By Phoebe Doscher, News Editor
Mara Auditorium was almost filled to capacity on Thursday evening for the 14th annual Derrick K. Gondwe Memorial Lecture on Social and Economic Justice, co-sponsored by the Africana Studies Program, the Department of Economics, and the Events Planning and Coordinating Committee. This year, Distinguished Chair and Professor of Economics at the University of Massachusetts Amherst Léonce Ndikumana presented on “Odious Debts and Africa’s Financial Hemorrhage through Capital Flight.”
The Gondwe Lecture is held in honor of the late Derrick K. Gondwe, a member of the faculty in the economics department at Gettysburg and the first black person to receive tenure and be promoted to full professor. The annual lectures began by virtue of an endowment made by William and Gayle Keefer, Gondwe’s host family when he first moved to the United States.
Ndikumana told the crowd he would be discussing “the issue of debt in African economies,” primarily the issue of capital flight caused by excessive borrowing in the poorly-regulated global financial system.
He continued to discuss how finance–primarily corporations–are dominating the global economy, and regulation thereof is at the mercy of capital. Global governance is also shifting from multilateral organizations to “elite clubs,” Ndikumana said. Africa suffers as a result, producing what it does not consume and consuming what it does not produce.
Although Africa has shifted from a continent on the brink of collapse to a continent on the rise, capital flight, or discrepancies in inflows and uses of finances in current accounts, he reported, has continued inversely, along with the rising rates of poverty and mortality. Despite Africa’s wealth from oil, its countries are underspending on health, he said, and they “don’t know where the oil money goes.” This case is the same for other oil-rich countries due to resource curse manifestation.
One cause of capital flight and odious debt in Africa, Ndikumana asserted, is leaders held up as friends by the West who engage in massive borrowing that benefits the leaders at the expense of citizens who live in poverty. Also at fault is a lack of transparency in global finances. According to Ndikumana, Africa is a net creditor, assets are kept private and in offshore accounts while debts are public. Such public debt was contracted without the consent of people and did not benefit from loans, he argued.
Africa’s net external assets, calculated by subtracting debt stock from capital flight stock, total $1.3 trillion continent-wide. At this point, Ndikumana provided more reasoning behind the discrepancies and corruption. Corrupt borrowers, he said, embezzle, which leads to debt since lenders are greedy and turn a blind eye.
He returned back to Africa’s offshore wealth which benefits foreigners, an example of Africa giving more than it’s receiving. Foreign countries plunder by investing in Africa and taking resources for cheap, he said, colluding with African capitalists.
In seeking a solution, Ndikumana said the complex problem of capital flight requires many angles from both macro- and micro-economic perspectives, and more attention policy-wise. He cited the 2012 UN Panel on Illicit Financial Flows from Africa, which tracked tax evasion and capital flight, as well as the World Bank recovery and repatriation of stolen assets. The UN also has a charge to reduce illicit finances and arms flows while increasing recovery of stolen assets and organized crime. Ndikumana said that the same day as the lecture, though, the U.S. Department of the Treasury’s Office of Foreign Assets Control sanctioned members of a corruption network in South Africa.
Although progress has been made, he said, the world has a long way to go to resolve imbalances of power with corporate banks and enablers, Western government offshore funds, and among economic and political elites.
Ndikumana fielded questions at the end of the presentation including China’s role in capital flight, finding ways to change the system of corruption, the potential for Western nations to stop capital flight, as well as questions surrounding accountability and Africa’s democracy.