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The President of the World Bank David Malpass has criticized Microsoft’s agreement to purchase Activision Blizzard for $69 billion, saying the money could have been better invested in struggling economies in poorer countries.
“You have to wonder: ‘Wait a minute, is this the best allocation of capital?'” Malpass said of the Microsoft deal. “This goes to the bond market. You know, a huge amount of (capital) flows are going to the bond market.”
Malpass was not criticizing Microsoft directly, but rather the easy access to money the company has when the same loans are not available to poorer countries to fuel their development.
He said he was struck by the scale of Microsoft’s acquisition of Activision Blizzard which at $69 billion dwarfed the $23.5 billion in cash contributions agreed in December by wealthier donor countries to the International Development Association, the World Bank’s fund for the poorest countries — about $8 billion annually over three years, he said.
“That 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 — building more and more on top of already heavily built infrastructure and real estate, for example,” Malpass said.
Malpass is asking rich countries to rein in the bond market to free up lending capital for other reasons.
While Malpass may have a point about the market being set up to help rich companies get even richer, in this particular case Microsoft’s deal was an all-cash purchase that would consume about 53% of their cash hoard, meaning monetary policy did not really have any impact on the deal.
While Microsoft’s purchase of Activision Blizzard may be the topic du jour, the World Bank may have to find another case that better illustrates the issue.