A Fisherman’s Reflections on a beautiful but troubled world
Chapter 19 - Global Economic Structures

Do not steal.  Do not covet anything that belongs to your neighbour. … Do not take advantage of a widow or an orphan.  Do not ill-treat aliens or refugees, or oppress them. … Do not use dishonest standards when measuring length, weight or quantity.  Use honest scales and honest weights. …  If you lend money to one who is needy, do not be like a money-lender; charge him no interest. … Do not defraud your neighbour or rob him.  Do not hold back the wages of a hired man. … When you harvest the land, do not reap to the very edges of the fields, or gather the left-over gleanings.  Do not pick up fallen grapes in your vineyards.  Leave them, and the gleanings, for the poor and the alien. …  Do not lend money at interest to the poor, or sell them food at a profit.  Land must not be sold permanently, it must be returned in the year of jubilee.  The fiftieth year is to be the year of jubilee.  Mortgaged land must be returned.  Indentured servants must be set free.* 

                        The Laws of Moses (selected), from Exodus and Leviticus, NIV translation

A final word to the arrogant rich : Take some lessons in lament !  You’ll need buckets for the tears when the crash comes upon you.  Your money is corrupt and your fine clothes stink.  Your greedy luxuries are a cancer in your gut, destroying your life from within.  You thought you were piling up wealth.  What you’ve piled up is judgment.

The workers you’ve exploited and cheated cry out for justice. … You’ve looted the earth and lived it up.  But all you have to show for it is a fatter than usual corpse.  In fact what you’ve done is condemn and murder perfectly good persons who had to take it, being vulnerable and defenceless.*

                                    The Epistle of James, paraphrased, from The Message, by Petersen

I saw an angel come down from heaven with great authority; and the earth grew bright with his splendour.  He gave a mighty shout, “Babylon the great is fallen; she is become a den of demons, a haunt of devils, and every kind of evil spirit.  For all the nations have drunk the fatal wine of her intense immorality.  The rulers of earth enjoyed themselves with her, and businessmen throughout the world have grown rich from all her luxurious living. …

                                                                                                World leaders who took part in her immoral acts, and enjoyed her favours, will mourn for her as they see the smoke rising from her charred remains.  They will stand far off, trembling with fear, and crying, “Alas, Babylon, that mighty city !  In one moment her judgment fell.”  The merchants of earth will weep and mourn for her, for there is no one left to buy their goods.  Businessmen who became wealthy by selling her produce shall stand at a distance, fearing danger to themselves, weeping and crying, “Alas, that great city, so beautiful, … decked with gold and pearls !  In one moment, all the wealth of the city is gone.”

            Ship owners, captains and crews of merchant vessels will stand a long way off crying as they watch the smoke ascend, “Where in all the world is another city like this ?”  They will throw dust on their heads in their sorrow and say, “Alas, alas for that great city !  She made us rich from her great wealth.  And now, in a single hour, all is gone”.*

                                    The Revelation, by the apostle John, paraphrased, from The Living Bible

The rise of capitalism and global banking systems in the last two to three centuries, has given enormous power to the individuals and organizations that own or control land and financial assets.  This power has been buttressed and given both legal and moral support although the actual manner in which the land and assets were acquired may have been dubious in the extreme, and based on little more than conquest, pillage, exploitation, patronage, corruption or manipulation.  An interesting aspect to the moral support for the whole monetary system is how it has assumed or acquired a religious basis as if it was founded on divine revelation.  This stands in contrast to the economic arrangements that all the great religions developed and implemented (to greater or lesser degrees), to ensure that indebtedness did not extend for generations, and that there was relief and support for the poor and destitute.  The pre-Christian era Hebrew prophets were fierce in their denunciation of unrestrained and unjust exploitation, as is the whole teaching of Christ on wealth and its use.  But today’s right-wing Christian churches and organizations, particularly in the USA, see the maximization of profit and the accumulation of wealth as a Christian duty.  Conversely, poverty and economic disenfranchisement are regarded as if they were the fault of the poor themselves.

Dollars, Pounds, Euros and Yen, - symbols of the world’s Currencies

A former Wall Street analyst and President of the Institute for the Study of Long-term Economic Trends in New York has written, “Today’s financially oriented economies undermine the ethic of mutual aid, societal safety nets, and policies that would alleviate debt burdens.  This is the outcome of a 5,000 year process, in which the privatization of land, credit and industry, has permitted creditors to assert their rights over the rest of society” (above all other moral and social rights). [Dr Michael Hudson; (editor),  Debt and Economic Renewal] 

Wall street, America’s financial centre

The process of the accumulation of wealth and power by a few at the expense of the many, has periodically resulted in enormous social upheavals and bloody conflicts such as the French and Mexican Revolutions, and the liberation wars of African and Asian territories.  Further conflicts are inevitable if present trends continue.  The World Bank reports highest rates of population growth (2.2% and 2.6% respectively) are occurring in parts of sub-Saharan and north Africa, and the Middle East where political turmoil, high unemployment, low economic growth, and massive export of irreplaceable and depleting natural resources are all presently occurring. [David Smiley, Macquarie University,  Macro-parasitism and the design of remedial programs]

Since the days of Adam Smith, market forces have recognized as a major, if not the major element in determining the economic performance of nations and companies.  Some have elevated the market to a position of reverence as if it was part of the immutable laws of the universe.  They seem to think that the market can do wrong.  But no less a student of the global markets as George Soros, has identified their weaknesses and limitations : “Markets are designed to facilitate the free exchange of goods and services among willing participants, but are not capable on their own, of taking care of collective needs.  Nor are they competent to ensure social justice.  These “public goods” can only be provided by a political process.” [Improving the World Order, George Soros, in The Bubble of American Supremacy] To me it has always seemed that allowing the market to rule above all other human or environmental concerns, represents a brazen return to the morality of the slave trade, the casino, or the whorehouse.   Of course, even the most ardent monetarist makes exceptions for things like narcotic drugs or nuclear weapons.  

George Soros, financier, currency speculator, and democracy advocate

Banking and Financial Systems

Our capitalist system is based on the control and use of money and assets by banks and financial houses which in many ways wield more power than do elected governments.  The way banks ‘create’ money, and the freedom they have to charge for this created money, is one of the wonders of this modern economic world.  Banks ‘create’ money by lending sums far beyond the deposits or assets in hand.  Every new loan they issue permits them to lend more money.  And the banks charge substantial interest on the loans they issue on the basis of their remit to issue credit beyond the immediate reserves they possess.  A major financial dealer cum politician has said, “Let me control a nation’s currency, and I won’t care who runs the government”. 

Avarice.  This is how Medieval scholars and ancient Hebrews thought of charging interest on loans of money.

Furthermore, the banks are lenders that must be paid before any other creditors. During the dark days of the demise of Scotland’s fishing industry, banks had to be paid from each vessel’s trip earnings before the suppliers of fuel, ice and stores were paid, and before the crew got any wages.  The banks gradually assumed ownership of boats and their assets, and even of ‘quotas’ which were little more than the right to catch fish in the future.  How can you ‘own’ a fish that is swimming somewhere in the ocean, or own huge amounts of fish that are not even born yet?    The same process occurred in American agriculture, and the tentacles of bank ownership and control continue to reach out and claim possession of land, businesses and assets that no one in the bank worked to create, except that it may have lent money to the venture, - money that itself was created out of nothing!

Our modern banking systems seem to me like an enormous parasite that sucks the wealth and assets from individuals, businesses, communities, and countries.  Governments all over the world appear to become more and more deeply in debt to national and global banks.  Why should that be ?   What right does a banking institution have to rake in excessive profits and yet share none of the risks of its borrowers ?  Some will protest that they do, and that some banks have suffered losses.  My own impression as a total layman in the subject is that investors certainly suffer losses, especially the small investors and pensioners, and some small banks and peripheral financial organizations suffer losses.  But the really big financial houses appear to gain as more and more people, companies and governments have their futures mortgaged to them.  Publicly, through World Bank loans and schemes like private finance initiatives, we are putting our children and our children’s children in debt for generations.  How can this whole gadarene slide into the shackles of endless debt be ended or reversed?

We need a cleansing apparatus that would put things to right every few decades.  The ancient Hebrews had such a righting mechanism in the “Year of Jubilee” instituted under the Law of Moses.  It was probably put into practice only rarely and incompletely, but it was designed to prevent perpetual indebtedness and bondage.  Every fifty years, all unpaid debts had to be wiped off the books.  Just think what such an arrangement would do for any country or any society!

Serious consideration is now being given to writing off the external debt of the poorest countries in the world.  Truth be told, in implementing such a policy the lending countries are just giving something to themselves since the debtor state can barely pay, and once in a condition of financial liquidity, would resume purchasing goods from the lender.  But some solution needs to be found to control the corrupt leaders of so many poor countries, and to limit the power of multi-nationals and arms suppliers who would be only too ready to take advantage of the continents new-found liquidity.

The World Bank and International Development

I have very mixed feelings about the World Bank and its affiliates, the Asian Development Bank and the African Development Bank.  I say that having worked for these organizations much of the time the past 25 years.  First of all, it should be borne in mind that if you describe World Bank loans as “aid”, - it is aid with strings attached, and aid that is very much in the interests of the lending parties.  Most World Bank money is actually spent on goods and services obtained from its member countries.  A smaller percentage of Bank project money is spent inside the recipient country, - and, - please note, - since the borrowing country has to contribute the local currency costs of the project, the amount spent in-country in most cases equals the amount they have contributed to the project.

Headquarters of the World Bank, Washington DC, close to the State Department and the White House.

The loans made by the World Bank and its affiliates are extremely bureaucratic in their design and administration, and can be subject to seemingly mindless nit-picking and arbitrary requirements, often to satisfy internal dogma rather than assist the borrowing state which is regarded with a surprising lack of genuine respect.

Some will protest that WB loans are very cheap.  They carry low interest, and often involve a grace period before repayment commences.  That is true only for the most preferential loans that are for social and environmental investments.  Rates may be as low as one per cent, and the grace period may be 5 years.  However one must remember that they are in foreign currency, usually dollars, and that means an automatic interest rate for the borrower as the local currency declines in value against the dollar. Other loans carry rates of around four to six-and-a-half per cent, and involve conditions that may not be in the borrowers’ best interests.

World Bank loans come with ‘strings attached’, and governments have to conform to Bank ideas on the direction of development investments, as well as on how their economies should be managed.  The attempts to impose fiscal policies on poor countries in Africa have been extremely punitive on the very section of the population that the loans are meant to help.  Bank officials are for ever trying to get developing country governments to reduce public sector employment.  But this is tackled in a manner that often reduces the little bit of development that governments can stimulate.  One practical example might suffice.

During the 1970’s under a UNDP country programme, I assisted the Republic of Indonesia to establish a nation-wide fishery extension service.  Technology units and extension centres were constructed and put into operation in all 26 provinces of the country.  Hundreds of technical staff were trained to levels of competency in gear and methods, navigation and seamanship, boat-building and marine mechanics, fish processing, refrigeration, quality control, and the farming of fish in fresh, brackish and marine waters.  The technical officers were posted to the field stations in every part of the country and for the next ten years, the national fisheries grew and prospered.  Then along came a World Bank official (an Englishman), in 1990 who advised the government to reduce its public sector employees.  He said it was a waste of money to have separate extension services for fisheries as well as agriculture.  Foolishly (as is now admitted), the government succumbed and scrapped the whole fishery extension service.  Thereafter, all a fisherman or fish farmer could get in the way of technical assistance was an occasional visit by an agriculture officer who was trained in the production of rice, livestock or coconuts.  It was small wonder then that within a few years, an imbalance took place in the harvesting of coastal fish stocks, and mismanagement of the fish farm sector led to virus disease outbreaks that were to cost hundreds of millions of dollars and cause several bankruptcies and non-repayment of bank loans.   All that to satisfy World Bank monetary ideology!

Fishery training in Indonesia.  After training hundreds of technicians, instructors and extension workers, and setting up centres in all 29 Provinces of Indonesia, the World Bank demanded the Government close that service and dismiss the employees, to economise on public expenditure in a nation that had over 3.5 million fishermen and fish farmers, producing much needed fish protein food for its then 150 million population.

I was once asked to address a seminar of government officials in the Philippines on the subject of “how to obtain a World Bank loan”.  I’m afraid I disappointed the whole audience by stating at the commencement that in most cases, developing countries needed World Bank Loans, like they needed a ‘hole in the head’.  The truth is that far too much Bank aid is spent on projects the country could well do without.  But right down through the whole government apparatus there is a perception that all the bureaucrats will benefit in some way from handling and spending the millions involved.  There are groups of projects that are attractive to government personnel since they are easy to justify, and the Banks appear to be only to willing to lend money for those infrastructure / energy projects.

This applies particularly to the damming of rivers for irrigation and power generation purposes.  Some early ventures of this nature may have been good and beneficial in the long run.  But soon they are seen as money making projects by central and regional officials, and you then see a series of dams being constructed with little strategic thought, and usually with tragic consequences for the environment.  This is happening all over the world.  It is happening in Africa, - Nigeria being a prime example.  It is happening in Indo-China where dams planned for the Mekong river threaten the future of agriculture and fisheries downstream.  It has happened with disastrous results in central Asia where canals rather than dams have drained the Amu Darya river and dried up the former inland sea of Aral.

Dams are a favourite investment for international banks.  This one is in India.

Itaipu dam, Brazil

Some will ask, “but aren’t the Banks reluctant to lend money for such projects”?  The answer is yes and no.  They have huge environmental departments that are supposed to warn them against this kind of intervention.  But the Banks are in the business of lending money.  Few lay persons realise that the World Bank and its affiliates are money-making organisations.  They make a healthy profit on their operations.  The last thing they want to happen is for countries to stop borrowing money from them.  And they love the big capital-intensive projects like those for seaports, airports, cement plants, dams and highways.  The kind of projects they don’t like, and the ones the Banks are poorest at implementing are investments aimed at benefiting hundreds of thousands of poor rural people.  Few of these poverty-alleviation projects ever succeed in achieving their objectives.

Persident Allende of Chile.  He was democratically elected, but was overthrown by General Pinochet with U.S. support.  Pinochet became a brutal dictator.

The loans are often political.  If anyone doubts this they should look at the way the World Bank shovelled huge sums of money into Chile to support the Pinochet regime after Allende was overthrown, and how they have no wish to know countries like Cuba.  But that is probably just as well for Cuba.  I was assisting a World Bank project in a country I shall not name, on what was intended to be a $ 100 million investment in higher education.  It was a rather dry, conservative, long-time staff member of the Bank who remarked half-way through the project, that its real purpose was political security, not education.  Most of the money was to go into new well-fenced university campuses located far away from urban centres, whether the institutes needed them or not.  Very little was to go into staff development, even less into laboratory equipment, and practically nothing into library materials and course textbooks.  The priorities were all upside down.  The officer pointed out that in his opinion the government wanted to secure college campuses and isolate troublesome students before political protests became widespread.  So the Bank happily lent money to make this physically possible, and dressed it up as investment in education.  But the officer who identified the real nature of the project just shrugged his shoulders and said that he had joined the Bank as an idealistic economist, but had sold his soul to the organisation within the first two years.

United States governments and legislators often criticise the U.N. Agencies and the international banks as being over-bureaucratic and wasteful.  One gets the feeling that such pronouncements are made mainly for internal consumption, to please an electorate that imagines that their tax dollars are being given away without thought to corrupt, lazy foreigners.  That would seem to be a popular impression.  In this area as in several others, the American public is ignorant of several aspects.  First, of the rich nations, although it is the largest single contributor to the U.N., it gives a smaller percentage of GNP to aid, than any of the others.  In contrast it gives from 30 to 100 times its aid amount, to the military and to weapons of mass destruction. 

A second misconception is that the US has no control over UN budgets, and has difficulty getting detailed information on where the money goes.  The lie to this idea is that the Head of Finance in each of the UN organisations and agencies, is an American officer !   So, if the Americans don’t know where the money goes, - no-one does !  The US has had a strange propensity for appointing its most belligerent military supporters to head the World Bank.  President Johnson did this with Robert Macnamara, and President Bush has just done so with Paul Wolfowitz.  The one masterminded the huge military expenditure in Vietnam, and the other, that in Iraq.   What kind of a message does this send to poor, vulnerable peoples ?   What compassion if any have those doctors of death ever shown to suffering humanity?

The other factor that needs to be borne in mind is that almost no country ever defaults on a World Bank Loan.  That is not wholly true as we have the case of Argentina at present, and a couple of pathetic basket cases in Africa, but the few who defaulted before were the poorest of the poor, and the loans they were unable to repay were modest.  Whether a Bank loan is successful or not, it has to be repaid.  I have often told officials abroad that if they were to offer private banks the same guarantees and security of repayment, that they give the World Bank, - they could get extremely preferential rates.  This in effect is what Malaysia has done with good results.

Some will ask about the corruption involved in the use of international loans, and sometimes talk foolishly as if the money was handed over in cash, with no accountability required.  What actually happens in most cases is that the lowly paid government staff members see aid loan expenditures as an opportunity to supplement their small salaries. In most Asian countries, this is done in a manner that has been almost formalized.  The contractors or suppliers of equipment are expected to pay a ‘commission’ to the government.  I have little inside information, but my guess is that the payment can be as high as 5 or even 10 per cent of the total cost, though I have heard of it having to be fifty per cent or more in Africa.  The more corrupt the country, the more, and the larger share of the ‘commissions’ goes to the greedy persons at the top.  In Asia, the money is distributed around all of the staff members of the Department concerned, according to rank.

So, when officials of developing countries put their hands on their hearts and told me they were not guilty of any corruption, what they really meant was that if and when a ‘commission’ came their way, they shared it with all others in the service, according to the unwritten code for such payments.  To confirm this, I recall the case of a village head I knew (the lowest civil authority rank), who was put in jail.  I asked why and was told it was for corruption as he had taken bribes from businessmen.  When I responded that all officials in the country took such bribes, the response was, “yes, but he did not share the money with the other local government officials”.

Do not foreign consultants like myself, sometimes protest or object to the practice ?  Yes, the answer is that many do.  But the response to them by national officials generally runs along these lines : “What are you complaining about ?  You are a highly paid consultant.  We are poorly paid officials.  And this money is not your money.  It is money our country has borrowed and which it will repay in full, with interest.  So what business is it of yours what we do with our money?”.

Now, what about the current case of Argentina (in 2004) ?    Successive governments led the country into colossal levels of debt, aided and abetted by wealthy people, financial speculators, and big businesses, that bled the country of foreign currency and charged poor Argentineans in U.S. dollars for rentals and contracts.  Now those poor Argentinean workers are being asked to repay the World Bank and other lenders, $ 132 billion, while those individuals and corporations that robbed the country get off “Scot-free”.  So the current President of Argentina, Nestor Kirchner, has said in effect, “No !, the people need food and jobs before the bankers start to be repaid, if ever”.   I must admit to strong sympathies with his attitude. 

Why should the money-lender not share in the risks of the business ?  When a business fails, the owner suffers, the workers suffer, the customers suffer, - but rarely does the money-lender suffer.  Banks usually have priority over other creditors.  Surprisingly, in the case of Argentina, the international banks and the USA have accepted for now the President’s fiscal priorities, and are giving him time to attend to the more urgent needs.  President Kirchner wants to create a million jobs, and to ensure that there will be food for all, including the poorest.  In fact a lot of the former debt is now held by nationals and  local companies in the form of bonds that are worth less than half their original value.

An unholy alliance

The global lending business centred on the World Bank and its affilliates, was established after WW II in an attempt to provide low-cost finance to poor countries that needed to re-build or develop their economies so they could feed, educate and care for their peoples.  Few would argue against the sentiments that led to the World Bank and its U.N. affiliates being established.  But the World Bank has now become an American institution, and its lending programme primarily designed to assist U.S. business and even become a tool of American foreign policy.  Global observers, much more experienced and knowledgable than I, have described how the process worked, over the past four decades and more. 

Bretton Woods where the post-war conference took place that set up the IMF and the World Bank

Inside the Bretton Woods conference

The military-industrial complex whose growing powers were apparent to President Eisenhower 45 years ago, has developed into a monster that could scarcely have been imagined back then.  The petroleum industry is now a major element in that enormous cartel.  Corporations like Halliburton, Bechtel, and the Texan oil giants, are among the global bloodsuckers that devour the world’s natural wealth. 

Some believe that Robert McNamara’s greatest and most sinister contribution to history, was not his ruthless accountants direction of the war in Vietnam and the colossal build-up of war materials to that end, but his impact on the World Bank and its lending program.  He made it an agent of a global empire, on a scale never before witnessed.  He also bridged the gaps between the primary components of corporate America, and its links with the United States Treasury and Defense Department.  The list of those senior officials in the U.S. Government who continued the McNamara policy in the State Department, in the CIA, in ambassadorial posts, and in the White House, include names like George Schultz, William Casey, Richard Helms, James Baker, Caspar Weinberger, Donald Rumsfeld, Dick Cheyney, and George Bush himself.  One can detect a ‘Texan’ thread running through most of these men and the corporations they served, mostly petroleum companies, or military-industrial businesses.

Robert MacNamara.  After a career in automobile manufacturing and sales, he was the logistic brain behind the Vietnam War. President Johnson then made him head of the World Bank.  Some believe he made that organization a tool of U.S. capitalism and imperialism.

A respected senior economist has written : “The 1970’s had been the heyday of the ‘big project’ paradigm for economic development.  Officials from Institutions like the World Bank, the Inter-American Development Bank, the Asian development Bank, and the U.S. Agency for International Development, roamed the globe, making huge project loans and preaching the virtues of sophisticated development-planning techniques. …  By 1990, developing countries had accumulated more than $ 1.3 trillion in foreign debt. … In 2000, eighty-six percent of the US EXIM’s bank $ 7.7 billion in new foreign export credits and guarantees went to just ten politically influential U.S. companies, including Halliburton, Enron, General Electric, Boeing, Bechtel, United Technologies, Schlumberger, and Raytheon.” [ James S. Henry, The Blood Bankers, Tales from the global Undergound Economy, New York, 4 Walls, 2003.]

The other side of the exploitation story is that many of the countries targeted by the multi-nationals, have repressive, corrupt governments, and some have ongoing internal armed conflicts.  A corrupt government is a gift to a foreign corporation intent on seducing them to sign up to large loans that are to be spent on huge contracts to the same corporations.  This is sometimes referred to as “the resource curse”.  One thinks of countries like Nigeria, Indonesia, Angola, and some South American and Arabian states in that respect.  They have each paid a heavy price for accepting the “Danegeld” of the petroleum corporations and the World Bank.   There has been an attempt in recent years to counter the practice by the introduction of a degree of transparency.  A campaign, “Publish What You Pay”, was launched in 2002 to persuade oil and mining companies to disclose all payments made to individual countries.  The campaign got scant support from the US Government. 

A second effort, the “Extractive Industries Transparency Initiative”, attempted to get the governments involved to follow a transparency code in their dealings.  Such attempts to address the resource curse, and have civil society pressure companies and governments, face new obstacles as China and India join the hunt for fresh resources to feed their rapidly growing industries and cities.

Poverty

Poverty in old London

Poverty in rural USA during the Depression

Even if one argues that the above is not the whole picture, and that some global lending has done good, I have deep skepticism about the ability of the world’s financial bodies to solve the problem of global poverty.  As Schumacher said in 1973, about the use of very sophisticated technology to put the world’s unemployed to work, - “It is like trying to cast out demons by Beelzebub the prince of demons”.   The interventions of major banks more often than not add to the problems rather than solving them.  For a start, the mention of their huge amounts of finance, attracts a host of corrupt politicians and officials, like flies to a honey pot.  And these corrupt persons are not found only in the developing countries, they are around in western democracies, and in the cloisters of the United Nations.

No, despite all the efforts of the World Bank and the major donors, poverty increases.  In 2002 according to UN statistics; 1.2 billion people live on less than a dollar a day; 2.8 on less than 2 dollars a day; over a billion lack access to clean water; 827 million suffer from malnutrition. And all this time, the income of the richest one per cent of the world is equal to the total income of more than half the world (57% to be exact).  Total international aid represents only 0.18 % of global GDP.  That is less than one fifth of one per cent.  Meantime one hears foolish statements about ending poverty.  They remind me of a pathetically funded and even more pathetically implemented UN programme to end all poverty in Africa, initiated in the late 1980’s.  I sat in a meeting with Food and Agriculture ‘experts’ where one actually said “If this project ends all poverty, there will be nothing for us to do in the next decade (the 90’s). A colleague sitting by responded that, “well, I think we should not assume that all poverty will be eliminated.  There will still be some work to do after the programme is over”.  One wondered what planet they were living on.  7 years later FAO had reduced its goal to only halving hunger by 2015.  By 2006 it admitted that virtually no progress had been made in eradicating hunger.

Global hunger and poverty

Similarly when Tony Blair and Gordon Brown spoke of ending poverty in Africa, having worked in 16 African states, I had to shake my head.  Not at the attempt or its well-meaning goal, - but at the thought that a country of 60 million persons could actually remove all poverty from the huge drought-afflicted, aids-stricken, and corruption-ridden continent.  New Labour can scarcely make a dent in the poverty of Glasgow’s worst housing estates, or Edinburgh’s districts of Pilton, Niddrie or Wester Hailes.  It cannot end poverty in Brent, in London city.  How then can it do so in all of Africa ?  No, one suspects these altruistic statements are for domestic political consumption.  Some may complain when I pour cold water on a genuine move in the right direction.  I welcomed the move.  I wished it were greater.  I wished it all success.  I am delighted that there is now a commitment to cancel crippling debt.  But let’s not delude ourselves about the likely outcome of the best that one country could do.  The rich man’s club that we call the European Union, and the United States of America, both need to dismantle and abolish the trade barriers they have erected to protect their markets from the produce of poor countries, and to spend a great deal less on arms and more on practical assistance.

Of the recent world leaders, President Bill Clinton appears to have the best record of practical assistance to the world’s poor and disadvantaged, both when in office, and since leaving it.   Together with the musician Bono of U 2, and philanthropists like Tom Farmer of Scotland, Bill Clinton has organised and orchestrated possibly the largest amount of private assistance ever, for the destitute and aids-stricken poor of Africa.

Sixto Roxas, (SKR to his friends), a Filipino economist and former banker I knew in the 1980’s, has worked for years assisting poor peasants, like the sugar estate workers of the island of Negros, and has some interesting things to suggest for alternative economic systems.  He says, “The world we are living in today is being cunningly and insidiously organised to fall into a particular pattern of imposed development, a massive restructuring in the image of the enterprise system’, that only engages itself in projects that are profitable to the promoters, and which ignores humanity’s other needs.  “What is left behind is a gigantic mess of virtually unsolvable problems: health, education, environmental preservation, care for the poor and the handicapped”.   Today, at 79 years of age, Roxas continues his imaginative efforts to achieve meaningful and beneficial models of agrarian reform. 

People are reduced to flesh-and-blood machines that earn wages and salaries and generate profits for the investors, but whose non-economic existence is not recognized.  Roxas proposes that a profit-and-loss balance sheet be drawn up for the community as a whole rather than for just the income earners in its area. “The enterprise paradigm has established an accounting system that measures revenues, costs and incomes for enterprise owners.  A new community paradigm must do the same for communities”, he says, adding that national income figures such as GDP, ought to be compiled from community accounts rather than, as at present, from the incomes of firms and individuals which say little about the real growth in and distribution of the nation’s wealth.

Attempts to institute such radical schemes of social accounting and cooperative sharing of benefits in cash and in kind, have been around since the early days of the cooperative movement. They rarely thrive beyond a certain level because they have to exist in a sea of capitalist businesses and monetary structures that ignore, isolate or reject them, as if they were foreign bodies inside a living organism.  Nevertheless, some still exist today and a few continue to flourish.  Two continuing examples would be the Kibbutzim of Israel, and the Amish communities of North America.  It is not surprising that both these remarkable socio-economic systems are maintained by persons of strong religious faith and ethnic identity, as such communes require a degree of commitment beyond normal employer – employee relationships.  They are not an easy option, neither are they a cosy haven for individuals who have no desire to work.

Some more recently established community-cooperative type enterprises include the Schumacher-promoted common ownership common-wealth ventures like Scott-Baader, in the 1970’s, and others in France and West Africa; the Sustainable Seattle project, and the Briarpatch craft guilds of San Francisco.  Other similar bodies, including work-sharing non-money based groups, have been set up in Britain and Europe.  Some have succeeded, and some have lasted for a short period only.   A number of small but remarkably successful ‘local currency’ groups have flourished in the USA, initiated by the E. F. Schumacher Society of Great Barrington, Massachusetts and similar non-profit bodies.  One of the most innovative and locally successful was SHARE (Self-Help Association for a Regional Economy) established in 1982.  It claims to “put a human scale and a human touch back into local economic transactions”.  It boasts a 100 % return on loans, and has been able to provide credit to establish family farms, cheese making businesses, deli food stores, corn markets and sweater knitwear units. 

Ideas on how to bring millions of financially deprived persons into the modern economic system have recently focused on recognition of the meager financial asset they possess in their mud huts, bamboo houses and shanty town shacks.  Few of the world’s poor have legal title to their homes.  For many the miserable properties are rented.  Others are erected on land owned or controlled by the state or the wealthy private sector.  What economists say in effect, is that though these tiny houses are worth only a few hundred dollars at most, - there are so many of them, - hundreds of millions, - that their combined monetary value must amount to tens or even hundreds of billions of dollars.  If the poor squatters or slum dwellers could become bankable entities by having title to their miniscule assets, then there would be no need for foreign aid or assistance.  They could all then have the possibility to mortgage their homes and go into business at a micro-level. 

Rural poverty

This imaginative philosophy is expounded by the renowned Peruvian banker and economist, Hernando de Soto, in his book, The Mystery of Capital.   De Soto is the founder of the ILD, the Institute for Liberty and Democracy in Lima.  His radical proposal was referred to by former President Clinton in his BBC lecture in London.  I strongly suspect that the capitalists who hail this idea as the solution, have little practical experience of working with poor and destitute.  I also suspect that it gives them an excuse for non-action, for if true, then it is the fault of the poor that they are in their predicament.  It smacks of the suggestion that the poor are to blame themselves for their predicament, and the capitalists’idea that the poor can be blessed by the ‘trickle down’ effect if they (the rich) would just go ahead and become richer by making their enterprises more profitable.

Urban squalor

What proponents of the capitalization of the assets of the poor do not ask or say, is, - who will be the main beneficiary of a de Soto measure ?  The answer to that question must be the banks and financial institutions of the world. The lending banks would stand to make millions of dollars in profits off the capitalization of the assets of the poor.  Something about the whole scheme fills me with unease.  With their tiny amounts of cash, the poor would then be working, not only to survive and feed their families, but also to generate profits for the banks.  And if they failed, - what would happen to their assets?Presumably they would be repossessed.  Even under ancient harsh religious laws, lenders had to return cloaks or blankets given as collateral, to the borrower each evening, so he would not die of exposure.

The experience of the Grameen Bank in Bangladesh, established by Muhammad Yunus in 1976 has shown that the poorest of the poor can be surprisingly honest and faithful in repaying debts.  That remarkable bank has experienced rates of loan repayment that commercial banks can only dream of.  It has grown from lending of $ 27 to 42 persons in 1976, to $ 2.3 billion lent in total by 1998.  Currently the bank has over 2 million borrowers.   Average loans are still less than $ 100 or £ 50 each.  Interestingly Yunus has regularly rejected World Bank offers of large low-interest loans, for reasons similar to why Mother Theresa would not accept offers of money for her mission from the Indian Government.  Both offers came with strings attached that would in effect change the character and philosophy of the core organization.  Yunus’s work with the Grameen Bank was finally given international recognition in October 2006 when he received the Nobel Peace Prize.

The Grameen Bank at work, lending to the poorest of the poor

Founder of the Grameen Bank, and Nobel Prize winner, Muhammad Yunus

Having assisted with numerous credit schemes to help the rural poor, from a Freedom From Hunger revolving fund in Africa in the early 1960’s, to multi-million dollar schemes financed by the international development banks, I feel a bit like a pharmacist friend who used to say that there was nothing like a lifetime dispensing medicines to disillusion one completely from any faith whatsoever in drugs and potions !  Or to use a very different illustration, I recall a young Pat Kelly-Rogers on the deck of a herring trawler I skippered in the days before mechanical aids were available to lift, wash and select fish on deck.  Pat was bent over, scooping up small, haddock, mackerel and herring from a 5 ton haul, and laboriously selecting them into separate baskets for the different species.  He straightened up after a while, stretched his aching back, and looking up to me on the bridge, said. – “There’s got to be a better way” !.

Well, there has to be a better way to reduce poverty and to improve the earnings and productivity of the world’s poor.  I do not believe it will be possible by urging them to follow the western path to industrialization and affluence.  There is no way everyone in the world will be able to consume energy and raw materials at the levels of the populations of the USA, Europe and Japan.  The resources simply do not exist to supply all humanity with enough to emulate our excessive consumption patterns. The world’s population will never  be able to consume meat protein or petroleum fuel at the levels of the industrialized societies.  In any case, the era of fossil fuels is coming to a close within the 21^st century, and there will soon be severe global shortages of fresh water.  So a very different route needs to be found to achieve universal access to basic food, water, health and housing provisions.

Certainly, the poor have to become more productive, and more efficient.  There has to be an economic motor to create more wealth and drive the small-scale enterprise society.  But the technology and systems that will benefit the billions of subsistence farmers or fishers, and the unemployed, or underemployed persons, will have to be appropriate to the smaller scale and lower cost structures of that half of the world’s population.  They cannot all work in Nike shoe factories producing expensive goods for the affluent.  Petroleum- based energy systems must begin to decline within the next 20 years or else we are in really serious trouble.  So the machinery and motors developed for small-scale systems in the third world will have to be low-cost and to utilize renewable fuels or natural energy.  And the West should avoid the hypocritical advice to developing countries to ‘curb their appetites’.    It is like a glutton telling a beggar to exercise self-control.

As long as we continue to spend a hundred times more on armed forces and weapons of war than we do on global assistance to the poor, we should not deceive ourselves into thinking that we can solve the problems of world hunger and poverty. We need to beat our swords into ploughshares and our spears into pruning hooks.  But just imagine if the leading powers were to unite in a massive effort to conserve soil and water, to re-plant forests and to reverse the pollution of air, land, and sea, - and to do it in a way that would provide millions with remunerative work, - just imagine the difference it would make to the major environmental and social problems of the world.  And let us remember that in protecting, conserving and enhancing the environment, we are preserving our own life-support system, and that of our children, and our children’s children.  And in addressing the social evils we are protecting ourselves and our children from the conflicts that continued social unrest would lead to, whether in the form of war or of terrorism.

If we are serious about tackling global poverty, malnutrition and human degradation, we have to end the destruction of tropical and sub-tropical forests, we must ensure that global fresh water resources are conserved, and that all peoples, however poor, have access to clean drinking water. We will have to reverse the growing desertification in Africa and Asia.  Every person should have the opportunity to work with dignity, whether income-earning in an activity of their own, or as paid employees.  Access to land, water, and to local natural resources must be equitably administered, and not be the sole preserve of the wealthy and powerful, whether individuals or corporations. 

Simple drinking water supply units.  This is possibly the greatest need of the world’s poor, few of whom have access to safe drinking water.

Diagram of Cansdale filters and pumps.  They are specifically designed to be low-cost and to be easily maintained by poor communities.

George Cansdale demonstrating water filtration

Two enormous changes are essential if this is to happen : Corrupt, despotic regimes must go.  -  And global capitalism must take its jackboot off the necks of the people.  I’ll give two examples.  Poor countries should be allowed to produce low-cost local drugs to treat aids, tuberculosis and malaria.  Wealthy pharmaceutical corporations should forego patent rights in these circumstances. Secondly, a way must be found to deliver small amounts of low-cost credit to poor farmers, artisans, and peasant traders.  At present, the World Bank or ADB can give a country a loan at 1, 2 or 3 per cent, with a five year grace period.  But no third world government will allow its poor people to access funds at that rate.  The government and the national banks all take a cut, and eventually the impoverished peasant has to pay anything from 14% to over 20%, with no grace period.  This is no exaggeration.  I see it time and time again, all over the world.   There must be a difference in approach to lending to impoverished peoples for their food security and economic survival, and lending to a powerful wealthy corporation that will make huge profits.

Referring back to my two essential changes; - they reflect two different attitudes towards third world development.  The provision of aid is what is commonly seen as the obvious way to help people out of poverty.  Examples of this approach (however flawed), include bilateral aid from rich states, multi-lateral aid from the U.N. or the World Bank, and all the assistance provided by charities and non-government organizations.  The other approach is to target the corrupt regimes and to have them replaced somehow with democratic and responsive governments.  This is the approach trumpeted by the United States (except that the only regimes it seems to overthrow are ones with oil resources, or those that pose a particular threat to American business).    For others who do not possess oil reserves, the ‘freedom and democracy’ argument is used as an excuse for not giving direct aid.  Where intervention has occurred, as in Haiti and Iraq and Afghanistan, we can ask ourselves, - have these states really become democratic entities?

I personally favour by-passing the despotic administrations, and providing practical assistance direct to the most needy.  This is best done through the charities, the missions, the NGOs like OXFAM, Tearfund, and ITG, and through concerned individuals.  Local production of cheap drugs is something that even corrupt rulers would have difficulty in opposing.  And through cheap modern communications, information can reach the most remote village, raising people’s awareness of issues.  Corruption flourishes when it can be hidden or obscured, but will eventually be shamed out of existence when it comes under the glare of public knowledge. If a state like North Korea or Myanmar, or Sudan, resists efforts to free or assist its people, then so be it.  But they should be subjected to the maximum global exposure of their crimes against their own humankind.

But there is another aspect to poverty we need to consider.  There are countries and areas of the world that are poor in a statistical sense, judged by cash income or GDP per head.  Yet they may live comfortably and in a measure of contentment, in an environment that is pleasant and conducive to good quality of life.  There are other communities and regions that may have a higher per capita income, in states where oil wealth has inflated the GNP statistically, yet the people live in squalor and under threat from exploitation, crime, disease, and limited access to medical services and schools.  Readers would no doubt agree that if they had to be poor, they would rather be poor on a Pacific island, or in Cuba, or in a mountain farming community in Africa or South America, - than in a back street slum in Lagos or Mumbai, Buenos Aires, Rio de Janiero, or Jakarta.  Mother Theresa spoke eloquently of the other side of poverty, - and this extends to spiritual poverty among the world’s affluent.  She said there were people who were:

                                                  “hungry, not just for bread, but for love.  Naked, not only for lack of clothing, but naked of human dignity and respect.  Homeless, not only for want of of a room of bricks, - but homeless because of rejection”.  

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