Background

In his book The End of Poverty: How We Can Make it Happen in Our Life Time, Jeffey Sachs, Director of The Earth Institute at Columbia University and director of the UN Millennium Project, tells us that

‘Western governments enforced draconian budget policies in Africa during the1980s and 1990s. The IMF and World Bank virtually ran the economic policies of the debt-ridden continent, recommending regimens of budgetary belt tightening known technically as structural adjustment programs. These programs had little scientific merit and produced even fewer results. By the start of the 21^st century Africa was poorer than during the late 1960s, when the IMF and World Bank had first arrived on the African scene, with disease, population growth, and environmental degradation spiraling out of control.’

 

Progress towards the Millennium goals

In the International Herald Tribune of September 25, 2008 there was an article on the fast-fading world of good intentions in which we were reminded that world leaders pledged, at the turn of the Millennium, to cutting extreme global poverty in half with a 2005 pledge of assistance of $130 billion by the year 2010. “Aid from the world’s developed countries fell by almost 13% between 2005 and 2007 – to under $104 billion, after inflation. The aggregate aid budget of the most developed nations amounts to 0.28% of their gross national income, woefully below the target of 0.7% agreed by world leaders in 2002. The United States, shamefully, is at the bottom of the list, spending 0.16% of its income on development assistance.”

Priorities

In the same issue of the International Herald Tribune, there were also articles on the $700 billion bailout plan for the financial system and the bitter struggle over outsize pay. $700 billion given without batting an eyelid to the financial failures, but no petty cash to honor the pledge to fighting the war on poverty. Plenty of money for the super-rich to enjoy outrageous salaries, but not a dime to spare for those on a dollar a day.

 

The rich get richer while the poor get poorer

The UN’s Food Development Report has produced evidence that the world’s richest 358 billionaires have a wealth equivalent to the combined income of 45% of humanity or 2.3 billion people. In 1960, the richest one-fifth had 70% of global wealth. By 1990, their share had grown to 80%. The poorest one-fifth saw their wealth drop from 2.5% to 1.4% over the same period. The wealthy and the privileged few, indifferent to or unconcerned with economic and social injustice, remain intent on protecting their privileges, consolidating their power, and isolating themselves from the suffering and deprivation that is to be seen everywhere.

In The Creation of World Poverty Teresa Hayter details how the wealthy countries of North America and Europe have enriched themselves at the expense of their colonies and dependencies.

 

THE CREATION OF WORLD POVERTY

TERESA HAYTER

Pluto Press in association with Third World First

Second edition 1990

PART II

 

Chapter 1: Survival

There is these days much talk of ‘survival’. The human species appears to be in unprecedented danger, the scene set for nuclear holocaust. In addition, and no less seriously, over half a billion people, most of them living in Asia, Africa and Latin America, are threatened with, if not death, at least a life of semi-starvation. The authorities in the industrialized countries of the West are beginning to link this latter phenomenon with their own survival: hence the publication of the Brandt Commission’s Report, North-South: A Programme for Survival. Unlike the international reports which have preceded it, this one has attracted some continuing attention, much of it uncritical. The book has sold nearly a hundred thousand copies in 1980 in Britain alone.

• The concern in the West with extreme poverty in under-developed countries has been intermittent at best.
• Many of those who support the proposals of the Brandt Report, especially for more ‘aid’, do so out of genuine humanitarian concern about poverty.
• The Brandt Commission Report represents currently the most enlightened expression of establishment thinking about international economic matters, and, in particular, about the provision of so-called ‘aid’ to developing countries.

But it would be a mistake to think of its authors as primarily or exclusively concerned with the alleviation of poverty in those countries. They are, instead, primarily concerned with the preservation of the existing world economic order. There are nevertheless two important differences between the current and previous states of establishment opinion: first, extreme poverty in underdeveloped countries is now seen as a real threat to the survival of the system rather than as something to be dealt with by occasional philanthropic gestures; and, second, a response is required to the current crisis in the world economy.

The reasons for the first change are not hard to find. In practically every country in the world, there are forces rebelling against the empty promises of political independence, demanding genuine independence and real economic progress, increasing aware that, just as they were robbed in the past by their colonial rulers, so now they are being robbed by an alliance between these old colonial rulers, some new neo-colonial ones and their own ruling classes. These rebellions have led to quite fundamental changes in social organization in some parts of the world and to the closing of some countries to profitable investment.

• The problem of containing the disaffection of the poor through military means has been shown most clearly by the failure of the United States war in Vietnam.
• Although this can usually be left to local armed forces, as was the case in Chile, these forces are massively armed and assisted by the West.

Reforms, in the sense of some alleviation of the harshness of the economic system, could be another way of stabilizing this system and it is precisely this that the Brandt Commission Report is proposing: ‘all the lessons of reform within national societies confirm the gains for all in a process of change that makes the world a less unequal and a more just and habitable place.’ The Report’s plea for ‘a world based less on power and status, more on justice and contract’ have a genuine ring: ‘the idea of a community of nations,’ it says, ‘has little meaning if hunger is regarded as a marginal problem which humanity can live with.’ But the members of the Brandt Commission were all, with the semi-exception of Dragoslav Avramovic, nationals of capitalistic countries and, many of them, notable beneficiaries of the capitalist system.

• It is clear that their implicit model is the ‘mixed economy’ of social democracy.
• They are not interested in solutions that are incompatible with the private ownership of the means of production, however necessary and inevitable such solutions may be.

The shift in international orthodoxy is to be found not only in the Brandt Report. It is embodied in numerous reports from the United Nations and other international agencies, especially World Bank publications and the International Labour Organisation’s publications on ‘basic needs’, and books such as the World Bank-sponsored Redistribution with Growth, Assault on World Poverty, and so on. These criticize the failure of past aid policies to achieve any reduction of poverty in the Third World and argue for greater attention to the needs of the very poor.

• By the end of the seventies, the Brandt Report says, ‘the world economy was in serious difficulties, and the institutional framework which had served it since the war was inadequate to resolve them’.
• At a time when governments have discovered the unworkability of the Keynesian model for internal purposes, the Brandt Report proposes a kind of international Keynesianism: the industrialized countries should transfer funds to developing countries to ‘prime the pump’ by increasing their ability to import from the industrialized countries.
• The Brandt report is strongly opposed to trade protection, including protection against exports from underdeveloped countries to developed countries.
• There is also much anxiety bout the availability of raw materials, preferably cheap, from underdeveloped countries.

The particular problems of oil supplies has further ramifications. The West has somehow to ensure that the OPEC countries continue to produce and export quantities of oil which produce revenues beyond these countries’ current financial needs, rather than preserving their reserves to ensure a steady income from oil in the future.

• Attractive forms of investment must be found for them abroad. Much of the oil money (so-called petrodollars) has so far been put in North American international banks and these banks, unable to lend their funds on a sufficient scale in developed countries because of the recession, have found willing borrowers in developing countries.
• This has created its own problems because most of the borrowers are already heavily indebted.
• The danger of default by the governments of underdeveloped countries looms over the international financial system, threatening to bring it down like a pack of cards.

An examination of the Brandt Report would in fact show that these latter problems are those to which it devotes the most space, and for the resolution of which it has the most detailed and concrete proposals. Thus its proposals for reform are designed first and most crucially to ensure that the existing world economic system functions smoothly. Second, if possible, the reforms are to be designed in such a way that they achieve some alleviation of extreme poverty in underdeveloped countries. But the Report, like most of the orthodox literature on development, notably omits to explain why poverty exists in the first place. If it attempted such an explanation, it might come to the embarrassing conclusion that the poverty is caused precisely by the economic system which its proposals are supposed to protect.

Chapter 2: Extremes of Poverty and Wealth