Did World Bank Say, “Give Me Control Of A Nation’s Wealth And I Care Not Who Makes Its Laws?”
By J. Yanqui Zaza
Economic Editor
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| Central Bank of Liberia |
It is not true that the World Bank stated, “GIVE ME CONTROL OF A NATION’S WEALTH AND I CARE NOT WHO MAKES ITS LAWS.” In fact, historians are still searching for the original author of that quote. However, is the World Bank not dictating onerous policies for poor countries such as Liberia, for example, since it came into existence in 1943? For example, was it not the World Bank that guided Liberia in awarding 66 fraudulent concessionary agreements such as the ExxonMobil concessionary agreement, according to Mr. Robert Sirleaf, son of former President Ellen Johnson Sirleaf? Was it not the World Bank’s economic prescription that allowed its subsidiary and allies to make money (i.e., fungible) from Liberia’s iron ore, rubber, gold mine, some portion of which the World Bank lent to Liberia?
Nowadays, while it lends money to the Liberian government, its 100% owned subsidiary (International Finance Company-IFC) is at the same time usurping business functions of Liberian commercial banks, by lending money to Liberia’s state-owned entities, including the Liberian Electricity Corporation. More so, its subsidiary (IFC) owns a US $19M investment in a gold mining Company that is polluting the Kinjor Community, Grand Cape Mount County; and has also invested US $8m in gold mines located within four southeastern counties of Liberia.
Every country or community should view the ownership of a nation’s wealth within a broader perspective, warned Chief Justice Edward G. Ryan of the Wisconsin Supreme Court in 1873. Commenting on the issue of a nation’s wealth at a graduation ceremony, he stated, “The question will arise…which shall rule-wealth or man; which shall lead-money or intellect; who shall fill public stations-educated and patriotic freemen, or the feudal serfs of corporate capital?”
Judge Ryan’s warnings, of course, such a warning is not the first nor will it be the last, has not discouraged a privileged few from accumulating a nation’s wealth at the expense of society. Neither have the countless financial crisis from AD 33, when Roman banking houses issued mass unsecured loans, to the 14th-century banking crisis, to the tulip mania in 1637, to the recent 2008 financial debacle, etc. reduced the desire of profiteers to accumulate more wealth.
In the case of Liberia, there is enough evidence for our officials to search for an alternative economic system, even if we are to forget about the causes of the fourteen-year civil war. Yet I do not understand why Liberia continues to limit governmental role in the management of its wealth with the hope that profiteers will voluntarily trickledown to the masses some portion of their productivity.
Okay, if Liberia’s experience with profiteers is insufficient, are American officials not under the influence of big business?
Well other countries such as the five countries listed below, do not share Liberia’s view and have authorized their governments to play a role. (1) Italy: The government has ownership in the world’s 11th largest industrial company with US $90 billion capitalization called Eni S.p.A.. (2) Germany: An entity manages more than 400 German State-owned entities. (3) France: Agence des de l'État (APE) manages the state's holdings in about 70 firms. (4) Japan: Government owns a 34% stake in the Petroleum Exploration Company (JAPEX); (5) South Korea: Government owns a share in the National Oil Corporation (KNOC).
Certainly, denying wealth ownership to multinational corporations does not necessarily reduce income inequality as it is in Germany, according to some experts. Then the question is, how did Germany gain trade surplus and a budget surplus, as it has done for the past five years, according to Mr. Michael Pettis. (Forbes Magazine). Mr. Pettis argued that Germany is increasing its saving, thereby, increasing deficits of other countries. But nationally, Germany’s increase in savings is not at the expense of funding for domestic programs such as education, healthcare, etc. Presumably, the German government generates adequate revenue in order to finance domestic programs and at the same time increase its surplus. For example, Germany’s 16 states abolished tuition fees for undergraduate students.
In order to understand how Germany generates adequate revenue by denying a transfer of wealth ownership to profiteers, let us review its banking system as presented by Mr. Theidor Baums in “The German Banking System and Its Impact on Corporate Finance and Governance.” (www.jura.uni-frankfurt.de).
Germany divides its bank industry into three layers; Universal banks (Total commercial banks of 340), which includes the three largest banks; Savings banks (total savings banks of 771), which are owned by states and municipalities; and credit co-operative banks (total co-operative banks of 3,346), which are owned by communities, etc.
The bank industry, for strategic reason, owns shares in many companies. For instance, the bank industry owns about 34% of the shares of Mercedes Benz car company. While it does not own a majority stake in many of the 100 big businesses, its votes coupled with the votes of its subsidiaries represent about 82% of the votes at meetings of the management board and supervisory board.
In addition, members of the supervisory board elect and dismiss members of the management board, an economic arrangement that increases the influence of stakeholders, and not shareholders.
The influence of stakeholders is not limited to state-owned banks and co-operative banks. This is because the supervisory board, the organ that makes important decisions, is made up of equaled numbers of representatives of employees and representatives of shareholders.
Using the Mercedes Benz car company as a test case, in which the bank industry owns 34% shares, stakeholders would have significant influence. Let assume that there are 100 members of the supervisory board to decide (1) to relocate Mercedes Benz car company outside of Germany and (2) to replace qualified workers with substandard employees (of course in order to increase profits). Half of the 100 supervisory board will be employees and 17 representatives of state/local government (i.e., 34% of the remaining 50 members) will represent the interest of stakeholders. This arrangement creates an opportunity for the government to make decisions in the interest of stakeholders and not only shareholders.
Instead of using Botswana’s economic policy, which allows a government to play a significant role, let us review the benefits that accrue to a minority ( passive) shareholder as depicted by the 2015 income statement and balance sheet of the Ghana National Petroleum Oil Company of Ghana. The country has about 10 to 15% stakes in the oil fields in Ghana. This interest has increased Ghanaian government revenue, similar to Botswana’s revenue increase. For instance, in addition to royalty income, it also receives a portion of the sale of petroleum products. With addition revenue, Ghana has invested in other profit-making associations and joint ventures (see page # 6 of the 2015 Audited Financial Statements). More so, it allocated funds for future projects and equity funds or sovereign funds.
Yes, government employees are corrupt, but private investors, with the desire to make profits, are usually the first to offer bribes to government bureaucrats, according to Transparency International. In some cases, if John Perkins, the author of a book called An Economic Hit Man, is right, bribe offerors do not accept a no for an answer.
Most importantly, Liberian elites and foreign profiteers who want to own Liberia’s wealth will continue to insist that prohibiting government’s role in the ownership and, or management of the nation’s wealth is the best way to generate adequate revenue.
If such a propaganda is correct, Germany will be experiencing trade deficit and budget deficit.