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The Wealth of Nations
David Kaplan studies the World Bank's latest
report on world poverty
Bank world
oday more
than one ion people
live in
absolute
poverty
WORLD DEVELOPMENT REPORT 1990. the annual report of the World Bank published in June 1990. is devoted to the question of poverty and its relief. It attempts to give an explanation of why. in the last decade. poverty has decreased in some parts of the developing world. while in others (notably some countries of latin America and most of the countries of Sub-Saharan Africa), it has increased on a massive scale.
The report also attempts to offer a strategy for reducing poverty: by "the productive use of the poors most abundant asset - labour" alongside "widespread provision to the poor of the basic social services, especially primary education, primary health care. and family planning."
Marxists would agree that there is a crying need for a strategy such as this to be carried out in all countries, not just the Third World. But a far more fundamental question that remains unanswered is: does boom in the principal industrial countries of the West lead to an alleviation of poverty in the Third World? By addressing this question, we will better understand the way in which the peoples of the colonial and ex-colonial countries have been exploited, and poverty subsequently increased.
Since 1900, the value of goods and services produced each year worldwide has grown 20-fold and the products of industry 50-fold Over the last 40 years, average income per person has doubled to 53.300, but the fruits of global
economic growth have almost all gone to the advanced capitalist countries. Wealthy nations have almost tripled their per capita income, while the figure in the colonial and ex-colonial countries has remained effectively level.
Today, more than one billion people. roughly one-third of the population of the Third World, are living in absolute poverty: This is the number of people who are struggling to survive on less than $370 a year. Of these. over 600 million have an annual consumption of less than $275.
The World Bank's report predicts that between 1985 and 2000. on the optimistic assumption of continued growth (of 3% a year in the industrial and 5% in the developing countries!). the number of poor will fall from 1.1bn to 825m. This would still leave one-seventh of humanity living a life of acute deprivation.
But "If the global economy performs less favourably than forecast, the level of world poverty will be considerably higher. A slowdown in industrial country growth, persistently high interest rates, rising protectionism, or setbacks in the current debt reduction initiatives could all seriously undermine progress. In that case. by 2000. the number of poor would still be hovering around one billion."
Although industrial countries, and even countries in the developing world, saw growth in their economies in the 1980s, the opportunity to improve the standard of living of millions of workers
was missed: "For the poor in these countries, the 1980s was a lost decade." The report lays blame for this 'missed opportunity' on the various national governments: because of ignorance — "a lack ot understanding of international moner markets" - these governments carried out austerity measures to maintain interest payments on their debts. In other words, millions are starving because national governments apParently do not understand how to work the system'. Full blame for international poverty in fact lies at the feet of international capital. The industrialised countries are holding the Third World to ransom.
Most developing countries remain heavily dependent on exports of raw materials and cash crops. For instance, commodities account for between 85% and 95% of Africa's total export earnings. As their debts to industrial countries piled up. earnings from commodities collapsed. Between 1980 and 1987, the prices of 33 such commodities fell by 10% on average. many to their lowest levels since World War II.
The rise in the production of synthetic materials (taking the place of cotton and rubber) and protectionism in America. Europe, Japan and Canada kept prices down, as did the economic recession and slow growth of 1979-82. Developing countries saw a worsening of their terms of trade the purchasing power of their exports compared to the cost of imports. especially manufactured goods. In an ettort to make up for falling prices, countries tried to boost export volumes. But this only tended to push prices down further.
Both the World Bank and the International Monetary Fund, the international guardians' of capital. promoted 'structural adjustment' as a method of alleviating the economic crises facing the countries of the developing world. Debt repayments were to be maintained, as well as accelerating growth of their economies, at the expense of better living standards and conditions of workers. But, as U'NICEF reported in 1989. 'structural adjustment' will continue to be little better than "a rearranging of the furniture inside the debtors' prison".
In the colonial countries, debt er
and ex-colonial intinues to be a
Economic Notes
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major obstacle to the alleviation
of poverty: There are +5 severely
indebted countries (indebted to
the tune of S620bn). Many donors
have converted part of the official
debt owed by these countries into
grants. But this has resulted in
little or no change in the living
standards of workers: it is estim-
ated that only S3bn of official debt
has been cancelled in this way.
About S2bn represented claims
on low-income Sub-Saharan Afric-
an countries, just 3% of their total
outstanding debts.
The ratio of debt to GNP for the
low-income countries was 111%
in 1988. Interest payments alone
on the external debt of the 24
low-income countries of Sub-Sah-
aran Africa totalled about S2.9bn.
Such high levels of interest pay-
ments severely limit the contrib-
utions that aid can make to increasing consumption and reducing poverty.
The promises of creditors have amounted to mere words: an acknowledgement of the deprivation faced by the people of these countries but continued resource. stripping to maintain profits in the principal industrial countries. Aid is donated partly as a sop to the recipients and partly to keep up the pretence of 'fighting poverty wherever it raises its ugly head.
Above all, aid is donated to maintain the reliance of the colonial and ex-colonial countries on the industrialised countries. Aid receiptscan beashigh as ninetimes the amount a countryreceivesfrom exports to donor countries.
A substantial proportion of aid is tied: recipients are required to buy goods and services from donor countries. This forces recipient countries, especially those which export primary goods such as food and raw materials, into dependence on aid and machinery from the industrialised countries. In this way, they are able to dictate the terms of trade and thus keep the Third World bound hand and foot.
Many severely indebted developing countries have been running substantial trade surpluses. Between 1980 and 1981 the 19 severely indebted middle-income countries had an average trade deficit of S4bn; during 1982-89 they achieved an average trade surplus of S26bn, equivalent to 3.3% of GDP. Again, this surplus was squandered in the mainten-
ance of debt services. Resources
which could have been used to
alleviate poverty locally were
transferred to the industrialised
countries. In fact, throughout the
last decade, there was every year
an average net transfer out of the
underdeveloped world to the
OECI nations of over $50bn in
interest, profit and loan repay-
ments. The total loss of value
reached S243bn in 1989.
There are great disparities in the
per capita allocation of aid and the
most generous per capita allocations do not necessarily go to the
poorest countries. In 1988, about
41% of aid was directed to middle and high-income countries, those who in 1988 had a GNP per
capita of between $545 and
$6,000 and those with a GNP per capita of more than $6,000.
Many 'aid' programmes in donor countries cover an assortment of activities (including commercial and strategic initiatives) which often have, at best, a tenuous connection with development. Only about 8% of the US aid programme in 1986, for example, could be identified as "development assistance devoted to lowincome countries". A substantial proportion of aid is provided, at least partly, for purposes other than to promote development. In 1988, per capita aid receipts in Israel was $282.07; in India, it was $2.58.
At 551bn, the total volume of aid in 1988 might seem large in absolute terms (in 1989, food aid to developing countries amounted to just $2.5bn). But it is small when viewed in a wider perspective - the development assistance provided by industrial country donors in recent years has only been about 5% of their military expenditures. These donors spent $31.6bn on aid and $666bn for military purposes in 1986.
Arms expenditure remains one of the key questions facing the Third World. On average, defence accounts for one-fifth of government spending. A transfer of resources from arms expenditure to aid would have an immediate effect on the living conditions and standards of workers in the Third World.
Leaving aside for a moment the possibility of a recession and of war in the Gulf, if the patterns of regional income growth seen in the 1980s were to be repeated in
the 1990s, the results would be disastrous for most of Sub-Saharan Africa as well as for parts of Latin America and South Asia. Sub-Saharan Atrica, which today has a population of about 450 million, would have an additional 165 million people, and per capita incomes would be 20% lower than today's near-subsistence levels. The countries of Latin America would have an additional 85 million people and average incomes 6% lower than today's.
Trotsky's theory of the permanent revolution holds true: no Third World economy can develop independently of international capital. The countries of Sub-Saharan Africa and Latin America will remain dependent on the export of cash crops and raw materials as long as there is a market for them. The 'benevolence' of the industrialised West is a smokescreen to blur the real reasons behind the existence of poverty.
This is the state of the world in 1990. World governments and institutions can offer no panacea to alleviate the deprivation suffered by millions of people across the globe. Under the best scenario that capitalism can offer - an average growth rate of 3% - 700 million will still be living a life of misery at the turn of the next century. Under conditions of recession, this figure will be massively increased.
Arms expenditi dwarfs a spending
MIR •41
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