The Divide: Global Inequality from Conquest to Free Markets

by Jason Hickel

Today, some 4.3 billion people – more than 60 per cent of the world’s population – live in debilitating poverty, struggling to survive on less than the equivalent of $5 per day. Half do not have access to enough food. And these numbers have been growing steadily over the past few decades. Meanwhile, the wealth of the very richest is piling up to levels unprecedented in human history. As I write this, it has just been announced that the eight richest men in the world have as much wealth between them as the poorest half of the world’s population combined.

In 1974, at the first UN Food Summit in Rome, US Secretary of State Henry Kissinger famously promised that hunger would be eradicated within a decade. At the time there were an estimated 460 million hungry people in the world. But instead of disappearing, hunger got steadily worse. Today there are about 800 million hungry people, even according to the most conservative measures. More realistic estimates put the figure at around 2 billion – nearly a third of all humanity. It is hard to imagine a greater symbol of failure than rising hunger, especially given that we already produce more than enough food each year to feed all 7 billion of the world’s people, with plenty left over for another 3 billion.

In 1960, at the end of colonialism, per capita income in the richest country was thirty-two times higher than in the poorest country. That’s a big gap. The development industry told us that the gap would narrow, but it didn’t. On the contrary, over the next four decades the gap more than quadrupled: by 2000, the ratio was 134 to 1.

As structural adjustment forced open markets around the world, a new system emerged in the mid-1990s to govern the international economy. Under this new system – run by the World Trade Organization – power would be determined by market size, so the rich countries of the North would be able to enshrine policies to suit their own interests even if it meant actively harming the interests of the South. For instance, global South countries would have to abolish their agricultural subsidies, but the United States and the European Union would be allowed to continue paying subsidies to their own farmers, enabling them to undercut the market share of global South producers in the one sector in which they are supposed to have a natural competitive advantage. 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.

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. In other words, developing countries ‘sent’ $3 trillion more to the rest of the world than they received. If we look at all years since 1980, these net outflows add up to an eye-popping total of $26.5 trillion – that’s how much money has been drained out of the global South over the past few decades. To get a sense of the scale of this, $26.5 trillion is roughly the GDP of the United States and Western Europe combined.

Frantz Fanon, the famous philosopher from Martinique and leading thinker of Algeria’s anti-colonial struggle, put it best: Colonialism and imperialism have not settled their debt to us once they have withdrawn from our territories. The wealth of the imperialist nations is also our wealth. Europe is literally the creation of the Third World. The riches which are choking it are those plundered from the underdeveloped peoples. So we will not accept aid for the underdeveloped countries as ‘charity’. Such aid must be considered the final stage of a dual consciousness – the consciousness of the colonised that it is their due, and the consciousness of the capitalist powers that effectively they must pay up.

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.

alive. One European witness, Bartolomé de Las Casas, reported startling statistics of the slow-motion genocide unfolding in the Caribbean region: ‘From 1494 to 1508,’ he wrote, ‘over three million people had perished from war, slavery, and the mines. Who in future generations will believe this? I myself writing it as a knowledgeable eyewitness can hardly believe it .

By the end of the slave trade in 1853, somewhere between 12 million and 15 million Africans had been shipped across the Atlantic. Between 1.2 million and 2.4 million died en route, in the darkness below the decks of the slave ships, their bodies cast into the sea. It is almost impossible to imagine the scale of the human devastation that these numbers represent.

It is important to grasp the difference between this emerging capitalist system and the various systems that preceded it. Previously, monarchs, conquistadors and feudal landlords directly appropriated wealth from others either by stealing it from them or by forcing them to pay tribute. In other words, they relied on some kind of direct coercive force. But under the new system such direct coercion was no longer necessary. The elite simply relied on the fact that the competitive pressures of the labour market (and the market in leases) would increase workers’ productivity at a much higher rate than the one at which their wages increased. This was the basic mechanism of profit, and it served as an automatic conveyor belt for redistributing wealth upwards.

During the colonial period in India, there was no increase in per capita income from the time the East India Company took power in 1757 to the time of national independence in 1947. In fact, during the last half of the 19th century – the heyday of British intervention – income in India declined by more than 50 per cent. And it was not just incomes that collapsed. From 1872 to 1921, the average life expectancy of Indians fell by 20 per cent. In other words, the subcontinent was effectively de-developed. While India and China watched their share of global GDP diminish, Europeans increased their own share from 20 to 60 per cent during the colonial period. Europe didn’t develop the colonies. The colonies developed Europe.

In most undergraduate economics courses, students are taught that the differences between the economies of poor and rich countries can be explained by the laws of comparative advantage and supply and demand. The standard theory holds that prices and wages are set automatically by the market depending on each country’s factors of production. Poor countries have a natural abundance of labour, so their wages are low and therefore their comparative advantage lies in labour-intensive production (first mining and agriculture and later also light manufacturing). Rich countries have a natural abundance of capital, so their wages will be higher and they will specialise in capital-intensive production of higher-order commodities. In orthodox economic theory, this is regarded as the natural order of things. But as soon as we bring history back into the picture, this theory starts to fall apart. Why do poor countries have a comparative abundance of labour in the first place? Because of hundreds of years of colonial rule, under which subsistence economies were destroyed and millions of people were displaced and forced into the labour market, driving unemployment up and wages down. The fact that slavery was used up through the 19th century further contributed to downward pressure on wages, as workers had to compete with free labour. And why do poor countries have a comparative deficit of capital in the first place? Partly because they were plundered of precious metals, and partly becaus...

Keynesian policies created the conditions for high rates of economic growth through the 1950s and 1960s – growth that was relatively equitably shared across classes. It was a success story like none other. Of course, the system wasn’t perfect: there were many who were left out. Middle-class women, for example, remained largely confined to the home and dependent on male wages and salaries. Black people were denied fair labour contracts and access to decent schooling and housing – particularly in the United States, where the Civil Rights Movement had not yet won basic legal equality for African Americans. Gay people were routinely persecuted and marginalised. In short, the Keynesian compromise in the West worked mostly for people who conformed to a particular norm – white, male and straight. It depended to some extent on cheap labour from women and minorities, and of course was financed in large part by surplus wealth siphoned from the rest of the world through the old colonial pipelines.

When President Dwight Eisenhower took office in the United States in 1953, he took a decisive stand against developmentalism, which he regarded as a threat to the commercial interests of America’s multinational companies. He hired two people into his administration who shared his views: John Foster Dulles, who became the US secretary of state, and his brother, Allen Dulles, who became head of the CIA.

The invasion of Guatemala marked the end of Franklin Roosevelt’s Good Neighbor policy of non-intervention in Latin America, after only twenty years of peace. In doing so, Eisenhower effectively restored the Monroe Doctrine and revived America’s habit of violently projecting power across the region. Brazil, too, was hit with a coup supported by the United States.

In 1965, with the aid of weapons and intelligence from the United States, Suharto hunted down and killed between 500,000 and 1 million of Sukarno’s supporters in one of the worst mass murders of the 20th century. By 1967, Sukarno’s base had been either eliminated or intimidated into submission, and Suharto took control of the country. His military regime – which ruled until 1998 – was open to Western corporate interests. Time magazine famously described the political transformation of the 1960s as ‘The West’s best news for years in Asia’. Suharto’s regime relied for its economic policies on a group of Indonesian economists who had been trained at the University of California, Berkeley, with funding from the Ford Foundation. Known as the Berkeley Mafia, they worked closely with Suharto to liberalise the economy and eliminate the last vestiges of developmentalism in the country.

And then there was South Africa. Both the United States and Britain actively supported the apartheid regime all the way through the 1980s, for they feared that if Nelson Mandela and the African National Congress ever came to power they would nationalise the country’s enormous deposits of gold, diamonds and platinum, which American and British companies controlled.

the US government launched Project Chile in 1956. The goal was to resist developmentalism by training Chilean economics students – around 100 of them – in the principles of neoliberal theory at the University of Chicago. A decade later, the programme was expanded to include students from across the continent, and eventually led to the formation of the Center for Latin American Economic Studies at Chicago. It was ideological warfare. The idea was to train students to scorn social safety nets, trade barriers, infant industry protection, price controls, public services and many of the other policies being promoted by progressive Latin American economists at the time. Juan Gabriel Valdés, a Chilean minister during the 1990s, has described this operation as ‘a striking example of an organized transfer of ideology from the United States to a country within its direct sphere of influence’. Interestingly, this project was conceived under the Point Four programme inaugurated by Truman, and was conducted by the US International Cooperation Administration (which would later become USAID), with funding from the Ford Foundation. In other words, it was one of America’s first official ‘international development’ programmes. But despite the millions of dollars that donors like USAID and the Ford Foundation pumped into this project, it was failing miserably. Developmentalism continued to gain pace in Latin America, and many voters wanted yet more nationalisation, land reforms and cooperati...

President Richard Nixon famously ordered the CIA director, Richard Helms, to ‘make the economy scream’. The US blocked government loans to Chile and encouraged private banks to do the same. They placed a moratorium on Chilean copper imports for six months, thus depleting Chile’s foreign currency reserves. And the CIA used El Mercurio, a newspaper owned by US multinational ITT, to disseminate anti-Allende propaganda. But all these efforts came to naught: by 1973, Allende was still in power. In fact, his party had gained support during those three years. The US felt it had no choice but to shift to a more aggressive stance, and resorted to the tactic they had used in Guatemala and Indonesia – the good old-fashioned coup. It was executed on 11 September 1973, by General Augusto Pinochet with CIA support under the code name Operation Fubelt.

the country as political refugees. The coup in Chile was similar in style to earlier US-backed coups, but it had a crucial new element. Instead of simply installing a new leader who would be friendly to US corporate interests, the US sought to totally remake economic policy in line with free-market principles – which was possible only because all opposition had been destroyed. According to a 1975 US Senate Committee investigation: ‘CIA collaborators were involved in preparing an initial overall economic plan which has served as the basis for the Junta’s most important economic decisions.’ The CIA funded a group of Chilean economists – graduates of the University of Chicago known as the Chicago Boys – to advise Pinochet’s regime, with the goal of instating the prescriptions laid down by Milton Friedman in Capitalism and Freedom. Indeed, Friedman himself was a key adviser to the Pinochet regime.

In the US, the portion going to the top 1 per cent more than doubled from 8 per cent in 1980 to 18 per cent today. Britain witnessed a similar jump during this period, with the share claimed by the richest growing from 6.5 per cent to 13 per cent. According to US Census data, the top 5 per cent of American households have seen their incomes increase by 72.7 per cent since 1980, while median household incomes have stagnated and the bottom quintile have seen their incomes fall by 7.4 per cent. In other words, the neoliberal counter-revolution restored levels of inequality that had not been seen since before the Great Depression.

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.

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.

This is how the plan was supposed to work: the IMF would help developing 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. The second mechanism was slightly less direct. Countries that were subject to structural adjustment programmes were forced to radically deregulate their economies. They h...

Only two decades after global South countries gained their independence from colonialism, structural adjustment brought about the end of meaningful national economic sovereignty. Economic independence, once the dream of popular movements across the global South, quickly became an illusion.

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.

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. 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 and labour are the product of historical and political processes – they are man-made, not natural.

66 per cent of the land that was grabbed between 2000 and 2010 was in Africa, accounting for up to 4 per cent of the continent’s total land mass.

The same instinct that leads us to want to put an end to suffering in the most immediate way possible is also what leads us to gravitate towards the most obvious explanation for the misfortunes of others. When we pass a homeless person on the street it is easiest to assume that they are responsible for their own misfortune – they didn’t study hard enough in school, they didn’t try hard enough at work, they’re too lazy and weak-minded to make it. It takes another level of analysis to think about upstream causes: they lost their home because of reckless speculation on the housing market by big banks; their pension disintegrated in the financial crisis; they were victims of unfair dismissal in the absence of decent labour laws; or their employer moved overseas to take advantage of cheaper labour elsewhere. The same is true of poverty on a global scale. It might be easiest to blame poor countries for their own misfortunes, but if we give it enough thought it becomes clear that there is much more to the story.

The pressure to increase GDP translates into pressure for more debt, more structural adjustment, more ‘free trade’ and so on, as the system groans and writhes in a desperate search for frontiers of accumulation, more things to be monetised. It is like an iron law. It is necessary for the very continuation of our economy’s existence – at least as the economy is presently organised.