This recent report by Global Justice Now highlights the increasing role of private sector companies in providing loans for development to developing countries.
Some of these loans often have quite significant interest rates, as you can see from this chart – the longer the loan term, the higher the interest rate:
NB the institutions holding these bonds (hence giving out loans effectively) are some fairly big name financial institutions, such as Goldman Sachs, Black Rock and HSBC.
There’s nothing particularly unusual about countries taking out loans for development, and the kind of interest rates above are not a problem IF GDP/ GNI can grow at a similar percentage to the loan interest rate – which has been the case in the above countries for the last several years.
The problem now is that with Coronavirus all countries have taken a hit to their GPDs, and growth rates globally have plummeted to around 0% – so now countries such as Kenya are in a situation for at least the next year where they have to pay all of that interest on their debts but without the growth the expected.
The problem with the loans coming from private sector companies is that they are less likely to offer debt relief (like a cut in interest rates) compared to public or aid agencies.
NB – these loan repayments aren not small, Kenya spends a similar amount of its health care system compared to its debt payments.
Relevance to Global Development
This seems to be yet another example of how Coronavirus is going to lead to increasing inequality – the Corporations continue to get their interest payments while the poor countries struggle with a declining GDP.
In this talk Noam Chomsky emphasises that Trump’s election and his climate change denial threaten the very existence of the planet and the human species; and he also reminds us that despite America’s increasing political isolationism, U.S. Corporations still reign supreme.
Chomsky starts by saying that he was in Spain when he heard the results of the U.S. election, and the various commotion and commentary which surrounded it, but in fact the first very real negative consequence of Trump’s victory happened on the very same day and yet went largely unnoticed by the world’s media.
At the very same time as the U.S. presidential election results were being announced and analysed, COP 22 was taking place in Morocco, which was the first meeting of the signatories to the Paris Climate Change agreement (COP21) at which most countries agreed in principle to take concrete action to reduce dependence on fossil fuels and try to slow down global warming.
The Paris Climate Change Agreement – Ruined by the Election of Donald Trump?
Because the specifics of the actions to be taken had been left vague after the Paris meeting, the point of COP 22 in Morocco was to start to add in the specific details of the agreement, however, following Trump’s election, and his commitment to scrapping current environmental regulation and monitoring in the U.S., COP 22 ended with no further progress having been made.
In fact, the agenda of the global climate change framework has now changed to one of ‘how can we combat global warming without the U.S. on board’, and nations have now started to look to authoritarian, anti-democratic China for leadership if any progress is to be made in this area.
Chomsky is very clear that environmental catastrophe is now one of the biggest threats facing the survival of the species (the other is nuclear war), and he focuses on Asia to highlight the coming global problems.
In the next few years, 10s of millions of people will be fleeing from Bangladesh because of the severe level of global warming resulting in sea levels rising, which would be a real refugee crisis, unlike the present one which he casts as a ‘moral crisis’ of the European Union.
(According to one climate change scientists, these climate change migrants should have the right to move to the United States and other rich countries that are causing global warming.)
Again in Asia, a second environmental crisis looms in India and Pakistan, in the form of potential conflict over scarce water resources – two states with nuclear weapons, which potentially trigger a survival crisis for the human species.
Chomsky’s next point is that U.S. isolation in the world is increasing in remarkable ways: the U.S. had been heavily involved in South and Latin America in the decades following World War Two, but the IMF has been completely kicked out of some countries in this region and has no military basis in the region at all; elsewhere in the world the TTIP has all but collapsed and other trading blocks are growing in scope, mainly centring around China, which are drawing in some of America’s historical allies such as Peru and New Zealand; finally with Brexit America has lost it’s main ally in Europe, the U.K., which could reduce its influence in Nato.
By looking at national wealth, it seems that U.S. influence is in decline, as its share has shrunk from 50% in 1945 to 25% today,
However, these measurements fail to take into account the crucial factor of the ownership of the world economy – which is virtually never discussed – CORPORATE ownership of wealth.
U.S. Companies still own 50% of the world’s wealth
If we look at Corporate wealth, U.S. Companies are well in the lead in terms of ownership of the the global economy, and they are own over 50% of the world’s wealth in nearly every sector of the global economy – manufacturing, finance, services etc… of course although this wealth is held in the U.S. and supported by public money, it is not shared by all the citizens of the U.S.
If you look at the military dimension, the U.S. is of course still supreme.
Chomsky finishes by reminding us that the threats we now face are matters of human survival and they cannot be ignored, they need to be faced directly and soon if the human experiment is not to be a disastrous failure!
How to use this in the Global Development Module?
Basically it fits into the ‘how important are nation states’ aspect of the course.
Firstly, Chomsky seems to be suggesting that the United States still has enormous influence in the world – in that its lack of action on climate change means that it is able to disrupt the ability of other nation states to take coordinated action on climate change (whether this actually happens remains to be seen).
Secondly, it seems that other countries are becoming more powerful than the United States, and the U.S. is losing its political influence in certain ways.
However, if we look at the real ‘power indicators’ – wealth and military expenditure – the U.S. is still by far the dominant superpower.
Smoking is on the increase in several low income and middle income countries according to this World Health Organisation data, published in the World Bank’s recent review of 2016
According to the World Health Organisation up to 80% of the world’s tobacco users now live in low and middle income countries, with younger people especially taking up smoking in increasing numbers.
Why is Smoking Increasing in Poorer Countries?
In Short, it seems that since governments in developed countries have made it more difficult for tobacco companies to kill people in rich countries, they’ve now moved on to trying to kill people in poor countries instead.
The latest evidence shows that tobacco industry marketing remains a significant global problem, particularly for people in the poorest countries who are the most exposed to it. Our study examined tobacco marketing in 16 countries.
In communities in low-income countries, 81 times more tobacco adverts were observed than in high-income countries.
People in lower-income countries were 46 times more likely to hear radio adverts, 11 times more likely to see poster adverts and nine times more likely to see television adverts than those living in high-income countries.
Access to tobacco was also higher in poorer countries. In low-income countries, we observed two and a half times more stores selling tobacco in the communities in the low-income and lower-middle-income countries than in the high-income countries. Worryingly, 64% of stores visited sold single cigarettes compared with just 2.8% in high-income countries.
This high level of marketing in poorer countries is consistent with the tobacco industry’s targeting of these countries. They are key to the industry’s future. In the west, the tobacco industry’s profits continue to increase despite the decline in smoking rates , but it is unclear how long this pricing power will hold out in the face of growing regulations.
How to Reduce Smoking in the Developing World?
The World Health Organisation notes that there are several things that effectively reduce the use of tobacco consumption:
Banning positive advertising for cigarettes, although there are only total bans in 29 countries worldwide.
Promoting negative advertising – those horrible picture adds about how smoking causes disease apparently work
Taxation – a 10% increase in the price reduces smoking by 5% in low income countries.
NB – A further challenge here is tackling Organised Crime – and their role in smuggling tax-free cigarettes, which can subvert national taxation policies.
This is a useful little data-case-study for lots of reasons
It’s a good example of the negative role TNCs play in development
It’s a good example of a critique of neoliberalism – it seems that regulation by the government – of advertising and through taxes for example – can really help reduce smoking.
This kind of reminds me of ‘Runaway World’ – we know what works to reduce smoking, but what with both TNCs and Organised crime having so much to gain financially from cigarettes, it seems unlikely that governments are going to get a handle on this problem any time soon!
Finally this is also a slap in the face to ethnocentrism – You (I did until today!) were probably under the impression that smoking’s on the decline – well it may be in the UK – but looked at globally it’s not.
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
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”.
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.
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.
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.
