Looting Africa

The Looting Machine: Warlords, Smugglers and the Systematic Theft of Africa’s Wealth

Tom Burgis

Harper Collins (2017)

Book Review

This book centers around something global economists refer to as the “Dutch curse.” In 1959, the discovery of oil in the Netherlands led to massive unemployment outside the oil industry. A big increase in dollars generated by oil exports caused major inflation in the local currency. This made imports cheaper than locally produced goods, shutting down hundreds of Dutch businesses and putting thousands out of work.

It’s typical of mineral and oil/gas mining everywhere (including here in New Plymouth) that these industries require vast capital investment but employ only small numbers of workers. According to Burgis, it was the “Dutch curse” that resulted in Russian’s oil-fueled criminal oligarchy prior to the rise of Putin. As the continent richest in natural resources, Africa, which has been ruthlessly exploited by multinational corporations, has a severe case of the “Dutch curse.”

Although multinationals pay far less than market value for oil, gas and precious minerals, they pay corrupt puppet dictators enough that they don’t need to tax their citizens. Burgis maintains this absence of taxation results in a lack of accountability to their citizenry. Instead of holding leaders to account for their failure to provide basic infrastructure, citizens of “resource states” are far more likely to angle for their share of the loot. Retaining power becomes a simple matter of maintain elaborate patronage (payoff) systems and harsh military/security networks.

Burgis also refutes the myth that Africa’s multiple civil wars stem from tribal and religious conflict. Most African wars are pure resource wars (often triggered by CIA and French and British intelligence), with the conflict used as a cover for resource smuggling and even lower net cost to multinationals.

The US government has attempted to crack down on its own corporations via stricter enforcement (since 2000) of the 1977 Foreign Corrupt Practices Act and a section of the 2010 Dodd Frank Act that prohibits the the purchase of Coltan* from armed rebel groups. The new law, which has done little to reduce Coltan smuggling, has opened the door to a Chinese monopoly on the Coltan market.

The Looting Machine presents a detailed country by country analysis, as well as an examination of the Chinese company responsible for most private investment in Africa (there’s less publicly available information about investment by state-owned Chinese companies). Both engage in far more infrastructure development than Western agents do.

• Angola – principle export oil, with 70% of oil ventures owned by Hong Kong billionaire Sam Pa, operating as Queensway Group or Chinese International Fund. Half of Angolan residents get by on less than $1.25/day.
• Congo – second most important produce of Coltan outside of Australia, also gold, tin, tungsten and diamonds. Residents live on less than $1.00/day.
• Nigeria – oil and gas. Cotton/textile industry that flourished in 1980s shut down (causing mass unemployment) by continuous flood of smuggled Chinese counterfeit textiles. Sam Pa and the French oil company Total have teamed up to challenge Shell’s longstanding monopoly on Nigerian oil.
• South Africa – rich gold, diamond and platinum exports financed the creation of the apartheid state, in which a tiny white minority controlled the entire economy. Since the fall of apartheid in 1994, this minority has been joined by a handful of Black entrepreneurs.
• Botswana – diamonds. Somewhat protected from “Dutch curse” by the creation of value added industries that cut and polish their diamonds prior to export.
• Guinea – among world’s richest reserves of iron and aluminum. Bought out by Sam Pa as a result of Western sanctions.
• Niger – rich in uranium and the world’s poorest country. France previously held monopoly on Niger’s uranium industry, being replaced by Queensway group based on agreement to invest in infrastructure development and employ local labor. (In most countries, Chinese investors import Chinese labor.)
• Ghana – gold. Financed by Chinese Investment Fund after IMF tried to impose structural adjustment conditions** to refinance a World Bank Loan.
• Zimbabwe – diamonds, platinum, nickel, gold. Mugabe used revenues from export industries to finance particularly brutal security force. Diamond industry bought out by Queensway as direct result of Western sanctions.

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*Coltan is a rare precious metal in high demand for cellphones and laptops.

**IMF structural adjustment conditions typically require debtor companies to privatize state owned industries, legislate deep cuts in social services and accept extensive foreign investment as a condition of receiving World Bank loans.

 

 

 

 

The US Military Occupation of Africa

The Shadow War in the Sahara

Al Jazeera (2017)

Film Review

The Shadow War in the Sahara is a thumbnail history of the US military occupation of Africa. The documentary begins with the 1885 Berlin Conference, at which the major European powers divided up all of Saharan Africa to better exploit its rich resources of gas, oil, copper, uranium, coltan and other rare earth minerals.

France initially came out the winner, controlling three-fourths of Saharan Africa until World War II. Even after all their Saharan colonies won independence (1945-62), France continued to maintain a military presence, as well economic dominance over most of its former colonies.

With the discovery of oil in the Gulf of Guinea in the sixties, this began to change – with the covert US support of armed rebellions in Ethiopia and Angola and its failed invasion of Somalia. Over time, most French troops have been replaced by US troops. While this was done in the name of “fighting terrorism,” the real US agenda has always been to secure oil and mineral resources in the face of Chinese domination over African oil.

Instead of employing military force and direct political intervention via the International Monetary Fund and their “structural adjustment”* policies, China has gained a major foothold in Africa in offering debt-free development loans and a policy of non-interference in domestic policy.

The US is the only major power to divide up the entire world into military command and control regions: USNorthcom (North America), USSouthcom (South America), USEUCom (Europe), USCentcom (Middle East and Central Asia), USPACom (Pacific region and Australia) and USAfricom.

Former Libyan ruler Omar Gaddafi successfully blocked the US from locating the USAfricom headquarters in Africa – so the US built it in Germany instead.

Prior to his assassination by US-backed rebels, Gadaffi was a powerful advocate for African unity. His primary goal in founding and bankrolling (from his massive oil revenues) the African Development Bank and an African Monetary Fund was to assist other African countries to resist western colonialism.

In 2009, he was elected chairman of the African Union, and in 2011 he cancelled major contracts with the powerful (US) Bechtel corporation and with France (for millions of dollars of military hardware). The punishment inflicted by the US and France was swift – a NATO bombing campaign in support of CIA-backed rebels charged with overthrowing his government.

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*Structural adjustment describes a process by which the US-controlled IMF forces countries to privatize public utilities, cut public services and open third world economies to western investment as a condition of debt refinancing.

 

 

 

Giving Capitalism a Feminine Face

Historically the IMF and World Bank, like the WTO, have been characterized by “faceless” leadership. Prior to the mid-nineties, only a handful of liberal intellectuals knew these powerful international institutions existed. Even after the 1999 Battle of Seattle effectively launched the antiglobalization movement, the leaders of these august institutions remained anonymous. When the IMF issued warnings against countries with excessive public spending, they originated from the agency itself, rather than IMF officials.

Prior to his June 2011 arrest for alleged sexual assault, no one outside of France had heard of Dominique Strauss-Kahn, who ran the IMF between 2007 and 2011.

The Historic Role of the IMF

The IMF was founded at the end of World War II at Bretton Woods. The British delegation, led by economist Maynard Keynes, wanted the IMF to be a cooperative fund member states could draw on to maintain economic activity and employment through the periodic economic crises that are characteristic of capitalist economies. The US delegation saw the IMF as more of a bank serving the needs of private lenders by ensuring borrowing states repaid their debts on time (see IMF History).

The US prevailed, and IMF loans came to be known as “structural adjustment” loans because they forced borrowing governments to adjust the structure of their economic activity. In most cases, this involved extreme austerity measures favorable to multinational corporations seeking access to cheap resources and labor markets. Such measures included privatizing publicly owned assets (airlines, telecoms, railroads, health systems, etc); liberalizing trade and financial markets; increasing incentives (corporate and individual tax cuts and waivers of environmental/labor regulations) for foreign investment; and supporting commercial export crops at the expense of food production.

Developing countries that blindly followed these policies, especially in South America and Africa, found their countries mired in debt and huge social inequalities. Russia was one of the most extreme cases: its economy shrank by 55% before President Vladimir Putin set the country on an alternative path to recovery.

Repackaging the IMF’s Image

Given the historic anonymity of the IMF leadership, you have to wonder about all the publicity being lavished on Christine Lagarde, the current IMF managing director. Although global economics is a low priority in the US media, she receives near daily attention in the British and international media. At sixty, Lagarde is still a strikingly attractive woman. Presumably, however, there is some political agenda behind the decision to promote this “rock star of the economic world,” as several media outlets have branded her

Lagarde’s Mission

Besides her carefully cultivated public persona, Lagarde is also unique in her willingness to lay out the IMF’s economic and political agenda. The policies she advocates include

• Stronger economic growth (allegedly to promote global re-employment)
• Deeper “integration” of European economies (translation: creation of a centralized fiscal body capable of making budgetary decisions for the entire Eurozone)
• Improved “fiscal consolidation” for the US and Japan (translation: less deficit spending)
• More domestic consumption and less reliance on foreign investment and exports in emerging economies (especially China)
• A stronger firewall against debt contagion (translation: no bailouts) around weaker Eurozone nations like Greece, Italy and Spain
• “Structural reform” (translation: anti-union legislation and reduced public spending) to improve the “competitiveness” of the industrial north.

Rebranding Structural Adjustment

Lagarde gives double messages about structural adjustment and austerity cuts. After warning that budget cuts lead to “recessionary tendencies,” she states that some countries (which, like Greece, are on the verge of economic collapse) need to cut their public budgets immediately. She feels others can stretch their cuts out over time.

Among specific “structural reforms” Lagarde favors are pension reform, with an optimal retirement age of 67, “wage restraint” (i.e. abandoning the expectation that wages will keep pace with inflation), and social service reforms in which “recipients of social assistance are expected to improve their situation.”*

The Fox Guarding the Henhouse

LaGarde isn’t without her critics. Former IMF chief economist Simon Johnson refers to her appointment as “the fox guarding the henhouse.” Johnson, like former World Bank economist Joseph Stiglitz, has been highly critical of the extreme concentration of financial power and it threat it poses to the global economy. This is the subject of Johnson’s recent book, Thirteen Bankers.

His criticism.of Lagarde centers mainly around her proposal to solve the Eurozone crisis by issuing additional loans to the debt-ridden “peripheral” countries (Greece, Spain, Italy, Portugal and Belgium). He maintains all these countries are looking at a default scenario, no matter how much money she throws at them. He accuses her of allowing EU leaders to use the IMF to conceal flaws in the Eurozone structure from voters.

*A questionable objective in countries with double digit unemployment

photo credit: Adam Tinworth via photopin cc