Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: Development Economics Page 3 of 5

A Great Idea About Capitalism That Was Wrong

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On July 27, 2021

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So, back in the 80s, when I was young, green and wet behind the years, one of the great thinkers about how to help poor people was a guy named Hernando DeSoto. (Great name, aces on parents!)

DeSoto, who was mostly concerned with Latin and South America had one big idea: the reason that poor people were fucked is they didn’t have clear ownership of what they actually owned: slum dwellers didn’t own their houses or the land they sat on, peasants often didn’t own their land either, and informal bus companies and the like operated without licenses or any rights to their routes.

Because they had no clear title, they couldn’t borrow against their actual property, couldn’t sell it and move, or in general use it as an asset.

This DeSoto said (and at the time, I believed, and so did many governments and NGOs and so on) was one of the reasons they stayed poor, not only couldn’t they access capital: they couldn’t even use the capital they already really owned.

The solution was to give them that clear title, which would allow a million new businesses to bloom, and so on.

Because we live in a far more cynical age (and because I gave it away in the title!) you know this didn’t work out. What happened instead, though it took a couple decades to become obvious, is that once they had title, they could lose it: sell it, have the government take it away, go into debt (which most poor people do) and have it seized in payment of debt, etc…

If you’ve ever been real poor (in the informal economy, unbanked, no assets) you know that perhaps the only good thing about it is the ability tell collection agents (generally the scum of the Earth) to go fuck themselves. “Take me to court, I have nothing you can seize!)

DeSoto managed to remove that one sliver a silver lining, so that slum dwellers could even lose their tin shacks.

Ah, capitalism! Truly the most glorious system ever developed to concentrate wealth and power in a few hands while pretending that it’s all voluntary. At least when feudal nobles or MOngols conquered you and took everything you didn’t have to pretend it was your free choice, or something.

Realism aside (I was going to say snark, but this is just how the system is meant to work) this is what happens when we are indoctrinated into thinking that capitalism is a system designed uplift everyone, and it just happens to require concentration of wealth. It’s also what happens when we assume that the uplift actually powered by industrialization happened because of capitalism instead.

It’s hard to disentangle these two because capitalism was in power when industrialization happened and the great challenge against it (state centralized “communism”) lost (largely because it had the inferior geostrategic position, I’d suggest.) So we mix the two.

But they aren’t the same, and capitalism, to the extent it has virtues, works best when it is kept under strict control and a lot of things are kept out of the market.

I assume DeSoto was sincere (though who knows), but because he bought the myth, and sold his myth so well, he wound up hurting exactly the people he wanted to help.

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Neoliberalism in India and Covid Deaths

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On May 18, 2021

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I’ve had my eye on India ever since I found out that calories per capita had dropped in India over the last 30 years.

That’s not what happens when things are going well, unless a huge number of people have moved to sedentary jobs, which they had not.

Neoliberalism is about production and supply trains. They’re very complicated, and the parts for a finished good may be made in a dozen countries and shipped to a plant which does the final assembly. The IP holder often skims ten to 30 percent profit off of this.

Most countries currently industrialized didn not industrialize under neoliberalism. They ran protectionist trade policies and exported their way to mature economies. That was generally allowed because they were a military ally or satrapy. Japan was first Britain’s ally, then for the US. Taiwan and South Korea were American satrapies, etc.

China used a hybrid model. They got themselves into the supply chains by offering high profits to Westerners, generally through simple wage arbitrage (“our workers cost less”). They put heavy pressure on people who took those profits to give them their technological secrets (IP) in exchange. And for much of the early period, they also ran a protectionist policy, keeping their currency low against the US dollar. They turned neoliberalization into mercantalism, and because less than five countries have EVER industrialized under any system but mercantalism, they succeeded.

They were able to do this because they made it very worth the while for greedy Western elites to ship jobs to them; they made a lot of Western elites rich. They knew exactly the deal they were offering.

India was socialist for a long time. They felt it didn’t work, so they decided to try neoliberalism.

But, they ran into the fact that it made more sense to offshore to China, and they didn’t do neoliberalism smart — they didn’t control their currency properly or find another way to turn neoliberalism into mercantalism. China kept large parts of their economy state-controlled, and used those companies actively. Yes, state-controlled companies were less efficient, but they gave the State power, and they provided ways of spreading welfare to people that the private companies weren’t taking care of. Not immiserating too many people meant making sure that Chinese citizens saw the new industrial and trade policies as good for them.

India, on the other hand, got in mostly on service jobs. “We speak English, so we can do service center stuff,” and a fair bit of IT outsourcing and offshoring.

But they neoliberalized as if they were already a first world nation; they sold off public enterprise and gutted state control over the economy as if there were a huge surplus created by decades of good growth which could be cannibalized to create a rich class.

India did create a small new middle class and rich, yes, but they did so without creating widespread prosperity.

Because of the way human psychology works (we have a strategy, it has not worked, we must do it harder because we are always right until we are overthrown), when the old elites couldn’t really make this work, a toxic mix of neoliberalism and Hindu Nativism took control of the country, with the face of Modi.

Modi’s a right-wing nationalist, verging-on-fascist (some would take out the word “verging”). But he’s also a neoliberal’s neoliberal. Practically, his first act was to de-monitize: removing large bills from circulation and forcing poor people to use electronic money. This was sold as crushing corruption, but what it did was make sure that the government and financial elites could grab more money from more transactions, while crushing the informal economy most Indians live in.

Recently, he’s passed a law which allows farms to be bought more easily. And so they will be (farmers, not being idiots, have opposed this law).

So Modi’s run the same play you can see in right-wing parties around the world: He’s offered nativism and feel-good, right-wing identity politics (Hindus are the best, Muslims are scum, get rid of them, no Hindu girl should marry a Muslim, etc.), and then run policies which will, over time, hurt the poor and create more rich.

But these general policies were running long before Modi.

One of those policies that has now been brought to light by Covid is that the public health care sector was gutted under neoliberal governments, so that private healthcare could make more money. So now, when it’s needed, there isn’t enough public (or private) care around.

This is how neoliberalism works: It looks for a public good and then it gets rid of it. This can be a regulation which, if removed, allows profit (making it hard to buy farms means they can’t be bought up and turned into large cash farms; cutting pollution rules means someone makes more money, etc.) or it can be by making public services shitty, or selling them off to the private sector, or other variations.

Again, in a developed country with a large prosperity cushion like the US, France, or Canada, you can do this for a while, and it doesn’t look so bad.

If, on the other hand, you do this to a country which had never hit developed status in the first place, well, people eat less calories, and when a pandemic happens, hospitals turns away patients in droves.

Neoliberalism doesn’t work when trying develop or industrialize countries, unless you game it so it turns into protectionist trade. China did that, India didn’t, and Indians are now paying the price.

Neoliberalism is designed to create rich elites while crushing ordinary people. In India’s case, it also created a small middle class (because that’s rich, really, in India, as anyone who’s spent much time there knows. Middle class means you have servants, for example. It’s not middle class like in The US or Europe.)

Neoliberalism is not designed to help anyone but the rich, except temporarily. Some asset holders will win (say, if you owned a house in 1980 in the US and didn’t sell until retirement, then moved somewhere cheap.)

But no other groups win for any length of time, because neoliberalism is the policy of looting, of pumping asset prices and of crushing wages. That’s the policy regime. It does what it’s meant to: It creates a rich class and, for a while, it keeps enough people supporting it who won’t win the end (unless they die soon enough) by giving them large, unearned asset price increases that are much greater than inflation.

India needs a new strategy. The overwhelming of its medical infrastructure is exactly the result of the neoliberal policies it has followed for decades. Modi is only the latest and worst, not the first.

I wish the Indians well. They have a very challenging few decades ahead of them, perhaps the most challenging of any non-African large country in the world. I hope they get their act together, ASAP, or a lot more Indians than Covid is killing will die, and die ugly, as climate change, ecological collapse, and water shortages hit.

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Offshoring Critical Industries Is So Harmful It Should Be Treason (Covid Edition)

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On March 25, 2021

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I was impressed how fast the UK and the US were vaccinating their population. How were they doing it, after they had been so incompetent during the rest of the pandemic?

Simple enough. Restrictions on vaccine exports.

Meanwhile:

India delays big exports of AstraZeneca shot, including to COVAX, as infections surge

And then there’s this:

(Spare me the self-serving arguments that breaking the patents wouldn’t have helped because it takes too much time to ramp up production. However long it takes, the sooner  your open up the IP, the faster it happens.)

And we could make it happen faster:

But the global capacity for producing vaccines is about a third of what is needed, says Ellen t’Hoen, an expert in medicines policy and intellectual property law.

….

To make a vaccine you not only need to have the right to produce the actual substance they are composed of (which is protected by patents), you also need to have the knowledge about how to make them because the technology can be complex.

The WHO does not have the authority to sidestep patents – but it is trying to bring countries together to find a way to bolster vaccine supplies.

The discussions include using provisions in international law to get around patents and helping countries to have the technical ability to make them.

Rich countries use IP law to keep poor countries poor, and to kill and impoverish their citizens to make even larger profits.

And, of course, if you’re stupid enough to believe neoliberal bullshit about how your countries will be OK and don’t take steps even though you have manufacturing capacity, (Europe), well, your citizens die. The EU is now restricting imports to the UK. I wonder how many Europeans will die because of not having those 10 million doses?

“I mention specifically the U.K.,” said EU Commission Vice-President Valdis Dombrovskis. Since the end of January, “some 10 million doses have been exported from the EU to the U.K. and zero doses have been exported from U.K. to the EU.”

OK. I have said this for years and years but I’m going to say it again now that it is being illustrated brutally: if you can’t make it yourself, you can’t be sure you’ll have it when you need it, since countries that can make it will tend to prioritize themselves.

You must make and grow everything essential to your country domestically if you can. Any international laws that forbid you from doing so are illegitimate. They may exist; they are not Just. This doesn’t mean completely breaking patent law (though it needs to be much less draconian and a lot less long), it does mean, at the least, writing in mandatory licensing provisions at reasonable prices.

A lot of people are going to die who didn’t need to because neoliberal “free trade” orthodoxy said you didn’t need to be able to both design and make vaccines in your own country: the “market” would supply you.

Eventually.

This isn’t just about behaviour now. It is about behaviour that has been encoded into law and trade practice over decades.

Don’t offshore anything that matters. If your citizens have to pay 5% or 10% more, slap on tariffs.

To not do so, if you think the welfare of your citizens is your duty, is treason.

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America Is About to Feel Like a Third World Nation

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On August 7, 2020

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I spent a good chunk of my childhood in third world countries. Most of that chunk was spent in Bangladesh, which was then arguably the poorest country in the world, but I visited or lived in Malaysia, Singapore, Indonesia, Nepal and India, among others.

There’s a feel to the third world one becomes familiar with: beggars, infrastructure that doesn’t really work, people doing terrible menial jobs. There’s the huge disparity between the wealthy and everyone else, or even those who have managed to attach themselves in a semi-dignified way to the wealthy.

Cruelty is routine and unremarked. Indian police officers routinely beat people as punishment (similar to their American counterparts). Servants are treated terribly, and in fact the locals routinely treated the servants far worse than foreigners. This has hardly changed, Vivekenanda, in the 19th century, noted that Americans treated their servants far better than Indians did.

The US is about to make a double digit percentage of its population homeless. Something like 20 to 30 percent — or more — of American small businesses have or are soob to shut down by the end of the pandemic. The jobs won’t all come back and those that do will pay worse and feature worse treatment than the ones before (which were mostly not well-paid and featured routine meanness).

We’re talking about 30 million to 60 million homeless.

These are staggering numbers.

The United States will feel third world. Oh, parts already did, when I landed in Miami airport the first time I immediately thought “third world.” Relatively prosperous third world, but third world.

Those places will be worse–and Florida (as I predicted near the beginning of the crisis) has handled the pandemic noticeably badly.

Of course, for many, little will change. They’ll keep their jobs, they’ll be fine. I recently witnessed a discussion of infosec jobs, talking about how for a person with a degree and a couple certifications, $120,000 was a lowball. There will still be good jobs, and you’ll still be able to lose everything in a few months if you become seriously ill.

But when those people who are hanging on go out in the streets, they’ll see, even more than now, the fate that awaits them if they slip.

So much of American meanness, and the culture is mean in the details of its daily life, comes from this fear. Because it is so easy to slip into the underclass, even if one “does everything right,” Americans are scared, even terrified, all the time. They suppress it with massive amounts of drugs (most of them legal), and most deny it, but the fear drives the cruelty.

In the Great Depression, people became less cruel, not more. They saw that the idea of meritocracy was absolute bullshit: The richest people in society had fucked up, good people wound up in poverty, and merit had nothing to do with who had how much.

I hope this is what will happen in the US this time. I fear, instead, it will lead to even more cruelty. Instead of saying, “We should make sure everyone is taken care of” and instituting universal health care, good wages, and a non-punitive welfare system (whether through a universal income or some other way), Americans will instead become even more cruel out of fear of losing their place.

The US is “undeveloping.” It is moving away from being a developed nation to being an undeveloped nation.

This process has been going on for a loooooong time. At least 40 years (1980), and arguably since about ’68 or so. The frustration, as an analyst, was that the trend was obvious but it took so long. There is, as Keynes said, a lot of ruin in a nation.

Change is slow, very slow, until it is fast. People who live in the slow period, of long decline, don’t really believe in collapse, they assume that things will get worse in a steady line.

But, in fact, there are long periods where everything changes slowly, then periods like earthquakes. 2008 was an earthquake (and collapse nearly inevitable by bailing out the rich). This is also an earthquake. Amercians will FEEL different afterwards, even if Covid goes away 100 percent, which it may not, because Americans refuse to do what is necessary. American media keeps having articles about how Covid will never go away. Well, except for quarantining visitors, it will for many countries. But not for the US, or Brazil, or India. Third world countries all.

Nor should we get too down on third world countries. The US is third world and experiencing the complete corruption of its ruling and governing classes, with the collapse of its administrative ability. When your post office can’t even deliver mail, you’re a failing state; this is such a basic part of being a government that it’s part of the Constitution, written in the 18th century, but because the post office isn’t a kleptocratic institution, the American political class is destroying it.

Most third world nations, indeed, are handling Covid better than The US.

Nonetheless the process is underway. The US is already governed like a third world nation, it just has a lot of legacy infrastructure and institutions to destroy to get the full experience.

So, expect that this is one of the times that matters. Expect that the US will be different after this. Expect that it will feel different. Understand that your personal position has become much more perilous. You must reduce your vulnerability and/or attach yourself to a corrupt money stream in a way which makes you indispensable. Being valuable is not enough, it needs to hurt important people if you you go down. If it doesn’t, the second the numbers say you go, you’re off, and any individual who can be replaced will be if you get on the wrong side of someone more powerful.

There’s lots of good paying jobs, yes, but almost all of them can be done by someone else. It doesn’t have to be you.

Bear all this in mind as you plan your future in the new third world United States.

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It’s Not OK to Think Everything Is OK or Getting Better and Better

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On November 13, 2019

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Globe on FireI’ve discussed the “better-than-ever world” argument before. I find it questionable, for a number of reasons and if that interests you, read the linked article and the articles to which it links.

What I’ve been paying attention to lately is WHO likes and buys into this argument.

They fall into two groups: the first are techies, the second are neoliberals.

We’ll start with neoliberals first. Neoliberals want to claim that everything’s going great so they don’t have to make serious changes. If even the poorest are getting better off rapidly (50K a week, I saw as a recent claim, for improvements in “dire poverty”), then all that is required to the current system are tweaks: It’s working.

More importantly for the neoliberals, if the world is better than ever, the people who have the most don’t have to give anything up–not money, or power, or the way they do things. What they’re doing is basically working, their being rich and powerful isn’t hurting the poor; in fact, it’s lifting the poor up!

So statistics have to show that poor people are getting better off, and if a few show that the poor in parts of the first world aren’t (like certain groups in the US having decreased life expectancy), well that cost has been far outstripped by all the people lifted out of poverty elsewhere and why care more about Americans than people objectively worse off in other countries?

The world order is basically fine. No need to do more than “bend the curve,” as Obama famously said.

Techies have some of the same reasons, especially those who are doing well, like the ones who run Silicon Valley, or who are very well paid. The world is fine, no need to change what’s working.

But there’s something deeper to it for the techies. While neoliberals want to defend neoliberal capitalism–which is why they get offended when one points out that China used mercantalist capitalism to lift people out of poverty. Almost all poverty gains, no matter how you slice the numbers, have been made in China and China DID NOT do what economic orthodoxy says you’re supposed to do.

Techies don’t care about that. Instead they want to defend their legacy and current actions. Forget capitalism, communism, fascism, and all that guff: Really, virtually all the gains of the last 250 years come down to using hydrocarbons to power various engines.

Technological progress is the actual driver of what’s happened. Modern techies identify with the engineers and scientists of the past, especially now that programmers like to call themselves engineers.

Likewise, the computer/internet/telecom revolution which has been driving new industries (I wouldn’t quite say “growth”) since the mid 70s or so is their child, their project. They either worked on it or are still working on it. The world must be doing well because they created it or are creating it, or are maintaining the technology it runs on, the technology that is really responsible for supposed welfare gains.

They believe they are good people, who do good work, and therefore the results of their work must be good.

We all want to believe that the order for which we are responsible, the work we do, and the economics that works to our benefit, is justified, because we want to believe we are good people.

Neoliberals, elites, and techies feel they have created this world. Therefore, this world must be a good one.

Techies also want to think that technology can solve everything, because it’s what they’re good at. And hey, it does demonstrably work. It’s just not clear that it can do everything, or do everything soon enough, since we all will, well, die.

Anyway, the larger point of this is simple: We argue over these things because they are about legitimacy and people’s self-esteems and self-images.

Of course those (like myself) who oppose the current neoliberal order want these figures to be BS. We want to be able to argue that change is urgent, and needed, and that the existing order has failed.

It’s good to understand that, no matter what side you’re on. What do you WANT to believe. Then see if you’re still justified.

Of course, I think I am. This doesn’t mean there’s been no progress, there has. I just think the numbers are wildly over-inflated outside of China, and the progress is unsustainable due to climate change and the impending environmental collapse. I can live like a king if I have a ten million dollar credit card limit, but if I can’t pay it back, eventually that ends.

Also I grew up in the development community. My father worked for the UN’s Food and Agriculture Organization (FAO) in Bangladesh, and had worked before in various other developing countries. I spent time in India, and so on. I listened to development workers talk about what worked and (mostly) what didn’t. There are more cynical (or rather, realistic) groups in the world, but not many.

So there’s always been an off-smell to these numbers to me. I know what works for development (mercantalist policies with the cooperation of the current hegemonic powers, and virtually nothing else, unless you’re a city state) and what doesn’t (anything orthodox development economists tell you to do).

I know who’s been allowed to actually bootstrap up and industrialize (American allies and China–because they bribed American leaders), and who hasn’t (almost everyone else).

And I know something else: If you’re forced off your land into a slum, you make more money, but you’re worse off. The economic and Western obsession with $$$$ as a measure of quality of life is unwise. Even calories (though better) are not great, because for example, when NAFTAs tortilla manufacturers were bought out after NAFTA, their nutritional content plummeted.

So it all smells off, to me.

But even if it didn’t, even if it was all true–that the world was “never better,” radical change is needed because climate change and ecological collapse are on their way, with the leading edge already causing problems. We can’t even keep industrializing the way we have been. If every developing country was allowed to industrialize properly, and we gave them what they needed to do it, we’d just bury ourselves deeper.

The fundamental WAY we have run our economies, both in terms of any type of capitalism (and communism back when, but they’ve been gone for 30 years now, so grow up) and in terms of technology is fucked. Fucked. It cannot continue or we risk civilization collapse. Worse case scenarios are great die-offs which take us down too. Good case scenarios are one or two billion deaths.

No matter what, we are past the point where we aren’t going to be able to change the environment in a way that prevents the climate from being fundamentally warmer and different from the environment and climate which has existed for the entirety of human civilization.

That’s not an economic or technological system which is more or less OK, or producing more or less good results even IF the triumphalists were right about everything.

It requires change, and radical change, if we are to avoid, not disaster (we’ve already had those), but multiple catastrophes of civilization-shaking levels.

It’s not OK to think everything is OK.

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A Few Words About Argentina

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On August 13, 2019

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Okay, so Argentina elected a neoliberal president. He went to deep austerity, removed capital controls, and sought an IMF bailout.

Now it looks like a socialist may win and markets are freaking out, because he may default on some of the debt and re-institute capital controls.

Argentina’s problems have a long history, but it’s worth remembering this: Before WWII, it was a first world country, with a standard of living about equal to Canada’s.

Argentina partially defaulted in 2001. We should remember that that default was caused by following the conservative policy of pegging the Peso to the dollar, which any moron should have known would eventually backfire.

It is also worth remembering that, when Argentina defaulted in 2001, it wasn’t actually allowed to. American courts wouldn’t let Argentina pay the creditors who allowed their debt to be reduced unless they also paid those debtors who didn’t take the deal.

We live in a stupid, perverse world where people don’t understand that there has to be a balance between debtors and creditors. Creditors are making a bet, and if they lend to the wrong entity, and that entity eventually can’t pay back the debt, they should have to eat their losses. Don’t lend to people who can’t pay you back. Everyone knew that Argentina was going to have debt problems, every time, but they took the chance because they wanted high returns.

But the central financial system, the NY and London courts, and the IMF act as debt collectors for people who want the upside of high payments from distressed borrowers without the downside of possibly losing the money.

Worse, they act as enforcers for bad actors, who won’t cut deals, and expect to litigate.

Debtors may lose some money, but leg-breaking countries for rich debtors kills and impoverishes poor people.

Now, none of this is to say Argentina hasn’t made mistakes. Flipping back and forth between neoliberals and socialists is stupid. Pick one, and suck it up. Electing Macri was stupid, but then being outraged when he does what a neoliberal technocrat would do (i.e., austerity and sucking up to the IMF) is equally stupid.

Pick a governing philosophy and elect governments that adhere to that philosophy until the leading parties all follow it (like when Labour became neoliberal under Blair, cementing Thatcher’s victory).

Right now, Argentina is getting the worst of both worlds.

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World Poverty Is NOT Decreasing

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On January 31, 2019

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I’ve said before that world poverty isn’t reducing, but let’s say it again.

The trend that the graph depicts is based on a poverty line of $1.90 (£1.44) per day, which is the equivalent of what $1.90 could buy in the US in 2011. It’s obscenely low by any standard, and we now have piles of evidence that people living just above this line have terrible levels of malnutrition and mortality. Earning $2 per day doesn’t mean that you’re somehow suddenly free of extreme poverty. Not by a long shot.

Scholars have been calling for a more reasonable poverty line for many years. Most agree that people need a minimum of about $7.40 per day to achieve basic nutrition and normal human life expectancy…

…So what happens if we measure global poverty at the low end of this more realistic spectrum – $7.40 per day, to be extra conservative? Well, we see that the number of people living under this line has increased dramatically since measurements began in 1981, reaching some 4.2 billion people today.

We also know, for example, that Indians have been eating less calories than 30 years ago (and having traveled in India in the 80s, I can tell you they weren’t overfed.)

As Hickel also points out about the earlier parts of the graph, and as I have pointed out previously, most of the “people are making more money” comes from “people were forced off their subsistence farms so that they had to use money to buy what they got from their own labor before.”

So, for example, when NAFTA went into place, millions of Mexican susbsistence farmers were forced off their land. This lead, directly, to the massive increases in immigration to the US that occurred in the 90s and early 2000s, by the way.

People miss the essential point: it’s not how much money you have. It’s whether or not you have enough food, shelter, clothes and so on. It’s whether you have what you need and some of what you want.

Only a moron (or someone as disconnected from the realities of life like Bill Gates) could think that being able to buy as much as $1.90 a day, in the United States of 2011, would qualify as enough money. I have been poor. I have been very poor, by first world standards. I can tell you that even back in the late 80s, $1.90 wasn’t enough (I could have barely eaten on that, I could not have saved up and paid rent.) Today it is completely inadequate, and the diet it would barely allow is basically starch and sugar.

(Which, again, anyone who actually has tried to shop cheaply would know. That won’t include Bill Gates.)

These people who say with certainty how poverty is massively decreasing make me sick. They are either ignorant, very stupid and disconnected from reality, or they are very evil.

Essentially all of the poverty reduction of the past 30 years comes from one source, and one source only. China. Which industrialized by classic protectionist policies which the IMF, World Bank and poverty ghouls do their best to make impossible.

And as for China, what is also clear from their experience, and in the data, is that the Chinese who moved to the cities to get those great new jobs are less happy than the people who stayed in the villages. Further, great amounts of force have had to be used to move peasants off the land, because they know the new factory jobs suck even worse than being a peasant. (As they did in Britain during the Industrial revolution.)

What made some parts of the world better wasn’t capitalism, per se. It was steam power and oil power. Those parts of the world then used that power, along with gunpowder and whatnot, to conquer most of the world and take what they wanted.

Today we do it different ways, but the bottom line is simple enough: measured by any semi-reasonable standard (would you want to try to live on $7.40 a day, including paying your rent?), poverty is not getting better. It is getting worse.

If you say poverty is decreasing, what you are saying is “it is ok to keep doing what we’re doing.”

If you’re wrong, you’re a monster, because you’re saying “we don’t really need to do more.”

And you’re wrong.

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The Destruction of the Third World

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On October 7, 2017

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The first thing to understand is this: 3rd world GDP growth in the post-war liberal period (roughly 46-68 or so), was good.  It was above population growth in most cases.  That changed around about the time OPEC grabbed the West by short and curlies, squeezed and wound up with tons of money they didn’t know what to do with.  This is an act in three parts:

ACT 1: Banks Loan Money to Third World Countries

Lots and lots of it. The pitch is this: we know how to develop countries. You’ll borrow this money, invest in development and have more than enough money to pay off the loans. Except that they didn’t know how to develop countries and even those countries in which the leaders didn’t steal the money, the loans grew faster than the tax base, leaving governments less and less able to administer their own countries.

ACT II: Money, Money, Money and Cash Crops

So, you need $.  Foreign dollars.  How do you get them?  You could do what Japan, Korea, the United States and Britain all did, and develop real industry behind trade barriers, of course, but that’s not what the experts are telling you to do.  What they’re saying is “you have a competitive advantage in certain commodities: cash crops and maybe minerals. You should work on that.”

Most cash crops are best grown on plantations, so if you want to move your economy to cash crops, you have to move the subsistence farmers off their land.  That means they will go to the cities and need food that you no longer grow (since you’re growing cash crops to sell to Westerners.)  But hey, that’s ok, because with all the foreign currency you’ll be getting from bananas, coffee and so on, you’ll be able to buy that food from Europe and America and Canada.  Right?  Right!

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Except that everyone is getting this advice, and everyone is growing more cash crops, and the price drops through the floor and you have a thirty year commodities depression.  You can’t feed the people you’ve shoved off the land without taking more loans; there are no jobs for those people, so now instead of self-supporting peasants you’ve got a huge amount of people in slums.  But, on the bright side, while not enough hard currency has been created to develop, or even stay ahead of your loans, enough exists so that the leaders can get rich; the West can sell grain to you; and you can buy overpriced military gear from the West.  Win!  For everyone except about 90% of your population.

ACT III: The IMF

The above was standard IMF and World Bank advice, of course.  Don’t let anyone tell you that the World Bank or IMF want a country to develop; their actions say otherwise.  What they do need to do is push neo-liberal doctrine.  So, now that your country is vastly in debt and can’t feed itself without foreign food which must be bought in hard currency, the IMF says “well, we could give you more money, BUT”.

The but is that they want you to stop subsidies of food and let food prices float.  Then they want you to reduce tariffs on goods, even though tariffs are a huge source of tax revenue, because your government is crippled and your people have tiny incomes, so you really don’t have the ability to tax them.  Then they want you to open up your economy to foreigners buying it up, so foreigners can own every part of your economy worth having (anything that generates hard currency, basically.)

FINIS

After all this your country is a basket case.

Win, Win, Lose.

(This was the great commodities depression. It ends about 1998, but the vast debt overhang remains in most cases.)

Originally published October 10, 2014. I can’t write this any more succinctly than this.

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