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?
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
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, 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
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
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.