World Bank President David Malpass criticized Microsoft’s $69 billion takeover of gaming developer Activision Blizzard as a questionable allocation of capital. This is when poor countries are struggling to restructure debts and fight poverty. Malpass said during a Peterson Institute for International Economics virtual event that more capital needed to flow into poor countries. But these flows have been disrupted by unusually easy monetary policies in developed countries.
He said that he was struck by the scale of Microsoft’s acquisition deal for “Call of Duty” maker Activision Blizzard. This dwarfed the $23.5 billion in cash contributions that was agreed in December by wealthier donor countries to the International Development Association. He added that the World Bank‘s fund for the poorest countries was about $8 billion annually over three years. Malpass said of the Microsoft deal that this goes to the bond market. A huge amount of capital flow is going to the bond market. A very small portion of the developing world has access to such bond financing. Meanwhile too much capital remains bottled up in advanced countries. That too, mainly in central bank reserve assets that are used to back long-term bond purchases.
Malpass also said that, it gets you into a situation where a huge amount of the capital is being allocated to already capital-intensive parts of the world. The advanced economies that are building more and more on top of already heavily built infrastructure and real estate. Meanwhile, a return to more normal global investment returns is needed to bring more financing capacity to small businesses in the developing world. He added that in order to address the refugee flow, that malnutrition that’s going on, and so on, there has to be more money and growth flowing into the developing countries.
