by
Jason Hickel
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[...] First, developing countries had to redirect all their existing cash flows and assets towards debt service. They had to cut spending on public services like healthcare and education and on subsidies for things like farming, food and infant industries; they also had to privatise public assets by selling off state companies like telecoms and railways. In other words, they had to reverse their developmentalist reforms. The savings gleaned from spending cuts and the proceeds of privatisation would then be funnelled back into Wall Street to repay debts. [...]
The second mechanism was slightly less direct. Countries that were subject to structural adjustment programmes were forced to radically deregulate their economies. They had to cut trade tariffs, open their markets to foreign competitors, abolish capital controls, abandon price controls and curb regulations on labour and the environment in order to 'attract foreign direct investment' and make their economies more 'efficient'. The claim was that these free-market reforms would increase the rate of economic growth and therefore enable quicker debt repayment. As the bankers put it, countries would be able to 'grow their way out of debt'. Debtor countries were also forced to orient their economies towards exports, to get more hard currency to repay their loans. This meant abandoning the import-substitution programmes they had used to such good effect during the developmentalist era. In addition, structural adjustment programmes required debtors to keep inflation low--a kind of monetary austerity--because the bankers feared they would use inflation to depreciate the value of their debt. This was a big blow to global South countries, not only because it prevented them from inflating away their debt, but also because it barred them from using monetary expansion to spur growth and create employment.
good summary
he describes it (p155) as a "three-part cocktail: austerity, privatisation and liberalisation"
[...] Major decisions require 85 per cent of the vote. Not incidentally, the United States holds about 16 per cent of the shares in both institutions, and therefore wields de facto veto power. The next largest shareholders are France, Germany, Japan and the UK--all members of the G7. Middle- and low-income countries, which together constitute some 85 per cent of the world's population, have only about 40 per cent of the world. [...]
also the president of the WB is always American, IMF European (appointed not elected)
When capitalism hits these limits, investors find themselves with fewer options for investing their capital, since nothing gives an acceptably high return. They can't just put it into savings because interest rates on savings accounts are typically lower than inflation, and that means losing money. This is what economists call a crisis of over-accumulation. In a crisis of over-accumulation, capital begins to lose its value--and according to the driving logic of capitalism, this cannot be allowed to happen. In order for capitalism to carry on, crises of over-accumulation have to be solved, someone needs to step in to provide a way to mop up the excess capital, to funnel it into some kind of profitable investment. It is an iron law.
earlier he mentions the ecological limit & the class conflict limit
later, the solutions: spatial/temporal fixes (stored here as vocab terms)
[...] given that structural adjustment destroyed growth rates, we can conclude that much of it came instead from the appropriation of already existing wealth. By requiring debtor countries to privatise public assets, the World Bank ad the IMF created opportunities for foreign companies to buy up telecoms, railroads, banks, hospitals, schools and every conceivable public utility at a handsome discount, and then either run them for private gain or strip them down and sell off the parts at a profit. The privatisation of public assets releases a tremendous asset into the market that was previously inaccessible to capital, creating new opportunities for profit. The World Bank alone privatised more than $2 trillion of assets in developing countries between 1984 and 2012. That amounts to an average of $72 billion per year of profitable opportunities for Western investors in addition to the $58 billion of high-interest bonds that the Bank sells on Wall Street each year.
important to keep this in mind when looking at, say, GDP stats during the SAP era--they will include the "value" of privatising assets that should really be public
[...] debt stocks have not reduced much at all. In fact, they have increased. External debt as a percentage of gross national income in the global South was 25 per cent in 1980, when the debt crisis struck. At the end of the first decade of structural adjustment, it was up to 38 per cent. By the end of the second decade, it was 39 per cent. In other words, structural adjustment failed even on its own putative terms. [...]
to consider: how do the relative numbers used here stack up with the numbers in absolute terms? what are the implications of considering one set of numbers over the other?
[...] The mobility of liquid capital is too perfect, while that of labour and fixed capital is not perfect enough.
think about this some more--some parallels to Mervyn King's theory of a mismatch between bank lending & deposits?
One of the problems with TI's methodology is that it measures people's perceptions of corruption, rather than corruption itself. People who live in Britain may not normally think of their country as being particularly corrupt, but that may be because corruption is something that they have been taught to associate with countries in the developing world--not with the rich world. In this case, Transparency International might be helping to create the very perceptions that it seeks to measure.
People find themselves surrounded by hideous poverty [...] They try to solve the problem of poverty, for instance, by keeping the poor alive. But this is not a solution: it is an aggravation of the difficulty. The proper aim is to try and reconstruct society on such a basis that poverty will be impossible. And the altruistic virtues have really prevented the carrying out of this aim. Just as the worst slave-owners were those who were kind to their slaves, and so prevented the horror of the system being realised by those who suffered from it, and understood by those who contemplated it, so, in the present state of things in England, the people who do most harm are the people who try to do most good. Charity degrades and demoralises.
he's quoting Oscar Wilde from the Soul of Man Under Socialism but I can't find a source that has the exact same wording that Hickel uses ...
[...] food aid from the West, for example, is carefully calculated to prevent the worst famines, to ensure that people receive at least enough calories to stay alive, because otherwise the injustices of the global economic system would become so apparent that its legitimacy would collapse and political upheaval would almost certainly ensure. To avoid this outcome, the more cynical among the rich are happy to channel some of their surplus into charity.
you can see neoliberalism as this very careful tightrope--too much of it and you end up redpilling/radicalising people against it; too little of it and you risk making capitalists unhappy
Some NGOs have called for debt 'relief' or even 'forgiveness', but these words send exactly the wrong message. By implying that debtors have committed some kind of sin, and by casting creditors as saviours, they reinforce the power imbalance that lies at the heart of the problem. The debt-as-in framing has been used to justify 'forgiving' debt while requiring harsh austerity measures that replicate the structural adjustment programmes that contributed to the debt crisis in the first place, effectively saying 'we will forgive your sins, but you will have to pay the price'. In other words, until now, debt forgiveness has largely just perpetuated the problem. If we want to be serious about dealing with debt, we need to challenge not only the debt itself but also the moral framing that supports it.
he cites Graeber on debt earlier in the book (you could even say that this book, as well as basically any other that mentions debt since 2011, is indebted to Graeber)