A preview of the unpublished book A CIVILIZATION WITHOUT A VISION WILL PERISH: AN INDEPENDENT SEARCH FOR THE TRUTH by David Willis. CHAPTER 1: INDIFFERENCE (Part 21). This blog is a continuation of review of The Creation of World Poverty by Teresa Hayter, published in 1990.
Extremely low wages
Very large numbers of people are separated from their means of subsistence, are landless or severely impoverished, and have no alternative to seeking employment in the ‘modern’ sector of the economy. Massive unemployment, underemployment and migration from impoverished rural areas into cities in search of employment have become the most obvious features of current forms of underdevelopment. All these factors have made it possible for Europeans and now for multinational companies of the West to pay extremely low wages in what are now the underdeveloped countries.
Trade unions were are crushed
Attempts to organize trade unions were, and are, crushed. Whereas by the mid-twentieth century workers in Europe and the United States had managed to win some rights and some improvement in conditions and wages, in the colonial and semi-colonial areas conditions remained similar to those of super-exploitation which existed in the earlier stages of European industrialization. It is sometimes argued that the differences can be accounted for by differences in productivity. But the fact is that they exist even when the physical output per worker is the same as, or higher than, in similar industries in the developed countries.
The exchange is an unequal one
Such disparities in wage levels have given rise to the idea of ‘unequal exchange’ as an explanation of underdevelopment. The theory suggests that, since the exports of underdeveloped countries are produced at very low wages and their imports of mainly manufactured goods from Europe and North America are produced at higher wages, the exchange is an unequal one. It can be argued that the low wages paid to workers in underdeveloped countries amount to a transfer of capital from underdeveloped countries to developed countries in the sense that many of the employers whose profits are thereby increased are foreigners who transfer the profits abroad.
Chapter 13: Terms of Trade
Another way of looking at unequal exchange is to say that it involves the exchange of goods produced at a low level of technology with goods produced at higher levels of technology. Those in possession of higher levels of technology are likely to have an advantage and to be able to command higher prices for their products, just as skilled workers can get higher wages than unskilled workers. Markets are dominated by the big companies of the developed countries and it is difficult for newcomers to enter them. The prices charged for manufactured goods are to some extent monopoly prices, and in any case they rise steadily over time.
Barriers against ‘cheap imports’ from underdeveloped countries
The governments of developed countries still exert pressures on underdeveloped countries to open their markets to the manufactured goods of developed countries, for example through the imposition of conditions of loans from the International Monetary Fund (IMF); yet they themselves put up barriers against ‘cheap imports’ from underdeveloped countries which might compete with their own manufacturing industries. They also impose discriminatory tariffs, quotas and freight rates to deter underdeveloped countries from processing their primary products before they export them.
Attempts to organize producers’ cartels have not been successful
Underdeveloped countries compete for limited markets for products such as tea, coffee, sugar and rubber, and they have been unable to control the prices paid for them. A notable exception has been oil, whose producers were able to organize in OPEC (Organization of Petroleum Exporting Countries) and increase the price paid to them sixfold between 1972 and 1974. Some other attempts have been made to organize producers’ cartels, for example in bananas, cocoa and bauxite, but they have not been very successful.
Three more problems
In general the cash crops of underdeveloped countries have been ‘false riches’. Underdeveloped countries, producing mainly primary commodities and raw materials for the developed countries, have three more problems: the prices for their primary commodities and raw materials not only decline in relative and sometimes in absolute terms, but they fluctuate widely from year to year; their economies are highly dependent on exports; and many of them are also dependent on the export of a few, sometimes one or two, commodities. In the mid-1970s, the price paid for sugar dropped from 64 cents a pound to 6 cents a pound in 18 months. Between 1975 and 1976 the value of Brazil’s sugar exports to the United States dropped from $100 million to zero.
Really effective pressure so far has been that of OPEC
When underdeveloped countries are confronted with such situations, they either have to cut their consumption further still or, if they can, they borrow, which only makes their foreign exchange problems worse in the future. Since the 1960s the governments of underdeveloped countries have been pressing for better treatment in their trade with developed countries. Such appeals to the better feelings of the governments of developed countries have met with little response. The possessors of privileges, especially if they are governments or private companies, do not usually give them away except under pressure, and the only really effective pressure exercised so far in this field has been that of OPEC.