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There is a “mystery” we must explain: How is it that as corporate investments and foreign aid and international loans to poor countries have increased dramatically throughout the world over the last half century, so has poverty? The number of people living in poverty is growing at a faster rate than the world’s population. What do we make of this?

There is a “mystery” we must explain: How is it that as corporate investments

and foreign aid and international loans to poor countries have increased

dramatically throughout the world over the last half century, so has poverty?

The number of people living in poverty is growing at a faster rate than the

world’s population. What do we make of this?

Over the last half century, U.S. industries and banks (and other western

corporations) have invested heavily in those poorer regions of Asia, Africa, and

Latin America known as the “Third World.” The transnationals are attracted by

the rich natural resources, the high return that comes from low-paid labor, and

the nearly complete absence of taxes, environmental regulations, worker

benefits, and occupational safety costs.

The U.S. government has subsidized this flight of capital by granting

corporations tax concessions on their overseas investments, and even paying some

of their relocation expenses—much to the outrage of labor unions here at home

who see their jobs evaporating.

The transnationals push out local businesses in the Third World and preempt

their markets. American agribusiness cartels, heavily subsidized by U.S.

taxpayers, dump surplus products in other countries at below cost and undersell

local farmers. As Christopher Cook describes it in his Diet for a Dead Planet,

they expropriate the best land in these countries for cash-crop exports, usually

monoculture crops requiring large amounts of pesticides, leaving less and less

acreage for the hundreds of varieties of organically grown foods that feed the

local populations.

By displacing local populations from their lands and robbing them of their

self-sufficiency, corporations create overcrowded labor markets of desperate

people who are forced into shanty towns to toil for poverty wages (when they can

get work), often in violation of the countries’ own minimum wage laws.

In Haiti, for instance, workers are paid 11 cents an hour by corporate giants

such as Disney, Wal-Mart, and J.C. Penny. The United States is one of the few

countries that has refused to sign an international convention for the abolition

of child labor and forced labor. This position stems from the child labor

practices of U.S. corporations throughout the Third World and within the United

States itself, where children as young as 12 suffer high rates of injuries and

fatalities, and are often paid less than the minimum wage.

The savings that big business reaps from cheap labor abroad are not passed on in

lower prices to their customers elsewhere. Corporations do not outsource to

far-off regions so that U.S. consumers can save money. They outsource in order

to increase their margin of profit. In 1990, shoes made by Indonesian children

working twelve-hour days for 13 cents an hour, cost only $2.60 but still sold

for $100 or more in the United States.

U.S. foreign aid usually works hand in hand with transnational investment. It

subsidizes construction of the infrastructure needed by corporations in the

Third World: ports, highways, and refineries.

The aid given to Third World governments comes with strings attached. It often

must be spent on U.S. products, and the recipient nation is required to give

investment preferences to U.S. companies, shifting consumption away from home

produced commodities and foods in favor of imported ones, creating more

dependency, hunger, and debt.

A good chunk of the aid money never sees the light of day, going directly into

the personal coffers of sticky-fingered officials in the recipient countries.

Aid (of a sort) also comes from other sources. In 1944, the United Nations

created the World Bank and the International Monetary Fund (IMF). Voting power

in both organizations is determined by a country’s financial contribution. As

the largest “donor,” the United States has a dominant voice, followed by

Germany, Japan, France, and Great Britain. The IMF operates in secrecy with a

select group of bankers and finance ministry staffs drawn mostly from the rich

nations.

The World Bank and IMF are supposed to assist nations in their development. What

actually happens is another story. A poor country borrows from the World Bank to

build up some aspect of its economy. Should it be unable to pay back the heavy

interest because of declining export sales or some other reason, it must borrow

again, this time from the IMF.

But the IMF imposes a “structural adjustment program” (SAP), requiring debtor

countries to grant tax breaks to the transnational corporations, reduce wages,

and make no attempt to protect local enterprises from foreign imports and

foreign takeovers. The debtor nations are pressured to privatize their

economies, selling at scandalously low prices their state-owned mines,

railroads, and utilities to private corporations.

They are forced to open their forests to clear-cutting and their lands to strip

mining, without regard to the ecological damage done. The debtor nations also

must cut back on subsidies for health, education, transportation and food,

spending less on their people in order to have more money to meet debt payments.

Required to grow cash crops for export earnings, they become even less able to

feed their own populations.

So it is that throughout the Third World, real wages have declined, and national

debts have soared to the point where debt payments absorb almost all of the

poorer countries’ export earnings—which creates further impoverishment as it

leaves the debtor country even less able to provide the things its population

needs.

Here then we have explained a “mystery.” It is, of course, no mystery at all if

you don’t adhere to trickle-down mystification. Why has poverty deepened while

foreign aid and loans and investments have grown? Answer: Loans, investments,

and most forms of aid are designed not to fight poverty but to augment the

wealth of transnational investors at the expense of local populations.

There is no trickle down, only a siphoning up from the toiling many to the

moneyed few.

In their perpetual confusion, some liberal critics conclude that foreign aid and

IMF and World Bank structural adjustments “do not work”; the end result is less

self-sufficiency and more poverty for the recipient nations, they point out. Why

then do the rich member states continue to fund the IMF and World Bank? Are

their leaders just less intelligent than the critics who keep pointing out to

them that their policies are having the opposite effect?

No, it is the critics who are stupid not the western leaders and investors who

own so much of the world and enjoy such immense wealth and success. They pursue

their aid and foreign loan programs because such programs do work. The question

is, work for whom? Cui bono?

The purpose behind their investments, loans, and aid programs is not to uplift

the masses in other countries. That is certainly not the business they are in.

The purpose is to serve the interests of global capital accumulation, to take

over the lands and local economies of Third World peoples, monopolize their

markets, depress their wages, indenture their labor with enormous debts,

privatize their public service sector, and prevent these nations from emerging

as trade competitors by not allowing them a normal development.

In these respects, investments, foreign loans, and structural adjustments work

very well indeed.

The real mystery is: why do some people find such an analysis to be so

improbable, a “conspiratorial” imagining? Why are they skeptical that U.S.

rulers knowingly and deliberately pursue such ruthless policies (suppress wages,

rollback environmental protections, eliminate the public sector, cut human

services) in the Third World? These rulers are pursuing much the same policies

right here in our own country!

Isn’t it time that liberal critics stop thinking that the people who own so much

of the world—and want to own it all—are “incompetent” or “misguided” or

“failing to see the unintended consequences of their policies”? You are not

being very smart when you think your enemies are not as smart as you. They know

where their interests lie, and so should we.

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