Subtle and Invisible – The Draining of the South

Cheddi Jagan railed for decades in hundreds of articles and thousands of speeches at the unfair and exploitative extraction of wealth by the developed industrial countries from the poor South, with an unenviable command of facts and figures. In the 1980s he travelled with a chart of figures in the trunk of his car. Whenever he saw a group of people, he would stop the car, take out the chart and deliver an impromptu lecture on the issue of exploitation. He demonstrated over and over again that the wealth extracted from poor countries, particularly Latin America and former British colonies, which he knew best, far exceeded the aid and investment that was received. No one who ever listened to him would be unaware of the overthrow of the Arbenz Government in Guatemala in 1954 and the Mossadeq Government in Iran in 1953. Both tried to defend and protect their countries from exploitation – Arbenz by agrarian land reform and Mossadeq by nationalising the Anglo-American Oil Company. Both countries suffered decades of brutal dictatorship, and genocide in Guatemala, thereafter.

Events in the late 1980s drowned out the voices of those who advocated, not socialism, but a global order, dedicated to more just relations between rich industrial and poor countries to assist in eliminating poverty. The triumph of the market after the fall of the Soviet Union and the imposition of the Washington Consensus that entrenched neoliberal policies on the World Bank and IMF, which in turn imposed them all over the developing world, including Guyana, silenced those demanding equity in international economic relations. Neoliberal policies, aiming to ease conditions for investment, did not solve the problems of development and poverty which remained high until its foundations were challenged by the 2008 world financial crisis. The COVID19 pandemic finally drove the last nail in the coffin of neoliberalism with the policies of social spending initiated by the Biden Administration.

In Jagan’s time, the few academics who wrote about the economic basis and consequences of the policies

Jagan struggled to advocate, were given short shrift. But they continued doggedly until the current environment which has become more hospitable for them. Economists Samin Amir and Arghiri Emmanuel described the subtle and almost invisible transfer of value from the South which sustains high levels and consumption in the North. These and other economists and historians of the “dependency theory” argued that the “underlying patterns of colonial appropriation remained in place and continued the global economy.” Recent research (“Global Patterns of ecologically unequal exchange,” Ecological Economics, Vol 179, Jan 2021) shows that rich countries continue to rely on large net appropriations from the Global South for tens of billions of tonnes of raw material and hundreds of billions of hours of human labour per year embodied in primary commodities as well as high tech products such as smart-phones, laptops, computer chips which are now overwhelmingly manufactured in the South. Since wages paid in the South are on average one-fifth of the level of Northern wages, it means that for every embodied unit of labour and resources imported by the South from the North, the South has to export many more units to pay for it.

The writers of the article from which this material is taken (Jason Hickel, Dylan Sullivan and Huzaifa Zoomkawala, “Rich countries drained $152tn from the Global South since 1960,” published in Aljazeera 6 May 2021), all academics, building on the work of Amir and Emmanuel, found that the drain increased dramatically in the 1980s and 1990s when neoliberal structural adjustment programmes were imposed on the South. They calculated that $2.2tn in Northern prices were drained from the South every year, enough to end global poverty fifteen times over. They conclude that net growth in the North rely on appropriations from the South.

Western economics tend to see low wages in the South as a natural phenomenon – a market outcome. The reality, these experts point out, is that the monopoly of power in the IMF and World Bank and the bargaining power in the World Trade Organisation, allowed rich countries to devise structural adjustment programmes which cut public sector wages and impose policies to compete for foreign investment. These impositions forced competitions among Southern countries to offer the lowest possible wages.

These views have been gaining currency in the West. They have generated calls and sustained campaigns for the reform of the institutions of global economic governance so that poorer countries have a greater say in setting the terms of finance and trade. Poorer countries also need to be empowered to use tariffs, subsidies and other industrial devices to build economic capacity. A global living wage system and a framework for environmental regulations would put a floor on labour and resource prices. By these and other means poor countries would be able to capture a fairer share of income to end poverty and meet human needs. But it will be a long and hard struggle dependent on large scale mobilization for militant struggle.

Cheddi Jagan has turned out to be right. His campaign against the windmills of history has not been quixotic after all. (I am indebted to the article mentioned above, some material of which I have liberally adapted).