The shocking naivety of the World Bank

The World Bank‘s record on alleviating poverty in Africa has been patchy at best. But its latest debacle takes the biscuit. Six years ago, the world’s largest development agency joined a consortium led by the oil giant Exxon Mobil to develop oilfields in southern Chad.

The World Bank naively insisted there was nothing dodgy about the deal: the Chadian government had promised to plough revenues from the oilfields into poverty-reduction schemes. The project would offer a model of how oil, gas and mining projects can help the poor. In reality, however, now that the first oilfields and the pipeline have been built, the notoriously corrupt Chadian government has reneged on its pledges and is spending the oil profits on “security” instead. Meanwhile, the influx of thousands of migrant workers to the project area has spread HIV and other diseases among local communities. Last July the G8 nations promised an additional $25bn in aid to Africa – to be administered by the World Bank. Let’s hope it spends that money more wisely.

Does it matter who owns UK Plc?

Britain is being sold off at a rate unprecedented in modern times and nobody seems to give a damn. Scarcely an eyebrow is raised at the potential loss of airports, banks, ports, gas pipelines and stock exchanges. To complain at all is to be cast as a protectionist. Yet if the current pace continues, within a generation, most British workers outside the public sector will be working for foreign companies. Conventional wisdom has it that this openness is a sign that Britain is more grown-up than other countries about foreign ownership, but that’s dangerous free-market hogwash.

When takeovers reach the current scale, it’s a sign of weakness, not strength. Our industrial and financial jewels are being auctioned to pay for a record trade deficit. Meanwhile, British staff, assets and brands are becoming the building blocks of somebody else’s dreams and ambitions. We’d do well to remember the perennial complaint of poor countries: that they have no say in their destinies because the businesses that matter are controlled by foreign multinationals. The pattern of sell-outs to European buyers, for instance, makes the euro the natural currency of a large portion of UK business – bringing British membership of the euro years closer. But its difficult to spurn the sums of money being offered by foreigners. And what would it mean in practice if we embraced protectionism? When open competition is removed, quality and efficiency are threatened. So too is economic vibrancy. Selling companies is part of the process of creative destruction, and the proceeds fund new growth elsewhere.

It wouldn’t be so bad if the process was a two-way street. But British companies have lost their bottle when it comes to foreign acquisitions. It’s a systemic failure: all the hand-wringing about race, gender, fat cats, corporate governance etc means that the sort of person who rises to the top is not an entrepreneur, but a glorified bureaucrat. Is it any wonder that British companies are so risk-averse? Investors are equally culpable when overseas companies vie to take over British business, they salivate at the cash that will come their way. Yet when Tesco or Vodafone so much as hint at foreign ambitions, their shares are punished. It’s time British companies made the case for being aggressors rather than just waiting to be the victims – and it’s time investors backed them.