The Divide: Global Inequality from Conquest to Free Markets

by Jason Hickel

Today, more than 50 per cent of the black population lives in absolute poverty, while the mines and plantations remain monopolised by a handful of white-owned (mostly British) conglomerates.

From the late 15th to the early 20th centuries, European powers considered their colonies to be a sacrifice zone for the sake of their own development. No loss of human life, no amount of suffering, no degree of degradation was too much so long as the economic interests of colonial companies and states were served. The inequity was justified by dehumanising those with black and brown skin – by repeatedly asserting that they were not quite as human as white people, and that therefore their suffering did not matter.

the end of this period, Europe owned somewhere between one-third and one-half of the domestic capital of Asia and Africa, and more than three-quarters of their industrial capital.

the Monroe Doctrine was to protect US interests in the region. This agenda became particularly clear when President Theodore Roosevelt added the Roosevelt Corollary in 1904, which was used to justify military intervention against any Latin American country that refused to cooperate with US economic interests. The idea was to keep Latin America open to US companies, as a source of resources and agricultural goods as well as an outlet for US manufactures – the same strategy that Britain had pursued in India and China.

the early 20th century, including multiple invasions and occupations of Cuba, Mexico, Honduras, Colombia, Nicaragua, Haiti, the Dominican Republic and Puerto Rico.

These are known now as the Banana Wars, as in many cases the invasions were designed to guarantee abundant land and cheap labour for American fruit companies. For instance, US marines invaded Honduras seven times between 1903 and 1925 in order to contain progressive political parties and install puppet leaders who would serve the interests of American banana producers. Cuba is another example: the US occupied Cuba on and off from 1906 to 1934, mostly to secure the interests of American sugar companies. But there were other issues at stake too. When the US invaded Colombia in 1903 it was in order to secure control over Panama, to clear the way for the US to dig the Panama Canal. Nicaragua was occupied from 1912 to 1933 largely in order to prevent the Nicaraguan government – or any other nation – from building its own alternative canal. Another key issue was debt. When the Dominican Republic threatened to default on its debts to American creditors, the US invaded and seized control of its ports, channelling the country’s customs revenues directly into American coffers. The occupation lasted from 1916 to 1924, at the end of which the US installed a military dictatorship to rule in its interests.

The system had two built-in features that generated increasing inequalities between the West and the rest. The first was that the terms of trade of developing economies deteriorated over time. In other words, the prices of their primary commodity exports gradually decreased relative to the prices of the manufactured goods they imported. This meant that they had to spend more to get less, which translated into an outward net transfer of wealth.

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, even when corrected for productivity and purchasing power, so the South was undercompensated for the value they shipped abroad. Together, these two patterns lie at the heart of what economists call ‘unequal exchange’ between the core and the periphery. By the end of the colonial period, the periphery was losing $22 billion each year as a result of unequal exchange, which is equivalent to $161 billion in 2015 dollars. That is twice the amount of aid and investment that the periphery was receiving each year during the same period. 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.

it, ‘The colonial economy was built in terms of – and at the service of – the European market.

In 1910, the richest 1 per cent in the United States claimed 45 per cent of the nation’s wealth, while in Europe they claimed nearly 65 per cent of total wealth. Zoom out a bit and the numbers are even more staggering: in the US the richest 10 per cent claimed more than 80 per cent of the nation’s wealth; in Europe, it was as much as 90 per cent. Such levels of inequality would be almost impossible to imagine were we not once again approaching similar extremes today.

This is what happens when capitalism is left to its own devices: it generates such extreme inequality that the whole system simply seizes up.

As part of the New Deal, the United States also implemented a universal Social Security programme, provided affordable housing and, with the GI Bill, handed out large university tuition subsidies for veterans. In Britain, a growing union movement – propelled largely by coal miners – brought to power Clement Atlee’s Labour Party, which rolled out the National Health Service, free education, public housing, rent controls and a comprehensive social security system, as well as nationalising the mines and the railways. Many politicians on the right were willing to go along with it, hoping that granting the working class a fairer deal would stave off the social discontent they feared might spark a Soviet-style revolution. They also hoped it might prevent the rise of fascism, which had attracted Germans beleaguered by their severe economic crisis. By ensuring stability and welfare across the industrialised world, Keynesian

In Argentina, for example, President Juan Perón’s administration (1946–55) invested heavily in infrastructure, nationalised oil resources and built the country’s capacity for heavy industry. It also made substantial investments in public education, healthcare, social security and housing – a programme spearheaded by the president’s wife, the reformer Eva Perón. To this day, the Peróns are celebrated for their largely successful efforts to eradicate poverty, support workers and build Argentina’s middle class.

What is more, the income gap between rich countries and the regions of the global South where developmentalism was most thoroughly applied began to narrow for the first time. In 1960, the average income in the United States was 13.6 times higher than in East Asia. By the end of the 1970s the ratio was down to 10.1, having shrunk by 26 per cent. During the same period, the per capita income ratio between the US and Latin America shrank by 11 per cent, and for the Middle East and North Africa by 23 per cent. The South was steadily closing the divide. In addition

John Foster Dulles, who became the US secretary of state, and his brother, Allen Dulles, who became head of the CIA. The Dulles brothers had both worked previously at the law

Iran became the first target of Eisenhower’s backlash. Iran’s democratically elected leader, Mohammad Mossadegh, had become a stalwart of the developmentalist movement. Tall, dignified and Paris-educated, Mossadegh had risen to

politician. As prime minister, he introduced unemployment compensation and benefits for sick and injured workers. He abolished forced agricultural labour. He raised taxes on the rich in order to fund rural development projects. And, most famously, he sought to renegotiate ownership of the country’s oil reserves, which at that point were controlled by the British-owned Anglo-Iranian Oil Company, now BP. When the company refused to cooperate with an audit of its accounts, the Iranian Parliament voted unanimously to nationalise the company’s assets. This move further boosted Mossadegh’s popularity at home. But it outraged the British government, which quickly turned to the United States for assistance. The option of military intervention was on the table, but they worried that it might provoke the USSR into coming to Iran’s aid and set off a proxy war. So they worked covertly through a secret project called Operation Ajax, which was led by CIA agent Kermit Roosevelt (the grandson of Theodore Roosevelt, the man who established the Roosevelt Corollary to the Monroe Doctrine and paved the way for US intervention abroad). It was a clever plan. First, they bribed politicians to whip up anti-government sentiment and paid demonstrators to take to the streets to create the false impression that Mossadegh was unpopular. Then they convinced the military to depose Mossadegh and hand power over to the Shah of Iran, Mohammad Reza Pahlavi. It worked: the coup in August 1953 toppled Mossade...

Arévalo saw the poor as his main priority. He introduced a number of pro-poor policies, including new minimum wage laws, as a way of reversing the mass impoverishment that the Ubico regime had produced during the land grabs. After his six-year term, which was marked by unprecedented political freedom and stability, Arévalo stepped down to allow for new elections, which brought one of his ministers, Jacobo Árbenz, to power.

Árbenz – known for his Swiss ancestry and nicknamed the Big Blonde – continued the progressive policies of his predecessor, adding a new land reform programme called the Agrarian Reform Act. At the time, fewer than 3 per cent of Guatemalans owned 70 per cent of the land. Árbenz’s plan was to nationalise large tracts of unused private land and redistribute it to landless peasants who had been victims of debt slavery during the Ubico years, to allow them to farm their way out of starvation. Incidentally, some 450,000 acres of the earmarked land belonged to the United Fruit Company. Despite being offered full compensation, the company refused to cooperate. Instead, they lobbied the US government to overthrow Árbenz and whipped up public support in the US using Cold War rhetoric, painting Árbenz as a Russian stooge and Guatemala as a Soviet satellite. The CIA, under the direction of Dulles – who, together with his brother, was on the payroll of United Fruit for thirty-eight years – was happy to comply. Under Operation PBSUCCESS, they bombed the capital, toppled Árbenz and installed the military dictator Carlos Castillo Armas in his place, putting an end to ten hopeful years of democracy in Guatemala. The new government quickly deregulated foreign investment, reversed the policies of the Árbenz era, and proceeded to imprison thousands of the regime’s critics. Guatemala was ruled by a series of military dictatorships – all with US support – until 1996. During that time, the regi...

Eva Joly exposed it during her landmark investigation of Elf Aquitaine – what the Guardian called ‘the biggest fraud inquiry in Europe since the Second World War’.

For Friedman and his followers, their great enemy was not only Keynesianism in the United States, but also social democrats in Europe and the developmentalists in the global South. They saw all of these systems as contaminated forms of capitalism that needed to be purified. There was price-fixing to make basic goods more affordable. There were minimum wage laws to protect workers from exploitation. Certain services – like education and healthcare – were kept out of the market altogether to ensure universal access. These policies were improving people’s lives, but Friedman claimed that they were doing hidden harm by disrupting the equilibrium of the market. Price controls, subsidies and minimum wage laws should all be abandoned, and the state should sell off any services that corporations could run at a profit, including education, healthcare, pensions and national parks. Governments should cut back social spending so as not to interfere with the labour market. Taxes should be at a flat rate. And corporations should be free to sell their products anywhere in the world. If implemented, he claimed, these policies would lead to unprecedented growth and prosperity.

And neoliberalism abandoned any pretence to neutrality in favour of a more politically charged agenda: it was against subsidies and protections for the working class and regulations that supported unions, but was quite comfortable with subsidies and protections for the rich and regulations that supported large corporations. During the 1970s, neoliberal

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.

There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.

They needed a new plan. In 1975, the leaders of the US, Britain, France, Italy, Japan and West Germany met at Château de Rambouillet in northern France to form the alliance that – with the later addition of Canada – would become the G7. The goal was to counter the rise of developmentalism and the NIEO, and to prevent global South countries from working together to increase the prices of raw materials. Henry Kissinger, the US secretary of state at the time, laid out the new geopolitical strategies that the group would use. He proposed to shift the most important decisions at the UN away from the General Assembly to the Security Council, which the rich nations controlled. Next, he laid out plans to divide the G77 by using aid as an instrument of control. The idea was to create a new group of so-called Least Developed Countries (LDCs) – the poorest and most desperate members of the global South – and offer them aid in exchange for siding with the West against OPEC and the rest of the G77. Aid would be wielded as an intentional strategy to shatter global South unity. Borrowing from Truman,

The embargo sent a massive shock through the US economy and triggered the crisis of high inflation and low growth that characterised the 1970s. Desperate for a quick solution, Nixon considered invading the Middle East to seize the oil fields, but at the last minute the two sides managed to reach a negotiated settlement. Israel withdrew from the Sinai Peninsula, thus placating Egypt; and Saudi Arabia would ensure that oil prices remained at a level acceptable to the United States in exchange for US military aid that would help the House of Saud hold off their domestic political enemies. But there was another, more important dimension to the settlement. As a result of the oil price increases, OPEC states suddenly found themselves awash with excess cash worth more than $450 billion. The only problem was that they didn’t know what to do with all the money. Because there was nowhere to invest it internally, Saudi Arabia and other OPEC nations decided to circulate or ‘recycle’ the money through Wall Street banks, probably to some extent under the pressure of US compulsion, as part of the negotiated settlement.

countries finance their debt on the condition that they would agree to a series of ‘structural adjustment programmes’. Structural adjustment programmes, or SAPs, included two basic mechanisms for debt repayment. First, developing countries had to redirect all their existing cash flows and assets towards debt service. They had to cut spending on public services like healthcare and education and on subsidies for things like farming, food and infant industries; they also had to privatise public assets by selling off state companies like telecoms and railways. In other words, they had to reverse their developmentalist reforms. The savings gleaned from spending cuts and the proceeds of privatisation would then be funnelled back to Wall Street to repay debts. In other words, public assets and social spending retroactively became collateral in the repayment of foreign loans – an arrangement that was, of course, never agreed at the time the loans were signed. Global South countries were made to pay for the banks’ risky practices with billions – even trillions – of dollars taken from ordinary people. This amounted to an enormous transfer of wealth from the public coffers of impoverished global South countries to the richest banks in the West.

prevent it from recurring. But this was a very subtle sleight of hand – a kind of ruse. The structural adjustment reforms themselves had nothing to do with the real causes of the crisis. The real causes of the crisis were exogenous: they had to do with exorbitant interest rates and declining terms of trade, over which global South countries had no control. But the IMF had no intention of tackling these problems, for to do so would require challenging the interests of Western governments and their commercial banks. Instead, the IMF acted as though the problem was endogenous, as though it had to do with problems in the local economy. So the IMF pushed domestic economic reforms as if they were a response to the crisis when in fact they were not. The crisis was simply an excuse for rolling out an economic agenda that Washington had long been seeking to impose.

Robert Pollin, an economist at the University of Massachusetts, calculates that developing countries lost roughly $480 billion per year in potential GDP during the 1980s and 1990s as a result of structural adjustment. To get a feeling for how much this is, total annual aid disbursements during the same period amounted to less than $100 billion per year. In other words, losses due to structural adjustment outstripped gains from aid by a factor of five. It would be difficult to overestimate the scale of human suffering – and the loss of economic potential – that these numbers represent. Indeed, structural adjustment turned out to be the greatest single cause of impoverishment in the 20th century: the number of people living on less than $5 per day increased

When wages fall as a proportion of national income, as we see here, it means there is a shift of income from wage-earners to capital-holders. In other words, the rich get richer while the poor get poorer. We can also see this happening at the level of specific cities. In Buenos Aires in 1984, the richest 10 per cent of the population were ten times richer than the poorest 10 per cent. By the end

We shouldn’t be surprised that structural adjustment yielded these results, for there is a flagrant double standard at play. Western policymakers told developing countries that they had to liberalise their economies in order to grow, but that’s exactly what the West did not do during its own period of economic consolidation. Every one of today’s rich countries developed its economy through protectionist measures. In fact, until recently, the United States and Britain were the two most aggressively protectionist countries in the world: they built their economic power using government subsidies, trade tariffs, restricted patents – everything that the neoliberal playbook denounces today. Structural adjustment allowed the West to ‘kick away the ladder’ they had used to climb the heights of development, ensuring that no one else would be able to follow. The development narrative has it wrong. It is not that poor countries have been unable to climb the development ladder; it is that they have been specifically precluded from doing so.

But there’s a second reason that the IMF and the World Bank have been able to power through with structural adjustment programmes despite their dismal record, and it has to do with how these two institutions are governed. Voting power in both is apportioned according to each member nation’s share of financial ownership, just as in corporations. Major decisions require 85 per cent of the vote. Not incidentally, the United States holds about 16 per cent of the shares in both institutions, and therefore wields de facto veto power. The next largest shareholders are France, Germany, Japan and the UK – all members of the G7. Middle- and low-income countries, which together constitute some 85 per cent of the world’s population, have only about 40 per cent of the vote. In other words, even if every single country in the global South united in disagreement against an IMF and World Bank policy, they wouldn’t be able to block it. And of course it doesn’t help that the leaders of these institutions are not elected, but are appointed by the US and Europe: according to an unspoken agreement, the president of the World Bank is always an American, while the president of the IMF is always European.

Davison Budhoo, the IMF senior economist whose job it was to implement structural adjustment programmes in Latin America and Africa during the 1980s. In 1988, Budhoo, a native of Grenada,

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. 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 the failure of structural adjustment programmes became too

In the early 1980s, the G7’s goal was to use the World Bank and the IMF to cripple the South’s economic revolution and re-establish Western access to its resources and markets. On this point, they certainly didn’t fail. But there was another, deeper purpose that the World Bank and the IMF served, and that was to save Western capitalism itself. We know that from time to time capitalism bumps up against limits to the creation of new profits. There is the market saturation limit, for instance: when consumers have more than they need, buying slows down and businesses can’t turn over as many products. There is the ecological depletion limit: when natural resources run low, the cost of essential inputs begins to rise. And there is the class conflict limit: as workers bargain for higher wages, the cost of labour becomes more expensive; and if you deny their demands, or indeed if you try to push wages down to increase your profits, you risk sparking social instability. All of this makes it increasingly difficult for firms to extract big profits. When capitalism hits these limits, investors find themselves with fewer options for investing their capital, since nothing gives an acceptably high return. They can’t just put it into savings because interest rates on savings accounts are typically lower than inflation, and that means losing money. This is what economists call a crisis of over-accumulation. In a crisis of over-accumulation, capital begins to lose its value – and according ...

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.

Some of this profit came from productive processes in the market – in other words, from the creation of new value in global South countries. But given that structural adjustment destroyed growth rates, we can conclude that much of it came instead from the appropriation of already existing wealth. By requiring debtor countries to privatise public assets, the World Bank and the IMF created opportunities for foreign companies to buy up telecoms, railroads, banks, hospitals, schools and every conceivable public utility at a handsome discount, and then either run them for private gain or strip them down and

sell off the parts at a profit. The privatisation of public assets releases a tremendous asset into the market that was previously inaccessible to capital, creating new opportunities for profit. The World Bank alone privatised more than $2 trillion of assets in developing countries between 1984 and 2012. That amounts to an average of $72 billion per year of profitable opportunities for Western investors in addition to the $58 billion of high-interest bonds that the Bank sells on Wall Street each year. While privatisation creates wonderful

When we look at it through this lens, it makes sense that all of the World Bank’s past presidents have been not development experts (as one might expect of an organisation devoted to development and poverty reduction), but rather US army bosses and Wall Street executives – people who have a strategic interest in America’s role in the global economic system. Here they are, in order of appearance: Eugene Meyer, Chairman of the Federal Reserve John McCloy, US Assistant Secretary of War Eugene Black, bank executive with Chase George Woods, bank executive with First Boston Corporation Robert McNamara, US Secretary of Defense and executive of Ford Motor Company Alden Clausen, bank executive with Bank of America Barber Conable, US Congressman Lewis Preston, bank executive with J. P. Morgan James Wolfensohn, corporate lawyer and banker Paul Wolfowitz, US Deputy Secretary of Defense Robert Zoellick, Deputy Secretary of State and US Trade Representative

1960s developing countries were losing $161 billion (in 2015 dollars) each year through what economists call ‘unequal exchange’, the difference between the real value of the goods that a developing country exports and the market prices that it gets for those goods. We can think of this as an expression of undervalued labour. If workers in the developing world had been paid the same as their Western counterparts for the same productivity in the 1960s, they would have earned an additional $161 billion per year for their exports. This disparity was largely the result of colonial policy, which had maintained wages at artificially low levels. But structural adjustment made this system even more inequitable.

reaching $2.66 trillion (in 2015 dollars) by 1995, at the height of the structural adjustment period. 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. The best way to think of this is as a hidden transfer of value from the global South to the North – a transfer that, in 1995, amounted to thirty-two times the aid budget, and outstripped total flows from the OECD by a factor of thirteen.

But another major driving force behind the growing inequality gap is the debt system itself. Not only because it paved the way for structural adjustment, but also because of the plain fact of debt service, which constitutes a river of wealth that flows from the periphery of the world system to the core. During the first decade of structural adjustment, the South sent out an average of $125 billion each year in interest payments on external debt. This flow stayed roughly steady through the next two decades, but has shot up to an average of $175 billion annually in recent years. Altogether, since the debt crisis began in 1980, the South has handed over a total of $4.2 trillion in interest payments to foreign creditors, mostly in the North. If we include payments on principal, we see that developing countries made total debt service payments of $238 billion per year during the 1980s, rising dramatically through the 1990s to $440 billion per year in 2000, and then to more than $732 billion per year by 2013. Altogether, during the whole period since 1980, the South has made debt service payments totalling $13 trillion.

This is a problem because these outflows drain away vital resources that might otherwise be spent on eradicating poverty. Lebanon, for instance, spends 52 per cent of its budget on debt service, and only 23 per cent on health and education combined.

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.

which came to serve as a kind of cautionary tale. When he became president of Burkina Faso in the 1980s, Sankara – a thirty-three-year-old known for his warm smile and trendy beret – made the debt issue one of his main concerns. Affectionately known as Africa’s Che, he is remembered for a speech he delivered at Addis Ababa in 1987 at the headquarters of the Organization of African Unity, to a room packed full of heads of state and government ministers from across the continent. The audience was gripped by the words of the young man who stood so bravely before them. He said things they would never dare to say. Some exchanged glances of shocked disbelief, others looked worried, half expecting him to be shot mid-sentence. His passion rippled through the room, and when he finished the audience erupted

Sankara had thrown down a gauntlet at the feet of the president of France, his region’s former colonial power. He challenged the postcolonial order by striking at its very core: debt. ‘Debt must be seen from the standpoint of its origins,’ Sankara said. ‘And the origins of debt lie in colonialism. Our creditors are those who had colonised us before. They managed us then and they manage us now. But we did not ask for this debt,’ he continued. ‘And therefore we will not repay it. Debt is neocolonialism. It is a cleverly managed reconquest of Africa. Each one of us becomes a financial slave. We are told to repay. We are told it is a moral issue. But it is not.’ And then he delivered the clincher: ‘The debt cannot be repaid. If we don’t repay, the lenders will not die. That is for sure. But if we do repay, we will die. That is also for sure.’ Sankara was considered dangerous not only because he threatened to default on Burkina Faso’s debt, but because he was spreading that idea across the continent. He was on the verge of galvanising a continent-wide debt-resistance movement – and from the perspective of Western creditors, it had to be stopped. Three months after his speech, Sankara was assassinated in a coup widely believed to have been backed by France, which brought Blaise Compaoré to power – a dictator who ruled for twenty-seven years.

Consider Greece in 2015: when the left-wing Syriza party came to power they planned to default on the country’s debts, but the threat of losing foreign investment – and the recession that would follow – frightened them into submission.

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.

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.’ ‘Likewise,’ Chang says, ‘industries in developing countries will not survive if they are exposed to international competition too early. They need time to improve their capabilities by mastering advanced technologies and building effective organizations. This is the essence of infant industry protection.’ Infant industry protection – at least for a certain period of time – is the only way that poor countries have a shot at bec...

In other words, because of the selective application of the WTO’s rules, many poor countries are effectively prevented from developing the one sector that free-trade theory says they should develop. Whether they attempt industrial development or agricultural development, they’re blocked both ways. And the WTO’s Agreement on Agriculture (AoA) locks these imbalances into international law.