Data Centre Investments Bad Deals

By Jomo Kwame Sundaram and K Kuhaneetha Bai

KUALA LUMPUR, Malaysia, Oct 28 2025 (IPS) - Opposition to data centres (DCs) has been rapidly spreading internationally due to their fast-growing resource demands. DCs have been proliferating quickly, driven by the popularity of artificial intelligence (AI).

Who are data centres for?

Already, the AI boom has overwhelmed other ‘cloud’ uses and drives the rapid growth of DCs, imposing fast-expanding resource demands. This has triggered a bipartisan public backlash in the US due to higher energy, water, and land use, as well as rising prices.

In October 2024, McKinsey projected that global energy demand by DCs would rise between 19% and 22% annually through 2030, reaching an annual demand between 171 and 219 gigawatts.

This greatly exceeds the “current demand of 60 GW”. “To avoid a [supply] deficit, at least twice the [DC] capacity built since 2000 would have to be built in less than a quarter of the time”!

As tech companies are not paying for the additional energy generation capacity, consumers and host governments are, whether they benefit from AI or not.

As DCs increasingly faced growing pushback in the North, developers have turned to developing countries, outsourcing problems to poorer nations with limited resources.

Understanding these energy- and water-guzzling facilities is necessary to better protect economies, societies, communities, and their environments.

Energy needs

With growing corporate and consumer demand for AI, DC growth will continue, and even occasionally accelerate.

Increased AI usage will significantly increase energy and water consumption, accelerating planetary heating both directly and indirectly.

As demand for AI and DCs increases, supporting computers will require significantly more electricity. This will generate heat, needing the use of water and energy for cooling. Much energy used by DCs, from 38% to 50%, is for cooling.

Electricity generation, whether from fossil fuels or nuclear fission, requires more cooling than renewable energy sources such as photovoltaic solar panels or wind turbines.

A small-scale DC with 500 to 2,000 servers consumes one to five megawatts (MW). For tech giants, a ‘hyperscale’ DC, hosting tens of thousands of servers, consumes 20 to over 100MW, like a small city.

Data centres not cool

As the popular focus is on DCs’ enormous energy requirements, their massive water needs to cool equipment tend to be ignored, understated and overlooked.

Locating new DCs in developing countries will further heat local microclimates and the planetary atmosphere. Worse still, heat is more environmentally threatening in the tropics, where ambient temperatures are higher.

Establishing more DCs will inevitably crowd out existing and other possible uses of freshwater supplies, besides reducing local groundwater aquifers.

Unsurprisingly, DC investors rarely warn host governments about the amount of locally supplied energy and water required.

DCs require much freshwater to cool servers and routers. In 2023, Google alone used almost 23 billion litres to cool DCs. In cooling systems using evaporation, cold water is used to absorb severe heat, releasing steam into the atmosphere.

Closed-loop cooling systems absorb heat using piped-in water, while air-cooled chillers cool down hot water. Cooled water recirculated for cooling requires less water but more energy to chill hot water.

Investors expect subsidies

Like other prospective investors, DCs have relocated to areas where host governments have been more generous and less demanding.

Led by US President Trump’s powerful ‘tech bros’, many foreign investors have profited from subsidised energy, cheap land and water, and other special incentives.

Prospective host governments compete to offer tax and other incentives, such as subsidised energy and water, to attract foreign direct investment in DCs.

The US pressured Malaysia and Thailand to stop Chinese firms from using them as an “export-control backdoor” for its AI chips. Washington alleges that DCs outside China buy chips to train its AI for military purposes. So far, only Malaysia has complied.

This limits Chinese firms’ access to such chips. Washington claims that Chinese substitutes for US-made chips are inferior and seeks to protect US technology from China.

High-tech DC jobs?

Data centres are emerging everywhere, but not many jobs will be created. Advocates claim DCs will provide high-tech jobs.

DCs are largely self-operating, requiring minimal human intervention, except for maintenance, which they determine independently. Thus, job creation is minimised.

Construction and installation work will be temporary, with most managerial functions being performed remotely from headquarters. A Georgetown University report estimates only 27% of DC jobs are ‘technical’.

While the DC discourse mainly focuses on foreign investments, there is little discussion on growing national desires for data sovereignty.

Acceding to so many foreign requests will inevitably block national capacity ambitions to develop end-to-end DC capabilities and not just host them.

Thus far, there is limited interest in the ‘afterlife’ of DCs, such as what happens after they have outlived their purpose, or the disposal of waste materials.

Higher energy and water costs, subsidies, tax incentives and other problems caused by DCs are hardly offset by their modest employment and other benefits.

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Available online at: Data Centre Investments Bad Deals

Beware Independent Central Banks

By Jomo Kwame Sundaram

JOHANNESBURG, South Africa, Sep 23 2025 (IPS) - US President Trump’s snide barbs against his appointee, US Federal Reserve Bank Chairman Jerome Powell, have revived support for central bank independence – long abused by powerful finance interests against growth and equity.

Independent central banks are supposed to improve the quality, equity, and growth impact of monetary policy. Instead, they have primarily served powerful financial interests, with contractionary and regressive effects leading to slower, unequal growth.

Independent of whom?

Central banks were established to determine monetary policy to shape financial conditions to achieve national economic objectives.

In recent decades, the new conventional policy wisdom has been that independent central banks should set monetary policy. Thus, they have been influenced by powerful financial interests, typically foreign, in smaller, open developing countries.

In the last half-century, many governments have changed laws under the influence of international finance to legislate central bank independence from governments of the day, especially the executive and legislative branches.

Meanwhile, most central banks have come to equate financial stability with price stability as ‘inflation targeting’ became the leading policy fetish.

When inflation rises, central banks raise interest rates, which reduces economic activity. However, some central banks of open economies, especially those pegging to major international currencies, target the exchange rate.

Thus, reducing inflation by conventional means worsens contractionary pressures. Many governments now face the threat of ‘stagflation’, i.e., recession with inflation. Central banks recognise this trade-off regarding how much growth has to decline for inflation to fall.

With interest rate management as their primary policy tool, central banks may raise interest rates in anticipation of inflation, despite its adverse consequences for growth, income and employment.

Such contractionary effects have reduced wages and jobs worldwide. Only a few, mainly large developed economies, have had other priorities, such as growth or employment.

Ironically, the end of the Bretton Woods fixed exchange rates regime and the counter-revolution against Keynesian economics from the late 1970s ensured the irrelevance of Milton Friedman’s monetarist emphasis on central banks’ money supply targeting.

Worsening inequity

Central banks worldwide respond to and anticipate inflation by raising interest rates to curb inflation.

‘Inflation targeting’ causes significant collateral damage, typically reducing growth, income and employment. Poor households’ incomes are likelier to fall, especially with labour-displacing technological change, such as mechanisation, automation, and artificial intelligence (AI) applications.

As unemployment increases, poor workers are more likely to lose jobs, especially hurting poorer families. Banks have typically profited handsomely from such situations, although most people are worse off.

With lending rates rising, banks get even more interest as borrowing rates lag, not increasing as much. Max Lawson cites an IMF study finding that the adverse effects of higher interest rates are “not counterbalanced by the positive effects of lower interest rates.”

The US Fed strongly influences central banks worldwide. Higher Fed interest rates from 2023, in response to minor inflationary pressures, have hurt developing countries, especially the poorest.

As most Global South companies and governments have incurred dollar-denominated debt, countries’ central banks raised interest rates to deter capital outflows.

Quantitative easing

‘Quantitative easing’ (QE) refers to central bank interventions buying financial assets. Such interventions were sought as it is difficult for central banks to cut interest rates below zero to revive economies. QE seemed to fit the bill.

Commercial banks typically get more for their deposits with the central bank when it raises interest rates. Thus, they receive considerable additional windfall interest payments from the central bank risk-free.

QE programmes seek to raise asset prices. Central banks buy assets such as government debt, inducing private investors to acquire riskier assets. US government debt is still the most important financial asset in the international monetary system.

Thus, QE tries to induce growth, presuming earlier contractionary policies will continue to curb or ‘moderate’ inflation.

This has even been justified as prudent, as inflation rates were below target despite interest rates near zero.

Major Western central banks adopted QE following the 2008-09 global financial crisis. Many governments spent even more in response to the COVID-19 pandemic from 2020.

Such efforts sought to counter the downward spiral of falling financial asset prices. The US Fed’s QE intervention involved ‘portfolio rebalancing’. It bought over $600 billion in US Treasury bonds and almost $300 billion in mortgage-backed securities.

Wealth is concentrated in relatively few hands in most societies. Jordi Bosch showed the top ten per cent holding 11 times more wealth than the bottom half in the euro zone, while the bottom fifth had more debt than assets.

QE interventions increase financial asset prices, enriching owners, especially the rich, who have more assets. As prices rise, their worth generally increases. Hence, such central bank interventions further enrich the already wealthy.

As the world struggles to cope with challenges posed by the current conjuncture, we must not jump out of the frying pan back into the fire kindled by central bank independence.

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Available online at: Beware Independent Central Banks

North Worsens Tropical Catastrophe

By Jomo Kwame Sundaram

KUALA LUMPUR, Malaysia, Sep 9 2025 (IPS) - Greenhouse gas (GHG) emissions have risen over the last two centuries, with current and accumulated emissions per capita from rich nations greatly exceeding those of the Global South.

Tropical vulnerability

The last six millennia have seen much higher ‘carrying capacities’, soil fertility, population densities, and urbanisation in the tropics than in the temperate zone.

Most of the world’s population lives in tropical and subtropical areas in developing nations, now increasingly threatened by planetary heating.

Different environments, geographies, ecologies and means affect vulnerability to planetary heating. Climate change’s effects vary considerably, especially between tropical and temperate regions.

Extreme weather events – cyclones, hurricanes, or typhoons – are generally much more severe in the tropics, which are also much more vulnerable to planetary heating.

Although they have emitted relatively less GHGs per capita, tropical developing countries must now adapt much more to planetary heating and its consequences.

Many rural livelihoods have become increasingly unviable, forcing ‘climate refugees’ to move away. Increasing numbers in the countryside have little choice but to leave.

Worse, economic and technological changes of recent decades have limited job creation in many developing countries, causing employment to fall further behind labour force growth.

Unequal development has also worsened climate injustice. Adaptation efforts are far more urgent in the tropics as planetary heating has damaged these regions much more.

Technological solutions?

While science may offer solutions, innovation has become increasingly commercialised for profit. Previously, developing countries could negotiate technology transfer agreements, but this option is becoming less available.

Strengthened intellectual property rights (IPRs) limit technology transfer, innovation, and development. The World Trade Organization (WTO) greatly increased the scope of IPRs in 1995 with its new Trade-Related Intellectual Property Rights (TRIPS) provisions.

Thus, access to technology depends increasingly on ability to pay and getting government permission, slowing climate action in the Global South. Financial constraints doubly handicap the worst off.

Despite rapidly mounting deaths due to the unprecedented COVID-19 pandemic, European governments refused to honour the West’s public health exception (PHE) concession in 2001 to restart WTO ministerial talks after the 1999 Seattle debacle.

Instead of implementing the TRIPS PHE as the pandemic quickly spread, Europeans dragged out negotiations until a poor compromise was reached years after the pandemic had been officially declared and millions had died worldwide.

With the second Trump administration withdrawing again from the World Health Organization (WHO) and cutting research funding, tropical threats will continue to dominate the WHO list of neglected diseases.

Climate finance inadequate

Citing the 2008 global financial crisis (GFC), rich nations claimed they could only afford to contribute a hundred billion dollars annually to climate finance for developing countries in line with the sustainable development principle of ‘common but differentiated responsibility’.

This hundred-billion-dollar promise was made before the 2009 Copenhagen Conference of the Parties (COP) to secure support for a significant new climate agreement after the US Senate rejected the Kyoto Protocol before the end of the 20th century.

Rich nations promised to raise their concessional climate finance contributions from 2020 after recovery from the recession following the GFC. However, official development assistance has declined while military spending pledges have risen sharply.

The rich OECD nations now claim that the hundred-billion-dollar climate finance promise has been met with some new ‘creative accounting’, including Italian government funding support for a commercial gelateria chain abroad!

In recent climate finance talks, Western governments increasingly insist that only mitigation funding should qualify as climate finance, claiming adaptation efforts do not slow planetary heating.

Meanwhile, reparations funds for ‘losses and damages’ remain embarrassingly low. Worse, in recent years, much of the West has abandoned specific promises to slow planetary heating.

Despite being among the greatest GHG emitters per capita, the USA has made the least progress. The two Trump administrations’ aggressive reversals of modest earlier US commitments have further reduced the negligible progress so far.

In late 2021, the Glasgow climate COP pledged to end coal burning for energy. But less than half a year later, the West abandoned this promise to block energy imports from Russia after it invaded Ukraine.

Concessional to commercial finance

Responding to developing countries’ demands for more financial resources on concessional terms to achieve the Sustainable Development Goals (SDGs) and address the climate crisis, World Bank president Jim Kim promoted the ‘from billions to trillions’ financing slogan.

The catchphrase was used to urge developing countries to take much more commercial loans as access to concessional finance declined and borrowing terms tightened.

With lower interest rates in the West due to unconventional monetary policies following the 2008 GFC, many developing nations increased borrowing until interest rates were sharply raised from early 2022.

Funds leaving developing countries in great haste precipitated widespread debt distress, especially in many poorer developing countries. Thus, purported market financial solutions compounded rather than mitigated the climate crisis.

Meanwhile, growing geopolitical hostilities, leading to what some consider a new Cold War, are accelerating planetary heating and further threatening tropical ecologies, rural livelihoods, and well-being.

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Available online at: North Worsens Tropical Catastrophe