Inequality

inequality is not just bad for social justice, it is also bad for economic efficiency

— Growth with equity is good for the poor, Oxfam, June 2000

The Overseas Development Institute (ODI) describes poverty reduction as a twin function of

• the rate of growth, and
• changes in income distribution.

The ODI also adds that as well as increased growth, additional key factors to reducing poverty will be:

• the reduction in inequality
• the reduction in income differences

A few places around the world do see increasing rates of growth in a positive sense. But globally, there is also a negative change in income distribution. The reality unfortunately is that the gap between the rich and poor is widening. For example:

• about 0.13% of the world’s population controlled 25% of the world’s assets in 2004.
• 20% of the world's population consume 86% of the world’s goods while 80% of humanity gets just the remainder 14%.

(See poverty facts and stats on this site for more examples.)

The Wealthy and the Poor

There is a pattern of inequality caused by the powerful subjugating the poor and keeping them dependent. Outside influence is often a large factor and access to trade and resources is the usual cause. It is often asked why the people of these countries do not stand up for themselves. In most cases when they do, they face incredible and often violent oppression from their ruling elites and from outsiders who see their national interests threatened.

Consider the following from the United Nations:

Everyone has the right to work, to just and favourable conditions of work and to protection for himself and his family [and] an existence worthy of human dignity ... Everyone has the right to a standard of living adequate for the health and well being of himself and his family, including food, clothing, housing and medical care.

— Universal Declaration of Human Rights, 1948

And contrast that with the following around the same time, from a key superpower that helped create the United Nations. It is from George Kennan, head of the US State Department planning staff until 1950, and his comments on US relations with Far East:

we have about 50% of the world's wealth, but only 6.3% of its population....In this situation, we cannot fail to be the object of envy and resentment. Our real task in the coming period is to devise a pattern of relationships which will permit us to maintain this position of disparity....To do so, we will have to dispense with all sentimentality and day-dreaming; and our attention will have to be concentrated everywhere on our immediate national objectives....We should cease to talk about vague and...unreal objectives such as human rights, the raising of the living standards, and democratization. The day is not far off when we are going to have to deal in straight power concepts. The less we are then hampered by idealistic slogans, the better.

... We should recognize that our influence in the Far Eastern area in the coming period is going to be primarily military and economic. We should make a careful study to see what parts of the Pacific and Far Eastern world are absolutely vital to our security, and we should concentrate our policy on seeing to it that those areas remain in hands which we can control or rely on.

— George Kennan, U.S. State Department Policy Planning, Study #23, February 24, 1948. (See also Foreign Relations of the United States 1948, Vol. 1, No. 2, 1976 for the full text where this was first published; The text to the part on realisim of US relations in the Far East; David McGowan, Derailing Democracy, (Common Courage Press, 2000), p.169; Noam Chomsky, What Uncle Sam Really Wants, (Odian Press, 1993), Chapter 2.

While it is recognized that strong institutions, a functioning and non-corrupt democracy, an impartial media, equitable distribution of land and a well structured judicial system (and other such factors), etc. all help in realizing a successful nation and society, a lack of any of these things can lead to a marginalization of a sector of people. Often, it can be a very large sector.

For example, those likely to lose out in such an equalizing effect are the rich, elite power holders.

As a result of their ability to own and/or influence one of these above-mentioned things, they affect the lives of millions. This is a pattern seen throughout history. Take for example the medieval days of Europe where the wealthy of the time controlled land via a feudal ruling system and hence impoverished the common people intentionally.

• The rulers (Kings etc), would proclaim their “Divine Right” to rule over their subjects.
• They had an army of Lords and Bishops to advise on policies that benefited these groups (religion was used — and still is — to control and influence people, while Lords and Knights were an extension to the ruling family that would carry out the wishes.)
• They would heavily tax the people of their land.
• Not allowing the peasants to own the land upon which they lived meant that they would be stuck in poverty and dependency.
• When the elite could no longer tax the poor, they started to tax the wealthy nobility.
  • It was only at that point did the revolutions such as the French Revolution take hold (because now the nobility had their wealth affected and were able to influence the peasants to fight for their cause.)
  • While this helped bring more rights, once the “people” won, there were concessions made that allowed the elite to retain their power, but to share it a bit more.

In the same way, today, certain rich multinational corporations influence the media, politicians and various institutions to foster an environment that benefits these few people. Dressed in rhetoric about how this is good for “everyone” it becomes difficult to break from this pattern.

Today's “corporate globalization”, is another example (in a more international context) where the wealthier are able to determine the rules, shape the international institutions and influence the communication mechanisms that disseminate information to people.

Geopolitically, the elite in the United States of America then, follows the same pattern seen throughout history. As the world tried to break free from their imperial rulers (i.e as seen by the wealthy nations fighting over themselves in World War I and II and the subsequent fights for freedom in the colonial nations), the United States emerged as the intact wealthy nation to continue the same process.

Trading superiority was maintained by raiding and plundering areas deemed as a threat. Summarizing from the works of the Institute for Economic Democracy:

• The old European city states, which were centers of wealth, would control their countryside as the source of their resources and production, and hence, the source of their wealth. If the countryside became more efficient and produced better, or threatened to trade with other neighboring cities, this would be seen as a threat to the wealth, power and influence of the city. These peripheries would therefore be raided and their means of production would be destroyed.
• The cities would fight over each other for similar reasons.
• For continual support, those rulers would proclaim various reasons to their people, of maintaining security and so on (not unlike what we hear today about national security). Even some laws were established that basically allow these practices.
• A strong military was therefore necessary (just as it is today) to ensure those trade advantages were unfairly maintained.
• Those European city states evolved into nation states and imperial powers, and the countryside expanded to include today's “third world”, which was much of the rest of the world. The discovery of the Americas, expansion of trade routes etc brought much wealth to these “centers of empire” which helped fuel the industrial revolution, which required even more resources and wealth to be appropriated, to continue this growth. Mass “luxury” consumption in Europe expanded as well as a result of the increased production from the industrial revolution. But this had a further negative impact on the colonized nations, the “country side”, or the resource-providers. (See the behind consumption and consumerism section on this site, for more about how this impacted much of the world in different ways as mass consumerism also resulted from the industrial revolution.)
• As with the previous wars throughout Europe's rise, World War I and II were also battles amongst the various European empires who struggled over each other to control more of the world's resources and who would “decide the rules of unequal trade”.

  Except for religious conflicts and the petty wars of feudal lords, wars are primarily fought over resources and trade. President Woodrow Wilson recognized that this was the cause of World War I: “Is there any man, is there any woman, let me say any child here that does not know that the seed of war in the modern world is industrial and commercial rivalry?”

  — J.W. Smith, Economic Democracy: The Political Struggle for the Twenty-First Century, (M.E. Sharpe, 2000, 1st Edition), p.58

  Plundering the “countryside” to maintain dominance and control of the wealth-producing process has been an age-old process.

These mercantilist processes continue today. Those plunderous policies by raid have continued, but in a more complex form today, as well. That is “plunder by trade” as well:

The powerful and cunning had learned to plunder by trade centuries ago and societies ever since have been caught in the trap of those unequal trades. Once unequal trades were in place, restructuring to equal trade would mean the severing of arteries of commerce which provide the higher standard of living for the dominant society and collapse of those living standards would almost certainly trigger open revolt. The world is trapped in that pattern of unequal trades yet today.

— J. W. Smith, Economic Democracy: The Political Struggle for the Twenty-First Century, (1st Books, 2002, 2nd Edition), Chapter 2

While Europe is now more cooperative, (in comparison to the horrors of World War II) and the U.S. has taken the lead, for the rest of the world, international trade arrangements and various economic policies still lead to the same result. Prosperity for a few has increased, as has poverty for the majority.

The geopolitical events of the post World War II era have been crucial for their impacts on poverty and most other issues. J.W. Smith summarizes this:

Virtually the entire colonial world was breaking free, its resources would be turned to the care of its own people, and those resources could no longer be siphoned to the old imperial-centers-of-capital for a fraction of their value.

... If India and the rest of the world's former colonies continued to take the rhetoric of democracy seriously and form the nonaligned bloc as they were planning, over 80 percent of the world's population would be independent or on the other side of the ideological battle. And, if Japan, Germany, Italy, and France could not be held (it was far from sure they could be), that would leave only the United States, Britain, Canada, and Australia, about 10 percent of the world's population, still under the old belief system, and even there the ideological hold would be tenuous at best. After all, if there were no countryside under the firm control of an imperial center, the entire neo-liberal/neo-mercantilist belief system will have disappeared.

What Western nations were observing, of course, was the same potential loss of the resources and markets of their “countryside” as the cities of Europe had experienced centuries earlier. “National security” and “security interests,” which citizens were coached (propagandized) to believe meant fear of a military attack, really meant maintaining access to the weak, impoverished world's valuable resources. The “domestic prosperity” worried about was only their own and the “constantly expanding trade” were unequal trades maintaining the prosperity of the developed world and the impoverishment of the undeveloped world as the imperial-centers-of-capital siphoned the natural wealth of their “countryside” to themselves.

... Those crucial natural resources are in the Third World and developed world capital could never compete if those people had their own industrial capital and processed their own resources into consumer products. With their own industrial capital, and assuming political and economic freedom as opposed to world neo-liberal/neo-mercantilist law dictated by military power, they could demand full value for their natural resources while simultaneously underselling the current developed world on manufactured product markets. The managers-of-state had to avert that crisis. The world's break for freedom must be contained.

— J.W. Smith, The World Breaking Free Frightened the Security Councils of Every Western Nation, Economic Democracy; The Political Struggle for the 21st Century (1st Books, Second Edition, 2002), Chapter 7

In this backdrop, how do developing nations contend with poverty?

• Often, if governments try to improve situations for their people, they may face pressure or even military intervention by the powerful nations. (Ironic then, that the foremost backers of free trade point out that it will help reduce conflicts. It probably would, if there was truly free but fair and possibly managed to avoid problems related to power and undue influence. Today's international trade is influenced by the wealthy.)
• The powerful nations of course claim this is to save the other country, but it is usually to do with protecting “their” national interests; namely a constant supply of cheap resources or some other reason related ultimately to maintaining influence and power.
• Dictators and other corrupt rulers have often been placed/supported in power by the wealthier nations to help fulfill those “national interests” in a similar way the old rulers of Europe used the Lords and Knights to control the peripheries and direct resources to the centers of capital. (Although, now, increasingly, “democracies” are supported, but ones where the economic choices are so limited, that the “democracy” provides a similar environment that a dictatorship did, for foreign investors, but without the overt violence and oppression.)
• This means that it is hard to break out from poverty, or to reduce dependency from the US/IMF/World Bank etc. Structural Adjustment, as described in a previous section on this web site, is an example of that dependency.

Hence, many back the economic neoliberal policies without realizing the background to it. It is another example that while international trade and globalization is what probably most would like to see, the reality of it is that it is not matching the rhetoric that is broadcast.

J.W. Smith has researched this in depth and the following offers a relevant summary:

The Third World remains poor because the powerful strive to dominate every choke-point of commerce. One key choke-point is political control through the “co-respective” support of local elites. Where loyalty is lacking, money will be spent to purchase it. If a government cannot be bought or otherwise controlled, corrupt groups will be financed and armed to overthrow that government and, in extreme cases, another country will be financed to attack and defeat it. ... The pattern has been well established repeatedly throughout history and throughout the world, as noted by the well-known philosopher Bertrand Russell,

An enormous proportion of the income of nations and individuals, nowadays, is blood money: payment exacted by the threat of death. Therefore the most prudent nation is the nation which is in the best position to levy blackmail....Modern nations are highwaymen, saying to each other “your money or your life,” and generally taking both.

— J.W. Smith, The World's Wasted Wealth 2, (Institute for Economic Democracy, 1994), p. 134.

(To find out more about the political dimensions of the economy of the world and to see the detailed links between history (how it is both told and repeated), politics that are always at play and the effects on the economy the world over, visit the Institute for Economic Democracy web site. It provides much more in-depth research into these backgrounds and in far more detail than what I have summarized above.)

With this in mind, why would so many people not oppose such things? There are many reasons, including:

• Most people don't know — this is not an accident. It is in the interest of power-holders to ensure as little is questioned by outsiders as possible. Whether it be via an aristocracy or by simple distortion of information, educational systems, or whatever, different nations have had various means to handle this.

  The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow very lively debate within that spectrum - even encourage the more critical and dissident views. That gives people the sense that there's free thinking going on, while all the time the presuppositions of the system are being reinforced by the limits put on the range of the debate.

  — Noam Chomsky, The Common Good, Odonian Press, 1998

• Those that have opposed such things in the past may have been persecuted in some way. In some societies those who try to say something may just face ridicule due to the embedded belief systems which are being questioned, while in other societies, people may even face violent oppositions.
• Some dare not entertain the thought that the work they may be doing could be at the expense and exploitation of someone else. The following summarizes this aspect quite well:

  [W]e should be familiar with the sincerity with which people will protect the economic territory that provides them their livelihood and wealth. Besides the necessity of a job or other source of income for survival, people need to feel that they are good and useful to society. Few even admit, even to themselves, that their hard work may not be fully productive. This emotional shield requires most people to say with equal sincerity that those on welfare are “lazy, ignorant, and nonfunctional.”

  Those above the poverty level vigorously insist that they are honest and productive and fulfill a social need. It is important to their emotional well-being that they believe this. They dare not acknowledge that their segment of the economy may have 30 to 70 percent more workers than necessary or that the displaced should have a relatively equal share of jobs and income. This would expose their redundancy and, under current social rules, undermine their moral claim to their share. Such an admission could lead to the loss of their economic niche in society. They would then have to find another territory within the economy or drop into poverty themselves.

  — J.W. Smith, The World's Wasted Wealth 2, (Institute for Economic Democracy, 1994), p. 90.

J.W. Smith, quoted above, also points out (and details in his work) how we have moved from “plunder by raid to plunder by trade” in recent centuries. The complexities of some of today's economics and trading systems also make it harder to address root causes of poverty:

Although in [the] early years the power brokers knew they were destroying others' tools of production (industrial capital) in the ongoing battle for economic territory, trade has now become so complex that few of today's powerful are aware of the waste and destruction created by the continuation of this neo-mercantalist struggle for markets. Instead, they feel that it is they who are responsible for the world's improving standards of living and that they are defending not only their rights but everybody's rights.

This illusion is possible because in the battle to monopolize society's productive tools and the wealth they produce, industrial capital has become so productive that — even as capital, resources, and labor are indiscriminately consumed — living standards in the over-capitalized nations have continued to improve. And societies are so accustomed to long struggles for improved living standards that to think it could be done much faster seems irrational.

— J.W. Smith, The World's Wasted Wealth 2, (Institute for Economic Democracy, 1994), p. 158.

And when considering how today's global economic model promotes the liberalization of capital more and more, the effects of rapid flows of capital and other impacts of over-liberalization is borne largely by the poorer members of society:

A French humorist once wrote, “When it's money you're after, look for it where it is most abundant, among the poor.” Governments now do this more than ever because the poor are rooted, stationary, “slow”; whereas the big money is nomadic and travels at the speed of bytes. Stationary money (of local businesses, professionals, wage and salary earners) will be taxed to the limit for the simple reason that it can be got at.

— Susan George, The Lugano Report, (Pluto Press, 1999), p. 186

The World Bank and Poverty

The World Bank, being a major international institution, is worth looking at to see how its policies help or impact poverty and development around the world.

The World Bank produces an annual report, called the World Development Report. The Bank regards this as its flagship report. Most mainstream economists use this report in some way or form, and it is one of the few reports on development that the US mainstream media reports on (because it usually shows the US, and its policies that it prescribes to the rest of the world, in a favorable light.)

The way the 2000 report was released highlighted another problem with the World Bank, and how it doesn't like to accept criticism on the current forms of globalization and neoliberalism. For the 2000 report, Ravi Kanbur, a professor from Cornell University had been asked to lead up the report team.

Kanbur won respect from NGO circles as he tried to be inclusive and take in a wide range of views, which the Bank doesn't normally do (which is a problem in itself!). However, as the report was to be published, he resigned because he was unreasonably pressured by the Bank to tone down sections on globalization, which, amongst other things called for developing nations to accept market neoliberalism cautiously.

The World Bank was apparently influenced itself by the US Treasury on this — this is not new though; critics have long pointed out that the Bank is very much influenced by the US, thus affecting the chance of real progress being made on poverty issues around the world.

The following quotes collected from the Bretton Woods Project, reveal some interesting insights:

The Washington Consensus has emerged from the Asia Crisis with its faith in free markets only slightly shaken. Poverty eradication is now the menu, but the main dish is still growth and market liberalisation, with social safety nets added as a side dish, and social capital scattered over it as a relish. The overall implication of the resignation is fairly clear. The US does not want the World Bank to stray too far from its agenda of economic growth and market liberalisation. Ravi Kanbur's draft has raised a few too many doubts about this agenda, and strayed too much towards politics.

— The Nation, Bangkok, 5 July, 2000

To keep the Bank afloat Wolfensohn has to steer between two major constituencies. The first are the critics, the second is the US Treasury. You don't need to be a World Bank economist to do the cost benefit analysis. To save the Bank, and his own reputation, it is essential that the Bank's policies and public pronouncements do not err too far from its main shareholder and political protector, the US Treasury.

— Focus on Trade, Issue Number 51, Focus on the Global South, June 2000

The World Bank has often come under criticism for its development projects not actually helping the societies that they claimed they will. One such example is the numerous dam projects that have seen lives devastated, where millions have been displaced and people have not seen the benefits promised, while at the same time, the environment has degraded and crucial arable land has been flooded. This is discussed further on this site's hunger and poverty causes section.

Another example is the devastating Structural Adjustment Policies pressured upon poor countries by the First World, The World Bank and the IMF. These have had devastating consequences for much of the third world, though benefitting the First World.

Another example involves a recent Cameroon-Chad oil pipeline project, which started construction in 2000. The World Bank had also stressed commitments to ensure policies were observed that would protect society and the environment, while helping millions of poor in Chad out of extreme poverty (Chad is the fifth poorest country in the world) and also providing land-locked Cameroon with much needed revenue.

The World Bank's actual monetary investment amount was just four percent of the cost. However their participation and stated commitment to poverty-combating development gave political backing that allowed multinational oil companies (who were the main investors) to raise sufficient capital on the international capital markets, which they would not have been able to otherwise do.

The World Bank had therefore highlighted this project as a prototype for the extractive industry, designed to carry oil wealth not to a few but to the mass of the poor.

AfricaFiles is an organization about African issues from the perspective of human rights, economic justice, and African perspective and alternative analysis. Given the World Bank's claims and presenting this project as a flagship of sorts, AfricaFiles issued a report looking to see how the World Bank's claims held up.

They concluded that

1. “Oil corporations cannot be transformed into development agencies even with the best intentions and monitoring mechanisms” referring to the sidelining of time-intensive parts of the project such as capacity building and taking social and environmental issues into consideration.
2. As a result, “global levers of development outcomes like the World Bank cannot exercise sufficient clout on oil multinationals' penchant for profits”
3. “The World Bank is incapable of respecting its own weakening safeguard policies, which are premised on controlling damage rather than avoiding harm. This is particularly significant as Africa banks on the increasing trend in Foreign Direct Investments (FDIs).”
4. “The embryonic neo-liberal governance structures in Africa are incapable of forcing FDIs, which are principally attracted by ground mineral resources, to respect ecological and social principles. This cannot be over-stressed, especially as the World Bank prepares to engage in what it calls high risk/high reward projects in developing countries.”
5. “The flawed contention of the World Bank is ‘you cannot eat omelettes without breaking some eggs.’ As this paper has demonstrated, the eggs most often broken are those of the poor who are left with no alternative livelihood.” The paper has also noted the high level of corruption, implying that those who would “eat the omelette” so to speak, would be the wealthy elite and multinationals.
6. “Public Private Partnership [PPP], the buzz paradigm of sustainable development, is fundamentally incapable of addressing the unequal power relation between fattening multinationals, weakening states and the World Bank, in this era of globalisation.”

AfricaFiles also, interestingly, suggested the World Bank use its precious resources to support more renawable energy sources development rather than oil, which has had so much political, economic and environmental problems associated with it. This was also a recommendation from a report commissioned by the World Bank itself, which has not been followed.

Poverty in Industrialized Countries

But poverty is not restricted just to developing countries. Industrialized nations are also seeing a sharp increase in poverty. While the current form of globalization is resulting in additional wealth, the disparities are sharp. Less people are turning out to be benefiting while an increasing number are left behind.

Even in places such as Europe and USA, poor people still do not seem to get enough attention or resources to help alleviate their problems. For example, consider Britain:

• Even though Britain is one of the most affluent members of the European Union (EU), a report shows that UK is the worst place in Europe to be growing up if you are poor, as more children are likely to be born in to poverty there, compared to elsewhere in the EU.
• The UK National Office of Statistics also shows that disparities between rich and poor continue to grow in UK, as reported by a UK newspaper, The Independent, April 2000.
• Priorities of the Labour Party government have often been questioned (as with priorities of any party) but highlighted by how at the turn of the century, some 150,000 people were homeless in Britain, yet the government helped build the Millennium Dome, that cost over a billion US dollars.
• Andrew Simms, policy director of the New Economics Foundation in an article mentioned further above about inequality notes that

  Crime and unhappiness stalk unequal societies. In the UK the bottom 50% of the population now owns only 1% of the wealth: in 1976 they owned 12%. Our economic system's incentive structure, instead of “trickle-down”, is causing a “flood-up” of resources from the poor to the rich. Inequality leads to instability, the last thing the country or world needs right now.

  Even the former hardline conservative head of the International Monetary Fund, Michel Camdessus, has come to the conclusion that “the widening gaps between rich and poor within nations” is “morally outrageous, economically wasteful and potentially socially explosive”.

  — Andrew Simms, Now for a maximum wage, The Guardian, August 6, 2003

As another example, the U.S. is worth looking at as well.

• It may be surprising to most people to realize that USA, the wealthiest nation on Earth, has the widest gap between rich and poor of any industrialized nation, and disparities continue to grow. And inequality within the nation is quite sharp. (See also this article and this article about how the media deals with such issues.) United For a Fair Economy reported that for 1998 almost 70% of the wealth was in the hand of the top 10%. In another report, they mention that the gap has widened in recent decades. “In 1989, the United States had 66 billionaires and 31.5 million people living below the official poverty line. A decade later, the United States has 268 billionaires and 34.5 million people living below the poverty line-about $13,000 for a three-person family.”
• Even during the “booming economy” (for some in society, not all) in the late 1990s and early 2000, there was an increasing gap between the rich and poor. Even into 2002, fighting poverty appears not to have been a major election campaign issue as with recent previous election campaigns.
• While health and education are key to any economy or nation to grow and be strong, both of these suffer issues of access, equality and pressure to cut back (including elsewhere around the world as discussed in the structural adjustment part of this site).
  • For example, as a summary of a report titled Economic Apartheid in America mentions, “that the United States is the only industrialised nation that ‘views health care as a privilege, not a basic human right.’”. (Unfortunately the report itself not available on the Internet, but is produced by United for a Fair Economy where you can see many extracts and similar reports.)
  • In addition, as good education is linked to a strong economy, Business Week reports (February 14, 2002) on a study that analyses OECD data from 1994 to 1998, and summarizes that “the literacy of American adults ranks 10th out of 17 industrialized countries.” In addition, the issue of inequality was highlighted: “More troubling, the U.S. has the largest gap between highly and poorly educated adults, with immigrants and minorities making up the largest chunk of those at the bottom.” While Business Week concentrates on the U.S. they also point out that “Despite the mediocre U.S. ranking, it still beat out most of its major trading partners except Germany, including France, Britain, and Italy. (Japan didn't participate [in the study].)”

And it isn't in just these two industrialized nations that these problems persist. A Guardian news report, for example, shows that certain types of poverty in various European cities can be regarded as worse than in some other parts of the world which one would not normally think would compare with Europe, such as India.

Corruption

Corruption is another impacting factor around the world, at all levels of society, from governments, civil society, judiciary functions, military and other services and so on. The impact of corruption in poor countries on the poorer members of those societies is even more tragic.

This is a large topic in itself. Over time, more will be added, but for now you can start at the following:

• Transparency International has a Corruption Perception Index. It provides many reports, statistics and information.
• The World Bank, despite criticisms about it not looking at its own policies as being a factor, do, however have a lot about corruption. A search result on World Bank site on corruption reveals many articles.

A hard thing to measure or compare though, is the impact of corruption on poverty issues, versus those inequalities that are structured into law, such as unequal trade agreements, structural adjustment policies, so-called “free” trade agreements and so on. It is easy to see corruption. It is harder to see these other more formal, even legal forms of "corruption". It is easy to assume that these are not even issues because they are part of the laws and institutions that govern national and international societies. Corruption from multinationals that sometimes makes headline news in the West is often worse in developing countries due to international economics and politics that makes it easier for multinationals to make profit. Resulting inequalities that are structured into law have a far reaching impact on the world's poor.

Such systemic causes of poverty further exacerbate corruption, which in turn increases poverty. One way to address corruption effectively then, would be to address these systemic issues as well.

Corruption is not something limited to third world despots. Indeed, in the past few decades, for cold war purposes for example, various dictators and other corrupt third world leaders have been placed in power with the aid of western nations, and accompanying this has been enormous corruption, even while they have been funded and financed by those western nations and institutions (for they benefitted immensely). Jubilee Research (formerly the prominent Jubilee 2000 debt relief campaign organization) is worth quoting at length looking at how lending institutions from the West, such as the World Bank, IMF, etc have often themselves supported corruption-encouraging practices:

Rich country politicians and bank officials argue that because dictators like Marcos, Suharto, and Mobutu were kept in power with western arms and were given loans to squander on ill-judged and repressive schemes, that the people of those countries - who often fought valiantly against those dictators — cannot be trusted not to waste the money released by debt cancellation. This may seem confusing to people not familiar with the logic of the IMF and World Bank. In summary:

• Creditors colluded with, and gave loans to dictators they knew were corrupt and who would squander the money.
• Creditors gave military and political aid to those dictators — knowing arms might be used to suppress popular opposition
• Therefore, successor democratic governments and their supporters, who may have been victims of corruption and oppression, cannot be trusted.

To many people in the South, this seems irrational and illogical — the logic of blaming the victim. It is the logic of power rather than of integrity, and is used to benefit the rich rather than the poor in developing countries.

A similar logic argues that if the World Bank and government export credit agencies promoted inappropriate and unprofitable projects, then southern governments proved their inability to control money because they accepted the ill-advised projects in the first place. Thus, if money is released by debt cancellation, it must be controlled by agencies which promoted those failed projects.

This is the logic that says if people were stupid enough to believe cigarette advertising, then they are too stupid to take care of themselves and the “reformed” cigarette companies should be put in charge of their health care.

The same institutions who made the corrupt loans to Zaire and lent for projects in Africa that failed repeatedly are still in charge, but their role has been enhanced because of their success in pushing loans. Can we trust these institutions to suddenly only lend wisely; to not give loans when the money might be wasted?

Preventing new wasted loans and new debt crises, and ensuring that there is not another debt crisis, means that the people who pushed the loans and caused this crisis cannot be left in charge.

The creditors or loan pushers cannot be left in charge, no matter how heartfelt their protestations that they have changed. Pushers and addicts need to work together, to bring to an end the entire reckless and corrupt lending and borrowing habit.

— Joseph Hanlon and Ann Pettifor, Kicking the Habit; Finding a lasting solution to addictive lending and borrowing - and its corrupting side-effects, Jubilee Research, March 2000

And in terms of how lack of transparency by the international institutions contributes to so much corruption structured into the system, Hanlon and Pettifor continue in the same report as cited above:

Structural adjustment programmes cover most of a country's economic governance.

... The most striking aspect of IMF/World Bank conditionality [for aid, debt relief, etc] is that the civil servants of these institutions, the staff members, have virtual dictatorial powers to impose their whims on recipient countries. This comes about because poor countries must have IMF and World Bank programmes, but staff can decline to submit programmes to the boards of those institutions until the poor country accepts conditions demanded by IMF civil servants.

There is much talk of transparency and participation, but the crunch comes in final negotiations between ministers and World Bank and IMF civil servants The country manager can say to the Prime Minister, “unless you accept condition X, I will not submit this programme to the board”. No agreed programme means a sudden halt to essential aid and no debt relief, so few ministers are prepared to hold out. Instead Prime Ministers and presidents bow to the diktat of foreign civil servants. Joseph Stiglitz (42) also notes that “reforms often bring advantages to some groups while disadvantaging others,” and one of the problems with policies agreed in secret is that a governing elite may accept an imposed policy which does not harm the elite but harms others. An example is the elimination of food subsidies.

— Joseph Hanlon and Ann Pettifor, Kicking the Habit; Finding a lasting solution to addictive lending and borrowing - and its corrupting side-effects, Jubilee Research, March 2000

As further detailed by Hanlon and Pettifor, Christian Aid partners, a coalition of development organizations, also argues that democracy is undermined by structural adjustment, because the associated top-down “conditionality has undermined democracy by making elected governments accountable to Washington-based institutions instead of to their own people.” The potential for unaccountability and corruption therefore increases as well.

And of course there is also corporate corruption, which has only recently come into the mainstream as headline news though has been a concern for many years. (For more on this aspect, see this site's section on corporate evasion of responsibilities.)

The above-cited report by Hanlon and Pettifor also highlights a broader way to try and tackle corruption by attempting to provide a more just, democratic and transparent process in terms of relations between donor nations and their creditors:

Campaigners from around the world, but particularly the South, have called for a more just, independent, accountable and transparent process for managing relations between sovereign debtors and their public and private creditors.

An independent process would have five goals:

• to restore some justice to a system in which international creditors play the role of plaintiff, judge and jury, in their own court of international finance.
• to introduce discipline into sovereign lending and borrowing arrangements — and thereby prevent future crises.
• to counter corruption in borrowing and lending, by introducing accountability through a free press and greater transparency to civil society in both the creditor and debtor nations.
• to strengthen local democratic institutions, by empowering them to challenge and influence elites.
• to encourage greater understanding and economic literacy among citizens, and thereby empower them to question, challenge and hold their elites to account.

— Joseph Hanlon and Ann Pettifor, Kicking the Habit; Finding a lasting solution to addictive lending and borrowing - and its corrupting side-effects, Jubilee Research, March 2000

This highlights that the issue of corruption is very much inter-related with other issues, and that corruption not only causes immense problems, but that aspects of the “international” (Washington Consensus-influenced) economic system also create conditions whereby corruption can flourish and exacerbate the conditions of people around the world who already have little voice in international meetings and summits about their own destiny.

Poverty and the Internet

The Internet has been hailed by many as the next information revolution and a major step towards a more free society with more opportunities for people to learn from a wider source of readily available information. It is hoped and envisaged that even the poorer and less fortunate people of the world can use the Internet and the World Wide Web to learn and experience things that would previously have seemed next to impossible. Various communities and people that were previously marginalized have now got the potential to be more empowered than they have been before.

However, with increased opportunities for the already well-off, the internet revolution has also seen a growing digital divide of haves and have nots. The reality of the internet revolution, with current trends, may not be as bright for all, as made out to be, because some major obstacles need to be overcome, such as

• Poor telecommunications
• An inability to afford computers
• Lower levels of education
• Higher cost of providing Internet services

(As an example of this see this article from the Indian-based Centre for Science and the Environment looking at some of the problems that need to be overcome for information technology's development potential in Indian villages to materialize.)

And it is not just the Internet that can open up many possibilities for people who never thought this possible, but at a more basic level, just easier access to impartial and less biased information would help to alleviate many of the problems we see, in the long run.

As the major businesses and nations around the world meet to decide on ways to make more seamless the globalization of e-commerce and e-trade, it will be interesting to see what attempts at legislation and control is made for Internet access.

Copyright issues on the internet are also touchy. On the one hand, software companies want to protect their investment in the code they have written. On the other hand, very stringent copyright laws can hamper innovation. Increasingly, software developers and security firms etc are writing code that will hack other's security systems to demonstrate weaknesses in employed technology, to help contribute to continually high standards. (Of course there are other “hackers” that do such things for various other reasons!) But they are facing backlash from companies that are set to be embarrassed by their findings.

The desire of entrenched commercial interests to control information is crushing the spirit of innovation that allowed the Internet to blossom, [said] Stanford Law School professor and technology pundit Lawrence Lessig.

...

The Digital Millennium Copyright Act (DMCA) has joined patent and copyright law as a tool to hobble the lively development environment that was behind the success of the Internet and Silicon Valley, Lessig said. The DMCA has been invoked to stifle Princeton professor Edward Felten's discussion of weaknesses in the copy-protection scheme of the Secure Digital Music Initiative (SDMI) and the prosecution of Russian programmer Dmitry Sklyarov for his work in breaking the encryption of Adobe's e-book format.

...

“Employees at Smith & Wesson don't worry if guns kill police officers,” Lessig said. “Some uses are illegal and some are not. But if you wrote code that could be used for good or bad, you're arrested and sent to jail...There's something screwed up about that.”

— Stephen Shankland, Lawyer Lessig raps new copyright laws, CNET News.com, August 29, 2001

In addition, while prominent and influential people in political and business circles may put a lot of faith in technology to solve the world's problems, such as poverty, hunger, health issues, etc, it must be realized that these issues are political in their causes, and so technology fixes may not address underlying political causes, though of course technology could be a powerful tool. Ultimately, political issues and causes must be addressed and focused upon. (This issue is discussed further using the example of hunger, in a later part of this site.)