Enable as much "freedom for market forces" as possible. This is claimed to be essential to maximise the efficiency of the use of capital and the allocation of resources.
Two village women, Dak Lak province, Vietnam (2009).
Pic by Neil Palmer (CIAT). Via Wikimedia Commons.
The faults in this approach are pretty obvious. If you take maximising the growth of GDP as your top priority then you will encourage and assist those with capital to invest in whatever will make most profit. That is what maximizes business turnover. They will do this best if they put the available local land, labour and capital into producing relatively expensive things to sell to people on higher incomes. People with capital to invest never maximise their income by producing what is most needed, such as food for poor peasants. It is always far more profitable to invest in putting Third World land into producing luxury crops such as coffee to export to rich countries.
Although increased production for sale in a society will bring some benefits to some people, when economic growth is taken as the major development goal damage is done to the living standards and the experienced quality of life of the poor majority of the people, to social cohesion and to the environment. For instance governments shift peasants off land to build dams or establish export plantations.
Yes making growth the goal will maximise the volume of goods and services produced, i.e., the "wealth" generated, but this is typically of little or no benefit to most people in the Third World, especially the poorest. It will generate a few more jobs for them but it deprives many of them of the resources they once had. The land, forests and fisheries they once had access to are put into production for sale in the global economy. The basic problem in Third World development is not any absolute shortage of resources such as land and capital … it is their extremely uneven and unjust distribution and the uses to which they are put. Those in most need of them don’t get them. So we must ask why the distributions are so bad? The answer is very simple.
The global economy is a market system. Market forces have a powerful, indeed an overwhelming tendency to make the wrong development decisions. The three major effects of the market system on development are:
1. Market forces allow the relatively rich to get most resources.
The 20% of the world's people who live in the developed countries consume approximately 80% of the resources produced for sale. Their per capita resource consumption is approximately 17 times that of the poorest half of the world's people. For example, while possibly 850 million people lack sufficient food, which might require 40 millions tonnes of gain p.a. to remedy, over 600 million tonnes of grain are fed to animals in rich countries each year.
These extremely unfair distributions of the world's resource wealth come about primarily because it is an economic system in which rich countries are allowed to outbid poor countries to buy scarce things. If you allow the market to allocate scarce things like grain or oil, when a few are rich and many are poor, then inevitably the rich will get most of them. The market has no concern whatsoever for what humans need or what is just or best for the environment. It will always distribute things according to "effective demand", which means that richer people and nations can take what they want and the poor must do without.
2. Market forces have mostly produced the development of the wrong industries in the Third World.
A great deal of development has taken place in the Third World; the trouble is that little of it has been development of the most needed industries. It has been mostly the development of industries to provide crops and consumer goods for the small rich local elites or for export to the rich countries i.e., it has been inappropriate development.
Just consider the fact that millions of Third World people work hard producing crops and goods for other people, from which they derive very little benefit, in the form of very low wages. All that labour and all that land could have been fully devoted to meeting their own needs. Look at any typical Third World capital city and you see a vast amount of development of offices, hotels, airports, boutiques, cars and roads...which is of little or no benefit to most people in the country.
Inappropriate development is precisely what should be expected when development resources are invested in what will make the highest profits or contribute most to GDP i.e., when profit and market forces are allowed to determine what is developed. If the land was taken out of production of export crops and put into growing food for poor people that would reduce the GDP. In general doing what is best for people and the environment is the opposite of doing what will most increase the GDP.
Therefore we can state a most important economic law which conventional economists never consider... growth deprives!
Essential to the Neoliberal doctrine which now dominates economic theory and practice is the insistance that maximum freedom should be given to market forces. This is precisely what the transnational corporations and local business classes want. They do not want any restriction on their freedom to go where they like and produce what they like and sell it where they like. Obviously the more rules a government sets and the more conditions it imposes the more the freedom of corporations to maximise their profits will be interfered with. If they were obliged to invest where unemployment is high, or build low cost houses for poorer people, their profits would be less than they otherwise could be.
Part of the "museum corner" created by Mr. Shopov and Mr. Petkov showing
almost all the tools and household utensils used by the inhabitants of the village
Blagoevo in Bulgaria (2007). Via Wikimedia Commons.
The “Trickle Down” assumption.
The basic justification for conventional development is that although it mostly enriches the rich, in time “…wealth will trickle down to benefit all.” There is indeed a tendency for this to happen, but this does not mean that the process is acceptable. There are strong reasons why the trickle down doctrine should be rejected.
1. Very little trickles down. In the world as a whole the amount of benefit that trickles down is evident in the fact that one-fifth of the world's people now get about 86% of world income, while the poorest one-fifth get only 1.3%, and the ratio is getting worse. Neoliberalism has greatly accelerated the accumulation of wealth by the rich and super-rich.
2. “But hasn’t poverty been greatly reduced?” It is commonly claimed and accepted that conventional development has lifted hundreds of millions of Third World poor out of poverty. This seems to be true, but the situation is complex and the overall effects are debated. Firstly, by the official definition to rise above an income of something like $1.25 (or $2) per day is to have risen out of poverty. (The Australian poverty line is $75 per day.) This is absurd; try living in Bangkok on $2.51 a day and see if you don’t feel impoverished.
Secondly, some studies find that the achievement has almost all been in China. (Hickel, 2016, Edwards and Summer, 2013.)
3. Neoliberal “development” also impoverishes; what are the net effects? Conventional/capitalist development creates a lot of poverty, mainly by depriving large numbers of poor people of resources and livelihoods they once had, including in rich countries (especially in the US, consider Detroit.). The removal of protection and subsidies allows foreign corporations to come in and take over markets and productive activity. Chinese broom exporters thrive, by taking the exports that lots of little broom makers in Mexico and Nepal once had. Because governments define development as increasing the GDP they allow corporations to log forests and build dams and mines, pushing many tribal and peasant people off their ancestral lands into urban slums. The poor in Third World countries that are most integrated into the global economy have fared worse than those in other countries. (Wodin and Lucas, p. 55, Meredith, 2005.)
Conventional economists typically enthuse about gains but ignore the losses. It is not clear how big the net gains in income, employment and welfare have been but the above evidence on global poverty changes suggest that they have not been as spectacular as is commonly claimed, and that many have actually gone backwards. Fletcher (2016) quoting the U.N. Human Development Report, says that in 2003 54 nations were poorer than they had been in 1990, and Sub-Saharan Africa had a lower per capita income than 40 years before.
3. The rate of trickle down is extremely slow. At present rates it would probably take several hundred years for the “living standards” of the poor majority in the Third World to rise to the present rich world level…and by that time rich world GDP per capita would have become astronomical…which is ecologically impossible (see below.) Yet if the available resources were applied directly by people to meeting their own needs rapid improvements for them would easily be achieved.
4. The strategy” is grossly immoral, because it (claims to) improve the welfare of those in great need by enabling them to get crumbs from the tables of the rich, while almost all of the benefit of “development” goes to rich people. A development process should be evaluated primarily by how well it addresses the most urgent needs, that is, how well it benefits the poorest.
The alternative development model (below) indicates how quickly the problems could be solved if the available resources were devoted to the needs of people in general. Compare what trickles down to factory workers in Bangladesh paid a few cents an hour with the benefit they would get if they were devoting their time and energy to producing basic goods they need in their own local cooperative firms and farms.
5. But outweighing all these considerations is the fact that the global resource situation will not permit Trickle Down to work. The “limits to growth” analysis shows that there are nowhere near enough resources for it to lift the expected 9.7 billion poor people to anything like rich world systems and levels of consumption.
The “Structural Adjustment Packages”.
The most powerful forces inflicting this unacceptable kind of "development” imposed on the Third World over the last 40 years have been the Structural Adjustment Packages of the World Bank and International Monetary Fund.
When a Third World country's debts become impossible for it to repay it must go to these agencies for assistance. Arrangements are made for more loans to enable debt repayments to be made, but this is done do so on condition that a Structural Adjustment Package is accepted. This obliges the country to do a number of things that are supposed to improve the economy, such as cut government spending including assistance to poor people, open the economy to more foreign investment, increase exports (more plantations and logging), devalue (making exports cheaper for us in rich countries to buy, and making the country pay more for the imports from us), reduce government regulation, reduce government ownership and control and generally increase adoption of free trade policies. There is considerable evidence that these measures have little or no effect in achieving these objectives.
More importantly, the packages are a delightful bonanza for the rich countries and their corporations and banks. Impediments to their access to Third World resources and markets are removed, they can buy up the firms that go bankrupt, hire cheaper labour, and import commodities more cheaply from the country (because of the devaluation). And SAPs force repayments to rich world banks. However the effects on the country's economy and on its poor majority of people are typically catastrophic. Many small firms fail as imports flood in, unemployment jumps, and government assistance to the poor is reduced. Any move to devote more of the country’s resources to producing to meet its own needs is ruled out, because resources must first go towards paying off the debt, and the overriding principle is that development must be determined by market forces within the global economy.
For decades there has been a great deal of criticism of Structural Adjustment Packages. They have caused or contributed to havoc in many countries, including riots, civil wars (Yugoslavia, Rwanda; see Chossudowsky, 1997) and increased death rates from deprivation, and the fall of governments (e.g., Indonesia.) SAPs and the rules of the World Trade Organisation are now widely recognised as among the main mechanisms ensuring that the global economy functions in the interests of the big corporations and banks and the rich world. (For extensive documentation see TSW: Third World Development, Collected Documents, and TSW: Globalisation, Collected Documents.)
Conventional development is therefore a form of plunder.
Conventional development can be seen as a process whereby the Third World's resources are taken over by the rich countries and their corporations, and Third World productive capacity is geared to rich world demand. Long ago Third World countries had control over their own forests and lands and ordinary people were able to use most of them to produce what they needed. But the result of conventional development is that these resources have come to be owned by, sold to, or produce for, the benefit of the small local rich classes, the transnational corporations and consumers in rich countries. The work is done by the few who get jobs in the factories and plantations, for very low wages. Conventional development involves bringing people into the global market, where they must sell something in order to buy what they need, and where market forces then ensure that the majority of very poor people get very few of the resources available, have to sell their resources and labour cheaply, and see their land and forests bought by rich people and put into the production of items for others to use. These are inevitable outcomes when development is allowed to be determined by market forces, because it is always more profitable to sell to or produce for richer people. The market never attends much to what poor people need.
Thus Goldsmith discusses "development as colonialism". (Goldsmith, 1997.) Rist says, "...development has resulted in material and cultural expropriation." (Rist, 1997, p.. 243.) Schwarz and Schwarz say, "Development now seems little more than a window dressing for economic colonialism." (1998, p. 3.) Chossudowsky's The Globalisation of Poverty (1997) details the mechanisms, especially in relation to finance. These are just a few of the many works documenting the way in which conventional development is a form of legitimized plunder. (Again see TSW: Third World Collected Documents.)
The unjust global economy enables rich world “living standards”.
The living standards we enjoy in rich countries such as Australia benefit greatly from the way the global economy works. The global market system and the freedom of trade the corporations enjoy deliver most of the world's resources to us and draw the Third World's productive capacity into producing for our benefit. What would our tea and coffee cost if those who produced them were paid a decent wage, or if much of the land growing coffee was put into growing food for them? In other words we have an empire and we could not have such high "living standards” without it.
But the remarkable feature of imperialism now is that in most cases gunboats are no longer needed; whole nations can be broken and put into servitude by the stroke of a pen. This is what happens when Structural Adjustment Packages are signed.
(For a more detailed summary of the vast literature documenting these themes see TSW:
Our Empire; Its Nature and Maintenance)
The Limits to Growth perspective: Overlooked implications for development.
It is difficult to understand why the development literature has given so little attention to the "limits to growth" analysis of our global predicament. Global resources are quite limited and declining and it will be totally impossible for all people to rise to anything like the material “living standards” presently enjoyed by the 1/5 who live in rich countries, let alone those we aspire to. (For detailed analysis see TSW:
The Limits to Growth)
This "limits to growth” perspective requires the total rejection of any view of development which assumes growth and trickle down, or which takes Western affluent living standards as the goal of development. Sensible development theory and practice must therefore be based on acceptance of the point Gandhi expressed long ago … “The rich, must live more simply so that the poor may simply live.”
This means that an acceptable approach to development has to be framed in terms of The Simpler Way; that is, focused on providing a high quality of life for all on only very low levels of production, consumption, resource use or GDP.
Self-supporting Village - Life in Hovingham, Yorkshire, October 1942.
Some of the produce made under the Village Produce Association scheme is sold
in the local village shop. Matthew Bell, the grocer, is also the Secretary of the local
Pig Owners' Club. Here he shows a female customer a jar of local jam, made using
surplus fruit grown locally. Via Wikimedia Commons.
ALTERNATIVE, APPROPRIATE DEVELOPMENT ...THE SIMPLER WAY.
The following basic principles of the alternative path flatly contradict conventional development theory.
1. Enable people to immediately begin applying the existing resources and productive capacity around them to producing the mostly simple things that are most needed to give them the highest possible quality of life at the least cost in labour, resources and environmental impact. Most if not all Third World regions have all the resources and traditional ways required to build the relatively simple structures and systems that would meet their basic needs in a few years at most. The aim should be to ensure that all people have basic but adequate shelter, food, health services, extensive and supportive community, security, leisure-rich environments, peace of mind, a relaxed pace, worthwhile work, a sustainable environment, and access to a rich cultural life. These goals can be achieved with little or no foreign investment, trade, heavy industrialisation, aid, external expert advice or sophisticated technology and with little or no capital. Little more is required than access to and cooperative organization of the land, labour and traditional building and gardening skills the people usually have. Conventional/capitalist development prevents that access. Appropriate development does not depend on material affluence or economic growth or on access to large amounts of capital.
The study TSW: Remaking Settlements… details the case that even in rich world city suburbs it might be possible to reduce per capita dollar and resource costs by 90%, and it would be far easier to organize The Simpler Way in Third World villages.
2. Priority must be put on cooperation, participation and collective arrangements and effort. People organise and contribute to town meetings, working bees, cooperatives, commons, and town banks. Villagers govern themselves, researching, planning, deciding development action via thoroughly participatory procedures. They do not need officials or politicians. They do not need to be ruled; they can take control of their own development. State governments must facilitate and support this self sufficiency and self government at the local level, especially by gearing the national economy to providing villages and towns with the relatively few and simple basic inputs they need, such as chicken wire and light irrigation pipe.
Thus, reject the absurd conventional economic assumption that the best for all results if individuals compete against each other pursuing their self-interest and trying to get rich in free markets. In a satisfactory economy there could be much freedom for individuals, many small private firms, and a place for market forces (under careful social control), but you cannot expect to have a satisfactory society unless the top priority is what is best for all, unless the main institutions and procedures are basically cooperative and collective, and unless there is considerable control and regulation of the economy for the public good. Thus it is important to develop shared facilities, village commons, working bees, community workshops, committees, cooperatives, decisions by village assemblies, and to encourage giving and sharing, volunteering, helping, civic responsibility and social cohesion.
3. Very simple material living standards must be happily accepted. Affluence and rich world living standards must be rejected as impossible for all to have. This does not mean there must be deprivation or hardship. The goal of development cannot be to rise to rich world affluent living standards; it must be material sufficiency on the lowest reasonable levels of per capita resource consumption for convenience and a good quality of life.
4. Local economic self-sufficiency is the essential element in appropriate development. Most of the goods and services used by people must be produced in and very close to the towns and suburbs they live in, by local people using local resources in local firms. Therefore mostly develop small, simple firms and industries serving villages close by, exporting only small quantities of surpluses in order to be able to import small quantities of necessities. Very little heavy industry, or transport or high rise buildings etc., are needed. Within villages and close by develop many commons and cooperatives, to produce for example poultry, fish, fruit and nuts, wood, free food. Set up committees, R and D groups, working bees, town meetings, and especially leisure and culture committees.
5. Prioritise the building of the non-monetary and non-market sector of the local economy. Produce and distribute as much as possible through volunteering, free community provision of for instance concerts, outings, festivals, ”edible landscapes” providing free fruit to the community, working bees, commitees, rosters, giving, helping, and community workshops and art and craft centres and clubs. These things build community solidarity, a caring and generous atmosphere and valuing the welfare of the community.
5. Capital and sophisticated technology are not very important for appropriate development. It is a serious mistake to assume that development cannot take place without large volumes of capital to invest or without modern technology. A well developed village or region can be achieved with little more than traditional hand tool technology which can make highly satisfactory houses, furniture, small dams, clothing and gardens. People can get together in voluntary working bees to build the dwellings, firms, clinics, stores, premises, orchards, fish ponds, workshops and leisure facilities their community needs, using mostly local materials such as earth and timber.
6. Have as little as possible to do with corporations, loans and debt, or the global economy. They want you locked into having to sell a lot to them so you can buy a lot from them. They are out to get your resources and to have you working mostly for their benefit. You need little from them. Borrow very little if anything. Export just enough to import necessities. Allow foreign investors into your nation only if they will produce necessities on your terms. Of course you need to import a relatively few modern items such as radios and medicines, so export only enough to pay for these.
7. Social and ecological goals must take priority over economic goals. Development decisions must be based on considerations of social need, morality, justice, rights, tradition, social cohesion and ecological sustainability. No attention whatsoever should be paid to the GDP. Whether it increases or falls is irrelevant. What matters is whether the quality of life, economic security, social cohesion and ecological sustainability are improving. In fact if appropriate development strategies are adopted this will in general reduce the GDP (e.g., by taking land out of export cropping and making it available to villagers.) Develop a wide range of measures of important factors such as the quality of life, social cohesion, social problems, and especially ecological sustainability. (Bhutan measures Gross National Happiness.)
8. Governments must do as much regulating, controlling, subsidizing, planning and controlling of the national economy as is necessary to enable these goals. National governments should prioritise the industries and infrastructures most likely to provide basic necessities to local economies. They should phase out or prevent many industries that are wasteful or producing luxuries for the rich. They should enable distribution of mostly light industries across the rural landscape, so that all villages can earn small export incomes to pay for the few necessary imports.
However it is only necessary for there to be social control over those industries and processes necessary to ensure that development goals are being met. I you wish to leave the rest of the economy to free market principles you can do that.
9. Preserve and restore cultural traditions. Do not assume that you must "modernise" and therefore adopt Western consumer culture.
10. Nothing is more important than the understanding of “development” that people have. It is crucial that people be helped to see that conventional/capitalist theory and practice is an ideology legitimising plunder and should be dumped, and to see that there is an alternative. It is distressing that billions of people have no idea that there can be anything but the conventional model which locks them into continued poverty and deprivation waiting for trickle down when they could be developing relatively simple systems that would quickly enable them to greatly impove their conditions.
There are many places and groups making progress towards realizing these kinds of principles, including The Zapatistas in Mexico, the Via Campesino movement with its estimated 200 million people, the Catalan Integral Cooperative in Spain, the Global Eco-village Movement, and the Voluntary Simplicity, Downshifting and Transition Towns movements.
This head-on contradiction between conceptions of development is extremely disturbing. Billions of people struggle to survive in dreadful conditions, when that is unnecessary and could easily and quickly be fixed, but this is not possible until and unless the rich stop hogging far more than their fair share of scarce global resources and the present “development” model is scrapped.
Consider those who must suffer the indignity, boredom of begging all day or trying to sell a few boxes of matches or shine a few shoes to be able to feed their families…or those who have to sell drugs, or steal, or the lucky ones who have jobs in dreadful factories. Consider the conflicts over water and land due to desperate struggles to get enough to live on, while vast tonnages of fodder are air-freighted out to rich world feedlots. Consider the international conflicts, the wars generated by nations trying to get control over the quantities of resources needed to provide their consumers with their high “living standards”. Consider the greenhouse problem as billions more Chinese and Indians scramble for development defined as consumerism. Would so many steal, kill Rhinos for their horns, run drugs, burn forests, become pirates or mercenaries … if they had secure livelihoods in thriving village economies. Most of the world’s troubles can be attributed to the tragic adoption of a definition of development that cannot be sustainable, just or achievable for all.
Village life: Making a boat, fence, tending the lambs, various crafts and trades
(15th century, Italian) Marsilius Ficinus. Via Wikimedia Commons
Bornschier, V., et al., (1978), "Cross national evidence of the effects of foreign investment and aid on economic growth and in equality; A survey of findings and reanalysis," American Journal of Sociology, 84, 3, Nov., 651-683.
Chossudovsky, M., (1997), The Globalisation of Poverty, London, Zed Books.
Edwards, P. and A. Summer, (2013) The geography of inequality: Where and by how much have income distributions changed since 1990?, Centre for Global Development, Working Paper 341, Sept.
Fletcher, I., (2016), "No, Free Trade Didn’t Lift Millions Out of Poverty" Feb 05, Huffington Post.
Goldsmith, E., (1997), "Development as colonialism", in J. Mander and E. Goldsmith, The Case Against the Global Economy, San Francisco, Sierra.
Hickel, J., (2016), “Global inequality may be much worse than we think”,
The Guardian. Friday 8 April
McRae, H., (“Creative destruction: The madness of the global economy”,
Meredith, M., (2005), The Fate of Africa, Oxford, UK., OUP.
Rist, G., (1997), The History of Development, London, Zed Books.
The Simpler Way: Remaking Settlements.
The Simpler Way: Third World Development, Collected Documents
The Simpler Way: Globalisation, Collected Documents.
The Simpler Way: Our Empire; Its Nature and Maintenance
The Simpler Way: The Limits to Growth
LINK TO "THE SIMPLER WAY" WEBSITE
ABOUT THE AUTHOR
Ted Trainer is a Conjoint Lecturer in the School of Social Sciences, University of New South Wales. He has taught and written about sustainability and justice issues for many years. He is also developing Pigface Point, an alternative lifestyle educational site near Sydney. Many of his writings are available free at his website The Simpler Way.