Tag: neoliberalism

The New Rulers of the World – A Summary

The New Rulers of the World (2001) by John Pilger provides a good example of a Dependency Theory analysis of the consequences of neoliberal globalisation, focusing on Indonesia as a case study.

The fact that this is a dependency view of development is quite clear from John Pilger’s own summary of the documentary:

“There’s no difference between the quite ruthless intervention of international capital into foreign markets these days than there was in the old days, when they were backed up by gunboats…. The world is divided between the rich, who get richer, and the poor, who get poorer, and the rich get richer on the backs of the poor. That division hasn’t changed for about 500 years” (the link above will take you to this quote)

Below I provide a brief summary of the documentary. The documentary is 15 years old now, but it provides a very useful introduction to the following concepts within global development.

  • It provides an unambiguous example of a Dependency Theory analysis of underdevelopment in one country – Indonesia
  • It’s an especially useful analysis of neo-colonialism – how economic institutions now work to extract wealth from a poor country.
  • It introduces you to the role of the World Bank and the International Monetary Fund in an accessible way.

NB this documentary is now over 15 years old, so you might like to think about the extent to which it still applies to Indonesia 15 years on, and the extent to which you can generalise this analysis to other countries today. 

(NB – the headings below are my own, not from the documentary)

John Pilger – The New Rulers of the World – intro section 

In recent months, millions of people around the world have been protesting against a new economic order called globalisation.

Never before has the human race enjoyed such enormous capacity to create wealth and reduce poverty, but never before has inequality been so great.

A small group of individuals controls more wealth than the billion people in Africa, and just a handful of corporations dominate a quarter of the world’s economic activity – for example General Motors is now bigger than Denmark.

The famous brands of almost everything are now made in poor countries, with wages so low it borders on slave labour.

Tiger Woods is paid more money to promote Nike than the entire workforce in Indonesia are paid to make Nike products.

Is this the new global village we’re told is our future, or is this an old project, that used to be run by the divine right kings, but is now run by the divine right of corporations and the government s which back them?

This film is about the New Rulers of the World – and especially their impact on one country – Indonesia.

Indonesia –history/ background

indonesia-underdevelopment

Indonesia is where the old imperialism meets the new. This is a country which should not be poor as it is rich in natural resources such as oil and gold, copper,  timber and the skills of its people.

It was first colonised by the Dutch in the 16th century, and plundered by the west for hundreds of years, a debt which is yet to paid back.

Pramoedayo Ananta Toer (ex political prisoner)

“For hundreds of years Indonesia and many other countries were sucked dry by the European countries, who became strong, and the masters of finance and commerce, and now they are dictated to by the World Bank and the IMF – Indonesia has been turned into a country of beggars because its elite is spineless.

George Monbiot (well-known environmentalist)

“We’re told that globalisation is going to bring us all together and help combat poverty but what we’ve actually seen is the opposite – the poor are becoming poorer, and the wealthy are becoming staggeringly wealthy”.

Rich and poor in Indonesia

world-bank-indonesia

The World Bank famously called Indonesia a ‘model pupil’, a success story of economic growth.

To illustrate this success the video now cuts to a lavish wedding between two merchant families – these are the elite who have reaped the benefits of globalisation –the freedom to earn money and let that money make more money.

However, Indonesia is also a very unequal country and only a relatively few people have benefited from this economic growth: 70 million people live in extreme poverty – and they’ve calculated that it would take one of the waiters working at the wedding 400 years to pay for such a wedding.

The lavish wedding is contrasted to an Indonesian labour camp less than 5 miles way where young people make the cheap consumer goods we consume in the west.

This is the backyard of global capitalism, the side we don’t see, the human price we pay for the cheap goods we buy. The average worker here gets £0.72 a day, the minimum wage in Indonesia, just over half a living wage (according to the government).

Dormitories are made from breeze blocks, they flood when it rains, and open sewers spread diseases which kill children.

The labour camp is set in an economic processing zone, which is basically a vast area of sweat shops.

Investigating Poor Working Conditions in Indonesia

GAP sweatshop.jpg

The documentary crew posed as fashion buyers to gain access and secretly filmed in one factory, and also conducted dozens of interviews with workers in these factories.

Working conditions are claustrophobic, frenzied, the workers fatigued, and working under strip-lighting in temperatures of up to 40 degrees (the management however have air conditioned offices.

They also have horrendous working hours – which can be upped when deadlines for orders are due. The workers are typically young women and one worker is on camera saying that she once worked a 24 hour shift with no breaks.  She says she is too scared to refuse or even question the working hours.

These factories are owned by Taiwanese and Korean contractors who take orders from companies such as GAP (whose products were made in the above factory where the workers are paid extremely low wages).

GAP has codes of conduct which are supposed to apply to working conditions globally, and GAP representatives do visit the factories, but the workers interviewed say they are warned by management to not tell them about forced overtime.

Dita Sari – Trade union leader

Points out that codes of conduct are meaningless in a country like Indonesia because there is high unemployment and terrible poverty, so the people are desperate enough to put up with dismal working conditions, and the government is unwilling to enforce the codes because they want Indonesia to be as attractive as possible to international companies (which means keeping labour cheap).

If you pay £8.00 for a pair of boxer shorts, then an Indonesian worker will receive approximately £0.04 pence of that.

In the previous year, the profits of gap were just short of £2 billion, and the CEO ‘earned’ £5 million, figures typical of many multinational companies.

For the sake of the documentary, they had to keep the factories anonymous, because the workers would have Victimisation from contractors and violence from anti-unionists.

Barry Coats – World Development Movement

We should aim to be better informed as consumers – when we buy something, we need to ask the company where it was produced and to give assurances that the workers are treated fairly.

The secret history of globalisation in Indonesia

president_suharto_1993
President Suharto – The most corrupt leader in modern history, according to Transparency International, having embezzled an estimated $15-35 billion during his rule

In the 1960s General Suharto seized power in Indonesia secretly backed the United States and Britain.

Suharto removed from power the founder of modern Indonesia, Sukarno – a nationalist who believed in economic independence for the country. He had kept the Transnational Corporations and their agents, the World Bank, and the IMF, out of the country, but with Suharto coming to power they were called back in to ‘save’ Indonesia.

This regime change was one of the bloodiest mass murders in post WW2 history, with more than a million people estimated to have died in the process. Suharto took brutal steps to consolidate his power by rounding up thousands and thousands of civil servants, school teachers and basically anyone with communist leanings and murdering them.

He did this with the support of the CIA, who provided a list of 5000 people they wanted dead, and the British ambassador at the time suggested a little shooting was necessary to ease the transition, while British war ships played a supporting role in protecting Indonesian troops.

Within a year of Suharto’s coming to power the economy of Indonesia was effectively redesigned, giving the west access to vast natural resources, markets and cheap labour, what Nixon called ‘the greatest prize in Asia.

The American press reported these events not as a crime against humanity, but in terms of ‘The West’s best news for years’.

In 1967 – a conference in Switzerland planned the corporate take-over of Indonesia, with most of the world’s large international companies represented, such as ICI, General Motors and American Express. For western business this was the start of the gold rush which later became known as globalisation, and barely anyone mentioned the million dead Indonesians.

Professor Jeffrey Winters

Has never heard of a situation like this where global capital holds a meeting with the state and hammered out their interests. The conference lasted for three days – and the companies present hammered out policies which would be acceptable to them on a sector by sector basis. They basically designed the legal infrastructure for investment in the country.

It basically becomes clear from a series of interviews, despite their evasiveness, that the international business community new they were dealing with a nepotistic mass murderer.

Globalisation – the British arms connection

Globalisation began in the 1980s when Margaret Thatcher dismantled manufacturing and poured billions of pounds into building up the arms industry. Suharto was an important customer for the UK arms industry at that time, and sales to Indonesia were supported by ‘export credits’, in other words, a large part of Suharto’s arms bill was paid for by the British tax payer.

queen
The Queen – entertaining the mass murderer and dictator general Suharto

So important was Suharto to British arms exporters, that he was welcomed to London by the Queen.

The World Bank and the IMF – The New Rulers of the World

Who are the new rulers of the world? Their empire today is greater than the British Empire ever was. Basically they are the World Bank, and the International Monetary Fund, two bodies which are the agents of the richest countries on earth, especially America.

Initially set up to help rebuild European economies after WW2, they later they began offering loans to poor countries, but only if they privatised their economies and allowed western companies free access to their raw materials and markets.

Barry Coates

Debt has been used by an instrument by the World Bank and IMF to get their policies implemented. The poorest countries are in a cycle of poverty, and current debt-reduction (not forgiveness) is not sufficient to allow them.

Susan George

The difference between Tanzania and Goldman Sachs

Tanzania – is a country with a GDP of $2.2 billion shared among 25 million, Goldman Sachs is an investment bank with profits $2.2 billion dollars shared among 162 partners.

The World Bank says its aim is to help poor people, calling this gobal development. It’s an ingenious system, a sort of socialism for the rich and capitalism for the poor – the rich get richer on running up debt, cheap labour and paying as little tax as possible, while the poor get poorer as their jobs and public services are cut to pay just the interest on the debt owed to the World Bank.

Here in Indonesia, the hand-outs to the rich have been extra-ordinary, internal documents from the World Bank confirm that up to a third of the banks loans went into – around $8 billion.

The 1998 Financial Crash, the End of Suharto and Indonesian Debt Repayment

Globalisation means that capital (big money) can be moved anywhere at any time, without warning.

In 1998 short-term capital was suddenly pulled out of Asia, collapsing the miracle economy overnight. This actually benefitted Nike in Indonesia, because they ended up labour costs were cut to 25% of what they had been previously.

With the economy collapsed, and Indonesia on the verge of revolution, Suharto was forced to step down, having already stolen an estimated $15 billion.

During his reign of more than 30 years, Suharto had handed out public utilities to his family and cronies, driving from Jakarta airport, you actually paid a toll to Suharto’s daughter.

Interview

The bank presents itself as an economic development agency, focusing on poverty reduction, but in fact, the bank operated during the entire cold war as an institution which distributed money to mainly authoritarian regimes in the third world that supported the West in the Cold War.

The Indonesian elite instigated many development projects with World Bank loans during Suharto’s 30 year reign, and many of them were seen as opportunities to skim money for themselves. In total, $10 billion remained unaccounted for out of $30 in loans. Of course the debt remained, and still had to be paid back to the World Bank.

According to the auditor general of the World Bank, if the citizens of Indonesia made a legal challenge against the World Bank over the remaining debt (given that they never received the money), the World Bank would be bankrupt, because this has gone on the world over.

Interview with Chief Economist of the World Bank – Nicholas Stone

In response to the question of how the World Bank didn’t realise that $10 billion of aid money to Indonesia had gone missing, his response was firstly to deny any knowledge of the $10 billion figure, then (on having been shown the World Bank’s own report) to say that figure was made up. He finally argued that progress had been made during Suharto’s regime if we look at literacy and infant mortality figures, even if the numbers in poverty had doubled from 30 million to 60 million.

When asked why there was such a silence over the atrocities of Suharto, he simply said the World Bank got it wrong, and they will get it wrong in the future too.

Dita Sari

Globalisation creates debts, creates misery, creates crisis, and creates privatisation, which pushes up the prices people have to pay for basic goods. In effect the money stolen by the Suharto regime is being paid back by the people who never benefited from that money.

Debt and the International Monetary Fund (IMF)

Every day nearly $100 million is transferred in debt repayments from the poorest countries to the richest, it is a debt that can never be paid back, given that half the world’s population live on less than $2 a day.

Interview with Stanley Fischer, from the International Monetary Fund

John Pliger asks whether debt cancellation should be a priority if we are to alleviate poverty, given that some countries spend half their GDP on debt repayments.

Fischer argues that we should not necessarily cancel their debt – we should rather look at the policies on education and health, and look at what sort of economies they run – do they integrate into the world economy, or do they run corrupt economies.

Fischer basically argues that countries need to repay their debts because they need to keep more resources flowing into their countries, and if they don’t repay them, they’ll never be leant to again. He sees debt as a ‘normal’ part of expanding enterprise and increasing economic growth.

NB – The subtext to the interview is that Western financial institutions depend on the debt repayments being kept up too.

Dita Sari

(In order to keep up debt-repayments) the government, as recommended by the IMF. has cut subsidies on electricity, water and education, which means that the workers have to pay more their children through school.

Now people now eat two meals rather than three meals a day.

Protests at the World Trade Organisation

Two years ago, protestors from all over the world converged on Seattle at a meeting of the World Trade Organisation….

Evaluation – How Valid are the Findings of this Documentary Today?

The documentary makes the following claims, all of which are worth investigating to see if they are still true today….

  1. The rich are getting richer and the poor are getting poorer
  2. 200 Corporations control 25% of world economic activity
  3. The World Bank and the IMF dictate economic policy to poor countries
  4. These economic policies are shaped by the 200 (or so) largest global corporations and work in their interests, not in the interests of the majority of people in poor countries.
  5. There is a small elite in poor countries which benefit from these economic policies and enforce them, against the interests of the majority.

I’ll provide a summary of the rest at a later date… In the meantime, you might like to actually watch the rest of it! 

Related Sources

The New Rulers of the World – video on John Pliger’s website

The New Rulers of the World – the book!

 

Trends in Global Wealth Inequality and Poverty

Global wealth inequality is increasing, but how can we explain this, is this is a problem, and what could we do to make the world a more equal place?

Trends in Global Wealth Inequality and Poverty

world wealth 2016.png

According to the 2016 Global Wealth Report produced by Credit Suisse, wealth inequality in 2016, measured by the share of the wealthiest 1 percent and wealthiest 10 percent of adults, as compared to the rest of the world’s adult population, continues to rise.

While the bottom half collectively own less than 1 percent of total wealth, the wealthiest top 10 percent own 89 percent of all global assets.

NB – You need to look at the pyramid below carefully, what it shows (to compare the very top and bottom) is as follows:

  • The richest 33 million people (0.7% of the world’s population ) control $116 trillion, or 45.6% of the world’s wealth, or more than $1 million each
  • The poorest 3.5 billion people (73% of the world’s population) control only $6.1 trillion of wealth, or less than $10, 000 in wealth each.

global-wealth-pyramid

NB – Inequality is no longer simply a matter of poor people living in less developed countries and rich people living in more developed countries -there are plenty of millionaires in low and middle income countries – the report notes that ‘today, emerging nations are home to 18 percent of the world’s ultra-high net worth population. China alone accounts for 9 percent of the top decile of global wealth holders, which is well above France, Germany, Italy, and the United Kingdom.’

However, this is hardly cause for celebrations, it simply means that not only is global inequality increasing across the world as a whole, but also within most countries in the world – there are billions of poor people living right alongside those millionaires in low income countries!

The infographic below, taken from the World Economic Forum Website (published 2015), displays global wealth inequality more simply, and it’s also easier to remember:the richest 1% control 50% of the world’s wealth, while the poorest 50% control less than 1%.

global-inequalities

Finally, to turn to trends in inequality over time, the chart below, also taken from the World Economic Forum website, shows how the global share of wealth controlled by the wealthiest 1% has increased from 45% to 50%, while the share of the ‘other 99%’ has decreased from 55% to 50%. (The chart below is derived from Oxfam’s 2016 Report: An Economy for the 1%?)

global-wealth-inequalities

Oxfam further notes that:

  • The wealth of the richest 62 people has risen by 45% in the five years since 2010 – that’s an increase of more than half a trillion dollars ($542bn), to $1.76 trillion.
  • Meanwhile, the wealth of the bottom half fell by just over a trillion dollars in the same period – a drop of 38%.
  • Since the turn of the century, the poorest half of the world’s population has received just 1% of the total increase in global wealth, while half of that increase has gone to the top 1%

Some Potential Problems with Statistics on Global Wealth Inequalities

  • Firstly, there are issues with reliability when tracking global inequality – different nations tally income and wealth in different ways, and some nations barely tally reliable stats at all
  • Secondly, you may have noticed that you get different figures depending on what groups your comparing – things look very different if you compare the top 1% to the rest, rather than comparing the top ten percent to the the bottom ten percent, or the top 50% to the bottom 50%. You might like to think about which is the most ‘valid’ comparison to give you a fair idea of global wealth inequalities (tough question!?)

Why has Wealth Inequality Increased?

What we are asking here, in short form is – how have the rich got so rich, and why have the poor lagged behind? In this section I summarise for changes which are correlated with increasing wealth inequality, all taken from the the Oxfam Report referred to above: Neoliberal economic policy; the global tax haven system, the growth of the financial sector and increasing returns to capital versus labour:

Neoliberal Economic Policy 

Neoliberal Economic and policy changes over the past 30 years – including deregulation, privatization, financial secrecy and globalization – have supercharged the ability of the rich and powerful to to further concentrate their wealth.

For example, companies working in oil, gas and other extractive industries are using their economic power in many different ways to secure their dominant position. They lobby to secure government subsidies – tax breaks – to prevent the emergence of green alternatives. In Brazil and Mexico, indigenous peoples are disproportionately affected by the destruction of their traditional lands when forests are eroded for mining or intensive large-scale farming. When privatized – as happened in Russia after the fall of communism for example – huge fortunes are generated overnight for a small group of individuals.

The Global Network of Tax Havens

A powerful example of an economic system that is rigged to work in the interests of the powerful is the global spider’s web of tax havens and the industry of tax avoidance, which has blossomed over recent decades. The system is maintained by a highly paid, industrious bevy of professionals in the private banking, legal, accounting and investment industries.

U S Companies tax havens.jpg

As taxes go unpaid due to widespread avoidance, this leads to cuts in vital public services and that governments increasingly rely on indirect taxation, like VAT, which falls disproportionately on the poorest people.

This global system of tax avoidance is sucking the life out of welfare states in the rich world. It also denies poor countries the resources they need to tackle poverty, put children in school and prevent their citizens dying from easily curable diseases.

Almost a third (30%) of rich Africans’ wealth – a total of $500bn – is held offshore in tax havens. It is estimated that this costs African countries $14bn a year in lost tax revenues. This is enough money to pay for healthcare that could save the lives of 4 million children and employ enough teachers to get every African child into school.

Tax avoidance is a problem that is rapidly getting worse and has rightly been described by the International Bar Association as an abuse of human rights and by the President of the World Bank as ‘a form of corruption that hurts the poor’.

Increasing Returns to Capital Versus Labour

One of the key trends underlying increasing wealth inequality is the increasing return to capital versus labour. In almost all rich countries and in most developing countries, the share of national income going to workers has been falling. This means workers are capturing less and less of the gains from growth. In contrast, the owners of capital have seen their capital consistently grow (through interest payments, dividends, or retained profits) faster than the rate the economy has been growing.

capital-and-labor

NB This article in The Economist challenges the idea that there are increasing returns to capital versus labour!

The Growth of the Financial Sector

The financial sector has grown most rapidly in recent decades, and a recent study by the OECD10 showed that countries with oversized financial sectors suffer from greater economic instability and higher inequality. Certainly, the public debt crisis caused by the financial crisis, bank bailouts and subsequent austerity policies has hurt the poorest people the most.

NB 1 -if you want more theoretical explanations of increasing inequality – look at Dependency Theory and World Systems Theory – much of this is applicable here. You might also like to look at ‘Why Nations Fail‘. 

NB2 – given that measuring inequality involves measuring relative wealth – that is what percentage share to the richest 10% control compared to other 90%, for example, then we’re necessarily looking at a zero sum game – If the richest 10% go from controlling 40% of the world’s wealth to 60% of the worlds wealth, then the amount of wealth controlled by the other 90% of the population must fall from a 60% share to a 40% share. 

Is Increasing Global Inequality a Problem for Humanity?

Neoliberals argue that increasing inequality isn’t necessarily a bad thing, the important thing is that even though the rich have got richer compared to the poor, the poor have also got richer, just not as rapidly as the rich and the middle.

poverty

However, Oxfam argues that growing economic inequality is bad for us all for the following reasons:

  • It undermines growth and social cohesion and the consequences for the world’s poorest people are particularly severe.
  • Had inequality within countries not grown since 2010, an extra 200 million people would have escaped poverty. That could have risen to 700 million had poor people benefited more than the rich from economic growth.
  • The International Monetary Fund (IMF) recently found that countries with higher income inequality also tend to have larger gaps between women and men in terms of health, education, labour market participation, and representation in institutions like parliaments.
  • The gender pay gap was also found to be higher in more unequal societies. It is worth noting that 53 of the world’s richest 62 people are men.
  • From and ecological point of view, there’s even more injustice: the poorest people live in areas most vulnerable to climate change, the poorest half of the global population are responsible for only around 10% of total global emissions.  The average footprint of the richest 1% globally could be as much as 175 times that of the poorest 10%.

What can we do to make the world a more equal place?

Oxfam notes that inequality is not inevitable. The current system did not come about by accident; it is the result of deliberate policy choices, of our leaders listening to the 1% and their supporters rather than acting in the interests of the majority. It is time to reject this broken economic model.

As a priority, Oxfam is calling on all world leaders to agree a global approach to end the era of tax havens

end-tax-havens

World leaders need to commit to a more effective approach to ending tax havens and harmful tax regimes, including non-preferential regimes. It is time to put an end to the race to the bottom in general corporate taxation. Ultimately, all governments – including developing countries on an equal footing – must agree to create a global tax body that includes all governments with the objective of ensuring that national tax systems do not have negative global implications.

In addition Oxfam is calling on leaders to take action to show they are on the side of the majority through doing the following:

  • Keep the influence of powerful elites in check: for example by reforming the regulatory environment, particularly around transparency in government; separating business from campaign financing; and introducing measures to close revolving doors between big business and government.
  • Share the tax burden fairly to level the playing field: by shifting the tax burden away from labour and consumption and towards wealth, capital and income from these assets; increasing transparency on tax incentives; and introducing national wealth taxes.
  • Pay workers a living wage and close the gap with executive rewards: by increasing minimum wages towards living wages; with transparency on pay ratios; and protecting workers’ rights to unionize and strikes.
  • Use progressive public spending to tackle inequality: by prioritizing policies, practice and spending that increase financing for free public health and education to fight poverty and inequality at a national level. Refrain from implementing unproven and unworkable market reforms to public health and education systems, and expand public sector rather than private sector delivery of essential services.

Selected Sources

Credit Suisse – The World Wealth Report (November 2016)

Oxfam – An Economy for the 1% (Jan 2016)

Inequality on the Rise? (2012)

Donald Trump’s Political Appointments – TNCs to shape U.S. Social Policy?

Trump’s political appointments seem to illustrate an extreme neoliberal approach to politics – those who are successful at business are being placed into senior positions in the U.S. political system which will allow them more power to shape domestic and foreign policy.

Trump’s Appointments – Transnational Corporations to Shape U.S. Social Policy  

According to a recent Guardian article on Donald Trump’s political appointments he ‘has so far nominated a number of billionaires, three Goldman Sachs bankers and the chief executive of the world’s largest oil firm to senior positions…. His team [has been] dubbed the “team of billionaires”.

Trump’s (neoliberal) argument for these appointments is that the accumulation of wealth is a sign of success and that having internationally successful business people in positions of power to negotiate (or renegotiate) trade-deals will benefit the U.S. economy and the the American people.

Two of Trumps appointments demonstrate this neoliberal approach (and its problems) perfectly: his appointment (still prospective at time of writing) of the CEO of Exxon-Mobile to Secretary of State and the appointment of Steve Mnuchin to the position of treasury secretary

It is the selection of Exxon’s chief executive, Rex Tillerson which has caused the most controversy. Tillerson has a close relationship with Vladimir Putin and some years ago agreed a joint venture with Russia to drill for oil in Siberia and the North Sea, however this venture was shelved following sanctions against Russia when it annexed Crimea. As secretary of state, Tillerson (who has $250 million of Exxon stock) will be leading discussions on whether the US should maintain sanctions against Russia.

According to this article from the Daily Kos, Tillerman’s appointment would be a disaster for business ethics…

‘Rex Tillerson is exactly the man you would expect a man who rose to the top of the oil industry to be. He has no evident morals or concerns about the world that supersede a paycheck. His respect for his own nation ends when there is a business deal to be made somewhere else.’

Trump’s pick for treasury secretary, Steven Mnuchin, is also a multimillionaire former Goldman Sachs banker who went on to be dubbed a “foreclosure king” for buying up distressed mortgages and evicting thousands of homeowners during the financial crisis.

Potential problems with Trump’s neoliberal agenda

  1. Increasing wealth and income inequality in the U.S. – With the transnational capitalist class now in direct control of U.S. domestic and foreign policy, there is every likelihood that the super rich will get richer while the income and wealth of the majority of U.S. citizens will stagnate or even go into reverse. Critics such as Warren (above) argue that Donald Trump has every intention of running Washington to benefit himself and his rich buddies”.
  2. Less respect for human rights globally. The appointment of Tillerson as Secretary of State and his close relations with the human-rights abuser Vladimir Putin suggests that the financial interests of the super-rich will trump (excuse the pun) issues such as respect for universal human rights – it’s more likely that the U.S. will turn a blind eye to dictators who trample on human rights, so long as there’s a profit to made for U.S. companies.
  3. More economic instability – The fact that Goldman Sachs executives now have greater say in shaping U.S. economic policy could mean more deregulation of financial markets and more instability in the global economy in the long run.
  4. Environmental decline – this is possibly the beginning of the end of life on planet earth as oil companies will almost certainly be given the green light to dig up the arctic.

Where can you use this in the A Level Sociology Course?

Unfortunately for those of you who haven’t been given the option of studying global development, this is just extension work, but if you are one of the fortunate few studying this most relevant and interesting topic – this info fits in as follows:

  • It’s a great example of current neoliberal policy (so neoliberalism is still very much relevant)
  • It demonstrates the increasing power of TNCs – yet how they need control over nation states to empower themselves.
  • It’s a great example of how the global super-class work – at a level above that of the nation state.

 

 

Dambisa Moyo’s Dead Aid – A Summary and Criticism

Dambisa MoyoIn this blog post I summarise Dambisa Moyo’s views on the problems with Aid as a strategy for development – she is talking about Official Development Aid rather than Emergency relief aid.

I’m mainly drawing from her writing at the end of chapter 3 and the whole of chapter 4 – and I offer up a few criticisms all the way through – before you read this through – please note my main criticism of Moyo’s work –

The main criticism I have of Moyo is that she uses statistics that show correlations between a high level of aid receipts and poor economic growth and then attempts to imply causality (aid causing poor growth) by using emotive, highly selective, anecdotal and even hypothetical (she invents a country – Dongo) ‘evidence’ to back up her case.

I say ‘imply causality’ because she never actually uses the word ‘cause’ – but the reader is left with the impression that this is what she is driving at. The end result for the less well informed reader is that they are stuck with a number of ‘easy to understand memorable case studies’ which imply that aid causes poverty – even though Moyo never actually says as much.

Anyway, here is my interpretation of the criticisms Moyo makes about the role of aid in development and a few criticisms that some people might make of Moyo’s work.

Criticism 1 – Aid does not bring about economic growth

At the end of chapter 3 – Aid is not working, Moyo starts to outline her basic criticism of Aid – This basic criticism being that aid has not effectively promote economic growth in Africa – Over 1 trillion dollars has been pumped into Africa over the past 60 years and there is little to show for it. In fact, according to Moyo, aid is malignant, it is the problem!

Moyo explains this through the following hypothetical example

 ‘There’s a mosquito net maker in Africa. He manufactures around 500 nets a week. He employs 10 people, who each have to support upwards of 15 relatives. However hard they work, they cannot make enough nets to combat the malaria-carrying mosquito.

Enter vociferous Hollywood movie star who rallies the masses, and goads Western governments to collect and send 100, 000 mosquito nets to the affected region, at a cost of $1 million, the nets arrive, the nets are distributed and a good deed is done.

With the market flooded with foreign nets, however, our mosquito net maker is promptly out of business. His ten workers can no longer support their dependents. 

Now think of what happens 5 years down the line when the mosquito nets are torn and beyond repair, we have now mosquito nets, and no local industry to build any more. The long term effect of the ‘aid injection’ has been to decimate the local economy and make the local population dependent on foreign aid from abroad.’

Backing this up with some stats, Moyo goes on to point out that ‘even the most cursory look at the data suggests that as aid has increased over time, Africa’s growth has decreased with an accompanying higher incidence of poverty. Over the past thirty years, the most aid-dependent countries have exhibited growth rates averaging minus 0.2 % per annum.

Moyo also argues that a direct consequence of aid-driven interventions has been a dramatic descent into poverty – citing Zambia as an example, and the fact that when aid flows were at their peak between 1970 and 1998 – poverty in Africa rose to a staggering 66%.

The problem Moyo has here is that she fails to present sufficient evidence to make her case – it’s well known that the later part of the period above was a time of global economic slowdown compared to the previous 20 years, which itself could play a major role in Africa’s poverty, as could be the case with the debt crisis. One could also simply cite Botswana and Ghana as case studies of aid-recipient countries that have grown to counter her one example of Zambia.

Criticism 2 – Aid Encourages Corruption, which in turn retards growth

Unlike the previous section, Moyo does use a reasonable amount of statistical (drawn mainly from Transparency International) and case study evidence in this section…

According to Moyo – If the world has one image of African statesmen, it is one of rank corruption on a stupendous scale. One of the best examples of this is Mobutu, who is estimated to have looted Zaire to the tune of $5 billion. He is also famous for leasing Concorde to fly his daughter to her wedding in the Ivory Coast shortly after negotiating a lucrative aid deal with Ronald Reagan in the 1980s.

Having provided a couple more examples of ‘classic African Dictators’, Moyo then cites that classic statement made in n 2004 by the British envoy to Kenya, Sir Edward Clay,  who complained about rampant corruption in the country, commenting that Kenya’s corrupt ministers were ‘eating like gluttons’ and vomiting on the shoes of foreign donors. In February 2005 (prodded to make a public apology), he apologised, saying he was sorry for the ‘moderation’ of his language, for underestimating the scale of the looting and for failing to speak out earlier.

Moyo further argues that at least 25% of World Bank Aid is misused. One of the worst examples is in Uganda in the 1990s – where it is estimated that only 20% of government spending on education actually made it to local primary schools.

According to Moyo, while it is not the only cause ‘aid is one of the greatest aides to corruption’ – arguing (Actually it might be more accurate to say ‘asserting’ given the lack of evidence in this section of her book) that ‘with aid’s help, corruption fosters corruption, nations quickly descend into a vicious cycle of aid’.

However, Moyo now drifts from the data and starts implying causality by asserting that growth cannot occur in an environment where corruption is rife, citing the following (un-evidenced) reasons (among others).

  • Corruption leads to worse development projects – corrupt government officials award contracts to those who collude in corruption rather than the best people for the job. This results in lower-quality infrastructure projects.
  • Foreign companies will not invest in countries where corrupt officials might siphon off investment money for themselves rather than actually investing that money in the country’s future.
  • Aid is corrosive in that it encourages exceptionally talented people to become unprincipled – putting their efforts into attracting and siphoning off aid rather than focusing on being good politicians or entrepreneurs.

Criticism 3 – Aid Corrupts Civil Society

Dambisa Moyo: Spreader of Neoliberal Hegemony?

OFFERING NO CONCRETE EXAMPLES OR EVIDENCE TO SUPPORT HER POINT, in this section Moyo asserts that Africa needs a middle class which trusts each other in order for development to occur. The problems is that in an aid environment, governments are more interested in lining their own pockets rather than encouraging entrepreneurs, meaning that the middle class cannot expand until it reaches that ‘critical mass’ which leads to sustained growth.

Criticism 4 – Aid undermines social capital

ONCE AGAIN OFFERING NO CONCRETE EXAMPLES OR EVIDENCE TO SUPPORT HER POINT, here Moyo argues that… In an aid dependent environment, there is no need for you to trust your neighbour and no need for your neighbour to trust you… Foreign aid weakens social capital by thwarting accountability mechanisms, encouraging rent-seeking behaviour, siphoning off scarce talent from employment positions and removing pressures to reform inefficient policies and institutions.

On the above two points it is also worth noting that these criticisms are really just fusions of the previous two criticisms of aid – that it prevents economic growth and breeds corruption.

Criticism 5 – Aid and Civil War

Moyo points out that there are three fundamental truths about conflicts today: they are mostly born out of competition for control of resources; they are predominantly a feature of poorer economies; and they are increasingly internal conflicts.

She then goes on to say that ‘this is why foreign aid foments conflict. The prospect of seizing power and gaining access to unlimited aid wealth is irresistible’. Unlike in the previous two sections, here she offers up one example to support her argument (Sierra Leone) before reminding us that aid also causes conflict more indirectly by reducing the prospects for economic growth.

The Economic Limitations of Aid

Having outlined five downsides of aid, Moyo then outlines its economic limitations – suggesting that there are four – once again lacking examples

  • Aid reduces savings and investment – assertion, no examples
  • Aid can be inflationary – assertion no examples
  • Aid chokes off the export sector (Dutch Disease) – cites unreferenced IMF studies
  • Aid causes bottlenecks due to low absorption capacity – Uses Uganda as an example

Aid and Aid Dependency

The end result of all the above is that aid leads to Aid Dependency – to the extent that aid makes up 13% of the average African country’s GDP. According to Moyo, this throws up the following problems

  • It makes Africans lazy
  • It leads to low tax revenues (no need to tax the citizenry if money is flooding in from outside!)
  • Citing Boone (1996) – it leads to bloated inefficient public sectors.
  • Finally, it leads to Western donors being able to call the shots.

In the final section of the chapter, Moyo pays homage to Peter Bauer, and briefly mentions that both William Easterly and Paul Collier disagree with the ‘one size fits all’ aid approach to development – before introducing the next sections of the book which are devoted to explaining why Africa should adopt free market (encouraging FDI/ Issuing bonds etc.)  rather than aid driven solutions to underdevelopment.

Criticisms of Moyo

Really, I’d just like to go back to what I said at the beginning and say that…

The main criticism I have of Moyo is that she uses statistics that show correlations between a high level of aid receipts and poor economic growth and then attempts to imply causality (aid causing poor growth) by using emotive, highly selective, anecdotal and even hypothetical (she invents a country – Dongo) ‘evidence’ to back up her assertions.

I say ‘imply causality’ because she never actually uses the word ‘cause’ – but the reader is left with the impression that this is what she is driving at. The end result for the less well informed reader is that they are stuck with a number of ‘easy to understand memorable case studies’ that imply aid causes poverty – even though Moyo never actually says as much – possibly because she might think that, really, there is insufficient evidence to make the case which she alludes to.

One has to reflect on why Moyo is so selective – I think it unlikely that an Oxford and Harvard Graduate has failed to read widely enough for this to be innocent – Especially when the author has 8 years at Goldman Sachs under her belt….so could it be that this is simply an overt attempt to promote a neoliberal anti aid agenda?

The Shock Doctrine by Naomi Klein – A Summary

Naomi Klein is one of the leading thinkers in the anti-capitalist movement and this book is one of the most important historical narratives of this century.

Taken from the web site –

‘At the most chaotic juncture in Iraq’s civil war, a new law is unveiled that would allow Shell and BP to claim the country’s vast oil reserves…. Immediately following September 11, the Bush Administration quietly out-sources the running of the “War on Terror” to Halliburton and Blackwater…. After a tsunami wipes out the coasts of Southeast Asia, the pristine beaches are auctioned off to tourist resorts…. New Orleans’s residents, scattered from Hurricane Katrina, discover that their public housing, hospitals and schools will never be reopened…. These events are examples of “the shock doctrine”: using the public’s disorientation following massive collective shocks – wars, terrorist attacks, or natural disasters — to achieve control by imposing economic shock therapy.’

 My summary –

The Shock Doctrine is the story of how “free market” policies have come to dominate the world. Klein systematically explores how neo-liberal economic policies have been pushed through following ‘shocks’ – typically either natural disasters or wars ore oppressive state apparatuses.

Klein argues that these policies work against the interests of the majority because they transfer wealth and power from the people to the global corporate elite, thus why elites need to implement these policies of in times of shock following disaster.

The book traces the origins of the ‘shock doctrine’ back fifty years, to the University of Chicago under Milton Friedman and follows the application of these ideas through contemporary history, showing in detail how the neo-liberal agenda has been pushed through in several countries following shocks

Some of the events Klein covers include –

  • Pinochet’s coup in Chile in 1973,  
  • The Falklands War in 1982,  
  • The Tiananmen Square Massacre in 1989,  
  • the collapse of the Soviet Union in 1991,  
  • the Asian Financial crisis in 1997  
  • The war in Iraq 2003 
  • Hurricane Katrina 2006 

All of the above are cases where the Corporate Elite, often in conjunction with the US government and oppressive regimes in some of the countries above have sought to profit out of times of disaster. Most of feel sympathy for people at such times – neo-liberalists see opportunity.

Once again, for me, the most important argument Klein makes is that Neo-Liberalists require situations of Shock to push through their policies of privatisation, deregulation and cut backs to public spending because the majority of people would not accept such policies because they mean a transfer of wealth and power to corporate elites.

Towards the end of the book, Klein talks about an extremely worrying trend in the USA – which is the privatisation of war and security – both of which are used in times of disaster – and we now have a situation where Capitalism benefits from disaster.

All in all this is an excellent book highlighting the links between advanced capitalism and growing human misery – as Klein says, you should read it and make yourself shock resistant.

NB – SOME MIGHT ARGUE THIS IS NOW GOING ON IN THE UNITED KINGDOM – WE ARE GOING THROUGH AN ‘ECONOMIC CRSIS’ (IN SHOCK) AND SO MILLIONNAIRE TORIES ARE NOW CUTTING PUBLIC SPENDING AND OUTSOURCING MORE AND MORE OF OUR PUBLIC SERVICES TO THE PRIVATE SECTOR!

See also –

http://www.naomiklein.org/shock-doctrine – the web site is an excellent resource that provides more contemporary examples of how neo-liberalism shafts the majority.

http://www.zimbio.com/watch/iIZMtUS-owU/The+Shock+Doctrine/The+Shock+Doctrine

http://www.youtube.com/watch?v=FPTBZrBmlfI

http://www.youtube.com/watch?v=dubkrQ7HfG8

Neo- liberalism is an economic and political ideology that believes state control over the economy is undesirable and seeks to transfer control of the economy from the state to the private sector. It gained popularity amongst politicians and influential economists following the economic crisis of the late 1970s. It involves three main policies –

  • Deregulation – Nation States placing less restraint on private industry. In practise this means fewer laws that restrict companies making a profit – making it easier for companies to fire workers, pay them less, and allowing them to pollute.
  • Privatisation – where possible public services such as transport and education should be handed over to private interests for them to run for a profit.
  • Cut backs in public spending – taxes should be low and so investment in public services would be cut back.

Sociology in the News (4)

Three articles about the close and friendly relationship between politicians and big business caught my attention this week.

The three articles below all illustrate how the Marxist critical theory is still relevant, and also serve as good examples of why we have shifted towards neoliberalism – basically big business and government are tightly interwoven, so it’s no surprise that government policy is pro-business – whether we’re talking about the EU, or Ireland, a member of the EU, or the UK which is about to leave the the EU!

Theresa May ‘Banging the Drum’ for Free Trade at the G20 summit

According to this BBC news article, during her first international appearance since Brexit at the G20 summit Theresa May

“banged the drum for free trade, an increasingly lonely message as electorates around the world urge their leaders to greater protectionism”

It’s difficult to know precisely what this means – but it’s highly likely that this means more neoliberalismneoliberalism – lower rates of tax on TNCs, to attract them to the UK, more deregulation (cutting ‘red tape’) and more privatisation of public assets, (already raging under the Tories) – basically more of putting the needs of business and the capitalist class first.

Apple’s 13 Billion Euro Tax Bill…

Or the 13 billion bite!

The European Union recently decreed that that the Irish government should recover 13 billion Euros in bax taxes from Apple, whose headquarters are based in Cork.

Ireland already has one of the lowest corporation taxes in the world, at 12.5%, but it agree 25 years ago it agreed to give Apple a number of subsidies in order to attract the corporation to Ireland, which effectively means it has been paying 0.005% tax during that period.

The reason the EU is demanding that Ireland claim the money back is because the subsidies are against competition law – states aren’t allowed to give preferential treatment to one company over another – by giving them cash hand-outs for example, but allowing tax-breaks effectively amounts to the same thing.

This amounts to giving Apple 220 000 Euros for every year for each job located in Ireland.

The revolving door between Government and Big Business 

A third article by John Harris in the Guardian reveals that there are very close links between EU and British cabinet ministers and big business – basically what happens is that ministers spend a period of time in political office, which often involves dealing with big business, and once they leave politics, the go on to work for big companies, advising them on how to get privileged access so they can easily lobby those in the corridors of power – which makes it easier for them to get ‘sweat heart tax deals’ like Apple did.

The event which prompted the article was that former EU commissioner Jose Manuel Barroso took a job as a nonexecutive chairman and adviser to Goldman Sachs which helped cause the financial crash of 2008, but Harris points out that this is normal – between 2009 and 2010 alone, six out of 13 departing EU commissioners moved into new corporate or lobbying roles.

Harris also suggests that we ‘watch closely as the alumni of the governments headed by David Cameron exit full-time politics. Already, in fact, an odorous cloud has started to form. Earlier this year a Daily Mirror investigation found that 25 former ministers in the coalition government had taken paid roles in sectors they once oversaw’

Somehow I get the feeling quite a few of these news update posts are going to be about the further advance of neoliberalism!

Neoliberalism in India – The Consequences

neoliberalism IndiaA brief summary of part of Arundhati Roy’s ‘Capitalism: A Ghost Story’ – In which she explores some of the consequences of privatisation (part of neoliberalisation) in India.

‘Trickle down hasn’t worked in India, but gush up certainly has’

The era of the privatisation of everything has made the Indian economy one of the fasted growing in the world and most of this wealth has gushed up to India’s Corporate Elite.

In India today, a nation of 1.2 billion people, one hundred people own assets equivalent to 25% of the GDP, while a 300 million strong middle class live among the ghosts of the 250 00 debt-ridden farmers who have killed themselves and the 800 million who have been impoverished and dispossessed and live on less than twenty Indian rupees a day.

The most egregious expression of this inequality is Antilla, a building on Altamount Road in Mumbai which belongs to India’s richest man Mukesh Ambanni. It is the most expensive dwelling ever built: it has 27 floors, including 6 for parking, 3 helipads, 600 servants and a 27 story vertical wall of grass. Ambanni is worth $20 billion dollars and his company, Reliance Industries Limited (RIL) has a market capitalisation of $47 billion.

Antilla Mumba

Ambanni’s RIL Corporation is one of a handful which run India, some of the others being Tata and Vedanta, the later of which are truly global in scope – Tata, for example, runs more than one hundred companies in 80 countries.

The consequence of this concentration of wealth, is an increase in corruption, or as Roy puts it – ‘As gush up continues, so more money flows through the institutions of government’. As an example, in 2011, a corrupt minister of communications and information undervalued 2G phone licences by $40 billion dollars, to the benefit of the telecommunications companies which now profit from them, effectively costing Indian taxpayers $40 billion of revenue.

How the Elite in India Benefit from Neoliberal Policies

The way this typically works is that a corrupt government official signs a ‘Memorandum of Understanding’ (MoU) with a Corporation which privatises a chunk of publicly owned land, giving that corporation the right to use that land to establish a business – this either takes the form of mining the raw materials from under the land, or establishing a range of other projects such as Agribusinesses, Special Economic Zones, Dams, and even Formula One racing circuits.

Taxes are typically kept very low in these deals – often sow low in that local people see little of the financial benefit of the new business.

Chhattisgarh
Chhattisgarh

This is especially true were mining is concerned. In 2005, for example, the state governments of Chhattisgarh, Orissa, and Jharkhand signed hundreds of memorandums of understanding with private corporations, turning over trillions of dollars of bauxite, iron ore and other minerals for a pittance – royalties (effectively taxes) ranged from 0.5% to 7%, with the companies allowed to keep up to 99% of the revenue gained from these resources. (Allowing people like Ambanni to build their 27 story houses, rather than the money being used for food for the majority of the Indian population.)

In a third strand of Neoliberal policy, companies are subjected to very little regulation. It seems that they are allowed to develop their projects without protecting the environment or paying any compensation to people who are negatively affected by these projects, as indicated in the case study below:

Tata Steel in Chhattisgarh, North East India

Only days after the Chhattisgarh government signed an MoU with Tata Steel, a vigilante militia was established (known as the Salwa Judum). Organised by the state government and funded by Tata Steel the Salwa Judum initiated a ground clearance operation to eradicate the local forest peoples so Tata could set up its steel plant.

The Salwa Judum
The Salwa Judum

The Salwa Judum burned, raped and murdered its way through 600 local villages forcing 50 000 people into police camps and displacing a further 350 000. To keep these displaced persons in check, the government then deployed 200 000 paramilitary troops to the region to make sure that it remained a stable climate for investment and economic growth.

An Adivasi (local tribal group) protest
An Adivasi (local tribal group) protest

According to Roy the government has labelled these people ‘Maoist Rebels’, but in reality they are just displaced peoples.

Find out More

Corporate Watch – Stolen for Steel: Tata takes Tribal Land in India

The Privatisation of Education

A summary of endogenous and exogenous privatisation in England and Wales since the 1988 Education Act, and evaluations.

Education in England and Wales has become increasingly privatised since the 1980s. The 1988 Education Act introduced endogenous privatisation through marketisation and New Labour, the Coalition and the Tories since 2015 have pursued exogenous privatisation through setting up academies and getting more private companies involved with running educational services.

This post covers the following:

  • what is privisation?
  • State and private education in the U.K.
  • Increasing privatisation
  • Exogenous and Endogenous education
  • Arguments for the privatisation of education
  • Arguments against the privatisation of education.

What is Privatisation?

Privatisation is where services which were once owned and provided by the state are transferred to private companies, such as the transfer of educational assets and management to private companies, charities or religious institutions.

The UK government spends approximately £90 billion a year on education, which includes to costs of teacher’s salaries, support workers, educational resources, building and maintaining school buildings, and the cost of writing curriculums, examinations and inspections (OFSTED), which means there is plenty of stuff which could potentially be privatised.

Most aspects of education in the UK have traditionally been run by the state, and funded directly by the government with taxpayer’s money, managed by Local Education Authorities (local councils). However, with the increasing influence of Neoliberal and New Right ideas on education, there has been a trend towards the privatisation of important aspects of education, both in the UK and globally. In other words, increasing amounts of taxpayer’s money goes straight to private companies who provided educational services, rather than to Local Education Authorities.

Private and State Education in the UK

The U.K. has always had private schools, also known as independent schools. These are fee paying schools which are entirely funded by the parents (or other wealthy benefactors) who pay annual fees to send their children to them.

Only the very wealthiest of parents (7%) can afford to send their children to independent schools and most parents (93%) rely on state funded education, which is funded tax payers, which has been the case since the Foster Act introduced free education for all children from the age of 10 in 1870.

Successive education acts gradually expanded the scope of state education throughout the late 19th and early to mid 20th centuries and by the 1970s Britain had one of the most broad ranging comprehensive education systems in the world, delivering free education to every 5-16 year old entirely funded and delivered by the state and managed by Local Education (government) authorities.

During this time Independent schools continued to exist and wealthy parents were free to send their children to them if they could afford the fees, so we’ve always had a ‘purely private’ education system, just only available to the minority.

The Privatisation of State Education

When the New Right conservative government came to power in 1979 they looked at State education, thought it was inefficient and sub-standard compared to the quality of education being delivered by independent schools.

They started a process of privatising state education and this process continued under New Labour (1997-2010) and the Coalition Government (2010 – 2015) and has been carried on to the present day under the current New Right Conservative government.

Endogenous and Exogenous Privatisation

Ball and Youdell (2007) distinguish between endogenous privatisation (privatisation from outside) and exogenous privatisation (privatisation within the education system)

Endogenous privatisation involves the establishment of a market in education – giving parents the right to choose which schools to send their children to and making schools compete for pupils in a similar way to which companies compete for consumers.

Exogenous Privatisation involves both British and international companies taking over different aspects of the UK education system, so the government gives money to private companies to run services related to education rather than the state running these services directly.

Endogenous Privatisation

Endogenous privatisation refers to ‘privatisation within the education system’ – it involves the introduction of free-market principles into the day to day running of schools. This is basically marketization and includes the following:

  • Making schools compete for pupils so they become like businesses
  • Giving parents choice so they become consumers (open enrolment)
  • Linking school funding to success rates (formula funding)
  • Introducing performance related pay for teachers
  • Allowing successful schools to take over and manage failing schools.

Broadly speaking endogenous privatisation was achieved through the 1988 Education Act, and was just tweaked to run more efficiently in following decades (for example by allowing successful academies to take over failing schools and by tweaking league tables so that schools couldn’t ‘game’ them).

Refer to the post on the 1988 Education act for the strengths and limitations of this type of privatisation!

Exogenous Privatisation

Exogenous privatisation is where private companies take over the running of aspects of educational services from the state.

Exogenous privatisation is what we’ve seen a lot more of since the New Labour government came to power in 1997 and introduced academies and then went on to outsource a lot of education services to private companies, a process which has been continued since and to the present day.

Examples of exogenous privatisation include…

  • The setting up of Academies. Since New Labour, the establishment of Academies has meant greater involvement of the private sector in running schools. Academies are allowed to seek 10% of their funding from businesses or charities, which increases the influence of private interests over the running of the school, and some recent academy chains such as the Academies Enterprise Trust are run by private companies, and managed by people with a background in business, rather than people with a background in teaching.
  • The Building and maintaining school buildings – Under New Labour A programme of new buildings for schools was financed through the Private Finance Initiative (PFI). Private companies did the building, but in return were given contracts to repay the investment and provided maintenance for 25-35 years. The colleges, schools or local education authorities had to pay the ongoing costs.
  • Running examination systems – The UK’s largest examinations body Edexcel is run by the Global Corporation Pearsons. Pearsons runs the exam boards in over 70 countries, meaning it sets the exams, it pays the examiners, it runs the training courses which teachers need to attend to understand the assessment criteria, and increasingly it writes the text books.
  • The Expansion of the Education Services Industry more generally. This is related to the above point – There are more International Corporations involved in education than ever before – two obvious examples include Google and Apple, both of which are well poised to play an increasing role in providing educational services for a profit.

Arguments for Privatisation

The main perspectives which argue for privatising education are Neoliberalism and The New Right.

The Neoliberal/ New Right argument is that state-run education is inefficient. They argue that the state’s involvement leads to ‘bureaucratic self-interest’, the stifling of initiative and low-standards. To overcome these problems the education system must be privatised, and New Right Policies have led to greater internal and external privatisation.

The main argument for endogenous privatisation is that the introduction of Marketisation within education has increased competition between schools and driven up standards.

The main argument for exogenous privatisation is that private companies are used to keeping costs down and will run certain aspects of the education system more efficiently than Local Education Authorities, even if they make a profit. Thus it’s a win-win situation for the public and the companies.

Arguments against the Privatisation of Education

If private companies have an increasing role in running the education system this may change the type of knowledge which pupils are taught – with more of an emphasis on maths and less of an emphasis on critical humanities subjects which aren’t as profitable. Thus a narrowing of the curriculum might be the result

Stephan Ball has also referred to what he sees as the cola-isation of schools – The private sector also increasingly penetrates schools through vending machines and the development of brand loyalty through logos and sponsorships.

There might be an increasing inequality of educational provision as private companies cherry pick the best schools to take over and leave the worst schools under Local Education Authority Control.

If we want universal education for all in our current very unequal society, the state probably has to be involved in some way. If we abandoned state education altogether and moved to a purely independent school system based on fees then millions of children would get no education at all because millions of parents lack the means to pay fees because they are too poor.

Simon et al (2022) (1) compared for profit early years providers with not for profit early years providers in England and Wales during the period of 2014-2018. They found that private providers were far more likely to have high levels of debt, poor accounting and spent less on wages proportionate to the funding they received from government.

They theorised that for profit nursery chains were deliberately putting nurseries at risk of bankruptcy in order to extract government money to parent companies. (Presumably if the nurseries did go bankrupt the government would just have to bail them out!).

The main perspective which criticises the privatisation of education is Marxism.

Signposting

For more links to my posts on the sociology of education please see this page, which follows the AQA A-level specification.

To return to the homepage – revisesociology.com

Globalisation and Education

This post explores five ways in which globalisation has changed education in the U.K. including increased competition for jobs from people abroad, the increasing influence of global ICT companies, and increasing multiculturalism in education.

Globalisation refers to the increasing interconnectedness between societies across the globe.

Globalisation and Education

Three dimensions of Globalisation

This post examines how economic and cultural globalisation and increasing migration have affected education in the United Kingdom, before we look at the consequences we review these three aspects of globalisation!

Economic globalisation

is the globalisation of trade, production and consumption. Most of what we consume in the UK is produced and manufactured abroad, for example, often through Transnational Corporations, or companies which operate in more than one country, such as Shell. As a result of globalisation we have seen a decline in manufacturing jobs in recent years, because these have moved abroad (to countries such as China) and most jobs in the UK are now in the service and leisure sectors.

Cultural Globalisation

refers to the increasingly rapid spread of ideas and values around the globe. This is mainly brought about as a result of the growth of ICT – communications technology which makes it possible to communicate with people in other countries instantaneously. Cultural globalisation includes everything from the spread of music and fashion and consumer products and culture to the spread of political and religious ideas.

Increasing migration

is also part of globalisation – with more people moving around the globe for various reasons. Sometimes this is voluntary, with people moving abroad for work or education, other times it is involuntary – as is the case with refugees from conflicts or climate disasters. As a result of increasing immigration, the UK is now a much more multicultural society than in the 1950s.

Five ways in which globalisation has affected education in the U.K.

1. Increased competition for jobs abroad meant the New Labour government increased spending on education in order to try and give children skills to make them more competitive in a global labour market. New Labour wanted 50% of children to enter Higher Education, although this goal was never achieved.

2. Part of economic globalisation is the establishment of global ICT companies such as Google and Apple. These powerful institutions are now involved in writing curriculums, and online learning materials for various governments around the world. Thus education is increasingly shaped by Transnational Corporations, who make a profit out of providing these services to government. If you have an exam with the edexcell exam board for example, that would have been written by Pearsons (along with your text book), a global corporation.

3. Increasing migration has meant education is now more multicultural – all schools now teach about the ‘six world religions’ in RE, and we have many faith schools in the UK serving Muslim and Jewish students. In more recent years schools have had to respond to increasing numbers of Polish children entering primary and secondary schools.

4. Increasing cultural globalisation challenges the relevance of a ‘National Curriculum’ – what is the place of the Nation State and the idea of a ‘national curriculum’ if we live in an increasingly global culture. It also challenges what type of history and literature we should be teaching.

5. Finally, the growth of global ICT companies and global media more generally challenges the authority of traditional schooling and possibly teachers. What role does a traditional school model have when you can get all your information for free on YouTube, the Student Room and so on….

Signposting and Related Posts

For students of A-level sociology this material is relevant mainly to the sociology of education topic, and it is also relevant to the globalisation aspect of the global development module.

This post should also be of interest to anybody studying education at degree level, trainee teachers and anyone with a general interest in globalisation and social change.

Please click here to return to the homepage – ReviseSociology.com

Revision notes on globalisation…

If you like this sort of thing and want some more context on globalisation, then you might like these revision notes on globalisation, specifically designed for A-level sociology. 

Globalisation cover

Nine pages of summary notes covering the following aspects of globalisation:

– Basic definitions and an overview of cultural, economic and political globalisation
– Three theories of globalisation – hyper-globalism, pessimism and transformationalism.
– Arguments for and against the view that globalisation is resulting in the decline of the nation state.
– A-Z glossary covering key concepts and key thinkers.

Five mind-maps covering the following:

– Cultural, economic, and political globalisation: a summary
– The hyper-globalist view of globalisation
– The pessimist view of globalisation
– The transformationalist/ postmodernist view of globalisation.
– The relationship between globalisation and education.

These revision resources have been designed to cover the globalisation part of the global development module for A-level sociology (AQA) but they should be useful for all students given that you need to know about globalisation for education, the family and crime, so these should serve as good context.

They might also be useful to students studying other A-level or first year degree subjects such as politics, history, economics or business, where globalisation is on the syllabus.

Neoliberalism and The New Right – An Introduction

Neoliberalism is an economic theory that believes free-market principles are the best way to organise society. The New Right is a political movement in the UK which has applied neoliberal thinking to social policies from 1979 to the present day.

What is Neoliberalism?

Neoliberalism is a pro-capitalist economic theory which believes that the ‘free market’ in capitalist economies is the best basis for organising society. Free market economies are based upon the choices individuals make when spending their money. The general principle is that if you ‘leave everything to the market’, then businesses will provide what people demand – because businesses want to make a profit and they can’t make a profit if they don’t provide what people want.

Market forces also encourage competition – when people see high demand for a product, they are encouraged to produce and sell that product – and the better product they can make and the cheaper they can sell it for, then the more profit they make.

The advantages of a free market system

According to Neoliberalism – the advantages of a free-market system are:

  1. Individual Freedom – They are based on the principle of allowing individuals to be free to pursue their own self-interest – this is seen as the best way to pursue the maximum good in society.
  2. They are efficient – businesses try to be efficient in order to maximise profit.
  3. Innovation – Competition and the profit motive encourage people to produce new products to stimulate demand – we probably wouldn’t have had the iPad without Capitalism!
  4. Economic Growth and jobs – The end result of leaving businesses free to do do business is more wealth and more jobs.

Neoliberalism and Social Policy

Neoliberals believe that governments should play a reduced role in managing the economy and in controlling people’s lives. In Neoliberal thought, the free market knows best, and individuals should be allowed as much freedom as possible to go about their businesses should be allowed more freedom to compete with each other in order to make profit.

  1. Deregulation – Removing restrictions on businesses and employers involved in world trade – In practice this means reducing tax on Corporate Profits, or reducing the amount of ‘red tape’ or formal rules by which companies have to abide – for example reducing health and safety regulations.
  2. Fewer protections for workers and the environment – For the former this means doing things like scrapping minimum wages, permanent contracts. This also means allowing companies the freedom to increasingly hire ‘flexible workers’ on short-term contracts.
  3. Privatisation – selling to private companies industries that had been owned and run by the state
  4. Cutting taxes – so the state plays less of a role in providing welfare – social security, education and health for example.
  5. IMPORTANTLY – In most neoliberal theory, the state does have a minimal role to play – it needs to protect private property – given that profit is the main motive, the system won’t work if anyone can steal or vandalise anyone else’s property – and so the state needs to maintain control of law and order.

The New Right

The New Right is a political philosophy associated with the Conservative Government (1979-1997 and 2010 to the present day). The New Right adopted and put into practice many of the ideas of Neoliberalism, but there are some differences (indicated below).

The New Right: Five Key Ideas:

  1. The introduction of free market principles into many areas of life (Like Neoliberalism) – The best example of this is the Marketisation of Education, and we also see it with academies.
  2. Reduced Spending by the State (Like Neoliberalism) – The 1979 Conservative government cut taxes on the highest income earners and the current conservative government is cutting public services massively.
  3. An emphasis on individual freedom and responsibility (Like Neoliberalism) – The New Right have cut welfare spending enormously – believing that welfare breeds dependency. Similarly, tax breaks for the rich are seen as promoting self-interest.
  4. A strong state in terms of upholding law and order – we see this in ‘Right Realist’ ideas of crime control – with Zero Tolerance Policing and increasing use of Prison as a form of punishment – this links with the above idea of holding people responsible for their own actions (rather than blaming their backgrounds like other perspectives might).
  5. A stress on the importance of traditional institutions and values (unlike neoliberalism). The New Right believe in maintaining some traditions, as they see this as the basis for social order and stability – they strongly support the traditional nuclear family as the backbone of society for example, and still support the idea of a National Curriculum, set by the government, which sets the agenda in education.

Signposting and Related Posts 

The distinction between neoliberalism and The New Right is especially important for the social theories aspect of the theory and methods module.

Related posts include…

New Right Views of the Family

The New Right View of Education

The Neoliberal Theory of Economic Development (if you’re teacher, you really should be teaching the Global Development module!)

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