As we discussed in the first article in this series, Neoliberalism: What Is It?, Neoliberalism is the dominant for of capitalism that our global economy. It began in the 1980s as a way to promote global trade and grow all economies.
The idea was that all countries could finally achieve economic equality, or close to it, by using the global market to their advantage.
Unfortunately, Global poverty and inequality has actually increased since the adoption of these policies by developed countries. Basically, there are some countries who are getting richer and some who are getting poorer. The middle-income countries are becoming fewer and fewer in number as they move into the afore mentioned categories. To understand this idea better we must look at financial institutions like the World Bank and the International Monetary Fund (IMF) who give loans to poor countries to help them work their way out of poverty and the power relationships that operate within the global economy. The IMF and the World Bank provide loans that have Neoliberal strings attached to them. These strings come in the form of loan conditions that force the country that received the loan to change their economic policies to fit with Neoliberal ideas. This often forces a reduction of protectionist policy for the poorest people of these nations, which makes them extremely vulnerable when their national economy is opened to the world. Many of these people are farmers whose goods must compete with highly subsidized western good that are much cheaper than their locally grown goods. This is causing them to lose their farms and move to cities to find work. This coupled with industrial agricultural companies buying up land once the country has opened their economy to the global market is fueling the mass migration to the cities in poor countries. The rapid urbanization causes shantytowns to pop up all over large urban areas. These slums house some of the poorest people in the world, who have no way out of the vicious cycle of poverty they find themselves in.
This is the foundation of the problem of extreme global poverty: Neoliberalism is a top down economic policy that does not benefit those who are impoverished.
Look at it this way, for every dollar in aid a developing country receives, that same country pays 25 dollars in debt repayment. How on earth will developing countries ever reduce poverty when the money they borrow is not being used to help the poor as it was intended to do? Developing countries are trapped in an increasing cycle of debt that becomes harder and harder to repay.
I think the inequality we see on a global scale can be epitomized in one mind numbing fact, in 2006; the world’s richest 497 people were worth 3.5 trillion dollars, which represents 7% of the world’s total GDP. That same year, the world’s lowest income countries that housed 2.4 billion people were worth just 1.6 trillion dollars, which only represents 3.3% of the word’s GDP.
This means that .000007% of the world’s population are worth over twice as much as the poorest 34% of the global population.
Incredible isn’t it? That we have created a system so skewed in wealthy countries’ favor that we are actually causing global poverty to rise. To learn more about this issue, click here to watch a short video by TheRules.Org. To see how neoliberalism has affected Jamaica, wait for my article next week!