Oooh, I really feel I am straying into dangerous territory here. I have no doubt that many (or all) of you may not agree with some (or all) of the content of this blog post. If you don’t agree, please don’t storm off in a state of silent high dudgeon, or yell at me. The reasons that this blog series is called Big Questions is because they are a) Big, and b) Questions. If one viewpoint or another was obviously correct, they would be neither.

So let’s begin – onward, where angels fear to tread (and yes, I’m aware that the first part of that phrase is “fools rush in”!).

Last year I was invited to join the Policy Circle. At first, I really liked the sound of it – women who care about their communities, getting together in a safe space to talk about policy. Great! Sign me up!

But then I received links to further information, including their principles. The very first principle was “The free-enterprise system works: We believe the core idea that free market practices and policies provide greater opportunity and better lives, even for the most vulnerable in every community.”

Erk. I had just finished reading The Divide: A Brief Guide to Global Inequality and its Solutions, which put forward a very different point of view.

The author, Jason Hickel, asserts:

“Development agencies, NGOs and the world’s most powerful governments explain that the plight of poor countries is a technical problem – one that can be solved by adopting the right institutions and the right economic policies, by working hard and accepting a bit of help. If only poor countries would follow the advice of experts from agencies like the World Bank, they would gradually leave poverty behind, closing the divide between the poor and the rich. It is a familiar story, and a comforting one. It is one that we have all, at one time or another, believed and supported. It maintains an industry worth billions of dollars and an army of NGOs, charities and foundations seeking to end poverty through aid and charity. But the story is wrong.”

He goes on to say that, in the year 1500, there was no appreciable difference in incomes and living standards between Europe and the rest of the world. In fact, people in some regions of the global South were a good deal better off than their counterparts in Europe.

But over the centuries, Western powers enforced on the rest of the world a single international economic system, and created an artificial divide between the Global North – rich – and the Global South – poor.

According to Hickel, the division widened in 1949, when Harry Truman’s inauguration speech pandered to the patriotism of post-war America. Hickel paraphrases the point thusly:

Jason Hickel

“The rich countries of Europe and North America were ‘developed’. They were ahead on the Great Arrow of Progress. They were doing better because they were better – they were smarter, more innovative and harder working. They had better values, better institutions and better technology. By contrast, the countries of the global South were poor because they hadn’t yet figured out the right values and policies yet. They were still behind, ‘underdeveloped’ and struggling to catch up. This story was deeply affirming for Americans; it made them feel good about themselves, proud of their achievements and their place in the world. But perhaps more importantly, it gave them a way to feel noble too – it gave them access to a higher, almost cosmological purpose. The developed countries would stand as beacons of hope, as saviours to the poor. They would reach out and give generously of their riches to help the ‘primitive’ countries of the South follow their path to success. They would become heroes, leading the way to a world of unprecedented peace and prosperity.”

The proof is in the pudding of the great neoliberal experiment. Has it alleviated poverty and hunger? Has it made the world a better place?

According to Hickel, no.

(If, at this point, you would like clarification on what is meant by capitalism and neoliberalism, I found these two videos by Investopedia very good – follow the links.)

In 1974, at the first UN Food Summit in Rome, US Secretary of State Henry Kissinger promised that hunger would be eradicated within a decade. At the time there were an estimated 460 million hungry people. 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.

The poverty headcount is exactly the same now as it was when measurements began back in 1981, at about 1 billion. There has been no improvement over thirty-five years. In reality,  the picture is even worse. The standard poverty measure counts the number of people who live on less than a dollar a day. But in many global South countries a dollar a day is not adequate for human existence, let alone dignity. Many scholars are now saying that people need closer to $5 a day in order to have a decent shot at surviving until their fifth birthday, having enough food to eat and reaching normal life expectancy. If we measured global poverty at this more realistic level, we would see a total poverty headcount of about 4.3 billion people. Any reported alleviation in poverty has been mostly attributable to the World Bank fudging the figures. If you take China and East Asia out of the statistics, it is even more starkly clear that poverty has worsened.

It didn’t have to be this way. During the 1950s, 60s and 70s, newly independent countries across the Global South were pursuing their own development agenda, building their economies with protectionist and redistributionist policies – trade tariffs, subsidies and social spending on healthcare and education, i.e. the exact same policies that Western countries had used during their own periods of economic consolidation. And it was working brilliantly – incomes were growing, poverty rates were falling and the divide between rich and poor countries was narrowing.

Where people are, and where GDP is made

In response, the US intervened covertly to overthrow dozens of democratically elected leaders across the South, replacing them with dictators friendly to Western economic interests who were then propped up with aid. (The other day someone asked me why the US is supporting a coup in Venezuela. Truth is, it’s pretty standard US policy.)

But, you might be thinking, what about all the aid the North sends to the South? Surely we’re helping, not hindering. But Hickel calculates that the foreign aid sent by the North to the South pales into utter insignificance compared with capital flight, commercial exploitation, and interest payments flowing from the South to the North. For every dollar of aid that developing countries receive, they lose $24 in net outflows. The countries of the South are perfectly capable of raising themselves out of poverty – they simply need to be allowed to use the same strategies that the North used to build prosperity, without being extorted and distorted by Northern powers.

Likewise, if you’re thinking that a rising tide lifts all boats, so prosperity in the North must lead inevitably to improvements in the South, Hickel quotes David Woodward’s research, showing that the “trickle-down” concept of poverty alleviation simply can’t work. The way that neoliberal capitalism distributes financial growth is too patchy. The poorest 60 per cent of humanity receive only 5 per cent of all new income generated by global growth. The other 95 per cent of the new income goes to the richest 40 per cent of people. To eradicate poverty at $5 a day, global GDP would have to increase to 175 times its present size. To put this into perspective, at current levels of distribution, the average global income would have to be $1.3 million per person per year simply so that the poorest two-thirds of humanity could earn $5 per day. Clearly, it is not possible to generate this kind of economic growth without destroying the planet even faster than we are already. Trickle-down can’t work unless income equality is dramatically improved.

So why the deception? Why bother to pretend that hunger and poverty are falling, when they’re not?

It’s because those who benefit from neoliberal capitalism have to pretend that it is working, and working not just for them, but for everybody. They don’t want to admit to the world – maybe not even to themselves – that their good fortune depends upon, and always will depend upon, the suffering and oppression of countless others.

To loop back to the start of this rather long blog post, I didn’t join the Policy Circle. I could have put it down to geography – it is US-based and I’m in the UK. But I was also reluctant to enter a hotbed of neoliberalism. Maybe I should have seized the opportunity to stir up some debate, but the challenge is that, by the time we reach our twenties, we have mostly made up our minds on this question, and any attempts to change our views will only make us dig our heels in harder.

Does capitalism work? Absolutely, for a minority of people, who are predominantly white, male, university-educated, and of European descent. For the vast majority of the world’s population, capitalism is failing dismally. And if you believe, as I do, that the measure of a society is how it treats its neediest members, then their suffering reflects badly on us all.

So okay, you say – you’ve complained about the existing system. What bright ideas do you have for a better one? Sadly, that’s above my pay grade. But smarter people than I have put forward some strong ideas, which I will share next week.

Some previous blog posts on related subjects:

Rethinking Money

Money Makes The World Go Round

Mother Nature and Father Greed

Of Plutocrats and Pitchforks


P.S. Out of fairness to the Policy Circle, I share here their articulate and reassuring response to my concerns:

“Our first core principle is aligned with how our nation was founded; an independent country that embraces the independence of the individual. The idea behind the free market is that it’s the avenue in which this independence and opportunity took place historically in the U.S. and we believe that protecting and embracing open economic principles (vs supporting a government structure designed to do the same things) is the way to ensure that everyone, including the most vulnerable among us, will continue to prosper.

It’s also worth noting that no discussion on this topic is off the table in The Policy Circle. We do not discuss social issues but we do discuss differences in opinion when it comes to the free market approach. For example, there are externalities (positive and negative) in irregular markets, such as the environment. One could argue that corrective taxes are necessary to curb pollution because there could be a negative impact on individuals and the environment we all enjoy. There are others who will argue that minimum regulation is necessary.

In other words – no discussion is off the table. There is a convening principle that Policy Circle women see the value of the free market versus the regulated market, and conversation and discussion flows from there. It’s certainly not black and white and we welcome those conversations!”

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