Reverse Robin Hood: The Historical Scam of Global Development
By Levi VonkJuly 19, 2017
The Divide by Jason Hickel
This is all a sham, according to The Divide: A Brief Guide to Global Inequality and its Solutions, by London School of Economics anthropologist Jason Hickel, out this May. The Divide argues that far from eradicating poverty, development initiatives like the Millennium Campaign just cover it up, spinning “development” into an “incredibly beguiling tale to Western ears” in which rich countries in the Global North imagine that they are benevolently stewarding less advanced societies in the South. In reality, international development organizations such as the UN, World Bank, and the International Monetary Fund have one main agenda: to take from the poor and give to the rich.
The Divide tracks the roots of modern-day development all the way back to Columbus’s first contact, which catapulted Spain to the top of the 16th-century world order. Between 1503 and 1660, 16 million kilograms of silver alone were shipped from Latin America to Europe, worth some $165 trillion today, more than double the entire world’s GDP in 2015. The human toll was brutal and almost unimaginable. Such extraction was only possible through the systematic enslavement and extermination of native populations, often under the cover of Catholic proselytization.
British colonialism further entangled the relationship between resource extraction and salvation. Under the guise of “civilizing” India, Britain forced locals to farm luxury crops — tea, indigo, and opium — for the export market rather than food for their own subsistence. Between 1876 and 1902, 12.2 to 29.3 million Indians starved to death as a result. Meanwhile, London became the epicenter of the Industrial Revolution.
Development, says Hickel, is the newest iteration of this dark history. Today, eight individuals control more wealth than the poorest half of humanity combined. To underline that staggering statistic, note that 4.3 billion people — 60 percent of the world’s population — live on less than $5 a day. And though developing countries are given $130 billion in aid annually, it is a pittance compared to the money they give back: Hickel writes that for every dollar of aid the South receives, it loses $24 in net outflows to the North. The wretched of the earth exist, he argues, specifically because of development initiatives, not despite them. Just as conquistadors used religion and the British aristocracy used civilization, the IMF and World Bank use development.
Shortly after the Millennium Campaign was announced in 2002, world hunger actually began rising, not falling. To “correct” this, the UN did not airdrop food or deploy convoys of aid workers. Instead, it relaxed the qualifications for being “hungry.” Those affected by food shortages brought on by the 2008 financial crisis, for instance, were simply not included in official Campaign figures. The UN reasoned that such instances were not “normal indicators” of hunger. Overnight, global hunger rates plummeted by hundreds of millions of people, but not because the UN had given anyone more food. Even the initial methodology of the Millennium Campaign was suspect. Those living in inner-city Milwaukee, for instance, were not included in Campaign data because they resided in the United States, not a poor country, though they also suffer from food insecurity.
Part of the problem, Hickel believes, is determining what exactly qualifies as “poverty.” Those living on less than $1.25 a day — approximately one billion people — are said to live under the global poverty line. This is terribly disheartening, says Hickel, but also woefully inaccurate. Even in extremely poor countries, two dollars a day does little to lift anyone out of poverty, let alone grant them some semblance of a dignified life. It is more reasonable to say that $5 a day is sufficient to keep someone out of extreme poverty, which would still only begin to cover all of their expenses, as it includes sufficient caloric intake and housing but passes over larger expenditures like medical care and retirement savings.
How did this come to be? After decolonization, and from the 1950s to the 1970s, incomes in the Global South were actually growing steadily, spurred on by the democratic elections of self-described “developmentalists” in former colonies. Many developmentalist policies were not dissimilar from the Keynesian economic principles that had helped the North prosper after World War II, including taxation of the rich, nationalization of certain enterprises, and collective bargaining by workers through unions. Such market control helped close the global wealth gap, but US companies were suddenly being boxed out of markets they had historically controlled. This couldn’t stand. Under the guise of combating Marxism, US and British leadership quickly began a campaign of military coups by forces loyal to Western interests. Salvador Allende was assassinated in Chile and a military junta instituted in Brazil, alongside military interference in Uruguay, Argentina, Bolivia, Guatemala, Iran, Indonesia, and the Congo.
In these newly captive markets, the North was able to institute economic policies known as structural adjustment programs, which were a boon for the United States and Western Europe. Poor countries were desperate for capital after coups and civil wars had disrupted their economies. The World Bank and IMF awarded them structural adjustment programs under very particular conditions, which insisted that developing countries deregulate their economies in order to create hospitable conditions for corporate investment. Trillions of dollars of previously nationalized property in the Global South — railways, hospitals, schools, and farmland — became privatized. Governments were not allowed to interfere, even as the prices of basic necessities such as food, transportation, and healthcare quickly rose beyond the means of the poor.
In order to attract corporate investment in these freshly deregulated markets, countries were required by the World Bank and IMF to grant corporations supremely low tax rates, meaning most profits were quickly ferried out of the country instead of being reinvested in infrastructure. If a nation’s government did try to impose extra regulations, corporations simply moved operations to a more hospitable country, or funneled money into offshore bank accounts through tricky trade invoicing. Hickel estimates that such practices loot over $1.8 trillion from developing countries each year. By 1990, the economic gains made in the South between 1950 and 1970 had reversed. In 1960, per capita income in the North was 32 times greater than in the South. Today, it is 134 times greater.
It is easy to see how magical realism emerges from Latin America during this time, as military coups materialize out of nowhere and children disappear into the night. The mountains and the riches inside them are no longer yours, though they still sit plainly before you. The same goes for the food you harvest. Even the rain has a price tag. Yet at every avenue, you are told you are developing. The skyscrapers erected from the ashes of the not-modern hold the wealth you should aspire to, even though they remain empty behind their veneer of glass and steel.
Hickel faces many skeptics. Deirdre McCloskey, distinguished professor of economics at the University of Illinois at Chicago and often a critic of mainstream economists, is one. She reasons that technological advancements pushed by economic “liberalism, in the free-market European sense” have improved the life of the global poor. “By the standard of basic comfort in essentials, the poorest people on the planet have gained the most,” she wrote in a 2016 New York Times op-ed. “In places like Ireland, Singapore, Finland and Italy, even people who are relatively poor have adequate food, education, lodging and medical care — none of which their ancestors had.”
Yet the same innovations responsible for improved healthcare and food production have also made it possible to extract vast sums of wealth in a blink of an eye. Today, the world’s currency is fiat money increasingly tethered to digitized regimes of credit and debt, which makes it easier than ever for the elite to transfer and hide resources as they see fit, as well as to apportion them to a worthy few. When McCloskey cites the “astonishing improvements in China since 1978” as evidence that modern development schemes work, she conveniently forgets that China has largely spurned development’s structural adjustment in favor of centralized and independent governmental solutions to poverty. Still McCloskey is resolute: “The world is rich and will become still richer,” she insists. “Quit worrying.”
This belief, that capitalist democracies are the world’s genius solution for producing an endless amount of riches, is patently false. United States capitalism has hit a wall more than once. It was not technical innovation that saved it — it was further extraction from the global poor.
After such blatant failure of structural adjustment programs, Hickel has concluded — as have dozens of development experts before him, including Immanuel Wallerstein, Eduardo Galeano, Aimé Césaire, and former World Bank Chief Economist Joseph Stiglitz — that the main function of the Bank and the IMF is not to eradicate poverty but rather to help wealthier nations avoid a “crisis of over-accumulation.” Over-accumulation occurs when a market reaches its zenith — perhaps the market has become saturated or the natural resources needed for production have been exhausted — and investors have few options left for their capital.
The problem is that in order for capital to grow, it must find new markets in which to expand. A hole to penetrate, a void to fill. Capital needs to be needed. Whether constrained by labor demands, resources, or technology, if capitalism’s surplus has no outlet and it over-accumulates, capital loses its value. Investors’ money disappears. The cruel paradox is that global capitalism’s promise of infinite growth is dependent upon scarcity; never-ending consumption is only possible if needs are never satisfied.
In the 1970s, many US markets faced over-accumulation. Increased social programs and worker organization — as well as stagflation under the Nixon administration — had led to ever-slimmer profit margins for American corporations. Structural adjustment and privatization created a spatial fix for this over-accumulation by turning the formerly nationalized economies of the Global South into investment opportunities. Capital could suddenly fill the freshly “empty” markets of developing countries. This same strategy would be employed to construct the American suburbs, where capital built out literally empty land, carried to new spaces on the wings of white flight. When the banks went bust in the 2008 financial crisis, they were bailed out, their empty coffers once again filled by taxpayers. It is tempting to take this analogy a step further, to imagine that our entire economic system is in fact built upon nothingness, forever adrift on a foundation of air. But this is not true. It is built upon the backs of the poor. We just see them as nothing.
When a world system is based on the creation of scarcity, it is the meek who inherit that scarcity. That mainstream economists have convinced the development world of the exact opposite is a testament to just how segregated the World Bank and IMF are from the poor they profess to serve.
After testing structural adjustment programs in the Global South, American economists looked to impose similar strategies at home, culminating in Ronald Reagan’s trickle-down economics of the 1980s. As Philippe Bourgois writes in his book In Search of Respect, historically black and Latino neighborhoods were targeted under the Reagan administration: community centers were defunded, public services like streetlights and garbage collection cut, banks refused locals small business loans, family-owned homes were strategically devalued. Once the local economy had been successfully sabotaged, the properties were sold on the cheap to companies, which slowly began to redevelop and sell them at a handsome profit. This is the process of American gentrification over the last half century, which has widened the wealth gap and helped push 43 million people into poverty.
Here, sociologist Matthew Desmond’s Evicted provides excellent insight into the human toll of such destabilization. Evicted’s protagonists bounce between the disenfranchised neighborhoods of Milwaukee, forever in search of stable, affordable housing. Lamar, a double amputee in a wheelchair, teeters at the brink of eviction because he cannot collect his disability benefits. Pam, a crack addict, struggles through relapses and unplanned pregnancies brought on by her homelessness. Child welfare services take Arleen’s children after she is evicted four times in a row. Even for near-condemnable housing, the average rent is between half and 96 percent of the renters’ incomes. The landlords are unflinchingly severe, tossing tenants out for the smallest of debts, while simultaneously snatching up property after property under foreclosure, carving out empires in the ghetto. The game is rigged. The side of Milwaukee that Desmond describes is more like a third-world fiefdom than the popular imaginary of the American heartland.
“In the 1980s,” writes Desmond, “Milwaukee was the epicenter of deindustrialization. In the 1990s, it would become the epicenter of the antiwelfare crusade.” Lamar is hit particularly hard by this destabilization after he is mistakenly given an extra welfare check, which he spends on clothes and school supplies for his sons. When the agency realizes its mistake, they deduct the over-payment from Lamar’s next check; he suddenly can’t afford the $250 for next month’s rent. His landlord, Sherrena, says he can make up the difference by cleaning the fetid basement beneath his apartment. He works nonstop for a week until the stubs of his legs grow sore. In the end, Sherrena isn’t satisfied and only credits him $50. She says he can repaint the interior of his unit for more money, and Lamar does, even retiling the bathroom for free in a show of goodwill, but Sherrena still isn’t appeased. “As far as I’m concerned,” she says, “he still owes the two sixty. Excuse me, now it’s two ninety.”
Lamar’s story might resonate with countries that bent over backward to meet the never-ending requirements of the World Bank and IMF’s structural adjustment programs. Suppose you inherited your family home (or are a cash-strapped, postcolonial country). It’s an old house, and it needs a lot of TLC, so you take out a loan with the local bank (World Bank). Except that in order to receive the money, the bank demands that you only repair features they approve, and these repairs are peculiar. They allow you to make cosmetic fixes with the shutters and shrubbery, but not the leaky plumbing or faulty electricity. Instead, the bank sends in someone else to attend to the toilet and lights, but now every time you need to use the bathroom or turn on a lamp, you have to pay an operating fee (your house has now been privatized). With these new costs, you fall behind on your loan payments. To correct this, the bank forces you to take a roommate (a corporation) but requires that the roommate pay almost no money in rent (to create a “competitive” tax rate). The roommate starts eating all of your food (or funneling the groceries into offshore accounts), and you continue to fall behind on your loan payments, so the bank sends another roommate to live with you, then another. At every house meeting, your new roommates outvote you when you ask them to stop stealing your dinner (they are, after all, able to lobby the World Bank, something you are not able to do). This is your life as a small, poor country stuck under the weight of structural adjustment programs. You once owned your home, but now you can’t even afford the rent.
This is, of course, a somewhat off-kilter analogy. Yet today 52 percent of Lebanon’s national budget goes toward repaying debt, while only 23 percent is spent on health and education combined. Between 1973 and 1993, “global South debt grew from $100 billion to $1.5 trillion,” says Hickel. “Only $400 billion was actually borrowed money.” The other $1.1 trillion was the result of compound interest. Like Lamar, developing countries keep working, but the rent never gets paid.
How do we correct this problem?
In a blog post by Bill Gates entitled “Why I Would Raise Chickens,” Gates argues: “It’s pretty clear to me that just about anyone who’s living in extreme poverty is better off if they have chickens.” Why? Mainly because “they’re a good investment” and after a year, a bourgeoning West African poultryman could “earn more than $1,000,” or a whopping $2.74 a day. This is particularly rich coming from Gates, not only because his net worth is greater than most West African countries’ GDPs combined, but because much of his wealth is owed to Microsoft’s utilization of sweatshops established through structural adjustment. The private investment regimes that create sweatshops do not allow laborers the time or capital necessary to establish small independent enterprises like chicken rearing. Implicitly framing the world’s poor as lazy or illiterate, rather than intentionally exploited, allows Gates to cast himself as their savior rather than as just another corporation benefiting from resource extraction.
Gates is one of the eight people who own the same amount of wealth as half of humanity. Seventy-four percent of their worth is derived from what is actually called “rents” — profit gained when one has a competitive advantage, or outright monopoly, over the market. Mainstream development policy helps to recreate and entrench this unequal system, in no small part because the people who design it are the same ones individually profiting from rents. Every single World Bank president has either been a Wall Street executive or US military boss. It was not until 2012 when Jim Yong Kim, a physician and anthropologist, was appointed the Bank’s 12th president, that someone with expertise outside of profiting as a rentier took the helm.
In the face of all the aid initiatives, says Hickel — for all the billions of aid dollars and tens of thousands of aid workers and the endless number of wells, shelters, and schools constructed — what the poor of the earth need most is for us to erase the debts of their fathers. In abolishing arrears incurred under the development regime — many of which were contracted decades ago or agreed upon with no democratic mandate — we could wipe out the single biggest impediment to actual development in one single stroke. Poor countries would then be able to determine their own economies, and, therefore, destinies.
Of course, this seems nearly impossible. For such a thing to happen, not only would the World Bank, IMF, and many other organizations, corporations, and wealthy countries have to go beyond admitting their historical guilt, but they would also have to repent, forgoing potentially trillions of dollars in future earnings. But in order for wealthy countries to survive the drastic inequality they have created, they may have to. “Scientists tell us,” says Hickel, “that even at existing levels of aggregate global consumption we are already overshooting our planet’s ecological capacity by about 60 percent each year.” According to the standard economic narrative, a healthy global economy needs a GDP growth rate of two to three percent each year. This may sound small, but it means that the global GDP needs to approximately double every 20 years. “That’s double the extraction, double the consumption, double the production, double the iPods, double the cars, double the airplane miles,” says Hickel. It’s not that something has to change, it’s that something will change. And soon.
In fact, we may be seeing the global order change now. Donald Trump’s recent promises to keep “America first” by slashing foreign aid may actually bring the United States down in the global economic order, especially if Hickel is right about development’s true intentions. The unraveling of NAFTA and the TPP has worried many experts not because their absence would hurt the global poor, but because Americans could lose a competitive advantage over the global economy. The Trump administration does not seem to grasp the complexity of this situation. But it is also possible that Trump senses a greater truth: the world has become so unequal that the United States no longer needs traditional aid schemes to stay on top. We are owed so much interest, and we so thoroughly control the Global South’s markets, that there is no longer a need for development pretense. We won. Now pay up.
Ultimately, however, what appears good for the United States in the short term may not be what’s good for the United States — let alone the world — in the long term. The seeds of foreign policy that Trump is sowing may now appear to be the same ones sown throughout American imperialism. But under the calamity that is climate change ignored, he will not reap the same crops. A forthright nation-state egalitarianism is crucial to institute a new global economic order, one intent on saving the planet rather than shareholder profits. The only way forward in a climate-altered world, says Hickel, is together.
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