Economic Power of Rich Countries: Debt, Adjustment, and Inequality in Developing Nations, Sintesi del corso di Antropologia

Scarica Economic Power of Rich Countries: Debt, Adjustment, and Inequality in Developing Nations e più Sintesi del corso in PDF di Antropologia solo su Docsity! The divide Since 1960, the income gap between the North and South has roughly tripled in size More than 60% live on 5$ a day. In debilitating poverty. In the year 1500, there was no appreciable difference in incomes and living standards between Europe and the rest of the world. In some regions of the global South people were better off than in Europe. Their fortunes changed dramatically as Western powers roped the rest of the world into a single international economic system. Part One: The Divide 1. The development Delusion = ‘development’ started as PR gimmick, for Truman's inaugural speech as president in 1949. Context: = post wwil = European imperialism was collapsing = World = increasingly a collection of equal and independent nations. = Only problem: they were actually not equal. = the development narrative was soon picked up also in Western Europe. It offered a convenient alibi, explaining the gross inequality between them and the people they had ruled for so long. The Myth Begins to crumble There have been some impressive achievements. = drop in children dying from preventable causes 1990-2013, from 17 million to less than 8 million. = Likelihood of mothers dying during childbirth — declined by 47% same time. However: hunger and poverty = 2 billion go hungry today (800 million in more conservative measure) = In 2015, UN published report saying that poverty has been cut in half since 1990. This | misleading. = Almost all gains have happened in China. = Also, this relies on proportions instead of absolute numbers — the original metric by which the world's governments agreed to measure progress. If we count heads: it's exactly the same as in 1981: 1 billion. “If rich countries are rich, it's down to their own talent and hard work. If poor countries are poor, they have no one to blame but themselves. This approach encourages us to think with a kind of ‘methodological nationalism’ - to analyse the fate of each nation without ever looking beyond its borders.” Page 1 of 66 ...‘the United States had been violently intervening in Latin American countries since the 19th century in order to secure access to the continent's raw materials. Indeed, the US military was invading and occupying states like Honduras and Cuba even as late as the 1920s and 1930s - during Truman's own career - at the behest of American banana and sugar companies.” “European powers had been controlling vast regions of the South since as early as 1492. Indeed, Europe's Industrial Revolution was only possible because of the resources they extracted from their colonies. The gold and silver they siphoned out of the mountains of Latin America not only provided capital for industrial investment; it also allowed them to buy land-intensive goods from the East, which freed them to transfer their own labour power from agriculture to industry. “Later, they came to rely on sugar and cotton - produced by enslaved Africans - that was shipped in from their colonies in the New World, grain from colonial India and natural resources from colonial Africa, all of which provided the energy and raw materials they needed to secure their industrial dominance. Europe's development couldn't have happened without colonial loot.” “Average living standards in India and China, which had been on a par with Britain before the colonial period, collapsed.So too did their share of world GDP, falling from 65 per cent to 10 per cent, while Europe's share tripled. ” “And mass poverty became an issue for the first time in history. Development for some meant underdevelopment for others.” “By telling a story of poverty that focused on domestic policies, Rostow's theory not only sought to pull people's attention away from the unfairness of the global economic system, it erased that system from view.” “However, Rostow's story failed to work as planned. Across the global South, newly independent countries were ignoring US advice and pursuing their own development agenda, building their economies with protectionist and redistributionist policies - trade tariffs, subsidies and social spending on healthcare and education. And it was working brilliantly. From the 1950s through the 1970s, incomes were growing, poverty rates were falling and the divide between rich and poor countries began to close for the first time in history. ” —> really though? COMPARE. “Given the new rules of global democracy, the North seemed powerless to stop the rise of the South. But in the early 1980s that suddenly changed. The United States and Western Europe discovered they could use their power as creditors to dictate economic policy to indebted countries in the South, effectively governing them by remote control, without the need for bloody interventions. Leveraging debt, they imposed ‘structural adjustment programmes’ that reversed all the economic reforms that global South countries had painstakingly enacted. In the process, they went so far as to ban the very policies that they had used for their own development, effectively kicking away the ladder to success.” -OMG “It is now widely acknowledged by scholars that structural adjustment was one of the greatest single causes of poverty in the global South, after colonialism. But it proved to be enormously beneficial to the economies of the North.” “As structural adjustment forced open markets around the world, a new system emerged in the mid-1990s to govern the international economy. Under this new system - run by the World Trade Organization - power would be determined by market size, so the rich countries of the North would be able to enshrine policies to suit their own interests even if it meant actively harming the interests of the South” Page 2 of 66 There is nothing wrong with aid as such, but the aid discourse distracts us from seeing the broader picture. The charity paradigm makes it seem as though the West is ‘developing’ the global South, when really the opposite is true. Really, poor countries have been developing rich countries, since the 15th century. Frantz Fanon: «The wealth of the imperialist nations is also our wealth. Europe is literally the creation of the Third World.» Until we target the structural drivers of global poverty — the underlying architecture of wealth extraction and accumulation—development efforts will continue to fail, decade after decade. Two. The end of poverty...has been postponed September 2000: the Millennium Declaration = UN = Objective: cut global poverty and hunger in half by 2015 = Gave birth to the 8 Millennium Development Goals Cut poverty in half Cut hunger in half Achieve universal primary education Eliminate gender disparity in education Reduce child mortality by 2/3 Reduce maternal mortality by 3/4 Reverse spread of AIDS Reverse spread of malaria. QNDPUAWNE Poor countries themselves would be responsible for meeting these targets (the assumption being that poverty had to do with domestic policies) with aid and assistance form rich countries. 12 years in, with three to got, they claimed success on Goal 1: cut poverty rates in half. Goal 2 was, supposedly, close to being achieved. Surprise: world was still recovering from the worst eco. crisis in almost a century. = export industried in the global South had dried up because of contractions in Western economies, causing high unemployment. = Also: unprecedented spikes in the price of food. Nevertheless, the Development success story was told and retold. E.g. through Hans Rosling's stats. The UN’s poverty-reduction figures quickly became some of the most repeated statistics in the world. This = the ‘good-news narrative’ about poverty. It is comforting. But it also serves as a potent political tool. The good-news narrative enjoins us to believe that the global economic system is on the right track. Page 5 of 66 It allows for a narrative along this lines: “We are on the road to an incredible goal: the abolition of poverty as we know it, within our lifetime. Those who care more about helping the poor than hurting the rich will celebrate the fact - and urge leaders to make sure that free trade and global capitalism keep spreading. ” This narrative says nothing about the link between global capitalism and the progress. In reality, progress may just as well have happened despite global capitalism. Regardless: political stakes are high! If poverty is falling faster than ever, that would be a strong argument in favour of our existing economic system. If other things happen to poverty rates, this can be used as challenge to the status quo. Some claims made by the MDG are strong and deserve to be celebrated: = decline in child mortality, 18,000 less per day from 1990 to 2015. = Maternal mortality decreased 45%. = Primary school enrolment is up. = HIV and malaria infection rates have declined markedly. = —> While UN fell short on reaching targets, numbers are nonetheless evidence of substantial progress. Poverty and hunger? Shakier ground. The Great Poverty Disappearing Act Starting at the beginning. = The goal, formulated in 1996, was to halve the absolute number of undernourished people. In 2000, the first explicit goal to half income poverty was made. However, this time in terms of proportion!!! Both for income, and for hunger. —> this switch made target easier to achieve, since it could take advantage of population growth. As long as poverty did not get much worse in absolute terms, it would automatically appear to be getting better in proportional terms. Shortly after, the goal was changed again, behind closed doors. 1. Changed from concerning the world to concerning developing countries only. Since the population in the developing world grows faster than the world as a whole, this shift in the methodology allowed the poverty accountants to take advantage of an even faster-growing denominator. 2. They moved the starting point back from 2000 to 1990. This extended the period of denominator growth and gave them more time to achieve the goal, even before the campaign had started. /n particular this backdating took advantage of gains made by China during the 1990s, when millions of people were lifted out of extreme poverty, and thus tehy deceptively appeared as a victory for the Millennium Development Goals. 3. This meant that they permitted themselves to be much less aggressive in the fight against poverty: while the initial goal required an annual rate of poverty reduction of 3.35 per cent, the final goal allowed for a much more leisurely rate of only 1.25 per cent. Poverty lines = most recent history: no ‘common’ line possible. Page 6 of 66 = In 1990, many countries clustered around $1.02 /day —> dollar-a-day threshold for ‘absolute poverty.’ International Poverty Line = $1. IPL was troublesome. It meant that poverty was rising. From 1.2 billion in 1987 to 1.5 in 2000. —> 1.9 billion in 2015? —> suggesting that structural adjustment had made things worse?? Solution: = in 2001, World Bank president announced that proportions had dropped from 29% in 1990 to 23% in 1998, estimably 200 (later 400!) million people. = They therefore changed the international poverty line = From $1.02 to $1.08, to adjust to new PPP calculations. = The poverty headcount thus changed overnight, even if nothing had actually changed in the real world. = In 2008 it was changed again, this time to $1.25, claimed to be roughly equivalent. Yale professor Thomas Pogge and economist Sanjay Reddy, however, claimed the data to be incomparable. = This created the illusion than an additional 121 million souls had been saved from the jaws of poverty. China = what happens if China is taken out of the equation? = Global poverty headcount increases during the 1980s and 19905, while the structural adjustment programs were happening. = Today, the extreme poverty headcount is exactly as it was in 1981 — just above 1 billion people. = So, whereas development narrative makes it seem as if poverty decreases around the world, this is actually only true of China and East Asia. Where free-market capitalism was not forcibly imposed by the World Bank and then IMF. What about hunger? = initially numbers rose. In 1996, 788 million hungry people in the world. In 2009, 1,023 million, or about 30% more. = Pushed back the base year to 1990. = Diluted goal to focus of proportions instead of absolute numbers. = Even so, the 2009 hunger headcount was still 21 per cent worse than it was in 1990. UN forced to concede defeat. 2012 = FAO suddenly begins telling the exact opposite story = «improved methodology for counting hunger» = From 23 per cent of people in the developing world was undernourished in 1990, there had been a reduction to 15%. = Goal still not accomplished = In absolute numbers, in 25 years, from 1 billion to 800 million. = Almost entirely in Asia; in Africa undernourishment still increased. How? The new methodology. = designed not to reflect the impact of economic crises, so the massive spike in hinger that followed the food-price crisis of 2007 and the financial collapse of 2008 Page 7 of 66 its economy on its own terms. — hence not thanks to «Washington's approach to free-market globalisation.» Also, the Gini index is relative to income growth. So if the incomes of poor countries increase at a rate slightly faster than the incomes of rich ones, the Gini index shows declining inequality $40,000 even if the absolute gap between them has grown. $45,000 There is a third and even more important problem. = The World Bank's approach expresses inequality between Nano the world's countries as if they 5,000 were all anonymous individual units. = But if we take a different angle and look at the gap between specific regions of the world... Source: World Development Indicators Since 1960 the gap between the US and the Middle East/North Africa has grown by 154 per cent, between the US and South Asia by 196 per cent, between the US and Latin America by 206 per cent, and between the US and sub- Saharan Africa by 207 per cent. A model made to fail Why are the FAO and the World Bank so eager to claim victories they have not achieved? - One likely reason is that if they were to use more accurate measures, then it would become clear that to fix these problems we would need to do much more than «aid.» - It would require changing the rules of the global economy to make it fundamentally fairer for the world's majority. According to our present-day mode, to eliminate poverty we must increase global GDP. But it is clear that GDP growth does not benefit the poor. While global GDP/capita has grown by 65% since 1990, the number of people living less than $5 a day has increased by 370 million. The poorest 60 per cent of humanity receive only 5 per cent of all new income generated by global growth. Woodward calculates that it will take more than 100 years to eradicate absolute poverty at $1.25 a day. At the more accurate level of $5 a day, eradicating poverty will take 207 years. Page 10 of 66 If we want to have any hope of eradicating poverty without destroying our ability to inhabit this planet, we will need to adopt a completely different economic model - one that provides for a much fairer and more rational distribution of our wealth. Into the future = in 2015 the MDGs were replaced by SDGs. = Again, assuming that the way to eradicate poverty is through GDP growth. And again, using the criticised $1.25 as low-end poverty line. “Shortly after the SDGSs were launched, the World Bank announced a brand-new poverty line of $1.90 per day. At first glance, it might seem that the Bank has finally admitted that the old line was just too low and has raised it to a more meaningful standard; indeed, many commentators assumed precisely that. But the opposite is true. The Bank didn't raise the poverty line at all - it simply rebased it to the newest purchasing power parity (PPP) calculations, to compensate for depreciation in the purchasing power of the dollar. And once again, the new line is significantly lower than the old one, in real terms.” —> UNDERSTAND THIS. = it makes it seem as though there are fewer poor people than before. = 100 million less, over night. = PPP revisions are well known for discriminating against poor people. = PPP moves relative to the price of consumer goods across whole economies, but the poorest people do not consume such a broad range of goods; they spend around 70% on food. = The price of food has gone up dramatically since PPP was last revised in 2005, relative to the prices of everything else, so while most people are able o buy more with their dollars, poor people are actually able to buy /ess. After forty years of anti-poverty efforts in sub-Saharan Africa, the World Bank projects, bizarrely, that poverty numbers will have been ‘reduced’ from 287 million to 335 million people. The Millennium Development Goals, for example, have trained us to forget everything that happened before 1990. That's a convenient date, because the poverty headcount increased steadily during the decade before that, even according to the World Bank's own $1.25 line. The 1980s were a decade of severe suffering in the global South, no matter how much you doctor the numbers. The good-news narrative only works because: 1. The poverty goalposts have been shifted 2. The International poverty line (IPL) was adjusted to make number seem more impressive. 3. Change from absolute to relative numbers. 4. FAO's ‘new methodology': non-reflection of impact of economic crises, relaxation of assumptions about people's access to calories, and downward adjustment of hunger threshold. 5. Also, the definition of hunger is based on a minimum of 1 year, and a calorie intake sufficient to cover minimum needs for a sedentary lifestyle, whereas most poor people live nothing close to sedentary lives. PART TWO: Concerning Violence Page 11 of 66 Where did Poverty Come From? A Creation Story = in 1500, same life expectancy everywhere. In South America, India, and Asia - perhaps better off than Europe. = People in forager/farmer communities living outside early states had 50% longer life expectancies. = healthier, stronger, taller, beter nourished, than in more ‘civilised’ South America and Europe. = Less likely to die from famine - more diverse food system. Worked fewer hours and lighter work. = Less exposed to diseases plaguing more densely populated societies. = Europe accounted for 15 % of global GDP - China and India together controlled 65%. How did this change? = tech innovations in Britain jump-started Industrial Revolution that spread through Europe and US. = Textile weaving = Steam engine - Coal fields = Easy transport When steam engine was built, however, Britain was already at the centre of a world system that was roughly organised into two zones: ‘core’ vs ‘periphery’. = constant interaction, linked by dense network of connections = Interactions were neither equitable or mutually agreed, but marked by violence and coercion. The making of the World System » Columbus arrived in Cuba in 1492. = On second trip, with 17 ships and 1,200 men, tehy capture thousands of indigenous Americans to be sent back to Spain as slaves. = Real objective, however, was gold. = He forced local inhabitants to bring him a certain quantity of gold every three months (killing those who did not comply). = Men were forced to spend lives in mines, stripping mountains in search for gold. = Within two years 125,000 people had been killed - half the island’s population. = Genocide reported by Bartolomé de Las Casas. In 14 years, 3 million people had died. Shortly after Columbus, Hernàn Cortés arrived in Mexico, in 1519. » destruction and massacre Pizarro - Peru in 1532 = more massacre, after emptying the city of silver and gold. A few decades later, Europeans discovered the immense network of silver mines centered on Potosi, today's Bolivia. = Metal started accounting for 99% of mineral exports from Spanish colonies. Page 12 of 66 Reformation = added impetus to the enclosure movement. = Catholic Church lands were quickly appropriated by the elite, when these were dissolved. = Peasants living on them kicked off. Agriculture = Landlords wanted to benefit from increased agricultural output. = Peasants' secure tenure rights were transformed into a market for leases = A lease could be gained by those who were able to produce the most. = Nonproductive peasants kicked off land. = —> immense pressure on peasants. » Forced to extract much more from land than what is needed to live on. = Increase in workload and intensification of farming techniques. = —> dramatic increase in agricultural output. —> all profits. So, enclosure movement spurred by = lucrative wool trade » Reformation = Biggest: realisation of gains of increased agricultural output —> This application of market logic to land and farming marked the formal birth of capitalism. —> people's loves were effectively governed by the imperatives to intensify productivity and maximise profit. One more step: = widespread peasant riots as result of enclosure movement. = Claiming «Land rights» = —> to prevent revolution, the monarchy stepped in to defend peasants' traditional rights to common lands. = —> English civil war. 1640s —> limited the powers of the Crown and allowed the landlord class, which came to control Parliament, to more or less do what they wanted. = The ‘glorious revolution’ of 1688 further empowered landed classes = Thus, parliament itself became powerful instrument of enclosure. The destruction of the English peasant system coincided with the Industrial Revolution. = millions of people forcibly displaced: massive refugee crisis = No homes, no land, no food. Only option: to sell their labour for wages. ‘Free labourers'. Most of them moved into towns Urbanisation of unprecedented rate = —in other oarts of Europe the enclosure movement had not yet gained traction. —> fuelled Industrial Revolution. Factories sprang up = Competition among workers drove down costs of labour = —> workers under heavy pressure to produce more and more = —> trickle-up effect on scale outstripping that of previous feudal lords. Page 15 of 66 Extreme wealth accumulation among England's industrialists. = England thus became the world's first mass consumer population = Depended on markets for even the most basic goods necessary for survival Conditions for the industrial revolution Internal - Enclosure = Mass displacement of peasants = The creation of a consumer market External = Colonisation of Americas = Slave trade = (Both in terms of value extraction from slave labour and metals, and of creation of market of demand for European manufactured goods) Distinction = previous systems: wealth was appropriated from others either by stealing or by coercive force = Capitalist system: the elite relied on the fact that the competitive pressures of the labour market (and the market in leases) would increase workers’ productivity at a much higher rate than the one at which their wages increased. —> this was the basic mechanism of profit and served as an automatic conveyor belt for redistributing wealth upwards. The emergence of capitalism was hardly a natural process. lt required violence and mass impoverishment, both at home and abroad. The goal of the enclosure movement was not just to display people from their land, but—much more profoundly—to eradicate cultural expectations of basic rights to habitation, to the means of subsistence, to the means of life. Why is this history of England useful to our understanding of global poverty? Because the process of enclosure not only marks the origin of mass poverty as a historical phenomenon, it also illustrates the basic logic of the process that would produce poverty across the rest of the world. Imperialism’s New Logic The rise of capitalism changed = the shape of Europe = Approach to imperialism Before: = Direct, coercive appropriation of wealth = Theft of precious metals = Use of slavery on plantations and in mines Page 16 of 66 = Securing access to trade routes = —> gain access to existing sources and flows of wealth. When England got involved in the imperial project, the logic changed. First, Ireland. 1585... = first attempt of reproduction of enclosure in foreign territory = Similar effects. Huge impoverishment and migration to England and Scotland to work as wage labourers. = By early 1800s, after 2-3 centuries of enclosure, Irish peasants had so little land that they planted only potatoes — the one crop yielding sufficient calories for survival on very small plots. = —> deadly at time of potato blight in 1845 = 10% of Irish population died in the Great Famine. = The scarcity which led to the famine was artificially created. = lreland was exporting lots of food to England and Scotland each day during the famine, while the local population starved to death. How was the mass dispossession that ‘improvement’ entailed justified? = John Locke's Second Treatise of Government. = A theory of property ownership. = Claim: while land initially belongs to all in the community, once you ‘mix’ labour with it it becomes your private property. = —> This ‘labour theory of property’ was used to justify the theft of land in the Americas: since it appeared that no one was engaged in agricultural production, settlers could rightfully appropriate the land as long as they were willing to farm it. In cases where there were people farming the land that English colonisers wanted to take (as in Ireland) Locke claimed that what really counted for ownership was not simply farming, but the improvement (i.e. intensification and profit-orientation) of the farming techniques. = this added to the common good —> increased productivity = Contribution to the betterment of humanity —> Improvement came to trump the basic value of human habitation —> ...began to assume the status of a religious creed, and its economic principles took on a kind of moral meaning. The English settled in North-East America in the 1600s = expropriated land from indigenous population = Outright warfare with indigenous population = Bloody massacres = In the 18008... = The young (!) US systemised land grabs: forcibly dispossessing nature inhabitants = Indian removal act 1830 = Mass enclosure opened up more than 25 million acres for white settlement, clearing way for tobacco and cotton plantations in the South and intensive grain-farming techniques further North. Page 17 of 66 = Europe constantly competed with each other for raw materials to use in factories, and for new markets where they could sell their products. = Intensified by financial crisis in Europe in last decades of 19th century. Also: growing social unrest. England. Threat of class war. —> solution: acquire new lands to settle the surplus population. Eyes turned to Africa, where previously only coastal towns and Algeria (France) and Cape Colony (Britain) had been colonised. —> huge competition between European states for uncolonised areas. To prevent escalation of conflicts —> the Berlin Conference in 1884. In 1914, only Ethiopia and Liberia remained independent. Two key examples: Congo and South Africa. Congo = Belgian colony = King Leopold Il = Congo 80 x size of Belgium = Under guise of ‘humanitarian and philanthropic work* = —> turned into a source of raw materials. = lvory and rubber. = Much of native population was enslaved — rubber was labour-intensive work. Failure at reaching quotas — hands were cut off. = 10 million died - half the population. = Local economies were destroyed. —> widespread dispossession and starvation. = Wealth from ivory and rubber went to investments in Belgian stately architecture, public works, arches, parks and impressive railway stations. South Africa = in 1800s, Dutch and British settlers spread = Impossible to find enough labour to work on their farms and, later, in gold and diamond mines. = Wages offered were not high enough to incentivise Africans to leave subsistence lifestyle. = —> thus, by destroying their existing subsistence arrangements, colonisers could force Africans. Hunger would leave them no choice. = Early method: force them to pay taxes. They now had to send family members to mines and plantations to work. = Also: process which minced the enclosure movement in England. = Natives land act 1913: restricted African land ownership to a series of ‘native reserves' or ‘homelands'’, totalling only 10% of the country's area. = This land was inadequate to support the population, and Africans had no choice but to migrate to European areas for wage work. ‘Pass laws’ prevented African workers from settling their families in white areas. = because then wages would have to be high enough to cover also for them Page 20 of 66 = Employers and the state would have to contribute to the African's social care needs, like health and retirement = (normal costs of maintaining and reproducing labour) = record profits were squeezed out of the highly exploitable workforce = South Africa is a land rich in fertile soil, mineral resources and human labour power. = Today, mor Ethan 50 per cent of the black population lives in absolute poverty, while the mines and plantations remain monopolised by a handful of white-owned (mostly British) conglomerates. Fallout in the Sacrifice Zone Between 1870 - 1913, per capita growth per year: - Asia 0.4% = Africa 0.6% = Western Europe 1.3% = USA 1.8% = —> 3-4 times the rate of colonised world. —> This differential in income growth rates was a major driver of global inequality. = At the end of this period, Europe owned 33% of domestic capital of Asia and Africa, and more than 75% of their industrial capital. Latin America - different = 300 years of colonialism came to end in early 1800s. Revolutions and independence. = Controlled by autocratic local elites. = Concerned that Europe might try to recolonise Latin America, US adopted the Monroe Doctrine (interpreting any aggression against Latin America as aggression against US itself) = —> Used to justify military intervention against any Latin American country that refused to cooperate with US eco. Interests. = the Roosevelt Corollary 1904. = Latin America was to be kept open to US trade companies, as a source of resources and agricultural goods, and as outlet for US manufacturers. Banana wars - 19th century US aggressions in = Cuba, Mexico, Honduras, Colombia, Nicaragua, Haiti, the Dominican Republic, Puerto Rico = Guaranteed abundant land and cheap labour for American fruit companies. These snippets of history hit at the contours of a world economic system that was designed over hundreds of years to enrich a small portion of humanity at the expense of the vast majority. —> the core of the system (Europe and the US) could siphon cheer raw materials from the periphery and then sell manufactured products back to them while protecting themselves from competition by erecting disproportionately high tariffs. Two built-in features that intensified inequalities: Page 21 of 66 = Terms of trade worsened over time = Prices of their primary commodity exports gradually decreased relative to the prices of the manufactured goods they imported. = Always spending more to get less —> outward net transfer of wealth = Lower wages in developing countries (even when corrected for productivity and PPP) = South undercompensated for the value they shipped abroad —> THIS IS ‘UNEQUAL EXCHANGE” between core and periphery In 1820, at dawn of the second wave of imperialism, the income gap between the richest country and the poorest country was only 3 to 1. —> By the end of colonialism, in mid-20th century, it was 35 to 1. Orthodox economic theory presupposes international inequalities as if they have always existed, but the historical record is clear the they were purposefully created. As the Uruguayan journalist Galeano put it, àThe colonial economy was built in terms of— and at the service of—the European market. Four. From Colonialism to the Coup. Wealth from colonisation was unevenly distributed in Europe and US. 1910 = US 1% owned 45% = Europe 1 % owned 65% = WWI1 slowed things down, but not for long = 1920s—> roaring twenties! Mostly for elite. = Great Depression (speculation) = —> from crisis emerged powerful new ideas — also across the global Soth = From 1950s-1970s = ldeals of economic independence and a fairer distribution of the world's wealth. = Incomes rose, living standards improved, gap between rich and poor countries narrowed for the first time since 1492 = HOWEVER, those whose rhetoric most celebrated international development as an abstract idea turned out to be its most violent enemies in practice. A new deal in the west Initially: = cut government spending = Slashed salaries — to encourage people to hire = —> opposite effect (companies did not trust that there were enough consumer power to make profit) After: = Keynesianism The New Deal = multiplier effect = —> also social security programs Page 22 of 66 Issue: hard to justify attacking something so rooted in equality, justice and independence. —> instead drew heavily on Cold War rhetoric: painted developmentalism as first step on the road to communism. Iran: first target. Democratically elected prime minister: Mohammad Mossadegh progressive Unemployment compensation, benefits for sick and injured workers Abolished forced agricultural labour Raised taxes on rich. Sought to renegotiate ownership of the country's oil reserves, at time controlled by British-owned Anglo-lranian Oil Company, now BP. Eventually, Iranian Parliament voted unanimously to nationalise the company's assets. outraged British government —> turned to US for assistance To avoid USSR's intervention and proxy war, military intervention was sensitive. —> Operation Ajax = Bribed politicians to whip up anti-government sentiment = Paid demonstrators to create false impression that Mossadegh was unpopular. = They convinced the military to make a coup in August 1953, and hand power over to the Shah of Iran, Mohammad Reza Pahlavi. —> absolute monarchy. = Governed Iran for 26 years, with US support and policies friendly to Western oil companies. Guatemala! overthrow of military dictator in 1945 —> democracy and progressive politics, fighting poverty Agrarian reform act. —> nationalisation of large tracts of private land and redistribution to landless peasants. Some of this belonged to United Fruit Company (US owned). Despite being offered full compensation —> US overthrew government using Cold War rhetoric, painting Guatemala as a Soviet satellite. Bombed capital, installed a new military dictator. = Imprisoned thousands of regime critics = Deregulated foreign investment = Guatemala ruled by military dictatorships with US support until 1996. Guatemala came to have cen of the highest poverty rates in the Western Hemisphere. 200,000 Mayans killed for resisting land grabs. Brazil 60s, Basic Reforms: education, voting rights, taxation of foreign transfers Nationalisation of telephone provider, partly owned by US company. US assisted military coup, under Lyndon Johnson, together with Britain. Military Junta established which ruled for 21 years. Deregulated foreign investment. Openly tortured and assassinated political dissidents. Others. Page 25 of 66 = 1953 Britain overthrew the world's first democratically elected Marxist president in Guyana. = 1961 US attempted overthrow revolutionary government in Cuba. = 1965, Johnson ordered invasion of Dominican Republic - El Salvador = Nicaragua - Bolivia = Ecuador = Haiti = Paraguay = Venezuela - Panama Indonesia = 1965 = US-backed coup. = Killed 500,000- 1 million of opponent's supporters. Worst mass murder of 20th century. = Military regime in place until 1998. = Liberalised the economy and eliminated the last vestiges of developmentalism. Africa = Ghana 1957 — first country in Africa to win independence. = Nkrumah, Africa's leading developmentalist thinker. = Built up manufacturing capacity = significantly reduced the country's dependence on European imports. - Nationalised mines = Regulated foreign corporations - Rolled out free healthcare and education = Created jobs through infrastructure works. = —> also became leading voice for liberation of rest of Africa. = Founding member of non-Aligned Movement. = Fierce critic of continuing Western intervention in global South affairs. = In 1966 CIA backed a coup and installed a military junta in the place of the government. = Junta brought in IMF and World Bank to manage the economy, privatised the country's assets. Cut down barriers to foreign corporations, forced Ghana back into previous role as exporter of raw materials. A number of other African countries experimented with developmentalist revolution. = mostly north of the Sahara. = Many never got the chance. = Western power, in particular US, killed leader after leader before they could begin, and in their place installed military dictatorships. = Congo's first post-independence leader in 1960 in office only two months. = The military officer Mobutu Sese Seko commanded country for nearly 40 years with support of aid from US, France and Belgium, most of which he siphoned into his offshore accounts. = —> collapse of economy in Congo (which he renamed Zaire) Page 26 of 66 = Worse poverty than during Belgian colonial rule. Uganda = first elected prime minister in 1962 = Increasingly paranoid, violent and authoritarian = BUT also developmentalist policies. = Common Man's Charter —> shift to the left 1969 = Also: nationalisation of some of the country's major private corporations, including a number of well-known British banks. = Britain, with the help of Israel, toppled the government in 1971. = —> Military rule, forced expulsion of the Asian population (the 27.000 Indians!). » Murdered half a million detractors Angola = Portugal held on to its colonies until 1975 = Waged long war against independence leader = US refused to help Angola against Portugal since they were interested in retaining access to Angolan oil under colonial government. = When Angola finally won independence, US feared nationalisation of oil reserves and fuelled civil war which lasted until 2002!!! Left Angola in ruins. South Africa = US and Britain supported apartheid regime though the 1980s, fearing that Nelson Mandela and ANC would nationalise the country's enormous deposits of gold, diamonds and platinum, which American and British companies controlled. The biggest intervenor in postcolonial Africa: France! = Francophone Africa won formal independence in 1960. = Intervened covertly to instal puppet leaders. Funded by the French state-owned oil company. = Rigged elections in Cameroon. Kept their president of choice in power for 22 years in return for backing French interests. = Same in Gabon, supported a dictator for 42 years in exchange for direct access to the country's oil. = In Còte d'Ivoire, they kept someone in power from 1960-1993. Also parts of ‘Frangafrique’ scandals. = Nigeria - Guinea = Niger = Congo Brazzaville The central African Republic Most importantly—> Burkina Faso = Successfully implemented a developmentalist program. = Vast network of political corruption and coups —> clarified in 1995 in the biggest fraud inquiry in Europe since the 2nd world war. = As recently as 2009 France is said by some to have supported rigged elections in Gabon. Complicates some commonly held assumptions about African politics: Page 27 of 66 Some recovery in 1978 only to crash again in 1982. = hyperinflation = Unemployment up to 35% = Pinochet forced to fire some Chicago boys and renationalise many of the privatised companies and banks. = Copper mining company was never privatised and thus continued providing, 85% of country's revenue. = 1988 - eocneomy recovered. Chicago Boys claimed success = 41% poverty rate = Average wages down 14% = Minimum wage 42% lower = Widespread hunger = Even in 1993, GDP per capita was 12% below its pre-coup level. = Only elite benefited. = —> Thus Chile became one of the most unequal countries in the world. 1970s. Same strategy also in - Brazil = Uruguay = Argentina - Bolivia = —> quelling opposition with torture. = Real wages down 40% The very countries that had once been the beacon of hope for equitable development in the global South. Neoliberal economic policies so obviously destructive to people's lives, that they were difficult to implement in a democratic government. Neoliberalism comes home. = stagflation crisis Why? = US inflation because Nixon printed money to afford Vietnam war — less credibility for dollar. = 1973 OPEC crisis. - huge increase in oil prices and of all other prices (all depended on oil production). Stagflation crisis - consequence of specific historical events. But neoliberals rejected these explanations and blamed Keynesianism. = firepower to the neoliberal alternatives thanks to Friedman and Hayek both having won Nobel Memorial Prize in Economics. Reagan —> lowered inflation on expense of jobs. High unemployment = taxes of rich cut from 70% to 28% —> belief in trickle down effect- = Raised payroll taxes on the working class. Page 30 of 66 = Deregulated financial sector and abolished the Glass-Steagall Act which had been designed to prevent banks from engaging in the sort of reckless speculation which had triggered the Great Depression. Thatcher, too. Social inequalities at unprecedented levels in the US and Britain. CEO salaries grew on average by 400% in the 19905, while workers' grew less than 5%. US minimum wag decreased by more than 9 per cent. We can learn a lot from the legacy of developmentalism. The solution to poverty = not charity = But fair wages for work = Labour unions to defend wages = State regulation preventing exploitation = Decent public services = Universal health care and education = Progressive taxation system capable of funding them. = Far access to land, fair share of natural resource wealth. = Redistribution of power — also resources. Fight against poverty and underdevelopment during this period was understood as a political battle. Not all developmentalist states were subject to retaliation: - India = China, = Libya = Algeria - Egypt = Syria = lraq = Tanzania » Numerous East Asian countries. Why? = some too powerful to cross w/o warfare = Some did not pose threat to western interests. Few of the global South leaders who were assassinated or posed identified as communist; for the most part tehy were explicitly non-aligned! Championed a their way Keynesian mixed economy. Digging behind the rhetoric, we see that Western support for right-wing coups had to do with defending Western economic interests rather than the Cold War. Caution. Developmentalism had its flaws too = huge displacement due to pushing farmers off land to make more efficient operations. = Or displacement of people in areas where they wanted to build dams. Page 31 of 66 = Drawing people into the labour force for the first time, making them dependent on wages for survival. - Environmental costs. so The focus on rapid economic growth sped up the process of commodifying human life and nature that had begun under colonialism. Developmentalism was, after all, a Western model Part Three: the New Colonialism. Five. Debt and the Economics of Planned Misery. = governments across the global South realised that because they controlled most o the natural resources and raw materials, they could improve terms of trade; prices of their commodity exports by working together in groups. = OPEC, for example. = Others too, organised around copper, bananas, and bauxite. 1973 G77 —> New International Economic Order. Granted developing countries the right to: = regulate multinational corporations = Nationalise foreign-owned assets when necessary - Protect their economies with tariffs = Cooperate with each other to maintain reasonable prices for raw materials = —> the freedom to do these things without fear of retaliation or invasion by Western powers. —> The highest achievement of developmentalism. Response: creation go G7. = counter rise of developmentalism = (officially: to work together on macroeconomic policies since breakdown of exchange rate system following breakdown of Bretton Woods 1971, as well as price shocks in oil 1973) = Proposed a shift of most important decisions at UN away from general Assembly to the Security Council. = Laid out plans to divide the G77 by using aid as an instrument of control. = —> Creation of a new group of so-called LDCS—the poorest and most desperate members of the global South—and offer aid in exchange for siding with the West against OPEC and the rest of the G77. Kissinger insisted that the question of global inequality and development should not be approached as a political question but rather as a matter of national responsibility. = depoliticising poverty = Rather than being responsible for causing poverty in Global South, rich countries were willing to give aid to help poor countries. A crisis of Debt Surprising turn of events! Page 32 of 66 = Global South countries were made to pay for the banks’ risky practices with billions—even trillion—of dollars taken from ordinary people. = Enormous transfer of wealth form the public coffers of impoverished global South to the richest banks in the West. = 2. Deregulation of economies. - Cut trade tariffs = Open markets to foreign competitors = Abolish capital controls = Abandon price controls = Curb regulations on labour and the environment to ‘attract foreign direct investment’ and make their economies more ‘efficient’ = Claim: this would spur economic growth and increase rate of debt repayment. = Also, forced to redirect economies towards exports to get more hard currency to repay loans. = Hence, abandonment of the import-substitution programmes they had used during the developmentalist era. = Also: required debtors to keep inflation low — as not to use inflation to depreciate value of their debts. This barred them from using monetary expansion to spur growth and create employment. Three part cocktail: 6. Austerity 7. Privatisation 8. Liberalisation = a one-size-fits all blueprint implemented in all countries placed under the control of the IMF, regardless of their local economic conditions or needs of their people. = Handed from above by Washington-based technocrats — the central planners of an emerging global economic order that claimed, ironically, to detest central planning. The policies were meant to alleviate the debt crisis and prevent it from recurring. But the structural adjustment reforms themselves had nothing to do with the real cause of the crisis. Real causes exogenous: - exorbitant interest rates = Declining terms of trade But the IMF had no intention of tackling these problems, as this would require challenging the interests of Western governments and their commercial banks. The IMF followingly acted as though the problem was endogenous and pushed domestic economic reforms as ifthey were a response to the crisis when in fact they were not. The debt crisis solved the problem of developmentalism for Western powers. = the structural adjustment programs consisted of the very same policies that the Chicago School had tested in Chile, but instead of being imposed through violence, they were imposed by leveraging debt = Debt became a powerful weapon for pushing neoliberalism around the world. = Under structural adjustment, the programmes were made to appear as voluntary although they were not. Page 35 of 66 —> western creditors proceeded to assume de facto control over economic policy in developing countries, overriding national sovereignty However, the coup was invisible. = nationally elected representatives were still believed to hold powers when in fact they had been shifted abroad. = Western hegemony was able to mask itself behind the facade of national governments that otherwise appeared as normal. Only 2 decades after global South gained independence from colonialism, structural adjustment brought the end of meaningful national economic sovereignty. World Bank = 1980s — began to require structural adjustment as basic condition for loans = If countries needed loans to finance development projects—power plants, irrigation systems, etc.—they had to agree to the same conditions that the IMF had prescribed as a remedy for over-indebtedness, even if tehy themselves were not over-indebted. Global South diet, bonds of which the World Bank sells on Wall Street, are foolproof. High yielding and safe (rated AAA). —> because the creditor is given direct power over debtor. This is not how common loans work. A bank can never assume direct control over a household. An adjusted World = the GNP of the average African country shrank by 10%, and the number of Africans living in extreme poverty more than doubled. - Estimate: developing countries lost roughly $480 billion per year in total GDP during 80s/90s as result of SAP. Losses due to SAP outstripped gains from aid by 1:5 As wages and employment collapsed, the same of wages in national incomes fell—a sign of growing national inequality. —> a shunt from income from wage-earners to capital-holders. ‘IMF riots' —> waves. = 1983-195 = 1989 — lasted a few years. Caracas 1989, four hundred demonstrators killed Lagos 1989, 50 students murdered in three days. By 1992, 146 IMF riots had played out in 39 countries. In 1993, half a million protestors in India marched against the IMF and World Bank's agricultural policies — largest public demonstration in history at that point. Little effect. Targets were invulnerable to any political pressure from below. Page 36 of 66 Why did structural adjustment have such a negative effect of growth and incomes? = large proportions of national budgets were spent on debt service = Hospitals and clinics fell apart = No investment in education = Families spent increasing proportions of income on food = Infant industries left without support to become competitive — and were forced to compete with multinationals. = Liberalisation fo financial sector menat that investors could pull their money out whenever — leaving finance dangerously unstable and unpredictable. No surprise. No rich country has developed without protectionist measures. West used SAPs to «kick away the ladder» they, themselves, had used to climb the lights of development. HOWEVER, some global South countries did not implement across-the board free- market principles, and, not surprisingly, they managed to develop reasonably well. Turkey, China and the East Asian Tigers. Why could no-one stop the World Bank and the IMF? = special ‘immunity’ status = Intended for Red Cross and UN — as to get on with their work without inference. = However striking difference: after all thet actively d uterine economic policy in global South countries. = No one can sue them. They therefore have no incentive to be careful when manipulating macroeconomic policy of other countries. No consequences if they screw up. = —> all of the risk belongs to the debtor country, which is denied any means of recourse or compensation in the case of disaster. Voting power in the IMF and World Bank is apportioned according to financial ownership. —> essentially dictated by the G7 members. = so, even if every single global South country disagreed with IMF and World Bank policy, tehy wouldn't be able to block it. = Leaders of IMF and World Bank are always appointed — one by US and one by Europe. SO, minority presides over IMF, World Bank, and UN security council. = ‘global apartheid’ Because of amounting criticism, the IMF and World Bank backed down from structural adjustment in end of 19905—> replaced by ‘Poverty Reduction Strategy Papers’. = more local ownership of structural adjustment - Little more than PR exercise Capital’s Iron Law Page 37 of 66 role as ‘to promote private investment’ and ‘to promote the growth of international trade’. It is no surprise that the World Bank's past presidents have never been development experts but rather US army bosses and Wall Street executives — people who have a strategic interest in America's role in the global economic system (until Obama appointed actual development expert in 2012 to recuperate the Bank's GLOBAL INEQUALITY, 1980-2000 reputation). (CHANGE IN GDP PER CAPITA, CONSTANT 2005 US$) The Inequality Machine - Official aid inthe form of conditional loans in many cases prevent South countries form pursuing policies necessary for development and poverty eradication, while creating new opportunities for investors in rich countries. = In 1960, the richest fifth of global population earned 30 times more than the poorest fifth. In 1995, 74 times O E more. M. E. & N. Africa South Asia Also visible in income per capita growth, where the difference between US and developing regions narrowed during developmentalist period only to grow significantly between 1980s and 19905, GLOBAL SOUTH FOREIGN DEBT SERVICE (BILLIONS, CONSTANT 2013 US$) 5800 Reasons for ever-widening gap = race-to-the-bottom effect triggered by structural adjustment and globalisation 5500 ‘ Unequal exchange ‘ —> the difference $500 between the real value of the goods that a developing country exports and the 5400 market prices that it gets for those goods. —> an expression of undervalued labour. 5300 billion per year in 1960s. —> due to se colonial policy which maintained wages at artificially low levels. = Structural adjustment made this worse. —> by factor of 16. (32 times the aid Source: World Bank, International Debt Statistics budget) = if workers in developing countries had been paid as Western counterparts for Cao same productivity in the 19605, + $160 | mil Driving force: debt system = not only for paving way for structural adjustment Also: debt service! River of wealth flowing from periphery to core. Totalling of $13 trillion since 1980. = Drain away a vital resource that might otherwise be spent on eradicating poverty. Page 40 of 66 = Lebanon, for instance, spends 52% of budget on debt service, and 23% on health and education combined, The amount that the global South spends collectively on debt service each year vastly outstrips the amount that the UN tells us is necessary to eradicate poverty entirely; you could cancel all debt payments and cancel global poverty in the same swoop, if you could muster the political will. = key reason for growing size of debt burden: multiplier effect of compound interest. Despite structural programmes being implemented with the exact intention to reduce debt, debt has increased. = up from 25% of GDP in 1980, to 39% after second decade. The hidden power of Debt Why did the Global South not just refuse to repay debt? = risk of US military invasion (had seen examples of Iran, Guatemala, the Congo and Chile) = Thomas Sankara, president of Burkina Faso in 1980s, made speech about debt saying that ‘creditor are the same as colonisers. Debt is neocolonialism.’ = If debt is not paid - they will not die. If we do, we will’. Dangerous not only for threatening to default Burkina Faso's debt, but also for spreading such ideas. = Assassinated three months later, probably backed by France. —> A dictator rose to power who would rule for 27 years. If a number of developing countries were to default at the same time, as part of a united front, they might have a better chance. This would require coordination and unity, whereas many have personal good reasons to turn a blond eye: benefit personally from new loans. Plus, now that structural adjustment has run its course, Global south is completely dependent on foreign investment for survival. —> being frozen out of the global financial system would entail immediate economic collapse. = many initial loans were taken out by unelected dictators = The principal has already been paid off three or four times over = The economic policies imposed b the lenders failed so it makes sense that they should absorb the loss. Jubilee 2000 campaign — academics and NGOs applied pressure on Western politicians to drop $90 billion of debt by the world's poorest nations. —> led to debt relief programs. However! Tied to stringent conditions that require countries to liberalise and privatise their economies. —> thus used for further structural adjustment. Chapter six. Free Trade and the Rise of the Virtual Senate. WTO = overrides sovereignty of independent nations Page 41 of 66 = Whoever controls the rules of international trade controls the flow of our planet’s vast wealth and resources. Inequitable trade rules constitute a classical tactic of extraction. = 1770s American Revolution. = US, like all colonies, was under ‘unequal treaty' with Britain. = Trade tariffs were decided by London. —> low, to facilitate British imports. = Double standard: British imposing low tariffs on America and other colonies knowing full well that their own industrial development had depended on high tariffs. = 14th-18th centuries, protectionist polices protected Britain from foreign competition. = Americans routinely referred to free trade as a ‘conspiracy’. Upon independence: quickly raised taxes and enacted a kind of import substitution policy. Along with this: cartels, subsidies, and other forms of state support to build industrial power. = recognised that British only advocated theories of Adam Smith because it benefited their own economic interests. For young economies, strong protectionism and solid state support = the only path to real industrial development. Between 1860s and 1930s, the US was the most heavily protected economy in the world. = US quickly became the world's dominant industrial power = Britain pushed their free trade elsewhere - Chinese opium wars. = Colonies in South Asia = Africa = —> the global South lost their economic independence because the Americans had gained it. All western countries followed the American system, line by line. GREAT DEPRESSION and WWIlI —> CHANGE IN TACTICS Bretton Woods Conference. = GATT set up — general agreement of tariffs and Trade. = Keynes: key figure. = Argued that protectionism across industrialised world contributed to low aggregate demand: people were not buying enough stuff. = Saw excess protectionism as a primary driver of the Great Depression. = Relaxed tariffs —> increase in consumption —> AD on the rise and economy back in action. GATT’s goal: reduce tariffs through collective bargaining among industrialised countries. In the spirit of unity and solidarity, ruled not rigidly applied: member states could negotiate to avoid policies that would seriously harm their economies. Page 42 of 66 Major African cotton producers: = Benin, burkina Faso, Mali, Chad. = US subsidies set world cotton prices at 10% lower than they should be — huge losses for four of the already poorest countries in the world. = The ‘cotton four’ have taken case to WTO, but US refuses to back down. Options: = taking US to court (the Dispute Settlement Body) where they would probably win. But the WTO cannot force the US to change course. = Enforcement is left to the plaintiffs; the Cotton Four. The would then be entitled to place sanctions on the US. But what would their sanctions do against the richest and most powerful economy in the world? = —> There is little reason for rich countries to play by the WTOs rules. Poor countries, on the other hand, can be seriously harmed by sanctions from the rich countries. Since sanctions (economic war!) may be argued to be disproportionate to be applied to trade disputes, developing countries have articulated suggestion of possibility of demanding compensation instead. For many poor countries, the real pain of trade liberalisation is the loss of customs revenue. = generellt a very important source of income for poor countries. (—-> REFER TO CRIM. ST. AFR. WHICH POINTS THIS OUT AS A DRIVER FOR AFRICAN STATES TO ENGAGE IN INFORMAL ECONOMY.) = Especially, the rely on customs revenue because it is so easy to collect, lacking possibilities of taxing personal incomes (too low) and capital gains/inheritance (difficult to collect). Trade liberalisation thus directly denies poor countries the very resources they so desperately need to spend on social services and reducing poverty. The ‘Efficiency’ of Involuntary Sex Work = For most time of modern history: quotas on textile imports from East Asia, as well as special preferences to very poor countries (like Swaziland). = This had had as effect that Asian producers had moved to countries like Swaziland to take advantage of the country's trade preferences —> and Swaziland's textile industry grew rapidly. = The landscape of the global textile trade changed overnight as Western countries, by order from WTO, abolished this system. = Great for Asia: textile firms around the world relocated there to take advantage of cheap labour. Detrimental for Swaziland. Many of the textile workers, the majority women, had to turn to sex work to survive. = only added to HIV/AIDS crisis. = Much of the disease burden that Swaziland bears today can be attributed to the spike in women's unemployment after 2005. According to economic theory, the situation will self-regulate as labour force will quickly be employed in another sector, and the capital with be invested in a sector more aligned with the country's comparative advantage. Page 45 of 66 = labour - hard to reeducate without unemployment benefits — remain unemployed or go to poorly paid work. = Fixed capital, such as machines, cannot ‘move’ to other sector, but is abandoned. = Money — perfectly mobile — goes abroad. The mobility of liquid capital is too perfect, while that of labour and fixed capital is not perfect enough. Of course, while Swaziland suffers, Eas Asia wins — quickly pointed out by WTO. Given history of South, this is sad. The 50s-60s saw valiant attempts by South leaders to unite in solidarity and mutual assistance though the Non-Alignment Movement and the G77, but structural adjustment and the WTO have unravelled these efforts, pitting one poor country against another. It is a strategy as old as colonialism itself. Divide and conquer. How to profit from a plague. TRIPS - Trade-Related Aspects of Intellectual Property Rights = WTO, controversially, raises patent standards an enshrine them in international law. Ironically, under banner of liberalisation. = Now, global average length of patent is 20 years (11 years at end of 19th centuries, 17 in 1975) = Great for those who own patents. = —> devastating for poor countries. Most powerful example: AIDS. = In the past, patents only applied to the process of manufacturing the drugs, not on the compounds themselves —> allowing for production of generic versions at a fraction for the costs. = During AIDS crisis, generic firms in India were capable of producing and exporting antiretrovirals for as low as $350/year, which would have been affordable enough to save millions of dying patients, but the WTO—pressured by the pharmaceutical companies—actively prevented them from doing so. Eventually, South Africa chose to disobey the WTO's rules and began using generic antiretrovirals, pleading a public health emergency. —> the US threatened them with crushing sanctions through WTO. —> But then something happened: a number of Americans died of exposure to anthrax! Fearing an epidemic, possibly from biological warfare, US stockpiled Cipro, an antibiotic whose patent was held by Bayer (a German company), citing a possible public health emergency as reason. —> patents were not inviolable after all, when made by US. If exceptions could be made after a few Americans fell ill, why could not the same exception be invoked for the sake of millions of dying Africans? —> Two years of grassroots mobilisation required for WTO and US to give in. Only in 2003 developing countries gained the right to manufacture and import generic versions of life-saving drugs to defend against AIDS and other public health emergencies. However, 10 millin Africans had died by AIDS by then. Page 46 of 66 Not only AIDS. Malaria, tuberculosis etc etc. 18 million people die/year because of preventable diseases, in part because of lack access to affordable medicine. Main argument for this: 9. Income from patents provides an incentive to develop the products in the first place. 10. Profits can be ploughed back into research and development (R&D) But 84% of research on pharmaceuticals is funded by governments and other public sources, only 12% from pharmaceutical industry. Most scientists who develop these are academics, not industry technicians driven by profit. Many of the key components of the AIDS drugs were developed in public universities, then bought and patented by corporations. For the most part, the products are publicly produced and then privately appropriated through the patent system. As for R&D, much more is spent on marketing than research. The End of Democracy = although WTO decisions are not unilateral, but made on consensus basis, the largest and most powerful economies almost always get their way. = Can also afford many more permanent negotiators and representatives. = Also citizens in the North tend to point out deep injustices of international trade system. = —> Doha Development Rounds — discussions that bore no fruit and that ended post 2008. Given stalemate at the WTO, rich countries now engage also in bilateral free-trade agreements. FTA (free trade agreements). = NAFTA — Canada, Mexico, US. Cut most tariff barriers between the three countries. Highly controversial, widely resisted by voters in all three countries. Led to the pushing out of business of 2 million Mexican farmers when their market was overflowed by US corn. = To add to insult, vacated land was then acquired by foreign firms who consolidated large plantations. = Since NAFTA deregulated retail prices on food, the cost of tortillas shot up by 279%. = Dream scenario for US companies: new export markets, new access to land, higher retail prices and cheaper labour. = Many large Mexican firms benefited too—hence why Mexican government agreed. But Ordinary People suffered tremendously. = 10 years after NAFTA, 19 million more Mexicans living in poverty than before. = 25% does not have access to basic food. = American workers suffered too, since NAFTA led to displacement of almost 700,000 jobs in US, most high-paying, unionised, manufacturing jobs. Page 47 of 66 The extension of neoliberalism has entailed powerful new forms of state intervention = violent coups and dictatorships backed by Western governments = The invention of a totalising global bureaucracy = The World Bank/IMF/WTO/FTAS = Free trade has a tendency to gradually undermine national sovereignty and electoral democracy. Chapter seven. Plunder in the 21st Century Ways that rich countries and powerful corporations have sought to secure economic interests on the world stage: = Coups Structural adjustment Free trade Investor dispute tribunals Coups still live tactic in 21st century. = 2002 US supported coup attempt against democratically elected government of Hugo Chavez in Venezuela = 2004 - toppled Haiti's progressive president Jean-Bertrand Aristide = 2009, Honduras = 2003 US-led Iraq invasion largely about securing access to oil and defence contracts, as well as preventing Iraq from selling oil in euros instad of dollars. = NATO airstrikes in Libya 2011, in part about France's concerns about Libya's attempts to create a Pan-African currency as an alternative to the French-controlled CFA franc. = Assassination of Honduran indigenous activist Berta Caceres in 2016 by US-trained forces, for resisting a dam across. Third world debt = global financial crisis —> collapse in commodity prices —> export revenues have plummeted. = Structural adjustment programs still widely in use by World Bank and IMF_ to secure debt payment. The Tax Evaders Common view: «Until we put an end to corruption and improve governance practices in poor countries, development will never get off the ground.» According to the World Bank, corruption in the forms of bribery and theft by government officials, the main target of the UN Convention, costs developing countries between $20 billion and $40 billion each year. However, this kind of corruption is an extremely small proportion—only about 3%—of the total illicit flows that leak out of the developing world each year. Page 50 of 66 By contrast, commercial tax evasion stands for 65% of total illicit outflows. This is about 11 times the aid they receive. And it is growing: 6.5% per year. How does this work? = Hot money - the rapid movement of capital from one country to another in order to speculate on interest-rate and exchange-rate differences. Enabled by the financial deregulation which has been promoted across the developing world over past decades by World Bank, IMF, and FTAs. Cause serious market instability. Also an avenue for moving money illegally across borders. In 2013, hot money = 19.4% of total illicit outflows. = Trade misinvoicing - selfing money into secret offshore accounts by cheating the trade system. Rein-voicing from tax havens. Although illegal, tax havens nonetheless openly advertise their rein voicing services. In 2013, trade misinvoicing accounted for 80.6% of illicit outflows - $879 billion. = Can be used both for tax evasion and money laundering, or dodging capital controls put in place to stabilise financial flows. = Even when the goal is not necessarily tax evasion, the effect is the same, for all forms of trade misinvoicing deny governments the opportunity to tax income and wealth. Researchers at the Global Financial Integrity can detect re-invoicing because of obvious differences between the invoices reported by exporters and importers. Other forms of misinvoicing impossible to detect. Mis-pricing— Transfer pricing — when companies sell goods within their own corporate structure Because of the rapid expansion of corporate monopolies over the past few decades, today at least 60% of the world trade takes place within multinational corporations, rather than between them. Transfer mispricing is easy. Alla a company has to do is write out an invoice that falsely reports the cost of an item, and then get their trade partner to write out a similarly false invoice on the other side— in other words, ‘same-invoice faking*. = By inflating transfer prices, a company can magically move its money from subsidiaries in high-tax countries to subsidiaries in low-tac countries—often in tax havens. = —> because so hard to detect, no one knows the full scale of the problem. = It is likely to be at least as common as re-invoicing since so easy to get away with. The biggest loser in this game = Africa. Already the poorest region, sub-Saharan Africa suffers total illicit outflows that amount to 6.1 per cent of its GDP. Page 51 of 66 Africa loses so much through illicit flows that it is effectively a net creator to the rest of the NET RESOURCE TRANSFERS TO AFRICA (BILLIONS OF USD) Usi 0 9 0 a + 0 0 9 a 2 0 9 8 2 s ® ® sa as è è s S S S 8 ® è a a da a aa a a a Sì Ss ss s Sag agg ases ss 3 a a a/a‘A so ga _ I ba ] Il -$60 -$90 -$120 -$150 -$180 Source: Global Financial Integrity world. If we tally up all the types of legal and illegal financial flows, including investment, remittances, debt forgiveness and natural resource exports, were see that Africa sends more money to the rest of the world than it receives. Who is to blame for this? Often, the victim countries are themselves put to blame. But in the past, customs officials in developing countries had the power to prevent misinvoicing. But the WTO argued that this made trade inefficient. Since 1994, Page 52 of 66 —> all of this only partially explain what happened. In 1991, Goldman Sachs bundled commodity futures—including food—into a single index which traders could speculate on. Initially it was in the backwaters. But at first signs of the sub-prima mortgage crisis in 2005, some nervous investors pulled out of mortgage derivatives and pumped their money instead into commodities, which are supposed to be stable even when the rest of the economy falters. —> rampant speculation on commodity features, with effects on prices in real economy. —> inflating of a new bubble (other than housing): food. Continued for several years. In 2011, some 40 million extra people around the world had been plunged into serious hunger. Dramatic knock-on effect: investors seized the opportunity to buy up millions of acres of land around the world for agricultural production, for food and biofuels, in order to take advantage of soaring prices. Countries joined in. —> Land Grabs. = a transfer of at least 500 acres to be converted from smallholder production, collective use, or ecosystem services to commercial activity. = Vulnerable people end up displaces from their land and stripped of their access to food and independent livelihoods. —> estimates vary. Perhaps land equivalent of the size of Western Europe. Not only North looting South: While US is biggest in terms of sheer size of grabs, and UK in number of deals, China and India are not far behind. Land-grabbers are always rich, regardless where they're from. Land-grabbers tend to target regions where people do not have formal legal title to their lands, and where residents are too poor to challenge in the courts. Also, countries with poor governance scores and where local corruption means the deals can be concluded quickly and quietly. —> inverting assumption that good governance attracts foreign investment (remember Ferguson!!). 66% of land that was grabbed between 2000-2010 in Africa. 4% of continent's total land mass. = much of land is technically owned by the state— a holdover from the colonial era when European governments simply appropriated vas swathes of land for themselves through legal writ. = This makes it easy for politicians and bureaucrats in Africa to sell or lease land to foreign investors. = Many cases: both sides party to obvious corruption. = Actual inhabitants end up bearing the real cost. Homes, resources, livelihoods and communities. In 2012 in Liberia, 75% of the country's land was in the hands of large investors in 2012, while 24% of Liberian children were malnourished. The G8 and more than 200 of the world's biggest agribusiness corporations (including Coca-cola) took the opportunity to launch a new wave of land grabs on putatively humanitarian grounds. Page 55 of 66 = the New Alliance for Food Security and Nutrition —> set out to lift 50 million people out of poverty over the next 10 years through inclusive and sustained agricultural growth. = Cost: African countries that agree must change their laws in order to ‘facilitate’ access to land for foreign firms. Cutting corporate tax rates, easing export regulations, extending length of leases, and setting aside huge chunks of prime agricultural land for agribusinesses. = In Còte-d'ivoire these deals will, according to a 2013 report by the watch-dog group GRAIN, displace tens of thousands of peasant rice farmers and destroy the livelihoods of thousands of small traders. —> the very people that the G8 claims will be the primary beneficiaries of its New Alliance. While biofuel and food production may be the biggest drivers, also: = rainforests - Papa New Guinea = Sugar production - Cambodia = South East Asia - rubber plantations. = Also for sake of tourism! Land grabbing is now also being conducted in the name of the most progressive cause of this century: climate change mitigation. deforestation contributes 20 percent of total global greenhouse gas emissions. = May seem like a good stem. In practice: lead to the forced eviction of indigenous communities from forests on the basis that their farming practices contribute to deforestation. REDD also incentivises a new wave of land grabs: corporations and states pushing to buy up forests in developing countries in order to cash in on payouts —> carbon colonialism. In many of these deals, land is sold at fire-sale prices — far below its actual value. Examples from Ethiopia and Peru show that investors end up paying around $0.50 per acre per year, or even as little as $0.30 per acre. Even at conservative estimates, the real value of land on the international market is probably closer to about $600 per acre per year. —> consider also value to be made off the land in an era of high food prices. Most of the investors involved are capable of avoiding tax systems altogether, making it unlikely that significant benefits in terms of tax revenue will ever materialise. The Climate Changers = the eight costliest typhoons in Philippines history have all occurred since 2008, exacting a total toll of nearly $6 billion. While developed countries are responsible for about 70% of greenhouse emissions, they bare only 12 of the costs of climate change. Also deaths. 98% of climate change induced deaths happen in developing countries. 83% in the countries with the lowest carbon emissions in the world. Why are consequences of climate change so unevenly distributed? Page 56 of 66 = climate change is causing rainfall gradually to shift up North. = Disease. In Africa, many cities and towns are built intentionally just above the ‘malaria line’ — just high enough to escape the reach of malaria-bearing mosquitoes. As the weather warms, mosquitoes are able to move into altitudes that were previously uninhabitable for them. By 2030, an additional 90 million Africans could be exposed to malaria. Increase in dengue fever and Zika virus also associated with climate change. Governments are still subsidising the fossil fuel industry to the tune of $5.3 trillion per year, according to the IMFs most recent estimates, while perversely using the WTOS court to knock down subsidies for alternative technologies such as solar panels. PART FOUR. CLOSING THE DIVIDE. In the end, nothing is actually changed. And once the humanitarian's urge to help is satisfied, they are unlikely to devote any further effort to thinking about the problem or wrestling with its real causes - it defuses their will for change. Wilde argues that charity not only distracts our attention from the ultimate causes of poverty (from the rot at the centre of the system) — it aslo obscures the nature of the problem from those who suffer from it. By smoothing over the contradictions of a deeply flawed system, charity allows the system to continue a little bit longer. Usually this is unintentional on the part of the humanitarian. But sometimes charity is specifically designed with this end in mind. Some scholars have pointed out that food aid from the West, for example, is carefully calculated to prevent the worst famines, to ensure that people receive at least enough calories to stay alive, because otherwise the injustices of the global economic system would become so apparent that its legitimacy would collapse and political upheaval would almost certainly ensue. On this point Wilde makes another critical intervention: “It is immoral to use private property to alleviate the horrible evils that result from the institution of private property,’ he writes. ‘It is both immoral and unfair.’ Fairness is better than charity. In the absence of fairness, charity carries the whiff of a scam. The same argument applies to official Western aid. If the US government wants to reduce global poverty, perhaps instead of doling out aid it should work to end structural adjustment, the tax evasion system and unfair trade laws - some of the major forces that cause poverty in the first place. Poverty is created by a system that has been carefully designed to benefit some - rich nations, multinational corporations, powerful individuals - at the expense of most of the rest. The official narrative tries to obscure this fact and distracts our attention away from it. It pushes us to focus on apolitical solutions like aid, without addressing underlying causes. /t makes the takers in the system seem like givers, and enjoins us to celebrate their generosity. And it tries to convince us that global poverty can be solved without any substantive changes to the status quo. Development will only ever make sense if we begin to change the rules that produce poverty in the first place - if we begin to dismantle the architecture of upward redistribution that defines the world system. Five ideas for evolving towards a fairer global economy: Page 57 of 66 For a global labour market, we need a global system of labour standards, too. Current recommendation: set it at 50% of each country's median wage, although by necessity above the national poverty line. = tailored to local economic conditions, costs of living, and purchasing power. Bureaucratic nightmare? Can be governed by the UN's ILO —> itself claims that it has the will and capacity to do so. Reclaiming the commons Dealing with the three mechanisms of plunder 12. Tax Evasion 13. Land Grabbing 14. Climate Change —> Reclaiming public resources and protecting the commons First: Tax Evasion = the most effective way to improve domestic tax collection — change the WTO's customs invoicing standards, which presently make it very easy for companies to steal money through trade misinvoicing and transfer mispricing. = Close down the secrecy jurisdictions that serve as tax havens in the first place. = Require multinational companies to report their profits in the countries where their economic activity actually takes place, rather than the current practice of providing a single consolidated balance sheet for all operations and filing it in a separate low- tac jurisdiction. = —> we could prevent tax evasion through transfer mispricing b taxing multinationals as single firms rather than as a collection of independent subsidiaries. = Impose a global minimum tax on corporations. = It would also put a floor on competition between countries in their race to attract investment by offering ever-lower taxes. = Introduce harsh penalties for bankers and accountants who facilitate tax evasion and other illicit flows. Then: Land Grabs = place moratorium on all deals that involve major transfers of land from small farmers, collective use or ecosystem services to commercial use, until such deals can b conduced transparently and with the full involvement of affected communities. = To get at root of problem (since sparked by potential profits from rising food prices) —> preventing financial firms and investors from speculating recklessly on food. = This would not only prevent harmful land grabs but also would help keep food affordable. In regards to the New Alliance for Food Security and Nutrition...risks increasing hunger. Page 60 of 66 The weight of evidence suggests that the best strategy is the opposite: land reform in favour of the small farmers whose produce already feeds the vast majority of the world's population. —> Indeed, this is how China eradicated so much hunger during the 1990s. Re-evaluate the UN REDD programme (using land grabs to protect areas from deforestation). Make sure they do not force off people who inhabit land in the name of climate change mitigation. Last: Climate Change. 1.5°C goal is no longer an option. Perhaps possible to keep below 2°C. = rich countries have to hit zero carbon emission by 2035, poor countries by 2050. Bizarelly, the Paris Agreement makes no reference to fossil fuels or fossil fuels companies — a fatal oversight. = end subsidies for fossil fuel companies, currently of $5.3 trillion per year. = —> make it less competitive compared with renewable alternatives. = Advance this further by reinvesting the $5.3 trillion in renewables. Also, ensure due compensation to developing countries for the damage caused by climate change. Proposed method: would not require a single dollar of foreign aid. NINE. THE NECESSARY MADNESS OF IMAGINATION. GDP as measurement invented by Simon Kuznets and Keynes. Kuznets did not want to include advertisement, commuting, and policing since they do not in any way make our loves better, but Keynes did, and he won. Of course, there's nothing inherently wrong with measuring some things and not others. GDP itself doesn't have any impact in the real world. GDP growth, however, does. As soon as we start focusing on GDP growth, = we're not only promoting the things that GDP measures, = we're promoting the indefinite increase of those things. = We started to do this in the 1960s. = GDP came into widespread use during the Cold War for the sake of adjudicating the grand pissing match between the West and the USSR. Suddenly, politicians on both sides became feverish about promoting GDP growth. » Kuznets was careful to warn that we should never use GDP as a normal measure of economic success, for it would incentivise too much destruction. = And yet that is exactly what we began to do - and then it was swiftly pushed around the rest of the world by the World Bank and the IMF. Today, nearly every government in the world, rich and poor alike, is focused obsessively on the single objective of increasing GDP growth. We face a near depletion of: = Minerals = Fish = Wildlife Page 61 of 66 = Soil In the US GDP has risen steadily over the past half-century, yet median incomes have stagnated, the poverty rate has increased and inequality has grown. The same is true on a global scale. While global real GDP has nearly tripled since 1980, the number of people living in poverty, below $5 a day, has increased by more than 1.1 billion. Why? = pasta certain point, GDP growth begins to provide more negative outcomes than positive ones. = There are no longer any frontiers where accumulation doesn't directly harm someone else by, say, enclosing the land, degrading the soils, polluting the water, exploiting human beings or the climate. = We have reached the point where GDP growth is beginning to create more poverty than it eliminates. Around the world it means longer working hours, more expensive housing, depleted soils, polluted cities, wasted oceans and—above all—climate change. We do not continue destroying the world because humans are inherently destructive, it is because we have created a rule that encourages us to behave in destructive ways. «What we measures informs what we do. If we measure the wrong thing, we're going to do the wrong thing.» ...aS long as GDP growth remains the main objective of the global economy, the solutions we covered in the previous chapter may prove to be impossible to achieve. The pressure to increase GDP translates into pressure for more debt, more structural adjustment, more ‘free trade' and so on, as the system groans and writhes in a desperate search for frontiers of accumulation, more things to be monetised. It is necessary for the very continuation of our economy's existence - at least as the economy is presently organised. Livestock farming alone contributes more to global warming than all the cars, trains, planes and ships in the world. Not enough to switch to 100% clean energy. We would still raze more forests, build more meat farms, expand industrial agriculture, produce more cement and heap up more landfills with waste from the additional stuff. Because our system demands exponential growth. The Degrowth Imperative How can we eradicate poverty if we're already bumping up against our ecological limits? = let's accept that poor countries will need to use a portion of this carbon budget in order to grow their incomes enough to eradicate poverty; after all, we know that for poor countries human development requires an increase in emissions, at least up to a relatively lowish point. Page 62 of 66 money to increase wages or protect the environment in a manner that results in decreased shareholder returns, they can't, for it is effectively illegal to do so. Second step: deal with debt. Sovereign debt pushes governments to push GDP growth because they have to, in order to pay compound interest. = cancel all sovereign debt, and private debt? — only a short-term fix. Root problem: the global economic system runs on money that is itself debt. Banks are only required to hold reserves worth about 10 per cent of the money they lend out...So where does that extra money come from, if it doesn't actually exist? The banks create it out of thin air. They loan it into existence. About 90 per cent of the money that is presently circulating in our economy is created in this manner. In other words, almost every single dollar that passes through your hands represents somebody 's debt. And every dollar of debt has to be paid back with interest - with more work, more production or more extraction.!! —> abolish debt-based currency altogether. = have state create money instead of commercial banks. Money could be spent in the economy instead of being lent out to the economy. = The responsibility for money creation could be placed with an independent agency that is democratic, accountable, and transparent. = Banks would still be able to lend money, but they would have to back it with 100% reserves, dollar for dollar. —> in the UK a campaigning group called Positive Money promotes this. IMF economists have proposed this, too, in 2012. This would do much to liberate us from the tyranny of growth. But how to downsize aggregate consumption? 15. Abolish advertisement. At least in public spaces. Another, more aggressive option is to replace advertising with public messaging that encourages reduced consumption. China is pioneering this approach in its new campaign to cut the country's meat consumption in half by 2030 - a widely celebrated strategy for reducing greenhouse gas emissions. 16. Ban particularly unnecessary and destructive products, like bottled water. Other ways: = regulating credit cards = Raising taxes on luxury products What about jobs? Reduce working week, to 30 or 20 hours. = promotion of job-sharing. Working less means having more time to: Page 65 of 66 = caring for young or elderly relatives = Growing own food, = Doing own cooking, cleaning, gardening —> activities that we often end up outsourcing to companies. = Get to know your neighbours —> sharing skills and possessions. Introduce basic minimum income. Over the past decade, we've amassed an extraordinary amount of data showing that direct cash transfers to poor people in the global ISouth is the single most effective way to reduce poverty. In the US and Europe, useful for other purposes. = it would sooth out gross levels of inequality = Equality reduces the pressure for economic growth. = One of the reasons why economic growth is so appealing to politicians is that it allows them to sidestep the thorny problem of distribution. As the pie is growing there's less pressure to redistribute existing resources. = Growth is a substitute for equality, and equality is a substitute for growth. How can a basic income be funded? = progressive taxes on commercial land use = Taxes on capital gains = Foreign currency transactions and financial transactions Tax the $32 trillion of private wealth that is presently hidden away in offshore tax havens, and use the proceeds for direct cash transfers. —> Regenerative farming —> switching from intensive industrial farming to more ecological methods. A soils recover, they not only regian their capacity to hold Co2, tehy begin to actively pull additional CO2 out of the atmosphere. —> new research says sequestration rates could be as highs 40%, and if we apply regenerative techniques to the world's pastureland as well, we could capture more than 100% of global emissions. Regenerative farming holds out a first-step solution to our crisis that doesn't require shiny new technology. Rather, it requires remembering some of the ancient wisdom that got our species through the last 200,000 years, and which may be our only hope of getting through the next 200,000: the knowledge that our existence is tied up with the existence of all other living things. Across Latin America, indigenous activists have brought the concept of ‘sumak kawsay' to prominence - an indigenous Quechua term that translates as ‘living in harmony and balance”. Instead of the Western model of development, which relies on a deep conceptual distinction between subject and object, self and other, humanity and the natural world, sumak kawsay calls us to recognise that we are interconnected, that we are part of a whole, that our well-being is inextricable from that of our ecosystems. This philosophy rejects the linear thinking that lies at the heart of the industrial development model, and calls us to think more relationally. —> Frankfurt school??? Page 66 of 66