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

by Jason Hickel

eight richest men in the world have as much wealth between them as the poorest half of the world’s population combined.

the gap between the real per capita incomes of the global North and the global South has roughly tripled in size since 1960.

In the year 1500, there was no appreciable difference in incomes and living standards between Europe and the rest of the world. Indeed, we know that people in some regions of the global South were a good deal better off than their counterparts in Europe. And yet their fortunes changed dramatically over the intervening centuries – not in spite of one another but because of one another – as Western powers roped the rest of the world into a single international economic system.

‘We must embark on a bold new program for making the benefits of our scientific advances and industrial progress available for the improvement and growth of underdeveloped areas … It must be a worldwide effort for the achievement of peace, plenty, and freedom.’ Of course, there were no actual plans for such a programme – not even a single document. It was included in the speech purely as a PR gimmick. And it worked.

The development story is so deeply ingrained in our culture that we take it almost completely for granted. It seems manifestly true.

Why were AIDS patients dying? Over time, I learned that it had to do with the fact that pharmaceutical companies refused to allow Swaziland to import generic versions of patented life-saving medicines, keeping prices way out of reach. Why were farmers unable to make a living off the land? I discovered that it was related to the subsidised foods that were flooding in from the US and the EU, which undercut local agriculture. And why was the government unable to provide basic social services? Because it was buried under a pile of foreign debt and had been forced by Western banks to cut social spending in order to prioritise repayment.

Anthropologists tell us that when the structure of a core myth begins to change, everything else about society changes around it, and fresh new possibilities open up that weren’t even thinkable before. When myths fall apart, revolutions happen.

underdevelopment in the global South was not a natural condition, but a consequence of the way Western powers had organised the world system over hundreds of years.

But in the early 1980s that suddenly changed. The United States and Western Europe discovered they could use their power as creditors to dictate economic policy to indebted countries in the South, effectively governing them by remote control, without the need for bloody interventions. Leveraging debt, they imposed ‘structural adjustment programmes’ that reversed all the economic reforms that global South countries had painstakingly enacted. In the process, they went so far as to ban the very policies that they had used for their own development, effectively kicking away the ladder to success.

Global South countries lost an average of $480 billion per year in potential GDP during the structural adjustment period.15 It is now widely acknowledged by scholars that 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.

Today, power imbalances like these, enshrined in the Uruguay Round of the WTO, are estimated to cost poor countries at least $700 billion each year in lost export revenues.

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.

Today, poor countries pay over $200 billion each year in interest alone to foreign creditors, much of it on old loans that have already been paid off many times over, and some of it on loans accumulated by greedy dictators.

Foreign investors take nearly $500 billion in profits out of developing countries each year, most of which goes back to rich countries.

But by far the biggest chunk of outflows has to do with capital flight.23 GFI calculates that developing countries have lost a total of $23.6 trillion through capital flight since 1980.

Three trillion dollars in total net outflows per year is twenty-four times more than the annual aid budget. In other words, for every dollar of aid that developing countries receive, they lose $24 in net outflows.

when structural adjustment was imposed on the global South during the 1980s and 1990s, they lost around $480 billion each year in potential GDP. That’s nearly four times the size of today’s annual aid budget.

Rich countries aren’t developing poor countries; poor countries are effectively developing rich countries – and they have been since the late 15th century. So it’s not only that the aid narrative misunderstands what really causes poverty, it’s that it actually gets it backwards.

The aid paradigm allows rich countries and individuals to pretend to fix with one hand what they destroy with the other, dispensing small bandages at the same time as they inflict deep injuries, and claiming the moral high ground for doing so.

But Palestine doesn’t have a shortage of water. When Israel invaded and occupied the West Bank in 1967, with the backing of the US military, it asserted total control over the aquifers beneath the territory. Israel draws the majority of this water – close to 90 per cent – for its own use in settlements and for irrigation on large industrial farms. And as the water table drops, Palestinian wells are running dry. Palestinians are not allowed to deepen their wells or sink new ones without Israeli permission – and permission is almost never granted. If they build without permission, as many do, Israeli bulldozers arrive the next day. So Palestinians are forced to buy their own water back from Israel at arbitrarily high prices.

For them, the USAID sign only adds insult to injury. It’s not that they lack water, as USAID implies; it’s that the water has been stolen from them. And it has been stolen with US support. In 2012, just two months before my visit, the United Nations General Assembly adopted resolution 66/225, calling for the restoration of Palestinians’ rights to their own water. One hundred and sixty-seven nations voted in favour of the resolution. The United States and Israel voted against it.

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

while the initial goal required an annual rate of poverty reduction of 3.35 per cent, the final goal allowed for a much more leisurely rate of only 1.25 per cent.

Remember that the Millennium Development Campaign moved the baseline year back to 1990, which allowed them to claim China’s gains against poverty. What happens if we take China out of the equation? Well, we find that the global poverty headcount increased during the 1980s and 1990s, while the World Bank was imposing structural adjustment across most of the global South. Today, the extreme poverty headcount is exactly the same as it was in 1981, at just over 1 billion people.

Media outlets ran the new story without scrutinising the methodological changes.

The UN counts people as hungry only when their calorie intake becomes ‘inadequate to cover even minimum needs for a sedentary lifestyle’ (i.e. less than about 1,600 to 1,800 calories per day) for ‘over a year’.18 The problem is that most poor people don’t live sedentary lifestyles; in fact, they are usually engaged in demanding physical labour, so in reality they need much more than the UN’s calorie threshold.

Hunger is not a problem of lack. It is a problem of distribution. A disproportionate amount of the world’s food ends up flowing to rich countries, where much of it ends up as waste. In the US and Europe, consumers bin up to half the food they purchase.26 The UN finds that cutting global food waste by only a quarter and redirecting it to where it is needed most would solve global hunger in a single stroke.

There is a strong consensus among scholars that the $1.25 line is far too low, but it remains in official use because it is the only line that shows any progress against poverty – at least when you include China – and therefore is the only line that justifies the present economic order.

Right now, the main strategy for eliminating poverty is to increase global GDP growth. The idea is that the yields of growth will gradually trickle down to improve the lives of the world’s poorest people. But all the data we have shows quite clearly that GDP growth doesn’t really benefit the poor. While global GDP per capita has grown by 65 per cent since 1990, the number of people living on less than $5 a day has increased by more than 370 million. Why does growth not help reduce poverty? Because the yields of growth are very unevenly distributed. The poorest 60 per cent of humanity receive only 5 per cent of all new income generated by global growth. The other 95 per cent of the new income goes to the richest 40 per cent of people.

To eradicate poverty at $5 a day, global GDP would have to increase to 175 times its present size.

‘There is simply no way this can be achieved without triggering truly catastrophic climate change – which, apart from anything else, would obliterate any potential gains from poverty reduction.’

the average income would have to be $1.3 million per year simply so that the poorest two-thirds of humanity could earn $5 per day. This gives us a sense of just how deeply inequality is baked into our economic system.

if we want to have any hope of eradicating poverty without destroying our ability to inhabit this planet, we will need to adopt a completely different economic model – one that provides for a much fairer and more rational distribution of our wealth. Our future depends on it.

No one colonises innocently. Aimé Césaire

If we accept the dominant narrative, we might be forgiven for believing that poor countries have always been poor, and that the gap between rich and poor countries has always existed.

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.

the late 1600s, Locke – a large landowner in England with stakes in American colonisation – wrote the Second Treatise of Government, which developed a new and very powerful theory of property ownership. He stated that while land initially belongs to all people in common, once you ‘mix’ your labour with it then it becomes your private property. This ‘labour theory of property’ was used to justify the theft of land in the Americas: since it appeared that no one was engaged in agricultural production, settlers could rightfully appropriate the land as long as they were willing to farm it.