The Divide: Global Inequality from Conquest to Free Markets

by Jason Hickel

To avoid having to confront domestic resistance, which can be politically costly, policymakers might solve a crisis of over-accumulation by resorting to a ‘spatial fix’ – in other words, by opening up new consumer markets, labour markets and investment markets abroad. This is where the World Bank and the IMF have come in handy. When the West’s economy stagnated in the late 1970s, they offered a spatial fix by creating opportunities for investment in the sovereign debt of foreign countries, with high returns that were basically guaranteed. To get a sense of the scale of this investment opportunity, consider the fact that the Bank sold around $58 billion of AAA-rated sovereign-debt bonds on Wall Street in 2015. That’s a substantial market. On top of this, the large-scale development projects funded by World Bank loans required recipients to hire American contractors to carry out the work and to purchase equipment and materials from American businesses rather than local ones, even though this can be up to 30 per cent more expensive. Through these ‘tied aid’ arrangements, the World Bank stimulates demand for American products with every loan. Some studies suggest that American businesses get up to 82 cents in new purchases for each dollar that the US government contributes to the Bank.