CBDS

Business in Development Studies

Critical Debates

Are shareholders the main beneficiaries of the global apparel industry?

By Felix Maile and Cornelia Staritz

Who captures most of the profits created in the global apparel industry? When discussing distributive issues in apparel global value chains, scholars, policy makers and activists tend to focus on distributive struggles between five groups of actors: Consumers, fashion brands and retailers, manufacturers, workers, and states. Much of the analysis concludes that the rise of global value chains since the 1990s has enabled fashion brands and retailers (also known as ‘lead firms’) to capture juicy profits, and consumers to benefit from low-cost yet fashionable apparel products. By comparison, manufactures operate with razor thin margins and workers are exposed to harsh working conditions and low wages. States in turn earn limited taxes, given the investment and sourcing attraction policies that are common in special economic zones through which many supplier countries are integrated in the apparel industry. Yet, this analysis factors out one group of actors that is central in distributive matters: The shareholders that own the fashion brands and retailers and that have the claim on the profits that these lead firms generate. In this blog, we question the dominant perception of stock markets serving as the major ‘source of finance’ for apparel corporations to run their operations. Analyzing patterns of value creation and capture as well as corporate financing in the past 30 years, we come to a different conclusion: Stock markets barely contribute to apparel lead firms’ financing. Instead, apparel lead firms have funded stock markets, based on the profits that they generated vis-à-vis manufacturers and workers in their value chains.

In order to understand the distribution between shareholders and actors in global value chains, we draw on the conceptual and methodological toolbox of the corporate financialization literature. This strand of work emerged in the early 2000s, seeking to make sense of a shift in corporate strategy and management practice towards ‘shareholder value’ that had been underway since the 1980s: Financialization scholars have analyzed the balance sheets and income statements of major corporations in order to trace their sources of funding and understand how profits are created and allocated.

The seminal financialization literature of the early 2000s concluded that large firms had shifted their strategy from ‘retain and invest’ to ‘downsize and distribute’. What they meant was that formerly vertically-integrated firms shifted away from reinvesting profits in ‘productive’ means such as machinery, their workforce, or research and development. Instead, they outsourced less profitable parts of the value chain, often to firms based in lower-cost countries, and disbursed their profits to shareholders, either via dividend packages or so called ‘share buybacks’, in which companies repurchase their shares to boost their stock price. Financialization and globalization are therefore closely interrelated and reinforcing processes in the global economy.  

More recent contributions challenged this seminal literature by highlighting the dramatic acceleration of corporate financialization since the turn of the millennium, which changed its characteristics. Central to this were two processes: Globalization expanded on a different scale, with China’s WTO entry in 2001 providing low-cost global value chains centered around China as a backbone of accelerated outsourcing and offshoring, and shifts in financial markets created a low-interest rate environment. This changed the profit capacity of transnational corporations: Rather than ‘downsizing’, transnational corporations have merged, and monopolized global consumer markets both in high income and in emerging economies. Because their dominant position required fewer investments, and low interest rates during this period reduced financing costs, transnational corporations loaded incurring super profits on their shareholders.

This is precisely what happened in the global apparel industry: Since the early 2000s, the ten largest apparel lead firms by annual turnover have quadrupled their revenues, by expanding in established end markets such as the US, Europe, and Japan, but especially in China. The liberalization of apparel trade as well as China’s entry into the WTO in 2001, which soon thereafter accounted for 40% of global apparel exports, put apparel lead firms in a structurally advantageous bargaining position vis-à-vis manufacturers, workers, and supplier countries. As Figure 1 (blue line) depicts, the hyper-competition in the supply base allowed these ten firms to boost profits realized on goods sourced (‘gross margin’) dramatically, from 33% in the mid-1990s to more than 50% by 2010. At the same time, net profits during the same period (orange line) barely exceeded 8%, because apparel lead firms made hefty expenses on their distribution network as well as in brand building and marketing, which is the essential competitive advantage for apparel corporations. However, an ever-larger chunk of these net profits was disbursed to shareholders: Expenses for dividends and share buybacks (‘shareholder payouts’, green line) rose dramatically, from 1,6 % of annual revenue in 2000 to 7,8% in 2022.

Figure 1: Gross profit margins (%), net profit margins (%) and shareholder payouts (%, on annual revenue), top 10 apparel lead firms
Note: The top ten apparel lead firms were selected based on their 2022 revenue. These firms include Nike, Inditex, Adidas, H&M, Fast Retailing, Gap, PVH, VF, Ralph Lauren, Levi’s. To control for global value chains dominated by apparel firms, we excluded high revenue brands that are part of multi-segment luxury conglomerates (LVMH, Kering) and wholesale retailers (Walmart, Target)

While apparel lead firms have distributed the bulk of their profits to shareholders, it is striking that they have barely used stock markets as a source of funding. Figure 2 shows that the annual proceeds lead firms generated from stock issuance since the early 1990s have been fairly meager (blue line), accounting for 0,7% when compared to annual revenues. Most apparel corporations had their public offering on stock markets during the 1970s to 1990s, through which they raised a few hundred million US dollars at the time. Afterwards, new share issuance was rather the exception than the norm. Once these firms turned global, the payouts to shareholders began to amount to several billion US dollars per year. By comparison, the central source of finance for apparel lead firms in the past 30 years have been bonds markets. Proceeds from corporate bonds accounted for 4,7% of revenue on average during that period (orange line), thus exceeding the funds secured from stock issuance by 7 times.

Figure 2: Proceeds generated from share issuance and bond issuance (%, compared to annual revenue)

The distributive relationship between apparel lead firms and their shareholders thus turned into a one-way street. Since the mid-1990s, net financial flows from lead firms to stock markets have been negative for all financial years. By 2022, this net negative finance flow accounted for on average 7,8%, when measured against lead firms’ annual revenues.

Figure 3: Net financial flows between apparel lead firms and stock market (%, compared to annual revenue)
Note: Net financial flows are calculated by comparing annual stock issuance with annual shareholder payouts, benchmarked against firms’ revenues.

These results raise broader questions about the role of stock markets in global capitalism.   Stock markets perform an array of functions: They are an institution of corporate control. Corporations also make use of their own shares as a currency to pay for acquisitions of other firms, and to remunerate their top executives. Stock markets further serve as an institution for ‘firm creation’, because the outlook for an initial public offering acts as a magnet of funding for early stage firms. Finally, as the market turmoil in recent weeks has shown, stock markets have become the central global institution of wealth management, on which institutional investors such as insurances, pension, sovereign wealth funds, hedge funds, but also wealthy individuals and retail investors seek to optimize their investment portfolios. But counterintuitively, stock markets do not function as a significant source of finance for firms. Instead, major transnational corporations, with fashion brands and retailers as a prime example, channel the profits created in global value chains to their shareholders.

Understanding global distributional inequality thus requires linking value creation in globalized production with value capture in global financial markets. The starting point for this is to acknowledge and understand the role of financial markets and actors as one of the main beneficiaries of globalized production, how they impact the business and sourcing strategies of (lead) firms, and ultimately shape the value capture of governments, manufacturers and workers integrated into apparel global value chains.  

Felix Maile is a doctoral researcher in development economics at the University of Vienna.

Cornelia Staritz is Associate Professor in Development Economics at the Department of Development Studies at the University of Vienna.

This blog post has first been published here.

Frelimo and the fate of Mozambique: Part 2

By Pedro Alarcón

The general election of 9 October 2024 in Mozambique triggered a political crisis in which hundreds of Mozambicans have been killed, injured or arrested. This blog post seeks to explain its origins and implications.

This is the second part in a two-part blog post. See the first part on Frelimo and the fate of Mozambique here.  

In early December 2024, during the protests triggered by the 9 October election, a statue of Alberto Chipande was brought down in Pemba, Cabo Delgado’s capital. It is hard to imagine that the crowd was not targeting the image of Frelimo’s strongman and businessman, once a guerrilla combatant, and fifty years later one of the richest people in the country with links to companies that hold interest in the hydrocarbon sector. Joseph Hanlon, who conducted research on Mozambique for around 40 years, argues that young people believed that the 9 October election was an opportunity for change, yet they saw this opportunity cheated. With the lowest life expectancy index of the continent, three out of four Mozambicans are younger than 30 years old. They lived their whole life under Frelimo rule. They are well aware that prestige inside the party opens the gates to success in private business and conspicuous wealth. 

During half a century, Renamo was the challenger, first as a contra guerrilla and then as a political party, exerting formal opposition from the National Parliament. This particular configuration is sometimes referred to as the rule of ‘Frenamo’ to underscore that Renamo was Frelimo’s unpleasant partner in steering national politics (with ups and downs depending on political leverage) and in controlling state businesses (sometimes making their claims with weapons). After all, Afonso Dhlakama, Renamo’s leader, was a member of the Council of State during Guebuza’s presidency. Dhlakama died in 2018 at the age of 65. The government decreed a state funeral with official honors. 

To stay in power, Frelimo co-opted the domestic opposition using the state apparatus as a toolbox. Amidst any threat, the Frelimo elite closed ranks and responded as a block. Frelimo governments secured international aid by embracing the changing socioeconomic and political agendas of multilateral aid institutions and Western governments’ aid agencies, or making these aid agencies believe that they embraced them. A few private fortunes thrived during the half-century, but the living conditions in the country barely improved for the majority. Three-quarters of the 35 million Mozambicans live in poverty, and the figure is growing. Maintaining control over society has been an increasing challenge for Frelimo as elections proved an illusion, and wealth generated by natural resource extractivism serves to keep clientelistic and patronage networks rather than to benefit the majority. Frelimo increasingly bets on state authoritarianism and outright repression.

The 2019 general election was the last election in which Renamo was the second force in parliament after Frelimo. On 23 December 2024, the Constitutional Court ratified Daniel Chapo as the winner of the 9 October presidential election and Frelimo with a majority of seats in Parliament.  Podemos had the second largest amount of seats, with 43 seats out of 250. For the first time since 1994, Renamo was not second. It goes without saying that Podemos’ unexpected electoral success was linked to the support of Venancio Mondlane as a presidential candidate. After the announcement of the Constitutional Court, protests resumed countrywide; between December 23 and January 9, 165 people were killed, 36 more than during the previous ten weeks. 

Venancio Mondlane returned to Maputo from his self-exi le on 10 January. At least three more people were killed while trying to reach airport facilities to take part of a massive reception. The morning of Mondlane’s arrival, the leaders of the political parties met President Nyusi in his office. Hours before, Podemos announced that the party was occupying their seats in parliament, tacitly accepting the results of the election. A setback for Mondlane, he officially broke with Podemos on February 4th in a press release.

Daniel Chapo was sworn in on 15 January amidst street protests in Maputo. Five days before, on the other side of the Atlantic, Nicolás Maduro assumed for the third time the presidency of Venezuela. Maduro’s election was also contested, locally and internationally. Nevertheless, his assumption meant a turning point to five months of fraud allegations, local protests, and demonstrations across all Latin American main cities with large communities of Venezuelan migrants. International pressure also faded. After all, Venezuela is an oil-rich country, and the global North still yearns for fossil fuels despite climate commitments and the rhetoric of a transition towards cleaner energy sources. With the benefit of hindsight, this could also apply to Mozambique. While Maputo awaits with high hopes the resumption of natural gas extraction in Cabo Delgado, President Chapo announces austerity measures to cope with the crisis. Attacks by the Al-Shabab also continue; by mid-2024, more than five thousand people had been killed and more than half-million have been displaced in Cabo Delgado’s third war.

Mass mobilization accompanies Venancio Mondlane in his tour throughout the country. In an interview for a British newspaper, Mondlane declared to have been offered a minister position in the new government, and that he was considering it. Daniel Chapo never denied it. Perhaps things never change: Frelimo’s old strategy of coopting the opposition, as the opposition mobilizes the people to put pressure on the government. 

Indeed, nothing has changed for the majority of Mozambican citizens. Mondlane catalyzed the opposition against Frelimo. In many ways, he unified a fragmented opposition that was found outside the formal political parties. Nevertheless, o povo (the people) was on the verge of a backlash after fifty years of Frelimo’s rule. But it seems it is not enough to alter the Mozambican political landscape. Alternatives must be offered. Alternatives to a democratic politics that maintain clientelist networks and co-opt oppositional forces. Alternatives to natural resource extractivism and rentier state dynamics that benefit few private pockets. Without addressing structural problems, the country will reproduce its history of suffering or, in words of Yussuf Adam, Mozambique might escape the crocodile’s teeth only to fall into the leopard’s mouth (“escapar aos dentes do crocodilo e cair na boca do leopardo”). 

Pedro Alarcón is a Global Forum Democracy and Development (GFDD) research fellow at the Nelson Mandela School of Public Governance of the University of Cape Town. Alarcón has held guest professor positions and fellowships in Europe, Latin America and South Africa. His research lies at the crossroads of climate change, energy, and society. Regions/countries of interest: Southern Africa, Andean countries, the Philippines. https://globalforum.ceu.edu/pedro-alarcon/

Frelimo and the fate of Mozambique

By Pedro Alarcón

The general election of 9 October 2024 in Mozambique triggered a political crisis in which hundreds of Mozambicans have been killed, injured or arrested. This blog post seeks to explain its origins and implications.

A taxi picks me up at the airport. It has a printed sheet stuck to the windshield: a photo of Venancio Mondlane with the caption povo no poder (people in power). I announce the destination of my trip: 25th September Avenue, downtown Maputo. ‘We’ll get there’, the taxi driver tells me confidently- ‘The protests, you know?’, he comments. I pretend to be unaware of the situation. He explains: ‘Venancio wants to be president’. ‘Will he be?’, I ask. ‘No’, he answers. ‘Frelimo is strong’. It is past four in the afternoon. Along Karl Marx Avenue we hear vuvuzelas. On 25th September Avenue cars with slogans like povo no poder, salve Moçambique (save Mozambique), or simply basta! honk their horns. Three blocks away policemen clear a barricade, smells of tear gas. Kids sell vuvuzelas.

It is mid-December 2024; ten weeks have passed since the 9 October general election. The National Electoral Commission declared Frelimo’s presidential candidate, Daniel Chapo, the winner by a large majority. The Mozambique Liberation Front (Frelimo) has ruled the country since 1975, first as a single party and after 1994 winning all electoral processes. Since then, there has been a crescendo of allegations of fraud. The European Union Election Observation Mission denounced blatant irregularities in the last election. Venancio Mondlane, an independent candidate supported by the party Optimistic People for the Development of Mozambique (Podemos) alleged fraud and declared himself the victor. From abroad, he called for protests. Days after the election, Mondlane’s lawyer, who was preparing to challenge the official results, and a Podemos spokesman were assassinated. Protests mushroomed across the country, resulting in the deaths of at least 130 people by mid-December, and more than 345 people shot and 3,600 arrested. 

In trying to understand the crisis, I do not consider Mozambique as an isolated case. After all, 2024 was a watershed for the liberation movements that became ruling parties in the southern part of the African continent. In the May 2024 general election in South Africa, Nelson Mandela’s African National Congress lost the parliamentary majority for the first time since 1994. In October 2024, the Botswana Democratic Party lost control of the government for the first time since independence in 1966. In December 2024, Namibia’s SWAPO, which has been in power since independence in 1990, managed to retain the presidency despite the worst election result in its history. Will Mozambique be the exception? To shed some light on the question, I delve into the country’s contemporary political economy. 

Official history tells that the liberation war began on 25 September 1964, when Alberto Chipande fired the first shots of the Frelimo guerrilla. Ten years later, the guerrilla emerged victorious and became the government of the nascent People’s Republic of Mozambique in 1975. Alberto Chipande was appointed Minister of Defense under the presidency of Samora Machel. The challenges of the new government were enormous: to guide the Mozambican society towards the construction of a project of modernity and national unity from a colonial past of suffering and segregation. The single party became the central tool to strengthen the state institutions and consolidate the government in power. Modernity came by hand of a state that intervened directly in economy and society. To achieve national unity, the state also had to respond to society’s needs of self-determination and cultural integrity and guarantee human and political rights.

Land, banking, industry, and businesses of all sizes abandoned by retornado Portuguese were nationalized. While investments were made in public education, health and infrastructure, the homem novo (new man) became common parlance. Elísio Macamo argues that a basic principle of Mozambican politics has been the notion that “individual liberty is a function of a national political project, and not necessarily inherent to the individuals themselves” or their rights. Methods of re-education, collective execution and punishment were not unusual. Benedito Luís Machava argues that re-education and labor camps were considered by Frelimo leaders as essential to the construction of the morality of the homem novo.

During its Third Congress in 1977, Frelimo declared itself a Marxist-Leninist Party. The national anthem, ¡Viva, Viva Frelimo!, promised that the homeland would be the tomb of capitalism and exploitation. But roads are never straight. Mozambique became one of those places where the Cold War was not cold. Apartheid South Africa and Rhodesia promptly built an army to remove Frelimo from government: the Mozambican National Resistance (Renamo).

The Mozambican civil war lasted 16 years. David Robinson estimates that while the war killed about one hundred thousand people, another one million lost their lives because of war’s effects such as famine. Five million Mozambicans were forced to become refugees. Renamo destroyed schools, health posts, bridges, and electricity infrastructure to undermine Frelimo’s popular support. In 1982, Mozambique defaulted external debt. Bretton Woods institutions started to claim key arenas in social and economic planning. 

Samora Machel was killed in a plane crash in South Africa in 1986. Frelimo appointed Joaquim Chissano as his successor. The first structural adjustment program was drawn up when Machel was still alive. For Frelimo, neoliberal reform was a strategy to secure international aid. The recipe of the so-called Economic Rehabilitation Program did not differ much from the reforms prescribed to other countries defaulting on their external debt, notably Mexico, Brazil, Argentina, the Philippines. In addition to the elimination of controlled prices, devaluations and an aggressive privatization program, the Mozambican recipe had a special ingredient. To seal the exit from socialism, a class of local capitalists had to be created.

Reform opened the gates for the transference of state resources to private pockets. Whereas larger industries went to foreign companies, medium and small businesses were transferred to individual members of the Frelimo party elite. International cooperation encouraged corruption. Joseph Hanlon argues that already by 1988 donors funded loans to the unexperienced businessmen of the Frelimo party elite with no intention that the loans would be repaid. Other misappropriations of public funds followed through the recently privatized banking system. 

The 1990 Constitution was meant to settle the transition of the socialist state towards a market economy and from the single party system to a liberal democracy through multi-partyism and elections. With the falling of the Berlin Wall, the civil war ended with the Rome Peace Accords of 1992. Frelimo’s candidate and acting president Chissano won the 1994 election against Renamo’s leader Afonso Dhlakama. With the entering into force of the constitution, the country became the Republic of Mozambique. Marxist rhetoric was removed from state parlance. Street names in Maputo recall a remote socialist dream.

During Chissano’s period (1986-2005), development aid accounted for more than fifty percent of the state budget. The government was more accountable to donors than to society. In 1999, Chissano was reelected with a narrow margin against Dhlakama. Nevertheless, Renamo became the principal oppositional force in the Assembleia da República(National Parliament) with enough leverage to demand a limited flow of state resources to benefit its leading members. 

When Frelimo’s Armando Guebuza won the 2004 election against Renamo’s Dhlakama, Alberto Chipande was already a successful businessman with his enterprises receiving (and not repaying) loans funded by state resources. Joseph Hanlon and Theresa Smart recap that by 2005, a company linked to Chipande had repaid 82 percent of its loan, whereas a company linked to President Guebuza had actually repaid only one percent. Alberto Chipande was appointed member of the Council of State, a four member-body created by Guebuza himself to advise the president. According to José Jaime Macuane, Lars Buur and Celso Marcos Monjane, during Guebuza’s period (2005-2015), the available economic opportunities were distributed among inner circle members. 

The personal trajectory of Alberto Chipande illustrates the metamorphosis of Frelimo and the fate of Mozambique: a guerrilla combatant turned into a high-ranking government official and then into a business mogul with a say in national politics. Many analysts highlight the fact that Chipande’s support was key to the election of Filipe Nyusi as successor of Armando Guebuza within Frelimo, and also for his victory in the 2014 presidential election against Dhlakama. Chipande and Nyusi are native of the Northern province of Cabo Delgado, where Chipande holds interest in many investments, including the hydrocarbon sector. 

Frelimo turned from a mainly rural guerrilla into the single governing Marxist party during the civil war, to the democrats overseeing neoliberal reforms—with practically the same people in charge. Furthermore, the government was central to turn the country into the “donor darling” by strategically complying with the changing requisites of Bretton Woods institutions and Western aid donors. Using the aid machinery and the whole state apparatus to their benefit, Frelimo controls politics and national businesses. 

The massive discovery of natural resources during the second decade of the twenty-first century—coal in the central province of Tete and natural gas in Cabo Delgado—translated into a period of fast economic growth driven by foreign direct investment. For the Frelimo elite, relying on coal and gas extractivism meant the possibility of ceasing dependence on international aid. The prospects for increased revenues stimulated the expansion of public debt, including a two-billion-dollar deal secretly sealed by Guebuza for purchasing military and surveillance equipment. Following the ‘hidden debt’ scandal, Bretton Woods institutions suspended their support to the state budget. Natural gas revenues did not flow as expected, and the country sunk in deep economic recession. There is no sign of light at the end of the tunnel.

Crisis is the hallmark of the administration of Filipe Nyusi (2015-2025). Frelimo’s attempt to switch from international aid rents towards rents generated by natural resource extractivism failed. Joao Feijó and Aslak Orre recap that extractivism in Mozambique has been historically instigated by foreign investment but invariably carried out with local rentier elites. Emblematic for Mozambique is the fact that the state grants tax incentives and ensures public guarantees for private debt to attract foreign direct investment and make extractive projects financially viable for domestic capitalists. In words of Carlos Nuno Castel-Branco, the Mozambican state gives away strategic natural resources at low cost. 

Cabo Delgado is the textbook case of extractivism within Mozambique. The historically “cursed” region by its abundance in natural resources experiences a boom of extractivism for more than a decade. Deposits of natural gas were discovered in 2010 and graphite begun to be extracted by multinational companies in 2017. Graphite is used in batteries and solar panels; hence, its demand is expected to rise as the energy transition advances in the Global North.

High expectations of access to increased natural resource rents and “creeping authoritarianism” precipitated the resumption of the armed conflict with Renamo in 2013. A new peace accord was signed in 2019. By the time peace talks were under way, in 2017, a new war emerged in Cabo Delgado: the third war. Cabo Delgado was the main site of the liberation war. The Mueda Massacre (Northwest of Cabo Delgado), where the Portuguese fired on a crowd demonstrating for independence in 1960, was central to the establishment and consolidation of the Frelimo guerrilla. Cabo Delgado was also a battlefield of the civil war. The region witnessed a high percentage of the total casualties.

Violence made it to the international news when Al-Shabab (the youth) militias attacked the town of Palma in March 2021. Palma served as a base of operations for French TotalEnergies in the construction of a liquefied natural gas plant aimed at facilitating the transportation of Mozambican gas to Europe. The attack resulted in more than one thousand people killed including dozens of contractors. TotalEnergies halted the construction of the plant. Tacitly admitting that it could not provide protection for foreign investment, the Mozambican government turned for military help to the Southern African Mission in Mozambique of the Southern Africa Development Community and to Rwandan armed forces, as a result of an agreement with France and Rwanda.

In an effort to shed light on the origins and the persistence of the third war in Cabo Delgado, Liazzat Bonate, Paolo Israel and Carmeliza Rosario argue that international jihadism became linked with local grievances such as poverty and unemployment and perceived discrimination, exclusion and state violence linked to religious and ethnic identities. In trying to regain control of the territory, the Mozambican armed forces have committed human right violations. Attacks of Al-Shabab continue in Cabo Delgado. The return of TotalEnergies through the provision of a pacified territory seems like another empty promise at the end of Nyusi’s administration.

This historical perspective describes the structural conditions that frame the stage in which the current political crisis takes place and might or might not be solved. It underscores the configuration that regulates the relationship between state and society through state’s allocation of rent generated by natural resource extractivism. In general, rentier politics creates clientelist and patronage networks with sectors of society and co-opts oppositional forces, which might explain Frelimo’s electoral success. In particular, the Mozambican rentier state benefits local elites by transferring state resources to private pockets. 

Pedro Alarcón is a Global Forum Democracy and Development (GFDD) research fellow at the Nelson Mandela School of Public Governance of the University of Cape Town. Alarcón has held guest professor positions and fellowships in Europe, Latin America and South Africa. His research lies at the crossroads of climate change, energy, and society. Regions/countries of interest: Southern Africa, Andean countries, the Philippines
https://globalforum.ceu.edu/pedro-alarcon/

‘Bob Geldof Pay Your Ethiopian Workers’

By Lisa Ann Richey

This year’s anniversary remake of Band Aid’s ‘Do They Know It’s Christmas?’ was unveiled amid renewed discussion about the song’s portrayal of Africa.

For 40 years now, Ethiopians specifically, and Africans in general, have been doing the work of being worthy recipients for band aid. Now, they should be recognized for that work and rewarded as workers. As I have argued here, Africa has become a market for profiting from Whiteness. Thus, the reasonable response to fulfill all those generous Christmas-inspired longings, is to pay Africans for their work.

Like the ghost of Christmas past, the tedious melody of white saviourism/effective emergency fundraising (pick your lens) hit the playlist in December, and we returned to tired debates over whether disempowering stereotypes of suffering strangers are OK, if they result in the means to reduce their pain. Sir Bob Geldof summed up his defense of the jingle saying: “There are 600 million hungry people in the world – 300 million are in Africa. We wish it were other but it is not. We can help some of them. That’s what we will continue to do.”

Actually, Bob, there are other ways of understanding the problem of global hunger and of working towards its solution.  But your framing of the ‘problem,’ echoing prevalent understandings that African suffering results from a combination of ‘natural’ disasters and local malevolence and mismanagement, all of which are delinked from global production chains and capitalism’s victors, serves elite interests, not hungry people.

My argument is based on my commodifying compassion  collaborative research project that explains how producing the good feelings for helpers is a form of affective labor. Causes have been treated as commodities, and sold by celebrities like Geldof for decades. Simultaneously, scholars have critiqued the legacy of ‘band aid’: consumer humanitarianism, ‘brand aid’ and celebrity activism are examples of the corporate norms infiltrating humanitarianism and development.

Moral responsibility, the currency peddled by Geldof, is based on pity for the Ethiopians suffering from famine, not on demands for justice. While pity played a role in charity-based philanthropy historically, the marketability of the feelings of compassion—actually selling these feelings for profit, whether the proceeds go to a celebrity or other private business or to a non-governmental organization, is a recent trend in contemporary neoliberal capitalism. Today, when ‘band aid’ is again revived to try to reinvigorate the attention economy for aging superstars, Ethiopian spokespeople are working to educate Northern publics on the absurdity of these well-intentioned interventions that sent cake and gold to unwitting strangers at the cost of defining an entire nation as pitiful, suffering and lacking.

If we consider that work that produces something of value, understood as something that can be sold for a profit, should be paid. Following this argument, the money made from six iterations of Band Aid singles, including celebrity appearances, merch, donations to charities, and of course, the record itself, should be considered as profit. Geldof estimated that they had raised more than 200 million GBP and issued a statement confirming that ‘100% of all publishing revenues from the sale of the song over the past 35 years (and continuing) and amounting to tens of millions of pounds go and have gone directly to the Band Aid Trust for distribution to projects that aim to help the poor in several countries in Africa.’ In harsh retort to accusations on Twitter that Geldof and Midge Ure had themselves profited from Band Aid over the years, a media push defended the philanthropic model. As summed up on James O’Brien’s morning call-in talk show on LBC Britain’s first licensed commercial radio station, ‘To be perfectly clear neither Midge nor Bob have ever received a single penny in royalty revenues from the song or any activity whatsoever regarding Band Aid  including the Live Aid and Live8 concerts or the 4 separate versions of Do They Know Its Christmas?’

Yet, framing the problem as whether or not the celebrities directly profit is a red herring to distract the public from more deeply critical considerations of why claiming to help Africans can produce a profit to begin with. Why are recipients of Band Aid considered to be just that— passive takers of the goodwill of compassionate people in the places where Christmas is the chance to claim our moral worth? Because there are profits to be made from worthy helping. Global ‘helping’ initiatives like Band Aid should be held to the same standards as global corporations. Businesses must balance payments between their inputs and labor. Then after balancing inputs and outputs to reveal profit, they are required to distribute dividends with all of their shareholders. Ethiopians should be seen not as recipients of help but as agents, working as part the production cycle for feelings of beneficence. These sentiments, emotions and feelings are used to sell stuff.

Instead of worrying only about whether the profits are going to celebrity humanitarians themselves, we should instead recognize that the recipients of all the global do-gooding are providing their labor in the production of our good feelings. Thus, they should be paid for this work.

Note: This blog post first appeared on the LSE blog, which can be found here.
Photo credit: Wes Candela used with permission CC BY-NC-ND 4.0

Lisa Ann Richey, Professor of Globalization, Department of Management, Society and Communication, Copenhagen Business School

The macro-financial weakness of Europe’s policy on EV manufacturing

By Cornel Ban

Observers of the Chinese EV ascendancy are correct in highlighting how China’s industrial policy, rare earth abundance, and subsidies have left Europe lagging in the race to electrify the automobile industry. Yet, their analysis misses three crucial financial dimensions underpinning China’s success in cleantech innovation and EV leadership.

First, the People’s Bank of China (PBOC) has, for over a decade, implemented targeted financial programs offering lower interest rates for cleantech industries, encompassing the entire EV value chain. This is a stark contrast to the European Central Bank (ECB), which has been notably hesitant to deploy such tools. The ECB briefly flirted with green-targeted lending in 2022 but failed to sustain these measures, missing an opportunity to align monetary policy with Europe’s industrial and climate goals.

Second, China has taken to heart the classical liberal argument that market failures necessitate state intervention in public infrastructure provision. In the context of EVs, this meant prioritizing the construction of a proper nationwide charging network, a move Europe largely neglected. Despite possessing the financial capacity to blanket the continent with EV infrastructure, the EU left the task to market forces that failed to deliver this infrastructure at scale. Even Germany, the country most acutely affected by the automotive crisis, failed to mobilize the needed public investment. The result is a fragmented and underdeveloped charging infrastructure, with a few exceptions in small member states that lack significant car manufacturing sectors.

Finally, China’s state-owned banks, government funds, and venture capital ecosystems have been systematically incentivized to channel massive financing into the EV value chain. Europe’s state-backed financial institutions, by contrast, have largely been bystanders despite their significant resources. Rather than orchestrating a cohesive financing strategy to support electrification in automotive, Europe has appeared content to hope for market-led solutions—a strategy that now risks cementing its position as a technological and industrial laggard.

The implications are stark. As China consolidates its role as the world’s dominant manufacturer and financier of green technology, Europe seems resigned to retreat behind a wall of tariffs and comforting narratives of global standard-setting on decarbonization. But this strategy is ultimately self-defeating. Without bold financial intervention and industrial coordination, Europe risks deeper deindustrialization, forfeiting not only its competitiveness but also its capacity to lead the green transition on its own terms.

Cornel Ban is an Associate Professor in the Department of Organization at Copenhagen Business School

See Cornel Ban’s views on this topic mentioned in the following posts:

https://www.politico.eu/article/northvolt-bankruptcy-ceo-peter-carlsson-resign-eu-battery

https://www.politico.eu/article/tesla-trump-and-the-china-trade-tariff-clash