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

by Jason Hickel

In addition, structural adjustment programmes required debtors to keep inflation low – a kind of monetary austerity – because the bankers feared they would use inflation to depreciate the value of their debt.

The structural adjustment reforms themselves had nothing to do with the real causes of the crisis. The real causes of the crisis were exogenous:

Ok...we're blaming US for jaking up interest rates and pushing loans, but not also OPEC for jacking up the oil prices overnight, leading to the first two?

Power over economic decisions was shifted from national parliaments and elected representatives to technocrats in Washington and bankers

investment in education fell to the point where it became impossible to produce the skills necessary for development.

We are talking about 10 years here ....not ages...

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.

It is true that income growth also slowed in the rich world during this period, as a result of the imposition of neoliberal policies at home.

Ok....so not only the south suffered...

In other words, developing countries would have been earning $2.66 trillion more each year for their exports if their labour was paid fairly on the world market.

But I don't understand what fair means. I find it normal that wages are smaller where living expenses are smaller; where all the services are cheaper.....maybe even free....where the entire popularion can afford to pay more for goods, so that companies make more money so they can pay their employees more....not all jobs in a country are producing exports for the US, so that you can compare their wages....i just don't get it..

Indeed, the amount that the global South spends collectively on debt service each year vastly outstrips the amount that the UN tells us is necessary to eradicate poverty entirely; you could cancel all debt payments and cancel global poverty in the same swoop, if you could muster the political will.

The World Bank itself defines development as promoting ‘economic and political freedom’, and ‘freedom of choice’.57 This claim is very familiar to us. Yet the history outlined above suggests the opposite. 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.

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.

Between the 1860s and the 1930s, the United States was the most heavily protected economy in the world. The model worked marvellously well, and the US quickly became the world’s dominant industrial power. Britain, for its part, had to compensate for its loss of the American market by pushing free trade elsewhere in the world, forcing it onto Chi...

During the first decades of the 20th century, protectionism was the norm across the industrialised world.

But then the Great Depression hit, followed by the Second World War. In the wake of the war, when Western powers gathered at the Bretton Woods Conference in New Hampshire to decide how to prevent such a catastrophe from recurring, they set up the General Agreement on Tariffs and Trade (GATT). John Maynard Keynes, the key figure at the conference, argued that the rise of protectionism across the industrialised world had contributed to low aggregate demand: people weren’t buying enough stuff because prices were too high, and the economy ground to a halt. For Keynes, excess protectionism was a primary driver of the Great Depression – a depression that had caused such misery in Germany and Japan, for example, that it had eventually given rise to the fascist politics that led to the war. Keynes believed that demand could be revived by carefully relaxing trade tariffs. This would allow prices to fall, people would start consuming again and the economy would be jolted back to life. The goal of the GATT was to reduce tariffs across the board through collective bargaining among industrialised countries. The system was designed to be beneficial to all, in the spirit of unity and solidarity, so the rules were not rigidly applied: member states could negotiate to avoid policies that would cause their economies significant harm.

So Keynes good, Hayek bad, but Keynes caused the first ceack in Global South development?

When the talks concluded in 1995, the World Trade Organization was born. The WTO was a completely different animal from the GATT. Instead of seeking to maintain economic stability and cooperation, it was designed to open up the world to capital flows from rich countries,

But this whole book was a list of bad stuff happening to global south way before 95. Actually, in earlier chapters you sad that in the 90s the world became at least more aware and critical of the debts...

Under the WTO, poor countries are required to stop subsidising their industrial goods, to prevent them from competing ‘unfairly’ with rich-country exports. As a result, many have no choice but to give up any hope of industrialisation and focus instead on agriculture. But through the US Farm Bill and the European Common Agricultural Policy, rich countries subsidise their own agricultural goods to the tune of $374 billion per year, then dump them on global markets for less than the cost of production, undercutting producers across the global South and driving down their market share.

Under the WTO, the Cotton Four have the option of taking the US to court (the Disputes Settlement Body) – and the court will probably rule in their favour. But the WTO cannot force the US to change course. Enforcement is left up to the plaintiffs; should they win the case, the Cotton Four would be entitled to place sanctions on the US. But what use are sanctions from a little group of poor countries against the richest and most powerful economy in the world?

In the past, pharmaceutical companies were only allowed to hold patents on the process of manufacturing drugs, not on the compounds themselves. This meant that developing countries could produce generic versions of important medicines – and sell them for a fraction of the cost – so long as they were able to find their own methods of manufacturing them. TRIPS put an end to this practice by extending corporate patents down to the level of the molecule itself.

neighbouring South Africa, where the epidemic was just as bad, chose to disobey the WTO’s rules and began using generic antiretrovirals, pleading a public health emergency. They insisted no patent was so sacred that millions should have to die to respect it. The United States responded by threatening them with crushing sanctions through the WTO’s court – and the world watched in horror at this callous move. But then something happened in the United States that weakened their case. In 2001, a number of Americans died of exposure to anthrax. The US government feared that an epidemic might be on the horizon, possibly triggered by biological weapons. Just in case, they decided to stockpile Cipro, the antibiotic that treats anthrax. But Cipro was under patent by Bayer, making it very expensive to buy. So the US government stepped in and, citing a possible public health emergency, forced Bayer to suspend its patent so that generic versions could be produced.

Wow

84 per cent of research on pharmaceuticals is funded by governments and other public sources, while only 12 per cent comes from the pharmaceutical industry.

Really?

Western nations have continued to refuse to back down from their agricultural subsidies and the most damaging provisions of TRIPS. As a result of their intransigence, the talks have stalled since 2008

these cases follow the same pattern: corporations sue the state for domestic laws that limit their ‘expected future profits’, even when the laws are meant to protect human rights, public health or the environment.

What is perhaps most troubling about these new investor–state dispute mechanisms, though, is that they are intrinsically imbalanced. Investors have the right to sue states, but states do not have a corresponding right to sue foreign investors. The most a state can hope to win out of a settlement is the nullification of the suit; a state cannot claim damages from foreign corporations. In other words, the system grants special new powers and freedoms to undemocratic corporations while eroding those of sovereign, democratic states.

‘When I wake up at night and think about arbitration, it never ceases to amaze me that sovereign states have agreed to investment arbitration at all … Three private individuals are entrusted with the power to review, without any restriction or appeal procedure, all actions of the government, all decisions of the courts, and all laws and regulations emanating from parliament.