01 January 2008|
Rebuttal: Naomi Klein
Solving the problem of African poverty by promoting its cause
Gordon Brown has a new idea about how to "make poverty history" in time for the G-8 summit in Scotland. With Washington so far refusing to double its aid to Africa by 2015, the British Chancellor is appealing to the "richer oil-producing states" of the Middle East to fill the funding gap. "Oil wealth urged to save Africa," reads the headline in London's Observer.
Here is a better idea: Instead of Saudi Arabia's oil wealth being used to "save Africa," how about if Africa's oil wealth was used to save Africa--along with its gas, diamond, gold, platinum, chromium, ferroalloy and coal wealth?
That's a wonderful idea that would require deregulation, property rights, and a state commitment to free-market principles, all of which are skillfully eluded by your meandering reasoning. More distinctions will follow.
With all this noblesse oblige focused on saving Africa from its misery, it seems like a good time to remember someone else who tried to make poverty history: Ken Saro-Wiwa, who was killed ten years ago this November by the Nigerian government, along with eight other Ogoni activists, sentenced to death by hanging. Their crime was daring to insist that Nigeria was not poor at all but rich, and that it was political decisions made in the interests of Western multinational corporations that kept its people in desperate poverty. Saro-Wiwa gave his life to the idea that the vast oil wealth of the Niger Delta must leave behind more than polluted rivers, charred farmland, rancid air and crumbling schools. He asked not for charity, pity or "relief" but for justice.
Certainly, the Nigerian government was only acting in the interest of multinational corporations. That's why all of the outsourcing is pro bono work for the public sector and the government doesn't profit a dime off of its monopoly.
It's even difficult to write it sarcastically.
In terms of natural resources, do you think Nigerians would be willing to operate the refineries and distribution streams in order to get the oil out to the market? Certainly not - they would naturally apply their property rights and sell the resources to the global market.
What does that transaction achieve? It enriches the people of Nigeria through free-market competition rather than a corrupt dictatorship. The people are then manumitted from their resources. More than this, they profit off of them.
The world wonders how it can successfully transfer Africa's human capital from agricultural labor into more economically productive fields. It never thinks, however, that perhaps the Western organizations that have perfected the discovery, transportation, and positive exploitation of natural resources might do this service the best, provide the nation with capital, and free labor for expansion.
No, that's just too difficult.
The Movement for the Survival of the Ogoni People demanded that Shell compensate the people from whose land it had pumped roughly $30 billion worth of oil since the 1950s. The company turned to the government for help, and the Nigerian military turned its guns on demonstrators. Before his state-ordered hanging, Saro-Wiwa told the tribunal, "I and my colleagues are not the only ones on trial. Shell is here on trial.... The company has, indeed, ducked this particular trial, but its day will surely come."
Why would Shell compensate the people when its usurpation of resources was only facilitated by a government that clearly despises its people? Shell's actions involved the purchase of oil; the state's involved a denial of basic liberty (the right to property) in the pursuit of illegitimate and unshared wealth.
Again, think about this rationally. If only one of these two parties were guilty, which would it be? Or put a different way, would the Nigerian people be better off without Shell and with their dictatorship, or without their dictatorship and with Shell?
Examples of each include, for the latter, a specter of mind-boggling wealth and economic growth for a people (Scandinavia, anyone?) and for the former, well, Sub-Saharan Africa.
Put another way, suppose in the United States of America, you happen to notice a large oil reserve in your backyard. Soon, a transnational oil corporation expresses interest in your oil. Were the company to begin drilling and prospecting without fair compensation or permission, a just application of United States capitalistic property rights would legally force the company to reimburse you and likely face large punitive damages.
Additionally, a recent study by the World Bank showed that the most productive companies in Nigeria are those owned by multinational corporations or by non-African industrialists, including Indians, Chinese, and Lebanese.
In Africa, where statist policies nationalize resources (your panacea), the same situation would result exactly how it is resulting - massive oil revenues to the state and scarcely a dime to the people.
Ten years later, 70 percent of Nigerians still live on less than $1 a day and Shell is still making superprofits. Equatorial Guinea, which has a major oil deal with ExxonMobil, "got to keep a mere 12 percent of the oil revenues in the first year of its contract," according to a 60 Minutes report--a share so low it would have been scandalous even at the height of colonial oil pillage.
Shell would be making "superprofits" no matter who owned the resources, simply because the developed world demands oil to record degrees.
Most of the oil, also for the sake of your further embarrassment, comes from the Middle East, not Africa. African oil reserves are estimated at 76.7 billion barrels, barely above North America's 63.9 billion barrels. By contrast, the Middle East provides an estimated 685.6 billion barrels. Somehow I doubt that a market that offers 7% of aggregate supply can make or break "superprofits."
Furthermore, the distinction that should be made is that African governments are conspicuously making their own "superprofits" while the people starve - a situation unseen in any nation with capitalistic property rights protection, large amounts of natural resources or that is otherwise committed to free markets.
As for the case of Equatorial Guinea, the country has seen a massive increase in government revenue - I suppose you could call them "superprofits" - because of oil exportation. Yet somehow, the per capita GDP is barely above $2,000.
Why is that?
For one, the constitution vests all authority in the executive branch of the government. (Let's not forget, the president, Brig. Gen Teodoro Obiang Nguema Mbasogo, is president because he seized power in a military coup in 1979.) As a result, according to the CIA Factbook, most businesses are owned by government officials and their family members.
In fact, the U.S. Senate has uncovered vast sums paid by oil companies to the private American bank accounts of Mr. Nguema. The state owns the resources; the state gets the money. It's not rocket science.
This is what keeps Africa poor: not a lack of political will but the tremendous profitability of the current arrangement. Sub-Saharan Africa, the poorest place on earth, is also its most profitable investment destination: It offers, according to the World Bank's 2003 Global Development Finance report, "the highest returns on foreign direct investment of any region in the world." Africa is poor because its investors and its creditors are so unspeakably rich.
The profitability for oil companies would be unchanged were oil control deregulated and individuals granted control over resources. They would still have access to the oil. However, the profitability for African governments would plummet, thus enlightening you as to the solipsistic interests at play here.
In fact, one of the great pioneers of the power grab on the eve of Africa's independence, Ghana's Kwame Nkrumah, urged the emerging political elites: "Seek ye first the political kingdom and all else shall be given."
Why is that? You're staring the answer in the face: wealth.
More specifically, Africa's investors and creditors are unspeakably rich because Africa presents a wealth of natural resources obsessively desired by the developed world.
The entire point beyond the objectification of Africa's natural bounty is its relative worth on a global scale. What would Africa do with its vast oil resources, if not sell the sweet crude to industrialized Western nations? Run their tractors and mopeds? What would they do we the diamonds? String them to their cattle? Where would the minerals go, if not into Western laboratories?
The relative wealth of Africa's natural resources is great because the First World has such great use for them. Naturally, if private industry in Africa (not corporations, but small businesses, family businesses, farm cooperatives) owned the resources, the august wealth now flooding to despots would be flooding into the economy.
Yes, Africa's people are poor simply because they are not being paid for the world of the land on which they reside.
Westerners lack this state-imposed restriction. Here, farmers profit f when they sell their goods to big, bad, multinational corporations. More than this, capitalism gives the opportunity to profit without benefit of natural resource. Hong Kong, nearly devoid of natural resources, boasts a per capita GDP equivalent to the major four Western European nations - $34,200. For a growing economy, just add free markets.
Africa, by contrast, is the world's greatest example of nationalization. Only severe economic myopia would prescribe the cause of a problem as the solution.
The idea for which Saro-Wiwa died fighting--that the resources of the land should be used to benefit the people of that land--lies at the heart of every anticolonial struggle in history, from the Boston Tea Party to Iran's turfing of the Anglo-Iranian Oil Company in Abadan. This idea has been declared dead by the European Union's Constitution, by the National Security Strategy of the United States of America (which describes "free trade" not only as an economic policy but a "moral principle") and by countless trade agreements. And yet it simply refuses to die.
If it dies, so will it millions of individuals who will fall by the same misguided principle that starved millions in the U.S.S.R. Governments cannot create wealth. Wealth breeds wealth; free markets allow the gestation.
For what it is worth (specifically, the desecration of your citation of the Boston Tea Party), the Boston Tea Party was a people's revolt representing a case where government was siphoning capital from the people through taxes, tariffs and other economic intervention.
It certainly was not a revolt against business - as business was the greatest source of revenue for the region and was the sine qua non of an economic expansion that continues to this day in the United States of America.
Free trade was stifled by the British Crown, and the colonists revolted. Where socialism was injected into the American side of the revolution is beyond me. Perhaps "No Taxation Without Representation" was actually "No Transaction Without Nationalization"?
Congratulations, you crafty historical revisionist.
Yeah, bringing people out of poverty is a moral principle. We're tired of seeing statists slaughter millions and starve millions more. Show us wealthy nation without a strong rating on the Economic Freedom of the World Report. Show us a case of "exploitation" that doesn't involve state power.
Review (authentic) history first, and come back to me if you still want to nationalize the factors of production in the Third World.
You can see it most clearly in the relentless protests that drove Bolivia's president, Carlos Mesa, to offer his resignation. A decade ago Bolivia was forced by the IMF to privatize its oil and gas industries on the promise that it would increase growth and spread prosperity. When that didn't work, the lenders demanded that Bolivia make up its budget shortfall by increasing taxes on the working poor.
The tax increases are not what any capitalist country would prescribe in a condition of financial difficulty. Unfortunately for Bolivia, its inefficient government had amassed such a gargantuan debt that it required large sums of revenues. Basically, the entire problem necessitating IMF intervention was the poor allocation of resources by the Bolivian government.
Also, the IMF recommended raising taxes in general, not necessarily on the workers. The Bolivian government chose to raise them on individual incomes rather than corporate profits or other indexes of prosperity. When your government spends itself into bankruptcy, it will usually claw its way out by fleecing the people.
Corporations lack this ability. Oil companies have nothing to offer for oil resources except cold, hard cash. Governments get the cash, however, because they took the resources at the point of a gun.
The two inevitably conflict, and the economic health of the nation is contingent upon the victor. The West chose the cash; Africa is still staring down the barrel of the twelve-gauge.
With articles like yours, the continent will be sniffing the gunpowder for a while.
Bolivians had a better idea--take back the gas and use it for the benefit of the country. The debate now is over how much to take back. Evo Morales's Movement Toward Socialism favors taxing foreign profits by 50 percent. More radical indigenous groups, which have already seen their land stripped of its mineral wealth, want full nationalization and far more participation, what they call "nationalizing the government."
(For anyone who ever wondered what kind of people fall for people like Che Guevara, now you know.)
Scientists know that deleterious mutations are not accurately understood through the study of healthy organisms - they are undertood through the study of specimens that fail to develop successfully and healthily.
Likewise, we could easily point to the wealthiest nations in the world and the absolute causal correlation with economic freedom, capitalistic economic arrangements, and state support of open markets.
However, we could (more accurately) take our conclusions from the study of the nations who somehow do not see their GDPs grow with the rest of the world, the ones whose standards of living do not consistently improve and the ones who lack deregulated economic production and institutionalized state aggrandizement.
There's a single common denominator: lack of economic freedom, defined as limited government, promotion of free markets, access to capital, property right protection, and ease of entrepreneurship.
Neoliberalism, an ideology so powerful it tries to pass itself off as "modernity" while its maniacal true believers masquerade as disinterested technocrats, can no longer claim to be a consensus. It was decisively rejected by French voters when they said No to the EU Constitution, and you can see how hated it has become in Russia, where large majorities despise the profiteers of the disastrous 1990s privatizations and few mourned the recent sentencing of oil oligarch Mikhail Khodorkovsky.
To your cited points:
The French (with the Germans) have been spearheading the economic movement in the EU, and while it certainly isn't U.S.-style capitalism, only an economic dunce would mistake it for the arrant socialism you propose.
As for the Russians, what does the hatred of an oil oligarch have to do with the attitude towards an economic system? Certainly, they can't despise Mr. Khodorkovsky more than they despise Josef Stalin, who happened to slaughter millions of their countrymen. And then, if we're still reasoning entirely in synecdoche, wouldn't the Russians therefore despise socialism more than capitalism?
To your implied point:
If we were to take a poll of societies whose economic activity was controlled most by multinational corporations, what would we find?
Certainly the United States is the most corporate-friendly nation on earth. We also happen to be the wealthiest.
In Africa, where corporations control the oil while food, water, land, labor, education, and every other primary and secondary good is controlled by a manipulative state, what is their status?
Now, if we were to take the reverse poll. Judging by state intervention into the economy, whose people benefit? In Communist Cuba, the middle class Cubans live in shacks, drive forty-year old cars, and have rationed air conditioning; In Capitalist America, lower class Americans live in suburbs, drive brand new cars, and have swimming pools.
According to the World Bank, "In 1965 . . . incomes and exports per capita were higher in Ghana than in Korea . . . Korea's exports per capita overtook Ghana's in 1972, and its income level surpassed Ghana's four years later. Between 1965 and 1995 Korea's exports increased by 400 times in current dollars. Meanwhile, Ghana's increased only four times, and real earnings per capita fell to a fraction of their earlier value." The distinction? Free markets.
According to The Economist, While per capita GDP nearly halved in Nigeria and the number of people living below the poverty line skyrocketed between 1970 and 2000, per capita income in China increased sevenfold during the same period, lifting more than 400 million people out of poverty. The distinction? Deregulation.
All of this makes for interesting timing for the G-8 summit. Bob Geldof and the Make Poverty History crew have called for tens of thousands of people to go to Edinburgh and form a giant white band around the city center on July 2--a reference to the ubiquitous Make Poverty History bracelets.
Poverty is history in the sense that it is the glorious history of the state and its fantastic effects on economic growth. Poverty defined world affairs for most of human existence, until a phenomenon known as capitalism (also known as the limitation of state intervention) came into existence.
Capitalism has some prerequisites, however. For per capita wealth to increase along with national wealth, the national resources and factors of production must belong to the people through a comprehensive and assiduously enforced system of property rights. Africa lacks this - and their per capita wealth growth freezes to a halt.
Otherwise, a state-owned resource will accrue benefits only to the government - again, exactly what is happening in Africa. The only source of wealth to assist Africa doesn't exist in Africa; it exists in the West. For the capital to flow in, it must be exchanged with the resources of value you mentioned.
Large corporations, including oil companies, contribute billions of dollars to Africa - billions of dollars more than African governments are capable of providing themselves. Why wouldn't you want that money to go to the people?
But it seems a shame for a million people to travel all that way to be a giant bauble, a collective accessory to power. How about if, when all those people join hands, they declare themselves not a bracelet but a noose--a noose around the lethal economic policies that have already taken so many lives, for lack of medicine and clean water, for lack of justice.
If meaningful medicinal advances are created and distributed by any entity other than the research and development labs of greedy transnational corporations, you are welcome to give an example of an alternate hypothesis.
Every lifesaving drug created since the 20th century has been developed under the auspices of, produced and distributed by, and marketed for the economic benefit of pharmaceutical corporations.
Without pharmaceutical companies and their innovations, hospitals would be able to do nothing but employ village mystics and suck poison out of snake bites.
Beyond that, here are more of the greedy activities of pharmaceutical companies:
Pfizer has donated more than $100 million in medicine to 20 nations and trained more than 16,000 health-care providers in the diagnosis and treatment of fungal infections. Pfizer offers Diflucan, an anti-fungal medication, free of cost to countries where the rate of HIV infection is over 1 percent of the population. More than 4 million free doses of Diflucan had been administered by early 2004.
Bristol-Myers Squibb completed a five-year, $100-million commitment to HIV/AIDS facilities in South Africa, Namibia, Lesotho, Swaziland, and Botswana; the company recently pledged another $15 million to the effort in Senegal, Ivory Coast, Mali, and Burkina Faso.
Merck has given $50 million to the government of Botswana for anti-AIDS efforts and has combined that donation with a free supply of anti-retroviral medications.
GlaxoSmithKline has reached agreements with 55 nations, mostly in Africa, to deliver anti-retroviral drugs at cost. During 2003, the company provided 2.4 million doses of its most popular anti-retroviral drug, Combivir, to Third World nations, making no profit on the sales.
Abbott Laboratories also makes its protease inhibitors, Norvir and Kaletra, available at cost to 68 indigent nations, primarily in Africa.
Observing that Africa is the continent with the lowest life expectancy, highest death rates, and greatest poverty on Earth, it wouldn't be much of a leap to recognize that the only lethal economic policies are the ones that are currently denying capitalism its foothold for economic growth.
It is beyond comprehension that the formula delivering previously unseen prosperity to the earth's population somehow contains an intrinsic, invisible, arbitrary, unproven and unsubstantiated point at which it reverses economic law, empirical evidence, centuries of history and rational analysis as it eliminates the wealth, prosperity and equality that only it can or ever has delivered.
A noose like the one that killed Ken.
Cry me a river.
But when you do, please don't nationalize the fishing.
The above work is the opinion of the author, and not necessarily that of the Prometheus Institute.