Jason Hickel: The Divide: A Brief Guide to Global Inequality and Its Solutions

Today, some 4.3 billion people — more than 60 percent of the world’s population — live in debilitating poverty, struggling to survive on less than the equivalent of $5 per day (which is the mean average of all the national poverty lines in the Global South). Half do not have access to enough food. And these numbers have been growing steadily over the past few decades.

With these data, Jason Hickel, an anthropology professor and global development expert, starts his controversial book, The Divide: A Brief Guide to Global Inequality and Its Solutions, in which he meticulously and convincingly debunks the narrative told by the UN and the likes of Bill Gates and Steven Pinker. In fact, while the good-news story leads us to believe that poverty has been decreasing around the world, in reality the only places this holds true are in China and East Asia. And these are some of the only places in the world where free-market capitalism was not forcibly imposed by the World Bank and the IMF, allowing these governments to pursue state-led development policies and gradually liberalize their economies on their own terms.

Development agencies, NGOs and the world’s most powerful governments explain that the plight of poor countries is a technical problem — one that can be solved by adopting the right institutions and the right economic policies, by working hard and accepting a bit of help. As Hickel writes: “It is a familiar story, and a comforting one. It is one that we have all, at one time or another, believed and supported. It maintains an industry worth billions of dollars and an army of NGOs, charities and foundations seeking to end poverty through aid and charity.” But it’s against this narrative that Hickel takes aim.

ECONOMIC UNEQUAL EXCHANGE OVER THE CENTURIES

The main argument presented in the book is that the discourse of aid distracts us from seeing the broader picture. It hides the patterns of extraction that are actively causing the impoverishment of the Global South today and actively impeding meaningful development. “The charity paradigm obscures the real issues at stake: it makes it seem as though the West is ‘developing’ the Global South, when in reality the opposite is true. Rich countries aren’t developing poor countries; poor countries are effectively developing rich countries — and they have been since the late 15th century,” argues Hickel.

In the book it is laid bare for all to see that underdevelopment in the Global South is not a natural condition, but a consequence of the way Western powers have organized the world economic system.

It’s not that the $128 billion in aid disbursements that the West gives to the Global South every year doesn’t exist — it does. But if we broaden our view and look at it in context, we see that it is vastly outstripped by the financial resources that flow in the opposite direction.

If all of the financial resources that get transferred between rich and poor countries each year are tallied up, we find that in 2012, the last year of recorded data, developing countries received a little over $2 trillion, including all aid, investment and income from abroad. But more than twice that amount, some $5 trillion, flowed out of them in the same year. In other words, developing countries “sent” $3 trillion more to the rest of the world than they received.

What do these large outflows from the Global South consist of? “Well, some of it is payments on debt. Today, poor countries pay over $200 billion each year in interest alone to foreign creditors, much of it on old loans that have already been paid off many times over, and some of it on loans accumulated by greedy dictators,” states Hickel. Another major contributor is the income that foreigners make on their investments in developing countries and then repatriate. Think of all the profits that Shell extracts from Nigeria’s oil reserves, for example, or that Anglo American pulls out of South Africa’s gold mines.

But by far the biggest chunk of outflows has to do with capital flight. A big proportion of this takes place through “leakages” in the balance of payments between countries. Another takes place through an illegal practice known as “trade misinvoicing.” Basically, corporations report false prices on their trade invoices in order to spirit money out of developing countries directly into tax havens and secrecy jurisdictions. A similarly large amount flows out annually through “abusive transfer pricing”, a mechanism that multinational companies use to steal money from developing countries by shifting profits illegally between their own subsidiaries in different countries. But perhaps the most significant loss has to do with exploitation through trade.

Hickel explains that “from the onset of colonialism through to globalization, the main objective of the North has been to force down the cost of labor and goods bought from the South. In the past, colonial powers were able to dictate terms directly to their colonies. Today, while trade is technically “free,” rich countries are able to get their way because they have much greater bargaining power.” On top of this, trade agreements often prevent poor countries from protecting their workers in ways that rich countries do. And because multinational corporations now have the ability to scour the planet in search of the cheapest labor and goods, poor countries are forced to compete to drive costs down. As a result of all this, there is a yawning gap between the “real value” of the labor and goods that poor countries sell and the prices they are actually paid for them. This is what economists call “unequal exchange.”

Since the 1980s, countries of the West have been using their power as creditors to dictate economic and trade policies to indebted countries in the South, effectively governing them by remote control, without the need for bloody interventions. “Leveraging debt,” argues Hickel, “they imposed “structural adjustment programs” that reversed all the economic reforms that Global South countries had painstakingly enacted in the previous two decades. In the process, the West went so far as to ban the very protectionist and Keynesian policies that it had used for its own development, effectively kicking away the ladder to success.”

DEGROWTH FOR SUSTAINABLE AND FAIR LIVELIHOODS

Hickel then ponders over how — if these unfair trade and business practices were amended — poor countries could actually go about developing their economies following the same path as the one embraced by the Global North over the past two centuries. He references a study by the economist David Woodward in which the latter shows that given our existing economic model, poverty eradication can’t happen. Not that it probably won’t happen, but that it physically can’t. It is a structural impossibility.

He explains that:

Right now, the main strategy for eliminating poverty is to increase global GDP growth. The idea is that the yields of growth will gradually trickle down to improve the lives of the world’s poorest people. But all the data we have shows quite clearly that GDP growth doesn’t really benefit the poor. While global GDP per capita has grown by 65 percent since 1990, the number of people living on less than $5 a day has increased by more than 370 million. Why does growth not help reduce poverty? Because the yields of growth are very unevenly distributed. The poorest 60 percent of humanity receive only 5 percent of all new income generated by global growth. The other 95 percent of the new income goes to the richest 40 percent of people. And that’s under best-case-scenario conditions.

Given this distribution ratio, 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. To eradicate poverty at $5 a day, global GDP would have to increase to 175 times its present size. In other words, we need to extract, produce and consume 175 times more commodities than we presently do. It is worth pausing for a second to think about what this means. Even if such outlandish growth were possible, the consequences would be disastrous. We would quickly chew through our planet’s ecosystems, destroying the forests, the soils and, most importantly, the climate.

According to data compiled by researchers at the Global Footprint Network in Oakland, our planet only has enough ecological capacity for each of us to consume 1.8 “global hectares” annually — a standardized unit that accounts for resource use, waste, pollution and emissions. Anything over this means a degree of resource consumption that the Earth cannot replenish, or waste that it cannot absorb; in other words, it locks us into a pathway of progressive degradation. The figure of 1.8 global hectares is roughly what the average person in Ghana or Guatemala consumes.

By contrast, Europeans consume 4.7 global hectares per person, while in the US and Canada the average person consumes 8 — many times their fair share. To get a sense of how extreme this overconsumption is: if we were all to live like the average citizen of the average high-income country, we would require the ecological capacity equivalent to 3.4 Earths. Hickel elaborates:

Scientists tell us that even at existing levels of aggregate global consumption we are already overshooting our planet’s ecological capacity by about 60 percent each year. And all of this is just at our existing levels of aggregate economic activity — with the existing levels of consumption in rich and poor countries. If poor countries increase their consumption, which they will have to do to some extent in order to eradicate poverty, they will only tip us further towards disaster. Unless, that is, rich countries begin to consume less.

If we want to have a chance of keeping within the 2°C threshold — which the Paris Agreement on climate change sets as an absolute cap — we can emit no more than another 805 gigatons of CO2 at the global level. Now, 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. This principle is already widely accepted in international agreements, which recognize that all countries have a “common but differentiated responsibility” to reduce emissions. Because poor countries did not contribute much to historical emissions, they have a right to use more of the carbon budget than rich countries do — at least enough to fulfill basic development goals (as I also argue in this article). This means that rich countries have to figure out how to make do with the remaining portion of the budget.

Professor Kevin Anderson, one of Britain’s leading climate scientists, has been devising potential scenarios for how to make this work. If we want to have a 50 percent chance of staying under 2°C, there’s basically only one feasible way to do it — assuming, of course, that negative emissions technologies is not a real option. In this scenario, poor countries can continue to grow their economies at the present rate until 2025, using up a disproportionate share of the global carbon budget. That’s not a very long time, so this strategy will only work to eradicate poverty if the gains from growth are distributed with a heavy bias towards the poor.

As Hickel writes: “The only way for rich countries to keep within what’s left of the carbon budget is to cut emissions aggressively, by about 10 percent per year. Efficiency improvements and clean energy technologies will contribute to reducing emissions by at most 4 percent per year, which gets them part of the way there. But to bridge the rest of the gap, rich countries are going to have to downscale production and consumption by around 6 percent each year. And poor countries are going to have to follow suit after 2025, downscaling economic activity by about 3 percent per year.” This strategy of downscaling the production and consumption of a country is called “degrowth.”

Hickel describes this visionary idea as follows: “All it means is easing the intensity of our economy, cutting the excesses of the very richest, sharing what we have instead of plundering the Earth for more, and liberating ourselves from the frenetic consumerism that we all know does nothing to improve our wellbeing or happiness.” And since the book first came out in 2017, Hickel has been developing an increasingly clearer position on how we can go about making such changes happen.

His thinking on degrowth was recently encapsulated in a captivating blog exchange he had with Branko Milanović, another global development expert. But Milanović still maintains that economic growth should be at the core of poverty relief. Paraphrasing a passage from Kate Raworth’s Doughnut Economics, we could summarize Milanović’s position as “economic growth is still necessary, and so it must be possible,” while Hickel argues that “economic growth is no longer possible, and so it cannot be necessary.” I side with the latter, simply because the laws of physics trump the laws of economics.

In light of this, perhaps we should regard countries like Costa Rica not as underdeveloped, but rather as appropriately developed. We should look at societies where people live long and happy lives at low levels of income and consumption not as backwaters that need to be developed according to Western models, but as exemplars of efficient living — and begin to call on rich countries to cut their excess consumption.

The Divide: A Brief Guide to Global Inequality and its Solutions. Jason Hickel. William Heinemann. 2017.

It is now often thought that extreme poverty is disappearing. That view has far-reaching political implications. If it can be said that the global system ain’t broke, then there is no need to fix it. In The Divide: A Brief Guide to Global Inequality and its Solutions, Jason Hickel attacks our contemporary ‘progress narrative’, arguing that global poverty is both an urgent issue and a direct product of the political order.

The book is written in a highly readable style and is accessible to a non-expert. It provides an overview of the world system and contains three stand-out themes: the persistence of extreme poverty; the environmental impact of global growth; and the claim that charity does little to help.

The Persistence of Extreme Poverty

Hickel lances the contemporary progress narrative surrounding global poverty. If unacceptable poverty is understood as living on $1.25 a day – the success level used by the United Nation’s Millennium Development Goals –  it might reasonably be said that large numbers of people have been lifted up since 1990 (51), taking into account the astonishing state-led growth of China and East Asia.

But even if we accept $1.25 as an aspirational target, because the fruits of global growth are unevenly distributed, it would still take 100 years to eradicate poverty at current rates. It would take an epochal 207 years to eradicate it at a more realistic – but still very low – $5 a day (57). When we account for hunger, the picture is even more bleak. People in low-wage jobs are likely to do calorie-consuming manual work and also suffer from calorie-consuming diseases. Accounting for the high activity levels of the very poor, global malnutrition is also rising (46).

However, the key point for Hickel is not an argument over the data. It is that the statistics chosen to underpin the progress narrative make up the palette of a highly political picture. Framing the world economy in terms of fast improvement justifies the status quo.

The Environmental Impact of Global Growth

Economic growth is only half the story. In order to achieve a future world in which the mass of the world’s poor are lifted to $5 a day – itself a minimal standard – global GDP would have to increase 175 times (57). Even if this is the plan, it is not environmentally possible.

Following current projections, if the planet heats up by 3.7 °c – 4 °c, then Amsterdam and New York would fall under water (248), the Amazon would turn to savannah and global agricultural production would be under the most severe type of stress. As Hickel puts it: ‘I sometimes wonder why anyone is talking about development at all […] when the whole edifice is at risk of collapsing’ (249).

For Hickel, there is no alternative but to abandon global economic growth (287). Expansion in consumption might be restricted to those countries still facing poverty. He argues that this would not be an impossible sacrifice. By way of an example, Costa Rica, with a GDP per capita of only $10,000, has both a longer average life expectancy and a statistically happier population than the United States (289). Using these alternative measures, a very different picture of economic success can be painted.

Charity does Little to Help

The Divide also makes the striking claim that global aid masks the true cause of poverty due to a ‘development delusion’ (10). For Hickel, the benefits of aid transfers are greatly outweighed by the problems caused by sovereign debt (257) and the linked system of ‘remote control’ power. For instance, during the 1980s and 1990s, the International Monetary Fund helped poor countries finance ballooning debts, but only on the condition that they underwent programmes of so-called ‘structural adjustment’ – selling off public industries, opening up to foreign goods and limiting welfare provision (154). This created an increase in global poverty (158).

In the present day, a country defaulting on debt would likely be frozen out of the world financial system and so face economic collapse. It is for this reason that Hickel argues charity is a distraction. In place of aid, he puts forward the view that those poor countries paying ever-expanding compound interest should have their debts straightforwardly written off (260).

Where Next?

The Divide is an extremely clear and well-argued diagnosis of our contemporary economic malaise. It confronts the reader with the impossibility of environmentally sustainable development within the parameters of the current global system and puts forward an optimistic manifesto for change. As Hickel writes: ‘when myths fall apart, revolutions happen’ (13).

However, despite its optimistic manifesto of solutions, evidence of a darker perspective can be found within the book’s own pages. Hickel charts the now centuries-old history of capitalism. He notes that food was exported from Ireland during the seven-year potato famine which began in 1845 (84), and that throughout the later nineteenth century, it was also exported from India despite sustained famine there too (87).

This should make us doubt the link between crisis and change. Neither instance of environmental catastrophe caused a shift towards fairer economics. The logic of the system continued. Commodities were sold in the markets where they had the most value. Producers sought the best prices. Order was largely maintained. The power of the profit motive is of such great strength that even the worst types of failure might not bring about a challenge to the status quo.

While Hickel’s diagnosis is correct – the global economic structure is both unfair and unsustainable – it takes an awful lot to make a patient change their habits.


Dr John Picton is Lecturer in Law at the University of Liverpool, where he is a member of the Charity Law and Policy Unit. He tweets @JohnPicton5Read more by John Picton.

Book review by Mathew D. Rose

The subtitle of Jason Hickel’s book “The Divide” is something of an understatement. The book is neither brief, nor is it a guide. Instead Hickel has written a brilliant and lengthy compendium of the structural inequalities maintaining, even increasing, underdevelopment in poor countries. He has marshalled the newest facts, analyses, and theories concerning economic inequality between rich and poor nations, destroying current myths about development. He brings the reader up to speed with regard to current neo-liberal strategies and their accompanying propaganda to further the dominance of rich nations, or better said their transnational corporations. He does this in a lively narrative over 300 pages.

Hickel, an anthropologist at the London School of Economics, addresses his topic systematically. He begins by exposing the concept of development in the Third World, a rabbit pulled from a hat to pad out the inaugural address of the American president Harry Truman in 1949. The idea caught the imagination of citizens of wealthy nations, not only confirming their superiority ethics and efficiency as advanced economies, but offering them the opportunity to exercise Christian charity. Since then these countries have run with the story, each generation retrofitting it with its own ideological ballast, yet gaming the system of iniquity and inequality.

Current examples are Bill Gate’s foundation, “which profits from an intellectual-property regime that locks life-saving medicines and essential technologies behind outlandish patent paywalls”, or Bono, who has prolifically used the tax haven system “that siphons revenues out of global South countries”. It is the old American Robber Baron philanthropy in hipster garb.

The Author then goes over to myth busting mode. Successes in combatting poverty turn out to be manipulation of data to achieve the desired result, having little to do with reality. If you take China, whose success in reducing poverty has little to do with foreign aid from rich countries, out of the equation, the situation has otherwise further deteriorated. In fact the ”generous” aid provided by wealthy nations is a pittance compared to the wealth being extracted from the recipient countries and flowing into the economies of rich countries or tax haven accounts.

These inequalities were not always there. Hickel continues by reviewing the rise of imperialism, its tools of wealth extraction in the colonies and how this system has been modernised and expanded following the termination of formal colonialism following the Second World War.

Initially the post-colonial era increased development and prosperity in regions of the global South thanks to “devolopmentalism”: Adopting relatively high trade tariffs on foreign goods to nurture domestic industries, restrictions on capital flows, and limiting foreign ownership of national assets. Land reform was often an integral part of the strategy. Politically these countries organised themselves in the Non-Aligned Movement.

As these nations began asserting themselves and nationalising their land and resources, thus threatening the interests of transnational corporations, the “Age of the Coup” began. The Americans, British or French no longer sent their troops and warships to enforce their economic interests. The former colonial masters corrupted the native military, which toppled their democratically elected governments and installed dictatorships. Western nations conveniently ignored these – as long as they did their bidding.

In the course of time coups no longer harmonised with the Western discourse of freedom and democracy in its conflict with the Soviet Union. They developed methods of gentle, but iron-fisted coercion.

Foremost of these is debt. As we recently experienced with Greece, the Third World Debt Crisis was a crisis of Western banks, which had recklessly leant vast amounts of money to developing nations. To save the banks, the International Monetary Fund was rebooted to make the creditor nations prioritise repaying bank loans. It was later joined by the World Bank in enforcing debt repayment. The two institutions imposed “structural adjustment programmes”, consisting of austerity, privatisation, and liberalisation. The damage this did to the people and economy of these nations was irrelevant. Hickel terms this the “invisible coup” because it appears voluntary, a programme approved by democratically elected governments to reintroduce virtuous economic policy. The pernicious results repeated themselves throughout the world. In the meantime this neo-liberal policy has been reimported to the Western, with equally ruinous effect upon the majority of the population. This received an inestimable fillip following the Great Recession.

Other weapons in the arsenal of the rich nations include trade agreements, which have benefitted the industrial nations of the West. The World Trade Organisation institutionalised the enforcement of trade-related aspects of intellectual property rights, which have allowed Western monopolies such as pharma to gouge consumers worldwide.

Another tool is the International Centre for Settlement of Investment Disputes, secret extra-judicial tribunals whose decisions override the laws and courts of sovereign states in furthering the interests of transnational corporations.

A more informal method of bleeding developing nations, but also Western nations, of their wealth has been the creation of tax havens, allowing international corporations to surreptitiously transfer illicit gains around the world, free of control, not to mention taxation.

Hickel concludes with a raft of suggestions for changing this skewered system. Many of these, such as recovering the commons, abolishing investment settlement dispute tribunals and tax havens are just as relevant for wealthy as for developing nations.

The forcefulness of this book lies in the author’s ability to bring together so many elements, including their interdependence, in a trenchant and cogent narrative.

**

Review by Ted Trainer, NSW

Hickle’s discussion of alternatives is disappointing, and I want to suggest more effective options.

The history of inequality; the creation of inequality.

Hickle (2017) begins with a discussion of “development”, conceived by the Truman administration as the solution to Third World hunger and poverty. In recent years it has been taken for granted that enormous gains have been made, lifting hundreds of millions out of despair and cutting the numbers in poverty in half since 1990, but Hickle gives strong case that poverty has not been reduced. He points out that most of the achievement has been in China, and that the gain has been in proportions of populations, not in absolute numbers, which he says for extreme poverty remain at 1 billion.

And that is based on a poverty line that is set far too low. Hickle says that if we measured poverty by a more realistic $5 a day we would find that 4.3 billion are under the line, and we would find that the problem has actually become worse over time. Pritchett of Harvard says the line should be $12.50.

International inequality has also become worse. In 1960 rich world per capita income was 32 times that in poor countries, but by 2000 Hickle says the ratio was 134 to 1. Personal wealth inequality has deteriorated at a far more rapid rate; in 2014 Oxfam estimated that 85 people had half the world’s wealth but by 2017 they say half was held by 8 individuals.

What has the “development” industry done to deal with this threat to its core ideological claim (i.e., that the system is solving the problem so no need to change it)? Easy – set very low hunger and poverty definitions and alter them when required. Consider the official definition of hunger as a yearly average of 1600 – 1800 cal/day, enough for “… a sedentary lifestyle.” Firstly, that means many averaging that intake over a year would have spent much of the year under it, but would not be classified as hungry. Secondly, Hickle points out that a rickshaw operator needs 3000-4000 cal/day. He says a satisfactory definition would mean 1.5 to 2.5 billion are hungry.

He rightly ridicules the “trickle down” rationale for conventional i.e., capitalist development theory. “To eradicate poverty at $5 a day, global GDP would have to increased to 175 times its present size.” (p. 57.)

So the first part of the book constitutes a hefty challenge to the conventional wisdom, showing that “the divide” is enormous and by some indices hardly improving and by others actually getting worse.

In Part 2 Hickle turns to the origins of poverty, surveying the 500-year-long story of the rich dispossessing the poor, primarily via either conquest and theft or by enclosures of various sorts. For instance, enclosures left the Irish poor highly dependent on the potato because it was the only plant they could survive on given the little land they had left at the time of the famine … in which 1 million died … while “Ireland was exporting … shiploads of food to England and Scotland.”

He sketches the same processes in many regions. The British deliberately wiped out Indian manufacturing, especially of textiles which were superior to British produce. As a result “… the centuries-old traditional welfare buffers were destroyed on the basis that they “… interfered with market forces” (p. 86.) (As Hickel points out on p. 185, for four hundred years the British had made sure market forces were not allowed to interfere with their development!) Thus in two major droughts 30 million died…although during the worst years “… they shipped a record 6.4 million tonnes of Indian wheat to Europe.” He reminds us about the forcing open of China and the Opium wars, and the scramble for Africa. He thinks the French were the worst, although the records of the Belgians and the glorious British Empire are pretty hard to beat.

These were the kinds of processes that created the Third World. A few hundred years ago there was little difference in economic performance and per capita “living standards” between Europe and various other regions and the world. There is little mystery in why the Third World became full of poor people suffering primitive economies, tyrants and miserable living conditions.

However in the 1950-70 period there was a remarkable progressive surge, “… a miracle in the South”, a liberation from colonialism and the emergence of “Developmentalism”. This reoriented the use of national resources to national purposes, controlling foreign investment and capital flows, land reform, protecting infant industries via tariffs, and nationalizing resources and industries for development in the interests of the nation. Due to this “postcolonial miracle”, inequality between rich and poor nations began to decline for the first time.

But the rich Western countries didn’t like it. Their access to cheap labour and resources and markets, and lucrative investment opportunities was being undermined. “The governments and corporations of the Western world were not willing to let this happen.” (p.115.) Eisenhower (correctly) saw all this as “…a threat to the commercial interests of American multinational corporations. “ (p. 115.) Thus began what Hickle describes as “The Age of the Coup”, the long list of CIA subversion and military invasions to get rid of non-compliant regimes and install those willing to rule in the interests of the rich.

“Developmentalism” was of course identified as communism, thereby instantly justifying its ruthless elimination. “…pro-poor legislation was demonised in Western media as communist and this designation gave Western governments licence to employ even the most draconian tactics with impunity.” (p. 140.) In fact the unacceptable initiatives had little to do with communism, and few of the leaders behind them and thus assassinated were communists. “…the goal rather, was to defend Western economic interests”. (p. 140.)

Hickel sketches the US, French, British and Portuguese interventions in Guatemala, Brazil, Guyana, Cuba, The Dominican Republic, Nicaragua, Bolivia, Ecuador, Haiti, Paraguay, Honduras, Venezuela, Panama, Indonesia, Ghana, the Congo, Guinea-Bissau and Cape Verde, Angola, Gabon, Cote d’Ivore, and South Africa. African problems are usually attributed to being plagued by corrupt dictators, but “…Africans have been actively prevented from establishing democracies… Western powers have actively thwarted countless attempts at real independence.” (p. 124.)

Enter Neoliberalism.

Hickel then outlines the emergence of the Neoliberal masterstroke, the ideology enabling effortless plunder, without gunboats. Chile was the test bed. Instead of the old strategy of organizing a coup and installing a dictator to rule in our interests with an iron fist, the CIA funded the installation of lots of Chicago trained ”economists” eager to implement free-market doctrine. The outcome was very successful … for the corporate rich and their military friends, but it was a predictable disaster for most Chileans. Chile became and one of the world’s most unequal societies and entered a long period of brutal dictatorship.

But Neo-liberalism was away and running. The US promoted it in many other countries, preferably dictatorships as it proved somewhat difficult to get free people to accept policies that transferred national wealth from them to the rich. Hickel’s Part 3 is about “The New Colonialism.”

He goes on to summarise the triumph through the Thatcher and Reagan years, and especially through the brilliant strategies implemented by the IMF and World Bank. The oil price hikes of the 1970s saw large amounts of money flowing into banks that didn’t know what to do with it all … until someone got the bright idea of seducing Third World leaders into borrowing heavily. Before long huge debts had accumulated, via unwise projects undertaken and much siphoned off in corruption, and then Federal Reserve chairman Volker hiked interest rates to 21%, skyrocketing debts and leaving no chance of paying them off. Bank profits soared to $100 billion p.a.

Enter the Structural Adjustment Packages, whereby new loans would be granted to solve debt repayment problems, but on condition that recipients geared their economies to Neoliberal policies. Thus, deregulate, get rid of impediments to business and foreign investment and trade, eliminate tariffs and protection for your industries, sell national assets (to rich world corporations, at fire-sale prices), eliminate subsidies, devalue (making your exports cheaper for the rich world to buy, and making you pay more for your imports from it), free up access to resources for foreign corporations, cut wages and welfare and allocate national income to paying back debt. In other words, totally reverse the previous national “developmentalist” policies and redirect national income and assets to debt repayment. “From the 1950s through the 1970s Western powers had struggled to prevent the rise of developmentalism in the South. What they failed to accomplish through piecemeal coups and covert intervention, the debt crisis did for them in one fell swoop.” (p. 155.) “Debt became a powerful mechanism for pushing Neoliberalism around then world.” 156.) Power over national development was shifted to rich world banks and corporations. It was “…a new kind of coup.” The IMF then began to put these conditions on all new loans.

Almost instantaneously “…the US and Europe seized control over the economic destinies of developing countries, conquering them all over again without spilling a single drop of blood.” “This time the job was done by bankers and bureaucrats.” (p. 148.) They were the ones deciding what would be developed in the Third World and what purposes national resources would go into.

Hickle explains the devastating impact on the Third World. For instance the average African GDP quickly fell 10% and the numbers in extreme poverty more than doubled. “…structural adjustment turned out to be the greatest single cause of impoverishment in the 20thcentury.” (p. 160.) Chussudovsky (2001) describes the Neoliberal triumph as the greatest wealth transfer in history, attributing to it massive national collapses, such as in Russia and Yugoslavia, civil wars and the Rwandan genocide. No surprise that the 1% now have half the world’s wealth. By 1992 there had been 146 “IMF riots” … which made no difference.

Chapter 6 deals with trade, again exposing the processes which enable rich countries and their corporations to disadvantage the rest. For instance at the centre of Neoliberal doctrine is the demand that loan recipients and trading partners eliminate subsidies, which of course interfere with market forces, but the US and Europe subsidise their agriculture more than $1 billion every day. When the North American Free Trade Agreement came into force “… American corn flooded into Mexico undercutting the capacity of local producers to sell anything. Some 2 million farmers were driven out of business”, and “… much of that newly vacated land was then acquired by foreign firms…”, another form of enclosure movement. But the greater efficiency of production lowered food prices, right? The cost of tortillas shot up by 279%, increasing hunger and malnutrition. Farm worker incomes fell by 23%, poverty numbers rose 19 million. Per capita growth halved. And in the US NAFTA resulted in 682,900 job losses. (p. 206.)

He outlines the procedures enabling these draconian trade policies to be imposed, such as the laws which prevent the World Bank and IMF from being sued for any damage they cause, while corporations are allowed to sue if governments take action that corporations think might affect profits. Of course the trade agreement rules prevent corporations from being sued, and governments have been forced to pay them hundreds of millions of dollars for action threatening profits. This means corporations can force change in a nation’s laws. Note that the “dispute settlement “ arrangements give the task of determining what trade agreement law says to three anonymous “judges”, appointed from corporate sources, meeting in secret, with no representation of affected parties and no right of appeal. (p. 209.)

Why would anyone sign up to such agreements? Because if you don’t you will be shut out of trading. Why don’t they just default, refuse to pay up? Because after all the privatisation “…default is no longer an option…they are now totally dependent on foreign investment.” (p. 181.)

Thus “development” is determined by the rich and powerful transnational elites. Your country will only get development of the industries which those with capital think will maximize their global profits. Your own resources will not be put into developing the things most urgently needed by your people; they will go into whatever some foreign investor thinks will sell best when exported to rich countries. Even your capacity to improve local arrangements is blocked. “A new minimum wage was just passed in Haiti? Better move your sweatshop to Cambodia!” … Countries are forced to respond by cutting regulations and driving wages down, “…to make themselves more attractive to the barons of global capital.”(p. 215.)

Chapter 7 deals with several other mechanisms of plunder functioning well today, including tax havens ($1.1 trillion p.a. siphoned out of the Third World), and transfer pricing, all made easier by the Neoliberal deregulation of finance. Especially disturbing are the land grabs, the purchase of land by foreign investors. In Liberia 75% of the agricultural land is owned by foreigners, growing what … beans for hungry peasants? ..er, no … crops to export to rich world supermarkets of course. Thus deregulation in this sector both dispossesses the poor of their land, and of the food it produces.

Some of the land loss is due to schemes to deal with climate change, i.e., to plant carbon absorbing trees. This is another way the cost of the climate problem the West has created is being dumped on the Third World poor.

Hickle sees the wider significance of all this. It is not just a matter of insatiable greed and single-minded bullying. The context is the long term trajectory of capitalism, driven by its ceaseless need to find ever increasing outlets for ever increasing capital accumulation. He says, the “…deeper purpose … was to save Western capitalism…” Neoliberalism opened up vast new fields for investment, resource extraction, markets and good business, fields that were previously inaccessible to capital. For instance the IMF forced through privatization of more than $2 trillion of assets in developing countries between 1984 and 2012. (p. 171.) Chusudovsky describes the sell off of Russian assets, including whole aircraft factories, for a song. Hickle refers to the classic Bolivian water example whereby the World Bank pressured the government to sell the public supply system to foreign corporations, which set about improving “efficiency”, i.e., profits, by a) hiking the price 35%, b) cutting off supply to poor areas. Similarly Hickle notes that 18 million people die every year because they can’t afford the high drug prices charged by extremely profitable private companies…while 84% of drug research is funded by governments. Questionable behaviour? Not really, after all item 1 of the World Bank’s Articles of Agreement says its role is “…to promote private investment … and the growth of international trade.” (p. 172.)

All in all Hickle’s indictment is spot on, but it is somewhat unusual in so clearly laying the blame and the cause of poverty mostly at the feet of Western elites, (and consumers), who knowingly and shamelessly drive through policies that grab for more resources, markets and territory. It’s all been heavily documented many times before, but it needs to be said again and again given the reluctance to take any notice.

Solutions.

In his Chapter 5 Hickle spells out major areas where he believes change is needed. These are debt relief, including cancelling the conditions put on SAPs [Structural Adjustment Programs], democratizing global institutions such as the IMF and World Bank, fair trade arrangements, just wages, and reclaiming the enclosed public resources and commons, ending land grabs and dealing properly with climate change. Of course all these are desirable, but the chapter is a huge and surprising disappointment.

Firstly, he offers no ideas on how such changes are to be made, especially when. he has spent 252 pages convincingly explaining that the rich and super rich will not tolerate anything like them. His entire theory of “how” seems to be, “…these interventions will require the political courage to stand up to the interests of the very powerful actors who extract so much benefit from the present system.” (p. 273.)

Secondly, in my opinion his statement of goals is unsatisfactory, because it does not focus on those which constitute the essence of the required system change. He does fleetingly refer to several of what seem to me to be the key themes, but in an indecisive and tentative way; nothing like as stroppy as he should be.

Here are a few of the points I think his first 252 pages show must be central and non-negotiable goal indicators.

  • The global predicament cannot be fixed unless there are astronomically big and radical changes in economic, political and cultural systems.
  • These changes cannot possibly be made by or within present society; it is run by and for the rich and they will not, cannot do other than continually intensify their drive for greater production, consumption, resource access, trade, investment , profits and wealth. A capitalist economy cannot abandon the commitment to growth, it cannot tolerate heavy regulation of the market, it cannot permit significant interference with the freedom of capital to invest where most profit can be made. Its greatest problem is finding outlets for the ever-accumulating volume of capital so it must get rid of impediments to this.

Such a system will not change itself. The kind of goals listed by Hickle cannot be got through the legislatures that exist today, which cannot move significantly against the interests of the capitalist class, nor of the rich world consuming masses who want more jobs and income and wealth. But Hickle proceeds as if changes of this magnitude can be made within and by the existing system. After referring to some of his big change recommendations he provides the following amusingly unconvincing claim: “This might sound scary but it’s really not,”… because “…it’s possible to reduce production and consumption at the same time as increasing human development indicators like happiness…” (p. 288.) True, but … A little later he says, “…one easy solution to overconsumption would be to ban advertising…” (p. 295.)

  • The possibility of desirable change will only come when deterioration in the present system has become much more serious. The system will increasingly fail to provide for most people. Within ten years it is likely that oil will become extremely scarce (see Ahmed, 2017), and that this will suddenly trigger GFC 2 (debt levels are already far higher than before GFC 1.)
  • There will inevitably be a great deal of trouble, probably catastrophic and irretrievable breakdown. Our fate will then depend entirely on whether or not enough people respond by moving to some kind of Simpler Way, i.e., to small-scale local economies that are as self sufficient as possible, basically collectivist, driven by mutuality and cooperation and centred on commons, committees, working bees and town meegtings, thoroughly self-governing, and above all content with lifestyles that are frugal, self-sufficient and not concerned with acquiring wealth or possessions. The chances of such a Simpler Way revolution in culture and systems are obviously very poor, but the point is that there can be no other solution; we have gone through the limits to growth and it is not possible to get per capita resource consumption down to sustainable levels unless we do manage to build this kind of alternative settlement and culture. Hickle does not seem to see this; he certainly does not discuss this way out.
  • What is to be done here and now is to work very hard at increasing the understanding people in general have of our situation, so that more see the sense of moving to initiatives of this kind. The Transition Towns and Eco-village movements are showing the viability and the benefits, and creating the space for people to come across to as conditions in the mainstream deteriorate (…although I have major criticisms of these movements).
  • States will not be central in the initial stages of this revolution; it can only be led by a grassroots shift to frugal, self-sufficient, communal localist culture. It is a mistake to try to get the big changes through legislatures here and now. Much later when states are failing and grass-roots initiatives have gathered momentum the task will be to bring (the relatively few) remaining state-level functions under the control of the local assemblies.

Hickle briefly refers to some of these themes, but again not very energetically. He points to the limits to growth and the need for Degrowth and reduced rich world consumption, but briefly and with no detail on how alternatives might be structured. He does not insist on the fundamental need to scrap capitalism or to prevent the market from determining our fate. He does not seem to realize that a sustainable society in a context of limited resources cannot be globalized, or have a lot of international trade, or be driven by high tech, or have more than a minimal amount of industrialisation or urbanization or scope for market forces. And although he deals with the fact that the GDP can rise while real indices of welfare fall, he does not go into the way that simpler lifestyles can liberate us to far higher quality of life than is possible in rat race society.

Surprisingly, it also seems to me he has no concept of alternative or non-conventional development for the Third World. The global reforms he recommends would only clear the way for improved conventional, basically capitalist development. Development would still be conceived in terms of investing capital to compete in the global economy, building profitable industries, operating within a market system, exporting to earn income to spend on imports, more jobs and wages, earning monetary income enabling purchase of consumer goods. Even if all this was under national control, and fair and free of corruption it would only be a resurrection of the old post WW2 “Developmentalism”, … and it would be grossly unsustainable.

Hickle does not seem to grasp the nature and magnitude of the limits to growth predicament we are in. We have so far exceeded sustainable global levels of resource use and ecological destruction that rich world per capita ”living standards” must be reduced by perhaps 90% before it will be possible to maintain them or extend them to all people. (See “The Limits to Growth analysis of our global situation.” This means the conventionally taken for granted ultimate goal of development must be totally abandoned; it cannot be aspiring to the living standards and ways of the rich countries.

Development must be radically reconceived in terms of moving to frugal, local, self-sufficient collectivism, in which growth, globalization and affluence have been scrapped and there is little role for trade, exporting, heavy industry or capital investment. National resources must be put into providing villages and regions with the (small amount of ) basic equipment and inputs they need. (See “Third World Development”). If you are interested in sustainable/appropriate Third World development, turn to the Zapatistas or the Eco-villages of Senegal.

Hickle’s general critique is valuable although well known and massively documented in critical circles. But I think the book’s merit is not in adding to our understanding of the empire or the creation of poverty but in its hard hitting indictment of the West and in its demolition of the exonerating myths and delusions. The history has been of deliberate, conscious grabbing and thuggery, sometimes engineered by trade and investment agreements but often by invasion and plunder, and now mostly by the quiet enforcement of debt provisions. As Hickle says, “If you have ever found yourself wondering what is responsible for global poverty, this is your answer.” (p. 182.) We in the West caused the underdevelopment, poverty and hunger. We got rich doing it. We continue to do it. We couldn’t care less.

Ahmed,N., (2017), Failing States, Collapsing Systems: Bio-Physical Triggers of Political Violence,Springer Briefs in Energy, Dortrecht, Springer.

Chussudovsky, M., (2001), The Globalisation of Poverty, Common Courage Press.

Hickle, J., (2017), The Divide; A Brief Guide to Global Inequality and its Solutions, Heinemann, London.

Manufactured consent: power, media and thinktanks

February 3, 2017, by the ROAR Collective

Corporations don’t just shape our politics or economics, they also seek do to the same to public opinion. What do they fund and who do they represent?

Corporations don’t just shape our politics or economics, they also seek to change public opinion to serve their interests. Which corporations play the biggest role in shaping knowledge and news? What do they fund? Who do they represent? What role have they played in the rise of authoritarian populists? This infographic for State of Power 2017 exposes those “manufacturing consent”.
In 1983, 50 corporations owned 90% of the media, a significant consolidation from earlier times.  Now 6 corporations own 90% of the media.

Infographic: Manufactured Consent via TNI’s State of Power 2017 report.

Thanks to Donald de Groen and Amy O’Donoghue for their research support

Sources for infographics