Brave New Third-World Order
excerpted from the book
Brave New World Order
by Jack Nelson-Pallmeyer
Orbis Books, 1992, paper
p5
Jon Sobrino, a Jesuit priest from El Salvador, writing after the
murder of two women and six priests at the hands of U.S.-trained
soldiers in El Salvador
"Wealth and power cannot exist if other people do not
die, if people do not suffer in powerlessness and poverty and
without dignity.... We say that the First World, the wealthy countries,
cover up the greatest scandal in this world, which is the world
itself. The existence of two-thirds , of humankind dying in poverty
is covered up."
***
We rightly equate food shortages and long lines in the Soviet
Union with the failures of communism, but we fail to see domestic
and international hunger in light of the failure of capitalism
and the international market economy. The United States celebrates
democratic movements and social changes in Eastern Europe. However,
it blocks the possibility of similar changes within the U.S. sphere
of influence. Processo, a journal of the Catholic University (UCA)
m San Salvador, implicitly highlights U.S. hypocrisy by contrasting
the fate of opposition leaders in Eastern Europe with that of
leaders in U.S.-dominated El Salvador:
The so-called Salvadoran "democratic process" could
learn a lot from the capacity for self-criticism that the socialist
nations are demonstrating. If Lech Walesa had been doing his
organizing work in El Salvador, he would have already entered
into the ranks of the disappeared, at the hands of "heavily
armed men dressed in civilian clothes ', or have been blown to
pieces in a dynamite attack on his union headquarters. If Alexander
Dubcek were a politician in our country, he would have been assassinated
like Hector Oqueli [a social democratic leader killed by Salvadoran
death squads in Guatemala]. If Andrei Sakharov had worked here
in favor of human rights, he would have met the same fate as
Herbert Anaya [assassinated leader of the Non-governmental Human
Rights Commission]. If Ota-Sik or Vaclav Havel had been carrying
out their intellectual work in El Salvador, they would have woken
up one sinister morning, Iying on the patio of a university campus
with their heads destroyed by the bullets of an elite army battalion.
The poor desperately need a new world order. However, an authentically
new order would require a fundamental break with the old. Not
only was victory in the Cold War an empty claim for underdeveloped
countries but the new world order that is taking shape in the
post-Cold War period is solidifying an alliance of Northern industrialized
countries against the nations of the South.
Wealth Transfers and Third-World Poverty
The new world order is ruled primarily by two global police
forces: a military force dominated by the United States, and an
economic force controlled by the United States and other Western
powers. The "global economic cop" is the International
Monetary Fund (IMF), which works closely with private Western
banks and the World Bank to guide the international economy in
preferred directions. Neither of these "global cops"
is new, but their power has grown considerably within the framework
of a new world order. Together they ensure a continuous transfer
of wealth from the poor to the rich.
The poor can rightfully protest police brutality at the hands
of these "global cops" and their allies withm third-world
countries. The poor are victims of structural violence and injustice
within the old order and the new. They are victimized not once,
but twice. First, they are casualties of injustice within their
own nations, because most third-world leaders organize economic
and human resources to enhance the power and privilege of internal
elites. Second, they are victims of injustice within the global
economy, which is structured by Western countries to drain wealth
from underdeveloped countries to themselves. This amounts to a
double dose of exploitation for the third-world poor. They are
marginalized within their own societies, and they are impoverished
by an unjust international order that serves the needs of external
elites.
***
p8
The poor are excluded from meaningful participation in economic
life in most third-world countries. According to the World Bank,
it is common for two or three percent of the landholders to control
seventy to eighty percent of the land. Banks are owned or controlled
by foreigners, rich business owners, the state, or military officials,
who are becoming major economic actors in some societies. Commercial
banks rarely if ever make loans to poor people, who are by definition
not credit worthy If small landowners get credit from a bank,
they risk losing their land, which they use as collateral. From
biblical times to the present foreclosing on debt has been an
important means of transferring land from the poor to the rich.
Generally speaking, poor people live without credit or live in
bondage to usurious (- moneylenders.
Industrial and agricultural production throughout much of
the Third World caters to export markets and elite consumption
These sectors are highly concentrated and subject to significant
foreign influence and control. Jobs in the commercial sector when
available to the poor, are limited to seasonal agricultural work
and unskilled factory work. It is not uncommon for poor majorities
to be unemployed or underemployed. The subsistence agricultural
sector and local craft industries, so important to the poor, are
ignored and/or often undermined by official development efforts.
The problems of the poor are compounded by corruption, political
repression, and terror. Independent labor unions and other social
change groups are treated harshly
The victimization of the poor within unjust internal orders
is not limited to their exclusion from meaningful participation
in the economic life of their societies. They also bear the brunt
of budget cuts, are often excluded from social services, and are
ignored when their societies invest in human capital.
The rich live in exclusive neighborhoods with nice houses
running water, sewer lines, schools, hospitals, clinics, and parks
They gain access to good health care, education, and nutrition
through a combination of private wealth and political power. Their
money makes health care, housing, and food affordable. It also
gives them a privileged place in politics. Political influence
then allows them to shape public policies that reinforce their
wealth-producing endeavors. It also enables them to direct limited
public funding to meet their needs for schools, hospitals, clinics,
and the basic infrastructure such as roads, sewers, and
The situation of the poor is just the opposite. The poor live
in shanty towns and shacks. Running water is the stream of raw
sewage winding among their homes. Their houses, often found at
the bottom of ravines, are a collage of tin, plastic, cardboard
and wood. In urban areas one or two water taps may be the only
water source for hundreds of families-and water may flow from
these taps for only a couple of hours each day. In rural areas
women and children often spend a significant part of each day
gathering water and firewood from distant sources.
The poor, in stark contrast to the rich, are denied access
to housing, health care, education, and adequate nutrition. They
have little economic power and even less political clout. The
poor lack political power, and therefore they are unable to shape
public policies to redistribute wealth-producing resources or
to fund education, health care, potable water, sewers, housing,
and roads that will meet their needs.
The typical job of the poor is to survive. The fact that many
do survive is a major testimony to the creativity and resiliency
of the poor. That many do not is part of a cover-up that is central
to world orders both old and new.
The unbearable situation of the poor under oppressive national
orders is reinforced by an unjust international order President
Bush's new world order is coming on the heels of a decade that
witnessed the largest transfer of wealth from the third-world
poor to the developed-country rich in human history. The recent
massive drain of wealth from the South to the North is reminiscent
of the colonial conquest. In 1989 alone, third world peoples sent
$52 billion more in debt payments to developed countries in the
North than their nations received in new credits.
The third-world poor blatantly subsidize the developed-country
rich because the two global police forces do their jobs effectively.
The United States reinforces a global economy based on unfair
trade practices and exploits third-world indebtedness through
a combination of military and economic intervention. Third-world
countries for decades have demanded fairer terms of trade within
a new international economic order. The response of Western countries,
with leadership from the United States, has been to defend a system
dominated by unfair pricing while offering loans to financially
strapped third-world countries. Today, loans to underdeveloped
countries are either drying up or are highly conditional. If a
third-world country wants access to loans from international lending
institutions and private banks, then it must agree to specific
terms that often result in greater exploitation.
The United States, when it suits its interests, believes in
free trade and in the utility of letting market forces set international
prices. The discrediting of command economies rightfully reinforces
a belief that markets have an important role to play within national
economies and international trade. Michael Harrington, perhaps
the best-known U.S. socialist, wrote before the upheaval in Eastern
Europe that "markets have an important role to play in the
new socialism." However, free trade is rarely free. For example,
about eighty percent of textile and apparel imports into the United
States are restrained by thirty-four quota agreements, mostly
with developing countries, and there are about 160 "voluntary"
export restraints in place to prevent the free movement of goods
into the United States and Europe.
Free trade may be fine among equal partners. However, it is
a prescription for disaster in a world of stark inequalities.
Unjust terms of trade coupled with loans to the Third World have
resulted in a $1.3 trillion debt among the world's underdeveloped
countries. Exploitation of this debt is now a major means of transferring
wealth from the poor to the rich.
One problem with free trade is that the international market
economy is dominated by multinational corporations and banks.
These groups, which pursue and defend specific interests, are
directly and indirectly responsible for the misery and deaths
of millions of third-world people. Most underdeveloped countries
depend on revenues from a few export commodities to finance development.
These commodities, according to the Ecumenical Coalition for Economic
Justice, are often "sold on world markets where prices are
set in U.S. dollars under conditions of very imperfect competition."
Markets for most primary commodities are "dominated by a
few corporations." Poor countries are selling their commodities
in "markets where many sellers face only a few powerful buyers.''
***
p11
A large number of sellers selling to a few number of buyers
is a characteristic of a free-market system in which weaker parties
in the "free" transaction lose out. Depressed commodity
prices are common to such an unequal free market. Falling commodity
prices are a major factor in the economic crisis plaguing underdeveloped
countries and they directly and indirectly contribute to hunger
and starvation. Between 1986 and 1988 sub-Saharan Africa lost
$50 billion in export earnings due to lower commodity prices.
The Western strategy of providing limited aid to compensate
partially for an unfair trading system is by most accounts a gross
failure. Aid, often self-serving and highly conditional, doesn't
compensate for lost income from unfair trading practices and capital
transfers to the rich through rising debt payments and capital
flight. Eighty percent of the cash flow between the rich and poor
nations occurs through trade, only five percent through aid. In
1985 emergency aid from all sources to Africa was approximately
$3 billion. That same year Africa paid $6 billion in interest
payments and lost an additional $19 billion in export earnings
due to price collapses on the international market.
The poor may not directly benefit from higher commodity prices
because wealth-producing resources are concentrated in the hands
of internal elites. However, they are most directly victimized
by burdensome debts that are aggravated by low commodity prices
and low export earnings. Low commodity prices lead to third-world
country debt. Debt for the poor leads to suffering and oftentimes
death.
Death through international finance is a central feature of
world orders old and new. Indebtedness gives the IMF substantial
policing power over third-world nations. The IMF, as the economic
enforcer in the new world order, uses its power on behalf of the
United States and other developed countries to achieve three important
objectives. First, IMF policies ensure a continuous transfer of
wealth to rich countries through interest payments on third-world
country debt. Second, the IMF imposes conditions on third-world
economies that result in their continued integration into an unjust
international order. Finally, IMF policies encourage greater foreign
penetration and control of the resources and economies of indebted
third-world countries. The principal tools in the IMF arsenal
are austerity measures imposed through structural adjustment programs
(SAPs). The Ecumenical Coalition for Economic Justice describes
the impact of these SAPs on third-world countries:
Instead of developing their own resources to meet pressing
human needs, many Third World economies are literally being "sapped"-gradually
exhausted of their wealth- through conditions imposed by their
creditors. The goals of this new colonialism are, in part, the
same as the old. Thanks to SAPs, transnational corporations enjoy
greater access to cheap raw materials, cheap labor and foreign
markets. But ... the contemporary recolonization also involves
an annual collection of tribute in the form of interest payments
on debts that ... can never be paid off.
Thanks to the "success" of SAPs, debt bondage is
becoming permanent.
Phrases such as the "new colonialism" and "contemporary
recolonization" are synonyms for the new world order in which
the IMF plays the role of global economic cop.
The standard features of the structural adjustment programs
imposed by the IMF and the World Bank include currency devaluations;
higher interest rates; strict control of the money supply; cuts
in government spending; removal of trade and exchange controls;
the use of market forces to set the prices of goods, services,
and labor; privatization of public sector enterprises; and indiscriminate
export promotion. These measures, according to IMF theory, should
result in lower inflation, increased exports, reduced consumption
and imports, greater efficiency, international competitiveness,
and substantial foreign exchange earnings available for debt repayments.
SAPs in practice have been a dramatic success for first-world
elites and a dramatic failure for the third-world poor. Between
1982 and 1989 the net outflow of debt service from underdeveloped
countries to the developed countries, that is, the amount of capital
exported in excess of new loans, equaled $240 billion. Despite
this massive transfer of wealth from the poor to the rich the
World Bank reports that in the five years after 1982 no country
rescheduling its debts actually reduced the ratio of that debt
to its gross national product.
The problem of third-world indebtedness worsened considerably
because of decisions made by U.S. elites, which sent U.S. indebtedness
and global interest rates soaring. Unfortunately, "sewage
workers" pay when "world controllers" make "mistakes."
Between 1978 and 1983 Latin America's total interest payments
increased by 360 per cent. By 1984 every 1 per cent rise in interest
rates was in effect adding $700 million to the annual payments
of Brazil alone. By 1990 Latin America's debts were four times
as large as its total annual earnings from exports which meant
that every 1 per cent rise in interest rates necessitated a 4
per cent increase in exports if the continent was to pay.
Growing indebtedness means greater vulnerability to IMF-prescribed
"solutions." There are at least seven ways in which
the SAPs imposed by the IMF and World Bank negatively effect underdeveloped
countries and poor people within them. First, an emphasis on production
for export, a standard feature of SAPs, further weakens the subsistence
sector while strengthening the sectors dominated by foreigners.
These export sectors tend to rely upon imported raw materials
and technology. The cost of such imports can actually aggravate
the debt crisis. More important, the commercial export sector's
reliance on foreign inputs and foreign markets precludes the possibility
of strengthening a domestic economy in which agriculture serves
local needs, including food production for local consumption and
production of raw materials for use in a domestically oriented
commercial sector. The agricultural sector is reduced to an export
factory that feeds the insatiable appetite of the debt and not
people. Thus SAPs become a prescription for hunger, malnutrition,
and environmental deterioration. "Development" within
the framework of SAPs is limited to an IMF plan for export-led
debt repayment. A second negative consequence of SAPs is that
the emphasis on exports can result in overproduction and a further
deterioration in the terms of trade. The Ecumenical Coalition
for Economic Justice describes how this happens, who benefits,
and who loses:
While it might appear to make sense for a single country to
try to improve its export earnings by increasing the volume of
its sales, when thirty countries that export the same basic products
try to do so, they end up driving down prices. The only winners
are the corporate buyers. As commodity prices fall, already exploited
peasant farmers, miners and workers are told they have to take
price or wage cuts to remain competitive, further subsidizing
corporate profits.
Third, the higher interest rates mandated by SAPs often encourage
speculation, fuel inflation, and further aggravate class divisions
by limiting lending to the most affluent and powerful economic
sectors. Higher interest rates may also discourage productive
investment and thereby further depress ailing economies, aggravating
already serious problems of unemployment.
Fourth, removal of trade and export controls fosters dependence
on foreign inputs, increases the domination of foreign firms over
third-world economies, and encourages capital flight. "A
good portion of the money lent to the Third World and in particular
to Latin American countries has mysteriously found its way back
to U.S. banks," writes journalist Paul Vallely, "but
in the personal accounts of influential Latin Americans."
Elites from Latin America and the Caribbean have more than $200
billion worth of assets in the United States. Capital flight is
another example of how the third-world poor subsidize the first-world
rich. Elites exploit the poor and then transfer their wealth to
U.S. and other Western banks.
Fifth, privatization encouraged by SAPs can result in greater
concentrations of wealth and a loss of economic sovereignty. Privatization
offers local elites and foreign investors the opportunity to purchase
publicly developed enterprises at sharply discounted prices. It
is particularly profitable when linked to debt equity swaps. Debt
equity swaps are a means by which foreign investors use debt as
leverage to take over important sectors of third-world country
economies. A commercial bank in a debt equity transaction sells
a portion of the debt owed to it by a third-world country to a
corporation at a discount. The corporation receives from the country's
central bank the value of the debt purchased in local currency,
which is then invested as equity in local enterprises.
Sixth, mandated currency devaluations erode the purchasing
power of workers while benefiting foreign corporations operating
in export zones. For example, as a result of devaluations of the
Mexican peso the U.S. dollar cost of employing young women in
Mexico's export processing zones fell by two-thirds.
Finally, in order to satisfy foreign creditors third-world
governments drastically reduce government spending. Spending cuts
can undermine future development by reducing funds for economic
and social infrastructure. They also aggravate problems of hunger
and poverty. One reason third-world elites cooperate with the
IMF is because they place the weight of painful adjustments on
the backs of the poor. SAPs lead to dramatic spending reductions
in areas of food subsidies, health, and education. According to
the United Nations children's organization (UNICEF) the world's
thirty-seven poorest countries cut health-care budgets by fifty
percent and education budgets by twenty-five percent in the 1980s.
UNICEF estimates that more than a million African children died
in the last decade as a result of structural adjustment programs
imposed on the poor. In 1988 alone, according to UNICEF, 500,000
children died in underdeveloped countries as a direct result of
SAP-induced austerity measures. UNICEF has concluded:
It is essential to strip away the niceties of economic parlance
and say that . . . the developing world's debt, both in the manner
in which it was incurred and in the manner in which it is being
"adjusted to" ... is simply an outrage against a large
section of humanity.
Third-world elites also cooperate with the IMF because their
power is tied to foreign economic interests. "The third world
elites who borrowed the money," Jorge Sol, a former IMF executive
director for Central America, states, ". . . come from the
same class as those who lent it and as those who managed it at
the IMF. They went to the same schools, belonged to the same clubs.
They all profited greatly from the debt. They will not turn on
those interests."
SAPs are a disaster for the poor, and they fail to achieve
officially stated goals. However, from the perspective of first
world elites, the International Monetary Fund and its partner,
the World Bank, police the world order with great efficiency.
The Ecumenical Coalition for Economic Justice provides the following
summary:
Given the evidence that SAPs do not achieve their official
goals, that they cause immense hunger and misery and they accentuate
underdevelopment, why do private bankers, the IMF, the World
Bank and conservative governments insist on their strict application?
. . . Viewed from the perspective of transnational investors,
SAPs do make sense. SAPs assure transnational corporations that
countries on the periphery will supply abundant supplies of cheap
raw materials, low-wage labor and markets for some of their products.
SAPs enable transnationals to maintain control over manufacturing
processes, technology and finance, sharing some of the spoils
with local elites. In addition, SAPs promote exports that earn
foreign exchange to service otherwise unpayable debts.
Conclusion
Jon Sobrino's charge that wealthy countries "cover up
the greatest scandal in this world, which is the world itself"
is more comprehensible in light of the above analysis. The new
world order is being structured on the backs of the poor and on
behalf of transnational corporations and banks. The poor are discovering
that the end of the Cold War leaves them even more vulnerable
to a new world order in which the North is increasingly united
against the South. One major objective of this new order is to
ensure the continued integration of third-world economies into
an inherently unjust system. Two global police forces ensure this
integration, the most important of which is the International
Monetary Fund. The other is the U.S. military, which justifies
itself in the post-Cold War period on the basis of third world
interventionism (see chapter 6J but which may in fact be less
important because of effective control achieved through institutions
such as the IMF.
The structural roots of massive third-world poverty testify
to the need for a radical break with both old and new orders of
the dominant powers. An authentically new world order would condemn
both the command economies dominated by elite bureaucratic parties
and the international market economy dominated by national and
international elites. It would also dismantle the economic policing
powers of the International Monetary Fund...
Brave
New World Order
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