The authors cite the justification "development economists" give for keeping labor's share of national income low. They claim it's because economic growth depends on capital accumulation, and households have a "low capacity to save and invest" since they spend all they get. The rich, in contrast, have a high propensity to save and invest so the more income they have the greater the economic benefit. In the 1970s and 80s, this kind of reasoning led to a class war between capital and labor with wages in the US losing 10% of their value from 1974 to 1984 and in Latin America and Sub-Saharan Africa even more - 40% in Chile and Mexico and 50% in many other countries.
Then consider economic growth under the neoliberal economic model centered around FDI. It promised prosperity but delivered failure. After 20 years at the end of the 1990s, average per capita growth overall was cut in half from the earlier period of "state-led development." It was reduced to 1.5% from 3% in industrialized countries and in developing ones (excluding China and India) to 1.2% from 3.5%. For the poorest countries, it was even worse going from 1.9% to a negative 0.5% per year. The only exceptions were a group of eight Asian "rapidly growing countries" whose governments followed a policy of state intervention outside the neoliberal model and proved their way works best.
The authors cite data to show, aside from China and India, that the "neoliberal era of globalizing capital and neoimperialism" led to rising worldwide income inequality between richer and poorer countries and between higher and lower income classes within countries. They explained that "Of the countries with the highest indices of poverty, social exclusion, and income inequality 41 are in Africa; 10 in Asia; and six in the Americas," and per capital income in all developing regions (except South and East Asia) declined compared to industrialized OECD states. During the two decade neoliberal period, inequality between rich and poor nations nearly doubled. It proves how false the notion is that unfettered free market forces create a "trickle down" effect to the poor that lets them benefit from economic growth. Just the opposite happened and it continues.
The authors show how the "magnitude of the global income divide and associated problems is staggering" with the richest population quintile consuming 86% of all products and services and the poorest one only 1.3%. And the social inequality fallout is even worse - high unemployment, desperate poverty, malnutrition, untreated illnesses and low life expectancy with hundreds of thousands of needless daily children's deaths. And yet economists at the IMF and World Bank continue to tout the benefits of neoliberal "structural reforms" in spite of clear evidence they fail. In the pre-neoliberal 1950s, 60s and 70s, income inequality decreased overall but has increased in most countries since then. Again, the culprits are privatization, financial "liberalization," deregulation and downsizing with governments exploiting working people for capital.
Take Mexico, for example. It has 11 billionaires with combined incomes exceeding the total for the country's 40 million poorest. But the same thing is true everywhere with developing nations faring the worst. It affects 2.5 billion people in the world who are unable to meet their basic needs of food, shelter, clothing and medical care let alone education, clean water, adequate sanitation and other goods and services people in the West consider essential and take for granted.
Using Latin America as an example, the authors show how capitalists in the region sustained their profits by exploiting ordinary workers. During the neoliberal period, labor's share of national income was cut from 40% to less than 20%. Even today in countries like Venezuela (with all its social gains under Hugo Chavez since 1999) and Argentina, worker wages are still below their 1970 levels. It's because of market deregulation that give employers arbitrary power to fire workers, cut wages and hire temporary and casual labor. It's gotten bad enough to hit the middle class as well and cause a rising level of urban poor. A "new urban poor" has emerged who aren't simply "rural migrants" but include "socially excluded and downwardly mobile workers and the lower middle class (who've been fired) and have found (other) employment in the burgeoning (lower-paying, less secure) informal sector."
These people, the unemployed and "rural-to-urban migrants" constitute a reserve army of labor that keeps wages in the formal sector down and workers' bargaining power weak. Then there's the notion of "social exclusion" reflecting the condition of the poor with the authors identifying its six "major pillars:"
-- social production dispossession showing up in landlessness and rural outmigration;
-- no access to urban and rural markets or for wage employment;
-- no access to "good quality" employment;
-- reduced access to government social services;
-- no access to adequate income; and
-- no political power.
In contrast, 15 - 20% of Latin Americans enjoy a "First World" lifestyle with the authors citing their array of luxuries that are unimaginable to the poor and most middle income earners. And whatever the economic condition, they benefit from the imperial system regardless because neoliberalism works by taking from the exploited many and giving generously to the privileged few. Put another way, it's a hugely out of balance give and take, and it was set up that way despite its proponents denial.
The authors review the period when the World Bank discovered poverty and carried on its kind of three-decade war against it that was the equivalent of fighting fire by throwing fuel on it. Readers know the drill by now - governments getting out of the way and promoting unfettered free market policies, pro-growth, structural adjustments and the rest of the package favoring capital over people on the nonsensical claim they'll benefit eventually. By now Latin Americans know "manana" never comes, and even some World Bank economists like Joseph Stiglitz figured it out.
The authors sum up three decades of World Bank efforts saying we're "where we were in the 1970s and in a number of ways further back," especially with regard to greater poverty that's now hitting the middle class. Based on incontrovertible evidence, social inequality and poverty at the end of the 1990s stem from the "pro-growth, pro-poor" World Bank "imperialist policies" and the FDI regime along with deregulated, unfettered markets giving capital free reign to pillage for profit. But there's hope in the form of resistance with the authors stating "capitalist development in its neoliberal form is clearly on its last legs." For the poor of the world, it can't come soon enough.
I am a 72 year old, retired, progressive small businessman concerned about all the major national and world issues, committed to speak out and write about them.
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