后殖民时代的掠夺 量化1960-2018年西方掠夺全球南方

后殖民时代的掠夺：量化 1960-2018 年不平等交换造成的全球南方流失

https://ideas.repec.org/a/taf/cnpexx/v26y2021i6p1030-1047.html

Jason Hickel、Dylan Sullivan、Huzaifa Zoomkawala, Mar 30 2021

摘要

本文量化了自 1960 年以来不平等交换造成的全球南方流失。根据我们的主要方法（依赖于汇率差异），我们发现，在最近一年的数据中，全球北方（“发达经济体”）从南方挪用了价值 2.2 万亿美元的商品（按北方价格计算）——足以消除 15 次极端贫困。在整个时期内，来自南方的流失总额为 62 万亿美元（按 2011 年不变美元计算），如果考虑到增长损失，则为 152 万亿美元。通过不平等交换获得的掠夺占北方 GDP 的 7%，占南方 GDP 的 9%。为了进行比较，我们还测试了几种替代方法：我们用工资差异而不是汇率差异来量化不平等交换，并用全球平均价格和北方价格来报告流失。无论采用哪种方法，我们都发现，在 20 世纪 80 年代和 90 年代的结构调整时期，剥削强度和不平等交换规模显著增加。这项研究证实，南方的流失仍然是后殖民时代世界经济的一个重要特征；富裕国家继续依靠帝国形式的掠夺来维持其高收入和消费水平。

世界正在掠夺非洲“每年数十亿美元”的财富

https://www.theguardian.com/global-development/2017/may/24/world-is-plundering-africa-wealth-billions-of-dollars-a-year

活动人士的研究声称，对非洲大陆的援助和贷款被流向避税天堂的资金和减缓气候变化的成本所抵消

Karen McVeigh 2017 年 5 月 24 日星期三 07.00 BST

根据挑战对外援助“误导性”看法的研究，每年流出非洲的财富比流入非洲的财富多——多出 400 多亿美元（310 亿英镑）。

包括全球正义组织在内的英国和非洲平等与发展活动家联盟于周三发表的分析称，世界其他地区从非洲大陆的财富中获得的利润比大多数非洲公民都多。

报告称，全球公共部门腐败助长民粹主义政客崛起

报告称，2015 年，非洲国家获得了 1620 亿美元，主要是贷款、援助和个人汇款。但同年，非洲大陆却被掠夺了 2030 亿美元，要么是跨国公司直接将利润汇回国内并非法将资金转移到避税天堂，要么是世界其他国家通过适应和减缓气候变化而强加的成本。

根据《2017 年诚实账户》报告，这导致 47 个非洲国家每年出现 413 亿美元的财政赤字，许多人仍陷于贫困之中。

活动人士表示，非法资金流动（定义为国家之间非法现金流动）每年高达 680 亿美元，是非洲获得的 190 亿美元援助的三倍。

Jubilee 债务运动的经济学家 Tim Jones 表示：“我们想要传达的关键信息是，流出非洲的资金多于流入非洲的资金，如果我们要解决贫困和收入不平等问题，就必须帮助非洲挽回损失。”

他说，造成这种不平等现象的关键因素包括不公平的债务支付以及跨国公司通过逃税和腐败隐藏收益。

非洲各国政府在 2015 年获得了 320 亿美元的贷款，但其中一半以上（180 亿美元）用于支付债务利息，债务水平迅速上升。

活动人士表示，目前盛行的说法是富裕国家政府称他们的外援正在帮助非洲，这种说法“分散注意力，具有误导性”。

全球正义运动的 Aisha Dodwell 表示：“西方社会有一种非常强烈的说法，即非洲很穷，需要我们的帮助。这项研究表明，非洲国家真正需要的是世界其他国家停止系统性地掠夺它们。虽然殖民掠夺的形式可能随着时间的推移而发生变化，但其基本性质保持不变。”

报告指出，非洲拥有相当丰富的资源。据估计，南非的潜在矿产财富约为 2.5 万亿美元，而刚果民主共和国的矿产储量被认为价值 24 万亿美元。

然而，报告称，非洲大陆的自然资源由外国私营公司拥有和开采。

加纳 Isodec（综合社会发展中心）政策分析师 Bernard Adaba 表示：“非洲的发展已经无望，而我们每年都在为采掘业、西方避税天堂以及非法伐木和捕鱼而损失数十亿美元。需要进行一些重大的结构性改革，以促进经济政策，使非洲国家能够最好地满足其人民的需求，而不仅仅是成为西方公司和政府的摇钱树。非洲的血流必须停止！”

然而，发展智库全球发展中心客座研究员玛雅·福斯塔特表示，该报告没有对这些问题进行有意义的审视。

福斯塔特说：“非洲有 12 亿人口。这份报告似乎将这些人及其机构视为一个惰性的桶，资金被注入或偷走，而不是充满活力和不断增长的经济体的一部分。他们提出的 410 亿美元标题需要放在非洲整体 GDP 约为 7.7 万亿美元的背景下。经济增长不是通过储存流入和防止流出来实现的，而是通过让人们投资和学习、采用技术和进入市场来实现的。

“报告提出的一些问题——例如非法砍伐、捕鱼和适应气候变化的成本——很重要，但把所有明显的流入和流出加在一起是没有意义的。”

福斯塔特还质疑了该报告的一些方法。

包括 Jubilee Debt Campaign、Health Poverty Action 和 Uganda Debt Network 在内的活动人士联盟表示，那些声称帮助非洲的人“需要重新考虑他们的角色”，并指出英国政府由于其作为海外避税天堂网络的首脑而负有特殊责任。

伦敦政治经济学院的经济人类学家 Jason Hickel 博士在评论该报告时表示，普遍的对外援助观点是扭曲的。

Plunder in the Post-Colonial Era: Quantifying Drain from the Global South Through Unequal Exchange, 1960–2018

https://ideas.repec.org/a/taf/cnpexx/v26y2021i6p1030-1047.html

Jason Hickel, Dylan Sullivan, Huzaifa Zoomkawala, Mar 30 2021

Abstract

This paper quantifies drain from the global South through unequal exchange since 1960. According to our primary method, which relies on exchange-rate differentials, we find that in the most recent year of data the global North (‘advanced economies’) appropriated from the South commodities worth $2.2 trillion in Northern prices — enough to end extreme poverty 15 times over. Over the whole period, drain from the South totalled $62 trillion (constant 2011 dollars), or $152 trillion when accounting for lost growth. Appropriation through unequal exchange represents up to 7% of Northern GDP and 9% of Southern GDP. We also test several alternative methods, for comparison: we quantify unequal exchange in terms of wage differentials instead of exchange-rate differentials, and report drain in global average prices as well as Northern prices. Regardless of the method, we find that the intensity of exploitation and the scale of unequal exchange increased significantly during the structural adjustment period of the 1980s and 1990s. This study affirms that drain from the South remains a significant feature of the world economy in the post-colonial era; rich countries continue to rely on imperial forms of appropriation to sustain their high levels of income and consumption.

By Jason Hickel, Dylan Sullivan and Huzaifa Zoomkawala， 6 May 2021

Protesters show a sign that reads 'The debt is with the people, not the IMF' during a demonstration at Plaza de Mayo on Aug 15, 2019, in Buenos Aires, Argentina 

We have long known that the industrial rise of rich countries depended on extraction from the global South during the colonial era. Europe’s industrial revolution relied in large part on cotton and sugar, which were grown on land stolen from Indigenous Americans, with forced labour from enslaved Africans. Extraction from Asia and Africa was used to pay for infrastructure, public buildings, and welfare states in Europe – all the markers of modern development. The costs to the South, meanwhile, were catastrophic: genocide, dispossession, famine and mass impoverishment.

Imperial powers finally withdrew most of their flags and armies from the South in the mid-20th century. But over the following decades, economists and historians associated with “dependency theory” argued that the underlying patterns of colonial appropriation remained in place and continued to define the global economy. Imperialism never ended, they argued – it just changed form.

They were right. Recent research demonstrates that rich countries continue to rely on a large net appropriation from the global South, including tens of billions of tonnes of raw materials and hundreds of billions of hours of human labour per year – embodied not only in primary commodities, but also in high-tech industrial goods like smartphones, laptops, computer chips and cars, which over the past few decades have come to be overwhelmingly manufactured in the South.

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This flow of net appropriation occurs because prices are systematically lower in the South than in the North. For instance, wages paid to Southern workers are on average one-fifth the level of Northern wages. This means that for every unit of embodied labour and resources that the South imports from the North, they have to export many more units to pay for it.

Economists Samir Amin and Arghiri Emmanuel described this as a “hidden transfer of value” from the South, which sustains high levels of income and consumption in the North. The drain takes place subtly and almost invisibly, without the overt violence of colonial occupation and therefore without provoking protest and moral outrage.

In a recent paper published in the journal New Political Economy, we built on the work of Amin and others to quantify the scale of drain through unequal exchange in the post-colonial era. We found that the drain increased dramatically during the 1980s and 1990s, as neoliberal structural adjustment programmes were imposed across the global South. Today, the global North drains from the South commodities worth $2.2 trillion per year, in Northern prices. For perspective, that amount of money would be enough to end extreme poverty, globally, fifteen times over.

Over the whole period from 1960 to today, the drain totalled $62 trillion in real terms. If this value had been retained by the South and contributed to Southern growth, tracking with the South’s growth rates over this period, it would be worth $152 trillion today.

These are extraordinary sums. For the global North (and here we mean the US, Canada, Australia, New Zealand, Israel, Japan, Korea, and the rich economies of Europe), the gains are so large that, for the past couple of decades, they have outstripped the rate of economic growth. In other words, net growth in the North relies on appropriation from the rest of the world.

For the South, the losses outstrip foreign aid transfers by a wide margin. For every dollar of aid the South receives, they lose $14 in drain through unequal exchange alone, not counting other kinds of losses like illicit financial outflows and profit repatriation. Of course, the ratio varies by country – higher for some than others – but in all cases, the discourse of aid obscures a darker reality of plunder. Poor countries are developing rich countries, not the other way around.

Neoclassical economists tend to see low wages in the South as “natural” – a kind of neutral market outcome. But Amin and other economists from the global South argued that wage inequalities are artefacts of political power.

Rich countries have a monopoly on decision-making in the World Bank and IMF, they hold most of the bargaining power in the World Trade Organization, they use their power as creditors to dictate economic policy in debtor nations, and they control 97 percent of the world’s patents. Northern states and corporations leverage this power to cheapen the prices of labour and resources in the global South, which allows them to achieve a net appropriation through trade.

During the 1980s and 1990s, IMF structural adjustment programmes cut public sector wages and employment, while rolling back labour rights and other protective regulations, all of which cheapened labour and resources. Today, poor countries are structurally dependent on foreign investment and have no choice but to compete with one another to offer cheap labour and resources in order to please the barons of international finance. This ensures a steady flow of disposable gadgets and fast fashion to affluent Northern consumers, but at extraordinary cost to human lives and ecosystems in the South.

There are several ways to fix this problem. One would be to democratise the institutions of global economic governance, so that poor countries have a fairer say in setting the terms of trade and finance. Another step would be to ensure that poor countries have the right to use tariffs, subsidies and other industrial policies to build sovereign economic capacity. We could also take steps toward a global living wage system and an international framework for environmental regulations, which would put a floor on labour and resource prices.

All of this would enable the South to capture a fairer share of income from international trade and free its countries to mobilise their resources around ending poverty and meeting human needs. But achieving these goals will not be easy; it will require an organised front among social movements toward a fairer world, against those who profit so prodigiously from the status quo.

The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial stance.

• Jason Hickel

  Professor at the Institute for Environmental Science and Technology (ICTA-UAB) and Fellow of the Royal Society of Arts

  Dr Jason Hickel is a Professor at the Institute for Environmental Science and Technology (ICTA-UAB), Visiting Senior Fellow at the London School of Economics, and a Fellow of the Royal Society of Arts. He is the author of The Divide and Less is More

• 

  Dylan Sullivan

  Adjunct Fellow in the School of Social Sciences, Macquarie University

• 

  Huzaifa Zoomkawala

  Independent scholar and data analyst based in Karachi.

World is plundering Africa's wealth of 'billions of dollars a year'

https://www.theguardian.com/global-development/2017/may/24/world-is-plundering-africa-wealth-billions-of-dollars-a-year

Research by campaigners claims aid and loans to the continent are outweighed by financial flows to tax havens and costs of climate change mitigation

More wealth leaves Africa every year than enters it – by more than $40bn (£31bn) – according to research that challenges “misleading” perceptions of foreign aid.

Analysis by a coalition of UK and African equality and development campaigners including Global Justice Now, published on Wednesday, claims the rest of the world is profiting more than most African citizens from the continent’s wealth.

Global public sector corruption fuels rise of populist politicians, report says

It said African countries received $162bn in 2015, mainly in loans, aid and personal remittances. But in the same year, $203bn was taken from the continent, either directly through multinationals repatriating profits and illegally moving money into tax havens, or by costs imposed by the rest of the world through climate change adaptation and mitigation.

This led to an annual financial deficit of $41.3bn from the 47 African countries where many people remain trapped in poverty, according to the report, Honest Accounts 2017.

The campaigners said illicit financial flows, defined as the illegal movement of cash between countries, account for $68bn a year, three times as much as the $19bn Africa receives in aid.

Tim Jones, an economist from the Jubilee Debt Campaign, said: “The key message we want to get across is that more money flows out of Africa than goes in, and if we are to address poverty and income inequality we have to help to get it back.”

The key factors contributing to this inequality include unjust debt payments and multinational companies hiding proceeds through tax avoidance and corruption, he said.

African governments received $32bn in loans in 2015, but paid more than half of that – $18bn – in debt interest, with the level of debt rising rapidly.

The prevailing narrative, where rich country governments say their foreign aid is helping Africa, is “a distraction and misleading”, the campaigners said.

Aisha Dodwell, a campaigner for Global Justice Now, said: “There’s such a powerful narrative in western societies that Africa is poor and that it needs our help. This research shows that what African countries really need is for the rest of the world to stop systematically looting them. While the form of colonial plunder may have changed over time, its basic nature remains unchanged.”

The report points out that Africa has considerable riches. South Africa’s potential mineral wealth is estimated to be around $2.5tn, while the mineral reserves of the Democratic Republic of the Congo are thought to be worth $24tn.

However, the continent’s natural resources are owned and exploited by foreign, private corporations, the report said.

Bernard Adaba, policy analyst with Isodec (Integrated Social Development Centre) in Ghana said: “Development is a lost cause in Africa while we are haemorrhaging billions every year to extractive industries, western tax havens and illegal logging and fishing. Some serious structural changes need to be made to promote economic policies that enable African countries to best serve the needs of their people, rather than simply being cash cows for western corporations and governments. The bleeding of Africa must stop!”

However, Maya Forstater, a visiting fellow for the Centre for Global Development, a development thinktank, said the report did not provide a meaningful look at the issues.

Forstater said: “There are 1.2 billion people in Africa. This report seems to view these people and their institutions as an inert bucket into which money is poured or stolen away, rather than as part of dynamic and growing economies. The $41bn headline they come up with needs to be put into context that the overall GDP of Africa is some $7.7tn. Economies do not grow by stockpiling inflows and preventing outflows but by enabling people to invest and learn, adapt technologies and access markets.

“Some of the issues that the report raises – such as illegal logging, fishing and the cost of adapting to climate change – are important, but adding together all apparent inflows and outflows is meaningless.”

Forstater also questioned some of the report’s methodology.

The coalition of campaigners, including Jubilee Debt Campaign, Health Poverty Action, and Uganda Debt Network, said those claiming to help Africa “need to rethink their role”, and singled out the British government as bearing special responsibility because of its position as the head of a network of overseas tax havens.

Dr Jason Hickel, an economic anthropologist at the London School of Economics, commenting on the report, agreed that the prevailing view of foreign aid was skewed. Hickel said: “One of the many problems with the aid narrative is it leads the public to believe that rich countries are helping developing countries, but that narrative skews the often extractive relationship that exists between rich and poor countries.”

A key issue, he said, was illicit financial flows, via multinational corporations, to overseas tax havens. “Britain has a direct responsibility to fix the problem if they want to claim to care about international poverty at all,” he said.

The report makes a series of recommendations, including preventing companies with subsidiaries based in tax havens from operations in African countries, transforming aid into a process that genuinely benefits the continent, and reconfiguring aid from a system of voluntary donations to one of repatriation for damage caused.

THE DIVIDE, A Brief Guide to Global Inequality and its Solutions

By Jason Hickel

https://eddierockerz.com/wp-content/uploads/2020/11/the-divide-a-brief-guide-to-global-inequality-and-its-solutions-pdfdrive-.pdf

About the Book

For decades we have been told a story about the divide between rich
countries and poor countries.

We have been told that development is working: that the global South is
catching up to the North, that poverty has been cut in half over the past thirty
years, and will be eradicated by 2030. It’s a comforting tale, and one that is
endorsed by the world’s most powerful governments and corporations. But is it
true?

Since 1960, the income gap between the North and South has roughly tripled in
size. Today 4.3 billion people, 60 per cent of the world’s population, live on less
than $5 per day. Some 1 billion live on less than $1 a day. The richest eight
people now control the same amount of wealth as the poorest half of the world
combined.

What is causing this growing divide? We are told that poverty is a natural
phenomenon that can be fixed with aid. But in reality it is a political problem:
poverty doesn’t just exist, it has been created.

Poor countries are poor because they are integrated into the global economic
system on unequal terms. Aid only works to hide the deep patterns of wealth
extraction that cause poverty and inequality in the first place: rigged trade deals,
tax evasion, land grabs and the costs associated with climate change. The Divide
tracks the evolution of this system, from the expeditions of Christopher
Columbus in the 1490s to the international debt regime, which has allowed a
handful of rich countries to effectively control economic policies in the rest of
the world.

Because poverty is a political problem, it requires political solutions. The Divide
offers a range of revelatory answers, but also explains that something much
more radical is needed – a revolution in our way of thinking. Drawing on
pioneering research, detailed analysis and years of first-hand experience, The
Divide is a provocative, urgent and ultimately uplifting account of how the world
works, and how it can change.

About the Author

Jason Hickel is an anthropologist at the London School of Economics. Originally
from Swaziland, he spent a number of years living with migrant workers in
South Africa, studying patterns of exploitation and political resistance in the
wake of apartheid. Alongside his ethnographic work, he writes about
development, inequality, and global political economy, contributing regularly to
the Guardian, Al Jazeera and other online outlets. His work has been funded by
Fulbright-Hays Program, the National Science Foundation, the Wenner-Gren
Foundation, the Charlotte Newcombe Foundation and the Leverhulme Trust. He
lives in London.

The Making of the World System

In 1492, Christopher Columbus set sail to discover a new sea route to the Indies.
He never made it that far, of course. Victim of shoddy geographical calculations,
he was intercepted by a landmass he had not anticipated. When he landed in
Cuba, which he insisted was India (stubbornly never admitting otherwise), he
encountered a remarkable people – a civilisation very unlike his own. In his
journals, Columbus reported that the people were ‘so free with their possessions
that no one who has not witnessed them would believe it.

When you ask for something they have, they never say no. To the contrary, they offer to share with anyone.’ They lived in communal buildings, and enjoyed a remarkable degree of equality, even between genders: women were free to leave their partners if they felt they were being mistreated.The people were healthy and strong. Columbus described them as ‘well-built, with good bodies and handsome features’. Other observers marvelled at how far they could swim, and noted that even pregnant women were agile and independent, gave birth with ease, and were up and about again shortly thereafter.

Columbus noticed that in addition to being open and generous, the people he
encountered were a peaceful lot. ‘They do not bear arms, and do not know
them,’ he wrote. ‘When I showed them a sword, they took it by the edge and cut
themselves out of ignorance.’ Columbus was eager to exploit this vulnerability,
jotting a rather ominous note in his journal: ‘With fifty men we could subjugate
them all and make them do whatever we want.’

During his second expedition, this time with seventeen ships and 1,200 men,
Columbus travelled around the Caribbean capturing thousands of indigenous
Americans to be sent back and sold in Spain as slaves. But this time his real
objective was gold. He had noticed the indigenous people wearing gold
ornaments and assumed that the metal must be abundant in the region. Yet he
was having a difficult time finding the source, so he resorted to coercive
measures. From his base on Hispaniola, the island shared today by Haiti and the
Dominican Republic, he forced the local inhabitants – the Arawaks – to bring
him a certain quantity of gold every three months. Those who failed to do so
would have their hands chopped off or were hunted down and killed. Men were
forced to spend their lives in mines, stripping the mountains in search of gold.
Up to a third of workers died every six months. Within two years of the Spanish
invasion, some 125,000 people had been killed – half the island’s population.
Most of the remaining inhabitants of Hispaniola were forced into slave labour on
plantations. A few decades later, only a few hundred Arawaks remained alive.
One European witness, Bartolomé de Las Casas, reported startling statistics of
the slow-motion genocide unfolding in the Caribbean region: ‘From 1494 to
1508,’ he wrote, ‘over three million people had perished from war, slavery, and
the mines. Who in future generations will believe this? I myself writing it as a
knowledgeable eyewitness can hardly believe it …’

Columbus was only the first in a long line of European conquistadors. Shortly
after him came Hernán Cortés, who landed in Mexico in 1519, claimed it for the
Spanish Crown and proceeded to march inland towards the Aztec capital,
Tenochtitlán, where Mexico City now lies. Once again, the indigenous
inhabitants of the land responded to their European invaders with hospitality,
and their generous gestures are well documented. But Cortés was unmoved. He
proceeded with his march, destroying towns along the way and massacring their
inhabitants in the squares, conquering by virtue of his superior weapons:
cannons, crossbows and horses. When he arrived at Tenochtitlán, Emperor
Montezuma welcomed him with marvellous gifts of gold and silver. Cortés
imprisoned him in his own palace and took control of the city. By 1521,
Montezuma had been killed and the capital plundered of its treasures.

Francisco Pizarro, yet another Spanish conquistador, followed suit. In 1532 he
was invited into the Inca capital in Peru by Emperor Atahuallpa, who – protected
by an army of 80,000 men – did not consider Pizarro and his soldiers to be a
threat. Yet Pizarro, enabled by his weapons, managed to sack the city and
capture Atahuallpa. To spare his life, the emperor offered to fill a large room
with gold and then to fill it twice again with silver, within two months, for he
knew how much the Spanish loved precious metals. As a Nahuatl text from the
time put it: ‘They lifted up the gold as if they were monkeys, with expressions of
joy, as if it put new life into them and lit their hearts.

As if it were certainly something for which they yearn with great thirst. Their bodies fatten on it and they hunger violently for it. They crave gold like hungry swine.’ Pizarro agreed to the emperor’s offer and Atahuallpa proceeded to pile the precious metals high.

But it was a trick. Having received the gold and silver, Pizarro executed
Atahuallpa after sentencing him in a mock court for the ‘crime’ of resisting the
Spanish invasion.

A few decades later, Europeans discovered the immense network of silver mines
centred on Potosi, in what is now Bolivia. Before long the metal came to account
for 99 per cent of the mineral exports from the Spanish colonies.
10 Between
1503 and 1660, 16 million kilograms of silver was shipped to Europe, amounting
to three times the total European reserves of the metal. And that was on top of
the 185,000 kilograms of gold that arrived in Spanish ports during the same
period.

By the early 1800s, a total of 100 million kilograms of silver had been
drained from Latin America and pumped into the European economy – first into
Spain, and then out to the rest of Europe as payment on Spain’s debts.

To get a sense of the scale of this wealth, consider this thought experiment: if
100 million kilograms of silver was invested in 1800 at 5 per cent interest – the
historical average – it would amount to $165 trillion today, more than double the
world’s total GDP in 2015. Europe had to purchase some of this silver from
indigenous Americans in exchange for goods, of course, but much of it came for
free – the product of coercive extraction. It was a massive infusion of windfall
wealth into the European economy.

What happened to all of this silver and gold from Latin America? Some of it
went to building up the military capacity of European states, which would help
secure their political advantage over the rest of the world. But most of it
lubricated their trade with China and India. Silver was one of the only European
commodities that Eastern states actually wanted; without it, Europe would have
suffered a crippling trade deficit, leaving it largely frozen out of the world
economy. The silver trade allowed Europe to import land-intensive goods and
natural resources that it lacked the land capacity to provide for itself. We can
think of this as an ‘ecological windfall’ – a transfusion of resources that allowed
Europe to grow its economy beyond its natural limits at the time, to the point of
catching up with and surpassing China and India around 1800.

China and India, then, provided a kind of ecological relief to overstrained Europe.
Outsourcing land-intensive production also allowed Europe to reallocate its
labour into capital-intensive industrial activities – like textile mills – which other
states did not have the luxury of doing.

But while Europe benefited from this arrangement, Latin America suffered
tremendously. It is estimated that Mexico had a population of up to 30 million
indigenous inhabitants before the arrival of the Europeans. The Andean region
had a similar number. Central America is thought to have supported around 13
million. The numbers vary by source to some extent, but scholars agree that in
1492 the Latin American region had a combined population of between 50 and
100 million.
15 By the middle of the 1600s, however, the continent’s population
had been slashed to 3.5 million.
16
In other words, around 95 per cent had been
killed.
Much of this genocide played out in the form of massacres perpetrated by the
conquistadors. Some of it had to do with the forced dispossession of indigenous
Americans and the dismantling of their social and economic systems, which
made it impossible for them to subsist. Many also died in slavery, their labour
used by Europeans to dig precious metals out of the mountains. Mining was not
only exceedingly dangerous, it was poisonous too: the use of mercury to extract
silver from the rocks exacted an enormous death toll among miners. And of
course much of it had to do with diseases such as smallpox, which Europeans
brought with them across the Atlantic – sometimes intentionally, as in cases
where infected blankets were distributed as ‘gifts’ to indigenous Americans.
Because indigenous Americans lacked immunity to these foreign diseases, the
germs took a heavy toll. Epidemics were as useful to the European conquest as
horses and cannons.
*
Indigenous Americans were not the only ones forcibly roped into the expanding
empires of Europe. Europeans’ labour requirements in the New World were also
slaked by slaves from Africa. The slave trade began early in the 1500s, shortly
after Columbus’s first colony was founded in Hispaniola, and was led by
European merchants – at first the Spanish and Portuguese, but later the British
dominated – who purchased slaves from the shores of West Africa in exchange
for European goods (or, more accurately, goods that Europeans had bought from
China and India, paid for with precious metals taken from the New World). Most
of these slaves were prisoners of war captured in conflicts between West African
states. Once transported to the Americas, they were put to work on European
sugar plantations in the Caribbean and in the mines of Brazil. In the 1700s,
Portuguese Brazil produced more gold using slave labour than the total volume
Spain had extracted from its colonies in the previous two centuries.
17
By the end of the slave trade in 1853, somewhere between 12 million and 15
million Africans had been shipped across the Atlantic.
18 Between 1.2 million
and 2.4 million died en route, in the darkness below the decks of the slave ships,
their bodies cast into the sea. It is almost impossible to imagine the scale of the
human devastation that these numbers represent.
How much did Western states gain from this enormous quantity of free labour?
It is estimated that the United States alone benefited from a total of 222,505,049
hours of forced labour between 1619 and the abolition of slavery in 1865.
Valued at the US minimum wage, with a modest rate of interest, that is worth
$97 trillion today.
19 And that’s just the United States. Right now, fourteen
Caribbean nations – represented by the law firm Leigh Day – are in the process
of suing Britain for slavery reparations. They have not disclosed how much they
seek in damages, but they have pointed out that when Britain abolished slavery
in 1834 it paid its slave owners compensation of £20 million for loss of property
(paying no compensation to the slaves themselves), which would be the
equivalent of $300 billion today.
20
It is worth noting that this figure reflects only
the price of the slaves, and tells us nothing of the total value they produced
during their lifetimes, nor of the trauma they endured, nor of the hundreds of
thousands of slaves who worked and died during the centuries before 1834.
Yet the real benefit that Europe derived from the slave economy was not just in
the form of value extracted coercively from the bodies of Africans and
indigenous Americans. The sugar and cotton plantations of the New World
supplied Europe with another ecological windfall, much as silver did. For
example, sugar came to account for up to 22 per cent of the calories Britain
consumed, which reduced the need for domestic agricultural production and
freed up labour power for industrial pursuits.
21 Cotton provided a key raw
material for Europe’s Industrial Revolution, and without diverting from food
production or straining Europe’s labour and land capacities. If we add timber
imports to sugar and cotton, we see that the New World contributed some 25
million to 30 million ‘ghost acres’ of productive land to Britain alone – roughly
double the size of Britain’s own total arable land.
22 These slave-produced
imports were one of the single largest factors in spurring Europe’s rapid
economic development – more significant even than the windfall energy
provided by the region’s rich seams of coal. Without the ecological windfall
from the slave colonies, Europe would not have been able to shift its economic
capacity towards industrialisation.
*
Because the Latin American economy was organised by the colonisers to
produce only a handful of agricultural products, it was prevented from
developing its own domestic industries. Instead, it became dependent on Europe
for the manufactured goods it needed. This arrangement proved to be
tremendously beneficial to Europe; Latin America was a captive market,
providing a steady demand for Europe’s industrial exports. Indeed, without the
slave colonies of the New World to consume its goods, Europe’s
industrialisation would have been impossible.
The consequences of this arrangement for the periphery of the world system
were immense. As we will see, Latin America would be stuck in a relationship
of economic dependency on Europe even into the 21st century, one marked by
declining terms of trade, with the price of Latin America’s exports falling
relative to the price of industrial imports from the West. Africa, for its part,
suffered a serious loss of labour power to the Atlantic slave trade. What if the
sum of the value produced by African slaves in the New World – worth the
equivalent of hundreds of trillions of dollars today – was subtracted from
Western wealth and added to the total wealth of Africa? Or even just a
proportion of this sum, subtracting, for example, the gains that African kings
made through the trade?
23
Economists often speculate that the global South failed to develop because of a
lack of capital. But there was no such lack. The wealth that might have provided
the capital for development (precious metals in Latin America and surplus
labour in Africa) was effectively stolen by Europe and harnessed to the service
of Europe’s own development. The global South could theoretically have
developed as Europe did were it not for the plunder of its resources and labour,
and were it not for the fact that it was forced by Europe to supply raw materials
while importing manufactured goods. Whether or not they would or should have
done so is another matter, of course – after all, much of European-style
development required violence towards other lands and other peoples. But the
point remains: it is impossible to examine the economic growth of the West
without looking at the base on which it drew.

Preface
Beginnings
I grew up in Swaziland – a tiny, landlocked country near the eastern seaboard of
southern Africa. It was a happy childhood, in many ways. As a little boy I ran
around barefoot through sandy grassland with my friends, unhindered by fences
or walls. When the monsoon rains hit we would sail tiny bark boats through the
dongas, welcoming the wet. We climbed trees and plucked mangoes and lychees
and guavas to snack on whenever we grew hungry. During lazy afternoons I
would sometimes wander up the hill from our little bungalow along the dirt track
towards the clinic where my parents worked as doctors. I still remember the cool
of the polished concrete floors and the breezy shade of the courtyard. But most
of all I remember the queue – the queue of patients winding out of the door,
some sitting on wooden benches, others on grass mats, waiting to be seen. To
me, it seemed that the queue never ended.
As I grew older, I began to learn about things like TB and malaria, typhoid and
bilharzia, malnutrition and kwashiorkor – scary words that were nonetheless
familiar and well worn among our family. Later still I learned that we were
living in the middle of the worst epidemic of HIV/AIDS anywhere in the world.
I learned that people were suffering and dying of diseases that could easily be
cured, prevented or managed in richer countries – a fact that to me seemed
unspeakably horrible. And I learned about poverty. Many of my friends came
from families that scraped together meagre livelihoods on subsistence farms
subject to the constant caprice of drought, or who struggled to find work while
living in makeshift shelters in the slums outside Manzini, the country’s biggest
city.
They were not alone. Today, some 4.3 billion people – more than 60 per cent of
the world’s population – live in debilitating poverty, struggling to survive on less
than the equivalent of $5 per day. Half do not have access to enough food. And
these numbers have been growing steadily over the past few decades.
Meanwhile, the wealth of the very richest is piling up to levels unprecedented in
human history. As I write this, it has just been announced that the eight richest
men in the world have as much wealth between them as the poorest half of the
world’s population combined.
We can trace out the shape of global inequality by looking at the distribution of
income and wealth among individuals, as most analysts have done. But we can
get an even clearer picture by looking at the divide between different regions of
the world. In 2000, Americans enjoyed an average income roughly nine times
higher than their counterparts in Latin America, twenty-one times higher than
people in the Middle East and North Africa, fifty-two times higher than subSaharan Africans and no less than seventy-three times higher than South Asians.
And here, too, the numbers have been getting worse: the gap between the real
per capita incomes of the global North and the global South has roughly tripled
in size since 1960.
*
It is easy to assume that the divide between rich countries and poor countries has
always existed; that it is a natural feature of the world. Indeed, the metaphor of
the divide itself may lead us unwittingly to assume that there is a chasm – a
fundamental discontinuity – between the rich world and the poor world, as if
they were economic islands disconnected from one another. If you start from this
notion, as many scholars have done, explaining the economic differences
between the two is simply a matter of looking at internal characteristics.
This notion sits at the centre of the usual story that we are told about global
inequality. 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. If only poor countries
would follow the advice of experts from agencies like the World Bank, they
would gradually leave poverty behind, closing the divide between the poor and
the rich. 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 the story is wrong. The idea of a natural divide misleads us from the start. In
the year 1500, there was no appreciable difference in incomes and living
standards between Europe and the rest of the world. Indeed, we know that
people in some regions of the global South were a good deal better off than their
counterparts in Europe. And yet their fortunes changed dramatically over the
intervening centuries – not in spite of one another but because of one another –
as Western powers roped the rest of the world into a single international
economic system.
When we approach it this way, the question becomes less about the traits of rich
countries and poor countries – although that is, of course, part of it – and more
about the relationship between them. The divide between rich countries and poor
countries isn’t natural or inevitable. It has been created. What could have caused
one part of the world to rise and the other to fall? How has the pattern of growth
and decline been maintained for more than 500 years? Why is inequality getting
worse? And why do we not know about it?
*
From time to time I still think back to that queue outside my parents’ clinic. It
remains as vivid in my mind as if it were yesterday. When I do, I am reminded
that the story of global inequality is not a matter of numbers and figures and
historical events. It is about real lives, real people. It is about the aspirations of
communities and nations and social movements over generations, even
centuries. It is about the belief, shaken with doubt from time to time but
otherwise firm, that another world is possible.
At one of the most frightening times in our history, with inequality at record
extremes, demagogues rising and our planet’s climate beginning to wreak
revenge on industrial civilisation, we are more in need of hope than ever. It is
only by understanding why the world is the way it is – by examining root causes
– that we will be able to arrive at real, effective solutions and imagine our way
into the future. What is certain is that if we are going to solve the great problems
of global poverty and inequality, of famine and environmental collapse, the
world of tomorrow will have to look very different from the world of today.
The arc of history bends towards justice, Martin Luther King Jr once said. But it
won’t bend on its own.
PART ONE
The Divide
One
The Development Delusion
It began as a public-relations gimmick. Harry Truman had just been elected to a
second term as president of the United States and was set to take the stage for his
inaugural address on 20 January 1949. His speechwriters were in a frenzy. They
needed to whip up something compelling for the president to say – something
bold and exciting to announce. They had three ideas on the list: backing for the
new United Nations, resistance to the Soviet threat and continued commitment to
the Marshall Plan. But none were very inspiring. In fact, they were downright
boring and the media was bound to ignore the speech as yesterday’s news. They
needed something that would tap into the zeitgeist – something that would stir
the soul of the nation.
Their answer came from an unlikely source. Benjamin Hardy was a young, midlevel functionary in the State Department, but as a former reporter for the
Atlanta Journal he had a knack for a good headline. When he stumbled across a
memo requesting fresh ideas for the inaugural address, he decided to pitch his
boss a wild thought: ‘Development’. Why not have Truman announce that his
administration would give aid to Third World countries to help them develop
and put an end to the scourge of grinding poverty? Hardy saw this as a sure
victory – an easy way, he wrote in his pitch, ‘to make the greatest psychological
impact’ on America and ‘to ride and direct the universal groundswell of desire
for a better world’.
Hardy’s bosses shut him down. It was a risky, out-of-the-blue idea, possibly too
new to make much sense to people; it wasn’t worth experimenting with it in such
an important setting. But Hardy was determined not to let the opportunity pass.
He managed to fake his way into the White House, gave a rousing defence of the
idea to Truman’s advisers and – with a little bit of careful manoeuvring by
supporters on the inside – his plan ended up as an afterthought, ‘Point Four’, in
Truman’s draft. Truman approved it.
It was the first inaugural address ever to be broadcast on television. Ten million
viewers tuned in on that cold January afternoon, making it the largest single
event ever witnessed up to that time. More people watched Truman’s address
than watched the inaugural addresses of all his predecessors put together. And
they loved what he had to say. ‘More than half the people of the world are living
in conditions approaching misery,’ he proclaimed. ‘Their food is inadequate.
They are victims of disease. Their economic life is primitive and stagnant.’ But
there was hope, he said: ‘For the first time in history, humanity possesses the
knowledge and skill to relieve the suffering of these people. The United States is
pre-eminent among nations in the development of industrial and scientific
techniques … our imponderable resources in technical knowledge are constantly
growing and are inexhaustible.’ And then the clincher: ‘We must embark on a
bold new program for making the benefits of our scientific advances and
industrial progress available for the improvement and growth of underdeveloped
areas … It must be a worldwide effort for the achievement of peace, plenty, and
freedom.’
Of course, there were no actual plans for such a programme – not even a single
document. It was included in the speech purely as a PR gimmick. And it worked.
The media went crazy – papers from the Washington Post to the New York Times
glowed with approval.
1 Everyone was excited about Point Four, and the rest of
the speech was forgotten.
*
Why did Point Four so capture the public imagination? Because Truman gave
Americans a new and powerful way to think about the emerging international
order. The dust was settling after the Second World War, European imperialism
was collapsing and the world was beginning to take shape as a collection of
equal and independent nations. The only problem was that in reality they were
not equal at all: there were vast differences between them in terms of power and
wealth, with the countries of the global North enjoying a very high quality of life
while the global South – the majority of the world’s population – was mired in
debilitating poverty. As Americans peered beyond their borders and began to
notice the brutal fact of global inequality, they needed a way to make sense of it.
Point Four offered them a compelling narrative. The rich countries of Europe
and North America were ‘developed’. They were ahead on the Great Arrow of
Progress. They were doing better because they were better – they were smarter,
more innovative and harder working. They had better values, better institutions
and better technology. By contrast, the countries of the global South were poor
because they hadn’t yet figured out the right values and policies yet. They were
still behind, ‘underdeveloped’ and struggling to catch up.
This story was deeply affirming for Americans; it made them feel good about
themselves, proud of their achievements and their place in the world. But
perhaps more importantly, it gave them a way to feel noble too – it gave them
access to a higher, almost cosmological purpose. The developed countries would
stand as beacons of hope, as saviours to the poor. They would reach out and give
generously of their riches to help the ‘primitive’ countries of the South follow
their path to success. They would become heroes, leading the way to a world of
unprecedented peace and prosperity.
In other words, Point Four explained the existence of global inequality and
offered a solution to it in one satisfying stroke. And for this reason it wasn’t long
before it was picked up by the governments of Western Europe as well. As
Britain and France were withdrawing from their colonies, they needed a new
way of explaining the gross inequality that persisted between themselves and the
people they had ruled for so long. The story of development – that the nations of
the world were simply at different positions along the Great Arrow of Progress –
offered a convenient alibi. It allowed them to disavow responsibility for the
misery of the colonies, and it was more palatable than the explicit racial theories
they had relied on in the past. What is more, it allowed them to shift their role in
the eyes of the world: graciously relinquishing imperial power, they would turn
to aiding their fellow man.
It was an incredibly beguiling tale to Western ears. It wasn’t just another story –
it had all the elements of an epic myth. It provided a keystone around which
people could organise their ideas about the world, about human progress and
about our future.
The story of development remains a compelling force in our society to this day.
We encounter it everywhere we turn: in the form of charity shops like Oxfam
and Traid, in TV ads from Save the Children and World Vision, in annual
reports published by the World Bank and the International Monetary Fund, and
every time we see the world’s nations ranked by GDP. We hear it from rock
stars like Bono and Bob Geldof, from billionaires like Bill Gates and George
Soros, and from actors like Madonna and Angelina Jolie, khaki-clad and mobbed
by eager African children. We get it in the form of Live Aid concerts and
celebrity fundraising singles like ‘Do They Know It’s Christmas?’, which
somehow manages to crop up every year. Every major university offers degree
programmes in development, and a whole class of professionals has emerged to
staff the thousands of NGOs that have sprung up over the past few decades.
Development is everywhere. And it comes with its own rituals that millions
upon millions of people can participate in: buying TOMS shoes, giving a few
dollars a month to sponsor a child in Zambia, or sacrificing summer holidays to
volunteer in Honduras.
It probably wouldn’t be a stretch to say that almost everyone in the Western
world has at some point encountered or even participated in the story of
development. It is ubiquitous. And it has become an enormous industry, worth
hundreds of billions of dollars – as much as all the profits of all the banks in the
United States combined.
2
*
The development story is so deeply ingrained in our culture that we take it
almost completely for granted. It seems manifestly true. For much of my young
adult life I passionately believed in it. When I left Swaziland for university in the
United States, I was confronted by a completely different world to the one in
which I had grown up: a world replete with excess – enormous houses, giant
cars, slick new roads and cavernous shopping malls. But I was unable to put
Swaziland behind me. Casting about for explanations for and solutions to the
profound material differences between the two worlds I straddled, I found
answers – and hope – in the story of development.
During my final year of university, I moved to Nagaland, a remote state in a farflung corner of north-east India, to work with a local microfinance organisation.
I found it exciting and rewarding – being part of the development story gave me
a sense of value and purpose far beyond anything the corporate world had to
offer. It made me feel as though I was part of something important. It made me
feel noble.
Eager to continue working in the field, I later returned to Swaziland to take up a
job with World Vision, one of the world’s largest development NGOs. Based in
the village of Mpaka, a dusty outpost on a road that traverses the lowveld
between Manzini and the border of Mozambique, I threw myself into a range of
projects – everything from water systems to healthcare – and once again I felt
the rush that came with being part of the development story. But after my initial
excitement faded, I found myself confronting some difficult questions. We had
dozens of projects across that tiny country, representing millions of dollars of
charity and many years of work – and World Vision was only one of many
NGOs tackling the very same problems, bolstered by a steady flow of aid from
donor countries in the global North. But on the whole, nothing really seemed to
be changing. Why did most people in Swaziland remain so poor, despite this
effort? It felt as though we were shovelling sand into a bottomless pit.
World Vision had hired me to help analyse why their development efforts in
Swaziland were not living up to their promise. The reason, I discovered, was that
their interventions were missing the point. Their story about the world –
borrowed more or less verbatim from Truman – led them to assume that all that
Swazis needed was a bit of charity to help them out. World Vision went about
caring for dying AIDS patients, setting up income-generation schemes for the
unemployed, teaching new techniques to farmers and paying for children’s
education. But, as helpful as these projects were, they did nothing to address the
actual causes of the problems. Why were AIDS patients dying? Over time, I
learned that it had to do with the fact that pharmaceutical companies refused to
allow Swaziland to import generic versions of patented life-saving medicines,
keeping prices way out of reach. Why were farmers unable to make a living off
the land? I discovered that it was related to the subsidised foods that were
flooding in from the US and the EU, which undercut local agriculture. And why
was the government unable to provide basic social services? Because it was
buried under a pile of foreign debt and had been forced by Western banks to cut
social spending in order to prioritise repayment.
The deeper I dug, the more I realised that the reason poverty persisted in
Swaziland had quite a lot to do with matters that lay beyond Swaziland’s
borders. It gradually became clear that the global economic system was
organised in such a way as to make meaningful development nearly impossible.
These findings troubled me. But when I pointed them out to World Vision’s
managers, who parachuted in from the US and Australia from time to time, I was
told that they were too ‘political’; it wasn’t World Vision’s job to think about
things like pharmaceutical patents or international trade rules or debt. If we
started to raise those issues, I was told, we would lose our funding before the
year was over; after all, the global system of patents, trade and debt was what
made some of our donors rich enough to give to charity in the first place. Better
to shut up about it: stick with the sponsor-a-child programme and don’t rock the
boat.
Frustrated and disillusioned, I left World Vision and went back to studying,
determined to learn everything I could about the deeper structural determinants
of poverty – not just in Swaziland, but across the global South. I needed to
understand why so much of the world continues to live in grinding poverty,
despite decades of ‘development’, while a few countries enjoy almost
unimaginable wealth.
What I learned along the way is that the story we’ve been told about rich
countries and poor countries isn’t exactly true. In fact, the narrative we’re
familiar with is almost the exact opposite of reality. There is a very different
story out there, if we are willing to listen to it. It will completely change the way
we think about the world. It will change the way we think about why poverty
exists. It will change the way we think about progress. It will even change the
way we think about our own civilisation, about our everyday lifestyles, and
about what the world should look like in the future.
Anthropologists tell us that when the structure of a core myth begins to change,
everything else about society changes around it, and fresh new possibilities open
up that weren’t even thinkable before. When myths fall apart, revolutions
happen.
The Myth Begins to Crumble
One of the reasons that the development story has been so compelling to people
is that it has at its core a narrative of success – a bit of heartening good news in a
world full of bad. Thanks to the generous aid of rich countries, the story goes,
we have made remarkable strides in our fight against global poverty, and human
want will soon be relegated to the dustbin of history. This hopeful story has
inspired people for many decades and won the development industry millions of
eager recruits. But in recent years public enthusiasm seems to have waned;
people are beginning to pack away the streamers and quietly exit the party.
Development agencies have produced report after report of hand-wringing
analysis about the fact that people no longer believe that development is
working. Drawing on survey data, the UK development umbrella group Bond
recently reported that ‘efforts to eradicate poverty appear to many members of
the public to have failed, and scepticism about the effectiveness of aid and global
development initiatives has risen’.
Development agencies find this trend difficult to understand. As far as they’re
concerned, development has been an outstanding success, scoring improvements
in areas like child and maternal mortality and inching us towards a world
without poverty. And indeed there have been some impressive achievements.
For example, the number of children dying from preventable causes has declined
from 17 million in 1990 to less than 8 million in 2013. And the likelihood of
mothers dying during childbirth has declined by 47 per cent during the same
period. These statistics are certainly worth celebrating.
3 But the development
industry wants the public to believe that these gains are tantamount to the overall
success of the development project, and the public just aren’t buying it. There
may be some small wins around the edges, they feel, but on the whole things
don’t appear to be getting much better, and may even be getting worse. The
development industry has repeatedly failed to deliver on its grand promises to
End World Hunger or Make Poverty History – so why give them any more
money? Why let them encourage false hope?
And they’re right. Take hunger, for example. In 1974, at the first UN Food
Summit in Rome, US Secretary of State Henry Kissinger famously promised that
hunger would be eradicated within a decade. At the time there were an estimated
460 million hungry people in the world. But instead of disappearing, hunger got
steadily worse. Today there are about 800 million hungry people, even according
to the most conservative measures. More realistic estimates put the figure at
around 2 billion – nearly a third of all humanity.
4
It is hard to imagine a greater
symbol of failure than rising hunger, especially given that we already produce
more than enough food each year to feed all 7 billion of the world’s people, with
plenty left over for another 3 billion.
5
What about poverty? For many years, the development industry has told us that
absolute poverty has been steadily declining. In 2015, the United Nations
published the final report of the Millennium Development Goals – the world’s
first major public commitment to reduce poverty – claiming that the poverty rate
had been cut in half since 1990. This official good-news narrative ricocheted
through the media and was repeated endlessly by NGOs. But it is very
misleading. First, almost all of the gains against poverty have happened in one
place, China. Second, the good-news story relies on proportions instead of
absolute numbers. If we look at absolute numbers – the original metric by which
the world’s governments agreed to measure progress – we see that the poverty
headcount is exactly the same now as it was when measurements began back in
1981, at about 1 billion.
6 There has been no improvement over thirty-five years.
And that’s according to the lowest possible poverty line. In reality, the picture is
even worse. The standard poverty measure counts the number of people who live
on less than a dollar a day. But in many global South countries a dollar a day is
simply not adequate for human existence, to say nothing of human dignity.
Many scholars are now saying that people need about four times that in order to
have a decent shot at surviving until their fifth birthday, having enough food to
eat and reaching normal life expectancy.
7 So what would happen if we measured
global poverty at this more realistic level? We would see a total poverty
headcount of about 4.3 billion people. That’s more than four times what the
United Nations would have us believe, and more than 60 per cent of humanity.
We would also see that poverty has become worse over time, with more than 1
billion people added to the ranks of the poor since 1981. Imagine the entire
population of the United States and then triple it. That’s how much global
poverty has grown over the past few decades. These numbers represent almost
unimaginable human suffering.
8
And all the while, inequality has been exploding. In 1960, at the end of
colonialism, per capita income in the richest country was thirty-two times higher
than in the poorest country. That’s a big gap. The development industry told us
that the gap would narrow, but it didn’t. On the contrary, over the next four
decades the gap more than quadrupled: by 2000, the ratio was 134 to 1.
9 We can
see the same pattern if we take a regional view. The gap between the United
States (the world’s dominant power) and Latin America, sub-Saharan Africa,
South Asia and the developing countries of the Middle East and North Africa
has roughly tripled between 1960 and today.
10 This is hardly a tale of ‘catching
up’. And of course global inequality is even worse at the level of individuals. In
early 2014, Oxfam reported that the richest eighty-five people had come to
accumulate more wealth than the poorest 50 per cent of the world’s population,
or 3.6 billion people. The following year things had already become worse – and
so too the year after that. And in early 2017, as the World Economic Forum met
in Davos, Oxfam announced that the richest eight people had as much wealth as
the poorest 3.6 billion.
It would be difficult to overstate how devastating these facts are to the success
narrative that the development industry seeks to propagate. No story can survive
very long when it runs so obviously against the grain of reality. Eventually
something has to give.
The industry is scrambling to respond to this existential crisis. NGOs, watching
their donor base recede, are working around the clock to turn the tide of
defection. Many of them have hired expensive public relations agencies to help
them combat negative perceptions and get people back on board with the old
story. The stakes are high, for if the story of development collapses, so too will
our certainties about the present order of the global economy. If people begin to
accept that, despite many decades of development, poverty has been getting
worse rather than better, and the divide between rich and poor countries is
growing rather than closing, then it will become clear to all that there is
something fundamentally wrong with our economic system – that it is failing the
majority of humanity and urgently needs to be changed. The official success
story has helped keep people on board with our existing system for a long time.
If that story falls apart, so too will their consent.
Why are Poor Countries Poor?
When I first started teaching at the University of Virginia in 2005, I would begin
my classes each term by asking students to brainstorm answers to the question:
Why are poor countries poor? Their responses were more or less the same each
year. You can probably guess them. There were always a few who thought it had
something to do with people being lazy, having too many children or holding
‘backwards’ cultural values. Others guessed that it had to do with corruption or
bad governance or poor institutions; or perhaps with environmental problems
like poor soils unsuited to productive farming and climates that incubate tropical
diseases.
11 And some believed that poor countries were poor because they just
were. Poor countries are just naturally poor, they assumed, and no one is really
to blame for it. After all, poverty is the normal first stage of development. Poor
countries are like children; they just haven’t grown up yet. They haven’t
developed.
It is a line of thinking that comes straight out of Truman’s speech. After all, the
story that he spun into being calls us to see the countries of the world as a series
of unconnected individuals, like runners on a track racing in their own separate
lanes. Some runners are behind, others are ahead; some runners are fast, others
are slow. Maybe it has to do with institutions or governance or climate – but
regardless of the reason, the important thing is that they are each responsible for
their own achievement.
12 So 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.
It was a somewhat strange move on Truman’s part. By casting the fates of poor
countries and rich countries as separate and unconnected, his story ignored the
obvious relationships between them. It airbrushed away the long and fraught
history of entanglement between the West and the Rest, along with the political
interests at stake. Truman wasn’t ignorant of that history. He knew that 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.
And of course, 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.
13
But it came with devastating consequences for the colonies. The plunder of Latin
America left 70 million indigenous people dead in its wake. In India, 30 million
died of famine under British rule. Average living standards in India and China,
which had been on a par with Britain before the colonial period, collapsed.
14 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, as European capitalism – driven by the imperatives of growth and profit
– prised people off their land and destroyed their capacity for self-sufficient
subsistence. Development for some meant underdevelopment for others. But all
of this was carefully erased from the story that Truman handed down.
*
Point Four was originally articulated for Western audiences – it explained global
inequality in a way that absolved Western nations of any culpability. But during
the 1950s and 1960s the governments of the United States, Britain and France
realised that it could have power beyond their borders as well, and they began to
wield it as a weapon in their foreign policy arsenal.
They were worried about the progressive ideas that were bubbling up across the
global South in the aftermath of colonialism. The leaders of the new independent
nations were rejecting Truman’s story about global inequality. Drawing on
insights from thinkers such as Karl Marx, Aimé Césaire and Mahatma Gandhi,
they pointed out that underdevelopment in the global South was not a natural
condition, but a consequence of the way Western powers had organised the
world system over hundreds of years. They wanted to change the rules of the
global economy to make it fairer for the world’s majority. They wanted to stop
foreigners from plundering their resources, to take control of their own abundant
raw materials and to build their own industries without Western interference. In
short, they wanted justice – and they saw this as a basic precondition for
development.
As far as the Western powers were concerned, this was a dangerous movement
that had to be stopped, for it threatened to disrupt their economic dominance.
They needed a way to defuse the anger of the people. And they found it in the
work of American economist Walt Whitman Rostow. Rostow – an academic
who moonlighted as a foreign policy adviser to President Dwight Eisenhower –
argued that underdevelopment was not a political problem, but a technical one. It
had nothing at all to do with colonialism or Western intervention, but rather to
do with internal problems. If poor countries wanted to develop, all they needed
to do was accept Western aid and advice, implement free-market policies and
follow the West’s path to ‘modernisation’. 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.
Rostow published his theory in 1960 in The Stages of Economic Growth. He
advertised the book as a ‘non-communist manifesto’ and it quickly became
popular at the highest levels of policy in the US government. During the 1960s
and 1970s, the government peddled Rostow’s theory across the global South as a
containment strategy – a way of depoliticising the question of global inequality.
It proved to be such a promising tool that President Kennedy hired Rostow into a
senior role at the US State Department, and President Johnson later promoted
him to national security advisor. Following Truman’s lead, Rostow turned the
development story into a public-relations exercise, although this time it was
targeted not only at American ears, but also at the rest of the world.
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. And we shouldn’t be surprised; after all, global South countries were
using the exact same policies that Western countries had used during their own
periods of economic consolidation.
The United States, Britain, France and other Western powers were not pleased
with these developments. The policies that global South governments were
rolling out undermined the profits of Western corporations, their access to cheap
labour and resources, and their geopolitical interests. In response, they
intervened covertly to overthrow dozens of democratically elected leaders across
the South, replacing them with dictators friendly to Western economic interests
who were then propped up with aid. For anyone who was paying attention, these
coups gave the lie to the story told by figures like Truman and Rostow, and
proved the point that the leaders of the global South had been trying to get across
all along. Indeed, Western-backed coups were being carried out even as early as
the 1950s – including in Iran and Guatemala – while Rostow was busy writing
his book. Close as he was to the Eisenhower administration, which perpetrated
those first coups, Rostow knew full well what was going on. Indeed, he may
have been involved in the US-backed coup against the leader of Brazil in the
1960s, which took place during his tenure in the State Department.
Yet despite these attacks the South was still rising and continuing to push for
economic justice. In the halls of the United Nations, governments of the South
argued for a fairer international order, and they were succeeding. 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.
Structural adjustment – a form of free-market shock therapy – was sold as a
necessary precondition for successful development in the global South. But it
ended up doing exactly the opposite. Economies shrank, incomes collapsed,
millions of people were dispossessed and poverty rates shot through the roof.
Global South countries lost an average of $480 billion per year in potential GDP
during the structural adjustment period.
15
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. For instance, global South countries would have to abolish their
agricultural subsidies, but the United States and the European Union would be
allowed to continue paying subsidies to their own farmers, enabling them to
undercut the market share of global South producers in the one sector in which
they are supposed to have a natural competitive advantage. Today, power
imbalances like these, enshrined in the Uruguay Round of the WTO, are
estimated to cost poor countries around $700 billion each year in lost export
revenues.
16
*
If we bring history back into the analysis, the story of global inequality begins to
take on a far more complex and even sinister hue. The whole idea that rich
countries are the saviours of poor countries begins to seem more than a bit naive.
The problem is not that poor countries are having difficulty hoisting themselves
up the development ladder; the problem is that they are being actively prevented
from doing so. The development industry likes to refer to poor countries by the
passive adjective ‘underdeveloped’. But perhaps it would be more accurate to
make the term a transitive verb, ‘under-developed’: to have had one’s
development intentionally obstructed, undone or reversed by an external
power.
17 After all, as we will see, poverty doesn’t just exist. It is created.
Aid in Reverse
When I teach this history in the classroom, I find that it quite often makes some
students feel uncomfortable. Yes, they reply, terrible things happened in the past,
but we live in a fairer, more compassionate world. And for evidence they
invariably invoke the aid budget, pointing out that rich countries give poor
countries about $128 billion in aid each year.
18
It is a powerful idea. Together with grand claims about global poverty reduction
and the assumption of methodological nationalism, the growing size of the aid
budget sits right at the centre of the official development story. The idea of aid
has been with us since at least Truman, but its continuing power in our world
today is largely down to the efforts of one man: the American economist Jeffrey
Sachs, former director of the Millennium Development Goals and special
adviser to UN Secretary General Ban Ki-moon. Sachs, affable and good-looking
– a refreshing departure from the stereotypical technocrat – has become the aid
evangelist of our age and a kind of rock star in the process, bagging two
appearances on Time’s list of the world’s 100 most influential people. His
bestselling 2005 book, The End of Poverty, made a simple and compelling
argument. Nobody is to blame for the continuing poverty of poor countries, he
said. It’s just down to natural accidents of geography and climate and these can
easily be overcome. If rich countries would just increase their foreign aid
contributions to 0.7 per cent of GDP, we would be able to eradicate global
poverty in only twenty years. All poor countries need is enough to pay for
essential agricultural technologies, basic healthcare, clean water, primary
education and electricity, and they’ll be on their way up the ladder of
development.
What matters here is not the content of the proposal (with which few would
disagree), but the story that it implies. Not only are rich countries not responsible
for causing underdevelopment in poor countries, as Rostow once insisted; they
are in fact reaching out across the divide with loving concern. Sachs’ ideas gave
life to the aid narrative for a new generation and were celebrated by the
governments of most of the world’s rich countries; indeed, many increased their
foreign aid disbursements accordingly. The aid narrative was useful because it
overrode any suggestion that Western powers were in any way responsible for
causing the suffering of the South. The US and Britain had just invaded Iraq, at
least in part in order to secure access to the region’s vast oil reserves, and the
Bush administration had just helped topple the progressive government of JeanBertrand Aristide in Haiti and tacitly supported a coup attempt against
Venezuela’s Hugo Chávez, continuing the long history of aggressive
intervention that Eisenhower had set in motion in the 1950s. But the flow of aid
would stand nonetheless as irrefutable proof of Western benevolence. It was a
matter of perception management.
If we look more closely, however, even this dimension of the development story
crumbles into incoherence. It’s not that the $128 billion in aid disbursements
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. By comparison, the aid budget turns out to be a mere trickle.
At the end of 2016, the US-based Global Financial Integrity (GFI) and the
Centre for Applied Research at the Norwegian School of Economics published
some truly paradigm-shifting data. They tallied up all of the financial resources
that get transferred between rich and poor countries each year: not just aid,
foreign investment and trade flows, as previous studies have done, but also other
transfers like debt cancellation and remittances and capital flight. It is the most
comprehensive assessment of resource transfers that has ever been made. They
found 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.
19
In other words, developing countries ‘sent’ $3 trillion more to the
rest of the world than they received. If we look at all years since 1980, these net
outflows add up to an eye-popping total of $26.5 trillion – that’s how much
money has been drained out of the global South over the past few decades. To
get a sense of the scale of this, $26.5 trillion is roughly the GDP of the United
States and Western Europe combined.
What do these large outflows 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.
20 Since 1980,
developing countries have forked over $4.2 trillion in interest payments – much
more than they have received in aid during the same period. And most of these
payments have gone to Western creditors – a direct cash transfer to big banks in
New York and London.
Another big 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. Foreign investors take nearly $500 billion in
profits out of developing countries each year, most of which goes back to rich
countries.
21 Then there are the profits that ordinary Europeans and Americans
earn on their investments in stocks and bonds they hold in the global South,
through their pension funds, for example. And there are many smaller outflows
as well, such as the extra $60 billion per year that developing countries have to
pay to foreign patent owners under the WTO’s agreement on intellectual
property rights (TRIPS) in order to access technologies and pharmaceuticals that
are often essential to development and public health.
22
But by far the biggest chunk of outflows has to do with capital flight.
23 GFI
calculates that developing countries have lost a total of $23.6 trillion through
capital flight since 1980. A big proportion of this takes place through ‘leakages’
in the balance of payments between countries, through which developing
countries lose around $973 billion each year. Another takes place through an
illegal practice known as ‘trade misinvoicing’. Basically, corporations – foreign
and domestic alike – report false prices on their trade invoices in order to spirit
money out of developing countries directly into tax havens and secrecy
jurisdictions. Developing countries lose $875 billion through trade misinvoicing
each year. 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.
24 Usually the goal of these practices is to evade taxes, but
sometimes they are used to launder money or circumvent capital controls.
Three trillion dollars in total net outflows per year is twenty-four times more
than the annual aid budget. In other words, for every dollar of aid that
developing countries receive, they lose $24 in net outflows. Of course, this is an
aggregate figure; for some countries the ratio is larger, while for others it is
smaller. But in all cases net outflows strip developing countries of an important
source of revenue and finance that could be used for development. The GFI
report finds that increasingly large net outflows (since 2009 they have been
growing at a rate of 20 per cent per year) have caused economic growth rates in
developing countries to decline, and are directly responsible for falling living
standards.
*
What this means is that poor countries are net creditors to rich countries –
exactly the opposite of what we would usually assume. But when we consider
the aid budget in its broader context, we should look not only at outward flows
but also at the losses and costs that developing countries have suffered as a result
of policies devised by rich countries. For instance, when structural adjustment
was imposed on the global South during the 1980s and 1990s, they lost around
$480 billion each year in potential GDP. That’s nearly four times the size of
today’s annual aid budget. More recently, imbalances in the World Trade
Organization have caused losses of $700 billion per year in potential export
revenues, outstripping the aid budget by a factor of six.
But perhaps the most significant loss has to do with exploitation through trade.
From the onset of colonialism through to globalisation, the main objective of the
North has been to force down the cost of labour 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 labour 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 labour and goods that poor
countries sell and the prices they are actually paid for them. This is what
economists call ‘unequal exchange’. In the mid-1990s, at the height of the
structural adjustment era, the South was losing as much as $2.66 trillion in
unequal exchange each year (in 2015 dollars) – a hidden transfer of value that
amounts to twenty-one times the size of today’s aid budget and dwarfs the flow
of foreign direct investment.
25
There are many other structural losses and costs that we could take into account.
For example, ActionAid reports that multinational corporations extract about
$138 billion from developing countries each year in the form of tax holidays.
26
This figure alone outstrips the global aid budget. Remittances sent home by
immigrant workers are slashed by exorbitant transaction fees, costing families
$33 billion each year.
27 Global South economies lose about $27 billion in GDP
each year because aid disbursements are so volatile, making it very difficult for
them to plan investment and manage their budgets.
28 Then there are forms of
extraction that are more difficult to quantify, such as the 162 million acres of
land (more than five times the size of England) that has been grabbed in global
South countries since 2000.
29 And then, of course, there are the damages that
developing countries suffer due to climate change – caused almost entirely by
rich countries – which are currently estimated to cost $571 billion per year.
30
The point here is simple: the aid budget is diminutive, almost ridiculously so,
when compared to the structural losses and outward flows that the global South
suffers. Yes, some aid goes a long way towards making people’s lives better, but
it doesn’t come close to compensating for the damage that the givers of aid
themselves inflict. Indeed, some of this damage is caused by the very groups that
run the aid agenda: the World Bank, for example, which profits from global
South debt; the Gates Foundation, which profits from an intellectual-property
regime that locks life-saving medicines and essential technologies behind
outlandish patent paywalls; and Bono, who profits from the tax haven system
that siphons revenues out of global South countries.
31
This is not an argument against aid as such. Rather, it is to say 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. So
it’s not only that the aid narrative misunderstands what really causes poverty, it’s
that it actually gets it backwards. Just as in Truman’s time, aid serves as a kind
of propaganda that makes the takers seem like givers, and conceals how the
global economy actually works.
Perhaps Frantz Fanon, the famous philosopher from Martinique and leading
thinker of Algeria’s anti-colonial struggle, put it best:
Colonialism and imperialism have not settled their debt to us once they
have withdrawn from our territories. The wealth of the imperialist nations is
also our wealth. Europe is literally the creation of the Third World. The
riches which are choking it are those plundered from the underdeveloped
peoples. So we will not accept aid for the underdeveloped countries as
‘charity’. Such aid must be considered the final stage of a dual
consciousness – the consciousness of the colonised that it is their due, and
the consciousness of the capitalist powers that effectively they must pay up.
Comparing aid to various outflows (dark grey) and structural costs/losses (light grey).
32
Frantz Fanon recognised that poverty in the global South is not a natural
condition any more than is the wealth of the West. Poverty is, at base, the
inevitable outcome of ongoing processes of plunder – processes that benefit a
relatively small group of people at the expense of the vast majority of humanity.
It is delusional to believe that aid is a commensurate, let alone honest and
meaningful, solution to this kind of problem. The aid paradigm allows rich
countries and individuals to pretend to fix with one hand what they destroy with
the other, dispensing small bandages at the same time as they inflict deep
injuries, and claiming the moral high ground for doing so.
*
A few years ago I had the opportunity to visit the West Bank in Palestine. On
one particularly hot afternoon, my hosts drove me down into the Jordan Valley
to interview some farmers there about water issues. Along the way, bumping
along a gravel track, we came across a huge white sign jutting out of the desert
rocks. The sign announced a USAID initiative ‘to help alleviate recurring water
shortages’ by adding a new well in the area. It was branded with the American
flag and bore the proud words: ‘This project is a gift from the American People
to the Palestinian People.’
A casual observer might be impressed: American taxpayer money offered
generously, in the spirit of humanitarianism, to assist impoverished Palestinians
struggling to survive in the desert. But Palestine doesn’t have a shortage of
water. When Israel invaded and occupied the West Bank in 1967, with the
backing of the US military, it asserted total control over the aquifers beneath the
territory. Israel draws the majority of this water – close to 90 per cent – for its
own use in settlements and for irrigation on large industrial farms. And as the
water table drops, Palestinian wells are running dry. Palestinians are not allowed
to deepen their wells or sink new ones without Israeli permission – and
permission is almost never granted. If they build without permission, as many
do, Israeli bulldozers arrive the next day. So Palestinians are forced to buy their
own water back from Israel at arbitrarily high prices.
This is not a secret. It is happening out in the open, and the farmers I spoke to
know it all too well. For them, the USAID sign only adds insult to injury. It’s not
that they lack water, as USAID implies; it’s that the water has been stolen from
them. And it has been stolen with US support. In 2012, just two months before
my visit, the United Nations General Assembly adopted resolution 66/225,
calling for the restoration of Palestinians’ rights to their own water. One hundred
and sixty-seven nations voted in favour of the resolution. The United States and
Israel voted against it.
I tell this anecdote not just as an example of how aid often misses the point, but
to illustrate a much larger truth. Poor countries don’t need our aid; they need us
to stop impoverishing them. 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. We will continue
to watch the poverty numbers rise, and the divide between rich and poor
countries will continue to grow. This is a difficult truth to swallow for the
millions of well-meaning people who have been sold on the development story.
It can be scary to grapple with the collapse of a core myth. At least it was for me.
But it also opens up a world of exciting new possibilities, and clears the way to a
different kind of future.
Two
The End of Poverty … Has Been Postponed
Everything faded into mist. The past was erased, the erasure was forgotten, the lie became truth.
George Orwell, 1984
On a cool September day in 2000, the world’s heads of state gathered at the
United Nations headquarters in New York to sign one of the most important
international agreements in modern history: the Millennium Declaration. It was a
monumental occasion. For the first time, world leaders had committed
themselves to a full range of development aspirations. And the main objective –
the one that captured the world’s attention – was a pledge to cut global poverty
and hunger in half by 2015.
After the meeting in New York, UN staff buckled down to the work of
formulating the aspirations of the Millennium Declaration into a series of eight
concrete, measurable targets called the Millennium Development Goals. Goal 1
was to cut poverty and hunger in half, but there were a number of others: to
achieve universal primary education, to eliminate gender disparity in education,
to reduce child mortality by two-thirds, to reduce maternal mortality by threequarters, and to reverse the spread of AIDS and malaria. Poor countries
themselves would be responsible for meeting these targets (the assumption being
that poverty had to do with domestic policies) with the help of aid and other
forms of assistance from rich countries.
After the launch of the MDGs, a well-funded PR campaign kept the programme
prominent in the public imagination and high on the global policy agenda. It
quickly became the biggest coordinated international effort of the 21st century.
Each year the UN published a report updating the world on progress towards the
goals. And only twelve years in, with their deadline still three years away, they
claimed success on Goal 1. They announced that poverty rates had already been
cut in half, and that the goal of halving hunger was close to being achieved.
The announcement came as a shock to many. At the time, the world was still
mired in the worst economic crisis in nearly a century. As Western economies
had contracted, export industries in the global South dried up and employment
fell. To make matters worse, the poorest had been hit by unprecedented spikes in
the price of food. If anything, analysts were expecting there to be more poverty
and hunger. Nevertheless the media seized the story and ran with it. Soon after
the UN’s report, The Economist ran a widely shared article with the headline: ‘A
Fall to Cheer: for the first time ever, the number of poor people is declining
everywhere’. That same year, Charles Kenny published Getting Better: Why
Global Development is Succeeding, with a glowing foreword by Bill Gates.
Gates himself published a public letter in 2014, opening with the words: ‘By
almost any measure, the world is better than it has ever been.’ And the Swedish
academic Hans Rosling continued to make his earnest presentations with shiny
visual gimmicks illustrating how the plight of the poor keeps improving.
Rosling’s TED Talk, ‘The Best Stats You’ve Ever Seen’, has been viewed more
than 10 million times. The UN’s poverty-reduction figures quickly became some
of the most repeated statistics in the world.
This is what I call the ‘good-news narrative’ about poverty. It is a comforting
story, a welcome contrast to the depressing tales that often fill the daily news
cycle. After all, it feels good to take a step back and realise that things are not as
bad as they seem – that in the broad scheme of things, the world is gradually
getting better. It is a story that vindicates our civilisation and affirms our deepest
and most powerful ideas about Progress.
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. It implies that if we
want to eradicate suffering, we should stick with the status quo and refrain from
making drastic changes. For anyone who has an interest in maintaining the
present order of distribution – the global 1 per cent, for instance – the good-news
narrative is a useful story indeed. Sometimes this argument is quite explicit. In
early 2015, the Spectator published a blog post with the title: ‘What Oxfam
doesn’t want you to know: global capitalism means less poverty than ever’. It led
with the MDG statistics on the reduction of extreme poverty, followed by a
graph showing the declining proportion of undernourished people in developing
regions. The author argued that all the attention we’ve been focusing on social
inequality and wealth accumulation among the richest 1 per cent is misplaced.
The 1 per cent may now have more wealth than the combined population of the
entire rest of the world, but that’s OK because the very system that has made
them so rich has also reduced poverty in developing countries. ‘We are, right
now, living through the golden age of poverty reduction,’ the author wrote.
‘Anyone serious about tackling global poverty has to accept that whatever we’re
doing now, it’s working – so we should keep doing it. 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. It’s the only true way to make poverty history.’
Of course, even if we take the good-news narrative at face value, it tells us
nothing about whether these gains are the direct result of the rapid extension of
free-market capitalism across the globe, as the Spectator article asserts. Indeed,
it is possible that they have happened in spite of it. But what is clear here is that
when it comes to the question of global poverty, the 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 poverty is falling a little bit, but not as quickly
as it was before, then maybe our system isn’t quite as good as it could be. And if
poverty is not falling at all but rather rising, that would be a good reason to
change the system altogether. With these kinds of questions on the table, it is
crucial that we have the facts straight.
Some of the claims made by the MDGs are strong and deserve to be celebrated.
The number of deaths among children under five declined from 12.7 million in
1990 to 6 million in 2015. That means there were 18,000 fewer children dying
each day. This is a remarkable improvement. The same is true of maternal
mortality, which declined by an impressive 45 per cent during the MDGs.
1
Primary school enrolment is up. And HIV and malaria infection rates have
declined markedly. While the UN technically fell short of reaching its targets on
these fronts, the numbers are nonetheless evidence of substantial progress.
But the headline assertion of the good-news narrative, the claim that poverty and
hunger have been cut in half, rests on much shakier ground. If we look more
closely, the real story about global poverty is not quite as rosy as we have been
led to believe. In fact, it is nearly the opposite of the official narrative. How did
this happen? What is going on? And what might a more accurate story of global
poverty and hunger look like?
The Great Poverty Disappearing Act
To understand what’s wrong with the story of poverty reduction, we have to start
at the beginning. The first multilateral agreement to reduce global poverty was
signed in 1996, when the world’s heads of state met at the World Food Summit
in the beautiful city of Rome. The commitment back then was a bold one: ‘We
pledge our political will and our common and national commitment to achieving
food security for all and to an ongoing effort to eradicate hunger in all countries,
with an immediate view to reducing the number of undernourished people to half
their present level no later than 2015.’ It is crucial to note that the goal was to
halve the absolute number of undernourished people. The Rome Declaration
focused specifically on hunger rather than income as the key dimension of
poverty, but it set an important precedent for the type of target – in terms of
parameters and ambition – that the world would pursue.
Four years later, when the world’s leaders gathered to sign the Millennium
Declaration in New York, they set out an explicit goal on income poverty – the
first of its kind. There was enormous fanfare surrounding this new pledge, but
those who were watching closely found little to celebrate, for the goalposts were
subtly shifted from the ones laid out in Rome. The new commitment was to
halve ‘the proportion of the world’s people whose income is less than one dollar
a day and the proportion of people who suffer from hunger’ from the baseline
year of 2000.
2 By switching from absolute numbers to proportions, the target
became easier to achieve, simply because it could take advantage of population
growth. As long as poverty was not getting much worse in absolute terms, it
would automatically appear to be getting better in proportional terms. At the
time, there were 1,673 million people in poverty. To cut the number of poor in
half would mean reducing the poverty headcount by 836 million people. But to
cut the proportion meant reducing it by only 669 million people – a significantly
easier goal to achieve. It was a masterful piece of statistical theatre, and almost
nobody noticed.
That was just the beginning. Shortly after the Millennium Declaration was
adopted, the UN rendered it into the Millennium Development Goals that we
know so well today. During this process, the poverty goal (MDG-1) was diluted
yet again – this time behind closed doors, without any media commentary at all.
First, they changed it from halving the proportion of impoverished people in the
whole world to halving the proportion in developing countries only. Because the
population of the developing world is growing at a faster rate than the world as a
whole, this shift in the methodology allowed the poverty accountants to take
advantage of an even faster-growing denominator. On top of this, there was a
second significant change: they moved the starting point of analysis from 2000
back to 1990. This gave them much more time to accomplish the goal, extended
the period of denominator growth and allowed them to retroactively claim gains
in poverty reduction that were achieved long before the campaign actually
began. This backdating took particular advantage of gains made by China during
the 1990s,
3 when hundreds of millions of people were lifted out of extreme
poverty, and deceptively chalked them up as a victory for the Millennium
Development Goals.
4
This new round of statistical theatre shrank the target by even more than the first
round. The goal of the Millennium Declaration was to cut the number of poor by
669 million people. But MDG-1 pledged to cut the number of poor by only 490
million. There’s another way to think about this change. The world’s
governments initially decreed that there should be no more than 1,004 million
people living in poverty in 2015; that was to be the absolute cap, and anything
more than that was deemed to be morally unacceptable. But they later decided to
adjust the cap upward to 1,327 million, essentially declaring it would be
acceptable for 323 million additional people to suffer from extreme poverty in
2015. This also 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.
5
In comparison, the new goal would need
hardly any effort to achieve.
There is something highly questionable about the ethics behind MDG-1, given
that it rests on such a flexible understanding of moral acceptability. But for those
who are committed to promoting the good-news narrative, it has been
remarkably useful. By redefining the goal, the Millennium Campaign is now
able to claim that poverty has been halved when in fact it has not.
TABLE 1 Diluting the poverty goal.
Source: Adapted from Pogge, ‘How World Poverty is Measured’.
The good-news narrative about poverty reduction only works because the
goalposts have been shifted. But that’s not the only sleight of hand to be
concerned about.
6
*
What counts as poverty – the ‘poverty line’ – is normally calculated by each
nation and is supposed to reflect the total cost of all of the essential resources
that an average adult needs to subsist. For most of recent history, it has been
understood that poverty lines are not really comparable across contexts: what
counts as poverty in Somalia is not the same as what counts as poverty in Chile.
Nonetheless, there was a big push to try to find some kind of common
denominator that would make it possible to measure the poverty rate across the
world with a single methodology. Martin Ravallion, an Australian economist at
the World Bank, was the first to make this a reality. In 1990 he noticed that the
poverty lines of a few of the world’s poorest countries clustered around $1.02
per day. It seemed reasonable, he thought, to assume that this would be a good
low-end threshold for measuring absolute poverty.
7 On Ravallion’s
recommendation, the World Bank adopted the dollar-a-day line as the first-ever
international poverty line (IPL).
But the IPL proved to be somewhat troublesome. Using this line, the World
Bank was forced to announce in its 2000 annual report that poverty was rising.
‘The absolute number of those living on $1 per day or less continues to
increase,’ the report read.
8
‘The worldwide total rose from 1.2 billion in 1987 to
1.5 billion today and, if recent trends persist, will reach 1.9 billion by 2015.’
This was alarming news, and projected a troubling future trend. Not only that, it
also suggested that the structural adjustment programmes imposed by the World
Bank and the IMF on global South countries during the 1980s and 1990s in the
name of ‘development’ were actually making things worse.
9 This posed serious
problems for the World Bank. If poverty reduction was going to be the method
by which we measured global economic progress, then it was clear that
structural adjustment would have to be scrapped, and the World Bank would
have to acknowledge a very costly mistake. This would mean halting the process
of forced market liberalisation and privatisation around the world, which was
bad news for the multinational corporations – and the global South elite – who
benefited so much from it. It was a dramatic moment that looked set to consign
the World Bank’s radical free-market policies to the dustbin of history.
But not long after the report was released, the World Bank’s story changed. In
2001, the Bank’s president, James Wolfensohn, delivered a speech in which he
stated that the forced imposition of free-market policies had actually reduced
poverty in the developing world: ‘Over the past few years,’ he announced,
‘better policies have contributed to more rapid growth in developing countries’
per capita incomes than at any point since the mid-1970s.
10 And faster growth
has meant poverty reduction: the proportion of people worldwide living in
absolute poverty has dropped steadily in recent decades, from 29 per cent in
1990 to a record low of 23 per cent in 1998. After increasing steadily over the
past two centuries, since 1980 the total number of people living in poverty
worldwide has fallen by an estimated 200 million.’
What was curious about Wolfensohn’s speech was that he acknowledged that
per capita incomes had been growing faster up until the mid-1970s, technically
admitting that the World Bank’s structural adjustment programmes had slowed
progress during the 1980s and 1990s. But at the same time he claimed that
poverty had nonetheless been reduced during those decades – and that’s the part
of the story that captured everyone’s attention. The media went along with it,
pivoting from questioning the Bank’s policies to celebrating its success against
poverty. That was in 2001. Then, three years later, the Bank published its new
official figures, which stated that poverty reduction was even more successful
than Wolhfensohn had suggested – twice as successful, in fact: a grand total of
400 million people were rescued from extreme poverty between 1981 and
2001.
11 The story just kept getting better.
How did the World Bank’s poverty numbers change so suddenly from a rising
trend to a falling one? To put it simply, they changed the international poverty
line. In 2000, they shifted it from the original $1.02 level to $1.08. While the
new poverty line looks slightly higher than the old one, in reality it was just
‘rebased’ to new purchasing power parity (PPP) calculations, which are updated
every few years to compensate for depreciation in the purchasing power of the
dollar. If the purchasing power of the dollar goes down, people need more
dollars to buy the same stuff as before. So the poverty line needs to be
periodically ‘raised’ to account for this. But in this case they didn’t raise it quite
enough to account for purchasing power depreciation. So the new $1.08 poverty
line was actually lower in real terms than the old $1.02 line. And lowering the
poverty line made it appear as though fewer people were poor than before. When
the new line was introduced, the poverty headcount fell literally overnight, even
though nothing had actually changed in the real world.
This new poverty line was introduced in the very same year that the Millennium
Campaign went live, and it became the campaign’s official instrument for
measuring absolute poverty. With this tiny alteration, a mere flick of an
economist’s wrist, the world suddenly appeared to be getting better.
The IPL was changed a second time in 2008, to $1.25. The World Bank’s
economists claimed that this new line was roughly equivalent to the earlier one,
in real terms, but watchdogs like Yale professor Thomas Pogge and economist
Sanjay Reddy at the New School in New York pointed out that the data was
simply not comparable.
12 Once again, the number of absolute poor changed
overnight, although this time it went up – by 430 million people. At first glance
this seems like it must have been shockingly bad news – a decisive blow to the
good-news narrative. But there was a bright side, as far as the World Bank was
concerned: the poverty reduction trend started to look significantly better, at
least since the baseline year of 1990. While the $1.08 line made it seem as
though the poverty headcount had been reduced by 316 million people between
1990 and 2005, the new line inflated the number to 437 million, creating the
illusion that an additional 121 million souls had been saved from the jaws of
poverty. Once again, the Millennium Campaign adopted the new poverty line,
which allowed it to claim yet further gains.
*
There is yet another sleight of hand at the centre of the poverty story that is often
overlooked. Remember that the Millennium Development Campaign moved the
baseline year back to 1990, which allowed them to claim China’s gains against
poverty. What happens if we take China out of the equation? Well, we find that
the global poverty headcount increased during the 1980s and 1990s, while the
World Bank was imposing structural adjustment across most of the global South.
Today, the extreme poverty headcount is exactly the same as it was in 1981, at
just over 1 billion people. In other words, 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. This is a crucial point, because
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.
13 Everywhere else,
poverty has been stagnant or getting worse, in aggregate. And this remains
evident despite the World Bank’s attempts to doctor the figures.
What Happened to Hunger?
The good-news narrative of the MDGs seeks to direct all our attention to the
question of poverty. But what about hunger – the other big goal of the
Millennium Declaration? For a long time we didn’t hear much about the hunger
issue, probably because the world’s governments were clearly failing to achieve
this goal – the number of hungry people in the world had been steadily rising
during the MDG period. When heads of state first pledged in 1996 to cut hunger
in half before 2015, there were 788 million hungry people in the world. In 2009,
there were 1,023 million, or about 30 per cent more. This trend has long been a
thorn in the side of the powers that be. After all, one of the best ways to test the
success of an economic system is to assess progress against hunger. If the hunger
numbers are static – or, worse, on the rise – it is difficult to argue that something
isn’t fundamentally wrong.
Of course, when the Millennium Campaign pushed the base year back to 1990,
the hunger trend appeared to get a little better. And diluting the goal to focus on
proportions instead of absolute numbers helped a little bit too. But even with
these changes, in 2009 the hunger headcount was still 21 per cent worse than it
was in 1990. The UN was forced to concede defeat, publishing a report
admitting that the hunger goal was going to be impossible to achieve: instead of
decreasing, ‘hunger has been on the rise for the past decade’.
14
It seemed a disaster. But then, out of the blue, in 2012 the UN agency
responsible for calculating the hunger numbers, the Food and Agriculture
Organization (FAO), suddenly began telling the exact opposite story. With only
three years to go before the expiry of the MDGs, the FAO announced an
‘improved’ methodology for counting hunger. And the revised numbers
delivered a rosy tale at last: while 23 per cent of people in the developing world
were undernourished in 1990, the UN was pleased to announce a reduction to 15
per cent. The goal still hadn’t been accomplished, of course, and in terms of
absolute numbers there wasn’t much to write home about: over twenty-five years
they had managed to cut hunger from 1 billion people to 800 million. And
almost all of this reduction had happened in Asia; in Africa, the number of
undernourished people had increased. But at least now the UN could at last
claim some progress on a global level. The 2013 report of the MDGs announced:
‘Progress in reducing hunger has been more pronounced than previously
believed, and the target of halving the percentage of people suffering from
hunger by 2015 is within reach.’
15
How did they pull this off? How did they turn a story of crisis into a story of
progress? It all had to do with the new methodology. The new model was
designed not to reflect the impact of economic crises, so the numbers did not
show the massive spike in hunger that followed the food-price crisis of 2007 and the financial collapse of 2008. In addition, the FAO revised their estimates of countries’ food supplies, and ‘relaxed’ their assumptions about people’s accessto calories.

16 They also adjusted the hunger threshold downwards, and in such a
way that the trend appeared to improve more rapidly than under previous
measurements.

17 All of this made the hunger story look much better than it had
before. Media outlets ran the new story without scrutinising the methodological changes.

Methodological twists aside, the other major problem with the UN’s hunger
numbers has to do with the definition of hunger itself. The UN counts people as hungry only when their calorie intake becomes ‘inadequate to cover even
minimum needs for a sedentary lifestyle’ (i.e. less than about 1,600 to 1,800
calories per day) for ‘over a year’.
18 The problem is that most poor people don’t
live sedentary lifestyles; in fact, they are usually engaged in demanding physical
labour, so in reality they need much more than the UN’s calorie threshold. The
average rickshaw driver in India, for example, burns through about 3, 000–4,000
calories per day.
19 The FAO itself recognises this flaw.
20
Its 2012 report admits
that ‘many poor and hungry people are likely to have livelihoods involved in
arduous manual labor’. It calls its core definition of hunger ‘narrow’, ‘very
conservative’, focused on only ‘extreme caloric deprivation’ and thus ‘clearly
insufficient’ to inform policy. It acknowledges that most poor people actually
require calories sufficient for ‘normal’ or even ‘intense’ activity.
So what happens if we measure hunger at these more accurate levels? We see
that between 1.5 billion and 2.5 billion people are hungry, according to the
FAO’s own data. This is two to three times higher than the Millennium
Campaign would have us believe.
21 And the numbers are rising, even according
to the FAO’s questionable new methodology.
But even these estimates aren’t quite good enough. Another problem with the
FAO’s definition is that it only counts calories. So people who have serious
deficiencies of basic vitamins and nutrients (a condition that affects some 2.1
billion people worldwide) are not counted as undernourished as long as they can
get enough calories to keep their hearts pumping.
22 People who suffer from
parasites, which inhibit food absorption rates, also fall through the cracks, since
what counts is calorie intake, not actual nutrition. And people who are hungry
for months at a time are not counted as hungry, since the definition of hunger
only captures hunger that lasts for over a year. The FAO writes: ‘The reference
period should be long enough for the consequences of low food intake to be
detrimental to health.
23 Although there is no doubt that temporary food shortage
may be stressful, the FAO indicator is based on a full year.’ In other words, the
FAO’s definition presupposes, without invoking any supporting evidence, that eleven months of hunger is not detrimental to human health.