Exposing a system of extraction

One of the early promises of neoliberal globalization[1] was that it would bring prosperity to poor countries, drive development, and reduce inequalities, ultimately helping poor countries gradually converge with rich countries. But exactly the opposite has happened. Globalization has made inequality worse, both between countries and within them. Harvard Economist Lant Pritchett has called this pattern “divergence, big time.”

We can see how this trend works over time. During the colonial period, the gap between the richest countries and the poorest countries widened from 3:1 to 35:1, as European powers extracted massive amounts of wealth and resources from the Global South. That’s a huge gap. Yet over the past thirty years the gap has grown much bigger, to the point where it is now about 80:1[2]. This makes colonialism seem petty by comparison.

How has this happened?

To understand what’s going on, we have to begin with the international debt system. Ravaged by colonialism and in desperate need of capital, particularly after the oil crisis of 1973, countries in the global South had to seek out loans from the World Bank and the International Monetary Fund (IMF). But there was a catch: these loans gave the donor agencies the power to determine economic policy in the recipient countries, overriding the will of local elected leaders.

By leveraging debt, the World Bank and the IMF – which are controlled by rich countries – force developing countries to liberalise their markets, sell off their public assets, and open their doors to multinational corporations. Western economists once assured us that these policies, known as “structural adjustment programs,” would stimulate development. But in reality they have done exactly the opposite, cutting income growth rates in half[3] and causing mass poverty.

This same dynamic operates in the international trade system. Through the World Trade Organization (WTO) and various bilateral “free trade” agreements, rich countries offer access to their markets on the condition that developing countries open their borders to Western competition, which almost always overpowers local industries. In other words, “free trade” is usually very unfair. Even more troubling, most trade agreements include “investor-state dispute resolution” clauses that give corporations the power to sue poor countries[4] for any legislation – such as labour laws or environmental laws – that compromise their profits.

Because of these policies, economists estimate that developing countries lose roughly $500 billion[5] in potential GDP every year. But the system has worked brilliantly for rich countries and their corporations, as they get unprecedented access to cheap labour, raw materials, and new markets. As a result, we’re seeing a torrential flow of wealth from poor countries to rich countries.

As if this were not bad enough, multinational corporations that operate in the global South have devised ways to extract their profits without paying local taxes. Every year, more than $900 billion[6] is stolen from developing countries and funneled into tax havens around the world, using legal loopholes such as trade mispricing.

Debt service comprises another primary flow of wealth from poor to rich. Developing countries have to pay about $600 billion[7] each year to rich countries, much of it on the compound interest of loans accumulated by dictators long since deposed.

For another example, we can look at the World Trade Organisation’s agreement on intellectual property (TRIPS), which has armed corporations with unprecedented rent-seeking powers. As a result of TRIPS, developing countries have been forced to pay around $60 billion[8] each year in extra patent licensing fees for the use of technologies and pharmaceuticals that are often essential to development and public health.

All together, these flows vastly outstrip the international aid budget, which trickles in at about $135 billion per year[9]. It’s no wonder, then, that our world has become so unequal, to the point where the richest 85 people on earth have come to accumulate more wealth than the poorest 3.5 billion[10].

If we want to put an end to poverty and extreme inequality, we need to dismantle the global wealth extraction system that draws our planet’s wealth to the rich at the expense of the poor. We need to democratize the institutions that control global economic policy. We need to put control of money creation and the money supply back in public hands. We need to dismantle the tax haven system and establish a global minimum corporate tax. We need to organise a global debt-resistance movement. We need to roll back the patent laws under TRIPS. And we need to freeze all “free trade” agreements and renegotiate them under conditions of transparency and public debate.

If we can change these rules, we can create a more democratic economy that shares prosperity fairly, and harness the power of the global economy to promote justice and well-being for all people rather than just for a tiny few.

  1. By “neoliberal globalization” we mean the phase of globalization that began in the early 1970s, when Western powers began to forcibly liberalise the markets of developing countries, while maintaining protectionist measures in their own.
  3. Bad Samaritans
  5. Contours of Descent

Login / Create account

Trump: Join us in connecting the dots

The election of Donald Trump has left millions, maybe even billions of us in shock. Although we may be looking with bewilderment at the US today, we should remember that he is not an isolated phenomenon. He is a symptom of a sickness that is raging all around the world. People are hurting, disillusioned with mainstream politics and increasingly angry at a neoliberal economic system that is destroying lives and the planet with increasing ferocity. And in their desperation they are willing to consider extreme measures to make themselves heard.

Demagogues thrive amid fear and insecurity, which is why they paint the world in such dark terms. It’s a strategy that has put right-wing populist leaders in power in an Axis of Egos: from Brazil to Turkey, the Philippines to Russia, authoritarian strongmen like Trump are on the rise. Meanwhile, many centrist liberals, like the Democratic Party in the US, have been so intent on rejecting left-wing populist solutions, and so sure of their ability to beat anyone running on a white supremacy platform with its misogyny and homophobia, that they opened the door for Mr. Trump to walk straight through. Their preference is always to maintain the status quo that has served them so well.

As dangerous as the election of Trump is for the world, we can also see in this moment the truth that we simply cannot rely on the electoral political system to save us, because it is designed to prevent the fundamental change we need. Its own survival is at stake and it will marshal all its champions and resources to defend itself and stop the emergence of a new system. But when we work, or continue working for change from the ground up; when we build or keep on building new ways of living and being with each other where we live; when we construct or keep constructing the future we know is possible with our own hands, rather than hoping distant leaders will build it for us, we find our true power. Finally, when we combine that with the unbending hope that has powered change through the ages, we know our power has meaning.

A 400-year-old economic system is dying and another is struggling to be born. Change on this scale is not going to be smooth or easy. We should not be surprised, then, that moments like this — where the establishment is dealt a body blow — become more and more common. We can despair when that blow comes in the form of right-wing extremists, or we can step-up. We are the ones we are looking for, who can and must grasp the opportunities in these crises that are undoubtedly there.

So it’s time to come together, taking time to remember the earth. Remember all the successful struggles for justice that came before us, and imagine all those to come. Remember that social movements are growing all over the world and realising the common struggle. Remember life. Then, organise. Find each other and help midwife the inevitable transition that brings forth from the ashes of neoliberal capitalism a system that works for the good of all life on Mother Earth. This is not just activism; this is our responsibility as human beings alive as this all unfolds.

This is why we are here.