The Biden-Harris Democratic ticket for the U.S. presidential elections in November 2020 will hopefully give new meaning to U.S-Africa relations by restoring respect for African institutions. There is a barrage of news spewing from all media sources right now speaking about Kamala Harris as Joe Biden’s vice-presidential pick. It is important. It is historic. It is a breath of fresh air with a song of hope. But it’s time to pivot away from exclusive focus on the vice-president’s personal aspects of background, race, ethnicity, and gender.
It’s time to start talking about the issues that affect America’s future. One of the key issues that must be addressed by the Biden-Harris team is how to rescue U.S.-Africa policy from the disarray resulting from the Trump administration’s bullying and purse strings grabbing.
The Trump administration’s irksome MDB challenge
Until recently, the United States has always been the largest financial contributor to international financial institutions, which include the International Monetary Fund (IMF), the World Bank, and multilateral regional development banks (MDBs). The United States is a member, and donor, to five major MDBs: the World Bank and four regional development banks, including the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank.
But emerging markets recently launched two new multilateral development banks: the Chinese-led Asian Infrastructure Investment Bank (AIIB), created in January 2016, and the New Development Bank, a multilateral development bank, established in 2014 by the BRICS states (Brazil, Russia, India, China, and South Africa).
These new institutions were created to address the long-held frustrations of many emerging markets and developing countries and their real economic and social development financing needs, which have traditionally been ignored or sidelined by the governance of the existing institutions with U.S. membership. And the U.S. is a member or shareholder of neither one and therefore has no say or control over how money is spent or allocated.
In other words, the U.S. no longer plays a leading role in shaping the policies of all existing international financial institutions and how their funds are assigned or spent. It is no wonder that a 2020 U.S. Congressional Research Service Report points out that existing MDBs question how these new financing institutions will fit into the “system”, controlled by the U.S. as the major donor.
At the same time, in Africa, with the rise of Nigeria as the largest economy in Africa, the African Development Bank (AfDB), founded in 1964, recently evolved into a majority-African led and controlled financial institution. Regional members hold 60% of the total stock of the bank and non-regional members, the balance of 40%.
Nigeria is the majority stakeholder, with a 9.120% capital subscription; the United States has a 6.472% AfDB capital subscription. As the second largest shareholder in the AfDB, the U.S. has a weighty vote but no longer has majority control over where and how the money is spent.
The changed MDB landscape evidently irks President Trump and explains his quest to undermined regional multilateral banks that escape U.S. control. Instead of using them as a foreign policy tool to facilitate global trade, he sees them as a national security threat and an “America First” target.
Trump’s strategic innovation: bank grabbing
Under the Trump administration, efforts are being made to control the World Bank and the IMF by fully “Americanizing” them while the regional multilateral banks in Africa and Latin America are being bullied to keep in line with U.S. aims and interests. All in the name of countering Chinese power and influence.
In Africa, the Trump administration seems to have developed a new strategic area for competing against China: bank grabbing. The history of grabbing African territory is well documented. It started with the partition of Africa by European powers at the Berlin Conference (1884-85), which was attended by representatives from 14 European countries plus one from the U.S. America participated in order to protect its perceived and mostly potential commercial interests in Africa.
Land grabbing in Africa has continued throughout the 19th, 20th and now the 21st centuries through massive land grabs by U.S. hedge funds and universities, as well as through the purchase or lease of large tracts of land by other foreign nations, companies or individuals for agricultural production. But the idea of multinational development bank (MDB) grabbing is something new that the Trump administration has attempted to put into practice.
The African Development Bank (AfDB) case involves direct bullying by the U.S. government of the bank’s board of governors to force an external investigation into the alleged corrupt behavior by the institution’s president, Mr. Akinwumi Adesina. The results of an internal probe had already cleared Adesina. But it wasn’t enough.
U.S. Treasury Secretary Steven Munchin demanded the premier regional African financial institution carry out an external investigation. Led by former Irish president Mary Robinson, the “verdict” resulting from the second investigation were the same: Adesina committed no wrongdoing and was cleared of all allegations and suspicions. This time, said results were congratulated by the U.S.
As I wrote in a previous article (“The Making of an American Tragedy in Africa”), the Trump administration demonstrated a rather strange and reprehensible way of declaring African innocence: the word of a single white Westerner of “high professional standing” counted more than the word of the 80 other members of the bank’s board of governors, whose voting power is split 60%-40% between African (or "regional") countries and “non-regional” member donor countries.
Indeed, the AfDB bank grabbing attempt is a case of American whitewashing African innocence.
Why should the innocence of a respected African leader of high professional standing rest on an obviously racist white American definition of the standard for innocence? Why should an African institution’s governing body be considered a deviation from that norm? Perhaps it’s because, under Adesina’s presidency, the AfDB raised $115 billion (105 billion euros) in fresh capital in October 2019.
The operation championed by Nigerian Adesina was deemed a personal success for him as the AfDB’s president. But it roiled World Bank’s President David Malpass, who in February commented that because the AfDB tends to provide loans too quickly, it adds the debt problems of African nations.
The statements were rebutted by the AfDB as "inaccurate and not fact-based." The root of the comments? In March, the AfDB issued a $3 billion social bond to help African countries deal with the fallout from the coronavirus pandemic. Bids for the securities on the London money market exceeded $4.6 billion. The bank also launched a $10 billion crisis-response facility for African nations.
In Latin America, the use of the World Bank as an instrument of U.S. foreign policy has never been a secret. Nicaragua and Guatemala (1950s) or Chile (1970s) provide clear examples. But in the latest chapter of the misuse of America’s exercise of power in this part of the world, the Trump administration recently nominated an American, Mauricio Claver-Carone, to head the Inter-American Development Bank. This nomination breaks the unwritten rule and “gentlemen’s agreement” since the institution’s inception in 1959 that the president would be Latin American.
America’s cynical accusations of favoritism: committing the crime Africans are innocent of
According to the same Congressional Research Committee report mentioned above, “[i]n March 2017, the Trump Administration proposed cutting $650 million over three years compared to the commitments made under the Obama Administration. However, in the spring of 2018, the Trump Administration pledged to support an expansion of the World Bank’s non-concessional lending facility, the International Bank for Reconstruction and Development (IBRD).”
Historically, both the IMF and the World Bank have systematically made loans to the United States, used foreign indebtedness as an instrument for subordinating other borrowers, had no qualms about supporting dictatorships, and violated international pacts on human rights. Today, the World Bank is headed by appointee David Malpass, a Trump loyalist and a critic of global institutions. The IMF, headed by Bulgarian Ms. Kristalina Georgieva, is next in line as U.S. interests in the institution grow more prominent.
Irrefutably, some of the best economists in the world serve the World Bank and the IMF, although not many stay for long. But an independent external review by professionals of high-standing of the how the banks choose their chief economists would be welcome.
At the World Bank, Carmen Reinhart of Harvard University was appointed on May 20, 2020 as Chief Economist. In a May 30 article in The Economist (“No fear of floating”) she is hailed as a “prescient and painstaking researcher”, “one of the most widely cited economists in the world”, and “original”. But it says nothing about the fact that she was chief economist at Bear Stearns, a New York-based global investment bank, securities trading and brokerage firm that failed in 2008 as part of the global financial crisis and recession. This post later occupied by her now new boss, David Malpass, who – surprise! - became president of the World Bank in 2019.
At the IMF, Gina Gopinath was appointed in October 2018 by the previous IMF Managing Director, Christine LaGarde, as the IMF Chief Economist to succeed Maurice Obstfeld, who in July 2018 announced he would retire at the end of that year. With this appointment, the IMF’s economic stance shifted more strongly toward Washington. Gopinath is a veteran U.S. economist and co-director at National Bureau of Economic Research and is an outspoken critic of China’s debt – as opposed to U.S. debt – as a global risk.
Both the World Bank and the IMF shun attempts by emerging and developing economies to help themselves as security threats to American interests. Meanwhile, they are bailing out rich European economies, targeting poorer ones and sanctioning those that oppose Washington's unilateralism.
Following a much-ado-about-nothing, U.S.-mandated external probe of the African Development Bank’s president, Akinwumi Adesina, who had already been exonerated by the bank’s Ethics Committee probe of any use of favoritism, the two cases of U.S.-dominated international financing institutions should give some pause for thought about favoritism and nepotism. Yet no external independent review of how chief economists at the World Bank or the IMF are appointed has been called for by anyone in the Trump administration.
Trump’s trump card: go for the purse and the pocket
The African Development Bank and the Inter-American Development Bank were created in 1964 and 1959, respectively, as an answer to a call to offset increasing bureaucratization of world development financing by creating new regional financing institutions. The loan approval processes in the World Bank and the IMF - both instruments of U.S. foreign policy aims and objectives - were and still are expressive of a perverse institutional culture that exerts pressure to lend while undermining governance in borrower institutions and weakening the economic quality of their operations.
The Trump administration’s newest trump card in its self-flagellating cold war with China is bullying regional multilateral banks to regain influence in the regions considered America’s playgrounds. Gaining forced access to financing is seen as a way not only to reverse America’s waning global influence and leadership, but also bypass the nation’s financial weakness (deficit and debt).
However, contrary to Treasury Secretary Steven Munchin’s pandering statement about “Trump’s strong commitment to U.S. leadership in important regional institutions”, the use of bully tactics to increase U.S. access to and influence over the largest sources of development financing for both Africa and Latin America and the Caribbean does not demonstrate leadership.
After consistently neglecting Africa and calling African nations “shithole” countries, the Trump administration has morphed a U.S. foreign policy side-kick into a kick in African leaders’ butts in an attempt to steal the African purse’s seat so the U.S. can use it as an American suitcase. But Africa is not a free-for-all Wild West whose resources, purses and pockets are for America’s taking.
A bank grab as a trump card is obviously a losing card for the exercise of American power. It defeats any purpose of offsetting China’s increasing welcome in Africa and Latin America. Crass bank grabs will not help the U.S. regain influence. Paraphrasing a vulgar saying: you can’t piss in someone’s pocket and tell them it's raining good will.
, the U.S. Global Leadership Coalition points out that Harris considers diplomacy a key pillar of U.S. foreign policy and promotes the use of ‘the power of smart diplomacy’ and calls for “ embracing multilateral engagement and alliances”. This must be translated into meaningful election discourse.
The Biden-Harris team must make a concerted effort to lip up Trump’s use of a bully’s dictionary to redefine political correctness when it comes to Africa and Latin America.
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