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Wealth extraction from the poorest is the rule, not the exception
Wealth extraction from the poorest is the rule, not the exception, according to an excellent new report from human rights education organisation 80:20 Educating and Acting for a Better World.
Catch Them If You Can was launched in Dublin earlier this week and reports on the scale of transfers from poor to rich which, according to the report's authors Tony Daly and Colm Regan, is "both staggering and utterly indefensible". Their research suggests that the net transfer of resources from developing countries to developed countries including Ireland adds up to a loss of €1.1 trillion over a three year period. (They analyse the first three years of the globally agreed Sustainable Development Goals.) This is more than 13 times the entire annual budget of the Irish government.
Among the key points highlighted:
- For every €1 transferred to developing countries in overseas aid, €5 is transferred out. (The authors estimate that a total of $146 billion in overseas aid flows to poor countries each years, with total 'legal' financial outflows amounting to $770 billion).
- For context, the annual financing gap required for all 59 of the world’s lowest-income developing countries (LIDCs) to achieve the Sustainable Development Goals includes $259 billion for education, $105 billion for social protection, and $225 billion for heatlh. (this calculation follows increases in domestic budget revenues, overseas aid and estimated philanthropy to 2030).
- In 2015 alone, the countries of Africa were net creditors to the rest of the world to the tune of $41.3 billion. Much more wealth was leaving the world’s poorest continent ($203 billion) than entered it ($162 billion).
Half of all of funds invested in developing countries by large corporations are now being routed (‘legally’) from or through tax havens. Hiding assets in tax havens may cost developing countries between $120 and $160 billion a year. About a third of these flows are being routed through tax havens under the jurisdiction of G8 countries (Canada, France, Germany, Italy, Japan, Russia, UK, and the USA. The European Union has observer status).
The authors estimate that if business-as-usual is maintained, there will be a net loss to the poorest of the world of at least €5.5 trillion by 2030. This of course translates into fewer hospitals, doctors, teachers, roads and water and sanitation services, slowing or even reversing progress in tackling world hunger and eradicating poverty. It also means that finances and the opportunity to use them to tackle some of the poor world’s most pressing problems is ‘lost’ in the jigsaw puzzle that is the international financial system, leading to reduced public and private investment and expenditure in vital services and projects for many of the world’s poorest countries and people.
It also means fewer jobs, and promotes and supports corruption, criminality, money laundering, tax evasion and the diverting of public ‘common-wealth’ to private pockets.
It is damaging to democracy, public transparency and the rule of law, and flies in the face of international programmes such as the Sustainable Development Goals (SDGs).
The report also highlights the need to address illicit activities such as fighting illicit financial flows, the growing use and promotion of tax havens, reforming international investment agreements and addressing the challenges of external debt burdens as challenges that cannot be ignored, particularly as inequalities deepen within and between countries under the Covid-19 pandemic.