How to Pretend Away Global Poverty: Neoliberalism and the Erasure of Historical Violence

Writing by Val Pyataev. Illustration by Phoebe McGowan.


Spurred on by the Black Lives Matter protests and global demands for racial justice, lively conversations about the legacy of colonialism have recently flared up around the world. During a moment when these ugly historical truths are being dug up and re-examined, it is crucial to also look at the relations of power and subjugation between the Global North and South that persist to this very day. However, these continuing patterns of extraction are often obscured, contorted, or at worst magicked away by misleading counter-narratives prevalent in our popular discourse. There is one particularly pernicious narrative which unashamedly scrubs the blood off recent history: the squeaky-clean tale of global ‘poverty eradication’ in the post-colonial era.


‘The Data Is Clear: Free Markets Reduce Poverty’ proclaims the title of one piece from the Mises Institute.[i] ‘In the last 20 years […] capitalism has lifted more than a billion people worldwide out of poverty’ reads a line from the National Review, exemplifying a claim many readers will likely have heard elsewhere.[ii] ‘People all over the world are living longer, healthier, and happier lives, so why do so many think things are getting worse?’ writes Bill Gates in a glowing review of Steven Pinker’s best-selling ‘case for reason, humanism and science’, Enlightenment Now.[iii] All sing in unison, the choir belting a cheerful ode to humanity’s relentless progress.


When telling the poverty eradication story, political commentators frequently refer to the promising ‘data’ or the ‘hard facts,’ which are contrasted with our commonly pessimistic, ‘ignorant assumptions’ about world poverty. Further, there is often a chokingly smug Western paternalism embedded in this discourse; the implication that the world is dramatically improving as more and more countries wise up and embrace US/UK/Swiss/Japanese-style free-market capitalism. The point is clear. If you still naively think we live in an exploitative and poverty-stricken world - educate yourself! Learn the facts!


Claims that poverty is soon to meet its natural demise commonly rely on the World Bank’s International Poverty Line (IPL). According to current figures which set the IPL at $1.90 per day (2011 purchasing power parity), between 1990 and 2015 extreme poverty fell from a headcount of 1.895 billion to 736 million; from 36 to 10 percent of the world’s population.[iv] This figure is widely celebrated - yet the desperate cries of hundreds of millions of impoverished people are disgracefully mistranslated here. Rather, they are unheard; echoes resounding in a blunt dissonance to the optimist choir’s deafening harmonies.


Analysis of the World Bank’s statistical misrepresentations was a key focus of Philip Alston’s final report to the UN of early July this year. Alston, the UN Special Rapporteur on extreme poverty at the time, fiercely denounced the ‘scandalous lack of ambition’ of the IPL:

‘The IPL is explicitly designed to reflect a staggeringly low standard of living, well below any reasonable conception of a life with dignity. Under the measure, one can ‘escape’ from poverty without an income anywhere near that required to achieve an adequate standard of living, including access to healthcare and education.’[v]


Recall that the IPL is set at $1.90 a day, in theory reflecting what that sum could buy in the US in 2011. In that specific year, the US Dept. of Agriculture indicated that the national minimum cost of attaining basic nutrition was $5.04 per day based on the ‘Thrifty Food Plan.’[vi] As such, despite using the US as a reference point, the IPL sits at below half the subsistence cost of food alone in the US, notwithstanding the fact that one cannot eat oneself out of lacking shelter or access to healthcare. The meagre daily sum of $1.90 is often far lower than national poverty lines which account for localised, relative costs of meeting basic needs. Using 2018 figures, the IPL provides a poverty rate of 0.0% in Thailand compared to 9.9% under the national poverty line[vii]; the figures for Mexico show an extreme disparity of 1.7% under the IPL and 41.9% under the national line.[viii]


If one takes the national poverty lines of each country respectively and uses $1.90 only as a bare minimum, about 1.7 billion people currently live in poverty - over 70% more than is indicated by the World Bank.[ix] Cruel disparities are also revealed by using the numerous alternative proposals for international lines. One of these is Peter Edward’s ‘ethical poverty line,’ based on the minimum necessary income for achieving a normal life expectancy of roughly 70 years. Relative to the World Bank’s newest 2011 PPP calculations, this sits at $7.40 a day and suggests a current poverty headcount of around 4.1 billion people - over four times higher than the 736 million under the IPL.[x] By digging deeper than the World Bank’s misleading main webpage on poverty and instead using the Bank’s online statistics database PovcalNet, one can unveil a disturbing trend: the number of people living in poverty at a $7.40 per day line has actually increased by roughly one billion since 1981.[xi]


'The Data is Clear: People Who Earned Cents in 1990 Now Earn Just Under Two Dollars A Day and Can Still Hardly Afford Basic Necessities.’ A far less dazzling headline than ‘The Data Is Clear: Free Markets Reduce Poverty.’ Yet the true harm of the latter narrative goes far beyond mere factual inaccuracy.


It is worth defining a key term at this stage: neoliberalism, an ideology which advocates for free-market policies such as deregulation, cuts to social spending, and privatisation of public services. The global spread of neoliberalism over the past forty years is a process depicted as neutral, rational, and inevitable by proponents of the poverty-eradication narrative. Yet this merely scribbles a cartoon smile over a deeply troubling past.


One example of this kind of sanitised depiction of history can be found in an article from the International Monetary Fund (IMF) entitled ‘Neoliberalism: Oversold?’.[xii] Opening with Milton Friedman’s 1982 description of Chile as an ‘economic miracle’, the piece goes on to state that Chile in the 1970s ‘turned to [neoliberal] policies that have since been widely emulated across the globe.’ What is entirely left out of this cheerful origin story of neoliberalism is the sheer brutality that made it possible.


In reality, Chile’s supposed ‘economic miracle’ followed from the violent 1973 coup d'état by which dictator Augusto Pinochet took power. This fulfilled the US’s ‘firm and continuing policy that [former president] Allende be overthrown by a coup’, to which one CIA document from 1970 attests.[xiii] The ensuing neoliberal ‘shock therapy’ [xiv] through which Pinochet (advised by economists who had been educated under Milton Friedman himself) aggressively remade the Chilean economy was a fundamentally undemocratic project, one enabled by the military dictatorship’s horrific repression of political dissidence. Opposition to Chile’s radical economic transformation could carry severe consequences - by 1990 the regime had carried out the state-sponsored torture of more than 40,000 people and the execution of thousands.[xv] One would be forgiven for not reading that into the IMF’s description of Chile simply ‘turning to [neoliberal] policies.’


The aforementioned IMF article further outlines the neoliberal platform: ‘the opening up of domestic markets, including financial markets, to foreign competition.’ Domestic markets across the globe are said to have ‘opened’ – unfurling like a cat might from its peaceful slumber, as opposed to how a clam might be smashed open for a shorebird to snack on. Of course, there is not really much rhetorical flourish to analyse here. Yet it is precisely the sterile neutrality which is deceptive. Markets ‘opened,’ neoliberal policies were ‘implemented’ and later ‘emulated’ – naturally, millions were saved from the clutches of poverty. Bloodless, technocratic progress. The graph points upwards forever.


What is especially unsettling about all these words in an International Monetary Fund publication is that they are contradicted by the institution’s own role in imposing neoliberal policies on countries across the Global South in the 1980s and 1990s.


Following the Third World Debt Crisis in 1982 - a crisis spurred on by the predatory lending practices of major US banks in the 1970s [xvi] - the IMF (and later the World Bank) refinanced the debt of many developing countries through conditional lending schemes known as ‘Structural Adjustment Programs.’ Loans were to be granted on the condition that bankrupt nations like Mexico, Argentina, Brazil, and India would adopt policies of austerity, market liberalisation and privatisation.[xvii] Of course, these loan agreements may seem superficially to have been fair and voluntary transactions, but as international political theorist Beate Jahn writes: ‘in light of the desperate economic dependence of many developing states, they [were for] all intents and purposes “imposed.”’ [xviii]


Taking advantage of financial weakness in the Global South, the conditionality of these lending schemes helped the shorebirds prise apart their clamshells to feast - markets in ‘developing’ countries were forcefully opened to foreign investors in ‘developed’ nations. Public assets were bought out and governments were compelled to redirect spending away from essential social needs towards a debt service under perilous compound interest rates. This technocratic project was a catastrophe for the Global South.


No one gives a more frank and disturbing account of structural adjustment than Davison L. Budhoo – a former IMF chief economist who worked directly on creating these programs in the 1980s. Budhoo admits in his published 1990 resignation letter that ‘everything we did from 1983 onward was based on our new sense of mission to have the south privatised or die.’[xix] The letter opens with exasperated guilt:

‘Today I resigned from the staff of the International Monetary Fund after over twelve years, and after 1000 days of official Fund work in the field, hawking your medicine and your bag of tricks to governments and to peoples in Latin America and the Caribbean and Africa […] [I hope] to wash my hands of what in my mind’s eye is the blood of millions of poor and starving peoples…. The blood is so much, you know, it runs in rivers. It dries up, too; it cakes all over me; sometimes I feel that there is not enough soap in the whole world to cleanse me from the things that I did do in your name.’ [xx]


His utterly harrowing confession sits in complete contrast to the discourses above: the glistening, triumphant narrative of poverty eradication and the incomplete, sanitised depiction of the processes by which it was purportedly achieved.


The shocking scale of human suffering Budhoo attests to can be corroborated by poverty data for the period. Anthropologist Jason Hickel writes soberingly: ‘structural adjustment turned out to be the greatest single cause of impoverishment in the 20th century: the number of people living on less than $5 per day increased by more than 1 billion during the 1980s and 1990s.’[xxi] Enjoying only a brief taste of free development on their own terms after the fall of colonialism, many Global South nations were once again denied economic self-determination and sucked dry. Even using the flawed metric of the IPL, most of the poverty reduction lauded by the World Bank since 1990 is attributable to China and other nations in East Asia - countries which were not turned into free-market playgrounds for Western investors through structural adjustment.[xxii]


Turning to the present day, governments of sixty-four of the world’s poorest countries, such as Ghana, Zambia and Pakistan still spend more on external debt payments than healthcare (based on April 2020 figures).[xxiii] Coronavirus deaths mount while desperately needed financing haemorrhages to unrepentant international creditors. The neoliberal fairy-tales of progress I have criticised here serve as Global North self-congratulation for ‘solving’ problems that the world’s wealthiest countries continue to contribute to, and as a subtle erasure of the exploitation and violence that historical reality is drenched in.


Regardless, I am not here calling for defeatism and endless wallowing in misery. Optimistic narratives are not far from the truth in one crucial respect: our technological and social development has in fact taken us towards the collective capacity for overcoming issues like world poverty and hunger. Yet these narratives obscure the political and distributive choices that are being made to sustain those inequities. Poverty arises not from our lack of material resources to tackle it, but from global inefficiency of their employment to fruitful ends, their maldistribution, and the structural exploitation of the Global South. For instance, the aggregate debt payments made by Global South countries to the Global North each year - both in servicing the menacing, persistent compound interest on older structural adjustment loans and offsetting more recent borrowing - greatly exceed the monetary cost estimated by the UN of completely ending poverty.[xxiv]


Cancelling unjustly accrued international debt would therefore free up vast resources for genuine poverty eradication. Another obvious, related disparity between our means and outcomes is that despite millions of deaths from hunger each year, we produce enough food globally to feed 10 billion people.[xxv] The financial and material resources are already available; it is the political will for international, structural change that is lacking, suppressed by fanciful narratives which tell us we’re doing enough and that nothing more is possible.


Get angry, then demand better.

References:

[i] D.W. MacKenzie, ‘The Data is Clear: Free Markets Reduce Poverty’, Mises Institute (16 Jun 2014). Available from: https://mises.org/library/data-clear-free-markets-reduce-poverty

[ii] Michael Tanner, ‘Capitalism’s Triumph’, National Review (18 Sept 2013). Available from: https://www.nationalreview.com/2013/09/capitalisms-triumph-michael-tanner/

[iii] Bill Gates, ‘Review of Enlightenment Now: The Case for Reason, Science, Humanism, and Progress’, Goodreads (17 May 2018). Available from: https://www.goodreads.com/book/show/35696171-enlightenment-now

[iv] World Bank, ‘Poverty and Shared Prosperity 2018: Piecing Together the Poverty Puzzle’ (2018), p. 2.

[v] Philip Alston, ‘The parlous state of poverty eradication: Report of the Special Rapporteur on extreme poverty and human rights’ (2 July 2020), p 5. Available from: https://chrgj.org/wp-content/uploads/2020/07/Alston-Poverty-Report-FINAL.pdf?fbclid=IwAR0ElvwxH4tn5Z_NdCYy-43X5mZtmrdswSlBLyeRDtF2gTqkiKSIWMdOqEo

[vi] Sanjay G. Reddy and Rahul Lahoti, ‘$1.90 Per Day: What Does it Say?’, Working Paper 25/2015, The New School for Social Research (Nov 2015), p13.

[vii] Alston, ‘The parlous state of poverty eradication’ (2 July 2020), p 4.

[viii] Ibid.

[ix] Jason Hickel, ‘Could you live on $1.90 a day? That's the international poverty line’, Guardian (1 Nov 2015). Available from: https://www.theguardian.com/global-development-professionals-network/2015/nov/01/global-poverty-is-worse-than-you-think-could-you-live-on-190-a-day

[x] Ibid.

[xi] World Bank, PovcalNet. Available at: http://iresearch.worldbank.org/PovcalNet/povDuplicateWB.aspx

[xii] Jonathan D. Ostry, Prakash Loungani, and Davide Furceri, ‘Neoliberalism: Oversold?’, IMF Finance and Development, vol. 53, no. 2 (June 2016). [All references to ‘the IMF article’ and quotes therefrom are attributable to page 1 of this source.]

[xiii] John Simkin, ‘Salvador Allende’, Spartacus Educational (Jan 2020). Available from: https://spartacus-educational.com/COLDallende.htm

[xiv] Naomi Klein, The Shock Doctrine: The Rise of Disaster Capitalism (Penguin Random House UK, 2014), p 10.

[xv] Wikipedia, ‘Human rights violations in Pinochet’s Chile’. Available from: https://en.wikipedia.org/wiki/Human_rights_violations_in_Pinochet%27s_Chile

[xvi] Jason Hickel, The Divide: A Brief Guide to Global Inequality and its Solutions (Cornerstone Digital, 2017), p 150.

[xvii] Ibid., p 154.

[xviii] Beate Jahn, ‘Kant, Mill, and Illiberal Legacies in International Affairs’, International Organization, Volume 59, Issue 1 (Jan 2005), p 192.

[xix] Davison L. Budhoo, Enough Is Enough: Dear Mr. Camdessus … Open Letter of Resignation to the Managing Director of the International Monetary Fund (New York: New Horizons Press, 1990), p 102.

[xx] Ibid., p 2.

[xxi] Hickel, The Divide, p 158.

[xxii] Ibid., p 42.

[xxiii] Jubilee Debt Campaign, ‘Sixty-four countries spend more on debt payments than health’ (12 April 2020). Available from: https://jubileedebt.org.uk/press-release/sixty-four-countries-spend-more-on-debt-payments-than-health

[xxiv] Hickel, The Divide, p 177.

[xxv] Eric Holt-Giménez et al., ‘We already grow enough for 10 billion people … and still can’t end hunger’, Journal of Sustainable Agriculture, vol. 36, issue 6 (2012) p 595.


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