Nigeria is reckoned to be the world capital of oil theft, losing at least 400,000 barrels a day. It has maintained this title thanks to a network ... of criminals among local politicians and security officers who collude with crooked international oil traders and refineries.
Something is rotten in the state of finance. It is failing badly in these frenetic times of climate crisis, pandemics and galloping authoritarianism. And the fallout is producing some unlikely revolutionaries. Take Zambia, where a chartered accountant won an election by standing up for human rights and freedom of the press, and promising to rescue the economy from a corrupt cabal.
Election victor Hakainde Hichilema is too diplomatic to call out the banks that collaborated with venal politicians. But the story has a similar pattern to the hidden loans scandal playing out in Mozambique. Corrupt political and financial elites colluded to steal public funds, leaving the povo with the bill. Enter the IMF and the debt restructurers, while a generation’s aspirations are put on hold.
Pull back the focus for a global view of financial dysfunction – from none other than David Malpass, president of the World Bank and partisan for deregulation and low-tax economies. Under Malpass, the bank has lagged behind the IMF on pushing for debt relief and financing the transition to renewable energy.
In conversation with China’s premier, Li Keqiang, in December, Malpass appears to have had an epiphany. “Part of the inequality problem is global finance itself, and the unequal structure of the stimulus,” said Malpass.
Prevailing sovereign debt, fiscal and monetary policies were worsening inequality, he added. To drive pandemic stimulus programmes, rich countries are using central bank funds to buy long-term bonds; that’s highly profitable for the big banks and corporates. But it’s locking out small businesses and developing economies from finance.
Pandemic economics have highlighted the urgent need to reform the financial system, but so will the imperatives of the transition to green and sustainable economies. At the UN’s COP26 climate summit, former governor of Britain’s central bank Mark Carney brought together more than 400 companies with cumulative assets of more than $130trn who are committed to make their operations net-zero in carbon emissions by 2050.
READ MORE Africa's Great Green Opportunity
Tremendous news for the green transition. But whose transition?
Rich countries have ramped up spending to $20trn in response to the pandemic. But those same countries have failed to honour a pledge, now 12 years old, to mobilise $100bn a year in climate finance for developing economies. And that $100bn a year is a rounding error compared with the $1trn-$2trn required each year in clean-energy investments in developing economies to achieve net-zero emissions by 2050, according to Jason Bordoff, climate advisor to former US president Barack Obama.
Those trillions could come from the green corporate barons. But voluntarism does not work in our dysfunctional financial system. The time has come for a progressive levy on the 28bn tonnes of carbon dioxide emitted by rich and middle-income countries each year. The IMF and the World Bank, with their regional counterparts, could collect and distribute this revenue for renewable-energy projects in developing economies.
A first and a green step to level up finance
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