It is often overwhelming for people when they hear about all the problems that plague third world or “developing” countries today. People are aware about all the poverty, exploitation, environmental degradation, corruption and conflict that ravage these countries without knowing the reason WHY these problems exist. How come these problems don’t take place in first world or “developed” countries? How come poverty, pollution, corruption and conflict are not rampant here in the streets of Markham as they are in Peru? The answer is simple. Through corporate-controlled mediums like agents of the global economic system (IMF, WTO, WB, NAFTA), people are lead to believe that the problem of poverty exists in the lifestyles of the third world and that globalization is the only means to the “development” of these countries. What is often neglected is the fact that the problems of these countries were created from economic forces such as colonization, and only worsened through globalization to now include increasing inequality, hunger, corruption, and loss of culture, exploitation, and environmental degradation as well. Many centuries ago, the colonization of countries served only to benefit the colonial powers while exploiting the land, labour, economy, resources, culture and indigenous peoples of the colonies. This trend continues today in the form of globalization, where multinational corporations and global economic agents are continuing to destroy the population and environment in the name of “progress”. It is obvious to address the problem of poverty in the third world. To find the true reasons as to why poverty exists, we must look back in time to find the true root of the problem.
Poverty has existed in civilization for as long as humans have remained greedy and concerned with their own personal gain. If there is one main cause, however, that attributed most to the conditions of the third world today; it would definitely be the history of colonization. Colonialism succeeded not only in benefiting the motherland, but also in exploiting the land, resources and economies of the countries they colonized. Most people, however, are unaware as to what colonization is or the lasting impact it’s had on third world countries, even today. Proponents of the global economic system would lead you to believe that the causes of poverty, pollution, underdevelopment, etc. lie within the third world, not within some antiquated system as colonization, which hasn’t been around for over a century. People who live in developed countries ignorantly believe that poverty exists in the third world because the people there lack the money, capital, education and work skills to get out of their rut. They assume that these “savages” are too lazy and lack the traditional western values (where profit is everything) to ever get out of poverty. When you ask people on the street why poverty exists in third world countries, you are likely to hear answers like “The government is corrupt”, “The geographical conditions/climate make it difficult” or one of the many reasons given above. While all of these factors do contribute to the pathetic state of third world countries, they are not the true roots of the problem. With the exception of the geographical conditions/climate (which can’t be helped), all of these reasons are effects of one single cause; that cause is colonization. Colonization dominated the world’s economic system for more than 4 centuries, its lasting impact felt even today from a political, social, environmental and economic standpoint. Colonization started in the mid-15th century when Europeans sought easier trade between Southeast Asia, China and India. Many European countries (namely Spain, Portugal and Britain) began to set up colonies in Africa, Asia, North/South America, India and Australia. To prevent conflict between colonizers over land disputes, the Treaty of Tordesillas was created. While it may have benefited the colonizers, it did not take into account the rights of any of the indigenous people in the colonies.
The fact that this treaty totally ignored the rights of all the people affected by it indicates the central belief of colonialism – that the colonies existed only to meet the needs of colonizers. (Wallace, Historical Colonialism Past and Present)[i]
The central dogma within colonialism is that the labour, land and resources in the colonies would only serve to benefit the mother country. It didn’t matter whether or not it destroyed the livelihood and culture of these colonies. Just how were these colonies exploited? When colonies were first created prior to the Industrial Revolution, they were mainly used as a source of products and resources not normally available in the motherland. After the Industrial Revolution and the introduction of the mercantile system, however, colonies were no longer seen as a source for raw materials but also as a captive market for the manufactured goods produced in the mother country. A prime example of how colonizers ravaged the economies of the colonies could be seen with India’s cotton industry. India, a colony under Britain, had once been a major producer and exporter of cotton. The economy of India prospered under its cotton industry, even forcing Britain to put a duty on Indian cotton to protect its own textile industries.
To prevent competition, Britain forced the destruction of India’s cotton industry. The result was that by the middle of the 1800’s, India no longer exported cotton textiles and, in fact, imported one-quarter of all the cotton clothing produced in Britain. (Wallace, Historical Colonialism Past and Present)[ii]
This was just one of many examples in which, to protect its own interests, the colonizers exploited the economy of the colonies. The rigid system of mercantilism and colonization prevented the colony from operating in its own economic interests. It was not allowed to sell its own resources to the highest bidder since all trade had to be done with the motherland. In some cases, like the one above, a country’s entire livelihood was destroyed for the benefit of the colonizers. This is just one of the many impacts of colonization that can still be felt today. Colonialism in the past is what leads to the human rights, economic and environmental abuses still seen in third world countries today. Colonization has also lead to the destruction of land tenure practices. All of the shared land of the colonies were turned into private properties owned by a wealthy few. Many of the poor no longer had any land to call their own and were forced to work in the plantations of the elite, planting cash crops for export to the motherland rather than desperately needed food for the country’s starving population.
The local population was pushed off their native land. These dispossessed farmers were then used as cheap labour on the plantations and other industries. This practice was widespread in Africa and South America. (Bernstein, The Impacts of Colonization)[iii]
In addition to the labour exploitation, many of the concession companies opened up by the colonizers paid little, if any, attention to the environment due to the lack of environmental laws and regulations. As a result, much of the resources in these countries have been plundered and the environment left in ruin.
Colonial mining, forestry and agricultural and manufacturing developments paid little attention to their projects’ environmental impacts. As a result, environmental problems, like the ones that continue to plague Presidio Hill, Brazil, still occur in these colonies, many years after their independence. (Luksic, Colonialism and the Environment)[iv]
Colonizers also had many other lasting impacts on the native population and environment of the colonies they took over. Native languages and cultures were displaced as colonizers forcibly imposed their political systems, beliefs, language and culture amongst the indigenous peoples. Due to these impositions, many former colonies today have no recollection of their native culture, heritage or identity. As you can see, colonization in the past has had lasting negative impacts on the colonies and people today. Their exploitation of the people, economy, land and resources is what brought problems like poverty, pollution, human rights abuses and conflict still present today. Though colonialism is long gone and few colonies exist today, a new type of economic force is taking its place. This new economic force is what is now known as globalization.
Globalization is a term that is often used in our present society today. When you watch a speech by George W. Bush or news coverage on free trade, then you have most likely heard about globalization and the positive effects it has had on the economy today. You could’ve just as easily heard other words like neoliberalism, or conventional modernization theory. It doesn’t matter; all three terms mean the same thing; the exploitation of third world countries through a new type of colonizers; transnational corporations. Globalization is repeating the same mistakes that colonization did so many years ago, except on a much more rapid rate on a wider scale. Supporters of globalization and modern economic theory, however, would tell you something completely different. Corporations, government and the media would claim that it is through globalization that these poor countries have developed and increased their GDP. Due to the trickle-down theory, this increased wealth for the elite would eventually trickle down to the poor in the form of tax revenue and investment dollars. Thus, there would be development that would benefit all. By following these policies and guidelines set by first world countries, there should be no reason that third world countries can’t modernize, invest in capital and go up the same development path that all developed countries went through. While this may be good and true in theory, it does not work as well in real life. In reality, globalization has only worsened the living conditions (standard of living) and quality of life of the people residing there. What good is an increase in a country’s GDP if all the profits go to the hands of a few wealthy elite while the rest of the country continues to starve? The trickle-down theory, long the backbone of the world’s current economic policies, is simply an inefficient and ineffective way of addressing the problems of poverty, pollution, etc. that are rampant in third world countries. While the wealth may trickle down from the rich to the poor, the real questions are “What amount of this ‘trickling down’ do the poor actually receive?” and “When, if ever, do they actually get it?”
How acceptable is a development strategy which allocates almost all of the world’s wealth to the rich few, increasing their per capital wealth by $270 per year, while increasing the income of the poorer half by less than $7 a year? (Unknown, “Trickle-Down” Theory)[v]
The quote above sums up the results of the trickle-down theory; very little actually trickles down to the poor after a long period of time. By giving all of the money to the rich to “invest”, that pretty much means they get to keep more money. Due to trickle-down, the rich were able to increase their profits by $270/year while the poor only get $7 per year. Wasn’t the trickle-down theory supposed to help the poor people? Why can’t we use this money to simply invest in foreign aid, education and other long-term projects that will truly benefit the poor in the long run? It is obvious that the trickle-down theory does not benefit the poor people and thus should be changed. If there’s one thing that the “trickle-down theory” has succeeded in doing, it has increased the income gap between the richest people and the poorest.
Now the richest 20 percent of the world’s population receives 83% of the world’s income, while the poorest 60% of the world receive just 5.6% of the world’s income” (Danaher, Seven Arguments For Reforming the World Economy)[vi]
The numbers above show the income difference between the richest 20% compared to that of the rest. It’s almost overwhelming. One fifth of the world’s population (which includes you and I) own 80% of the world’s resources! There is a HUGE gap between the rich and the poor. How can we expect poor countries to ever progressively develop when the first-world countries own the majority of the income, resources and capital? What’s even more frightening is the fact that the situation isn’t getting any better. On the contrary, it is getting worse and worse as time goes by. The gap between the rich and the poor is widening at an uncontrollable rate, similar to the spread of a cancerous cell.
The data shows that during a period of major growth in world trade, global inequality got significantly worse; the ratio between the richest 20% and poorest 20% of the world population went from 30:1 in 1960 to 59:1 in 1989. In 1997, it skyrocketed once again to a level of 74:1! (Danaher, Seven Arguments For Reforming the World Economy)[vii]
As the numbers show, the gap between the rich and the poor is growing at an alarming rate. As long as the trickle-down theory continues to be the core economic theory behind globalization, inequality and poverty will always exist. Though globalization has brought about many positive effects, like competitive free trade, lower prices and an international market, its negative effects far outweigh any benefits it brings about. The disadvantages of globalization could best be summed up in this quote from an online NGO (non-governmental organization).
Critics say that the chaotic matter in which market forces have scaled up the global level has unleashed a destructive whirlwind that treats workers callously, serves too often to further impoverish the poor at the expense of the rich, and wreaks vast amounts of environmental destruction. Its side effects are equally horrific, ranging from the spread of AIDS and drug abuse to the creation of a world monoculture that destroys local traditions and squelches diversity. (Unknown, Perspective: The Exigencies of Globalization)[viii]
Knowing all of this, how can people still believe so strongly in the power of globalization? It may benefit the wealthy elite, but it does so at the expense of human rights and the environment. Just how does globalization do this you ask? Through global economic agents and the neoliberal economic policies they enforce on third world countries.
Globalization and conventional modernization theory is implemented through the use of global financial institutions such as the IMF (International Monetary Fund), WTO (World Trade Organization, WB (World Bank), and NAFTA (North American Free Trade Agreement). These organizations, along with transnational corporations, enforce the theories of globalization and neoliberalism to poor countries in an effort to help them “develop”. By following the 5 neoliberal policies, they claim that a country can rapidly experience economic growth that will eventually “trickle-down” to all. While we’ve already proven the massive deficiencies with the trickle-down theory, it is through these 5 neoliberal policies and the institutions listed above that globalization wreaks havoc in third world countries. These global economic agents, working alongside corporations and the government is destroying the population, environment and economies of the countries they are supposed to “aid”. They further stack the deck against third world countries, making it impossible for them to ever get out of debt or ever get any real justice in the world. The first, and perhaps most notorious, organization would be the IMF, who works in conjunction with the WB to aid poorer countries by giving them loans for investment. In exchange for these loans, these countries must sign a contract to implement SAPs (Structural Adjustment Programs). The governments of these third world countries, already impoverished and in massive debt due to colonization and globalization must now sign an agreement to implement SAP policies similar to that of neoliberal economic policies. The World Bank and IMF argue that SAPs are necessary to bring a developing country from a crisis to economic recovery and growth. They believe that economic growth, driven by foreign investment, is the key to development. This includes cutting government spending on social programs, increasing exports, devaluing the currency, raising interest rates, opening the market to free trade and privatizing government enterprises. Sound familiar? These SAP guidelines are very similar to the 5 neoliberal economic policies of free trade, privatization, cutting social spending, deregulation and corporate tax cuts. While adopting these policies may be the quickest way to increase a country’s exports and GDP, they absolutely destroy its social programs. One example is the SAP guideline of cutting government spending on social programs. At this rate, social programs like subsidized housing, nutrition, welfare, unemployment insurance, pensions, etc. will be abolished to make the way for corporate tax cuts and investment. Would you put a price on social programs that benefit all of society? When the IMF implemented its SAPs into Mexico it was expecting rapid economic growth. I chose Mexico as a prime example because it was globalization’s “model student”. It did everything that the IMF asked it to, including implementing free trade, privatizing its industries and cutting back on social spending. What the SAPs have done is cut or abolish most of Mexico’s social programs to a point where many people lack the proper necessities to even survive.
In almost every social sector – health, nutrition, housing, education – virtually all of the key indicators show deterioration over the last 15 years that the IMF has been in Mexico. (Global Exchange, How the IMF and the WB Undermine Democracy and Erode Human Rights)[ix]
What’s even worse is that the people in poverty are more dependent on these social programs than anyone else. If they experience funding cutbacks or are taken away altogether, what will happen to all the people that rely on them? In Mexico, the state of social programs has become so bad that every social sector has deteriorated. It’s so bad that in the “Maquiladora” areas of Mexico (the free trade zones), the people living in overcrowded conditions lack clean drinking water! Is this what development is? Along with cutting public spending, the IMF SAPs also encourage the privatization of government-controlled services such as health care, education, hydro, electricity, and other essential services. If these services are taken from the government, which serves in the interest of the people, and put in the hands of corporations, which serves only for its own profits, then it is obvious that these services won’t work for the benefit of the general public. All privatization does is allow corporations to cut corners and strive for personal profit at the expense of good service. Using the example of Mexico, the IMF’s “model student”, again, the government allowed the privatization of the country’s profitable phone system, Telmex. While it promised to lower rates and provide better service, it did just the opposite. In fact, privatization has lead to an increase in the rate of local calls from 16 pesos per minute to 115 pesos per minute! That’s an almost eight-fold increase in rates! While rates have lowered since then, they haven’t dropped to the promised levels.
In a 1992 report, the World Bank admitted that ‘the privatization of Telmex, along with its attendant price-tax regulatory regime, has the result of taxing consumers – a rather diffuse, unorganized group – and then distributing the gains among more well-defined groups, shareholders, employees, and the government. (Global Exchange, How the IMF and the WB Undermine Democracy and Erode Human Rights)[x]
Even the World Bank admitted that the privatization of Telmex has only benefited the wealthy elite, in the form of tax cuts and increased profit margins, while the consumers (the general public) deal with increased prices. It’s obvious that the privatization of Telmex has yet to benefit the people or make do on any of its promises. Instead, it has given more profit to the corporations and the private sectors. In addition to cuts in social programs and privatization, the IMF/WB also opens up the country’s markets to free trade and global competition. What this means is the elimination not only of trade barriers and tariffs, but also that of government subsidies. In Mexico, a country dependent on its agricultural industry, the entrance into NAFTA (North American Free Trade Agreement, between U.S., Canada and Mexico) has spelled disaster for the country’s small farmers. With the IMF’s elimination of government subsidies for the country’s staple crop, corn, many Mexican farmers have suffered a great deal with free trade.
In recent years since the implementation of NAFTA, a flood of subsidized US corn has caused a 45 percent decrease in the prices Mexican corn farmers receive for their commodity. This has pushed millions of farmers off their land and into the urban ghettoes or toward the US. And yet – because of the monopolistic control of the Mexican corn processing industry – consumer prices have not gone down. (Global Exchange, Top Ten Reasons to Oppose the Free Trade Area of the Americas)[xi]
Ever since Mexico has opened up its markets to free trade and NAFTA (and soon enough, the FTAA), many small farmers have been unable to compete with large U.S. agribusiness corporations. With free trade and the elimination of subsidies, Mexican farmers simply can’t compete with the subsidized corn of the U.S. How is it fair that the Mexican government is forced to eliminate support for its small farmers while the U.S. is able to give subsidies to its agribusiness corporations to stimulate overproduction? Free trade can never be fair when a double standard is set that destroys the livelihood of Mexican farmers for the profits of corporations. NAFTA and free trade have also succeeded in costing jobs in North America as well. Free trade has brought about the destruction of worker rights and unions, as corporations threaten to move operations down south to Mexico, where labour is much cheaper. The implementation of free trade and NAFTA also bring about more negative effects, including environmental destruction and human rights abuses. Through the SAP guideline of deregulation of environmental/labour laws to attract foreign investment, poor countries like Mexico are losing their land and labour rights. Deregulation and/or abolition of government regulations means that corporations can pretty much pollute as much they want or ignore the rights of their workers without fear of repercussion. With free trade implemented into these countries, many corporations are free to move their operations there. In Mexico’s case, many logging companies have moved there because of the lack of environmental/human rights regulations. Illegal practices, such as clear cutting (which is very destructive to the environment) have ravaged the environment and landscape of Mexico.
In the Mexican state of Guerrero, 40 percent of the forests have been lost in the last 8 years since NAFTA was implemented, and massive clear cutting has lead to soil erosion and habitat destruction. (Global Exchange, Top Ten Reasons to Oppose the Free Trade Area of the Americas)[xii]
Due to the SAPs and the implementation of free trade, the Mexican environment has been devastated. With all the logging and clear cutting, many of Mexico’s forests and landscape was destroyed to the point where they could no longer support life. This story is typical of the effects of neoliberal economic policies. In order to attract more foreign investment, environmental regulations had to be put aside. In essence, its allowed corporations to come into these countries plunder all its resources, pollute as much as they like and leave. The same thing goes for human rights regulation. Since the IMF/WB came into Mexico and implemented NAFTA, child labour and other dangerous, low-paying jobs have emerged due to the massive poverty. In Mexico, people are so desperate for money that they will take any job, no matter how dangerous or difficult, for very little income. Often times in these jobs, their rights are exploited. They are barely paid enough to survive, work in horrid conditions and have no benefits. There are no such things as unions in Mexico, and jobs can be easily taken away and given to the next desperate worker. With the deregulation of labour rights, workers are treated inhumanely, just like animals. Knowing all the damage that these institutions cause to third world countries, how can they continue to get away with such atrocities? The answer is the WTO. The World Trade Organization was created by developed countries to oversee and settle trade disputes around the world. They would normally be the legislative and judicial body of trade, enforcing trade rules and making sure such atrocities like the ones listed above would never take place. The WTO, however, is controlled by corporations that support these institutions and their neoliberal economic policies. Since its inception in 1995, the WTO has done nothing but promote the agenda of transnational corporations above the interests of local communities, working families and the environment.
The WTO is not a democratic, transparent institution, but its policies impact all aspects of society and the planet. The WTO rules are written for and by corporations with inside access to the negotiations. For example, the U.S. Trade Representative relies on its 17 Industry Sector Advisory Committees to provide input into trade negotiations. (Global Exchange, Top Ten Reasons to Oppose the WTO)[xiii]
The WTO is controlled by the corporations and serves only their interests. It is common sense to realize that the WTO will always rule in favour of its “bosses”, at the expense of social programs, local peoples, and environmental/human rights. The trade dispute council is comprised of right-wing politicians and trade representatives who care more about development than they do about social justice. Globalization is implemented to third world countries through institutions like the IMF/WB, NAFTA and the WTO. It allows corporations and developed countries to take control of third world countries for their own interests, similar to the principles of colonialism. They loan money to desperate countries, charge an obscene amount in interest (which can probably never be repaid) in exchange for the implementation of SAPs. These SAPs destroy third world countries while benefiting the developed ones. These corporations never have to take responsibility for their actions because the trade authority is also controlled by them. It is similar to the hockey game analogy, where the deck is stacked against the opposing team (the third world countries). No matter how much progress they make, they will never be able to get out of poverty; they will never be able to win the hockey game.
Injustices and atrocities occur in our world everyday. Though the general public is kept unaware of this (mostly through the media), many organizations (mostly non-governmental) strive to expose the truth of the world outside Toronto. The problems of poverty, inequality, environmental degradation and human rights abuses in third world countries can be attributed to one source; the colonization and exploitation of these countries for the benefit of the motherland. These problems continue to exist today through globalization and the dominant (and false) economic concept of the trickle-down theory, which further increases income inequality. The spread of globalization is facilitated through financial institutions like the IMF/WB, NAFTA and WTO in conjunction with transnational corporations, which implement neoliberal economic policies through use of structural adjustment programs. These SAPs further destroy social programs, the environment and human rights. Globalization is giving more power to corporations at the expense of the rest of the world, and is the true cause to poverty in the third world. We now know the roots of poverty and why it continues even today. Its how we use this newfound information that’s important. If people ever hope to change things in this world, to fight against such inequalities, then they must be ready to act. Everyday, there are rallies, protests and conventions where people gather around together, united against a global economic system that serves the interests of corporations only.
[i] Wallace, Clark. Historical Colonialism Past and Present. Global Connections: Canadian and World Issues Textbook. P. 173. 6/9/2003
[ii] Wallace, Clark. Historical Colonialism Past and Present. Global Connections: Canadian and World Issues Textbook. P. 175. 6/9/2003
[iii] Bernstein, Ronald. The Impact of Colonization. www.hri.ca/tribune/view/Article. 2/12/2001
[iv] Luksic, Jennifer. Colonialism and the Environment. www.rainforestrelief.org/newsnotes/brazil.htm. 6/9/2002
[v] Unknown. Trickle-Down Theory. Handout in Mrs. Orsi’s Class. 5/12/2003
[vi] Danaher, Kevin. Seven Arguments For Reforming The World Economy. http://globalexchange.org/economy/econ101/sevenArguments.html. 5/21/2003
[vii] Danaher, Kevin. Seven Arguments For Reforming The World Economy. http://globalexchange.org/economy/econ101/sevenArguments.html. 5/21/2003
[viii] Unknown. Perspective: The Exigencies of Globalization. Online Newsletter of the Baha’I International Community. www.onecountry.org/perspectives/globalization. 6/9/2003
[ix] Global Exchange. How the IMF and the WB Undermine Democracy and Erode Human Rights. http://globalexchange.org/wbimf/imfwbReport2001.html. 2/21/2003
[x] Global Exchange. How the IMF and the WB Undermine Democracy and Erode Human Rights. http://globalexchange.org/wbimf/imfwbReport2001.html. 2/21/2003
[xi] Global Exchange. Top Ten Reasons to Oppose the Free Trade Area of the Americas. http://globalexchage.org/naftaftaa/ftaanaftaReport2001.html. 2/16/2003
[xii] Global Exchange. Top Ten Reasons to Oppose the Free Trade Area of the Americas. http://globalexchage.org/naftaftaa/ftaanaftaReport2001.html. 2/16/2003
[xiii] Global Exchange. Top Ten Reasons to Oppose the Free Trade Area of the Americas. http://globalexchange.org/economly/rulemakers/topTenReasons.html. 2/2/2003
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