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

by Jason Hickel

So much for the trickle-down effect. As it turns out, making rich people richer doesn’t make the rest of us richer.58 Nor does it stimulate economic growth, which is the sole justification for supply-side economics. In fact, quite the opposite is true: since the onset of neoliberalism, the rich countries of the OECD have seen per capita growth rates fall from an average of 3.5 per cent during the 1960s and 1970s down to an average of 2 per cent during the 1980s and 1990s.59 As these numbers show, neoliberalism has failed as a tool for economic development – but it has worked brilliantly as a tool for restoring power to the wealthy elite. *

Why don't people shout this from rooftops?

We can learn a great deal from the legacy of developmentalism. The solution to mass poverty turns out to be remarkably simple. Poor people don’t need charity, they need fair wages for their work, labour unions to defend those wages and state regulation that prevents exploitation. They need decent public services – such as universal healthcare and education – and a progressive taxation system capable of funding them. They need fair access to land and a fair share of natural resource wealth. In other words, real development requires the redistribution of power, which then in most cases naturally precipitates a redistribution of resources. Developmentalist policies were generally brought in by democratically elected governments that had broad popular support, although a few of them – as in Egypt – calcified into authoritarian regimes. But in all cases, developmentalist governments sought to change the rules of national economies to make them fairer for the majority, so that economic systems would serve the interests of the people rather than just the interests of the national elite and foreign corporations.

Summary

From the perspective of the bankers, the Third World Debt Crisis was a complete catastrophe. According to basic free-market theory, when a borrower defaults on a loan, the loss should be shouldered by the lender; after all, it was their risk to begin with. But Wall Street had so much invested in Third World debt they knew that they would be unable to absorb the losses, and would almost certainly collapse. They refused to let this happen. They set about convincing the US government to bail them out, claiming that if they collapsed then the whole financial system would crash, credit markets would dry up and the global economy would spiral into recession. And that is exactly what they got. The US government stepped in to bail out the banks by forcing Mexico and other countries to repay their loans. They did this by repurposing the International Monetary Fund.

Empire strikes back

So SAPs introduced a three-part cocktail: austerity, privatisation and liberalisation. These principles were applied across the board, not just in Mexico, Argentina, Brazil and India – the first victims of structural adjustment – but in every country that was placed under the control of the IMF, regardless of their local economic conditions or the particular needs of their people. It was a one-size-fitsall blueprint, handed down from above by Washington-based technocrats – the central planners of an emerging global economic order that claimed, ironically, to detest central planning.

The genius of the World Bank’s conditional lending was that it was virtually risk-free for the creditors. The World Bank sells bonds on Wall Street, allowing commercial banks and private investors to buy global South debt. These ‘innovative debt products’, as the Bank calls them, are simultaneously safe (usually AAA rated) as well as high yielding, with returns of up to 15 per cent.16 How is the Bank able to deliver such large and secure returns? Because it wields direct power over its debtors. Through structural adjustment conditions, the Bank can force debtors to channel all their available resources towards repaying the loans, requiring them to cut spending elsewhere and raise new funds by selling off their assets. It’s a foolproof strategy. And it comes with the added benefit of prising open the receiving country’s market to foreign investors.

Usury

This model of lending would never fly in normal commercial banking. Imagine you walk into Barclays to get a loan for a new business. Now imagine that they will lend to you only if you agree to give them complete control over your household, so that if your interest payments don’t come in fast enough, they can garnish your wages, liquidate your house and force your children to get jobs. Imagine, further, that you are not allowed to declare bankruptcy under any circumstances; if you can’t repay your loan you have to sell everything you own, stop feeding your children, stop buying whatever medicines you might need to stay healthy and channel all that money to the bank. Such an arrangement would never fly. We would never allow it. And yet such invasive conditions are routine when it comes to development loans.17 An

We can get a better sense for how devastating structural adjustment was by zooming in on particular regions, countries and cities.22 Take Africa, for instance, which suffered a total of thirty-one structural adjustment programmes during the 1980s and 1990s. In Dar es Salaam, public expenditure per person was cut by 10 per cent per year during the 1980s. In Khartoum, 1.1 million people were added to the ranks of the poor, many of whom had lost their public-sector jobs during spending cuts. A structural adjustment programme imposed in Harare in 1981 raised the cost of living by 45 per cent in a single year; 100,000 people ended up hospitalised due to malnutrition. In CÔte d’Ivoire, the ‘Tiger of West Africa’, poverty doubled in a single year, between 1987 and 1988, as a result of a structural adjustment programme. In Nigeria, the poverty rate rose from 28 per cent in 1980 to an astonishing 66 per cent by 1996. In Algeria, the government was made to privatise 230 firms and fire 130,000 state workers. Poverty rates rose from 15 per cent in 1988 to 23 per cent in 1995.

Wtf

There were, however, some global South countries that did not implement across-the-board free-market principles and, not surprisingly, they managed to develop reasonably well – like Turkey, China and the East Asian Tigers.

Today I resigned from the staff of the International Monetary Fund after over twelve years, and after 1,000 days of official Fund work in the field, hawking your medicine and your bag of tricks to governments and to people in Latin America and the Caribbean and Africa.33 To me resignation is a priceless liberation, for with it I have taken the first big step to that place where I may hope to wash my hands of what in my mind’s eye is the blood of millions of poor and starving people. Mr Camdessus, the blood is so much, you know, it runs in rivers. It dries up too; it cakes all over me; sometimes I feel that there is not enough soap in the whole world to cleanse me from the things that I did do in your name and in the names of your predecessors, and under your official seal. When

It would be impossible to overestimate how important the World Bank and the IMF are to the countries of the G7. Not only did they become the most powerful tool in the fight against developmentalism, they also offered a spatial fix to the crisis of Western capitalism, which was bumping up against its own limits in the late 1970s. By turning poor countries into new frontiers for investment, extraction and accumulation, they allow Western capitalism to surmount its limits and carry on without having to confront its own internal contradictions – at least for the time being. It is not a real solution to the crisis, of course; it’s just a way of moving the crisis around geographically.44 But without it, capitalism in the United States and Europe would have crashed up against market saturation, ecological depletion and class conflict long ago, and may well have collapsed. This is why the World Bank and the IMF are so valued by the US government and Wall Street: they are essential to the continuity of the system.

Unlike Thomas Sankara, I have never been assassinated for talking against debt; I’m just an academic, not a head of state. But I do find that people get very passionate about the issue. When I teach my students about the history of debt in the global South, even the more progressive ones will insist that the debts should be repaid. After all, the thinking goes, they took out the loans in the first place – so aren’t they obligated to repay? I retort by pointing out that many of the initial loans were taken out by unelected dictators, or that the principal has already been paid off three or four times over, or that the economic policies imposed by the lenders failed so it makes sense that they should absorb the loss. But none of this convinces. The feeling that debts have to be repaid is so deeply entrenched in our culture that it is almost impossible to dislodge. It is not just an economic claim, it is a highly moral one. It’s about giving people what they are due. It’s about accepting one’s responsibilities. It’s about fulfilling one’s obligations. Refusing to pay a debt seems like reneging on a promise – it’s just wrong. And this is why debt is so powerful. The anthropologist David Graeber puts it nicely when he says, ‘There’s no better way to justify relations founded on violence, to make such relations seem moral, than by reframing them in the language of debt – above all, because it immediately makes it seem that it’s the victim who’s doing something wrong.’54 There ha...

So that’s what the Americans did. They quickly raised trade tariffs, and enacted a kind of import substitution policy – similar to that which they would later deny to Latin America. But they didn’t stop there: they also used cartels, subsidies and other forms of state support to build their industrial power, again following in the footsteps of the British. Hamilton explicitly rejected the theories of Adam Smith and other British free-trade figures. He recognised that they were promoting free trade not because it was better for all, but because it benefited their own economic interests. Hamilton knew that for young economies like that of the United States, strong protectionism and solid state support were the only path to real industrial development.

Poor Theory, Poor Countries If free trade runs counter to the development needs of poor countries, why do most mainstream economists continue to advocate it? One reason is that the theory of free trade is so remarkably compelling. The keystone of modern free-trade theory comes from David Ricardo, the early-19th-century British economist. Ricardo argued that the global economy would operate most efficiently and productively if every country specialised in producing the goods in which they have a comparative advantage over other countries, given their particular set of technologies. If Portugal is better at producing wine and England is better at producing cloth, it doesn’t make any sense for England to waste its time producing wine – it should just focus on cloth and import the wine from Portugal.3

In a famous 1848 speech, a well-known German economist made a barbed critique of free-trade theory – and of European imperialism – with the following words: We are told that free trade would create an international division of labour, and thereby give to each country the production which is in most harmony with its natural advantage.4 You believe, perhaps, gentlemen, that the production of coffee and sugar is the natural destiny of the West Indies. Two centuries ago, nature, which does not trouble herself about commerce, had planted neither sugar-cane nor coffee trees there. The economist was Karl Marx. And his point was that the relative endowments of capital

Rich countries have expensive labour because of a long history of unions and strong labour laws, and have abundant capital because of long-standing tariff protections that allowed them to develop their industries. Poor countries, on the other hand, have cheap labour and no capital because of a long history of colonisation, dispossession, unequal treaties and structural adjustment. Comparative advantage isn’t given, it is created.5 To suggest that the global South should focus on exporting raw material while the North should focus on capital-intensive industry is the equivalent of saying that black people are just naturally better at working in the cotton fields while white people are just naturally better at being overseers, and that investing in educating a black person to become anything other than a common labourer is a ‘distortion’ that runs against their natural abilities. It takes an inequitable social relationship and gives it the aura of the natural, of the unquestionable.

Based on the theory of comparative advantage, free-trade advocates lead us to believe that trade liberalisation will ultimately boost economic development in poor countries. But while it may be true that free trade increases efficiency in some abstract, mathematical sense, and perhaps even boosts consumption in the short term, it is not a meaningful strategy for long-term economic development. In fact, the theory itself never pretends to make this claim – it is merely a fancy bit of rhetoric that gets wheeled out by people who stand to benefit from it. In order for real economic development to occur, poor countries need to build their capacity for capital-intensive industry. This means intentionally insulating their industries from global competition until they are fully prepared to compete on the open market – just as Britain and the United States did during their own periods of economic development, along with every one of today’s rich countries. It’s surprising, and perhaps even offensive, then, that rich countries have now turned around and denied this strategy to poor countries. They insist that poor countries should be liberalised as quickly as possible in order to expose them to competition, so that they will have an incentive to develop their most competitive industries in order to survive. Protection, they say, only induces laziness and complacency.

The Cambridge economist Ha-Joon Chang likes to illustrate the problems of this theory by using the example of his very young son, Jin-Gyu. If Jin-Gyu is going to have a chance at becoming something great and succeeding in the world, then he will need many years of parental protection and investment to make sure he stays healthy, attends a good school and has plenty of time to focus on his studies before being let loose into the world to make it on his own. But what if we were to apply the logic of free trade to the Chang family? We might say that little Jin-Gyu lives in an economic bubble, his parents subsidise his idle existence and he is protected from the harsh realities of competition. What he needs is to have the subsidies cut off, get a job and make a living for himself – this will force him to become productive and efficient. ‘But,’ Chang argues, ‘if I drive Jin-Gyu into the labour market at the age of six, he may become a savvy shoeshine boy or even a prosperous hawker, but he will never become a brain surgeon or a nuclear physicist – that would require at least another dozen years of my protection and investment.’6 ‘Likewise,’

Genius

What do free-trade theorists have to say about such catastrophes? Well, they assume that the labour and capital ‘released’ from uncompetitive industries due to liberalisation will quickly be reallocated to other industries that align more closely with the country’s comparative advantage. This is the assumption of ‘perfect factor mobility’. But, as with many economic assumptions, reality almost never plays out according to theory. Workers who lose their jobs in one industry usually lack the skills necessary to quickly take up jobs elsewhere, and end up either languishing in unemployment or taking on very low-skilled, poorly paid work. The only way to ensure that some kind of productive transition takes place is to provide substantial unemployment benefits and training programmes – something that poor countries can rarely afford. Indeed, under structural adjustment programmes they are often denied the right to spend on this kind of social assistance.

As for capital mobility: the theory states that the capital from one dying industry will shift automatically to other, more competitive ones. But if capital is fixed, in the form of a machine, for example, it is usually too specialised to be used in another industry, so it sits languishing until someone sells it off – like the shuttered factories that stand like empty giants on the outskirts of Manzini. And if the capital is liquid, there’s no guarantee that it will stay in the country when it could just as easily move abroad. Indeed, that’s what happened in Swaziland when textile investors packed up and moved to East Asia. The mobility of liquid capital is too perfect, while that of labour and fixed capital is not perfect enough.

How to Profit from a Plague Much of the pain that developing countries suffer under the global free-trade regime actually has nothing to do with free trade at all. One of the WTO’s agreements, the Trade-Related Aspects of Intellectual Property Rights (or TRIPS), focuses on copyright and patent rules. One might think that trade would be enhanced by lowering patent standards: making it easier for countries to share technology is surely a good way to spur technological development and make trade more efficient. It would increase productivity, innovation and exchange. But TRIPS is designed to do exactly the opposite. The point of TRIPS is to raise patent standards and enshrine them in international law – and this is being conducted, ironically, under the banner

For investors, one of the risks of operating in a foreign land is that your host government might decide to nationalise your assets. During the developmentalist period, global South governments often resorted to this tactic in their attempts to reclaim wealth from foreign control, nationalising land and even businesses owned by Western companies. When this happened to, say, American companies, their only recourse was to persuade the US government to retaliate by sending a blockade or staging a coup – which, as we know, they did on many occasions. It was a messy business, and politically risky: no government really wants to be seen invading another country for the sake of corporate interests. So in 1965 they came up with a way to work such disputes out in the orderly environs of a court: the International Centre for Settlement of Investment Disputes (ICSID), which would be overseen by the World Bank. The idea was that in cases of expropriation, states would be obligated to compensate investors at a fair value for their property. Each dispute would be worked out by three arbitrators – one picked by each side, and a third agreed upon by both.

These treaties amount to something like a corporate coup d’état on an international scale. They create an avenue for extraterritorial legislation that bypasses national parliaments and any form of democratic discussion, pouring scorn on the idea of elected government. In this sense, the ideology of ‘free trade’ overplays its own hand and exposes itself as farce. The FTAs make it clear that free trade was never meant to be about freedom in the first place. Indeed, the very things that do promote real human freedoms – such as the rights of workers to organise, equal access to decent public services and safeguards for a healthy environment – are cast as somehow anti-democratic, or even totalitarian. These freedoms are reframed as ‘red tape’ or as ‘barriers’, even when, as is almost always the case, they have been won by popular grassroots movements exercising democratic franchise. In this sense, democracy itself is targeted, bizarrely, as anti-democratic, inasmuch as it grants voters control over the economic policies that affect their lives.

states could decide the terms by which foreign investors were allowed to send capital in to set up businesses or buy up shares of local companies. And if those investors wanted to pull their money out, they had to go through a rigorous application process. This was considered crucial to protecting economic stability. When an economy takes a downturn for some reason, an investor’s first impulse is to pull their money out and send it somewhere safer. When this happens on a large scale, it drains the economy of much-needed capital, and only makes the problem worse. Slight downturns can become full-blown crises when investors flee en masse. Keynes’s system allowed countries to impose ‘capital controls’ that prevented this from happening.

Of course, it can be difficult for investors to keep track of what’s going on in terms of economic policy in all the countries around the world. The Wall Street Journal and the Financial Times can only cover business news in so many countries. Fortunately for investors, they have another option. The World Bank publishes a handy pamphlet known as the Doing Business report – a controversial document that ranks the world’s countries every year based on the ‘ease of doing business’ in them. For the most part, the fewer regulations a country has, the higher they score. Investors and CEOs use the rankings to decide where to move their money or headquarter their businesses for maximum profit. There’s even an iPhone app that jet-setting capitalists can use to redirect their investments on the fly. A new minimum wage law was just passed in Haiti? Better move your sweatshop to Cambodia! Higher taxes on the rich in South Africa? Time to sell your stocks and invest in Ireland instead! By providing a panopticon of knowledge about regulatory policies all over the world, the Doing Business rankings give investors an incredible amount of power. Countries are forced to respond by cutting regulations to make themselves more attractive to the barons of global capital. A special online ‘reform simulator’ shows how each country can improve their ranking by, say, slashing corporate taxes or legalising land grabs. The Doing Business report has become the World Bank’s most influential publication...

Fucking hell

The rise of the virtual senate represents an important innovation in the history of neoliberalism. In the past, neoliberalism was imposed around the world by external powers. But the virtual senate enjoys the power to get countries to impose neoliberalism on themselves, simply by controlling the flow of capital. If a country wants to secure the capital they need for development – or even for survival – they have to kowtow to the wishes of the virtual senate: cut wages, cut taxes, slash regulations. Before the gods of foreign investment, the world is hostage.

People commonly think of neoliberalism as an ideology that promotes totally free markets, where the state retreats from the scene and abandons all interventionist policies. But if we step back a bit, it becomes clear that the 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 – the World Bank, the IMF, the WTO and bilateral free-trade agreements – with reams of new laws, backed up by the military power of the United States. In other words, an unprecedented expansion of state power was necessary to force countries around the world to liberalise their markets against their will. As the global South has known ever since the Opium Wars in 1842, when British gunboats invaded China in order to knock down China’s trade barriers, free trade has never actually been about freedom. On the contrary, as we have seen, free trade has a tendency to gradually undermine national sovereignty and electoral democracy.

Summary

According to the World Bank, corruption in the forms of bribery and theft by government officials, the main target of the UN Convention, costs developing countries between $20 billion and $40 billion each year.9 That’s a lot of money – and this figure is certainly large enough to warrant our attention as an obstacle to development. But if we broaden our view a little bit and put this figure into perspective, a very different story emerges. As it turns out, this kind of corruption is an extremely small proportion – only about 3 per cent – of the total illicit flows that leak out of the developing world each year. By contrast, the Washington-based Global Financial Integrity (GFI) calculates that up to 65 per cent of total illicit outflows have to do with corruption of a very different sort: commercial tax evasion.10 And when we look at commercial tax evasion, the neat corruption narrative that Transparency International tells begins to fall apart.

Transfer mispricing is remarkably easy. All a company has to do is write out an invoice that falsely reports the cost of an item, and then get their trade partner to write out a similarly false invoice on the other side – in other words, ‘same-invoice faking’. Analysts have recorded some flagrant examples of this: a kilogram of toilet paper from China priced at $4,121, a litre of apple juice from Israel priced at $2,052, ball-point pens from Trinidad priced at $8,500 each.18 By inflating transfer prices, a company can magically move its money from subsidiaries in high-tax countries to subsidiaries in low-tax countries – often in tax havens. Because this practice is so difficult to detect, no one knows the full scale of the problem. Global Financial Integrity estimates that it probably amounts to outflows that are at least equivalent to the scale of reinvoicing. That means another $879 billion flowing out of developing countries each year.19 And it may even be more than reinvoicing, given that transfer mispricing is so much easier to get away with. *

In light of all this, the question of corruption begins to take on a somewhat different hue. Given the role of Britain, the United States and various European countries in facilitating illicit flows by building and maintaining the global tax haven system, and in light of the role that the WTO plays in making it difficult for customs officials to clamp down on mispricing, it seems a bit strange that rich countries appear in corruption-free yellow on the Transparency International map. One of the problems with TI’s methodology is that it measures people’s perceptions of corruption, rather than corruption itself. People who live in Britain may not normally think of their country as being particularly corrupt, but that may be because corruption is something that they have been taught to associate with countries in the developing world – not with the rich world. In this sense, Transparency International might be helping to create the very perceptions that it seeks to measure.

From the start of the Industrial Revolution until today, humans have released a total of 588 billion tons of CO2 into the atmosphere. Rich industrial economies are responsible for about 70 per cent of this, although measurements vary slightly: the number is much higher if you count only industrial emissions, but slightly lower if you include non-industrial emissions, such as from deforestation.44 Yet, according to data from the Climate Vulnerability Monitor, developed nations bear only 12 per cent of the total costs of climate change.45 Developing countries, by contrast, have to bear 82 per cent of the total costs, which in 2010 meant $571 billion in losses due to drought, floods, landslides, storms and wildfires. The Monitor predicts that as these costs

Emissions patterns are changing, of course. In 2005, developing countries as a group caught up with their richer counterparts in terms of CO2 emissions – a change for which China is almost exclusively responsible, given its heavy reliance on coal. Indeed, China recently surpassed the USA to become the world’s biggest polluter. And Brazil, Indonesia and India have now surpassed Germany and the United Kingdom. Much of this has to do with the fact that globalisation has shifted production to developing countries, and especially to China, effectively outsourcing responsibility for pollution.46 Still, once corrected for population size the picture looks significantly different. The United States remains the biggest polluter, emitting three times more CO2 than China on a per capita basis.47 Germany emits almost double what China does, per capita. And India, for its part, emits just a fraction of the world average: each Indian is responsible for only 1.4 tons of CO2, while the world average is upward of 4.5 tons per person. Africans emit only 0.9 tons per person. And yet the costs of climate change will hit Africa and India the hardest, amounting to 4 per cent and 5 per cent of their GDP, respectively.48

If we want to have a 66 per cent chance of keeping below 1.5°C, we can pump no more than another 205 gigatons of carbon dioxide into the earth’s atmosphere between 2015 and the end of the century.55 This is known as the ‘carbon budget’. At our current rate of emissions, we are pumping 40 gigatons of CO2 into the atmosphere each year, which means the 1.5°C budget will be blown by 2020.56 To limit ourselves to 205 gigatons of CO2 will take a monumental effort, given that the world’s fossil fuel reserves currently contain more than 2,600 gigatons’ worth of CO2. These are reserves that are known and extractable using today’s technologies and in today’s economic conditions.

But the Paris Agreement makes no mention of this red line. In fact, it imposes no limits on the use of fossil fuels whatsoever. What is more, the Paris pledges don’t even kick in until 2020. In other words, countries are allowed to continue increasing their carbon emissions for five years after the agreement was signed, by which time we will have blown the budget for 1.5°C. On the face of it, five years seem a fair transition period, even given the tight budget. But we have known about anthropogenic climate change since at least the 1960s, and international negotiations to reduce carbon emissions have been under way since 1990. And yet instead of reducing annual carbon emissions, we have increased them by 61 per cent over the past two decades.57 Governments are still subsidising the fossil fuel industry to the tune of $5.3 trillion per year, according to the IMF’s most recent estimates, while perversely using the WTO’s court to knock down subsidies for alternative technologies such as solar panels.58 What

But the climate change emergency forces us to discard this approach and think seriously about the logic of capitalism itself. As Naomi Klein puts it in her most recent book, This Changes Everything, ‘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.’

People find themselves surrounded by hideous poverty, by hideous ugliness, by hideous starvation.1 It is inevitable that they should be strongly moved by all this. Accordingly, with admirable intentions, they very seriously and very sentimentally set themselves to the task of remedying the evils that they see. But their remedies do not cure the disease: they merely prolong it. Indeed, their remedies are part of the disease. They try to solve the problem of poverty, for instance, by keeping the poor alive. But this is not a solution: it is an aggravation of the difficulty. The proper aim is to try and reconstruct society on such a basis that poverty will be impossible. And the altruistic virtues have really prevented the carrying out of this aim. Just as the worst slave-owners were those who were kind to their slaves, and so prevented the horror of the system being realised by those who suffered from it, and understood by those who contemplated it, so the people who do most harm are the people who try to do most good. Charity degrades and demoralises.

If we are overshooting our planet’s ecological capacity at our existing levels of economic activity, what happens when we factor in exponential growth? Even the near future looks quite bleak. Scientists tell us that by 2050 our mature tropical forests will have disappeared. Species biodiversity will have declined by another 10 per cent.6 Stocks of all presently fished seafood will have collapsed by an average of more than 90 per cent from 1950 levels.7 Most major metal reserves will be exhausted, including gold, copper, silver and zinc, along with many of the key metals used in renewable energy technologies, like lead, indium and antimony.8 If Silicon Valley entrepreneurs like Elon Musk are to be believed, we might be able to replace some of these metals by mining the moon and asteroids. But extraterrestrial extraction won’t help us much with the forests and the fish. Nor will it do much for our soil crisis: at present rates of depletion, the topsoils of the world’s farmlands will be more or less useless by 2050, and by 2075 they will be gone.9 Despite these obvious problems, for some reason we have come to believe that GDP growth is equivalent to human progress.

It might be the primary public imperative, but there is also a private one: the imperative for corporations to maximise shareholder returns. Like GDP, this imperative has not been around for ever. We can trace it back to 1919, with the landmark US Supreme Court case Dodge v. Ford Motor Company. At the time, the Ford Motor Company had a sizeable capital surplus, and Henry Ford had decided to devote some of it to raising his workers’ wages, which were already considered to be quite high. The Dodge brothers, two of the company’s biggest shareholders, sued Ford for this move, claiming that Ford’s capital actually belonged to his shareholders, and that unnecessarily raising wages was effectively stealing from them. The court ruled in their favour, and a precedent was set. Business decisions would have to be made in the interests of shareholder returns first. If CEOs want to spend money to increase wages or protect the environment in a manner that results in decreased shareholder returns, they can’t, for it is effectively illegal to do so. Today, corporations are largely ruled by this imperative, which makes them much more rapacious than they otherwise might be. Abolishing it will be an important step towards giving them the space to consider other priorities.

but it doesn’t address the main underlying driver of growth, which is a little bit deeper and more difficult to see, and that is debt. Right now, one of the reasons our economies have to grow is because of debt. Debt comes with interest, and interest means that debt grows exponentially. For a country to pay down its debt over the long term, it has to grow its economy enough to match the growth of its debt. The same is true of a business. If you want to start a business, you’ll probably have to take out a loan. Then, because you have that debt, you can’t just be satisfied with earning enough to pay your employees and feed your family – you also have to turn enough profit to pay off your loan with compound interest. Regardless of whether you’re a country or a business – or even an individual – you’ll find that, without growth, debt piles up and eventually causes a financial crisis. If you don’t grow, you collapse.

Genius but evil

But even debt cancellation would only provide a short-term fix; it wouldn’t really address the root problem, which is the fact that the global economic system runs on money that is itself debt. When you walk into a bank to take out a loan, you assume that the bank is lending you money it has in its reserve – real money that it stores in a basement vault, for example, collected from other people’s deposits. But that’s not how it works. Banks are only required to hold reserves worth about 10 per cent of the money they lend out. This is known as ‘fractional reserve banking’. In other words, banks lend out about ten times more money than they actually have. So where does that extra money come from, if it doesn’t actually exist? The banks create it out of thin air. They loan it into existence. About 90 per cent of the money that is presently circulating in our economy is created in this manner. In other words, almost every single dollar that passes through your hands represents somebody’s debt. And every dollar of debt has to be paid back with interest – with more work, more production or more extraction. The

It just doesn't stop

In other words, regenerative farming may be our best shot at actually cooling the planet. And it comes with a very useful side-effect: regenerative methods actually produce higher yields than industrial methods over the long term, by enhancing soil fertility and improving resilience against drought and flooding.