Brave New Third-World Order

excerpted from the book

Brave New World Order

by Jack Nelson-Pallmeyer

Orbis Books, 1992, paper

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.


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.''



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.



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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