How Wealth Creates
Poverty In The World
By Michael Parenti
24 April, 2007
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
Over 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
labor, and the nearly complete absence of taxes, environmental regulations,
worker benefits, and occupational safety costs.
The 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 labor unions here at home who see their jobs evaporating.
The transnationals push out
local businesses in the Third World and preempt 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.
By displacing local populations
from their lands and robbing them of their self-sufficiency, corporations
create overcrowded labor 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.
In 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
labor and forced labor. This position stems from the child labor 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.
The savings that big business
reaps from cheap labor 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.
U.S. 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.
The 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 favor of imported ones, creating more dependency, hunger,
A good chunk of the aid money
never sees the light of day, going directly into the personal coffers
of sticky-fingered officials in the recipient countries.
Aid (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.
The 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.
They 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.
So 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
Here 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.
There is no trickle down,
only a siphoning up from the toiling many to the moneyed few.
In 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
No, 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? Cui bono?
The 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 labor with enormous
debts, privatize their public service sector, and prevent these nations
from emerging as trade competitors by not allowing them a normal development.
In these respects, investments,
foreign loans, and structural adjustments work very well indeed.
The real mystery is: why
do some people find such an analysis to be so improbable, a “conspiratorial”
imagining? Why are they skeptical 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!
Isn’t 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.
recent books include The Assassination of Julius Caesar (New Press),
Superpatriotism (City Lights), and The Culture Struggle (Seven Stories
Press). For more information visit: www.michaelparenti.org.
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