Global Poverty in the Late 20th Century.

• Author: Chossudovsky, Michel

THE GLOBALIZATION OF POVERTY

The late 20th century will go down in world history as a period of global impoverishment marked by the collapse of productive systems in the developing world, the demise of national institutions and the disintegration of health and education programs. This "globalization of poverty"--which has largely reversed the achievements of post-war decolonization--was initiated in the Third World coinciding with the onslaught of the debt crisis. Since the 1990s, it has extended its grip to all major regions of the world including North America, Western Europe, the countries of the former Soviet block and the Newly Industrialized Countries (NICs) of South East Asia and the Far East.

In the 1990s, famines at the local level have erupted in sub-Saharan Africa, South Asia and parts of Latin America; health clinics and schools have been closed down; hundreds of millions of children have been denied the right to primary education. In the Third World, Eastern Europe and the Balkans, there has been a resurgence of infectious diseases including tuberculosis, malaria and cholera.

IMPOVERISHMENT -- AN OVERVIEW

Famine Formation in the Third World

From the dry savannah of the Sahelian belt, famine has extended its grip into the wet tropical heartland. A large part of the population of the African continent has been affected: 18 million people in Southern Africa (including 2 million refugees) are in "famine zones" and another 130 million in 10 countries are seriously at risk.(1) In the Horn of Africa, 23 million people (many of whom have already died) are "in danger of famine" according to a United Nations estimate.(2)

In the post-independence period extending through the 1980s, starvation deaths in South Asia had largely been limited to peripheral tribal areas. But in India today, there are indications of widespread impoverishment among both the rural and urban populations following the adoption of the 1991 New Economic Policy under the stewardship of the Bretton Woods institutions. More than 70 percent of rural households in India are small marginal farmers or landless farm workers, representing a population of over 400 million people. In irrigated areas, agricultural workers are employed for 200 days a year and in rain-fed farming for approximately 100 days. The phasing out of fertilizer subsidies--an explicit condition of the International Monetary Fund (IMF) agreement--and the increase in the prices of farm inputs and fuel is pushing a large number of small- and medium-sized farmers into bankruptcy.

A micro-level study conducted in 1991 on starvation deaths among handloom weavers in a relatively prosperous rural community in Andhra Pradesh sheds light on how local communities have been impoverished as a result of macroeconomic reform. The starvation deaths occurred in the months following the implementation of the New Economic Policy: with the devaluation and the lifting of controls on cotton yarn exports, the jump in the domestic price of cotton yarn led to a collapse in the pacham (24 meters) rate paid to the weaver by the middle-man (through the putting-out system). "Radhakrishnamurthy and his wife were able to weave between three and four pachams a month, bringing home the meagre income of 300 to 400 rupees (U.S.$12 to 16) for a family of six; then came the Union Budget of 24 July 1991, the price of cotton yarn jumped and the burden was passed on to the weaver. Radhakrishnamurthy's family income declined to Rs. 240-320 a month (U.S.$9.60 to 13.00)."(3) Radhakrishnamurthy of Gollapalli village in Guntur district died of starvation on 4 September 1991. Between 30 August and 10 November 1991, at least 73 starvation deaths were reported in only two districts of Andhra Pradesh.(4) There are 3.5 million handlooms throughout India supporting a population of some 17 million people.

Economic "Shock Therapy" in the former Soviet Union

When assessing the impact on earnings, employment and social services, the post-Cold War economic collapse in parts of eastern Europe appears to be far deeper and more destructive than that of the Great Depression. In the former Soviet Union (starting in early 1992), hyperinflation triggered by the downfall of the ruble contributed to rapidly eroding real earnings. Economic "shock therapy" combined with the privatization program precipitated entire industries into immediate liquidation, leading to lay-offs of millions of workers.

In the Russian Federation, prices increased one hundred times following the initial round of macroeconomic reforms adopted by the Yeltsin government in January 1992. Wages, on the other hand, increased tenfold. The evidence suggests that real purchasing power plummeted by more than 80 percent in the course of 1992.(5)

The reforms have dismantled both the military-industrial complex and the civilian economy. Economic decline has surpassed the plunge in production experienced in the Soviet Union at the height of the Second World War, following the German occupation of Byelorussia and parts of the Ukraine in 1941 and the extensive bombing of Soviet industrial infrastructure. The Soviet gross domestic product (GDP) had by 1942 declined by 22 percent in relation to pre-war levels.(6) In contrast, industrial output in the former Soviet Union plummeted by 48.8 percent and GDP by 44.0 percent between 1989 and 1995, according to official data, and output continues to fall.(7) Independent estimates, however, indicate a substantially greater drop and there is firm evidence that official figures have been manipulated.(8)

While the cost of living in eastern Europe and the Balkans was shooting up to western levels as a result of the deregulation of commodity markets, monthly minimum earnings were as low as ten dollars a month. "In Bulgaria, the World Bank and the Ministry of Labor and Social Assistance separately estimated that 90 percent of Bulgarians are living below the poverty threshold of U.S.$4 a day."(9) Old age pensions in 1997 were worth two dollars a month,(10) Unable to pay for electricity, water and transportation, population groups throughout the region have been brutally marginalized from the modern era.

Poverty and Unemployment in the West

Already during the Reagan-Thatcher era, but more significantly since the beginning of the 1990s, harsh austerity measures are gradually contributing to the disintegration of the welfare state. The achievements of the early post-war period are being reversed through the derogation of unemployment insurance schemes, the privatization of pension funds and social services and the decline of social security.

With the breakdown of the welfare state, high levels of youth unemployment are increasingly the source of social strife and civil dissent. In the United States, political figures decry the rise of youth violence, promising tougher sanctions without addressing the roots of the problem. Economic restructuring has transformed urban life, contributing to the "thirdworldization" of western cities. The environment of major metropolitan areas is marked by social apartheid: urban landscapes have become increasingly compartmentalized along social and ethnic lines. Poverty indicators such as infant mortality, unemployment and homelessness in the ghettos of American (and increasingly European) cities are in many respects comparable to those prevailing in the Third World.

Demise of the "Asian Tigers"

More recently, speculative movements against national currencies have contributed to the destabilization of some of the world's more successful "newly industrialized" economies (Indonesia, Thailand, Korea), leading virtually overnight to abrupt declines in the standard of living.

In China, successful poverty alleviation efforts are threatened by the impending privatization or forced bankruptcy of thousands of state enterprises and the resulting lay-offs of millions of workers. The number of workers to be laid off in state industrial enterprises is estimated to be on the order of 35 million.(11) In rural areas, there are approximately 130 million surplus workers.(12) This process has occurred alongside massive budget cuts in social programs, even as unemployment and inequality increase.

In the 1997 Asian currency crisis, billions of dollars of official central bank reserves were appropriated by institutional speculators. In other words, these countries are no longer able to "finance economic development" through the use of monetary policy. This depletion of official reserves is part and parcel of the process of economic restructuring leading to bankruptcy and mass unemployment. In other words, privately held capital in the hands of "institutional speculators" far exceeds the limited reserves of Asian central banks. The latter acting individually or collectively are no longer able to fight the tide of...