HOW WEALTH CREATES POVERTY
Michael Parenti's recent books include The
Assassination of Julius Caesar (New Press), Superpatriotism
(City Lights), and The Culture Struggle (Seven
Stories Press). This article is republished with the permission
is a “mystery” we must explain: How is it that as
corporate investments and foreign aid and international loans
to poor countries have increased dramatically throughout the
world over the last half century, so has poverty? The number
of people living in poverty is growing at a faster rate than
the world’s population. What do we make of this?
the last half century, U.S. industries and banks (and other
western corporations) have invested heavily in those poorer
regions of Asia, Africa, and Latin America known as the “Third
World.” The transnationals are attracted by the rich natural
resources, the high return that comes from low-paid labour,
and the nearly complete absence of taxes, environmental regulations,
worker benefits and occupational safety costs.
U.S. government has subsidized this flight of capital by granting
corporations tax concessions on their overseas investments,
and even paying some of their relocation expenses -- much to
the outrage of labour unions here at home who see their jobs
transnationals push out local businesses in the Third World
and pre-empt their markets. American agribusiness cartels, heavily
subsidized by U.S. taxpayers, dump surplus products in other
countries at below cost and undersell local farmers. As Christopher
Cook describes it in his Diet for a Dead Planet, they
expropriate the best land in these countries for cash-crop exports,
usually monoculture crops requiring large amounts of pesticides,
leaving less and less acreage for the hundreds of varieties
of organically grown foods that feed the local populations.
displacing local populations from their lands and robbing them
of their self-sufficiency, corporations create overcrowded labour
markets of desperate people who are forced into shanty towns
to toil for poverty wages (when they can get work), often in
violation of the countries’ own minimum wage laws.
Haiti, for instance, workers are paid 11 cents an hour by corporate
giants such as Disney, Wal-Mart, and J.C. Penny. The United
States is one of the few countries that has refused to sign
an international convention for the abolition of child labour
and forced labour. This position stems from the child labour
practices of U.S. corporations throughout the Third World and
within the United States itself, where children as young as
12 suffer high rates of injuries and fatalities, and are often
paid less than the minimum wage.
savings that big business reaps from cheap labour abroad are
not passed on in lower prices to their customers elsewhere.
Corporations do not outsource to far-off regions so that U.S.
consumers can save money. They outsource in order to increase
their margin of profit. In 1990, shoes made by Indonesian children
working twelve-hour days for 13 cents an hour, cost only $2.60
but still sold for $100 or more in the United States.
foreign aid usually works hand in hand with transnational investment.
It subsidizes construction of the infrastructure needed by corporations
in the Third World: ports, highways, and refineries.
aid given to Third World governments comes with strings attached.
It often must be spent on U.S. products, and the recipient nation
is required to give investment preferences to U.S. companies,
shifting consumption away from home produced commodities and
foods in favour of imported ones, creating more dependency,
hunger and debt.
chunk of the aid money never sees the light of day, going directly
into the personal coffers of sticky-fingered officials in the
(of a sort) also comes from other sources. In 1944, the United
Nations created the World Bank and the International Monetary
Fund (IMF). Voting power in both organizations is determined
by a country’s financial contribution. As the largest
“donor,” the United States has a dominant voice,
followed by Germany, Japan, France, and Great Britain. The IMF
operates in secrecy with a select group of bankers and finance
ministry staffs drawn mostly from the rich nations.
World Bank and IMF are supposed to assist nations in their development.
What actually happens is another story.
A poor country
borrows from the World Bank to build up some aspect of its
economy. Should it be unable to pay back the heavy interest
because of declining export sales or some other reason, it
must borrow again, this time from the IMF.
But the IMF imposes
a “structural adjustment program” (SAP), requiring
debtor countries to grant tax breaks to the transnational
corporations, reduce wages, and make no attempt to protect
local enterprises from foreign imports and foreign takeovers.
The debtor nations are pressured to privatize their economies,
selling at scandalously low prices their state-owned mines,
railroads, and utilities to private corporations.
are forced to open their forests to clear-cutting and their
lands to strip mining, without regard to the ecological damage
done. The debtor nations also must cut back on subsidies for
health, education, transportation and food, spending less on
their people in order to have more money to meet debt payments.
Required to grow cash crops for export earnings, they become
even less able to feed their own populations.
it is that throughout the Third World, real wages have declined,
and national debts have soared to the point where debt payments
absorb almost all of the poorer countries’ export earnings
-- which creates further impoverishment as it leaves the debtor
country even less able to provide the things its population
then we have explained a “mystery.” It is, of course,
no mystery at all if you don’t adhere to trickle-down
mystification. Why has poverty deepened while foreign aid and
loans and investments have grown? Answer: Loans, investments,
and most forms of aid are designed not to fight poverty but
to augment the wealth of transnational investors at the expense
of local populations.
is no trickle down, only a siphoning up from the toiling many
to the moneyed few.
their perpetual confusion, some liberal critics conclude that
foreign aid and IMF and World Bank structural adjustments “do
not work”; the end result is less self-sufficiency and
more poverty for the recipient nations, they point out. Why
then do the rich member states continue to fund the IMF and
World Bank? Are their leaders just less intelligent than the
critics who keep pointing out to them that their policies are
having the opposite effect?
it is the critics who are stupid not the western leaders and
investors who own so much of the world and enjoy such immense
wealth and success. They pursue their aid and foreign loan programs
because such programs do work. The question is, work for whom?
purpose behind their investments, loans, and aid programs is
not to uplift the masses in other countries. That is certainly
not the business they are in. The purpose is to serve the interests
of global capital accumulation, to take over the lands and local
economies of Third World peoples, monopolize their markets,
depress their wages, indenture their labour with enormous debts,
privatize their public service sector, and prevent these nations
from emerging as trade competitors by not allowing them a normal
these respects, investments, foreign loans, and structural adjustments
work very well indeed.
real mystery is: why do some people find such an analysis to
be so improbable, a “conspiratorial” imagining?
Why are they sceptical that U.S. rulers knowingly and deliberately
pursue such ruthless policies (suppress wages, rollback environmental
protections, eliminate the public sector, cut human services)
in the Third World? These rulers are pursuing much the same
policies right here in our own country!
it time that liberal critics stop thinking that the people who
own so much of the world -- and want to own it all -- are “incompetent”
or “misguided” or “failing to see the unintended
consequences of their policies”? You are not being very
smart when you think your enemies are not as smart as you. They
know where their interests lie, and so should we.