Media Center, 1 September 2022, https://mediacenter.imf.org/news/imf-zambia-s-extended-credit-facility-arrangement/s/45ff4f0d-ab95-44b4-995b-499fa4f273d1.

⁴¹‘Zambia: Request for an Arrangement’, p. 1.

⁴²‘IMF Deal: Cry My Beloved Zambia, the Conditions Are Heartless,’ Lusaka Times, September 9, 2022, https://www.lusakatimes.com/2022/09/09/imf-deal-cry-my-beloved-zambia-the-conditions-are-heartless/.

⁴³Grieve Chelwa, ‘Thanks to the IMF, Zambia’s Fuel Prices Have Nearly Doubled in Two Years’, Africa Watch, 15 February 2024, https://gchelwa.substack.com/p/thanks-to-the-imf-zambias-fuel-prices.

⁴⁴Bernadette Mushinge and Grieve Chelwa, ‘Policy Failure Caused Zambia’s Food Crisis’, Africa Watch, 3 March 2024, https://gchelwa.substack.com/p/policy-failure-caused-zambias-food.

⁴⁵Matthew Hill, ‘Zambia Considers Fresh IMF Deal With Elections in Sight’, Bloomberg, 6 February 2025, https://www.bloomberg.com/news/articles/2025-02-06/zambia-considers-fresh-imf-deal-with-elections-in-sight.

⁴⁶‘Social Policy Advice to Countries from the International Monetary Fund During the COVID-19 Crisis: Continuity and Change’, ILO Working Paper no. 42, 10 December 2021, https://www.ilo.org/publications/social-policy-advice-countries-international-monetary-fund-during-covid-19.

⁴⁷Alexandros Kentikelenis and Thomas Stubbs, A Thousand Cuts: Social Protection in the Age of Austerity (Oxford: Oxford University Press, 2023).

⁴⁸Abbas Asamaan, ‘Au Sénégal, la Cour des comptes pointe les dérives financières de la présidence de Macky Sall’ [In Senegal, the Court of Auditors Points Out the Financial Excesses of the Presidency of Macky Sall], Le Monde, 14 February 2025, https://www.lemonde.fr/afrique/article/2025/02/14/au-senegal-la-cour-des-comptes-pointe-les-derives-financieres-de-la-presidence-de-macky-sall_6546381_3212.html.

⁴⁹‘Le Sénégal espère un nouveau programme du FMI d’ici fin juin’ [Senegal Hopes for a New IMF Programme by the End of June], TRT Afrika, 14 February 2025, https://trtafrika.com/fr/business/le-senegal-espere-un-nouveau-programme-du-fmi-dici-fin-juin-18264878.

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Life or Debt: The Stranglehold of Neocolonialism and Africa's Search for Alternatives

Notes

¹ Marcello Estevão and Sebastian Essl, ‘When the Debt Crises Hit, Don’t Simply Blame the Pandemic’, World Bank (blog), 28 June 2022, https://blogs.worldbank.org/voices/when-debt-crises-hit-dont-simply-blame-pandemic.

² Estevão and Essl, ‘When the Debt Crises Hit, Don’t Simply Blame the Pandemic’.

³ International Monetary Fund, Global Financial Stability Report – Navigating the High-Inflation Environment (Washington, DC: IMF, October 2022),https://www.imf.org/en/Publications/GFSR/Issues/2022/10/11/global-financial-stability-report-october-2022.

⁴ IMF, Global Financial Stability Report, ix.

⁵ International Monetary Fund, Fiscal Monitor: Helping People Bounce Back (Washington, DC: IMF, October 2022), https://www.imf.org/en/Publications/FM/Issues/2022/10/09/fiscal-monitor-october-22.

⁶ International Monetary Fund, World Economic Outlook Update: Inflation Peaking amid Low Growth (IMF, January 2023), https://www.imf.org/en/Publications/WEO/Issues/2023/01/31/world-economic-outlook-update-january-2023.

⁷ Thomas Sankara, ‘A United Front Against Debt’, Committee for the Abolition of Illegitimate Debts, 27 October 2011, https://www.cadtm.org spip.php?page=imprimerid_article=13533#:~:text=Debt’s%20origins%20come%20from%20colonialism’s,cousins%20who%20were%20the%20lenders.

⁸ Sankara, ‘A United Front Against Debt’.

⁹ For more on this, see Tricontinental: Institute for Social Research, Looking Towards China: Multipolarity as an Opportunity for the Latin American People, dossier no. 51, 11 April 2022, https://thetricontinental.org/dossier-51-china-latin-america-and-multipolarity/.

¹⁰ John Maynard Keynes, The Economic Consequences of the Peace (London: Palgrave Macmillan, [1919] 2019), 58.

¹¹ John Maynard Keynes, The Collected Writings of John Maynard Keynes: Volume XXVI, Activities
1941–1946. Shaping the Post-War World: Bretton Woods and Reparations, ed. D. E. Moggridge (Cambridge: Cambridge University Press, 2013), 42.

¹² International Monetary Fund, IMF History Volume 3 (1945–1965): Twenty Years of International Monetary Cooperation Volume III: Documents (Washington, DC: International Monetary Fund, [1969] 1996), 15.

¹³ International Monetary Fund, Articles of Agreement of the International Monetary Fund (Washington, DC: International Monetary Fund, 2020), https://www.imf.org/external/pubs/ft/aa/pdf/aa.pdf.

¹⁴ International Monetary Fund Policy Development and Review Department, ‘Review of the Compensatory and Contingency Financing Facility (CCFF) and Buffer Stock Financing Facility (BSFF) – Preliminary Considerations’, International Monetary Fund, 9 December 1999, https://www.imf.org/external/np/ccffbsff/review/index.htm.

¹⁵ James M. Boughton, The IMF and the Silent Revolution Global Finance and Development in the 1980s (International Monetary Fund, 11 September 2000), https://www.imf.org/external/pubs/ft/silent/index.htm#3.

¹⁶ Raghuram Rajan, Fault Lines: How Hidden Fractures Still Threaten the World Economy (New Jersey: Princeton University Press, 2010), 93.

¹⁷ Jonathan D. Ostry, Prakash Loungani, and Davide Furceri, ‘Neoliberalism: Oversold?’ Finance and Deveopment 53, no. 2 (June 2016), https://www.imf.org/external/pubs/ft/fandd/2016/06/ostry.htm.

¹⁸ Alexander E. Kentikelenis, Thomas H. Stubbs, and Lawrence P. King, ‘IMF Conditionality and Development Policy Space, 1985–2014’, Review of International Political Economy 23, no. 4 (2016): 543-582.

¹⁹ Lounceny Nabé and Kerfalla Yansané, ‘Guinea: Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding’, International Monetary Fund, 20 June 2011, https://www.imf.org/external/np/loi/2011/gin/063011.pdf.

²⁹ Mohamed Diaré and Lounceny Nabé, ‘Guinea: Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding’, International Monetary Fund, 1 February 2014, https://www.imf.org/External/NP/LOI/2014/GIN/020114.pdf.

²¹ UNICEF Office of Research – Innocenti, COVID-19 and the Looming Debt Crisis, Innocenti Policy Brief 2021-01, Protecting and Transforming Social Spending for Inclusive Recoveries (Florence: UNICEF, April 2021), https://www.unicef-irc.org/publications/pdf/Social-spending-series_COVID-19-and-the-looming-debt-crisis.pdf, 15.

²² Kristalina Georgieva, ‘The Next Phase of the Crisis: Further Action Needed for a Resilient Recovery’, IMF (blog), 16 July 2020, https://www.imf.org/en/Blogs/Articles/2020/07/16/blog-g20-md-the-next-phase-of-the-crisis-further-action-needed-for-a-resilient-recovery.

²³ Oxfam International, ‘IMF Must Abandon Demands for Austerity as Cost-of-Living Crisis Drives up Hunger and Poverty Worldwide’, Oxfam Press Release, 19 April 2022, https://www.oxfam.org/en/press-releases/imf-must-abandon-demands-austerity-cost-living-crisis-drives-hunger-and-poverty.

²⁴ Matthew Martin et al., The West Africa Inequality Crisis: Fighting Austerity and the Pandemic, Oxfam and Development Finance International, 14 October 2021, https://oxfamilibrary.openrepository.com/bitstream/handle/10546/621300/rr-west-africa-cri-austerity-pandemic-141021-en.pdf, 4, 19.

²⁵ Dambisa Moyo, Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa (New York: Farrar, Straus, and Giroux, 2009).

²⁶ Peter Bauer, ‘The Case Against Foreign Aid, Intereconomics’, Verlag Weltarchiv 8, no. 5 (1973) 154–157.

²⁷ Reuters, ‘Huge Demand for Ghana’s Debut Eurobond’, Ghana Web, 27 September 2007, https://www.ghanaweb.com/GhanaHomePage/business/artikel.php?ID=131428.

²⁸ Vivian Kai Mensah, ‘Ghana Issues Third Eurobond’, 11 September 2014, Citi 97.3 FM, https://citifmonline.com/2014/09/ghana-issues-third-eurobond/#sthash.Ry1XkD86.dpbs.

²⁹ Grieve Chelwa, ‘It’s Time to Treat Commodity-Backed Loans to African Countries the Same Way We Treat Equity’, Quartz, 2 June, 2015, https://qz.com/africa/417167/its-time-to-treat-commodity-backed-loans-to-african-countries-the-same-way-we-treat-equity; Grieve Chelwa, ‘The “Truth” about Zambia’s Debt’, Grieve Chelwa (blog), 15 October 2020, http://gchelwa.blogspot.com/2020/10/the-truth-about-zambias-debt.html.

³⁰ Paul Wafula, ‘Kenya: Eurobond Dossier Reveals Kenya’s Deep Economic Ties to China, IMF’, AllAfrica, 17 June 2021, https://allafrica.com/stories/202106170380.html.

³¹ World Bank, International Debt Statistics 2022 (Washington, DC: World Bank, 2022), https://openknowledge.worldbank.org/bitstream/handle/10986/36289/9781464818004.pdf?sequence=4&isAllowed=y.

³² World Bank, International Debt Statistics 2022 (Washington, DC: World Bank, 2022), https://openknowledge.worldbank.org/bitstream/handle/10986/36289/9781464818004.pdf?sequence=4isAllowed=y.

³³ ‘The Growing Debt Crisis in Lower Income Countries and Cuts in Public Spending’, Debt Justice, July 2022, https://debtjustice.org.uk/wp-content/uploads/2022/07/Who-African-governments-debt-is-owed-to_Media-Briefing_07.22.pdf, 2.

³⁴ Deborah Brautigam and Meg Rithmire, ‘The Chinese “Debt Trap” Is a Myth’, The Atlantic, 6 February 2021, https://www.theatlantic.com/international/archive/2021/02/china-debt-trap-diplomacy/617953/.

³⁵ ‘Loan Data’, China Africa Research Initiative, Johns Hopkins University’s School of Advanced International Studies, accessed 13 February 2023, http://www.sais-cari.org/data.

³⁶ Edwin Mutai, ‘Ouko Says Eurobond Billions Still a Mystery’, Business Daily Africa, 23 January 2018, https://www.businessdailyafrica.com/bd/economy/ouko-says-eurobond-billions-still-a-mystery–2186608; Steven Mvula and Frank Ching’ambu, ‘Where Did the Eurobond Given to ZR Go?’, Frontlines Zambia, 4 August 2022, https://frontlineszambia.com/archives/26311.

³⁷ ‘Mozambique and the “Tuna Bond” Scandal’, Spotlight on Corruption, 9 February 2021, ; Lily Kuo, ‘Kenya’s Ex-PM Accuses US Banks of Helping the Government Steal $1 Billion from the Country’s First Eurobond’, Quartz, 4 January 2016, https://qz.com/africa/594324/kenyas-ex-pm-accuses-us-banks-of-helping-the-government-steal-1-billion-from-the-countrys-first-eurobond.

³⁸ Alicia García-Herrero, Suman Bery, and Pauline Weil, ‘How Is the G20 Tackling Debt Problems of the Poorest Countries?’, Bruegel (blog), 25 February 2021,https://www.bruegel.org/blog-post/how-g20-tackling-debt-problems-poorest-countries; ‘China Says Has Given $2.1 Billion of Debt Relief to Poor Countries’, Reuters, 20 November 2020, https://www.reuters.com/article/us-china-debt-g20-idUSKBN28009A.

³⁹ ‘The Common Framework for Debt Treatment beyond the DSSI’, Ministry of Economy and Finance of the Italian Government, accessed 13 February 2023, https://www.mef.gov.it/en/G20-Italy/common-framework.html.

⁴⁰ ALBA-TCP, Tricontinental: Institute for Social Research, and Simón Bolívar Institute, A Plan to Save the Planet, 24 November 2021, https://thetricontinental.org/text-a-plan-to-save-the-planet/.

⁴¹ ‘Factsheet: IMF Conditionality’, International Monetary Fund, 22 February 2021, https://www.imf.org/en/About/Factsheets/Sheets/2016/08/02/21/28/IMF-Conditionality.

⁴² Ostry, Loungani, and Furceri, ‘Neoliberalism: Oversold?’; Grieve Chelwa, ‘Is it Too Late Now to Say Sorry?’ Africa Is a Country, 29 May 2016, https://africasacountry.com/2016/05/is-it-too-late-to-say-sorry-imf-edition.

⁴³ Shahra Razavi et al., ‘Social Policy Advice to Countries from the International Monetary Fund during the COVID-19 Crisis: Continuity and Change’ (ILO Working Paper 42, International Labour Organisation, Geneva, 10 December 2021), https://www.ilo.org/global/publications/working-papers/WCMS_831490/lang–en/index.htm.

⁴⁴ International Monetary Fund, ‘Zambia: Request for an Arrangement Under the Extended Credit Facility-Press Release; Staff Report; Staff Supplement; Staff Statement; and Statement by the Executive Director for Zambia’, IMF Country Report, no. 22/292 (September 2022), https://www.imf.org/en/Publications/CR/Issues/2022/09/06/Zambia-Request-for-an-Arrangement-Under-the-Extended-Credit-Facility-Press-Release-Staff-523196, 10.

⁴⁵ Grieve Chelwa, ‘IMF Deal: Cry, My Beloved Zambia’, Grieve Chelwa (blog), 7 September 2022, .

⁴⁶ Peter Doyle, ‘The IMF’s Zambian and Sri Lankan Programs are Indefensible’, Peter Doyle (blog), 14 September 2022, .

⁴⁷ ‘Ghana to Conclude IMF Deal in March – Akufo-Addo Hopes’, Africanews, 7 February 2023, https://www.africanews.com/2023/02/07/ghana-to-conclude-imf-deal-in-march-akufo-addo-hopes/; ‘Ghana: IMF Program Helps Restore Luster to a Rising Star in Africa’, International Monetary Fund, May 2019, https://www.imf.org/en/Countries/GHA/ghana-lending-case-study.

⁴⁸ Andre Gunder Frank, ‘The Development of Underdevelopment’, Monthly Review, 18 April 1966, https://monthlyreviewarchives.org/index.php/mr/article/view/MR-018-04-1966-08_3; Walter Rodney, How Europe Underdeveloped Africa (New York: Verso Books, 2018).

⁴⁹ Daniel Mulé and Mukupa Nsenduluka, ‘Potential Corporate Tax Avoidance in Zambia’s Mining Sector? Estimating Tax Revenue Gains from Addressing Profit Shifting or Revising Profit Allocation Rules. A Case Study of Glencore Mopani Copper Mines’, Oxfam Research Backgrounder Series, December 2021, https://www.oxfamamerica.org/explore/research-publications/potential-corporate-tax-avoidance-in-zambias-mining-sector/.

⁵⁰ Alberto Fernández and Luiz Inácio Lula da Silva, ‘Escriben Lula y Alberto Fernandez: Relanzamiento de la alianza estratégica entre Argentina y Brasil’ [Lula and Alberto Fernandez Write: Relaunching the Strategic Alliance Between Argentina and Brazil], Perfil, 21 January 2023, https://www.perfil.com/noticias/opinion/relanzamiento-de-la-alianza-estrategica-entre-argentina-y-brasil-por-alberto-fernandez-y-luiz-inacio-lula-da-silva.phtml.

⁵¹ Zinya Salfiti,
‘Nobel Economist Paul Krugman Slams Brazil and Argentina’s Joint Currency Plan, Saying “It’s a Terrible Idea”’,
Markets Insider, 30 January 2023,
https://markets.businessinsider.com/news/currencies/paul-krugman-brazil-argentina-south-american-euro-terrible-idea-2023-1.

⁵² ‘United States of America’, African Development Bank, accessed 13 February 2023, https://www.afdb.org/en/countries/non-regional-member-countries/united-states-of-america.

⁵³ African Tax Administration Forum (ATAF), African Union Commission (AUC), and Organisation for Economic Co-operation and Development (OECD), Revenue Statistics in Africa 2022 (Paris: OECD Publishing, Npvember 2022), https://www.oecd.org/tax/tax-policy/brochure-revenue-statistics-africa.pdf, 3; United Nations Conference on Trade and Development, Economic Development in Africa Report 2020. Tackling Illicit Financial Flows for Sustainable Development in Africa (Geneva: United Nations, 2022), .

⁵⁴ Isabel Ortiz et al., Fiscal Space for Social Protection. A Handbook for Assessing Financing Options (Geneva: International Labour Organisation, November 2019), https://www.ilo.org/secsoc/information-resources/publications-and-tools/books-and-reports/WCMS_727261/lang–en/index.htm.

⁵⁵ ‘COP27: IMF Calls for Climate-Smart Investment in Africa’, Africanews, 8 November 2022, https://www.africanews.com/2022/11/08/cop27-imf-calls-for-climate-smart-investment-in-africa/.

⁵⁶ Michael Kremer and Seema Jayachandran, ‘Odious Debt’,
Finance & Development 39, no. 2 (June 2002), http://www.imf.org/external/pubs/ft/fandd/2002/06/kremer.htm.

⁵⁷ United Nations Conference on Trade and Development, Economic Development in Africa Report 2020. Tackling Illicit Financial Flows for Sustainable Development in Africa, 88.

⁵⁸ International Monetary Fund, ‘Review of The Institutional View on The Liberalization and Management of Capital Flows’, IMF Policy Paper, 30 March 2022, .

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How Neoliberalism Has Wielded 'Corruption' to Privatise Life in Africa

Notes

¹ Transparency International, The Anti-Corruption Plain Language Guide (Berlin: Transparency International, 28 July 2009), 14, https://images.transparencycdn.org/images/2009_TIPlainLanguageGuide_EN.pdf.

² Daniel W. Barnes et al., Public Office, Private Interests: Accountability Through Income and Asset Disclosure (Washington, DC: World Bank Group, 16 March 2012), ix.

³ ‘Taking the Temperature: Corruption Perceptions Index 2010’, Transparency International (blog), 26 October 2010, https://blog.transparency.org/2010/10/26/cpi2010_temperatures_up/.

⁴ International Labour Organisation, ‘Country Profiles’, ILOSTAT, accessed 29 September 2024, https://ilostat.ilo.org/data/country-profiles/.

⁵ Mr Ke-young Chu and Mr Richard Hemming, Public Expenditure Handbook: A Guide to Public Policy Issues in Developing Countries (Washington, DC: International Monetary Fund, 1991).

⁶ Manenga Ndulo and Edna Kambala, ‘Transfer Mispricing in Africa: Contextual Issues’, Southern African Journal of Policy and Development 4, no. 1 (1 May 2018).

⁷ For more on this concept, see Tricontinental: Institute for Social Research, The World in Economic Depression: A Marxist Analysis of Crisis, notebook no. 4, 10 October 2023, https://thetricontinental.org/dossier-notebook-4-economic-crisis/.

⁸ Syed Hussein Alatas, The Problem of Corruption (Kuala Lumpur: The Other Press, 2015), 64. This edition is built on the original 1968 text by Alatas called The Sociology of Corruption.

⁹ For more, see Tricontinental: Institute for Social Research, Resource Sovereignty: The Agenda for Africa’s Exit from the State of Plunder, dossier no. 16, 7 May 2019, https://thetricontinental.org/wp-content/uploads/2019/05/190503_Dossier-16_EN_Final_Web.pdf and The Congolese Fight for Their Own Wealth, dossier no. 77,25 June 2024, https://thetricontinental.org/dossier-77-the-congolese-fight-for-their-own-wealth/.

¹⁰ Ellen Gutterman, ‘The Legitimacy of Transnational NGOs: Lessons from the Experience of Transparency International in Germany and France’, Review of International Studies 40, no. 2 (April 2014): 391–418.

¹¹ Barbara Crutchfield George, Kathleen Lacey, and Jutta Birmele, ‘The 1998 OECD Convention: An Impetus for Worldwide Change in Attitudes Toward Corruption in Business Transactions’, American Business Law Journal 37, no. 3 (2000).

¹² Morris Szeftel, ‘Misunderstanding African Politics: Corruption and the Governance Agenda’, Review of African Political Economy 25, no. 76 (June 1998): 221.

¹³ Parliament of the Republic of South Africa, ‘Finance Committee Outraged by Irregularities in Steinhoff’, Press Release, 6 December 2018, https://www.parliament.gov.za/press-releases/finance-committee-outraged-irregularities-steinhoff.

¹⁴ ‘FSCA Levies Record R1.5 Billion Fine against Steinhoff International Holdings N.V. for False, Misleading and Deceptive Statements to the Market’, Herbert Smith Freehills, 20 September 2019, https://www.herbertsmithfreehills.com/notes/fsrandcorpcrime/2019-09/fsca-levies-record-r1-5-billion-fine-against-steinhoff-international-holdings-n-v-for-false-misleading-and-deceptive-statements-to-the-market; ‘Steinhoff Will Only Have to Pay R53 Million of Its R1.5 Billion Fraud Fine’, BusinessTech, 12 September 2019, https://businesstech.co.za/news/business/340685/steinhoff-will-only-have-to-pay-r53-million-of-its-r1-5-billion-fraud-fine/.

¹⁵ Robert K. Merton, Social Theory and Social Structure. Toward the Codification of Theory and Research (Glencoe, Illinois: The Free Press, 1949).

¹⁶ Edward Shils, ‘Political Development in the New States’, Comparative Studies in Society and History 2, no. 3 (April 1960): 385. Based on fieldwork in a number of African states, a number of scholars developed the argument of Merton and Shils, see M. McMullan, ‘A Theory of Corruption’, The Sociological Review 9, no. 2 (July 1961) and Colin Leys, ‘What Is the Problem with Corruption?’, The Journal of Modern African Studies 3, no. 2 (August 1965): 215–230.

¹⁷ Samuel Huntington, Political Order in Changing Societies (New Haven and London: Yale University Press, 1968), 70.

¹⁸ For more on the NIEO, see Tricontinental: Institute for Social Research, Sovereignty, Dignity, and Regionalism in the New International Order, dossier no. 62, 14 March 2023, https://thetricontinental.org/dossier-regionalism-new-international-order/.

¹⁹ See Vijay Prashad, ed., Selected Ho Chi Minh (New Delhi: LeftWord Books, 2022).

²⁰ For more, see Ernesto ‘Che’ Guevara,‘Socialism and Man in Cuba’, in Ernesto ‘Che’ Guevara: On Socialism and Internationalism (New Delhi: LeftWord Books, 2020), 83, https://thetricontinental.org/text-che/.

²¹ See United Nations, Commission on Transnational Corporations, Report on the Special Session (7–18 March and 9–21 May 1983), Economic and Social Council Official Records, 1983, supplement no. 7, E/1983/17/Rev. 1 (New York: United Nations, 1983), https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://digitallibrary.un.org/record/204950/files/E_1983_17_Rev-1-EN.pdf%3Fln%3Dar&ved=2ahUKEwigz5aL7cSJAxXxqVYBHctSLlcQFnoECBYQAQ&usg=AOvVaw2la6mtRlj4cq6wQh3gbHLy; United Nations Economic and Social Council, Code of Conduct on Transnational Corporations, UN Document, E/RES/1987/57 (10 June 1987), https://digitallibrary.un.org/record/156251?ln=en&v=pdf.

²² United Nations Conference on Trade and Development (UNCTAD), Global Value Chains and Development: Investment and Value Added Trade in the Global Economy (New York: United Nations, 2013), iii, https://unctad.org/system/files/official-document/diae2013d1_en.pdf; United Nations Conference on Trade and Development (UNCTAD), Trade and Development Report 2018: Power, Platforms, and the Free Trade Delusion (New York and Geneva: United Nations, 2018), https://unctad.org/system/files/official-document/tdr2018_en.pdf.

²³ ‘Corruption Perceptions Index’, Transparency International, 30 January 2024, https://www.transparency.org/en/cpi/2023.

²⁴ Bill De Maria, ‘Neo-Colonialism Through Measurement: A Critique of the Corruption Perception Index’, Critical Perspectives on International Business 4, no. 2/3 (2 May 2008): 184–202; Faiz-ur-Rahim and Asad Zaman, ‘Corruption: Measuring the Unmeasurable’, Humanomics 25, no. 2 (June 2009): 117–126.

²⁵ United Nations Office on Drugs and Crime, United Nations Convention Against Corruption (New York: United Nations, 2004), https://www.unodc.org/documents/brussels/UN_Convention_Against_Corruption.pdf; African Union, African Union Convention on Preventing and Combating Corruption, adopted 1 July 2003, https://au.int/sites/default/files/treaties/36382-treaty-0028_-_african_union_convention_on_preventing_and_combating_corruption_e.pdf.

²⁶ ‘What Is ESG Investing and Analysis?’, CFA Institute, 4 March 2024, https://www.cfainstitute.org/en/rpc-overview/esg-investing.

²⁷ Adenike Abati, ‘Examining Coca-Cola’s Role in Global Plastic Pollution’, Climate Action Africa, 17 November 2021, https://climateaction.africa/coca-colas-role-in-global-plastic-pollution/; World Rainforest Movement, ‘Green Resources Mozambique: More False Promises!’, WRM Bulletin, no.235 (9 January 2018), https://www.wrm.org.uy/bulletin-articles/green-resources-mozambique-more-false-promises; Matthew Gavin Frank, ‘De Beers: Destruction Is Forever’, EcoWatch, 17 March 2021, https://www.ecowatch.com/de-beers-diamond-mining-greenwashing-2651117844.html.

²⁸ United Nations, ‘UN Comtrade Database’, accessed 5 November 2024, https://comtradeplus.un.org/.

²⁹ PricewaterhouseCoopers, ‘Zambia: Corporate – Taxes on Corporate Income’, PwC World Tax Summaries, accessed 5 November 2024, https://taxsummaries.pwc.com/zambia/corporate/taxes-on-corporate-income; PricewaterhouseCoopers, ‘Switzerland: Overview’, PwC World Tax Summaries, accessed 5 November 2024, https://taxsummaries.pwc.com/switzerland.

³⁰ ‘Zambia Court Ruling Against Copper Mining Company Is a Victory Against Abusive Tax Practices’, African Tax Administration Forum, 1 June 2020, https://www.ataftax.org/zambia-court-ruling-against-copper-mining-company-is-a-victory-against-abusive-tax-practices.

³¹ A 2021 Oxfam study estimated that Glencore was underpaying its taxes in Zambia by about $100 million per annum between 2011–2018. See Daniel Mulé and Mukupa Nsenduluka, ‘Potential Corporate Tax Avoidance in Zambia’s Mining Sector? Estimating Tax Revenue Gains from Addressing Profit Shifting or Revising Profit Allocation Rules. A Case Study of Glencore Mopani Copper Mines’, Oxfam Research Backgrounder series, 9 December 2021, https://www.oxfamamerica.org/explore/research-publications/potential-corporate-tax-avoidance-in-zambias-mining-sector/.

³² High Level Panel on Illicit Financial Flows from Africa, Illicit Financial Flows: Report of the High Level Panel on Illicit Financial Flows from Africa (Addis Ababa: United Nations Economic Commission for Africa, 2015), 2, https://au.int/en/documents/20210708/report-high-level-panel-illicit-financial-flows-africa.

³³ High Level Panel, Illicit Financial Flows, 15.

³⁴ High Level Panel, Illicit Financial Flows, 3.

³⁵ Dev Kar and Joseph Spanjers, Illicit Financial Flows from Developing Countries: 2004–2013 (Washington, DC: Global Financial Integrity, December 2015), https://34n8bd.p3cdn1.secureserver.net/wp-content/uploads/2015/12/IFF-Update_2015-Final-1.pdf.

³⁶ High Level Panel, Illicit Financial Flows, 24.

³⁷ High Level Panel, Illicit Financial Flows, 28.

³⁸ Kwame Nkrumah, Africa Must Unite (New York: Frederick A. Praeger, 1963), 23–24, https://ccaf.africa/books/Africa-Must-Unite-Kwame-Nkrumah.pdf.

Sources referenced in the artworks

Accounting fraud: ‘Government nails Steinhoff for R6.2 billion’, BusinessTech.

Transfer pricing: Daniel Mulé and Mukupa Nsenduluka, ‘Potential Corporate Tax Avoidance in Zambia’s Mining Sector? A Case Study of Glencore Mopani Copper Mines’, Oxfam Research Backgrounder series.

Sustainability reporting: World Rainforest Movement, ‘Green Resources Mozambique: More False Promises!’, WRM Bulletin, no. 235.

Illicit financial flows: Dev Kar and Joseph Spanjers, Illicit Financial Flows from Developing Countries: 2004–2013, Global Financial Integrity.

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How the International Monetary Fund Is Squeezing Pakistan

Notes

¹ Tricontinental: Institute for Social Research, Pakistan Under Water, red alert no. 15, 8 September 2022, https://thetricontinental.org/red-alert-15-pakistan-floods/.

² ‘Pakistan’, IMF Country Information, International Monetary Fund, April 2023, https://www.imf.org/en/Countries/PAK.

³ Economic Advisor’s Wing, Highlights: Pakistan Economic Survey 2022–23 (Islamabad: Finance Division, Government of Pakistan, June 2023), 1, https://www.finance.gov.pk/survey/chapters_23/Highlights.pdf.

⁴ ‘Ranking by Population Growth Rate: All Countries in Asia’, Place Rankings, Data Commons, accessed 27 July 2023, https://datacommons.org/ranking/GrowthRate_Count_Person/Country/asia?h=country/PAK&unit=%.

⁵ Erwin Knippenberg, Mattia Amadio, Nadeem Javaid, and Moritz Meyer, ‘Quantifying the Poverty Impact of the 2022 Floods in Pakistan’, World Bank Blog, 18 May 2023, https://blogs.worldbank.org/developmenttalk/quantifying-poverty-impact-2022-floods-pakistan.

⁶ The World Bank, ‘Pakistan: Flood Damages and Economic Losses Over USD 30 billion and Reconstruction Needs Over USD 16 billion – New Assessment’, The World Bank press release, 28 October 2022, https://www.worldbank.org/en/news/press-release/2022/10/28/pakistan-flood-damages-and-economic-losses-over-usd-30-billion-and-reconstruction-needs-over-usd-16-billion-new-assessme.

⁷ ‘Pakistan GDP Growth Rate 1961–2023’, Macrotrends, accessed 17 July 2023, https://www.macrotrends.net/countries/PAK/pakistan/gdp-growth-rate.

⁸ ‘Pakistan GDP’.

⁹ Mubasher Bukhari and Jibran Ahmad, ‘Five Killed in Stampedes at Flour Distribution Sites in Pakistan’, Reuters, 30 March 2023, https://www.reuters.com/world/asia-pacific/five-killed-stampedes-flour-distribution-sites-pakistan-2023-03-30/.

¹⁰ For examples of this reasoning, see Muslim Mooman, ‘Ukraine Crisis and Inflation’, The Express Tribune, 21 February 2022, https://tribune.com.pk/story/2344472/ukraine-crisis-and-inflation; Gibran Naiyyar Peshimam, ‘US Concerned about Debt Pakistan Owes China, Official Says’, Reuters, 17 February 2023, https://www.reuters.com/world/asia-pacific/us-concerned-about-debt-pakistan-owes-china-official-says-2023-02-16/.

¹¹ Gibran Naiyyar Peshimam, ‘US Concerned about Debt Pakistan Owes China, Official Says’, Reuters, 16 February 2023, https://www.reuters.com/world/asia-pacific/us-concerned-about-debt-pakistan-owes-china-official-says-2023-02-16/.

¹² Faseeh Mangi, ‘China’s Funding to Pakistan Stands at 30% of Foreign Debt’,Bloomberg, 2 September 2023, https://www.bloomberg.com/news/articles/2022-09-02/china-s-funding-to-pakistan-stands-at-30-of-foreign-debt.

¹³ IMF Communications Department, ‘IMF Executive Board Approves US$3 billion Stand-By Arrangement for Pakistan’, International Monetary Fund, 23 July 2023, https://www.imf.org/en/News/Articles/2023/07/12/pr23261-pakistan-imf-exec-board-approves-us3bil-sba.

¹⁴ ‘Pakistan Tariff Rates 1995–2023’, Macrotrends, accessed 9 September 2023, https://www.macrotrends.net/countries/PAK/pakistan/tariff-rates.

¹⁵ ‘Pakistan Balance of Trade’, Trading Economics, accessed 16 September 2023, https://tradingeconomics.com/pakistan/balance-of-trade#:~:text=.

¹⁶ ‘Rescheduling of the Debt of Pakistan’, Paris Club, 13 December 2001, https://clubdeparis.org/en/communications/press-release/rescheduling-of-the-debt-of-pakistan-13-12-2001.

¹⁷ These were the Symington Amendment (adopted in 1976 and implemented in 1978), the Pressler Amendment (1990), and the Glenn Amendment (adopted in 1977 but applied to Pakistan in 1998). Approximately $1.2 billion in US foreign assistance was promised to Pakistan for 2002–2003. See Bessma Momani, ‘The IMF, the US War on Terrorism, and Pakistan’, Asian Affair 31, no. 1 (2004), https://uwaterloo.ca/scholar/sites/ca.scholar/files/bmomani/files/the_imf_us_war_on_terrorism_and_pakistan_a_lesson_in_economic_statecraft.pdf, 45.

¹⁸ Murtaza Haider, ‘Which Political Party Has Been the Best for Pakistan’s Economy? Trade Stats Reveal All’, DAWN, 16 May 2019, https://www.dawn.com/news/1482443.

¹⁹ Salman Siddiqui, ‘Pakistan’s Current Account Deficit Peaks at $17.99b’, The Express Tribune, 20 July 2018, https://tribune.com.pk/story/1762078/pakistans-current-account-deficit-peaks-17-99b.

²⁰ Since the 1950s, the government of Pakistan has promoted exports through tax rebates and import licensing schemes. See for instance, Federal Board of Revenue, ‘Export Facilitation Scheme’, Revenue Division, Government of Pakistan, 13 August 2020, https://www.fbr.gov.pk/export-facilitaion-schemes/51149/132200. On export promotion benefits, see Syed Zahid Abbass Naqvi, Aneeqa Nawaz, Ayesha Naeem, and Shahzad Ahmad, ‘Bearing of Export Subsidies on Pakistan’s Exports’, International Journal of Business Management and Economic Research 10, no. 3 (2019): 1587–1592, https://www.ijbmer.com/docs/volumes/vol10issue3/ijbmer2019100301.pdf.

²¹ ‘Pakistan Trade Balance 1960–2023’, Macrotrends, accessed 16 September 2023, https://www.macrotrends.net/countries/PAK/pakistan/trade-balance-deficit; Amna Puri-Mirza, ‘Value of Remittances Received in Pakistan from 2012 to 2022’, Statista, 9 August 2023, https://www.statista.com/statistics/880752/pakistan-value-of-remittances/.

²² State Bank of Pakistan Infrastructure Taskforce, The Pakistan Infrastructure Report (Islamabad: State Bank of Pakistan, 2012), https://www.sbp.org.pk/departments/ihfd/InfrastructureTaskForceReport.pdf; Khaleeq Kiani, ‘LNG Replaces Oil as Costliest Source of Power’, DAWN, 17 July 2023, https://www.dawn.com/news/1765123/lng-replaces-oil-as-costliest-source-of-power.

²³ ‘Pakistan Imports by Category’, Trading Economics, accessed 26 September 2023, https://tradingeconomics.com/pakistan/imports-by-category.

²⁴ Khaleeq Kiani, ‘Study Finds Fault with KESC Privatisation’, DAWN, 18 August 2012, https://www.dawn.com/news/743064/study-finds-fault-with-kesc-privatisation.

²⁵ Zofeen T. Ebrahim, ‘Pakistan Energy Climate Change Future’, Reuters, 24 February 2021, https://www.reuters.com/article/us-pakistan-energy-climate-change-featur-idUSKBN2AO27C.

²⁶ Ishrat Husain, ‘The Future of SOEs – Part 1’, The News International, 6 May 2023, https://www.thenews.com.pk/print/955466-the-future-of-soes.

²⁷ Husain, ‘The Future of SOEs’; Implementation and Economic Reforms Unit, Finance Division, Government of Pakistan, Federal Footprint: State Owned Entities (SOEs) Performance Review FY2013–14 (Islamabad: Finance Division, Government of Pakistan, 2014), https://www.finance.gov.pk/publications/State_Owned_Entities_FY_2013_14.pdf.

²⁸ Husain, ‘The Future of SOEs’; Implementation and Economic Reforms Unit, Finance Division, Government of Pakistan, Federal Footprint: SOEs Annual Report FY2019. Commercial SOEs, vol. 1 (Islamabad: Finance Division, Government of Pakistan, 2019), https://www.finance.gov.pk/publications/SOE_Report_FY19_Vol_I.pdf.

²⁹ Implementation and Economic Reforms Unit, Finance Division, Government of Pakistan, ‘Special Section 2: Evaluating the Fiscal Burden of State-owned Enterprises in the Power Sector’, In The State of Pakistan’s Economy: Second Quarterly Report for FY19 (Islamabad: Finance Division, Government of Pakistan, 2019), https://www.sbp.org.pk/reports/quarterly/fy19/Second/Special-Section-2.pdf.

³⁰ Taimur Rahman, ‘Privatisation and Power’, Discourse, no. 2023–02 (May–June 2023), https://pide.org.pk/research/privatisation-and-power/.

³¹ Fahd Ali and Fatima Beg, The History of Private Power in Pakistan, Working Paper Series, no.106 (Sustainable Development Policy Institute, April 2007), https://sdpi.org/sdpiweb/publications/files/A106-A.pdf.

³² Capacity charges are payments made by the government to private power producers to cover returns on investments including costs of land purchase, design, installation, taxes, insurance, administration, debt servicing, and return on equity. These charges are fixed against factors such as fluctuations in the exchange rate and interest rates.

³³ Senate Standing Committee, Senate of Pakistan, Report of the Sub-Committee of the Standing Committee on Power, Report no. 1 of 2020 (11 September 2019), https://senate.gov.pk/uploads/documents/1583320128_224.pdf.

³⁴ Khaleeq Kiani, ‘Pakistan Facing “Exceptionally High” Risks, Says IMF’, DAWN, 19 July 2023, https://www.dawn.com/news/1765586/pakistan-facing-exceptionally-high-risks-says-imf.

³⁵ Anjum Shahnawaz, ‘Government Employees in Pakistan Granted Salary Increase of up to 35%’, Pakistan Revenue, 6 July 2023, https://pkrevenue.com/government-employees-in-pakistan-granted-salary-increase-of-up-to-35/#:~:text=Islamabad%2C%20July%206%2C%202023%20%E2%80%93,details%20of%20this%20salary%20raise.

³⁶ ‘Why Did Pakistan Need the IMF Deal? What Does It Need to Do Now?’, Al Jazeera, 30 June 2023, https://www.aljazeera.com/news/2023/6/30/why-did-pakistan-need-the-imf-deal-what-does-it-need-to-do-now.

³⁷ Mubarak Zeb Khan, ‘Rs215bn in New Taxes to Help Seal IMF Deal’, DAWN, 25 June 2023, https://www.dawn.com/news/1761637.

³⁸ A letter of credit is a guarantee by a bank that payment will be made to the foreign suppliers after the goods have been received and cleared by customs.

³⁹ Ali Salman, ‘We Need a Minister of Economy’, The Express Tribune, 26 June 2023, https://tribune.com.pk/story/2423561/we-need-a-minister-of-economy.

⁴⁰ ‘Pakistan Imports of Cotton’, Trading Economics, accessed 2 August 2023, https://tradingeconomics.com/pakistan/imports/cotton.

⁴¹ To learn more about this dynamic, see Tricontinental: Institute for Social Research, In the Ruins of the Present, working document no. 1, 1 March 2018, https://thetricontinental.org/working-document-1/.

⁴² Malik Fahim Bashir, Taimur Khan, Yasir Bin Tariq, and Muhammad Akram, ‘Does Capital Flight Undermine Growth: A Case Study of Pakistan’, Journal of Money Laundering Control (31 August 2023), https://www.emerald.com/insight/content/doi/10.1108/JMLC-07-2022-0100/full/html; ‘Capital Flight’, The Nation, 25 May 2015, https://www.nation.com.pk/25-May-2015/capital-flight?show=486.

⁴³ ‘800,000 Professionals, Left Pakistan in 2022’, Daily Times, 1 February 2023, https://dailytimes.com.pk/1058262/800000-professionals-left-pakistan-in-2022/.

⁴⁴ Zafar Bhutta, ‘Power Sector to Eat up Major Chunk of Subsidies’, The Express Tribune, 10 June 2023, https://tribune.com.pk/story/2421017/power-sector-to-eat-up-major-chunk-of-subsidies; ‘Pakistan Further Removes Fuel Subsidies to Win IMF Funding –Finmin’, Reuters, 15 June 2023, https://www.reuters.com/markets/asia/pakistan-further-removes-fuel-subsidies-win-imf-funding-finmin-2022-06-15/.

⁴⁵ Bhutta, ‘Power Sector to Eat up Major Chunk of Subsidies’.

⁴⁶ ‘IPPs’, Central Power Purchasing Agency (Market Operator), https://www.cppa.gov.pk/ipps.

⁴⁷ ‘Decisions on Provisional Measures’, Tethyan Copper Company Pty Limited v. Islamic Republic of Pakistan, case no. ARB/12/1 (Washington, DC: International Centre for Settlement of Investment Disputes, 13 December 2012), http://icsidfiles.worldbank.org/icsid/icsidblobs/OnlineAwards/C3805/DC4984_en.pdf.

⁴⁸ ‘About the IMF’, International Monetary Fund, accessed 2 August 2023, https://www.imf.org/external/pubs/ft/ar/2016 eng/about.htm#:~:text=It%20works%20to%20foster%20global,reduce%20poverty%20around%20the%20world.

⁴⁹ ‘Exporters’ Issues: PM for Establishing One-Window Facilitation Centres’, Business Recorder, 17 July 2023, https://www.brecorder.com/news/40252962.

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