Mystery: How Wealth Creates
Poverty in the World
By Michael Parenti
02/17/07 "ICH" -- -- There 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?
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
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
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, and debt.
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
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 effect?
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.
Michael Parenti's recent books include The
Assassination of Julius Caesar (New Press),
Superpatriotism (City Lights), and The Culture Struggle
(Seven Stories Press). For more information visit:
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