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At the end of 2016, the U.S.-based Global Financial Integrity (GFI) and the Centre for Applied Research at the Norwegian School of Economics published an extensive report on global financial flows. They tallied up all of the financial resources that are transferred between rich and poor countries each year—not just aid, foreign investment, and trade, but also transfers like debt cancellation, remittances, and capital flight. Their calculations revealed that in 2012, the last year of recorded data, developing countries received a total of about $1.3 trillion in total inflows. But that same year, some $3.3 trillion flowed out of them. In other words, the South sent $2 trillion more to the rest of the world than they received. What this means is that developing countries are net creditors to the rest of the world—the exact opposite of the usual narrative. Indeed, since 1980, these net outflows have added up to a total of $16.3 trillion. To get a sense for the scale of this, $16.3 trillion is roughly the GDP of the United States.
What do these large net outflows consist of? Some of it is payments on external debt. According to World Bank data, developing countries pay out around $200 billion each year in interest alone, with most of it going to creditors in rich countries—a direct cash transfusion that far outstrips the aid that flows in the other direction. In all the years since 1980, the South has forked over an eye-watering $4.3 trillion in interest payments on external debt. Importantly, much of the interest being paid out today is being rendered on decades-old loans that have already been paid off many times over. And much of it is being paid on principal that was accumulated by illegitimate dictators—many of them propped up by Western powers—who have long since been deposed. In fact, around $700 billion of sovereign debt in the global South today is considered illegitimate or “odious” by international standards.
Another major source of reverse flow leaves in the form of profits repatriated by multinational companies operating in the developing world—a practice that has grown rapidly since capital controls were liberalized beginning in the 1980s. Multinational companies repatriate close to $500 billion each year out of developing countries, which outstrips the aid budget four times over and roughly matches or even exceeds the amount of foreign direct investment that the South receives. Think of all the profit that Coca-Cola extracts out of Central American sugar plantations and banks back home, for example, or the income that Total pulls out of West Africa’s oil fields.
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as much as other symbols of nationalism.
americanaffairsjournal.org
