"Mystery: How Wealth Creates Poverty in the World"

By Michael Parenti (Found at Common Dreams)

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....