Collision Course: Endless Growth on a Finite Planet (20 page)

An immense price was paid for these advances, however. The peasants of England in the first place, and of Europe as time went on, were separated from their livelihoods and cast adrift as landless people seeking work and a wage. One of the main penalties of modernity was exacted from these rural commoners, who were progressively dispossessed, and from their children, who migrated over time into the industrial cities.
¹¹
An even greater penalty was paid by the dispossessed and enslaved populations of Europe’s colonies.

Even if the brutal effects could be eliminated from the equation, there are few grounds to believe that the path embraced by early modern Europeans could be replicated in the postcolonial world. From Cortez to Cook, they launched out into a poorly defended world where an apparently infinite supply of natural riches was available for them to expropriate—not a situation in which developing countries found themselves after World War II. The new Indonesia, for example, had access to numerous “empty” islands and West Papua, but none of the new nations had the “superior force” that would allow them to sail off and conquer territories on the other side of the world. The specific historical conditions enjoyed by Europe during its colonial expansion were ignored by the development theorists. These conditions included vast quantities of cheap (often stolen) resources, and captive peoples who could be fashioned into markets and obliged to accept tens of millions of Europe’s own surplus population, people who themselves had no livelihood, having been swept from the land into the cities. The development theorists also ignored the role that the entire colonial process had played in the impoverishment of the countries now being designated as underdeveloped in the mid-twentieth century. For Truman, these pitiable people were stragglers who only needed help along the same route. Greater production—a bigger pie—was the key; the scientific and technical knowledge that blossomed out of the European heritage was thought to be the appropriate means to that end.

None of the development economists looked at the primitive accumulation that underpinned European savings and investment, or noticed that most such avenues were not available to third world countries in 1950. Indeed, as noted above, the funds required for the “take-off” and “big push” into the rapid accumulation of capital had to be borrowed from the Europeans themselves, which ultimately led to endemic debt crises and failure to accumulate much at all except debt. Such vastly different circumstances may help to explain why, although significant industrialization occurred in the non-Western world during the development era, prosperity did not follow.
¹²
With few exceptions, Truman’s stragglers did not catch up.

Escobar identifies what he calls the development discourse as a version of Edward Said’s “orientalism”—the way Europeans have defined and managed non-European cultures through the lens of their cultural superiority. For Escobar, this attitude was inherent in the idea that it was essential to “modernize” peasants and submit feudal relations to marketplace rationality, to sweep aside “backward” cultures in their own interests.
¹³

The development planners of the first thirty years after World War II did indeed seem indifferent to actual outcomes. While the so-called “Brazilian miracle” powered along for several years around 1970, for example, with growth in Brazil’s GDP running at 10 percent, poverty and unemployment increased, the distribution of income was further polarized, and low-income groups were worse off in absolute terms than they had been.
¹⁴
In this case, the pie (measured as GDP) certainly grew, but only Lewis’s saving class benefited.

There is no disagreement among historians and economists of all persuasions that the world experienced a huge surge in economic growth during the 1950s and 1960s. The World Bank measured an annual global rate of GDP growth between 4 and 6 percent in every postwar year until 1974, levels matched again in only a few scattered years between 1975 and 2004;
¹⁵
this amounted to a global tripling of industrial production in the twenty years from 1950 to 1970. GDP grew everywhere in those decades, including Africa, but the most rapid expansion occurred in Japan and in Western Europe. Though GDP growth in
percentage
terms was comparable in the third world, the minuscule base dictated a far smaller gross expansion there, and rapid population growth also minimized the per capita increase.
¹⁶

Neither is there any argument that third world countries did see an increase in industrialization in the development era, as the gap between first and third world manufacturing capacity narrowed. What is doubtful is the extent to which these developments actually led to the catch-up in prosperity that Truman advocated and the development economists confidently predicted. Though first and third world levels of industrialization converged between 1960 and 1980, per capita income did not.
¹⁷
The hierarchy of wealth between the OECD countries and the rest persisted, with few exceptions. In short, the development project, while fostering industrialization in the third world, had little impact on prosperity there, suggesting that the reliable causality assumed between the two was mistaken. The first development era’s rhetoric of saving the world transferred the values of growth economics to the global south, while sharing few of the potential benefits with the people.

Globalization: Over to the Market

The development model fell from favor inside the international institutions of the first world after 1980 and was rapidly replaced with neoliberal nostrums, especially the idea that free trade would solve all the world’s problems, including “underdevelopment.” During the course of the next decades, the full suite of solutions was offered and in many cases imposed by the World Bank and the IMF. When third world countries were in financial trouble, funds were made dependent on “structural adjustment programs” (SAPs), which required privatization, tax cuts, and the dismantling of whatever meager welfare programs the state might have had in place. The very same institutions that had been the arbiters of the Bretton Woods system from World War II until 1973 were still in charge of the globalization agenda. The changes concerned only the ruling ideology within those organizations, not a realignment of the power of the institutions themselves.

With uncanny echoes of the promises of the late 1940s, purveyors of the new orthodoxy claimed—just as Truman had done—that the means to solve the poor world’s problems were finally at hand. In
The End of the Third World
(1986), the economist Nigel Harris argued that the dispersal of the global manufacturing system was bringing the third world to an end and breaking down the old simple distinctions between “First and Third, haves and have-nots, rich and poor, industrialised and non-industrialised.” Instead we have “one world [which] offers the promise of a rationally ordered system, determined by its inhabitants in the interests of need, not profit or war.”
¹⁸
Eleven years later, in 1997, Renato Ruggiero, the first director-general of the World Trade Organization (WTO), claimed that we now had “the potential for eradicating global poverty in the early part of the next century—a utopian notion even a few decades ago, but a very real possibility today.”
¹⁹
The claim that millions have been, are being, or will be “lifted out of poverty” by the wonders of globalization still litters the pages of think tank articles, World Bank reports, and the popular press, appears several times in the APEC report discussed in chapter 6 and is endlessly repeated by senior politicians, businessmen, and economists of the first world.

These enthusiastic claims do not, however, tally with empirical research. Political economist Giovanni Arrighi and colleagues found that the free trade era was no more successful in lifting incomes in the third world than the development era had been. A surge in industrialization occurred in third world countries in the period from 1980 to 1998, and though a handful of countries improved their income situation—notably South Korea, Taiwan, and, increasingly, China—the expected improvement was not spread evenly.
²⁰
The prominent World Bank economist William Easterly confirms these findings. From 1980—when SAPs began—to 1999, third world countries stagnated economically “in spite of policy reform.” Notwithstanding the inclusion of China’s sustained growth in the calculation, median per capita growth in the overall third world was zero, a major reduction from the 2.5 percent figure for the two decades before 1980.
²¹

Free Trade: “Kicking Away the Ladder”

Free trade is an axiomatic good in the neoliberal ideological armory. Trade is supposed to add to the wealth of nations by giving each the chance to do a lot of “what it does best”—and to import other things with the proceeds.
²²
Nancy Birdsall, a development policy researcher with many decades of experience at the World Bank, the American Development Bank, and development research organizations, challenges the automatic benefits said to be bestowed by free trade. She suggests that the market power of the rich allows them to impose rules and regimes to their own benefit and deploy their immense resources in their own interests. The poorest countries do not stand a chance:

Highly dependent on primary commodity and natural resource exports in the early 1980s, their markets have been “open” for at least two decades, if openness is measured by their ratio of imports and exports to GDP. But unable to diversify into manufacturing (despite reducing their own import tariffs) they have been victims of the decline in the relative world prices of their commodity exports, and have, literally, been left behind.
²³

Among many difficulties—and despite lowering their tariffs—third world countries have so far been unable to force Europe and the United States to reciprocate by reducing their large agricultural subsidies. Rich developed countries provided more than $250 billion in 2011 in support and protection for their own agriculture;
²⁴
this is a perplexingly large subsidy in what is supposed to be a free trade regime. In the globalization period, earning foreign currency is reckoned to be more important for developing countries than growing food by and for local people, especially in the view of the World Bank and the IMF, who wish to see loans repaid. Free trade has brought another generation of smallholders under terminal pressure, including dairy farmers in Jamaica, tomato farmers in Senegal, and chicken farmers in several West African countries.
²⁵

The historical evidence from the countries of the developed world does not support the idea that free trade underpinned their rise to economic dominance. As the Cambridge economist Ha-Joon Chang argues in
Kicking Away the Ladder
:

How did the rich countries
really
become rich? [They] did not get where they are now through the policies and the institutions that they recommend to developing countries today. Most of them actively used “bad” trade and industrial policies, such as infant industry protection and export subsidies—practices that these days are frowned upon, if not actively banned, by the WTO.
²⁶

Before shifting to free trade in the mid-nineteenth century, Britain had practiced protection for its infant industries for centuries, banning Irish woolen goods and Indian cotton, for example, until British industries could surpass their competitors. Through the nineteenth century and up to the 1920s, the United States was “the fastest growing economy in the world, despite being the most protectionist.” Chang concludes that the supposed causal relationship between free trade and economic growth and prosperity is tenuous at best and not apparent from history; in Chang’s view, the most plausible explanation for the popularity of free trade in rich world countries is that they are aiming to “kick away the ladder” they have already successfully climbed.
²⁷

Furthermore, despite prominent claims to the contrary from World Bank researchers, there is little evidence that third world free traders fared better than more protected economies in the last two decades of the twentieth century. As noted above, commodity producers were endangered by open trade. Robert Wade of the London School of Economics notes that the World Bank researchers treat China and India as “globalizers” and attribute their trade growth to openness, even though the definition of globalizer is based on volume of trade rather than on removal of trade barriers. China and India are not, in any case, straightforward examples of liberal trade regimes:

They began to open their own markets
after
building up industrial capacity and fast growth behind high barriers. In addition, throughout their period of so-called openness they have maintained protection and other market restrictions.… China began its fast growth with a high degree of equality of assets and income, brought about in distinctly non-globalised conditions and unlikely to have been achieved in an open economy and democratic polity.

Their experience—and that of Japan, South Korea and Taiwan earlier—shows that countries do not have to adopt liberal trade policies to reap large benefits from trade.
²⁸

One further problem with the free trade agenda is its reliance on the consumption of immense quantities of fossil fuels. The fuel for the fleets of ships, trucks, and planes involved in trade is a significant part of the drain on the oil resource and the escalation of greenhouse gas emissions. A UN report in early 2008 estimated that nearly 4.5 percent of all carbon dioxide emissions are attributable to the merchant shipping that moves cheap goods around the world, emitting approximately twice as much carbon dioxide as aviation.
²⁹
Air freight, too, is problematic; perishable and high-value items travel by air (35 percent of the value of all goods traded internationally, according the International Air Transport Association)—an even more intensive expenditure of petroleum-based fuel.
³⁰
All of this movement involves profligate expenditure of energy, contributing 6 or 7 percent of global CO
₂
emissions.