We Need a New Union of the Poor Rooted in the Global South: The Forty-Third Newsletter (2022)
Greetings from the office of Tricontinental: Institute for Social Research.
Chaos reigns in the UK, where the Prime Minister’s residence in London – 10 Downing Street – is preparing for the hall of Rishi Sunak, one of the richest men in the country. Liz Truss rest in power for barely 45 days, shaken as was his government by a cycle of workers’ strikes and the mediocrity of its policies. In his mini-budget, which condemned his government, Truss opted for a full-scale neoliberal assault on the British public with both tax cuts and unacknowledged welfare cuts. The politicians surprised the international financial class, whose political role became clear when wealthy bondholders signaled their loss of confidence in the UK by throwing up government bonds, raising the cost of government borrowing and increasing mortgage payments for homeowners. It was this wealthy bond class that acted as the real opposition to the Truss government. Even the International Monetary Fund (IMF) weighed in with a strong statementclaiming that “the nature of the UK measures is likely to increase inequality”.
What is staggering here is the IMF’s concern about rising inequality. Over the 78-year history of the IMF, since its inception in 1944, the fund has rarely paid attention to the phenomenon of increasing inequalities. In fact, largely because of his policies, most countries in the Global South are stuck in an “austerity trap”, which has been shaped by the following processes:
- Old colonial histories of plunder meant that new post-World War II nations had to borrow money from their former colonial rulers.
- Borrowing this money to build key infrastructure that had not been built in colonial times meant that the loans were invested in long-term projects that did not pay off.
- Most of these countries were forced to borrow more money to settle interest payments on loans, leading to the Third World Debt Crisis of the 1980s.
- The IMF used structural adjustment programs to impose austerity in these countries as a condition for borrowing to repay loans. Austerity impoverished billions of people, whose labor continued to be drawn into cycles of accumulation and was used – often very productively – to enrich the few at the expense of the many who poured their sweat into the global commodity chain.
- A poorer population meant less social wealth in the Global South, despite increased industrialization, and this decline in social wealth alongside the plundering of resources meant both that there was less surplus to improve living conditions of the population and that the governments of these countries had to pay higher rates to borrow money in order to pay off their debts. This is why, from 1980, the countries of the South experienced a exit $4.2 trillion in public funds to pay the interest on their loans. This plunder is further compounded by the fact that an additional $16.3 trillion left countries of the Global South from 1980 to 2016 by trade misinvoicing and mispricing as well as balance of payments leakages and recorded financial transfers.
The ugly detritus of this process of routine impoverishment of the countries of the South is documented in detail in our file no. 57, The geopolitics of inequality: discussing pathways to a fairer world (October 2022). The brief, produced by our Buenos Aires office based on a detailed analysis of available datasets, shows that while inequality is a global phenomenon, the greatest reductions in livelihoods are experienced in the countries of the South. For example, the dossier states that “in the 163 countries of the world, only 32% of households have incomes above the world average. Of this total, only a few periphery countries have above-average incomes, while 100% of core countries are above average.”
This “geopolitics of inequality” persists, even though industrial production has shifted from the North to the South. Industrialization in the context of the global division of labor and global ownership of intellectual property rights means that while countries in the South harbor industrial production, they do not receive the gains from that production. “A paradigmatic case is that of the region of North Africa and the Middle East, which accounts for 185% of the manufacturing output of the North but only accounts for 15% of the per capita income of the rich countries”, notes the dossier. Otherwise, ‘[t]he global South produces 26% more manufactured goods than the North, but represents 80% less per capita income”.
Industrialization is underway in the countries of the South, but “the centers of global capitalism still control the process of production and the monetary capital which allow the initiation of cycles of productive accumulation”. These forms of control of the capitalist system (industry and finance) lead to the relentless increase in the wealth of billionaires (like the new British Prime Minister, Rishi Sunak) alongside the impoverishment of the many, most of whom live in poverty. no matter how hard or how hard they work. During the early years of the pandemic, for example, “a new billionaire appeared every 26 hours, while the incomes of 99% of the population fell”.
In the interest of building a path to a fairer world, the analysis of our dossier on the reproduction of inequalities ends with a five-point plan. These points are an invitation to dialogue.
- Partial disconnection from global chains. Here, we call for new trade and development regimes that provide for greater South-South participation and greater regionalism rather than being tied to global commodity chains anchored by the needs of the global North.
- State appropriation of revenue. Concrete state intervention through taxation (or nationalization) in the appropriation of revenues (such as land rents as well as mining and technological revenues) is essential to reduce the growth of ruling class incomes.
- Taxation of speculative capital. Large volumes of capital flee countries in the Global South, which can only be captured if there are capital controls or taxes on hot money.
- Nationalization of strategic goods and services. Key sectors of the economies of the countries of the South have been privatized and bought up by global finance capital, which expatriates the profits and makes decisions concerning these sectors according to their interests and not those of the workers.
- Taxation of exceptional profits of companies and individuals. The astronomical profits of corporations are largely invested in speculation rather than production or increasing the incomes and quality of life of the majority. Imposing a tax on super profits would be a step towards closing this gap.
Almost fifty years ago, the countries of the South, organized by the Non-Aligned Movement (NAM) and the G77, drew up a resolution called the New International Economic Order (NOEI) and was adopted in the United Nations General Assembly on May 1, 1974. The NOEI articulated a vision for trade and development that was not based on Southern dependence on from the North, with specific proposals around the transfer of science and technology, the creation of a new world monetary system, the maintenance of import substitution, cartelization and other strategies to strengthen food sovereignty and obtain higher prices for commodity sales, as well as greater South-South cooperation.
Many of the proposals sketched out in our dossier and refined for our time are drawn from the NOEI. Algerian President Houari Boumediene pushed the NOEI at the 1973 NAM meeting in Algiers. One year after the resolution passed at the UN, Boumédiène argued that the world was gripped by the “dialectic of domination and plunder on the one hand, and the dialectic of emancipation and recuperation on the other”. If the NOEI is not adopted and if the countries of the North refuse to transfer “the control and the use of the fruits of the resources belonging to the countries of the third world”, Boumédiène declared that it would result in an “uncontrollable conflagration”. However, rather than allowing the establishment of the NOEI, the West pursued a policy that created the third world debt crisis, leading to the “austerity trap” on the one hand and the anti-IMF riots the other. The story, since then, has not progressed.
In 1979, Tanzanian President Julius Nyerere said following the death of the NOEI and the birth of the Third World debt crisis that it was necessary to create a “union of the poor”. Such a political unity did not emerge at that time, nor does there exist such a “union” in our time. Its construction is a necessity.