By Sardar Khan Niazi
Rich countries and energy giants are to blame for throttling poor nations with predatory interest rates and crippling fuel prices.
UN chief Antonio Guterres rightly condemned rich countries’ treatment of poor States in his speech on the opening day of the UN’s Least Developed Countries (LDC) summit in Qatar on Saturday.
United Nations is perfectly aware of the inequities created by the unfair global economic and financial system. The global financial system designed by wealthy countries is mostly to their benefit.
Net growth in the global North depends on appropriation from the rest of the world.For the global North i.e. the US, Canada, Australia, New Zealand, Israel, Japan, Korea, and the rich economies of Europe, the gains are so large that, for the past couple of decades, they have outstripped the rate of economic growth.
It is a well-known fact that the industrial rise of rich countries depended on extraction from the global South during the colonial era. Europe’s industrial revolution relied in large part on cotton and sugar, grown on land stolen from Indigenous Americans, with forced labor from enslaved Africans.
Extraction from Asia and Africa was used to pay for infrastructure, public buildings, and welfare states in Europe – all the markers of modern development. The costs to the South, meanwhile, were catastrophic: genocide, dispossession, famine, and mass impoverishment.
Imperial powers finally withdrew most of their flags and armies from the South in the mid-20th century. However, over the following decades, economists and historians associated with dependency theory argue that the underlying patterns of colonial appropriation remain in place.
Colonial appropriation continues to define the global economy. Imperialism never ended. It has just changed form. Rich countries continue to rely on a large net appropriation from the global South, including tens of billions of tons of raw materials and hundreds of billions of hours of human labor per year.
This trend was visible not only in primary commodities but also in high-tech industrial goods like smartphones, laptops, computer chips, and cars, which over the past few decades have come to be overwhelmingly manufactured in the South.
These days, the global North drains from the South commodities worth $2.2 trillion per year, in Northern prices. For perspective, that amount of money would be enough to end extreme poverty, globally, fifteen times over.
Opulent countries have a monopoly on decision-making in the World Bank and IMF, they hold most of the bargaining power in the World Trade Organization, they use their power as creditors to dictate economic policy in debtor nations, and they control 97 percent of the world’s patents.
Northern states and corporations leverage this power to cheapen the prices of labor and resources in the global South, which allows them to achieve a net appropriation through trade.
During the 1980s and 1990s, IMF structural adjustment programs cut public sector wages and employment, while rolling back labor rights and other protective regulations, all of which cheapened labor and resources.
At present, poor countries are structurally dependent on foreign investment and have no choice but to compete with one another to offer cheap labor and resources in order to please the barons of international finance.
This guarantees a steady flow of disposable gadgets and fast fashion to affluent Northern consumers, but at extraordinary cost to human lives and ecosystems in the South.
Some techniques are available to fix this problem. One would be to democratize the institutions of global economic governance, so that poor countries have a fairer say in setting the terms of trade and finance.
One more step would be to ensure that poor countries have the right to use tariffs, subsidies, and other industrial policies to build sovereign economic capacity.