Dark Victory: The United States and Global Poverty

by Walden Bello, Shea Cunningham, Bill Rau (Editor)

Overview

As we enter the 21st century, many countries of the South are in a state of economic crisis, with once optimistic visions of the future cruelly dashed by rising mass poverty, inequality, and hunger. At the same time, working people in the North find their living standards declining. Dark Victory reveals the roots of these global trends in a sweeping strategy of global economic rollback unleashed by the US to shore up the North’s domination of the international economy and reassert corporate control.

Bello argues that lower barriers to imports, removal of restrictions on foreign investments, privatization of state-owned activities, reduction in social welfare spending, and wage cuts and devaluation of local currencies–all conditions of structural adjustment loans from the North-have had disastrous consequences. Hailed as a classic study of global poverty, Dark Victory is now reissued with a new epilogue by the authors.

Product Details

ISBN-13:	9780935028768
Publisher:	Food First / Institute For Food & Development Policy
Publication date:	10/01/1999
Series:	Transnational Institute Series
Edition description:	New
Pages:	176
Product dimensions:	5.40(w) x 8.40(h) x 0.50(d)

About the Author

Walden Bello is an author, academic and political analyst. He is a professor of sociology and public administration at the University of the Philippines, as well as executive director of Focus on the Global South.

Read an Excerpt

CHAPTER 1

Introduction: The Great Reversal

This new order will not put an end to history. It will not be a utopia, harmonious and placid. Indeed, conflict is more likely now that the Cold War has ended and the market has triumphed ... For inequality will cleave the new world order as surely as the Berlin Wall once divided East and West.

— Jacques Attali, Millenium: Winners and Losers in the Coming World Order (New York: Times Books, 1991)

For many people in the West the defining event of the last few years has been the collapse of centralized socialism in the Soviet Union and Eastern Europe.

Springtime of Freedom ...

Socialist regimes were largely undermined by their internal shortcomings, particularly their inability to institutionalize democracy and their failure to create an economy that would promote equity without stifling growth and innovation and destroying the environment. There was a rough equality in living conditions under centralized socialist rule, but it was not the dynamic equality amid rising living standards and growing freedom that had been envisioned by the pioneers of socialism. Rather, it was the equitable sharing of shoddy material goods and services amid generalized economic stagnation, political repression, and environmental collapse.

Thus, the peoples of the South for the most part wished the citizens of Eastern Europe and the former Soviet Union well as the latter began to exercise their newly found political freedoms. Many of them, however, could not understand the rush of the post-socialist leaders to embrace free-market reforms and, in some cases, economic 'shock treatments' prescribed by the World Bank and the International Monetary Fund (IMF). In their view, it was these very methods that had led to the massive reversal of the fortunes of the Third World during the 1980s.

... or Time of Troubles?

By the beginning of the 1990s, per capita income in Africa had plunged to the level it had held at the time of political independence in the 1960s. In Latin America, per capita income was down to where it had been in the late 1970s. Indeed, for the peoples of the South, the defining features of the last two decades of the twentieth century have been the rollback of their living standards, the virtual loss of their economic sovereignty, and the increased hollowness of their political independence – all of which add up to what Chakravarthi Raghavan has so aptly called 'recolonization'.

The eagerness for reforms designed to release the energies of private enterprise on the part of Eastern European technocrats failed to excite not only people in the Third World but large sectors of the population in the United States and Western Europe as well. Many Americans viewed pro-market reforms as in fact measures to promote the unrestrained freedom of corporate capitalism, and they bitterly attacked these policies as the cause of the sharp reversal of trends in US living standards during the 12-year reign of the Republican Party. By the early 1990s median family incomes had dropped to their level of the late 1970s, the portion of the population living in poverty had risen significantly, and wealth and income inequality had shot up to levels not seen since the 1930s. Perhaps the most telling statistic was that by 1991, more than one out of every five children was defined as poor.

Global Rollback

The same forces, many suspected, were at work in both the North and the South, producing similar consequences for poor and working people everywhere. When the Los Angeles riots broke out in May 1992, many saw the event as one of a kind with the anti-IMF and food riots that had broken out earlier in the Third World, in Santo Domingo, Caracas, and Sao Paulo. All were essentially poor peoples' responses to a wrenching process to which economists and technocrats had given the euphemism 'adjustment.'

This book constitutes an effort to confirm analytically and empirically the widely shared sense that the collapse of the South and the greater insecurity in the working and living conditions of most people in the North were consequences of the same thing – a sweeping strategy of global economic rollback unleashed by Northern political and corporate elites to consolidate corporate hegemony in the home economy and shore up the North's domination of the international economy.

Central to this process was the leadership of a highly ideological Republican regime in Washington, which abandoned the grand strategy of 'containment liberalism' abroad and the New Deal modus vivendi at home. Aside from defeating communism, Reaganism in practice was guided by three other strategic concerns. The first was the resubordination of the South within a US-dominated global economy. The second was the rolling back of the challenge to US economic interests from the NICs, or 'newly industrializing countries,' and from Japan. The third was the dismantling of the New Deal 'social contract' between big capital, big labor, and big government which both Washington and Wall Street saw as the key constraint on corporate America's ability to compete against both the NICs and Japan.

Conspiracy or Ideology?

It is worthwhile to pause briefly here to consider if this argument is tantamount to advancing a conspiracy theory of recent history. Far from it. The last image this analysis wishes to convey is that of corporate and political elites plotting at the White House or in Manhattan highrises to impose global adjustment. This is never the way that major shifts in national policy come about.

What usually occurs is a much more complex social process in which ideology mediates between interests and policy. An ideology is a belief-system – a set of theories, beliefs, and myths with some internal coherence – that seeks to universalize the interests of one social sector to the whole community. In market ideology, for instance, freeing market forces from state restraints is said to work to the good not only of business, but also to that of the whole community.

Transmitted through social institutions such as universities, corporations, churches or parties, an ideology is internalized by large numbers of people, but especially by members of the social groups whose interests it principally expresses. An ideology thus informs the actions of many individuals and groups, but it becomes a significant force only when certain conditions coincide. For example, radical free-market ideas as an alternative to the post-War Keynesian 'social contract' had been floating around for quite some time before the 1980s, particularly among certain cultural elites ensconced in universities. However, market ideology became a dominant force only when a political elite which espoused it ascended to state power on the back of an increasingly conservative middle-class social base, at the same time that the corporate establishment was deserting the liberal Keynesian consensus in its favor, because of the changed circumstances of international economic competition.

Thus, the wide sharing of the assumptions of free-market ideology by cultural, state, and economic elites during the Reagan-Bush era obviated the need for crude conspiracy. Indeed, not only were these assumptions shared, they were widely propagated and fervently believed by ideologues as the solution to the problems of both the United States and the world. Of course, the translation from ideology to policy was affected by differences of opinion on the efficacy of specific policies, differences between hardliners and pragmatists, and differences occasioned by personal ambitions. But for the most part, the broad thrust of championing private enterprise, rolling back communism and the insurgent South, eliminating state intervention in the economy, reducing government-supported safety nets, and 'freeing labor markets' by dismantling unionism were all aims shared by the dominant state, cultural, and corporate elites.

There was not, however, a full correspondence between ideology and interests. Free-market ideology has an intellectual consistency and coherence that leads it to champion competition over oligopoly. Here is where the promotion of interests took precedence over ideological integrity during the Reagan-Bush era. Deregulation, or unfettering the marketplace, became a means not of breaking up oligopolies but of doing away with the obstacles in the way of corporate mergers and acquisitions that led to an even higher concentration of corporate wealth. Letting the market weed out inefficient producers was a principle that was left by the wayside as Washington increased subsidies to US farmers and tightened quotas on imports of NIC-produced textiles and garments in order to protect US cloth manufacturers.

Dismantling the Activist State

Ultimately then, the strategic coherence of the Republican policies was provided not by their pro-competition principles but by their anti-statist and pro-corporate thrust: the elimination of state supports for production in the South and the NICs and the reduction of state restraints on corporate activity in the United States. From the viewpoint of the free-market vanguard which dominated Washington, state intervention via protectionism and foreign investment restrictions prevented US capital from fully penetrating Third World economies; aggressive state support for domestic firms in the NICs militated against the creation of a 'level playing field' for US corporations; and exorbitant taxation of the private sector and enforcement of environmental and labor standards prevented US capital from becoming competitive with the formidable Japanese.

In the South, the debt crisis of 1982 served as the opening for the imposition of structural adjustment programs – via the World Bank and the International Monetary Fund – that sought to roll back the state from economic life. The aim was to weaken domestic entrepreneurial groups by eliminating protectionist barriers to imports from the North and by lifting restrictions on foreign investment; to overwhelm the weak legal barriers protecting labor from capital; and to integrate the local economy more tightly into the North-dominated world economy.

Against the NICs, trade policy was the choice weapon. While Washington's immediate goal was to rectify trade imbalances by reducing NIC exports to the US and prying open NIC markets, its strategic objective – so clear in its treatment of South Korea, the NIC par excellence – was to dismantle the system of state intervention and support that had enabled NIC producers, following the 'Japanese model,' to compete successfully against American corporations not only in world markets but in the US market itself.

In the US, 'getting government off the back of business' took the form of a radical reduction of tax rates on the rich, removal of state restraints on corporate mergers and acquisitions, and weaker enforcement of environmental standards. Above all, it meant giving government support to aggressive corporate efforts to bust unions and weaken labor's resistance to the drive to achieve competitiveness by reducing wages and benefits, 'downsizing' the domestic workforce, and transferring manufacturing operations to cheap labor areas in the Third World.

Ironically, however, a Republican regime pledged to arrest US decline ended up accelerating it by pursuing domestic policies that might have strengthened US military power and produced economic growth in the short term, but that weakened the US techno-industrial capability in the long term. One of these strategic blunders was the massive deficit spending on defense, which made the US the world's top debtor country, especially to Japan, America's main competitor. Another was the eschewing of state-led economic planning in the name of market principles, putting the economic future of the US in the hands of corporations that were mainly interested in short-term profitability. A third strategic error was made in allowing the corporations to squander, with their anti-labor strategy of regaining competitiveness, the United State's key resource in global competition: its human capital.

Barbarians at the Gates

Having dismantled the New Deal mechanisms for social peace at home and abandoned the strategy of liberal containment abroad, the US, under the Reagan and Bush administrations, was reduced to punitive strategies to deal with rising domestic discontent and growing resistance in the South. Indeed, the Southern policies of all the key Northern governments on the eve of the twenty-first century are marked by similar features. These include continued support for structural adjustment in the Third World; creation of a new Berlin Wall to prevent the entry of refugees fleeing the devastation of the South; exploitation of tribal fears of racial and ethnic minorities to deflect domestic attention away from the structural causes of economic distress; and demonization of Southern figures or institutions, such as Islam, as the new enemy in the post-Cold War era.

Although a new Democratic administration has ascended to power in Washington, hopes that it will break with the policies in place are likely to be misplaced. Continuing support for structural adjustment, an even more aggressive trade policy, the June 1993 bombing of Iraq ordered by President Bill Clinton, and support for the North American Free Trade Agreement (NAFTA) designed to consolidate a cheap-labor preserve south of the border indicate continuity rather than the promise of change. 'New Democratic Thinking' may well be less ideological, more pragmatic, more technocratic in approach than Reaganism, but it does not appear to question the basic strategy of local and global economic restructuring chosen by US corporations, nor is it incompatible with the anti-South military strategy that is consolidating within the defense establishment.

Not surprisingly, the dark vision of the twenty-first century as an era of North-South polarization between privileged white citizens and colored barbarian hordes, or between the Christian West and the 'Islamic-Confucian Connection', has begun to take hold in the writings of Northern intellectuals. Will they be prophetic? Or can progressive forces still successfully mount an effective movement for an alternative future based on the reality that, for the most part, the peoples of the North and South share the same condition of being victims of the same counter-revolution that serves the interests of a global minority?

CHAPTER 2

Challenge from the South

For many, there was the hope born of success in their liberation struggles. Everywhere there was talk of equality and progress ... It is important to remember this period of progress and its atmosphere of hope now, when there is deep pessimism in much of the Third World about the prospects of economic development.

— South Commission, The Challenge to the South (New York: Oxford University Press, 1990)

Southern Sunrise

The 1960s and 1970s were years that saw significant gains for the Third World, or South. National independence movements came to power or were institutionalized in Cuba, Mozambique, Angola, Guinea-Bissau, Vietnam, Laos, Kampuchea, Nicaragua, Iran, and Zimbabwe. Moreover, stimulated by development strategies in which the state played a central role, Southern economies grew. Latin America's gross domestic product (GDP) rose by an average of 5 per cent per annum between 1960 and 1982, while Africa's climbed by an average of 4 per cent. Of course, the Asia-Pacific region, with its much-touted 'tiger economies' (Taiwan, South Korea, Hong Kong, and Singapore), was the Third World's star player, with regional GDP registering an average increase of 7 per cent a year.

In the three decades after 1950, the South's rate of economic growth was not only higher than the North's during the same period, it was also higher than the rate for the developed countries in their early stages of development. With per capita income doubling between 1950 and 1980, the proportion of people living in absolute poverty, though not their numbers, was reduced. In Latin America, for instance, the share of families below the poverty line defined by the Economic Commission for Latin America decreased from 51 to 40 per cent in just 10 years, 1960-70, while the proportion below the 'line of destitution' dropped from 26 to 19 per cent. The growth locomotive pulled not only the relatively less deprived countries of Latin America but even the poorest countries too, many of them in Africa, providing testimony, according to the South Commission, 'of the remarkable results that can be achieved through public policy and social action, despite low levels of national income.'

True, the pattern of growth in the South was not ideal. For instance, inefficiency often marked the operation of state enterprises and protected industries, and environmental destabilization was usually a by-product of industrial growth. These facts, however, must be seen in context. Inefficiency did not, for the most part stifle growth, and state-led or state-assisted capitalism was critical in enhancing national control over the economy. And when one assesses the environmental impact of the efforts of Third World countries to industrialize, it must be borne in mind that this was puny compared to the national and international ecological consequences of the high-consumption driven, highly wasteful economic strategies pursued by the Northern economies during the same period.

(Continues…)

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Table of Contents

About the Author and his Associates, vii,
About Food First, vii,
Acknowledgements, viii,
Foreword by Susan George, x,
List of Acronyms, xii,
1 Introduction: the Great Reversal, 1,
2 Challenge from the South, 7,
3 Liberalism and Containment, 10,
4 Reaganism and Rollback, 18,
5 Adjustment: the Record, 32,
6 Adjustment: the Costs, 51,
7 Adjustment: the Outcome, 67,
8 Resubordinating the NICs, 72,
9 Adjusting America, 86,
10 Dark Victory, 105,
11 The Battle for the 21st Century, 111,
12 Epilogue: The Asian Economic Implosion, 116,
Notes and References, 128,
Appendix: Tables,
1: IMF and World Bank Stabilization and Structural Adjustment Loans, 1980-1991, 143,
2: Rates of Poverty and Indigence in Selected Latin American Countries, 146,
3: External Accounts of Selected Third World Countries, 1982 and 1991, 147,
4: Voluntary Export Restraints and Related Measures Imposed by the US, 1980-1991, 148,
5: Shares of US Family Income Going to Various Fifths, and to Top 5% 1973-1991, 150,
6: Changes in Distribution of US Net Worth, 1962-1989, 150,
Glossary, 151,
Selected Readings, 155,
Index, 157,

Editorial Reviews

Praise for Dark Victory

“Bello et al. Build their case with relentless scholarship. Even those who think they know the structural adjustment scenario inside out will be grateful to Bello for taking on the toughest cases for examination.”

–Susan George

“A book that progressive political leaders the world over should read and take to heart…”

–David C. Korten, executive director of People-Centered Development Forum

From the Publisher