Tag: 3rd World

The first thing to understand is this: 3rd world GDP growth in the post-war liberal period (roughly 46-68 or so), was good.  It was above population growth in most cases.  That changed around about the time OPEC grabbed the West by short and curlies, squeezed and wound up with tons of money they didn’t know what to do with.  This is an act in three parts:

ACT 1: Banks Loan Money to Third World Countries

Lots and lots of it. The pitch is this: we know how to develop countries. You’ll borrow this money, invest in development and have more than enough money to pay off the loans. Except that they didn’t know how to develop countries and even those countries in which the leaders didn’t steal the money, the loans grew faster than the tax base, leaving governments less and less able to administer their own countries.

ACT II: Money, Money, Money and Cash Crops

So, you need $.  Foreign dollars.  How do you get them?  You could do what Japan, Korea, the United States and Britain all did, and develop real industry behind trade barriers, of course, but that’s not what the experts are telling you to do.  What they’re saying is “you have a competitive advantage in certain commodities: cash crops and maybe minerals. You should work on that.”

Most cash crops are best grown on plantations, so if you want to move your economy to cash crops, you have to move the subsistence farmers off their land.  That means they will go to the cities and need food that you no longer grow (since you’re growing cash crops to sell to Westerners.)  But hey, that’s ok, because with all the foreign currency you’ll be getting from bananas, coffee and so on, you’ll be able to buy that food from Europe and America and Canada.  Right?  Right!

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Except that everyone is getting this advice, and everyone is growing more cash crops, and the price drops through the floor and you have a thirty year commodities depression.  You can’t feed the people you’ve shoved off the land without taking more loans; there are no jobs for those people, so now instead of self-supporting peasants you’ve got a huge amount of people in slums.  But, on the bright side, while not enough hard currency has been created to develop, or even stay ahead of your loans, enough exists so that the leaders can get rich; the West can sell grain to you; and you can buy overpriced military gear from the West.  Win!  For everyone except about 90% of your population.

ACT III: The IMF

The above was standard IMF and World Bank advice, of course.  Don’t let anyone tell you that the World Bank or IMF want a country to develop; their actions say otherwise.  What they do need to do is push neo-liberal doctrine.  So, now that your country is vastly in debt and can’t feed itself without foreign food which must be bought in hard currency, the IMF says “well, we could give you more money, BUT”.

The but is that they want you to stop subsidies of food and let food prices float.  Then they want you to reduce tariffs on goods, even though tariffs are a huge source of tax revenue, because your government is crippled and your people have tiny incomes, so you really don’t have the ability to tax them.  Then they want you to open up your economy to foreigners buying it up, so foreigners can own every part of your economy worth having (anything that generates hard currency, basically.)

FINIS

After all this your country is a basket case.

Win, Win, Lose.

(This was the great commodities depression. It ends about 1998, but the vast debt overhang remains in most cases.)

Originally published October 10, 2014. I can’t write this any more succinctly than this.