They found that the South receives about $1.3 trillion per year from the North, in the form of aid, FDI, remittances, everything. In 2017 Global Financial Integrity published new data looking at all the money that flows between the global North and the global South. In The Divide, you write that poor countries are effectively developing rich countries, can you explain how?
But the opposite is true: as Cambridge economist Ha-Joon Chang has put it, rich countries are kicking away the very ladder that they used to climb to the top. We like to think that rich donor countries are helping poor countries up the development ladder. At the World Trade Organization, bargaining power is determined by market size, so rich countries get to push through policies that primarily benefit themselves. At the World Bank and IMF, horrible imbalances in voting power mean that a handful of rich nations get to dictate macroeconomic policy across much of the global South. Poor countries have to bend to the wishes of creditors and investors, who prohibit the use of tariffs, subsidies, capital controls and regulations – key tools that Western countries used to build their own economies. But we too often ignore the much more significant external forces that perpetuate poverty.
Of course, that has something to do with it. We tend to imagine that the poverty of poor countries has to do with their internal domestic problems – maybe it’s corruption, or weak institutions. Why are poor countries poor? Why massive poverty still exists in a world of plenty? This is a blistering indictment of our global economy, and it suggests that our usual approach to development has basically failed. It is estimated that 4.2 billion people live with less than this amount it is nearly 60% of the world’s population. The number of people living on less than $5 per day (2005 PPP), the minimum necessary for good nutrition and normal human life expectancy, has increased dramatically since the 1980s, particularly during the era of structural adjustment. If we look at more accurate poverty lines, it’s clear that the reality is more complex. But this narrative relies on a very low poverty line.
The dominant story that is handed down to us from technocrats and the media is that global poverty is rapidly decreasing, thanks to free-market globalization. What do you call the “tale of catching up”?
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