CAPITALISM'S ACHILLES HEEL Dirty Money and How to

246 CAPITALISM’S ACHILLES HEEL
Mexican citizens in their own names. Mexico is also the only developing
country that has a border with a major industrialized democratic state, and
it’s not surprising that the porosity of this long border lends itself to back and
forth movements of people and money. China has a good bit of illicit wealth
transferred abroad returning as FDI, perhaps as much as a third or a half of
its annual investment inflows.
A Swiss banker was honest when he said to me that there has been “no
evident leveling off” of his private bank holdings for citizens in poorer countries.
3 A central banker in Turkey confirmed that her country’s citizens “are
not liquidating their foreign principal and bringing it home.” 4 Of the trillions
of dollars transferred illegally from developing and transitional
economies into foreign coffers, by far the greater part of this is permanently
shifted into western economies, never to return to the countries of origin.
“DON’T TELL ANYONE”
Western countries prefer to deal with poverty in other lands through the instrument
of foreign aid. Unfortunately, over the years, ideas about what constitutes
effective assistance to developing and transitional economies have
had a very checkered history. Guiding principles have a shelf life of only a
decade or so and then are replaced.
In the late 1940s and through much of the 1950s, most developing countries
were viewed as materials exporters, either agricultural produce or rubber
or coffee or oil or other primary products. In the late 1950s and through the
1960s, as more than 50 nations gained their independence, import substitution
was thought to be the first order of industrialization, producing locally
what had previously been imported. In Nigeria alone I saw hundreds of plants
set up to manufacture pots and pans, textiles, garments, bicycles, motorcycles,
plastics, soft drinks, beer, mattresses, nails, pipes, tires, you name it. These infant
industries were protected behind tariff barriers on competing imported
products, and often such barriers allowed local pricing to be high, facilitating
over-invoiced raw materials and component parts coming in and illicit transfers
going out. At the same time, the World Bank focused on infrastructure
projects—roads, dams, irrigation systems—as its major contribution toward
helping countries achieve “takeoff,” consistent with the five stages of economic
development offered by W.W. Rostow in 1960. 5