Beyond Apologies by Beyond Apologies

Beyond Apologies A lot is wrong with current economic thinking. The bad eďŹ&#x20AC;ects are all around us: a worsening environment, growing inequality, and bankrupt governments. But we cannot achieve something better if we do not learn to identify and counter the myths that hold us back. Beyond Apologies makes the case for an economics not of waste, consumption, and inequality, but of wellbeing. ď&#x201A;&#x2013;ď&#x201A;&#x2014;

Advance praise for Beyond Apologies: “Economics does not have to be the dismal science. Many false assumptions have crept into economics over the years. Debra Efroymson clears the air and shows us how to build a prosperous and sustainable economy.” – J.H. Crawford, author of Carfree Cities (International Books, 2002) and Carfree Design Manual (International Books, 2009) “Debra Efroymson’s new book, Beyond Apologies, is a must read for development practitioners and social justice advocates working to question mainstream development policies and programs. Efroymson deftly combines a historical review of the unintended consequences of diverse poverty alleviation initiatives from around the world with a sharp analysis of current policy debates and a logically-drawn road map for fundamentally changing how practitioners should think about development. The book is engagingly written and holds a treasure trove of illustrative cases and data points that oblige the international development community to rethink economic assumptions and assess how policy incoherence is driving counterproductive impact and harming the poor.” – Judy Gearhart, Executive Director, International Labor Rights Forum “Debra Efroymson debunks the myths that moneyed interests and big corporations use to justify their domination of our society. She also provides a clear roadmap for those who want to show another world is possible. She presents evidence, stories, and insights that health, environmental and social justice activists can use to guide their eﬀorts to create a healthier, more sustainable and more just world.” – Nicholas Freudenberg, Distinguished Professor of Public Health, City University of New York and author of Lethal but Legal: Corporations, Consumption and Protecting Public Health (OUP, 2014)

Debra Efroymson has co-authored the following publications: Addressing Climate Change: Can We Reduce Carbon Emissions While Increasing Quality of Life? Broadening the Focus from Tobacco Control to NCD Prevention: Enabling Environments for Better Health Ecocity Planning: Images and Ideas The Economic Contribution of Bangladeshi Women through their Unpaid Labour Enforcement of Tobacco Control Law: A Guide to the Basics From the Field: Building and Maintaining Strong Networks to Address Tobacco, Poverty, and Development Livable Cities: Ideas and Action Making the Tobacco and Poverty Link: Results from Research for Advocacy Projects in Africa, Asia, and Latin America Promoting Male Responsibility towards Greater Gender Equality Public Space and Quality of Life: A Case Study of Mount Lavinia Beach Public Spaces, How they Humanize Cities Sometimes We Win: Tobacco Control Success Stories from Asia Talking about Gender, Love, and Health Tobacco and Poverty: Research for Advocacy Guidelines Using Media and Research for Advocacy: Low Cost Ways to Increase Success Youth Who Love Life Know About HIV/AIDS

BEYOND APOLOGIES Deﬁning and Achieving An Economics of Wellbeing



Debra Efroymson

The Institute of Wellbeing Dhaka, Bangladesh

Acknowledgments This book would not have been possible without the generosity of many people who contributed their ideas and stories. Their courage and fortitude in the face of lifeâ&#x20AC;&#x2122;s obstacles are inspiring. Stimulating debates with colleagues, friends, acquaintances, and the occasional stranger helped me to think through and clarify my arguments. I am deeply grateful to all those who reviewed and commented on various drafts of this book, particularly Lori Wallach, Nicholas Freudenberg, Judy Gearhart, and James Sargent. A special thanks to all my dear friends who gave me their emotional support and encouragement as I worked on this book. There are far too many of you to name individually, but special mention goes to Phaeba Abraham, Abraham Thomas, Emmanuel Ayuk, Joan Meschino, and Anne Bertram. Heartfelt thanks to Saifuddin Ahmed and all the staďŹ&#x20AC; at Work for a Better Bangladesh (WBB) Trust and the Institute of Wellbeing in Dhaka, who have given me the opportunity to learn ďŹ rsthand about the frustration and exhilaration of advocating for policies to promote wellbeing. I would also like to thank my colleagues at the HealthBridge Foundation of Canada (at which I have worked since 1995), who gave me the much needed personal space and time to dedicate to researching and writing this book. Particularly warm thanks go to my wonderful friends and editors Kennie Lyman and Lori Jones. Kennie helped me, over the course of multiple drafts, to rethink and focus my arguments. Both helped me to unravel some of my more convoluted arguments and to present my ideas in a clearer way. Lori also formatted the book for the printed and online versions. I can never thank you both enough for all of your patience, guidance, and support. All remaining errors and unclear passages are entirely my own fault.

Copyright ÂŠ 2015 by Debra Efroymson Published by The Institute of Wellbeing All rights reserved. Printed in Bangladesh. No part of this book may be reproduced without written permission except in the case of brief quotations. Cover design and artwork by Saifuddin Ahmed Layout and printing by Imex Media Ltd. Efroymson, Debra, 1966Beyond Apologies: DeďŹ ning and Achieving An Economics of Wellbeing/Debra Efroymson ISBN 978-984-99-8928-2 First Edition, 2015

CONTENTS INTRODUCTION: WHY IT IS IMPORTANT TO LEARN ABOUT ECONOMICS ------

A Quick Economics Overview ------------------------------------------------------------------

Notes about this Book -----------------------------------------------------------------------------

Dedications ------------------------------------------------------------------------------------------

PART I. ECONOMICS REVISITED: WHAT WE’VE ALWAYS KNOWN ABOUT ECONOMICS MAY NOT BE SO ---------------------------------------------------------------

Mainstream Economics versus an Economics of Wellbeing -----------------------------

MYTH #1: The Poor Just Need a Few More Dollars ---------------------------------------------

Deﬁning Poverty ------------------------------------------------------------------------------------

Towards a Better Way: Moving from Dollars to Sense ------------------------------------

MYTH #2: GNP/GDP Tell Us How Well We Are Doing ----------------------------------------

What does GNP/GDP Actually Measure? ----------------------------------------------------

Towards a Better Way: Alternative Systems -------------------------------------------------

MYTH #3: Economic Growth is Necessary to End Poverty -----------------------------------

Economic Growth versus Poverty Alleviation -----------------------------------------------

Towards a Better Way Part I: Maximize Wellbeing -----------------------------------------

Towards a Better Way Part II: Achieving Prosperity through ‘Local Money’ --------

MYTH #4: The BWI Seek Primarily to Alleviate Poverty --------------------------------------- 100 The Origins and Evolution of the Bretton Woods Institutions -------------------------- 100 Towards a Better Way: Making Institutions Accountable to People ------------------- 115 MYTH #5: Aid Alone, or as Currently Practiced, Signiﬁcantly Reduces Poverty --------- 120 Does Aid Bring Equality? ------------------------------------------------------------------------- 120 Towards a Better Way: Improving Aid and Finding Alternatives ---------------------- 126 MYTH #6: Microcredit & Income Generation are Miracle Cures ----------------------------- 135 Microcredit: A Silver Bullet to End Poverty? ------------------------------------------------- 135 Towards a Better Way: Pay More Attention to Income Preservation as a Small but Important Piece of the Puzzle -------------------------------------------------------------- 145 MYTH #7: Extreme Inequality is Inevitable -------------------------------------------------------- 153 Why Inequality? ------------------------------------------------------------------------------------ 153 Towards a Better Way: Reducing Inequality ------------------------------------------------- 167

MYTH #8: Mainstream Economists Want Governments to Play Only a Minimal Role in the Economy ------------------------------------------------------------------- 180 Mainstream Economists Want Small Governments That Leave Businesses Alone...Or Do They? ------------------------------------------------------------------------------- 180 Towards a Better Way: Finding the Right Role for Government ------------------------ 193 MYTH #9: Whatever Governments Do, the Private Sector Can Do Better ----------------- 202 Privatizing the Public Purse: Efficiency and Effectiveness or Just More Inequality? ------------------------------------------------------------------------------------------- 202 Towards a Better Way: Resisting Privatization and Strengthening Community ---- 214 MYTH #10: When Corporations Prosper, Everyone Prospers --------------------------------- 219 Private Profit, Public Loss ------------------------------------------------------------------------ 219 Towards a Better Way: Encouraging Small Local Businesses and Limiting the Power of Corporations ---------------------------------------------------------------------------- 238 MYTH #11: Countries Should First Get Rich, Then Worry about Health and the Environment ----------------------------------------------------------------------------------------- 249 Does it Make Sense to Sacrifice Wellbeing for Money? ----------------------------------- 249 Towards a Better Way: Prioritizing Health and the Environment ---------------------- 265 MYTH #12: The Mass Media Provides Unbiased Economic Reporting --------------------- 277 Promoting the Corporate Agenda -------------------------------------------------------------- 277 Towards a Better Way: Controls on Advertising, Support for Independent Media, and Preserving the Internet ------------------------------------------------------------ 288 MYTH #13: Greed is Good ----------------------------------------------------------------------------- 293 The Defenders of Greed -------------------------------------------------------------------------- 293 Towards a Better Way: Generous and Moral Economics --------------------------------- 300 PART II. ACHIEVING AN ECONOMICS OF WELLBEING ---------------------------------- 303 Moving from Vision to Reality ------------------------------------------------------------------ 303 Getting Involved ------------------------------------------------------------------------------------ 304 A Few Advocacy Tips ----------------------------------------------------------------------------- 308 Dealing with a Sense of Hypocrisy/Inconsistency ----------------------------------------- 312 What Can I Do? -------------------------------------------------------------------------------------- 314 Can We Succeed? ----------------------------------------------------------------------------------- 319 A Word of Caution --------------------------------------------------------------------------------- 325 A Few Final Words of Advice ------------------------------------------------------------------- 326 CONCLUSION -------------------------------------------------------------------------------------------- 328 Bibliography ----------------------------------------------------------------------------------------- 330

INTRODUCTION:

Why It Is Important To Learn About Economics “I am God.” “Then I do not desire to have thee for a godfather,” said the man, “thou givest to the rich, and leavest the poor to hunger.” – Grimm, Household Tales

 A Quick Economics Overview Wealth and squalor We live in a world in which governments spend hundreds of billions of dollars each year on weapons systems and wars while claiming that they cannot afford to provide decent sanitation for their citizens or to keep them fed. It is a world in which, during the recent global recession that brought devastating economic failure to so many, the number of billionaires continued to increase. It is a world in which people perceive that everything that matters to wellbeing – health, the environment, conservation of natural resources, resilient communities, and so on – has no economic value unless it can be bought and sold. It is a world in which American leaders, despite living in one of the wealthiest countries, tell their citizens that universal health care is unaffordable, as is the teaching of art and music in schools, because the government is going bankrupt. Yet corporations in that same country can legally avoid paying taxes. We live in a world in which people consider it to be acceptable, even praiseworthy, for individuals to become rich by destroying forests and rivers; in which pollution is considered a necessary economic by-product and environmentalists are treated as nuisances, if not as terrorists. It is a world in which global meetings on climate change fail to reach any consensus for meaningful action because ‘economic’ interests consistently take priority. Wealth and power accumulate in the hands of the rich, while those at the bottom of the economic pyramid struggle for their very survival. In many countries, people whose hard work consists of manual labour or providing vital services to others earn a pittance, while those whose wealth comes from activities that provide no tangible social benefit can gain enormous riches. An American employed to care for others’ children or elderly relatives makes less than half the national average annual wage ($19,099 versus $42,110).1 Meanwhile sports stars and actors earn millions. Haitian factory workers earn twenty-eight cents per hour sewing Disney-themed clothing, while the Disney CEO makes $97,000 per hour.2 Even in countries in which the majority of the population regularly goes hungry, storeowners pack their shelves with luxury food items. Pharmaceutical companies design an endless array of products to make people look better but fail to do the

INTRODUCTION

necessary research to find cures for diseases that destroy countless lives in lowconsumption countries. There are more than one hundred varieties of soft drinks and bottled water available for purchase, yet over a billion people lack access to clean and safe water. The carrying capacity of the planet is finite. People cannot continue to generate endlessly as if natural resources, including fuel, are infinite and as if the burning of fuel and the disposal of products takes no toll. The planet’s inability to generate infinite wealth means that as more wealth is concentrated in the hands of the few, less is available for everyone else.i Just as more money allocated to weapons systems means less money available for schools, so too does the redirection of wealth to billionaires directly contribute to the continuation of poverty among others. Rapid deterioration of the natural environment and rapid depletion of natural resources spells poverty for future generations. Low-consumption countries regularly enact policies pushed by international institutions such as the World Bank and International Monetary Fund. However, despite all the privatizations of former government enterprises, despite the diminished regulation of industry and of the financial sector, despite significant cuts to taxes on the rich and corporations, the poor remain too poor to live secure lives while the rich keep getting richer. While half of the world’s adults collectively own just one percent of the $125 trillion in global wealth, the richest one percent of adults own forty percent of it, and the richest ten percent own eighty-five percent.3 This is not so different from what Leo Tolstoy described in his novel Resurrection more than a century ago: “...a society where millions struggled to provide an easy life for a few, and where sufferings were so carefully hidden that the very ones who benefited by them did not see and could not see them.”4 One difference between Tolstoy’s day and ours is that now some of that global wealth is invested in ‘corporate media,’ more commonly known as mass media. This allows the rich and powerful to influence both consumerism and thought among the masses, as they reinforce the doctrines of mainstream economics through that media. It is, of course, possible to make money without generating wealth, for instance by speculating on currencies. Such behaviour causes other problems, though, since currency speculation can mean that others lose their lifesavings. People normally spend some portion of their profit on products that require resources to produce, transport, and dispose (mansions, fancy cars, or international travel). Large houses, golf courses, and exclusive malls also take away space from other uses that benefit broader sections of society. In theory, if the rich paid their employees decent wages and lived in smaller, more energyefficient homes, cycled and walked for transport, and spent their money on such things as artwork and hiring musicians, their wealth would not take away from others. i

BEYOND APOLOGIES

As corporate wealth and power grow, the inequality gap between the rich and poor and the unequal treatment of peoples also increase. Some poverty alleviation and development projects actually enrich the wealthy rather than improve the lives of the poor. The push to grow biofuels and other large-scale cash crops, the building of mines or dams, urban renewal: all can lead to the forced displacement of poor local residents for the sake of ‘progress.’ The reality that some groups (such as the indigenous or those with darker skin) tend to fare worse everywhere is often ignored in poverty alleviation schemes, which are typically based on the ideal that everyone really does have an equal chance and they simply need to be provided with the right opportunities to succeed. A rising tide may indeed lift many boats, but it lifts some far more than others; many capsize. The growth in inequality has serious social and health consequences: homelessness, violence, infant mortality, mental illness, and imprisonment.5 Yet, people generally dismiss protests to stop actions that harm the poor as attempts to slow progress, to keep the poor in their poverty. Those who oppose the notion of ‘progress at any cost’ are treated as though they should apologize for their ‘backward thinking’ and are expected to watch silently as the wave of destructive ‘development’ drowns the poor. Or must they? Is there a better way? Can we afford to ignore the environment? Tropical storms and other extreme weather events are increasing in number and intensity. Globally, temperatures are rising. Scientists continue to issue dire warnings about human-caused climate change that is contributing to severe water scarcity (some countries such as India are already suffering from severe droughts and famines) and to the potential loss of seafood.6 Life without water is impossible; feeding the world without the protein contributed by seafood would be extremely difficult. Pollution and habitat loss also affect everyone on earth because we live in an interconnected system in which different species require each other for their survival. A new study sponsored in part by NASA's Goddard Space Flight Center suggests that global industrial civilization could collapse in the coming decades due to unsustainable resource exploitation and increasingly unequal wealth distribution. Other studies have noted that a convergence of food, water, and energy crises could likewise cause collapse.7 There is no synthetic substitute for nature. The question is not whether saving the environment is affordable, but how much environmental destruction can people inflict before humankind’s ability to survive on the planet has been completely undermined.

INTRODUCTION

Why we must understand economics to increase wellbeing “Conventional economics is a form of brain damage.” – David Suzuki8

* * * Economics affects the environment and human wellbeing in two interconnected ways. On the one hand, people’s lives are shaped in many ways by the opportunities that having money can create or by the crises that its absence causes. On the other hand, mainstream economic thinking predicated upon the sanctity of ‘free’ markets dominates industry, government, and international affairs, and therefore determines the very opportunities that exist. People might believe that they freely choose their careers and places of residence, that they independently decide whether to walk, cycle, take a bus or drive their personal vehicles to work, that they are homo sapiens rather than homo economicus. In fact, the clothes that people wear, the food that they consume, the homes in which they live, and the other people that they meet on the street are tied in no small way to economics. Refusing to learn about economics does not mean that people are able to stop their lives from being shaped in important ways by economic forces beyond their control. The widely accepted procedure for measuring national wealth (Gross Domestic Product or GDP) bolsters these economic influences because it reflects mainstream economic values. In this system, even economic activities that are environmentally or socially destructive count as a contribution to national ‘wealth’ because they generate financial gain for someone. This system also portrays policies designed to protect health, the environment, or the poor as being financially draining, making them actions for which one must apologize, rather than a logical part of a framework that does accord value to the environment and to human wellbeing. Decisions made on economic grounds affect everyone. Until it becomes clear how those decisions are justified and where the flaws in the valuation of wealth are located, people cannot counter these decisions with alternatives that focus on the values of wellbeing and environmental sustainability. National wealth calculations that do not include health, the environment, or natural resources often force people wishing to improve wellbeing to use standard economic theories when arguing for their proposed actions. For example, instead of being able to focus on its tremendous impact on population health, human suffering, and the social fabric, health workers have to talk about how HIV/AIDS damages national economies because it causes high mortality rates within the most productive segment of the population. Rather than point out the polluting effects of oil and gas production and use, environmentalists, if they wish to be heard, are forced to explain how reducing carbon emissions can bring economic

BEYOND APOLOGIES

benefits by creating a series of new industries that will generate and supply clean energy. Instead of focusing on the difficult living conditions of the poor, human rights advocates have to argue that an entire society cannot develop economically when it suffers from high rates of poverty within some segments of its population, or when women do not have equal opportunities with men. Yes, one can explain poor health, destruction of the environment, prejudice, poverty, and lack of opportunity in purely monetary terms, but advocates would not need to make those arguments if calculations of national wealth addressed what actually matters. Mainstream economics: handmaiden to the rich & powerful For the elites to maintain their extreme wealth, they need an economic ideology that defends their position from those who seek to redistribute wealth more evenly. Mainstream economics serves that purpose. The pro-business, dominant international approach to economics has various names: neoliberal, neoclassical, or Chicago School of economics. Neoliberalism derives its name from the idea of ‘economic liberalization’ – by which its proponents mean less state involvement and control (except when it comes to providing subsidies to the rich) and a greater role for the private sector in providing all types of goods and services. Neoclassical economists claim to draw their principles from early (‘classical’) economists such as Adam Smith and David Ricardo, who lived and wrote in the 1700s and early 1800s. The Chicago School derives its name from Milton Friedman, formerly a professor at the University of Chicago, who argued that government intervention in the economy was undesirable. All three schemes are part of the same broad approach that this book refers to as mainstream economics. Mainstream economists argue that people’s selfishness, consumption, and inequality directly benefit others by stimulating the economy and creating jobs. What matters, according to this view, is the total quantity of money that is generated, not how it is earned or how profits are distributed. In the words of a Forbes writer, “If you can afford constant materialism like what I continually exhibit, there’s no reason for criticism.”9 Those who remain poor, some economists suggest, are lazy, foolish, and villainous. These economists argue that social programs designed to support and benefit the poor discourage people from working. They suggest that society should focus on providing the conditions that will allow the few to get rich rather than work directly towards a system in which all can lead a decent existence. Tax cuts for the rich and slashes to social spending will, these economists argue, ultimately lead to a wealthier society in which everyone benefits. The ‘free market,’ they claim, will allow consumers to communicate their wants and needs via their spending, and this will allow only those companies that most effectively meet those needs and desires to prosper. Poverty, they argue, is a problem that is best solved by means of the ‘free market’ and ‘free’

INTRODUCTION

trade, not by government intervention (which they call interference). These same economists label dissenting voices – those who seek more economic equality – as ignorant and dangerous. Most mainstream economists act in the interests of the wealthy and powerful, not of the majority or of the environment. The mainstream approach to economics is, however, full of mistruths and contradictions. Given their preference for the private sector, mainstream economists believe that the primary role of government is to defend and protect private property. They claim to support small government and are opposed to taxes, regulations, oversight, and marketing restrictions that limit the expansion and prosperity of the private sector – and that are indispensable to protect the population and the environment. For example, they claim that government-mandated minimum wages or benefit packages for workers will discourage employers from hiring more people because decent pay and working conditions would reduce corporate profits. They object to public sector spending and programs that benefit the poor and middle class; the private sector should provide such services, they argue, for profit, if they are necessary at all. Yet they support, at least tacitly, enormous government expenditures on military technology and materiel and on lucrative contracts for large corporations (while arguing for corporate tax breaks that will lessen government revenue). Mainstream economists directly advise government leaders and policymakers around the world. They also develop policies for global institutions such as the World Bank and the International Monetary Fund, which the international community ostensibly established to reduce poverty and national financial insecurity but that have become lenders, providing funds conditional on nations meeting certain policy requirements. Those requirements may vary slightly from country to country, but essentially these global financial institutions enforce the same prescriptive policies everywhere: privatize government services, including the provision of health care, electricity, and water (the private sector, they claim, will provide these services with better quality and at a lower cost); encourage the liberalization of finance and trade; woo large corporations; and keep taxes on the rich and on corporations low. The rationale is that corporations and their executives will use the additional wealth they obtain through the privatization of public services and the enactment of special foreign investor protections to create employment for a broader section of society. This will allow, in turn, the resulting wealth to ‘trickle down’ to all (except perhaps to the laziest and most unproductive people and in the most poorly managed countries). Thus, mainstream economists exert their influence globally, and corporations become more powerful than national governments.

BEYOND APOLOGIES

By consensus, countries measure their economic progress in terms of GDP, that is, the total production of goods and services within a country. They view an increasing GDP as a sign of economic progress, and a stagnant or declining GDP as a cause for concern. With ever-increasing GDP as the goal, mainstream economists argue that ever-increasing production and consumption are critical for a nation’s financial health…even while maintaining that direct efforts to improve population health and wellbeing are unaffordable. Identifying economic myths and learning to counter them Society cannot get to a better place without looking at what is holding it back. Conventional beliefs about economics limit people to a few discourses and solutions that, rather than resolve problems, increase their magnitude. It is thus critically important to identify some widely accepted myths that underlie current economic discourse and to offer a more helpful and hopeful way of looking at the issues. Being free from dominant myths can lead to exciting new possibilities. Countering myths also involves replacing them with realities that will lead to an economics of wellbeing. People need to understand that acting in the interests of the environment will not cause economic slowdown or job loss. They need to understand that tax cuts for the wealthy do not stimulate the economy. They need to understand that greater equality would not mean impoverishing everyone. They need to stop apologizing for believing in something better, and learn to counter their opponents’ arguments effectively, be it at the dinner table or in a public debate. They need to learn enough about economics to stand up strongly for what they believe in and to start realizing the great possibilities that existing wealth would offer, if only people used it more wisely, more fairly, and more justly. As American novelist Mark Twain remarked, “Often, the less there is to justify a traditional custom, the harder it is to get rid of it.”10 Economic myths persist not because they are true, but because they allow the rich to maintain the status quo. They are necessary because they hide the otherwise obvious reality. This book identifies various economic myths and suggests ways to counter them. It does so by asking some difficult questions and by making some uncomfortable suggestions. Doing so, of course, does not win popularity; many advocates find themselves treading a fine line so that they do not offend people with their message. Environmental groups in North America, for instance, rarely suggest raising the tax on fuel to encourage people to use their cars less. Charitable organizations make a plea for generosity but refrain from suggesting that if people wasted less, they could donate more. Many people avoid referring to social classes and income groups, as if not mentioning them means that their existence will disappear.

INTRODUCTION

People have become so used to the idea of economic growth and so dependent on various aspects of the ‘modern’ life that they cannot imagine making major changes. Instead, many people look to technology to save them from the consequences of modern lifestyles. Some technologies claim to offer the potential to reduce resource consumption but typically result in the opposite outcome and thus greater resource extraction.11 Just how much longer the world can sustain this path is a serious issue. The literal fuel of economic growth is cheap oil, which people continue to burn as if the supply is infinite; but it is no longer cheap, nor will the supply last forever. For the last couple of years, the price per barrel has hovered around $100.ii China and the United States are competing for their share of a shrinking supply. Oil fuels virtually everything, including the manufacture of many of our gadgets, toys, and processed foods; when oil prices increase, so do other prices, including those of food, contributing to food riots in many countries when basic nourishment becomes unaffordable. Some have tied the recent global economic recession of 2007-2008 to the high price of oil. People realize that it is unsustainable to centralize the growth of food in a few places and to use large amounts of fuel both to grow and to ship that food, yet this process continues unabated as they make little effort to focus instead on local agricultural production without petroleum-based fertilizers. People talk about reducing their dependence on oil and other fossil fuels (all of which are running out) yet expect to maintain their current lifestyles. They talk about renewable resources, but these are not sufficient to offset current energy use or to fuel ongoing economic growth. Ignoring these problems will not make them go away; rather, it prevents us from finding the answers. It is my hope in writing this book that when I raise these difficult issues I will not frighten away my readers. I believe that it will require courage, honesty, and fresh thinking to work ourselves out of some of the dilemmas in which we currently find ourselves. Or as Plato wrote some 2,500 years ago, “Strange times are these in which we live when old and young are taught falsehoods in school. And the person that dares to tell the truth is called at once a lunatic and fool.”

As this book goes to press, the price of oil is down to $50 a barrel, the lowest price since 2009, and continues to decline. The low price is due to a number of reasons but is unlikely to last.

BEYOND APOLOGIES

Notes about this Book A note about geography I intend this book to be internationally relevant. However, I draw many of my examples from the United States, which, as the world’s economically dominant country, exerts enormous influence over policies everywhere else. I also derive many of my ideas and solutions from cities and countries in Asia. I write more about the places where I have lived, particularly Bangladesh. I have tried to be clear in the text about the locations to which I am referring. While most of the concepts are universal, of course different regions and different communities may need different solutions to solve their particular problems. A note about terms Throughout this book, I refer not to high-income and low-income countries but rather to high-consumption and low-consumption ones. Referring to countries by income level puts too much emphasis on money and not enough on wellbeing. The countries with the highest per capita incomes also tend to be the ones that use the most resources and contribute the most to climate change; there are better models to follow. Low-consumption can be a virtue, especially when combined with greater wellbeing. Some pros and cons of using numbers to prove a point Persuasive as they may appear, one must handle numbers with great care. It is far too easy to manipulate the same set of numbers to support any argument, the limit only being human creativity. For example, during the 1970s, Country X did well economically thanks to the socialist policies then in play. The country’s economic decline in the 1980s under more conservative policies (such as those espoused by American President Reagan and British Prime Minister Thatcher) did not entirely eliminate the gains of the 1970s. In comparing the country’s economic position in 1970 to its position in 1990, one might be able to attribute the improvement to the conservative policies of the 1980s simply by ignoring what actually happened during that decade. One can also carefully choose which numbers to use, putting forth only those that support one’s case while ignoring those that contradict it. Similarly, some economic measures sound compelling but in fact have little validity, such as per capita income (which ignores real income gaps) or the number of people living on only one or two dollars a day (a point that will be discussed in the first myth). I do not mean, of course, to discredit numbers entirely; they are vital for comparisons and evaluation. Infant and maternal mortality, life expectancy, literacy rates, and school enrolment, for example, demonstrate something real and important

INTRODUCTION

about a specific country’s situation. Such measures are particularly important because they focus on the most vulnerable members of society. We simply have to use numbers with caution. People should ask questions about which numbers are being chosen and by whom, whether they actually measure what they claim to measure, and whether there may be other explanations for the association between the numbers and the situation to which they are being applied. More simply, it helps to consider them within a logical framework that makes use not only of figures but also of references to observable reality. A note about myself I grew up in Albuquerque, New Mexico, in the southwest United States. My family was well off; my father was a university professor and my mother a nearly full-time home manager. In addition to studying, I developed a fondness for running and joined my school’s cross country and track teams. I’m not sure when my awareness of inequality began, but I remember travelling around the state to participate in races and being shocked at the poverty that I saw in rural New Mexico (which in some respects resembles a low-consumption country). At university, I read literature and other writings with strong social values. In my early twenties, I lived in Guatemala for more than two years as a Peace Corps volunteer working on public health and nutrition projects. While it quickly became clear that my main utility to the town in which I was living was as an object of amusement, it was equally clear that there would be at least one significant beneficiary from my posting: me. It was my first practical training in real-life economics. Among other things, it was hard not to notice that some of those who worked the hardest earned the least, both in terms of money and respect. After Peace Corps, I spent a few years in the United States, first working at various companies as a temporary secretary and then studying for a Masters degree in Public Health. My secretarial work gave me some valuable insight into the corporate world. At graduate school, I learned the essential difference between public health and medicine: while medicine focuses on treating the individual, public health is about the health of entire populations and focuses more on prevention than treatment. We were taught to see the bigger picture behind the suffering of any particular individual: why does this happen, not just to this person, but to anyone? What solutions exist to prevent this problem from occurring, at least to this degree? While in graduate school, I also worked part-time for the Pan American Health Organization (PAHO), initially the precursor to and later a regional part of the World Health Organization; this work introduced me to various issues and countries in South America...and again to more real-life economics training.

11 BEYOND APOLOGIES After getting my Masters degree, I moved to Vietnam in 1994 and have lived in Asia ever since. After four years in Hanoi working on ‘integrated development,’ reproductive and sexual health, and tobacco control I have lived for more than fourteen years in Dhaka, Bangladesh, and more than two years just outside of Colombo, Sri Lanka. I have worked on a range of policies and programs involving urban and transport planning, tobacco control, and reproductive health. I have also had the opportunity, as part of my job, to travel a bit in Africa and Europe and more widely within Asia. I have thus accumulated two decades of living and working in low-consumption countries. My life has also been shaped by a love of languages (which has led me to learn Spanish, French, Vietnamese, Bengali, and Nepali) and of mixing with ‘ordinary’ people: sidewalk vendors, rickshaw wallah, guards, and beggars. Having the chance to hear their stories and gain their insight into the economic discourse has been eye-opening. Nowhere has the intersection of economics and health become clearer to me than in my work in tobacco control. A massive international effort and absurd quantities of money have been required to start to rein in the multinational corporations producing just one unquestionably addictive and deadly product. How can corporations be more powerful than governments? Why do powerful elements in governments exert so much effort to support these corporations?iii It is no secret that tobacco kills, not only by the diseases it causes but also by diverting household spending from food.iv Yet when we try to convince a government to pass or strengthen laws to reduce tobacco use, governments invariably come to the defence not of their populations but of the tobacco industry. Why do Ministries of Finance, Trade, and Industry have so much more power than Ministries of Health, Children, Women’s Affairs, or the Environment? In his many books and articles, Noam Chomsky describes some of the ways in which the United States seeks to benefit its corporations, both recently and historically. Marion Nestle and Michael Pollan discuss them in terms of food policies. For example, the United States went to the World Trade Organization to fight on behalf of Chiquita bananas, saving the company from bankruptcy at the cost of a years-long fight with European countries over tariffs (Nestle, Food Politics: How the Food Industry Influences Nutrition and Health (Berkeley: University of California Press, 2007)). The United States likewise continues to harm the environment and impoverish farmers in order to keep corn cheap to benefit a very few very rich corporations at the expense of farmers, the environment, animals, and consumers (Pollan, The Omnivore’s Dilemma: A Natural History of Four Meals (New York: Penguin Books, 2007)). iv We estimated that 10.5 million Bangladeshi children could eat better if their parents shifted their spending from tobacco to food. Debra Efroymson, Saifuddin Ahmed, Joy Townsend, et al. “Hungry for Tobacco: An Analysis of the Economic Impact of Tobacco on the Poor in Bangladesh,” Tobacco Control 10 (2001): 212-217. iii

INTRODUCTION

I see the same problem with urban planning and transportation: financial concerns that have little to do with promoting liveable environments dominate policy. Despite abundant evidence that expanding urban roads invites traffic rather than solving congestion, governments continue to build them, including elevated expressways. The corporations that sell fuel and cars and that build roads have enough money and power to drown out opposing viewpoints. Again, money talks far too loudly to allow for sensible discussions or decisions. Over the years, I have realized that the reason for most of governments’ inexplicable decisions is a set of economic priorities derived from a rigid and highly damaging definition of economic good. Or they are simply due to the need to repay favours received from the wealthy. Elite individuals and corporations influence policy through their control of media, through intensive (mis)information campaigns, and through payoffs, from the direct bribe (more common in so-called ‘corrupt’ countries) to the favours returned to corporations that support an electoral campaign (as in the ‘less corrupt’ United States where such influence is completely legal). Mainstream economics, meanwhile, serves to justify those decisions. In the decision-making balance sheet, too often the only consideration is short-term economic gain, while any potential negative effects or concerns about equity are brushed aside as irrelevant. What matters, economists tell us, is the economy. What exactly is ‘the economy’? An article in Forbes suggests that it is simply a code word for the elite: “There’s nothing wrong with boosting the automobile industry or lining Apple’s pockets with cash. It helps the economy.”12 It is difficult not to become frustrated when trying to convince governments to ‘do the right thing.’ One could give up, which, though tempting, hardly advances the cause. Or, more productively, one could acquire new knowledge and skills to improve one’s chance of success. Since most of what is hashed over in the mass media and in common discourse about economics, development, and poverty reduction is dangerously (even murderously) wrong, I have spent the last several years trying to learn for myself. I have observed daily life in different countries and talked to countless people, particularly those who work hard for little material reward. I have read books and articles about economics by alternative thinkers who have helped to shape the ideas that this book presents. Some of the authors who have most influenced my thinking include former New Zealand Member of Parliament and economist Marilyn Waring, who dismisses the ability of GDP to say anything useful about the state of the economy and certainly about how people are doing; economist and author David Korten, who rephrases much of what is wrong with the world in

BEYOND APOLOGIES

terms of an ongoing battle between corporations and people; and the late John Kenneth Galbraith, who served in the administrations of American presidents Franklin D. Roosevelt, Harry S. Truman, John F. Kennedy, and Lyndon Johnson, and who wrote about the need to challenge conventional economic thinking and focus not on standard economic measures but on improving people’s quality of life. All of these authors illustrate how much can be gained when we question ‘common knowledge’ and, in the phrase Galbraith coined, ‘conventional wisdom.’ Most recently, Naomi Klein has written about the way that capitalism has made it impossible to respond appropriately to climate change. Her book supports many of the arguments made here.13 Waring, Korten, Galbraith, Klein, and other writers validate my optimistic belief that far better alternatives exist than what the mainstream economists are pushing. They show that we can do better than enact policies that seem to be aimed at punishing rather than helping the poor; better than agree to the self-serving claim that unlimited selfishness and greed are the greatest contributors to the public good; better than allow the insistence that there is only one economic path to follow and that all countries, however resistant, must be forced to take it; better than accept the idea that the rule of corporations is always preferable to the rule of governments. These alternative views demonstrate what I hope to make clear in this book and what activists around the world are working hard to demonstrate: that a better world is possible. Why I want you to read this book Having gone to the trouble of writing this book, I naturally hope that people will read it and take away something from it. However, there are more compelling reasons for you to read it as well. Knowledge is indeed power and the lack of it can leave us vulnerable. By fearing economics and leaving the subject to professionally-trained economists, far too many of whom side with the rich and powerful, those of us who are concerned with helping the less fortunate and protecting the planet we live on disqualify ourselves from contributing our own viewpoints to the debate. We thus find ourselves forced to play by their rules, responding to their concerns, and apologizing for offering up anything that might contradict their principles. We need to do better than that. E.F. Schumacher gave to his famous book, Small is Beautiful, the subtitle “A Study of Economics As If People Mattered.”14 To have any meaning in the real world, economics must be concerned with people. Economics must look at the wellbeing of people, not just at their material wealth. Economics is a huge field; I only touch on relatively few issues in this book. I address some of the gaps that typically occur within traditional economic explanations. I question whether some of the most common measures that people

INTRODUCTION

use in discussions about economics are valid, and I offer other alternatives that would yield measures that more accurately reflect human wellbeing. I also question dominant ideas about economic development and suggest other approaches that would lead to better results for people and for the world in which we live. In short, I look beyond apologies and seek ways to define and achieve an economics of wellbeing. Dedications Dedication #1 I dedicate this book to my dear friend and inspiration Carlo Fonseka, formerly Chairman of the National Authority on Tobacco and Alcohol (NATA) in Sri Lanka. Professor Fonseka is well known and respected in Sri Lanka for, among other things, disproving claims of the religious nature of fire walking. Despite informing me that he finds my way of writing books odd (snatching at opportunities to scribble a few lines during moments of leisure), he had the generosity to offer me precious Galbraith tomes and other economics classics without asking me to return them. He also had the foresight to insist that I actually read them before finishing this book. Dedication #2 In addition, I dedicate this book to anyone who has argued at the dinner table with family and friends that government intervention is more effective than the ‘free market’ in helping the less fortunate – and has been laughed at in consequence. I hope this book will help all of you win such arguments, or at least amply befuddle your opponents. Dedication #3 Finally, I would like to dedicate this book to all the people who have taught me that sometimes those with the least are the most generous, with their possessions, their smiles, their knowledge, and all those other forms of wealth that typically go uncounted:  The hotel receptionist in Lao who insists on taking me to his mother’s wooden home on stilts to feed me a meal of sour fish soup and sticky rice.  The Vietnamese woman who lugs a pot of broth and noodles on a shoulder pole and who, while I eat my meal, complains bitterly about how difficult her life is and then hands me change because the payment I have made is too high: “I won’t accept that much.”  The Nepali shopkeepers who overcharge the tourists and give money to the beggars.

BEYOND APOLOGIES

 The sellers of salted plums in Hanoi who treat me to glass after glass of sugarcane juice when I arrive sweaty on my bicycle at their shop.  The Vietnamese woman who gives me green tea when I am about to collapse from the heat after playing with the children in her village.  All the people I have seen refuse payment, throw in extra goods, or help others out in innumerable ways just because that’s what you do.  The beggar in Dhaka who offers her umbrella to me in the pouring rain.  The ragged boys playing cricket on the beach in Sri Lanka who ask me to join in their game, their eyes alight with pleasure from the sheer fun of their play.  All the Bangladeshi beggars I have come to know on my daily walks, who suspend their pleas for money when they see me and instead offer a warm greeting.  The man with hands gnarled by leprosy who carries in his arms another man with stick-like limbs.  The beggar eating a piece of bread who makes a game of protesting that my dog will steal it from him, then rips off a piece and offers it to him.  The police officer who, while buying tennis shoes from a hawker, solicits advice from two street girls who sagely instruct him on which is the most fashionable pair.  All those who seek to educate me about economics and inequality: The Dhaka police officer who gives me an impromptu lecture on how wage inequality demoralizes workers. The motorcycle driver/tourist guide at Angkor Wat who complains about foreign tourists taking foreign-run tours, staying in foreign-owned hotels, eating in foreign-owned restaurants, chauffeured around in foreign air-conditioned buses, so that almost none of the money they spend in Cambodia makes its way to the locals. * * * A Short Story about National Accounting Systems Prakash is a farmer. He and his family are poor, but they own a small piece of land with a fishpond, and they have a house and a bicycle. Life is difficult and they all work hard, but they have enough to get by.

INTRODUCTION

One day a wealthy businessman’s car breaks down near Prakash’s house. While the driver fixes the car, the businessman takes a rest under one of Prakash’s trees and engages the farmer in conversation. The businessman, on seeing how little money Prakash has, suggests that he could help. “Let me buy your bicycle,” he suggests, “and then you will have some extra cash to spend. You could buy your wife and children new clothes, maybe spoil yourself a little.”Prakash shakes his head. “If I sell my bicycle, how will I take my children to school? How will we get to the market? No, I can’t sell it.” The businessman looks a little surprised at Prakash’s obstinacy, but continues to try to help. “How about selling me your house, then? That would give you a lot of money that you could use for other things.”“Are you crazy?” Prakash exclaims. “If I sell my house, where will we live?” “Fine,” the businessman replies. “Let’s see…I know. I have friends who make fertilizer, and they are having trouble finding places to dump their chemicals. How about letting them dump them on your land? They would pay you a lot of money and you could get a rest from farm work.” Prakash gasps in amazement. “Allow someone to pollute my land and my water? Where would we bathe? How would we eat fish once chemicals pollute the pond? You would ruin my land and pond not just for me but also for my children and grandchildren, and their children and grandchildren. Do you think I’m crazy?” The businessman heaves a sigh. It seems to be more difficult to help this stubborn man than he had anticipated. “Listen,” he suggests, “you have a few children. Why don’t you send one to the city to get a job? He could earn money instead of wasting his time here at home.” “Drop out of school in order to work?” Prakash demands. “Impossible! I would be harming his chances of getting a good job in the future. Instead he would be stuck doing menial labour for the rest of his life.” “What about your wife, then?” the businessman suggests. “She isn’t contributing anything valuable. Let her go to the city to work as a maid and send money home.”Prakash’s eyes widen. “And without my wife, how would we survive here? Who would clean and cook and take care of the younger children and wash our clothes and help with the farm work? No, I could never do that.” The businessman looks at Prakash in scorn, but before he can criticize him, his driver appears and announces that the car is ready. He drives off, with one last look of disgust at this crazy man who refuses to help himself. No wonder the poor are poor. When governments calculate national wealth, they fail to consider the environment, natural resources, or women’s unpaid domestic work. Governments do not look at a healthy, educated population as a resource that is essential for a healthy economy; if they

BEYOND APOLOGIES

do consider such things as environment and health, they regard them separately, not as an intrinsic aspect of national wealth. If individuals were as shortsighted in their thinking as governments, they would all be sleeping on the streets. Governments have much to learn from people like Prakash. After all, if we sell our future for the sake of some ready cash, are we becoming wealthier? And the question naturally arises: how could we help people like Prakash? Step One: let’s start by not further impoverishing him. Notes Patton, “McDonald’s $8.25 Man and $8.75 Million CEO Shows Pay Gap,” Bloomberg News 12 December 2012. 2 David C. Korten, When Corporations Rule the World, 2nd ed. (Bloomﬁeld, Connecticut and San Francisco: Kumarian and Berrett-Koehler, 2001). 3 James Davies, Susanna Sandström, Anthony Shorrocks, and Edward Wolﬀ, The World Distribution of Household Wealth (London & UN Secretariat, New York: World Institute for Development Economics Research of the United Nations University (UNU-WIDER), December 2006). 4 Leo Tolstoy, Resurrection, 1989. 5 On Point with Tom Ashbrook, “How Inequality Hurts Societies,” http://onpoint.wbur.org/2011/01/27/inequality-societies accessed 7 August 2014. 6 If ocean temperatures rise high enough to kill plankton, the lowest element in the sea-based food chain, there will be no nourishment available to sustain other sea creatures. Plankton also removes half of all carbon dioxide from the atmosphere; its loss would thus be catastrophic to all life on earth. “Climate Change Will Upset Vital Ocean Chemical Cycles, Research Shows,” Science Daily 8 September 2013. 7 Nafeez Ahmed, “NASA-Funded Study: Industrial Civilisation Headed for 'Irreversible Collapse'?” The Guardian 26 May 2014. 8 Live Toxin Free, “David Suzuki on Why Conventional Economics is a Form of Brain Damage,”http://www.toxinfreefuture.com/david-suzuki-conventional-economics-form-br ain-damage.html accessed 7 August 2014. 9 Luke Landes, “Resist Planned Obsolescence or Accept the Financial Consequences,” Forbes 6 November 2012. 10 Mark Twain, The Adventures of Tom Sawyer. 11 Ahmed, “NASA-Funded Study.” 12 Landes, “Resist Planned Obsolescence.” 13 Naomi Klein, This Changes Everything: Capitalism versus the Climate (New York: Simon & Schuster, 2014). 14 E.F. Schumacher, Small is Beautiful: A Study of Economics As If People Mattered (London: Vintage Books, 1993). 1 Leslie

PART I. ECONOMICS REVISITED: What we’ve always known about economics may not be so

Economics is “[a] social science concerned with how people, either individually or in groups, attempt to allocate scarce resources, each with alternate uses, to meet their unlimited wants through the processes of production, substitution and exchange.” – Brian Goodall, Dictionary of Human Geography1

 Mainstream Economics versus an Economics of Wellbeing Most definitions of economics take scarcity of resources for granted (though in fact most mainstream economists treat resources and the ‘sink’ capacity of the planet – its ability to absorb pollution and waste – as infinite). Many resources are indeed scarce, and it is vital that people make better use of them and share them in a more equitable fashion. However, not all natural resources are finite. Intelligence, creativity, ingenuity, generosity, and kindness are essentially unlimited. This does not mean that ingenuity can help people to work their way out of all of their problems. It does mean that people can use these infinite resources to find a better way to share the finite resources on this planet. Nor are people’s needs unlimited, although their wants may well be. Allocating goods and services would be far simpler if the focus was on meeting people’s needs before worrying about their wants. Focusing on first meeting all people’s basic needs – such as food, water, shelter, clothing, basic health care, companionship – and only then, within the limit of available resources, addressing their material wants could lead to greater wellbeing without destroying the world’s resource base. Fortunately, not all needs or wants are material; friendship and human contact, for instance, rely on renewable sources. Nor should we underestimate the importance of those non-material needs; not everyone will be happier if they simply have more stuff. Human contact is a necessity, as is illustrated by the fact that placing prisoners in solitary confinement is “the most extreme sanction which may be legally imposed on prisoners,” second only to the death penalty.2 One could define an economics of wellbeing as a study of how various resources, both limited and unlimited, are allocated and exchanged to achieve the maximum benefit for all people and for the environment. Such an approach would emphasise needs over wants, wellbeing over consumption, and cooperative approaches that are consistent with social justice and with protecting the planet over competition and greed. Those who are interested in maximizing wellbeing need to find ways to ensure the fair allocation of resources, focusing on social justice and on protecting the environment. They will get little help from conventional economics as they do so, however. By starting with an assumption of scarcity, one must

BEYOND APOLOGIES

discount cooperation in favour of competition. This in turn leads to isolation from others and to the very qualities and behaviours most likely to threaten wellbeing.3 In order to find that better way, we must seek alternative discourses on economics. Doing so may lead to the discovery that economics is less ‘dismal’ and more interesting than previously thought, and that people have the right and the need to engage in discussions about it. Or as Indian novelist and social critic Arundhati Roy writes, “One of the things that I really think we have to try to do is to snatch our future back from the world of experts, to say, ‘I’m sorry, but it’s not that hard to understand and it’s not that hard to explain.’”4 Learning about non-mainstream economics can also help people to better understand why some efforts made to reduce poverty are successful while others are not...although it is always wise in this endeavour to mix theory with plenty of observation. Reality, unlike theory, often fails to resemble economists’ models. We can make much progress towards developing more human- and nature-centric ways of living by maintaining an open, questioning mind and refusing to be bullied or coerced into accepting common dogma. By moving away from conventional economics and looking instead at what is needed to improve the lot of people and the environment, many exciting new vistas open up. But if those exciting possibilities are to be achieved, people must learn how to counter the dominant voices in economics that are focused only on money and material possessions but that have significant influence on policymakers and policies, and thus on the world in which we all live. It is hard not to notice that something is deeply wrong with the current economic system when walking past beggars on the sidewalk while $200,000 cars pass by on the street, or when reading about India’s miraculous economic transformation side by side with accounts of the powerless being pushed off their land and farmers committing suicide. From noticing those dichotomies to learning how one could have a role in fixing the system can be a long yet intensely satisfying process full of new thoughts, reflection on long-held beliefs, the emergence of exciting possibilities, and the realization that the only hope for the future may be in a complete reversal of current economic priorities and actions. Getting there will not be easy. However, those seeking a better way will not be alone in their struggles; working together makes the task easier and more enjoyable. Discovering exciting possibilities rewards people’s efforts. For all those wishing to have a role in making the world a better place, a first step is to learn about the economic underpinnings of the current system and some of the many promising alternative approaches. The first part of this book addresses common – and enduring – economic myths that severely limit the world’s ability to make

ECONOMICS REVISITED

progress on human wellbeing and sets out to debunk them. Hint: Do not believe the old adage that hard work will be rewarded, at least not under a capitalist system. Question why we value the money that buys farmland or a factory so much more than the work of those who produce the food and goods. Notes Brian Goodall, The Penguin Dictionary of Human Geography (London: Penguin Books, 1987). 2 “Punitive or disciplinary segregation is the most serious punishment which can be imposed on prisoners, and as such should be reserved for the most serious prison offences and be proportional to them.” Sharon Shalev, Sourcebook on Solitary Confinement: The Decision to Place Prisoners and Detainees in Solitary Confinement, http://solitaryconfinement.org/uploads/sourcebook_03.pdf accessed 7 August 2014. 3 John McKnight and Peter Block, The Abundant Community: Awakening the Power of Families and Neighborhoods (San Francisco: American Planning Association and Berrett-Koehler, 2010). 4 Arundhati Roy, The Shape of the Beast (New Delhi: Penguin Books India, 2009). 1

MYTH #1: The Poor Just Need a Few More Dollars “Money is better than poverty, if only for ﬁnancial reasons.” – Woody Allen, Without Feathers “The only problems that money can solve are money problems.” – Unknown

 Defining Poverty A friend of mine who works for the United Nations and who was, at one point in her career, a ‘poverty expert,’ once teasingly remarked that my cozy, compact home in Sri Lanka barely qualified as decent poverty. I had, after all, only one bedroom, a one-burner stove, and a kitchen that doubled as an office. On another occasion, a colleague from the United Nations Development Program (UNDP) informed me that she wanted the poor in Dhaka to join the middle class, which she defined as ownership of a home and car. My friend’s joke and colleague’s comment raise the important issue of what exactly those in the ‘business’ of poverty reduction aim to achieve. It matters what people mean by poverty, because how one defines it also affects one’s goals, the likelihood of achieving them, and the extent of environmental damage that results from providing the level of consumption that one considers sufficient to raise people out of poverty.i Let us start with the question of abject, material poverty.ii One common way to define it is the number of people (or percentage of the population) living on less than one or two dollars a day. While these parameters can identify a group of truly needy people, this definition says very little about the experience of poverty. Defining poverty strictly in monetary terms, such as number of dollars spent per day, ignores the context in which people live their lives. How much people can buy with their money varies widely across and even within countries. How much money people need also varies considerably depending on the level of access they

The Myth about Economic Growth addresses the link between consumption and environmental damage in more detail. ii It is not always possible (or desirable) to be politically correct when discussing poverty. In some cases, I am unaware of a better term that could include a whole group and thus am obliged to use a word to which I personally object or with which I do not agree (some ‘poor’ countries are far wealthier in culture, community, language, dress and generosity than many ‘rich’ ones) or that may sound derogatory (‘lower classes’). However, it is more important to spend time resolving the problems associated with poverty than to seek uncontroversial terms with which to discuss them. i

MYTH#1: THE POOR JUST NEED MORE DOLLARS

have to basic services.iii People living on fifty dollars a day in a high-consumption country may still be extremely poor, while that amount would be considerable elsewhere. Those in the countryside who live in their own homes and grow their own food will typically need vastly less cash than those who live in cities. People who have to pay for education and health care will need a lot more money than will those who receive such services from the government for free.1 Rather than being measured in terms of dollars per day, abject poverty could more meaningfully be described in other ways: as the inability to afford three decent meals a day; as lacking sufficient shelter that protects against the cold or diseases related to exposure (including rodent bites); as the inability to send one’s children to school because the fees are unaffordable or because the children’s labour is needed to help support the family; as the persistence of sleepless nights full of worry about how to pay one’s medical bills or rent and the homelessness that may result if these bills are not paid. Using such descriptions has the added benefit of providing a clear image of people’s life circumstances, beyond the actual amount of money that they earn. One step above abject poverty is what medical anthropologist and physician Paul Farmer calls ‘decent poverty.’iv People falling into this group would include those whose housing is basic but still adequate to protect them from the elements and from rodents. It takes account of those who have enough good quality food to stay healthy, whose children are in school, and who have access to affordable health care, but who cannot afford many non-essentials. Those living in decent poverty may be unfashionably dressed, reside in simple housing, get about mainly by foot or on bicycles and public buses, and often work at more than one job to get by — but they do not suffer from cold, hunger, or the threat of imminent homelessness.

It is impossible to avoid the use of some vague terms; obviously adequate shelter is relative and location-speciﬁc (adequate housing and clothing in a tropical climate could prove deadly in a cold one). I was surprised at how well housed the poor were in La Paz until I remembered that Bolivia has cold winters. Some North American cities address the problem in less humane fashion through heating grates on which the homeless can sleep during the winter. iv “What happens when the destitute…stand up for what is theirs, to reclaim what was theirs and was taken away, to ask only that they enjoy decent poverty rather than…misery…?” Tracy Kidder, Mountains Beyond Mountains (New York and Toronto: Random House, 2004). iii

BEYOND APOLOGIES

A further step above decent poverty is relative poverty, which refers to those in the lower middle or even middle classes. People in this group have far more than enough to survive and enjoy various modest comforts, but still suffer from a sensation of poverty when they compare themselves to their neighbours or others in their city or country. They have enough food and decent housing, can afford the occasional meal out and some fancier clothing, but struggle to pay the costs needed to elevate their children to a higher class or to allow them to participate fully in the middle class ideal of consumption. This may include the strain of tutoring fees, the inability to afford a car, or the necessity to forgo shopping in fancy stores or eating in expensive restaurants that their neighbours seem to frequent. When I lived in a small town in Guatemala, my host family felt wealthy. They lived in a plain cinderblock house with a tin roof; it was impossible to be indoors during the day because it was so hot. Nine people shared the one bathroom. However, unlike most families in the town of about two thousand people, they had a flush toilet, some land of their own, and cows. They had plenty of food and could afford to fix their broken TV.v I then moved to Florida, where I felt I was living it up in my very simple apartment because I could drink water right from the tap, the sinks and showers produced hot water on demand (not just when the sun supplied it), and I only had to share the bathroom with one other person. A good friend of mine at the time lived in a large house, her child attended a private school, and both she and her husband held good white collar jobs; yet she felt poor because others in her neighbourhood had far more, and more expensive, possessions. One’s sense of prosperity is certainly relative. Research has shown that once people attain a basic level of wealth, they seem to gain contentment from further increases in wealth only if they visibly rise above their neighbours. Additional material wealth will not necessarily make people feel less poor as long as there are others who have more. For example, the World Happiness Report, a comprehensive overview of various studies of wellbeing, finds that: A household’s income counts for life satisfaction, but only in a limited way. Other things matter more: community trust, mental and physical health, and the quality of governance and rule of law. Raising incomes can raise happiness, especially in poor societies, but fostering cooperation and community can do even more, especially in rich societies that have a low marginal utility of income...[W]hile absolute income is important in poor countries, in richer countries comparative income is probably the most important.2 But why bother when they could spend their evenings singing rancheros with a guitar under the lime tree? v

MYTH#1: THE POOR JUST NEED MORE DOLLARS

As the above quote points out, wealth and deprivation are not only about money and possessions. Chilean economist and environmentalist Artur Manfred MaxNeef observes that: ...one should speak not of poverty, but of poverties. In fact, any fundamental human need that is not satisfied reveals a poverty: poverty of subsistence is due to insufficient income, food, shelter, etc.; poverty of protection is due to violence, the arms race, and so on; that of affection is due to authoritarianism, oppression and exploitative relations with the natural environment; of understanding, to bad quality of education, of participation, to marginalization and discrimination against women, children, and minorities; of identity, to imposition of alien values upon local and regional cultures, forced migration, political exile, etc. ...3

Those other poverties may seem at first to be less important than material ones, but they can be as real and devastating as suffering from chronic hunger or cold. While material and experiential poverties can coincide, often they do not.4 A friend in West Africa commented on his experience after moving from a poor, dirty area – where he constantly worried about the health of his wife and daughter – to a ‘wealthier’ part of town. His new home consisted of a couple of rooms in a threeunit, one-storey cement block; hardly fancy by Western standards, but a big step up from his previous location. He told me that after his move, he had tried repeatedly to greet the neighbours on either side but they had not responded. This was in stark contrast to his previous home, where admittedly there was little privacy but at least people talked to each other and the surrounding open space was filled with neighbours working and interacting. * * * While living in Dhaka, I changed apartments, moving to a far nicer location, partly to escape the pervasive stench of sewage in my old neighbourhood. When robbers had tried to break into my first apartment, a neighbour immediately saw them from her kitchen window and ran to alert my landlord; a group of people then chased away the would-be thieves. In the nicer location, people are more respectful of boundaries and neighbours do not know each other; robberies happen unhindered. I find the area friendly, as many people greet me when I pass through on foot, but virtually none of the people I pass actually live there; they are vendors, guards, and beggars. The upper class come and go in cars, have little casual contact with their neighbours, and are only superficially friendly. Their help in a time of need is, unfortunately, somewhat unlikely. * * * Wealthy children and adults may suffer from a ‘paradoxical poverty’ in which they have a large home, car, and plenty of food, but lack social connections and confidence in dealing with their environment. I once asked a Bangladeshi woman

BEYOND APOLOGIES

to send her hefty 15-year-old son a few blocks to visit me; she declined on the basis that she was too busy to take him and he might be kidnapped if he came alone. I tried not to laugh at the image of the number of muscular kidnappers needed to overpower her son, in daylight, on the typically crowded streets of Dhaka. However, I repeatedly see the result of the restrictions that the middle and upper class place on their children: not just children but teenagers afraid to move about the city alone and who often lack basic social skills due to their limited exposure to people beyond their tight circle. A multi-country UNESCO study on the relationship between community, poverty, and the wellbeing of children and youth found that “…institutionalising young people’s activities…can undermine young people’s autonomy and exacerbate their separation from their own community.” In country after country, the report found that the poorest children and youth were not necessarily the worst off. Not just financial security but opportunities to engage with their community were vital to the wellbeing of the young.5 People do better when they live in a supportive community where they can turn to their neighbours or colleagues for help; where they have trust in others, be they officials or the people they see on the streets; and where they feel that they have a valuable contribution to make to their community. International research has shown that these are some of the ingredients that contribute much more than simple income to a sense of wellbeing.6 People might have a greater sense of wellbeing if they lived in a less consumeroriented society in which human relationships were seen as more valuable than money. The distinction as to what actually constitutes poverty is important. If one defines poverty simply as not having enough money or not being able to purchase many of the goods that are available for sale, then the simple solution is for people to have more money. The poor do indeed need more money, but that money is only helpful if they can use it to buy what they actually need. If people have more money and the cost of living increases proportionately, they are no better off. Likewise, people would need a lot less money if they could meet their basic needs in other ways, such as through government-provided services, self-production, or local trade and barter. Even in megacities, people live in neighbourhoods that could facilitate local exchange; rooftops and verandas provide space for growing significant quantities of food. The question is not how much money people need, but rather how they can access – not necessarily through purchases – the basics that allow for a decent quality of life. While working to reduce material poverty, it is important to attempt to maintain or expand experiential richness. This requires acknowledging that poverty is not

MYTH#1: THE POOR JUST NEED MORE DOLLARS

just about material deprivation, and that communities that are poor in material goods may be quite rich in other ways and vice versa. Those who ignore the nonmaterial aspects of poverty will fail to address them and, in doing so, potentially further impoverish those they seek to help. The focus on money as the solution to poverty also gives industries and governments an excuse to implement activities that can actually lower people’s wellbeing, such as building unsafe and polluting factories to create more jobs. Focusing on money makes polluting industries look like a net benefit and ignores their environmental costs as well as the value of the entire social economy – all the exchanges that occur without money. Without a measure focused on wellbeing, it is difficult to explain why some people may be better off without a formal job or why having access to an unpolluted river is more important than earning enough to pay for privatized water supplies. Given that those at the top of the economic pyramid should be consuming significantly less – both for the health of the planet and to make more available to others – and that those in abject poverty should be consuming more, the focus should be not on increasing per capita income but rather on bringing the living conditions of the very poorest up to a decent level while reducing excess at the top. More of the world’s limited non-renewable resources should be directed towards ending absolute, wretched poverty. In doing so, though, it is critical not to harm social structures or to worsen the environment; the focus should be on outcomes rather than cash. Hint: Beware of those who suggest that we can eliminate poverty without being specific about what they mean by poverty or who focus on money rather than wellbeing. * * * Do NGOs have a role in reducing poverty? I half-jokingly referred in the opening sentences of this chapter to the ‘business’ of reducing poverty. In fact, non-government organizations or charities are a great source of employment for many people. This leads to the unfortunate situation that succeeding in the goal of reducing poverty would mean working oneself out of a comfortable job. While NGOs are usually sincere in their efforts, how they define poverty will determine whether they can succeed in reducing it. Yet reducing vaguely defined ‘poverty’ continues to be the target for many. A few examples: Oxfam International seeks “to end poverty and injustice.”7 CARE’s slogan is “Defending dignity, fighting poverty” and seeking to “expand economic opportunity.”8 Nor is the focus on poverty limited to NGOs. The World Bank’s mission “is to fight poverty with passion and professionalism for lasting results

BEYOND APOLOGIES

and to help people help themselves and their environment by providing resources, sharing knowledge, building capacity and forging partnerships in the public and private sectors.”9 Fight poverty. End poverty. Expand economic opportunity. Missing from these slogans is the link between extreme wealth and extreme poverty. Missing is the possibility of decent poverty – of modest lifestyles that are adequate for people’s needs and not harmful to the planet. Also missing is the concept of social justice – of a mechanism that regularly and automatically shifts wealth from the top down and helps to ensure that it circulates there rather than rising back to the top.vi As to the notion of fighting poverty, one may wonder if poverty actually fights back. It does…especially when we focus on its symptoms rather than its causes. NGOs certainly do have an important role to play in reducing or eliminating abject poverty. In order to do so, they need to be clearer about what they mean when they talk about ‘fighting’ and ‘ending’ it. When do NGOs say that they have reached their goal? When NGO staff members receive high salaries and live well, how much do they sympathize with their real target and how reasonable are their goals? Many NGOs do great work in the world. However, that work has limitations that are absent in their documentation. To read NGO reports to donors, one would think that nobody should be suffering anymore from violence, poor harvests, or natural disasters. According to those reports, NGO projects are usually extremely successful. Then why does abject poverty still exist? 

Towards a Better Way: Moving from Dollars to Sense “The beneﬁt [of price controls] lay in ensuring that key components of a civilized life – including electricity, communications, energy, banking, education, and health care – were available to all, regardless of their money income. This fact placed a ﬂoor under the real incomes of working, retired, and disabled people so far as the most basic consumption goods were concerned.” – James Kenneth Galbraith10

* * * Poverty is not a simple issue with simple answers. Poverty is about more than money, and it is about more than material needs. On the bright side, this means that even in circumstances of very limited money, it is possible to improve quality of life signiﬁcantly. vi

I explore this point further in the Myth about Inequality.

MYTH#1: THE POOR JUST NEED MORE DOLLARS

Better measurement systems provide a better approach As I discuss in more detail in the Myth about GDP, countries need a better way to measure how well their populations are doing. Rather than measure poverty in terms of dollars earned or spent per day, their focus should be on outcomes. It is possible to measure people’s access to the essential necessities of life: sufficient food, clean water, sanitation, shelter, education, health care, opportunities to participate in community and government, and protection from the violence of crime and war. Specific measures include life expectancy, maternal mortality, infant mortality, calories consumed per day or number of meals skipped per month, percentage of the population with access to clean water and a decent latrine, percentage of the urban population that lives within 800 metres of a usable public space, and so on. Countries and population groups could then rank as very low, low, medium, high, and very high in terms of the wellbeing or quality of life of their citizens. Defining wellbeing more broadly…and working to achieve it A broad definition of wellbeing is set out in the Universal Declaration of Human Rights; Article 25 establishes that Everyone has the right to a standard of living adequate for the health and wellbeing of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.

Article 26 of the Declaration further states, “Everyone has the right to education. Education shall be free, at least in the elementary and fundamental stages. … higher education shall be equally accessible to all on the basis of merit.” Those concerned with alleviating poverty need to pressure governments to provide more generous safety nets including free, universal, quality education (for adults as well as children), health care (including programs to prevent disease and make it easier for people to stay healthy), and transportation (good conditions for walking and cycling as well as public transit). People need to pressure governments to increase access to sanitation, clean water, and healthy foods by enacting policies to prohibit privatization of water and to subsidize healthy rather than unhealthy food. People must push governments to redirect the money they currently use to subsidize the rich and instead invest it in infrastructure and programs to beneﬁt the poor.vii vii

There is more discussion of this topic in later myths.

BEYOND APOLOGIES

Many, though by no means all, poor people could work their way to a better life if they had better opportunities to do so. Others, such as young orphans, mothers of young children or of children with special needs, or people with a full-time caretaking job at home, or those with various disabilities that make it impossible to earn a sufficient living, will need government and community support, at least temporarily. Efforts to increase access to paid employment must accompany efforts to ensure the quality of that employment, including wages, working hours and conditions, and holidays. Bangladeshi garment workers have reportedly started rolling their eyes at attempts to increase their minimum wage, as the last such increase, though far less than their demand, led to a proportionate increase in the fees they pay for their onsite housing and food. Many workers pay more per square foot for their housing than do residents of luxury apartments. A job is all very well, but it is not enough to help people out of poverty if it pays an inadequate wage or puts an intolerable additional burden on the worker or fails to protect workers from exploitation. The more that governments and communities take care of basic needs, the more money people will have available to access what is not free. Beyond education, health care, and transport, there are other important areas of life. It is easier for people to accept having smaller homes and less in-house entertainment when the city is their living room. Great public spaces like parks and plazas can provide entertainment, room for activity, and relief from isolation and loneliness. What a decent standard of living might look like For those who live in low-consumption countries, a decent standard of living would include a home of sufficient quality to protect its residents from the elements and from rodents, sufficient clothing to keep people warm, nutritious food, easy access to potable water and a clean latrine, and enough electricity for basic needs (such as lights and fans). There would not necessarily be running water, and certainly not flush toilets, in every home. The standard would not include washing machines, dishwashers, air conditioning, or in most cases motorcycles or cars.viii Some of these amenities, such as washing machines, might exist

Detailed discussions of global justice in terms of current divisions of the world’s resources, and the grossly disproportionate share that Americans and some other nationalities consume, is beyond the scope of this book; the reader can draw her own conclusions. Nor is it up to me to decide how the world’s poor will live. But discussions of a reasonable level to aim at are vital to making wiser decisions about resource allocations and addressing poverty. viii

MYTH#1: THE POOR JUST NEED MORE DOLLARS

in public places.ix In Guatemala, the shared place to access water – the community pila – is where women gather to socialize, chatting as they wash clothes and dishes. It would be more convenient for them to have water in their homes, but the trade-off would be greater isolation from the community. Fewer heavily processed foods and more fresh ones would help not only the environment but also public health, as would fewer cars and fewer TVs. Even youth might not mind less time with Facebook if, in return, they had better opportunities for face-to-face socializing and fun. A little respect would go a long way Imagine if people treated the homeless and others with little or no money with great respect or friendliness, and the wealthiest with undisguised scorn. People would pause to greet beggars or to sit on the sidewalk with them to listen to their stories. Tired workers would relieve some of their stress by cursing drivers of big fancy cars when they try to occupy parking spaces reserved for bicycle commuters. Better yet, the police would impound the Porsches while waving on the Schwinns.x Imagine if the darker your skin, the better the treatment you received in shops and restaurants, and if perks were reserved for the lowest-level employees. Janitors and cleaning women would have their own private canteen with the best food; executives would have to walk down the hall to use a common and not particularly clean toilet. Factory workers would go on junkets, and managers would have only one bathroom break a day. Local officials would regularly fete Prakash and his family for their low-impact lifestyle. Pure fantasy, of course, but the point is that it is possible to separate income from other advantages. At least some of the lure of wealth has less to do with consumption than with the prestige and other privileges associated with money. When considering different approaches to addressing poverty, it helps to abandon realism temporarily in favour of imagination. It is at such moments that the most astonishing and beautiful possibilities can emerge, possibilities that are unlikely to make themselves seen when one is simply arguing about how to remedy issues at the margins without addressing various aspects of the status quo.

ix At least one author argues that there is joy to using Laundromats due to their social possibilities. See Rick Risemberg’s take on them: http://www.newcolonist.com/laundromat.html and http://www.sustainablecitynews.com/laundromat3rd.html x Schwinns are cheap bicycles.

BEYOND APOLOGIES

Of course taking a more enlightened social approach to the poor is no substitute for major policy changes. However, those social approaches have their significance, and could help relieve some of the suffering of the poor while they wait for needed policies to come about. While in university, I bumped into several formerly homeless men in and around Boston, whom I recognized from the shelter where I had volunteered. They informed me that simply being treated with respect by Harvard students at the homeless shelter had made such a difference in their self-confidence that they felt able to find a way out of their desperate poverty. xi All of us can afford to be more generous with our smiles, nods, and brief greetings to the poor and marginalized (including all the ‘invisible’ workers that we encounter each day). They will likely appreciate the friendliness and their returning smiles will make our lives a bit better. After all, the first step towards demanding humane treatment is to believe that you are human, a belief that may rapidly fade when your humanity is denied on a daily basis. This is one of the easiest injustices to remedy, and one of the first steps to creating wellbeing.xii Fixing transportation In urban planning and transportation, as in tobacco control, fiscal concerns that have little to do with promoting liveable environments dominate the discourse. The experience of virtually all countries demonstrates that building more urban roads encourages more traffic and thus results in more traffic injuries and deaths, as well as pollution, destruction of valuable land, and high costs for maintenance of the roads and the vehicles. In much of the world, the poor are marginalized in communities far from the urban core and from jobs, schools, health care, and almost everything else. They spend significant chunks of their income and of their precious time just to avail themselves of high-cost, poor-quality transport, which contributes to keeping them poor. Many cities are now discouraging driving of private vehicles through measures such as congestion charges, higher parking fees, restrictions on car ownership, higher taxes, and urban planning that focuses on bringing destinations closer. At

One was working at a bank, another had found a construction job; a third, to my astonishment, was employed at the Massachusetts Institute of Technology (MIT): he showed me his lab there. All three had found housing, either in a halfway house or with friends, and carried themselves with pride. xii A colleague told me about interviewing a man in Dhaka who pedals a rickshaw. The rickshaw wallah said that the worst aspect of his job is the lack of respect that he faced every single day. xi

MYTH#1: THE POOR JUST NEED MORE DOLLARS

the same time, they encourage the space-saving modes of walking, cycling, and public transport – all measures that have tremendous benefits for the poor. As a result, in addition to having less congestion, less pollution, lower transport costs, more public spaces (including reclaimed parking lots), and less need to tear down increasing swathes of their city in order to build more roads, these cities are now better places for the poor – and everyone else – to live.xiii These changes would also provide multiple benefits for health and the environment, and would save money for both governments and individuals.11 They also increase mobility options for the large portions of the population that are too young, too old, too poor, or otherwise unable to drive. The dual approach of the carrot and the stick is the most effective as well as the most humane. It does little good to offer people an environmentally better approach, such as public transit, while still making it easy to access everywhere by car. Until there are fewer cars, it is nearly impossible to provide quality public transit, as well as good conditions for walking and cycling. Higher fees for parking, for registering a car, for fuel, and so on can also fund needed improvements in public and active transport that benefit everyone.xiv * * * Local funds for local improvements: In Mexico, a group has found a way to ensure that parking fees pay for local parks and public spaces that benefit the poor. The group piloted a new parking fee scheme in which the fees charged on streets in a specific neighbourhood were used to upgrade public spaces in that neighbourhood. The community now loves this program and new communities are requesting it.12 While all residents benefit, the poor in particular appreciate better conditions for affordable transport (walking and cycling) and free, outdoor recreation, since they cannot ‘opt out’ by using a car or paying membership fees for recreation in private clubs. Such programs have the additional benefit of allowing people to see where their taxes or fees are going, rather than having the money disappear into the city’s coffers with no noticeable results. * * *

While congestion charges and parking fees seem minimal compared to the price of buying a car, they still are eﬀective at changing people’s behaviour. What may be most important in pricing policies to discourage waste is not the absolute amounts but a sudden increase in prices that even the rich notice. xiv ‘Active transport’ refers to human-powered transport, usually walking or cycling in order to reach a destination. Active transport reduces congestion and pollution, provides people with much-needed physical activity, and saves on transport costs; it also contributes to making cities more sociable and liveable. xiii

BEYOND APOLOGIES

First steps Rather than working towards the vague goal of ‘poverty eradication,’ people should focus on ensuring that nobody has to live in abject poverty. Fortuitously, that goal is likely achievable by redistributing existing wealth – perhaps even ‘simply’ by dramatically reducing the wealth of the world’s billionaires and multi-millionaires and redirecting it to those with the least. The goal is also achievable without causing irrevocable damage to the planet. Given all the resources available today, there is no reason why people should go hungry, lack a decent latrine or safe drinking water, and live in miserable shacks. Continued efforts to redistribute wealth from the top down are necessary, through higher taxes on the rich and on corporations to fund a wide range of social programs that would help to alleviate the material suffering of the poor. Stringent employment laws would allow more of the poor to work their way out of abject poverty. Among other benefits, violence would decline in societies that are more egalitarian. It is vital, however, to reduce non-material poverty at the same time as material poverty. Encouraging popular involvement in local decision-making – such as creating local committees that have a voice in local and regional funding allocations – would reduce political disempowerment. Ensuring that every community has public spaces in which community members can gather at no cost would help foster interaction, as would a focus on non-motorized (fuel-free) transport and public transit. Less pollution and more attractive natural environments would also enrich people’s lives. More emphasis on cooperation and less on competition (in school, in sports, in our approach to promoting business) would contribute to stronger, more vital communities. Strong social networks enhance wellbeing and happiness and encourage problem solving; importantly, they do so without depleting the resource base or destroying the environment. Much of what today are considered ‘fringe’ movements (such as slow food, Community Supported Agriculture, food co-ops, and more cooperative approaches to problem solving) need to move to center stage.xv If more people focused their creativity and brainpower on solving problems, such as how to feed the world without relying on transnational food companies, many solutions thus far unimagined would likely become evident. Someone with funding and a keen interest in promoting wellbeing needs to recruit creative young people into such national and international problem-solving efforts, especially those led by small, flexible, In Community Supported Agriculture, people pay farmers at the beginning of the growing season (which allows the farmers to avoid taking out loans at interest) and receive a portion of whatever produce the farmer grows during that season. xv

MYTH#1: THE POOR JUST NEED MORE DOLLARS

freethinking groups. Now, the only decently-paid jobs many educated and creative people can find are likely to be in large corporations, especially in marketing or other consumption-oriented businesses. Enticements are lacking, including respect and other non-monetary incentives, to enter more socially useful professions. Enhancing wellbeing – defined in terms of meeting basic needs, encouraging strong social relations, and providing leisure and the enjoyment of a clean environment and attractive public spaces – should be our goal, not just ‘ending poverty.’ I talk more about how to achieve these desired changes in Part II of this book. For now, a few key points. A goal of enhancing wellbeing for all does not mean that everyone currently consuming more than the average would necessarily have to reduce their consumption, but it would require a far more equitable distribution of resources. The first step is to dramatically reduce the accumulation of wealth at the top and shift it to the bottom. Some forms of self-denial will do nothing to help the poor, like finishing all the food on your plate whether you want it or not (because people of some obscure nationality are going hungry). Sacrifice for the sake of decency is a useless gesture; what we need are actions that can actually help others, such as conscious spending decisions that help to reallocate resources to those in need. We can all contribute to the redistribution of wealth and other important actions by making an effort to buy from small, local shops rather than from Big Box stores. (A colleague in India tells me that he has convinced various friends to buy from small neighbourhood shops rather than big grocery stores, using the argument that they should not want to make the owners of the big stores even richer.) Buying from local shops might appear to cost more, as they cannot offer the same low prices as the huge corporations. However, if the external costs were included in these calculations – such as the effect of big box stores on local employment, local businesses, and the environment – their goods would no longer seem so cheap. People in cities who have access to other means of transport can give less of their money to oil companies by avoiding driving. Those who work for NGOs need to challenge themselves by asking whether their efforts are making as much of a difference as they should. ‘Grassroots’ work is, of course, important, but it should feed into policy solutions. There is too little connection in many countries between those with knowledge of community conditions and those working on national policy approaches. NGOs need to collaborate with each other, with the media, with government, and with other interested parties to draft and work for the passage and implementation of

BEYOND APOLOGIES

policies that will reduce abject poverty and make life a bit easier for all. My colleagues in Bangladesh, for instance, have successfully countered an initiative to institute user fees in all public health services; more such campaigns are needed around the world. Business as usual will not solve the world’s problems, though it will keep some people comfortably employed. We need unusual approaches to overcome the poverty of ideas and the multiple poverties of the poor. Notes 1 Marilyn Waring, If Women Counted: A New Feminist Economics (New York: HarperCollins, 1990). 2 John Helliwell, Richard Layard and Jeﬀrey Sachs, eds., World Happiness Report (New York: Earth Institute, Columbia University, 2012). 3 Manfred Max-Neef, “Human-Scale Economics: The Challenges Ahead,” in The Living Economy: A New Economics in the Making, ed. Paul Ekins (London, New York: Routledge and Kegan Paul, 1986). 4 Louise Chawla, Growing Up in an Urbanising World (Paris and London: UNESCO and Earthscan, 2002). 5 Chawla, Growing Up. 6 Helliwell et al., World Happiness Report. 7 Oxfam International, “Who We Are,” http://www.oxfam.org/en/about accessed 13 July 2014. 8 CARE, “Our Work,” www.care.org/work accessed 13 July 2014. 9 World Bank, “What We Do,” http://www.worldbank.org/en/about/what-we-do accessed 13 July 2014. 10 James Kenneth Galbraith, The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too (New York: Free Press, 2009). 11 Debra Efroymson, Roxana H Haﬁz and Lori Jones, eds., Ecocity Planning: Images and Ideas (Dhaka: WBB Trust, Bangladesh University of Engineering and Technology, and Health Bridge, 2008), and Debra Efroymson, Maruf Rahman, and Ruhan Shama, Liveable Cities: Ideas and Action (Dhaka: HealthBridge and WBB Trust, 2009). Available for free download at www.healthbridge.ca 12 Andrés Sañudo, “Los parquímetros en Polanco: impactos, lecciones y tendencias para México (Parking Meters in Polanco: Impacts, Lessons, and Trends for Mexico),” presentation made at Walk21, Mexico City, October 2012.

MYTH #2: GNP/GDP Tell Us How Well We Are Doing “Gross National Producti does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public oﬃcials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile.” -- Robert F. Kennedy1

 What does GNP/GDP Actually Measure? Economic considerations underlie many of the public policies that directly affect people’s lives at the local, national, and international levels: How much does it cost? Is it worth it? Is it affordable? To answer these questions, and to compare the wealth of different countries or of a single country over time, one needs simple measure that uses globally applicable specific and uniform standards. Since the mid 1940s, governments and international institutions have used Gross National Product (GNP) or Gross Domestic Product (GDP) to make these comparisons. In the driest terms, GNP and GDP are measures of production. GNP takes the total economic output of a country's goods and services, adds the income that residents of that country earned abroad from investment or other means, and deducts the country's goods and services owned by foreigners. That is, GNP measures production that generates income for a country’s residents. GDP, on the other hand, measures the total economic output of goods and services valued at market prices that a national economy produces in a given period (usually a year), regardless of whether that country’s residents own the resources. The United Nations System of National Accounting (UNSNA) provides guidelines on what to count – and what not to count – when measuring GDP so that the figure is comparable whenever and wherever it is applied. GDP purports to show the relative health of an economy: when GDP grows, the economy is prospering; when GDP remains stable or declines, the economy is in poor shape. All very simple and clear. But is it true? In fact, GDP reveals very little about the real wealth of a nation and its people – and even less about their

As will be discussed below, the term Gross National Product (GNP) has for the most part been replaced with the similar term Gross Domestic Product (GDP). Both refer to essentially the same thing, at least in terms of what Kennedy is discussing. While GDP is now the common term, I also use GNP as many of the sources cited herein precede the formal change in measurement.

BEYOND APOLOGIES

wellbeing.ii As former World Bank Chief Economist Joseph Stiglitz and others have written, one should not conflate market production and consumption with wealth, and especially not with well-being.2 Despite these warnings, however, GDP continues to form part of the very foundation on which economic policies are designed and promoted as ‘development.’ In order to question the policies that are justified by GDP, people must understand the problem with the measurement tool itself. The origins of GNP/GDP American officials first used GNP in the 1930s to measure the effects of the Great Depression and to calculate the affordability of American involvement in World War II.3 Years later, the 1944 Bretton Woods conference brought together representatives of forty-four countries to determine how to avoid future economic catastrophes, such as the one that had led to the rise of fascism in Germany after the First World War. By the time of the Bretton Woods conference, both the American and British treasuries were using methodologies based on GNP to analyse domestic economic activity, and the two countries significantly influenced the conference. Delegates at the Bretton Woods conference established The World Bank and the International Monetary Fund (IMF).iii In response to Germany’s postwar monetary crisis, they created the World Bank to loan money to countries in times of dire need, while the IMF was established to ensure the stability of monetary exchange rates and to promote international trade. Both institutions later evolved into far more powerful global entities that had the ability not only to determine but also to enforce their economic policies; many of these policies continue to be justified based on their potential positive effects on GDP. Following the Bretton Woods conference, the IMF and the World Bank adopted GNP as the primary tool with which to measure economic progress within and across countries. Ultimately, they used GNP to demonstrate that their financial goals of increasing international trade, privatizing social goods and services, reducing the number of people on government payrolls, and so on were the best choices for the world’s economic wellbeing.4 Over the past few decades, most countries have switched to calculating GDP rather than GNP. The difference between the two is highly significant: according For ease of discussion, throughout this book I accord more of a personality to GDP than it deserves. GDP is simply a number resulting from a specified system of national accounting. iii A more detailed discussion of the myths about the Bretton Woods Institutions (BWI) and their relationship to poverty and wellbeing follows later in this book. ii

MYTH#2: GDP TELLS US HOW WELL WE ARE DOING

to economist Marilyn Waring, the switch to GDP came about because expected improvements in the GNP of developing countries during the United Nations development decade (the 1960s) failed to materialize. The United Nations then told governments to switch to measuring GDP which demonstrated significant economic ‘improvements’ in many low-consumption countries due to foreign direct investment and foreign ownership of resources and local production.5 With the growing emphasis on ‘globalization,’ it should perhaps come as no surprise that a measure that fails to distinguish whether a nation’s wealth belongs mainly to foreigners or to locals should be the ‘preferred’ measurement unit. Why GDP is not a good measure of wealth Although it focuses on production, GDP is, in fact, a poor measure of wealth. It is useless as a measure of wellbeing. The following outlines some of its significant shortcomings. (1) It reflects only averages. GDP is expressed in per capita terms: the total wealth generated within a country divided by its population. This approach would seem to make sense, as a lot of wealth shared by a few people is not the same thing as a comparable amount of wealth shared by a large population. However, GDP per capita does not tell us how evenly that wealth spreads across population groups in a country. It also ignores all individual, regional, class, race, ethnic, sex, and other differences. While some countries are clearly more materially wealthy than others are, high-consumption countries often contain pockets of intense poverty, just as low-consumption countries typically contain pockets of extreme wealth. Per capita GDP tells us nothing about the extent of such disparity or about the distribution of the limited wealth that it does measure. Even in Niger, which sits at the absolute bottom of the United Nation’s Human Development Index,iv expensive cars roam the streets on which most people have to walk and supermarkets sell fancy French jams and cheeses while most people go hungry. The mineral resources of the country enrich the few – and often foreigners – rather than meet the basic needs of the many. Or, in the words of one local NGO activist, Niger is a rich country with poor people. To use the example of American economist, professor, and Nobel laureate Paul Krugman: when a billionaire walks into a bar, the ‘average wealth’ in the bar goes through the ceiling, but the other customers in the bar are no richer than they were before he arrived.6 GDP also says nothing about a country’s economic structure. It fails to distinguish between an economy in which there are many small, independent businesses and one dominated by a few monolithic multinational corporations. iv

I discuss this in more detail below.

BEYOND APOLOGIES

(2) Disasters are welcome. In 2011, disastrous floods wreaked havoc around Bangkok. People stocked up on rowboats and thigh-high rubber boots. Some people living in the suburbs had to row their own boats to a military station, then be taken by an army boat to the nearest operational public transit station in order to reach the city. The rebuilding of the roads and houses damaged by the flooding and the landslides actually added to Thailand’s GDP, as did all those purchases of rubber boots and boats; however, the value of the houses, roads, and so on that were destroyed by the disaster were not subtracted. While it is not entirely clear if intensive logging contributed to the floods in Bangkok, some disasters are entirely man-made. As American columnist and regular commentator on domestic and economic policymaking Ezra Klein wrote in The Washington Post, the disastrous BP oil spill in the Gulf of Mexico in April 2010 could lead to an increase in America’s GDP. v After all, an estimated 4,000 workers were employed to clean it up. “This is a nice object lesson in the inadequacy of GDP,” Klein wrote. “I could blow up the biggest building in every city in the country and the resulting reconstruction effort could mean a big temporary increase in GDP. But blowing up buildings is not a sustainable way to grow your economy.”7 A car crash that requires someone to buy a new car, a fire that causes people to build a new home, or an epidemic that leads to an upsurge in medical care are all measured as increases in GDP. However, are the people involved really better off than they were before the disaster? To make the measure more meaningful and to make it clear that disasters are not desirable – economically or otherwise – GDP calculations should subtract the losses that occur from disasters. (3) Work and consumption only count if money is involved. It is important to consider not just what GDP includes but also what it leaves out. For the most part, GDP only measures exchanges if they involve money. The rules for calculating GDP specifically exclude household work, collecting firewood and water, family members helping with family enterprises or working in the family fields, and caring for others. Such activities are counted only if they are done for direct wages or as someone’s ‘primary occupation;’ but since most women globally do not have a single ‘primary occupation,’ most of the work that they do is not included in GDP. Most of the tasks typically performed worldwide by men, however, are. When the work that women do without pay is not counted, women are not counted, giving the impression that women fail to contribute to the economy.8 Disastrous as are oil spills, the everyday use of the car actually results in more spillage than do spectacular tanker accidents. Routine oil changes and leaks pour hundreds of millions of gallons of oil into the ground and waterways in just the United States alone each year. Jayne Holtz Kay, Asphalt Nation (Berkeley: University of California Press, 1998). v

MYTH#2: GDP TELLS US HOW WELL WE ARE DOING

Such an impression contributes to gender inequality and can involve billions of dollars of distortions in economic thinking. Calculations of what it would cost to pay someone else to do the work that women do every day without compensation, such as caring for home and family as well as collecting firewood and water, would in many cases be in the billions of dollars per country, essentially doubling a country’s GDP.9 Using GDP as a measure means that production and consumption for sale is more valued than work done by oneself, in one’s home, and for one’s family. A country in which people pay others to look after their children, elderly, and unwell, or where people buy most of what they consume rather than growing it or making it at home, appears richer than one in which such activities are done at the household level. GDP thus makes industrialized societies look much better off than countries whose citizens are more self-sufficient. It means that building a house only has productive value if people buy the materials and pay for the labour, rather than work on the construction themselves and scavenge for materials, even though either house clearly contributes to the wellbeing of those it shelters. Since unpaid work does not count, GDP increases only if everyone goes to work for someone else for wages, doing for others what they formerly did for themselves. Part of the confusion about the value of paid versus unpaid work lies in the way that people talk about ‘the economy.’ The assumption is that the economy is one entity involving the exchange of goods and services in the marketplace. There are, in fact, several economies. In addition to all that is traded for money is the work done at no cost, the non-monetary contributions of Mother Nature, and the services provided by the public sector. All these economies can actually be more significant in terms of the amount of time people invest and the amount of value that changes hands than the market economy.10 GDP’s neglect of the other economies means that growth counts only when production shifts from the social economy to the market economy. This is nonsense: an apple or a fish has just as much value to the person eating it whether she acquired it by her own hand or bought it from a store, and work has value whether or not it results in wages. (4) The more something costs, the better it is. Since what matters in GDP is money, things that cost more have greater value to a nation’s economy than do things that cost less; free benefits are considered worthless. It is thus preferable, according to GDP calculations, to buy a car rather than a bicycle, to install an air conditioner rather than a fan, and to purchase packaged foods rather than eat the produce grown in one’s own garden. Seen in that light, economists’ obsession with GDP goes far to explain their reluctance to address climate change, to protect the environment, or to resist the growing strength of corporations such as agro-business,

BEYOND APOLOGIES

car manufacturers, and petrol companies.vi (5) Non-renewable resources, nature, and health have no value. Here too GDP is a faulty accounting system. Flourishing forests, unpolluted lakes and oceans, beautiful mountains, healthy habitats for various species, and urban parks are not treated as assets to be preserved, but are rather viewed as having no intrinsic value in and of themselves. They only gain value when sold or destroyed. Drinking water only has value if it is sold in a bottle. Forests only have value when the trees are cut down and sold; mountains only have value when they are mined. Since the loss of these resources is not deducted from the monetary gain that their destruction brings, the GDP calculation is only on one side of the balance sheet. What of a company that opens a factory that will employ a few people and earn some money for the owner but that will dump toxic chemicals into the nearby river? GDP values the production that results; it is up to any relevant environmental agency or the community itself to decide whether to protest the dumping of chemicals. It does not matter whether a significant number of fishermen will be thrown out of work due to the pollution that comes from the factory or whether environmental harm will otherwise outweigh the factory’s economic gains. In a similar vein, when logging companies engage in clear-cutting, nowhere does the accounting system force – or even allow – a country to subtract the cost of animal habitat loss or of protection against erosion from the wealth gained by the company that sells the wood. For years prior to the flooding in Bangkok, there was serious flooding in the northern regions of the country. Although coverage of the flooding filled countless pages in the newspapers, virtually nothing was mentioned about the role of deforestation.11 Tolerance for logging may be due at least in part to its contribution to a rising GDP. One cannot measure the economic benefits of logging in a sustainable fashion using GDP. GDP calculations do not allow for an analysis of whether the longterm costs of one project offset its short-term gains, or whether short-term restraint could lead to greater long-term gains. It would be like Prakash (from the story at the start of this book) selling his home and congratulating himself on all the money he has made while forgetting that his family now has nowhere to live. (6) Shoddy workmanship and early obsolescence are valuable assets. The faster appliances wear out or become obsolete and need replacement, the better a As mentioned in the introduction, Naomi Klein has recently written a book on the issue of how capitalism makes it impossible to have a sensible response to climate change. See Naomi Klein, This Changes Everything: Capitalism versus the Climate (New York: Simon & Schuster, 2014). vi

MYTH#2: GDP TELLS US HOW WELL WE ARE DOING

country’s GDP numbers look. The focus on GDP thus encourages an economy of disposal and replacement rather than one of reuse and repair. It also means that the growing tendency of manufacturers to create products that quickly grow obsolete (what, you don’t have the latest model of mobile phone??) is considered economically beneficial, while the damage to the environment and the resource base caused both by manufacturing and disposal is ignored. David Korten suggests that another definition of GDP could be the rate at which we turn resources into garbage.12 (7) Harm away! GDP is blind to damage, be it to physical assets, the environment, or health. All production, no matter how harmful, counts as an economic benefit. There is no deduction for the harm caused in producing dangerous items. Since it is production that is counted – and not its effect on consumers, workers, the resource base, or the environment – economic activity that is harmful, such as coal mining, is seen to be worth more than many positive activities, such as teaching children. We all know about China’s amazing economic growth. What is easy to forget, because it is not talked about as much, is the basis of that growth. China has made itself into the world’s dirty factory. Pollution rates are staggering. Cities are home to many chemical plants, and the air has become so foul in many of them that people are dying at alarming rates simply from breathing the air. The people who live there may be happy to have jobs, but is this the best that ‘development’ can do by them? GDP allows for the measurement of benefits, but the problems, being outside the UNSNA guidelines, go unnoticed and thus ignored. Why GDP is an even worse measure of wellbeing Over the years, many people have warned that GDP only looks at production and cannot measure wellbeing. As early as 1959, American economist Moses Abramovitz questioned the association that mainstream economists were making between growth in output and growth of human welfare.14 Even Simon Kuznets, one of the founders of the measure, warned, “the welfare of a nation can scarcely be inferred from a measure of national income.”13 Yet, with the encouragement of mainstream economists, politicians, and the media, GDP has slipped in the consciousness of many into being a measure of wellbeing. As Kennedy so eloquently stated, GDP ignores such matters as health, beauty, integrity, wisdom, and compassion. GDP does not take into account how well a country is protecting and preserving its natural assets and resources or how well it is doing at preventing the pollution of its oceans, lakes, rivers, soils and air, or at preventing the loss of various species, or at preserving urban amenities such as

BEYOND APOLOGIES

parks and playgrounds. GDP is silent on the deterioration of industrial and social infrastructures: the state of roads, sewers, schools, housing stock and other buildings. Nor does it say anything about the wellbeing of the poorest. Yet economists persist in viewing it as a measure of how well a country is doing. There are other ways that GDP fails to measure wellbeing:  GDP ignores quality. It does not indicate whether or not food has any flavour or nutritional value, or how far it has to travel before ending up on our plates. Clearly, this is absurd, and as a bonus, it leads to those tasteless tomatoes we buy at the supermarket.  GDP ignores the percentage of the population that is unemployed, because the actual number of jobs is irrelevant to the measurement of production.  GDP ignores the conditions of employment. GDP does not reveal whether workers earn a living wage, how many hours they are required to work, whether their workplaces are safe (let alone pleasant), or whether their rights are respected. It does not distinguish between low-paid, insecure, and dangerous employment and jobs that allow employees to prosper. It does not indicate whether jobs are located near people’s residences, or whether people must live hundreds or thousands of miles from their families, working for the welfare of a family they rarely see. Nor does GDP show whether a country has enough of the workers it needs: teachers, health-care providers, social workers, food safety inspectors, and so on. It makes no sense to measure how well a country is doing using a single number averaged over the population that treats disasters as positive, makes no distinction between beneficial goods and services and harmful ones, and ignores much of what people value. When one uses GDP to indicate the quality of people’s lives rather than just the extent of their production, people themselves cease to matter as individuals or citizens and become instead ‘consumers’. Consumption becomes the highest form of expression of personhood, and the rich become inherently more valuable than everyone else. Why is GDP still used to measure economic wellbeing? With all these problems, why does GDP continue to be used as the most common tool to show how well countries (and, by extension, their citizens) are doing? The powerful defenders of GDP claim that GDP is simply a tool that does not reflect the biases and prejudices of its creators. Such a claim is clearly absurd. Measurement of GDP reflects a set of values that bear little relation to the values that many people share. It reflects a world economic system that has worked extremely well to enrich the few at the expense of the many. Those who like the system like the

MYTH#2: GDP TELLS US HOW WELL WE ARE DOING

measure: measuring only production and consumption provides justification for their activities and for their wealth. It also serves the goal of allowing those whom the system benefits to feel that their growing wealth and social position do not come at a cost to those at the bottom of the social and economic pyramid, but rather contribute to the economy and thus to the wellbeing of all.vii More accurate measures of wellbeing would bring to the forefront the damage that has been caused by mainstream economics and growing inequality. They would show that the majority often fails to benefit from – in fact is often harmed by – policies meant to strengthen the system. Those who wish to maintain the status quo are in power, and GDP helps them hide the damage that their policies wreak throughout the world. There have been updates to GDP measurements over the years, but they have done little to address major concerns such as the assignment of equal value to harmful and helpful products and the exclusion of most of women’s unpaid work. This is hardly surprising, as few environmentalists – and perhaps even fewer women, not to mention ‘housewives’ – make up the ranks of UNSNA bureaucrats. Updating GDP is not a socially inclusive process, but rather one performed by bureaucrats who share a specific worldview. The persistence of GDP and its proponents’ failure to make significant changes to it are due less to its virtues or to the lack of potential alternatives than to its defenders’ power. Hint: When you read in the paper or hear someone talking about GDP, remember to ask: Why do we care if GDP is going up or down? What does that tell us about the wellbeing of people in the country they are discussing? * * * It seems that GDP reveals the most about what matters least and the least about what matters most. Unfortunately, it also helps to determine where governments invest money and what types of businesses and practices are encouraged. The constant efforts to increase GDP guide people down paths that they might otherwise not take. GDP thus leads to Grossly Distorted Priorities. The focus on GDP leads governments to make decisions that harm large numbers of people, including minorities and other vulnerable groups, and benefit only a few wealthy corporations and individuals. An example is Dambisa Moyo, who in Dead Aid (2009) follows an incisive criticism of aid with a menu of self-serving actions designed to ‘benefit’ Africans, including extracting raw materials with the lowest possible payments to governments. She herself seems to forget that the point of the book is not to extol the riches to be made by exploiting Africa but to suggest effective remedies to the poverty across much of the continent.

vii

BEYOND APOLOGIES

Nicolas Sarkozy, the former president of France (2007-2012), has joined in the search for measures of economic performance that will do better at defining progress in a way that is meaningful to people’s daily lives. As Sarkozy explains, If we refer to a representation of the world in which the services people render within a family have no value compared with those we can obtain on the market, we are expressing an idea of civilization in which the family no longer counts for much. Who could imagine that this won’t have consequences? If leisure has no accounting value because it is essentially filled with nonmarket activities such as sports and culture, this means that we are putting the criterion of high productivity above that of the realization of human potential, contrary to the humanist values that we proclaim. Who could imagine that this won’t have consequences? If the poor maintenance of transport infrastructures causes more accidents and higher repair costs, and even higher medical costs, which increase output; if we count activities that lengthen the distance between home and work and increase insecurity and exclusion as positive contributions to progress; if evergrowing nervous tension, stress, and anxiety undermine society, and the evergreater resources devoted to fighting their effects are included in economic growth – if we do all this, then what, concretely, is left of our notion of progress?15

Replacing GDP with a measure that takes into account what people actually value would be a vital step towards the adoption of an economic system that promotes wellbeing rather than just consumption. 

Towards a Better Way: Alternative Systems “Too much and for too long, we seem to have surrendered personal excellence and community values in the mere accumulation of material things.” – Robert F. Kennedy16

* * * Despite the defence of GDP by the wealthy and their allies, people have become frustrated with its limitations. Many individuals and groups have lobbied governments to create, test, and reﬁne alternatives that could measure, to some degree, the quality of people’s lives. “…[T]here is a consensus,” writes Joseph Stiglitz, “that quality of life depends on people’s health and education, their everyday activities (which include the right to a decent job and housing), their participation in the political process, the social and natural environment in which they live and the factors shaping their personal and economic security.”17 This growing accept-

MYTH#2: GDP TELLS US HOW WELL WE ARE DOING

ance that wellbeing is about a lot more than production of material goods has led some individuals and some countries, such as Bhutan, France, and Australia, to identify a better progress measure.18 The following are a few promising options which, in some cases, have begun to be adopted. Human Development Index According to the United Nations Development Program (UNDP), which established and uses it, the Human Development Index (HDI) is a “new way of measuring development by combining indicators of life expectancy, educational attainment, and income into a composite human development index.”19 HDI is calculated using mean years of schooling for adults and expected years of schooling for children entering school; life expectancy at birth; and per capita Gross National Income.viii HDI does not look, however, at non-renewable resources, the state of the environment, unemployment rates, or other important aspects of life. Various indicators of health – including infant mortality, maternal mortality, and life expectancy – are already measured nationally and globally, as are indicators of the number of people seeking jobs (employment sufficiency), the number of children completing school (educational performance), and incomes. The measure could easily add all of these. Since income is one of the few things that HDI measures, highconsumption countries naturally score higher, which still tells little about how much wellbeing (other than life expectancy and years of education) one actually ‘buys’ with that income. HDI is also not yet a widely used measure outside of limited discussions on health and education. Despite its shortcomings, HDI is certainly better than GDP. It would be even better if the single composite number that it generates for each country included graphs or other explanations to show the details behind the different parts of HDI, to enable comparisons across countries while giving access to the separate elements within each country. A single number can only reveal so much. A country with low infant and maternal mortality could score poorly on education or employment, and vice versa. Our measurements need to be more complex to reflect the complexities of our societies.

viii According

to www.businessdictionary.com, GNI is “The gross domestic product (GDP) of a country combined with its international income. [It] consists of government expenditures, net income from international assets and gross exports, with gross imports and indirect business taxes deducted.”

BEYOND APOLOGIES

Adjusted National Product In the 1980s, Christian Leipert, currently a staff member of the International Institute for Environment and Society in Germany, proposed a measure that he called the Adjusted National Product (ANP). The ANP separates costs from gains in national wealth calculations. It involves identifying and then deducting so-called ‘defensive expenditures’ from GDP. Defensive expenditures include pollution control and clean up. They factor in the costs of urban sprawl, including the cost of providing additional utilities such as electricity, water, and sewerage over a wider area. They include the many indirect costs of cars such as injury and death, and loss of walkable and cycle-able environments. They include the various costs of domestic and international insecurity and social unrest: expenses of policing, jails, private security guards, security systems, and the military.20 The sums are not insignificant: the United States alone spent about $700 billion on weapons in 2010,ix while all of Europe spent $376.3 billion.21 Defensive expenditures also include the many manifestations of unhealthy lifestyles: all the costs associated with smoking, fast food and sugar-sweetened beverages (including soft drinks, energy drinks, and artificial juices), drugs, alcohol, industrial accidents and disease, and psychological and physical health problems resulting from unemployment, to name a few. ANP thus attempts to distil the negative from the positive expenditures and points towards economic decisions that would result in better health and a cleaner and more attractive environment. However, who decides which expenditures are positive and which are not? As mentioned above, the United Nations System of National Accounting currently determines what production GDP counts. If the decisions about how to calculate ANP were more inclusive, then ANP would be a vast improvement over GDP. While ANP has not gained much attention, similar measures exist. China created a ‘Green GDP’ index in 2006, which indicated that Chinese GDP would fall by three percentage points if it took into account environmental damage.22 The World Bank calculates ‘adjusted net national income,’ which it defines as Gross National Income (GNI) “minus consumption of fixed capital and natural resources ix In The Good Society, John Kenneth Galbraith explains that “The American military establishment effectively and independently decides on its own budget, on the extent and the use of the money it receives.” When I suggest to my tobacco control colleagues that we try to team up with others in the health sector to lobby for higher budgets for health rather than competing with other health programs for limited funds, they look at me funny. The gains we could achieve would compensate for the difficulty of the attempt.

MYTH#2: GDP TELLS US HOW WELL WE ARE DOING

depletion.” While these are steps in the right direction, it is not clear what precisely goes into these measurements or how much they are being used. At the minimum, these alternative measures remind us that not all economic activity is beneficial. Genuine Progress Indicator A similar attempt to separate the good from the bad in national accounting is the Genuine Progress Indicator (GPI), which was developed in 1995 by Redefining Progress, an organization that seeks to shift policy “to achieve a sustainable economy, a healthy environment and a just society.”23 GPI raises the question of whether economic growth (increased production of goods and expansion of services) has actually resulted in improved wellbeing. Like ANP, GPI attempts to separate worthwhile economic progress from growth in unhealthy and polluting industries and activities. It relates to the business practice of separating net from gross profit, with net profit being the total income minus the costs incurred. GPI would thus be zero if the financial costs of crime, ill health, pollution, resource depletion, and environmental damage were equal to the financial gains of the production of goods and services. GPI is a far more detailed measure than HDI, combining as it does not just three but twenty-six indicators over three areas (economic, environmental, and social) to arrive at a single measure of progress. Indicators include income inequality, the cost of underemployment, loss of wetlands and farmlands, depletion of nonrenewable resources, the value of household and volunteer work, loss of leisure time, and the cost of commuting. One could use GPI to distinguish between countries in which economic growth is leading to more wellbeing and those in which it is not. The American states of Vermont24 and Maryland25 are now using GPI to give information on such issues as distribution and sustainability of wealth that calculations of GDP do not provide. Because it is more inclusive, it is a big step beyond HDI; like HDI, the single composite number would be more helpful if the various aspects that went into calculating it were also available. Gross National Happiness Perhaps the most comprehensive and promising approach, one that takes a big step away from GDP to address what people value rather than what they produce, is Gross National Happiness (GNH). Despite the name, ‘happiness’ refers to wellbeing, not to joy or good moods. GNH originated in the tiny isolated mountain kingdom of Bhutan. Bhutan is atypical in many ways, including its requirement that everyone wear national dress in public during the day, its complete ban on smoking, and the fact that it only introduced television in 1999. GNH reflects the importance that the Bhutanese government has given to the wellbeing of its

BEYOND APOLOGIES

population and to the preservation of its environment and culture. Stefan Priesner, formerly Programme Officer for UNDP in Bhutan, explains, “It was Bhutan’s perception that development ought to be people-centred, which resulted in decisions to invest scarce resources in social facilities rather than in industrialisation or the diversification of the economy to generate growth.”26 The point of GNH is to assess wellbeing rather than income. To again quote Priesner, GNH reflects “the perception of human well being as the fundamental objective of economic activity. … the aim is not economic efficiency, but a maximization of happiness.” Specifically, GNH looks at nine overall areas or pillars: psychological wellbeing, time use, community vitality, cultural diversity, ecological resilience, living standard, health, education, and good governance. Within those overall areas are thirty-three indicators, among which household per capita income is but one. Other indicators include safety, community relationships, literacy, ecological issues, and time spent working and sleeping. Importantly, the goal of the government is not only to increase overall GNH but also to address each of the areas in each of the population groups in which any component of GNH is poor. For instance, even if the population is doing well overall, the fact that people in the capital lack community vitality would be considered an issue that needs to be addressed.27 It might be difficult to adapt GNH for countries with far larger and more heterogeneous populations. However, given the acknowledged problems with GDP, it is a little too easy to dismiss the GNH alternative simply because it is being tried in exactly the sort of country where it naturally would be tried: a very different one from most others. In fact, the key concepts are replicable: one can measure whether people have time for activities beyond work and commuting; whether outdoor public spaces are used or empty; whether people have a say in their governance, or whether elected leaders appear more responsive to corporations than to the electorate. GNH has already gained tremendous international attention, with officials in France, the United Kingdom, and Japan now considering its use. The question is not whether GNH or other alternatives to GDP are perfect measures. Nothing is. What matters is that we shift our focus from consumption to wellbeing, and that we replace GDP with a more adequate measure. In order to redress current economic woes around the world, national accounting systems must be more reflective of people’s values. Better ways of measuring how nations are doing would help officials to understand and demonstrate whether current economic systems are helping or hurting the population. Alternatives to GDP

MYTH#2: GDP TELLS US HOW WELL WE ARE DOING

must be flexible: they will have to be adapted repeatedly as countries gain experience with them to respond to current and ever-changing needs. However, it is not necessary to wait for a perfect replacement to start the process of moving to something better. Stepping away from GDP may be the first step in liberating ourselves from the economic system that it supports. * * * How much wellbeing do countries buy with their GDP? Unfortunately, there are no widely available estimates by country of GNH (or other improved measures) to compare to GDP. What is possible is to compare national infant mortality rates to GDP. One might expect that countries with higher average incomes would have lower levels of infant mortality. When most mothers can afford to eat well during pregnancy, access good health care, give birth in a safe place, and feed their baby properly, there will be less infant mortality than in countries where poverty makes such practices difficult or impossible. Yet infant mortality rates often fail to track closely with GDP. Indeed, as the following figure shows, there is often little direct relationship between the total amount of wealth in a country and the level of its infant mortality. Qatar, the world’s richest country when measured by GDP, is worse off than 59 others in terms of infant mortality. Saudi Arabia, the 44th wealthiest, does worse than 114 others. Other poorly performing countries include the United States (14th in GDP but 56th in infant mortality)x and South Africa (108th in wealth but 174th in infant mortality). There are some remarkably good achievers too: Costa Rica, Cuba, Sri Lanka, Vietnam, and Madagascar. Zimbabwe, remarkably, scores at the very bottom of wealth, at 227 (only the war-torn Democratic Republic of Congo is poorerxi), but ranks 155th for infant mortality. The following figure presents this information graphically, using the American Central Intelligence Agency’s rankings for GDP and infant mortality.xii Countries are not getting much wellbeing for their production if their infant mortality ranking is much higher than their GDP ranking.

Cuba, Hungary, Taiwan, South Korea, Slovenia, and the Czech Republic all have lower infant mortality than the United States. xi Congo is extremely wealthy in terms of valuable minerals. Its poverty is due largely to the exploitation of that wealth – and the ensuing violence that facilitates the exploitation. See http://www.congojustice.com xii The CIA ranks infant mortality (per 1,000 live births) from highest to lowest. Central Intelligence Agency, “The World Factbook,” https://www.cia.gov/library/publications/theworld-factbook/ accessed 7 August 2014. To match these to GDP (which the CIA ranks in reverse), I ranked both sets of ﬁgures from lowest (best) to highest (worst). The CIA includes 224 countries in its infant mortality list, and 228 countries in its GDP list. x

BEYOND APOLOGIES

Figure 1: GDP versus Infant Mortality Ranks (Lower Number = Better Rank)

Notes Robert F. Kennedy, speech given at the University of Kansas on 18 March 1968. http://www.jfklibrary.org/Research/Research-Aids/Ready Reference/RFK Speeches/Remarks-of-Robert-F-Kennedy-at-the-University-of-Kansas-March-18-1968.aspx accessed 7 August 2014. 2 Joseph E. Stiglitz, Amartya Sen and Jean-Paul Fitoussi, Mismeasuring Our Lives: Why GDP Doesn’t Add Up (New York: The New Press, 2010). 3 Rosemary D. Marcuss and Richard E. Kane, U.S. National Income and Product Statistics Born of the Great Depression and World War II (Washington: U.S. National Income and Product Statistics, Bureau of Economic Aﬀairs, February 2007). 4 Robert Costanza, Maureen Hart, Stephen Posner, and John Talberth, Beyond GDP: The Need for New Measures of Progress, The Pardee Papers No. 4 (Boston: The Frederick S. Pardee Center for the Study of the Longer-Range Future, Boston University, January 2009). 5 Marilyn Waring, If Women Counted: A New Feminist Economics (New York: HarperCollins, 1988). 6 Paul Krugman, The Conscience of a Liberal (New York, London: W.W. Norton & Company 2009). 7 Ezra Klein, “Could the BP Oil Spill Increase GDP?” The Washington Post, 15 June 2010. 8 Waring, If Women Counted. 9 Debra Efroymson, Julia Ahmed, and Shakila Ruma, The Economic Contribution of Bangladeshi Women through their Unpaid Labour 2nd ed. (Dhaka: HealthBridge and WBB Trust, 2013). This and other information on the topic can be found at www.healthbridge.ca 1

MYTH#2: GDP TELLS US HOW WELL WE ARE DOING

Hikka Pietilä, “Basic Elements of Human Economy: A sketch for a Holistic Picture,” paper presented at the International Household & Family Research Conference 2002, Helsinki, Finland (revised 2007) http://www.forumforthefuture.org/project/fivecapitals/overview accessed 7 August 2014. 11 Charoenlak Petpradap, “Prawase Says Floods Due to Deforestation,” Bangkok Post, 2 December 2011. 12 David C. Korten, When Corporations Rule the World, 2nd ed. (Bloomfield, Connecticut and San Francisco: Kumarian and Berrett-Koehler, 2001). 13 Elizabeth Dickinson, “GDP: A Brief History,” Foreign Policy, 3 January 2011. 14 Simon Kuznets, “National Income, 1929-1932,” 73rd US Congress, 2nd Session, Senate Document No. 124, page 7, cited in Jon Hall, “Measuring What Matters to Make a Difference,” Journal of Futures Studies 15.2 (November 2010) : 151-154. 15 Cited in Stiglitz et al., Mismeasuring Our Lives. 16 Robert F. Kennedy, speech at the University of Kansas, 18 March 1968. 17 Stiglitz et al., Mismeasuring Our Lives. 18 Hall, “Measuring What Matters.”19 United Nations Development Programme, Human Development Reports, “Human Development Index (HDI)” http://hdr.undp.org/en/statistics/hdi/ accessed on 16 July 2011. 20 Christian Leipert, “From Gross to Adjusted National Product,” in The Living Economy, A New Economics in the Making, ed. Paul E. Ekins (London, New York: Routledge and Kegan Paul, 1986). 21 Anup Shah, “World Military Spending,” Global Issues 2 May 2011. 22 Dickson, “GDP: A Brief History.” 23 Redefining Progress, “Genuine Progress Indicator,” http://rprogress.org/sustainability_indicators/genuine_progress_indicator.htm accessed 7 August 2014. 24 Demos, “Vermont Establishes a Genuine Progress Indicator, Blazes a Path for Measuring What Matters,” http://www.demos.org/press-release/vermont-establishesgenuine-progress-indicator-blazes-path-measuring-what-matters accessed 7 August 2014. 25 Government of Maryland, “Maryland’s Genuine Progress Indicator: An Index for Sustainable Prosperity,” http://www.green.maryland.gov/mdgpi/ accessed 7 August 2014. 26 Stefan Priesner, “Gross National Happiness – Bhutan’s Vision of Development and its Challenges,” in Gross National Happiness – A Set of Discussion Papers, Centre for Bhutan Studies and GNH Research, 1999. 27 Karma Ura, Sabina Alkire and Tshoki Zangmo, “Case Study: Bhutan, Gross National Happiness and the GNH Index,” in World Happiness Report, ed. John Helliwell, Richard Layard and Jeffrey Sachs (New York: Earth Institute, Columbia University, 2012). 10

MYTH #3: Economic Growth is Necessary to End Poverty “The assumption is that growth is good and more is better. It is as if economists had never heard of cancer. It is extraordinary that an entire social science, and the dominant discipline in today’s world at that, can eﬀectively have come to be based on such a simplistic assumption.” – Paul Ekins1 “…conventional economics starts with certain basic premises that are clearly, unequivocally incorrect: that the environment is a subset of the economy; that resources are inﬁnitely substitutable; and that growth in population and consumption can continue forever. In conventional economics, natural resources like fossil fuels are treated as expendable income, when in fact they should be treated as capital, since they are subject to depletion. As many alternative economists have pointed out, if economics is to stop steering society into the ditch it has to start by re-examining these assumptions.” – Richard Heinberg2

 Economic Growth versus Poverty Alleviation One of the most commonly repeated mantras in economics is that the way to end poverty and all the misery that it entails is through continuous economic growth. Growth – politicians, the media, and ‘experts’ of every stripe repeatedly state – generates jobs and products that can satisfy people’s unmet needs. Without growth, there will always be deprivation, especially as the population increases. According to this view, the production and consumption of a variety of goods and services generates jobs and wealth that will eventually lessen, or even entirely eliminate, poverty. Perpetual economic growth is thus the best possible goal for all societies. Moreover, according to the Economic Growth Myth, because competition and proﬁt drive private companies, the private sector is the most likely to power growth.i Thus, according to the proponents of this myth, the economy needs to grow free of the fetters of government regulation for there ﬁnally to be

Mainstream economists argue that competition will bring gains for all, although it is difficult to find the parallels between this and real life: “The more competition there is, the more likely are firms to be efficient and prices to be low. … Perfect competition is the most competitive market imaginable in which everybody is a price taker [subject to competition and thus having to sell at the price the market sets, rather than being able to charge what they want]. Firms earn only normal profits, the bare minimum profit necessary to keep them in business. If firms earn more than this (excess profits) other firms will enter the market and drive the price level down until there are only normal profits to be made.” The Economist, Economics A-Z, http://www.economist.com/economics-a-to-z accessed on 25 July 2013.

MYTH#3: ECONOMIC GROWTH IS NECESSARY

enough for all. The concept has the benefit of sounding reasonable: if existing wealth is insufficient for all, then we should generate more. The need for economic growth is thus implicit; the main question is how to achieve it. Which economic model will work better at achieving growth? How can we sustain growth? Why are some countries growing while others remain stagnant or decline? When I mentioned to a colleague that I object to the goal of economic growth, he was surprised. “Doesn’t economic growth mean that people will have more of what they need?” he asked. Well, no, not really: it refers to GDP growth, which, as I explained previously, is a sound measure of neither economic health nor wellbeing. The goal of economic growth is by definition flawed, because it draws on flawed measures. Beyond an objection to the measurement tool (GDP) are the problems associated with the belief that simply having more goods available will inevitably lead to a decline in poverty. Certainly, there are cases where economic growth has helped the poor, but it is not the most direct or efficient way to do so. There is too much waste in a system that relies on increased consumption to generate the wealth that will help some of the poor to do better. It may work, but other methods that are far better for the environment could work even better. Limited success at high cost is not sufficient justification for promoting a harmful model. For several reasons, economic growth often does not help the poor. It involves the increased production of goods that often do not contribute to greater wellbeing. Even the useful goods that it produces often do not reach the poor. The jobs that result too often pay too little. Meanwhile, even current consumption levels in many countries are unsustainable, given the limited resource base and the amount of pollution that consumption generates. Increasing worldwide production is pure folly: it puts too much pressure on the environment, and it defines the problem as insufficient supply without considering that the real issues at hand may be grossly unequal distribution and unchecked waste. More is not necessarily better. The poor will not benefit from economic growth if the growth never reaches them Economic growth tracks growth in GDP, not the growth in jobs, or the growth in services provided to the poor, or the growth in the number of low-income people who are able to buy or otherwise access what they need to survive. The assumption is that more production benefits the poor, but one can have an awful lot of

BEYOND APOLOGIES

production without it ever reaching those in need.ii Even if all the goods produced by factories are consumed, it does not necessarily mean more consumption – or more ability to consume – by the poor. One way to achieve economic growth is by encouraging corporations to build new manufacturing facilities in countries with high levels of poverty. However, the goal of those facilities is to make money for corporate executives and shareholders. Corporations take advantage of low wages and the lack of regulations, such as for working hours and conditions and for environmental pollution. Profits from the factories flow back to the investing country. The poor contribute their (low-waged) labour to the company’s economic growth, while only the rich company owners, executives, and shareholders enjoy the fruits of that labour. Low-waged employment obviously does not lead to prosperity for the workers themselves. If large corporations dominate the economy, other lowincome people will benefit little from the added spending of the newly employed. Rather than circulating in the lower echelons of the economy, what little wealth trickles down to the poor gravitates right back up again when the poor use their wages to purchase the various goods and services that the rich control. This gravitational pull of money upwards towards the rich is not a problem for those who believe that it is the owners of capital, not those who engage in physical labour, who should reap most of the benefits. To be painfully direct, the poor often fail to benefit from growth because they were never intended to benefit. The United States, which most prominently promotes the economic growth model, deserves special scrutiny here. The richest ten percent of Americans received not just the lion’s share, but a full one hundred percent of the average growth in income over the years 2000 to 2007, the most recent extended period of economic expansion.3 Going back farther reveals similar results: while the size of the American economy tripled between 1973 and 2006, the bottom ninety percent of the population actually suffered a small decline in their absolute wages during those thirty-three years, with average incomes falling from $32,135 in 1973 to $31,528 in 2006 (figures adjusted for inflation).4 Net worth also declined among this group.5 The trends continue today, with the earnings of the richest households increasing and those in the bottom four quintiles decreasing.6

ii A quick clariﬁcation: the overly general catchphrase ‘the poor’ refers to two important groups: those living in abject poverty who struggle to meet their basic needs, and those living in relative poverty. In addressing poverty, the goal obviously should be to improve the situation of those who lack the basics for a decent survival, as opposed to those who simply wish for more.

MYTH#3: ECONOMIC GROWTH IS NECESSARY

Despite all of the country’s wealth and economic growth, an estimated one in one hundred Americans is homeless at any given time.7 According to Census Bureau data cited in the Washington Post, in 2009 some forty-four million Americans (one in seven) lived in homes in which the total income was below the poverty level. That figure represents the largest number of people living in poverty since the national census began tracking poverty fifty-one years ago.8 Economic growth in the United States has not eliminated poverty. Poverty in the United States does not reach, of course, the levels seen in some countries in Africa, Latin America, or Asia. Still, the United States is one of the wealthiest countries in the world, and many less prosperous countries try to follow its economic policies in hopes of achieving similar rates of wealth. They need to be very aware of the persistent nature of deep poverty that exists throughout the country. As E.F. Schumacher has asked, “If economic growth to the present American level has been unable to get rid of public squalor – or, maybe, has even been accompanied by its increase – how could one reasonably expect that further ‘growth’ would mitigate or remove it? How is it to be explained that, by and large, the countries with the highest growth rates tend to be the most polluted and also to be afflicted by public squalor to an altogether astonishing degree?”9 Not only will economic growth often fail to reduce poverty, it will also often fail to increase the wellbeing of the vast majority of citizens. Writing in the World Happiness Report, Jeffrey Sachs, Director of The Earth Institute and Special Advisor to the United Nations Secretary-General, notes that “the world’s economic superpower, the United States, has achieved striking economic and technological progress over the past half century without gains in the self-reported happiness of the citizenry. Instead, uncertainties and anxieties are high, social and economic inequalities have widened considerably, social trust is in decline, and confidence in government is at an all-time low.”10 This decline in happiness is due, in part, to the declining position of the middle class: the formerly comfortable are now sinking into poverty (losing their jobs and homes), while the rich grow ever richer and the poor are virtually forgotten. What plays out in the United States also happens in countries with vastly less wealth. Ecuador, for instance, experienced significant growth in the 1970s largely through oil sales. Former ‘Economic Hit Man’ John Perkins notes that following the so-called oil boom, the official poverty level in that country actually increased from fifty percent to seventy percent and under- or unemployment increased from fifteen percent to seventy percent. Public debt also grew from $240 million to $16 billion. The poorest, who previously received twenty percent of national resources, later received only six percent.11 Ecuador is, alas, far from exceptional.

BEYOND APOLOGIES

When ‘development’, funded by economic growth, is believed to consist of fancy airports, luxury apartments, high-rise office towers, and elevated expressways, the beneficiaries are often few, and the price of growth includes environmental destruction as well as a loss of livelihood for many. Other measures that have resulted in economic growth have been equally disastrous for the poor. Clamours over high food prices in the United States in the 1970s resulted in a food revolution spurred by President Nixon, who succeeded in reducing the price of food. Food prices in the United States, measured as the average proportion of people’s income spent on food, are now about the lowest in the world – and in history.12 This drop in food prices resulted in part through a switch in production methods away from small farmers and other local producers and retailers, who focus on fresh produce and meat, and towards large corporations that raise animals and vegetables on environmentally destructive mega-farms and focus on producing processed foods that have dramatically less nutritional value. At the consumer level, there has been a purchasing shift from fresh ingredients to unhealthy processed and ‘fast’ foods. The result is cheaper food, more nutritionrelated disease, and corporate control of virtually the entire food supply chain.iii If the indirect costs of ill health and environmental damage were included, this now-abundant food would not be cheap at all. If corporate control and unhealthy food accompanied not just more obesity and disease but also less hunger, then it would be more difficult to determine if there was progress. However, this is not the case. Despite the relatively low cost of food in the United States as a percentage of income, widespread hunger remains a problem because of poverty: nearly forty-eight million Americans (one in six, including more than seventeen million children), are ‘food insecure’ – meaning that they often go hungry. Hunger costs the country about $167 billion each year in health care costs, missed workdays, and – since so many of the hungry become school dropouts – lowered productivity due to educational deficits.13 The situation in the United States is by no means unique. Increasing rates of obesity accompanied by continuing malnutrition is a global phenomenon. Industrial food has not eliminated hunger; it may simply be contributing to obesity. There are now nearly twice as many overweight and obese people in the world (one and a half billion14) as malnourished ones (850 million15). As with our waistlines, so with the economy: growth is not necessarily a healthy phenomenon. Yet, For example, six retailers – Walmart, Kroger, Albertsons, Safeway, Costco, and Ahold – control more than half of the entire American retail grocery market. Paul Roberts, The End of Food: The Coming Crisis in the World Food Industry (London: Bloomsbury, 2009).

iii

MYTH#3: ECONOMIC GROWTH IS NECESSARY

in a scenario based on increasing GDP, it is precisely this switch from homegrown to processed foods that economic growth reflects. The problem is not limited to societies where food is overly abundant. In a poor rural community in which most people are malnourished, governments and NGOs may encourage local farmers to grow export crops so that the farmers will earn more money. However, if they follow that advice, the farmers can no longer subsist on what they grow. They must use at least some of the money they earn to buy food. If food prices increase, whether because fewer farmers are growing food crops or because the prices of petroleum-based fertilizers and transportation rise, they may not be able to afford to feed their families and the community may become even more malnourished than before. Finally, an important cause of hunger is waste, rather than inadequate yields. Recent research commissioned by the UN Food and Agriculture Organization finds that one-third (more than one billion metric tons) of the food produced each year for human consumption is lost or wasted. While in wealthier countries much good food is deliberately thrown away, in low-consumption countries in which distribution systems are inadequate, food is mainly lost because it rots or is eaten by rodents.16 Rather than helping the undernourished, increasing the availability of food could simply result in fatter rats. So much for growth benefiting the poor. How does growth help when what is growing is the availability of harmful or unnecessary products? Growth in output simply does not equate with people being better off. What is produced, how it is distributed, and how much is wasted, are all often far more important to wellbeing than total production. More tobacco products, more soft drinks, and more weapons all represent economic growth but not more wellbeing. Nor is it helpful to have more products going to the rich while the poor continue to do without. Sometimes more availability of products simply means more waste, which again benefits no one but the producers and sellers. Even in the case of an increased availability of consumer goods, it is important to note that economic growth typically brings about growth in the range of consumer goods available rather than more of what people really need. For example, throughout the world, there has been an explosion in the variety of soft drinks, chips, and countless other mass-produced products. There has been an increase in large shops pushing local sellers out of business. Economic growth would be more helpful if it made available the goods and services needed for good health. More variety would be helpful if, for instance, it included the variety of housing available to meet the needs of different types of people: extended families, students, the low-income, those wishing to live in a group, single people wishing to live alone,

BEYOND APOLOGIES

and those who do not own a car. It is easiest to produce and market goods that target a uniform audience lacking in individual tastes; it is more difficult to design housing and other products to suit individual needs. Neither hand-made goods nor items tailored to the individual consumer lend themselves to either mass production or economic growth. The very poor spend the majority of their wages on food, housing, clothing, and other essentials. Rising incomes among the poor can mean the difference between barely surviving and a decent way of life. However, across many segments of society, rising incomes can mean that people shift from spending most of their money on essentials to spending it on non-essential items or luxurious versions of essentials (carrots to caviar, a bicycle to a BMW, to use extreme examples). Many non-essential items require large quantities of resources to create, package, use, and dispose. Many are imported from far away. This production, transport, consumption, and disposal, in turn, take a toll on the environment. As such, an increase in consumption may only marginally benefit the poor – who still generally cannot afford to purchase even the bulk of essential goods – while contributing greatly to environmental harm and the depletion of natural resources. Consumer goods, moreover, represent only one part of the economy. Economies also grow in other sectors, such as the military, security, private prisons, and health care. In the case of the military, security, and prisons, more usually means less wellbeing. The more weapons that exist, the more likely societies are to end up in wars.iv The more companies that seek to make money by convincing people of the immediate threat of terrorism and of the increasingly high-tech measures that are needed to protect them, the more likely the population is to lose some of its basic freedoms. More prisons require more prisoners, which encourages the passage of extremely harsh sentencing laws that lock people away for minor offenses. Enormous amounts of wealth end up invested in unproductive, even destructive, enterprises. More health care would be a good thing if it were equitably distributed and combined with preventative measures to reduce and not just treat disease. People are certainly not better off when increased health care spending simply involves iv This is an enormously important point. When people talk about government budget shortfalls, they rarely mention how much is spent on the military. If fewer tax dollars went to the military, more could be used for education, health care, and infrastructure improvements, which would make life better for everyone. And alas, in order to justify high military expenditures, countries may feel the need to go to war occasionally. The business of producing and selling arms may be not only the greatest enemy of peace but also of prosperity.

MYTH#3: ECONOMIC GROWTH IS NECESSARY

more insurance companies, more bureaucracy, and more questionable but lucrative treatments. Is economic growth sustainable? Is it possible to keep simply increasing the amount of global wealth until everyone reaches the economic level of the average American? Is doing so even a good idea? It may appear that economic growth can continue indefinitely: in many countries, GDP growth has been sustained for decades and seems able to be sustained for decades more. However, a longer view demonstrates that sustained growth over the last few decades has actually been an historical exception. Around the world, rapid economic growth has mainly been the result not of human ingenuity and new technologies, but of cheap fuel. Fuel is no longer cheap, and its supply is by no means infinite. Continue to raise the price of fuel and other natural resources, and economic growth may well disappear. This is no distant prospect, as the recent global economic recession reminds us. Modern society may well have lived through highly unusual times and is now reverting to normalcy.17 However, complicating this return to normalcy is the fact that the sustained use of natural resources, and the pollution that has ensued, is now threatening our very existence. Mainstream economists claim that limits on growth are not necessary. By replacing natural materials with synthetic ones, non-renewable resources with renewable ones, and devising more ingenious and efficient ways of doing things, they argue, economies can continue to expand endlessly. However, a closer look at the foundation of such arguments shows otherwise. Is it possible to sustain economic growth by replacing fossil fuels with renewable energy? No energy source is available for free. One must expend one type of energy in order to create another. The amount generated in return for the amount used is known as ‘energy returned on energy invested’ (EROEI). Capturing renewable energy requires the use of at least some non-renewable resources, and these are running out. The world’s supply of fossil fuel probably peaked recently and will now begin a slow decline – what is known as ‘peak oil’.v With diminishing sources of energy (and thus of income derived from exploiting that energy), there is also less money available to invest in creating new power sources. Fossil fuels are actually our most efficient (in terms of EROEI) form of energy. The most easily extracted sources are, however, in most cases now depleted. Oil and v The issue of peak oil is controversial. Some deny that we have reached it or that there is any threat of reaching it. Others argue that those denying peak oil are simply playing with the numbers. Only time will tell, but there are plenty of good reasons not to bank on an infinite supply of non-renewable resources.

BEYOND APOLOGIES

gas companies have been forced to work much harder – in terms of ﬁnancial cost and the amount of energy required – to access the remaining sources. For example, in the 1930s, the EROEI ratio for oil produced in the United States was about one hundred to one. That is, for every barrel of oil burned during the extraction process, one hundred barrels could be obtained from the ground. That number fell to less than thirty-six to one by the 1990s and to nineteen to one by 2006. A similar trend is occurring with coal and natural gas. If the ratio falls far enough, then economies based on fossil fuels cannot survive. Nor is there a technological solution available: although oil extraction techniques have improved tremendously since the early 1900s, EROEI continues to decline.18 The price of energy thus continues to increase in terms of both dollars per barrel and the amount of energy invested to get some in return. Cheap fuel can no longer spur economic growth. Meanwhile, a much larger world population and much higher per capita fuel use means that total worldwide demand for fuel continues to expand. Alternative fuels such as ethanol and biofuels, attractive though they may seem, do not deliver the same ‘bang for the buck’ as oil. They require too much energy to extract and/or to process and distribute; by the time they are ready to use, they may even represent a net loss in terms of energy.vi Just as with peak oil, all nonrenewable resources will eventually decline to where their use is no longer feasible. This does not mean that they will completely disappear, but it will be too expensive to extract what remains to make it worth the cost and bother.19 What about other, seemingly renewable sources? Wind energy requires windmills; solar energy requires solar panels or some other means of absorbing sunlight, and often requires batteries to store the energy. Nothing is free: no economic growth that is based on energy is sustainable in the end. There is a huge need to reduce waste in our production, distribution, and use of energy; less waste might mean that countries could get far more for less, and that their economies could grow more slowly and sustainably. But here too there are natural limits; eventually we run up against the law of limited return. It is not possible to reduce beyond zero. One reaches the inevitable limits to growth once one makes all possible cuts or achieves all possible gains in eﬃciency. Light bulbs that use far less energy are possible, but light bulbs cannot run without some sort of electricity. It is possible to reduce the number of people and the amount of materials needed to make a product, but one cannot make something out of thin air.

vi And don’t forget that when food crops are diverted to fuel, the price of foodstuﬀs inevitably increases. It is not a viable trade-oﬀ.

MYTH#3: ECONOMIC GROWTH IS NECESSARY

While technology has delivered seemingly magical results, those results come mostly in the fields of computing, communication, and entertainment; much less success has been achieved in how food is grown and distributed, in modes of travel, in sewage treatment, or in the generation of energy. Science fiction notwithstanding, people’s most basic needs are still being met in ways that are very similar to the ways that they were met a hundred years ago.20 Advances in ways to share information and ideas are all very well, but people’s basic needs still require energy, water, and other limited resources. In the absence of cheap fuel, we cannot sustain economic growth, as we now understand it. This does not mean that an individual country may not continue to have economic growth; globally, though, people can no longer rely on economic growth as business as usual. In a world of depleting resources, more growth in one country may actually result in greater declines in others. The planet, despite appearances, is infinite in neither her generosity with her resources, nor in her ability to absorb all the pollution and waste that people create in their drive for ever-more wealth. In his essay, “The Economics of the Coming Spaceship Earth,” economist, educator, and interdisciplinary philosopher Kenneth Boulding rephrases the opposing ways of perceiving economic possibilities in terms of cowboys and astronauts. For cowboys, writes Boulding, the world is an endless plain of sparsely populated expanses and seemingly inexhaustible resources. Everything is free for the taking; cowboys do not need to worry about waste disposal as the winds carry away the refuse. Those who work hard will succeed, and one person’s success does nothing to detract from the possibilities of others; there is plenty for all. Cowboys need not worry about sharing resources: someone using more does not mean that someone else will have less. There is always more than enough to go around, and so there is no need to conserve or share fairly. Economic growth potential is essentially infinite. The perspective of astronauts, writes Boulder, is the diametric opposite of that of cowboys. For astronauts on a spaceship, resources are extremely limited with nothing to spare and no room for waste. Wellbeing depends on how well the astronauts maintain their physical and mental health, how well they preserve available resources, and how carefully they maintain their mutual life-support system. Anything thrown away is forever inaccessible; any waste that is accumulated but not recycled fouls the living space. To survive, each astronaut must act in the interests of others. Non-essential consumption is unacceptable unless the basic needs of all are met and ample provision has been made for the future.21 In this case, economic growth is an oxymoron, as nothing can ‘grow’ without something declining in an equal measure.

BEYOND APOLOGIES

The world today is a living ‘spaceship’ whose finely balanced life-support system requires care and cooperation for its survival. High levels of consumption by a few do affect others; pollution and climate change are global problems, not limited by place. Climate change driven by high energy use is helping to drown the entire country of the Maldives. When a factory dumps chemicals into a river and kills all the fish, fishermen downstream suffer. Extensive logging contributes to flooding. To an extent and for a certain period, the very rich can opt out of the system — exist, as it were, in their own separate spaceship — but even here limits exist. The rich do not have to live in the most polluted areas, but they still must breathe the air and drink the water. Catastrophic weather patterns and devastating pollution will not always pass over the wealthy. Neither can unsustainable patterns of growth be forever sustained. Exploitation of natural resources and environmental damage – necessary accompaniments to economic growth – disproportionately harm people who are already suffering from poverty. Many of those displaced by dams (which provide electric power to help run the machines of industry), mines, and industrialization in general are indigenous people already worse off than the general population in terms of poverty and basic rights. As energy sources become more difficult to obtain, as humankind’s insatiable search for fuel drives it to ever more desperate and inhumane ways to access it, the poor and powerless are likely to suffer ever more. There are limits to how long creativity, ingenuity, and technology will allow people to maintain and expand their current energy-intensive way of life. However, if that creativity, ingenuity, and technology is successfully redirected from consumption to wellbeing, then the end of economic growth could bring genuine and dramatic improvements in how everyone lives. * * * Land is also a limited resource. The more land that is used by the wealthy, the less land is available for everyone else. This is especially visible in cities, where the poor are crowded into slums while the rich enjoy large, luxurious apartments or urban estates; where urban parks are often poor in quality and too few in number, while golf courses serve the elite. In city after city, developers see public parks as potentially profitable land. Luxury housing springs up; gathering and recreational spaces for the poor disappear. In one city in which I worked, a senior urban planner talked of plans to “liberate land from the poor” and turn it over to developers for luxury projects. The poor are then sent off to live on the outskirts of the city, far from jobs. My first apartment in Dhaka was a small one-bedroom, but there had previously been about ten tenants, the entire floor covered with mattresses laid side by side.

MYTH#3: ECONOMIC GROWTH IS NECESSARY

Downstairs, there was one family per room, with space for little more than a bed. The poor face a serious housing crunch, while more and more luxury apartments for the rich continue to be built. In terms of square footage per person, the poor actually pay more than the rich for their living space.22 Several years ago, planners created the Detailed Area Plan (DAP) for Dhaka. The plan allocated less than half of one percent of available land for four and a half million low-income urban dwellers while reserving thirty-four percent of the land for four and a half million upper-income people. That means the wealthy would have more than one hundred times the land per person than the poor. The result could be thousands of persons per hectare in the slums, as compared to the existing high-income parts of the city, which house just ninety-five persons per hectare.23 * * * An un-exportable model of growth and consumption The carrying capacity of the planet depends not only on the number of people living on it but also on how much each one of them consumes. If one accepts the natural limits discussed above, then three facts become clear: 1) rich countries need to cut back on their consumption; 2) low-consumption countries cannot match the levels of the high-consumption countries; and 3) the world’s population cannot continue to grow indefinitely. (I will return to the third point in the Towards a Better Way section.) Consumption patterns differ greatly across countries and regions. Americans comprise only five percent of the world's population and yet consume twenty percent of its energy.24 According to the United Nations Development Program, per capita carbon dioxide emissions are much higher in the forty-seven highestconsuming countries than in all other 140 countries combined. High emissions levels in countries with high rates of consumption come from activities such as driving motorized vehicles, cooling and heating homes and businesses, and producing and eating processed and packaged food. The average person in a high-consumption country generates about thirty times more carbon dioxide emissions than does a person in a low-consumption country. The average British citizen generates as much greenhouse gas emissions in two months as a person in a low-consumption country generates in an entire year, while an average Qatari (Qatar has the highest per capita emissions) does so in just ten days.25 Nor is the discrepancy limited to emissions. According to Jared Diamond, geography professor and author of Collapse and Guns, Germs and Steel, “The average rates at which people consume resources like oil and metals, and produce wastes like plastics and greenhouse gases, are about 32 times higher in North America, Western Europe, Japan and Australia than they are in the developing world.”26

BEYOND APOLOGIES

While one billion people live in high-consumption countries, most of the remaining five and a half billion live in low-consumption countries. Rapidly growing populations in these low-consumption countries pose a burden for the countries in question, but not for the world as a whole. If, for example, the population of the Sudan were to double, it would be very difficult for the country to provide even the minimal basic services to its citizens. However, since each new person would consume very little (based on the country’s current consumption patterns), the global consumption rate would essentially be unaffected. Therefore, reducing the number of births in low-consumption countries will have little impact on the international use of resources. If, on the other hand, China were to catch up to the consumption rates of the United States, then the global consumption rates of oil and metals would roughly double. If India caught up as well, according to Diamond, then “world consumption rates would triple. If the entire developing world were suddenly to catch up, world rates would increase eleven-fold. It would be as if the world population ballooned to 72 billion people (retaining present consumption rates).”27 If the world is to be one in which all inhabitants enjoy some basic level of wellbeing, then the world’s resources need protection. They will have to be shared more equally. Those consuming the most will have to cut back significantly. Economic growth that relies on growth in overall consumption would not only not benefit the poor; it would bring about their eventual destruction. Along with everyone else’s. Pollution and other environmental damage as a by-product of economic growth Constant economic growth has come at a high cost to the planet: natural resources have been rapidly depleted and so much fossil fuel has been burned that the environment has been harmed and climate change threatens the future of human and other life on earth. This growth also generates enormous amounts of waste, which in turn requires disposal that is itself often environmentally harmful. Pollution takes a direct human toll. In 2010, more than one million premature deaths in China were linked to outdoor air pollution, making air pollution the fourth leading risk factor for death in China that year. In India in the same year, more than half a million people died prematurely from outdoor air pollution. Outdoor air pollution, mainly caused by vehicle fumes and factories, is now the sixth most common killer in South Asia.28 Add to this the more than one million deaths per year worldwide from traffic crashes and it is clear that economic growth does not come without cost. As resources become increasingly less available, people must use more environmentally destructive ways to access them. One might accept some form of environmental damage as the necessary cost of bringing sanitation and food to all

MYTH#3: ECONOMIC GROWTH IS NECESSARY

those in need. It is much harder to argue that harming the environment is a reasonable exchange for having a greater supply of potato chips or batteryoperated toys. Humankind is destroying the planet not to bring about greater wellbeing, but simply to increase production and consumption, regardless of the product’s value or of who uses it. To quote UNDP, “…activities that emit carbon dioxide into the atmosphere are those linked to the production of goods, not to the provision of health and education.”29 Economists and others argue about the extent to which the economic models in place in India and China have succeeded in reducing poverty levels. The question is not whether they have but whether a different model might succeed just as well or even better and at less cost to the environment and natural resource base. If the cost of environmental degradation and resulting ill health were deducted from measures of progress, it would be easier to know whether the world is actually progressing, and at what cost. What are countries supposed to develop into? The terms ‘third world’ and ‘first world’ have long since passed out of popularity, having been replaced with ‘developing’ and ‘developed.’ The newer terms raise the question of what countries are supposed to be developing into and for how many decades one can classify a country as ‘developing.’ Yet most people ignore such questions and continue to believe that the obvious key to ‘development’ is economic growth, without a clear understanding of what the final goal should be or whether there is any likelihood of actually achieving or sustaining it.vii In its common, vague use, the word ‘development’ fails to address the issue of what type of lifestyle people wish to attain, what progress really means, and who decides what development actually entails. It quietly sidesteps the question of who, in a ‘developed’ country, can achieve that progress. Nor does it raise the question of feasibly achieving ‘developed’ status within existing national and global resource bases and environmental constraints. Former Peruvian diplomat Oswaldo de Rivero argues that the term ‘development’ suggests a linear track that all countries must follow, a continuing march of progress towards a state of vii Many people have questioned the goal of ‘development’ and Maxfred Man-Neef and colleagues have established the school of ‘Human Scale Development’ as a way of addressing fundamental human needs in opposition to the simplistic view of linear development towards a fully industrial, high-consumption economy. According to Max-Neef, people’s fundamental needs are subsistence, protection, affection, understanding, participation, leisure, creation, identity and freedom. Paul Ekins and Manfred Max-Neef, eds., Real-Life Economics, Understanding Wealth Creation (New York: Routledge, 1992).

BEYOND APOLOGIES

enlightenment, a straight line from the dim past into the ever-brighter future.30 ‘Development’ suggests that the new and modern are always better.viii Such a linear approach fails to raise the issue of people’s values, such as family, community, and time for one’s own pursuits. It suggests that people only care about money, and that everything that is valuable is available for purchase. Everyone considers the United States as ‘developed,’ but only three countries with at least 250,000 adults (Russia, Ukraine, and Lebanon) are more socioeconomically unequal. Is inequality thus a prerequisite or a by-product of development?ix What if development meant something other than unsustainable rates of consumption? What if it meant that everyone had enough quality food to eat, lived in decent housing, could access quality health care, all children attended good schools, and the poor and minorities were no more likely to be jailed than the rich were. If that were the definition of development, then the United States would certainly deserve the label of undeveloped. Although the American example is extreme, it is not an exception. In countries that have recently ‘developed,’ sizeable portions of the population remain unemployed, underemployed, or extremely poor, while the rich grow richer. Brazil, Russia, India, and China all exhibit these trends, although Brazil has recently begun to reduce its levels of inequality.31 Russia exhibits the highest level of wealth inequality in the world, other than a few tiny Caribbean countries inhabited by billionaires. A mere 110 Russians control thirty-five percent of all household wealth in the country.32 Meanwhile, at least eighteen million Russians (thirteen percent of the population) live below the poverty line. While the rich continue to grow richer, the poor remain about the same, meaning that an ever-growing gulf exists between the two.33 Despite India’s ‘miraculous’ economic progress, more than a quarter million people, or twenty-six percent of the country’s population, live below the poverty line.34 No country, not even in Africa, has a higher proportion of underweight children than does India.35 Urban housing is unaffordable for all but the most prosperous Indians, causing many to commute for hours each day or to live in crowded slums. More Indians use mobile phones than have access to a toilet or to decent sanitation.36 While many poor Indians have benefited from viii This belief in progress as a linear track, with everything new by definition being better, reflects Darwin’s evolutionary theory. Yet evolution may more often have entailed random changes, not adaptive ones: those changes that were seriously maladaptive disappeared, but changes that simply were random and unconnected to improvement, but not disastrous, remained. See Stephen Jay Gould’s books on this subject, including Eight Little Piggies: Reflections in Natural History (New York: WW Norton, 1993). ix I address inequality in more detail in the Myth on that topic.

MYTH#3: ECONOMIC GROWTH IS NECESSARY

economic growth, far too many have not, as a small elite group accumulates massive wealth. Yet India presents itself as a model of rapid development, as if the generation of wealth alone is enough, regardless of how many tens or hundreds of millions continue to live in dire poverty. While other countries may not show such extremes in wealth inequality as India, the levels of inequality in them are still striking (see Figure 2).37 Figure 2: Examples of Wealth Inequality

The greatest recent success story in terms of an economy that has grown tremendously while seeing reductions in poverty is China. (Note that to the extent that China has succeeded in growing its economy, the growth is due to ignoring, rather than following, the advice of the IMF.) Although the economy has indeed grown, that growth has taken a huge toll on the environment and has led to extreme inequality and breakdown of community. A number of factors, including the need to find sufficient fuel (including coal) and the fact that an export-led economy faces troubles when the global economy slows, also threaten Chinese economic growth.38 Despite all of its ‘progress’ and ‘economic miracles,’ huge swathes of poverty remain in rural China. The definition of ‘development’ could, from the evidence, therefore actually mean increased access to luxury goods and lifestyles for the wealthy and modest gains for the poor that are offset by environmental and health costs, while in the worst cases the poor have suffered from the environmental costs while making no

BEYOND APOLOGIES

gains at all. Is that the path that ‘developing’ countries should be encouraged to take? Surely, they could do better than that. Economic growth and the never-ending rat race “I can get no remedy against this consumption of the purse; borrowing only lingers and lingers it out, but the disease is incurable.” – Falstaﬀ in Shakespeare’s Henry IV Part II “Our economy is based on spending billions to persuade people that happiness is buying things, and then insisting that the only way to have a viable economy is to make things for people to buy so they’ll have jobs and get enough money to buy things.” – Philip Slater39

* * * Even when it succeeds in raising average incomes, the goal of constant growth is hardly a restful one. Because seemingly limitless consumerism is the norm while incomes are limited, people must regularly take out loans to purchase goods. Any growth in living standards often accompanies an even greater growth in debt. As college teacher and social justice advocate Paul Buccheit writes, “Today, Americans are burdened with over $11 trillion in consumer debt, including mortgages, student loans, and credit card liabilities. As the very rich have accumulated income and wealth, the middle class has kept up appearances by taking out loans.”40 As a result, people have to work overtime or at second jobs to keep up with their payments. Running constantly on a hamster wheel may make for good GDP numbers, but how much does it contribute to quality of life? ‘The economy’ may benefit when people work long hours most weeks of the year while still finding themselves in debt (that is, at least until personal and corporate bank ruptcy claims skyrocket). It is less certain how much individuals gain in a system that treats money as the most, or even the only, important aspect of life. Not only does it exhaust and demoralize people, but the reliance on debt is inherently unstable. Nor is consumer debt the only source of instability. Those keen to make large fortunes often do so in socially dangerous ways. They lobby successfully to remove the safeguards meant to protect currencies and economies and to prevent predators from successfully preying on the system. Stability and growth do not go hand in hand. Over-consumption can also directly harm people’s health. Excessive consumption of food, alcohol, tobacco, and cars, to name a few, is harmful both to people and to the environment. The poor suffer the most from money wasted on addictive and harmful products and from the trashing of their neighbourhoods by the pollution and other problems related to the car (such as car repair shops, parking lots, and highways spewing pollution into low income communities). The problem is not just individual greed, but also a system that encourages over-consumption

MYTH#3: ECONOMIC GROWTH IS NECESSARY

in order to generate growth; that growth, in turn, is not only of GDP but also of waistlines, deadly crashes, alcohol-related violence, tobacco-related disease, and other unsavoury by-products. * * * Researcher and paediatrician Dr. Jody Heymann is conducting the first global study on the impact of health and social policies on individuals, families, and communities around the world. The book Forgotten Families summarizes data from surveys conducted on 55,000 families in 180 countries, as well as original research that was conducted under the Project on Global Working Families. Heymann estimates that there are at least 340 million children under the age of six in the world who live in households in which all adults work for pay. In too many cases, those children are left under the supervision of an older sibling or simply locked up for hours each day without adequate care. Neglect leads to a number of problems including accidents, poor school performance, and disciplinary problems. While Heymann largely makes the case for extensive early childhood care and education programs (that could, she argues, be paid for with current high-consumption country agricultural subsidies), the hours the study finds parents working makes it clear that some people have virtually no waking hours with their children and would benefit from shorter hours to spend more time with family...and for all else that matters outside of work.41 * * * Increased income and consumption do not equal greater happiness When people are extremely poor, an increase in income generally contributes to their happiness, as measured by people’s reported contentment with their lives. There are excellent reasons for increasing the income and living standards of the poorest. But what about everyone else? Beyond a certain level, increased income no longer translates into increased happiness. There is no pre-defined level at which people feel contented. People’s perception of their economic status is largely comparative; they wish to feel or appear to be better off than their peers are. In Japan, as real per capita income increased five-fold between 1958 and 1987, and as ownership of consumer goods (refrigerators, washing machines, TVs, and cars) rose from one percent to about sixty percent of households, the perception of wellbeing (satisfaction with life) remained constant.42 Richard Easterlin, professor of economics at University of Southern California and a Distinguished Fellow of the American Economic Association, argues that “the magnitude of Japan’s subsequent advance in living levels does encompass a transformation from a ‘subsistence level’ of consumer durables to plenitude, with no impact on subjective wellbeing. One would suspect that the spread of consumer durables among the Japanese must have involved widespread satisfaction of perceived needs” – yet it did not.43 Easterlin cites evidence that material norms rise at the same rate as incomes,

BEYOND APOLOGIES

meaning that people simply expect more as more money or products become available. While, in general, those whose incomes are higher are happier than others, “raising the incomes of all does not increase the happiness of all.”44 The lack of a connection between income and happiness or wellbeing is also due in part to the difference between actually having a higher income and the efforts spent to gain that higher income; those who wish for more money tend to be “less happy and more vulnerable to other psychological ills than individuals who do not crave higher incomes.”45 The billions of dollars spent on advertising, plus all the messaging that comes through social media, TV programming, and movies, tend to reinforce the same message: wealth equates with happiness, and shopping is the most delightful of all activities. If those messages really were true and if people really did enjoy the pursuit of ever-greater wealth, then perhaps the media would not have to spend so much money bombarding people with the message that shopping will make them feel better about themselves. How much is enough? As Schumacher writes, the level at which people can say that they have enough is by no means easy to identify when materialism is the goal: “...how could it be that the frenzy of economism does not abate as higher ‘standards of living’ are attained, and that it is precisely the richest societies which pursue their economic advantage with the greatest ruthlessness?”46 Media and advertising certainly contribute to the perception that others have more, and that more is always better; as a result, people learn to never be content with what they have, no matter how much that is. Obviously everyone cannot have more money (or stuff) than everyone else.x Since it is impossible for everyone to have aboveaverage incomes, simply raising incomes (once a decent benchmark is reached) will not achieve greater happiness. Once we succeed in ending abject poverty, it is time to look at other ways of satisfying people’s wants than through encouraging ever-greater consumption. Greater wellbeing – better schools and health care, more pleasant parks and other public spaces, more scope for public involvement in government, stronger and safer communities, and so on – could have a significant impact on happiness.47 It is time to try these measures. And if there were no more poor people, who would clean our toilets? Social policies that result in overall high levels of wellbeing in Western Europe are facilitated, arguably, by high immigration rates, so that there is always an underclass to perform the tasks that the better off now reject. My own answer to this problem, rather than maintaining an underclass (be it of women, the dark-skinned, or recent immigrants), is to accept the importance of the unpleasant tasks and share them more equally (perhaps a rotational system such as is used in Israeli kibbutzim), while trying to see if we can reorient our lifestyles to remove the need for some of the least pleasant tasks.

MYTH#3: ECONOMIC GROWTH IS NECESSARY

Resource constraints mean that endless consumption is neither attainable nor sustainable In addition to global constraints related to energy are all the local resource constraints that make the Western lifestyle unattainable for most of the world’s population. Countries rich in fresh water may not have to worry about water conservation, for example, but those with little water do not have that luxury. According to UNDP, an American’s average water use is almost six hundred litres per day, a rate more than thirty-eight times that used in countries such as Angola, Cambodia, or Haiti.xi Let us not even talk about Mozambique, at four litres per day...which hardly seems enough to survive.48 It is clearly ludicrous to suggest that the population of Mozambique (or of any other water-poor country) should aim for a Western lifestyle, including Western flush toilets.xii Cutting back on energy use in countries such as the United States would help other countries; reductions in water by the high consumption countries would do little to help others. What would help is not to push the Western lifestyle on places that clearly cannot afford it. “Yet,” writes Diamond, “we often promise developing countries that if they will only adopt good [sic] policies – for example, institute honest government and a free-market economy – they, too, will be able to enjoy a firstworld lifestyle. This promise is impossible, a cruel hoax: we are having difficulty supporting a first-world lifestyle even now for only one billion people.”49 Meanwhile, water-poor countries use some of their precious water to grow foods or other crops that they export to water-rich countries. Food-growing farmers in parts of Kenya face drought, while other others rely on fancy irrigation schemes to grow flowers and passion fruit for export. Even in countries with limited resources, average consumption masks enormous differences. For instance, in Nepal, although everyone’s electricity turns off for about twelve hours each day, a reliable water supply is available only to the wealthy. While it flows freely in the big hotels, much of the population of Kathmandu gets little or no water from their taps most of the day. We must address these inequities in resource use both globally and nationally. The world’s primary focus on economic growth and trade means that limited resources are being used not to feed the local population or to improve overall wellbeing, but rather to generate wealth for a few. Yet another benefit brought by ‘economic growth.’

Water use refers to industrial, agricultural, and household use. Most flush toilets require between six to thirteen litres of water per flush; even highefficiency toilets use almost five litres per flush.

xii

BEYOND APOLOGIES

Would it hurt to cut back on consumption (and economic growth)? Can society ‘afford’ not to have economic growth? A more appropriate question would be, could society afford to have it? The United States uses fifty-seven times as much energy per capita than does Bangladesh, sixteen times as much per capita as Indonesia, and twice as much as the United Kingdom.50 There are strong cases for getting Americans to use less, including reducing the American contribution to climate change and making more global fuel supplies available to countries that currently use vastly less energy. At the policy level, decision makers need to drop the goal of economic growth and replace it with one of promoting wellbeing. Less national obsession with production would set the stage for reductions at the individual level as well. But cutting back greatly on resource use involves some complications. First, there is the problem of getting people to agree to the goal, which can be difficult when politicians and the media persuade Americans that reductions in energy use are unnecessary, unpleasant, or – more commonly – harmful to the economy. Second, there is a big difference between agreeing to an overall goal and actually making the changes needed to achieve it. Third, even where people wish to make changes, such changes may be difficult or even impossible given the design, layout, and customs of urban and rural America. The lack of good infrastructure for public transit, cycling, and walking necessitates driving private vehicles. Common agricultural practices require heavy application of petroleum-based fertilizers, as well as fuel to operate farm machinery. Urban sprawl means that food travels long distances. The typical diet of heavily processed and packaged foods means that eating is energy-intensive at many levels.xiii Wearing ‘corporately-appropriate’ suits in the summer requires air conditioning.xiv How exactly are Americans to reduce consumption? What about people in other nations who are eager to match the vaunted American lifestyle? Life does require consumption, which in turn requires resources and generates waste. However, the differences in both the scale and the kind of consumption and waste can be enormous. It is the difference between drinking a glass of water from the tap and drinking from a throwaway plastic bottle whose manufacture requires chemicals, energy, and water. It is the difference between riding a bicycle and driving a car, between over-cooled/over-heated buildings and adjusting the temperature and one’s clothing to be more in synch with the climate. It is the Estimates vary, but one figure suggests that it requires fifteen calories of fuel to produce one calorie of fuel. Eric Garza, “The Energy Cost of Food,” Resilience, July 22, 2013. xiv There is a big difference between the use of energy to stay warm enough for health and survival, and the use of air conditioning or heating simply to increase personal comfort or to allow for clothing inappropriate to the climate/season. xiii

MYTH#3: ECONOMIC GROWTH IS NECESSARY

difference between eating a diet that mainly consists of grains, legumes, fresh fruits and vegetables bought from a small local organic farm that utilizes human and animal labour versus eating heavily processed, chemical-laden foods that have been transported thousands of miles. And so on. People need to become far more conscious of what they eat and use, from production through shipment to consumption and disposal. Cutting back would not likely be as painful as many may imagine, and could result in some significant benefits. Jared Diamond (somewhat optimistically) argues, Real sacrifice wouldn’t be required…because living standards are not tightly coupled to consumption rates. Much American consumption is wasteful and contributes little or nothing to quality of life. For example, per capita oil consumption in Western Europe is about half of ours, yet Western Europe’s standard of living is higher by any reasonable criterion, including life expectancy, health, infant mortality, access to medical care, financial security after retirement, vacation time, quality of public schools and support for the arts. Ask yourself whether Americans’ wasteful use of gasoline contributes positively to any of those measures.51

That there is at least some demand, even in the United States, for a simpler, less cumbersome, less materialistic lifestyle can be seen in the growing circulation of simple-living magazines. People are growing tired of working hard just to buy more ‘stuff,’ and of fearing what their lives will be like after retirement. Declines in consumption could be at least partially offset by increases in other aspects of wellbeing: less driving would not be a sacrifice if there were better public transit, cycle paths, and walkways; fewer home appliances might be compensated by more community services and interactions; less industrial and more fresh and local food would mean tastier food and better health; less heating and cooling could be offset by more climate-appropriate clothing. Moreover, most people on the planet do not have the option of consuming more; it is the questionably lucky few who are in a position to reduce their consumption – while virtually everyone would gain from that reduction. Much of what people today consider unsophisticated or hopelessly outdated needs to become mainstream, including chemical-free agriculture, cycling and walking as transport, and repairing items rather than throwing them out. People will have to cut back on their consumption, including by buying fewer imported items and relying more on local products and services. Local purchases have the additional benefit of keeping money circulating within the community, whereas mass-produced products typically enrich only corporate executives and shareholders.

BEYOND APOLOGIES

How can people get from here to there? If enough people make enough noise about the need for a change, they could eventually bring it about; the process is already underway with many debates about the need for a better measure than GDP. The debate about GDP must highlight the importance of aiming not for increased consumption (no matter of what, by whom) but rather for increased wellbeing. As more people bring more ideas to the table, we will get closer to making the needed changes. Is economic growth about production or is it about employment? Ironically, increases in production, at least in high-consumption countries, are often justified not based on any real desire for the products themselves but rather on the need to create jobs. Decades ago, philosopher Hannah Arendt wrote: “Today it is almost universally accepted that we must make cars to keep jobs, not to move people about.” Arendt described how the obsession with production and consumption results in “a huge economy of waste.” In such a system, she continued, progress means that “to stop going, to stop wasting, to stop consuming more and more, quicker and quicker, to say at any given moment enough is enough would spell immediate doom.”52 Economic growth occurs largely through mechanization, which allows for higher levels of production (output) with less labour (input). While machines can enhance the productivity of people and thus increase their earnings, as well as protect them from the most dangerous and painfully boring jobs, they also replace human workers. The tax structure in many countries furthers this shift by making it far more expensive to hire people than to use machines: governments provide tax cuts for automation to attract investment but fail to provide similar incentives to encourage the hiring of people.xv At the same time, employee benefits such as health insurance and leave – unless provided directly by government, funded in part through corporate taxes – have a financial cost, as do safety regulations, and both kinds of costs cut into profits. What are the consequences of economic-growth-through-mechanization? In the United States, economic growth has occurred along with a one-third drop in manufacturing employment in less than twenty years. In 1992, there were more than eleven million people employed in manufacturing jobs; that number fell to just over ten million in 2000, and to less than seven million in 2009.53 With no jobs to replace those that have been mechanized, the negative economic and social xv Why do governments tax capital at such low rates and labour (income tax) so much higher? Obviously, it is about power, that is, the ability to lobby for the benefits you want. Machines never protest for higher wages or better working conditions.

MYTH#3: ECONOMIC GROWTH IS NECESSARY

effects on communities and the country have been serious. The problem has been addressed, in part, not by efforts to increase other forms of employment, but rather by redefining the term ‘unemployment.’ By removing the chronically unemployed from the statistics, the formal unemployment rate appears to be lower than it actually is; the problem can thus be safely ignored. Automation reduces the connection between consumption and employment. Given that consumption is encouraged in part because of the idea that it will create more jobs, it is important to consider whether reduced consumption would actually result in fewer jobs. An economy that is focused on the reduced use of resources – through more repair and reuse rather than production – would actually result in more employment, as it requires individual labour to repair something that can be mass produced mechanically. Items that are mass-produced generate few jobs, as do foods grown on factory farms. Small local production results in more employment. It is hard to imagine going back to the days when individuals made shoes for others, but a few pairs of tailored shoes that are truly comfortable and durable could replace a far larger number of ill-fitting, massproduced ones. Repairing existing shoes (still a common business in much of the world) would result in employment as well as cost savings. More employment, lower costs, and more goods is not a feasible combination, but more employment combined with a smaller number of higher quality goods certainly is. Why all the ongoing attention to the goal of economic growth? Yet another indication that there is something wrong with the goal of economic growth is the fact that we are not supposed to question it. Policymakers, international institutions such as the World Bank and IMF, and even most in the NGO community take it for granted. Newspaper headlines refer to ways to achieve economic growth; they never question the need for it. When people lose the right to question its assumptions, economics should no longer be called a science but rather a religion.54 Censorship of ideas is dangerous; in this case, almost murderous. As American economist and University of Texas professor James Kenneth Galbraith writes, What is the purpose of the myth? It serves...mainly as a device for corralling the opposition, restricting the flow of thought, shrinking the sphere of admissible debate. ... This in turn limits the range of presentable ideas, conveniently setting an entire panoply of reasoned discourse beyond the pale of what can be said, at least in public, by reputable people.55

All points of policy should be open to discussion and debate. Those who wish to stiﬂe debate either by refusing to produce evidence or by attacking the questioner probably have something to hide.

BEYOND APOLOGIES

If I sound particularly bitter about the subject of economic growth, it is due to my fatigue of hearing it inevitably accepted as the only way to achieve poverty reduction. The strength of my arguments is in proportion to the power of the belief in question. When for years we have been told the same lies, it takes great effort to recover our freedom of thought. Meanwhile, at least three simple reasons explain why so many people preach economic growth as the main or sole antidote to poverty, and more broadly, as the only potential economic goal of any nation. First, economic growth will, people believe, create more wealth. With more to go around (a bigger pie to divide), redistribution will not be necessary. The rich can continue consuming at current or even higher levels, the middle class can continue to try to catch up, and the poor (who, after all, do not tend to vote or have any influence on policy) can fight for the scraps. Somewhat surprisingly, and an indication of the widespread acceptance of the idea, is the fact that defenders of economic growth extend beyond those who directly benefit from it. After all, it is far more attractive to those with limited means to imagine that they will someday be rich than to be satisfied with the idea of greater equality. Second, if endless growth is necessary and possible, people can ignore the need to conserve limited resources. Once people are convinced that economic growth is essential, it is conservationists, not the very rich, who become the enemy of the poor and middle class. Any attempt to slow down business and industry can be portrayed as an attack on the engine of growth, on the hopes and dreams of all. Difficulties in finding a job or figuring out how to meet monthly expenses are hard to ignore. It is far easier to ignore the extinction of species or even extreme weather events (except when you are directly affected by one). Once people posit economic growth as an implicit need, its proponents need not defend their positions. It is those who argue for a stable state economy or even shrinking economies that need to defend their ideas. Third, given current monetary systems, people have no choice but to promote growth. For the most part, money is created not by printing notes but by giving loans. Under current laws, banks can lend out far more money than they keep in reserve. However, those loans carry interest. The interest charged on those loans is essentially ‘new’ money. If a business takes out a loan, the only way for it to generate the money that pays the interest is to expand the business. When individuals take out loans, the only way to pay them back with interest is through increasing income or cutting back on other expenditures. When an individual takes out a college loan, the anticipation is that the increased income opportunities that come with the degree will allow him/her to repay the loan. Credit card debt operates with the same principle, just at higher interest rates. The system requires growth.

MYTH#3: ECONOMIC GROWTH IS NECESSARY

As long as society remains focused on the moving target of economic growth, it will not succeed at increasing wellbeing or preserving the environment. The ﬁrst step is to change people’s thinking. Targets that are more appropriate will lead to achievements that are more valuable. 

Towards a Better Way Part I: Maximize Wellbeing

“There is no imperative for the economic system to be geared to proﬁt rather than people.” – Paul Ekins56 “An entirely new system of thought is needed, a system based on attention to people, and not primarily attention to goods—(the goods will look after themselves!).” – EF Schumacher57

* * * What might a goal of increased wellbeing for all look like? If economic growth does not lead to improved wellbeing and is destroying the world’s resource base and even the planet, what would be a better option? If people care more about wellbeing than about a rising GDP, then polluting the environment to generate wealth, firing workers to increase productivity, and allowing fast food and tobacco companies to profit from poison seems much less sensible. If people value life and health over money, then they will make radically different choices in many parts of their lives. However, to reject the economic growth model, a better one must replace it. The alternative to economic growth is an approach focused on meeting people’s basic needs. Rather than try to make everyone rich and to maximize consumption, the focus should be on direct attempts to increase people’s wellbeing. * * * My office in Dhaka is in a low-income area that people refer to as a slum. The buildings are small and built closely together. The ground floor is usually occupied by a shop with housing above. Some of the shops are so small that nearly all the goods are within arms’ length of the owner. Almost everyone gets about by foot, bicycle, or bicycle rickshaw. A large bare playing field is full of children and youth playing cricket and riding bicycles, while women walk around the perimeter. The streets remain lively late into the night. People seem to know each other, and children roam about freely. The residents probably live in small and not very comfortable homes with very few possessions. They have at most a fan to cool themselves and wash their clothes in a bucket. But as long as they are able to meet their basic needs, it is difficult to see how they are deprived in any important way, and in many ways their community seems far stronger and ‘wealthier’ than the upper middle class neighbourhood in which I live. * * *

BEYOND APOLOGIES

A system focused on wellbeing would measure success by GNH or some similar measure, not GDP.xvi It would emphasize government provision of a variety of high quality, free services, especially to the poor. It would classify as wasteful government spending used to subsidize corporations or to expand the military. Its taxation policy would prevent all the wealth going to the very rich and ensure sufficient funds for government services. It would give governments the power to regulate industry. It would emphasize public transit, walking, and cycling over the automobile. It would replace the current focus on material wealth with a greater focus on other forms of wealth, especially on thriving communities. It would create opportunities for recreation and interaction, and promote a cleaner and safer environment. It would nurture cooperation rather than emphasize competition. While growth in production and consumption is not sustainable, growth in wellbeing is. It is possible to achieve an increase in the number of people who enjoy a modest but overall satisfying lifestyle that, while involving fewer consumer goods, would offer significant advantages in terms of better health, education, and job opportunities as well as more friendly and cooperative neighbourhoods. Such a model would include better government services and more opportunities to enjoy one’s family and a variety of leisure pursuits. This is not pure fantasy. Western Europeans, on average, hardly lead materially impoverished lives, yet they drive far less than Americans, have fewer appliances, and work far fewer hours. On the flip side, albeit overworked, Americans get to sit longer in bigger cars and, when they finally get home, they can eat processed foods and use a dishwasher and vacuum cleaner to compensate for their lack of time to cook or clean, and then collapse from exhaustion in front of the television (and watch lots of programs about the lifestyles of the rich and famous that they wish to emulate). Europeans do pay higher taxes than do Americans. But Europeans receive a lot in return for those taxes. As a result, each individual needs less money, as she does not have to buy all those services that the government provides. Nor are the poor, the unemployed, the sick, and women punished to the same extent in Western Europe as they are in the ‘free’ and ‘democratic’ United States. (Americans do enjoy some real and valuable freedoms. Unfortunately employers also ‘enjoy’ the freedom to pay low wages, to refuse to provide paid maternity leave, and to deny workers safety protections.) If people were less concerned about productivity and more concerned about wellbeing, it would be easier to show the value of policies xvi

These methodologies are described earlier in this book.

MYTH#3: ECONOMIC GROWTH IS NECESSARY

such as workplace child care, a shorter work week, more generous vacation and leave allowances, a higher minimum wage, and a basic benefits package. Although the European model is more sustainable than the American one, it is not replicable internationally: its resource use, low compared to America, is still high by international standards. What currently ‘developing’ countries could aspire to is a level of government services and social policies similar to what is available in Western Europe, combined with significantly less consumption than is currently found in either Europe or North America. Fortunately, people in the lowconsumption countries already have significant expertise on making do with less. Perhaps some could find employment in teaching those skills to their more wasteful peers in other countries. Could a basic needs approach work? Countries that focus on meeting basic needs rather than on encouraging industrial growth have done quite well in health and education, despite having few material resources compared to the high-consumption countries. The main historical examples are Cuba, Sri Lanka, Costa Rica, Vietnam, and the state of Kerala in India. Some have since strayed from that approach – and are now seeing increased income inequality – but their experience demonstrates the feasibility of the model. The Indian state of Kerala is typical of these successful outliers; it does far better on measures of population health, education, and political involvement than does the rest of India due to its direct focus on those measures. * * * “Perhaps the real significance of a multidimensional approach to poverty lies in the fact that it allows for an expanded public policy agenda. In many cases where social performance indicators, such as health and education, far exceeded expectations based on levels of gross national product (GNP) per capita, these results were achieved through transformative social policies, for example, in China, Costa Rica, Cuba, Kerala State of India, Sri Lanka and many formerly socialist countries. Those policies, which were holistic, inclusive and universalistic, can provide lessons to developing countries struggling to overcome poverty in its various dimensions. Many of the major social transformations were achieved despite low average income levels. Conversely, many countries that raised average income levels significantly but failed to adopt a more transformative social agenda remained underperformers in terms of health, education and social inclusion. This highlights the limitations of approaches that are excessively focused on income.” – UNDP Department of Economic and Social Affairs, Rethinking Poverty, Report on the World Social Situation 2010 * * *

BEYOND APOLOGIES

Brazil, which for years has experienced rapid economic growth, could easily have continued along its path towards greater income inequality. Instead, the government chose to focus on improving the lot of the poor and increasing the middle class, while worrying less about GDP. As a result, unemployment has fallen greatly and the middle class has increased; over forty million people have risen out of poverty. Extreme poverty has declined by eighty-nine percent. While GDP growth has slowed, per capita income has continued to grow. The government has addressed extreme poverty directly through the program Bolsa Familia, which gives money to mothers in poverty in return for them sending their children to school and making use of health services. While many economists scold Brazil for failing to prioritize economic growth, others realize that the country has achieved something remarkable.58 People can ‘buy’ a lot of wellbeing when they invest in it directly, or achieve less by waiting (and waiting) for increases in wealth to bring it about. What Cuba and other socialist countries have in common is that their governments focus ﬁrst on providing basic services to their populations. They have built schools and health clinics and staﬀed them with well-trained teachers and health workers, enacted nationwide vaccination campaigns, and provided health and education at no cost. They have ignored the advice of the World Bank and IMF on collecting user fees from the poor and on privatizing various services and industries. According to an article about Cuba in the International Journal of Epidemiology, In virtually every critical area of public health and medicine facing poor countries Cuba has achieved undeniable success; these include most prominently – creating a high quality primary care network and an unequaled public health system, educating a skilled work force, sustaining a local biomedical research infrastructure, controlling infectious diseases, achieving a decline in non-communicable diseases, and meeting the emergency health needs of less developed countries.

Nor is there a reason why other countries could not achieve similar beneﬁts: “If the Cuban experience were generalized to other poor and middle-income countries human health would be transformed.”59 Why do we not hear more about a basic needs approach? The ‘problem’ with approaches that focus on wellbeing rather than on income is that they oﬀer only very limited scope, if any, for the few to amass great wealth. They reduce the possibility of foreign investors making a fortune. So it should not be a surprise that the rich prefer a more market-based model for poverty reduction (helping people to earn the money to buy what they need and want from private companies) rather than a public service approach (greatly reducing what people

MYTH#3: ECONOMIC GROWTH IS NECESSARY

need to buy to survive and thrive). Wealthy businessmen and giant corporations control much of the media, and they are naturally loath to report about anything positive in socialist countries, or those that reject the ‘free enterprise’ model. One has to do extensive research to find information about the good things happening in socialist countries. When Americans think about Cuba, they are encouraged by the media to think of repression and lack of freedom, not of quality health services. That the Cuban government does much to improve the health and wellbeing of the population gets little if any media attention, yet its achievements are such that the National Health Service of the United Kingdom visited Cuba to see what it could learn about the Cuban health system to improve the British one.60 In countries like China and India, on the other hand, the focus is on greater industrialization and more jobs, regardless of how miserable those jobs may be, and of how much of the wealth generated floats up to the top. Ignored are such possibilities as taxing the growing and fabulously wealthy elite and corporations in order to provide basic services to all citizens and to allow people to continue with more traditional ways of earning money. Those traditional income sources, though not lucrative, might provide a higher quality of life when complemented by free government services than does the current capitalist model of each person trying to earn enough to pay for everything. Attempting to make everyone wealthy through free market economies is a pipe dream, an opiate to keep the poor from demanding their rights.xvii The fact that the United States focuses so strongly on vilifying socialism proves that it must have some popular appeal. The threat to capitalist wealth posed by the appeal of socialist policies – and of a basic needs approach – explains the ongoing need for the conventional, corporate-controlled media to attack such approaches. Why fight a war in Vietnam, why demonize the former Soviet Union and Cuba, why attack the successful systems of socialized health care in all other western democracies, if the people in those countries were so miserable that their political system or approach to health care had no chance of spreading? Whatever the shortcomings of the governments of those countries, it is clear that powerful elements in the United States fear the potential popular reaction to the possibility of universal free health care, worker ownership of enterprises, and similar policies. It helps to remember that much of what we see on the news and in newspapers is about selling ideas and products, including ideas and products that are destrucxvii In this sense, TV and the Internet have replaced religion as what Karl Marx famously referred to as the opiate of the people.

BEYOND APOLOGIES

tive to the self-interest of the ninety-nine percent. It is important to conduct independent research, check the statistics, and question the assumptions underlying news reports. It is important to ask why, if social policies are so bad for the economy, the United States is the only Western country not to have a strong set of them. It is important to vote for politicians who are working towards a better system, and keep reminding them that voters expect them to fulfill their campaign promises. There will be many obstacles in doing so, including people’s nearly instinctive dislike for paying taxes. But difficulty does not guarantee defeat. Using less rather than producing more The idea of producing a smaller number of high quality goods and services and having more employment raises the difference between what people have come to expect and what they actually need. Taking all of people’s desires equally seriously is neither feasible nor affordable.xviii Fewer mass-produced items and more handmade ones, complemented by more repair, would benefit employment and the environment. In addition, while people do demand various things (more parking, more road space, more stuff), there is no need to take all such demands more seriously than the demands for affordable housing, good schools, and attractive public spaces, to name a few. One of the specific areas in which consumer pressure results in untenable policies is in electricity production. Consumers want more electricity; governments rush to provide more. However, if the wealthy continue to increase their use, the poor may still not get even a small supply. Reducing waste, some of which occurs even before the service reaches the consumer, is rarely proposed as a solution.xix Even those who are interested in renewable energy tend to ignore the issue of how to reduce the wastage of existing energy supplies. A form of rationing, either direct or through pricing, on the other hand, can help to ensure that the poor get at least some of the essential services that, like electricity and water, are often in limited supply. As it is, we ignore many of people’s needs and wants. We ignore the need for affordable housing, health care, and quality schools. We ignore the need for pleasant outdoor recreational places that are accessible to all. We ignore the need for walkable and cycle-able neighbourhoods. A quick look at the ‘urban interest’ headlines in newspapers around the world gives the impression that the biggest problem people face is not any of the abovementioned, but simply traffic. And the solution they offer is to build more roads, not to provide better transport options. xix Electricity that never makes it from the generating plant to the power grid and leaky water pipes are typically presented as ‘normal’ costs of these services for which the consumer must pay. xviii

MYTH#3: ECONOMIC GROWTH IS NECESSARY

Since rising expectations and rising populations will continue to drive up the demand for resources, limits and rations are unavoidable. Household electricity use could be priced so that minimal use is free and the unit cost continues to rise with the amount used, so that those wishing to use energy-intensive appliances must pay a significant premium. The approach would be particularly successful if governments invested the high tariffs in renewable electricity production and ways of reducing waste in the system. Urban planning guidelines, for example, should ensure that buildings get sufficient natural light and breezes, and have proper insulation, to reduce the need for electricity. In other words, what if instead of asking “Isn’t it a pity the poor have so little,” people were to ask, “Isn’t it a pity that we waste so much and some people have so much while others don’t have enough?” Such rephrasing may help to illustrate why producing more wealth, supplying more electricity, building more roads or adding more car parking instead of focusing on meeting people’s basic needs first will not make poverty or shortage go away. Increasing supply is all too likely to result in those who already had plenty having more while the poor still do not have enough. A note about population growth Efforts to improve wellbeing will necessarily have to consider not only per capita consumption levels but also the issue of population growth. The subject is controversial, partly due to various religious objections to contraception and partly due to the origins of the family planning movement in eugenics, which sought to breed better humans, including by limiting reproduction among the poor. Both Margaret Sanger and Marie Stopes, early pioneers in the birth control movement, promoted eugenics. Suggesting that the poor are bad parents or are not entitled to have children puts one on dangerous territory and should be avoided. The issue of population growth is controversial also due to the sometimes coercive use of family planning by some governments that have been keen to limit their populations without paying sufficient attention to the most humane way of doing so. Sensitivities notwithstanding, the issue is too important to ignore. In the countryside, children represent low-cost labour, so it can make economic sense to have many children. Where infant and child mortality rates are high, people may have more children than they desire simply to ensure that at least a few survive to adulthood. However, as people migrate to the cities (more than half the world’s population is now urban), the cost of raising children rises. Further, the status of women will always be low if they have no control over their fertility.

BEYOND APOLOGIES

It is the responsibility of governments to ensure that quality family planning services are available. In many cases, they deliver family planning services so poorly that simply improving those services could bring about a dramatic reduction in the birth rate, without the use of coercion.61 Empowerment of women will also facilitate their ability to decide to limit births. As to whether it is more inhumane to use coercion to lower the birth rate or to allow people to live in extreme poverty due to limited resources and large populations, I leave it to my reader to determine. It does little good to reduce the population of the poor if the rich continue to consume at current levels. The reverse is also true: redistribution may be of little use if the population continues to grow inordinately. The issues of population and resource use need to be kept separate. Global issues of resource use have far more to do with per capita consumption than with the size of the world’s population. Local resource use, on the other hand, depends both on population levels and on individual consumption. The two issues require two different solutions. The high-consumption countries need a dramatic decline in per capita consumption accompanied (in some cases) by decreases in population growth.xx All countries need strong programs for family planning, so that everyone who wishes to practice contraception can do so, regardless of their level of income. Can governments afford to invest in wellbeing? Part 1: Taxes It costs money to improve education and health care. It also requires a greater acknowledgement of their importance, since money alone cannot solve problems related to mismanagement, corruption, and general ineptitude. A goal of wellbeing would mean not only higher social budgets but also increased priority accorded to social programs. However, how can cash-strapped governments, especially in low-consumption countries, afford to pay for universal health care, education, and social services? Two main mechanisms are available. The first is to raise more money through higher taxes on those who can most afford to pay. The second is to reduce spending on wasteful and harmful items, including subsidies for the wealthy. There are, of course, obstacles. Among them are ‘convenient beliefs’ – those beliefs that allow the believer to defend his or her own advantage while appearing to act in the interest of others, or what John Kenneth Galbraith describes as “what the socially and economically favoured most wish or need to have believed.”62 It is convenient, for example, to believe that the economy will prosper if people pay Population size is not an issue in countries with very low birth rates, whose populations are only maintained by immigration.

MYTH#3: ECONOMIC GROWTH IS NECESSARY

fewer taxes and spend more as they please. People do not like to pay taxes, especially when wealthy individuals and corporations can evade themxxi, and when they hear constantly in the media that government is inefficient, ineffective, and wasteful. This is yet another reason to fight against anti-government propaganda and to have a strong citizenry supporting government to implement high quality services that will benefit everyone. * * * Although a more progressive tax structure would result in less luxury for those at the top, the lifestyles of billionaires and even millionaires would unlikely be greatly affected even if they paid taxes of over ninety percent on their incomes.xxii Bill Gates is not quite the richest man on earth (Carlos Slim of Mexico repeatedly wins that title, with a net worth of $73 billion), but he is the richest American. Consider this:“If Bill Gates were a country, he would be the 37th richest country on earth.” “Bill Gates is 57 this year. If we assume that he will live for another 33 years, he has to spend $6 million per day to use up all of his wealth.” “If he gave everyone on Earth $10 this Christmas, he’d still have $2.26 billion left.”63 * * * The potential for raising money through taxes on the extremely rich is enormous. The total net worth of the richest 1,426 people in the world is $5.4 trillion.64 Taxing them at even thirty-five percent of their annual income would yield an enormous amount of money for starters. Hint: It is worth pondering why many people who are not wealthy object to higher taxes on the rich. Does it really have anything to do with what is likely to help/hurt the economy, or are they susceptible to the belief that someday they too will be rich and they want to be sure to enjoy all their future millions? If we are ever going to work successfully towards higher tax rates on the rich, we have to figure out how to get a wider swathe of the population, including those who would benefit directly, on board. * * * For example, American billionaire Warren Buffett earned almost $63 million in 2010; of that total, his taxable income was just under $40 million, and his federal income tax bill was only seventeen percent of his taxable income. For the American middle class, the tax rate is about thirty-five percent. However, Buffett, unlike most of the rich, believes that the wealthy are not taxed enough. “Billionaire Warren Buffett Earned $62,855,038 in 2010.” CNN Money, 12 October 2011. xxii Note the important difference between taxes on incomes and on salaries. The very wealthy tend to make most of their money from investments. That income (such as capital gains) needs to be taxed at least as much as salaries in a truly progressive system, whereby a ninety percent tax, for instance, would cover all forms of money making by the very rich. Various loopholes that allow the wealthy to avoid paying taxes should also be plugged. xxi

BEYOND APOLOGIES

Governments should only impose increased taxes on the middle class, meanwhile, in return for expanded services that result in reduced spending on essential services such as education, health care, and daycare. Done right, a restructured tax system would have a number of desirable effects: the poor would benefit directly by having both more cash (from more generous ‘social welfare’ programs) and better services, the middle class would see its taxes go up by less than its expenses would go down, and the rich would have less excess. In addition to taxing the super-rich at a much higher rate, we need to recapture the sums that vanish through tax evasion. As explained in depth in the Oxfam report, Releasing the Hidden Billions for Poverty Eradication, countries and cities compete with each other to attract foreign investment.65 They do this by offering cheap labour, weak protection for labour (including a prohibition on unions), and weak environmental protection. They also attract investment by offering low tax rates on capital, including a range of ‘tax holidays’ and other benefits. The result has been a widespread reduction in tax rates for foreign-owned subsidiaries and the affiliates of transnational companies. Corporate tax rates for American affiliates operating in low-consumption countries, for instance, fell from fifty-four percent in 1983 to just twenty-eight percent in 1996. When governments try to raise tax rates, corporations often scare them with threats of decamping and cutting jobs. The Oxfam report finds that low-consumption countries lose billions of dollars each year through two forms of tax loss: ‘tax competition’ (the common policy of lowering corporate taxes to attract investment) and untaxed capital flight (transfer of funds out of a country without paying tax on it). There are two potentially ‘easy’ ways for low-consumption countries to raise more funds. First, they could tax foreign corporations at a higher rate. Second, they could begin taxing capital flight. Using these two measures alone, governments could double their corporate tax revenues. These figures do not include other ways in which corporations (and individuals) evade taxes and are subsidized by governments. For example, many corporations register their operations in tax havens – countries that do not tax corporations. This may involve as little as maintaining a post office box in the country. According to a more recent Oxfam report, wealthy individuals have stashed away at least $18.5 trillion (yes, trillion) in tax havens. If governments collected tax on that amount, they could have over $156 billion more in tax revenue.66 According to John Christensen, Director of Tax Justice Network, governments lose an enormous amount of money due to offshore tax havens that essentially enable money laundering and tax evasion. If all the assets in such tax havens were taxed even at the low rate of thirty percent, an estimated $255 billion a year could become available.67

MYTH#3: ECONOMIC GROWTH IS NECESSARY

What might the low-consumption countries of the world do with an additional $156-255 billion? Those amounts would certainly go a long way to improving wellbeing around the world. As mentioned in the Inequality Myth, UNICEF estimates that it would cost $250 billion to provide sanitation facilities and safe water for all in need. Closing tax havens requires international cooperation to force corporations to pay taxes wherever they operate, and to ensure that individuals pay taxes on all their wealth. If activists then succeeded in convincing governments to invest that money in wellbeing, the lives of the poor would improve dramatically. Can governments afford to invest in wellbeing? Part 2: Other approaches It is a truism that the world is inter-connected. What people are less likely to acknowledge is the negative impact that many policies and practices in highconsumption countries have on low-consumption nations. Many of the lowestconsumption countries could afford better social services if they were not spending so much money servicing foreign debt. If the countries that made the loans forgave the debt or at least reduced interest rates on it, then debtor countries would be in a position to devote more of their limited funds to helping their poorest citizens. Nor is debt the only issue. ‘Negotiations’ between high-consumption and lowconsumption countries determine the terms under which international trade will occur. Since the low-consumption countries desperately need markets but have no power to influence the rules, these ‘negotiations’ are hardly fair. They also contribute to unnecessary movement of goods between countries. The World Trade Organization serves as a global policeman enforcing the rules set by the rich, rather than helping the poor to prosper. It forces low-consumption countries to import goods they already produce and even export. It also forces them to import goods, such as cigarettes, which are unhealthy. There needs to be a strong popular movement to ensure that trade rules are about increasing wellbeing, including health, the environment, and the rights of workers to organize and to receive decent pay and working conditions, and not about defending the ‘rights’ of corporations. Other measures do not require international cooperation. If governments spent less money on the military, for example, they could free up resources for disease prevention, primary health care, guaranteeing primary and possibly secondary education for everyone, and improving domestic food production and distribution. Investments today in health, education, and nutrition mean savings tomorrow, due to a healthier and more productive population. Unfortunately, in developing their budgets many governments tend to start with the most expensive

BEYOND APOLOGIES

items and run out of funds when they get to the budget lines that are most likely to help those in need (and save money in the future): hospitals take precedence over primary health care and universities over primary schools. Those who are in a position to raise their voices – by writing letters to newspapers and to government officials and taking their cause to the streets – need to pressure governments to change their priorities and put people’s needs first. Greater investment in sidewalks, bike lanes, and public transit should take precedence over investments in ever more roads for private vehicles. Governments should fund primary health care and prevention programs before more high-tech equipment in hospitals. They need to make investments in primary schools throughout the country, not just in universities in the capital city. They should invest more in wellbeing and vastly less in the military, security, prisons, and corporate subsidies. Governments may say that they prioritize health or children, but budgets talk, and what they are saying right now is that governments in most countries are far more interested in supporting the military and industry than in alleviating poverty. As with taxes, making changes will be difficult. Ideally, for example, NGOs should be able to help governments improve the quality and accessibility of health services. Instead, some NGOs prefer to provide parallel health services and to work with the private sector rather than with the government. Prudence is required. It is important for protesters to be very clear about what they want, and about the consequences of their demands. People protesting high bus fares must insist on subsidies for bus companies, not on fuel subsidies that will benefit private vehicles as well. It also helps to remember that groups such as the International Monetary Fund, the World Bank, the World Trade Organization, and donor agencies are still pushing government policies inherently designed to benefit the rich at the expense of the poor and middle class.xxiii Government leaders who attempt to act on behalf of the poor have often become international pariahs (such as Hugo Chávez in Venezuela), subjected to coup attempts by the American Central Intelligence Agency (Jacobo Arbenz in Guatemala, Jean-Bertrand Aristide in Haiti, and Salvador Allende in Chile, to name a few successful ones), or been the target of hundreds of assassination attempts (Fidel Castro in Cuba). NGOs, informed citizens, and anyone else with the ability to speak out needs to be vocal and active in resisting those pressures and in working for the types of changes discussed above. It has worked in many countries with tobacco control; it can work here. All

xxiii

I discuss this in more detail in the Myth on those organizations.

MYTH#3: ECONOMIC GROWTH IS NECESSARY

would share the ultimate benefit – a cleaner, healthier, and more beautiful environment and greater human wellbeing.xxiv Hint: When you read about budget shortfalls, ask yourself, might this have anything to do with low tax rates on the rich and on corporations? When people talk about global economic woes, ask, “Then how come there are more billionaires each year?” * * * How do we get there? It is one thing to know where the money is; it is quite another matter to access it. How does one convince governments to collect their taxes? The Oxfam report Releasing the Hidden Billions for Poverty Eradication contains several recommendations. The international nature of transnational corporations and international investors makes it difficult to say where many corporations or individual are actually based and therefore where their tax liabilities lie. Where it is unclear, nations need to work together to define common standards for the tax base. International cooperation is needed to prevent individuals and companies from taking advantage of the different rules in different countries. A multilateral agreement or treaty is needed to ensure that multinational corporations pay taxes in all the countries where they do business.xxv Such cooperation is also needed to find ways to facilitate the recovery and repatriation of funds that have been illegally appropriated from low-consumption countries.xxvi Perhaps more simple would be to advocate for some sort of multilateral agreement to allow countries to share information on tax collection in order to reduce tax avoidance and evasion.68 I have been personally involved in the negotiation of an international treaty (on tobacco control). I helped lobby for its ratification and implementation in one country, and xxiv Perhaps not literally: those at the very top do inhabit a separate universe far removed from such realities, but they also represent a tiny portion of the population. These are the ones, described by Paul Krugman, for whom $11,000 a night hotel suites are being built. The most colourful historical depiction may be by Thorstein Veblen in his classic The Theory of the Leisure Class, published in 1899. xxv Tax havens and tax evasion contribute to budget constraints in the high-consumption countries as well. In the United Kingdom, for example, tax evasion amounts to many billion pounds each year, contributing to budget shortfalls. The underpayment of tax in the United Kingdom is carried out through complex and secretive, yet legal, manoeuvres. “Firms' secret tax avoidance schemes cost UK billions.” The Guardian, 2 February 2009. xxvi According to the Oxfam report, “It has been estimated that around US$55 billion was looted from Nigerian public funds during the Abacha dictatorship. To put the figure in perspective, the country is today blighted by an external debt burden of US$31 billion. Northern governments … create incentives for corruption by failing to deal effectively with tax havens and other tax loopholes.”

BEYOND APOLOGIES

have followed the efforts of advocates in other countries. I know how extraordinarily difficult and time-consuming treaty negotiations and implementation can be. Nevertheless, the results would certainly compensate for the effort. Activists tired of seeing ridiculously low government health and education budgets, or slashes in the number of government workers because of the lack of funds to pay them, need to raise more attention to the issue of tax avoidance and evasion, and work to make taxation policies more transparent. Given the importance of corporate image, brand names, logos, and labels, such specific attacks might prove to be effective at shaming corporations into paying (at least some of their) taxes or at convincing consumers to boycott their products. One could even have a bit of fun in doing so. For example, guerrilla-type demonstrators could pop up in front of stores, targeting certain brands, saying “I’ll buy so-and-so’s products when they start paying taxes.” Protesters could also hand out postcards at public places to try to convince consumers to send them to corporate headquarters with the same message: “I’ll buy your products when you pay your taxes.” Those interested in taking on the extremely important issue of military spending can give support to the global Arms Trade Treaty (ATT), which entered into force on 24 December 2014. According to Amnesty International’s blog, the global arms trade is worth $60 billion a year. The Arms Trade Treaty seeks to keep arms out of the hands of those who abuse human rights. The treaty should prevent the transfer of arms where they are likely to be used to commit genocide, gender-based violence, or to aid in forcibly recruiting children to serve in armed conflict.69 The treaty is only one part of a bigger puzzle, though, as weapons kill not only directly but also through the diversion of funds from health care, education, and nutrition. It will not be easy to convince governments to change their spending priorities. Advocates need a variety of lobbying tools and much publicity.xxvii Involving the media will generate broader coverage, highlighting the issues for both policymakers and the public. Good research – often quick, and always targeted and policyfocused – will help to counter industry claims, present the case, and influence government officials. Public support is also critical, and can be generated and funnelled through public rallies, protests, demonstrations, letter-writing campaigns, and so on.  xxvii Lobbying could be defined as shaming governments into doing the right thing, in part by shining a strong light on some of their less savoury activities, and then giving them credit for the good actions that they undertake in response to criticism. Corporations, of course, prefer to do their lobbying in secret.

MYTH#3: ECONOMIC GROWTH IS NECESSARY

Towards a Better Way Part II: Achieving Prosperity through ‘Local Money’ “[Local currency] is a very good idea because we need to make people realise we can all buy and sell something; we don't only need Euros.” — Mark Lown70

* * * Most of us spend more time worrying about how to earn money and dreaming about how to spend it than we do in thinking about the money itself. While money traditionally consists of coins and paper certificates issued by a government, most financial transactions today, certainly the large ones, are electronic and involve no exchange of actual money at all. While historically coins have had an intrinsic value (gold or silver) and the notes have corresponded to reserves of precious metals, this is no longer true. Whatever its form, money serves both as a straightforward medium of exchange for the trade in goods and services and as a means of storing wealth. However, if too much of it gets stored by too few people, the ability of the rest to use money to facilitate their transactions is hampered. Money also has limitations as a repository of wealth. The value of any national currency is subject to many factors outside of the control of the citizens, such as international currency trading, destabilization of the government, and inflation. Those who store their wealth at home may overnight find themselves sitting on a useless pile of notes. The residents of a small village can see their local economy wiped out because people far away have gambled on the national currency and caused it to lose its value. Inflation too can wipe out a lifetime of savings or render a fixed income valueless. Sudden deflation tends to affect the poor and middle class far more than the rich, as the rich are more likely to store their money in foreign bank accounts with a more secure currency and to keep their wealth in forms other than cash. Although elsewhere in this book I argue that one cannot define poverty by how many dollars a day people live on, the lack of money certainly can create and perpetuate conditions of want. Money is not just the reward for economic activity; it is sometimes a necessary precondition thereof. A small-scale farmer (such as Prakash) may have plenty of land but needs to buy some seeds and hire some labour to help him farm. The local shopkeeper sells seeds. Plenty of local people would be happy to work for pay. However, if the farmer has no money, he can access none of those services. If all farmers in a given community similarly lack money, then the shopkeeper cannot sell the seeds and the labourers can find no work. Since the labourers cannot work, they cannot afford to purchase other goods in the shop. And, since the farmers cannot farm, locally-available food is in short

BEYOND APOLOGIES

supply. Local skills and assets such as buildings, machinery, and land go idle and local needs remain unmet. Where local needs and local resources cannot be brought together, everyone suffers. The obvious fact that the poor lack money is thus true in a deeper sense as well: lack of money not only defines but also perpetuates poverty, which is part of the reason why it is so difficult for the poor to work their way out of poverty.xxviii What then is the solution? Rather than always relying on national currencies traded in international financial markets, communities can create their own form of local currency. Local currency can be denominated in terms of money, time, or any other form of goods or services. It can be rated at the same value as the national currency, or in some other form. A remarkable aspect of money denominated in hours is that everyone’s inputs are valued at the same rate, whether they be a janitor or a lawyer, a kindergarten teacher or a software designer. This is putting ideas of equity into practice. Importantly, local currency systems do not involve interest payments and thus avoid the need for the economy to grow to repay loans. Local currencies have a rich history. The Labour Exchange Bazaar in London, established by social reformer Robert Owen, operated from 1832 to 1834 and was a system in which people exchanged their labour for ‘National Equitable Labour Notes’. Owen brought in raw materials that the labourers converted to goods in exchange for the notes. While the goods could be sold for the national currency (with a percentage kept to operate the system), the Labour Notes could be used to buy food from local shops as well as additional raw materials. The system resulted in long-unemployed workers re-engaging in paid work and a decline in unemployment.71 The British island of Guernsey also used local currency, first from 1815 to 1836 and again from 1914 onward. In order to revive the war-torn economy, local government officials issued local, interest-free notes that paid previously unemployed workers to improve roads and repair buildings. The workers were then able to buy goods from local shops, and the shops could buy and sell more locally produced goods. This helped to shift the economy from one of depression to one of prosperity.72 In the Austrian Worgl experiment of 19291934, the mayor created ‘Tickets for services rendered,’ initially used to pay wages for public works. The tickets were usable at local businesses. The tickets decreased Other reasons include a number of structural barriers to upward movement, including racism; the lack of decent schools, health care, mentors and other support for the poor and minorities; the unavailability of decent jobs; and the difficulty in remaining optimistic when surrounded by despair. And the biggest reason of all: too much for the few means not enough for everyone else. xxviii

MYTH#3: ECONOMIC GROWTH IS NECESSARY

in value by one percent each month, but could be ‘revalued’ with stamps purchased from local authorities; the profits were used for poor relief. As nobody wished to carry a devalued note, the notes rapidly circulated; it was thus possible to avoid hoarding or accumulation in the hands of a few. Rapid and regular circulation of the notes created a healthy economy in which many people participated. The system was so popular that it spread and prosperity grew until the Austrian national bank, threatened by the system’s lack of interest rates, launched a legal challenge against it.xxxix Unfortunately, in this case the bank won.73 More recently, when Argentina’s economy collapsed in 2000-2003, trade continued and people were able to make money and access needed goods and services,partly thanks to the rapid rise of various local currencies. While there were many problems with the local currencies that people invented, they were critical for survival, and as local currency expert Peter North writes, they “helped literally millions of Argentines to get through an awful financial crisis.”74 Even more recently, at least one town in Greece is weathering the financial downturn in part through a local currency system. People can gain credits by offering goods or services, and then use them to purchase other goods and services.75 * * * Local currencies are not just for times of crisis. Their use is widespread. According to the Complementary Currency Resource Center, local currencies are used today in the following countries: Argentina, Australia, Austria, Belgium, Brazil, Canada, China, Colombia, Croatia, Czech Republic, Denmark, El Salvador, France, Germany, Greece, Honduras, Hong Kong, Hungary, Indonesia, Italy, Japan, Kenya, Mexico, Netherlands, New Zealand, Papua New Guinea, Poland, Portugal, Russia, Scotland, Senegal, Slovakia, South Africa, South Korea, Spain, Sweden, Switzerland, Thailand, Ukraine, United Kingdom, the United States, and Venezuela. Any individual country can have many systems: there are 250 in El Salvador and almost 32,000 in South Africa.76 * * * Because local currency (as opposed to international alternative currencies such as bitcoin) has value only in the community that issues it, people use it at local businesses, thus helping to deter the gravitational pull of money upwards (and outwards). It can prevent speculation and trading in the means of exchange, thus ensuring a more stable currency and economy. It can also deter hoarding, by being designed to ‘rust’ (‘demurrage’ is the technical term) that is, lose its value over time. This encourages the frequent exchange of notes, which in turn stimulates the The Guernsey experiment also threatened the banks, which objected to low or no interest rates on the notes. In this case, attempts by the banks to stop the experiment failed and the Guernsey pound is still in use.

xxxix

BEYOND APOLOGIES

local economy and fosters greater local wellbeing.xxx Local currencies do have limitations. They work best in small, tight-knit communities in which people are committed to their success. They are a piece of the puzzle, not a complete solution in themselves. Since their purpose is circulation rather than storage, they cannot act as savings accounts, and their use is limited to those who accept them. However, a local currency helps to ensure that all people in the community with goods and services to oﬀer can participate in the local marketplace, and that all can avail themselves of those goods and services. Since the community issues the ‘money’, it can print or issue as much as is needed. History suggests that local currencies would be far more widespread if it were not for the objection of conventional banks, which obviously do not approve of the use of money that does not bear interest. In some jurisdictions, it is actually illegal to make non-oﬃcial currency. However, according to local currency expert and Professor Jem Bendell, Is prosperity without economic growth possible? Yes, but only if we transform monetary systems. Is there a way for businesses to thrive with an alternative monetary system? Yes, as more credit would go to productive economic activity not speculation. Whether in business, investment, philanthropy, or politics, there are few more important, less understood and less pursued objectives today than monetary reform. It is time to direct more of our time and resources to the underlying causes of our multiple crises, and swiftly learn about the pros and cons of alternative systems.77

A small amount of ‘rust’ can prevent hoarding without discouraging people from accepting bills right before they expire; the rust only becomes signiﬁcant if notes are kept for a long time.

xxx

MYTH#3: ECONOMIC GROWTH IS NECESSARY

Notes Paul Ekins, ed. The Living Economy: A New Economics in the Making (London, New York: Routledge and Kegan Paul, 1986). 2 Richard Heinberg, The End of Growth: Adapting to Our New Economic Reality (Gabriola Island, BC, Canada: New Society Publishers, 2011). 3 Bob Herbert, “Losing Our Way,” The New York Times Opinion Pages, 25 March 2011. 4 Joshua Holland, The Fifteen Biggest Lies About the Economy and Everything Else the Right Doesn’t Want You to Know About Taxes, Jobs, and Corporate America (Hoboken, New Jersey: John Wiley & Sons, Inc., 2010). 5 Paul Buchheit, “Five Facts about America’s Pathological Wealth Distribution,” Common Dreams, 3 December 2012. 6 Leslie Patton, “McDonald’s $8.25 Man and $8.75 Million CEO Shows Pay Gap,” Bloomberg News, 12 December 2012. 7 National Coalition for the Homeless, “How Many People Experience Homelessness?” http://www.nationalhomeless.org/factsheets/How_Many.html accessed 25 August 2014. 8 Carol Morello, “About 44 Million in U.S. Lived Below Poverty Line in 2009, Census Data Show,” http://www.washingtonpost.com/wp-dyn/content/article/2010/09/16/ AR2010091602698 .html accessed 25 August 2014. 9 E.F. Schumacher, Small is Beautiful: A Study of Economics as If People Mattered (London: Vintage Books, 1993). 10 John Helliwell, John, Richard Layard and Jeﬀrey Sachs, ed., World Happiness Report (New York: Earth Institute, Columbia University, 2012). 11 John Perkins, Confessions of an Economic Hit Man (San Francisco: Berrett-Koehler, 2004). 12 Barbara Kingsolver, Animal, Vegetable, Miracle (New York: HarperCollins, 2007). 13 Alexander Eichler, “Hunger, Food Insecurity Cost The Country $167 Billion Every Year: Study,” The Huﬃngton Post, 10 June 2011. 14 World Health Organization, “Obesity and Overweight,” Fact sheet N°311, updated March 2013 (Geneva: WHO, 2013). 15 Claire Provost, “MDG Target to Halve Prevalence of Hunger Within Reach, Says UN,” The Guardian, 9 October 2012. 16 Environment News Service, “One-Third of World's Food Lost or Wasted,” www.ens-newswire.com/ens/may2011/2011-05-12-02.html accessed 25 August 2014. 17 Heinberg, The End of Growth. 18 Nathanial Gronewold, “New School of Thought Brings Energy to 'the Dismal Science,” The New York Times, 23 October 2009. 19 Gronewold, “New School of Thought.” 20 Heinberg, The End of Growth. 21 Kenneth E Boulding, “The Economics of the Coming Spaceship Earth,” 1966. http://www.ub.edu/prometheus21/articulos/obsprometheus/BOULDING.pdf accessed 26 August 2014. 22 Personal communication with Kalpona Akter, garment worker organizer, Dhaka, December 2013. 1

BEYOND APOLOGIES

M. Bari and D. Efroymson, Detailed Area Plan (DAP) for Dhaka Metropolitan Development Plan (DMDP): A Critical Review (Dhaka: WBB Trust, 2009). 24 “Population and Energy Consumption,” World Population Balance: http://www.worldpopulationbalance.org/population_energy accessed 8 January 2015. 25 United Nations Development Programme, Summary Human Development Report 2011, Sustainability and Equity: A Better Future for All (New York: UNDP, 2011). 26 Jared Diamond, “What’s Your Consumption Factor?” The New York Times, 2 January 2008. 27 Diamond, “What’s Your Consumption Factor?” 28 Edward Wong, “Air Pollution Linked to 1.2 Million Premature Deaths in China,” The New York Times, 1 April 2013. 29 UNDP, Summary Human Development Report 2011. 30 Oswaldo de Rivero, The Myth of Development: The Non-Viable Economies of the 21st Century. 2nd impression (London: Zed Books, 2003). 31 Joe Nocera, “Does Brazil Have the Answer?” The New York Times online, January 20, 2014. http://www.nytimes.com/2014/01/21/opinion/nocera-does-brazil-have-the-answer.html 32 Ron Synovitz, “Russia Has Highest Level of Wealth Inequality,” Radio Free Europe, October 10, 2013. 33 Tom Balmforth, “Divide Between Rich and Poor Increases in Russia,” Telegraph, 2 January 2013. 34 Planning Commission, National Human Development Report (Delhi: Government of India, 2001). 35 Jean Drèze and Amartya Sen, “Putting Growth in Its Place,” Outlook India, 24 November 2011. 36 United Nations University, Greater Access to Cell Phones than Toilets in India: UN (London& UN Secretariat, New York: United Nations University, 14 April 2010). http://unu.edu/media-relations/releases/greater-access-to-cell-phones-than-toilets-in-india. html 37 In the graph, wealth control figures are taken from James B. Davies, Susanna Sandström, Anthony Shorrocks, and Edward N. Wolff, The World Distribution of Household Wealth, Discussion Paper No. 2008/03 (New York: United Nations University, 2008);poverty figures are taken from the Central Intelligence Agency, The World Factbook, https://www.cia.gov/library/publications/the-world-factbook/fields/2046.html accessed 26 August 2015 and World Bank, World Development Indicators, http://databank.worldbank.org/data/home.aspx accessed 26 August 2015. It is important to note that if international poverty figures were used, rather than national figures, the poverty levels in most of the countries included here would be much higher. 38 Heinberg, The End of Growth. 39 Goodreads, “Philip Slater Quotes,” http://www.goodreads.com/quotes/188845-our-economy-is-based-on-spending-billions-to -persuade-people, accessed 19 August 2014. 40 Paul Buchheit, “Five Facts about America’s Pathological Wealth Distribution,” Common Dreams, 3 December 2012. 23

MYTH#3: ECONOMIC GROWTH IS NECESSARY

Jody Heymann, Forgotten Families: Ending the Growing Crisis Confronting Children and Working Parents in the Global Economy (Oxford: Oxford University Press, 2006). 42 Richard A. Easterlin, “Will Raising the Incomes of All Increase the Happiness of All?” Journal of Economic Behavior and Organization, Vol. 27 (1995): 35-47. 43 Easterlin, “Raising the Incomes.” 44 Easterlin, “Raising the Incomes.” 45 Helliwell et al., World Happiness Report. 46 Schumacher, Small is Beautiful. 47 Helliwell et al., World Happiness Report. 48 Data360, “Average Water Use Per Person Per Day,” http://www.data360.org/dsg.aspx?Data_Set_Group_Id=757 accessed 25 August 2014. 49 Diamond, “What’s Your Consumption Factor?” 50 World Population Balance, “Population and Energy Consumption,” http://www.worldpopulationbalance.org/population_energy, accessed 5 Feb 2013. 51 Diamond, “What’s Your Consumption Factor?” 52 Hannah Arendt, Responsibility and Judgment (New York: Schocken Books, 2003). 53 James Sherk, “Technology Explains Drop in Manufacturing Jobs,” The Heritage Foundation, 12 October 2010. 54 David C. Korten, When Corporations Rule the World, 2nd ed. (Bloomﬁeld, Connecticut and San Francisco:: Kumarian and Berrett-Koehler, 2001). 55 James K. Galbraith, The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too (New York: Free Press, 2009). 56 Ekins, The Living Economy. 57 Schumacher, Small is Beautiful. 58 Nocera, “Does Brazil Have the Answer?” 59 Richard S Cooper, Joan F Kennelly, and Pedro Orduñez-Garcia, “Health in Cuba.” International Journal of Epidemiology 35.4 (August 2006): 817-824. doi: 10.1093/ĳe/dyl175 The authors mention that “Despite occasional ‘discovery pieces’ the biomedical literature in English has been almost entirely silent on the Cuban experience and US government policy temporarily forbade publication of articles from Cuba by US journals or their foreign subsidiaries.” 60 “…a study tour/conference was held in Havana in March 2000, attended by over 100 UK doctors including Department of Health oﬃcials, the President of the Royal College of General Practitioners and several senior academics, including Chairs of Primary Care Groups. This visit has generated a further series of contacts and in October 2000 the UK hosted a visit by the Vice-Minister of Health who was received by our Under Secretary of State for Health. A further study tour/conference is planned for April/May 2001 and numerous individual exchange visits have been organised including ‘twinning’ of health centres in the UK and polyclinics in Cuba.” Select Committee on Health Appendices to the Minutes of Evidence, Appendix 60, Memorandum by Professor Patrick Pietroni (PH 97), “Cuban Health Care Systems and its Implications for the NHS Plan.” 61 See, for instance, the International Planned Parenthood Federation, http://www.ippf.org/en/Resources/UN+statements/Commission+on+Population+and+Dev elopment+on+its+41st+Session.htm, accessed 24 July 2011. 41

BEYOND APOLOGIES

Galbraith, The Predator State. Nairaland Forum, “Ridiculous Facts About How Rich Bill Gates Is,” http://www.nairaland.com/1580059/ridiculous-facts-how-rich-bill accessed 26 August 2014. 64 Luisa Kroll and Kerry A. Dolan, “The Richest People on the Planet 2013,” Forbes, 25 March 2013. 65 Oxfam, Tax Havens: Releasing the Hidden Billions for Poverty Eradication (London: Oxfam Great Britain, 2000). 66 Oxfam International, “Tax on the ‘private’ billions now stashed away in havens enough to end extreme world poverty twice over.” 22 May 2013. 67 John Christensen, “Dirty Money: Inside the Secret World of Oﬀshore Banking,” in A Game As Old As Empire: The Secret World of Economic Hit Men and the Web of Global Corruption, ed. Steven Hiatt (San Francisco: Berrett-Koehler, 2007). 68 Oxfam, Tax Havens. 69 “Fact vs. Fiction: Arms Trade Treaty and Gun Ownership in the U.S.” posted 19 July 2012. 70 Mark Lowen, “Greece Bartering System Popular in Volos,” BBC News, 11 April 2012. 71 Michael Linton, Shann Turnbull, and David Weston, “Financial Futures,” in Ekins, ed., The Living Economy. 72 Linton, Turnbull, and Weston, “Financial Futures.” 73 Linton, Turnbull, and Weston, “Financial Futures.” 74 Peter North, Local Money (Devon, England: Transition Books, 2010). 75 Mark Lowen, “Greece Bartering System Popular in Volos,” BBC News, 11 April 2012. 76 Complementary Currency Resource Center, “World Map of Complementary Currency Systems,” http://www.complementarycurrency.org/ccDatabase/maps/worldmap.php accessed on 5 August 2014. 77 Jem Bendell, “Trading without Money? Why a New System Can Address the Economic Spiral,” The Guardian, 12 March 2013. 62 63

MYTH #4: The BWI Seek Primarily to Alleviate Poverty “… it was seldom that the money we were providing for development ever accomplished anything of substance that truly beneﬁted the poor. Yet year after year, and despite glaring evidence to the contrary, the [World] Bank would produce glowing reports of success in one sector after another, in one country after another, as its managers sought to protect themselves from criticism.” – former World Bank insider Steve Berkman1

 The Origins and Evolution of the Bretton Woods Institutions No discussion of global economic issues is complete without mentioning the Bretton Woods Institutions (BWI): the World Bank (originally known as the International Bank for Reconstruction and Development), the International Monetary Fund (IMF), and the General Agreement on Tariﬀs and Trade (GATT). After operating for nearly ﬁfty years, GATT became, in 1995, the World Trade Organization (WTO).i However much animosity they generate at present, these institutions have a reputable history. By the end of World War I, Germany’s economy and infrastructure were shattered. Other countries – especially those that had fought against Germany – refused to provide rebuilding assistance to the German government, preferring instead to punish the enemy and teach it a lesson. The world did indeed learn a lesson: that devastated countries easily become prey to totalitarian rulers. Following the Second World War, world leaders better understood the need to avoid taking this punitive approach, and there was consensus for creating global cooperation for economic stability. In July 1944, representatives of forty-four Allied countries met for three weeks in Bretton Woods, New Hampshire.ii Their goal was to develop an international system that would stabilize economies and facilitate international trade after the war. In spite of the number of countries attending the conference, however, the participants seriously considered proposals from just two countries, the United States and the United Kingdom. Key delegates included British economist John Maynard Keynes, American Treasury Secretary Henry Morganthau, and his chief economic advisor, Harry Dexter White. According to the Bretton Woods Project website, In his opening speech at the Bretton Woods conference, Henry Morganthau said the ‘bewilderment and bitterness’ resulting from the Depression became ‘the breeders of Not to be confused with the more respectable World Toilet Organization, which has the misfortune of sharing this blighted acronym. ii The meeting is formally known as the United Nations Monetary and Financial Conference. i

101 BEYOND APOLOGIES fascism, and ﬁnally, of war’. Proponents of the new institutions felt that global economic interaction was necessary to maintain international peace and security. The institutions would facilitate, in Morganthau's words, ‘[the] creation of a dynamic world community in which the peoples of every nation will be able to realise their potentialities in peace’.2

Originally, the conference attendees established the World Bank to lend money to countries for reconstruction and development. They designed the IMF to look after the stability of exchange rates, and they created the GATT to work on reducing tariffs to facilitate international trade. At the time, stability efforts included enabling IMF member states to control their capital flow; that is, control the flow of money in and out of their countries so that currency or other speculators could not undo the stability that the BWI institutions sought to create.3 The modern face of the BWI Over the course of their history, the Bretton Woods Institutions have strayed far from their original purposes. The most prominent policy shift came in the 1980s, during the Reagan-Thatcher era, when the institutions’ focus turned to ensuring that low-consumption countries would repay the loans made by highconsumption countries.iii This was done, in part, by tying loans to the implementation of ‘structural adjustment’ policies, which were designed to make the borrowing countries’ economies more market-oriented. This led, in turn, to the application of a number of very unpopular and heavily criticized ‘free-market’ policies that continue to be pushed onto vulnerable countries. The World Bank continues to make loans to the governments of low-consumption countries. Rather than supporting the provision of basic goods and services that would benefit the poor populations of these countries, however, the Bank now more often earmarks conditional loans for the development of environmentally damaging infrastructure such as dams, large highways, and heavily polluting industries. The IMF, in turn, has transitioned from its limited focus on the stability of exchange rates to pushing for the implementation of specific monetary policies, including policies that weaken the ability of governments to limit speculative investment. Together, the IMF and the World Bank press debtor countries

This shift began in the 1950s, when the IMF and the World Bank began to apply conditions to their loans in earnest. In the 1980s, changes in American monetary policies ensured that the 'tying of aid' would beneﬁt the loaning countries. Countries loan money directly as well as via the World Bank, Asian Development Bank, other regional banks, and their own Export Credit Agencies (ECAs).

iii

MYTH#4: THE BWI SEEK TO ALLEVIATE POVERTY

102

to enact policies that actually harm the poor, including implementing tax breaks for corporations and user fees for health services and education. Despite being separate institutions, the IMF and the World Bank typically demand the same conditions for their loans, particularly the privatization of government services and industry. According to a report issued by the European Network on Debt and Development (Eurodad),iv the current similarity between the IMF and World Bank “reveals a worrying lack of division of roles and responsibilities between the two institutions.”4 The conditions imposed by the World Bank and IMF on their loans and other support were called ‘structural adjustment programs’ until that term became so widely unpopular that the terminology – though not the practices associated with it – was changed. Loan conditions typically include drastic reductions in government social spending during times of crisis, the firing of public sector employees, the floating of interest rates, the lifting of tariffs on imports, trade liberalization, and pressure to privatize such government enterprises and services as banks, electricity, water, and telecommunications. Eighteen of the twenty countries that Eurodad studied had privatization-related conditions attached to their loans, and the average number of conditions per loan actually rose from forty-eight in 2002 to sixty-seven in 2005. But sixty-seven conditions is just the average. Uganda, with almost one-fourth of children under age five malnourished, had almost two hundred conditions attached to the financing it received from the World Bank in 2005. In the face of the evidence that these conditions are counterproductive, the United Kingdom and Norway no longer tie their development loans to such conditions, but the World Bank and IMF (and many other donor countries) continue to do so.5 * * * One of the more absurd conditions put on the Ugandan government was that it “review and approve its school sports policy for tertiary schools.”6 * * * It is reasonable, at least in the abstract, to justify loan conditions. A loan, if misspent, will do little good. Nor will assistance given in times of crisis be useful if the government is grossly mismanaging its economy. But the conditions imposed by the World Bank and IMF are precisely those that are most likely to prolong rather than quickly end an economic crisis, as they are the policies that are most likely to increase suffering among the lower and middle classes and to Eurodad is a network of forty-eight NGOs from nineteen European countries that addresses “issues related to debt, development finance and poverty reduction.” See http://www.eurodad.org

103

BEYOND APOLOGIES

increase profits among the rich. Where the World Bank and IMF have successfully imposed these loan conditions, they have caused so much devastation among both the poor and the middle class that they have proved to be wildly unpopular. What about the GATT? While its original mission was to reduce tariffs in order to facilitate international trade, its successor, the WTO, has moved far beyond that original agenda.v WTO now looks less at global trade as a whole and more at domestic laws in member countries that may in any way restrict international trade. These laws include protections for workers’ rights, the environment, or a safe food supply. What this means in practice is that any WTO member country – or, in some cases, any corporation based in a member country – can challenge a domestic law of another member country by claiming that the said law deprives it of actual or potential economic benefits. When such challenges occur, the rules stipulate that the cases be tried not before local courts but before international tribunals composed of private-sector lawyers. If the challenging country or corporation wins – and experience with previous free trade agreements shows that they often do – then the losing country’s taxpayers are expected to pay compensation, even in cases where the business conduct of the winning country or corporation has been shown to cause severe damage to human health or the environment.7 Thus, under WTO rules, corporations gain standing equal to that of the signatory country’s government, while people and the environment lose whatever rights or protection they might have had. For example, the government of Venezuela was ordered to pay Exxon $1.6 billion for nationalizing oil in the country.8 In another example, Mexico was forced to pay $16.5 million to an American company (Metalclad Corporation) after a Mexican municipality refused to grant permission for the construction of a toxic waste facility until Metalclad had cleaned up a previous site.9 Power is with the profits, not the people; public health and other concerns are less important than the free flow of trade. The same principle applies to intellectual property rights, which the WTO also defends. When, for instance, the government of Vietnam decided to make AIDS treatment available for all those diagnosed with the disease, its biggest obstacle, according to my colleagues there, was the drug patents that made the medicines

Of course, the GATT/WTO has not pushed the tariff agenda in an equitable fashion, as it only addresses tariffs in low-consumption countries. “HIC tariffs on manufactured imports from developing countries are on average 4 times greater than those on manufactured imports from industrial countries.” “Trade liberalisation statistics,” http://www.gatt.org/trastat_e.html accessed 2 September 2014.

MYTH#4: THE BWI SEEK TO ALLEVIATE POVERTY

104

unaffordable. Corporations depend on government financial support to develop new pharmaceuticals, but once they patent the drugs, all the profits go directly to the corporation.vi The companies claim that drug prices need to be high to cover the cost of research and development, even when they spend little of their own money to develop the drugs for which they receive patents. Patenting life-saving medicines means that they remain unaffordable for many of those who need them. Taken together, the policies of the Bretton Woods Institutions reduce governments’ control over their own economies, prevent them from protecting local industry, the environment, and public health, and force them into international trade under unfair conditions. In pursuing these policies, the World Bank, IMF, and WTO have drifted far from their idealistic origins and have become institutions that reduce democracy, harm the poor, and benefit corporations. * * * How the World Bank Helps the Poor: In 2004, the government of Bangladesh decided to expand the number of major streets in the capital city of Dhaka on which it would ban bicycle rickshaws. The World Bank strongly supported the expansion. In the face of protests organized by my colleagues and myself against these bans, the World Bank claimed that the government had made the decision and the World Bank was only supporting it. Given that the World Bank had funded and provided consultants for a transport project that called for the bans, this seemed to be an unnecessarily modest statement of the Bank’s contribution! During a conference call, a World Bank transport official told me that if Bangladesh wanted to enter the twenty-first century, it had to get rid of the rickshaws. Obviously, the point of the ban was to leave more room on the roads for private cars, which in Bangladesh are only owned by the wealthy few. Pedalling rickshaws is a major source of income for the poor. They provide pollution-free and inexpensive transport, and so are often used by people of modest means. A study on the effects of banning them from one major street in Dhaka revealed that the ban led to as much as a forty-one percent decrease in wallahs’ incomes, despite the fact that they worked longer hours to compensate for losing a main route. Deterioration of the living conditions of the rickshaw wallah and their families included reduced food intake.10 Apparently the World Bank’s idea of helping the poor includes eliminating their jobs and allowing their families to sink into malnutrition. * * * A scientist working for the US Centers for Disease Control and Prevention on the development of tuberculosis drugs explained to me that the government pays for the drug research while allowing the companies to maintain the patent because they fear that otherwise the companies will not develop drugs for diseases that offer little potential for corporate profit. But as it is, there have been no new drugs for TB in decades and the existing ones cause many extremely unpleasant side effects. Surely a better system could be devised.

105

BEYOND APOLOGIES

What have been some results of BWI intervention? Whether or not they are aware of the BWI’s role in setting these policies, people in low-consumption countries regularly face the policies’ harmful impacts. The inner workings of the institutions, meanwhile, become clearer when a former insider reveals his own frustration with the policies of his ex-employer. One of the most famous of these insiders is former World Bank chief economist, Joseph Stiglitz. In his book, Globalization and its Discontents, and in various articles, Stiglitz criticizes the BWI and offers an agenda for change.vii Although Stiglitz tends to direct his anger primarily at the IMF, what he writes is also largely true of the World Bank. There are, of course, some good people working at these institutions who are trying to utilise their position to help those in need; good actions have resulted from some of the BWI programs. However, positive examples are virtually lost in the disasters that the BWI have helped to generate in country after country. A few examples follow. Argentina is a ‘poster child’ for how a country can see its economy destroyed by faithfully adhering to the policies prescribed by the BWI. Argentina experienced what Stiglitz calls “a vicious downward spiral of economic decline and social unrest.”11 As Argentina went through a major economic crisis between 1998 and 2002, the IMF told the government to cut its budget deficit from $5.3 billion (in 2000) to $4.1 billion by the following year. Later, the IMF ordered that the debt be eliminated. It also ordered a pay cut for already underpaid government employees and the firing of others, despite the fact that the unemployment rate already hovered around twenty percent. Finally, the IMF ordered that the government reduce expenditures for the poor. What did it tell the government to do with its savings? Pay interest on foreign loans. As a result, unemployment ballooned, production declined, and much of the middle class fell below the poverty line. By 2002, more than half of Argentines were poor, and one-quarter were destitute.12 That Argentina survived at all was due in part to the emergence of a range of local currencies to replace the by-then useless peso.viii

Many would say that Stiglitz does not go far enough in his criticism, but this is hardly surprising from a former insider; what is surprising is that he speaks out at all. Another well-known insider-turned-informer is John Perkins, a former consultant with ties to the World Bank. See Confessions of an Economic Hit Man (San Francisco: Berrett-Koehler Publishers, 2004). viii More discussion of local currencies is found in the Myth on Economic Growth; see especially Peter North, Local Money (Devon, England: Transition Books, 2010). vii

MYTH#4: THE BWI SEEK TO ALLEVIATE POVERTY

106

As in Argentina, so in Chile: similar policies were only stopped when, ironically, the murderous dictator Augusto Pinochet himself reversed course by restoring the minimum wage and bargaining rights of the unions, creating large numbers of government jobs, and nationalizing many banks.13 In Costa Rica, the interventions of the World Bank and IMF led to a shift in the economy from small farms to large estates (mega-farms) and exports. This caused the displacement of thousands of small farmers, an increase in the income gap between rich and poor, and more crime and violence – which in turn led to higher public expenditures on policing and security. The country became dependent on imports for basic food and, while foreign debt was supposed to decline, it actually doubled. Yet, according to the World Bank and the IMF, Costa Rica is a success story because economic growth has increased and the country can meet its growing debt service payments.14 Ecuador faced disaster when it liberalized its financial market under IMF pressure. The government lost its control over local banks, and an explosion of private debt and interest rates followed, helping to propel the country into crisis. This led the government to borrow $1.5 billion from the IMF. The loan came with 167 detailed conditions, such as increasing the price of cooking gas by eighty percent, eliminating 26,000 public sector jobs and fifty percent wage cuts for remaining workers, the transferring of ownership of its biggest water system to a foreign company, and giving British Petroleum rights to build and own an oil pipeline. Not surprisingly, when prices rose, riots ensued. The IMF-imposed conditions simply worsened the IMF-provoked crisis.15 Across all of Latin America, thanks in part to policies imposed by the IMF, economic growth declined nearly eight-fold from 1980 to 2000 as compared to the previous twenty years.16 Projects supported by the BWI resulted in the displacement of almost thirty million people in Brazil between 1960 and 1980, and the displacement of twenty million people over forty years in India. In 1989 alone, World Bank projects displaced or threatened the displacement of three million people. According to World Bank officials, there has been no Bank-funded project in which the relocated ever regained their previous standard of living.17 Indian writer Arundhati Roy describes how policies enforced by the BWI affect the most vulnerable groups in India: the indigenous and those of the lowest social caste. These vulnerable groups are regularly displaced to make room for dams and other large-scale industrial projects. Their dissent is forcibly silenced.ix Their

I was surprised, during a visit to India in early 2013, to notice that a protest involving a handful of people in a rural area was supervised by a far larger and well-armed contingent of police.

107

BEYOND APOLOGIES

situation is worsened when the government privatizes electricity and other utilities and services. Local farmers are impoverished when India bows to international pressure to import grains rather than allowing them to grow and consume local products.18 Farmers have also been obliged to use genetically modified seeds. The BWI heavily promoted the use of these seeds to local farmers as being profitable; more often, they ended up with debt that can never be repaid.19 One of the direct results of India’s adoption of the corporate/BWI model is an epidemic of suicides among the nation’s farmers. According to one estimate, the wave of suicides reached a quarter of a million between 1995 and 2010.20 It has been called “the largest wave of suicides in history.”21 The World Bank pressured the Egyptian government to privatize its water utilities for the sake of increased ‘efficiency.’ The government transformed public water utilities into corporations that were required to operate at a profit. These corporations raised the cost of water to pay for the required new infrastructure. The price of water in some parts of Cairo doubled within months of privatization. Citizens began to protest. Some had to obtain water from dirty canals because they could not afford the water coming out of their taps. The water company also diverted water from farming and fishing areas, sending it to wealthy resort communities.22 In Tanzania, the IMF and World Bank required the government to institute fees on previously free hospital visits, leading to a decline of over fifty percent in the number of patients treated in the capital’s three big public hospitals. The World Bank and IMF also ordered the Tanzanian government to charge school fees; as a result, enrolment dropped from eighty to sixty-six percent. Over fifteen years of BMI ‘assistance,’ literacy declined and abject poverty rose. Journalist Greg Palast cites a frustrated World Bank report as saying, “One legacy of socialism is that most people continue to believe the State has a fundamental role in promoting development and providing social services.”23 * * * From fighting wars to fighting poverty: not such a big leap? It is hard not to be suspicious of an institution which has had, among its presidents, the architects of two of the most infamous wars in recent history: the Vietnam War (Robert McNamara, 1968-1981) and the Iraq War (Paul Wolfowitz, 2005-2007). Mr. Wolfowitz was also a good friend of the most thieving leader in history, Indonesia’s Mohamed Suharto; yet Wolfowitz claimed to be fighting corruption while leading the World Bank.

MYTH#4: THE BWI SEEK TO ALLEVIATE POVERTY

108

A more recent World Bank president was Robert Zoellick (2007-2012). His claims to fame include pushing for the American invasion of Iraq, briefing Enronx on economic and political issues, promoting the Central American Free Trade Agreement despite the objections of labour, environmental, and human rights groups, and trying to oppose the European Union’s moratorium on the approval of new genetically modified crops.24 The current president, Jim Yong Kim, is the first Bank leader who does not come from the political or financial sector and who actually has experience dealing with health issues in low-consumption countries. Kim is also one of the co-founders (along with Paul Farmer and others) of Partners in Health, suggesting that at least he is well intentioned. The jury is still out on whether World Bank policies will improve under his leadership.25 * * * IMF policies also contributed to devastation in Russia following the collapse of the Soviet Union and its brand of state-controlled socialism. As the Soviet Union collapsed and Russia faced debts that it could not pay, it turned to the IMF for help. The IMF negotiated loans that led to notable changes. In the new, more capitalist system, the bread lines are gone; in their place are sparkling new shops that sell luxurious items. The stores are indeed well stocked now, but few can afford to purchase what they contain. Because the IMF ‘reformers’ only wanted economic growth in Russia and did not care about equality, the growth in wealth mostly benefited a few. According to Forbes, in 2007, Russians contributed more than ten percent of the world’s new billionaires (nineteen of 178 newcomers).26 Nor did the Russian economy boom as quickly as was expected. By August 1998, output had declined by almost half, and the percentage of people living in poverty had grown from two percent to more than forty percent. In the words of Stiglitz, Yes, the market economy can provide incentives for wealth creation. Unfortunately, under the … years of IMF programmes, the market economy – with high interest rates, illegitimate privatisation, poor corporate governance and capitalmarket liberalisation – provided only incentives for asset-stripping.27

Great news for the billionaires; not so great for everyone else. Although things have improved since 1998, in 2011 the government estimated that sixteen percent of the population was poor (near the line that demarcates physical survival); the actual figure may be much higher.28 Stiglitz claims that the key problem was the IMF’s refusal to devalue the currency; when that was finally done, local production soared as imports became unaffordable. In other words, it was only when the Enron is the American energy company that famously succeeded in fooling people for years about the extent of its operations while laundering money and fabricating its financial statements.

109

BEYOND APOLOGIES

Russians stopped listening to the IMF that their economy began to recover. History does indeed repeat itself: the IMF recently tried to impose the same disastrous policies on Greece that it had on Argentina. Alan Cibils, chair of the political economy department at the Universidad Nacional de General Sarmiento in Buenos Aires, went to Greece to share Argentina's experiences with the IMF. In an article about his visit, Cibils was quoted as saying “It just blew my mind that these policies that have failed catastrophically, repeatedly, are now being pushed on European countries.” The article goes on to note that “His message to activists was that ‘default is not only not the end of the world; default is the first step of your next stage. What's happening now is unsustainable. When the ECB [European Central Bank] and the French and German policymakers say a default would be a disaster, they're speaking on behalf of the financial industry.’”29 In country after country, year after year, the policies of the World Bank, the IMF, and the WTO aid transnational companies and harm the poor. The model of increasing international linkages, more rights for corporations, and a weakening of government controls over domestic economies have never helped a country and the vast majority of its citizens to grow wealthy. Quite the opposite. Countries experience economic success when their governments nurture local businesses, protect currency from speculation, and regulate the flow of money in and out of their country.xi Prior to World Bank and IMF interference, many low-consumption countries were socialist or had a strong welfare system in place. According to Greg Palast, in the years of strong national government control and extensive welfare schemes, “per capita income grew 73 percent in Latin America and 34 percent in Africa. By comparison, since 1980, the Reagan/Thatcher model has seen Latin American growth come to a virtual halt – growth of less than 6 percent over twenty years – and African incomes decline by 23 percent.” Nor has income been the only loser: “from 1950 to 1980, socialist and welfare statist policies added more than a decade of life expectancy to virtually every nation on the planet. From 1980 to today, life under structural assistance has gotten brutish and decidedly shorter.”30 External critics are not the only ones who claim that the policies of the BWI do little to relieve countries after financial crisis. According to David Korten, a World Bank report found that thirty-eight percent of Bank-funded projects completed in 1991 were failures – even when measured in purely economic terms and without taking Some countries have also gained wealth by exploiting other countries, e.g. through colonization and through unfair trade rules that give them low-cost access to mineral resources and agricultural products, but that is another story.

MYTH#4: THE BWI SEEK TO ALLEVIATE POVERTY

110

into account the impact on affected communities.31 Another World Bank study cited by Korten found that twelve of the twenty-five projects initially rated as successful turned out to be failures. The two figures combined suggest a success rate of only one-third, hardly a remarkable achievement given the money, power, and intellectual talent that exists within the Bank. Then again, it is hardly a problem for the Bank if a project fails, as in any case, the loan must be repaid. As Korten points out, the World Bank “bears no liability for its own errors.”32 Although this may be the least damning of the accusations made against the World Bank, a significant portion of its lending, possibly twenty percent, funds corruption. Steve Berkman, formerly a staff member of the World Bank, writes about his experience with loans to Africa: “I could come to understand that, in most cases, if you looked closely into Bank projects, you would find that they were more about the personal enrichment of government officials than about alleviating the poverty and deplorable living conditions of the average African citizen.”33 This corruption, he emphasizes, is not exceptional but rather standard practice: “…corruption has been the bedfellow of all Bank-funded projects I have encountered over the years.” Berkman also notes that “I have seen much more than I can squeeze into this brief chapter: millions of dollars for roads that could not be found, millions paid for the rehabilitation of infrastructure that could not be verified, millions to facilitate better economic policies, and millions to improve governance. All in the name of economic development. All in the name of alleviating poverty.”xii His allegations point to two main questions: why does the Bank, with all its power, remain relatively silent about rampant corruption? And how do the poor benefit when much of the Bank’s lending is simply stolen? Why would governments accept loans when the conditions make the cure worse than the disease? Unfortunately, countries cannot simply refuse to accept the conditions and turn to other lenders in time of need. Other lenders judge the credit worthiness of countries by the ratings assigned by the World Bank and the IMF. The World Bank and the IMF hold up the countries in which GDP is growing as role models to others – unless, of course, the economy grows by not following their advice.xiii These same institutions rate countries in terms of their worthiness Berkman’s words ring true to those of us who know that to obtain government contracts funded by the World Bank, one may be expected to part with a percentage; in fact, the usual line in some countries is “it isn’t important to do the work, but be sure you hand over the bakhsheesh.” Colleagues of mine who attempted to obtain contracts honestly quickly realized that it was a waste of effort. xiii China here is a tricky case; its GDP is increasing rapidly, but since China ignores the advice of the major international institutions, it is not necessarily used as a model. The IMF xii

111

BEYOND APOLOGIES

to receive loans based on whether or not they bow to the pressure to institute the policies advocated by the institution. If countries refuse to buckle under pressure, the IMF and World Bank can essentially blacklist the countries, making it impossible for them to receive the international loans that they need to pay their bills. Unreasonable as the loan conditions often are, governments pressed for cash may see no other option. Eurodad explains that nearly all official development donors/creditors (bilateral and multilateral) tie their development aid and debt relief to the presence of an IMF program. The IMF’s ‘gatekeeper’ role makes the conditions the Fund attaches to its program hugely potent. If a poor country does not fulfil the conditions that the IMF attaches to its lending, then not only does it forfeit IMF development finance, it will also potentially forfeit all other sources of much-needed donor finance.34

According to Global Exchange,xiv because of their sole focus on macroeconomic financial stability, the IMF and the World Bank have prioritized the wellbeing of the wealthy lenders and neglected those that they purport to help; in doing so, they “have created a human rights catastrophe.”35 Government leaders in lowconsumption countries who genuinely wish to improve the conditions of the poor find themselves in a fail-fail situation: they fail because they lack the funds to pay the bills, or they fail because loans come with conditions that benefit the wealthy and harm the poor. What do the policies say about the institutions? The World Bank’s slogan is “Working for a world free of poverty.” According to its website, “Our mission is to fight poverty with passion and professionalism.”36 But it is important to judge by behaviour, not by words. The pressures placed by BWI on governments to change the way that they manage their economies are limited in focus. The institutions push trade agreements, privatization, and reduced social spending.xv The IMF rejects high corpo-

objects because China ignores its advice; I object because the beneﬁts of the growth are so unevenly distributed and because much of the growth involves environmental devastation and ignoring workers’ rights. xiv Global Exchange is “an international human rights organization dedicated to promoting social, economic and environmental justice around the world.” See www.globalexchange.org xv Privatization is a mantra of all the international development banks. When I wrote a report for the Asian Development Bank about the condition of pedestrians in Dhaka, an ADB staﬀer with thirty years experience at the World Bank kept pushing the concept of

MYTH#4: THE BWI SEEK TO ALLEVIATE POVERTY

112

rate tax rates, claiming that they stifle innovation. It rejects high taxes on the rich, saying that they dampen incentive. The IMF also ignores land reform – despite its obvious potential to aid the poor – and financial sector regulation.37 However, the result of such policies that dismantle restrictions on the flow of capital in and, importantly, out of countries, can convulse entire national economies.xvi The IMF objects to food subsidies but welcomes the bailing out of banks. The policies of the IMF thus only make sense if one views the institution as serving the financial community rather than as working towards global economic stability.38 A simple explanation exists for the failure of the Bank to take serious measures to address corruption, and to continue doling out conditional loans despite their obvious failure at alleviating poverty. What if the point of the BWI never was to help the poor, but rather to tangle countries in a web of debt? The idea is not implausible. As economist, attorney and investigate journalist James S. Henry notes, “many projects seem to have been cooked up solely to justify the loans.”39 In other words, the whole process of providing conditional loans is simply a vicious cycle that ensures its own continuity to the benefit of the donor. Debt comes with high interest, so that the net flow of wealth is from the lowconsumption to the high-consumption countries. When one country is indebted to another, various favours can be extracted from it, such as accepting politically unpalatable ideas like joining in American President Bush’s ‘coalition of the willing’ during the Iraq War. Loans come with conditions that result in corporations gaining ever more power and profit while the masses are further impoverished and enfeebled. If the United States wishes to remain the major world power, one way to do so is to prevent other countries from becoming too wealthy or too independent. One of its tools of control is the World Bank, over which it exerts considerable influence. According to the Bank’s website, “As the only World Bank shareholder that retains veto power over changes in the Bank’s structure, the United States plays a unique role in influencing and shaping development priorities.”40 Proponents of public-private partnerships (PPPs). I ignored him. After I submitted the report, ADB gratuitously added a conclusion that promoted PPPs, despite their complete absence from the text of my report. I objected and they restored my original conclusion. xvi The resulting outflow of money can inflict poverty on millions of people, as happened in Asia in the 1990s, when “the Indonesian economy underwent a severe contraction and the number of people living in poverty doubled to forty million. In Thailand, the health budget was cut by almost one-third. Nearly three years on from the outbreak of the crisis, the economies of Thailand and Indonesia continue to struggle under the huge public debt burden that it created.” See Stiglitz, Globalization and its Discontents.

113

BEYOND APOLOGIES

the BWI argue that their prescriptions mean temporary punishment of the poor so that they can reap long-term benefits from economic growth; opponents say that the BWI push a recipe for increasing the number of billionaires and the power of the wealthiest at the expense of the masses. Or perhaps the BWI simply have a very different image of prosperity. To many people, prosperity includes a fairly even distribution of wealth. It includes thriving small, local, independent businesses. It includes a range of employment options, including part-time. It includes leisure time to enjoy all that cannot be purchased, and strong communities that promote collective wellbeing. While countries will of course remain connected, a healthy economy would be one that is self-sufficient where possible, growing much of its own food without chemicals or petroleum, providing transport with little use of fuel, and prioritizing health, education, and other basic needs over luxuries. Governments would have the right, with the involvement of their citizens, to pass and enforce laws meant to protect people and the environment from corporate harm. Basic wellbeing would be prioritized over the possibility of making fortunes, and internal trade would be favoured over international. The world dreamed of by the BWI, in contrast, seems to be one in which countries regularly import items that they used to produce themselves, paying for many of those imports through loans. In this world, multinational corporations control much of the economy; business profit is used to service interest payments on loans. Public services are run not by government but by corporations on a for-profit basis. Korten suggests a way of looking at the BWI which, extreme though it sounds, does jibe with reality: the World Bank provides the financing for large northernbased corporations to set up their export operations overseas. The IMF collects the debts owed to northern-based financial institutions (refuse to pay up and you will be blacklisted internationally). Finally, the WTO creates and enforces a corporate bill of rights that protects the world’s largest corporations against intrusion in their affairs by individuals, organizations, and democratically elected governments. That description is a far cry from their self-promotion as agencies eager for international financial stability and a world free from poverty, yet it matches their actions all too well.41 An even greater menace? Unfortunately, even if the World Bank closed and the IMF and WTO ceased to yield influence, campaigners would still have plenty of work to do. Export Credit Agencies (ECAs) dwarf, in size and possibly evildoing, even the World Bank and IMF. According to the non-governmental organization ECA WATCH, export

MYTH#4: THE BWI SEEK TO ALLEVIATE POVERTY

114

credit agencies “are public agencies and entities that provide government-backed loans, guarantees and insurance to corporations from their home country that seek to do business overseas in developing countries and emerging markets” including “in some of the most volatile, controversial and damaging industries on the planet.”42 Most high-consumption countries have at least one ECA that gives financial backing to risky projects, operating mostly in secrecy. ECA WATCH calls ECAs “the world's biggest class of public finance institutions operating internationally ...that fund more private-sector projects in the developing world than any other class of finance institution.” As a result, ECAs are now the largest debt holders of the low-consumption countries. Among the more recent entrants in the ECA field are the BRIC nations (Brazil, Russia, India, and China). According to American writer and lawyer Bruce Rich, in 2004 alone, ECAs “financed, guaranteed, and insured $788 billion worth of international trade and investment, of which longer-term loans and guarantees totalled about $76 billion.”43 They fund projects that even the World Bank will not touch, including extremely harmful environmental activities that greatly deteriorate the situation of an area’s residents.44 Examples of ECA-funded projects include the BakuTiblisi-Ceyhan (BTC) pipeline, considered the most controversial pipeline in the world. The pipeline places the power of corporations over national governments, allegedly violates European human rights law, and carries allegations of corruption, incompetence, and malpractice. Among those financing the BTC are European ECAs. European ECAs also fund fossil fuel projects, largely ignoring the potential for funding of renewable energy. Canadian ECAs have funded nuclear power in India and Pakistan. ECAs finance weapons and export them to lowconsumption countries. They have been shown to ignore human rights concerns, financing projects such as large dams that displace large numbers of people. They fund logging enterprises that result in deforestation. Since they do not fall under the purview of elected officials, ECAs undergo less scrutiny than any other international financing institution and yet they are guaranteed with taxpayer money.45 There is one big difference between ECAs and the BWI, however. ECAs are not able to blacklist countries or to demand long lists of conditions on their loans. 

115

BEYOND APOLOGIES

Towards a Better Way: Making Institutions Accountable to People “There is life after the IMF, and it’s a good life.” – former Argentine president Néstor Kirchner46

* * * There are several possible courses of action in the face of the BWI’s behaviour. One is to work towards the abolition of these institutions. In many cases, it seems likely that countries would be better off without any development assistance and BWI interference. Some in the so-called ‘anti-globalization’ movement (that is, those who would prefer that unaccountable international institutions not force their corporate policies on the world) would argue that local solutions are available that could more humanely and effectively reduce poverty than does reliance on external institutions. Such an approach is tempting. The BWI are indeed doing things very badly (or very well, depending on whether one looks at their stated or their implicit agenda). Nevertheless, the original reasons for their establishment have not yet vanished. Economic devastation can still lead to dangerous totalitarian policies. Given the existing high levels of inequity in wealth and other resources between countries, it seems possible that international cooperation, if sufficiently reformed, could bring about more benefit than harm. So how can we dramatically reorient the mission of the Bretton Woods Institutions? Jody Heymann argues that the World Trade Organization should be converted into an institution that fights not for corporate but rather for workers’ rights.47 With its global reach and nearly unlimited power, it could do tremendous good in advocating for decent minimum working conditions, rather than encouraging companies to compete in a race to the bottom. David Korten suggests other possible transformations: he would replace the World Bank with a UN International Insolvency Court, or UNIIC. The role of the UNIIC would be to discourage new debt and help resolve existing debt, in part by taking into account the wealth extracted from low-consumption countries by high-consumption countries without fair compensation. That is, debt could be paid off not just in cash but also through rebalancing accounts, taking into consideration the various forms of exploitation being practiced by the high-consumption countries. Korten also suggests that the IMF should be replaced by a UN International Finance Organization (UNIFO). UNIFO would not provide loans; rather, its mission would be precisely to prevent the need for such loans. UNIFO would seek to maintain balance and stability in international financial relationships by preventing the use of offshore banks and tax havens for money laundering and tax evasion, and by supporting domestic (as opposed to foreign) investment and encouraging self-sustainability. Finally, Korten would replace the WTO with a UN Organiza-

MYTH#4: THE BWI SEEK TO ALLEVIATE POVERTY

116

tion for Corporate Accountability (UNOCA). UNOCA would assist governments in establishing sensible, appropriate regulatory regimes to ensure the public accountability of international corporations and finance. That is, it would try to prevent the back-door dealing, secrecy, and concentrations of corporate power that can have a devastating effect on the livelihood of millions. It would seek to prevent unfair competition and to eliminate corporate subsidies, and would prohibit corporations from direct political lobbying of politicians. Finally, it would prohibit the patenting of genetic materials, life forms (such as seeds and medicinal plants), processes, and indigenous knowledge.48 Korten’s ambitions are by no means modest, but they are motivated by the idea that people need not only to sustain themselves but also to contribute to the life of the whole. This echoes one definition of sustainability: passing on to the next generation a planet that is in better shape than it was in when we inherited it. Short of drastically restructuring the institutions, countries might escape BWI control by creating Southern alliances. At the moment, left-wing governments are in power in several countries in Latin America. The United States can try to topple rulers (and frequently has) in one or two ‘renegade’ states, but not when so many populist leaders are in power. At that point, the United States can only accept them. Venezuela happens to have immense oil wealth, although previously that money only enriched the elite at the expense of the population. When Chávez was in power, he used the wealth both to improve the situation for the masses and to assist neighbouring countries to escape from BWI influence. Venezuela bought up loans in Argentina, Ecuador, and Bolivia, allowing them to rebuild their economies and eliminate their BWI debt.49 Brazil also decided to pay off its IMF debt early, and presidents throughout the region have been increasingly successful at winning elections based on platforms that reject the BWI.50 Regional cooperation could provide an alternative to the BWI model and the mainstream economic policies that it espouses. There is also another alternative, which various organizations, such as the Bretton Woods Project, are recommending: try to change some of the practices of the BWI. Concerned individuals and organizations can work for more transparency, accountability, and public input. They can work to shift the focus of these institutions from protecting and enriching corporations towards strengthening local economies. It is possible to protest specific World Bank projects and prescriptions. I mentioned earlier my personal frustration with the World Bank’s push to ban rickshaws in Dhaka. The noisy and colourful protests that my colleagues and I engaged in – using clearly documented evidence of the negative effects that rickshaw bans were having on people’s livelihood, mobility, and on traffic conges-

117

BEYOND APOLOGIES

tion – gained us entry into discussions of the ban. We were invited to a meeting and participated in a conference call. Finally, the World Bank representative in Bangladesh responded in written form to our criticisms, essentially agreeing that the World Bank should not play a role in supporting such bans. Our victory was not total. The Bangladeshi government has continued, though at a far slower pace, to impose the bans, and the World Bank has not kept to its word about ending its support of such bans. However, we did greatly limit the damage that would otherwise have occurred. We also learned an important lesson: sometimes being vocal about an issue can win you a seat at the negotiation table. In fact, making noise about BWI policies is an important first step. Newspaper coverage of the IMF and the World Bank tends to assume that their intervention is helpful, that loans are desirable, and that they are trying to make corrupt governments change their practices. Attacks on the WTO are treated as uninformed minority opinion. There need to be more and stronger voices criticizing these institutions. At the very least, more people must be vocal about their scepticism of the BWI’s intentions. One place to start is by learning more about the projects in your own country, or by focussing on an existing project. Some information is available from the World Bank website; other potential sources include World Bank watchdog organizations, both locally and internationally. External credit agencies are more difficult to track, but again watchdog organizations can help. Protests can lead to positive change. Notes Steve Berkman, “The World Bank and the $100 Billion Question,” in A Game As Old As Empire: The Secret World of Economic Hit Men and the Web of Global Corruption, ed. Steven Hiatt (San Francisco: Berrett-Koehler, 2007). 2 Bretton Woods Project, “What are the Bretton Woods Institutions?” http://www.brettonwoodsproject.org/item.shtml?x=320747 accessed 23 July 2011. 3 James K. Galbraith, The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too (New York: Free Press, 2009). 4 Eurodad, “World Bank and IMF Conditionality: A Development Injustice. http://www.eurodad.org/uploadedfiles/whats_new/reports/eurodad_world_bank_and_im f_conditionality_report.pdf accessed 14 July 2013. 5 Eurodad, “World Bank and IMF Conditionality.” 6 Eurodad, “World Bank and IMF Conditionality.” 7 See Public Citizen for information on treaties, for example the Trans Pacific Partnership: http://www.citizen.org/more-about-trans-pacific-fta. 8 “Venezuela Owes Exxon US$1.6 billion over Nationalized Assets.” Pan Am Post, October 13, 2014. 1

MYTH#4: THE BWI SEEK TO ALLEVIATE POVERTY

118

Public Citizen, “TPP’s Investment Rules Harm the Environment.” http://www.citizen.org/documents/TPP-and-the-environment.pdf 10 “After Study on the Impact of Mirpur Demonstration Corridor Project (Gabtoli-Russell Square),” report prepared for the Dhaka Transportation Coordination Board (DTCB). Dhaka: Human Development Research Centre, 2004. 11 Joseph E. Stiglitz, Globalization and its Discontents (New York: W.W. Norton & Company, 2003). 12 Alan B. Cibils, Mark Weisbrot, Debayani Kar, “Argentina since Default: The IMF and the Depression,” Center for Economic and Policy Research, 2002. http://www.cepr.net/documents/publications/argentina_2002_09_03.htm accessed 31 August 2014. 13 Naomi Klein, The Shock Doctrine: The Rise of Disaster Capitalism (New York: Picador, 2007). 14 David C. Korten, When Corporations Rule the World, 2nd ed. (Bloomfield, Connecticut and San Francisco: Kumarian and Berrett-Koehler, 2001). 15 Greg Palast, The Best Democracy Money Can Buy (New York: Plume Printing/Penguin Books, 2003). 16 Simone Baribeau, “Venezuela to Buy Argentine Bonds, Backs IMF Payoff.” VenezuelanAnalysis.com, 21 December 2005. 17 Korten, When Corporations Rule. 18 See, for example, Arundhati Roy, The Shape of the Beast (New Delhi: Penguin Books India, 2009). 19 Andrew Malone, “The GM Genocide: Thousands of Indian Farmers are Committing Suicide after Using Genetically Modified Crops,” Mail Online, 3 November 2008. 20 P. Sainath, “In 16 years, Farm Suicides Cross a Quarter Million,” The Hindu, 27 May 2012. 21 P. Sainath, “The Largest Wave of Suicides in History,” Counterpunch, 12 February 2009. Sainath gives a figure of 182,936 from 1997 to 2007. 22 Karen Piper, “Water Privatization Overlooked as Factor in Egypt's Revolt, Mubarak's Water Policies Contributed to the Arab Spring Revolution Last Year,” On the Commons, 10 August 2012. 23 Palast, The Best Democracy Money Can Buy. 24 Debra Efroymson, “Masters of War...and Finance, A Profile of the World Bank's Presidents,” Sustainable City News, 2011. 25 For a conservative viewpoint, see, for example, Richard Behar, “World Bank Spins out of Control: Corruption, Dysfunction Await New President,” Forbes, 27 June 2012. 26 Luisa Kroll and Allison Fass, ed., “The World’s Richest People,” Forbes 8 March 2007. 27 Joseph Stiglitz, “The Ruin of Russia,” The Guardian, 9 April 2003. 28 Vladimir Shabanov, “Poverty in Russia Grows Faster than Expected,” English Pravda, 4 July 2011. 29 Heather Stewart, “Defaulting Rescued Argentina: It Could Work for Athens Too,” The Observer, 10 July 2011. 9

119

BEYOND APOLOGIES

Palast, The Best Democracy Money Can Buy. Korten, When Corporations Rule. 32 Korten, When Corporations Rule. 33 Berkman, “The World Bank and the $100 Billion Question.” 34 Eurodad, “World Bank and IMF Conditionality.” 35 “How the International Monetary Fund and the World Bank Undermine Democracy and Erode Human Rights: Five Case Studies,” Global Exchange, September 2001. 36 The World Bank, http://www.worldbank.org/en/about 37 Stiglitz, Globalization and its Discontents. 38 Stiglitz, Globalization and its Discontents. 39 James S. Henry, “The Mirage of Debt Relief,” in Hiatt ed., A Game As Old As Empire. 40 The World Bank, “United States Overview,” http://www.worldbank.org/en/country/unitedstates/overview accessed 25 November 2014. 41 Korten, When Corporations Rule. 42 ECA Watch, “Issues,” http://www.eca-watch.org/issues accessed 25 November 2014. 43 Bruce Rich, “Exporting Destruction” in Hiatt ed., A Game As Old As Empire. 44 FERN, “Export Credit Agencies,” http://www.fern.org/campaign/trade-and-investment/export-credit-agencies accessed 14 August 2014. 45 ECA Watch, “Issues.” 46 Cited in Christopher Swann, “Hugo Chávez Exploits Oil Wealth to Push IMF Aside,” The New York Times, 1 March 2007. 47 Jody Heymann, Forgotten Families: Ending the Growing Crisis Confronting Children and Working Parents in the Global Economy (Oxford: Oxford University Press, 2006). 48 Korten, When Corporations Rule. 49 Asad Ismi, “July 2008: An Interview with Dr. Maria Paez Victor, South Americans Defy U.S. to Integrate their Economies,” Policy Alternatives, 1 July, 2008. 50 Baribeau, “Venezuela to Buy Argentine Bonds.” 30 31

MYTH #5:

Aid Alone, or as Currently Practiced, Signiﬁcantly Reduces Poverty “...as a broad rule countries determined to reduce poverty (China, Venezuela and Cuba are notable examples in today’s world) do so without aid; countries dependent on aid do not manage to end poverty.” – James K. Galbraith1

 Does Aid Bring Equality? The last section discussed the failure of the major international ﬁnancial institutions to deal with the problem of poverty. What about the whole concept of foreign aid? Can it help? Does it help? Are there alternatives? Globally, resources are distributed in an extremely unequal fashion. In some countries and regions, people enjoy immense material wealth while in others, daily life is hard and death comes early. Foreign aid – through which high-consumption countries give or lend resources such as money, food, emergency assistance, technical expertise, or military supplies to low-consumption countries – could be a humane and generous way to reduce global inequities.i The government of one country may give aid directly to another or via an international institution such as the World Bank. Aid may also consist of smaller grants, from a few thousand up to a million dollars or more, given by private foundations and governments, often directly to non-governmental organizations (NGOs), universities, and other agencies to implement speciﬁc projects and programmes. The focus in this section will be on loans to governments of tens or hundreds of millions of dollars, because they are the most visible and, in the end, the most problematic. Grants also can be problematic when used for projects that increase the wealth and power of corporations and do nothing for or harm the poor or the environment. There are occasions in which foreign aid provides great value for the recipient, especially in the case of a severe natural disaster with which the government is unprepared to cope, such as a devastating earthquake in Pakistan or Haiti, or a hurricane in Central America.ii Even in such cases, however, aid can have its

Technical assistance can be problematic if it includes giving advice on the creation of laws that give transnational corporations a greater foothold in the recipient country; it can of course also be beneficial where it leads to the enactment of better policies and infrastructure to help the poor and to preserve the environment. ii Hurricane Katrina in the American city of New Orleans is an example in which a highconsumption country could have benefited from the technical assistance offered by a low-consumption one, but the United States refused Cuba’s help. Theoretically, the United States should have been able to handle the disaster with its own resources, but the evidence i

121

BEYOND APOLOGIES

downsides. Outside food aid delivered during a drought can drive down food prices, thereby causing further harm to local farmers. Foreign aid workers can be a drain on existing resources, such as drinking water, and take needed jobs away from locals. Because of the complexities of getting aid to those who need it, aid often does not reach those who really require it. All too often, corrupt politicians siphon it off. Given all those problems, no matter how important short-term aid may be, the main long-term solution to disaster management is to improve the capacity of local governments to handle their own crises whenever feasible. At a global scale, aid can only reduce inequality between countries if the net flow of funds is from high-consumption to low-consumption countries. But that is not the case. A lot of aid is administered not as grants, but as loans. As discussed above, countries must repay those loans with interest even while suffering economically due to the numerous conditions that come attached to the loan. Corrupt leaders in recipient countries sometimes steal much of the funds for their own personal use; nevertheless, the country must still repay the loans.iii For example, Mobutu Sese Seko reportedly stole almost half of the $12 billion that Zaire (now the Democratic Republic of Congo) received in aid from the IMF during his thirty-two-year reign; consequently, the country, which never benefitted from the aid, remains deeply in debt. Likewise, Ferdinand Marcos stole about $10 billion from the Philippines and Mohamed Suharto embezzled about $35 billion in Indonesia, with much of those funds being foreign aid.2 * * * More money for servicing debt than for aiding the population: Mozambique has a population of about eighteen million people. Approximately nine million have no access to health care. Ten million lack access to safe drinking water. Every year, 190,000 children die before the age of five. Meanwhile, the country is $5.6 billion in debt. Payments on that debt often total more than its total export earnings. In 1995, Mozamsuggests otherwise. The American government had previously hobbled the Federal Emergency Management Agency (folding it within Homeland Security). Officials also assumed that everyone could flee the storm by car and drove empty buses out of the city; this costly error in judgement meant that many people without cars (mainly minorities) were stranded, and many of them perished. The whole episode also raises questions about the common practice of sending American technical expertise worldwide, as if the United States inherently has more knowledge than others do. iii Some corrupt leaders may even fear that ‘development’ will lead to a more empowered public that will, in turn, throw out the corrupt leaders; they thus have little incentive to use the aid in a way that will help the population. See Claudia R. Williamson, “Exploring the Failure of Foreign Aid: The Role of Incentives and Information,” The Review of Austrian Economics, published online: 11 July 2009.

MYTH#5: AID ALONE REDUCES POVERTY

122

bique was only able to pay $100 million dollars, or a quarter of its scheduled debt. This was more than the country spent on health and education combined.3 * * * The result of many decades of loan giving is that every day, nearly $23 million flows from the lowest-consumption countries in the world to the highestconsumption ones in the form of interest and loan repayment.4 In total, the low consumption countries currently owe more than $4.9 trillion to the World Bank, the IMF, the governments of high-consumption countries, and to corporations.5 Between 1980 and 1992, international debt servicing amounted to $1.6 trillion, or three times the original amount owed in 1980.6 Unfortunately, the way that repayment is structured and interest calculated means that these countries can repay the original loan many times over and yet still owe money. * * * From each according to his ability…What’s up with this? Monaco, about the fifth wealthiest country in the world in terms of GDP per capita, contributed all of $12,000 to the World Bank’s Financial Intermediary Funds in 2010. Bangladesh contributed $100,000.7 * * * In addition to the money that flows from low-consumption to high-consumption countries in the form of loan and interest payments, a large portion of aid returns to donor countries in the form of employment of that country’s residents, flights on that country’s airlines, income from that country’s hotels, and purchases of that country’s products and raw materials. I met a man in Dhaka who was working on a project funded by the American government’s aid agency, USAID. He mentioned that the grant included money to buy a vehicle; USAID insisted that the project team buy an American car. Unfortunately, there were no local mechanics who knew how to fix the car nor were spare parts available for that particular model. Not only did the vehicle quickly become useless to the aid project, but the aid money spent on it went to an American automobile manufacturer, not to the country supposedly intended to benefit from the project. * * * Seeking a cushy job? Apply here! Many people are attracted to aid work for genuine humanitarian reasons. However, it is also true that some of the attraction of the work lies in its glamour and prestige, the potential for luxurious living, and the exciting travel opportunities (otherwise known as ‘development tourism’). Just how exorbitant the living gets for some is eloquently presented by Graham Hancock in his book, Lords of Poverty: The Power, Prestige, and Corruption of the International Aid Business. Nor am I immune. I once received an e-mail urgently requesting me to serve as a facilitator at a workshop in the Thai beach resort of Phuket. The flight, hotel, and food were all paid for, and a small fee was provided for my service. The beach was lovely and the work

123

BEYOND APOLOGIES

was easy. I felt guilty accepting but justified it to myself on the basis that as I work hard, I deserve a break. My Bangladeshi colleagues work hard too; rarely do they get such privileges. Those whom we are supposedly helping never do. People who could never afford household help back home may have several servants while working in ‘development.’ If they achieved their stated goal of eliminating poverty, they would have to give up these privileges. To be direct, those in the aid business have an unfortunate incentive to fail at what they aim to do. * * * Aid often benefits the donor country in other, more indirect, ways. A donor country can offer, for example, assistance to create electricity generation plants. Corporations from the donor country can then build factories that use that electricity to create inexpensive goods that they can export back to their country. At other times, aid is barely even disguised under its humanitarian wrappings. If a government wants its businesses to have access to the natural resources in a low-consumption country, aid can provide the entry point. For example, some donor countries label mining as ‘development assistance,’ but though some local jobs result, the real wealth (the value of the extracted minerals) flows right back to the donor country. Companies may donate computers in the name of development but sell the software necessary to run the computers at high prices. Donor countries that manufacture cars and want to broaden their markets may provide ‘development assistance’ to build local infrastructure (roads, bridges, elevated expressways) that will support the import and sale of those cars. For instance, a Korean company is constructed a road along the Mekong River in Vientiane, the capital of Lao. The road runs parallel to a nearby existing road, thereby doubling its capacity. Korea happens to be the main car exporter to Lao.8 It is hard to say exactly how much of what happens in the name of aid may be of more use to the donor than to the recipient, but whatever the amount is, it is too much. Because aid is commonly viewed as a form of charity rather than as economic justice, it can make the receiving country indebted in more ways than simply financial. At one level, the conditions put on aid make sense: if aid is intended to help the poor, the donor does not wish to see it being used to buy mansions with swimming pools for the president’s friends and family. If the donor feels that the cause of the crisis that led to the request for aid is remediable through better policies, the donor may wish to push for those policies. A truly thoughtful donor would wish to ensure that the loan supports the public good, is spent as intended rather than to line the pockets of the powerful, that chances of repaying it are high, and that the repayment conditions are not causing undue stress or harm to the recipient. However, there is a not-so-fine line between telling people exactly how to spend their money and allowing them to steal as much as they please; over

MYTH#5: AID ALONE REDUCES POVERTY

124

time, aid agencies and multilateral banks should have done better at finding a balance. Who does aid serve? A bigger question posed by foreign aid is, who gets to decide what is in the public good? The role of the public in recipient countries is virtually non-existent in determining what projects to undertake, how to use grant money, and under what conditions to accept loans. In fact, the main beneficiary may be the group lending the money. In her bestselling book Dead Aid, Dambisa Moyo quotes Rwandan president Paul Kagame commenting on why the more than $300 billion of aid that has gone to Africa since 1970 has done the continent so little good: “The primary reason is that in the context of post-Second World War geopolitical and strategic rivalries and economic interests, much of this aid was spent on creating and sustaining client regimes of one type or another, with minimal regard to developmental outcomes on our continent.” Aid is unlikely to reduce poverty when the givers never intended it to do so. Even when delivered with good intentions, aid is a difficult enterprise. The largest projects, while having the potential to do the most good, can also be the most harmful, since they are often for damaging infrastructure such as large dams. Big projects also mean big money. When large sums of aid money pour in to very poor and unstable countries, violence can ensue as various factions fight to see who can steal the largesse. Aid-related violence can take place directly when and where the aid is dispensed, and in fights among political factions, each of which want to gain political power in order to steal the money easily. Victims of economic crimes include all those who could have been helped by the money, but who were not, and all those affected by the violence that results from the desire to steal aid money. As those siphoning off aid become exorbitantly wealthy, the chasms between rich and poor grow, as do incentives to seek new forms of aid, regardless of how useless or detrimental the projects might be or how much the population is burdened with debt. As to how much of the aid is stolen, one former World Bank insider remarked: “Sadly, having spent sixteen years in Bank lending operations and anticorruption investigations, I have become convinced that $100 million or more [of $500 million lent] may well have been lost to fraud…”9 Governments may spend time seeking foreign assistance and negotiating grants rather than seeing what they themselves might do with existing resources. Dependence on aid can distract governments from taking on the responsibility of improving conditions locally – why do so when donor aid can be used instead – and from passing laws that would give the poor the opportunity to have a better

125

BEYOND APOLOGIES

life. The temptation is particularly strong where corruption among government officials is rampant (and goes unchecked by the donor). On the smaller scale as well, aid gives rise to many other types of problems. Programs and priorities follow the ‘flavour of the day’ and often do not undergo any rigorous evaluation for effectiveness; evaluations themselves are problematic if not well designed.iv Projects are often too short-term to make the desired changes or to sustain them after the grant has finished. Aid has become an industry in many low-consumption countries, with a growing number of businesses and NGOs set up to receive the money but with little evidence that they have contributed to the betterment of the poor.10 NGOs typically must tailor their programs to suit donor requirements and interests and ignore or avoid those areas that are not palatable to donors; otherwise, there is no way to pay one’s bills.v NGO workers can also be so distracted by the potential of grants – and the work that goes with applying for them, managing them, and reporting on them – that they shift their attention away from actually addressing the critical issues of the more equitable distribution of resources, workers’ rights to liveable wages, and government responsibility. Again, donors often do not encourage NGOs to take on these difficult issues. Because governments fail to provide a safety net, NGOs often step in with donor-funded programs to help the poor. As long as they do so, there is less pressure on governments to fulfill their duty. However, successfully pressuring governments to take over would cause the NGOs to lose their sources of funding, and so their incentive to keep the pressure up lessens. The NGO that iv I have seen evaluation reports that are worse than useless because what they measure – number of people who attended an information session, number of desks set up in a new school, number of health education posters pasted on walls – fail to indicate whether people’s lives are any better. Purely quantitative evaluations, which seem to be the norm, cannot capture the beauty of some truly effective programs. On the other hand, purely qualitative evaluations that relate stories of people’s newfound happiness typically provide no measureable or reliable evidence. There is also the issue of the complexity of donor application and reporting forms, and how much time NGO staff must spend chasing funds and filling out reports rather than doing the work that they are supposedly paid to do. v This is an important point that merits more discussion and will no doubt make some readers uncomfortable. The whole setup of NGOs is premised on the idea that the donors and voluntary contributors are intent on reducing poverty or otherwise aiding low-consumption countries. Yet many of the governments and foundations making the grants are, to a greater or lesser extent, controlled or funded by corporations with profitmaking opportunities in those countries. The criticism extends beyond the particular (for instance, a foundation supporting contraception due to its support for eugenics) to the general (the ways in which donors set and control the agenda of NGOs).

MYTH#5: AID ALONE REDUCES POVERTY

126

wishes to be the exceptional group that actively pushes governments to take on the services provided by many other NGOs may find it impossible to find enough funding to stay on mission. It is difficult to argue that one should ignore the urgent needs of the poor in order to push governments to assume their responsibility, but if one fails to push governments, they may never act to redistribute wealth, and there will be an ongoing need for NGO action.vi * * * If it were easy, it would not be a problem. It can be difficult to make accountability a reality. When I lived in Hanoi and asked shopkeepers for a receipt, they typically asked me how much money they should make it out for; this taught me the value of receipts in many countries. Years later, colleagues in the business of disbursing relatively small grants (generally between $80,000 and $500,000) told me that they had instituted extremely strict accounting procedures after they visited a health clinic they had funded, only to discover that the building was being used as a brothel. A friend told me that when the foundation she was working for decided to stop working in Bangladesh, they gave their remaining funds – one million dollars – to a large, well-known NGO. Later, when they asked what the money had been used for, the answer was, “We don’t know. We can’t find it.” * * * A more useful approach would be to see whether aid could be dispensed in a way that would optimize the potential for good and reduce the potential for harm, while seeking other ways to reduce global inequality. 

Towards a Better Way: Improving Aid and Finding Alternatives “Poverty is also a violation of elementary absolute standards of social justice. …Social justice requires that everyone should have a minimal standard of living, and that people living in poverty should receive assistance when they lack the means to live lives that aﬃrm their human worth and dignity.” UNDP, Rethinking Poverty11

* * *

NGOs may deliver better services than governments, but the cost is typically much higher. My personal feeling is that NGOs should push and support governments, not replace or replicate them. vi

127

BEYOND APOLOGIES

“Fixing” aid Pouring in aid money is only one, and not always the best, solution to poverty; it is no solution at all when large portions of the money simply return, in various forms, to the donor or are stolen before they can be used to help the poor. A longterm goal may be to reserve aid for conditions of real emergency or dire need, with an accompanying effort made to push/support governments to take care of their own people and to increase the role of the public in ensuring that governments carry out these responsibilities properly. Different approaches to dispensing aid can make a big difference in how it is used. One might start with this rather simple rule: do not provide large unmarked loans to leaders who have little or no popular support and who have a propensity to siphon off funds into their Swiss bank accounts. Following this rule might have prevented many loans from being made in the past and could presumably prevent many more in the future. After all, the populace must repay these loans long after the leader has left power (often taking a hefty amount of the loan with him). Other checks and balances would also help, such as stronger rules at the lending institutions to prevent the approval of projects that displace large portions of the population and that cause serious damage to the environment, to public health, and to local businesses/economies.vii As long as loans are necessary, there is a need for more accountability and transparency in choosing which ones to take and whether to accept the conditions attached to them. There are probably people in every country who take an active, humanitarian interest in local affairs and who would like to have a say in foreign aid decision-making. Loan negotiations may need to occur in private, but surelymechanisms could exist to introduce more transparency and public input into decisions about which projects merit loans. Local experimentation is needed to arrive at the best methods, but possibilities include the government putting notices in the newspaper, advertising by radio, posting information on the Internet, or using banners in the streets to announce planned loans, then providing a number of ways to give input, including public meetings, email, and the old-fashioned letter. Not only which projects are worthy, but the basic conditions of the loans and the likely burden of repayment should also be open to public discussion. In the same way that participatory budgeting (discussed elsewhere in vii The World Bank is doing just the opposite, at least in terms of dams. In searching for ways to finance ‘development’ without increasing climate change, the Bank is getting back into hydropower, despite all the displacements involved. “World Bank rethinks stance on large-scale hydropower projects.” The Guardian, 14 May 2013.

MYTH#5: AID ALONE REDUCES POVERTY

128

this book) allows communities to give input into local spending priorities, so communities could have a say on whether they want loans/grants to build, for example, a new airport or to create a network of local health clinics in remote areas. It may require a major educational effort to enable informed input into loans, but such an effort would have a huge payoff. Local leaders, NGO officials, and journalists are among those in a position to educate others about loans. With most people in many countries now having a mobile phone, organizers could use text messages as a way to inform people of the opportunity to come to a session to learn more and to offer their opinion. Even those with very little understanding of the projects and of loan conditions are likely to have an opinion about bankrupting the country’s future to pay for questionable projects today. At the level of small or medium grants to NGOs and other organizations such as universities, trust and respect can play an important role. Donors could conduct a background check of the recipient organization. Asking that basic accounting procedures be met, and following the progress of the grant in a respectful way, can help to build the sort of trust that makes cheating less likely. Bigger grants, to the tune of millions of dollars, require closer monitoring – such as visiting the project to see if the work is actually being carried out. For individual countries, the option of refusing aid always exists. The government of Myanmar reportedly refused international assistance to deal with the devastating effects of a typhoon because it was afraid that once they let in aid workers and their backers, they would have trouble getting them to leave. It is easy to see how governments may fear the influx of an army of aid workers, even when aid is needed.viii The conditionality of aid should be at least reduced, and conditions meant to support the mainstream economic system, such as draconian cuts in government budgets and privatization of public services and industries, should be eliminated. Interest rates need to be slashed on overly burdensome loans, and many loans viii I could be wrong in my interpretation of events in Myanmar, but I request that readers consider the possibility that the media is misleading us. I can find no other explanation for the West’s obsessive interest in Myanmar than that the type of ‘democracy’ that the United States is pushing would mean not more freedom for the population, but rather greater access for multinational corporations. My suspicion is partly based on observing very few billboards when I visited the country and seeing a small article in The Economist complaining about the high tariffs on cars. Yes, the current regime is in some ways atrocious and certainly Aung San Suu Kyi has excellent motivations, but the situation there is probably vastly more complex than the mainstream media reports. For more discussion on the role that the media plays in perpetuating economic untruths, see the Myth on mass media.

129

BEYOND APOLOGIES

need to be forgiven. The flow of aid money should be from high-consumption to low-consumption countries, not vice versa. Other options There are, of course, taxes. As I discuss elsewhere in this book, taxes on corporations and wealthy individuals are (too often) an enormously underutilized resource. Rwanda recently announced a budget of which, for the first time ever, about fifty-four percent would be financed domestically (mostly through tax) rather than by aid.12 Populations would require less help from government if they were better off. Efforts to prevent the rich from exploiting the poor and to reduce inequality could include land reform and laws designed to protect labour, to ensure a living wage, and to protect the rights of indigenous groups to ‘sustainable’ use of natural resources (such as the right to collect nuts and herbs in the forest versus having it destroyed for logging, mining, and large-scale farms). More protection for the poor from exploitation by the rich and powerful would lessen the need for outside assistance. Another common way to bring money into a country is to encourage remittances from overseas workers. Remittances provide an important source of local funds; they also bring many problems. The official, and probably low, estimate is that thirty million Africans (about three percent of the population) have migrated regionally or internationally.ix Remittances of nearly $40 billion in 2010 represent the largest source of foreign funding to Africa after direct foreign investment. According to the World Bank, the amount sent home by overseas workers is about the same as official aid. Nigeria alone received $10 billion in officially recorded remittances in 2010.13 Remittances may reduce poverty among individual families and communities and lead to greater spending on health and education. They can also help families cope with emergencies.14 However, remittances are not cheap: workers often fail to send home as much as they otherwise would due to the exorbitant price and insecurity of transferring the I happened to befriend a few of these expatriate Africans in Dhaka; they were all professional athletes. They did relatively well, though the clubs for which they worked often failed to pay their salaries or honour their contracts, and the players had nowhere to turn for regress. They desperately missed their homes. Some of the locals looked upon them with scorn and contempt. One player had the president of his club put a gun to his head to force him to sign a resignation letter; my friend who played at the same club had to leap over a wall to escape being put into a similar situation. I can only imagine how much worse the situation must be for many economic refugees, especially illegal ones.

MYTH#5: AID ALONE REDUCES POVERTY

130

money. According to a World Bank report, the cost of a $200 remittance sent to sub-Saharan Africa averaged close to twelve percent. Sending money within Africa is even costlier and more difficult than sending it from outside Africa.15 Although mobile phones are playing a growing role in banking, it is still difficult to get money to rural areas. Remittances involve other costs. When people leave their homes to work far away, the emotional cost and the effect on family structures and relationships can be devastating, with children being particularly affected. HealthBridge-supported research in Vietnam found that while many parents left the country to work in order to help their children gain a better future, some of those children felt abandoned and suffered from a range of emotional problems; some dropped out of school.x Reídar Jönsson beautifully captures this issue in his moving novel My Life as a Dog: “My father left. As usual, the Swedish nation needed their bananas more than I needed my father.”16 Many countries, Vietnam and the Philippines included, simply encourage migrant labour on the assumption that it is a net good, but the cost of this practice must be taken into account when determining national policy. Emigration represents a direct financial cost to the nation of origin as well. When skilled workers leave a low-consumption country, they take their valuable skills with them. Countries pay for the education of their citizens, only to find that many of the most educated emigrate.17 At the same time, high-consumption recipient countries receive already educated and possibly trained workers, representing yet another reverse subsidy. Worse, educated workers often fail to find jobs that utilize their skills and background, while the country they left may be in desperate need of them. Tourism, another source of local funds, is also a mixed bag. Tourism can drain resources, such as water and electricity, from the local population; it can also contribute to the privatization of land, as (for example) luxury hotels with private beaches occupy space formerly used by locals, including fishermen. Tourism that

Many children left behind suﬀer from a sense of inferiority and have no one to take care of them and supervise their studies. School dropouts were especially common when the mother left. ‘I have dropped out of school since I think my mother does not love us anymore’ (daughter of a guest worker, Thai Binh city, speaking to a member of a HealthBridge project team studying the eﬀects of migrant labour on local communities and families). Pham Thi Ngoc Anh and Nguyen Van Tung, “Impacts of Labour Exportation on Family Life in Thai Binh Province,” Report prepared by the Central School for Female Cadres and HealthBridge. Hanoi, May 2008.

131

BEYOND APOLOGIES

caters to high-end vacationers will mostly benefit wealthy corporations, including foreign ones, rather than locals: French tourists flying on French airplanes, staying at French-owned hotels, eating in French restaurants, and traveling on French buses will do little for the local economy. Tourism to low-consumption countries also has a seedy side, with its connection to prostitution and drug use. A more promising option is for governments to encourage and protect small domestic industry, particularly for products that are not harmful to health or the environment. Instead, the current basis of some economies simply keeps the nation impoverished. When I visited Malawi several years ago, I saw the true meaning of the country’s ‘dependence’ on tobacco, which resembled dependence on a drug. Planners focused on a single crop, tobacco; that crop mainly benefits the tobacco industry, not the farmers.18 The industry uses some of its profits to buy the support of government officials. As a result, there was little or no effort to diversify the economy. People continue to go hungry despite decades of tobacco cultivation. While I was there, some people were refusing to check out of the hospital after recovering from illnesses brought on by malnutrition because they had no food at home. Singapore, Hong Kong, Taiwan, and South Korea – former lowconsumption nations that have become economic success stories – grew rich by protecting their nascent industries from cheap imports until they were strong enough to compete. Today, however, trade rules imposed by donor countries and the Bretton Woods institutions benefit large corporations and thus prevent lowconsumption countries from taking these steps. * * * Jane Jacobs describes how in the small country of Taiwan, the combination of land reform, workers with many years of experience in factories but with no capital, and a powerful but benign government helped transform a poor country into a wealthy one. The government forced wealthy rural landowners to sell some of their land to the government so that it could redistribute that land to poor farmers. The government in return insisted that the landowners invest part of their payment in urban industry. Importantly, the government did not specify which industry. Most landowners were not natural entrepreneurs. Meanwhile, many people had gained ideas about potential new industries during their many years working for the foreign companies that had invested in Taiwan when salaries were low, but had no funds to implement them. The combination of those with ideas and those with funds, helped along by government protection, led to a burgeoning of local industry. When many foreign companies departed to seek lower-paid workers elsewhere, such as China, the Philippines, and Bangladesh, their departure was an indication of success, not failure, in Taiwan’s development.19 Whether Taiwan’s particular case is replicable is another matter. * * *

MYTH#5: AID ALONE REDUCES POVERTY

132

One area on which some liberals and conservatives agree is the need for more genuinely ‘free’ trade in which the high consumption countries stop imposing tariffs on imports from low-consumption ones. Any solution to poverty that depends on trade has a number of limitations, but this sort of trade could at least prove a temporary solution while the low-consumption countries recover from debt and find a more sustainable way to support their populations. According to Oxfam, by imposing high tariffs on imported goods, the G8 countries collectively deprive the low-consumption countries of $160 billion a year in trade.xi “For every dollar we give in aid two are stolen through unfair trade,” points out Robert Fox, Executive Director of Oxfam Canada; “The G8 countries have rigged trade rules, blocking trade's potential to wipe out poverty and instead increasing the global wealth divide.”20 Finally, even the low-consumption countries may not need as much aid as they think. Their governments often spend money on unnecessary and harmful items, such as on weapons systems and on extravagant ‘development’ projects like fancy airports. It is surprising the amount of money the government of Bangladesh (which ranks 170 out of 207 countries based on income21) finds available for projects like transport facilities for the less than one percent of the population that owns a car.xii When the government commissioned a transport plan, the transport experts listed and ranked various options following an extensive study of considerations such as speed, safety, and the environment. The highest-ranking option was also the cheapest, at ‘only’ $1.9 billion. Rather than choose that option, however, the government chose the option ranked sixth, which at an estimated $4.8 billion would cost more than double the first option.22 The government planned to seek grants or loans to fund it – aid it would not have needed if it had chosen the more affordable and more highly ranked option. The savings potentially gained by choosing the better and cheaper plan was more than twice the planned budget for health in 2013.23 As a local colleague of mine says, “The government is very rich when it comes to road projects, and very poor when it comes to education and health.” According to World Bank data, some countries such as Ghana spent as little one percent of their central government budget on the military in 2013,xiii while others The G8 countries are the highly industrialized countries of France, Germany, Italy, the United Kingdom, Japan, the United States, Canada, and Russia. xii According to the World Bank, there were only three motor vehicles (cars, buses, and trucks but not motorbikes) per one thousand people in Bangladesh in 2010. Transport statistics indicate that less than four percent of trips in Dhaka are made by private car. (http://data.worldbank.org/indicator/IS.VEH.NVEH.P3); xiii Sierra Leone is listed at zero percent in 2011 and 2012, down from six percent in 2009. xi

133

BEYOND APOLOGIES

spent as much as eighteen to nineteen percent (India and Pakistan) and twentythree percent (Uganda).xiv The same governments that spent a lot on weapons spent signiﬁcantly less of their central government budget on health: eleven percent in India, ten percent in Pakistan, and fourteen percent in Uganda in 2012 versus Ghana’s thirty-three percent in 2011.24 Those concerned about the poor need to learn more about total government budgets and engage in public discussions about them. As it is, those working on tobacco control or on HIV/AIDS compete for scarce resources from donors and governments. Instead, all those working for health, the environment, and a better life for the poor should work together to demand more government allocations for those issues. They should work together to demand more spending to help the poor and middle class and less for weapons and for projects meant to enrich the wealthy.xv Could cuts in wasteful military and other non-social spending, combined with increased revenue from local taxes and support for local industry, replace aid or at least reduce the need for it? There is no one answer for all countries, but alternatives to aid clearly merit more consideration. It is time to spend more energy exploring the alternatives and, where aid continues, to make the process more transparent, with more public oversight.

Oman tops the chart, at almost thirty-three percent in 2013; that figure is forty-four percent for 2014. I use 2013 for comparison, as the data for 2014 are incomplete. World Bank, “Military Expenditure (% of Central Government Expenditure),” http://data.worldbank.org/indicator/MS.MIL.XPND.ZS accessed 2 September 2014. xv I hope it is clear that the middle class is a victim of mainstream economics, not the beneficiary or villain. The true villains are few in number and phenomenally wealthy. Government provision of essential services at no cost to the recipients would benefit not only the poor but also the middle class. xiv

Notes 1 James K. Galbraith, The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too (New York: Free Press, 2009). 2 Charlotte Denny, “Suharto, Marcos and Mobutu Head Corruption Table with $50bn Scams,” The Guardian, 26 March 2004.

MYTH#5: AID ALONE REDUCES POVERTY

134

3 Gumisai Mutume, “Mozambique: Debt Relief Needed for Investment in Peace,” Inter

Press Service (IPS), Johnannesburg, 4 September 1997. 4 Jubilee Debt Campaign, www.jubileedebtcampaign.org.uk accessed 5 June 2013. 5 The World Bank, International Debt Statistics 2013 (Washington: The World Bank, 2013). 6 Gumisai Mutume, “Mozambique: Debt Relief Needed.” 7 World Bank Group Finances, “Biggest Donors by Countries - 2010” https://ﬁnances.worldbank.org/Financial-Intermediary-Funds/Biggest-donors-by-countrie s-2010/r2cs-ptjn 8 Kanga Kong, “Why Laos Is Hyundai/Kia Country,” Wall Street Journal, 30 October 2013. 9 Steve Berkman, “The World Bank and the $100 Billion Question,” in A Game as Old as Empire: The Secret World of Economic Hit Men and the Web of Global Corruption, ed. Steven Hiatt (San Francisco: Berrett-Koehler, 2007). 10 Claudia R. Williamson, “Exploring the Failure of Foreign Aid: The Role of Incentives and Information,” Review of Austrian Economics, published online: 11 July 2009. 11 UNDP Department of Economic and Social Aﬀairs (New York: UNDP, 2009). 12 Kenn Okwaroh, “Budget 2012: Is East Africa Spending Where it Matters?” Development Initiatives, 20 June 2012. 13 Dilip Ratha, Sanket Mohapatra, et al. Leveraging Migration for Africa: Remittances, Skills and Investments (Washington: The World Bank, 2011). 14 Ratha, Mohapatra, et al. Leveraging Migration for Africa. 15 Ratha, Mohapatra, et al. Leveraging Migration for Africa. 16 Reídar Jönsson, My Life as a Dog, trans. Eivor Martinus (New York: The Noonday Press/Farrar-Straus-Giroux, 2nd printing, 1996). 17 Ratha, Mohapatra, et al. Leveraging Migration for Africa. 18 Marty Otañez, “Social Disruption Caused by Tobacco Growing,” www.escholarship.org/uc/item/7ks4s9js accessed 3 September 2014. 19 Jane Jacobs, Cities and the Wealth of Nations: Principles of Economic Life (New York: Vintage Books, 1985). 20 Oxfam Canada, “Making Trade Fair,” http://oxfam.ca/our-work/campaigns/make-trade-fair accessed 14 September 2014. 21 Encyclopedia of the Nations, http://www.nationsencyclopedia.com/ accessed 27 December 2011. 22 Debra Efroymson and Mohammed Bari, Dhaka Strategic Transport Plan (STP), A Critical Review (Dhaka: WBB Trust, 2007). 23 “Health Sector Development Budget Reduced,” New Age, 7 June 2013. 24 World Bank, “Public Spending on Education, Total (% of Government Expenditure),” http://data.worldbank.org/indicator/SE.XPD.TOTL.GB.ZS accessed 2 September 2014. Dates given are the latest available.

MYTH #6: Microcredit & Income Generation are Miracle Cures “Everyone here grows marĳuana.i Since we all grow it, nobody gets much for it.” – Man in small town in USA A young boy at a tea stall in Dhaka asks me if I will take him to America. “Sure,” I say, “but what will you do there?” “Sell tea,” he replies.

 Microcredit: A Silver Bullet to End Poverty? Microcredit has gained significant global attention as a viable way to reduce poverty. Accounts of microcredit experiences are almost universally glowing and microcredit programs have been widely replicated.ii Mohammed Yunus, the originator of the concept of microcredit, received the 2006 Nobel Prize jointly with his Grameen Bank. Microcredit addresses the double bind of the poor: since the poor lack collateral, they are unable to get loans at traditional banks; local moneylenders will provide them with loans but only at very high interest rates. In order to get around the lack of assets that can be used as collateral, microcredit programs put people (in the case of Grameen, almost exclusively women) into groups, with the group as a whole serving as insurance that individual members will repay their loans.iii Once the first woman in the group receives a small loan for her own project, the other group members cannot receive loans until the first one repays hers. There is thus significant pressure on the first woman to repay her loan. Women also learn to save money through a mandatory savings program, in which they must regularly pay a certain amount of money to the Grameen Bank, which keeps that money for them. The very high loan repayment rates (about ninety-seven percent) have been widely publicized and praised as indicators of success. Here, it seems, is a program that offers the poor a chance to work their way out of poverty with dignity. There is another side to the story, though. My views of it, discussed here, reflect the many hours of conversations that I have had with locals during the more than fourteen years that I have lived in Bangladesh and on my own observations of microcredit programs there and elsewhere. While it is difficult to find critical views in much of what is written about it, microcredit is not without its detractors. A few of the criticisms of the system as currently implemented deserve a quick Some American states have legalized the sale of marĳuana. One example among many: Dambisa Moyo in Dead Aid raves about the Grameen Bank model: “The most truly extraordinary aspect of this extraordinary tale is their ‘No Donor Money, No Loans’ policy”: meaning that the poor must pay for all the help they get. iii Individuals receive the loans; the group serves as loan collateral. i

MYTH#6: MICROCREDIT IS A MIRACLE CURE

136

mention before moving on to its more essential flaws. (While I focus here on Grameen Bank, other microcredit programs operate in similar ways.) Consider, for instance, the much-praised high repayment rates. How likely is it that ninetyseven percent of the projects for which a loan was taken will succeed and produce income over the longer term?iv Let us say, for example, that a woman takes out a loan to buy a goat. The goat gets sick and dies or is stolen. The woman still has to repay the loan. Alternatively, a woman’s husband beats her to get her to take a loan, and then uses that money to drink.v She still must repay the money. If the loans are repaid, they are hailed as a microcredit success story. As for where a woman can find the money to repay the loan if she loses the original amount or generates no income, possibilities include eating less – in Bangladesh, women already eat after their husband and children and get the least food – and selling what few possessions she may have had. Stories circulate about the abusive practices sometimes used to collect the loan repayments. I have heard, for example, from former Grameen Bank staff whose job it was to collect the loan payments that any money missing from repayments was deducted from their own salaries. In addition to the other group members, bank staff members clearly have a strong incentive to do everything possible to make sure that women repay their loans. I have also heard stories of women chasing the non-payer, who tried to run away, and forcibly removing her nose ring so that they could sell it to repay the loan. Then there are the interest rates. The interest rates charged on microcredit loans may be lower than those charged by local moneylenders, but at twenty percent, they are by no means low. The combination of interest payments and forced savings means that women are paying money to the bank on a regular basis even if their income is not consistent. In a situation of high illiteracy and innumeracy, the possibilities for exploitation are rife. I have heard a former Grameen Bank employee complain about the bank’s singular focus on loans. Borrowers do not receive any other type of support to teach them how to manage their new businesses. One of the Bank’s highly touted programs was to provide women in rural areas with mobile phones and Grameen phone services, which they could then rent out. The fact that Grameen charges higher rates than other mobile phone companies tends not to get mentioned. iv In the United States, for example, eight of ten small businesses fail in their first eighteen months. Eric Wagner, “Five Reasons 8 out of 10 Businesses Fail,” Forbes, 12 September 2013. v In Bangladesh, it is estimated that over half of all women are beaten by their husbands or other family members. “National Digital Database on Violence against Women: An Essential Tool For Effective Services.” Summary of joint discussion between UNDP and The Daily Star under UN Joint Programme on VAW Project. The Daily Star, 26 July 2013.

137

BEYOND APOLOGIES

Other accusations made against Grameen Bank by one vituperative critic, Taj Hashmi (writing of his field work and personal experiences in Bangladesh), include allegations that borrowers regularly lend the money to fellow villagers; that men take multiple wives to access numerous loans for their own moneylending business; and that the poorest of the poor do not actually have access to the loans as they simply cannot make the repayments. As Hashmi points out, if simply borrowing money at high interest rates could help people out of poverty, then the credit card companies should also receive the Nobel Prize. Or, as he asks rather brashly, “If micro-credit could alleviate poverty, why on earth [are] hundreds of thousands of Bangladeshis going to Dubai, Saudi Arabia, Kuwait or Singapore, borrowing hundreds of thousands of takas (two lakh [$2,580] per head on the average) to work as menials? If borrowing fifty or sixty dollars could alleviate poverty, why are they [going overseas as labourers instead]? Are they stupids?”1 No program, however good, can be immune from criticism and perhaps occasional abuse and it would be useful if people addressed these abuses rather than ignore them. However, they are not the most serious problems. More serious issues arise when microcredit is seen not as a patch, or as one tool among many in a sizeable kit of methods, but rather as the most significant or substantial approach to poverty reduction. The theory underlying microcredit is that the poor need better access to loans so that, through their own hard work and ingenuity, they can work their way out of poverty. The poor undoubtedly need access to loans at low interest rates (or to local currencies, which would give them access to cash without interest). But whether microcredit programs can greatly reduce poverty is another matter entirely. When I hear that the poor are natural entrepreneurs who just need some financial support to climb from poverty to prosperity, I remember the two men I saw on a street corner one day in the northeastern United States. They took a break from shouting ‘ice cold lemonade’ to complain to each other about how bad business was. The day was damp and chilly, and customers were few and far between. There are, no doubt, many natural entrepreneurs among all segments of society, but they seem unlikely to be the majority. Development agencies, government departments, and NGOs typically act on the belief that the problem of widespread poverty is due to some deficiency in the poor themselves, and that addressing a single need (a small infusion of cash to be repaid with interest) will solve the problem. This belief, and any approaches based on it, completely ignores the institutions and systems that perpetuate poverty. As feminist economists Susan F. Feiner and Drucilla K. Barker point out in their criticism of the Grameen Bank model, microcredit is popular among governments

MYTH#6: MICROCREDIT IS A MIRACLE CURE

138

and multilateral donors because it reinforces the individualist approach of mainstream (neoliberal) economics, shifting the burden from structural change to individual eﬀort and initiative: The key to understanding why Grameen Bank founder and CEO Muhammad Yunus won the Nobel Peace Prize lies in the current fascination with individualistic myths of wealth and poverty. Many policy-makers believe that poverty is "simply" a problem of individual behavior. By rejecting the notion that poverty has structural causes, they deny the need for collective responses. In fact, according to this tough-love view, broad-based civic commitments to increase employment or provide income supports only make matters worse: helping the poor is pernicious because such aid undermines the incentive for hard work. This ideology is part and parcel of neoliberalism. For neoliberals the solution to poverty is getting the poor to work harder, get educated, have fewer children, and act more responsibly. Markets reward those who help themselves, and women, who comprise the vast majority of microcredit borrowers, are no exception. Neoliberals champion the Grameen Bank and similar eﬀorts precisely because microcredit programs do not change the structural conditions of globalization – such as loss of land rights, privatization of essential public services, or cutbacks in health and education spending – that reproduce poverty among women in developing nations.2

One could compare the microcredit approach to planting a few trees while not noticing that behind one’s back hundreds are being cut down for each one planted. Microcredit programs may do much good for some individuals, but they fail to address why such programs are needed. The message that the poor are masters of their own destinies and that, with a little help (for which they must repay the full cost with interest), they can lift themselves out of poverty seems positive, even empowering. Nor is it baseless. Microcredit has no doubt beneﬁted many individuals. However, poverty is primarily a structural problem, one that is built into the mainstream economic system through policies that are designed to enrich the wealthy. While perhaps not intentional, these policies do nothing for (or worse, punish) the poor. Some people are poor despite possessing excellent ideas and sound managerial skills, because in an environment ripe with opportunities they simply cannot get a loan. Are such people likely to be the majority of the poor? Most of the poor lack the education and necessary skills to avail themselves of opportunities that are anyway far too few in number. Such people will not be helped by microcredit. Worse, if people believe that it is entirely the responsibility of the poor to work their way out of poverty, then one needn’t bother to raise taxes on the rich or on corporations, or to insist on fair wages, or to give power back to

139

BEYOND APOLOGIES

unions, or to ensure that governments provide basic services. Focusing on the individual ignores the responsibility of governments to provide basic support including health and education services for the poor, measures that, in addition to creating jobs, will be far more successful in reducing poverty than will microcredit alone.3 The vision of microcredit as the solution to the problem of poverty, without requiring any other structural changes, is its most dangerous (and to many, attractive) aspect. Feiner and Barker also cite evidence that many microcredit programs, including Grameen Bank, may actually charge more than informal moneylenders. They claim that Grameen overstates the financial gains that its loans generate, as the gains realized by most borrowers are very small, with the poorest borrowers benefiting the least. They argue that the loans are not necessarily empowering because they can lead to a double burden (‘small business’ work added to a woman’s already full day of household work) and conflict when men, not women, actually control the loans. In fact, pressure to repay the loan from women group members can lead to conflict rather than building solidarity.4 My own suspicions about microcredit were aroused after I visited the head office of the Grameen Bank in Dhaka. The high rise, modern office building located in the heart of the city seemed incongruous with its definition as a bank of the poor. As I was curious to learn more about Grameen, I asked if I could visit one of the sites where it works. It was possible to do so, for a fee. The village I was taken to seemed to be a little too tidy, the stories told a little too neat. A group of women who met regularly to hand over their savings chanted slogans in bored voices, suggesting that this was just another act that they had to undergo to get their loans, rather than being useful guidance for their lives. (Slogans included the refusal to accept or offer dowry; unfortunately, the advice is not particularly practical in a country where it can be impossible for one’s daughter to marry unless her family pays off the groom.) My guide gave me suspicious answers to some of the questions that I asked, including his obviously untrue claim that various Grameen enterprises, such as Grameen mobile phone, were unrelated to Grameen Bank. According to its website, Grameen Bank gives loans to many people: more than eight million to date. Grameen says that it charges twenty percent interest on its income generating loans and lower rates on student and housing loans (loans for beggars carry no interestvi). In 2010, the Grameen Bank recorded a profit of $10.76 million after operational expenses.5 The profits to be gained by running a microBeggars may be in a better position to repay their loan than others, as they at least have a steady source of income. vi

MYTH#6: MICROCREDIT IS A MIRACLE CURE

140

credit program were confirmed when someone working for a large and wellknown Bangladeshi NGO asked why my colleagues at a much smaller NGO didn’t start a microcredit program, as doing so would fund all of their other work. It seems morally wrong to place the burden of paying for any assistance they receive back on the poor, but that is precisely what microcredit programs do. As a primary means to end poverty, microcredit thus has serious limitations. Those very limitations, however, make it attractive to many: an implementing organization can earn money while ‘helping’ the poor and without addressing any of the structural causes of poverty. What microcredit could be is an often helpful but sometimes dangerous adjunct to other programs designed to help the poor or to address injustices, inequality, and lack of opportunities. Claims that microcredit is a universal solution to poverty should be taken with a large grain of salt. In reality, it is a program that should be carefully monitored to avoid abuse. Related programs Another common approach to poverty reduction is income generation through means other than microcredit. This includes job training, job creation and, in rural areas, attempts to switch from subsistence farming to cash crops. On the surface, this approach makes sense. As with microcredit, the idea is to help the poor gain opportunities to earn money and thus work their way out of poverty. Where jobs do exist and people need training, or where good jobs can develop, this approach can be tremendously helpful. As with microcredit, however, the approach also has some major flaws or at least limitations that make it only one of a number of approaches needed to reduce poverty. NGOs tend to stick to non-challenging projects as job training without having adequate assurances that the jobs will be there when the trainees finish their studies. All of these programs must recognize the obstacles that exist within the external environment that prevent people from escaping poverty. Discussions of job creation should not ignore the parallel issue of job destruction. This occurs when new job options and industries take over in rural areas, replacing farmland with factories. It also occurs through various government decisions. There is often a great uproar about the potential decline in jobs when plans are announced to ban or restrict a polluting industry.vii Yet when a government decides to ban cycle rickshaws or street vendors or to tear down traditional markets, wiping out large numbers of jobs that employ the poor in the process, In the case of Bangladesh, this included an industry that employed very few people (making polythene bags) and one that, while hiring many people, pays almost nothing (bidi work). vii

141

BEYOND APOLOGIES

officials tend to claim that there are plenty of other jobs available for those who will lose their source of income. Again, it does little good to plant a few trees while a forest is being chopped down behind your back. Preventing the destruction of local jobs that benefit the poor can be one of the most effective (if unglamorous) forms of poverty reduction. At the same time, job creation as an end in itself can perpetuate a different sort of poverty: undertaking virtually any new activity takes time away from other, existing activities such as subsistence farming and providing care for children and elderly relatives. The amount that one earns by taking on an additional job needs to be enough to compensate for the time spent earning it. Again, like microcredit, the job creation approach assumes that poverty can be reduced or eliminated by increasing the amount of money available but it does not make significant changes to the overall economic system, nor does it address inequality. Money is important but is not all that matters. A new industry that will pollute the environment may generate more costs than the jobs are worth. Dangerous, extremely repetitive, and otherwise highly unpleasant jobs may not be better than what they replace. In cases where the government is subsidizing job creation (for example by providing tax holidays or low-cost water and electricity to the corporation providing the jobs), it is worth seeing whether similar investments could not create better jobs elsewhere, jobs that give more independence and control to the worker rather than to the corporation. In some cases the land that a new industry will occupy was already being used by people to earn a livelihood. Are those people necessarily going to be better off after losing their land and having to purchase food in addition to all their other basic necessities? How will the earnings be divided between the owner and the workers? Recent research shows that while bidiviii workers in Bangladesh keep less than five percent of the wealth that they generate and most of the profits go to extremely wealthy factory owners, rickshaw wallah (men who pedal bicycle rickshaws) can retain seventy percent, earning much higher wages while working fewer hours and taking more days off.6

viii Bidis are small cigarettes made from tobacco wastage that are rolled by hand in cheap paper or a leaf, and then sold in packets. Tobacco control eﬀorts in Bangladesh and India are often hampered by ‘concern’ about the potential job losses, though workers are paid starvation wages while factory owners are immensely wealthy.

MYTH#6: MICROCREDIT IS A MIRACLE CURE

142

* * * A major source of employment are the well-known call centers, whereby people in North America and England, when seeking information about a product or service, are often routed to workers in India who attempt to answer questions with the appropriate accent and language. People are desperate enough to take the jobs, but may not be desperate enough to keep them. When some companies have an annual turnover rate of sixty to seventy percent of staff, one can safely assume that the workers do not love their jobs. Workers experience stress from intense pressure to meet their productivity targets. Beyond that is the attitude of the callers to those centers. Unemployment rates in Britain are high, leading to a good deal of anger over the off-shoring of jobs. This anger has led to deliberate abuse of call center staff, and that abuse is reportedly the main reason that staff give for quitting. As the head of one call firm explained, “They are vulnerable anyway, and an abusive call really knocks confidence. They don't want to take another call for an hour or two, and their performance is impacted.” Research has shown that about half of call center workers interviewed would like to receive counselling – this despite social stigma towards such support.7 * * * Not everyone has the skills or ambition to move to a higher position, but for those who do, the potential is important. The potential is also important for a country’s economy. Low-paid jobs that teach the worker almost nothing useful are helpful for preventing starvation, but do not lead to any dynamism that can reduce the country’s dependence on low-paying jobs over the longer term. Reliance on such jobs also leaves workers vulnerable if companies decide to move somewhere with even lower salaries or even more lax regulatory environments. People need to push governments to look beyond the short term: inviting factories into the country to take advantage of low salaries and the lack of environmental protections will help feed people today, but will do little to reduce poverty in the longer term. Investments in local activity (including organic farming, small repair shops, and in some cases local production to replace some imports) that is controlled by local people can do far more in the long term. Many job-creation-to-reduce-poverty initiatives are motivated by the desire to see more women in formal employment.ix Of course, women need more opportunities to earn a living; they also need more jobs that are decently paid and that

I emphasize the word formal, because most women do work when we consider the amount of labour involved in maintaining a home and family and the importance of those activities.

143

BEYOND APOLOGIES

allow them to maintain their family responsibilities.x When the goal of increased female participation in the formal labour force is not accompanied by efforts to decrease the resulting double burden on women, especially where (as in much of Africa) most agricultural as well as household work is already done by women, formal jobs may represent a further burden on women rather than an empowerment. They may also mean supplying a large pool of low-paid and disempowered workers to factory owners and others – a program to further enrich the wealthy while doing very little to actually help the poor. I once traveled to southern Vietnam to look at a worthwhile sounding home-based income-generating project for women which involved raising silkworms. The worms both produce silk and, after the silk is removed, a valuable source of protein (yes, some people consider fried silkworms a tasty treat). The women we talked to at first expressed their pleasure at having a steady source of income. It all sounded great, but a little further probing revealed other stories. The women explained that the worms have to be fed mulberry leaves every few hours, around the clock. That means that the women have to get up throughout the night, while still doing all their regular daytime activities, including work in the fields and household work. (The men were pleased about the extra income, but seemed to consider night-time feedings a womanly duty.) Many of the women complained of exhaustion and questioned whether the extra income was worth the fatigue it brought. In Vietnam, men usually control the money and there is a high rate of domestic violence, both of which affect the outcome of income-generating projects targeted at women. The women do the work but the women and their children may not even benefit from the additional income. In this case, it is clear that the women would have benefitted from receiving support to convince their husbands to share in the feeding responsibilities, or to get time off during the day to compensate for interruptions during the night, or to learn to bargain for control of the money that they had earned. The project could have included a component to educate men about the exhausting nature of the work, the need for men to contribute to household work, and the right of the women to keep their earnings. In any country with a high rate of domestic violence, it is not wise to assume that women can successfully negotiate with their husbands without outside assistance. Nor is it just the money that counts; more money does not necessarily mean a better livelihood. The cost of living may increase beyond the growth in additional income. Having a job can itself generate costs, such as the need for better clothes, transport, and childcare. As people become busier with paid work, the goods and This will, of course, be less important when men around the world take up their share of household work.

MYTH#6: MICROCREDIT IS A MIRACLE CURE

144

services that used to be produced within the household (most notably food and childcare) often have to be purchased. In the case of rural-urban migration, people may previously have lived in their own homes and grown much of their own food. In the city, they most likely have to pay rent and buy their food. The sprawling slums growing up around cities throughout the world indicate at least two things: rural poverty is a serious problem and the poor do not have adequate opportunities and support in cities. Anyone working on poverty reduction needs to consider policies that will both support rural livelihoods and reduce the likelihood that urban migrants will have to live in subhuman conditions. Decent conditions for the rural poor and for desperate migrants to cities cannot be created by simply handing out repayable loans or promoting more low-paid urban industry. Many NGOs suggest that the solution to rural poverty is for farmers to grow crops for sale, especially for export. The magic of cash crops and the wonders of technology are also questionable. Tobacco provides an extreme example given the many other problems that it causes, but there are dangers in all forms of agricultural monoculture. Traditional farming systems utilize a mix of crops in a small space, as well as natural pest resistance and composting. Industrial farming relies on chemicals rather than natural methods. The high input costs for fertilizers, insecticides, and seeds often cancel out the potential of any anticipated gains. Crop failure in a monoculture system can spell total disaster, as can a drop in the market price of the crop. When farmers grow several different food crops, the failure of one is not so devastating, and even if they cannot find a market for all of their harvest, at least their families do not go hungry. Research on tobacco farming in Bangladesh reveals many things that typical econometric studies of the financial return on various crops would not easily capture. While tobacco is profitable in some years, in others, it generates a loss; this is not a problem for wealthy landowners but it can completely wipe out a small farmer, forcing him to sell his land. Farmers must take out loans to purchase seeds, fertilizers, and pesticides to grow tobacco. They then take out loans to pay for needed household items during the growing season. After they harvest, dry, and sell the tobacco, they must use the money first to repay those loans, along with their interest, before realizing any profit. If they plant a variety of vegetables, they can harvest them over the course of the season rather than waiting until the end, thus avoiding at least some of the loans. Vegetables also require far fewer (if any) chemical inputs.8 When economists rave about the growth in agricultural income, it helps to ask whether the farmers are really better off than they were before. 

145

BEYOND APOLOGIES

Towards a Better Way: Pay More Attention to Income Preservation as a Small but Important Piece of the Puzzle “Anyone who has struggled with poverty knows how extremely expensive it is to be poor.” – James Baldwin9

* * * As I argue throughout this book, a number of different policy measures are needed to reduce poverty, and those working for this goal should become involved in advocacy campaigns to bring them about. These include protecting the poor from exploitation, providing basic services at no cost, and strengthening rather than combating labour unions. In addition to all the difficult policyoriented issues that desperately need to be addressed, there are also smaller-scale actions that could make an enormous difference in the livelihood of the poor. Too often forgotten by those working on poverty alleviation, these small actions offer a potentially large impact. Given their ability to help hundreds or thousands of people, such approaches are worth considering. People can make a significant improvement in the lives of the poor by fighting against projects and policies that will destroy existing, local jobs. Unfortunately, these types of jobs – ones that benefit the poor rather than the wealthy – are continually under threat for the simple reason that they do not support mainstream economic growth. Ideally, these are jobs that are good for the environment (or at least not harmful to it) and that require few if any non-renewable resources. This includes the kinds of jobs that, weather permitting, people can engage in outdoors, without the cost of rent and utilities: small-scale vendors, local repair people, and local recyclers (sometimes disparagingly referred to as garbage pickers). As environmentalists fight for more bicycle use, there will be space for more street-corner servicers, ready to pump tires and to fix bicycles. As environmentalists fight for less waste of limited resources, there will be a need for more people to repair broken appliances and to recover what is valuable from those items that are not repairable. Every low-consumption country has people engaged in these kinds of jobs; most of them, as well as those doing household work, have no legal or financial protection. NGOs and others concerned about the poor should work with community groups and legal advocates to improve the legal situation of these members of the working poor by ensuring that they are covered by existing laws – and strengthening those laws where needed – to provide full protection and support. A further benefit of such efforts is that it brings money to the bottom of the pyramid and helps it circulate there, thus avoiding the gravitational pull of money upwards. The more involvement of transnational corporations in the economy, the more likely money is to drift up to the rich. A stand

MYTH#6: MICROCREDIT IS A MIRACLE CURE

146

selling limeade made from local limes benefits the seller as well as the owner of the tree; not so with the sale of Coca-Cola.xi The neglected companion of job preservation is income preservation: helping the poor to reduce their expenditures so that they can keep more of what they earn. Some would argue that poverty already does that quite effectively, but it can in fact be quite expensive to be poor. The poor cannot afford to purchase goods in bulk; even if they could, they do not have massive freezers or abundant storage space.xii The poor in many countries live on the outskirts of big cities; many pay a substantial portion of their income on transportation to get themselves to two or three different jobs. Lacking bank accounts, the poor who work for others have to pay exorbitant fees to cash a pay cheque. Health care and education costs put a major economic burden on the poor.10 In Haiti, the poorest country in the Americas, poor families spend up to thirty percent of their income on education, as the school system is mostly private.11 In such cases, what is needed is not (simply) more income but better government services. NGOs can implement projects to increase people’s incomes, knowing that some of that money will purchase the goods and services they no longer produce at home. They could also combine their efforts to increase income with efforts to decrease the need for additional expenditures. Income preservation is a sensitive issue, and I do not mean to suggest that the poor should accept their lot and become more efficient at scrimping and saving. Redistribution of income from the top down is essential. In addition, the lot of the poor could be vastly improved if governments provided better basic services. If people did not have to pay for education, health care, or transport, and if governmentprovided safety nets meant that they did not have to put money aside or use up their savings for emergencies, the poor would get by far better. Unfortunately, policymakers and economists alike tend to ignore such government-provided services. Everyone concerned about poverty reduction should pressure governments to provide the services that can help the poor preserve what income they have. NGOs working on transport should support better policies to reduce travel costs and time. Grassroots NGOs in low-income neighbourhoods should look into helping people set up cooperative shops that buy in bulk and sell in smaller quantities, encouraging customers to bring in reusable containers instead of relying on proOn cold days, I would suggest switching to hot limeade. I have seen shampoo sold in such tiny foil packages as to be laughable, but realized that this may be all that the poor can afford.

xii

147

BEYOND APOLOGIES

ducts pre-packaged into tiny units. NGOs should also help the poor to grow and raise more of their own food, while working with them to make sure that they consume at least some of what they produce.xiii Even in cities, unused land and spaces such as rooftops and verandas provide spaces for food production. Precedents exist. Cuba faced dire poverty following the 1989 collapse of the Soviet Bloc. The country had been growing sugarcane for export and importing most of its food. Since it no longer had cheap oil imports supported by the Soviet Union, Cuba could no longer rely on machinery and cheap fertilizers, which affected their production of sugarcane. The Cuban government responded with a series of policy initiatives. It changed city laws to grant cooperatives indefinite free right to grow food on public land and encouraged urban gardening. The result was 383,000 urban farms on otherwise unused land, such as patios, rooftops, and unused parking lots.12 In the same way that people keep pets in cities, Cubans raise rabbits, chickens, and goats at their homes. The Cuban Ministry of Agriculture trained extension agents who in turn taught people permaculture, composting, and natural (chemical-free) pest control, as chemical pesticides were banned within the city. City dwellers formed cooperatives and traded seeds and tools. They sold their produce and livestock at local farmers’ markets. Today, urban farms in Cuba supply at least seventy percent of all the fresh vegetables in cities such as Havana and Villa Clara. Cubans now produces ninety percent of the fruits and vegetables consumed in the country.13 People weathered the crisis with ample food, and urban gardening and food production continues to be an important national policy.14 Again, the gravitational pull of money upwards was avoided. There are similar examples elsewhere. Detroit, Michigan, which was devastated by the crash of the American automotive industry, has also turned to urban gardening on vacant land. Benefits include earning more money, having more job opportunities, gaining new skills, and improved nutrition and health, as well as potentially $200 million in sales and around five thousand jobs.15 Each dollar invested in the program yields about six dollars in fruit and vegetables. The multiple benefits of urban agriculture include a reduction in urban poverty, an increase in the value of local housing stock, and greater civic participation. In the largest homeless community in the United States, Skid Row in Los Angeles, the Urban Farming Food Chain Project helps the local residents to grow their own For decades, agricultural programs were divorced from nutrition programs. For example, Bolivian farmers growing the ‘super grain’ quinoa sold it all for export; they earned some money, but their diets did not improve. More recently, NGOs are combining the two approaches, helping farmers to both grow and consume foods that are more nutritious. See http://www.healthbridge.ca/food_and_nutrition.html

xiii

MYTH#6: MICROCREDIT IS A MIRACLE CURE

148

food. Community urban agriculture in Kitchener, Ontario (Canada) has increased civic involvement and thus may have helped to reduce local crime. In Newark, New Jersey, the use of Small Plot Intensive (SPIN) methods allows people to grow food even where the soil is contaminated. It uses boxes or crates filled with healthy soil that can be shifted around easily.16 Some of the cities in Argentina which lost their industry during the country’s economic collapse responded by converting available uncontaminated land into urban gardens. Results included stronger communities as well as the availability of more food. That food, in turn, was traded partly with local currencies. In the city of Rosario, the economic crises of the late 1990s and early 2000s pushed more than sixty percent of families in the city into poverty, but a local urban gardening program that involved over ten thousand families working in almost eight hundred community gardens managed to produce enough food for forty thousand people.17 Poverty did not have to mean starvation or an unhealthy diet. There are multiple benefits to encouraging small, local food production over factory farms. While factory farms may enjoy a certain economy of scale, they are not the most efficient way to produce food; one can get higher yields through intensive mixed land use.18 Factory farms are owned by a relatively small group of people or by remote stockholders who keep most of the profits that the cash crops generate. Factory farms also rely on middlemen to distribute the food, much of which is sold to processors. The price of the food that the consumer eventually purchases includes petroleum, processing, packaging, shipping, and advertising. When food is grown closer to the consumer, without chemical inputs, and is sold at farmers’ markets and local stores, more of the food dollar goes to the farmer and to small businesses and less to fuel and middlemen. Fewer processed foods mean a healthier diet. Those concerned about public health, poverty, and about supporting small local farmers can encourage farmers’ markets, Community Supported Agriculture, and urban food production. Everyone can shop at local markets and at stores that carry local produce. NGO workers should teach people how to make organic fertilizers and to collect and plant traditional seeds rather than switching to hybrid or genetically modified seeds and chemical fertilizers, even if the yield and supposed profit is thus lower.xiv I have visited a project in Kathmandu that teaches people to compost As Eric Schlosser and Michael Pollan observe, higher output can harm others producing the same product by driving the price down. The high yields then benefit not the farmer but the purchaser, often a multinational company that dominates the market and government policy. Jane Jacobs (Cities and the Wealth of Nations: Principles of Economic Life (New York: Vintage Books, 1985)) points out that the ‘green revolution’ in the southern United States xiv

149

BEYOND APOLOGIES

their household food waste right inside their kitchens. They can then use the compost for rooftop gardening and for their ﬁelds. The less one spends on inputs, the lower the cost of failure and the greater the preservation of one’s income. This is not to suggest that everyone should produce everything for themselves; communities need specialists such as carpenters and shoemakers. However, we can encourage the better use of available resources in order to improve nutrition and raise the standard of living for the poor. Tobacco control and a ban on lotteries can also help reduce expenditure by the poor. Expenditures by the poor on addictive and harmful products and activities such as tobacco, alcohol, and gambling can be sizeable, particularly when people are living near the margins of existence. Research in Bangladesh suggests that more than ten million malnourished children could have enough to eat if their parents shifted most of what they spend on tobacco to food.19 Quoting research my colleagues and I conducted in Bangladesh, ...the amount currently spent annually on bidis in Bangladesh is equivalent to the price of 4.85 billion eggs, 291 million chickens, 1.46 million tons of rice, 2.91 million cows or 2.33 million cycle rickshaws. If even a percentage of bidi expenditure were shifted to these other [items], none of which are controlled by a few monopolistic companies as is the tobacco sector, a large number of higher value, healthier and better remunerated jobs could be created, completely oﬀsetting any job losses in the tobacco sector.20

Even the homeless in India spend a significant portion of their minimal income on tobacco.21 If children ate better, their education, as well as their health, would improve; it is easier to pay attention on a full stomach. NGOs should support comprehensive tobacco control laws. Extensive research has shown that policy measures are much more effective than educational ones.22 Ill health is another major contributor to poverty. While programs are needed that focus on a single disease or issue, such as tuberculosis or HIV/AIDS or tobacco control, NGOs should also support efforts to improve public health and to ensure that there are sufficient government expenditures for health and education, broadly speaking. NGOs banding together in alliances to promote better budget-

led to greatly reduced labour demands, high unemployment, and vast migrations to cities that were incapable of absorbing so many desperate job seekers. There is debate whether switching entirely to organic farming would lead to less or more hunger, but in the meantime, what diﬀerence does it make? We do not have to make the decision for the entire world, and there is plenty of evidence that small plots can provide high yields without using chemicals.

MYTH#6: MICROCREDIT IS A MIRACLE CURE

150

ing and advocating for surtaxes on various products (tobacco, alcohol, sugarsweetened beverages, televisions, cars…) would make a significant contribution to better health, both through decreased consumption of those items and through the health programs that the surtax could fund. Other possibilities for action exist. Counter claims that the poor do not contribute to the economy. They contribute their labour (usually for a pittance); they also pay taxes even when they do not pay income tax. In the United States, sales taxes fall disproportionately on the poor. While the top one percent of Americans pays five percent of their incomes in state and local taxes, the bottom half pay ten percent.23 Support ‘informal’ (or more appropriately self-employed) workers, through purchase choices and advocacy work. Such workers are vital to the economies of many countries, but are regularly under threat by laws and ‘development’.24 While addressing people’s current needs, it is important to think about the future, and decide whether one has enough bravery to take on the more challenging issues that could lead to major improvements. It is important to engage in activities that help the poor today, but even more so to put the policies in place that will greatly reduce the need for such work in the future. Identify and support those working to counter land grabs, which consist of large-scale land acquisitions by high-consumption countries and corporations in low-consumption ones. According to the Oakland Institute, between 2006 and mid- 2009, some fifteen to twenty million hectares of farmland were taken in this fashion.25 Foreign companies lease nearly four million hectares of land in Ethiopia. If local inhabitants refuse to leave, they can be beaten up and jailed. As one NGO official explains, “Over the next few years, the Ethiopian government plans to forcibly move 1.5 million people off their homelands and concentrate them into a few settlements.” The process takes land away from local production of food grains and shifts production to export crops. “Very little local employment is created; there is no requirement by the Ethiopian government that companies have to hire locally. Nor is there any contractual clause by which the money generated is to remain within the Ethiopian economy.” A similar situation is occurring in India, wherein minorities are pushed off their land to make way for cash crops or industrial development.26 Identifying and addressing root problems and injustices – the structural causes of poverty – would be an excellent place to start; so would taking on some of the issues that are ignored by others. Simply replicating programs like microcredit may put a bandaid on poverty, but does not heal it.

151

BEYOND APOLOGIES

Notes Taj Hashmi, “Nobel Peace Prize for Dr Yunus and Grameen Bank”, http://openspace.org.in/node/379 2 Susan F. Feiner and Drucilla K. Barker, “A Critique of Microcredit,” Economica, Women and the Global Economy (first printed in November/December 2006 issue of Dollars & Sense) http://imow.org/economica/stories/viewStory?storyId=3693 3 Aneel Karnani, “Failure of the Libertarian Approach to Reducing Poverty,” Asian Business & Management 9 (2010):5–21. 4 Feiner and Barker, “Critique of Microcredit.” 5 Grameen Bank, www.grameen-info.org, accessed 14 July 2014. 6 Anupom Roy, Debra Efroymson, Lori Jones, et al., “Gainfully Employed? An Inquiry into Bidi-Dependent Livelihoods in Bangladesh,” Tobacco Control 21 no. 3 (2012): 313-317. doi: 10.1136/tc.2011.043000. Published Online First July 20, 2011. 7 “Indian Call Staff Quit over Abuse on the Line; Firms Provide Counselling to Help Staff Insulted by British Customers,” The Guardian, 29 May 2005. 8 Firdousi Naher, Debra Efroymson, and Saifuddin Ahmed, “Tobacco Cultivation and Poverty in Bangladesh: Issues and Potential Future Directions,” Case study prepared for WHO, February 2007. 9 James Baldwin, "Fifth Avenue, Uptown: a Letter from Harlem," Esquire, July 1960. 10 K Xu, DB Evans, Z Kawabata, R Zeramdini, J Klavus, and DJ Murray, “Household Catastrophic Health Expenditure: A Multi-country Analysis,” The Lancet 362, no. 9378 (July 12 2003):111-7; WHO, “Out-of-Pocket Health Payments and Catastrophic Expenditures,” www.who.int, accessed 15 July 2014. 11 Jeffrey Puryear and Michael Lisman, Haiti’s Educational Moment (Ottawa: The Canadian Foundation for the Americas (FOCAL), 2010). 12 Miguel A. Altieri and Fernando R. Funes-Monzote, “The Paradox of Cuban Agriculture,” Monthly Review, Volume 63, Issue 08, 2012. 13 Yvonne Rydin, Ana Bleahu, Michael Davies, et al., “Shaping Cities for Health: Complexity and the Planning of Urban Environments in the 21st century,” The Lancet 379 (2 June 2012): 2079-2108. 14 Altieri and Funes-Monzote, “The Paradox of Cuban Agriculture.” 15 Rydin, Bleahu, Davies, et al., “Shaping Cities for Health.” 16 Rydin, Bleahu, Davies, et al., “Shaping Cities for Health.” 17 UN Habitat, http://www.unhabitat.org/bp/bp.list.details.aspx?bp_id=206; personal communication with Yves Cabannes, Montreal, 23 August, 2011. 18 Vandana Shiva, Soil Not Oil: Climate Change, Peak Oil, and Food Insecurity (New Delhi and London: Women Unlimited and Zed Books, 2009). 19 Debra Efroymson, Saifuddin Ahmed, Joy Townsend, et. al., “Hungry for Tobacco: An Analysis of the Economic Impact of Tobacco on the Poor in Bangladesh,” Tobacco Control 10 (2001): 212-217. 1

MYTH#6: MICROCREDIT IS A MIRACLE CURE

152

Roy, Efroymson, Jones, et al. “Gainfully Employed?” Debra Efroymson and Sian FitzGerald, eds., Tobacco and Poverty, Observations from India and Bangladesh (Dhaka: HealthBridge (formerly PATH Canada), 2002). 22 Prabhat Jha and Frank Chaloupka, Curbing the Epidemic: Governments and the Economics of Tobacco Control (Washington: The World Bank, 1999). 23 Joshua Holland, The Fifteen Biggest Lies About the Economy And Everything Else the Right Doesn’t Want You to Know about Taxes, Jobs, and Corporate America (Hoboken, New Jersey: John Wiley & Sons, Inc., 2010). 24 Ela Bhatt, “Piece-Rate Workers’ Attempts at Self-Reliance” in The Living Economy: A New Economics in the Making, ed. Paul Ekins (London, New York: Routledge and Kegan Paul, 1986). 25 “The Great Land Grab: Rush for World’s Farmland Threatens Food Security for the Poor.” http://www.oaklandinstitute.org/great-land-grab-rush-world%E2%80%99sfarmland-threatens-food-security-poor 26 Ashish Kothari, “How Ethiopians are Being Pushed oﬀ Their Land,” The Hindu, 19 February 2013, p. 9. See also the various non-ﬁction books by Arundhati Roy for the situation in India. 20 21

MYTH #7: Extreme Inequality is Inevitable “This troubled planet is a place of the most violent contrasts. Those who receive the rewards are totally separated from those who shoulder the burdens. It is not a wise leadership.” – Spock, character in the American science fiction television show Star Trek1 “In a sign that the global economy could be improving, there are now 1,011 billionaires in the world, up from 793 last year. … So with the tide apparently turning, and money beginning to be made once more…” – Pól Ó Conghaile, “Billionaires’ Playgrounds”2 “The problem is, you help people out, then they expect to be treated like equals.” – A Sri Lankan man explaining to me why conflict breaks out in different countries

Why Inequality?



The Marxist ideal of “From each according to his ability, to each according to his need” still has great appeal; there have been, however, some difficulties in its application. In a society in which everyone is expected to contribute what they can and everyone receives what they need, what would be the incentive to work? Most people do not work for the sheer joy of it, and will not want to work harder than those around them simply because they have the ability to do so. Similarly, people tend not to be satisfied getting simply what they need. Meanwhile, people have a wide range of talents and abilities. If people fail to be either rewarded for their hard work or punished for their laziness, then many people will try to get away with doing as little as possible. Those who are willing to work harder for greater material rewards will be discouraged from doing so if those rewards do not exist; they will thus work less and the whole economy will suffer. Absolute equality – wherein each person is treated exactly the same and is given identical rewards regardless of his or her input – thus makes little sense as a goal of a good society. There is, however, a vast and all-important difference between minor levels of inequality – those that reward the people who work the hardest and produce the most, or who have the rarest skills, or who have invested the most in training, or have made the greatest contributions to society – and the levels of inequality that are common in much of the world, where some people have billions of dollars while their neighbours starve. Not only do unacceptable levels of inequality exist, but too often, inequality has nothing to do with skills or hard work and everything to do with accidents of birth. Some people never get a fair chance in life because of their sex, ethnicity, religion, or family history, among many other causes of discrimination. Both wealth and poverty tend to be inherited conditions. Even where poverty is ‘earned,’ how high a price are people willing to make others pay for poor financial management or lack of marketable skills or

MYTH#7: INEQUALITY IS INEVITABLE

154

laziness? And while there are certainly appealing economic arguments to be made for rewarding those who contribute the most and work the hardest, it is difficult to defend rewarding only those who, by mere chance, have lighter skin or belong to a certain ethnic group. * * * My closest friend in Sri Lanka recently spent several months on Christmas Island, where he was held with thousands of illegal would-be immigrants to Australia. On his nearly three-week long illegal boat ride there under the hot sun, he received just two cups of water a day. However, he felt that the risk of death that he faced during the boat ride and the humiliation and suffering of being held on the island were a small price to pay for the hope of a better future. The abstract idea of ‘inequality’ takes on a new meaning when the friend with whom you have been going for walks on the beach feels the need to put himself through misery that you can never imagine for yourself. * * * Not only ethnicity and religion, but the simple difference between having an XX or an XY chromosome pair makes an enormous difference in one’s life possibilities and what choices one has, even in the probability of surviving to adulthood. One’s life circumstances are also largely determined by the country of one’s birth. An American is almost five times more likely to be jailed than a Canadian.3 An American woman is seven times more likely to die in childbirth than a woman in Italy, while a woman in Sierra Leone is a hundred times more likely to do so than a woman in Lithuania.4 The natural resources of this planet are limited. This means that we cannot simply address poverty by looking down at the bottom of the economic pyramid while ignoring the vast wealth that is increasingly being hoarded at the peak. We cannot keep trying to make the ‘pie’ bigger. Such vast inequality causes a range of problems, including the collapse of democracy. It violates the principles of humanity and decency. If people fail to act to reduce it, then inequality will perpetuate itself, worsening poverty and chipping away at the middle class. The scale of the problem Inequality within and between countries is enormous and continues to grow. 

In the 1990s, workers making Nike shoes in Indonesian factories were paid as little as ﬁfteen cents an hour, lived in company barracks, had no unions, were often forced to work overtime, and knew that if they went on strike, the military might be called in to retaliate. In 1992, the $20 million that Michael Jordan received in endorsements of Nike products was equivalent to the entire annual payroll of the Indonesian factories that made the shoes.5 Today,

155

BEYOND APOLOGIES Indonesian Nike workers continue to be underpaid and badly treated.6



In Argentina in 1970, the richest ten percent of the population earned twelve times as much as the poorest; by 2002, they were earning forty-three times as much.7



In 1980, the average American CEO was paid forty-two times as much as the average worker; at the time, income tax rates for the richest were seventy percent. Today, the pay ratio is 380 times, while the top income tax rate is just under forty percent. Tax loopholes mean that the rich pay even less than that amount. One hedge fund manager, Raymond Dalio, received three billion dollars in compensation in 2011.8

Figure 3: American Income Inequality



In the 1990s, the CEO of McDonalds received about 230 times more in compensation that what a full-time worker receiving the federal minimum wage could earn. That gap has since increased to 580 times. While a typical McDonalds employee struggles to survive on his or her salary,i the CEO has access to a company aircraft for personal trips and recently purchased two condos at the top of the Trump International Hotel in Chicago for about $3.3 million.9

The typical employee’s wages are so low that, for example, one man who has worked for McDonalds for twenty years cannot pay the rent on his substandard housing in a men’s welfare hotel.

MYTH#7: INEQUALITY IS INEVITABLE

156



In the decades between 1971 and 2001, the median income of the average American worker did not grow at all, while the income of the top onehundredth of one percent of the population increased by almost ﬁve times.10



In 2007, the top one percent of the population in the United States controlled almost half of the country’s total financial wealth, the top five percent had seventy-two percent, and the top ten percent had eighty-three percent. The bottom eighty percent owned just seven percent of total financial wealth.11



The much talked about economic growth in China has resulted in a doubling of the income gap between city dwellers and the 800 million rural poor since the mid-1990s.12 There are now 1.6 million rich households in China (annual disposable income of more than $150,000), while there are 164 million poor ones (annual disposable income of less than $5,000).13

Figure 4: Argentinean Income Inequality



In India, 410 million people (thirty-seven percent of the population) live below the poverty line.14 At the same time, there were sixty-one billionaires in 2012. The combined net worth of the hundred richest people in India is $250 billion15 – enough to give $610 to each person who lives below the poverty line.ii

That may not sound like much, but consider that the government’s poverty line – the amount needed to reach the “minimum standard” – is set at ﬁfty-six cents per day per person in urban areas and forty-four cents per day in rural areas. An additional $610 per year would triple the individual budget of the urban poor and almost quadruple it for the rural poor. Ashima Goya, “India Debates Meaning of Poverty Line and Budget Deﬁcit,” EastAsiaForum, 5 May 2012.

157

BEYOND APOLOGIES



While there was only one billionaire in the United States in 1978, there were sixty-eight in 1988, after eight years of Ronald Reagan’s presidency.16 Reagan’s anti-poor policies also meant that conditions worsened for many at the bottom of the pyramid: the number of people living below the federal poverty line increased from twenty-six million in 1979 to almost thirty-three million in 1988.17



Worldwide, the number of billionaires has continued to grow, even during the recent worldwide economic recession. The combined net worth of the world’s 1,426 billionaires in 2013 was $5.4 trillion. The billionaires were worth, on average, $3.7 billion apiece.18



The GDP of the forty-one Heavily Indebted Poor Countries (567 million people) is less than the combined wealth of the world’s seven wealthiest people.19



Globally, the incomes of the top one percent have increased sixty percent in twenty years. The growth in income for the top tenth of one percent has been even greater.20

In the absence of regulations and measures to redistribute wealth, ‘free market’ capitalism will inevitably lead some people to grow extremely wealthy while others remain entrenched in – or fall deeper into – poverty. In a world in which greed is sometimes more common than empathy, some of those at the top fight any measure that would lead to a redistribution of ‘their’ wealth. Because of this, one sees, in the words of Indian writer Prabhu Chawla, that “… subsidies for the poor are being gradually withdrawn to make way for increased incentives for the rich.”21 Mainstream economists, rather than lamenting these trends, applaud them for their upward impact on GDP; wellbeing is forgotten or ignored. Inequality, unemployment, and poverty Inequality, unemployment, and poverty reinforce each other in a number of ways. Imagine that an employer wishes to pay his workers a low wage in order to generate more profits for himself. If there are plenty of better jobs available, or if unemployment benefits are sufficiently generous that people are better off taking the benefits than working for a pittance, then workers will not accept his low wages and he will have to offer more.iii But if a lot of people are looking for work,

Unless, of course, these jobs can be ﬁlled with immigrant labour. If the immigrants are illegal, they cannot complain about their working conditions. But that, again, is a manifestation of inequality.

iii

MYTH#7: INEQUALITY IS INEVITABLE

158

there is a shortage of good jobs, and unemployment benefits are minimal to nonexistent or are doled out in a humiliating way, then the employer will find it easy to attract workers in spite of the low wages. Employers thus benefit both from high levels of unemployment and from stingy unemployment compensation. Hint: Whatever they say to the contrary, those who benefit from unemployment and inequality are unlikely to do anything to improve the situation. * * * When most wealth gravitates to the top, there is less to spread around everywhere else. As a result, the number of well-paid jobs – even of jobs in general – declines. Inequality also results in a greater number of existing jobs being unpleasant and of low quality. When the ‘floor’ is removed in terms of how awful jobs can become, and where rules about government unemployment benefits require that people take a job to receive said benefits, then people are forced into awful conditions. With more equality, nobody is desperate enough to take the most unpleasant jobs (which also, too often, are the worst paid). As a result, either the conditions must improve or the salary must go up, or both. * * * In the early 1980s when I was volunteering at a homeless shelter in Boston, I met a man who had been working as a dishwasher. He said the job was miserable – unpleasant work in an extremely hot and humid room – and only allowed him to afford the most atrocious housing. He decided that he was better off quitting his job and living on the streets so that he could at least have his days to himself. The example is extreme, but the lesson remains. * * * The reverse is also true. Historically in the United States and Europe, periods of low inequality have been periods of low unemployment.22 When limited resources are spread more equally, there are more possibilities for job creation in general, and for good jobs in particular. Reducing the difference between the best and the worst jobs will result in people staying in their jobs longer. The result will not be an entire nation of lazy people taking government benefits, but rather better working conditions overall. Entire countries such as Denmark have prospered and continue to prosper by promoting both employment and equality.23 Because employers can benefit from joblessness, poverty, and a powerless, desperate workforce, some employers put pressure on politicians to keep unemployment rates high. For example, epidemiologist Dr. James Gilligan describes how American unemployment rates are consistently higher when Republicans are in power, due to their implementation of a whole range of anti-poor policies that also, incidentally, contribute to higher rates of violence.24 Those policies reduce unemployment benefits and weaken the organizing rights of workers. Gilligan

159

BEYOND APOLOGIES

argues that inequality actually benefits conservatives because it causes resentment and fear of the poor – and thus public support for conservative policies that, ironically, make the situation even worse. In the United States, one significant factor in wage inequality has been the drastic reduction in the strength and power of labour unions. America has a long history of labour unions designed to defend the rights of workers. Employees will usually be in a weaker position than their employers will; that gap is even greater when it comes to unskilled workers who can easily be fired and replaced. The only way to narrow that power gap is for workers to organize and negotiate as a group, rather than as individuals. The results of this negotiating power are evident: in the United States, unionized workers earn between eleven and thirty percent more than non-unionized workers, in terms of wages and full employment packages that include benefits.iv Having the ability to go on strike to press for demands when the situation becomes desperate is a critical negotiating tool.v That ability ended to a large extent in the 1980s, at least in the United States. When air traffic controllers went on strike, rather than support their right to do so and pressure their employers to negotiate fairly, then-president Reagan took a strong stance against strikes. In so doing, he eliminated one of the most important tools of unions, which have lost significant power in the years since. When there is nobody with power left to stand up for the beleaguered workers, it becomes that much easier to pay absurdly low wages and deny workers decent working conditions and benefits.25 It is not difficult to see who benefits and who loses from the deterioration of unions. Where the poor have not seen their incomes decline, it is largely due to the fact that they work longer hours rather than to any increase in pay.26 Of course, when the worker loses, someone else wins. Labour unions are being busted not because they were ineffective at helping workers but precisely because of their success. The weakening of labour unions explains only one aspect of growing inequality in the United States. In fact, any explanation of equality that focuses solely on salaries is incomplete, since many multi-millionaires and billionaires did not gain iv The wide range (eleven to thirty percent) stems partly from the decline in the power of unions and current versus historical benefits. v Literature can often make a point more articulately than non-fiction. The suffering of striking workers and the fact that strikes are generally reserved as last-ditch measures when workers have no other recourse was particularly brought home to me by Ėmile Zola’s Germinal. At the time of writing this book, non-unionized fast food workers across the United States were going on strike to protest their ridiculously low wages.

MYTH#7: INEQUALITY IS INEVITABLE

160

their status by receiving high salaries alone but rather by receiving large compensation packages that are comprised of low-taxed perks, or through investments and inheritances. Compensation packages that include stock options and similar investment products can be particularly lucrative because they are taxed at a lower rate than salaries. The wealthiest Americans – those with incomes over $10 million – acquire almost half of that income through capital gains and dividends. For the most part, such investments (capital gains) are taxed at only fifteen percent, much lower than the current highest American income (salary) tax bracket of almost forty percent. Income tax, rather than being progressive, is regressive – some members of the middle class pay a higher percentage (up to thirty-five percent) than do the wealthiest (only fifteen percent). Since taxes pay for public services, decreases in tax rates have consistently made the rich – who do not need the services – richer, and the poor and middle class – who rely on those services – poorer.27 Inequality is, in many other ways, simply bad economics. The best way to generate spending in an economy is to ensure that as many people as possible have money to spend. Because their needs are so great, the poor are virtually guaranteed to spend rather than save any money they have. The same cannot be said for the rich. At some point, when a person has millions or billions of dollars, it becomes difficult to spend it.vi Even when the rich do spend their money, they tend to spend it in ways that make other rich people better off; little ever trickles down to the poor. When money shifts to the bottom of the socio-economic pyramid, though, it is more likely to circulate there: where the opportunity exists, low-income earners are more likely than the rich to buy their goods from small local shops and stands owned by others with little money. Some of that money will indeed ‘trickle up’ to the rich when people buy items manufactured by large corporations, a process I call the gravitational pull of money upwards. That process requires various policies to resist, such as encouraging small, local businesses and allowing/encouraging street vendors. But when wealth is spread more evenly rather than collecting in the hands of the few, poorer people would have more to spend, and most of that spending would be for non-luxury items. The poor

vi Let us not completely underestimate the creativity of the very rich in spending their billions. Outrageous examples include a $95,000 truﬄe, a $3 million sports car, building a $1 million emergency room in one’s home to avoid the misery of going to a hospital, installing an ATM in one’s kitchen, and buying one’s own personal submarine or full-sized passenger jet. Ross A. Lincoln, “3 Insane Things Rich People Blow Their Money On,” AlterNet, 1 Nov. 2013 and Khadeeja Safdar, “8 Insane Things Super-Rich People Spend Their Money On (Photos),” The Huﬃngton Post, 6 June 2012.

161

BEYOND APOLOGIES

would thus benefit in terms of both what they can buy and the income opportunities generated by their spending. Other problems with inequality The fact that inequality contributes to poverty is reason enough to address it. However, success in reducing inequality will also bring rewards in many other areas. Given how difficult it is to force the elite to surrender some of their money and influence, it is helpful to keep in mind that many other aspects of life will get better if inequality is successfully addressed. Social cohesion declines when the rich live their lives separately from the poor, retreating behind gates and barred windows, only frequenting expensive clubs and restaurants, never encountering those outside their income group except as workers and beggars. While visiting Malawi, I met a young activist who had just had all the appliances in his outdoor bathroom stolen. His boss did not suffer from theft because he lived behind a high gate, nor did he appear to empathize with his colleague. The affluent can wall themselves off from would-be thieves and other threats, but fear and high walls destroy one’s sense of community. Social cohesion also diminishes when the life experiences of the rich and poor vary enormously. For a society to function, different social and income groups need to mix and interact and learn about each other. Where mixing is rare, prejudices go unchallenged, stereotypes become entrenched, and violence becomes more common. Where inequality is highest, so are murder rates. Mostly the poor kill each other, as jealousy and despair over the lack of opportunities leads to more gangs and other deadly crime – though the fear of crime affects virtually everyone.28 Inequality erodes people’s sense of humanity. The sight of extreme poverty can be so distressing that the only way to respond is to look away, assuming that those living such a life are not fully human; such beliefs, in turn, reduce people’s willingness to address that poverty. Nobody should have to live in conditions of extreme deprivation: street children subjected to violence; parents forced to leave their young children locked in the home alone, uncared for, while they are out working (or looking for work); the sense of inadequacy and despair that arises when, no matter how hard people work, they can never afford even the basic necessities while others live in palatial homes with servants to wait on them. It is impossible to foster a sense of community, of nationhood, of joint endeavour – even of empathy and understanding – when people in the same country or locale are living such drastically unequal lives. It also makes it difficult for nations to work together to solve international problems such as climate change and armed conflict.

MYTH#7: INEQUALITY IS INEVITABLE

162

Inequality creates two separate tracks of services: public government services for those who can afford nothing else, and private services for those who can. The rich, who have the power to influence government to improve service delivery, have no reason to do so if they are not utilising those services; this includes health, education, transport, and policing. The rich also object to paying taxes to support services that they do not use. They are likely to support policies – such as regressive taxation and limited social spending – that will enable their children to become richer while making it difficult for the poor to rise out of poverty.29 Comparisons between different countries show that those with the greatest levels of inequality (the biggest gaps between the wealthiest and poorest segments of the population) have the worst health outcomes, including life expectancy, infant mortality, and rates of obesity. The relationship is not simply a reflection of the fact that poverty causes ill health. High levels of inequality have a negative effect on the health of even the well off, mostly because more inequality means less social cohesion, which results in stress, fear, and insecurity for everyone.30 Mainstream economic policies may exacerbate this relationship by whittling away at the welfare state, creating even worse situations for the poor.31 Inequality also has a destructive effect on politics. When some people have vast wealth, they are able to exercise undue influence on the political system, either legally through campaign donations or illegally through bribes. The more power the rich have, the more of it they can use to keep themselves at the top of the pyramid and others at the bottom. As a result, it becomes more difficult to enact policies and programs that would help the poor, or save the environment, or improve human rights. The repealing or weakening of laws in various countries that were designed to regulate banks and other financial institutions – which ultimately led to multiple economic crashes – were brought about through political pressure from the financial industry. The wealthy can pay politicians to enact policies that maintain or increase inequality. This occurs through a variety of means, including campaign contributions by individuals and corporations, and by a range of ‘gifts’ and other ‘favours’ that exact a return. The wealthy can also control the media so that it refuses to show the negative repercussions of inequality. When inequality grows too great, it is impossible to have genuine democracy. Extreme inequality also leads to environmental destruction. The fantastically extravagant lifestyles of the very wealthy can be fantastically damaging: enormous climate-controlled homes, private jets, and luxuries sourced from around the world. The very poor do far less damage to the environment than the very rich, but they may have no other options for survival than to destroy natural resources. Finally, despite what mainstream economists claim about inequality encouraging

163

BEYOND APOLOGIES

effort, high levels of inequality actually discourage effort and encourage wrongdoing. In Dhaka I cannot help but notice that in terms of physical effort, drudgery and systematic abuse, the worst jobs, such as manually cleaning out blocked sewers, are also the worst paid. Where is the motivation to work hard when one is doomed to a life of poverty anyway? If hard work is to be encouraged, it should be rewarded. If the goal is to encourage cutthroat behaviour and lack of concern about others…well, much of the world is right on track. How inequality is viewed in mainstream economics While there is considerable attention being paid to the problem of inequality in some circles, it is largely ignored – or treated as a plus – in mainstream economics, which claims that inequality leads to motivation and prosperity and thus benefits everyone. According to the conservative Heritage Foundation, [t]he current welfare system also erodes the culture of work that makes the American Dream possible. Welfare may well ‘give’ the poor many things, from cash to subsidized housing, but it also takes away a crucial ingredient of happiness: the incentive to work, to save, to improve oneself. … In America, we no longer extol hard work the way we used to. … Nor do we view with shame those who live off of handouts. … we must be relentless in exposing the fallacies of the income inequality argument. If we are, as we should be, concerned with mobility and prosperity, then income inequality is a red herring. Furthermore, behind the charts and graphs detailing the rise in income inequality often lies an ugly animosity against the rich. Even worse, this envy and hatred of the ‘one percent’ masquerades as compassion for the downtrodden. Every time someone lashes out at the top 1 percent, we ought to talk instead of the bottom 1 percent.32

Or, from Forbes: While it is distressing to consider the people in the bottom percentiles in the United States, the possibility of such wealth at the top should be exciting. It should not depress us; it should inspire us. It should not incite jealousy; it should kindle ambition. People should look at that astronomical green bar and think: What can I do to get there? What can I make? How can I create something of worth? The real issue that ignites anger, fear, and sadness is poverty. We need to concentrate on that and ﬁnally forget our misguided and nihilistic inclinations to pillage the wealthiest among us. Why should we hate them? We should want to be them. To achieve that, we must unleash our creative forces. Let people make...more useful and agreeable things, it’s the best way.33

Believing that social mobility really exists – that current inequality is not that important because the truly motivated can work their way up the social and economic ladder – both reduces empathy for the worst oﬀ and puts one’s focus in the wrong place. Part of the mythology of the United States is the popular belief

MYTH#7: INEQUALITY IS INEVITABLE

164

that anyone with sufficient talent and drive, no matter their background, can succeed. That this can take place is demonstrated by the many individuals who have overcome wretched circumstances and escaped poverty. That it is extremely difficult to do so is likewise demonstrated by the consistent correlation between race and family history on the one hand and such measures as unemployment, income levels, incarceration, and life expectancy on the other. Wealth buys opportunity. Wealthy families can send their children to the best schools, where they not only get a good education but also can make the contacts that lead to the accumulation of more wealth. Equally smart children from poor families cannot attend those schools or, if they can, may not thrive in a setting in which material abundance is taken for granted and other students look down on scholarship recipients. Pretending that these issues do not exist does not make them disappear. Figure 534 illustrates how advocates of the “American Dream” – the rich – argue that social programs designed to foster equality threaten the very existence of their Dream. The distinctions between this vision and one that seeks to ensure that poverty is actually addressed, not just feared and pitied, is stark. Figure 5: Two Conflicting Dreams?

The mainstream media plays an important role in perpetuating the positive mythology of inequality by creating envy for the rich. Adulation of the rich and calls to emulate or at least envy their lifestyles are far more common in the media – and in public discourse – than are discussions of how the extent of such wealth

165

BEYOND APOLOGIES

negatively affects the exponentially larger numbers of poor people on the planet. False solutions It certainly can be unseemly to act unconcerned about the situation of those at the bottom. Numerous solutions to poverty – and sometimes even to inequality – have been put forward. However, one should analyze these ideas with great care. One way to ensure that inequality remains is to put forth solutions that one knows will be ineffective at best, or downright harmful at worst. The examples above are one such approach: suggest that inequality provides incentives for the individual hard work that will bring people out of poverty. The way one diagnoses the problem of inequality will affect the nature of the solution that is offered. If people believe that inequality results from unequal access to technology, then programs that supply low-income schoolchildren with laptops will make sense. Such a focus also means, though, that there would be no need to pass laws to ensure that unions could organize and engage in activities that would help to improve the conditions (and incomes) of low-paid workers. Nor need anything be said about raising taxes to reduce the concentration of wealth in the hands of the few. In the late 1980s, in a report entitled Our Common Future, The Brundtland Commission recommended a three percent increase in worldwide per capita income to solve global poverty and environmental problems.vii While that recommendation may sound good on the surface, the results that it would have achieved are somewhat less impressive. Such growth would, in the first year, result in a gain of $633 on average per person living in the United States and $3.60 for one living in Ethiopia. After ten years, the added income would be $7,257 for an American and $41 for an Ethiopian.35 Certainly, $41 can buy a lot more in Ethiopia than it can in the United States, but not 177 times more. For an equivalent example, compare the rise in income that a billionaire would receive to someone with an income of just $20,000. In the first year, the lower-income earner would gain an extra $600, while the billionaire would gain $30 million. Clearly, flat percentage increases would further increase inequality rather than reduce it. Of course, dollar figures reveal only a piece of the puzzle. However, these figures do indicate the absurdity of using an approach based on percentage increases.

vii Formally known as the World Commission on Environment and Development (WCED), the Brundtland Commission pursues sustainable development in a collaborative way. For the report, see World Commission on Environment and Development, Our Common Future (Oxford: Oxford University Press, 1987).

MYTH#7: INEQUALITY IS INEVITABLE

166

* * * I once participated in a heated battle over whether to give lump sum or percentage-based wage increases. The accountant with whom I argued said that giving everyone a ten percent increase was ‘fair’ as it would apply equally across the board…except that it meant a monthly increase at the bottom of $5 and at the top of about $65. Basic necessities cost roughly the same whether people are rich or poor (though one might think the poor would need the money more). Increasing the incomes of the poor is logical, but if we do the same for the rich, we will never reduce inequality. * * * The dimensions of the inequality gap are the real issue here. Ten-fold or thirty-fold differences in wealth between people are a vastly different matter from hundredfold or thousand-fold differences. People surely have the right to profit from their efforts. However, those profits should be kept within a reasonable limit and should extend to all workers whose labour helps generate the profits, not just to those with the power to push for higher remuneration. Any effort to decrease poverty is doomed to failure if one ignores the grotesque scale of existing inequalities and the fact that a few have become fabulously wealthy because so many others work so hard for so little return.viii Plenty of people seek to ensure that inequality remains and that the most effective measures for redistribution do not gain political acceptance. The Tea Party Movement in the United States is a highly visible example of successful political advocacy against equality that uses inflammatory arguments based on ridiculous presumptions. For instance, the movement claims that inequality is not a problem because the rich pay more in taxes than the poor (in terms of total dollars), and that the difference between the two groups, at least in America, is minor: “Today the rich have very nice cars, fly first-class, and have a vacation home or two. Meanwhile, non-rich Americans have a decent used car or two, fly coach, and go on some vacations.”36 

viii A colleague at the World Bank told me that there is a wise piece of Hindu philosophy that he ﬁnds quite helpful: we have the right to work but not to enjoy the fruits of our labour.

167

BEYOND APOLOGIES

Towards a Better Way: Reducing Inequality “Is this improvement in the circumstances of the lower ranks of the people to be regarded as an advantage or as an inconveniency to the society? The answer seems at first sight abundantly plain. Servants, labourers, and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed, and lodged.” – Adam Smith, The Wealth of Nations

* * * The persistence of enormous wealth inequality is not accidental; political, financial, and monetary policies promote it. They can also reduce it. The first step is to be absolutely clear that it is not possible to address poverty without also reducing inequality. There is not enough wealth in the world for everyone to have a decent life and for some to have an enormous share. It is not enough to seek to increase wealth at the bottom; it must also decrease at the top. Activists must counter the claim that efforts to smooth out differences in opportunity and wealth acquisition are going to squash initiative and harm the economy. Activists must defend policies designed to give everyone a decent chance in life, regardless of their chromosomes or their family backgrounds. Activists also need to be clear that there is an inherent contradiction in feeling empathy for the poor while adulating the rich. Hint: Pay attention to how the growing number of billionaires is being treated in the media. Why are people supposed to be happy that their number keeps growing? Are people really expected to believe that one day, if they are smart enough and work hard enough, they may join the ranks? Or that their country would be worse off if the rich had to pay more taxes? * * * What types of policies are needed? NGOs, social activists, and others concerned about poverty need to address the issue of inequality. It helps to focus efforts in terms of both the importance of the goal and the likelihood of achieving it. It is not possible to accomplish these major tasks by working alone: people can join local movements or start one of their own to take on some of the more difficult issues. First and foremost, many countries need better tax policies. They need international cooperation on corporate taxation, so that corporations cannot simply regi-

MYTH#7: INEQUALITY IS INEVITABLE

168

ster in a low- or no-tax country to avoid paying taxes on their profits.ix Too many individuals and corporations now legally (or otherwise) dodge their taxes. Some companies even pay their CEOs more money than they do in taxes. For example, in 2011, Chesapeake Energy in Oklahoma (United States) paid only $13 million in taxes (based on sales of $11.64 billion), while paying its CEO, Aubrey McClendon, $17.9 million in compensation. Nor is this a lone exception; according to the Institute for Policy Studies, twenty-six of the one hundred highest-paid American CEOs had a higher salary – on average $20.4 million a year – than the amount their companies paid in taxes. American executives can also legally avoid paying taxes on a significant chunk of their income by having it designated as performancerelated pay; Larry Ellison, the CEO of the California-based software company Oracle, avoided paying taxes on $76 million of his income. That $76 million is only a small portion of his wealth: Ellison was able to purchase ninety-eight percent of a Hawaiian island at a cost reported to have been more than $500 million.37 The CEO of Walmart, Michael Duke, used a tax loophole to bank more than $17 million of his compensation tax free in 2011, or about 774 times more than one of his employees would be allowed (never mind able!) to do. The hedge fund manager Raymond Dalio paid only fifteen percent in taxes on his $3 billion income; if he had paid twenty-five percent – still ten percent less than the tax bracket calls for – he would have paid an additional $450 million.38 What is true in the United States is true, to varying degrees, throughout the world: corporations and the rich too often pay far less than their fair share of taxes, leaving the tax burden to those who earn far less. Tax structures should be fair, ensuring vertical equity – whereby the rich pay more than the poor – and horizontal equity – whereby those with the same income (regardless of its source) pay the same. Raising taxes on the wealthy would mean more government revenue to spend on services for the poor and middle class. It would also help to make societies more equal and governments more democratic, since reducing the wealth of the elite would reduce their power to influence public policy. Most of the population will benefit from better tax policies, and this message needs to be widely broadcasted. Using a simple message would be helpful here, along the lines of ‘Tax the rich; support the middle class and poor.’ Many groups need to be involved in spreading that message. Clear explanations of what the message means are needed, as is clarity about its specific goals. The Occupy movement in the United States showed that there is abundant public support for evening out the difference between the ix

I also discuss taxes in several of the other myths.

169

BEYOND APOLOGIES

‘99 percent’ and the ‘one percent,’ but it lacked a clear goal. Examining how the Occupy movement gained such momentum – and why it collapsed – should inform future movements; its lessons learned could be used to rebuild it with a more specific, achievable aim in mind. In addition to pushing for higher taxes, activists need to push for those new tax revenues to be invested in wellbeing, for example to provide immediate financial help for those in need to obtain food, heating, housing, and clothing; such an approach would go a long way in preventing some of the worst aspects of poverty.x Increased taxation revenues should also be used for longer-term investments in public health, education, income supports, and other government services. Improved services for the poor would also help to decrease the significant inequality of opportunity that currently exists between rich and poor. Tax revenues could also help pay for services such as water and sewerage, which governments are privatizing because they claim they cannot afford to operate them. Higher taxes on the rich would help, in other words, to foster kinder, gentler, more humane societies. There are other ways to reduce wealth at the very top and increase it at the bottom, aside from taxing wealth. Of course, solutions need to be tailored to local contexts, but possibilities abound. Policies can be developed to reward companies for hiring more workers (so that employment is no longer seen as a cost to corporations), to mandate full benefit packages for all employees (including part-time workers), and to encourage worker-owned enterprises. A minimum wage that allows people a decent lifestyle and actually keeps pace with increases in the cost of living would make an enormous difference for those working in low-end jobs. One of the many advantages of unions is that they tend to focus their efforts on raising the lowest wages.39 Better workplace safety, anti-discrimination, and anti-harassment policies must be enacted. Flexible leave policies would make it easier for people to balance their home lives with their work.xi Unions should be strengthened, with all Ensuring decent opportunities for the poor also has direct economic benefits. For instance, today’s children who receive decent food, housing, health care and education will, as adults, provide the labour which will pay the pensions of current adults. It thus makes perfect sense that all society, not just the parents, should contribute to the raising of children. xi While perhaps not immediately identifiable as an equality issue, many countries have passed laws to help people better balance work-family conflicts; this provides significant benefits, especially to lower wage earners. The United States is exceptional for its low level of government protection for workers and families, including maternity leave. Paid maternity leave is mandatory in all countries except the United States, Swaziland, Lesotho, and x

MYTH#7: INEQUALITY IS INEVITABLE

170

relevant legislation and policies amended to support the concept and practicality of the organization of workers, rather than, as is too often the case, the opposite. At the other end of the spectrum, caps could be placed on the maximum allowable wages and benefits for the rich; the easiest way to achieve this is through high tax rates. Activists also need to support policies that promote wealth circulation at the bottom of the pyramid, including policies to benefit informal vendors and other independent, self-employed workers/businesspeople. They need to support policies that reduce giant corporations’ control of the economy (for instance, by banning big box stores) and that bolster small farmers, farmer markets, local cooperatives, etc. * * * A vivid moment in Michael Moore’s film Capitalism, A Love Story comes when he shows the police marching towards striking automakers...not to break up the strike, but rather to protect them from the owners. That scene is particularly compelling to me, given the number of times I’ve seen newspaper coverage of Bangladeshi police coming in to break up protests by underpaid and mistreated garment workers; there is never a doubt who is at fault in these episodes. The forces of government being used to defend the worker, not the owner, should be the norm. * * * One piece of advice that development banks and ‘economic experts’ regularly give to governments with financial woes is to reduce their public sector workforce. The assumption is that government workers do not provide beneficial (meaning economically beneficial) services, and are thus a net drain on the national coffers. However, while governments, like corporations, are susceptible to swollen bureaucracy, governments also provide much-needed social services that should be expanded, not curtailed, in times of economic difficulty. Government employment, rather than being regarded as ‘wasteful,’ could be seen as what it is: a major contributor to growing equality and wellbeing. Governments could thereby set a good example for the private sector, by showing that even in difficult economic times, anti-labour policies are not necessary. Kriengsak Chareonwongsak, a Senior Fellow at Harvard University who comes from Thailand, writes, “When Asian countries face economic downturn, they do not fire a large number of employees Papua New Guinea. Paid sick leave through a social insurance company, delivered either by companies or a government system, exists in 139 countries. Paid annual leave is mandated in ninety-six countries, and a day of rest is mandatory in ninety-eight countries. Jody Heymann, Forgotten Families: Ending the Growing Crisis Confronting Children and Working Parents in the Global Economy (Oxford: Oxford University Press, 2006).

171

BEYOND APOLOGIES

and let the public sector take care of the unemployed. Instead the government and the [private] sector cooperate to find the best solutions that will keep employees in their jobs. This means people continue to have purchasing power and are able to support the domestic economy…” Such practices do not necessarily come at a high cost to companies, he points out, since “By not firing employees during a recession, companies gain more loyalty and trust from workers and so are able to retain skilled workers.”40 In both the private sector and the public, employment is good for the economy. In some cities, land prices are artificially high due to speculators holding unused land on which they pay little or no tax. Raising taxes on unused urban land can prevent speculation and help to ensure that it is put to productive use.xii Land reform is also vital. Distribution to the landless poor of unused rural land that companies hoard but do not put to productive use could make an enormous difference in people’s livelihood. Land reform, however, while essential, is extremely difficult from a practical point of view. Attempting it is sufficiently contentious to get leaders ousted, permanently blacklisted, or assassinated. It would make a world of difference to the rural poor, though. Policies are needed to prevent corporations from situating large-scale ‘development’ projects, such as open-pit coalmines and large industries, on land that is being used as someone’s rice paddy. The right of the poor to use their land is critical; campaigning for more transparency in various types of land dealings, including those involving the BWI and other international institutions could help. Land must be given back to the poor, not taken away from them. Those working at the grassroots level can look at ways to organize the poor, not simply for local projects, but to increase public input into local, regional, and national decision-making.xiii Traditional societies typically have mechanisms in place to spread the (local) wealth. Those with the most money are expected to sponsor festivals, to throw big parties, and to engage in other activities that serve to reduce jealousy and increase a sense of community. There is wisdom in such practices: inequality breeds resentment and potentially violence, while equality can help to build community.

It should be clear by now that I consider parks as ‘productive’ use. Someone at an international aid agency once mistakenly sent the NGO at which I work a set of internal comments on a proposal that we had submitted for funding consideration. One of the comments, from someone working for the aid agency in Dhaka, was that “organizing the poor could lead to violence.” Undoubtedly true, but a revealing remark for someone in the aid business!

xii

xiii

MYTH#7: INEQUALITY IS INEVITABLE

172

Traditional mechanisms to address inequality have largely vanished in much of the world. It is time to rebuild them and to foster a sense of responsibility for those doing less well. One place to start is by encouraging cooperation. Teachers could encourage students to help their classmates to pass, rather than encourage them to compete. Supervisors could promote and reward group efforts. * * * I see remnants of these traditions in Asia: when somebody gets a job or receives a scholarship to study abroad, friends will clamour for the happy recipient to treat everyone to some food. When the Vietnamese and other Asians go on study tour as part of their work, they save as much as possible of their per diem so that they can buy gifts for those at home. In my experience, when Asians go out to eat, they never split the bill; instead, the most senior or most wealthy person pays. If someone becomes unemployed, friends will help. Typically, payback is expected, so that someone who was generous while in a good job can expect help if she in turn loses her position. * * * How effective would these policies and actions be in reducing inequality? It is useful to estimate just how much poverty could be eliminated immediately if existing wealth were distributed far more evenly. In a sense this is difficult to know, since poverty, as I have argued, is more than a simple lack of money. It is, however, easy to estimate what it would cost to provide certain services. A recent article in the renowned British medical journal The Lancet suggests that a figure of about $116 per person in sub-Saharan Africa would reduce poverty and undernutrition. The necessary activities under this investment would be carried out in partnership with communities and local governments by investing in programs to improve agricultural practices, better protect the environment, support new small businesses, and improve access to education and basic health services. The study found that investments of that size led to a twenty-two to thirty-two percent decline in mortality of children under age five.41 Another estimate is that it would cost a total of $66 billion to elevate everyone on the planet out of extreme poverty; this is equivalent to four percent of current global military spending,42 less than fifteen percent of the accumulated wealth of the ten richest people in the world,43 and one-fourth the additional amount that the top one hundred billionaires added to their existing wealth in 2012 ($240 billion).44 Surely, it is not too much to ask? An estimated one-fourth of all global wealth – as much as $32 trillion – sits in offshore, non-taxed accounts. Taxing those assets could amount to at least $189 billion in additional tax revenues.45 Millions of dollars in taxes could pay for a lot of school lunches for the poor, among other things. According to a 2012 report on tax loopholes in The Guardian, “The four most direct tax subsidies for excessive

173

BEYOND APOLOGIES

executive pay cost taxpayers an estimated $14.4 billion per year – $46 for every American man, woman, and child. That amount could also cover the annual cost of hiring 211,732 elementary-school teachers or creating 241,593 clean-energy jobs.”46 It could also pay for healthcare for almost ﬁve million low-income American children.47 According to UNICEF, it would cost $250 billion ($25 billion a year over ten years) to provide global access to low-cost sanitation facilities and safe water – the equivalent of the net worth of about sixty-eight billionaires: that is, the combined holdings of just sixty-eight people could be used to provide safe sanitation and water facilities for the entire world.48 Precedents for enacting policies to reduce inequality Levels of inequality vary dramatically between countries. The countries with the greatest levels of inequality are mainly in southern Africa and Latin America, and, of course, the United States. Most European countries, for example, are vastly more egalitarian than the most unequal countries. Redistributive policies are both common and popular throughout Europe, Australia, and Canada.xiv In Scandinavian countries, high wages and equality have led to widespread prosperity. Denmark, for instance, is a highly egalitarian, wealthy country with very low unemployment. The United States does not do well in an international comparison, scoring worse than Nigeria.49 No surprise, given the taxation rates, labour policies, and social policies that exist there. Because the United States is the most unequal of the highconsumption countries, and because it has so much inﬂuence on the rest of the world, it is worth focusing on it for a moment. Even the United States had its golden age of relative equality decades ago with the redistributive policies of Franklin Delano Roosevelt’s New Deal and Lyndon Johnson’s War on Poverty and Great Society.xv During World War II, the federal government placed controls on consumption through rationing, coordinated

I am not aware of any utopia on earth. Canadians bicker about their social services. African immigrants in France regularly riot due to their mistreatment. Australians are notoriously harsh to immigrants. The British attack the poor on welfare while supporting corporate welfare. Many countries do not extend full beneﬁts to non-citizens. However, the situation overall is vastly better in these countries than elsewhere. xv American President Franklin Delano Roosevelt enacted various social policies, known as the New Deal, in 1933 to help lift Americans out of poverty following the depression. The policies included job creation through investment in public works. In 1964, President Lyndon B. Johnson passed legislation on civil rights and economic opportunities. xiv

MYTH#7: INEQUALITY IS INEVITABLE

174

industrial output, decided how to allocate national resources, and established a highly progressive tax system in which those with the greatest means paid the most. In the 1950s, those in the highest tax bracket in the United States paid ninety-one percent of their income in tax. Taxes on corporate profits were also much higher than at present. In 1960, the top 0.01 percent of Americans paid about seventy percent of their income in federal tax, or almost twice as much as they pay today. At the same time, unions were far stronger than they are now. About a third of American workers were union members in 1955; large companies had to take into account not just those who owned stock in their companies, but the employees as well. The result of redistributive policies (and of the Great Depression) was a significant decrease in inequality. In 1929, there had been 20,000 millionaires and two billionaires, but by 1944 those numbers had dropped to ‘just’ 13,000 millionaires and no billionaires. While the share of total wealth held by the top 0.5 percent of households was about thirty-two percent in 1929, it was ‘only’ nineteen percent in 1949.50 National programs such as Johnson’s War on Poverty also succeeded in steadily reducing the percentage of the population that was living in poverty, at least until the late 1970s.51 Meanwhile, the American economy grew faster than it did in years when the tax rate was lower.52 As Paul Krugman notes, it was during the period of high taxes and strong unions that median family income doubled (from 1947 to 1973) – something never seen before or since.53 Precedence does not mean that it will be easy, but it does remove the suggestion of impossibility. How did the golden age of relative inequality end? By the 1970s, many states had failed to raise the monthly payments given to low-income families with dependent children sufficiently to ensure that they kept up with inflation. When Ronald Reagan became president in 1980, those payments became insufficient nationwide. Reagan also busted the power of unions. As a result, the trend of declining poverty came to a halt. As mentioned, taxes on the wealthiest also dropped significantly. All these changes contributed to growing inequality. It need not continue. To the extent that a safety net still exists in the United States, it does work. While fifteen percent of Americans had incomes below the poverty line in 1992, that figure would have been twenty-four percent if they had not received support from the government, including Aid for Families with Dependent Children, Social Security, and Supplemental Security Income.54 Taxes on the rich could return to historic rates. The United States has the worst social policies of any high-consumption country, and this needs to change. The United States needs to learn from its own past or to learn from countries with the highest rates of equality. People need to push the government to take proven measures to reduce inequality, rather than pretending that economic growth will do the trick.

175

BEYOND APOLOGIES

Overcoming the political difficulties of promoting equality Knowing what to do is one thing; knowing how to do it is quite another. The difficulty is not in identifying what needs to happen, but rather in figuring out how to make such drastic changes politically feasible. Given that money buys power, it is difficult to know how to enact the sorts of policies that could successfully reduce inequality. Those who benefit from a highly skewed wealth distribution system are not going to agree easily to remedies that would reduce their wealth and power. Billionaires and even the lesser millionaires enjoy their power and prestige; those who can afford to have family foundations enjoy portraying themselves as generous and as contributors to the solution, not the problem. When we lobbied for higher tobacco taxes in Bangladesh, tax officials told us that the major international cigarette companies were already making big economic contributions through taxes. They said that higher taxes on the smaller local companies would reduce employment for those making packaged hand-rolled cigarettes (bidis). They even said that the government was already collecting sufficient taxes and did not need more. A tax official at the National Board of Revenue later mentioned to me how heavily BAT had lobbied against the tobacco tax increase. However, we persevered and after years of effort, we recently won a one percent surtax on tobacco to fund public health programs. In some countries, it can take years, even a decade or more, to get better tax policies; the beauty of it is that once a good tax policy is passed it can reap rewards for many more decades to come. In Thailand, a two percent surtax on tobacco and alcohol yields tens of millions of dollars a year that are used to support various public health initiatives. The years of effort made to obtain that funding now pay off in ample annual health promotion budgets. That model is being copied, albeit slowly, by other countries looking for creative and long-term ways to fund health-related activities. There is hope. There is not, however, a single recipe for success. Advocacy campaigns must respond to local conditions and make use of local resources. Creativity, persistence, recruiting and training allies, making use of the media, mobilizing the masses, and learning how to make the case to policymakers are all critical. The strategy used to get policymakers on board will vary by country. In the United States, the most important measure may be campaign finance reform, which could help to liberate politicians from corporate control. Elsewhere, the wealthy have other ways to bribe or influence politicians. People need to shine a spotlight on such practices. In many countries, the population is so used to the idea that politicians serve corporations rather than the public that it is difficult to get a reaction (or traction) on the issue. People need to find creative ways to shake public

MYTH#7: INEQUALITY IS INEVITABLE

176

apathy and convince others that change is possible and desirable. In addition to shaming and blaming the most blatantly corporate-sponsored politicians, people should praise those who act in the public interest, vocally, publicly, and frequently. Attempting to lessen inequality may be the hardest thing that this book recommends. The goal, though difficult, is not impossible. One big step would be to counter the widespread adulation of the rich; remember, great wealth is always accompanied by great poverty. Finally, it helps to remember that not only the poor will benefit from greater equality. As epidemiologists Richard G. Wilkinson and Kate Pickett, authors of The Spirit Level: Why More Equal Societies Almost Always Do Better, note, the benefits of greater equality are not confined to the poor. While the benefits are much bigger lower down the social ladder, even well paid middle class people live longer and do better in societies that are more egalitarian. Their children too are less likely to become victims of violence, to drop out of high school or become involved in drugs.55

Most of the population will benefit from greater equality, so people need to strategize how to get everyone on board. The billionaires cannot be outspent, but they can be out-strategized. They are already vastly outnumbered. Notes Cited in David C. Korten, When Corporations Rule the World, 2nd ed. (Bloomfield, Connecticut and San Francisco: Kumarian and Berrett-Koehler, 2001). 2 Pól Ó Conghaile, “Billionaires’ Playgrounds,” Sawasdee (Thai Air in-flight magazine), April 2010. 3 Project America, http://www.project.org/info.php?recordID=174 accessed 21 August 2012. 4 Based on maternal mortality rates from Trends in Maternal Mortality 1990-2013. WHO 2014. For example, the rate per 100,000 live births in 2013 ranges from one in Belarus, four in Italy, six in Singapore, eleven in Lithuania, and twenty-eight in the United States to eighty in Cuba, 270 in Timor Leste, 450 in Togo, and 1100 in Sierra Leone. Several countries had over 1,000 deaths per 100,000 live births – one death per one hundred births – in 1995, but report significant decreases since. I could not find an explanation for Cuba’s relatively high maternal mortality rate versus its very low infant mortality rate and high life expectancy. The rate in the United States has increased from eleven in 1995, placing it at about number fifty out of 171 countries. (For rankings, see http://data.worldbank.org/ indicator/SH.STA.MMRT?order=wbapi_data_value_2010+wbapi_data_value+wbapi_data _value-first&sort=asc); the World Bank and WHO numbers do not entirely match. 1

177

BEYOND APOLOGIES

Korten, When Corporations Rule. See, for example, “Nike’s Indonesian Workers Are Still Paid A Poverty Wage,” TeamSweat, 31 January 2011. http://www.teamsweat.org/2011/01/31/nikes-indonesian-workers-are-still-paid-a-povertywage/ and Zaid Jilani, “Meet The Indonesian Workers Who Make Your Nikes: 50 Cent Hourly Wages, Beatings, And Humiliation,” ThinkProgress, 13 July 2011. http://thinkprogress.org/economy/2011/07/13/267520/nike-workers-humiliation/ 7 Naomi Klein, The Shock Doctrine: The Rise of Disaster Capitalism (New York: Picador, 2007). 8 Pratap Chatterjee, “The New Robber Barons: How Taxpayers Subsidise CEOs' Multimillion Salaries,” The Guardian, 19 August 2012. 9 Leslie Patton, “McDonald’s $8.25 Man and $8.75 Million CEO Shows Pay Gap,” Bloomberg News, 12 December 2012. 10 Barack Obama, The Audacity of Hope (New York: Three Rivers Press/Random House, 2006). 11 Joshua Holland, The Fifteen Biggest Lies About the Economy and Everything Else the Right Doesn’t Want You to Know About Taxes, Jobs, and Corporate America (Hoboken, New Jersey: John Wiley & Sons, Inc., 2010). 12 Klein, The Shock Doctrine. 13 Sanjeev Sanyal, “Who are Tomorrow’s Consumers?” The Bangkok Post, 17 August 2012. 14 The World Bank, “IDA & India,” http://www.worldbank.org/ida/country/india.html, accessed 22 July 2014. 15 Forbes, http://www.forbes.com/india-billionaires/gallery, accessed on 25 July 2013. 16 John Russell, “In 1978, There Was One American Billionaire on the Planet, Give or Take,” TheNewsTalkers, 9 March 2013. 17 Peter Dreier, “Reagan's Real Legacy,” The Nation, 4 February 2011. 18 Luisa Kroll and Kerry A. Dolan, “The Richest People on the Planet 2013,” Forbes, 25 March 2013. 19 Oxfam, “The world's Top 100 Economies: 53 Countries, 34 Cities and 13 Corporations,” http://oxfamblogs.org/fp2p/the-worlds-top-100-economies-53-countries-34-cities-and-13-c orporations/ accessed 20 July 2014. 20 Oxfam, “The Cost of Inequality: How Wealth and Income Extremes Hurt Us All,”18 January 2013. 21 Prabhu Chawla, “Mr Chidambaram, Can the Nation’s Poor Have More on Their Plates Please?” The New Sunday Express, Kochi, 17 February 2013. 22 James K. Galbraith, The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too (New York: Free Press, 2009). 23 Galbraith, The Predator State. 24 James Gilligan, Why Some Politicians Are More Dangerous Than Others (Cambridge: Polity Press, 2011). 25 Paul Krugman, The Conscience of a Liberal (New York, London: W.W. Norton & Company, Inc., 2009). 5 6

MYTH#7: INEQUALITY IS INEVITABLE

178

Lawrence Mishel, “Vast Majority of Wage Earners Are Working Harder, and For Not Much More: Trends in U.S. Work Hours and Wages Over 1979–2007,” Economic Policy Institute, 30 January 2013. 27 Paul Buchheit, “Five Facts about America’s Pathological Wealth Distribution,” Common Dreams, 3 December 2012. 28 Kyle G. Brown, “Guns don’t Kill Americans. Inequality Kills, Because It’s the Cause of Gun Violence,” The Globe and Mail, 31 December 2012. 29 World Bank, World Development Report 2006: Equity and Development (New York: World Bank, 2005). 30 Inequality.org, “Inequality and Health,” http://inequality.org/inequality-health, accessed 21 July 2014. 31 David Coburn, “Income Inequality, Social Cohesion and the Health Status of Populations: The Role of Neo-Liberalism,” Social Science & Medicine 51, no. 1 (July 2000): 135–146. 32 David Azerrad and Rea S. Hederman Jr., Defending the Dream: Why Income Inequality Doesn’t Threaten Opportunity, The Heritage Foundation, Special Report #119, http://www.heritage.org/research/reports/2012/09/defending-the-dream-why-income-ineq uality-does-not-threaten-opportunity accessed 9 September 2014. 33 Maura Pennington, “To Fix Income Inequality, The Have-Nots Must Become The Do-Somethings,” Forbes, 8 March 2013. 34 Azerrad and Hederman Jr., Defending the Dream. 35 Galbraith, The Predator State. 36 Tea Party Patriots, “Tea Party Patriots Refutes Video on Inequality,” 1 April 2013. http://www.teapartypatriots.org/all-issues/news/tea-party-patriots-refutes-video-on-inequ ality/ 37 Sarah Anderson, Chuck Collins, Scott Klinger, and Sam Pizzigati, “Executive Excess 2012: The CEO Hands in Uncle Sam's Pocket,” Institute for Policy Studies 2012. 38 Chatterjee, “The New Robber Barons.” 39 Holland, Fifteen Biggest Lies. 40 Kriengsak Chareonwongsak, “Asian Capitalism Can Give the West a Few Lessons,” Bangkok Post, 17 August 2012. 41 Paul M Pronyk, Maria Muniz, Ben Nemser, et al. “The Eﬀect of an Integrated Multisector Model for Achieving the Millennium Development Goals and Improving Child Survival in Rural Sub-Saharan Africa: A Non-Randomised Controlled Assessment,” The Lancet 379 (2012): 2179–88. 42 Oxfam, “How to Write Killer Facts and Graphics – What Are Your Best Examples?” http://www.oxfamblogs.org/fp2p/?p=10593 accessed 13 October 2013. 43 The combined net worth of the top ten billionaires is about $451.5 billion, according to the Forbes website (calculated by manually adding the amounts for the top ten). See http://www.forbes.com/video/3272727836001/ 44 Oxfam, “The Cost of Inequality.” 45 Oxfam, “The Cost of Inequality.” 26

179

BEYOND APOLOGIES

Anderson, et al., “Executive Excess 2012.” Chatterjee, “The New Robber Barons.” 48 Unicef, “Sanitation for All,” http://www.unicef.org/wash/ﬁles/sanall.pdf accessed 13 August 2013. 49 Max Fisher, “Map: How the World’s Countries Compare on Income Inequality (The U.S. ranks Below Nigeria),” The Washington Post, 27 September 2013. 50 Galbraith, The Predator State. 51 Randy Albelda and Nancy Folbre, The War on the Poor: A Defense Manual (New York: The New Press, 1996). 52 Moshe Adler, Economics for the Rest of Us: Debunking the Science that Makes Life Dismal (New York: The New Press, 2010).53 Paul Krugman, “The Twinkie Manifesto,” The New York Times, 18 November 2012. 54 Albelda and Folbre, The War on the Poor. 55 Tom Ashbrook, “How Inequality Hurts Societies,” OnPoint, National Public Radio, 27 January 2011. 46 47

MYTH #8: Mainstream Economists Want Governments to Play Only a Minimal Role in the Economy

“They [liberals] think that the cure to big government is to have bigger government... the only eﬀective cure is to reduce the scope of government – get government out of the business.” – Milton Friedman1

 Mainstream Economists Want Small Governments That Leave Businesses Alone...Or Do They? Mainstream economists and their conservative followers often talk about the need to shrink government; it is, in fact, one of their primary platforms. They claim that government policies and regulations interfere with the natural process of moneymaking that will cause total wealth to grow, thereby delivering benefits to all. They cite absurd regulations (it is not difficult to find examples); they complain that taxes on the wealthy and on corporations reduce incentives for hard work; and they argue that only a ‘free market’ will lead to the most rational distribution of resources and to the best economic results. Shrinking government, they proclaim, will provide incentives for investment and hiring. An increased minimum wage mandated by government, on the other hand, will lead to a devastating loss of jobs while taxes on the rich will cause economic growth to slow. The key argument of conservatives and mainstream economists is that government intervention makes everyone poorer. A large number of conservative think tanks regularly publish anti-government sentiments for the media to deliver to the public in an attempt to persuade the public of the wisdom of mainstream economics. For example, Sheldon Richman of the Future of Freedom Foundation argues that: “Bureaucrats, who necessarily have limited knowledge and perverse incentives, regulate by threat of physical force. In contrast, market forces operate peacefully through millions of cooperating participants, each with intimate knowledge of her own personal circumstances and looking out for her own well-being. Bureaucratic regulation is likely to be irrelevant or (more likely) inimical to what people in the market care about. Not so regulation by market forces.”2 Ah, what an ideal world the quote paints, one in which caring companies and executives provide exactly what informed and rational consumers need and desire, offered at fair prices, and manufactured by workers paid reasonable wages, all free from obtrusive government interference. No wonder such ideas gain a following. Conservatives around the world use similar tactics to justify their opposition to measures that those concerned about social justice are trying to enact. Detractors of land reform call it a violation of property rights that will prevent long-term investment and productivity. Factory owners, regardless of how much they themselves earn, claim that they cannot afford to raise wages or to maintain ‘ridicu-

181

BEYOND APOLOGIES

lously high’ safety standards in their factories. (After all, don’t employees bear some responsibility for being safe?) Those who object to the nationalization of oil or mineral companies say that governments are incapable of running them efficiently. Conservatives and mainstream economists condemn as bad economics whatever might benefit the poor (or the population in general); whatever benefits the wealthy they call good economics. Those who push for war in Iraq (or Libya or elsewhere) claim that profit never enters their decision-making, even if they stand to make millions or billions of dollars from weapons sales, security contracts, newly available supplies of natural resources and markets, and reconstruction. Mainstream economists claim that while they are in fact deeply concerned about the poor, most of the current policies that were designed to benefit them (such as the minimum wage, more generous income supports and social programs, protection of their rights to land, and so on) are ill-considered, useless, and – horror of horrors – communist. These policies, they argue, do not help the poor to escape poverty; instead, they promote laziness and harm employment (who would be willing to work for low wages if they could get free welfare?i). The free-market based solutions that mainstream economists endorse, such as microcredit, on the other hand, are labelled as appropriate and helpful. Their arguments can indeed sound appealing. It is sometimes enjoyable – and it can clearly resonate with one’s own experiences or sentiments – to hear laments about stodgy bureaucrats who misuse taxpayers’ hard-earned income and who enforce burdensome regulations. Many people complain about ‘red tape’. It can be encouraging to hear stories about the much greater efficiency of the private sector. Because of these arguments, conservatives of all social classes tend to defend policies that benefit the wealthy and powerful, even if they themselves actually stand to lose by those same policies. There is perhaps a natural tendency to identify with the rich rather than with the poor.

When mainstream economists and their followers acknowledge that the poor will sometimes take welfare instead of going to work because work does not pay enough for them to survive, their response is not to enforce higher wages so that people can live on their earnings. Rather, they suggest reducing benefits, so that the poor have no choice but to take any job available, no matter how miserably paid: “…if Congress and state legislatures are serious about reducing welfare dependence and rewarding work…states should shrink the gap between the value of welfare and work by reducing current benefit levels and tightening eligibility requirements.” Michael D. Tanner, “Why Get off Welfare?” Los Angeles Times, 22 August 2013.

MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS

182

What do mainstream economists really want? In truth, the idea that mainstream economists want small government is hogwash. Mainstream economists only object to government intervention when its aim is to assist the poor or to protect workers or the environment, for example by increasing the minimum wage, strengthening standards for worker safety, or preventing environmental pollution. Not only do mainstream economists have no objection to government involvement in the private sector when it assists companies to wield influence and make ever-greater profits, but — despite their claims — they actively promote such intervention. Mainstream economists want government intervention when it provides them with well-maintained roads and a generous supply of the natural resources that they need to manufacture their products. They like tariffs to protect national industries while supporting treaties that prevent their trading partners from imposing similar tariffs. They also support a rapidly revolving door between government and the private sector that sometimes makes it difficult to distinguish between the two. Corporate lobbyists and government officials make cozy bedfellows; the more powerful the lobby group, the greater impact it has on government policy making. In fact, in many countries and at many levels, corporate interests already dictate government policy. Rather than wanting smaller governments and fewer regulations, mainstream economists and their followers want to be the government. * * * Canada's ‘spy watchdog’ appointed someone who had been on the board of directors of a petroleum company to investigate alleged spying by environmental activists who objected to a pipeline that was being built by that same company.3 Official links to oil companies were strong under American President George W. Bush’s administration. His family has run oil companies since 1950. Vice President Dick Cheney was CEO of the oil company Halliburton, which also won controversial contracts for reconstruction in Iraq. National Security Advisor Condoleezza Rice sat on the board of the oil company Chevron. Commerce Secretary Donald Evans was the CEO of a natural gas company. Bush’s family also received significant financial support from the bin Laden family and other members of Saudi Arabia’s oil-wealthy elite.4 President Obama’s administration has strong ties with various companies, including General Electric, Ford, and Dow Chemical that evade taxes as well as engage in other nefarious practices.5 * * * All too often, mainstream economists have gotten their way, and the negative results are evident in many countries: greater income inequality, reduced protections for workers and the environment, a decline in public services, and unregulated financial practices that have brought entire economies tumbling down. The

183

BEYOND APOLOGIES

policies advocated by these economists have brought about, at least in the United States, record levels of government debt.6 They have also led, in some areas, to increased rather than reduced government interference in people’s private lives.7 Perhaps their ‘greatest’ achievement has been in the corporatization of government. How clearly can we distinguish between the public and private sectors? While acknowledging that corporations often exert enormous influence on governments through their campaign contributions and lobbying, most people naturally see corporations and government as separate entities. Corporate influence is so great, however, that it can actually be difficult to draw the line between where one stops and the other begins. It is extremely common for former government regulators to later work for the private sector and for company employees to spend a period working for the government agencies that are supposed to be regulating their industry. American Congressional interns often go on to become industry lobbyists, at which time they lobby the very politicians for whom they formerly worked. People from the corporate sector also typically fill top government posts, including that of president. On the surface, this ‘revolving door’ makes sense. Those who have worked for a company may be experts on how the company or industry works and thus are seemingly suitable as regulators. If such people were truly loyal to government while in public office, their inside knowledge of corporations could prove invaluable. Unfortunately, what too often happens is that people transition regularly between the public and private sectors, using their time with the government to help them learn about the very regulations that they can then assist their companies to evade, and using their government connections to help them in their fight. It is also all too common for people to perceive government service as a way to gain experience and influence which will help them to a generous corporate salary in the future.ii

The process is not limited to government-corporate revolving doors. PepsiCo has hired very senior people at the World Health Organization (WHO), including a former DirectorGeneral; they had worked on WHO’s international tobacco control treaty (the Framework Convention on Tobacco Control). Rumour has it that the appointments are in order for Pepsi to beneﬁt from their experience in case the WHO decides to attempt similar regulations with soft drinks. For a list of inﬂuential health people accepting their salaries from PepsiCo, see http://www.pepsico.com/Annual-Reports/2007/purpose-human-hw.html

MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS

184

* * * The influx of private sector actors into the government sector is an international phenomenon. In India, for example, a study found that 128 of the 543 members of the 15th Lok Sabha (the lower house of the Indian parliament) are businessmen who bring their business interests to bear while debating public policy.8 The oil company Shell, in a leaked American diplomatic cable, bragged of putting its staff “into all the main ministries of the Nigerian government, giving it access to politicians’ every move in the oil-rich Niger Delta” and thus knowing “everything that was being done in those ministries.”9 * * * Corporate influence is so pervasive that it is easy to take it for granted. As John Kenneth Galbraith repeatedly observes in his writing, governments around the world spend vast sums on the military but little on education or health. Missiles take precedence over museums. Education in science, engineering, and accounting is deemed important, while education in art, literature, philosophy, anthropology, and history – the humanities – is not.iii The explanation lies in what large powerful corporations produce and what their needs are in terms of trained manpower. Worse, when things go badly, people can blame it all on government, and then argue for the need to ‘shrink’ government and increase the role of the private sector. That ‘solution’ is akin to inviting the fox into the chicken coop since it is difficult to keep him out. It is not possible to eliminate the links between the public and private sectors, but it is possible and very important to liberate governments from undue corporate influence. * * * A bill in the California legislature to tax sugar-sweetened beverages was defeated following heavy lobbying by the major soft drink manufacturers. On the eve of the vote, PepsiCo organized a reception at the legislature after which it invited a couple of key legislators to dinner. While bills to regulate farmers’ markets moved smoothly through the legislature, anything addressing Big Food was voted down quickly. Pure coincidence, of course.10 * * * In fact, this situation is so well known and familiar that it may not appear odd in the slightest. Imagine the American government investing heavily in public housing rather than space travel and weaponry?! Or spending a trillion dollars on a genuine ‘war against poverty’ that involves revamping the inner cities and their schools and creating good job opportunities for the chronically unemployed, rather than on a distant war, one purpose of which seems to be to further enrich military corporations.

iii

185

BEYOND APOLOGIES

Subsidies help the rich but harm the poor The same people who argue for small, weak, and ineffectual government still fully expect their government to provide generous subsidies for corporations. In the United States, federal budgets and deficits have grown, not shrunk, when Republicans have been in charge, despite the fact that they slashed social budgets. Ah, but mainstream economists argue that a generous safety net discourages people from working; given the option of living decently and enjoying leisure, people will naturally take the easy option. Referring to American food assistance to the poor, Robert Rector of the Heritage Foundation says, “Some people like to camouflage this by calling it a nutrition program, but it’s really not different from cash welfare…food stamps is quasi money.” Rector then claims that receiving food assistance discourages work. He feels that recipients should be forced to work for the benefits, as many are now forced to do for other welfare payments: “The food stamp program,” says Rector “is a fossil that repeats all the errors of the war on poverty.”11 What mainstream economists like Rector ignore is the possibility that insufficient pay also creates a disincentive to work. Note the assumptions: in order to be motivated to work, the rich need high pay…and the poor need poverty. There are a few other problems with Rector’s argument. Even the most generous safety net leaves a lot to be desired. It does not deal, for example, with the effect on the ego of being jobless or of accepting government assistance. Nor does the evidence indicate that people spend long periods using safety nets.iv According to congressional testimony made by an expert on the issue, “In an ‘average’ year, about one-half of the [welfare] caseload leaves the welfare rolls. … The majority of families who leave the welfare system do so after a relatively short period of time – about half leave within a year; 70 percent within two years and almost 90 percent within five years.”12 As for the few who do remain on welfare for long periods, is cutting their aid really the best way to solve the supposed problem of the ‘lazy poor’? In the grand scale of things, subsidies to the rich cost taxpayers much more than the limited assistance offered to the poor. No such objection arises with respect to helping the affluent. Government subsidies to the wealthy take many forms. Governments fund research that leads to new products, including pharmaceuticals, from which the companies alone profit. They pay companies to provide services to their citizens that the government used to provide directly. They allow companies to hire workers at untenably low The criticism, however baseless, led to a change in the nomenclature in the United States from Aid to Families with Dependent Children (AFDC) to Temporary Assistance to Needy Families (TANF). iv

MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS

186

salaries and to deny them basic benefits. They allow corporations to register offshore and to engage in a range of other tax avoidance strategies. In 1983, ‘only’ ten percent of American company income was funnelled through offshore tax havens as a means of avoiding taxes; that figure rose to twenty-five percent in 2009.13 Allowing companies to avoid taxes is the same as providing them with financial assistance. * * * “Poor people in this country lack the shield of glib self-confidence that well-educated, affluent citizens often use to deflect criticism of their own entitlements. Ask a group of young professionals how many of them receive federal housing assistance. Very few will raise their hands. Then ask how many deduct the interest they pay on their home mortgages from their income taxes. Many will get huffy at the very idea that this could be considered public assistance. Yet this tax deduction costs the federal government more than twice as much as is spent on low-income housing assistance and low-rent public housing. There are no limits or restrictions on it – the deduction applies to summer homes and beach compounds as well as full-time residences. This deduction is worth about $5,000 a year, on average, to taxpayers making more than $200,000.” – Nancy Folbre14 * * * When faced with economic crisis, then-president of the United States George W. Bush convinced government decision makers to agree to a roughly $700 billion bailout of failing banks and businesses. Bush, a professed advocate of small government, somehow did not object to that particular subsidy: “I'm a strong believer in free enterprise, so my natural instinct is to oppose government intervention,” he said at the time. However, “these are not normal circumstances. The market is not functioning properly. There has been a widespread loss of confidence.”15 The Average Person, losing confidence in his ability to support his family after losing his job, might wonder when he gets his generous bailout package. Bush did not see the value of bailing out small borrowers who had been duped into taking out untenable mortgages.v Rather, he sought to give corporations the chance to make even more money with even less accountability, with taxpayers footing the bill.

While researching this book, I came across numerous articles that refer to the mortgagees as greedy and stupid – as if they are to be blamed more than those who pushed the mortgages on them. It is clear that the market was functioning exactly as it was designed to function, and that if better government regulations had been in place, the economic free-fall would never have happened. v

187

BEYOND APOLOGIES

In 2003, taxpayers in the United States and the European Union spent (however unknowingly and unwillingly) an estimated $400 billion dollars in subsidies to their farmers.16 This would be fine if the government used such funds mainly to support poor farmers and to feed the poor. Too often, though, these subsidies simply benefitted rich agricultural companies, contributed to the blocking of imports from low-consumption countries, and failed to benefit the poor in any way. Subsidies to American corn farmers allow them to sell corn in other markets at far less than the production cost, which has helped to wipe out corn farmers in Mexico.17 Meanwhile, trade rules imposed by the WTO prevent those same countries from exporting their products to Europe and America. As journalist Nick Mathiason, business correspondent at the Bureau of Investigative Journalism, points out, “In effect, rich countries say to the rest of the world: you liberalise, we subsidise. So much for free trade.”18 Hint: When you read a newspaper article about ‘wasteful government spending,’ see if it refers to military expenditures, subsidies to corporations, and tax breaks for the rich, or to social spending. * * * How does one justify such stinginess towards those who need support the most accompanied by such generosity towards those who need it least?vi Economic arguments meant to silence the uninitiated come into play here. Mainstream economists claim that a healthy economy will benefit all by bringing about full employment and prosperity. They argue that to subsidize the poor directly will simply maintain the cycle of poverty and that it would be better and more sustainable (indeed, more generous) to build a healthy economy so that all those who are willing to work will have a job and can thus escape poverty. American President Ronald Reagan was by no means the first to treat the poor as undeserving, lazy, and morally corrupt.vii But Reagan turned this practice into a

This is not entirely accurate; some companies are only able to operate at a profit due to generous government subsidies. But it is easy (at least for those who have not received formal training in mainstream economists) to see that the need of the poor to eat and to be decently housed is greater than the need of the corporate CEO to make millions of dollars. vii Is the tendency to consider the poor as immoral universal? In Bangladesh, one of the reasons officials give for banning rickshaws is that the men who pedal them engage in ‘antisocial’ activities such as gambling and frequenting prostitutes. Even if it were true, it would not seem quite as heinous a crime as, for instance, cheating the elderly out of their pensions, as Enron executives did. And of course, some corporate executives also gamble and visit prostitutes, but since they do so in sufficiently expensive ways, it is somehow considered to be legitimate rather than antisocial. vi

MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS

188

high art. His description of the fictional ‘welfare mother’ as the driver of a luxury car who was cheating the system and living high on the hog touched a resonant chord with Americans.viii He did not have to provide any supporting details; everyone knew that she was black, probably unmarried, and had children by multiple partners. Although Reagan’s story had no basis in reality, it afforded people relief from any guilt that they might feel about the poor since, after all, the poor deserved their lot, or were not as poor as they pretended to be. How pleasant to be told that you shouldn’t have to pay high taxes or share your wealth with the poor! How enticing to believe that you too could someday become a millionaire (this was in the 1980s, before the Age of the Billionaire)! Reagan made it that much easier for his followers to attack social programs while defending corporate subsidies. This contradictory approach to the role of government in the economy comes at high economic and social costs. Governments could use the tax dollars that they currently fail to collect from the very rich and from tax-dodging corporations to pay for many needed activities and services. But exorbitant costs to government and the public are accompanied by exorbitant profits for a powerful few; it is far cheaper for corporations to pay some bribes and some lobbyists than it is to pay their taxes.ix It requires a truly strong democracy – one in which the interests of the public are represented, not just those of the wealthiest corporations – to prevent such wasteful and harmful handouts to the rich and such stinginess to the poor. Government regulation Another aspect of ‘small government’ that conservatives/mainstream economists demand is less government ‘interference’ (read regulation). They claim that regulations slow the economy, interfere with the workings of the ‘free market’ system, and curtail important and valuable freedoms. They argue that measures meant to protect workers’ health, prevent environmental contamination, or address climate Did she exist or did Reagan invent her? There are numerous views, naturally. According to one (Josh Levin, “The Welfare Queen,” Slate, 19 December 2013), she did exist but only cheated the government out of $8,000, hardly a major sum; others argue she was completely fictional (see, for example, Paul Krugman, “Republicans and Race,” The New York Times, 19 November 2007). ix My colleagues sometimes question why governments agree to keep taxes on tobacco low, given how much the government loses as a result. But the individuals making the decisions do not gain from higher tax revenues. For any government official, a bribe or contribution from the tobacco industry is pure gain, though only a tiny fraction of the amount that the tax cut costs the government. Thus seemingly illogical decisions are made quite rationally on the basis of individual gains. viii

189

BEYOND APOLOGIES

change will reduce the efficient workings of corporations and thus, like the minimum wage, will slow business and lead to massive unemployment and poverty. Apparently, the world would be a better place if all those well-intentioned but ill-informed ‘liberals,’ who want to impose safety standards and other regulations to protect workers, consumers, and the environment, would just stop meddling in the system. Dismantling regulations in response to corporate lobbying, however, inflicts huge public costs: health, environmental, and even financial. It is vastly less expensive to regulate banks than to bail them out when mismanagement occurs; vastly better to prevent than to deal with oil spills. Pundits are still arguing about whether George W. Bush’s bailout of the banks and auto industry was needed to prevent a devastating crash or whether it was simply a final, spurious gift to wealthy corporations that were suffering the consequences of greed and utter mismanagement. Certainly, ugly details abound. For instance, nine banks that received a total of $175 billion in bailout funds used $32.6 billion of that money to pay executive bonuses.19 What is clear about the bailout is that the need for it arose directly from Ronald Reagan’s mantra of ‘small government.’ That mantra led to a craze of deregulation and the repeal of laws designed to keep the banking system and other critical parts of the economy stable. That unravelling of protective regulations led to the devastating economic crisis that justified Bush’s bailout.20 The event would be less catastrophic if people at least learned a few lessons from it (lessons that could have been learned from other past events, but never mind – better late than never). One is that human greed knows no limits. Another is that, when uncontrolled by outside forces, that greed can destroy the very system that feeds it. Government regulation of corporations can benefit workers and the environment. It can protect public health. It can also preserve the entire economic system from collapse. People can also learn that corporate executives will always oppose sensible regulations, even those that could save their companies from self-destruction. Few people would wish to live in a world completely free of government regulation and intervention. Some regulations are indeed absurd, but others are essential. The forty-hour work week, maternity leave, and various other worker, health, and environmental protections are all vital and – where they exist – did not come about through the voluntary actions of corporations. In a world without government intervention, everything is permissible.x Imagine allowing chemical compaI always smile when I read a food label that mentions ‘permitted flavourings’ – well, I should certainly hope they aren’t adding forbidden ones!

MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS

190

nies to sell any product that they wish, with the consumer being ‘adequately’ informed by a skull and crossbones on the label. Stronger regulations that prevent pollution mean more freedom to swim and to fish in local streams and rivers. Regulations that prohibit the promotion of cigarettes mean more freedom from addiction. The enforcement of manufacturing standards means freedom from anxiety over the safety of our medications and our children’s toys. Regulations on food additives mean freedom from anxiety about what we eat. Less freedom for corporations means more freedom for individuals. However unpalatable regulations may sound in the abstract, they appear more reasonable when one looks at specific cases. Meanwhile, corporations that claim to oppose regulation on principle do not actually argue against all regulations and policies.xi They like regulations that keep small companies out of their business, they like tariffs, and they especially like government contracts. * * * The corporate take on improving worker safety. How would industry like to deal with worker safety? They propose a voluntary model. An industry-supported foundation to improve worker safety lists the following initiatives: “Building bridges between members of the community – parents, young workers, educators, employers, employees, and community leaders. “Transferring knowledge between participants using a highly successfully face-to-face model. “Inspiring courage in young workers to stand up for their personal safety and rights. “Influencing change within corporations to make health and safety a priority.” The proposals are extremely vague. They do not mention periodic inspection of the workplace by workers to locate and address safety problems. Their suggestion that young workers should find the courage to stand up for their rights, rather than that corporations should be forced to recognize those rights, is a rather stunning shift in responsibility away from the powerful bosses and corporations to the vulnerable worker. The foundation’s corporate partners include Shell and ExxonMobil.21 * * * Who pushes deregulation? The public often benefits from regulations; corporations and mainstream econoFor example, both the 2010 African hunger plan and the 2012 Farm Bill in the United States provided generous policy and regulatory benefits to the agro-giant Monsanto. See Josh Sager, “Monsanto Controls Both the White House and the US Congress,” http://www.globalresearch.ca/monsanto-controls-both-the-white-house-and-the-uscongress/5336422

191

BEYOND APOLOGIES

mists generally oppose them (unless, of course, they stand to benefit from them). Speaking at the Eighth Global Conference on Health Promotion in Helsinki, Finland, Dr. Margaret Chan, Director-General of the World Health Organization (WHO) voiced concern about two recent and related trends. “The first relates to trade agreements. Governments introducing measures to protect the health of their citizens are being taken to court, and challenged in litigation. This is dangerous,” she stated. “The second is efforts by industry to shape the public health policies and strategies that affect their products. When industry is involved in policy-making, rest assured that the most effective control measures will be downplayed or left out entirely. This, too, is well documented, and dangerous.”22 Corporatocracy is not the same thing as small government; it is large government controlled in large part by the corporate sector and operating on its behalf. There is little difference between concentrating power in a centralized government unresponsive to the public, as under a dictatorship, and concentrating power in a government controlled by similarly unresponsive corporations.23 A democracy wherein corporations wield far more power than citizens is democratic in name only. Unfortunately, far too often that is the only kind of democracy that exists. According to MIT professor and public intellectual Noam Chomsky, “A democracy is a system in which you are free to do whatever you like as long as you do what we [corporate government] tell you.”24 * * * With friends like these, who needs enemies? When a government puts forth a set of policies as the best ones to reduce poverty that just happens to be the exact mix most favoured by giant corporations and the wealthiest elites, one has full right (and indeed obligation) to step back and question that claim. When corporate executives object to policies that would benefit the environment or slow its destruction, but would also harm the profits of giant corporations, it is, likewise, reasonable to question their claim that the policy would result in job losses. That scepticism should be reinforced when you notice that some of those same people who talk about job loss actively work to reduce employment in their own countries. For instance Mitt Romney, while running for president in the United States, talked incessantly about the need for local job creation. Romney also happens to be the founder of Bain Capital, which holds fifty-one percent of the shares of a company called Sensata. Sensata used to manufacture auto parts in Freeport, Illinois, but shut down in order to take advantage of lower labour costs and laxer laws in China. Sensata/Bain banks much of its profits in the Cayman Islands, in order to avoid paying American taxes.25 * * * Large corporations are not alone in seeking to undo helpful regulations. They have strong allies in international institutions. It may be difficult for a reader in North America or Western Europe to imagine the extent of influence that the

MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS

192

World Bank, World Trade Organization (WTO), or the International Monetary Fund (IMF) have on the decisions made by policymakers in low-consumption countries. Lacking the resources to declare financial and political independence, the leaders of those countries seek aid and trade concessions from the richer countries and, in return, are expected to bend to their rules. All countries trade with others; most or all countries run up deficits at some point. But such common practices have very different results in rich and powerful countries than they do in poorer and weaker ones.xii When rich countries have a trade deficit, they can allow that deficit to keep growing. When poor countries have deficits that they can no longer service, they must borrow the money from the World Bank or another international agency, which in turn makes the money available only with a large set of conditions.xiii In low-consumption countries, people are told that the government must comply with WTO regulations in ways ranging from the trivial to the serious: from stopping the sale of cheap CDs in Phnom Penh to preventing Thailand from enacting stronger controls on foreign cigarettes than it has on domestic ones. The World Bank congratulates a government agency for shedding employees. It ‘helps’ governments to draft laws designed to reduce regulation.xiv It pushes governments to privatize large swathes of the public sector. It applies pressure on governments to pass a range of policies, including deregulation of the banking and other sectors, which seem aimed more at enriching international corporations than at improving local living conditions. Hint: It is wise to be suspicious when extremely wealthy people say that they object to tax increases and government regulations because they will harm the poor or middle classes. * * * Don’t regulations reduce employment? If regulations are so cumbersome that they cause companies to go out of business, then they could result in a loss of jobs. But when companies pay CEOs enormous salaries and benefits packages, then claim that simple measures meant In the case of the United States, the independence is by no means total. With Saudi Arabia and China owning so many of its assets, the American government must make some concessions. This might help to explain some of the oddities of how the country dealt with 9/11, since it did not wish to upset its Saudi banker friends. xiii I discuss this in more detail in the myth about the BWI. xiv Not always; I reviewed a draft traffic law prepared under a World Bank project. The law was overly-prescriptive and draconian, and aimed at making it nearly a crime to walk or ride a bicycle. xii

193

BEYOND APOLOGIES

to help their employees work in safer environments would bankrupt them, it is hard to take them seriously. In many cases, simple and inexpensive measures such as unblocking or unlocking emergency exits are sufficient to prevent injuries and deaths. A recent American study finds that Occupational Safety & Health Administration (OSHA) inspections reduce workplace injuries and worker compensation costs, so they can actually save companies money: “OSHA doesn’t kill jobs; it helps prevent jobs from killing workers,” says Dr. David Michaels, Assistant Secretary of Labor for Occupational Safety and Health in the United States.26 Injuries mean lost production; fewer injuries should thus benefit production. As David Levine, Professor of Business Administration at the University of California, Berkeley and co-author of the study, explained in congressional testimony: These inspections protect workers’ health and safety. The randomly inspected firms experienced nine percent fewer injuries and had 26 percent lower workers’ compensation costs than the control group of similar firms. Workplace inspections cause no discernible damage to employers' ability to stay in business and no reductions in sales or credit ratings, according to our research. Nor did we identify any effects of workplace inspections on employment or wages. These inspections save employers billions of dollars a year, and a figure that only grows when we include injured workers’ lost earnings.27

Stronger labour protections could cause some industries to shift their operations to places with lower worker protection standards. Shifting operations for this reason – which essentially amounts to protecting executive salaries and bonuses at the expense of worker’s health and safety – is morally wrong; it should also be illegal. This is why international standards are needed so that all workers are oprotected and companies no longer have the option of shifting their manufacturing base to places sufficiently desperate or corrupt to sacrifice health and the environment for jobs. Short of that, activists need to make noise about dangerous working conditions. They also need to be vocal about the benefits of other regulations to protect workers, public health, and the environment. 

Towards a Better Way: Finding the Right Role for Government “Deregulation and competition when consumers have no real power of choice will always lead to the abuse of power. It is a pure illusion to expect natural monopolies to transform into perfect competitors; calling something a ‘market’ does not a competitive market make.” – James K. Galbraith28 “…governments need to play a developmental role, with implementation of integrated economic and social policies designed to support inclusive output and employment growth as well as to reduce inequality and promote justice in society.” – UNDP, Rethinking Poverty29

MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS

194

* * * It makes little sense to argue whether ‘small’ or ‘big’ government is better; size is relative. A more useful issue is the appropriate role of government in regulating industry, promoting equality, and ensuring the protection of the poor, vulnerable, and the environment from corporate harm. Subsidies Some government subsidies to the private sector are inevitable. Factories, offices, and laboratories all benefit from the infrastructure that governments provide to their citizens. While governments charge users for water, electricity, trash collection, and other services, it is not possible or practical for governments to charge companies for every advantage they receive. After all, many of those advantages are indirect, involving not just the manufacture of products but their use and disposal. This includes roads, police protection, and general infrastructure that allow society to function. But the inability to come up with a precise system of charging corporations for the advantages they receive does not mean that they should be allowed to evade payment entirely. Corporate tax is an important way to help ensure that businesses pay for some of the benefits that they receive. Those concerned about social justice and alleviating poverty need to inform themselves and the public about the ways in which corporations avoid paying their taxes and to campaign to end those practices. In addition to tax avoidance and tax holidays are other subsidies, such as electricity and water provided at reduced cost. Concerned people need to learn about those subsidies and inform others, in order to persuade politicians to limit or eliminate these subsidies and use the savings for services that benefit the poor. It would be easier to persuade people that corporations should pay sufficient taxes to begin to compensate for what they receive if the people had more information about the nature and extent of such subsidies. Identifying and publicizing some of the more absurd and damaging ones would be a critical step towards ending them. Safety nets Better wages and a comprehensive safety net would not only benefit the recipients, but also the economy overall. Using higher taxes on the rich to pay for the safety net makes a direct contribution to reducing inequality. During recessions or other economic slowdowns, people are reluctant to make purchases. Either they do not have enough money, or they are afraid to spend what little they have, or they anticipate future price declines. As a result, businesses produce less. The

195

BEYOND APOLOGIES

process builds on itself, and things continue to worsen. Admittedly, this is a simplistic picture of a complicated process, but it is nevertheless true that one way to break the self-reinforcing cycle is to introduce more money into the system and put it into the hands of those who are most likely to pass it on quickly: those with the fewest material resources and the greatest needs. Welfare payments, unemployment insurance, and a higher minimum wage all work to stimulate spending and thus prevent slowdowns and crashes. Such payments, as late British economist Richard Douthwaite observed, have “ensured that, whenever the rate of joblessness has increased, larger amounts of money have automatically been transferred to people who spent all of it immediately. This is a very effective way of compensating for the loss of spending power.”30 As the economy improves, more and better jobs become available, and fewer people will require government assistance. Regulations One reason why governments are essential is that they give the powerless some protection from the powerful. A similar situation exists when individuals or small groups of people want to protect themselves and their environment from the actions of large corporations. It is unreasonable to expect that individuals can prevent companies from polluting rivers or ensure food safety standards or basic worker protections. The public needs government to act on its behalf. It is not hard to see that an entire absence of government regulation would mean chaos, for not only consumers but also corporations. So of course government should regulate the private sector. Who else but government has the power and authority to protect the population from corporate lies, half-truths, and terribly persuasive advertising? Who else but government stands a chance at limiting environmental pollution from business activities and ensuring (with at least some success) a safe food supply? True, some regulations appear ridiculous. For example, the European Union has banned the sale of eggs by the dozen, overly curved cucumbers, the blowing up of balloons by small children without adult supervision, and eating your pet horse.31 But there is a flip side to at least some of them. As one commentator points out, At first, the regulations seem ludicrous, but another look shows them to actually be quite sensible, whether it is norms for truckers' seats (which has to do with ensuring safety), regulating the trade in bull semen (in this case, exchanges were forbidden in order to reduce the chance of livestock epidemics), or issuing passports for dogs and cats (which makes it easier to take the quadrupeds along on holidays). Standards and norms make life easier, and they are to be thanked even for banal, everyday things such as that letter stationery fits into an envelope, a chair fits under a table,

MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS

196

and a credit card ﬁts into a wallet. They ensure that consumers can be conﬁdent that their purchases meet certain conditions. They also help to reduce production costs.32

Where regulations are lacking, people suffer. Workers in unregulated meat processing plants must do their job so quickly to meet production quotas that serious injuries – not to mention contamination – are almost guaranteed. Garment factories lock workers in during the day to prevent theft, leaving workers to die when there is a fire. The ship breaking industry in Bangladesh, wherein workers attempt to salvage what they can from submerged ships, is unregulated. It is also famous for exacting a high death toll among its employees.33 In some factories, workers are fined the equivalent of three days’ pay for each day they miss and lose their jobs if they arrive just slightly late.34 That a company is in a position to exploit its workers is insufficient justification for allowing such exploitation. Surely in these situations more regulations governing workplace safety and workers’ rights would be a good thing. What is true of industry applies equally well to other sectors. Deregulation of the banking sector has repeatedly led to economic chaos. There are very good reasons why governments should try to control the flow of money in, and more particularly out of, their countries. It is difficult to maintain a stable economy when investors can inject enormous sums quickly, and just as quickly – within days or even hours – pull that money back out. When the International Monetary Fund successfully convinced many Southeast Asian countries to remove many of their rules governing the flow of funds, the result was an economic crash that led to major devastation in several countries in the 1990s. Deregulation of the banking and other sectors in the United States in the 1980s contributed to the crashes years later. Many people lost their jobs and homes. A system that rewards short-term gain no matter what the consequences and that fails to hold gamblers responsible for the results of their actions will inevitably cause problems if sufficient controls are not in place. “When the masters of the universe who control decision making on Wall Street are confronted with enormous short-term personal rewards and minimal long-term downside risk, then disaster awaits,” says Bryne Purchase, former Chief Economist and former Deputy Minister of Finance and of Revenue in the province of Ontario, Canada.35 Regulation, when done well, protects not only individuals but also the financial sector itself. Finally, if government should not interfere in the private sector, then we should also challenge private sector interference in government: the revolving door between government and corporate jobs, all the lobbyists, the corporate officials who run for public office, and so on. There are loudvoices speaking out against government regulations and control. Others must respond with even stronger arguments in favour of a vigorous

197

BEYOND APOLOGIES

public sector with active civil society involvement that will complement and constrain industry for the beneďŹ t of (virtually) all. Where regulations are absurd, governments should certainly discard or improve them. But it is unwise to suggest that simply reducing regulations will lead to a better situation. Just as privatizing various government services is no solution to existing problems,xv so throwing out the regulatory system in the hopes that the marketplace will provide something better is an exceedingly dangerous idea. When people talk about the harms of regulation, it helps to turn the issue on its head and ask who or what will be harmed if governments fail to regulate industry. There are at least four areas that merit intervention and regulation: 1) protection of the planet to avoid environmental destruction; 2) protection of vulnerable workers; 3) protection of consumers from defective, dangerous, or damaging goods and services; and 4) protection of the economic system from self-destructive tendencies.36 As NGOs and as individuals, we need to campaign for strong and well-enforced regulations that reduce the damage that industry can otherwise cause to the environment and that ensure that industry pays for its clean up. We need to work towards regulations that ensure a living wage and safe and humane working conditions. We should demand regulations that protect consumers and speak out for regulations that can protect the economic system from predatory harm. We should counter arguments that government regulation of industry is an unnecessary and damaging cost, and show how instead regulation is a vital form of protection that makes wellbeing a possibility. * * * How would our friend Prakash feel about government regulations? Certainly if his children did decide to go to work in the city, he would want to know that strong regulations regarding job safety existed. If he lived in a city and had to buy rather than grow his food, he would also appreciate strong regulations that limit the use of agricultural chemicals and other additives in the food supply. And if his government invested more on the poor and less on propping up businessmen, then the wealthy man who wished to help him might no longer feel any need, or be in as much of a position, to do so. * * * Rejecting corporate doublespeak The arguments about shrinking government so that corporations can contribute to prosperity sound good. It seems far more empowering to provide the overall xv

See the Myth on Privatization for more discussion of this issue.

MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS

198

conditions that will allow the poor to prosper than to keep giving them handouts Selfish considerations aside, it is no wonder that some would favour such an approach. Unfortunately, experience has proven repeatedly that this way does not work. It suggests that in a thriving economy, everyone benefits, despite more than ample evidence of growing inequality. It values capital far more than labour, and ignores, in the words of Bryne Purchase, “the roles randomness and chance play in individual achievement.”37 Those concerned about these issues need to learn to look beyond the attractive front that giant corporations create for themselves and to understand what corporations are really doing to their workers, to public health, and to the environment. Although it is neither quick nor easy, it is possible to strengthen governments to curtail corporate power. Years long, even decades long, struggles in the past have yielded victory at reining in the tobacco industry, manufacturers of infant formula, and, in some countries anyway, gun manufacturers. I could describe my own work over the last several years in tobacco control and liveable cities as trying to lessen corporate power and increase the power of people. The work involves pushing politicians to make decisions that are good for public health and the environment, even if giant corporations express strong objections. It means promoting policies that help the poor, even if big companies would like to see something different happen. And, with a combination of hard work, long-term campaigns, smart strategizing, and the recruitment of allies, we have shown that success is possible. A vibrant civil society Reclaiming a strong and sensible role for government and ensuring that governments meet their commitments to the population overall (not just the wealthy) will not succeed without the genuine involvement of the public. Hugo Chávez, former President of Venezuela, stated that he believed not in representative but rather in participatory democracy.38 This is not easy to achieve, but various ways do exist to increase the role of the public in decision-making and thus the ability of the general population to oversee the activities of otherwise unaccountable governments and corporations. A genuinely free and balanced press would help; this is possible through the Internet. Activists need to continue making use of the Internet to communicate ideas. Activists also need to remind others of the ways in which mainstream media too often misleads people into supporting the status quo.xvi Representatives of unions, environmental groups, consumer groups, and so on must demand that they be xvi

See the Mass Media Myth for more on this topic.

199

BEYOND APOLOGIES

included in government committees in sufficient numbers to have some influence on what happens. It is easier to influence what happens locally than at the national level, and small successes grow into broader efforts and positive change. The first step in convincing governments to pass needed policies is information. Activists must explain the importance of a policy. They may need to draft model legislation to show exactly what it should contain. (Big business already does this for government, and politicians under time pressures may accept what is given rather than draft their own version.) But information is usually not enough. A multi-pronged strategy will work better to pressure government to do the right thing. Research showing that the public supports the desired policy helps. Evidence of cost savings is also important. Media attention is vital. Several groups pushing the same policy will make a bigger impression than one group acting alone. Activists need to communicate directly with government officials, through letters and meetings. Finally, the passage of a policy is not the end of the process; work is needed to ensure proper implementation as well, using many of the same tools that proved successful for the policy’s passage. None of this is impossible or hopelessly utopian. Town meetings, participatory budgeting, and public input into government plans are occurring in different venues around the world. The sensation of powerlessness leads to apathy; when people see that they can have a positive influence, they are more likely to become involved in civic affairs. Of course not all public involvement will lead to improved results. Various selfish interest groups will speak loudly on behalf of their members, often to the detriment of the public good. However, vibrant communities – communities that get involved in how they are governed – can wield significant power; that power is needed to ensure that government, big or small, acts in the interests of its population, including low-paid workers and others in poverty. We need neither smaller nor bigger government, but government that acts in the service of the public and the environment.

MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS

200

Notes https://www.youtube.com/watch?v=R_T0WF-uCWg Sheldon Richman, “The Free Market Doesn’t Need Government Regulation, Bureaucrats Regulate by Threat of Physical Force while the Market Operates Peacefully through Millions of Cooperating Participants,” Future of Freedom Foundation, 5 August 2012. 3 Jim Bronskill, “Yves Fortier's Oil Patch Ties Prompt Civil Liberties Complaint,” CBC News, 28 September 2014. http://www.cbc.ca/news/politics/yves-fortier-s-oil-patch-ties-prompt-civil-liberties-compla int-1.2780666 4 Damien Cave, “The United States of Oil,” Salon, 20 November 20 2001. 5 Zach Carter and Jordan Howard, “Obama's Close Ties To CEOs Whose Firms Dodge Taxes,” Huffington Post, 1 September 2011. 6 Steve Clemons, “GOP Presidents Have Been the Worst Contributors to the Federal Debt,” The Atlantic, 27 October 2012. 7 David Morris, “The Huge Difference between Republicans and Democrats,” On the Commons, 18 June 2013. 8 Samanwaya Rautray and Urmi Goswami, “Conflict of Interest Rampant in India’s Corporate Sector, Politics & Financial Markets,” The Times of India, 9 June 2013. http://articles.economictimes.indiatimes.com/2013-06-09/news/39834855_1_most-mps-jaira m-ramesh-serious-conflict 9 David Smith, “WikiLeaks Cables: Shell's Grip on Nigerian State Revealed,” The Guardian, 8 December 2010. 10 Laurel Rosenhall, “Big Business Wins Capitol Food Fights,” The Sacramento Bee, 17 August 2014. 11 Jason DeParle and Robert Gebeloff, “Food Stamp Use Soars, and Stigma Fades,” The New York Times, 28 November 2009. 12 LaDonna Pavetti, “Time on Welfare and Welfare Dependency, Testimony before the House Ways and Means Committee, Subcommittee on Human Resources,” Urban Institute, 23 May 1996. 13 Joshua Holland, The Fifteen Biggest Lies About the Economy and Everything Else the Right Doesn’t Want You to Know About Taxes, Jobs, and Corporate America (Hoboken, New Jersey: John Wiley & Sons, Inc., 2010). 14 Nancy Folbre, “Eliminating Economic Penalties on Caregivers,” in Jody Heymann and Christopher Beem, eds., Unfinished Work: Building Equality and Democracy in an Era of Working Families (New York: New Press/ W. W. Norton & Co., 2005). 15 CNN, “Bush: Bailout Plan Necessary to Deal with Crisis,” 25 September 2008. 16 Nick Mathiason, “Subsidies Sow Seeds of Ruin,” The Observer, 7 September 2003. 17 Elizabeth Becker, “U.S. Corn Subsidies Said to Damage Mexico,” The New York Times, 27 August 2003. 18 Mathiason, “Subsidies Sow Seeds of Ruin.” 19 Karen Freifeld, “Banks Paid $32.6 Billion in Bonuses amid U.S. Bailout (Update4)”, Bloomberg News, 30 July 2009. 20 Paul Krugman, “Reagan Did It,” The New York Times, 31 May 2009. 1 2

201

BEYOND APOLOGIES

MySafeWork, “Our Story,” http://www.mysafework.com/our-story/ “Global Efforts to Promote Health Face Serious Challenges from ‘Big Business’ – UN official,” United Nations News Centre, 10 June 2013. 23 For a book-length discussion on this topic, see David C. Korten, When Corporations Rule the World, 2nd ed. (Bloomfield, Connecticut and San Francisco: Kumarian Press and Berrett-Koehler Publishers, 2001). 24 Noam Chomsky, Imperial Ambitions: Conversations with Noam Chomsky on the Post-9/11 World (London: Penguin Books, 2006). 25 Institute for Global Labour and Human Rights, “Bain Capital: Pitting American Workers Against Workers in China Earning Just 99 Cents an Hour,” October 2012. 26 Dr. David Michaels, “OSHA Saves Lives and Jobs.” (Work in Progress), The Official Blog of the U.S. Department of Labor 21 May 2012. http://social.dol.gov/blog/osha-saves-lives-and-jobs 27 David I. Levine, “Randomized Government Safety Inspections Reduce Worker Injuries with No Detectable Job Loss,” Testimony Prepared for the House of Representatives Subcommittee on Workforce Protections, Hearing on “Promoting Safe Workplaces through Voluntary Protection Programs,” 28 June 2012. 28 James K. Galbraith, The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too (New York: Free Press, 2009). 29 Rethinking Poverty, Report on the World Social Situation 2010 (New York: UNDP Department of Economic and Social Affairs, 2009). 30 Richard Douthwaite, The Ecology of Money, Schumacher Briefing No. 4 (Devon: Green Books, reprinted 2010). 31 Christopher Leake, “EU to Ban Selling Eggs by the Dozen: Shopkeepers' Fury as They are Told All Food Must be Weighed and Sold by the Kilo,” Daily Mail, 27 June 2010 and http://www.huffingtonpost.co.uk/2011/11/25/top-5-crazy-eu-demands_n_1112685.html 32 Susanne Geiger, The Strange Curvature of the Cucumber, The German Times, January 2007. 33 See, for instance, http://www.shipbreakingbd.info/ 34 Jody Heymann, Forgotten Families, Ending the Growing Crisis Confronting Children and Working Parents in the Global Economy (Oxford: Oxford University Press, 2006). 35 Bryne Purchase, “Mortal Hazard: Why Catastrophic Events like the Sub-Prime Mortgage Crisis and Climate Change are Inevitable,” The Walrus, April 2013. 36 John Kenneth Galbraith, The Good Society, The Humane Agenda (New York: Houghton Mifflin Company, 1996). 37 Purchase, “Mortal Hazard.” 38 Hugo Chávez and Aleida Guevara, Chávez, Venezuela and the New Latin America, An Interview with Hugo Chávez by Aleida Guevara (New York: Ocean Press, 2005). 21 22

MYTH #9: Whatever Governments Do, the Private Sector Can Do Better “From the results, one can easily see that the whole point of privatization is neither economic eﬃciency nor improved services to the consumer but simply to transfer wealth from the public purse – which could redistribute it to even out social inequalities – to private hands.” – Susan George1

 Privatizing the Public Purse: Efficiency and Effectiveness or Just More Inequality? Conduct a quick internet search on the term privatization, and a range of sectors appear: prisons, war, water, electricity, transport, pensions, health…the list goes on. In country after country, whether due to pressure from the International Monetary Fund and World Bank, to financial shortfalls, or to political ideology, governments are privatizing basic services and industries. While it is sometimes sensible for governments to contract private companies to deliver services, that is a far cry from outright privatization. In cases in which the government holds the purse strings and sets the terms of the contract, the government can actively monitor whether the company performs its limited activities properly. Under privatization, the government hands over the entire operation to a private company, which is then given the power to decide how to carry out the activity. There is a critical difference between a government hiring a private firm to lay water pipes and handing over the entire water service for the company to design and run, with no input or oversight by the government or recourse for the customer. Privatization can sound appealing. Imagine a popularity contest in which the private and public sectors compete. On the one hand, people see clever, amusing, attractive advertising featuring cute dogs and gorgeous women to promote wondrous products like magical weight loss pills. On the other hand, they see unattractive and boring politicians, uncomfortably crowded buses, and seemingly endless and cumbersome bureaucracy. The private sector offers people the pleasure of choosing how to spend their money; the public sector presents them with the burden of paying taxes. It is clear which contestant would win. However, while the private sector is very seductive, much of its appeal is superficial. As with the other myths presented in this book, it helps to remember who benefits from the belief in question. Those who stand to gain financially from allowing the private sector a greater role in the provision of basic services loudly claim that the public sector is corrupt, inefficient, and ineffective, and that the private sector is well-managed, efficient, and avoids waste. Claims based on self-interest do not, of course, equate with truth. There are several reasons for rejecting the overly simplistic idea that private sector management is inherently better than the public sector and that the government should privatize more and more services.

203

BEYOND APOLOGIES

People need access to basic services When governments provide services, everyone (at least theoretically) has equal access to them. Universal access stems from an understanding that some services are essential to the wellbeing of the community and should be available to all, regardless of whether or not people can afford to pay for them. In the private sector, the goal of the provider is to make a profit. When a service is privatized, the price typically goes up. People who can no longer afford the service cannot access it. Absent is the belief that people should look out for each other and that a society cannot function well if some of its members are deprived of basic services. For these reasons, the privatization of basic services is morally abhorrent. The private sector prospers by passing costs on to the public Some private companies make a lot of money, while others go bankrupt. A company may do well for years and then suddenly fail. The idea that companies must operate efficiently to succeed is not particularly meaningful, particularly in light of the recent revelations that several successful, multi-billion dollar enterprises have been ‘cooking their books’ for years and engaging in other fraudulent practices. The retail company Tesco has recently been accused of having overstated its profits by about $424 million.2 The fraudulent practices of Pennsylvania soft drink maker Le-Nature has cost lenders, vendors, and investors around $684 million.3 America’s second largest long distance phone company, WorldCom, committed accounting fraud to the tune of over $7 billion.4 The financial services company Lehman Brothers hid more than $50 billion of loans by classifying them as sales. The energy company Enron engaged in various schemes, aided by the corrupt accounting firm Arthur Anderson, which cost shareholders $74 billion.5 Defence contractors in Iraq and Afghanistan wasted or lost to fraud as much as $12 million a day from 2001 to 2011, for a total of $60 billion.6 The fact that some companies succeed in making a lot of money for decades is not proof that those companies know how to deliver services in a better, more efficient fashion than governments. That is, unless ‘efficiency’ is defined as being effective at shifting one’s costs onto others, ignoring the damages of one’s actions, and making a profit regardless of the poor quality of the services one delivers. Nor, as the recent scandals show, is there any reason to believe that corporations are any less corrupt than governments. Wasteful or otherwise ‘inefficient’ companies can make sizeable profits in many ways. They can secure government contracts by means other than competitive bidding, whether through the influence of employees who were formerly government officials, bribes and kickbacks, personal connections and family ties, or other means. For example, a local government official in the American state of Alabama

MYTH#9: THE PRIVATE SECTOR DOES BETTER

204

was convicted in 2009 of accepting bribes from JP Morgan, an American multinational banking and financial services holding company. Local officials then hired JP Morgan to advise them on how to refinance the debt on their sewer system. JP Morgan’s services required the locality to pay $120 million in fees, or six times the normal charges. The result: a $277 million increase in local government debt that required the government to raise sewer rates repeatedly in order to avoid bankruptcy. Since sewer rates are based on use, not ability to pay, the price increases fell most heavily on the poor.7 Wasteful corporations can also pass on many of their costs to the public at large. This can take the form of bypassing environmental regulations, underpaying workers, and evading taxes. In the United States, underpayment of fast food workersi costs the government almost $7 billion a year to support those same workers through welfare and other poor relief programmes, essentially subsidizing the companies to pay low wages.8 While it might seem cheaper to bring in a fast food franchise to supply school lunches rather than having them prepared by people hired directly by the school system, some of the costs (support of underpaid workers and health effects of eating fast food) simply fall back on the public. Hint: When someone suggests the need to privatize a government service in order to save money, look at all the costs that are involved and whether the privatization will benefit the public, or just the company and a few of its friends. * * * Efficiency is elusive everywhere The idea that corporations operate more efficiently than governments is repeated so often that it has become difficult to even question the notion. However, where is the evidence that corporations are more ‘efficient’ than governments in providing services? Businesses and governments both consist of individuals operating under a set of motivations and incentives. The primary incentive of businesses is to make a profit. The primary incentive of government, when things work properly, is to serve the public. That is the main difference between the two. Another key area of difference between the two sectors is transparency: reporters and citizens have at least some access to public government records and accounts, and can find and publicize government inefficiencies. The public typically has no such access to

The proportion of fast-food workers who receive food stamps rose to almost twenty-seven percent in 2010, compared with ﬁfteen percent of all Americans.

205

BEYOND APOLOGIES

corporate accounts.ii As for management, both governments and large corporations can be hopelessly bureaucratic and inflexible. With size typically comes bloated bureaucracy and rigidity. With any human enterprise come errors; the private sector can excel at incompetence at least as well as the public sector. For example, the American state of Indiana had a $1.34 billion contract with IBM (hardly a small or newly established company) to deliver government assistance to the needy. During the two-year period of the contract, some of the families who qualified for benefits (including food stamps, health coverage, and financial assistance) never received them due to company ‘errors’; the company’s work was also marked with frequent delays. In 2009, the government cancelled the contract.9 The argument that companies cannot afford to be inefficient is belied by the fact that large companies are sometimes protected from failure no matter how badly they perform. They can save money by evading regulations. They can lobby obliging governments for a number of subsidies, such as tax holidays, profitable contracts, and pressure on other countries to buy their products. They can persuade governments that their failure would do irreparable harm to the entire economy – that they are ‘too big to fail’. A recent case was the bailout of American automakers and banks. If private companies are so efficient, why do they require so much financial help from their ‘inefficient’ governments? Governments do not have a monopoly on corruption A further manifestation of anti-government, pro-business prejudice is the widespread belief that governments are corrupt while businesses are not. The media regularly reports on corrupt government leaders who steal millions or billions of dollars from their country (but had an awful lot of nice shoes). Forbes has even created a top ten list of all-time corrupt government leaders, topped by Mohamed Suharto (Indonesia), who embezzled an estimated $15 to $35 billion and Ferdinand Marcos (Philippines) who stole $5 to $10 billion.10 In some parts of the world, people hear about daily corruption, whereby citizens must pay bribes to obtain even the simplest services, including a doctor’s attention in the hospital. In other parts of the world, daily corruption may be less but periodic scandals reveal that it is common there as well. This belief in the inherent corruption of the public

Theoretically, publicly-traded companies allow their shareholders access to some information and input into decisions. Given the size and complexity of most companies, in reality (according to John Kenneth Galbraith) shareholders are highly unlikely to have access to enough information to provide any meaningful input, and shareholder meetings are simply a means by which the company formally passes the decisions it has already made.

MYTH#9: THE PRIVATE SECTOR DOES BETTER

206

sector begs the question: who bribes governments? When a corporation bribes a government official, why do we consider only the public official to be corrupt?iii What is the correct term for companies that pressure governments to provide a range of subsidies, benefits, and exemptions from worker and environmental protection laws? The same act labelled as corruption when governments engage in it is labelled good business practice when corporations are involved. In addition to bribes received from businesses and individuals, a major source of government corruption is aid money. International lending agencies such as the World Bank and Asian Development Bank fund projects to the tune of hundreds of millions of dollars but provide little genuine oversight or quality control. They regularly – and publicly – condemn government corruption and demand accountability, without asking whom it is that consistently and continually provides the aid monies that are then misused or outright stolen.iv If so much aid money really is being stolen, while little or none of it is being put to any productive use in a given country, then there must be a simple explanation. Either the World Bank and its partners are not as concerned about corruption as they claim to be, or there is another reason that they continue to prop up corrupt governments through aid. If the funders do not object to corruption, it is unlikely that the recipients will. Wherever there are people and money, there can be corruption. Increased vigilance by aid agencies and the public can help to make governments less corrupt. But while governments are, to some extent, accountable to their citizens, corporations are only accountable to their shareholders. Worse, shareholders generally have very little information or ability to insist on accountability. Too often, handing over the control of vital services to the private sector simply hides the corruption rather than making it go away. Cost savings from privatizations are often a mirage One reason regularly given for privatizing government services is that it will save taxpayers’ money. There are a few problems with that notion. One is that companies are often only concerned with the short term. For example, contracts It is true that in some cases people, including businesspeople, have no choice but to pay a bribe to get something perfectly legal done. Bribery is sometimes written into the system: policemen must take bribes to pay back the bribe they paid to get their job. If people valued honesty more than wealth and received decent pay, some corruption might decrease on its own. However, those minor bribes are only a very small part of a much larger picture of overall corruption. iv I once attended a seminar in which the Minister of Transport said that he would be transparent in all large-scale transport projects because that is what donors want. Perhaps his cynicism reflects the fact that the donors themselves are rarely transparent. iii

207

BEYOND APOLOGIES

given to private companies to manage water supplies are typically only for about five or ten years. The short-term nature of the contract and the fact that the system will then revert to the government (or be put up for tender again) creates a strong temptation for the company to skimp on maintenance and to delay making repairs for as long as possible. After all, why invest heavily in something that may be in someone else’s hands in the near future? If the operation ceases to be profitable, the contracted company can simply hand the mess back over to the government and let the taxpayers pick up the cost of repairing the damaged infrastructure. In the long term then, governments may pay more to contract out a service than they would have spent to carry out the service themselves. For example, the American city of Gary, Indiana cancelled a ten-year contract with United Water after a government inspection found many problems, including broken equipment, inadequate monitoring reports, and failure to meet deadlines. The city anticipated a fifty percent reduction in costs (a savings of $8 million per year) simply from cancelling the contract.11 Another way private companies may cut costs is by reducing their workforce. A recurrent theme in critiques of ‘inefficient’ governments is that they hire too many people, as if employees only represent a cost. Proponents of privatization ignore the fact that many or most of those workers were performing a useful service, and that their unemployment will generate a different type of social cost. In fact, when former government workers become unemployed and rely on the government for assistance or can no longer pay income taxes, there is simply a shifting of the cost, not a true savings. When those employees were performing an important service and are not replaced, there is a further cost. When private companies take over the running of prisons, there is an economic incentive to see higher rates of incarceration – more prisoners translate into more profit. Prisons are also more profitable if operating costs are kept low. Those operating prisons can save costs by cutting back on guards and by training and paying them less. However, a lower guard-to-inmate ratio can lead to more outbreaks of violence and create more dangerous working and living conditions. The government can end up spending more when it must send in police to deal with riots and other violence than it saved by hiring the company to take over the prison. Another cost-saving measure is to overcrowd cells and supply less than adequate health care to prisoners. If a disease outbreak occurs – such as of fungal diseases or multiple (or extremely) drug-resistant tuberculosis – it is the government, not the company running the prison, that bears the costs.12 The United States has the highest rates of incarceration in the world; it also has a high rate of privatization within the prison sector. Rather than save money or increase efficiency – the arguments used to justify corporate control of the prison system – privatization has

MYTH#9: THE PRIVATE SECTOR DOES BETTER

208

made existing problems worse. Privatization has also reduced the ability of the government to solve those problems, since it has already passed much of the control of decision making to private companies.13 What happens when basic services are privatized? Despite the glowing remarks of its proponents, the literature on privatization is full of disasters. Reading the history of privatization makes it clear that some sectors should never be privatized because they are too open to abuse or are too critical for the population. While abuses are particularly likely where civil society is weak, history shows that abuses occur even in that ‘bastion of freedom and democracy,’ the United States. One example is the experiment conducted in the state of California with the deregulation of electricity in the year 2000. As summer temperatures rose and people turned on their air conditioning, the company that had received the contract realized that it could increase its prices as much as it wished, and people would be forced to comply. The company raised the price on some days by as much as seven thousand percent and collected billions of dollars in surcharges. The price increases had nothing to do with a supply problem; privatization simply opened the door to profiteering.14 Governments do raise the price of utilities also, of course, and in some countries, there are regulatory agencies that allow or disallow such increases; but government officials generally keep the increases modest because they wish to be re-elected. Private companies have no such constraints. In Bangladesh (until recently), the price of a train journey had not increased for thirty years, meaning that rail was, and still is, an exceptionally affordable system of transport. On a business level, the lack of fare increases is ‘inefficient,’ because the government’s revenue from the sale of tickets is not keeping up with its cost of running the train service.v No company would overlook such a great source of potential revenue. If the system were privatized, price rises would likely make the cost of tickets unaffordable to many riders. Because containing costs would be a priority, cuts in personnel and on maintenance schedules might make the service less safe. Nor is the problem limited to low-consumption countries: rail privatization in Britain has led to higher fares and more accidents.15 In Canada, a recent

v Throughout the world, governments do not expect to make money from roads; expenditure for roads is commonly considered an ‘investment’ whereas expenditures for intercity rail and public transit are considered an ‘expense’ or ‘loss.’ Roads, which are proﬁtable to the makers and sellers of cars, to truck operators, to oil companies, and to road builders, receive regular and huge inputs of cash; trains and other ‘alternative’ transport are treated as an unaﬀordable cost and receive vastly less funding.

209

BEYOND APOLOGIES

tragedy in which a train carrying explosive crude oil derailed and exploded in the centre of a small town, killing forty-seven people, was shown to be caused, in part, because the owner of the rail company had cut back on train personnel and on safety measures.16 Then there is the case of the privatization of water services in Cochabamba, Bolivia. According to a Public Citizen report, water rates in Cochabamba increased by as much as two hundred percent immediately after the local water supply was privatized. Some families were paying $20 each month just for water, while trying to survive on an income of less than $100 per month. The price hikes led to a four-day general strike in January 2000. Finally, the government cancelled the contract and re-nationalized the water system. The Public Citizen report finds that “In this case, [the American engineering and construction firm] Bechtel and the British-led consortium of investors put up less than $20,000 of up-front capital for a water system worth millions. Consumers suffered rate increases, while the company was expected to earn an annual income of $58 million.”17 Despite the value of the deal, the government received almost nothing for it, although some public officials received bribes to approve the privatization.18 Similar events have occurred in Argentina. The Public Citizen report noted above quotes Fernando de la Rua, then mayor of Buenos Aires, as saying, Water rates, which Aguas Argentinas [the private company running the water system] said would be reduced by 27 percent have actually risen 20 percent. These price increases, and the cost of service extension, have been borne disproportionately by the urban poor. Non-payment for water and sanitation are as high as 30 percent, and service cut-offs are common with women and children bearing the brunt with health and safety consequences.19

What does the World Bank have to say about water privatizations in Latin America? Efforts to reform utilities can affect poor households in varied, often complex, ways, but it is by no means certain that such reform will hurt vulnerable households. … Many myths have been perpetuated in discussions of utility reform – and in many cases poor households have benefited…The good news is that many measures can be taken to improve the chances that poor households will benefit from reform. Chief among these is promoting competition, where possible.20

It is clear that by ‘reform’ the World Bank means privatization. Just two quick comments: Saying that the work that one does will not necessarily hurt the poor is hardly laudable. And how is one to promote competition for the provision of

MYTH#9: THE PRIVATE SECTOR DOES BETTER

210

utilities, which by their very nature are a monopoly?vi Certainly, governments do not always do an acceptable job of providing affordable water or other basic services. Many people in low-consumption countries do not have access to clean water, and as a result, some must pay high fees to obtain water from private suppliers. The solution is not, however, to toss the entire system over to the private sector. Rather, it is to pressure (or assist) the government to improve its services. According to one report, the private sector has done no better than governments at providing new water connections in various countries in which it has received privatization contracts in sub-Saharan Africa, South Asia and East Asia. Where more people have received water connections under privatization, in most cases the government actually paid for the new connections, not the private company. The number of people who lost their connections due to their inability to pay the bills must balance any gains that have occurred through privatization.21 Similar abuses have been documented concerning privatized sewage systems, with raw sewage sometimes being dumped into waterways instead of being taken to treatment plants. For example, in addition to the price increases for water mentioned above, Aguas Argentinas also failed to fulfill the obligations in its contract to build a new sewage treatment plant.22 The result has been that over ninety-five percent of the city’s sewerage is dumped directly into the Rio del Plata. If people are not happy with their provider of water or electricity or sewage, they can neither switch providers nor stop purchasing the product. This is just the sort of situation that companies crave – and the informed citizen fears – and is another reason why governments should never hand these services over to the private sector. The problems that have resulted in country after country, city after city, have led to a growing international movement to fight the privatization of water. Many cities that had previously privatized water systems have since re-nationalized them. In Johannesburg, a private water company installed pre-paid meters that would only issue a certain amount of water against a token. The amount of water provided per household at no cost was far too little for even basic survival. Finally, the High Court, citing the Constitutional right to water, decided that the system had to be changed so that families could receive an ample quantity of free water per month.23 Both the Netherlands and Uruguay have laws against the privatization of water.24 They would compete, of course, to win the contract, including competing to pay the highest bribe to the decision-makers. vi

211

BEYOND APOLOGIES

Health care In all industrialized countries (other than the United States), the government provides health care for all of its citizens, funded through taxation. Only in the United States do private sector health insurance providers play an enormous, and enormously expensive, role as intermediaries. Having insurance companies act as intermediaries in the health care system also makes it more difficult for people to obtain health care: since insurance companies make higher profits if they pay fewer claims, they resist paying, even on the slightest pretext. Involving an insurance company – whose goal is to make a profit – in critical medical decisionmaking is inherently inefficient; when companies deny coverage to those with pre-existing conditions, or find other excuses to refuse to pay claims, it is unethical. This system raises the cost of medical care enormously. Not only must the insurance companies pay their staff, the companies must make a profit for their shareholders, and the doctors and hospitals must hire additional staff to fill out all the widely varied forms required by all the different health insurance companies. All of this makes the per capita level of American health care spending one of the highest in the world. France, for instance, spends $300 per person on administrative costs each year, while the average cost in the United States is $900.25 In the recent past, the cost of simply screening patients in the United States for private health insurance was $350 billion per year, and that is before any care is even provided.26 Where the government pays directly for health care rather than delegating it to private insurance companies, similar or better results are achieved for far less money. Per capita spending on health care in the United States, at just over sixteen percent in 2012, was the second highest in the world in terms of percentage of GDP.vii That is the equivalent of more than $8,000 per person per year, or two and a half times more than most industrial countries, including France, Sweden, and the United Kingdom.27 Even with this higher spending, though, life expectancy in the United States, at 78.2 years, is less than the average of 79.5 years among OECD (Organisation for Economic Co-operation and Development) countries. More troubling, despite the high national costs, is the reality that many Americans still have little or no access to health care. According to the United States Centers for Disease Control and Prevention, more than forty-eight million Americans, or eighteen percent of those under the age of sixty-five, are uninsured.28 (This should be improving under the Affordable Health Care for America Act, derisively and Although GDP is a lousy measure of wellbeing, it does give an idea of the level of consumption, and thus provides some sort of comparison among countries in terms of how much is spent on health versus other products and services. vii

MYTH#9: THE PRIVATE SECTOR DOES BETTER

212

misleadingly labelled by the press as ‘Obamacare’.) The government program Medicare already covers Americans over the age of sixty-five. Medicaid covers the poor, at least to some extent. It is not as if the United States does not have any government-provided health care. But efforts to expand the existing ‘socialist’ system to cover the entire population have been met with increasingly fierce resistance, in part because it threatens corporate profits.vii This is not an exclusively American problem; despite its obvious inefficiencies, many non-Western countries have adopted some sort of private health insurance modeled on the American system.29 If the United States implemented a system of universal, free, government-funded health care that did not require its citizens to go first through private insurance companies, then major illness would no longer result in personal debt and bankruptcy. Instead, people could have treatment minus the bills. Where government programs cover the entire population, expenditures to evaluate the risk that those they insure might get ill become unnecessary. As a result, one large cost of providing health insurance declines. A single payer system would greatly reduce the role of private insurance companies in determining who gets health care (since they would only fill in the gaps left by the government) and in driving up the cost of that service. A single payer system would thus be far simpler and would mean great cost reductions, with the potential of lower spending actually buying better results – if only one could overcome the lobbying of the insurance companies.x Private health insurance is only part of the picture. Another aspect of the privatization of health is the provision of some degree of health care through private, userpay clinics and hospitals. Private health care facilities may be more attractive and more pleasant than public ones, but one pays a high price for those benefits.xi If government paid directly for most health care, then the health insurance companies would play a much smaller role. If government negotiated better prices from the pharmaceutical companies, their profits would decline. ix I mentioned to a Canadian colleague recently that a private health care provider in Thailand hadn’t billed me for a rather ridiculous doctor’s visit that it had insisted I make. She smiled and remarked that the very idea of being billed for seeing the doctor is odd. x Obama’s plan, thanks to that lobbying, is not a single payer system, and thus maintains much of the bureaucratic inefficiency that makes health care in the United States so expensive and inadequate. Other countries would do well to learn that lesson. xi I have personally witnessed unashamed gouging of patients at private hospitals in Bangkok. I know of a private hospital that refused to release a dead body until the bills were settled. The same hospital deliberately racked up the cost of care, including charging $1,000 for each high-tech (but malfunctioning) bandage, for a foreign patient with an amputated leg who was about to be transferred to a far more affordable public hospital. viii

213

BEYOND APOLOGIES

It would be wiser to lobby the government to improve its services than to encourage the opening of private clinics. In Bangladesh, for example, private clinics and hospitals are attractive, clean, and generally well-managed. They are also expensive. They have just one small problem: they tend to lack doctors. In some private hospitals, the doctors make their rounds only after 10 p.m. (after they finish their public sector work and, presumably, go home for dinner).xii Public hospitals in Dhaka, on the other hand, are typically dirty and poorly managed, with dusty floors and small cockroaches crawling on the beds. However, they have some excellent medical staff, usually the same doctors who moonlight at the private hospitals and clinics. Public hospitals can provide treatment, typically not the most modern care, but sometimes stunningly effective. It would not be difficult to improve conditions in the public hospitals, since most of the problems result simply from poor management and poor hygiene. If activists could convince the upper echelons of government that it was important to improve governmentprovided health care, then management and sanitation would improve almost immediately. Governments do sometimes make stupid, expensive decisions, partly but not always due to private sector lobbying. It is still safer to keep control of basic services in government hands than to hand it to the private sector, which has a direct profit motive to externalize as many costs as it can. The pressure to privatize Multinational organizations (for example, the World Bank, the International Monetary Fund, and the Asian Development Bank), aid agencies, and even some NGOs regularly push for greater private sector involvement in areas formerly under government control. That pressure is often tremendous, forcing governments into privatization deals even if they realize the dangers. According to a report by Public Citizen, “Cash-strapped and indebted countries like Bolivia rarely reject IMF and World Bank advice, because they don’t want to risk being denied future loans and international aid.”30 Experience with privatization has been so negative in so many cases, however, that those pushing for privatization have begun to talk instead about publicprivate partnerships, or PPPs. Unfortunately, this is just the same arrangement under a more appealing name. According to the website of the World Bank, a PPP I have seen patients admitted to a private hospital, only to be informed that the doctor is away for the weekend. I know people who searched in vain for a doctor in the emergency rooms of various private hospitals before finally resorting to a public provider. I have also heard the stories of private hospitals refusing to admit anyone with a serious condition for fear that they might die and the hospital be investigated or get bad press.

xii

MYTH#9: THE PRIVATE SECTOR DOES BETTER

214

usually involves a medium to long-term arrangement wherein the private sector takes over some services that the public sector would normally carry out. ’Partnership’ is simply a code word for handing over control to the private sector. Sometimes corporations lobby for privatization directly, without the intervention of multinational agencies. In India, for example, biscuit-making companies have tried for years to take over the school meal program. The Indian program currently hires local women to prepare hot cooked meals for 120 million children. The meals contribute to better nutrition and to higher school attendance (and, one assumes, to children being better able to concentrate in class). According to an article about the effects of capitalism in India, The Biscuit Manufacturers’ Association (BMA) launched a massive campaign for the replacement of cooked school meals with branded biscuit packets. The BMA wrote to all members of Parliament, asking them to plead the case for biscuits with the minister concerned and assisting them in this task with a neat pseudo-scientific precis of the wonders of manufactured biscuits. Dozens of MPs representing most of the political parties promptly wrote to the minister and rehashed the BMA’s bogus claims. According to one senior official, the ministry was ‘flooded’ with such letters.

Thanks, however, to the active eﬀorts of state governments, nutrition experts, and the public, who were shocked at the crudeness of the attempt to undermine a vital program, the proposal did not go through.31 The India case, alas, may be an exception: the joint pressure of private companies, government ﬁnancial shortfalls, and pressure by international agencies can be too much to resist. 

Towards a Better Way: Resisting Privatization and Strengthening Community “…we do not aspire to live better than others. We do not believe in the line of progress and unlimited development at the cost of others and nature. ‘Live well’ is to think not only in terms of income per capita but cultural identity, community, harmony between ourselves and with mother earth.” – Evo Morales, President of Bolivia32

* * * When bad policies cause enough damage, eventually people will resist. By now, there have been so many bad experiences with privatization in so many communities and countries that resistance is widespread. It should not be difficult to find groups to join and organizations to support to resist privatization. If a group to fight a planned privatization does not already exist in a local community, start one.

215

BEYOND APOLOGIES

Sadly, governments do not always act in the interest of their citizens. Nevertheless, they remain vastly more accountable than private companies do. It is up to citizens to work with governments to improve their record. Sometimes this will involve friendly cooperation; at other times, explicit criticism is needed. What it will always require, though, are a sufficient number of vocal, energized, strategic people working together. In other words, it requires community. There are various ways to help strengthen local community, which can in turn act to rein in corporations and push government to act on behalf of all its citizens, including the poorest. Public schools are a good place for parents to meet their neighbours and to learn how to become engaged in civic affairs. Public places can become venues for organizing, displaying posters, and holding meetings. Social media can also play an important role, but it is important not to forget the significance and vibrancy of interpersonal encounters. An exciting possibility is participatory budgeting, which allows the public to have some role in discussing and deciding how to spend part of a local government budget, including identifying and prioritizing projects on which to spend money. Participatory budgeting emerged when local mayors in Porto Alegre, Brazil in 1989 decided to address corruption and wasted resources in a context in which too often local governments seemed to be unconcerned about the people they served. Rather than having government officials make decisions behind closed doors without public input, the local population now engages in debate to define and decide on investments, priorities, plans, and actions. Public participation involves meetings with community members to allow them to give input. Significant results include a more active and involved public and greatly improved public services. Participatory budgeting has increased school enrolments and the quality of education, and helped get citizens more involved in local decision-making.33 People in many other cities around the world are now trying this same approach. * * * The inspiring movie A Convenient Truth shows just how effectively government can contribute to employment while also improving the physical environment.34 The film is about the city of Curitiba, Brazil, a low-consumption city in a poor region of Brazil. Mayor Jaime Lerner wished to support good works as long as it cost the government nothing. One of the initiatives he undertook was a recycling program that serves not only to clean the environment and improve public health, but also to create jobs. The government uses bus tickets to pay people from the slums to bring in trash. To provide rehabilitation while also performing a useful service, the city-run recycling centre mostly hires those with alcohol and drug problems to sort through the trash. The employees, meanwhile, are trained for better jobs. Some of that job training involves computers rescued

MYTH#9: THE PRIVATE SECTOR DOES BETTER

216

from the garbage. When government officials in Curitiba provide housing for the low-income, they ask the recipients to give input into the design of their home, which usually has a workplace on the ground floor, so that the person feels genuine ownership. The government also provides job training and support for starting a home-based business. (These initiatives were meant to address the common problem of public housing being built on the edge of cities where jobs are few and those housed feel no ownership and thus mistreat their dwellings.) The entire documentary is an example of how much can be done on a shoestring by creative government officials eager to reduce poverty while improving the environment. Curitiba could serve as a model of beneficial government actions for other cities. * * * Remember Prakash from the beginning of the book, who was struggling to get by? His life is difficult enough; do not make it worse by forcing him to pay for services he gets from the government at no cost. Instead, since he seems to have a good head on his shoulders, invite him to your next community meeting in which you will discuss how to work together to convince government to be more attentive to community problems.

Notes 1 Cited in David C. Korten, When Corporations Rule the World, 2nd ed. (Bloomfield, Connecticut and San Francisco: Kumarian and Berrett-Koehler, 2001). 2 Jenny Anderson, “Tesco Accounting Scandal Draws Scrutiny of Serious Fraud Office in Britain,” The New York Times, 29 October 2014. 3 Joe Mandak, “Robert Lynn, Former Chief Revenue Officer Of Le-Nature, Sentenced To 15 Years In Prison For Massive Accounting Fraud,” Huffington Post, 3 January 2012. 4 Mark Tran, “WorldCom Accounting Scandal,” The Guardian, 9 August 2002. 5 “The Biggest Accounting Scandals of All Time (PHOTOS),” Huffington Post, 17 May 2010. 6 Anna Fifield, “Contractors Reap $138bn from Iraq War,” The Financial Times, 18 March 2013. 7 The Public Interest, “Privatization Myths Debunked,” www.InThePublicInterest.org accessed 26 November 2013. 8 Sylvia Allegretto, Marc Doussard, Dave Graham-Squire, Ken Jacobs, Dan Thompson and Jeremy Thompson, Fast Food, Poverty Wages: The Public Cost of Low-Wage Jobs in the Fast-Food Industry (Champaign, IL: University of Illinois at Urbana-Champaign and UC Berkeley Labor Center, 2013). 9 The Public Interest, “Privatization Myths Debunked.” 10 “The World's All-Time Most Corrupt Leaders,” Forbes, 25 March 2004. 11 The Public Interest, “Privatization Myths Debunked.”

217

BEYOND APOLOGIES

Don Thompson, “Valley Fever Prison Outbreak Sweeps Through California Prisons,” Huff Post San Francisco, 29 June 2013 http://www.huffingtonpost.com/2013/04/29/valley-fever-prison-outbreak_n_3178843.html; Thomas Halleck, “Alabama Facing 'Serious' Tuberculosis Outbreak In Prisons,” International Business Times, 14 August 2014 http://www.ibtimes.com/alabama-facing-serious-tuberculosis-outbreak-prisons-1659304. 13 Paul Farmer, Pathologies of Power: Health, Human Rights, and the New War on the Poor (Los Angeles: University of California Press, 2005). 14 Greg Palast, The Best Democracy Money Can Buy (New York: Plume Printing/Penguin Books, 2003); James K. Galbraith, The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too (New York: Free Press, 2009). 15 Oliver Huitson, “Rail Privatisation has Failed – And the NHS is Hurtling Down the Same Track,” The Guardian, 10 March 2012. 16 CBC, “Special Report: Lac Mégantic,” http://www.cbc.ca/montreal/features/lac-megantic/ accessed 29 August 2014. 17 “Water Privatization Fiascos: Broken Promises and Social Turmoil,” Public Citizen, March 2003. 18 Palast, Best Democracy. 19 “Water Privatization Fiascos.” 20 Antonio Estache, Andres Gomez-Lobo, and Danny Leipziger, Utility Privatization and the Needs of the Poor in Latin America: Have We Learned Enough to Get It Right? Policy Research Working Paper 2407 (Washington: World Bank, 2000). 21 David Hall and Emanuele Lobina, Pipe Dream: The Failure of the Private Sector to Invest in Water Services in Developing Countries (Greenwich: Public Services International Research Unit and World Development Movement, 2006). 22 “Water Privatization Fiascos.” 23 Polaris Institute, “Johannesburg High Court Declares Prepaid Water Meters Unlawful & Unconstitutional,” http://www.polarisinstitute.org/johannesburg_high_court_declares_ prepaid_water_meters_unlawful_unconstitutional accessed on 11 August 2011. 24 David Hall, Emanuele Lobina, and Robin de la Motte, “Making Water Privatisation Illegal: New Laws in Netherlands and Uruguay,” Report commissioned by Public Services International, 31 November 2004. 25 Jason Kane, “Health Costs: How the U.S. Compares With Other Countries,” PBS Newshour, 22 October 2012. 26 Galbraith, The Predator State. 27 Index Mundi, “Country Comparison: Health Expenditures,” http://www.indexmundi.com/g/r.aspx?v=2225 accessed 28 January 2014. 28 Centers for Disease Control and Prevention, “Health Insurance Coverage,” http://www.cdc.gov/nchs/fastats/hinsure.htm accessed 28 January 2014. 29 There are innumerable articles about ‘Obamacare’ as critics invariably call the Affordable Health Care Act. One example of a strategy to undermine it: Jonathan 12

MYTH#9: THE PRIVATE SECTOR DOES BETTER

218

Weisman and Sheryl Gay Stolberg, “G.O.P. Maps Out Waves of Attacks Over Health Law,” The New York Times, 20 November 2013. 30 “Water Privatization Fiascos.” 31 Jean Drèze and Amartya Sen, “Putting Growth in Its Place,” Outlook India, 24 November 2011. 32 Cited in Tara Lohan, ed., Water Consciousness (San Francisco: Independent Media Institute, 2008). 33 “The Experience of the Participative Budget in Porto Alegre, Brazil,” Most Clearing House Best Practices. http://www.unesco.org/most/southa13.htm Many websites exist on the subject, which has spread from Brazil to many other countries, not always with similar success. 34 Del Bello, GV, A Convenient Truth: Urban Solutions from Curitiba, Brazil. Film produced by Maria Terezinha Vaz. Del Bello Pictures, 2006.

MYTH #10: When Corporations Prosper, Everyone Prospers “For years I thought that what was good for our country was good for General Motors, and vice versa.” – Former General Motors CEO and American Secretary of Defence Charles Wilson1 “Liberty for business, liberty for prices, liberty for trade: one throws the people in prison so that business will remain free.” – Eduardo Galeano2

 Private Profit, Public Loss Corporations come in a variety of shapes and sizes; in this section, I use the term ‘corporation’ to refer specifically to giant, for-profit companies that wield significant influence over governments. The products they sell may or may not be harmful per se, but the business practices in which they engage harm society. Most importantly, they exert far more power over political decisions than any private entity ever should. These huge corporations are multinational: they operate in different countries, take advantage of tax havens to avoid paying taxes, and use weak local laws governing labour and the environment to conduct their business as cheaply as possible. While this discussion is mostly limited to companies that manufacture and sell products, it is important not to forget the role of financial institutions that utilize their significant lobbying power to defeat the development and implementation of regulations that would protect consumers from their more nefarious and destructive practices. The failure of the American government to regulate new types of financial institutions, which bank regulations did not cover because they technically were not banks, contributed to the worldwide financial crash of 2007-2008.3 Big buddy or big bully? Many people see Coca-Cola, McDonalds, Walmart, General Electric, and other gigantic corporations as benign institutions that make life easier and more pleasant. After all, they provide the world with a wide array of desirable products at affordable prices. Many believe these corporations’ declarations that they provide many good jobs and that their social responsibility departments make significant contributions to resolving or lessening local social and environmental problems. These people accept that monolithic companies are a major part of the modern global economy, and believe that the bigger and more powerful the corporations are in any given country, the stronger the citizens of that country will be. In short, these people believe the mainstream economic rhetoric that if businesses profit, so will their employees and society at large. The best way to help people, these corporate apologists argue, is for governments to help, or at least enable, corporate prosperity.

MYTH#10: CORPORATE PROSPERITY BENEFITS ALL

220

Many other people hold an opposing view. They argue that large corporations decrease rather than increase personal prosperity and freedom. They point out that the world’s biggest corporations have more wealth and more power than do most countries; because of the power that this wealth brings, these companies can freely dictate the laws under which they are willing to operate, thereby undercutting democracy. These people protest when large corporations put small local shops out of business, noting that the process reduces rather than expands consumer choice and wreaks havoc on local economies. These people object to the billions of dollars that companies spend advertising products that harm human health. These people feel that the control of much of the market by a handful of giant companies serves to concentrate wealth in the hands of the few while fostering environmentally destructive processes. The best way to help people, these advocates argue, is for governments to protect them from corporations. It may be tempting to take a view that falls somewhere between these two extremes, arguing that some corporations make important contributions to the economy while others produce dangerous products or engage in particularly destructive practices. For example, anti-tobacco advocates consider tobacco companies to be peculiarly evil, as they make enormous profits by producing a consumer product that, when used as intended, kills up to half of its long-term users. However, while they seek to reduce the ability of tobacco companies to influence national and international laws and policies, these advocates do not necessarily feel that all corporations need to be reined in. Other advocates highlight and attempt to counter the abuses carried out by petroleum companies, ‘Big Food,’ water companies lobbying for privatization, giant retail chains, the pharmaceutical industry, agrochemical companies, etc.4 However, while it is important to take on individual corporations or sectors that cause harm, it is equally important to keep in mind that many of the abuses of any individual corporation or sector are replicated across other corporations and sectors.i While the pharmaceutical, tobacco, arms, or chemical industries may seem to be particularly heinous, in fact all giant corporations have so much power that they can rewrite rules and laws to ensure their own ongoing economic success and their ability to influence policies and people.5 It is critically important to move beyond accepting ubiquitous feel-good corporate advertising, beyond a belief that only exceptional corporations cause harm, to recognizing that it is impossible to

Of course, it is diﬃcult enough to win a battle with an individual company without attempting to take on the world of mega-corporations as a whole, but it helps to keep the bigger picture in mind.

221

BEYOND APOLOGIES

improve wellbeing for all without reducing the power of giant corporations. Profits or people? By law, corporations are supposed to maximize the profits of their stockholders.ii The legal context for maximizing shareholder profitability dates to a 1919 court case in the United States in which shareholders (in this case the Dodge brothers) sued the Ford Motor Company when Henry Ford stopped paying them sizeable dividends on their stocks. During the trial, Ford testified that he believed that since the company made so much money it had an obligation to benefit the firm’s workers (by paying decent wages) and customers (by lowering prices). The Dodge brothers countered that this amounted to ‘improper altruism.’ The court agreed, strongly rebuking Ford: A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to attain that end, and does not extend to a change in the end itself, to the reduction of profits, or to the nondistribution of profits among stockholders in order to devote them to other purposes.

As such, the court ruled “it is not within the lawful powers of a board of directors to shape and conduct the affairs of a corporation for the merely incidental benefit of shareholders and for the primary purpose of benefiting others.”6 This ruling established a legal precedent that ’improper altruism’ is not just inappropriate, but inherently illegal for corporations. As unlikely as large modern corporations are to engage in ‘improper altruism’ towards their employees or communities, they do engage in tremendous generosity when it comes to paying out bonuses to their top executives. General Electric provided one executive with a retirement benefit that included a Manhattan apartment that had a rental value of $50,000 per month. Merrill Lynch funded a $1.2 million renovation of a single office (following a government bailout of the company). Mattel dished out $150,000 country club memberships. Pfizer provided a CEO with a pension worth more than $83 million.7 To both pay their shareholders and give their executives millions of dollars in

John Kenneth Galbraith has written repeatedly about the fact that it is unlikely that corporations maximize the proﬁt of their shareholders; more likely, they maximize it for their executives. Shareholders know too little about the companies to meddle much in their management, and executives make use of their power to exact large bonuses. See, for example, Galbraith, The New Industrial State (Princeton, New Jersey: Princeton University Press, 2007).

MYTH#10: CORPORATE PROSPERITY BENEFITS ALL

222

bonuses, corporations must make a lot of money.iii Doing so often means cutting corners somewhere. A few obvious places to cut costs are in workers’ salaries and benefit packages (as opposed to those for executives), environmental protections, and taxes. The more power one has in the economic system, the easier it is to make and sustain large profits, partly by avoiding such costs. This is a privilege for which corporations will happily pay: they strongly object to paying taxes or making workplace improvements but are happy to pay millions of dollars in campaign donations to ensure that politicians will vote against the imposition of future taxes or regulations.iv These corporations often pay their workers extremely low salaries but reward their executives for instituting policies of long hours and low pay. It is not only workers who suffer from low salaries. All the benefits that American Walmart employees end up receiving from the government (such as food stamps, Medicaid, and rent assistance) to compensate for their low wages simply transfer the cost of better wages directly to American taxpayers. This transfer cost amounts to more than $2,000 per employee, or more than $420,000 per Walmart store with 200 employees.8 According to Walmart, its 4,700 stores in the United States employ more than one million people.9 At an average government compensation of over $2,000 per employee, American taxpayers are subsidizing Walmart’s low wages to the tune of some $2.73 billion each year. This cost transfer system is described by billionaire Nick Hanauer as being “as morally repugnant as it is economically inefficient.”10 As Hanauer points out, the $27 billion in profits that Walmart makes every year means that it could easily pay each of its lowest-paid workers $10,000 more annually, which would raise them all out of poverty, saving taxpayers billions of dollars. And Walmart would still make $17 billion in profit.v Walmart is one of the largest and wealthiest corporations in the world.vi The owners of Walmart, the Waltons, take the concept of billionaire to entirely new heights. After all, a billionaire need only be worth one billion dollars to qualify. Just four members of the A small caveat: companies often pay sizeable bonuses to executives even when they are losing money. iv Such donations also typically provide tax credits. v In October 2014, Walmart announced that it would raise its salaries so that all workers would earn more than the minimum wage. It did not say, however, how much more. vi Much has been written about Walmart. Palast mentions that Bangladeshi workers supplying products to Walmart are paid eighteen cents per hour while their helpers get fourteen cents to work an eighty-hour, seven-day week. The problem of poverty wages is not limited to factories selling to Walmart, of course, but Walmart has more resources than others to address a situation regularly discussed in the Bangladeshi newspapers (and then forgotten iii

223

BEYOND APOLOGIES

Walton family (including Christy Walton, the richest woman in the world) were worth a combined $107.8 billion in 2012.11 Walmart’s CEO, Mike Duke, received $23.15 million in compensation in 2012, or more than one thousand times the median Walmart worker’s wages, making it the company with the highest employee-CEO pay discrepancy in the United States. Half of the company’s workers earned less than $22,400 that year, which is below the American poverty level for a family of four.12 As the wages the company pays are so low, many of the workers receive food assistance from the government so they can survive.13 The company is so big, hires so many people, and pays its employees so little, it actually drove down wages throughout the United States by more than two percent.14 It is unclear why a corporation that earns billions of dollars a year cannot pay its workers a wage that would allow them to get by without government support, nor why the American government (that is, the public) should be expected to pay part of the wages for Walmart employees. The government should provide a safety net for those in need, but full-time workers at wealthy corporations should not require such assistance. The company argues that higher wages for its staff would mean higher prices for its products, which in turn would cause suffering to its customers. The argument is weak when we remember how profitable the company is. One study found that giant retailers like Walmart could easily pay a living wage simply by reducing (not eliminating) their profits. Even if they passed on all the cost of salary increases to their customers, prices would only go up by one percent; if they passed on only half the cost to customers, it would cost shoppers on average just $17.73 per year.15 Henry Ford, motivated in part by a desire to increase his customer numbers, famously paid his workers enough that they could afford to buy the products they made. Sam Walton appears to have adopted that vision in reverse: paying his employees so little that they cannot afford to shop anywhere but at his stores. * * * Another way to afford to pay generous packages to corporate executives is to convince governments to pay large subsidies. In the United States, corporate welfare has become an increasingly large component of the federal budget.

about until it occurs again). As this book was being edited, Bangladeshi garment workers had been rioting for increased minimum wages: rejecting the ‘generous’ oﬀer of $43 a month, they are clamouring for $73, thus far without success. Following the collapse of a building containing several garment factories in Dhaka, in which more than one thousand people died, Walmart refused to join other companies seeking better safety conditions.

MYTH#10: CORPORATE PROSPERITY BENEFITS ALL

224

According to Congressional testimony, “In 1997 the Fortune 500 corporations recorded best-ever earnings of $325 billion, yet incredibly Uncle Sam doled out nearly $75 billion in taxpayer subsidies....There are roughly 125 such business subsidy programs in the federal budget of the United States, and they can be found in virtually every cabinet agency – including the Defense Department.”16 Subsidies are often not explicit, making it difficult to identify – and counter – them. For instance, transportation is a major expense for individuals and for governments, and extremely profitable for those in the business of building roads or selling fuel or motorized vehicles. Besides building and maintaining roads, governments invest in fuel subsidies that benefit the users of private cars but do nothing for those who commute by foot and bicycle. They also subsidize parking, thereby vastly decreasing the amount of land that is available for other uses. Those government subsidies represent a subsidy to all the corporations that benefit from a focus on individual motorized transport. If instead governments concentrated on providing a well-operated public transit system and safe conditions for bicycles and pedestrians, they could build far narrower roads, which would cost less both to build and to maintain, and would allow significantly more land for productive use. Meanwhile, government expenses complement those made by individuals, who spend thousands of dollars to buy and operate a car or motorbike. For example, according to the Bangladesh Road Transport Authority there are 200,776 private cars and 324,714 motorcycles in Dhaka.17 If each car costs on average $10,000 and each motorcycle $2,000, individuals invest about $2.7 billion in transport, not even counting operational expenses. Seven of the top twenty companies on the Forbes list of the biggest corporations are transport-related: Exxon Mobil (#6), PetroChina (#10), Royal Dutch Shell (#11), Toyota Motor (#12), BP (#17), Chevron (#18), and Volkswagen (#19).18 Petroleum companies, car manufacturers, and road builders all lobby governments to ensure that transport expenses sharply favour the car. This works great for the companies that benefit and for a few individuals, while the majority suffers. It is difficult for many to imagine what it would be like to be the executive of a large corporation. It would mean knowing that you pay your workers ridiculously low wages and deny them basic benefits such as health care or pensions, while you – the executive – receive huge benefits. Corporate decision-makers live their lives secluded from those affected by their policies, a fact that helps to shield them from facing the consequences of their actions. When questioned, corporate representatives adeptly defend their practices: they argue that high salaries and bonuses are needed to attract and encourage good directors. They claim that environmental protections are silly, useless, and reduce productivity. They say that it is wrong to

225

BEYOND APOLOGIES

tax corporations, because higher taxes will mean job losses. And they defend those outrageously low wages on the basis that at least they provide jobs for the poor. Walmart, for instance, actually claims that “We believe we have an opportunity and a responsibility to make a difference on the big issues that matter to us all. Issues like preserving the environment, fighting hunger, empowering women and providing access to healthy, affordable food.”19 Nice words…but actions would be more meaningful. Subsidies for corporations while employees struggle for subsistence Countless corporations receive government subsidies in the name of creating worthwhile employment, even when the wages that the companies pay are not enough for their employees to afford a decent lifestyle. The subsidization of corporations, partly justified by job creation, is not limited to the United States. Many other countries allow companies to pay impossibly low wages while providing them with generous subsidies. For example, the garment industry has been a major source of employment in Bangladesh for many years. Workers receive low wages and work in substandard factories. When they protest for higher salaries and better working conditions, the government sends in the army and police, not to bolster the workers’ complaints against the owners, but rather to put down the protests. According to The New York Times, “A recent study reported in a Bengalilanguage newspaper estimated that these subsidies and tax breaks exceeded tax revenues from the industry by roughly $17 million.”20 The article cites Badiul Alam Majumdar, secretary of the non-profit group Citizens for Good Governance, as saying that “The doors of the treasury are open for [the garment industry]…they extract all kinds of subsidies. They influence legislation. They influence the minimum wage. And because they are powerful, they can do, or undo, almost anything, with impunity.” The power and influence of the company owners and their disregard for their workers has contributed to such events as the collapse of Rana Plaza, which housed several garment factories, in 2013. More than eleven hundred people died in that collapse.21 Fires also regularly take lives in factories, as either the workers are locked inside to prevent theft or there are no operational fire escapes. The truth is, in Bangladesh as in the United States, the point of corporate subsidies is to help the rich. Consider two sides of the garment worker equation. Garment manufacture is indeed important to the Bangladeshi economy: the ready-made garment sector accounts for an estimated $20 billion of Bangladesh’s $120 billion GDP and for eighty percent of its export proceeds. It employs more than four million workers.22 From the industry perspective, those low-paid workers are a key financial advantage. Speaking at a Post-Rana event, a garment factory

MYTH#10: CORPORATE PROSPERITY BENEFITS ALL

226

representative quoted Professor Gus Papanek, President of the Boston Institute for Developing Economies, as stating that: Bangladesh has a unique opportunity in the next year and a half or two years because it has the possibility of taking over part of the world market that China is going to abandon .... It has become increasingly clear that China is no longer competitive in many of the goods that Bangladesh could supply. China's labor costs are rising, its pollution costs are increasing, its labor regulations are getting stricter… Bangladesh can compete in this market because it has some major assets and the greatest of which is the low-cost labor.23

Reading between the lines, the advantages that Bangladesh offers are not only a large labour force of women so desperate for work that they will accept horrid conditions and very low pay, but also the lack of concern about pollution (such as the dumping of dyes and other chemicals directly into water bodies adjoining factories) or regulations to ensure decent working conditions – just the sort of regulations that could have prevented the Rana Plaza and other disasters. Workers view the situation differently than the owners. Kalpona Akter, a former garment worker and current labour organizer in Bangladesh, testified to the Senate Foreign Relations Committee in the United States about the working conditions experienced by garment workers. She mentioned how “U.S. and European brands and retailers …have flocked to the country to take advantage of rockbottom wages. Bangladesh’s garment workers are the lowest paid in the world, with an industry minimum wage of about $38 a month.”24 She described that, “Aside from long hours and low wages, apparel sector workers often work in factories with chronic safety problems. Since 2005, over 1,800 workers have died and thousands more were severely injured in garment factory fires and building collapses.” She explained that workers have been trapped in fires: they heard the alarms but were locked inside by managers too concerned about meeting tough quotas to allow them to escape. A few of them survived after jumping from the second or third storey, only to face a lifetime of chronic pain and disability that leaves them unable to work. She told how workers were afraid to go to work after seeing the cracks in Rana Plaza but had to go because their employers had threatened that if they did not show up, they would lose a day or even a month’s wages. They were also lied to about the safety conditions in the building.vii (When I first visited Bangladesh in 1994, I saw a poster demanding a weekly holiday for the garment workers. They do now get one day a week off, although they are expected vii Meanwhile, the police repeatedly harass Kalpona Akter, and have arrested her in the past; one of the two union organizers with whom she regularly worked was murdered. The Bangladeshi government claims that Kalpona was never a garment worker.

227

BEYOND APOLOGIES

to work ten to sixteen hour days the other six days and often end up working on their day off anyway.)25 Yes, the garment industry is important to the economy of Bangladesh. But it is not enough to say that a sector is important. Tobacco growing in Malawi is a major component of the economy of one of the poorest countries in the world. It would not be so important, and the country could be a lot richer, if the government invested in finding alternatives that are more remunerative to the farmers. In Bangladesh as well, the potential exists to create alternative employment possibilities and to push the government to support those alternatives. This would create new opportunities for young women otherwise drawn to garment factories. It is small-scale local industries, not big corporations, that need subsidies. Corporations as taxpayers While it seems reasonable to expect corporations to pay taxes, many avoid doing so to the greatest extent possible. The common, global practice of corporate tax evasion includes schemes that allow companies to look as if they earn less than they actually do, or to move their profit making – at least according to their financial books – to locations that charge lower tax rates. Companies can take advantage of ‘free trade’ agreements to set up phony companies in tax havens with which they pretend to trade. They can dramatically over-report the prices at which they buy goods and then just as dramatically under-report the prices at which they sell them – a practice known variously as transfer pricing manipulation, abusive transfer pricing, and transfer mispricing – and then claim various deductions that not only result in paying no taxes, but in actually receiving refunds from the government.26 For example, company financial records show such outrageous exaggerations as purchases of $850-per-pound Chinese multivitamins, Czech plastic buckets priced at $973 each, a Pakistani $154 cotton dishtowel, and $4,896 Japanese tweezers. Sales, on the other hand, show dramatically low prices: multivitamins to Finland for sixty-one cents a pound, bus and truck tires sold to Britain at $11.74 each, colour video monitors sold to Pakistan at $21.90, missile and rocket launchers sold to Israel at $52.03, and prefabricated buildings sold to Trinidad at $1.20 a unit.27 While the American corporate tax rate is thirty-five percent of profits, almost twothirds of the companies that operate in the country reported that they owed no taxes (made no profit) for the period 1996 through 2000, while over ninety percent of the big corporations reported owing taxes that amounted to less than five percent of their profits.viii The result in 2002 was that rather than collecting viii

Using techniques such as transfer mispricing, companies show that they are earning

MYTH#10: CORPORATE PROSPERITY BENEFITS ALL

228

$308 billion in corporate tax, the government received only about $136 billion, a difference of $172 billion.28 It gets worse. A report on all Fortune 500 companies that were profitable every year during the period 2008 to 2012 found that the 288 companies investigated paid taxes of only nineteen percent of their profits while one-third of the companies paid less than ten percent. Thirty-nine percent of the companies paid no tax at all in at least one of the years covered by the study. Thus, in total, the companies received $364 billion in discounts (subsidies) from not paying full taxes.29 Just one example: Apple Inc. keeps more than $100 billion offshore. The company spent more than $2 million on lobbying in 2012, which may help explain how it has legally avoided paying taxes on $74 billion in profits since 2009.30 Tax evasion and avoidance have increased in recent years. According to author and radio host Joshua Holland, in the United States “while the big corporations were becoming ever more profitable, the taxes they paid were plummeting – from one in four federal tax dollars in the 1950s to one in ten in the 2000s.”31 Taxation issues occur at the local as well as the national level. Local governments are eager to attract industries to create jobs. One way they attract industry is by offering millions of dollars in tax breaks, including ‘tax holidays.’ The granting of such ‘tax holidays’ to attract companies is common practice throughout the world. Companies can and do play local governments off each other, by accepting huge handouts while at the same time threatening to relocate to a place that offers a better deal. It is corporations, not communities, which benefit when local governments compete with each other by offering attractive subsidies to lure companies to locate there. Jobs are obviously important, but workers do not benefit when the companies offer an inadequate wage. Too often, after receiving a tax holiday or other subsidy, companies still fire workers or relocate to a place offering an even better deal. Here too, the situation has been getting worse: while in 1957, American corporations paid forty-five percent of local property tax revenues, by 1987 they paid only sixteen percent.32 Another broken appliance, another computer upgrade Another way in which corporate prosperity can hurt consumers is through planned obsolescence. In order to guarantee continuing sales, companies are designing the next generation product even while marketing the current one as vastly superior to the previous one, which itself was billed as a huge improvement

substantially less than they are, so a highly proﬁtable company is able to pay taxes on only a very small percentage of its actual income.

229

BEYOND APOLOGIES

over what had come before. (How many products contain the words ‘new and improved’ on the label, as if everything new is better than what it replaces?) As one commentator notes of Apple’s planned six-month obsolescence strategy for the iPad, Aiming to achieve a revolutionary technical breakthrough several times a year is an impossible business plan. Fuelling a frenzy of public feeling at the same interval, however, is eminently possible. … the fact [is] that the best generator of technological proﬁt margins in 2012 isn’t features or value for money, but the very fact that there is another model out there which is newer and diﬀerent.33

Planned obsolescence also refers to products designed in such a way that they will need replacement regularly. The accounting software Quicken, for example, contains some features such as online connectivity that are disabled after several years, forcing users to purchase regular upgrades.34 Manufacturers also create obsolescence by making products with cheap, flimsy materials so that they simply fall apart after a few years. Not only does the company sell more products this way, it lowers its production costs as well.35 Light bulbs, for instance, could last twice as long as they do; but then where is the profit? According to the 2010 documentary “The Light Bulb Conspiracy,” early incandescent light bulbs lasted more than 2,500 hours until a cartel shortened their lifespan to about 1,000 hours. According to the documentary, companies also deliberately shorten the lifespan of other consumer products such as computers, printers, and iPods.36 Even Forbes, which is usually dedicated to idolizing the rich, admits that planned obsolescence is a problem, at least for the consumer: “Products of all types – cars, incandescent bulbs, your iPad and iPhone – are designed with planned obsolescence in mind. The need or desire to replace products quickly and a shorter product life-cycle are a consistent drain on wealth.”37 That drain occurs not only in the products’ selling price, but also in all the resources that go into producing, marketing, distributing, using, and disposing of them. Planned obsolescence is yet another aspect of corporate prosperity that we could comfortably do without. Corporate control of the food supply benefits only the corporations Around the world, hunger tends to have less to do with the quantity of food that is available and more to do with whether people can afford to purchase it. However, it does little good if food becomes cheaper only because the quality is poorer. Worse still if the universal act of eating delivers fewer economic benefits to farmers and more to transnational food companies. This happens when people replace fresh, minimally processed foods such as whole grains and fresh meat, fruits, and vegetables with fast food, junk food, and sugar-sweetened beverages that deliver

MYTH#10: CORPORATE PROSPERITY BENEFITS ALL

230

few nutrients but are packed with sugar, salt, and fat…with the switch being subsidized by governments.ix Alas, most of the profits made from selling food involve heavily processed items that happen to be the worst for health. Large-scale food processors and advertisers work together – too often successfully – to convince people to consume far more than they need and to eat unhealthy foods.38 Rather than purchase whole potatoes to cook at home, most Americans now eat potatoes in the form of corporatelyproduced fast food French fries. In the United States, meat that was formerly raised on local ranches and small chicken farms now originates in Concentrated Animal Feeding Operations (CAFO). There is, in fact, corporate control over virtually the entire food supply chain, as a few supermarket chains that capture most food purchases have largely replaced small stores and farmers ’ markets. In other countries as well, a number of factors, including busy schedules and the increasing availability of heavily marketed processed foods, have led to unhealthy switches in eating that also take profits away from local producers and shift them to global corporations. As corporate control of the food supply has grown, the problems – and people’s waistlines – have increased. The combination of inexpensive, low-quality food, a dependence on driving for transport, and excessive screen time has resulted in the growing international obesity epidemic. Sixty percent of the American population is overweight. Obesity costs Americans more than $215 billion each year in medical costs, disability, and reduced productivity, while allowing food sector corporations to rake in the profits.39 The same issue now extends worldwide. So too for beverages. The best beverage for health is water, but the producers of sugar-sweetened beverages attempt to persuade people to consume their products instead. For instance, recently the sugary sports drink Gatorade, which PepsiCo owns, added elements to a video game that it uses to promote itself. The game, featuring Jamaican Olympic medalist Usain Bolt, portrayed water as the enemy of athletic performance.x The addition of the water element to the game apparently Subsidies for the production of corn mean that American farmers sell it for less than it costs to grow. As a result, corn is so cheap that it is used in virtually every single processed food in the United States, in the form of corn sweetener (high fructose corn syrup or HFCS), stabilizers, and so on. This is corporate agriculture policy at its most malignantly odd. Mono-cropping corn is good neither for farmers nor their land, but the corporate food processors love it. Food processors have vastly more power over politicians than small farmers and environmental advocates, and so the system remains, at least for the time being. x The New York Attorney General has responded to complaints about the game. ix

231

BEYOND APOLOGIES

came about due to concerns that athletic youth were choosing to drink (gasp) tap water to rehydrate.40 Coca-Cola likewise organized a “Cap the Tap” program throughout the United States to reward restaurant waiters for turning an order for tap water into one for a Coca-Cola beverage. The demise of small businesses, damage to community By now, it should be no secret what happens when a big chain store comes to town. Local residents are often excited about the appearance of a new superstore offering discount prices for a large selection of items. It may take some time before people notice that the price of those big stores comes in the loss of local businesses that cannot afford to compete. A study of the effect of a Walmart store opening on one neighbourhood found that the opening resulted in a wave of closures of small businesses: near the store’s location, between thirty-five and sixty percent of local stores closed. Jobs gained from the store opening were offset by the loss of jobs from local shops closing, and local sales tax revenues actually declined.41 While local shops often make use of local products and invest more of their money locally, big box stores access their products outside of the community (indeed, often outside the country) and immediately transfer their profits out as well, resulting in net loss for the locale when small businesses are replaced by far larger ones.42 Other chain stores have similar impacts. The opening of a 7-Eleven convenience store, for instance, can spark protest from residents who know that the lower prices will cause the demise of local shops.43 A visitor to Bangkok cannot help but notice that there is a 7-Eleven on almost every block, leaving little room for local shops that support the local economy. In the United States, just two stores – Home Depot and Lowe’s – together account for about half of all home improvement sales; that does not leave much room for local shops. How bad is the impact of big box stores?44 Big stores engage in intensive advertising, squeeze their supply chains to get lower prices, and use ‘loss leaders’ to make profits and sink their competition. Big chains tend to pay lower wages than do locally-owned businesses. Posing as contributors to economic development, big box stores receive subsidies from local governments to open stores. Poor wages means that the employees of these large stores may not be able to afford to

Gatorade/PepsiCo has agreed not to discourage people from drinking water, and have paid $100,000 to Michelle Obama’s campaign to promote non-branded water in New York State. http://civileats.com/2014/10/23/update-gatorades-war-on-water-dampened-by-nyattorney-general/

MYTH#10: CORPORATE PROSPERITY BENEFITS ALL

232

purchase from small local shops that cannot externalize their costs the way big ones do. Sourcing goods from other countries means that there is little or no contribution to other aspects of the local economy.45 The benefits of small and local versus big chain shops are numerous; studies abound on the issue, at least in the United States.46 For example, one study used data from the 2000 census to compare communities by concentration of small businesses and population health outcomes. They found that communities with more small businesses have less obesity, diabetes, and mortality, and greater ‘collective efficacy,’ which the authors define as the ability of residents to work together for the benefit of all.47 Communities dominated by large corporations scored more poorly on all outcomes. In another study, researchers drew on statistics collected from counties across the United States to look at the effect of big businesses on civic participation; they found that where big firms dominate, people feel less connected and citizens participate less in voting and in local affairs and protests.48 A further study comparing the level of social capital (the number and strength of relationships among people who live or work together) in communities with a Walmart against those without one were able to establish a link in the decline in civic participation in American communities directly to the presence of Walmart.49 The size of shops also affects the form of transport people use to visit them. People do not normally walk to big box stores; they are located too far from residential areas and people make too many purchases to carry home on foot. Small local shops are more easily accessible by – and indeed are more inviting to – those travelling by foot and bicycle. They do not require huge parking lots, thus freeing more space for other uses. In Europe, where people prefer fresh local food to the industrial food typically consumed in the United States, food shops tend to be small and specialized: people buy bread from the baker, meat from the butcher, and so on. In twenty-first century Paris, people still stroll home in the evening with a baguette under their arm; in many Asian cities, sidewalk vendors offer local foods. This is another area in which benefits to health and the environment, and maintenance of local culture, are good economics – but only if our accounting systems take into account all the additional costs of big box stores that are invisible on the price tags. In many cities, independent businesses grow harder to find as small traditional shops, eateries, and vendors give way to larger chain stores and restaurants. In parts of Asia, officials have attempted to close down local markets and ban street vendors in order to force customers into supermarkets. It is all too common to see police on the streets of Hanoi and Dhaka chasing local itinerant vendors and – if

233

BEYOND APOLOGIES

they catch them – demanding a large bribe (fine) to return their goods. In many cases, it is also a game: the vendors may return immediately afterwards. Clearly someone powerful objects to their presence, presumably due to the competition they pose to established shops, but these street vendors are too popular to ban outright. Nor is police harassment of vendors limited to a couple of cities in Asia. Mohamed Bouazizi, a twenty-seven-year-old Tunisian street vendor, set himself on fire on 17 December 2010 to protest police harassment. His act reputedly set off a series of national protests that led to a revolution that ousted the country’s president.50 Ousting the chain stores that oust the local shops and vendors may prove far more difficult. Corporations as people In the United States, corporations can claim the rights of individuals; many other countries have similar laws. How did this come about? Being human may not always seem to guarantee much by way of rights, but there are some legal guarantees that corporations had viewed with envy for many years, such as free speech, the right to vote, and privacy rights. In the 1800s, it was clear that corporations were not people, and laws in the United States specifically prohibited corporations from participating in the political process. It was illegal for corporations to lie about their products, and corporate accounts had to be open to the inspection of government regulators. According to bestselling author and talk show radio host Thom Hartmann, the government also had the right to inspect and investigate companies “when they caused pollution, harmed workers, or created hazards for human communities, even if in the early years that right was unevenly used.”51 The corporations did not appreciate this. Hartmann claims that the railroad companies – at the time among the largest American corporations – led a legal assault to gain ‘corporate personhood,’ arguing “that governments could not regulate their fees or activities, or tax them in differing ways, because governments can’t interfere to such an extent in the lives of ‘persons’ and because different laws and taxes in different states and counties represented illegal discrimination against the persons of the railroads under the Fourteenth Amendment.”52 Although the corporations lost their early lawsuits – including four cases in 1877 alone – in 1886, the Supreme Court ruled on an obscure taxation issue involving a railroad that, according to Hartmann, ultimately changed the legal identity of corporations. The court recorder was the former president of a small railroad; in his personal commentary of the case, he wrote “the Chief Justice had said that all the Justices agreed that corporations are persons.” Although the note had no legal standing, and although the Supreme Court had not in fact made that decision, the

MYTH#10: CORPORATE PROSPERITY BENEFITS ALL

234

court recorder’s note, writes Hartmann, “was taken as precedent by generations of jurists (including the Supreme Court) who followed and apparently read the note but not the decision.”53 Corporate personhood provided corporations with many new rights such as privacy and free speech.xi When activists attempt to ban some forms of advertising, such as ads for cigarettes or alcohol, they are told that the ban would violate the corporate right to free speech – a ‘right’ that corporations use to the fullest extent possible, not only to advertise their products, but also to promote and protect their image. Activists, like corporations, also enjoy free speech, at least in some countries and under some circumstances; what they do not enjoy is access to the same budget for making their voices heard. For example, the European pharmaceutical industry spends more than forty million Euros each year to lobby politicians on such issues as discouraging the production of low-cost, generic alternatives to brand-name drugs. In contrast, NGOs spend less than one tenth of that sum to lobby governments on such pharmaceutical issues as access to low-cost generic medicines.54 It is hard to compete when a single company can donate more than $11 million to a presidential campaign.55 It is hard to compete when the American Supreme Court can strike down limits to corporate campaign donations.56 If corporate contributions are not used to buy political influence, then corporate generosity is certainly breathtaking. Corporations as good global citizens If one believes the feel-good advertising of giant corporations – their beautiful depictions of the environment and of their many charitable actions to help the poor and sick – then one may well view corporations as good, caring, global citizens. The reality is far different. Corporations regularly engage in unsavoury activities, such as preventing workers from forming unions (sometimes violently) and sidestepping and lobbying against regulations meant to protect worker safety or to avoid environmental pollution and disasters. To redirect (misdirect) the public gaze, companies then advertise what wonderful corporate citizens they are.xii As noted above, corporations have not been so keen to accept the responsibilities that go with those rights, such as to pay taxes. xii One clue to the type of harm any corporation causes is a look at its feel-good ads. Those that pollute the environment show gorgeous scenes of pristine nature; those that harm health brag of their contributions to improve it, and so on. This involves not only distraction but buying off potential opponents. For example, Shell contributes to environmental xi

235

BEYOND APOLOGIES

Undertaking a few projects labelled as corporate social responsibility (CSR) is, after all, much less expensive than actually changing the way that one does business. Nike, for instance, spends some $10 to $12 million each year on CSR. That sum, while large, is much less than the $210 million per year – or seventy-five cents per shoe – that it would cost Nike to give its employees decent working conditions.57 In Bangladesh, British American Tobacco brags about its tree nursery and how many trees it plants. What it fails to mention is how many trees are cut down in the process of growing and curing tobacco, and how few of the seedlings it distributes actually survive to maturity. Reforestation does involve, after all, more than giving people seedlings to stick in the ground. Of course, the point is to embellish one’s image, not to compensate for the damage one causes. * * * I met a young woman who was paid by Nike to ‘empower’ young women in Bangladesh to say no to early marriage. While I suspect that it is the parents, not the young women, who are pushing for those early marriages, it also seemed likely that the most effective way to empower young people is to pay them better so that they are less dependent on either their parents or their (potential) spouses. * * * Corporations do play a sizeable role in the economy. They provide people with many products, some beneficial, some harmful. They create jobs, but often at such low wages that workers remain impoverished. Due to their inordinate political spending on politics, they often decrease the power of individual citizens to engage in democratic processes. Why the status quo persists The influence that corporations exert on governments worldwide and the ability of large corporations to put smaller companies out of business are not new. Neither are attempts to rein in the corporations. In the United States, attempts to regulate corporations date at least to the 1700s, when Thomas Jefferson worked with James Madison to develop an (ultimately unsuccessful) eleventh Constitutional Amendment.xiii This amendment would have prevented corporations from groups, British American Tobacco supports programs to prevent child labour, and so on. Those contributions can also have direct benefits: Playboy Foundation contributes to work on sexual dysfunction, to make abortions available, and to uphold the First Amendment (free speech, including for pornographers). xiii People also sought to fight against monopolies in the late 1500s and 1600s in England, when the Crown was granting patents to individuals and companies that essentially gave them full monopoly rights over a whole host of enterprises and sectors. Of course, since the Crown was involved in creating these monopolies, opposition to them did not gain much traction.

MYTH#10: CORPORATE PROSPERITY BENEFITS ALL

236

becoming so large that they gained a monopoly and could easily crush smaller, local entrepreneurs. The amendment also would have prohibited corporations from giving money to politicians or trying to influence elections in other ways.58 There were also early attempts to ensure that the corporations’ charters would explicitly state that the purpose of the corporation was to serve the public good. After all, the American Revolution was fought not only against Britain but also against its personification in the British East India Company.59 Nevertheless, these attempts failed. * * * Canadian Prime Minister Stephen Harper cancelled ecoENERGY, a small grants program that allowed homeowners to offset the cost of upgrading their insulation, of replacing an inefficient furnace, or of making other energy-saving renovations to their homes. The program had triggered more than $7.45 billion in local economic activity across the country, returning to the capital two dollars in new tax revenue for each dollar of funding.60 Why would governments act in such ridiculously irrational ways, such as cancelling a popular program that saves money? Is it because someone would benefit from its cancellation? * * * It is not particularly surprising that many governments and individuals have not succeeded at reining in corporations. Not only is it extremely difficult to limit the size and influence of a giant whose power, after all, means that it has control over those who seek to do the reining in, it is also sometimes quite dangerous to attempt to do so. There have been many brave souls: community organizers and union leaders, journalists, religious leaders and even heads of state, whose attempts to shift the balance of power from corporations to the people have resulted in their facing arrest, torture, and even death. * * * A woman I knew in Bangladesh, Nasreen Huq, fought plans for an opencast coalmine that threatened the displacement of 40,000 to 100,000 people in the country’s poorest district.61 She died when her driver lost control of her SUV, as his foot supposedly hit the accelerator rather than the brake and crushed her against a wall in a parking lot. I thought at the time that the accident sounded rather odd; I later heard that many consider it to have been an assassination. I also knew a young woman in Guatemala who died while traveling in a car with a local doctor who had dared to speak out for the rights of peasants. All four people in the vehicle were summarily shot. When I went to visit her mother, she described to me her daughter’s wounds and told me that only military bullets could have left such marks. At the time, military repression of protesters was common; sometimes the army would murder all the men in a village. These cases never led to reprisal or punishment. Such

237

BEYOND APOLOGIES

repression, alas, continues in Guatemala today in the form of right-wing death squads. The effects have been that people rarely discuss politics and passive acceptance of miserable circumstances is the norm. Too often the victims of the death squads are union organizers or people objecting to the power of multinational corporations.62 * * * There is a long list of national leaders targeted in overthrow or assassination attempts orchestrated by the American Central Intelligence Agency (CIA). Perhaps the most obvious corporate-sponsored government overthrow occurred in Guatemala in 1954. As the CIA admits, United Fruit (now Chiquita Brands International) objected to that small Central American country’s democratically elected president, Jacobo Arbenz, because he took unused land away from the fruit company and gave it to landless peasants. At the instigation of United Fruit, the United States, via the CIA and then-ambassador John Peurifoy, supported and directed Guatemalan military leaders to overthrow Arbenz’s government. Deceptive efforts that persuaded Guatemalan citizens and leaders that a major military force was moving towards the capital caused the government to fall with little resistance.63 That was a long time ago, but democracy in Guatemala, alas, has still not recovered. The overthrow of Arbenz is not an exception, although the corporate influence in such actions is not usually so obvious. Both Fidel Castro in Cuba and Hugo Chávez in Venezuela have been on the receiving end of vicious media attacks, as well as of hundreds of assassination attempts (in the case of Castro) and a rather absurd and short-lived coup attempt (in the case of Chávez). Cuba allows essentially no advertising, and for years people have been speculating about the amazing business possibilities that will open up when Fidel Castro dies.64 The death of Hugo Chávez was greeted with delight from the business community, which saw in it an opportunity for corporations to regain the power they had lost during his pro-poor rule.65 The global movement to reduce the power of corporations is strong, but for any individual involved, whether a politician or an activist, being vocal can be lifethreatening. For people living in relatively safe countries it is easy to forget that the repression and murder of protesters occurs regularly throughout the world. The popular media rarely reminds us about them. When it does, it puts the emphasis on something other than what the person was trying to achieve…again distracting the public from thinking about and acting on serious issues. While it is true that being a union organizer or populist leader does not promote one’s personal longevity, many options exist for those who wish to rein in corporations – without endangering life or limb.

MYTH#10: CORPORATE PROSPERITY BENEFITS ALL

238



Towards a Better Way: Encouraging Small Local Businesses and Limiting the Power of Corporations “I sympathize, therefore, with those who would minimize, rather than with those who would maximize, economic entanglement between nations. Ideas, knowledge, art, hospitality, travel – these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and above all, let ﬁnance be primarily national.” – John Maynard Keynes66

* * * Supporting small businesses and increasing employment In the classic urban planning text The Death and Life of Great American Cities, Jane Jacobs writes of the role played by the local shopkeeper in New York City neighbourhoods: she is the person who is equally entrusted with keys and secrets.67 There is a vast and essential difference between the cheery hollow “Have a nice day” greeting at big anonymous stores and the more personal friendly greeting (and all the other services and favours) of the known shop owner. Sometimes anonymity is preferable, but something is lost when that is the only option available, when the small and local have completely disappeared, and all main streets and urban neighbourhoods resemble each other with their collection of chain stores. I once observed an elderly woman buying a bottle of wine at a small local store in the northeastern United States. She billed it to another woman’s account, explaining that she was invited for dinner and her hostess had asked her to pick up the wine but not to pay for it. The shopkeeper, obviously knowing both women well, readily agreed.xiv In a small town in Switzerland, I once stayed at a hotel in which the owner rather casually mentioned, as I was going out on a Friday afternoon, that I should take my keys. When I looked at her quizzically, she explained that her family was going away for the weekend; I would need the keys to get in and out of the hotel. When I returned in the evening, sure enough the front door Such experiences are common in Asia. One day while living in Hanoi, I forgot my wallet and could not pay for my dessert (admittedly it only cost about thirty cents); the woman happily served me and let me pay later. On another occasion, I did not have small enough bills to pay for my transport; I finally paid the man a week later. In both cases, I was purchasing from a local vendor. Another time, a woman in a small shop offered to let me take an expensive roll of black and white film and pay her later, though she did not know me. I’ve also had a local shopkeeper in Sri Lanka lend me an umbrella when I got caught in the pouring rain. xiv

239

BEYOND APOLOGIES

was locked. The owners simply trusted that I, a stranger, would neither steal the silver nor disappear without paying my bill. Of course, there are advantages to larger stores and malls. There are good reasons why shopping malls are often popular. They offer a wide variety of shops within close proximity. They provide a car-free environment (once one traverses the vast parking lot) in which people can move freely from store to store without fear of traffic. Malls also typically provide some open areas for sitting, resting, and socializing. However, they are not truly public spaces. They ban some people from entering and they ban certain activities. One cannot get up and make a speech or sing a song in a shopping mall without permission as one can, at least in much of the world, in a public square or on Main Street. Shopping malls are in fact highly regulated, artificial environments. They have their appeal, but they cannot replace the traditional downtown. The benefits to the community of small, independent, and local stores are many. The smallness of the shop, the fact that the owner probably lives nearby, and the shop’s ready access and connectedness to the street means that it is far more likely that the shopkeeper will know her neighbours, keep an eye out to ensure safety in the surrounding area, and lend her support to community events. She is also more likely to invest some of her profits in the local community and to make her purchases locally than are big store executives whose central office is thousands of miles away. As the Institute for Self Reliance writes about the owners of small businesses, Their personal and financial interests are tied to the community’s well-being and, as a result, they are often active in various civic endeavors. While small business owners gain prestige and influence by contributing to community improvement, corporate managers garner status by advancing the company’s interest, even at the expense of the community.68

Small local shops and informal (self-employed) sellers also are better at resisting the gravitational pull of money upwards. I witness this daily in Dhaka. A middle class person gives money to beggars and uses cycle rickshaws for transport; he also buys fruits, vegetables, snacks, and tea from a vendor on the street. A woman out walking stops at a small stand to buy a green coconut to drink. The vendors buy from each other. The beggars and rickshaw wallah eat local food sold on bicycle carts or at sidewalk stands. Some of those stands source their food from other small sellers, who in turn use bicycle carts to distribute their food. To the extent that Coca Cola, Nescafe, and other corporate products stay out of the picture, money is moving down the pyramid and circulating there to the beneﬁt of the poor.

MYTH#10: CORPORATE PROSPERITY BENEFITS ALL

240

Independent business can also prove to be far better at providing service than large, bureaucratic ones. One spectacular example of the efficiency of self-employed workers is the delivery of home-cooked meals from homes to businesses in India. Dabba-wallahs travel to people’s homes, collecting about 160,000 metal carriers (tiffins) and then delivering them to those people’s workplaces. An article about them notes “Forbes awarded the humble dabba-wallahs a 6 Sigma performance rating, a rating used in quality assurance if the percentage of correctness is 99.9999999 or more. In other words, for each six million tiffins delivered, only one fails to arrive. This error rate means in effect that a tiffin goes astray only once every two months.”69 Another example of the effectiveness of the small and local is a chain of worker-owned bakeries in San Francisco: because none of the money they take in goes to support distant investors, the bakers make more than double the usual wage, and also receive health insurance, paid vacation, and a share of the bakery’s profits.70 Rather than subsidize corporations in the hopes that they will hire people, governments can do it themselves. They can pay people to rebuild affected areas following a disaster, or to create, operate, maintain, and repair needed infrastructure, including for sewerage, water, and transport, or to build schools and health clinics. Where people are concerned about chemicals in food, they could have agricultural extensionists train people to grow food without chemicals. Many governments are already active in job creation. The National Rural Employment Guarantee Act in India guarantees a minimum of one hundred days of employment per year to the rural poor. A number of countries – including Argentina, China, Indonesia, and South Korea – are carrying out public works programs in order to reduce unemployment and increase needed infrastructure. According to the United Nations Development Program, successful poverty reduction in some East Asian countries was achieved through a partnership – or social contract – between the governments and local entrepreneurs. In this case, each assumed a portion of the risks and the rewards: “This contract was designed both to ensure [an] expansion of jobs in labour-intensive manufacturing as a means of absorbing unskilled labour and reducing poverty, and to effect a shift to more technologically demanding activities which were more likely to guarantee continued competitive advantage in the international markets and rising living standards in the future.”71 In other words, it brought together government resources and local ingenuity to benefit local communities. The shift in the national accounting system that I talked about earlier in this book is especially important here. Governments must shift their focus from increasing the country’s GDP to increasing the wellbeing of their citizens. In the case of garment workers in Bangladesh, local activists need to investigate the possibilities

241

BEYOND APOLOGIES

that could emerge if the government were, for instance, to establish a fund to help former garment workers and managers wanting to set up small, local factories run as cooperatives. Or, they could explore the potential of government support in other parts of the economy. For example, they might respond to concerns about chemicals in the food supply by helping small local producers grow organic fruits and vegetables for local sale. Those concerned about the way that big stores harm economies and people’s lives can work to achieve policies that ensure that large chain stores are not always allowed to replace traditional markets, small independent shops, and street vendors. Some cities have laws prohibiting big box stores and mega shopping malls within the city limits, at least in part because of their inordinate need for car parking. In Vietnam, the staff of the Canadian NGO HealthBridge played a role in a joint campaign that has been, to a large degree, successful at stopping government policy designed to destroy traditional markets and replace them with supermarkets. The new policy that is emerging involves preserving the markets and creating them in new areas of the city as well.72 Concerned activists can also push officials to stop subsidizing factory farms owned by wealthy individuals and large corporations. They can push local governments to offer contracts to local farmers with small plots to supply food for government institutions such as schools, hospitals, and other workplaces and to hire local people directly to prepare fresh food in those institutions, rather than buy prepared food from big corporations. They can push governments to buy other goods and services as locally as possible.xv Even if the cost were slightly higher, they would reap savings from a more prosperous citizenry. Internationally, they can fight the World Trade Organization’s policies that make local contracts illegal by labelling them as ‘preferential treatment’ of local companies over transnational corporations. It should never be unlawful to support small producers over big corporations. Taxing harmful products and services to discourage their production and use There are many potential sources of funds for investment in basic needs and wellbeing. Taxes and surcharges on cars, petrol, and parking could raise funds to improve public transport. Why is the United States the only industrialized country that does not tax petrol heavily? Why do some countries continue to subsidize petrol rather than directly subsidizing bus fares? It makes little economic, and even less environmental, sense to continue to promote the use of the car as the sole xv That is, they can unless they have signed a trade treaty that prohibits them from ‘favouring’ local over transnational businesses.

MYTH#10: CORPORATE PROSPERITY BENEFITS ALL

242

means of getting around, when less expensive, less polluting, and less restrictive options exist. The idea holds true for parking charges, which are more acceptable when used to maintain local sidewalks, bicycle lanes, and parks. Various American cities are considering raising taxes on sugar-sweetened beverages. Such drinks contribute to ill health, including diabetes. Their production harms the environment, as does the disposal of the bottles in which they come. They represent wasted spending, as tap water is a less costly, healthier, and environmentally better alternative. In November 2014, Berkeley, California followed the example set by Mexico in raising taxes on sugar-sweetened beverages. Sales have declined already in Mexico because of the tax.73 The Navajo Nation in the United States has raised its tax on food with little or no nutritional value.74 In a growing number of countries, a surtax added to tobacco, and sometimes to alcohol, products goes into a health promotion foundation. An important lesson from efforts to increase tobacco taxes is that they prove more popular when the money collected goes into a specific program for which the public can easily understand the benefits, rather than into general revenues. A similar type of approach could support work on other health issues that are both amenable to prevention-based approaches and caused by harmful products. Tax increases would be far more palatable if it were clear that savings or other benefits enjoyed by a wide range of people would offset the higher prices. Funds to improve the quality of tap water, and water delivery in general, could come in part through a high tax on bottled water. In the United States, corporate advertising has convinced people that bottled water is safer than tap water, even though tap water is perfectly safe. Indeed, in many places, the bottled water is no more than tap water with a fancy bottle and label attached! Ever notice how nobody in movies and on TV these days drinks tap water, but characters often drink bottled water? Bottled water companies also frequently sponsor film festivals, including the Toronto and London film fests, as well as various sporting events.75 As a result of all the advertising and promotion, three of four Americans drink bottled water, while one in five drink only bottled water.76 In 2011, Americans spent $21.7 billion on bottled water.77 That amount is more than a fourth of what the government spends on building, operating, and maintaining the infrastructure for water and wastewater.78 Even in countries where the tap water is not safe, bottled water may be no better. Most bottled water is not tested for quality. Since the poor cannot usually afford bottled water anyway, taxing it can contribute in some small way to narrowing inequality, especially where the tax is used to improve the provision of safe water to the public.

243

BEYOND APOLOGIES

Those working on behalf of the poor, or for a better environment, or for other social causes, spend a lot of time seeking funds from governments, foundations, and other sources. They tend to spend much less time on campaigns to convince governments to stop giving money to the rich and corporations by eliminating tax breaks. They are almost universally silent on the need to prohibit tax havens, such as offshore registration. They do not generally complain about the high proportion of the budget that goes to the military and to other harmful or useless sectors, while health, education, general welfare, and environmental protection are consistently given short shrift. With a few exceptions, such as a historic effort to raise taxes on tobacco and a growing movement to raise them on sugar-sweetened beverages, they are silent about the need and potential of raising taxes on various harmful products, such as fuel and the automobile, to help pay for the costs their consumption engenders. Any harm to the poor from such policies can easily be countered by subsidizing needed products that are not widely consumed by the rich, e.g. certain staple foods, public transportation, or public housing. People need to stop accepting budgetary shortfalls as inevitable. Activists should campaign to end government support to corporations, to reduce military spending, and to raise corporate taxes, while also campaigning for the resulting increased savings/revenues to be invested in programs to improve wellbeing. Other ways to encourage the small and local Various actions can support a move away from subsidizing large corporations and towards building local prosperity. Local currencies, such as those discussed in the Myth about economic growth, could generate local wealth and keep it in the community. Small local businesses can create their own insurance pools, rather than buying expensive policies from large, ‘one-size-fits-all’ companies. Loans made available through local credit unions and the creation of a directory of community services can encourage the establishment of local businesses, artisans, and professionals. Employees can chip in to a common loan fund from which their colleagues can then draw low- or no-interest loans. People can convert unused land – including in their backyards – into community gardens, where others without access to soil can have a small gardening plot. Cooperatives of artisans, repair people, and other services can help keep work and profits in the community. Small food producers can create local markets. Whatever action one takes, it is important to publicize the benefits of small, locally owned businesses that provide employment to local people, pay local taxes to maintain local infrastructure and social services, meet local social and environmental standards, participate in the community, and compete fairly with similar businesses.

MYTH#10: CORPORATE PROSPERITY BENEFITS ALL

244

It is also possible, at least to some extent, to change the nature of large corporations. Activists at Citizen Works in the United States (founded by Ralph Nader) are working to change the law in order to prohibit corporations from engaging in profit-making practices that harm human rights, public safety, the environment, the dignity of their employees, or the communities in which the corporation operates.79 The first step is to challenge the premise that corporations must focus on returning high dividends to their shareholders. This has required new laws. According to CitizenWorks, For Benefit Corporations (or b-corps) are “a new class of corporation that are required to create a material positive impact on society and the environment and to meet higher standards of accountability and transparency.”80 By defining themselves as For Benefit Corporations, companies can put socially beneficial goals ahead of maximizing shareholder value. Maryland was the first American state to allow b-corps, which by law must provide public benefits such as ‘preserving the environment’ and ‘improving human health.’ When Maryland b-corps make decisions, they must consider not only shareholder or investor value, but also ‘community and societal considerations’ and ‘the local and global environment.’ According to the Business Alliance for Local Living Economies, three more American states (Vermont, New Jersey, and Virginia) have passed laws allowing b-corps, and several others have introduced similar legislation.81 There is a long way to go, but times are changing. Activists can make use of the power of the corporate logo. Since corporations are eager to defend their corporate image, attacks on the logo can prove effective in getting corporations to change their practices. Another promising innovation is ‘slow money,’ which promotes investment in local farmers. Among its goals are the promotion of investments close to where the investor lives, encouragement of companies to give away half of their profits, and an increase in the organic matter in soil.82 We may never again see the milkman delivering glass bottles to people’s doorstep. The soda fountain at the corner drugstore may have disappeared forever. But thriving local economies can re-emerge from the ashes, and the remaining vestiges of such a local economy, where it does continue, can be encouraged rather than deliberately extinguished.

245

BEYOND APOLOGIES

Notes Testimony to the Senate Armed Services Committee on his proposed nomination for Secretary of Defence, 15 January 1953. See, for instance, the GM Heritage Center, https://history.gmheritagecenter.com/wiki/index.php/Wilson,_Charles_E 2 “Open Letter to North American Christians,” cited in Noam Chomsky and Edward S. Herman, The Washington Connection and Third World Fascism (Boston: South End Press, 1979). 3 Paul Krugman, The Return of Depression Economics and the Crisis of 2008 (New York, London: Penguin Books, 2008). 4 Just a few examples: Marion Nestle, Food Politics: How the Food Industry Influences Nutrition and Health (Oakland: University of California Press, 2007); Eric Schlosser, Fast Food Nation: The Dark Side of the All-American Meal (New York: HarperCollins, 2002); Michael Pollan, The Omnivore’s Dilemma: A Natural History of Four Meals (New York: Penguin Books, 2007); Allan Brandt, The Cigarette Century (New York: Basic Books, 2007); Tara Lohan, ed., Water Consciousness (San Francisco: Independent Media Institute, 2008); the Center for Science in the Public Interest on fast food (www.cspinet.org); and Barbara Kingsolver, Animal Vegetable Miracle (New York: HarperCollins, 2007). 5 Some of the many writers to address these themes are Greg Palast, Noam Chomsky, Michael Moore, Molly Ivins, Naomi Klein, David Korten, and John Kenneth Galbraith. 6 Stephen Bainbridge, “Case Law on the Fiduciary Duty of Directors to Maximize the Wealth of Corporate Shareholders,” Stephen Bainbridge’s Journal of Law, Politics, and Culture, 5 May 2012. www.professorbainbridge.com accessed 8 August 2014. 7 Alistair Barr, “Golden Coffins, Golden Offices, Golden Retirement,” MarketWatch, 13 May 2009. 8 “Sneak Peeks at ‘Wal-Mart: The High Cost of Low Price’, Alternet, 26 October 2005. http://www.alternet.org/story/26976/sneak_peeks_at_%22wal-mart%3A_the_high_cost_of _low_price%22 9 Walmart, “Our Story,” www.corporate.walmart.com, accessed 28 April 2014. 10 Nick Hanauer, “Why Capitalism has Nothing to do with Supply and Demand,” Making Sen$e, 28 July 2014. 11 Clare O'Connor, “Walmart's Billionaire Owners $1.6 Billion Richer As Big-Box Giant Takes On Banks,” Forbes, 10 October 2012. 12 Bonnie Kavoussi, “Walmart's CEO Paid 1,034 Times More than the Median Walmart Worker: PayScale,” The Huffington Post, 20 March 2013. 13 Greg Palast, The Best Democracy Money Can Buy (New York: Plume Printing/Penguin Books, 2003). 14 “Measuring the Impact of Wal-Mart on the U.S. Economy,” Global Insight, Inc., 4 November 2005. 15 Catherine Ruetschlin, “Retail's Hidden Potential: How Raising Wages Would Benefit Workers, the Industry and the Overall Economy,” Demos, 19 November 2012. 16 Stephen Moore, “The Future of Social Security for This Generation and the Next,” Testimony to the Committee on the Budget, United States House of Representatives, 30 June 1999. 17 Bangladesh Road Transport Authority, “Number of Registered Motor Vehicles in Dhaka 1

MYTH#10: CORPORATE PROSPERITY BENEFITS ALL

246

(Yearwise).” http://www.brta.gov.bd/images/files/statistics/stat_dhk_08-14.pdf 18 Forbes, “The World’s Biggest Public Companies,” http://www.forbes.com/global2000/list accessed 8 August 2014. 19 Walmart, “Global Responsibility,” http://corporate.walmart.com/global-responsibility accessed 8 August 2014. 20 Jim Yardley, “Garment Trade Wields Power in Bangladesh,” The New York Times, 24 July 2013. 21 Unusually, the collapse garnered several front-page articles in The New York Times and continues, at least to some degree. “One Year after Rana Plaza,” The New York Times, 27 April 2014. 22 Ifty Islam, "Post-Rana Roadmap," presentation at La Vita, Lakeshore Hotel, 30 April 2013. 23 Islam, "Post-Rana Roadmap." 24 Testimony of Kalpona Akter, Executive Director, Bangladesh Center for Worker Solidarity, Senate Foreign Relations Committee, Labor Issues in Bangladesh, Washington, DC, 6 June 2013. 25 See, for instance, the website of the Bangladesh National Garments Workers Federation, http://www.nadir.org/nadir/initiativ/agp/s26/banglad/index.htm 26 Tax Justice Network, “Transfer Pricing,” http://www.taxjustice.net/topics/corporate-tax/transfer-pricing/ accessed 13 May 2014. 27 Lucy Komisar, “Corporate Tax Evasion via Offshore Subsidiaries: A Primer,” Reclaim Democracy, 9 April 2004. 28 Komisar, “Corporate Tax Evasion.” 29 Citizens for Tax Justice, “The Sorry State of Corporate Taxes: What Fortune 500 Firms Pay (or Don’t Pay) in the USA and What they Pay Abroad – 2008 to 2012,” http://www.ctj.org/corporatetaxdodgers/sorrystateofcorptaxes.php accessed 15 March 2014. 30 Mark Gongloff, “U.S. Companies Lobbying Furiously To Save Corporate Tax Loopholes: Study,” Huffington Post, 18 June 2013. 31 Joshua Holland, The Fifteen Biggest Lies About the Economy and Everything Else the Right Doesn’t Want You to Know About Taxes, Jobs, and Corporate America (Hoboken, New Jersey: John Wiley & Sons, Inc., 2010). 32 David C. Korten, When Corporations Rule the World, 2nd Edition (Bloomfield, Connecticut and San Francisco:: Kumarian and Berrett-Koehler, 2001). 33 Tom Chatfield, “Apple’s Fashionable Seduction,” BBC Life: Connected, 26 October 2012. 34 Luke Landes, “Resist Planned Obsolescence or Accept the Financial Consequences,” Forbes, 6 November 2012. 35 Landes, “Resist Planned Obsolescence.” 36 Daniel DiClerico, “The 'Light Bulb Conspiracy' Probes Planned Obsolescence,” Consumer Reports, 27 October 2011. 37 Landes, “Resist Planned Obsolescence.” 38 Pollan, The Omnivore’s Dilemma; Greg Critser, Fat Land: How Americans Became the Fattest People in the World (Boston: First Mariner Books, 2004). 39 Ross Hammond, “The Economic Costs of Obesity,” Brookings, 14 September 2010.

247

BEYOND APOLOGIES

www.brookings.edu 40 Nancy Huehnergarth, “Water Is the Enemy, Gatorade Mobile Game Tells Youth,” Huffington Post blog, 1 August 2014. http://www.huffingtonpost.com/nancy-huehnergarth/water-is-the-enemy_b_4557456.html 41 Nate Berg, “Radiating Death: How Walmart Displaces Nearby Small Businesses,” The Atlantic 14 September 2012. 42 Jeff Milchen, “The Benefits of Buying Locally.” Reclaim Democracy! http://reclaimdemocracy.org/local_business_benefits/ accessed 28 April 2014. 43 Pasha Farmanara, “Small Shops Already Feeling the Crunch from 7-Eleven,” The Villager, 14 November 2013. 44 The Institute of Local Self Reliance (www.ilsr.org/key-studies-walmart-and-bigboxretail/#6) has links to studies on the issue. 45 Good Jobs First, “Harms of Big Box Retail,” (http://www.goodjobsfirst.org/) accessed 28 April 2014. 46 Stacy Mitchell, “Local Ownership Makes Communities Healthier, Wealthier and Wiser,” http://www.ilsr.org/local-ownership-healthier-wealthier-wiser accessed 18 July 2012. 47 Troy C. Blanchard, Charles Tolbert, and Carson Mencken, “The Health and Wealth of US Counties: How the Small Business Environment Impacts Alternative Measures of Development,” Cambridge Journal of Regions, Economy and Society (2012), 5:149–162. 48 Troy Blanchard and Todd L. Matthews, “The Configuration of Local Economic Power and Civic Participation in the Global Economy,” Social Forces 84.4 (June 2006):2241-2257. 49 Stephan J. Goetz and Anil Rupasingha, “Wal-Mart and Social Capital,” American Journal of Agricultural Economics 88.5 (2006):1304-1310. 50 Alexandra Hartmann, “Some Tunisians Still Waiting for Revolution, Aljazeera, 17 December 2013. 51 Thom Hartmann, “To Restore Democracy: First Abolish Corporate Personhood,” Thom Hartmann Program, 31 December 2001. 52 Hartmann, “To Restore Democracy.” 53 Hartmann, “To Restore Democracy.” 54 “Big Pharma Spends Over €40 million per Year Lobbying in the EU, Dwarfing Public Health NGOs,” Corporate Europe Observatory, 28 March 2012. 55 Douglas A. McIntyre and Alexander E. M. Hess, “The Ten Companies Making the Biggest Political Donations,” 24/7 Wall St, 2 July 2012. 56 Dan Roberts, “Supreme Court Strikes Down Cap on Overall Campaign Contributions,” The Guardian, 2 April 2014. 57 “Ballinger Says CSR Is a Fraud That Undermines Worker Rights,” 21 Corporate Crime Reporter 22, 24 May 2007. http://www.corporatecrimereporter.com/ballinger052407.htm 58 Hartmann, “To Restore Democracy.” 59 DemocraticUnderground.com, “Thomas Jefferson's Failed 11th Amendment -- A Check on Corporate Power,” http://www.democraticunderground.com/101636229 accessed 12 February 2013. 60 Monte Paulsen, “How to Build Better Homes in Three Simple Steps,” Canadian Geographic, June 2012. 61 Jamie Doward and Mahtab Haider, “The Mystery Death, A Town in Uproar and a $1bn

MYTH#10: CORPORATE PROSPERITY BENEFITS ALL

248

UK Mines Deal,” The Observer, 3 September 2006. 62 See, among others, www.upsidedownworld.org and www.multinationalmonitor.org. The information is easy to find; simply search on the Internet for “Guatemala human rights death squads corporations” or some such combination. 63 David M. Barrett, “Congress, the CIA, and Guatemala, 1954,” Central Intelligence Library, https://www.cia.gov/library/center-for-the-study-of-intelligence/kent-csi/ vol44no5/html/v44i5a03p.htm 64 For example, Matthew Creamer, “How You'll Advertise in a Newly Capitalist Cuba,” AdAge, 13 June 2011. 65 One among many: Christopher Helman, “What Does Chavez's Death Mean for Venezuelan Oil Giant Pdvsa?” Forbes, 5 March 2013. 66 Cited in Korten, When Corporations Rule the World. 67 Jane Jacobs, The Death and Life of Great American Cities (New York: Random House and Vintage Books, 1961). 68 Mitchell, “Local Ownership Makes Communities Healthier.” 69 Luke Harding, “A Bombay Lunchbox,” The Guardian, 24 June 2002. 70 Shaila Dewan, “Who Needs a Boss?” New York Times Magazine, 25 March 2014. 71 UNDP Department of Economic and Social Affairs, Rethinking Poverty: Report on the World Social Situation 2010 (New York: UNDP, 2009). 72 If you want to read the story about this action, see Issue 2 of the NCD and Poverty Research Network Newsletter (April 2014), available on the website: www.healthbridge.ca 73 Mike Esterl, “Berkeley Voters Approve Tax on Sugary Drinks,” The Wall Street Journal, 5 November 2014. 74 Felicia Fonseca, “Navajo Nation President Approves Junk-Food Tax,” Santa Fe New Mexican, 21 November 2014. 75 “Water Marketers Haven’t Bottled Up Spending,” IEG Sponsorship Report, 12 January 2009. 76 Kelle Louaillier, “Thinking Outside the Bottle” in Tara Lohan, ed., Water Consciousness (San Francisco: Independent Media Institute, 2008). 77 Charles Fishman, “U.S. Bottled Water Sales Are Booming (Again) Despite Opposition,” National Geographic NewsWatch, 17 May 2012. 78 The total spent on maintenance of infrastructure was $84 billion in 2005, according to the American Water Works Association: http://www.awwa.org/legislation-regulation/issues/infrastructure-financing.aspx accessed 6 September 2013. 79 See www.citizenworks.org 80 See http://www.bcorporation.net 81 “Benefit corporations are producing shareholder value and have a positive impact on society and the environment.” Business Alliance for Local Living Economies, 10 May 2011. The states that are considering them are California, Colorado, Hawaii, Michigan, New York, North Carolina, and Pennsylvania. https://bealocalist.org/benefit-corporations-are-producing-shareholder-value-and-have-po sitive-impact-society-and-environment 82 Slow Money, https://slowmoney.org/ accessed 7 September 2014.

MYTH #11: Countries Should First Get Rich, Then Worry about Health and the Environment “...the purpose of economics is to ﬁnd out how to increase human welfare. Human welfare is a complex condition, the increase of which involves far more than the mere maximisation of production and consumption. Welfare has to do with health and human needs, with mental, emotional and spiritual matters, as well as with physical wellbeing and with social and environmental issues.” – Paul Ekins1 “When you look at the world in that way – from the standpoint of: ‘What are our most fundamental needs?’ – then it just seems crazy that we use air, water and land as a garbage can to dump our most toxic chemicals.” – David Suzuki2

 Does it Make Sense to Sacrifice Wellbeing for Money? How one looks at public health and the environment varies greatly depending on whether one focuses on economic growth or on wellbeing. According to the economic growth model, wealthier societies have the resources to provide better health care and better living conditions for their citizens. Wealthier societies also have the motivation and resources to preserve the environment. Poorer societies, on the other hand, are struggling for survival and so cannot afford to worry about health or their natural surroundings.i Make money first, this conventional view argues, and the rest will take care of itself. Unfortunately, this view promotes comfort for those who already have it and dangerous procrastinationfor everyone else. Can we have prosperity if people and the environment are not healthy? An estimated one and a quarter million people around the world die each year as a result of traffic crashes; an additional twenty to fifty million suffer non-fatal

According to something called the ‘Kuznets environmental curve’, economic growth will eventually lead to concern for the environment. As people gain material wealth, they start to show concern for clean air and water and for attractive environments, and to believe in the importance of standing forests and of preserving wildlife and their habitats. Thus, this model suggests, if one can simply nurture growth in per capita income then environmentalism will follow suit. But that process of gaining enough wealth to care about the environment can take decades or even centuries, by which time there might not be much of anything left to save. Kahn points out that there are shortcuts wherein an active civil society can raise demand for environmental protections even where per capita incomes are extremely low. See Matthew E Kahn, Green Cities, Urban Growth and the Environment (Washington, DC: Brookings Institution Press, 2006).

MYTH#11: COUNTRIES SHOULD FIRST GET RICH

250

injuries, including lifetime disability. Internationally, for those aged fifteen to twenty-nine, years, traffic injuries are the leading cause of death.3 Diseases directly linked to air pollution are another leading cause of premature death, responsible for more than three million early deaths annually.4 That number was 800,000 just a decade earlier. For the first time, air pollution ranks in the world’s top ten list of causes of death.5 More driving and higher speeds mean more crashes, worse air pollution, and less physical activity; wider roads mean less space for farmland and green space. Yet when it comes to the choice between promoting transport systems that would reduce driving (focusing on trains, light rail, good infrastructure for walking and cycling, and policies that make driving more costly) or promoting the use of cars (building more roads, widening existing ones, adding more flyovers and elevated expressways), transport planners and funders opt for the latter. They claim that economic growth requires more infrastructure for cars and trucks rather than for people. There is, they say, a necessary trade-off between the economic benefits of roads and their negative consequences.ii Similarly, every mine, every polluting industry, and every attempt to resist improved workplace safety is justified based on economics; illness and death are simply the price of doing business (‘collateral damage’ is another phrase often used). Damage to health and the environment is justified as long as it contributes to prosperity; attempts to protect health and the environment are unwarranted brakes on economic progress. In order to make the case for protecting health despite the economic incentives to create conditions that worsen it, researchers have carried out a number of studies to estimate the economic costs of disease, disability, and environmental pollution – and the benefits of a radically different approach. Here are some of the results:  Asthma is the fourth leading cause of work absenteeism among American adults. Nearly fifteen million workdays are lost or are less productive due to asthma attacks in workers. As a result, asthma leads to $18 billion in direct costs in the United States alone: $10 billion for hospitalization and $8 billion for lost earnings due to disease or death.6  Air pollution in China cost the economy an estimated $112 billion in 2005.7  The direct and indirect costs of overweight and obesity in Australia were estimated at $56.6 billion in 2005.8 The cost of treating obesity in the United States for one year is about $147 billion.9 Among other places, I heard this argument repeatedly at the ADB Transport Forum, which was supposedly focused on sustainable transport. ADB Transport Forum, Manila, 15-19 September 2014.

251

BEYOND APOLOGIES

 The health consequences of tobacco use in the United States cost more than $289 billion each year: at least $133 billion in direct medical care costs for adults and more than $156 billion in lost productivity.10  Traffic crashes worldwide resulted in an estimated economic cost of $518 billion in the year 2000.11  More than $100 trillion in public and private spending could be saved by 2050 if there were a global expansion of public transportation, walking, and cycling in cities.12 The fact that the case for health and the environment needs to make use of economic costs is frustrating. If some form of Gross National Wellbeing were the common measure rather than GDP, their importance would be self-evident. Meanwhile, despite the availability of statistics like those above, the importance of promoting a healthy environment still has not made its way into mainstream economics. As James Robertson, writer and speaker on economic and social change, remarks, “The idea that the development of healthier people, and the creation of a social and physical environment which enables people to be healthy, might be treated as productive investment in a society’s capital assets, as the development of its most important resources (its people) is alien to conventional economics.”13 Even more alien is the idea that people are valuable simply because they are human. The importance of the environment to human wellbeing should also transcend monetary figures. In his film An Inconvenient Truth, former United States vice president Al Gore displays a scale that weighs gold bars against the earth. Yes, the gold bars look tempting, but it obviously makes no sense to sacrifice our planet for them. One cannot destroy the environment and then buy one’s way out of the destruction. Yet, while people may acknowledge the need to save the environment in a general sense, for any single decision they typically view ‘the economy’ as more important. People have already sacrificed much for the economy, why not a little more? It is not possible to return to a pristine state of nature. It is no easy matter to decide how much of one’s comfortable lifestyle (for those who have one) and ambition to live better, in a material sense, one should sacrifice to avoid doing a little more damage to the planet. But it is unwise to forget Gore’s scale entirely. Economic growth, as measured by growth in GDP, necessarily takes a toll on the environment. This includes climate change that scientists have tied to all the carbon dioxide and methane generated from transport, industry, and livestock. It includes environmental damage that results from paving over the countryside to make space for industry. It results

MYTH#11: COUNTRIES SHOULD FIRST GET RICH

252

from the continuous building of more roads and highways. It results from power plants that generate power in environmentally damaging ways, and from the creation of ever greater amounts of waste. These are not trivial concerns that we can postpone to a future day when countries will be better able to afford to address them. The environment affects people’s health and overall wellbeing today. It is not a separate entity; it is the space that people inhabit. It is not that people should save the environment out of a sense of goodwill or charity; it is the environment that enables life to exist on the planet. I face these issues almost daily in my career. The low importance given to public health affects everything that I try to do.iii People working on tobacco control are told that reductions in tobacco use will harm national economies. It is difficult to raise the possibility of restricting the promotion of soft drinks and fast food, so large and powerful is the industry that profits from their sale. According to the Federal Trade Commission, American food companies spent nearly $2.3 billion on advertising and promotions targeting children in 2006.14 While some progress is occurring in the United States on calling attention to the problematic nature of offering children’s games in fast food meal packages and seeking to restrict them, the latest government measures on this issue are only voluntary. Anyone who dares to suggest that measures should be implemented to reduce the use of and need for automobiles in cities is likely to become the target of ridicule. People are encouraged to defend their ‘right’ to respond to advertising by shopping, yet it is somehow unpatriotic to call for measures that would protect people’s health from the effects of those same ads. In most settings, money talks far more loudly than does health. Wouldn’t economic growth lead to better health outcomes? Wealthier individuals in any country, and wealthier countries overall, tend to have better overall health outcomes than do those with fewer material resources. This stems from, generally speaking, a combination of better living conditions and higher expenditures on health. However, there are enough exceptions to make it clear that low-consumption countries can do as well as the high-consumption

That health (e.g. creating the conditions that allow an entire population to be healthy) is considered to be less important than medicine (treating individuals for their ailments) was obvious to me while I was getting my Masters degree. The Harvard School of Public Health had an unattractive campus, an ugly cafeteria that served bad food, and few amenities. The Harvard Medical School next door had gorgeous buildings, a beautiful cafeteria with good food, and a gym which the ‘poor cousins’ in the public health school were ‘generously’ allowed to use.

iii

253

BEYOND APOLOGIES

ones if they prioritize health rather than economic growth. The United States government spends $3,076 per capita on health care; only a handful of countries spend more. In terms of total health spending (government plus individual), the United States spends $6,719 per capita on health care, more than almost any other country and surpassing other big spender countries such as Luxembourg and Monaco. In terms of life expectancy, however, the United States does far worse than many other countries. High-consumption countries that spend less on health than the United States, but whose governments provide health care directly, do better because they do not need to support a bloated insurance bureaucracy. Canada, for instance, spends ﬁfty-eight percent of what the United States does on health but has two and one half more years of life expectancy, thanks to a more socialized system of health care delivery. Cuba excels in terms of health outcomes; its life expectancy is higher than that in the United States, and yet it spends less than six percent of what the United States does on health care. These comparisons are shown in Figure 6.15 Other low-consumption countries with socialized systems of health care delivery – including Sri Lanka, Costa Rica, and Vietnam – have, like Cuba, achieved high levels of health. But Cuba is the extreme case. Even the World Bank paints a rather rosy picture of Cuba: one hundred percent literacy, a life expectancy at birth of 79 years, and less than two percent unemployment.16 (Where Cuba performs less well is in maternal mortality, though its rate is still considered ‘low’.17) Figure 6: National Comparisons of Per Capita Health Expenditure and Life Expectancy

MYTH#11: COUNTRIES SHOULD FIRST GET RICH

254

Treating health as a commodity rather than as a human right that should be available to all, regardless of ability to pay, is a market-based approach that is more conducive to GDP growth than it is to improved wellbeing. It is important to keep in mind the lack of a direct connection between wealth and health when deciding whether to develop one’s economy by increasing industry, expanding mining, or engaging in various other practices that, while contributing to GDP and possibly generating jobs, also harm the environment. It is probably preferable to work in a coalmine than to starve, but that is not necessarily the real choice that people face. Because pollution is causing an increasing number of deaths, it needs to be seen as a real threat to health, rather than as a minor inconvenience. Finally, it is helpful to remember who benefits from the economic growth promoted at the cost of health and the environment, and who suffers most from the damage. It is easy for the rich and powerful to disregard the natural environment when they feel safely ensconced in the artificial one that they have created with their wealth; not so for those who must live in a degraded environment. * * * Self-interest is a great motivator. When the wealthy create their own systems of health care, education, security, transport, and so on, they have no incentive to work to improve the public system that others have no choice but to utilize. At a discussion of the extremely poor conditions for pedestrians in Manila, I asked a senior sustainable transport specialist at the Asian Development Bank whether he would be more motivated to work to improve walking conditions if he walked the kilometre to work rather than using his car. “Yes,” he replied. The rich opt out; the poor are left to suffer. * * * Medical care and medicine for the highest bidder An important part of the ‘recipe’ for economic growth is the privatization of basic services, including health care. Many people also argue that health care is better left to private companies whose need to make money will ‘ensure’ that it is of good quality. Although health is, of course, about much more than medical care, the type of care that is accessible is critically important. When medical care is privatized, it becomes unaffordable to the poor. There can thus be a direct trade-off rather than a convergence between economic prosperity and wellbeing. GDP can increase while the poor have less, rather than more, access to good health services (as well as to a good environment and other conditions that they need to stay healthy). In Paul Farmer’s words, A preferential option for the poor, and all perspectives rooted in it, also offers a way out of the impasse in which many of us caregivers now find ourselves: selling our wares and services only to those who can afford them, rather than making sure that

255

BEYOND APOLOGIES

they reach those who need them most. Allowing ‘market forces’ to sculpt the outlines of modern medicine will mean that these unwelcome trends will continue until we are forced to conclude that even the practice of medicine can constitute a human rights abuse.18

The responsibility of the physician goes far beyond simply serving those who can afford her services. When a physician limits her practice to those patients who can afford to pay and ignores the needs of the poor, she is herself, argues Farmer, guilty of human rights abuse: she is in the position to deliver health care to those in need but refuses to do so. The idea of forcing users to pay for health care rather than making it a provision of the government is bad economics because it will increase poor health. The opposite is also true: experience in Nepal, for instance, found a doubling or more in use of medical services when provided at no cost instead of at even nominal fees.19 If health and wellbeing are important, then economic arguments are secondary: it makes no sense to save money by denying access to basic health services. If treating illness is a lucrative business, then those in the health care business will have no incentive to support public health measures that create healthier populations. Many governments simply ignore the whole issue of disease prevention. The recently passed Bangladesh health policy, under debate for years, did not mention prevention at all until my colleagues lobbied heavily for its inclusion. The revised version, though far from perfect, does give importance to government’s role not only in treating disease, but also in preventing it.iv The dentist that I visit in Bangkok also runs a snack stand that sells exclusively sweet items: a mouthwatering assortment of cakes, biscuits, and sweetened coffee. This makes good business sense: make money by selling sweets and again by fixing the damage caused by those sweets. Private hospitals in Bangkok typically have fast food chains in their lobbies. The practice is widespread when profits are allowed to trump health, including in the United Kingdom.20 How likely are doctors who work in hospitals that make money from selling unhealthy foods to counsel their patients against eating them? How much weight (excuse the pun) does such advice carry when the fast food industry and hospitals are seen to be compatible business partners? Some pharmacies no longer sell cigarettes, but what message is Language in a policy, no matter how good, is of course not helpful if it does not lead to actual changes in practice. But the language is important because it gives activists a tool with which to push their cause, which is far more difficult when government policies completely ignore the issue. iv

MYTH#11: COUNTRIES SHOULD FIRST GET RICH

256

given when they continue to sell potato chips, candy bars, and soft drinks?v The drive to maximize profits also leads private health services to treat as many patients over the course of the day as is possible. ‘Extra’ services such as counselling and other support to ensure a healthier population disappear because they are, in the short and long term, bad for business. Focusing on economic growth rather than on wellbeing brings greater profits to government-subsidized pharmaceutical companies at the same time that inequality and suffering increase. Drug companies argue that they must maintain patents and high drug prices in order to recoup the investments that they have made in research and development (R&D) for new drugs. While this implies that the main goal of pharmaceutical R&D is to develop new drugs to improve health, the facts indicate that the real goal is to increase the profitability of the companies themselves. Of the more than one thousand new drugs approved by the United States Food and Drug Administration (FDA) between 1989 and 2000, only fifteen percent were highly innovative. Of the 137 new drugs under development in 2000, only one was for sleeping sickness,vi one was for malaria, and none was for tuberculosis – all diseases that cause debility, suffering, and death for millions of people around the world every year.21 The reality is that nearly all pharmaceutical R&D focuses on drugs to treat an increasing number of lesser ailments that affect those who have the ability to pay for these drugs. Furthermore, although the American government often pays for much of the research through subsidies, research grants, and other means, it surrenders to the companies the patents to any drug that is developed. Even with new drugs, there may have been little by way of corporate R&D expense. Keeping drug prices high to fund R&D is thus a smoke screen; the real motive is profit. In 2000, the pharmaceutical company Glaxo-Wellcome attempted to block the sale of cheaper generic AIDS drugs in Ghana, despite having made $1.1 billion selling AIDS drugs during that same year. When the company finally offered a discount on its drugs, the Minister of Health of India reportedly responded with disdain that if pharmaceutical companies can afford to offer such large discounts, they surely must have been charging too much in the first place.22 Recently, one pharmacy in Nova Scotia, Canada, made headlines when it announced that, as part of a move to sell healthier foods, it would stop selling soft drinks and other sugarsweetened beverages. Graham’s Blog, “Press Release: Soft Drinks and Sugary Beverages,” http://stonespharmasave.com/blog/?p=560 vi Sleeping Sickness is a tropical disease that, despite its benign nickname, causes headaches, pain, anaemia, kidney dysfunction, sleeping disorders, and in its more serious manifestation, mental deterioration and death. v

257

BEYOND APOLOGIES

The big pharmaceutical companies talk about ‘responsibility’ and ‘corporate giving.’ Under the sub-section of its website entitled “Health for All,” (found in the “Responsibility” section), Glaxo Smith-Klinevii (GSK) talks about “How we are developing innovative products and improving access to healthcare for patients around the world” without mentioning affordability.23 The company was blasted in the United Kingdom for making sizeable profits on a flu vaccine after charging the National Health Service six times what it had cost to make: the chief executive of GSK, Andrew Witty, admitted that the swine flu crisis was a “significant financial event [e.g. highly profitable] for the company.”24 Companies can say what they will about their good behaviour; their actions speak otherwise. Pharmaceutical companies keep prices high enough to make substantial profits even in low-consumption countries. They refuse to allow even limited suspension of their patents so that those countries could produce generic versions of essential drugs for local use at very low cost, even where those drugs are needed to save the lives of millions of people. These are not companies operating on the brink of profitability for which such measures would lead to bankruptcy. Pfizer, for instance, recorded first quarter revenues in 2010 of $16.8 billion.25 The same observations hold true with many other private sector companies that provide health and medical services. The profitability of the corporations involved in the provision of health care directly opposes the public’s need for low-cost essential medicines and other health and medical services. Providing such services to the highest bidder will increase economic growth and GDP; what it will not do is improve human wellbeing. And without human wellbeing, what does economic growth matter? Whose health matters the most? Diseases do not affect all parts of a population equally; some diseases, like tuberculosis and AIDS, disproportionately affect the poor and other disaffected populations. Government policies can determine the degree to which vulnerable groups are protected from – or are made more susceptible to – disease outbreaks. Multidrug and extremely drug resistant tuberculosis (MDR and XDR TB), for example, tend to be especially rampant among prison populations due to over-crowding. Therefore, the higher the incarceration rates, the greater the likelihood that the disease will spread within the prison population, which itself is mostly poor.

vii This is the name that Glaxo-Wellcome took following its merger with SmithKline Beecham in 2000.

MYTH#11: COUNTRIES SHOULD FIRST GET RICH

258

The results of the ‘criminalization of poverty’ by which governments incarcerate rather than help many of the poor, combined with the privatization of hospitals, played out in notable fashion in the major epidemic of MDR TB that broke out in New York City between 1978 and 1992. Tuberculosis rates nearly tripled over that time, and rates of MDR TB more than doubled. The greatest numbers of cases were located in the poorest parts of the city, in neighbourhoods with large immigrant populations, in prisons, and among the homeless.viii The case rate in central Harlem – at 222 per 100,000 people – was higher than that found in many lowconsumption countries.26 Most of those who fell ill were young adults (aged fifteen to twenty-four) and non-white: fifty percent were black, twenty-six percent Hispanic, and thirty-eight percent were HIV-infected.27 According to the authors of a study published by the Centers for Disease Control and Prevention, “The loss of government funding of TB programs in the 1970s and 1980s in New York City made access to treatment more difficult for poorer sectors of the population (often non-white patients), likely contributing to increases in disease in these groups.”28 As the authors further note, “During the early part of the TB epidemic in New York City, TB control was underfunded and highly fragmented.” Budget cuts for MDR TB programs in the 1980s led to savings of about $200 million. The government only took the disease seriously when it began to spread beyond poor prisoners and minorities and into the general population. By that time, the cost of addressing the epidemic was over one billion dollars and predicted to exceed that amount.29 The costs in financial terms were astounding; in terms of damage to health and wellbeing, they were incalculable. This problem is by no means limited to the United States: Russian prisons have had, at least historically, notoriously high rates of MDR TB. For many Russians, a short jail term can mean a death sentence.30 Cutting corners when facing an epidemic is bad economics, since the cost of addressing the crisis exceeds the cost of preventing it in the first place. Bad health is bad economics, since people are less productive when they are sick. Beyond all the numbers is the simple question of what is valued. Governments tend to run short of funds when it comes to investing in the poor. Yet they have plenty of money to spend on weapons. Isn’t it about time that we put people, including the poor, first?

Outbreaks also occurred in many hospitals, with a fatality rate of over eighty percent; some health care workers died after contracting the disease, which inevitably spread from poor to other segments of society.

viii

259

BEYOND APOLOGIES

Corporate prosperity harms health and the environment Why does mainstream economics tend to ignore the importance of the environment and health? Speaking at the Eighth Global Conference on Health Promotion in Helsinki, Finland, Dr. Margaret Chan, Director-General of WHO made strong statements about the growing contradiction between prosperity as conventionally measured and good health. Economic growth, modernization, and urbanization have actually fostered unhealthy lifestyles, she noted, and those who seek to improve public health face opposition from forces that are “not so friendly.” There is a direct conflict between the interests of big business and those of health, said Dr. Chan: “Market power readily translates into political power. Few Governments prioritize health over big business.”31 It has taken an enormous amount of effort and expense to begin to limit the power of the tobacco industry. Internationally, the advocacy efforts are now starting to broaden from tobacco alone to the overall epidemic of non-communicable disease (NCD). Industry is directly responsible for promoting the four major NCD risk factors: tobacco use, excessive alcohol use, unhealthy diets, and insufficient physical activity.32 As Dr. Chan pointed out during her talk in Helsinki, “It is not just Big Tobacco anymore. Public health must also contend with Big Food, Big Soda, and Big Alcohol. All of these industries fear regulation, and protect themselves by using the same tactics.”33 Added to this must be Big Transport, which supports extremely expensive investments in car-based infrastructure to the detriment of health, the environment, and the economy. The single largest source of calories in the American diet is carbonated soft drinks.34 An eleven-ounce (325ml) soft drink contains about ten teaspoons (49ml) of sugar.35 A study of more than 90,000 women found that those who consumed just a single serving a day of a soft drink or commercial fruit juice had almost twice the rate of type 2 diabetes than did those who rarely consumed such sweetened drinks.36 Health advocates have responded to this correlation by trying to limit the affordability and attractiveness of these beverages. They have tried to limit portion sizes sold in New York City (an attempt that failed). They have pushed for a special tax on sugar-sweetened drinks (which have succeeded in Mexico and Berkeley, California). As anticipated, the food and beverage industry has consistently countered those efforts. According to the American Beverage Association’s (ABA) web page on obesity, “All of our industry's beverages can be enjoyed as part of a balanced lifestyle.”37 Nor is the industry silent on the subject of possible regulation. In a script taken directly from the tobacco industry, the ABA runs a blog with categories including “Americans Against Food Taxes” and “Americans For Food and

MYTH#11: COUNTRIES SHOULD FIRST GET RICH

260

Beverage Choice.”38 The bogeymen of the ‘nanny state’ and ‘health Nazism’ are familiar to those working on tobacco control, and it comes as little surprise to see them being resurrected by other industries: a typical article calls a proposed tax on sugar-sweetened beverages “coercive” and “nanny-state-like”.39 Another refers to “health Nazis” wanting to tax sugar.40 Every single success must involve overcoming these well-funded voices of opposition, because every gain for health is a loss to industry. What is true of health is also true of the environment; the focus on economic growth means that governments often fail to take seriously the environmental catastrophes caused by industry and instead wink at corporate violations of whatever regulations do exist. When industrial growth is always regarded as being more important than a clean environment, the damage that ensues is ignored. Ignoring it does not make it go away. Industry is far more generous about sharing the damage it creates than it is about sharing the profits such damage generates – what Paul Krugman calls privatizing gains and socializing losses. The mess industry creates is left for everyone else to clean up or suffer in. A recent example is British Petroleum’s (BP) handling of the disastrous oil spill in the Gulf of Mexico, a spill caused by its own negligence and by its successful lobbying of the American government to prevent the enforcement of reasonable safety measures. According to The New York Times, regulators had been warning offshore rig operators for more than a decade of the need for stronger safety measures. There was nothing new about the accident in the Gulf except its size: between 2001 and 2007, there were, according to the Times, 1,443 serious drilling accidents, “Yet the federal agency continues to allow the industry largely to police itself.”41 BP also lobbied against stricter regulations: “Last year,” the Times article notes, BP, the owner of the well that blew up in the Gulf, teamed with other offshore operators to oppose a proposed rule that would have required stricter safety and environmental standards and more frequent inspections. BP said that ‘extensive, prescriptive’ regulations were not needed for offshore drilling, and urged the minerals service to allow operators to define the steps they would take to ensure safety largely on their own.

Industries lobby, governments listen, and the environment and the public suffer. Corporate-owned mainstream media contributes to the problem by encouraging people to be unconcerned about the health of people or of the planet and by portraying corporations as good global citizens seeking to improve the state of both. The behaviour of corporations leaves no choice: to prioritize healthy people and a flourishing environment over the growth of GDP and corporate profit, a number of measures will be needed to rein in corporate activities.

261

BEYOND APOLOGIES

Why don’t economic incentives work to preserve health, the environment, and the natural resource base? In the laissez-faire, everything-works-out-for-the-best-as-long-as-governmentdoesn’t-interfere model of mainstream economics, people will make rational decisions when choosing between financial gains and the harm that such gains may bring about. In terms of health, this model asserts, people will only accept pollution and disease until they have enough money to afford to mitigate them or to find less polluting, disease-causing ways to earn more wealth. A low-income society will thus continue to accept polluting industry until it becomes rich enough to move the dirtiest factories to a poorer region and let others suffer from the health problems that such factories cause. The poor will dump raw sewage and chemicals into water bodies; the rich will be too keen to swim to do so. * * * Is it rational to pollute low-consumption countries further? In what has become a famous memo, in 1991 an internal World Bank document undersigned by Larry Summers, then chief economist, put forth the ‘logic’ of transferring waste and dirty industries from industrialized to low-consumption countries. Since the World Bank measures human life in terms of its earning potential, and since those in low-consumption countries earn less than those in high-consumption countries, Summers deemed it to make economic sense to shift pollution and other sources of early death to countries in which human life was seen to be worth little. “Just between you and me, shouldn't the World Bank be encouraging more migration of the dirty industries to the LDCs [lesser developed countries]?” asked the memo. “I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that. ... I've always thought that underpopulated countries in Africa are vastly under polluted; their air quality is vastly inefficiently low [sic] compared to Los Angeles or Mexico City.” Summers later stated that he meant the memo to be ironic or as a thought experiment. However, according to Robert Weissman, president of the American NGO Public Citizen, Summers has apparently “never explained … how he disagreed with the memo's ‘impeccable,’ if ironic, logic. Indeed, that kind of logic has guided World Bank policy for decades, as it has pushed deregulation, privatization and corporate globalization, with horrific results.”42 * * * A similar process, claim mainstream economists, works to prevent resource depletion. As resources become more and more rare, their prices go up, which will lead to less use; as such, there will never be a genuine problem of depletion. If resources remain (somewhat) affordable, then obviously there is still a sufficiently abundant supply of them and no need to conserve. In fact, however, resources are

MYTH#11: COUNTRIES SHOULD FIRST GET RICH

262

not affordable. The prices of many natural resources have increased dramatically, and the soaring price of food that led to riots in many countries – and possibly contributed to the Arab Spring43 – likely stemmed in part from a spike in oil prices,since the growing and distribution of food is so dependent on oil.ix As to why oil is not even more expensive, many factors contribute to determining its price. One is political insecurity in major oil-producing countries. Another is the need to keep customers addicted to the product so that they do not invest resources in other, renewable sources or find ways to get by on less. When the price of oil rises too high, people cannot afford to buy it and so sales decline. If prices remain too high, or if prices increase in sudden spurts, countries would presumably shift to less energy-intensive ways of doing business. The price therefore needs to be kept high – but not too high.x During the oil crisis of the 1970s, American President Jimmy Carter suggested that people wear sweaters indoors to reduce their need to use heating oil. When the Soviet Union collapsed and Cuba could no longer get cheap oil, the use of bicycles greatly expanded. In both cases, oil industry supporters ridiculed the suggested use of alternatives – sweaters and bicycles – as being unnecessary and harmful to economic growth. More typically, governments respond to price hikes by providing subsidies which shield consumers from the ‘signal’ they would otherwise receive from price hikes. Not only do such subsidies distort consumer behaviour (by not allowing them to respond to the real price), but they increase debt and lead to chronic fund shortages.xi Certainly, governments should subsidize the poor, but while fuel subsidies may keep bus fares from going up, they give the most benefit to the rich in their private cars. Indonesia, for example, spent about $20 billion on fuel subsidies in 2012, and the projected subsidies for fuel and electricity in 2013 were about $32 billion, twenty percent of the total government budget. That figure

Other reasons for high food prices include climate change and soil depletion because of industrial agriculture. See Nafeez Ahmed, “Why Food Riots are Likely to Become the New Normal,” The Guardian Earth Insight blog, 6 March 2013. x The price is in fact too high, but like the frog that boils to death gradually without noticing, so gradual increases in price have prevented many from noticing how unaﬀordable fuel actually is. The historic relationship between high oil prices and recession/depression tends to be ignored. See Richard Heinberg, The End of Growth: Adapting to Our New Economic Reality (Gabriola Island, BC, Canada: New Society Publishers, 2011). xi This is one of the few places where I agree with the World Bank and some mainstream economists – except that I think that the poor should be protected from the harm of price increases by receiving subsidies elsewhere in the economy. ix

263

BEYOND APOLOGIES

exceeds what the government spends on capital expendituresxii and social programs combined.44 Horrific traffic jams in Jakarta are, in a sense, directly subsidized by the government through low fuel prices. Such subsidies fail to allow people to respond to the price shock of oil hikes and divert government resources from building a better transport system that would require less fuel to run. If governments really wanted to protect the poor from high costs, they would simply subsidize buses directly, with the agreement that the companies would not increase the fares. They would also introduce congestion charges and parking fees to make car use more expensive, and use the revenues to improve further the situation for pedestrians and cyclists, generating a positive cycle and reducing dependence on fuel. The combination of political tactics of oil-producing countries and government subsidies in importing countries prevent a rational response to price hikes, even where due to declining supply. Similar processes prevent people from responding in rational ways to poor health and a deteriorating environment. If the wealthy can opt out of the poor conditions they create by living in less polluted environments or by moving polluting factories to low-consumption countries, then they have no incentive to reduce pollution. If they can afford to protect their own health, then they have no incentive to reduce corporate profits in order to protect the health of others. If they are profiting from local resource booms, they can ignore, according to Canadian writer Allan Casey, “the inconvenient truth of poverty amid oil wells and mines.”45 Ever-greater inequality means that there is an increasingly two-tiered system in which those who profit fail to pay for the consequences of the wealth that they enjoy, while those who struggle to survive are virtually powerless to shift attention from economic growth to the preservation of health, the environment, and natural resources. Technology as a shortcut If market forces alone are not enough to protect health and the environment, what about technology, which has achieved amazing results over the past few decades and particularly the past few years? Mainstream economists and their followers claim that it is possible to have it all: that technology will save the environment without people having to change their lifestyles. To some, this thought is appealing. If the river floods, dam it. If fresh water becomes a growing problem as glaciers disappear, desalinate salt water, which is in abundant supply. If cars Capital expenditure refers to money spent on items used repeatedly in providing goods or services such as building a hospital or roads, or purchasing equipment. The contrast is with current expenditures, which are for quickly used items such as drugs, stationery, etc.

xii

MYTH#11: COUNTRIES SHOULD FIRST GET RICH

264

pollute, run them on biofuel. Call me a Ludditexiii if you will, but it seems that each technological solution brings new problems in its wake. It is a bit like the patient who needs drugs to deal with the side effects of her other medications. Dams provide electricity, water, and some measure of flood control. They also displace millions of people and completely distort the environment. The water collected in reservoirs, which is often full of plants from the flooding of the pre-existing area, is a serious source of gases that contribute to climate change.46 Desalinating salt water is costly, in terms of both money and the fuel required. Biofuel can be a net loss, given the amount of conventional fuel that is needed to grow, harvest, and transport the vegetable components of which it is made (chemical fertilizers are petroleum-based, and farmers these days tend to use tractors rather than oxen). Growing of corn and other components of biofuel also takes land away from food crops for people, thereby exacerbating rising food prices and world hunger. Cars were envisioned as a wonderful technology to free people from the horse and buggy and to allow residents to escape polluted, congested cities; television was meant to expand people’s horizons and provide them with wonderful sources of information. There was once a belief that nuclear weaponry would make the world safer, as nobody would dare to start a war given the potentially disastrous global consequences. Human arrogance can lead us into dangerous territory, suggesting that people can overpower nature or rewire the world to suit their needs. The tsunami that devastated several Asian countries and part of Somalia in 2004, hurricane Katrina in the American city of New Orleans in 2005, the tsunami in Japan in 2011, and other extreme weather events are reminders of how powerless humankind remains in many circumstances, no matter how advanced its technology. Technology can make people’s lives better in many ways, but it cannot rewrite the fundamental rules of life, including that non-renewable resources are limited and that pollution has deadly consequences. 

The term ‘Luddite’ originally referred to British workers in the early 1800s who destroyed labour-saving machinery in protest of its introduction, knowing their livelihoods were threatened. More broadly, it refers to anyone who is opposed to change, especially technological change. The term is commonly used to put down those who do not believe that technology can provide miraculous solutions to the woes that, often, technology itself has caused.

xiii

265

BEYOND APOLOGIES

Towards a Better Way: Prioritizing Health and the Environment “Medical education does not exist to provide students with a way of making a living, but to ensure the health of the community.” – Rudolf Virchow, one of the founders of social medicine

* * * Healthier people are better able to take care of themselves and their families; they lead better lives. The planet sustains humanity; a healthier environment means healthier people. When wellbeing is the priority, it is obvious that health and the environment are more important than money. Regulations imposed and money spent to preserve and improve health and the environment is a net benefit and an investment, not a cost. Money is of very little use to someone if it obtained at the price of that person’s health. Economic and health policies would look very different if people felt that it is illness, not health, which is unaffordable. It is time to reject any definition of prosperity that posits unhealthy people living on a sick planet, even if it also posits an abundance of material goods mostly accumulating in the hands of a few. The need for more and wiser government investments It is possible to overcome the opposition of a tremendously rich and powerful corporation. Successes in tobacco control illustrate the possibilities. The success of a decades-long campaign to ban Nestlé’s marketing of infant breast milk formula is another example.xiv But corporations are by no means the only culprits in the poor state of public health and the environment. In too many countries, governments focus on subsidizing industry and giant corporations and fail to invest in the basic needs of their citizens. They ignore the fact that the social determinants of health include housing quality, education level, and (to some extent) income. When they do fund health, governments tend to focus on big hospitals in cities rather than on easily accessible primary health care centres throughout the country. When the focus is on treatment, prevention is ignored. If activists succeed at convincing governments to prioritize health instead of economic growth, then more government funding will be available for appropriate and accessible health care services, particularly at the primary care level, as

xiv As one of the main people involved in the original Nestlé campaign points out, the Swiss company is still involved in causing disease and death – but this time through its promotion of unhealthy foods. See Mike Muller, “Nestlé Baby Milk Scandal Has Grown up but Not Gone Away,” The Guardian, 13 February 2013.

MYTH#11: COUNTRIES SHOULD FIRST GET RICH

266

well as for a range of measures meant to increase the population’s health overall. Health is of great value to people; people bankrupt themselves spending large amounts of money to treat disease. Governments could thus improve people’s financial status as well as their health by reducing their need to make personal expenditures on health care; prevention efforts would also save governments money in the medium and long term. For example, it is far cheaper to supplement the diets of pregnant women than to take care of premature infants. As Ryan Meili explains in his 2012 book A Health Society, democracy itself could be revitalized by making health outcomes the underpinning of all government policy.47 Nor should concern about economics serve as an excuse for further deterioration of the environment. Any short-term gains made by those polluting the environment are more than offset by long-term costs for everyone. A focus on wellbeing would also help activists to convince governments to make bigger investments in education, with an emphasis on primary education for the most disadvantaged groups. Educational levels are related to a range of health issues, with not only the more prosperous but also the better educated segments of the population tending to do better in a number of ways. Women with less education are less likely to use preventive services and are more likely to have poor health status.48 A review of data from twenty-two low-consumption countries found that women with higher education levels are more likely to get their children vaccinated.49 Investing in education, especially for women, is likely to help improve family health and may result in fewer births. Educated societies are healthy societies. Comprehensive health policy – which in turn needs to be part of a broader approach that makes health a key component of all policies – should address prevention as well as treatment and should treat health as a basic right for all rather than as a commodity to be purchased by the few. Viewed holistically, health is not just about providing treatment for disease; it is also about facilitating healthy lifestyles through the built environment and through other policies that enable people to have decent housing, safe jobs, sufficient economic support to be able to afford the basics, and access to healthy foods and pleasant and safe environments for physical activity. The conditions that are necessary for people to stay healthy in the first place should be put in place: better jobs, income supports, controls on pollution, and improved infrastructure and services that are used by the poor. Activists need to support policies that restrict the affordability, attractiveness, and availability of health-harming substances such as cars, fuel, TV, tobacco, sugar-sweetened beverages and other calorie-dense, low-nutrient foods, and

267

BEYOND APOLOGIES

excessive alcohol.xv Activists must address the dumping of hazardous substances. Where governments fail to monitor and publicize pollutant levels, groups need to push them to do so, and to take effective action to reduce them. * * * Universally accessible design: can we afford not to have it? Designing buildings and transport so that they are accessible to everyone – including the blind, deaf, those in wheelchairs, those on crutches, the elderly, and all those with some sort of sensory or physical limitation – is often seen as an unaffordable cost. Designing for those living with disabilities is vastly cheaper (sometimes no additional expense at all) than retrofitting buildings and transport to accommodate them.50 Where retrofitting is needed, the costs need to be balanced against the costs, both economic and opportunity, of denying those with disabilities the chance to be fully participating members of society. More than one in seven people worldwide have some sort of disability. Poverty increases the risk of disability, and disability leads to poverty when job opportunities are inaccessible.51 The question is about much more than cost-benefit analysis. As Adolf Ratzka, Founder and Director of the Institute on Independent Living in Sweden comments, “Although I am an economist by training, I have difficulties in using economic arguments when it comes to such basic human rights as freedom of movement and the right to participate in society on equal terms. Human and civil rights cannot be expressed in dollars and cents. If our countries can afford to invest billions in the most sophisticated weapons to kill and disable other human beings, then our governments surely have enough money to invest in a barrier free society, a more democratic and human society for all.”52 * * * Government investment should also support a return to traditional farming methods. Governments need to put and an end to highly profitable, highly polluting Concentrated Animal Feeding Operations (CAFOs). CAFOs are morally abhorrent in the way that they treat the animals, but they also impose an enormous cost in terms of releasing climate change-inducing methane into the atmosphere and tremendous amounts of contaminated fecal waste into the groundwater. Chemical-based industrial agriculture also contributes to pollution, leaking petroleum-based fertilizers as well as dangerous insecticides and other chemicals into the world’s waterways. Sadly, and as a direct result of policy rather than pracPolicy measures include higher taxes, better labelling, and bans on advertising, sponsorship, and promotion, among other measures. Ad bans do not cost much to implement, and higher taxes mean higher government revenues as well as a shift in expenditures away from harmful products. But even measures that would cost the government money to implement should be viewed as an investment, not an expense or loss, if they can improve health and the physical environment. xv

MYTH#11: COUNTRIES SHOULD FIRST GET RICH

268

ticality, junk food in the United States has become cheaper than healthy food.xvi Agricultural subsidies in the United States favour crops such as corn and soybeans that are key ingredients in fast food, soft drinks, and animal feed. Fresh fruits and vegetables for direct consumption receive no such subsidies.53 Nor is information about healthy diets easy to come by. In some poor neighbourhoods, food choices are even worse: fast food outlets completely dominate the food scene and fresh produce is a rarity.54 As Barbara Kingsolver points out, “In our daily fare, even in school lunches, we broadly justify consumption of tallow-fried animal pulp on the grounds that it’s cheaper than whole grains, fresh vegetables, hormone-free dairy, and such.”55 There is something bizarre about a country as wealthy as the United States cutting the budget for school-based food programs, debating if ketchup is a vegetable, and feeling that it is acceptable to feed substandard food to children.xvii If governments took a longer-term view of the costs and benefits of the policies that they were enacting, if they prioritized health and the environment instead of economic growth, then the fallacies of mainstream economics would become clear. It is a sure indication that an economic system is ‘sick’ when it fails to give priority to health or to the ability to sustain life on the planet. An all-of-government approach One of the reasons that it has been so difficult to make health a priority is that governments are not a single, monolithic unit, any more than the poor are a homogeneous group. Different sectors of the government commonly work in direct opposition to each other, and the department or ministry that is responsible for health is typically far weaker than are the agencies that oversee finance, industry, and trade. Because human health is not a government-wide priority – while ‘economic health’ usually is – one government agency’s policies and programs may essentially create or foster the very health problems that other agencies are then expected to address. The Ministry of Industry, for example, encourages polluting industries, and the vastly weaker Ministries of Health and Environment become responsible for the resulting problems. The Ministries of Finance and This is true elsewhere as well. In Nepal the cheapest snack is not a piece of fresh fruit but rather packaged, broken noodles with artificial flavourings. In Bangladesh, tobacco can be purchased for less money than any food item. xvii When I volunteered at the Boston Food Bank, which collects food that cannot be sold from grocery stores and distributes it to the poor via social workers, I received training to check cans to see whether the food inside was safe to eat. I was told to accept bags of sugar even if torn open as long as no contamination was visible, because sugar was in such high demand. But we had to throw away all dog food, even if it arrived in good condition from the donating store, because by law the animal shelters could not accept it. xvi

269

BEYOND APOLOGIES

Agriculture may wish to support tobacco production because they see it as an economic benefit for farmers in terms of income and for the government in terms of tax revenues; when people become ill from using tobacco, the problem is shunted to the Ministry of Health. Overcoming this economics versus wellbeing dichotomy will require that policy makers take a holistic approach to their investments, so that polluting indu stries, a frenzy of road building, and encouraging industry at the expense of the population will no longer seem sensible or acceptable. Government departments must work together to promote wellbeing, rather than each focusing on an issue that, on its own, is too narrow to guarantee genuine prosperity. The World Health Organization (WHO) recognizes that “Economic sectors such as transport, agriculture, and housing have profound impacts on health. For instance, transport is a major factor in traffic injuries, air pollution, and noise. ‘Healthy transport policies’ can help reduce these risks, as well as promoting walking and cycling.”56 It has developed a toolxviii to address this issue: Health impact assessment (HIA) is a set of methods and tools designed to incorporate a health dimension in all public policy. By means of HIA, a policy, programme or plan may be evaluated for its potential effects on health. … For it to be effective, HIA should involve all relevant stakeholders, including the affected population, and participants should be willing to question the value of programmes that are shown to have a negative impact on public health.57

Economic decisions have health consequences, which in turn have economic consequences. Economic decision-making cannot continue without involving those whose obligation it is to improve health. It is time to promote whole-ofgovernment decision-making that acknowledges the inter-relatedness of transport, industry, trade, agriculture, health, and the environment. Choosing the environment and employment Recognizing that jobs are important does not mean that people should always be ready to sacrifice the environment to create more jobs. To the accusation that one cares more about the environment than about the suffering unemployed, the correct response is not to back down, but rather to reply, “Actually, I care about xviii Public input is vital to environment and health impact assessments; they cannot be safely left to private companies. When I worked as a temporary secretary, I typed an environmental assessment report written by an engineering consulting firm for the American military. The report discussed whether a planned bomb test in the ocean would affect local marine life. The response of the highly-trained engineers: fish are smart enough to swim away.

MYTH#11: COUNTRIES SHOULD FIRST GET RICH

270

both.” Good jobs are jobs that are healthy for the people doing them and for the environment. People do not need to go along with the assumption that it is necessary to make a choice between jobs and economic prosperity on the one hand and human and environmental wellbeing on the other. That type of reductionist thinking has gotten us into the current mess; it will not get us out. There are a number of ways to make existing jobs healthier. One is to improve and enforce workplace safety. Policies that mandate a shorter workweek (thirty-six or forty hours/week) would allow more people to be employed, with all people working fewer hours and thus having more time to pursue other activities that contribute to their and their families’ wellbeing. Nor would such a shift cause any reduction in productivity; in fact, it would likely mean a gain. Workers are less productive and more accident-prone when they are tired, as happens if they regularly work more than forty hours a week. The shorter workweek would thus benefit not only employees, but employers as well.58 Government policies should not favour large businesses over smaller ones, nor should they subsidize wealthy corporations to create substandard jobs. The current practice of subsidising employers through tax benefits and then having to provide food stamps and other benefits for its workers because the salaries they pay are too low to live on, is in fact a double subsidy to the corporation at the expense of the employees. McDonalds has created a website to explain to its fulltime workers how they can get by on the minimum wage that the company pays, by holding a second job and spending no money at all on food, clothing, or heating.59 In the meantime, Don Thompson, the company’s new CEO, receives a pay package of almost $14 million. The average McDonalds employee would have to work one million hours to earn as much as Mr. Thompson.60 The jobs created by the opening of a fast food restaurant or a big box store replace jobs that already existed in local shops, many of which go out of business when the behemoth comes to town. The question is not whether a policy will create jobs, but whether it will create more and better jobs than it replaces, or whether a better alternative, in terms of job quality and health and environmental effects, already exists. Governments can support local, intensive industry and repair. In some countries, this includes making traditional fishing nets, baskets, and other products from natural materials. In reality, the exact opposite often occurs. In 2002, the Government of Bangladesh closed Adamjee Jute Mill in response to the World Bank’s complaints about corrupt management at the firm and its insistence that the company be closed. The mill, which had been operating for more than fifty years, was the largest jute mill in the country. The jute it processed provided biodegradable local materials and generated employment for about 30,000 people.61 A recent article suggests that the mill will reopen, with ‘modern machinery’ and jobs for

271

BEYOND APOLOGIES

5,720 people.62 Surely less draconian measures could have solved the corruption problem and saved employment. It is too late for Adamjee Jute Mill; there is still time to save other local, non-polluting industries. How does one have both employment and a healthy environment? Policies that discourage employment by encouraging automation should be repealed, except in cases where such policies protect people from really awful jobs. Since payroll taxes and worker benefit schemes – including pension funds, health benefits, and vacation and sickness leave – can make it more expensive to hire workers than to replace them with machines, many companies opt for automation, particularly when they receive tax breaks for capital investments. What if those investments were subjected to tax rates that were high enough to make it less costly to hire people than to replace them with machines? This is particularly important in countries where unemployment rates are high. A range of policies could be developed and enacted to reward employers for hiring and to punish them for replacing people with machines. Any benefits to industry should, of course, only be proffered when the businesses pay at least a minimum wage; it makes no sense to subsidize companies to underpay their workers. The environmental impact of the move to automation is direct. Machines require fuel to run, as well as having environmental costs in their creation and disposal. (People also require fuel to operate, but that is true whether they are employed or not.) Labour-intensive activities and techniques, on the other hand, typically replace fossil fuel with human input, generate more employment, and require less waste disposal, thus benefiting the environment. When the goal is to maximise employment rather than production, it is possible to choose both jobs and a healthy environment. It would be interesting to know what the effect might be on a national economy of promoting economic policies that favour the environment and employment. Fortunately, there is already evidence from an ‘experiment’ conducted in the Netherlands between 1980 and 1983. (The work is old but the ideas are, if anything, more valid today than ever.) The experiment used computer models to compare different growth scenarios: two focusing on growth and production, and an alternative ‘conserver-economy’ strategy that focused on saving the environment and using less energy.63 Measures used in the models included the accounting of goods and services produced as well as of: environmental ‘goods’ such as energy, natural resources, and plant and animal species; the safety of the future in terms of the environment and natural resources; the distribution of scarce goods or income; working conditions; the degree of free choice in terms of whether to

MYTH#11: COUNTRIES SHOULD FIRST GET RICH

272

spend one’s time working or in other ways; and leisure time.xix Government agencies and a university calculated the results of the different scenarios. On the surface, the conserver-economy appeared less prosperous: compared to one that emphasised production, the conserver approach resulted in a lower GDP and less total income, agriculture, industry, and services. However, it did not cause a decline in employment, and it led to a significant increase in the share of income going to those doing the work. There were astonishingly large predicted decreases in various types of pollution. These are all estimates, but based on a detailed analysis of the various scenarios, vast improvements would occur through the implementation of a conserver-economy in terms of preservation of plant and animal species, emissions of various air pollutants, water pollution, solid waste, radioactive waste, burning of coal, changes to the landscape, and workers’ incomes. Health and the environment clearly are not mutually exclusive with economic wellbeing – as long as we stop using GDP as our measure of progress. For those used to living in a world of disposable products, it may be hard to imagine anything different. However, most of the world does not take consumption quite so much for granted as do Americans. In Dhaka, trash is often picked through a few times before it is collected. In many countries, the repair of various articles (electronics, shoes, bicycles) is a major source of income, as is the regeneration of ‘garbage’ into something useful. Nor will people’s standard of living necessarily decline if they switch from several pairs of plastic sandals to one pair of repaired leather ones. The ‘conserver-economy’ acknowledges this. It focuses on: preventing pollution, saving energy, using more solar power, discouraging car use through parking fees and a ban on new garages/roads, etc., reducing the use of artificial fertilizers and pesticides and inducing a shift to smaller farms, promoting high density mixed use areas, and encouraging services such as repair shops and small retail shops.xx This model provides employment and is good for the environment. The model also favours ‘short-time working’ to reduce unemployment (more people working fewer hours). Surely, a small decline in monetary income in exchange for more equality and an improved living environment is a worthwhile trade-off. As Hueting notes, “In the John Kenneth Galbraith has written extensively about this. Given that so many people complain about their hectic lives, it is possible that many would happily trade some of their goods and services for more leisure time…especially if they spent that leisure away from the TV and other reminders to maintain a non-stop materialist existence. xx These small shops repair rather than dispose of items, and they allow people to buy things close to their homes and workplaces instead of driving to big box shops surrounded by huge parking lots. xix

273

BEYOND APOLOGIES

right conditions, environmental conservation creates employment. ... In my opinion this is the most important conclusion that can be drawn from the scenario exercise.”64 Another major conclusion is that it can work. Although the model would play out differently in various settings, the main findings hold: burning less fuel and using more human effort would create more employment, more equality, and a cleaner environment. A direct approach to increasing wellbeing rather than consumption and an appropriate measuring system to evaluate progress would eliminate the incentives to make money while harming health. A wellbeing-focused approach would illustrate that the value of health goes far beyond simple dollars and cents. Such an approach would also help in demonstrating the need to incorporate health – both in terms of access to health care and of the living conditions that promote health – into declarations of/actions on human rights. Canadian environmental activist David Suzuki, for example, is working to include the right to clean air and water in Canada’s Charter of Rights and Freedoms; ninety-five countries already recognize the right to a healthy environment.65 Essential human rights should not be limited to the right to assembly, religion, and free speech. While it is true that it is not possible to have it all – employment, a healthy environment, and all the material goods we desire – it is possible to have a lot. It will be easier to make sensible decisions if the full range of options with their costs and benefits are known. It is time to stop believing that difficult choices must be made between employment and the environment, or between health and the economy. It is time to maximize health, employment, and the environment within a broader definition of prosperity. Notes Paul Ekins, ed., The Living Economy, A New Economics in the Making (London, New York: Routledge and Kegan Paul, 1986). 2 Sue Bailey, “David Suzuki Kicks Off Environmental Rights Tour in St. John’s,” The Globe and Mail, 21 September 2014. 3 World Health Organization, “Road Traffic Injuries Fact Sheet N°358,” March 2013. 4 “Global Shift Away from Cars Would Save US$100 Trillion, Eliminate 1,700 Megatons of Carbon Dioxide Pollution,” ScienceDaily, 17 September 2014. 5 John Vidal, “Pollution from Car Emissions Killing Millions in China and India,” The Guardian, 17 December 2012. http://www.guardian.co.uk/environment/2012/dec/17/pollution-car-emissions-deaths-chin a-india 6 Asthma and Allergy Foundation of America, “Asthma Facts and Figures,” http://www.aafa.org/display.cfm?id=10&sub=42#cost 1

MYTH#11: COUNTRIES SHOULD FIRST GET RICH

274

K. Matus, K.-M. Nam, N.E. Selin, L.N. Lamsal, J.M. Reilly and S. Paltsev, “Health Damages from Air Pollution in China,” Global Environmental Change, 22.1 (2012): 55-66. 8 S. Colagiuri, C.M. Lee, R. Colagiuri, D. Magliano, J.E. Shaw, P.Z. Zimmet, I.D. Caterson, “The Cost of Overweight and Obesity in Australia,” Medical Journal of Australia 192.5 (1 March 2010):260-4. 9 Centers for Disease Control and Prevention, “Overweight and Obesity,” http://www.cdc.gov/obesity/data/adult.html accessed 17 January 2015. 10 Centers for Disease Control and Prevention, “Smoking & Tobacco Use Fast Facts,” http://www.cdc.gov/tobacco/data_statistics/fact_sheets/fast_facts/index.htm#cost accessed 17 January 2015. 11 World Health Organization, “Road Traffic Injuries.” 12 “Global Shift Away from Cars.” 13 James Robertson, “The Mismatch between Health and Economics,” in Ekins, ed., The Living Economy. 14 William Neuman, “U.S. Seeks New Limits on Food Ads for Children,” The New York Times, 28 April 2011. 15 Life expectancy at birth figures for the years 2005-2010 come from United Nations Department of Economic and Social Affairs Population Division, World Population Prospects: The 2006 Revision (New York, 2007), http://www.un.org/esa/population/publications/wpp2006/WPP2006_Highlights_rev.pdf. 16 World Bank, Development Indicators 2010 (Washington: World Bank, 2010), http://data.worldbank.org/country/cuba 17 “11 countries in Latin America and the Caribbean have reduced maternal mortality, new UN data show.” Pan American Health Organization, 6 May 2014. 18 Paul Farmer, Pathologies of Power: Health, Human Rights, and the New War on the Poor (Los Angeles: University of California Press, 2005). 19 Duncan Maru and Roshan Bista, “Free-for-All Healthcare,” Nepali Times, 14-20 June 2013. 20 Laura Donnelly, Rosie Shields and Lily Waddell, “NHS Hospital Cafés 'are Helping to Fuel the Obesity Crisis’,” The Telegraph, 2 Aug. 2014. 21 Farmer, Pathologies of Power. 22 Farmer, Pathologies of Power. 23 GSK “Responsibility,” http://www.gsk.com/en-gb/responsibility/ accessed 29 September 2014. 24 “Glaxo Profits Soar as Drug Firm Charges NHS £6 for Swine Flu Vaccine that Costs £1 to Make,” Mail online, 23 July 2009. 25 Pfizer, “ Pfizer Reports First-Quarter 2010 Results: Reaffirms 2010 Financial Guidance,” http://www.pfizer.com/files/news/press_releases/2010/pfizer_1q_2010_earnings_050410.pdf 26 T.R. Frieden, P.I. Fujiwara, R.M. Washko, M.A. Hamburg, “Tuberculosis in New York City—Turning the Tide,” New England Journal of Medicine 333 (1995):229-33. 27 Frieden et al., “Tuberculosis in New York City.” 28 Andrew C. Hayward and Richard J. Coker, “Could a Tuberculosis Epidemic Occur in London as It Did in New York?” Emerging Infectious Diseases, 6.1 ( Jan-Feb 2000), http://www.cdc.gov/ncidod/eid/vol6no1/hayward.htm 7

275

BEYOND APOLOGIES

Frieden et al., “Tuberculosis in New York City.” Farmer, Pathologies of Power. 31 “Global Efforts to Promote Health Face Serious Challenges from ‘Big Business’ – UN Official,” United Nations News Centre, 10 June 2013. 32 K. Daniel, D. Efroymson, S. FitzGerald, and L. Jones, Broadening the Focus from Tobacco Control to NCD Prevention: Enabling Environments for Better Health (Dhaka: HealthBridge, 2013). Available for free download at www.healthbridge.ca 33 “Global Efforts to Promote Health.” 34 Michael Jacobson, Liquid Candy: How Soft Drinks are Harming Americans’ Health (Washington, D.C.: Center for Science in the Public Interest, 2005). 35 Tanya Trayers, “10 Teaspoons of Sugar Makes the Waistline Expand,” Journal of Epidemiology and Community Health 60 (2006):750. 36 M.B. Schulze, J.E. Manson, D.S. Ludwig, G.A. Colditz, M.J. Stampfer, W.C. Willett, F.B. Hu, “Sugar-Sweetened Beverages, Weight Gain, and Incidence of Type 2 Diabetes in Young and Middle-Aged Women,” Journal of the American Medical Association 292 (2004):927-934. 37 American Beverage Association, “Obesity,” http://www.ameribev.org/nutrition-science/obesity/ Accessed 15 August 2014. 38 American Beverage Association, “Americans for Food and Beverage Choice,” http://www.ameribev.org/blog/category/americans-for-food-and-beverage-choice/ Accessed 15 August 2014. 39 Editorial, “Soda Tax Is The Wrong Medicine,” The Courant, 8 August 2014. 40 Just one example among many: Editorial, “The Food Police Trying to Arrest Soda, Again,” The Washington Times, 21 July 2014. 41 Eric Lipton and John Broder, “Regulator Deferred to Oil Industry on Rig Safety,” The New York Times, 7 May 2010. This case is also discussed at length in Joshua Holland, The Fifteen Biggest Lies About the Economy and Everything Else the Right Doesn’t Want You to Know About Taxes, Jobs, and Corporate America (Hoboken, New Jersey: John Wiley & Sons, Inc., 2010). 42 Robert Weissman, “The (Larry) Summers of Our Discontent,” Common Dreams, 21 March 2012. 43 Even that conservative bastion, The Economist, gives food prices a role in the Arab Spring: “Let Them Eat Baklava,” The Economist, 17 March 2012. 44 Joe Cochrane, “Indonesia Struggles to End Fuel Subsidies,” The New York Times, 2 May 2013. 45 Allan Casey, “Reviving Riversdale,” The Walrus, October 2014. 46 This has been described in many places. See, for instance, Duncan Graham-Rowe, “Hydroelectric Power's Dirty Secret Revealed,” NewScientist, 24 February 2005 and “Reservoir Emissions,” International Rivers (www.internationalrivers.org). 47 Ryan Meili, A Health Society (Saskatoon: Purich, 2012). 48 H. Mead, K. Witkowski, B. Gault, and H. Hartmann, “The Influence of Income, Education, and Work Status on Women's Well Being,” Women’s Health Issues 11.3 (May-June 2001):160-72. 29 30

MYTH#11: COUNTRIES SHOULD FIRST GET RICH

276

49 S. Desai and S. Alva, “Maternal Education and Child Health: Is There a Strong Causal Relationship?” Demography 35.1 (February 1998):71-81. 50 Molly Edmonds, “How is an Aging Baby Boomer Generation Changing the Design of Homes?” How Stuff Works, http://home.howstuffworks.com/baby-boomer-design3.htm accessed 15 August 2014. 51 World Health Organization and World Bank, World Report on Disability (Geneva: World Health Organization, 2011). 52 Adolf Ratzka, “A Brief Survey of Studies on Costs and Benefits of Non-Handicapping Environments,” presentation at the International Congress on Accessibility in Rio de Janeiro, Brazil, June 1994. http://www.independentliving.org/cib/cibrio94access.html 53 Annie Corrigan, “Marion Nestle (Part 2): Food Policy, Local Food and Food Labeling,” Earth Eats, 13 July 2010. 54 See, for example, Janne Boone-Heinonen, Penny Gordon-Larsen, et al., “Fast Food Restaurants and Food Stores,” Archives of Internal Medicine Vol. 171, No. 13, 11 July 2001. http://archinte.ama-assn.org/cgi/content/short/171/13/1162 and Rudd Center for Food Policy & Obesity, Access to Healthy Foods in Low-income Neighborhoods: Opportunities for Public Policy (New Haven: Yale University, 2008). 55 Barbara Kingsolver, Animal, Vegetable, Miracle (New York: HarperCollins, 2007). 56 World Health Organization, “Health Impact Assessment (HIA),” http://www.who.int/hia/en/ 57 WHO, “Health Impact Assessment.” 58 Sara Robinson, “Bring Back the 40-hour Work Week,” Salon, 14 March 2012. 59 Annie-Rose Strasser, “McDonalds' Budget for Employees: Get a Second Job, Turn off Your Heat; How about Just Paying Them a Living Wage?” AlterNet, 17 July 2013 and Minyanville, “McDonald's Sample Budget Sheet Is Laughable, But its Implications Are Not.” NASDAQ, 27 July 2013. 60 Leslie Patton, “McDonald’s $8.25 Man and $8.75 Million CEO Shows Pay Gap,” Bloomberg News, 12 December 2012. 61 Anu Muhammad, “Closure of Adamjee Jute Mills: Ominous Sign,” Economic and Political Weekly 37.38 (21-27 September 2002): 3895-3897. 62 “Adamjee Jute Mills to Restart with Modern Machinery,” Fibre2fashion News Desk – India, 13 September 2010. 63 Roefie Hueting, “An Economic Scenario for a Conserver-Economy” in Ekins, ed., The Living Economy. 64 Hueting, “An Economic Scenario.” 65 David Suzuki Foundation, “Right to a Healthy Environment,” http://www.davidsuzuki.org/issues/health/right-to-healthy-environment/ accessed 28 September 2014.

MYTH #12: The Mass Media Provides Unbiased Economic Reporting “Inform, educate, distract” – slogan of a TV channel in Niger "The goal [of advertising] is to undermine markets by creating uninformed consumers who will make irrational choices and the business world spends huge eﬀorts on that." – Noam Chomsky1 “The engines of mass communication, in their highest state of development, assail the eyes and ears of the community on behalf of more beverages but not of more schools.” – John Kenneth Galbraith2

Promoting the Corporate Agenda



Imagine for a moment that you are the CEO of a major corporation. You have a legal obligation to give your shareholders a good return. You have a personal motivation to pay yourself a high salary. By banking most of your profits overseas, you save on taxes and thus enjoy higher profits. Perhaps it is not all about the money, because you also enjoy a pleasant sensation of power. Mixed with your enjoyment is concern about possible threats to your position and to the status and profits of your company. There is competition from similar companies. There is the possibility that government regulations will become stricter. Moreover, there is the nagging thought that governments might try, especially in times of economic hardship, to raise corporate and personal taxes and to close some of the loopholes and evasion tactics that, so far, have kept your taxes low. You are uncomfortably aware that a number of different groups are campaigning for tax reform and other policies to rein in corporate profits and power. You realize that politicians would be under a lot of pressure to pass such policies if public support were sufficiently mobilized. You thus need to ensure not only that policymakers are on your side, but also that the public does not support such policies, even though it is the public which suffers from government budget shortfalls (to which your tax avoidance contributes). What should you do? You could rely on the high levels of apathy and lethargy that exist within the public. People are busy with their own problems, including struggling to survive on the minimal wages that you pay. However, a rather worrisome momentum became evident during the Occupy movement. Such bubbles of enthusiasm and the sustained efforts of a few NGOs to increase attention on the problems of growing income inequality are cause for concern. Given the high stakes, it is better not to be too complacent. It is easy to ensure that politicians remain beholden to you and will thus pursue your agenda: campaign donations and other acts of generosity will do the trick. In the face of a determined public, it will not be enough just to pay off politicians. You also have to get the public on your side. You want to make sure that the average person believes that the concen-

MYTH#12: THE MASS MEDIA IS UNBIASED

278

tration of wealth in the hands of a few corporations and people, rather than impoverishing others, actually benefits the economy and all those who cannot pay the rent or find a job. It is no secret that the easiest way to influence public opinion is through the media. Various options are available, and, to cover all your bases, you may well choose to make use of all of them. It will cost a lot of money but, after all, you can simultaneously advertise your company, your products, and the joy of consumerism (and, if done properly, get tax breaks for doing so). There is significant overlap between promoting the message that corporations are everyone’s best friend and the message that people need to buy more of your products…and it is still a lot cheaper to use the media to get your message across than to pay taxes. Strategy to get Average Person on board #1: Use direct and indirect advertising to convince people how wonderful your company is or how unfairly it is being attacked. Advertising can be for a generic product (soft drinks), a specific company’s product (Coke), or the company itself (Coca-Cola Company). The amounts spent on advertising are significant: in the United States in 2013 alone, they amount to $42.8 billion on the Internet, $40.1 billion on broadcast TV, $34.4 billion on cable TV, $18 billion in newspapers, $16.7 billion on the radio, and $13.4 billion in magazines, for a total of more than $165 billion.3 Plenty of opportunity thus exists to avail the media to improve your corporate self-image.i Some ads specifically seek to promote a corporate image: by advertising its good corporate behaviour, a company is often able to counter complaints made against it. Catchy slogans help when regularly repeated on TV and through other media. How can one not like General Electric after repeatedly hearing its jingle: “We bring good things to living, we bring good things to life”? In the days before tobacco advertising was banned, British American Tobacco in Bangladesh regularly took out half-page, full-colour ads to advertise its ‘socially responsible’ programs, such as planting trees and telling children not to smoke.ii Walmart regularly runs TV The ads do not of course always succeed. Many women would take exception to the overtly sexist advertising that is used to promote beer, cigarettes, and other products. The sexualisation of women (and girls), the promotion of unachievable body image, and the glamorisation of violence are common in advertising of just about every product available, as Jean Kilbourne shows in her lecture “The Naked Truth.” Kilbourne’s lectures are listed here: http://www.jeankilbourne.com/lectures; some of her talks are also available on the Internet, e.g. http://www.youtube.com/watch?v=Uy8yLaoWybk ii There is extensive literature showing that tobacco industry campaigns to convince youth not to smoke are likely to have the opposite effect; that is, they make young people more interested in smoking. One useful source on this is www.ash.org.uk/current-policyissues/youth-smoking i

279

BEYOND APOLOGIES

spots to boost its corporate image in an attempt to counter some of the many complaints people have about the mammoth company. Shell, BP, and other oil companies have all used TV ads to talk about their environmental commitments. McDonalds advertises its “Ronald McDonald House Charities” which provide homes for families to stay in while their children receive medical treatment, comfortable places to relax within hospitals, a mobile clinic (which is itself a roaming ad), grants to improve access to health care, and college scholarships.4 (You can afford a lot of generosity when you make a ton of money and pay paltry salaries.) Televised news and entertainment programs, newspapers, magazines, and the Internet are all intensely commercial. Their real purpose is not to inform, educate, or entertain us, but rather to make money.iii Broadcasters and publishers make money by capturing an audience that has certain demographic qualities sought by advertisers and then selling that audience to those advertisers. Direct advertising is clearly labelled as such, with the sponsor duly noted. Indirect advertising, on the other hand, is embedded in a TV, radio or other type of program and the sponsor is not necessarily obvious. Women’s magazines, for example, print articles that promote specific beauty products; sports magazines run articles about physiqueenhancing drink powders. TV programs and movies show people consuming or using specific products or engaging in specific behaviours; some even incorporate more detailed, pro-corporate messages into their plots. In some cases, it is difficult or impossible to know who has sponsored the advertisement. Editorials can also be subtle advertisements for products or corporations, giving rise to the term ‘advertorials.’5 * * * Distraction…with a message: An episode of a popular American TV program about an overweight couple focused on their growing debt. The husband, a policeman, was concerned about his unemployed wife’s tendency to go on shopping sprees. He suggested various ways to curb their spending, including by drinking tap rather than bottled water. As he poured a glass from the tap, the water came out cloudy. Later, his wife explained that when she is upset, shopping makes her feel better, and he realized that his devotion to his wife required him to encourage her habit. The bills could wait. * * * iii The situation is slightly more complicated than this. Some media moguls use the media to influence politicians and the public, which in turn increases their profits; in this case, they may be less concerned about selling ads and more concerned about the corporate and political messages that they put forth in their programming and articles. And, of course, there are less commercial or non-commercial alternative media options.

MYTH#12: THE MASS MEDIA IS UNBIASED

280

I once heard a brief radio segment about an international gathering of heads of state during which the leader of Spain said to Hugo Chávez, “Cállate” (shut up). Someone proceeded to make a ring tone from the Spanish leader’s words and made a fortune selling the ringtone. (The program did not mention what Chávez had said to elicit that response.) I paused to reflect on what exactly could be newsworthy in that story, then realized that any excuse to put Chávez down is welcome, as is any chance to promote a company’s new product. * * * Strategy to get Average Person on board #2: Influence news reporting. It is easy to identify the ads aired during the news, and there are lots of them: in the United States, ads take up thirty percent of local TV news time.6 In addition to all the clearly identified ads, there are prepared news segments that companies give to TV stations to air. Likewise, companies pay newspapers and magazines to print articles or information. Journalists are busy and most TV stations and newspapers are understaffed, so they will happily accept pre-packaged ‘news.’ Again, these are sometimes easy to spot (a ‘news’ article about a great new product or a corporate event)…but other times they are not. In either case, they are pervasive in the United States and internationally. An article in The New York Times about such pre-packaged news quotes the sales pitch of a video news release company called TVA productions: “No TV news organization has the resources in labor, time or funds to cover every worthy story,” TVA tells its potential clients, adding “90 percent of TV newsrooms now rely on video news releases.”7 Both governments and corporations purchase time in the media under the cover of ‘news reporting’ without acknowledging their sponsorship. According to the New York Times article on the topic, Under the [second] Bush administration, the federal government has aggressively used a well-established tool of public relations: the prepackaged, ready-to-serve news report that major corporations have long distributed to TV stations to pitch everything from headache remedies to auto insurance. In all, at least 20 federal agencies, including the Defense Department and the Census Bureau, have made and distributed hundreds of television news segments in the past four years…Many were subsequently broadcast on local stations across the country without any acknowledgement of the government's role in their production.8

And why not? Local news stations are spared the expense and trouble of doing their own reporting; public relations firms make millions of dollars on the contracts; and networks collect fees from government agencies and from affiliates. Moreover, governments and corporations get their propaganda out, unfiltered, “delivered in the guise of traditional reporting.”9 So is it news or is it corporate messaging? Hard to know.

281

BEYOND APOLOGIES

Strategy to get Average Person on board #3: Use the media to spread the idea that consumption is our greatest goal, that corporations and the wealthy are our greatest friends, and that the poor and racial minorities are violent criminals. Messages telling the public that consumption means happiness are incorporated throughout the media. The occasional counter-view is lost in the sea of messages that, in John Kenneth Galbraith’s words, tell us that the “greatest source of pleasure, the highest measure of human achievement” and “the foundation of human happiness” is consumption.10 While consumption is a goal in itself for corporations, it also links to the feel-good message that corporations spread about themselves. This includes the use of movies such as Sex in the City and The Princess Diariesiv to show that there is no greater happiness than shopping. It includes TV programs like Lifestyles of the Rich and Famous (later replaced by Social and a whole host of reality TV shows) which show that there is nothing better than to be fabulously rich. The goal is to cultivate a sensation of envy for the rich that makes it less likely that people will blame the rich for their own less enviable financial position. The message is so pervasive in media that people may not even consciously notice it. It should not be surprising that Hollywood helps here, as it costs a lot of money to produce a movie. Corporations insert their advertising, both of specific brand names and of general items, into movies, as well as the overall messages about the glamour and joy of consumption. To give a few (somewhat outdated) examples, Titanic glamorized all sorts of tobacco use and suggested that it is cool to blow smoke into other people’s faces, Sleepless in Seattle featured a huge Coca-Cola billboard, and E.T. the Extra-Terrestrial made its pitch for Reese’s Pieces. Movies that are more recent promote, among other things, bottled water, SUVs, and Apple computers. The 40-Year-Old Virgin equated cycling with childhood: the hero only learned to drive ‘a manly vehicle’ (e.g. a car) after he finally had achieved adulthood by losing his virginity. Criminals on TV and in movies are not exclusively poor, Hispanic, or black – but

iv This was adapted from a book I would not normally read, but I happened to, before passing on to a teenage girl in Sri Lanka. What particularly horriﬁed me was not just the book’s glamorization of extreme wealth but also the way that it portrayed the head of the imaginary state of Genovia: despite being absurdly wealthy, he is able to defend his wealth because he “does so much for the population.” The thoughtful reader might argue that the presence of billionaires in actual countries does not preclude extreme poverty, but then, the target of the book is not thoughtful readers.

MYTH#12: THE MASS MEDIA IS UNBIASED

282

they most often are. Noam Chomsky refers to the long-term eﬀort to destroy the institutional basis for social support systems, to eliminate programs such as Social Security that are based on the conception that people have to have some concern for one another. The idea that we should feel sympathy and solidarity, that we should care whether the disabled widow across town is able to eat, has to be driven from our minds. That is a large part of the domestic agenda, quite apart from just shifting wealth and power toward ever-narrower sectors. And the way to achieve that – since people aren’t going to accept it otherwise – is to make people afraid.11

Certainly if one goal of TV programming is to make people afraid, and speciﬁcally to make them afraid of those on the receiving end of various forms of government support, then any number of programs eﬀectively do just that. Strategy to get Average Person on board #4: Buy media outlets (or become the subsidiary of a company that owns one). The fewer the number of corporations that own the media, the less risk there is of alternative viewpoints being aired. According to the Media Reform Information Center, In 1983, 50 corporations controlled the vast majority of all news media in the U.S. At the time, Ben Bagdikian was called ‘alarmist’ for pointing this out in his book, The Media Monopoly. … In 2004, Bagdikian's revised and expanded book, The New Media Monopoly, shows that only 5 huge corporations – Time Warner, Disney, Murdoch's News Corporation, Bertelsmann of Germany, and Viacom (formerly CBS) – now control most of the media industry in the U.S. General Electric's NBC is a close sixth.12

Just one example of the result: the Trans-Pacific Partnership (TPP) is a trade treaty that is being widely contested by NGOs because it would limit the ability of signatory governments to protect public health, local industry, and the environment; the TV news virtually ignores the treaty.13 The corporate owners of TV channels could earn a lot of money if the TPP is approved, since the trade treaty would expand the rights of corporations and reduce those of governments seeking to regulate or control them. With just a few corporations owning most of the media, a media blackout is easy to achieve. The situation may be better in other countries. Where government-owned media are promoting the propaganda, it is more easily recognizable. There is, for example, nothing subtle in Vietnam about the loudspeakers telling people at seven a.m. what they are supposed to do, if not to think. In many countries, certain newspapers have clear ties to different political parties and/or political viewpoints; competing political parties may also lead to a broader spectrum of views. Nevertheless, American influence on news is universal, given the tendency of news houses to pick up articles published in the United States. It becomes more and

283

BEYOND APOLOGIES

more difficult to find progressive viewpoints in mainstream media anywhere in the world. Media as a distraction Now wait just a moment. Even if you, the corporate executive eager to boost your corporate image and to avoid taxes and regulations, are successful at using the media, can the Average Person not fight back? She still maintains the power of independent thought. She can still say, “Just because Shell tells me it cares deeply about the environment doesn’t mean that I have to believe it. And that business about shopping? It’s a stressful activity that just increases my credit card debt. I’d rather go for a bike ride with my friends! And if I have to pay thirty-five percent of my income in taxes, why on earth shouldn’t corporations and the wealthy pay at least as much?” Fortunately, the media is your friend in another way. Most media does not encourage thinking. On the contrary, it encourages people to sit back and let someone else think for them. Some TV programming is of course thoughtful and opens up questions; much more of it discourages questioning, either through extreme silliness or by providing viewers with the answers. TV news stories tend to make clear who the ‘good’ and ‘bad’ guys are and inform us how we should view the issues. While people appreciate the ‘free’ entertainment that TV offers, such passive recreation comes at a high price: it discourages people from being creative thinkers and from solving problems.v The media thus represents a powerful tool through which corporations can engage in mass brainwashing. Watching television and using the Internet are also, for many, highly distracting pursuits that take hours in the day away from the possibility of more mindful pursuits, such as reading a book about the economics of wellbeing, pursuing information from alternative media, or organizing a group of neighbours to discuss how to respond to local budget cuts. According to Noam Chomsky, advertising is a form of “off-job control” which “means turning people into robots in every part of their lives by inducing a ‘philosophy of futility,’ focusing people on ‘the superficial things of life, v A moment of thought reveals the oddity of people spending money to purchase a TV set in order to allow advertisers to broadcast messages right into their homes. Big Brother does not need to force his way in, in Orwellian fashion; the modern family invites him. In contrast to Orwell’s nightmarish view, Big Brother is not Government but the Corporation. For more on this, see Neil Postman, Amusing Ourselves to Death (New York: Penguin Books, 1985). As new forms of media emerge, advertisers adapt, for instance with the constant stream of ads and mindless distractions on the Internet and smart phones that make it clear what we should (and what we should not) value. Fashion, yes; obsession with the stars, yes; helping the poor...not so much.

MYTH#12: THE MASS MEDIA IS UNBIASED

284

like fashionable consumption.’” This allows “the people who are supposed to run the show [to] do so without any interference from the mass of the population, who have no business in the public arena.”14 Hint: Look for corporate influence in the media. In addition to direct ads, what messages do they promote in terms of how we should look at the wealthy and the poor, the role of corporations in our society, and the pleasures of consumerism versus non-materialistic pursuits? * * * Utter nonsense masquerading as news is common, palatable, and even enjoyable. I have seen newspapers in Mumbai (Bombay) that only write about Bollywood stars. The papers in Bangkok are better, but often the news section is slim compared to the thick sections about business, arts, entertainment, and gossip. When I go on the Internet, I find informative articles about the best- and worstdressed Hollywood actresses at a recent event. Television coverage of the British royal family is extensive while coverage of serious issues is often absent. Yes, there is good stuff among the rubbish, but the overwhelming majority is nonsense or mainstream propaganda…and advertising supplies the corporate message even in the better TV programming. Is it news or is it thought control? In addition to producing rubbish and delivering corporate (and sometimes government) propaganda masquerading as news, the media also regularly ‘educates’ the public about political and economic issues. That ‘education’ typically comes with a heavy bias towards the conservative, mainstream economic view. Fairness and Accuracy in Reporting (FAIR) regularly reports on conservative biases in American media, including in major newspapers such as The New York Times, the Washington Post, and the LA Times. For example, according to FAIR, massive protests against World Bank and IMF policies led to five op-eds in The New York Times, all critical of the protests.15 Both The New York Times and the Washington Post mainly cheered on the Iraq War and downplayed any information suggesting it was unjustified, placing their pro-war pieces on the front page and burying deep inside the paper suggestions that evidence of weapons of mass destruction did not exist.16 As the editors of The New York Times later admitted, ...we have found a number of instances of coverage that was not as rigorous as it should have been. In some cases, information that was controversial then, and seems questionable now, was insufficiently qualified or allowed to stand unchallenged. Looking back, we wish we had been more aggressive in re-examining the claims as new evidence emerged – or failed to emerge.17

285

BEYOND APOLOGIES

While the apology is appreciated, it should also serve as a useful reminder that even the best of the media often fail us in terms of providing the information that is needed to decipher the world and to make informed decisions. The media decides who it labels as a ‘terrorist’ or ‘rebel’ instead of as an outspoken opponent of a corrupt regime. Decades ago, the labelling of a protester as a terrorist was less common, but still prevalent enough for the former president of Argentina, General Jorge R. Videlia, to define terrorists thus: “a terrorist is not just someone with a gun or a bomb, but also someone who spreads ideas that are contrary to Western and Christian civilizations.”18 Post 9/11, the convenient label ‘terrorist’ can now be applied even more readily to anyone fighting for land reform or against mining or oil drilling on their native land or for more equitable practices or for workers’ rights or against privatization of government services or...just about anything else that questions mainstream economics and politics. When one hears and sees it enough in the mainstream media, it becomes difficult to remember to question it. Corporation: good guy. Indigenous man resisting corporation: bad guy. The media also distorts issues, not only in terms of what it says but also in what it ignores. An American newspaper article about dogs returning from the war in Iraq with post-traumatic stress disorder was interesting but, as with the common articles about returning soldiers being reunited with their families, did not address why America went to war in Iraq or the effect of the war on Iraqis. In general, articles about war focus on battles, not on causes or effects. An article about a gunman firing inside a school focuses on how easily the shooter entered the school, not on the importance of making it more difficult to obtain a weapon. Bradley (now Chelsea) Manning leaked government ‘secrets’ about the wars in Iraq and Afghanistan and about the way that corporations mistreat the world’s poor. The media has focused on whether she will be found guilty, not on the content of the leaks. Stories about how the North Atlantic Treaty Organization (NATO) is conducting a months-long bombing campaign of major cities to ‘liberate’ a country tend not to mention what life must be like for the residents of those cities. An article about how to attract more foreign direct investment into a country assumes that it is a good thing, and ignores the fact that the resulting mine or oil well will displace thousands and likely create very few local jobs. A story about GDP growth assumes that GDP tells us something useful. The Internet can be better…or not. As with the rest of media, the Internet is subject to corporate influence. Again, it takes a bit of work to find the genuinely worthwhile, and too often, it is buried under piles of corporate messages and mindless diversion. Coverage of the contribution of fast food to obesity and the potential of

MYTH#12: THE MASS MEDIA IS UNBIASED

286

holding companies liable is peppered with such phrases as “undermine personal responsibility,” “jeopardize consumer choice,” and “will turn all Americans into victims incapable of bearing responsibility for their personal choices.”19 An entire website is devoted to debunking the “highly questionable” reports put out by one nutrition advocacy group, the Center for Science in the Public Interest (CSPI).20 The stories on the site have colourful titles such as “CSPI Nuts Prefer Kids Fast than Eat Fast Food” and “CSPI Applauds Taking Toys from Kids.” The website also claims that CSPI “routinely uses scare tactics justified by ‘junk science’ and media theatrics as part of their ceaseless campaign for government regulation of your personal food choices.”vi Who might be funding these attacks on CSPI? Fast food companies can certainly afford to promote their image and attack their attackers; McDonalds alone posted $4.3 billion in profits on sales of $23.5 billion in 2008.21 According to most media outlets, it would be a crime to interfere with ‘consumer choice’ or with such sizeable corporate profits. The image of the strong independent consumer victimized by the nanny state (with the innocent corporation sheltered in the background) is common, and, thanks to pervasive corporate messages, one need not be a paid corporate mouthpiece to repeat those messages. On the other hand, information not funded by corporations is probably easier to access on the Internet than via other media. It often involves a bit of digging, as the first sites that appear are likely to have paid money in order to move up on a search engine. It also involves sorting through the assorted crazies. Nevertheless, it is plentiful and some of it is highly valuable. Corporatocracy’s biggest ally The role of TV (not simply advertising but programming itself) is, in the words of David Korten, “not simply to sell products and strengthen the consumer culture...but to create a political culture that equates the corporate interest with the human interest in the public mind.”22 There is significant overlap between the corporate interest and the interests of the wealthy. The media succeeds in bridging the gap between those elite interests and everyone else’s. Rather than resent the wealthy, most people wish to emulate them. Outrageous wealth no longer seems so outrageous when we regularly read about billionaires and the places they frequent. One can find respectable media coverage of heroes: people working to improve the conditions of vulnerable populations or to preserve an endangered species or prevent destruction of a special habitat. (Media coverage, especially on The term ‘choice’ has particular resonance with those who have worked on tobacco control. The tobacco companies love talking about consumer choice, as if government regulations to inform consumers about harmful products, and policies to counter or reduce billions of dollars of advertising, would somehow inhibit people’s ability to decide what they want. vi

287

BEYOND APOLOGIES

TV, of those fighting corporations is probably much harder to find.) But such praise hardly holds a candle to the outpourings of attention and adulation poured on the rich, simply for being rich. It is not difficult to see which lifestyle we are supposed to imitate and whose interests we should seek to defend. * * * One dull day I watched a reality show in which two people with the same name switch places. One is a Texan working for his mother’s lawn care business; the other is a famous Hollywood actor. They each find the other’s lifestyle extremely strenuous: the actor is exhausted after a day of mowing lawns, while the landscaper is worn out from the intense gym workout and numerous meetings. The actor spends his first couple of nights tossing and turning on an uncomfortable bed in a cramped and unattractive home, while the landscaper is awed by the luxury of the actor’s massive and well-equipped home. At one point, the landscaper tells the camera, in great earnestness, “He works hard; he deserves all this!” while the actor shows his generosity by giving the struggling Texans, who are in danger of losing their business because they lack updated equipment, three new riding mowers. The moral of this episode appears to be that the actor deserves all of his wealth and luxury for working so hard at looking and sounding good, while the landscaper, who works equally hard, deserves his poverty and should thank his lucky stars the actor made a charitable gesture in his direction. * * * It does work. Whatever her actual financial status, the average American is surprisingly eager to defend the interests of the wealthy. When twenty percent of Americans believe they will become millionaires in the next ten years (even though only about five percent currently are), they do not push for higher taxes on the rich.23 When Americans believe that giant corporations deliver wonderful products, are a great source of jobs, and are essential to their nation, they won’t be too concerned about corporate tax evasion (if they are even aware that it happens). When Americans believe that government regulations stifle personal freedom and prevent corporations from making the profits that will enrich citizens, they will not push for more regulations. Unfortunately, what is true for America is true, to a greater or lesser degree, in many other countries as well. But the media sometimes attacks corporations! With all the corporate influence, how then does it happen that the conventional press does sometimes publish a story attacking a corporation? I often wonder why there is any liberal reporting in the mainstream media at all. There are at least a couple of reasons for its presence: liberal reporting can create controversy which allows for more conservative responses; it gives companies an incentive to increase their advertising (to fend off negative reporting); and it maintains the

MYTH#12: THE MASS MEDIA IS UNBIASED

288

important façade of a free press, which is needed to reassure citizens of the world that they do in fact live in democracies, whatever the case may actually be. When searching for information about the spectacular British Petroleum oil spill in April 2010, I found countless articles that referred to BP ‘accidentally’ spilling 2.5 million gallons of oil a day into the Gulf of Mexico. Many articles discussed potential ways to contain the spill, which was likely to cost billions of dollars. Harder to find in the media was any discussion of the cause of the spill, and more specifically, the extent of BP’s liability and how extensively the company had lobbied to avoid the sorts of safety procedures that could have prevented the spill in the first place. The New York Times did publish a more meaningful article pointing out BP’s liability.24 In 2014, BP took out several full-page ads in the Times to argue that the settlement to which it agreed was unfair. Those two events (the anti-BP article and the full-page ads) may not be connected, but I know that in Bangladesh, newspapers sometimes deliberately run articles attacking a major company either to elicit higher advertising spending or to punish the company for withdrawing its ads. Some exceptions aside, mainstream media is owned by major corporations and spends most of its energy pursuing the corporate agenda, directly or indirectly. It is up to those who wish to promote wellbeing to find ways to counter it. 

Towards a Better Way: Controls on Advertising, Support for Independent Media, and Preserving the Internet “Citizens of the democratic societies should undertake a course of intellectual self defense to protect themselves from manipulation and control, and to lay the basis for meaningful democracy.” – Noam Chomsky25

* * * People’s assumptions and beliefs about economics are too often shaped by an uncritical acceptance of the myths that the media constantly feeds them. What is perhaps most sinister in all of this is that most people are unaware of the extent to which they are influenced by the implicit and explicit messages that the media promotes. As stated on advertising analyst Jean Kilbourne’s website, “Advertising is an over $200 billion a year industry. We are each exposed to over 3000 ads a day. Yet, remarkably, most of us believe we are not influenced by advertising.”26 Alas, even the few countries that have tried to escape from media’s influence are relenting; Bhutan introduced TV in 1999 and saw a rapid deterioration of its culture.27 Myanmar has already opened its doors to the corporate world.28 Only Cuba may still have virtually no advertising.29 Even if people stopped watching

289

BEYOND APOLOGIES

TV, the Internet would fill the gap. At an individual level, it is at least theoretically possible to be aware of the pervasiveness of media and alert to the messages that the media is spreading. In fact, the easiest way to avoid being influenced is to limit one’s exposure to conventional media. Refuse to watch TV and try to avoid all the junk on the Internet. Be alert when reading the newspaper and balance the reporting with articles from independent media. Learn from experts on advertising like Jean Kilbourne; turn to Fairness and Accuracy in Reporting (FAIR) or Media Matters for information about the deceptiveness of conventional media and for alternative views. Listen to public or, if available, independent, community radio. Read books that go into issues in depth and that provide context and a logical development of arguments. Talk to others, especially to those who are not benefitting from the current economic regime. However, it is unlikely that more than a small percentage of the population of any country will actively resist corporate media messaging. As long as people remain captivated by conventional media, it will be difficult to convince them to work for a world that is oriented more towards wellbeing and less towards consumption. Corporate control of the media is an enormous issue that will not easily be resolved, but there are various places to start. Given the enormous amount of media to which people are exposed, even small victories can have significant results and can lead to bigger ones. As people learn to resist corporate media in small ways, they can also learn to reduce its influence on their lives. Campaigns for advertising restrictions should highlight the myriad ways that advertising infiltrates people’s day-to-day lives. Activists could call for limits on the percentage of TV programming time that can show ads, for outright bans on advertising during children’s TV programs, for restrictions on the amount of advertising allowed in newspapers, and for prohibitions against advertising for specific harmful products. There is no reason to accept a passive role or to being subjected to whatever advertising companies dream up. Even if the laws of a country are interpreted to defend the ‘free speech’ of corporations, no individual has an unlimited right to free speech. Bans are difficult to pass and implement, but they have succeeded in drastically curtailing the advertising of tobacco and infant formula. The easiest place to start is with advertising that clearly targets children. Research has found that children under the age of eight readily accept whatever they see in ads, consider the messages in ads accurate, truthful, and unbiased, and that a single exposure to an ad can lead a child to desire a product.30 Sweden has banned all ads on children’s prime time TV since 1991. The European Union is looking at the possibility of implementing a Europe-wide ban on or regulation of ads targeting children.31 Another approach is to allow advertising but to force those sponsoring the ads to pay as well for the running of an equal amount of

MYTH#12: THE MASS MEDIA IS UNBIASED

290

counter ads produced by non-industry groups. A large and diverse network to campaign for advertising restrictions could bring together like-minded people with a wide background of interests and areas of expertise. Advertising is offensive not only because of the corporate messages that it promotes but because of its sexual depiction of women and pre-adolescents. Ms. Magazine tried to implement a policy that only allowed advertising that was not insulting or demeaning to women, and then realized that such a policy was impossible to implement. Instead, it banned ads altogether.32 It may thus be possible to recruit women’s rights activists to join a coalition to put limits on commercial speech. Activists can look at supporting or expanding existing independent media. Within a large network, there are usually people with ideas, creativity, and time who just need some support, encouragement, and guidance. Possibilities include starting or contributing to a local, independent newspaper; using social media; and starting or using community radio to spread ideas and information about the promotion of wellbeing and to question the goal of economic growth. Groups that are lobbying to keep access to the Internet open provide another approach to addressing media. The international, open exchange of information threatens many interests, which in turn are keen to limit that access. Corporations would like to control the Internet so that commercial content is listed well before non-commercial, making it more difficult for people to gain access to information that is not put out by corporations. The Pew Research Internet Project looked at various potential threats to full ongoing public use of the Internet. The threats they identified include government control (through blocking, filtering, and other means), the use of the Internet for government or corporate surveillance of citizens, commercial pressures that limit the flow of information, and the risk of efforts to minimize excessive content leading to reduced availability of viewpoints. There was also concern about the use of only a single, major corporate search engine (such as Google) to look for information, which can easily reduce access to counter viewpoints.33 It is also important, where possible, to utilize the mainstream media to spread messages that run counter to the doctrines of mainstream economics. Corporate control makes it difficult but not impossible to access mainstream media, and there are various strategies to increase one’s access. Controversy can be profitable to media companies, and colourful protests make good news.34 At the beginning of this discussion, I suggested that the reader imagine being a corporate executive defending himself from potential attacks, including by those eager to raise taxes on rich corporations and individuals. In that scenario, the

291

BEYOND APOLOGIES

mainstream media is likely to be your close friend. Not all friendships last forever, nor, as the saying goes, is it possible to fool all of the people all of the time. People can learn to be active critics of media propaganda and to question what they see on the news and on other programming. People can learn to be alert to how the media portrays economic and other issues. People can seek out alternative sources that depict positive solutions to the problems of ever-growing inequality and an ever-worsening environment. People can also, to some degree, inﬂuence the media, ensuring better reporting of issues and events. The very wealthy have most of the money, but the public can successfully ﬁght back with ideas.

Notes Noam Chomsky, lecture titled "The State-Corporate Complex: A Threat to Freedom and Survival," at the University of Toronto, 7 April 2011. 2 John Kenneth Galbraith, The Aﬄuent Society (Middlesex, England: Penguin Books, 4th reprint, 1967). 3 Mark Berman, “Internet Ad Revenue Outpaced Broadcast TV Ad Revenue for the First Time,” The Washington Post, 10 April 2014. 4 Ronald McDonald House Charities, “What We Do,” http://www.rmhc.org/what-we-do accessed 20 August 2014. 5 See, for example, Anup Shah, “Media and Advertising,” Global Issues, 4 March 2012. http://www.globalissues.org/article/160/media-and-advertising 6 “Advertising: Exposure & Industry Statistics,” Media Education Foundation Factsheet, 2005. 7 David Barstow and Robin Stein, “Under Bush, a New Age of Prepackaged TV News,” The New York Times, 13 March 2005. 8 Barstow and Stein, “Under Bush.” 9 Barstow and Stein, “Under Bush.” 10 John Kenneth Galbraith, Economics and the Public Purpose (London: André Deutsch Ltd./Houghton Miﬄin Company, 1974). 11 Noam Chomsky, Imperial Ambitions: Conversations with Noam Chomsky on the Post-9/11 World (London: Penguin Books, 2006). 12 Media Reform Information Center, http://www.corporations.org/media/, accessed 30 April 2014. 13 Fairness and Accuracy in Reporting, “TPP TV Blackout: A Big Controversy That Isn’t News—But Look What Is...” 24 April 2014, http://fair.org/take-action/media-advisories/tpp-tv-blackout/ 14 Chomsky, Imperial Ambitions. 15 Fairness and Accuracy in Reporting, “Media Distortion of World Bank/IMF Protests Starts Early,” 11 April 2000, http://fair.org/take-action/action-alerts/media-distortion-of-world-bankimf-protests-startsearly/ 1

MYTH#12: THE MASS MEDIA IS UNBIASED

292

Howard Kurtz, “The Post on WMDs: An Inside Story,” The Washington Post, 12 August 2004. 17 The Editors, “The Times and Iraq,” The New York Times, 26 May 2004. 18 Quoted in Noam Chomsky and Edward S. Herman, The Washington Connection and Third World Fascism (Boston: South End Press, 1979), citing London Times, 4 January 1978. 19 Competitive Enterprise Institute, “Fast Food Obesity Lawsuit Threatens Consumers, Rule of Law,” http://cei.org/news-releases/fast-food-obesity-lawsuit-threatens-consumers-rule-law 20 CSPIscam, www.cspiscam.com. 21 Monsters and Critics, http://www.monstersandcritics.com/news/business/news/ article_1455840.php/ McDonald_s_posts_stronger_annual_proﬁts_in_2008, accessed 26 May 2011. 22 David C. Korten, When Corporations Rule the World, 2nd ed. (Connecticut and San Francisco: Kumarian and Berrett-Koehler, 2001). 23 Laurie Kellman, “AP-CNBC Poll: Americans, Britons Less Optimistic about Becoming Millionaires than Australians,” AP-GFK, 13 September 2011. 24 Eric Lipton and John Broder, “Regulator Deferred to Oil Industry on Rig Safety,” The New York Times, 7 May 2010. This case is also discussed at length in Joshua Holland, The Fifteen Biggest Lies About the Economy and Everything Else the Right Doesn’t Want You to Know About Taxes, Jobs, and Corporate America (Hoboken, New Jersey: John Wiley & Sons, Inc., 2010). 25 Noam Chomsky, Necessary Illusions: Thought Control in Democratic Societies (London: Pluto Press, 1989). 26 Jean Kilbourne, http://www.jeankilbourne.com/lectures/ accessed 21 August 2014. 27 Cathy Scott-Clark and Adrian Levy, “Fast Forward into Trouble,” The Guardian, 14 June 2003. 28 I lived in Hanoi when the American trade embargo lifted and advertising poured in. The same process has started in Myanmar. See Anita Chang Beattie, “Myanmar Is Ripe to Be Marketing's New Frontier,” AdAge, 17 June 2013. 29 Eric Goldman, “Fantasize About A World Without Advertising? Try Cuba,” Forbes, 22 August 2013. 30 “Television Advertising Leads to Unhealthy Habits in Children, Says APA Task Force,” American Psychological Association, 23 February 2004. 31 “Advertising: Exposure & Industry Statistics.” 32 “Ms.’s policy is to only accept mission-driven or non-proﬁt advertising, The magazine also rejected ads it found insulting or demeaning to women.” http://www.answers.com/topic/ms-magazine#ixzz2ekbBetiI 33 Pew Research Internet Project, “Net Threats,” http://www.pewinternet.org/2014/07/03/net-threats/ 34 I have written a guide on how to access media at little or no cost: Using Media and Research for Advocacy: Low Cost Ways to Increase Success, available for free download at www.healthbridge.ca. 16

MYTH #13: Greed is Good “Is there some society you know that doesn’t run on greed?” – Milton Friedman1 “A tension has always existed between the capitalist imperative to maximize eﬃciency and the moral imperatives of religion or community, which have historically served as a counterweight to the moral blindness of the market. This is one of ‘the cultural contradictions of capitalism’ – the tendency of the economic impulse to erode the moral underpinnings of society. Mercy toward animals is one such casualty. More than any other institution, the American industrial animal farm oﬀers a nightmarish glimpse of what capitalism can look like in the absence of moral or regulatory constraint.” – Michael Pollan2

The Defenders of Greed



One of the foundations of mainstream economics is that greed is good.i Mainstream economists claim that greed motivates people to work hard and to be creative. They claim that when people indulge their endless desire for material possessions, they generate vital economic activity. They state that greed is more rational, natural, and beneficial than generosity. The pursuit of greed can, they claim, motivate employers to pay workers better than they would otherwise; after all, the desire for profit will lead to expanded markets that require more employees…and thus the need to pay enough to woo those people to come work for them.ii 3 Some even claim to believe that greed would eliminate racism, as the truly greedy person is too focused on earning money to allow prejudices to slow him down.4 Followers of mainstream economics assert that the best that one can do for the world, in addition to becoming as wealthy as possible, is to be a nonstop consumer, eagerly shopping for all sorts of products and services. By indulging one’s own tastes and wishes, they argue, a person contributes to the reduction of poverty. Wasting time worrying about others, they contend, simply slows down the generation of wealth that will make everyone richer. According to Time magazine, “Greed really is good, as are income inequality, bullying across class lines, and even the iron fist of the political strongman – in certain contexts, at least.”5 Mainstream economists maintain that the capitalist ‘superhero’ looking out for number one has brought forth the innovations and products that make life easier and more pleasant for all – or at least for all who can afford them.

This phrase was popularized by the ﬁctional Gordon Gekko character in the Hollywood ﬁlm Wall Street. ii This argument ignores the fact that machines often replace workers and that jobs often shift to other countries. It also ignores the various government policies that force workers to accept ridiculously low wages. i

MYTH#13: GREED IS GOOD

294

Greed’s biggest promoter: Ayn Rand. The idea of greed (or, more politely, ‘selfinterest’) being a positive virtue got its biggest push from Russian-American novelist Ayn Rand. Rand claims that looking out for others, not selfishness, hinders the achievement of freedom and prosperity: “If any civilization is to survive, it is the morality of altruism that men have to reject.”6 Rand describes her philosophy as “the concept of man as a heroic being, with his own happiness as the moral purpose of his life, with productive achievement as his noblest activity.”7 While some consider people who pursue wealth with no regard for others as sub-human, Rand labels them as super-human. According to her, it is only the selfish pursuit of money that prevents people from becoming violent and destructive: “Until and unless you discover that money is the root of all good, you ask for your own destruction. When money ceases to become the means by which men deal with one another, then men become the tools of other men. Blood, whips and guns or dollars. Take your choice - there is no other.”8 Why worry about what Ayn Rand writes? Because the American Library of Congress and the Book of the Month club has labelled her book Atlas Shrugged, with over six million copies sold in the United States alone, as “the most influential book on American lives after the Bible.”9 Her books and ideas are also popular internationally. They have proved influential to businessmen and politicians who argue that government concern for the poor simply breeds laziness and that government regulations slow down the vital and beneficial pursuit of unlimited wealth.10 * * * Despite the biblical claim that it is easier for a camel to pass through the eye of a needle than for a rich man to enter the kingdom of God, many people associate wealth with morality. References to the wealthy suggest that they work hard and use their skills to gain their money, and thus that it would be wrong to redistribute any of their riches to the poor. The poor, likewise, embroiled in their immoral ways, are poor for a reason. The mainstream economic model thus suggests that the poor are just as deserving of their poverty as the wealthy are of their money. From this viewpoint, the ‘correct’ response to the super-rich is admiration, envy, and emulation. Lest people forget the correct response, the media constantly reminds them. Television, newspapers, movies, and the Internet offer tantalizing glimpses into the homes, lifestyles, and buying habits of the ultra wealthy. Being wealthy is its own virtue. As the media, itself owned by the wealthy, reminds people: you can never be too rich, too thin, or too greedy. Oh, but wait, the wealthy are not greedy: journalists talk about the generosity of billionaires voluntarily giving away large chunks of their wealth. Of course, when you have billions and pay little tax, you can afford to part with significant sums (especially when you get a tax refund for your charitable gifts).

295

BEYOND APOLOGIES

As well as creating envy for the rich and famous, the media also diverts people’s attention away from the harm done by some of the ultra rich: unethical ways of earning money, tax avoidance, and mistreatment of employees. The media does single out, of course, a few individuals, but the person who got rich by cheating – or rather who was caught cheating – is treated as the exception not the rule, since by nature, the rich are virtuous, generous, and wise.iii Journalists write about the poor exploiting natural resources for need, but far less about the rich exploiting those same resources for greed. The media definition of theft involves small-scale robbery; at the level of a CEO, robbery becomes justified acquisition. And so the chief economist of HDFC Bank in India blames the inflation in his country not on the spending habits of billionaires, but rather on the poor who, thanks to a program that guarantees employment, can now (at least sometimes) afford to eat. On the issue of inflation management, it might help to pay attention to the fact that the upward pressure on rural wages continues unabated. High wages are known to feed price pressures and it appears that the rural economy is sitting on large pile of cash that is supporting excess demand in consumer items particularly food. … Thus it is imperative to take a fresh look at some of the sacred cows of public policy like the employment guarantee programme. If indeed it is contributing to pricepressures, streamlining it would meet the dual objectives of harnessing inflation and reducing spending.11

In other words, keeping the poor so poor that they cannot afford food will end the inflation problem – while conveniently distracting attention from the growing number of billionaires. When society considers greed a social good, there is no compulsion to worry about ethics. A colleague with many friends in the business community has suggested that the moral of the 21st century may well be, “If it’s legal, it’s ethical; if it’s not illegal, it’s not unethical.” As long as you amass great wealth without breaking any laws, the how is not important. Greed, by making a bigger pie, is its own justification. The idea that unlimited greed is economically beneficial and thus should be encouraged has its foundation in the writings of classical economist Adam Smith, Not all rich people are wicked any more than all poor ones are virtuous…but neither are they all heroic. But when George Soros or Warren Buffett say something, it is news; if an average person were to say the same thing, no one would listen. Why, just because they have figured out a way to make billions of dollars, do people think that their opinions are more valuable than anyone else’s is?

iii

MYTH#13: GREED IS GOOD

296

whose writings are supposedly the basis of mainstream economics. In The Wealth of Nations, first published in 1776, Smith famously wrote, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.” Further, “by pursuing his own interest, [the individual] frequently promotes that of the society more effectually than when he intends to promote it.” Did Smith genuinely believe in selfishness as the highest form of morality? Presumably not, given that in his book The Theory of Moral Sentiments he seemed unable to imagine people being governed by nothing more humane than greed: “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it.”12 The dangerous consequences of dangerous thinking Mainstream economists seem to believe that since the rich contribute – so they claim – vastly more to society than do the poor, governments should enable the rich (through low taxes, limited regulations, abandonment of the minimum wage, a range of subsidies for big business, and laws to protect private property) rather than assist the poor. They claim that helping the poor simply makes them reluctant to work. So extensive is their dominance of media that many people agree, at least until personal experience demonstrates otherwise. Thus, an American recipient of federal aid explained that, before having to obtain it, “I always thought people on public assistance were lazy.” And now? “…it helps me know I can feed my kids.”13 Despite the great need for those government services, beneficiaries may still feel they encourage laziness, since media can have a bigger role in shaping public opinion than experience itself. It is not difficult to see the negative consequences of promoting self-interest over concern for others. In contrast to the more socially and economically equal European (and especially Scandinavian) countries, the extent of poverty in the United States is shocking: half of all American children require government food assistance at some point before reaching the age of twenty; among black children, that figure is nine out of ten.14 Almost twelve percent of Americans currently receive food stamps (now known as SNAP, the Supplemental Nutrition Assistance Program). That number hides large differences by race: twenty-eight percent of blacks, fifteen percent of Latinos and eight percent of whites receive SNAP. Nor do those figures provide a true figure of poverty, since food aid reaches only about two-thirds of those who are eligible to receive it.15 Some of the beneficiaries hold

297

BEYOND APOLOGIES

full-time jobs that pay too little for them to afford food. According to a recent report, one-fourth of the entire American workforce receives some sort of public assistance; that figure includes more than half of the workers in the fast-food industry.16 A country as rich as the United States should not have to provide food aid to over a tenth of its population, especially not to those who are employed. That it is necessary is testament to the preference given to greed over fairness. Sometimes things are what they seem There is a very big leap between Smith’s rather modest comment about the value of self-interest and the idea that society functions best when people think only about their own interests. To reduce everything to selfishness and material wealth belittles us all. To believe that our greatest contribution to society comes through selfishness and shopping represents a ‘convenient belief,’ not an economic truth. Do people wish to live in a society based on the principle that greed is good? The fact is that in all but the most egalitarian countries, a handful of people have vastly more money than they can spend while their neighbours lack basic necessities. Modern societies can do better than that. In fact they do. Cooperation and trust are far more common than people may recognize, partly because people rarely talk about them. Violence, selfishness, and greed dominate the airwaves and the newspapers, and people internalize the message that vice is widespread. Nevertheless, the existence of human societies is dependent on a large dose of more selfless behaviours. Crime is the exception, not the norm. Every day people have countless encounters that offer opportunities for rudeness and cruelty; instead, the people they have contact with generally exhibit neutrality or friendliness. Otherwise, life would be one big barroom brawl. While it may not be talked about much on the news, there are plenty of people who feel that the very essence of humanity involves a concern for others; that financial rewards need not be enormous to motivate hard work and creativity; and that societies can generate both equality and prosperity, as long as greed is kept in check. People accept too much ugliness when they believe that it is better to elbow others out of the way in the struggle to the top than to lend a hand and to ensure that others succeed as well. There are simply too many people on the planet for selfishness and greed to be the main organizing principles. People everywhere seek out the company of others; they group themselves into communities, and those communities require cooperation to survive and to flourish. Both selflessness and selfishness are human traits, but if people really want to promote a better society, they must encourage the quality of looking out for others.

MYTH#13: GREED IS GOOD

298

It is obvious that in much of the world, the accident of birth is the biggest determinant of the life that an individual will lead. In fact, wealth generates wealth; it is the highly exceptional rich person who started out in poverty. Social mobility is far more of a myth than a reality in present-day America and in much of the rest of the world. The poor have so many disadvantages to overcome from the very start of life that very few can escape poverty on their own. Too often, rather than allowing people to get ahead, hard work simply keeps them exhausted and poor. The best educated send their children to the best schools and have the contacts to help them get the best jobs. Even where education is supposedly free, parents must pay for clothes, books, and other fees. Recently, the situation may have gotten even worse in many countries with the heavy dependence on outside tutoring. Parents are expected to pay substantial fees for tutors; it sometimes appears that little if anything is taught anymore in the schoolroom itself.iv Tutors benefit. The rich can afford it. The middle class struggles. What happens to the poor? Lack of education combined with racism, other prejudices, and the lack of opportunities means that the poor stay poor. So much for the benefits of hard work. The costs of losing in economic competition may be starvation and homelessness, and the odds are so unfairly cast that it is, in the mildest language, a cruel joke to expect the poor to ‘pull themselves up by their bootstraps.’v But even if people did believe that poverty is partly a result of laziness or inability rather than of a system weighed heavily against the poor, neither of those human qualities should be considered acceptable reasons for some people to face inhuman living conditions. How harshly do we want to punish people for not being the most capable or energetic? Some, perhaps most, people are lousy at managing their money. How severely do mainstream economists wish to penalize them for that inability, and how generously do they wish to reward those who are good at it? It makes sense that those who manage money well will be better off. But how much better? People have (or lack) talents in a wide array of fields: music, art, mathematics, cooking, human relationships, dog training, and earning and managing money. The penalty for lacking most skills is not huge. It is nice to be able to carry a tune, and you may I have observed this in Bangladesh and Sri Lanka. I imagine that the practice is widespread. v Even the Time magazine article about the social benefits of greed makes this point (if one bothers to read to the end): “The plutocrats, the pampered, are necessary members of a complex economy, and calls for pure egalitarianism have always been nonsense. But so is the tough-love, pull-yourself-up, no free lunch even if you’re starving ethos of the people who have forgotten – or never knew – what that kind of desperation feels like.” iv

299

BEYOND APOLOGIES

make a fool out of yourself at a karaoke party if you cannot, but your quality of life will not be seriously diminished if you are tone deaf. If you lack the skill of either making or managing money, though, the results can be disastrous. A just and humane society would value many other qualities and talents above the ability to amass money. The worship of greed causes people to allow far more suffering and adversity than a supposedly civilized world should be prepared to accept. Most European countries understand that an important role of government is to address the fact that unbridled capitalism imposes inhumanly high suffering on many of the economic ‘losers.’ Human effort and ingenuity are still rewarded, but the gap between the rich and poor is minimized by truly progressive taxation and a wide variety of services that benefit all members of society.vi * * * Earlier I mentioned a homeless man in Boston who quit his job as a dishwasher because it paid too little to maintain him even in decent poverty. During our conversations, he explained that he was incapable of operating on a sufficiently selfish basis to get ahead. He had moved in with his sister, but her home was crowded and he felt that he took up too much space. He did not want to cheat others. He felt that if selfishness was the price of success, he would rather not have it. * * * In a capitalist system, people are encouraged to invest money in the production of goods and services. In return, they expect to receive significant profits. While capitalism is effective at the production and distribution of goods and while it sometimes rewards effort and ingenuity, it distributes its rewards unfairly, giving far more back to the capitalist (the person who invests the money) than to the labourers who produce the products. It also encourages profit making at the expense, rather than for the benefit, of the consumer. It cannot ensure, in and of itself, a humane society in which the cost of losing the economic game is not devastating. It would be far better to take the good aspects of capitalism, to encourage people to work hard and gain reasonable rewards for their effort, but not allow them to accumulate absurd levels of wealth. Again, to quote Smith’s Wealth of Nations, “No society can surely be flourishing and happy of which by

vi Or, at least, the Europeans have historically understood this, though England has a worse track record than other countries. Good policies can get whittled away elsewhere. Further, they often do not extend to all the residents of the country, but rather only to the citizens. Still, Europe and particularly Scandinavia are as good as it gets in terms of treating people relatively equally.

MYTH#13: GREED IS GOOD

300

far the greater part of the numbers are poor and miserable.” If one is to accept that private purchases are important to the economy, one should also accept that spending by governments in favour of the poor and middle class is vital to the economy as well as to people’s wellbeing. 

Towards a Better Way: Generous and Moral Economics “I seek not to wax great by others’ waning Or gather wealth I care not with what envy; Suﬃceth that I have maintains my state, And sends the poor well pleased from my gate.” – Shakespeare, Henry VI Part II “If I am not for myself, who will be for me? But if I am only for myself, what am I?” – Hillel the Elder, Jewish scholar “I had rather not have riches if I am not to know from whom they come, for then I have no peace.” – Grimm, Household Tales

* * * In a close and well-functioning community, hard times are weathered because, normally, not everyone is equally badly off at all times. Those who are doing better help others through their difficult spells, and in return are more likely to receive help when they need it.vii Such a system makes good economic sense. Sometimes life is simple and direct; sometimes a virtue is a virtue and a sin a sin, be it in religion or economics. Despite what some economists tell us, it is better to act in the interests of others, to keep in mind how our behaviour affects them, than always to focus on ourselves. Unlimited greed can do unlimited damage. * * * A Vietnamese colleague told me about moving into an apartment building in which the neighbours did not know or interact with each other. She went to each home and introduced herself. If she heard that a neighbour was sick, she would bring food or help with cleaning or laundry. Others immediately began to reciprocate. And so, after a short

This could be described as long-term rather than short-term selfishness. Being good to others often does involve a reward: the pleasure of satisfying one’s conscience or the enjoyment of expressions of gratitude or the satisfaction of seeing the results of one’s good deeds. If that sort of gratification was what was meant by selfishness, the world would be a far more congenial place. vii

301

BEYOND APOLOGIES

period, the building of isolated strangers was transformed into a vibrant, thriving community in which people looked after and helped each other. * * * It can be difficult to stay grounded when society promotes materialism and selfishness. But community and cooperation are still flourishing. It is possible to work to support them and to remind people of their importance. People can support and encourage cooperative efforts whatever their area of expertise. They can keep in mind that increasing wealth is not life’s only goal. They can remind people that humanity has little meaning if everyone seeks to behave like beasts.viii People can question the value of projects that harm people and/or the environment, despite the argument that they are good for the economy. They can question why ‘cost effectiveness’ and ‘tradeoffs’ are only discussed when they short-change the poor or harm the environment. Finally, people can advocate for measures to ensure that the benefits of capitalism are widely shared, that its negative effects are kept in check, and that income is redistributed from the top down and kept circulating at a lower level. People concerned about the promotion of greed by mainstream economists can support communal efforts, whether commercial or attempts to improve neighbourhood conditions. Success in one such effort will lead to others. Despite what the mainstream economists claim, humanistic interests will lead to a better society that promotes not unending consumption by the few but rather the wellbeing of all.

viii This is a little unfair to animals, among which cooperation, even across species, is common.

MYTH#13: GREED IS GOOD

302

Notes 1 http://www.popmodal.com/video/9940/What-has-greed-done-for-you-lately-Dedicated-

to-the-Occupy-Wall-Street-Protesters 2 Michael Pollan, “An Animal’s Place,” The New York Times Magazine, 10 November 2002. 3 See, for example, Jeffrey Dorfman, “Workers Should Be Very Thankful That Corporations Are So Greedy,” Forbes, 15 December 2013. 4 Harry Binswanger, “Selfish Greed Wipes Out Racism,” Forbes, 26 December 2013. 5 Jeffrey Kluger, “Science Proves It: Greed Is Good,” Time, 28 March 2014. 6 Ayn Rand, “Faith and Force: The Destroyers of the Modern World,” lecture delivered at Yale University on 17 February 1960, at Brooklyn College on 4 April 1960, and at Columbia University on 5 May 1960. http://freedomkeys.com/faithandforce.htm 7 D. Campbell, “Greed is Good: A Guide to Radical Individualism,” The Guardian, 10 March 2009. 8 Campbell, “Greed is Good.” 9 Campbell, “Greed is Good.” 10 Kathleen Kennedy Townsend, “Ayn Rand vs. America,” The Atlantic, 23 August 2011. 11 Abheek Barua, “A Tough Balancing Act,” The Hindu, 18 February 2013. 12 Adam Smith, The Theory of Moral Sentiments, 1759. 13 Jason DeParle and Robert Gebeloff, “Food Stamp Use Soars, and Stigma Fades,” The New York Times, 28 November 2009. 14 Mark R. Rank, and Thomas A. Hirschl, “Estimating the Risk of Food Stamp Use and Impoverishment during Childhood,” Pediatrics and Adolescent Medicine 163.11 (2009):994-999. doi:10.1001/archpediatrics.2009.178 15 J DeParle and Gebeloff, “Food Stamp Use Soars.” 16 Sylvia Allegretto, Marc Doussard, Dave Graham-Squire, Ken Jacobs, Dan Thompson and Jeremy Thompson, Fast Food, Poverty Wages: The Public Cost of Low-Wage Jobs in the Fast-Food Industry (University of Illinois at Urbana-Champaign and UC Berkeley Labor Center, 15 October 2013).

CONCLUSION “…if it is possible to go to the moon, why can’t we solve the easier problems of building for the ill-housed, feeding the hungry, overcoming poverty and fear of poverty…” – Jane Jacobs1

 The study of economics is the study of people; it is thus one of the most fascinating topics imaginable. It offers vast potential for helping those who have consistently failed to benefit from the changes brought about by modernization, industrialization, and globalization. People, wherever they live, whatever their skin colour, and however seemingly different they might be, do matter; they matter because they are human and because their suffering is our suffering. If national governments learned to do accounting the same way that Prakash does, in terms of estimating loss as well as gain, countries and individuals would be far better off. If governments focused on wellbeing instead of on economic growth, people like Prakash would lead far more comfortable, secure lives. As to how to help Prakash, the best may be to ensure that he receives some basic assistance from the government and otherwise is allowed to live his life and earn his living, safe from the threats posed by corporations eager to seize his land or to pollute his water. It is vital to learn to identify and question the many conventional wisdoms and convenient beliefs that have led to so much inequality and suffering. More people need to stand up and challenge economists and politicians about their approaches and policies. It is possible to find a direct path to wellbeing rather than attempt to increase it indirectly through endless consumerism. It is possible to question what is meant by development and even poverty. With a better understanding of the causes, it will be easier to identify and implement successful solutions. More and more people can refuse to accept blindly what the media, policymakers, and economists tell them to believe. More and more people can dare to imagine something better. More and more people can read, learn, discuss, and register their protest with how things are. I did not set out to provide definitive answers in this book. One may disagree with much of what I have written. The point is not that the reader be convinced on every point, but rather that she considers the possibility that alternative scenarios to those we are told daily to believe do exist. Simply beginning to think about and discuss these issues would be an important first step. The potential is there: it is up to us to educate ourselves, join the networks of those seeking positive change, and find our own ways of contributing to a more just and humane world.

329

BEYOND APOLOGIES

For years, I have watched the way political, financial, and corporate leaders and the economists who support them blandly contribute to making the world worse for the poor. I have seen how governments often prioritize militarization over programs to help those in need. I have seen how classism, racism, caste and other prejudices allow the ‘favoured’ to look down upon and mistreat others. I have come to realize that not everyone finds the problems faced by the poor and outcast particularly compelling. As a result, I have begun to suspect that I can summarize ‘all that is wrong with the world’ in two main problems: first, the belief that wealth is more important than people are, and second, the belief that not all people are fully human. (Those points may sound oversimplified. True. But oversimplifications, like shortcuts, however dangerous they may often prove, do not always lead one in the wrong direction and can save much time.) If we truly believed that people are more important than possessions, and that no matter how dark, dirty, or otherwise different from us they are, that all people truly are human, we would surely act far differently. We would insist that everyone have a decent standard of living: enough to eat, clean water to drink, and access to health care and education. We would work towards ensuring that everyone has decent living conditions and towards greatly reducing the gap between those who can never have too much and those who can never have too little. We would do this not through small charitable efforts but rather through long-term policies of redistribution of wealth. We would prioritize wellbeing for people and our planet over consumption, production, and waste. In short, we would treat people – all people – as if they mattered. We must move beyond apologies; now is the time to define and achieve an economics of wellbeing.

Notes Jane Jacobs, Cities and the Wealth of Nations (New York: Random House/Vintage Books, 1985).

Bibliography Note: I have listed below the books that I consider to be particularly valuable. Almost everything I have written is available on the HealthBridge website www.healthbridge.ca; all articles should be easy to find using the Web. Adler, Moshe. Economics for the Rest of Us: Debunking the Science that Makes Life Dismal. New York: The New Press, 2010. Albelda, Randy, Nancy Folbre & the Centre for Popular Economics. The War on the Poor: A Defense Manual. New York: The New Press, 1996. Castro, Fidel and Ignacio Ramonet. Fidel Castro: My Life. New York: Scribner, 2008. Chávez, Hugo and Aleida Guevara. Chávez, Venezuela and the New Latin America: An Interview with Hugo Chávez by Aleida Guevara. New York: Ocean Press, 2005. Chawla, Louise, ed. Growing Up in an Urbanising World. New York: UNESCO, 2002. Chomsky, Noam. Failed States: The Abuse of Power and the Assault on Democracy. New York: Owl Books, 2006. Chomsky, Noam. Hegemony or Survival: America’s Quest for Global Dominance. London: Holt Paperbacks, 2003. Chomsky, Noam. Imperial Ambitions: Conversations with Noam Chomsky on the Post-9/11 World. London: Penguin Books, 2006. Chomsky, Noam and Edward S. Herman. The Washington Connection and Third World Fascism. Boston: South End Press, 1979. Cohen, Lizabeth. “A Consumers’ Republic: The Politics of Mass Consumption in Postwar America,” Journal of Consumer Research 31.1 (2004): 236-239. Crawford, JH. Carfree Cities. Dublin: International Books, 2002. Crawford, JH. Carfree Design Manual. Dublin: International Books, 2009. Critser, Greg. Fat Land: How Americans Became the Fattest People in the World. Boston: First Mariner Books, 2004. De Rivero, Oswaldo. The Myth of Development: The Non-Viable Economies of the 21st Century. 2nd impression. London: Zed Books, 2003. Dodson, Lisa and Ellen Bravo. “When There Is No Time or Money: Work, Family and Community Lives of Low-Income Families.” In Unfinished Work, Building Equality and Democracy in an Era of Working Families, edited by Jody Heymann and Christopher Beem. New York: The New Press, 2005. Douthwaite, Richard. The Ecology of Money. Schumacher Briefing No. 4. Devon: Green Books, 1999. Easton, Mark. “The Politics of Happiness”. BBC News 22 http://news.bbc.co.uk/1/hi/programmes/happiness_formula/4809828.stm

May

2006.

Efroymson, Debra, Maruf Rahman and Ruhan Shama. Making Cities More Liveable. Dhaka: HealthBridge and WBB Trust, 2009. Efroymson, Debra, Tran TKT Ha, and Pham T Ha. Public Spaces: How they Humanize Cities. Dhaka: HealthBridge and WBB Trust, 2009.

331

BEYOND APOLOGIES

Efroymson, Debra, Sometimes We Win: Tobacco Control Success Stories from Asia. Dhaka: HealthBridge, 2010. Efroymson, Debra, Using Media and Research for Advocacy: Low Cost Ways to Increase Success. Dhaka: HealthBridge, 2006. Ekins, Paul, ed. The Living Economy: A New Economics in the Making. London, New York: Routledge and Kegan Paul, 1986. Ekins, Paul and Max-Neef, Manfred, ed. Real-Life Economics: Understanding Wealth Creation. ondon, New York: Routledge, 1992. Farmer, Paul. Pathologies of Power: Health, Human Rights, and the New War on the Poor. Los Angeles: University of California Press, 2005. Galbraith, James K. The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too. New York: Free Press, 2009. Galbraith, John K. The Affluent Society. Middlesex, England: Penguin Books, 1958. Galbraith, John K. The Culture of Contentment. Middlesex, England: Penguin Books, 1992. Galbraith, John K. Economics and the Public Purpose. Boston: Houghton Mifflin Company, 1973. Galbraith, John K. The Good Society: The Humane Agenda. Boston: Houghton Mifflin Company, 1996. Galbraith, John K. The New Industrial State. Princeton: Princeton University Press, 2007. Gilligan, James. Why Some Politicians Are More Dangerous Than Others. Cambridge: Polity Press, 2011. Gross National Happiness. Thimphu, Bhutan: Centre for Bhutan Studies, July 1999. Heinberg, Richard. The End of Growth: Adapting to Our New Economic Reality. Gabriola Island, BC, Canada: New Society Publishers, 2011. Helliwell, John, Richard Layard and Jeffrey Sachs, ed. World Happiness Report. New York: Earth Institute, Columbia University, 2012. Heymann, Jody. Forgotten Families: Ending the Growing Crisis Confronting Children and Work ing Parents in the Global Economy. Oxford: Oxford University Press, 2006. Heymann, Jody and Christopher Beem, ed. Unfinished Work, Building Equality and Democracy in an Era of Working Families. New York: The New Press, 2005. Hiatt, Steven, ed. A Game As Old As Empire: The Secret World of Economic Hit Men and the Web of Global Corruption. San Francisco: Berrett-Koehler, 2007. Holland, Joshua. The Fifteen Biggest Lies About the Economy and Everything Else the Right Doesn’t Want You to Know About Taxes, Jobs, and Corporate America. Hoboken, New Jersey: John Wiley & Sons, Inc., 2010. Ivins, Molly and Lou Dubose. Bushwhacked: Life in George W. Bush’s America. New York: Random House, 2003.

332

BEYOND APOLOGIES

Bibliography

332

Jacobs, Jane. Cities and the Wealth of Nations: Principles of Economic Life. New York: Vintage Books, 1984. Kingsolver, Barbara. Animal, Vegetable, Miracle. New York: HarperCollins, 2007. Klein, Naomi. The Shock Doctrine: The Rise of Disaster Capitalism. New York: Picador, 2007. Klein, Naomi. This Changes Everything: Capitalism versus the Climate. New York: Simon & Schuster, 2014. Korten, David C. When Corporations Rule the World. 2nd Edition. Bloomfield, Connecticut and San Francisco: Kumarian and Berrett-Koehler, 2001. Krugman, Paul. The Conscience of a Liberal. New York, London: W.W. Norton & Company, Inc., 2009. Lohan, Tara, ed. Water Consciousness. San Francisco: Independent Media Institute, 2008. McKnight, John and Peter Block. The Abundant Community: Awakening the Power of Families and Neighborhoods. San Francisco: American Planning Association and Berrett-Koehler, 2010. Moore, Michael. Downsize This! Random Threats from an Unarmed American. New York: Harper Perennial, 1996. Nestle, Marion. Food Politics: How the Food Industry Influences Nutrition and Health. San Francisco: University of California Press, 2007. North, Peter. Local Money. Devon: Transition Books, 2010. Palast, Greg. The Best Democracy Money Can Buy. New York: Plume Printing/Penguin Books, 2003. Perkins, John. Confessions of an Economic Hit Man. San Francisco: Berrett-Koehler, 2004. Pollan, Michael. The Omnivore’s Dilemma, A Natural History of Four Meals. New York: Penguin Books, 2007. Postman, Neil. Amusing Ourselves to Death: Public Discourse in the Age of Show Business. New York: Penguin Books, 1985. Postman, Neil. The Disappearance of Childhood. New York: Vintage Books, 1994. Roberts, Paul. The End of Food: The Coming Crisis in the World Food Industry. Boston: Houghton Mifflin, 2008. Roy, Arundhati. Listening to Grasshoppers: Field Notes on Democracy. Delhi: Penguin Books, 2010. Roy, Arundhati. The Shape of the Beast. Delhi: Penguin Books India, 2009. Schlosser, Eric. Fast Food Nation: The Dark Side of the All-American Meal. New York: Harper Collins, 2002. Schumacher, EF. Small is Beautiful: A Study of Economics as If People Mattered. London: Vintage Books, 1993.

333

BEYOND APOLOGIES

Stiglitz, Joseph E. Globalization and its Discontents. New York: W.W. Norton & Company, 2003. Stiglitz, Joseph E, Amartya Sen and Jean-Paul Fitoussi. Mismeasuring Our Lives: Why GDP Doesnâ&#x20AC;&#x2122;t Add Up. New York: The New Press, 2010. Thurow, Lester C. The Zero Sum Society: Distribution and the Possibilities for Economic Change. New York: Penguin Books, 1983. Waring, Marilyn. If Women Counted: A New Feminist Economics. San Francisco: Harper, 1988. Wilkinson, Richard and Kate Pickett. The Spirit Level: Why Greater Equality Makes Societies Stronger. New York: Bloomsbury Press, 2009.