Capital Flight From Africa: How the Poor Finance the Rich

Summary

In this interview from The Real News Network, Sharmini Peries speaks with Professor Leonce Ndikumana about the World Bank's report 'The Changing Wealth of Nations,' which highlights wealth inequality across regions. Ndikumana emphasizes how the report overlooks the critical issue of capital flight from Africa, where vast amounts of wealth are hidden offshore, fueling developed economies while African nations suffer. He explains how corruption, both within Africa and globally, facilitates this issue, worsening inequality and hindering development. Ndikumana calls for global cooperation to address these challenges and return stolen wealth to African nations.

Takeaways

• 🌍 The World Bank report, 'The Changing Wealth of Nations,' shows sub-Saharan Africa's stagnation and wealth loss while OECD countries have grown wealthier since 1995.
• 💸 The report omits the issue of capital flight from Africa, which has stashed African wealth in secrecy in offshore accounts, significantly affecting Africa’s wealth estimation.
• 📊 Measuring wealth instead of just income is crucial for assessing the long-term sustainability of growth and inequality, both within and between countries.
• 💰 Capital flight from Africa is often hidden in international financial systems, making Africa's wealth appear smaller while the rich elite hold substantial wealth abroad.
• ⚖️ Inequality within African countries is underestimated because national statistics do not account for the wealth hidden offshore by the elite.
• 📉 The capital flight from Africa, estimated at over $1.5 trillion from 1970 to 2015, has severely hindered Africa's economic development, public investment, and social services.
• 🏦 Wealth stashed abroad from Africa fuels the economies of developed countries like the US and UK, ironically leading to African countries financing developed economies.
• 👥 Corruption on both ends—within African institutions and international financial systems—facilitates capital flight, making reforms challenging without external support.
• 🚨 Global cooperation is essential to curb capital flight and corruption, as domestic institutions alone cannot address these issues when they are part of the problem.
• 🏥 The poor in Africa suffer the most, as capital flight reduces government revenue for public services like education and healthcare, further widening inequality.

Q & A

What is the main focus of the World Bank report 'The Changing Wealth of Nations'?

The report compares economic growth across different regions since 1995 and highlights that sub-Saharan Africa has faced stagnation and even a loss of wealth, while wealthy OECD countries have become even wealthier.

What key issue related to Africa’s wealth is not addressed in the World Bank report?

The report does not address the issue of capital flight from Africa, where a significant amount of wealth is stashed in offshore financial centers, often through corruption and embezzlement by elites.

Who is Leonce Ndikumana and what is his expertise on the topic discussed in the interview?

Leonce Ndikumana is a professor of economics at the University of Massachusetts Amherst, Director of the African Development Policy Program at the Political Economy Research Institute, and a co-author of the book 'Capital Flight From Africa: Causes, Effects, and Policy Issues.'

How does capital flight from Africa contribute to the wealth of developed nations?

Capital stashed in offshore financial centers by African elites is often reinvested in financial systems of developed nations like London and New York, essentially fueling their economies while depriving African countries of needed resources.

How does the stashing of African wealth abroad affect inequality within African countries?

The wealth held abroad by elites is not accounted for in national measures, leading to an underestimation of inequality. The elite, whose wealth is hidden, are much wealthier than ordinary citizens, deepening the inequality gap.

What are the broader implications of capital flight for African economies?

Capital flight deprives African economies of critical resources that could have been used for public investment, social services, and overall development. This contributes to economic stagnation and deepens inequality.

How does capital flight undermine public services in African countries?

The wealth that is smuggled out of Africa could have generated tax revenue for governments to fund education, healthcare, and other services. As a result, the poor are left without access to essential public services.

What role does corruption play in facilitating capital flight from Africa?

Corruption plays a key role at both the source (within African countries) and the destination (offshore financial centers). In Africa, corrupt elites use their positions to smuggle money abroad, and international financial systems often do not enforce due diligence rules.

Why is capital flight considered a global issue rather than just an African problem?

Capital flight is enabled by international financial systems, with banks in developed nations accepting money from developing countries without adequate scrutiny. Stopping capital flight requires cooperation from global financial institutions.

What solutions does Leonce Ndikumana propose for addressing capital flight and corruption in Africa?

Ndikumana emphasizes the need for stronger domestic institutions in Africa and global cooperation to prevent capital flight. He suggests building coalitions between international governments and civil society groups to help African nations curb corruption and recover stolen wealth.