Banana republic? | By Rashid A Mughal

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Banana republic?

IN political science, the term banana republic describes a politically unstable country with an economy dependent upon the export of natural resources.

A country with so-called “hi-jacked and controlled Democracy” and a government which is corrupt to the core and cronies ruling with impunity.

A state where Rule of Law is totally absent and substituted by “might and rich is right”. In a nutshell, a country where Kleptocracy, thievery, plutocracy, favoritism, nepotism and corruption are rampant.

In 1904, the American author, O.Henry, coined the term “Banana Republic” to describe Honduras and neighboring countries under economic exploitation by U.S corporations.

Typically, a Banana republic has a society of extremely stratified social classes, usually a large impoverished working class and a ruling class plutocracy, composed of the business, political, and “deep state” actors/ elites.

The ruling class controls the primary sector of the economy by way of the exploitation of labor; thus, the term banana republic is a pejorative descriptor for a servile oligarchy that abets and supports kickbacks, the exploits large-scale plantation agriculture, especially banana cultivation, for their own good.

A banana republic is a country with an economy of state capitalism, whereby the country is operated as a private commercial enterprise for the exclusive profit of the ruling class.

Such exploitation is enabled by collusion between the state and favored economic monopolies, in which the profit, derived from the private exploitation of public lands, is private property, while the debts incurred thereby are the financial responsibility of the public treasury.

Such an imbalanced economy remains limited by the uneven economic development of town and country and usually reduces the national currency into devalued banknotes (paper money), rendering the country ineligible for international development credit.

Kleptocracy is a government whose corrupt leaders (kleptocrats) use political power to expropriate the wealth of the people and land they govern, typically by embezzling or misappropriating government funds at the expense of the wider population.

Thievocracy, literally is the rule by thieves and is a term used synonymously to kleptocracy. One feature of political-based socio-economic thievery is that there is often no public announcement explaining or apologizing for misappropriations, nor any legal charges or punishment levied against the offenders.

Kleptocracy is different from plutocracy (rule by the richest) and oligarchy (rule by a small elite).

In a kleptocracy, corrupt politicians enrich themselves secretly outside the rule of law, through kickbacks, bribes, and special favors, or they simply direct state funds to themselves and their associates.

Also, kleptocrats often export much of their profits to foreign countries, in anticipation of losing power.

Kleptocracies are generally associated with autocratic and nepotistic governments in which external oversight is impossible or does not exist.

This lack of oversight can be caused or exacerbated by the ability of the kleptocratic officials to control both the supply of public funds and the means of disbursal for those funds.

Kleptocratic rulers often treat their country’s treasury as a source of personal wealth, spending funds on luxury goods and extravagances as they deem fit.

Kleptocracy is most common in developing countries and collapsing nations whose economies are reliant on the trade of natural resources and/or limited exports.

Developing nations’ reliance on export incomes constitute a form of economic rent and are easier to siphon off without causing the income to decrease.

This leads to wealth accumulation for the elites and corruption may serve a beneficial purpose by generating more wealth for the state.

In a collapsing nation, reliance on imports from foreign countries becomes likely as the nation’s internal resources become exhausted, thereby contractually obligating themselves to trading partners.

According to some pundits, one reason governmental bodies subscribe to theft-prone policies is to lay the groundwork for the socialization of labor and property in an effort to permit thievocrats to make the populace “subservient to an institutionalized authority.

” Newspaper columnist Paul Greenberg, in writing against the idea of the United States sending large amounts of foreign aid to Poland in 1989, argued that Poland was emerging from “40 years of Communist Thievocracy that obliterated not only economic progress but also the idea of a modern economy.”

Contemporary studies have identified 21st century kleptocracy as a global financial system based on money laundering, which “depends on the services of the world’s largest banks and expert financial professionals”.

The International Monetary Fund has suggested it could be a consensus of estimates, that money laundering made up 2–5 percent of the global economy in 1998.

Kleptocrats engage in money laundering to obscure the corrupt origins of their wealth and safeguard it from domestic threats such as economic instability and predatory kleptocratic rivals.

They are then able to secure this wealth in assets ( usually Real Estate) and investments within more stable jurisdictions, where it can then be stored for personal use, returned to the country of origin to support the kleptocrat’s domestic activities, or deployed elsewhere to protect and project the regime’s interests overseas.

Since 2011, more than $1 trillion has left developing countries annually in illicit financial outflows.

A 2016 study found that $12 trillion had been siphoned out of the kleptocracies –developed and developing economies.

Western professional services providers are taken advantage of by kleptocratic rulers by exploiting legal and financial loopholes in the West to facilitate transnational money laundering.

The kleptocratic financial system typically comprises four steps according to one opinion. First, kleptocrats or those operating on their behalf create anonymous shell companies to conceal the origins and ownership of the funds.

Multiple interlocking networks of anonymous shell companies may be created and nominee directors appointed to further conceal the kleptocrat as the ultimate beneficial owner of the funds.

Second, kleptocrats violate Western laws when they illegally transfer funds into the Western financial system.

Third, financial transactions conducted by the kleptocrat in a Western country complete the integration of the funds.

Once a kleptocrat has purchased an asset this can then be resold, providing a defensible albeit illegal origin of the funds.

This is known as money laundering and is illegal throughout the Western world. Research has shown the purchase of luxury real estate to be a particularly favored method.

Fourth, according to a British tabloids, kleptocrats may use their illegally laundered funds to engage in reputation laundering, hiring public relations firms to present a positive public image and lawyers to suppress journalistic scrutiny of their political connections and origins of their wealth.

Many countries, presently, fit into the above description? I leave it to the readers, intellectuals, scholars and patriotic citizens to ponder over it seriously.

—The writer is former civil servant, consultant ILO and IOM.

 

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