Andre Gunder Frank (1971) argues that the reason trade doesn’t work for poor countries is a legacy of colonialism – before independence, the colonizing power simply took these commodities. After independence, developing societies are often still over-dependent on exporting these primary commodities, which typically have a very low market-value, and rich countries are happy to keep things this way because this enables them to stay rich.
Dependency Theorists point to at least the following reasons why trade doesn’t help poor countries develop:
Poor countries are often dependent on low value, primary products for their export-earnings
Examples of countries over-dependent on low-value commodities include the Ivory Coast in West Africa, which to this day remains around 33% dependent on the export of raw cocoa beans or related products; Kenya (in East Africa) which is about 30% dependent on two primary products – tea and cut flowers, and Ethiopia (also in East Africa, although never a European colony) which is about 30% dependent on income from Coffee exports.
According to Elwood (2004) three commodities account for 75% of total export in the poorest 50 countries, but because of the declining value of such commodities, the developing nations need to export more and more every year just to stay in the same place. One developing nation leader described it as ‘running up the downward escalator’. For example, in 1960, the earnings from 25 tons of natural rubber would buy four tractors, today it would only buy one.
Value is added to primary commodities by rich countries
Primary products such as cocoa, tea and coffee, sell for relatively low prices, so the farmers growing and selling such products make relatively little. However, once these products have been processed, branded and turned into the goods you see on the supermarket shelves, they can sell several times the original price. The problem (for developing countries) is that most of this processing and branding is done in the West. Thus, poor countries stay poor, and rich countries get rich.
With some commodities, there are several links in the chain of trade – take coffee for example – it goes from grower (in Ethiopia for example), to the local buyer, to the exporter, to the roaster (in Germany for example), to the supermarket and then to the consumer – 6 links in the chain. A bag of coffee might cost the consumer £2.50 in the supermarket, but the grower is lucky (very lucky) if they receive even 10% of this.
Two good video sources which illustrate how low-value exports don’t generate enough income for development are the movie „Black Gold‟ which illustrates exploitation of coffee farmers in Ethiopia, and there is also Stacey Dooley’s „Kids with Machetes‟ which illustrates the low wages paid to cocoa farmers in The Ivory Coast.
The terms of trade are often biased against poor countries
Western nations impose tariffs (import taxes) or quotas (simply limits on how much a country can import) on goods from the developing world, which seriously impairs the ability of poor countries to make money from exports.
At the same time as restricting imports from poorer countries, Western governments subsidize some of their own industries. This results in over-production in some sectors, which can result in cheap, subsidized Western goods being dumped on poor countries, which undermines local industries in poorer countries. This happened in Haiti in the early 1990s, when cheap, subsidized American rice was dumped on the Haitian market, forcing local rice farmers out of business (because the American rice was cheaper.
This 2015 video from Al Jazeera focuses on this issue in Kenya – Kenyan cotton farmers are finding it very difficult to compete with subsidized American cotton farmers. You get to see the large scale U.S. operation which is subsidized by the American government, who exports their cotton: the US is the largest cotton exporter in the world. And you also get to see how American cotton production contrasts with the much smaller scale nature of Kenyan cotton production, cotton which they cannot export because they cannot compete with the subsidized US cotton.
More recently, Dependency Theorists have become concerned with the recent increase in bilateral ‘free trade’ agreements (FTAs). For example, in 2007, the EU singed FTAs with India which opened up Indian markets to the import of poultry and dairy products, despite the fact that 85% of demand is met locally by Indian farmers, and the introduction of big supermarket chains into the Indian marketplace.
Poor countries have been pressurized into exporting to clear their debts
The World Bank sees loans and debt as a ‘normal’ part of development, and poor countries are required to maintain repayments on (often low-interest) development loans to be eligible for more loans, thus keeping up repayments on loans is a crucial part of development for many countries.
Ellwood (2004) argues that this has resulted in the ‘social violence of the market’ – the constantly escalating pressure on farmers and workers in the developing world to produce more for less, which results in a problem called ‘immiserating trade’ – the more a developing country trades, the poorer it gets.
Marxists conclude that the terms of world trade are far from equal. Developing countries are very much junior partners in global trading relationships and are consequently exploited by more powerful countries, TNCs and their agents.
Chapman et al (2016) – A Level Sociology Student Book Two [Fourth Edition] Collins. ISBN-10: 0007597495
The Millennium Development Goals (MDGs) were adopted by 189 nations during the UN Millennium Summit in September 2000. Eight MDGs were developed which responded to the world’s main development challenges.
The goals ranged from halving extreme poverty rates to halting the spread of HIV/AIDS and providing universal primary education, all by the target date of 2015 – form a blueprint agreed to by all the world’s countries and all the world’s leading development institutions.
They have so far galvanized unprecedented efforts to meet the needs of the world’s poorest. The UN is also working with governments, civil society and other partners to build on the momentum generated by the MDGs and carry on with an ambitious post-2015 development agenda.
The MDGs aimed to measure development in eight categories, using 60 separate indicators. The final two goals were aimed more at developed countries, aiming to monitor things such as carbon dioxide emissions, development aid donations and fair trade rules.
Following the success of the eight MDGs, they have since ‘developed’ into seventeen global goals for sustainable development
The Global Goals for Sustainable Development
The Millennium Development Goals – Progress to 2015 (selected)
The infographics below provide the headlines….
And some further MDG achievements….
The proportion of undernourished people in developed regions halved between 1990 and 2015.
In 1990, nearly half of the population in the developing regions lived on less than $1.25 a day. This rate dropped to 14 per cent in 2015.
The average proportion of women in parliament has doubled
The net loss of forests has reduced from an average of 8.3 million hectares annually in the 1990s to an average of 5.2 million hectares annually between 2000 and 2010.
Remaining Development Goals (selected)
At the global level more than 800 million people are still living in extreme poverty
Globally, an estimated 795 people are malnourished
Globally, 300 million workers lived below the $1.25 a day poverty line in 2015.
The proportion of the working-age population that is employed – has fallen from 62 per cent in 1991 to 60 per cent in 2015.
In countries affected by conflict, the proportion of out-of-school children increased from 30 per cent in 1999 to 36 per cent in 2012.
Globally, about three quarters of working-age men participate in the labour force, compared to half of working-age women.
Women continue to experience significant gaps in terms of poverty, labour market and wages, as well as participation in private and public decision-making
Between 1990 and 2012, global emissions of carbon dioxide increased by over 50 per cent.
The map below shows the regions where most and least progress was made over the 15 years of the Millennium Development Goals.
Some strengths of the MDGs as indicators of development
Much broader range of indicators (60) – more validity! – Good for professional development workers!
Includes the developed nations (these also have targets – 7 and 8 especially)
NB – These have now become the ‘sustainable development goals’.
Some limitations of the MDGs as indicators of development
Not very ambitious – halving poverty by 2015, given up on the idea of ‘economic growth’.
Problems with some indicators – e.g. ‘finishing primary school’ doesn’t tell us about quality of education or how many days actually spent in school.
Do the MDGs lack ambition?
The main source used to write this post was the United Nations ‘Millennium Development Goals Progress Page’.
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
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.
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%.
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%?)
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.
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.
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.
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.
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
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.
The richest 20% are 100 times wealthier than the poorest 20%, and their annual income is five times greater. This post explores statistics on wealth and income inequalities in the UK
Official statistics suggest that the richest 20% of the U.K. are 100 times wealthier than the poorest 20%; the richest fifth’s annual household income is 5 times greater than the poorest 20% of the U.K. Population, after benefit and taxes are taken into account.
Wealth and income inequalities are closely correlated with social class, although economic measurements are just one indicator of social class, which is a broader concept, also encompassing social and cultural capital (if we are going to use the latest social class survey – see here for an introduction to the concept of social class.
Wealth Inequalities in the UK
The wealthiest 10% of households owned 45% of aggregate total wealth in July 2012 to June 2014.
The bottom 50% of households owned 9% of aggregate total wealth.
In 2012-14 the wealthiest 20% of households had 117 times more aggregate total wealth than the least wealthy 20% of households.
In comparison, the wealthiest 20% of households had 97 times more aggregate total wealth than the least wealthy 20% of households in July 2010 to June 2012.
The total net wealth of the lowest three decile households (30% of the U.K. population) is approximately £200 million.
The lowest decile have zero wealth, many such households will have net debt rather than assets.
The poorest fifth of households had a median income of £14600, after taxes and benefits
The richest fifth of households had a median income of £62700 after taxes and benefits.
This means the richest fifth of households in the UK received more than 4 times as much income than the poorest fifth.
The above statistics also suggest that there were some variations in income due to Covid-19, three quintiles got poorer between 2020 and 2021, while the 2nd and 3rd quintiles were slightly better off.
Income inequalities in the UK (from 2016 Report)
I’ve left this material in here because the most recent report (above) had less detail than this, focussing mostly on income changes post-Covid 19!
Original household income (before cash benefits and direct taxes) for the richest fifth of households was around 12 times higher than the poorest fifth (£85,000 and £7,000 per year respectively)
Disposable household income (after cash benefits and direct taxes) for the richest fifth was 5 times higher than the poorest fifth (£62,400 and £12,500 per year respectively).
This shows us that, overall, cash benefits and direct taxes led to income being shared more equally between households
Over the past year, median disposable income for the poorest fifth of households rose by £700 (5.1%). In contrast the income of the richest fifth of households fell by £1,000 (1.9%) over the same period.
Looked at over the past decade, the incomes of the poorest fifth of households have increased by approximately 13%, while the incomes of richest fifth of households have fallen by approximately 3%.
The three country case studies below all suggest that although neoliberal policies might promote economic development in the long run, in the case of Chile at least, there are some significant negative consequences of this pathway to development.
Chile in the 1970s
Boliva in the the 1990s
India – Contemporary
NB – If you’re here for a blog post about Neoliberalism in India – please click here (I moved it!)
The following clip from ‘The Shock Doctrine’ outlines the ‘neoliberal experiment in Chile from 1973 onwards, the very first neoliberal experiment in development.
Following the overthrow Salvador Allende, the democratically elected but Socialist President, the American backed Dicator Augusto Pinochet implemented neoliberal economic reforms.
These were written for him by by a group of American economists known as ‘The Chicago school’, headed by Milton Freedman.
Examples of neoliberal policies reforms included the cutting of taxes on imports to 10% (previously Chile had the second most protected economy in the world) and the privatisation of state owned companies.
In the short term – the policies increased unemployment and inflation and inequality and human misery which led to massive social unrest which Pinochet oppressed violently killing tens of thousands of people.
However, 40 years later… Chile is one of Latin America’s leading economies.
Neoliberals might argue tens of thousands of lives is a price worth paying for rapid wealth creation
Neoliberalism in Bolivia
This video clip from ‘The Corporation’ summarizes the case study of water privatization in Bolivia in the 1990s.
In the early 1990s, one local administrative area within Bolivia was forced to privatise the previously state owned water supply as part of a ‘Structural Adjustment Programme’
A Multinational took over running the water supply for a profit
The poorest people couldn’t afford to pay for water.
This led to massive protests which the government violently suppressed.
In this case the government eventually renationalised the water supply due to popular demand.
Did neoliberalism help development?
If you define progress as the right to clean water then no.
If you define it as increasing profit for European Transnationals then yes.
Neoliberalism in India
Arundhati Roy notes that ‘Trickle down hasn’t worked in India, but gush up certainly has’
She notes the following three ways in which the Elite in India Benefit from Neoliberal Policies
Corrupt government officials sign 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. 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.
One of the things you need to look at for the AS Education module is the extent to which material deprivation is responsible for educational underachievement. While statistics give you an overview of the extent of poverty, and a little bit of information of the kind of things poor people can’t afford, they don’t give you much a feeling of what it’s like to actually live in poverty.
To get a feeling for day to day challenges of living in poverty you need more qualitative sources, and ‘thankfully’ we are blessed with a number of recent documentaries which look at the experience of living with material deprivation in the UK.
Watch the documentary sources below and then answer the questions/ contribute to the discussions below. The videos have all been selected because they focus on material deprivation and education in some way.
Source One – Poor Kids (BBC – 2011) – Mainly focusing on younger children
Poverty – Britain’s Hungry Children (Channel 4 Report, 2013) – Cites research drawn from 2500 food diaries kept by children in the UK – Some of whom live on less than half of the recommended calories. Also highlights the importance of lunch clubs to feed hungry children.
Finally watch this video – This shows you a case study of one girl from a poor background who actually made it into the best school in the area, against the odds. It’s a bit slow, but later on it gives an insight into the struggle her mum faces to raise enough cash to meet the ‘hidden costs’ of education (she has to resort to a ‘pay day loan’).
Questions/ tasks for discussion:
Q1: Draw an ‘ageline’ (like a timeline, I may have just invented the word) showing how material deprivation affects 3 year olds to 18 year olds in different ways.
Q2: From a broadly Marxist Perspective, the effects of material deprivation on children are structural, or objective if you like. Being brought up in poverty and having a poorer diet, and living in lower quality housing effectively cause poor children to do less well in education. This means that, all other (non material) things being equal (same school, same intelligence, same motivation etc) a poor kid will always do worse than a rich kid. Do you agree? Be prepared to explain your answer.
Material deprivation can be defined as the inability to afford basic resources and services such as sufficient food and heating. Material deprivation generally has a negative effect on educational achievement.
Gibson and Asthana (1999) pointed out that there is a correlation between low household income and poor educational performance. There are a number of ways in which poverty can negatively affect the educational performance of children. For example –
Higher levels of sickness in poorer homes may mean more absence from school and falling behind with lessons
Less able to afford ‘hidden costs’ of free state education: books and toys are not bought, and computers are not available in the home
Tuition fees and loans would be a greater source of anxiety to those from poorer backgrounds.
Poorer parents are less likely to have access to pre-school or nursery facilities.
Young people from poorer families are more likely to have part-time jobs, such as paper rounds, baby sitting or shop work, creating a conflict between the competing demands of study and paid work.
Supporting evidence for the importance of material deprivation
Stephen Ball (2005) points out how the introduction of marketisation means that those who have more money have a greater choice of state schools because of selection by mortgage
Conner et al (2001) and Forsyth and Furlong (2003) both found that the introduction of tuition fees in HE puts working class children off going to university because of fear of debt
Leon Fenstein (2003) found that low income is related to low cognitive reasoning skills amongst children as young as two years old
The existence of private schools means the wealthy can afford a better education. Children from private schools are over-represented in the best universities
Evaluations of the role of material deprivation
To say that poverty causes poor educational performance is too deterministic as some students from poor backgrounds do well. Because of this, one must be cautious and rather than say there is a causal relationship between these two variables as the question suggests, it would be more accurate to say that poverty disadvantages working class students and makes it more difficult for them to succeed.
There are other differences between classes that may lead to working class underachievement. For example, those from working class backgrounds are not just materially deprived, they are also culturally deprived.
The Cultural Capital of the middle classes also advantages them in education.
In practise it is difficult to separate out material deprivation from these other factors.
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