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Global Poverty and Neoliberalism

Development by the Elites, For the Elites


Jim O’Neill is at it again. He is best known for inventing the acronym BRIC (now BRICS), a group of countries — Brazil, Russia, India, China and then South Africa — which, he claimed, would dominate the world economy in the 21st century. Now he is suggesting that the MINTs (Mexico, Indonesia, Nigeria and Turkey) will have the same economic growth as China if they continue their market-orientated economic policies.

O’Neill, a British economist who used to work for the “vampire squid” investment bank Goldman Sachs, is pursuing a double objective. He is identifying emerging economies fit for investment by the global banking community; he says the BRICS and MINTs are knocking on a development door, which, if they’re pursuing the correct economic policies, will open wide to the benefits of economic growth. His view of the world system regards the self-interested actions of investment bankers as contributing to the development of poor countries; he and other neoliberal economists disguise the central dynamics of economic development under capitalism.

The contemporary world has unprecedented wealth, and mass poverty. Total global wealth was $241 trillion in 2013 and is expected to rise to $334 trillion by 2018. Yet the majority of people live in poverty. To suggest that rising global wealth and global poverty are interrelated, and that the former is premised upon the latter, is not something that most players in international development want to do because it would reveal the sordid foundation of their vision of development.

Most development theory — free-market or statist — explains the relationship between capitalism and poverty as based on the dichotomy of inclusion into capitalism versus exclusion from capitalism. The global capitalist system is described as a source of opportunities for less developed countries. From this perspective, poor countries are held to be poor, not because of the nature of global capitalism but because of their effective exclusion from it. Policies such as trade liberalisation and market deregulation are designed to enable poor countries to harness capitalism’s dynamism. The world market is often described as a ladder of opportunity and wealth; once on the bottom rung, poor countries can climb and accelerate their populations’ human development. UN Millennium Project director Jeffrey Sachs defends sweated labour across the global South, saying the “sweatshops are the first rung on the ladder out of extreme poverty” (1).

The idea of capitalism as a benign sphere of human activity goes with another firmly held axiom, that development policy has enlightened actors (states, entrepreneurs, international institutions and NGOs) carrying out actions for the poor. Development discourse calls the poor the “disempowered” who need to be “empowered” by benign assistance from above. Development theorists such as Paul Collier argue in neo-colonialist style that the poor in the developing world need to be forcefully liberated from oppressive state rulers through western military action, as in Britain’s intervention in Sierra Leone in 2000 (2).

Low wages and long hours

In this elitist conception of development, innovating entrepreneurs, supported by benign states, generate wealth through participation in capitalist markets, which then trickles down to the population, who should be grateful for the enhancement of their lives. This view rests on a paradox. The process of wealth creation, whether through incorporation into “free” markets, or through state-led generation and allocation of resources, requires the subordination of the working masses to the elite’s objectives — low wages, long hours and subjection to strict management discipline, denial of trade union rights and suppression of workers’ political actions.

The first large-scale neoliberal development experiment was in Chile under General Pinochet’s dictatorship. One of neoliberalism’s founding fathers, Friedrich Hayek, wrote: “I have not been able to find a single person even in much-maligned Chile who did not agree that personal freedom was much greater under Pinochet than it had been under [deposed former president] Allende” (3). Perhaps the most impressive example of statist selwyncatch-up development is South Korea, which, between the 1960s and 1980s, transformed itself from an agrarian economy to a dynamic industrial one. This was based upon mass labour, repression and exploitation: active trade unionists were sent to camps, workers suffered one of the world’s longest working weeks, and women experienced a strict gender hierarchy (4).

Over the last four decades the global working class has tripled from 1 billion to over 3 billion (5). In many “developing” countries integrated into globalised production networks, workers are employed by national and transnational corporations at poverty wages. They must have several jobs or work overtime, and their health suffers. The Catholic Agency for Overseas Development (Cafod) reports that in the electronics industry in China, workers need to do illegal overtime (a 15-16 hour working day) to earn the minimum wage; in Thailand sub-contracted workers earn a minimum wage that does not cover their food and household expenses (6). In Bangladesh 1,130 people died when a factory making products for Primark and Matalan collapsed in April 2013. Many more have died in fires in garment factories across the country.

Far from a ladder of opportunity, workers in globalised production networks are incorporated into economic systems that reproduce their poverty to sustain corporation profits. Arguments by liberals and statists for further global integration are based upon the expectation (and requirement) of the continued subordination of the working classes to the objectives of capital accumulation.

The World Bank and its defenders argue that global poverty has declined under neoliberalism. They can only make these arguments because the World Bank defines the poverty line as $1.25 a day, below which it is impossible to lead a dignified life. If applied to Britain, this would be equivalent to 37 people living on a single minimum wage, with no benefits (7). Lant Pritchett, a critical World Bank economist, suggests a more humane $10 a day poverty line; according to his calculations, 88% of the world population lives in poverty (8).

‘If you don’t give the people social reform…’

Is there a way of changing the relationship between poverty and rising global wealth? A labour-centred concept of development would recognise that global wealth is based upon the working classes. It would note that improvements to workers’ livelihoods come about not by working for global capital, but through their own struggles for better wages and conditions, gender equality, access to land, and for political and economic democracy. The significant human development gains of the European working classes after the second world war were due not to the generosity of capitalists and states, but to the threat of mass unrest from below: “If you don’t give the people social reform, they will give you social revolution,” Quintin Hogg, a leading light in the Tory party, told the British parliament in 1943.

In China, recent wage increases and small, but significant, improvements to workers’ rights happened after an increase in what the Chinese state refers to as “mass incidents”. In Brazil, access to land has been won, not through economic growth or benign government policies, but through the actions of hundreds of thousands of landless labourers. In Argentina, engulfed by economic crisis in the early 2000s, workers responded to unemployment by taking over factories. In many of these factories, productivity, employment and wages increased as workers enjoyed an unprecedented degree of workplace democracy and, for the first time, a real incentive to collaborate to enhance their labour, as they were its direct beneficiaries.

Labour-centred development regards the increase in workers’ free time and their ability to democratically control the production and distribution of wealth, rather than the endless drive to accumulate capital, as the real basis of human development. That vision conceives of the working classes of the developing world as architects of their own development.

Mainstream discourse discounts ways in which working classes can be agents of their own development, and thinks of them as dependent upon the elites for their salvation. It is time to think about how the majority can pursue development for themselves.

Ben Selwyn is senior lecturer in international development at the School of Global Studies, University of Sussex and the author of The Global Development Crisis, Polity, Cambridge, 2014.


(1) Jeffrey Sachs, The End of Poverty: How We Can Make it Happen in our Lifetime, London, Penguin, London, 2005.

(2) Paul Collier, The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About it, Oxford University Press, 2007.

(3) Friedrich Hayek, letter, The Times, London, 3 August 1978.

(4) Dae-oup Chang, “Korean Labour Relations in Transition: Authoritarian Flexibility” (PDF), Labour, Capital and Society, vol 35, no 1, Canada, 2002.

(5) Steven Kapsos, “World and Regional Trends in Labour Force Participation: Methodologies and Key Results” (PDF), International Labour Organisation,Geneva, 2007.

(6) Katherine Astill and Matthew Griffith, “Clean up your Computer: Working conditions in the electronics sector” (PDF), Cafod, London, 2004.

(7) David Woodward, “How Poor is Poor? Towards a Rights-Based Poverty Line” (PDF), New Economics Foundation, London, 2010.

(8) Lant Pritchett, “Who is Not Poor? Dreaming of a World Truly Free of Poverty”, World Bank Research Observer, vol 21, no 1, Oxford University Press, 2006.

This article appears in the excellent Le Monde Diplomatique, whose English language edition can be found at mondediplo.com. This full text appears by agreement with Le Monde Diplomatique. CounterPunch features two or three articles from LMD every month.