by Jason Hickel
p. 127 ‘The poverty rate was 41 . . .’ Andre Gunder Frank – one of Friedman’s students – was deeply disturbed by these events. He wrote an Open Letter to Arnold Harberger (one of the lead economists of Project Chile) and Milton Friedman, pointing out that on Friedman’s version of the ‘living wage’, a Chilean family would spend 74 per cent of its income on bread. Under Allende, these basic expenses – bread, milk and bus fare – claimed only 17 per cent of a family’s budget. Frank went on to become one of the main Latin American economists behind dependency theory.
p. 127 ‘And hunger was widespread . . .’ The figures I cite here come from: James Petras, Fernando Ignacio Leiva and Henry Veltmeyer, Democracy and Poverty in Chile: The Limits to Electoral Politics (Boulder, CO: Westview Press, 1994); and Alvaro Díaz, El Capitalismo Chileno en Los 90: Creimiento Economico y Disigualdad Social (Santiago: Ediciones PAS, 1991).
p. 127 ‘Real wages declined by 40 . . .’ Klein, The Shock Doctrine, p. 96.
p. 127 ‘Arnold Harberger, the economist in . . .’ According to Harberger’s CV, which is available online through his UCLA profile.
p. 128 ‘According to standard Keynesian theory . . .’ The relationship between inflation and employment is the basic principle of the Philips Curve.
p. 128 ‘For one, Nixon was engaged . . .’ See, for example, Paul Krugman, ‘The stagflation myth’, New York Times, 3 June 2009.
p. 129 ‘Not because it was correct . . .’ The prize was established in 1968 as the Swedish National Bank’s Prize in Economic Sciences In Memory of Alfred Nobel. It is unrelated to the original prizes established by Alfred Nobel himself in 1895, although it is granted at the same ceremony.
p. 129 ‘The argument held a great . . .’ As I mentioned above, the share of national income that went to the top 1 per cent of earners fell dramatically during the post-war decades. This didn’t hurt them a great deal so long as economic growth remained strong, since they were getting a still-large share of a fast-growing pie. But when growth stalled and inflation exploded in the 1970s, their wealth began to collapse in a much more serious way.
p. 130 ‘He even managed to abolish . . .’ The Financial Services Modernization Act of 1999 abolished the Glass–Steagall Act.
p. 131 ‘CEO salaries grew by . . .’ Executive Excess 2006, the 13th annual CEO compensation survey from the Institute for Policy Studies and United for a Fair Economy.
p. 131 ‘According to US Census data . . .’ US Census Bureau, Historical Income Tables: Families.
p. 131 ‘As it turns out, making . . .’ As Ha-Joon Chang has so aptly put it.
p. 131 ‘In fact, quite the opposite . . .’ Robert Pollin, Contours of Descent (New York: Verso, 2005), p. 133.
p. 134 ‘ “We thought that an acceleration . . .” ’ Prebisch, 1980, pp. 15, 18, cited in Kevan Harris and Ben Scully, ‘A hidden counter-movement? Precarity, politics, and social protection before and beyond the neoliberal era’, Theory and Society 44(5), 2015, pp. 415–44.
Five: Debt and the Economics of Planned Misery
p. 138 ‘It drove right to the . . .’ For more on this movement, see Vijay Prashad’s excellent book, The Darker Nations: A People’s History of the Third World (New York: The New Press, 2007).
p. 139 ‘The idea was to create . . .’ Vijay Prashad, The Poorer Nations: A Possible History of the Global South (London: Verso Books, 2013).
p. 140 ‘Outraged by this incursion . . .’ This shipment was known as Operation Nickel Grass.
p. 140 ‘In response, the Arab coalition . . .’ Egypt’s Sadat managed to convince Saudia Arabia’s King Faisal to make this move.
p. 140 ‘Desperate for a quick solution . . .’ Lizette Alvarez, ‘Britain says US Planned to seize oil in ’73 crisis’, New York Times, 2 January 2004.
p. 141 ‘As a result of the oil . . .’ The $450 billion figure reflects petrodollar influx into OPEC as of 1981.
p. 142 ‘Loan pushers were trained . . .’ John Perkins offers a troubling account of his time as a loan pusher during those years, in his bestselling book Confessions of an Economic Hit Man.
p. 142 ‘These “juicers” created a strong . . .’ Perkins, Economic Hit Man.
p. 142 ‘By 1982, total debt stocks . . .’ In 2013 dollars, according to World Development Indicators (DataBank).
p. 143 ‘Through the miracle of compound . . .’ In 2013 dollars, according to World Development Indicators (DataBank).
p. 143 ‘And that’s exactly what happened . . .’ Average interest rates on new loans to global South countries shot up from 5 per cent in 1970 to more than 10 per cent in 1981.
p. 143 ‘In 1982, Mexico took . . .’ In current dollars.
p. 144 ‘In other words, the IMF . . .’ I am indebted to my colleague David Graeber for this comparison.
p. 144 ‘This is how the plan . . .’ The IMF had been using conditional lending since 1952, but it wasn’t until the late 1970s that this power was leveraged to impose a specific economic ideology around the world. This idea was first hatched by World Bank president Robert McNamara (formerly president of Ford Motor Company, and then Secretary of Defense) in 1979. The goal was to begin to dismantle developmentalism and get indebted countries to focus on exports again. In 1980 the World Bank’s first Structural Adjustment Loan was approved for Turkey – Loan 1818, for $200 million. The idea was picked up and supported strongly by Ronald Reagan.
p. 145 ‘This was a big blow . . .’ As the Phillips Curve states, higher inflation correlates (in the short term) with higher employment.
p. 148 ‘These “innovative debt products” . . .’ See World Bank Treasury, List of Selected Recent Bonds, http://treasury.worldbank.org/cmd/htm/World_Bank_Bond_Issuances.html.
p. 148 ‘And yet such invasive conditions . . .’ I am indebted to Ha-Joon Chang for this illuminating comparison.
p. 149 ‘During the 1960s and 1970s, global South . . .’ These figures exclude China. Robert Pollin, Contours of Descent (New York: Verso, 2005), p. 133.
p. 149 ‘The region went into a long . . .’ For perspective on the impact of structural adjustment on Africa, see: H. White, ‘Adjustment in Africa: a review article’, Development and Change 27, 1996, pp. 785–815; B. Riddel, ‘Things fall apart again: structural adjustment programs in sub-Saharan Africa’, Journal of Modern African Studies 30(1), 1992, pp. 53–68; Howard Stein and Machiko Nissanke, ‘Structural adjustment and the African crisis: a theoretical appraisal’, Eastern Economic Journal, 1999, pp. 399–420.
p. 149 ‘The GNP of the average . . .’ Ha-Joon Chang, Bad Samaritans (New York: Bloomsbury Press, 2008), p. 28.
p. 149 ‘the number of Africans living . . .’ World Bank, World Development Indicators, 2007.
p. 151 ‘We can get a better . . .’ The figures I cite here come from the chapter titled ‘SAPing the Third World’, in Mike Davis, Planet of Slums (London: Verso, 2006), unless indicated otherwise.
p. 151 ‘By the end of the 1990s . . .’ James Petras and Henry Veltemeyer, ‘Age of reverse aid: neoliberalism as catalyst of regression’, Development and Change 33(2), 2002, p. 287.
p. 151 ‘In Brazil, wages fell by . . .’ According to the ILO; see Martin Khor, States of Disarray: The Social Effects of Globalization (Geneva: UNRISD, 1995), p. 45. See also Davis, Planet of Slums, p. 166: the average income of working people fell by 40 per cent in Venezuela, 30 per cent in Argentina and 21 per cent in Brazil and Costa Rica.
p. 152 ‘In Latin America in 1980 . . .’ Petras and Veltemeyer, ‘Age of reverse aid’, p. 287.
p. 152 ‘In Rio, inequality rose from . . .’ Davis, Planet of Slums, p. 166.
p. 153 ‘By 1992, some 146 IMF . . .’ Davis, Planet of Slums, p. 166. See John Walton and David Seddon, Free Markets and Food Riots: The Politics of Global Adjustment (Hoboken, NJ: John Wiley & Sons, 2011).
p. 154 ‘Structural adjustment allowed the West . . .’ Ha-Joon Chang, Kicking Away the Ladder: Development Strategy in Historical Perspective (London: Anthem Press, 2002).
/> p. 154 ‘In the United States . . .’ And the Foreign Sovereign Immunities Act of 1976.
p. 155 ‘Middle- and low-income countries . . .’ ‘Analysis of World Bank voting reforms’, Bretton Woods Project, 30 April 2010.
p. 156 ‘This minority (and white) control . . .’ The term global apartheid was first introduced by Gernot Köhler in 1978.
p. 156 ‘There have long been calls . . .’ For instance, the demands made in the Charter for Global Democracy (Charter99), signed in Vienna in 1999.
p. 156 ‘ “Today I resigned from the staff . . .” ’ I first came to learn about Budhoo’s letter from Naomi Klein’s The Shock Doctrine (London: Allen Lane, 2007).
p. 157 ‘But it was little more . . .’ Geske Dijkstra, ‘The PRSP approach and the illusion of improved aid effectiveness: lessons from Bolivia, Honduras, and Nicaragua’, Development Policy Review 29, 2011, pp. 110–33.
p. 157 ‘Once they understand the consequences . . .’ This appears to be the position of William Easterly in his book The White Man’s Burden (Oxford: Oxford University Press, 2007).
p. 158 ‘This is what economists call . . .’ David Harvey, A Brief History of Neoliberalism (Oxford: Oxford University Press, 2005).
p. 159 ‘Capitalists tend to prefer such . . .’ The Supreme Court case Dodge v. Ford Motor Company is often invoked to force companies to prioritise short-term shareholder returns over other concerns.
p. 160 ‘To get a sense of . . .’ World Bank Treasury, Annual Borrowing Program, http://treasury.worldbank.org/cmd/htm/AnnualBorrowingProgram.html.
p. 160 ‘On top of this . . .’ Petras and Veltmeyer, ‘Age of reverse aid’, p. 286.
p. 160 ‘Through these “tied aid” arrangements . . .’ James Bovard, ‘The World Bank vs. the Poor’, Cato Policy Analysis No. 92, 1987.
p. 161 ‘What is more, American companies . . .’ Harvey, A Brief History of Neoliberalism, p. 30.
p. 161 ‘The World Bank alone privatised . . .’ World Bank, Private Participation in Infrastructure Database, http://ppi.worldbank.org/.
p. 162 ‘ “We believe that providing clean . . .” ’ ‘The World Bank botches water privatization around the world’, Alternet, 22 September 2008.
p. 162 ‘It is not a real solution . . .’ I am indebted to David Harvey for this insight.
p. 163 ‘Rather, the statement of purpose . . .’ IBRD Articles of Agreement, http://siteresources.worldbank.org/EXTABOUTUS/Resources/ibrd-articlesofagreement.pdf.
p. 164 ‘In 1960, the richest fifth . . .’ United Nations Development Programme, Human Development Report 1999: Globalization with a Human Face (New York: Oxford University Press, 1999), pp. 104–5.
p. 165 ‘South Asia, where structural adjustment . . .’ The ratio of per capita income in the US to that in Latin America grew from 6:1 to 8.5:1, the ratio of the US to the developing countries of the Middle East and North Africa grew from 15.1:1 to 20.8:1, and the ratio of the US to sub-Saharan Africa grew from 26.9:1 to 51.5:1. For South Asia the ratio shrank from 86.5:1 to 73.2:1. The absolute gap in per capita incomes, however, grew for all regions during this period vis-à-vis the United States. The gap between the US and Latin America grew by 66 per cent. For the Middle East, North Africa and sub-Saharan Africa it grew by 60 per cent. For South Asia it grew by 56 per cent. (GDP per capita, constant 2005 US$; data from World Development Indicators.)
p. 165 ‘If workers in the developing . . .’ Samir Amin, Unequal Development (New York: Monthly Review Press, 1976), p. 144.
p. 166 ‘The best way to think . . .’ Gernot Köhler, ‘Unequal Exchange 1965–1995: World Trend and World Tables’, 1998, wsarch.ucr.edu/archive/papers/kohler/kohler3.htm. See also Gernot Köhler and Arno Tausch, Global Keynesianism: Unequal Exchange and Global Exploitation (New York: Nova Science Publishers, 2002). Köhler calculates unequal exchange in 1995 as $1.752 trillion in current dollars. See note in Chapter 1 for more on Köhler’s methods and the meaning of unequal exchange.
p. 166 ‘Altogether, during the whole period . . .’ All of these figures come from the World Bank’s World Development Indicators, accessed through DataBank, and are reported in 2013 dollars.
p. 167 ‘Lebanon, for instance, spends 52 . . .’ New Economics Foundation, ‘Debt Relief as if Justice Mattered’, 2008.
p. 168 ‘The rest was piled up . . .’ J. W. Smith, The World’s Wasted Wealth (Sun City, AZ: Institute for Economic Democracy Press, 1994), p. 143.
p. 168 ‘External debt as a percentage . . .’ External debt stocks (percentage of GNI), World Bank, International Debt Statistics.
p. 171 ‘ “There’s no better way . . .” ’ David Graeber, Debt: The First 5,000 Years (New York: Melville House, 2011), p. 5.
p. 171 ‘In all of these cases . . .’ In other words, in order win debt relief a country must first agree to submit to IMF structural adjustment.
p. 172 ‘One of the key tenets . . .’ Amartya Sen, Development as Freedom (New York: Oxford University Press, 1995).
p. 172 ‘The World Bank itself defines . . .’ World Bank, ‘What is Development?’ http://www.worldbank.org/depweb/english/beyond/beyondco/beg_01.pdf.
Six: Free Trade and the Rise of the Virtual Senate
p. 174 ‘Ever since the 14th century . . .’ See Ha-Joon Chang, ‘Kicking away the ladder’, Post-Autistic Economics Review 15, 2002.
p. 174 ‘The system was rigged . . .’ See Perry Anderson, American Foreign Policy and Its Thinkers (New York : Verso, 2014).
p. 177 ‘If Portugal is better at . . .’ And Portugal should focus on wine even if it can produce cloth more cheaply than England, presuming its comparative advantage over England in wine is greater than that in cloth.
p. 178 ‘ “We are told that free . . .” ’ These words come from a speech by Karl Marx that he delivered before the Democratic Association of Brussels on 9 January 1848.
p. 179 ‘Comparative advantage isn’t given . . .’ The economist Arghiri Emmanuel has probably done the most to develop this view, arguing that wages and prices are set by historical-political factors. This view became a cornerstone of dependency theory.
p. 180 ‘ “But,” Chang argues, “if I drive . . .” ’ Ha-Joon Chang, ‘My six-year-old son should get a job’, in Bad Samaritans (New York: Bloomsbury Press, 2008), chapter 3.
p. 181 ‘ “Likewise,” Chang says, “industries . . .” ’ Chang, Bad Samaritans, pp. 65–6.
p. 182 ‘$374 billion per year . . .’ This is the figure for agricultural subsidies in OECD countries in 2010, according to data published by the OECD. Subsidies given directly to farmers totalled $227 billion in the same year. Agricultural subsidies also hurt small farmers within rich countries, as the vast majority of subsidies go to big agribusiness. In the US, 20 per cent of recipients receive 89 per cent of subsidies.
p. 183 ‘If they decide to break . . .’ I am indebted to Yash Tandon for the example of the cotton four. Yash Tandon, Trade is War: The West’s War Against the World (New York: OR Books, 2015), p. 41ff.
p. 183 ‘Indeed, a study conducted . . .’ Cited in Chang, Bad Samaritans, p. 69.
p. 184 ‘They placed special quotas on . . .’ The quota system was known as the Multi-Fiber Arrangement, and was first put in place in 1974.
p. 184 ‘At the same time, Western . . .’ Preferences were organised through the Generalized System of Preferences (GSP) and the US-initiated African Growth and Opportunity Act (AGOA), of which Swaziland became a beneficiary in 2000.
p. 185 ‘The WTO upheld their argument . . .’ This was according to the Agreement on Textiles and Clothing (ATC), which was implemented in 1995 and phased in over ten years.
p. 185 ‘As one might imagine, this . . .’ I develop this argument in ‘Neoliberal plague: the political economy of HIV transmission in Swaziland’, Journal of Southern African Studies 38(3), 2012, pp. 513–29.
p. 188 ‘As a result of TRIPS . . .’ Meena Raman, ‘WIPO Seminar Debates Intellectual Property and Development’, Our World is Not For Sale, 10 May 2015.<
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p. 189 ‘During the AIDS crisis . . .’ See Peter Mugyenyi, Genocide by Denial: How Profiteering from HIV Killed Millions (Kampala: Fountain Publishers, 2008).
p. 190 ‘It was only in 2003 . . .’ The Doha Declaration on the TRIPS Agreement and Public Health was signed in November 2001 in order to allow Least Developed Countries (LDCs) to produce generic drugs for internal consumption in the case of emergency public health crises. Nevertheless, the Doha Declaration failed to benefit countries that lacked the capacity for pharmaceutical production (like Swaziland), for TRIPS still prevented the importation of generic drugs. It was not until the WTO succumbed to pressure and signed the General Decision of August 2003 that poor nations were allowed to import generics.
p. 190 ‘But we know that . . .’ Dylan Gray, ‘Big pharma’s excuses for the monopolies on medicine won’t wash’, Guardian, 22 February 2013.
p. 191 ‘As for the argument about . . .’ The pharmaceutical industry spent $27 billion on marketing in the US in 2012. Nine of the ten largest companies spent more on marketing than they did on research and development. Ana Swanson, ‘Big pharmaceutical companies are spending more on marketing than research’, Washington Post, 11 February 2015.
p. 191 ‘In the consensus process . . .’ Peter Drahos, ‘When the weak bargain with the strong: negotiations in the World Trade Organization’, International Negotiation 9(1), 2003, pp. 79–109.
p. 191 ‘This is why so many . . .’ Richard H. Steinberg, ‘In the shadow of law or power? Consensus-based bargaining and outcomes in the GATT/WTO’, International Organization, 56(2), 2002, pp. 339–74.
p. 194 ‘ “Twenty-five per cent of the population . . .” ’ Lara Carlsen, ‘Under NAFTA, Mexico Suffered, and the United States Felt Its Pain’, New York Times, 24 November 2013.
p. 194 ‘NAFTA led directly to the . . .’ Robert Scott, ‘Heading South: US–Mexico Trade and Job Displacement after NAFTA’, Economic Policy Institute, 3 May 2011.
p. 194 ‘NAFTA proved to be a powerful . . .’ The statistics I have listed in the previous paragraphs come from Public Citizen’s ‘NAFTA’s Legacy for Mexico’ report, unless otherwise stated.