The Divide: A Brief Guide to Global Inequality and its Solutions

by Jason Hickel

But, as helpful as these projects were, they did nothing to address the actual causes of the problems.

the global economic system was organised in such a way as to make meaningful development nearly impossible.

If we started to raise those issues, I was told, we would lose our funding before the year was over; after all, the global system of patents, trade and debt was what made some of our donors rich enough to give to charity in the first place. Better to shut up about it: stick with the sponsor-a-child programme and don’t rock the boat.

despite many decades of development, poverty has been getting worse rather than better, and the divide between rich and poor countries is growing rather than closing, then it will become clear to all that there is something fundamentally wrong with our economic system – that it is failing the majority of humanity and urgently needs to be changed.

global South, newly independent countries were ignoring US advice and pursuing their own development agenda, building their economies with protectionist and redistributionist policies

global South countries were using the exact same policies that Western countries had used during their own periods of economic consolidation.

structural adjustment was one of the greatest single causes of poverty in the global South, after colonialism. But it proved to be enormously beneficial to the economies of the North.

They found that in 2012, the last year of recorded data, developing countries received a little over $2 trillion, including all aid, investment and income from abroad. But more than twice that amount, some $5 trillion, flowed out of them in the same year.

while trade is technically ‘free’, rich countries are able to get their way because they have much greater bargaining power.

multinational corporations now have the ability to scour the planet in search of the cheapest labour and goods, poor countries are forced to compete to drive costs down.

Rich countries aren’t developing poor countries; poor countries are effectively developing rich countries – and they have been since the late 15th century.

Europe is literally the creation of the Third World.

paradigm allows rich countries and individuals to pretend to fix with one hand what they destroy with the other,

Poor countries don’t need our aid; they need us to stop impoverishing them.

By switching from absolute numbers to proportions, the target became easier to achieve, simply because it could take advantage of population growth.

good-news narrative is so important to the world’s most powerful governments because it justifies the present economic order and maintains people’s consent for it.

poverty headcount increased steadily during the decade before that, even according to the World Bank’s own $1.25 line.

the 1960s and 1970s were better days for developing countries – before the World Bank and the IMF intervened.

Without the ecological windfall from the slave colonies, Europe would not have been able to shift its economic capacity towards industrialisation.

Latin America would be stuck in a relationship of economic dependency on Europe even into the 21st century,

it is impossible to examine the economic growth of the West without looking at the base on which it drew.

The emergence of the landless working class added a final piece to the great transformation of England’s economy: they became the world’s first mass consumer population, for they depended on markets for even the most basic goods necessary for survival: clothes, food, housing, and so on. It was these three forces – enclosure, mass displacement of peasants and the creation of a consumer market – that provided the internal conditions for the Industrial Revolution. The external conditions, as we have seen, had to do with the colonisation of the Americas and the slave trade.

Millions died, not outside the ‘modern world system’, but in the very process of being forcibly incorporated into its economic and political structures. They died in the golden age of Liberal Capitalism.

While India and China watched their share of global GDP diminish, Europeans increased their own share from 20 to 60 per cent during the colonial period. Europe didn’t develop the colonies. The colonies developed Europe.

By the early part of the 20th century, this new order was complete, designed so that the core of the system – Europe and the United States – could siphon cheap raw materials from the periphery and then sell manufactured products back to them while protecting themselves from competition by erecting disproportionately high tariffs.

The first was that the terms of trade of developing economies deteriorated over time.

The second was that the wages that workers in developing countries were paid for the goods they traded remained much lower than in the West,

these two patterns lie at the heart of what economists call ‘unequal exchange’ between the core and the periphery.

This arrangement became a major driver of global inequality. In 1820, at the dawn of the second wave of imperialism, the income gap between the richest country and the poorest country was only 3 to 1. By the end of colonialism in the middle of the 19th century, the gap was 35 to 1.

desire to build their economies for their own national good, rather than solely for the benefit of external powers.

Suharto’s regime relied for its economic policies on a group of Indonesian economists who had been trained at the University of California, Berkeley, with funding from the Ford Foundation. Known as the Berkeley Mafia, they worked closely with Suharto to liberalise the economy and eliminate the last vestiges of developmentalism in the country.

neoliberalism has failed as a tool for economic development – but it has worked brilliantly as a tool for restoring power to the wealthy elite.

structural adjustment reversed the very policies that global South governments needed for development and poverty eradication, and which they had used to such great effect in the past. It was de-development imposed in the name of development.

It became a global ‘race to the bottom’ towards ever cheaper labour and ever lower standards.

When utilities are publicly owned, they generally have a mandate to provide service to the whole population. But for privately owned utilities the mandate is to make a profit, so they have no reason to serve those who cannot afford to pay.

Official aid in the form of conditional loans has not been designed to promote development in global South countries, but in many cases to prevent them from pursuing the policies necessary for development and poverty eradication, while creating new opportunities for investors in rich countries.

Global South countries are now totally dependent on foreign investment for survival. Default would mean being frozen out of the global financial system, and this would spell immediate economic collapse.

Interventions by the World Bank and the IMF in the name of development have shifted political power away from democratically elected decision-making bodies and placed it in the hands of remote, unelected bureaucrats. Economic and political freedom has been attacked, ironically, in the name of economic and political freedom. Structural adjustment is a powerful manifestation of this paradox, but it has also been perpetrated in other, more insidious ways.

Doing Business rankings reduce economic policy to the shallow metrics of private gain.

extension of neoliberalism has entailed powerful new forms of state intervention. The creation of a global ‘free market’ required not only violent coups and dictatorships backed by Western governments, but also the invention of a totalising global bureaucracy

‘Illicit outflow’ is just a fancy name for any illegal movement of money from one country to another.

Hot money is a term used to describe the rapid movement of capital from one country to another in order to speculate on interest-rate and exchange-rate differences.

Trade misinvoicing, for its part, involves sending money into secret offshore accounts by cheating the trade system.

companies artificially distort transfer prices in order to evade taxes or dodge capital controls; this is when transfer pricing becomes transfer mispricing.

Africa sends more money to the rest of the world than it receives.

The money stashed away in tax havens amounts to more than one-sixth of all the world’s private wealth. Today, at least 30 per cent of all foreign direct investment flows through tax havens, and about 50 per cent of all trade.23

The climate crisis is madness. I speak for my delegation. But more than that, I speak for the countless people who will no longer be able to speak for themselves after perishing from this storm. We must stop calling events like these natural disasters. [The disaster] is a result of inequity, and the poorest people of the world are at greatest risk because of their vulnerability and decades of maldevelopment, which I must assert is connected to the pursuit of so-called economic growth that dominates the world.’

‘Our economic system and our planetary system are at war.62 What the climate needs to avoid collapse is a contraction in humanity’s use of resources; what our economic model demands to avoid collapse is unfettered expansion. Only one of these sets of rules can be changed, and it’s not the laws of nature.’

Fairness is better than charity. In the absence of fairness, charity carries the whiff of a scam. The same argument applies to official Western aid. If the US government wants to reduce global poverty, perhaps instead of doling out aid it should work to end structural adjustment, the tax evasion system and unfair trade laws – some of the major forces that cause poverty in the first place.

public health medicines – should be exempt from the patent system altogether.