Beyond Apologies
A lot is wrong with current economic thinking. The bad
effects are all around us: a worsening environment, growing
inequality, and bankrupt governments. But we cannot achieve
something better if we do not learn to identify and counter
the myths that hold us back. Beyond Apologies makes the case
for an economics not of waste, consumption, and inequality,
but of wellbeing.

Advance praise for Beyond Apologies:
“Economics does not have to be the dismal science. Many false assumptions have
crept into economics over the years. Debra Efroymson clears the air and shows
us how to build a prosperous and sustainable economy.”
– J.H. Crawford, author of Carfree Cities (International Books, 2002) and Carfree
Design Manual (International Books, 2009)
“Debra Efroymson’s new book, Beyond Apologies, is a must read for development
practitioners and social justice advocates working to question mainstream
development policies and programs. Efroymson deftly combines a historical
review of the unintended consequences of diverse poverty alleviation initiatives
from around the world with a sharp analysis of current policy debates and a
logically-drawn road map for fundamentally changing how practitioners should
think about development. The book is engagingly written and holds a treasure
trove of illustrative cases and data points that oblige the international development community to rethink economic assumptions and assess how policy
incoherence is driving counterproductive impact and harming the poor.”
– Judy Gearhart, Executive Director, International Labor Rights Forum
“Debra Efroymson debunks the myths that moneyed interests and big corporations use to justify their domination of our society. She also provides a clear
roadmap for those who want to show another world is possible. She presents
evidence, stories, and insights that health, environmental and social justice
activists can use to guide their efforts to create a healthier, more sustainable and
more just world.”
– Nicholas Freudenberg, Distinguished Professor of Public Health, City University of
New York and author of Lethal but Legal: Corporations, Consumption and Protecting Public Health (OUP, 2014)
Debra Efroymson has co-authored
the following publications:
Addressing Climate Change: Can We Reduce Carbon Emissions
While Increasing Quality of Life?
Broadening the Focus from Tobacco Control to NCD Prevention:
Enabling Environments for Better Health
Ecocity Planning: Images and Ideas
The Economic Contribution of Bangladeshi Women
through their Unpaid Labour
Enforcement of Tobacco Control Law: A Guide to the Basics
From the Field: Building and Maintaining Strong Networks
to Address Tobacco, Poverty, and Development
Livable Cities: Ideas and Action
Making the Tobacco and Poverty Link: Results from Research for Advocacy
Projects in Africa, Asia, and Latin America
Promoting Male Responsibility towards Greater Gender Equality
Public Space and Quality of Life: A Case Study of Mount Lavinia Beach
Public Spaces, How they Humanize Cities
Sometimes We Win: Tobacco Control Success Stories from Asia
Talking about Gender, Love, and Health
Tobacco and Poverty: Research for Advocacy Guidelines
Using Media and Research for Advocacy: Low Cost Ways to Increase Success
Youth Who Love Life Know About HIV/AIDS
BEYOND APOLOGIES
Defining and Achieving
An Economics of Wellbeing

Debra Efroymson
The Institute of Wellbeing
Dhaka, Bangladesh
Acknowledgments
This book would not have been possible without the generosity of many people
who contributed their ideas and stories. Their courage and fortitude in the face of
life’s obstacles are inspiring. Stimulating debates with colleagues, friends,
acquaintances, and the occasional stranger helped me to think through and clarify
my arguments.
I am deeply grateful to all those who reviewed and commented on various drafts
of this book, particularly Lori Wallach, Nicholas Freudenberg, Judy Gearhart, and
James Sargent. A special thanks to all my dear friends who gave me their
emotional support and encouragement as I worked on this book. There are far too
many of you to name individually, but special mention goes to Phaeba Abraham,
Abraham Thomas, Emmanuel Ayuk, Joan Meschino, and Anne Bertram.
Heartfelt thanks to Saifuddin Ahmed and all the staff at Work for a Better Bangladesh (WBB) Trust and the Institute of Wellbeing in Dhaka, who have given me the
opportunity to learn firsthand about the frustration and exhilaration of advocating
for policies to promote wellbeing. I would also like to thank my colleagues at the
HealthBridge Foundation of Canada (at which I have worked since 1995), who
gave me the much needed personal space and time to dedicate to researching and
writing this book.
Particularly warm thanks go to my wonderful friends and editors Kennie Lyman
and Lori Jones. Kennie helped me, over the course of multiple drafts, to rethink
and focus my arguments. Both helped me to unravel some of my more convoluted
arguments and to present my ideas in a clearer way. Lori also formatted the book
for the printed and online versions. I can never thank you both enough for all of
your patience, guidance, and support. All remaining errors and unclear passages
are entirely my own fault.
Copyright © 2015 by Debra Efroymson
Published by The Institute of Wellbeing
All rights reserved. Printed in Bangladesh. No part of this book may be reproduced without written permission except in the case of brief quotations.
Cover design and artwork by Saifuddin Ahmed
Layout and printing by Imex Media Ltd.
Efroymson, Debra, 1966Beyond Apologies: Defining and Achieving An Economics of Wellbeing/Debra
Efroymson
ISBN 978-984-99-8928-2
First Edition, 2015
CONTENTS
INTRODUCTION: WHY IT IS IMPORTANT TO LEARN ABOUT ECONOMICS ------
1
A Quick Economics Overview ------------------------------------------------------------------
1
Notes about this Book -----------------------------------------------------------------------------
9
Dedications ------------------------------------------------------------------------------------------
14
PART I. ECONOMICS REVISITED: WHAT WE’VE ALWAYS KNOWN ABOUT
ECONOMICS MAY NOT BE SO ---------------------------------------------------------------
18
Mainstream Economics versus an Economics of Wellbeing -----------------------------
18
MYTH #1: The Poor Just Need a Few More Dollars ---------------------------------------------
21
Defining Poverty ------------------------------------------------------------------------------------
21
Towards a Better Way: Moving from Dollars to Sense ------------------------------------
27
MYTH #2: GNP/GDP Tell Us How Well We Are Doing ----------------------------------------
36
What does GNP/GDP Actually Measure? ----------------------------------------------------
36
Towards a Better Way: Alternative Systems -------------------------------------------------
45
MYTH #3: Economic Growth is Necessary to End Poverty -----------------------------------
53
Economic Growth versus Poverty Alleviation -----------------------------------------------
53
Towards a Better Way Part I: Maximize Wellbeing -----------------------------------------
78
Towards a Better Way Part II: Achieving Prosperity through ‘Local Money’ --------
92
MYTH #4: The BWI Seek Primarily to Alleviate Poverty --------------------------------------- 100
The Origins and Evolution of the Bretton Woods Institutions -------------------------- 100
Towards a Better Way: Making Institutions Accountable to People ------------------- 115
MYTH #5: Aid Alone, or as Currently Practiced, Significantly Reduces Poverty --------- 120
Does Aid Bring Equality? ------------------------------------------------------------------------- 120
Towards a Better Way: Improving Aid and Finding Alternatives ---------------------- 126
MYTH #6: Microcredit & Income Generation are Miracle Cures ----------------------------- 135
Microcredit: A Silver Bullet to End Poverty? ------------------------------------------------- 135
Towards a Better Way: Pay More Attention to Income Preservation as a Small
but Important Piece of the Puzzle -------------------------------------------------------------- 145
MYTH #7: Extreme Inequality is Inevitable -------------------------------------------------------- 153
Why Inequality? ------------------------------------------------------------------------------------ 153
Towards a Better Way: Reducing Inequality ------------------------------------------------- 167
MYTH #8: Mainstream Economists Want Governments to Play Only a
Minimal Role in the Economy ------------------------------------------------------------------- 180
Mainstream Economists Want Small Governments That Leave Businesses
Alone...Or Do They? ------------------------------------------------------------------------------- 180
Towards a Better Way: Finding the Right Role for Government ------------------------ 193
MYTH #9: Whatever Governments Do, the Private Sector Can Do Better ----------------- 202
Privatizing the Public Purse: Efficiency and Effectiveness or Just More
Inequality? ------------------------------------------------------------------------------------------- 202
Towards a Better Way: Resisting Privatization and Strengthening Community ---- 214
MYTH #10: When Corporations Prosper, Everyone Prospers --------------------------------- 219
Private Profit, Public Loss ------------------------------------------------------------------------ 219
Towards a Better Way: Encouraging Small Local Businesses and Limiting the
Power of Corporations ---------------------------------------------------------------------------- 238
MYTH #11: Countries Should First Get Rich, Then Worry about Health and the
Environment ----------------------------------------------------------------------------------------- 249
Does it Make Sense to Sacrifice Wellbeing for Money? ----------------------------------- 249
Towards a Better Way: Prioritizing Health and the Environment ---------------------- 265
MYTH #12: The Mass Media Provides Unbiased Economic Reporting --------------------- 277
Promoting the Corporate Agenda -------------------------------------------------------------- 277
Towards a Better Way: Controls on Advertising, Support for Independent
Media, and Preserving the Internet ------------------------------------------------------------ 288
MYTH #13: Greed is Good ----------------------------------------------------------------------------- 293
The Defenders of Greed -------------------------------------------------------------------------- 293
Towards a Better Way: Generous and Moral Economics --------------------------------- 300
PART II. ACHIEVING AN ECONOMICS OF WELLBEING ---------------------------------- 303
Moving from Vision to Reality ------------------------------------------------------------------ 303
Getting Involved ------------------------------------------------------------------------------------ 304
A Few Advocacy Tips ----------------------------------------------------------------------------- 308
Dealing with a Sense of Hypocrisy/Inconsistency ----------------------------------------- 312
What Can I Do? -------------------------------------------------------------------------------------- 314
Can We Succeed? ----------------------------------------------------------------------------------- 319
A Word of Caution --------------------------------------------------------------------------------- 325
A Few Final Words of Advice ------------------------------------------------------------------- 326
CONCLUSION -------------------------------------------------------------------------------------------- 328
Bibliography ----------------------------------------------------------------------------------------- 330
INTRODUCTION:
Why It Is Important To Learn About Economics
“I am God.”
“Then I do not desire to have thee for a godfather,” said the man, “thou givest to the rich,
and leavest the poor to hunger.” – Grimm, Household Tales

A Quick Economics Overview
Wealth and squalor
We live in a world in which governments spend hundreds of billions of dollars
each year on weapons systems and wars while claiming that they cannot afford to
provide decent sanitation for their citizens or to keep them fed. It is a world in
which, during the recent global recession that brought devastating economic
failure to so many, the number of billionaires continued to increase. It is a world in
which people perceive that everything that matters to wellbeing – health, the environment, conservation of natural resources, resilient communities, and so on – has
no economic value unless it can be bought and sold. It is a world in which American leaders, despite living in one of the wealthiest countries, tell their citizens that
universal health care is unaffordable, as is the teaching of art and music in schools,
because the government is going bankrupt. Yet corporations in that same country
can legally avoid paying taxes.
We live in a world in which people consider it to be acceptable, even praiseworthy,
for individuals to become rich by destroying forests and rivers; in which pollution
is considered a necessary economic by-product and environmentalists are treated
as nuisances, if not as terrorists. It is a world in which global meetings on climate
change fail to reach any consensus for meaningful action because ‘economic’ interests consistently take priority.
Wealth and power accumulate in the hands of the rich, while those at the bottom
of the economic pyramid struggle for their very survival. In many countries,
people whose hard work consists of manual labour or providing vital services to
others earn a pittance, while those whose wealth comes from activities that
provide no tangible social benefit can gain enormous riches. An American
employed to care for others’ children or elderly relatives makes less than half the
national average annual wage ($19,099 versus $42,110).1 Meanwhile sports stars
and actors earn millions. Haitian factory workers earn twenty-eight cents per hour
sewing Disney-themed clothing, while the Disney CEO makes $97,000 per hour.2
Even in countries in which the majority of the population regularly goes hungry,
storeowners pack their shelves with luxury food items. Pharmaceutical companies
design an endless array of products to make people look better but fail to do the
INTRODUCTION
2
necessary research to find cures for diseases that destroy countless lives in lowconsumption countries. There are more than one hundred varieties of soft drinks
and bottled water available for purchase, yet over a billion people lack access to
clean and safe water.
The carrying capacity of the planet is finite. People cannot continue to generate
endlessly as if natural resources, including fuel, are infinite and as if the burning
of fuel and the disposal of products takes no toll. The planet’s inability to generate
infinite wealth means that as more wealth is concentrated in the hands of the few,
less is available for everyone else.i Just as more money allocated to weapons
systems means less money available for schools, so too does the redirection of
wealth to billionaires directly contribute to the continuation of poverty among
others. Rapid deterioration of the natural environment and rapid depletion of
natural resources spells poverty for future generations.
Low-consumption countries regularly enact policies pushed by international
institutions such as the World Bank and International Monetary Fund. However,
despite all the privatizations of former government enterprises, despite the diminished regulation of industry and of the financial sector, despite significant cuts to
taxes on the rich and corporations, the poor remain too poor to live secure lives
while the rich keep getting richer. While half of the world’s adults collectively own
just one percent of the $125 trillion in global wealth, the richest one percent of
adults own forty percent of it, and the richest ten percent own eighty-five percent.3
This is not so different from what Leo Tolstoy described in his novel Resurrection
more than a century ago: “...a society where millions struggled to provide an easy
life for a few, and where sufferings were so carefully hidden that the very ones
who benefited by them did not see and could not see them.”4 One difference
between Tolstoy’s day and ours is that now some of that global wealth is invested
in ‘corporate media,’ more commonly known as mass media. This allows the rich
and powerful to influence both consumerism and thought among the masses, as
they reinforce the doctrines of mainstream economics through that media.
It is, of course, possible to make money without generating wealth, for instance by speculating on currencies. Such behaviour causes other problems, though, since currency speculation can mean that others lose their lifesavings. People normally spend some portion of
their profit on products that require resources to produce, transport, and dispose
(mansions, fancy cars, or international travel). Large houses, golf courses, and exclusive
malls also take away space from other uses that benefit broader sections of society. In
theory, if the rich paid their employees decent wages and lived in smaller, more energyefficient homes, cycled and walked for transport, and spent their money on such things as
artwork and hiring musicians, their wealth would not take away from others.
i
3
BEYOND APOLOGIES
As corporate wealth and power grow, the inequality gap between the rich and
poor and the unequal treatment of peoples also increase. Some poverty alleviation
and development projects actually enrich the wealthy rather than improve the
lives of the poor. The push to grow biofuels and other large-scale cash crops, the
building of mines or dams, urban renewal: all can lead to the forced displacement
of poor local residents for the sake of ‘progress.’
The reality that some groups (such as the indigenous or those with darker skin)
tend to fare worse everywhere is often ignored in poverty alleviation schemes,
which are typically based on the ideal that everyone really does have an equal
chance and they simply need to be provided with the right opportunities to
succeed. A rising tide may indeed lift many boats, but it lifts some far more than
others; many capsize. The growth in inequality has serious social and health
consequences: homelessness, violence, infant mortality, mental illness, and
imprisonment.5 Yet, people generally dismiss protests to stop actions that harm
the poor as attempts to slow progress, to keep the poor in their poverty. Those who
oppose the notion of ‘progress at any cost’ are treated as though they should
apologize for their ‘backward thinking’ and are expected to watch silently as the
wave of destructive ‘development’ drowns the poor. Or must they? Is there a
better way?
Can we afford to ignore the environment?
Tropical storms and other extreme weather events are increasing in number and
intensity. Globally, temperatures are rising. Scientists continue to issue dire warnings about human-caused climate change that is contributing to severe water
scarcity (some countries such as India are already suffering from severe droughts
and famines) and to the potential loss of seafood.6 Life without water is impossible; feeding the world without the protein contributed by seafood would be
extremely difficult. Pollution and habitat loss also affect everyone on earth because
we live in an interconnected system in which different species require each other
for their survival.
A new study sponsored in part by NASA's Goddard Space Flight Center suggests
that global industrial civilization could collapse in the coming decades due to
unsustainable resource exploitation and increasingly unequal wealth distribution.
Other studies have noted that a convergence of food, water, and energy crises
could likewise cause collapse.7 There is no synthetic substitute for nature. The
question is not whether saving the environment is affordable, but how much environmental destruction can people inflict before humankind’s ability to survive on
the planet has been completely undermined.
INTRODUCTION
4
Why we must understand economics to increase wellbeing
“Conventional economics is a form of brain damage.” – David Suzuki8
* * *
Economics affects the environment and human wellbeing in two interconnected
ways. On the one hand, people’s lives are shaped in many ways by the opportunities that having money can create or by the crises that its absence causes. On the
other hand, mainstream economic thinking predicated upon the sanctity of ‘free’
markets dominates industry, government, and international affairs, and therefore
determines the very opportunities that exist.
People might believe that they freely choose their careers and places of residence,
that they independently decide whether to walk, cycle, take a bus or drive their
personal vehicles to work, that they are homo sapiens rather than homo economicus. In fact, the clothes that people wear, the food that they consume, the homes in
which they live, and the other people that they meet on the street are tied in no
small way to economics. Refusing to learn about economics does not mean that
people are able to stop their lives from being shaped in important ways by
economic forces beyond their control.
The widely accepted procedure for measuring national wealth (Gross Domestic
Product or GDP) bolsters these economic influences because it reflects mainstream
economic values. In this system, even economic activities that are environmentally
or socially destructive count as a contribution to national ‘wealth’ because they
generate financial gain for someone. This system also portrays policies designed
to protect health, the environment, or the poor as being financially draining,
making them actions for which one must apologize, rather than a logical part of a
framework that does accord value to the environment and to human wellbeing.
Decisions made on economic grounds affect everyone. Until it becomes clear how
those decisions are justified and where the flaws in the valuation of wealth are
located, people cannot counter these decisions with alternatives that focus on the
values of wellbeing and environmental sustainability.
National wealth calculations that do not include health, the environment, or natural resources often force people wishing to improve wellbeing to use standard
economic theories when arguing for their proposed actions. For example, instead
of being able to focus on its tremendous impact on population health, human
suffering, and the social fabric, health workers have to talk about how HIV/AIDS
damages national economies because it causes high mortality rates within the
most productive segment of the population. Rather than point out the polluting
effects of oil and gas production and use, environmentalists, if they wish to be
heard, are forced to explain how reducing carbon emissions can bring economic
5
BEYOND APOLOGIES
benefits by creating a series of new industries that will generate and supply clean
energy. Instead of focusing on the difficult living conditions of the poor, human
rights advocates have to argue that an entire society cannot develop economically
when it suffers from high rates of poverty within some segments of its population,
or when women do not have equal opportunities with men. Yes, one can explain
poor health, destruction of the environment, prejudice, poverty, and lack of opportunity in purely monetary terms, but advocates would not need to make those
arguments if calculations of national wealth addressed what actually matters.
Mainstream economics: handmaiden to the rich & powerful
For the elites to maintain their extreme wealth, they need an economic ideology
that defends their position from those who seek to redistribute wealth more
evenly. Mainstream economics serves that purpose. The pro-business, dominant
international approach to economics has various names: neoliberal, neoclassical,
or Chicago School of economics. Neoliberalism derives its name from the idea of
‘economic liberalization’ – by which its proponents mean less state involvement
and control (except when it comes to providing subsidies to the rich) and a greater
role for the private sector in providing all types of goods and services. Neoclassical economists claim to draw their principles from early (‘classical’) economists
such as Adam Smith and David Ricardo, who lived and wrote in the 1700s and
early 1800s. The Chicago School derives its name from Milton Friedman, formerly
a professor at the University of Chicago, who argued that government intervention in the economy was undesirable. All three schemes are part of the same broad
approach that this book refers to as mainstream economics.
Mainstream economists argue that people’s selfishness, consumption, and
inequality directly benefit others by stimulating the economy and creating jobs.
What matters, according to this view, is the total quantity of money that is generated, not how it is earned or how profits are distributed. In the words of a Forbes
writer, “If you can afford constant materialism like what I continually exhibit,
there’s no reason for criticism.”9 Those who remain poor, some economists
suggest, are lazy, foolish, and villainous. These economists argue that social
programs designed to support and benefit the poor discourage people from working. They suggest that society should focus on providing the conditions that will
allow the few to get rich rather than work directly towards a system in which all
can lead a decent existence. Tax cuts for the rich and slashes to social spending
will, these economists argue, ultimately lead to a wealthier society in which everyone benefits. The ‘free market,’ they claim, will allow consumers to communicate
their wants and needs via their spending, and this will allow only those companies that most effectively meet those needs and desires to prosper. Poverty, they
argue, is a problem that is best solved by means of the ‘free market’ and ‘free’
INTRODUCTION
6
trade, not by government intervention (which they call interference). These same
economists label dissenting voices – those who seek more economic equality – as
ignorant and dangerous. Most mainstream economists act in the interests of the
wealthy and powerful, not of the majority or of the environment.
The mainstream approach to economics is, however, full of mistruths and contradictions. Given their preference for the private sector, mainstream economists
believe that the primary role of government is to defend and protect private property. They claim to support small government and are opposed to taxes, regulations, oversight, and marketing restrictions that limit the expansion and prosperity of the private sector – and that are indispensable to protect the population and
the environment. For example, they claim that government-mandated minimum
wages or benefit packages for workers will discourage employers from hiring
more people because decent pay and working conditions would reduce corporate
profits. They object to public sector spending and programs that benefit the poor
and middle class; the private sector should provide such services, they argue, for
profit, if they are necessary at all. Yet they support, at least tacitly, enormous
government expenditures on military technology and materiel and on lucrative
contracts for large corporations (while arguing for corporate tax breaks that will
lessen government revenue).
Mainstream economists directly advise government leaders and policymakers
around the world. They also develop policies for global institutions such as the
World Bank and the International Monetary Fund, which the international
community ostensibly established to reduce poverty and national financial insecurity but that have become lenders, providing funds conditional on nations meeting certain policy requirements. Those requirements may vary slightly from country to country, but essentially these global financial institutions enforce the same
prescriptive policies everywhere: privatize government services, including the
provision of health care, electricity, and water (the private sector, they claim, will
provide these services with better quality and at a lower cost); encourage the liberalization of finance and trade; woo large corporations; and keep taxes on the rich
and on corporations low. The rationale is that corporations and their executives
will use the additional wealth they obtain through the privatization of public
services and the enactment of special foreign investor protections to create
employment for a broader section of society. This will allow, in turn, the resulting
wealth to ‘trickle down’ to all (except perhaps to the laziest and most unproductive people and in the most poorly managed countries). Thus, mainstream economists exert their influence globally, and corporations become more powerful than
national governments.
7
BEYOND APOLOGIES
By consensus, countries measure their economic progress in terms of GDP, that is,
the total production of goods and services within a country. They view an increasing GDP as a sign of economic progress, and a stagnant or declining GDP as a
cause for concern. With ever-increasing GDP as the goal, mainstream economists
argue that ever-increasing production and consumption are critical for a nation’s
financial health…even while maintaining that direct efforts to improve population
health and wellbeing are unaffordable.
Identifying economic myths and learning to counter them
Society cannot get to a better place without looking at what is holding it back.
Conventional beliefs about economics limit people to a few discourses and
solutions that, rather than resolve problems, increase their magnitude. It is thus
critically important to identify some widely accepted myths that underlie current
economic discourse and to offer a more helpful and hopeful way of looking at the
issues. Being free from dominant myths can lead to exciting new possibilities.
Countering myths also involves replacing them with realities that will lead to an
economics of wellbeing. People need to understand that acting in the interests of
the environment will not cause economic slowdown or job loss. They need to
understand that tax cuts for the wealthy do not stimulate the economy. They need
to understand that greater equality would not mean impoverishing everyone.
They need to stop apologizing for believing in something better, and learn to
counter their opponents’ arguments effectively, be it at the dinner table or in a
public debate. They need to learn enough about economics to stand up strongly
for what they believe in and to start realizing the great possibilities that existing
wealth would offer, if only people used it more wisely, more fairly, and more
justly. As American novelist Mark Twain remarked, “Often, the less there is to
justify a traditional custom, the harder it is to get rid of it.”10 Economic myths
persist not because they are true, but because they allow the rich to maintain the
status quo. They are necessary because they hide the otherwise obvious reality.
This book identifies various economic myths and suggests ways to counter them.
It does so by asking some difficult questions and by making some uncomfortable
suggestions. Doing so, of course, does not win popularity; many advocates find
themselves treading a fine line so that they do not offend people with their
message. Environmental groups in North America, for instance, rarely suggest
raising the tax on fuel to encourage people to use their cars less. Charitable organizations make a plea for generosity but refrain from suggesting that if people
wasted less, they could donate more. Many people avoid referring to social classes
and income groups, as if not mentioning them means that their existence will
disappear.
INTRODUCTION
8
People have become so used to the idea of economic growth and so dependent on
various aspects of the ‘modern’ life that they cannot imagine making major
changes. Instead, many people look to technology to save them from the consequences of modern lifestyles. Some technologies claim to offer the potential to
reduce resource consumption but typically result in the opposite outcome and
thus greater resource extraction.11 Just how much longer the world can sustain this
path is a serious issue. The literal fuel of economic growth is cheap oil, which
people continue to burn as if the supply is infinite; but it is no longer cheap, nor
will the supply last forever. For the last couple of years, the price per barrel has
hovered around $100.ii China and the United States are competing for their share
of a shrinking supply. Oil fuels virtually everything, including the manufacture of
many of our gadgets, toys, and processed foods; when oil prices increase, so do
other prices, including those of food, contributing to food riots in many countries
when basic nourishment becomes unaffordable. Some have tied the recent global
economic recession of 2007-2008 to the high price of oil.
People realize that it is unsustainable to centralize the growth of food in a few
places and to use large amounts of fuel both to grow and to ship that food, yet this
process continues unabated as they make little effort to focus instead on local
agricultural production without petroleum-based fertilizers. People talk about
reducing their dependence on oil and other fossil fuels (all of which are running
out) yet expect to maintain their current lifestyles. They talk about renewable
resources, but these are not sufficient to offset current energy use or to fuel ongoing economic growth. Ignoring these problems will not make them go away;
rather, it prevents us from finding the answers. It is my hope in writing this book
that when I raise these difficult issues I will not frighten away my readers. I believe
that it will require courage, honesty, and fresh thinking to work ourselves out of
some of the dilemmas in which we currently find ourselves. Or as Plato wrote
some 2,500 years ago, “Strange times are these in which we live when old and
young are taught falsehoods in school. And the person that dares to tell the truth
is called at once a lunatic and fool.”
As this book goes to press, the price of oil is down to $50 a barrel, the lowest price since
2009, and continues to decline. The low price is due to a number of reasons but is unlikely
to last.
ii
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BEYOND APOLOGIES
Notes about this Book
A note about geography
I intend this book to be internationally relevant. However, I draw many of my
examples from the United States, which, as the world’s economically dominant
country, exerts enormous influence over policies everywhere else. I also derive
many of my ideas and solutions from cities and countries in Asia. I write more
about the places where I have lived, particularly Bangladesh. I have tried to be
clear in the text about the locations to which I am referring. While most of the
concepts are universal, of course different regions and different communities may
need different solutions to solve their particular problems.
A note about terms
Throughout this book, I refer not to high-income and low-income countries but
rather to high-consumption and low-consumption ones. Referring to countries by
income level puts too much emphasis on money and not enough on wellbeing.
The countries with the highest per capita incomes also tend to be the ones that use
the most resources and contribute the most to climate change; there are better
models to follow. Low-consumption can be a virtue, especially when combined
with greater wellbeing.
Some pros and cons of using numbers to prove a point
Persuasive as they may appear, one must handle numbers with great care. It is far
too easy to manipulate the same set of numbers to support any argument, the limit
only being human creativity. For example, during the 1970s, Country X did well
economically thanks to the socialist policies then in play. The country’s economic
decline in the 1980s under more conservative policies (such as those espoused by
American President Reagan and British Prime Minister Thatcher) did not entirely
eliminate the gains of the 1970s. In comparing the country’s economic position in
1970 to its position in 1990, one might be able to attribute the improvement to the
conservative policies of the 1980s simply by ignoring what actually happened
during that decade. One can also carefully choose which numbers to use, putting
forth only those that support one’s case while ignoring those that contradict it.
Similarly, some economic measures sound compelling but in fact have little validity, such as per capita income (which ignores real income gaps) or the number of
people living on only one or two dollars a day (a point that will be discussed in the
first myth).
I do not mean, of course, to discredit numbers entirely; they are vital for comparisons and evaluation. Infant and maternal mortality, life expectancy, literacy rates,
and school enrolment, for example, demonstrate something real and important
INTRODUCTION
10
about a specific country’s situation. Such measures are particularly important
because they focus on the most vulnerable members of society. We simply have to
use numbers with caution. People should ask questions about which numbers are
being chosen and by whom, whether they actually measure what they claim to
measure, and whether there may be other explanations for the association
between the numbers and the situation to which they are being applied. More
simply, it helps to consider them within a logical framework that makes use not
only of figures but also of references to observable reality.
A note about myself
I grew up in Albuquerque, New Mexico, in the southwest United States. My
family was well off; my father was a university professor and my mother a nearly
full-time home manager. In addition to studying, I developed a fondness for
running and joined my school’s cross country and track teams. I’m not sure when
my awareness of inequality began, but I remember travelling around the state to
participate in races and being shocked at the poverty that I saw in rural New
Mexico (which in some respects resembles a low-consumption country). At
university, I read literature and other writings with strong social values. In my
early twenties, I lived in Guatemala for more than two years as a Peace Corps
volunteer working on public health and nutrition projects. While it quickly
became clear that my main utility to the town in which I was living was as an
object of amusement, it was equally clear that there would be at least one significant beneficiary from my posting: me. It was my first practical training in real-life
economics. Among other things, it was hard not to notice that some of those who
worked the hardest earned the least, both in terms of money and respect.
After Peace Corps, I spent a few years in the United States, first working at various
companies as a temporary secretary and then studying for a Masters degree in
Public Health. My secretarial work gave me some valuable insight into the corporate world. At graduate school, I learned the essential difference between public
health and medicine: while medicine focuses on treating the individual, public
health is about the health of entire populations and focuses more on prevention
than treatment. We were taught to see the bigger picture behind the suffering of
any particular individual: why does this happen, not just to this person, but to
anyone? What solutions exist to prevent this problem from occurring, at least to
this degree? While in graduate school, I also worked part-time for the Pan American Health Organization (PAHO), initially the precursor to and later a regional
part of the World Health Organization; this work introduced me to various issues
and countries in South America...and again to more real-life economics training.
11 BEYOND APOLOGIES
After getting my Masters degree, I moved to Vietnam in 1994 and have lived in
Asia ever since. After four years in Hanoi working on ‘integrated development,’
reproductive and sexual health, and tobacco control I have lived for more than
fourteen years in Dhaka, Bangladesh, and more than two years just outside of
Colombo, Sri Lanka. I have worked on a range of policies and programs involving
urban and transport planning, tobacco control, and reproductive health. I have
also had the opportunity, as part of my job, to travel a bit in Africa and Europe and
more widely within Asia. I have thus accumulated two decades of living and
working in low-consumption countries. My life has also been shaped by a love of
languages (which has led me to learn Spanish, French, Vietnamese, Bengali, and
Nepali) and of mixing with ‘ordinary’ people: sidewalk vendors, rickshaw wallah,
guards, and beggars. Having the chance to hear their stories and gain their insight
into the economic discourse has been eye-opening.
Nowhere has the intersection of economics and health become clearer to me than
in my work in tobacco control. A massive international effort and absurd quantities of money have been required to start to rein in the multinational corporations
producing just one unquestionably addictive and deadly product. How can corporations be more powerful than governments? Why do powerful elements in
governments exert so much effort to support these corporations?iii It is no secret
that tobacco kills, not only by the diseases it causes but also by diverting household spending from food.iv Yet when we try to convince a government to pass or
strengthen laws to reduce tobacco use, governments invariably come to the
defence not of their populations but of the tobacco industry. Why do Ministries of
Finance, Trade, and Industry have so much more power than Ministries of Health,
Children, Women’s Affairs, or the Environment?
In his many books and articles, Noam Chomsky describes some of the ways in which the
United States seeks to benefit its corporations, both recently and historically. Marion Nestle
and Michael Pollan discuss them in terms of food policies. For example, the United States
went to the World Trade Organization to fight on behalf of Chiquita bananas, saving the
company from bankruptcy at the cost of a years-long fight with European countries over
tariffs (Nestle, Food Politics: How the Food Industry Influences Nutrition and Health (Berkeley:
University of California Press, 2007)). The United States likewise continues to harm the
environment and impoverish farmers in order to keep corn cheap to benefit a very few very
rich corporations at the expense of farmers, the environment, animals, and consumers
(Pollan, The Omnivore’s Dilemma: A Natural History of Four Meals (New York: Penguin Books,
2007)).
iv We estimated that 10.5 million Bangladeshi children could eat better if their parents
shifted their spending from tobacco to food. Debra Efroymson, Saifuddin Ahmed, Joy
Townsend, et al. “Hungry for Tobacco: An Analysis of the Economic Impact of Tobacco on
the Poor in Bangladesh,” Tobacco Control 10 (2001): 212-217.
iii
INTRODUCTION
12
I see the same problem with urban planning and transportation: financial
concerns that have little to do with promoting liveable environments dominate
policy. Despite abundant evidence that expanding urban roads invites traffic
rather than solving congestion, governments continue to build them, including
elevated expressways. The corporations that sell fuel and cars and that build roads
have enough money and power to drown out opposing viewpoints. Again, money
talks far too loudly to allow for sensible discussions or decisions.
Over the years, I have realized that the reason for most of governments’ inexplicable decisions is a set of economic priorities derived from a rigid and highly damaging definition of economic good. Or they are simply due to the need to repay
favours received from the wealthy. Elite individuals and corporations influence
policy through their control of media, through intensive (mis)information
campaigns, and through payoffs, from the direct bribe (more common in so-called
‘corrupt’ countries) to the favours returned to corporations that support an
electoral campaign (as in the ‘less corrupt’ United States where such influence is
completely legal). Mainstream economics, meanwhile, serves to justify those
decisions. In the decision-making balance sheet, too often the only consideration is
short-term economic gain, while any potential negative effects or concerns about
equity are brushed aside as irrelevant. What matters, economists tell us, is the
economy. What exactly is ‘the economy’? An article in Forbes suggests that it is
simply a code word for the elite: “There’s nothing wrong with boosting the automobile industry or lining Apple’s pockets with cash. It helps the economy.”12
It is difficult not to become frustrated when trying to convince governments to ‘do
the right thing.’ One could give up, which, though tempting, hardly advances the
cause. Or, more productively, one could acquire new knowledge and skills to
improve one’s chance of success. Since most of what is hashed over in the mass
media and in common discourse about economics, development, and poverty
reduction is dangerously (even murderously) wrong, I have spent the last several
years trying to learn for myself.
I have observed daily life in different countries and talked to countless people,
particularly those who work hard for little material reward. I have read books and
articles about economics by alternative thinkers who have helped to shape the
ideas that this book presents. Some of the authors who have most influenced my
thinking include former New Zealand Member of Parliament and economist
Marilyn Waring, who dismisses the ability of GDP to say anything useful about
the state of the economy and certainly about how people are doing; economist and
author David Korten, who rephrases much of what is wrong with the world in
13
BEYOND APOLOGIES
terms of an ongoing battle between corporations and people; and the late John
Kenneth Galbraith, who served in the administrations of American presidents
Franklin D. Roosevelt, Harry S. Truman, John F. Kennedy, and Lyndon Johnson,
and who wrote about the need to challenge conventional economic thinking and
focus not on standard economic measures but on improving people’s quality of
life. All of these authors illustrate how much can be gained when we question
‘common knowledge’ and, in the phrase Galbraith coined, ‘conventional wisdom.’
Most recently, Naomi Klein has written about the way that capitalism has made it
impossible to respond appropriately to climate change. Her book supports many
of the arguments made here.13 Waring, Korten, Galbraith, Klein, and other writers
validate my optimistic belief that far better alternatives exist than what the mainstream economists are pushing. They show that we can do better than enact
policies that seem to be aimed at punishing rather than helping the poor; better
than agree to the self-serving claim that unlimited selfishness and greed are the
greatest contributors to the public good; better than allow the insistence that there
is only one economic path to follow and that all countries, however resistant, must
be forced to take it; better than accept the idea that the rule of corporations is
always preferable to the rule of governments. These alternative views demonstrate what I hope to make clear in this book and what activists around the world
are working hard to demonstrate: that a better world is possible.
Why I want you to read this book
Having gone to the trouble of writing this book, I naturally hope that people will
read it and take away something from it. However, there are more compelling
reasons for you to read it as well. Knowledge is indeed power and the lack of it can
leave us vulnerable. By fearing economics and leaving the subject to
professionally-trained economists, far too many of whom side with the rich and
powerful, those of us who are concerned with helping the less fortunate and
protecting the planet we live on disqualify ourselves from contributing our own
viewpoints to the debate. We thus find ourselves forced to play by their rules,
responding to their concerns, and apologizing for offering up anything that might
contradict their principles. We need to do better than that. E.F. Schumacher gave
to his famous book, Small is Beautiful, the subtitle “A Study of Economics As If
People Mattered.”14 To have any meaning in the real world, economics must be
concerned with people. Economics must look at the wellbeing of people, not just
at their material wealth.
Economics is a huge field; I only touch on relatively few issues in this book. I
address some of the gaps that typically occur within traditional economic explanations. I question whether some of the most common measures that people
INTRODUCTION
14
use in discussions about economics are valid, and I offer other alternatives that
would yield measures that more accurately reflect human wellbeing. I also question dominant ideas about economic development and suggest other approaches
that would lead to better results for people and for the world in which we live. In
short, I look beyond apologies and seek ways to define and achieve an economics
of wellbeing.
Dedications
Dedication #1
I dedicate this book to my dear friend and inspiration Carlo Fonseka, formerly
Chairman of the National Authority on Tobacco and Alcohol (NATA) in Sri Lanka.
Professor Fonseka is well known and respected in Sri Lanka for, among other
things, disproving claims of the religious nature of fire walking. Despite informing me that he finds my way of writing books odd (snatching at opportunities to
scribble a few lines during moments of leisure), he had the generosity to offer me
precious Galbraith tomes and other economics classics without asking me to
return them. He also had the foresight to insist that I actually read them before
finishing this book.
Dedication #2
In addition, I dedicate this book to anyone who has argued at the dinner table with
family and friends that government intervention is more effective than the ‘free
market’ in helping the less fortunate – and has been laughed at in consequence. I
hope this book will help all of you win such arguments, or at least amply befuddle
your opponents.
Dedication #3
Finally, I would like to dedicate this book to all the people who have taught me
that sometimes those with the least are the most generous, with their possessions,
their smiles, their knowledge, and all those other forms of wealth that typically go
uncounted:
 The hotel receptionist in Lao who insists on taking me to his mother’s wooden
home on stilts to feed me a meal of sour fish soup and sticky rice.
 The Vietnamese woman who lugs a pot of broth and noodles on a shoulder
pole and who, while I eat my meal, complains bitterly about how difficult her
life is and then hands me change because the payment I have made is too
high: “I won’t accept that much.”
 The Nepali shopkeepers who overcharge the tourists and give money to the
beggars.
15
BEYOND APOLOGIES
 The sellers of salted plums in Hanoi who treat me to glass after glass of sugarcane juice when I arrive sweaty on my bicycle at their shop.
 The Vietnamese woman who gives me green tea when I am about to collapse
from the heat after playing with the children in her village.
 All the people I have seen refuse payment, throw in extra goods, or help
others out in innumerable ways just because that’s what you do.
 The beggar in Dhaka who offers her umbrella to me in the pouring rain.
 The ragged boys playing cricket on the beach in Sri Lanka who ask me to join
in their game, their eyes alight with pleasure from the sheer fun of their play.
 All the Bangladeshi beggars I have come to know on my daily walks, who
suspend their pleas for money when they see me and instead offer a warm
greeting.
 The man with hands gnarled by leprosy who carries in his arms another man
with stick-like limbs.
 The beggar eating a piece of bread who makes a game of protesting that my
dog will steal it from him, then rips off a piece and offers it to him.
 The police officer who, while buying tennis shoes from a hawker, solicits
advice from two street girls who sagely instruct him on which is the most
fashionable pair.
 All those who seek to educate me about economics and inequality: The Dhaka
police officer who gives me an impromptu lecture on how wage inequality
demoralizes workers. The motorcycle driver/tourist guide at Angkor Wat
who complains about foreign tourists taking foreign-run tours, staying in
foreign-owned hotels, eating in foreign-owned restaurants, chauffeured
around in foreign air-conditioned buses, so that almost none of the money
they spend in Cambodia makes its way to the locals.
* * *
A Short Story about National Accounting Systems
Prakash is a farmer. He and his family are poor, but they own a small piece of land with a
fishpond, and they have a house and a bicycle. Life is difficult and they all work hard, but
they have enough to get by.
INTRODUCTION
16
One day a wealthy businessman’s car breaks down near Prakash’s house. While the
driver fixes the car, the businessman takes a rest under one of Prakash’s trees and engages
the farmer in conversation. The businessman, on seeing how little money Prakash has,
suggests that he could help. “Let me buy your bicycle,” he suggests, “and then you will
have some extra cash to spend. You could buy your wife and children new clothes, maybe
spoil yourself a little.”Prakash shakes his head. “If I sell my bicycle, how will I take my
children to school? How will we get to the market? No, I can’t sell it.”
The businessman looks a little surprised at Prakash’s obstinacy, but continues to try to
help. “How about selling me your house, then? That would give you a lot of money that
you could use for other things.”“Are you crazy?” Prakash exclaims. “If I sell my house,
where will we live?”
“Fine,” the businessman replies. “Let’s see…I know. I have friends who make fertilizer,
and they are having trouble finding places to dump their chemicals. How about letting
them dump them on your land? They would pay you a lot of money and you could get a
rest from farm work.” Prakash gasps in amazement. “Allow someone to pollute my land
and my water? Where would we bathe? How would we eat fish once chemicals pollute the
pond? You would ruin my land and pond not just for me but also for my children and
grandchildren, and their children and grandchildren. Do you think I’m crazy?”
The businessman heaves a sigh. It seems to be more difficult to help this stubborn man
than he had anticipated. “Listen,” he suggests, “you have a few children. Why don’t you
send one to the city to get a job? He could earn money instead of wasting his time here at
home.”
“Drop out of school in order to work?” Prakash demands. “Impossible! I would be
harming his chances of getting a good job in the future. Instead he would be stuck doing
menial labour for the rest of his life.”
“What about your wife, then?” the businessman suggests. “She isn’t contributing
anything valuable. Let her go to the city to work as a maid and send money
home.”Prakash’s eyes widen. “And without my wife, how would we survive here? Who
would clean and cook and take care of the younger children and wash our clothes and help
with the farm work? No, I could never do that.”
The businessman looks at Prakash in scorn, but before he can criticize him, his driver
appears and announces that the car is ready. He drives off, with one last look of disgust at
this crazy man who refuses to help himself. No wonder the poor are poor.
When governments calculate national wealth, they fail to consider the environment,
natural resources, or women’s unpaid domestic work. Governments do not look at a
healthy, educated population as a resource that is essential for a healthy economy; if they
17
BEYOND APOLOGIES
do consider such things as environment and health, they regard them separately, not as
an intrinsic aspect of national wealth. If individuals were as shortsighted in their
thinking as governments, they would all be sleeping on the streets.
Governments have much to learn from people like Prakash. After all, if we sell our future
for the sake of some ready cash, are we becoming wealthier? And the question naturally
arises: how could we help people like Prakash? Step One: let’s start by not further
impoverishing him.
Notes
Patton, “McDonald’s $8.25 Man and $8.75 Million CEO Shows Pay Gap,” Bloomberg
News 12 December 2012.
2 David C. Korten, When Corporations Rule the World, 2nd ed. (Bloomfield, Connecticut and
San Francisco: Kumarian and Berrett-Koehler, 2001).
3 James Davies, Susanna Sandström, Anthony Shorrocks, and Edward Wolff, The World
Distribution of Household Wealth (London & UN Secretariat, New York: World Institute for
Development Economics Research of the United Nations University (UNU-WIDER),
December 2006).
4 Leo Tolstoy, Resurrection, 1989.
5 On Point with Tom Ashbrook, “How Inequality Hurts Societies,”
http://onpoint.wbur.org/2011/01/27/inequality-societies accessed 7 August 2014.
6 If ocean temperatures rise high enough to kill plankton, the lowest element in the
sea-based food chain, there will be no nourishment available to sustain other sea
creatures. Plankton also removes half of all carbon dioxide from the atmosphere; its loss
would thus be catastrophic to all life on earth. “Climate Change Will Upset Vital Ocean
Chemical Cycles, Research Shows,” Science Daily 8 September 2013.
7 Nafeez Ahmed, “NASA-Funded Study: Industrial Civilisation Headed for 'Irreversible
Collapse'?” The Guardian 26 May 2014.
8 Live Toxin Free, “David Suzuki on Why Conventional Economics is a Form of Brain
Damage,”http://www.toxinfreefuture.com/david-suzuki-conventional-economics-form-br
ain-damage.html accessed 7 August 2014.
9 Luke Landes, “Resist Planned Obsolescence or Accept the Financial Consequences,”
Forbes 6 November 2012.
10 Mark Twain, The Adventures of Tom Sawyer.
11 Ahmed, “NASA-Funded Study.”
12 Landes, “Resist Planned Obsolescence.”
13 Naomi Klein, This Changes Everything: Capitalism versus the Climate (New York: Simon &
Schuster, 2014).
14 E.F. Schumacher, Small is Beautiful: A Study of Economics As If People Mattered (London:
Vintage Books, 1993).
1 Leslie
PART I. ECONOMICS REVISITED: What we’ve always
known about economics may not be so
Economics is “[a] social science concerned with how people, either individually or in
groups, attempt to allocate scarce resources, each with alternate uses, to meet their
unlimited wants through the processes of production, substitution and exchange.”
– Brian Goodall, Dictionary of Human Geography1

Mainstream Economics versus an Economics of Wellbeing
Most definitions of economics take scarcity of resources for granted (though in fact
most mainstream economists treat resources and the ‘sink’ capacity of the planet –
its ability to absorb pollution and waste – as infinite). Many resources are indeed
scarce, and it is vital that people make better use of them and share them in a more
equitable fashion. However, not all natural resources are finite. Intelligence,
creativity, ingenuity, generosity, and kindness are essentially unlimited. This does
not mean that ingenuity can help people to work their way out of all of their problems. It does mean that people can use these infinite resources to find a better way
to share the finite resources on this planet.
Nor are people’s needs unlimited, although their wants may well be. Allocating
goods and services would be far simpler if the focus was on meeting people’s
needs before worrying about their wants. Focusing on first meeting all people’s
basic needs – such as food, water, shelter, clothing, basic health care, companionship – and only then, within the limit of available resources, addressing their
material wants could lead to greater wellbeing without destroying the world’s
resource base.
Fortunately, not all needs or wants are material; friendship and human contact, for
instance, rely on renewable sources. Nor should we underestimate the importance
of those non-material needs; not everyone will be happier if they simply have
more stuff. Human contact is a necessity, as is illustrated by the fact that placing
prisoners in solitary confinement is “the most extreme sanction which may be
legally imposed on prisoners,” second only to the death penalty.2
One could define an economics of wellbeing as a study of how various resources,
both limited and unlimited, are allocated and exchanged to achieve the maximum
benefit for all people and for the environment. Such an approach would emphasise needs over wants, wellbeing over consumption, and cooperative approaches
that are consistent with social justice and with protecting the planet over competition and greed. Those who are interested in maximizing wellbeing need to find
ways to ensure the fair allocation of resources, focusing on social justice and on
protecting the environment. They will get little help from conventional economics
as they do so, however. By starting with an assumption of scarcity, one must
19
BEYOND APOLOGIES
discount cooperation in favour of competition. This in turn leads to isolation from
others and to the very qualities and behaviours most likely to threaten wellbeing.3
In order to find that better way, we must seek alternative discourses on economics.
Doing so may lead to the discovery that economics is less ‘dismal’ and more interesting than previously thought, and that people have the right and the need to
engage in discussions about it. Or as Indian novelist and social critic Arundhati
Roy writes, “One of the things that I really think we have to try to do is to snatch
our future back from the world of experts, to say, ‘I’m sorry, but it’s not that hard
to understand and it’s not that hard to explain.’”4 Learning about non-mainstream
economics can also help people to better understand why some efforts made to
reduce poverty are successful while others are not...although it is always wise in
this endeavour to mix theory with plenty of observation. Reality, unlike theory,
often fails to resemble economists’ models. We can make much progress towards
developing more human- and nature-centric ways of living by maintaining an
open, questioning mind and refusing to be bullied or coerced into accepting
common dogma.
By moving away from conventional economics and looking instead at what is
needed to improve the lot of people and the environment, many exciting new
vistas open up. But if those exciting possibilities are to be achieved, people must
learn how to counter the dominant voices in economics that are focused only on
money and material possessions but that have significant influence on policymakers and policies, and thus on the world in which we all live.
It is hard not to notice that something is deeply wrong with the current economic
system when walking past beggars on the sidewalk while $200,000 cars pass by on
the street, or when reading about India’s miraculous economic transformation
side by side with accounts of the powerless being pushed off their land and farmers committing suicide. From noticing those dichotomies to learning how one
could have a role in fixing the system can be a long yet intensely satisfying process
full of new thoughts, reflection on long-held beliefs, the emergence of exciting
possibilities, and the realization that the only hope for the future may be in a
complete reversal of current economic priorities and actions.
Getting there will not be easy. However, those seeking a better way will not be
alone in their struggles; working together makes the task easier and more enjoyable. Discovering exciting possibilities rewards people’s efforts. For all those wishing to have a role in making the world a better place, a first step is to learn about
the economic underpinnings of the current system and some of the many promising alternative approaches. The first part of this book addresses common – and
enduring – economic myths that severely limit the world’s ability to make
ECONOMICS REVISITED
20
progress on human wellbeing and sets out to debunk them.
Hint: Do not believe the old adage that hard work will be rewarded, at least not under a
capitalist system. Question why we value the money that buys farmland or a factory so
much more than the work of those who produce the food and goods.
Notes
Brian Goodall, The Penguin Dictionary of Human Geography (London: Penguin Books,
1987).
2 “Punitive or disciplinary segregation is the most serious punishment which can be
imposed on prisoners, and as such should be reserved for the most serious prison offences
and be proportional to them.” Sharon Shalev, Sourcebook on Solitary Confinement: The
Decision to Place Prisoners and Detainees in Solitary Confinement,
http://solitaryconfinement.org/uploads/sourcebook_03.pdf accessed 7 August 2014.
3 John McKnight and Peter Block, The Abundant Community: Awakening the Power of Families
and Neighborhoods (San Francisco: American Planning Association and Berrett-Koehler,
2010).
4 Arundhati Roy, The Shape of the Beast (New Delhi: Penguin Books India, 2009).
1
MYTH #1: The Poor Just Need a Few More Dollars
“Money is better than poverty, if only for financial reasons.”
– Woody Allen, Without Feathers
“The only problems that money can solve are money problems.”
– Unknown

Defining Poverty
A friend of mine who works for the United Nations and who was, at one point in
her career, a ‘poverty expert,’ once teasingly remarked that my cozy, compact
home in Sri Lanka barely qualified as decent poverty. I had, after all, only one
bedroom, a one-burner stove, and a kitchen that doubled as an office. On another
occasion, a colleague from the United Nations Development Program (UNDP)
informed me that she wanted the poor in Dhaka to join the middle class, which she
defined as ownership of a home and car. My friend’s joke and colleague’s comment
raise the important issue of what exactly those in the ‘business’ of poverty reduction aim to achieve. It matters what people mean by poverty, because how one
defines it also affects one’s goals, the likelihood of achieving them, and the extent
of environmental damage that results from providing the level of consumption
that one considers sufficient to raise people out of poverty.i
Let us start with the question of abject, material poverty.ii One common way to
define it is the number of people (or percentage of the population) living on less
than one or two dollars a day. While these parameters can identify a group of truly
needy people, this definition says very little about the experience of poverty.
Defining poverty strictly in monetary terms, such as number of dollars spent per
day, ignores the context in which people live their lives. How much people can
buy with their money varies widely across and even within countries. How much
money people need also varies considerably depending on the level of access they
The Myth about Economic Growth addresses the link between consumption and environmental damage in more detail.
ii It is not always possible (or desirable) to be politically correct when discussing poverty. In
some cases, I am unaware of a better term that could include a whole group and thus am
obliged to use a word to which I personally object or with which I do not agree (some ‘poor’
countries are far wealthier in culture, community, language, dress and generosity than
many ‘rich’ ones) or that may sound derogatory (‘lower classes’). However, it is more
important to spend time resolving the problems associated with poverty than to seek
uncontroversial terms with which to discuss them.
i
MYTH#1: THE POOR JUST NEED MORE DOLLARS
22
have to basic services.iii People living on fifty dollars a day in a high-consumption
country may still be extremely poor, while that amount would be considerable
elsewhere. Those in the countryside who live in their own homes and grow their
own food will typically need vastly less cash than those who live in cities. People
who have to pay for education and health care will need a lot more money than
will those who receive such services from the government for free.1
Rather than being measured in terms of dollars per day, abject poverty could more
meaningfully be described in other ways: as the inability to afford three decent
meals a day; as lacking sufficient shelter that protects against the cold or diseases
related to exposure (including rodent bites); as the inability to send one’s children
to school because the fees are unaffordable or because the children’s labour is
needed to help support the family; as the persistence of sleepless nights full of
worry about how to pay one’s medical bills or rent and the homelessness that may
result if these bills are not paid. Using such descriptions has the added benefit of
providing a clear image of people’s life circumstances, beyond the actual amount
of money that they earn.
One step above abject poverty is what medical anthropologist and physician Paul
Farmer calls ‘decent poverty.’iv People falling into this group would include those
whose housing is basic but still adequate to protect them from the elements and
from rodents. It takes account of those who have enough good quality food to stay
healthy, whose children are in school, and who have access to affordable health
care, but who cannot afford many non-essentials. Those living in decent poverty
may be unfashionably dressed, reside in simple housing, get about mainly by foot
or on bicycles and public buses, and often work at more than one job to get by —
but they do not suffer from cold, hunger, or the threat of imminent homelessness.
It is impossible to avoid the use of some vague terms; obviously adequate shelter is
relative and location-specific (adequate housing and clothing in a tropical climate could
prove deadly in a cold one). I was surprised at how well housed the poor were in La Paz
until I remembered that Bolivia has cold winters. Some North American cities address the
problem in less humane fashion through heating grates on which the homeless can sleep
during the winter.
iv “What happens when the destitute…stand up for what is theirs, to reclaim what was
theirs and was taken away, to ask only that they enjoy decent poverty rather
than…misery…?” Tracy Kidder, Mountains Beyond Mountains (New York and Toronto:
Random House, 2004).
iii
23
BEYOND APOLOGIES
A further step above decent poverty is relative poverty, which refers to those in the
lower middle or even middle classes. People in this group have far more than
enough to survive and enjoy various modest comforts, but still suffer from a
sensation of poverty when they compare themselves to their neighbours or others
in their city or country. They have enough food and decent housing, can afford the
occasional meal out and some fancier clothing, but struggle to pay the costs
needed to elevate their children to a higher class or to allow them to participate
fully in the middle class ideal of consumption. This may include the strain of
tutoring fees, the inability to afford a car, or the necessity to forgo shopping in
fancy stores or eating in expensive restaurants that their neighbours seem to
frequent.
When I lived in a small town in Guatemala, my host family felt wealthy. They
lived in a plain cinderblock house with a tin roof; it was impossible to be indoors
during the day because it was so hot. Nine people shared the one bathroom. However, unlike most families in the town of about two thousand people, they had a
flush toilet, some land of their own, and cows. They had plenty of food and could
afford to fix their broken TV.v I then moved to Florida, where I felt I was living it
up in my very simple apartment because I could drink water right from the tap,
the sinks and showers produced hot water on demand (not just when the sun
supplied it), and I only had to share the bathroom with one other person. A good
friend of mine at the time lived in a large house, her child attended a private
school, and both she and her husband held good white collar jobs; yet she felt poor
because others in her neighbourhood had far more, and more expensive, possessions. One’s sense of prosperity is certainly relative.
Research has shown that once people attain a basic level of wealth, they seem to
gain contentment from further increases in wealth only if they visibly rise above
their neighbours. Additional material wealth will not necessarily make people feel
less poor as long as there are others who have more. For example, the World Happiness Report, a comprehensive overview of various studies of wellbeing, finds that:
A household’s income counts for life satisfaction, but only in a limited way. Other
things matter more: community trust, mental and physical health, and the quality
of governance and rule of law. Raising incomes can raise happiness, especially in
poor societies, but fostering cooperation and community can do even more,
especially in rich societies that have a low marginal utility of income...[W]hile
absolute income is important in poor countries, in richer countries comparative
income is probably the most important.2
But why bother when they could spend their evenings singing rancheros with a guitar
under the lime tree?
v
MYTH#1: THE POOR JUST NEED MORE DOLLARS
24
As the above quote points out, wealth and deprivation are not only about money
and possessions. Chilean economist and environmentalist Artur Manfred MaxNeef observes that:
...one should speak not of poverty, but of poverties. In fact, any fundamental
human need that is not satisfied reveals a poverty: poverty of subsistence is due
to insufficient income, food, shelter, etc.; poverty of protection is due to violence,
the arms race, and so on; that of affection is due to authoritarianism, oppression
and exploitative relations with the natural environment; of understanding, to bad
quality of education, of participation, to marginalization and discrimination
against women, children, and minorities; of identity, to imposition of alien values
upon local and regional cultures, forced migration, political exile, etc. ...3
Those other poverties may seem at first to be less important than material ones,
but they can be as real and devastating as suffering from chronic hunger or cold.
While material and experiential poverties can coincide, often they do not.4 A friend
in West Africa commented on his experience after moving from a poor, dirty area
– where he constantly worried about the health of his wife and daughter – to a
‘wealthier’ part of town. His new home consisted of a couple of rooms in a threeunit, one-storey cement block; hardly fancy by Western standards, but a big step
up from his previous location. He told me that after his move, he had tried repeatedly to greet the neighbours on either side but they had not responded. This was
in stark contrast to his previous home, where admittedly there was little privacy
but at least people talked to each other and the surrounding open space was filled
with neighbours working and interacting.
* * *
While living in Dhaka, I changed apartments, moving to a far nicer location, partly to
escape the pervasive stench of sewage in my old neighbourhood. When robbers had tried
to break into my first apartment, a neighbour immediately saw them from her kitchen
window and ran to alert my landlord; a group of people then chased away the would-be
thieves. In the nicer location, people are more respectful of boundaries and neighbours do
not know each other; robberies happen unhindered. I find the area friendly, as many
people greet me when I pass through on foot, but virtually none of the people I pass
actually live there; they are vendors, guards, and beggars. The upper class come and go in
cars, have little casual contact with their neighbours, and are only superficially friendly.
Their help in a time of need is, unfortunately, somewhat unlikely.
* * *
Wealthy children and adults may suffer from a ‘paradoxical poverty’ in which
they have a large home, car, and plenty of food, but lack social connections and
confidence in dealing with their environment. I once asked a Bangladeshi woman
25
BEYOND APOLOGIES
to send her hefty 15-year-old son a few blocks to visit me; she declined on the basis
that she was too busy to take him and he might be kidnapped if he came alone. I
tried not to laugh at the image of the number of muscular kidnappers needed to
overpower her son, in daylight, on the typically crowded streets of Dhaka. However, I repeatedly see the result of the restrictions that the middle and upper class
place on their children: not just children but teenagers afraid to move about the
city alone and who often lack basic social skills due to their limited exposure to
people beyond their tight circle.
A multi-country UNESCO study on the relationship between community, poverty,
and the wellbeing of children and youth found that “…institutionalising young
people’s activities…can undermine young people’s autonomy and exacerbate
their separation from their own community.” In country after country, the report
found that the poorest children and youth were not necessarily the worst off. Not
just financial security but opportunities to engage with their community were
vital to the wellbeing of the young.5 People do better when they live in a supportive community where they can turn to their neighbours or colleagues for help;
where they have trust in others, be they officials or the people they see on the
streets; and where they feel that they have a valuable contribution to make to their
community. International research has shown that these are some of the ingredients that contribute much more than simple income to a sense of wellbeing.6
People might have a greater sense of wellbeing if they lived in a less consumeroriented society in which human relationships were seen as more valuable than
money.
The distinction as to what actually constitutes poverty is important. If one defines
poverty simply as not having enough money or not being able to purchase many
of the goods that are available for sale, then the simple solution is for people to
have more money. The poor do indeed need more money, but that money is only
helpful if they can use it to buy what they actually need. If people have more
money and the cost of living increases proportionately, they are no better off. Likewise, people would need a lot less money if they could meet their basic needs in
other ways, such as through government-provided services, self-production, or
local trade and barter. Even in megacities, people live in neighbourhoods that
could facilitate local exchange; rooftops and verandas provide space for growing
significant quantities of food. The question is not how much money people need,
but rather how they can access – not necessarily through purchases – the basics
that allow for a decent quality of life.
While working to reduce material poverty, it is important to attempt to maintain
or expand experiential richness. This requires acknowledging that poverty is not
MYTH#1: THE POOR JUST NEED MORE DOLLARS
26
just about material deprivation, and that communities that are poor in material
goods may be quite rich in other ways and vice versa. Those who ignore the nonmaterial aspects of poverty will fail to address them and, in doing so, potentially
further impoverish those they seek to help.
The focus on money as the solution to poverty also gives industries and governments an excuse to implement activities that can actually lower people’s wellbeing, such as building unsafe and polluting factories to create more jobs. Focusing
on money makes polluting industries look like a net benefit and ignores their environmental costs as well as the value of the entire social economy – all the
exchanges that occur without money. Without a measure focused on wellbeing, it
is difficult to explain why some people may be better off without a formal job or
why having access to an unpolluted river is more important than earning enough
to pay for privatized water supplies.
Given that those at the top of the economic pyramid should be consuming significantly less – both for the health of the planet and to make more available to others
– and that those in abject poverty should be consuming more, the focus should be
not on increasing per capita income but rather on bringing the living conditions of
the very poorest up to a decent level while reducing excess at the top. More of the
world’s limited non-renewable resources should be directed towards ending absolute, wretched poverty. In doing so, though, it is critical not to harm social structures or to worsen the environment; the focus should be on outcomes rather than
cash.
Hint: Beware of those who suggest that we can eliminate poverty without being specific
about what they mean by poverty or who focus on money rather than wellbeing.
* * *
Do NGOs have a role in reducing poverty?
I half-jokingly referred in the opening sentences of this chapter to the ‘business’ of
reducing poverty. In fact, non-government organizations or charities are a great
source of employment for many people. This leads to the unfortunate situation
that succeeding in the goal of reducing poverty would mean working oneself out
of a comfortable job. While NGOs are usually sincere in their efforts, how they
define poverty will determine whether they can succeed in reducing it. Yet reducing vaguely defined ‘poverty’ continues to be the target for many. A few examples:
Oxfam International seeks “to end poverty and injustice.”7 CARE’s slogan is
“Defending dignity, fighting poverty” and seeking to “expand economic
opportunity.”8 Nor is the focus on poverty limited to NGOs. The World Bank’s
mission “is to fight poverty with passion and professionalism for lasting results
27
BEYOND APOLOGIES
and to help people help themselves and their environment by providing
resources, sharing knowledge, building capacity and forging partnerships in the
public and private sectors.”9
Fight poverty. End poverty. Expand economic opportunity. Missing from these
slogans is the link between extreme wealth and extreme poverty. Missing is the
possibility of decent poverty – of modest lifestyles that are adequate for people’s
needs and not harmful to the planet. Also missing is the concept of social justice –
of a mechanism that regularly and automatically shifts wealth from the top down
and helps to ensure that it circulates there rather than rising back to the top.vi As
to the notion of fighting poverty, one may wonder if poverty actually fights back.
It does…especially when we focus on its symptoms rather than its causes.
NGOs certainly do have an important role to play in reducing or eliminating
abject poverty. In order to do so, they need to be clearer about what they mean
when they talk about ‘fighting’ and ‘ending’ it. When do NGOs say that they have
reached their goal? When NGO staff members receive high salaries and live well,
how much do they sympathize with their real target and how reasonable are their
goals?
Many NGOs do great work in the world. However, that work has limitations that
are absent in their documentation. To read NGO reports to donors, one would
think that nobody should be suffering anymore from violence, poor harvests, or
natural disasters. According to those reports, NGO projects are usually extremely
successful. Then why does abject poverty still exist?

Towards a Better Way: Moving from Dollars to Sense
“The benefit [of price controls] lay in ensuring that key components of a civilized life –
including electricity, communications, energy, banking, education, and health care – were
available to all, regardless of their money income. This fact placed a floor under the real
incomes of working, retired, and disabled people so far as the most basic consumption
goods were concerned.” – James Kenneth Galbraith10
* * *
Poverty is not a simple issue with simple answers. Poverty is about more than
money, and it is about more than material needs. On the bright side, this means
that even in circumstances of very limited money, it is possible to improve quality
of life significantly.
vi
I explore this point further in the Myth about Inequality.
MYTH#1: THE POOR JUST NEED MORE DOLLARS
28
Better measurement systems provide a better approach
As I discuss in more detail in the Myth about GDP, countries need a better way to
measure how well their populations are doing. Rather than measure poverty in
terms of dollars earned or spent per day, their focus should be on outcomes. It is
possible to measure people’s access to the essential necessities of life: sufficient
food, clean water, sanitation, shelter, education, health care, opportunities to
participate in community and government, and protection from the violence of
crime and war. Specific measures include life expectancy, maternal mortality,
infant mortality, calories consumed per day or number of meals skipped per
month, percentage of the population with access to clean water and a decent
latrine, percentage of the urban population that lives within 800 metres of a usable
public space, and so on. Countries and population groups could then rank as very
low, low, medium, high, and very high in terms of the wellbeing or quality of life
of their citizens.
Defining wellbeing more broadly…and working to achieve it
A broad definition of wellbeing is set out in the Universal Declaration of Human
Rights; Article 25 establishes that
Everyone has the right to a standard of living adequate for the health and wellbeing of himself and of his family, including food, clothing, housing and medical
care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in
circumstances beyond his control.
Article 26 of the Declaration further states, “Everyone has the right to education.
Education shall be free, at least in the elementary and fundamental stages. …
higher education shall be equally accessible to all on the basis of merit.”
Those concerned with alleviating poverty need to pressure governments to
provide more generous safety nets including free, universal, quality education (for
adults as well as children), health care (including programs to prevent disease and
make it easier for people to stay healthy), and transportation (good conditions for
walking and cycling as well as public transit). People need to pressure governments to increase access to sanitation, clean water, and healthy foods by enacting
policies to prohibit privatization of water and to subsidize healthy rather than
unhealthy food. People must push governments to redirect the money they
currently use to subsidize the rich and instead invest it in infrastructure and
programs to benefit the poor.vii
vii
There is more discussion of this topic in later myths.
29
BEYOND APOLOGIES
Many, though by no means all, poor people could work their way to a better life if
they had better opportunities to do so. Others, such as young orphans, mothers of
young children or of children with special needs, or people with a full-time
caretaking job at home, or those with various disabilities that make it impossible
to earn a sufficient living, will need government and community support, at least
temporarily. Efforts to increase access to paid employment must accompany
efforts to ensure the quality of that employment, including wages, working hours
and conditions, and holidays. Bangladeshi garment workers have reportedly
started rolling their eyes at attempts to increase their minimum wage, as the last
such increase, though far less than their demand, led to a proportionate increase
in the fees they pay for their onsite housing and food. Many workers pay more per
square foot for their housing than do residents of luxury apartments. A job is all
very well, but it is not enough to help people out of poverty if it pays an inadequate wage or puts an intolerable additional burden on the worker or fails to
protect workers from exploitation.
The more that governments and communities take care of basic needs, the more
money people will have available to access what is not free. Beyond education,
health care, and transport, there are other important areas of life. It is easier for
people to accept having smaller homes and less in-house entertainment when the
city is their living room. Great public spaces like parks and plazas can provide
entertainment, room for activity, and relief from isolation and loneliness.
What a decent standard of living might look like
For those who live in low-consumption countries, a decent standard of living
would include a home of sufficient quality to protect its residents from the
elements and from rodents, sufficient clothing to keep people warm, nutritious
food, easy access to potable water and a clean latrine, and enough electricity for
basic needs (such as lights and fans). There would not necessarily be running
water, and certainly not flush toilets, in every home. The standard would not
include washing machines, dishwashers, air conditioning, or in most cases motorcycles or cars.viii Some of these amenities, such as washing machines, might exist
Detailed discussions of global justice in terms of current divisions of the world’s
resources, and the grossly disproportionate share that Americans and some other nationalities consume, is beyond the scope of this book; the reader can draw her own conclusions.
Nor is it up to me to decide how the world’s poor will live. But discussions of a reasonable
level to aim at are vital to making wiser decisions about resource allocations and addressing poverty.
viii
MYTH#1: THE POOR JUST NEED MORE DOLLARS
30
in public places.ix In Guatemala, the shared place to access water – the community
pila – is where women gather to socialize, chatting as they wash clothes and
dishes. It would be more convenient for them to have water in their homes, but the
trade-off would be greater isolation from the community. Fewer heavily processed
foods and more fresh ones would help not only the environment but also public
health, as would fewer cars and fewer TVs. Even youth might not mind less time
with Facebook if, in return, they had better opportunities for face-to-face socializing and fun.
A little respect would go a long way
Imagine if people treated the homeless and others with little or no money with
great respect or friendliness, and the wealthiest with undisguised scorn. People
would pause to greet beggars or to sit on the sidewalk with them to listen to their
stories. Tired workers would relieve some of their stress by cursing drivers of big
fancy cars when they try to occupy parking spaces reserved for bicycle commuters. Better yet, the police would impound the Porsches while waving on the
Schwinns.x Imagine if the darker your skin, the better the treatment you received
in shops and restaurants, and if perks were reserved for the lowest-level employees. Janitors and cleaning women would have their own private canteen with the
best food; executives would have to walk down the hall to use a common and not
particularly clean toilet. Factory workers would go on junkets, and managers
would have only one bathroom break a day. Local officials would regularly fete
Prakash and his family for their low-impact lifestyle.
Pure fantasy, of course, but the point is that it is possible to separate income from
other advantages. At least some of the lure of wealth has less to do with consumption than with the prestige and other privileges associated with money. When
considering different approaches to addressing poverty, it helps to abandon
realism temporarily in favour of imagination. It is at such moments that the most
astonishing and beautiful possibilities can emerge, possibilities that are unlikely to
make themselves seen when one is simply arguing about how to remedy issues at
the margins without addressing various aspects of the status quo.
ix At least one author argues that there is joy to using Laundromats due to their social
possibilities. See Rick Risemberg’s take on them:
http://www.newcolonist.com/laundromat.html and
http://www.sustainablecitynews.com/laundromat3rd.html
x Schwinns are cheap bicycles.
31
BEYOND APOLOGIES
Of course taking a more enlightened social approach to the poor is no substitute
for major policy changes. However, those social approaches have their significance, and could help relieve some of the suffering of the poor while they wait for
needed policies to come about. While in university, I bumped into several
formerly homeless men in and around Boston, whom I recognized from the
shelter where I had volunteered. They informed me that simply being treated with
respect by Harvard students at the homeless shelter had made such a difference in
their self-confidence that they felt able to find a way out of their desperate
poverty. xi All of us can afford to be more generous with our smiles, nods, and brief
greetings to the poor and marginalized (including all the ‘invisible’ workers that
we encounter each day). They will likely appreciate the friendliness and their
returning smiles will make our lives a bit better. After all, the first step towards
demanding humane treatment is to believe that you are human, a belief that may
rapidly fade when your humanity is denied on a daily basis. This is one of the
easiest injustices to remedy, and one of the first steps to creating wellbeing.xii
Fixing transportation
In urban planning and transportation, as in tobacco control, fiscal concerns that
have little to do with promoting liveable environments dominate the discourse.
The experience of virtually all countries demonstrates that building more urban
roads encourages more traffic and thus results in more traffic injuries and deaths,
as well as pollution, destruction of valuable land, and high costs for maintenance
of the roads and the vehicles. In much of the world, the poor are marginalized in
communities far from the urban core and from jobs, schools, health care, and
almost everything else. They spend significant chunks of their income and of their
precious time just to avail themselves of high-cost, poor-quality transport, which
contributes to keeping them poor.
Many cities are now discouraging driving of private vehicles through measures
such as congestion charges, higher parking fees, restrictions on car ownership,
higher taxes, and urban planning that focuses on bringing destinations closer. At
One was working at a bank, another had found a construction job; a third, to my astonishment, was employed at the Massachusetts Institute of Technology (MIT): he showed me his
lab there. All three had found housing, either in a halfway house or with friends, and
carried themselves with pride.
xii A colleague told me about interviewing a man in Dhaka who pedals a rickshaw. The
rickshaw wallah said that the worst aspect of his job is the lack of respect that he faced every
single day.
xi
MYTH#1: THE POOR JUST NEED MORE DOLLARS
32
the same time, they encourage the space-saving modes of walking, cycling, and
public transport – all measures that have tremendous benefits for the poor. As a
result, in addition to having less congestion, less pollution, lower transport costs,
more public spaces (including reclaimed parking lots), and less need to tear down
increasing swathes of their city in order to build more roads, these cities are now
better places for the poor – and everyone else – to live.xiii These changes would also
provide multiple benefits for health and the environment, and would save money
for both governments and individuals.11 They also increase mobility options for
the large portions of the population that are too young, too old, too poor, or otherwise unable to drive.
The dual approach of the carrot and the stick is the most effective as well as the
most humane. It does little good to offer people an environmentally better
approach, such as public transit, while still making it easy to access everywhere by
car. Until there are fewer cars, it is nearly impossible to provide quality public
transit, as well as good conditions for walking and cycling. Higher fees for parking, for registering a car, for fuel, and so on can also fund needed improvements
in public and active transport that benefit everyone.xiv
* * *
Local funds for local improvements: In Mexico, a group has found a way to ensure that
parking fees pay for local parks and public spaces that benefit the poor. The group piloted
a new parking fee scheme in which the fees charged on streets in a specific neighbourhood
were used to upgrade public spaces in that neighbourhood. The community now loves
this program and new communities are requesting it.12 While all residents benefit, the
poor in particular appreciate better conditions for affordable transport (walking and
cycling) and free, outdoor recreation, since they cannot ‘opt out’ by using a car or paying
membership fees for recreation in private clubs. Such programs have the additional
benefit of allowing people to see where their taxes or fees are going, rather than having the
money disappear into the city’s coffers with no noticeable results.
* * *
While congestion charges and parking fees seem minimal compared to the price of
buying a car, they still are effective at changing people’s behaviour. What may be most
important in pricing policies to discourage waste is not the absolute amounts but a sudden
increase in prices that even the rich notice.
xiv ‘Active transport’ refers to human-powered transport, usually walking or cycling in
order to reach a destination. Active transport reduces congestion and pollution, provides
people with much-needed physical activity, and saves on transport costs; it also contributes
to making cities more sociable and liveable.
xiii
33
BEYOND APOLOGIES
First steps
Rather than working towards the vague goal of ‘poverty eradication,’ people
should focus on ensuring that nobody has to live in abject poverty. Fortuitously,
that goal is likely achievable by redistributing existing wealth – perhaps even
‘simply’ by dramatically reducing the wealth of the world’s billionaires and
multi-millionaires and redirecting it to those with the least. The goal is also achievable without causing irrevocable damage to the planet. Given all the resources
available today, there is no reason why people should go hungry, lack a decent
latrine or safe drinking water, and live in miserable shacks. Continued efforts to
redistribute wealth from the top down are necessary, through higher taxes on the
rich and on corporations to fund a wide range of social programs that would help
to alleviate the material suffering of the poor. Stringent employment laws would
allow more of the poor to work their way out of abject poverty. Among other
benefits, violence would decline in societies that are more egalitarian.
It is vital, however, to reduce non-material poverty at the same time as material
poverty. Encouraging popular involvement in local decision-making – such as
creating local committees that have a voice in local and regional funding allocations – would reduce political disempowerment. Ensuring that every community
has public spaces in which community members can gather at no cost would help
foster interaction, as would a focus on non-motorized (fuel-free) transport and
public transit. Less pollution and more attractive natural environments would
also enrich people’s lives. More emphasis on cooperation and less on competition
(in school, in sports, in our approach to promoting business) would contribute to
stronger, more vital communities. Strong social networks enhance wellbeing and
happiness and encourage problem solving; importantly, they do so without
depleting the resource base or destroying the environment.
Much of what today are considered ‘fringe’ movements (such as slow food, Community Supported Agriculture, food co-ops, and more cooperative approaches to
problem solving) need to move to center stage.xv If more people focused their
creativity and brainpower on solving problems, such as how to feed the world
without relying on transnational food companies, many solutions thus far unimagined would likely become evident. Someone with funding and a keen interest in
promoting wellbeing needs to recruit creative young people into such national
and international problem-solving efforts, especially those led by small, flexible,
In Community Supported Agriculture, people pay farmers at the beginning of the growing season (which allows the farmers to avoid taking out loans at interest) and receive a
portion of whatever produce the farmer grows during that season.
xv
MYTH#1: THE POOR JUST NEED MORE DOLLARS
34
freethinking groups. Now, the only decently-paid jobs many educated and
creative people can find are likely to be in large corporations, especially in marketing or other consumption-oriented businesses. Enticements are lacking, including
respect and other non-monetary incentives, to enter more socially useful professions. Enhancing wellbeing – defined in terms of meeting basic needs, encouraging strong social relations, and providing leisure and the enjoyment of a clean
environment and attractive public spaces – should be our goal, not just ‘ending
poverty.’
I talk more about how to achieve these desired changes in Part II of this book. For
now, a few key points. A goal of enhancing wellbeing for all does not mean that
everyone currently consuming more than the average would necessarily have to
reduce their consumption, but it would require a far more equitable distribution
of resources. The first step is to dramatically reduce the accumulation of wealth at
the top and shift it to the bottom. Some forms of self-denial will do nothing to help
the poor, like finishing all the food on your plate whether you want it or not
(because people of some obscure nationality are going hungry). Sacrifice for the
sake of decency is a useless gesture; what we need are actions that can actually
help others, such as conscious spending decisions that help to reallocate resources
to those in need.
We can all contribute to the redistribution of wealth and other important actions
by making an effort to buy from small, local shops rather than from Big Box stores.
(A colleague in India tells me that he has convinced various friends to buy from
small neighbourhood shops rather than big grocery stores, using the argument
that they should not want to make the owners of the big stores even richer.)
Buying from local shops might appear to cost more, as they cannot offer the same
low prices as the huge corporations. However, if the external costs were included
in these calculations – such as the effect of big box stores on local employment,
local businesses, and the environment – their goods would no longer seem so
cheap.
People in cities who have access to other means of transport can give less of their
money to oil companies by avoiding driving.
Those who work for NGOs need to challenge themselves by asking whether their
efforts are making as much of a difference as they should. ‘Grassroots’ work is, of
course, important, but it should feed into policy solutions. There is too little
connection in many countries between those with knowledge of community
conditions and those working on national policy approaches. NGOs need to
collaborate with each other, with the media, with government, and with other
interested parties to draft and work for the passage and implementation of
35
BEYOND APOLOGIES
policies that will reduce abject poverty and make life a bit easier for all. My
colleagues in Bangladesh, for instance, have successfully countered an initiative to
institute user fees in all public health services; more such campaigns are needed
around the world. Business as usual will not solve the world’s problems, though it
will keep some people comfortably employed. We need unusual approaches to
overcome the poverty of ideas and the multiple poverties of the poor.
Notes
1 Marilyn Waring, If Women Counted: A New Feminist Economics (New York: HarperCollins,
1990).
2 John Helliwell, Richard Layard and Jeffrey Sachs, eds., World Happiness Report (New
York: Earth Institute, Columbia University, 2012).
3 Manfred Max-Neef, “Human-Scale Economics: The Challenges Ahead,” in The Living
Economy: A New Economics in the Making, ed. Paul Ekins (London, New York: Routledge
and Kegan Paul, 1986).
4 Louise Chawla, Growing Up in an Urbanising World (Paris and London: UNESCO and
Earthscan, 2002).
5 Chawla, Growing Up.
6 Helliwell et al., World Happiness Report.
7 Oxfam International, “Who We Are,” http://www.oxfam.org/en/about accessed 13 July
2014.
8 CARE, “Our Work,” www.care.org/work accessed 13 July 2014.
9 World Bank, “What We Do,” http://www.worldbank.org/en/about/what-we-do accessed
13 July 2014.
10 James Kenneth Galbraith, The Predator State: How Conservatives Abandoned the Free Market
and Why Liberals Should Too (New York: Free Press, 2009).
11 Debra Efroymson, Roxana H Hafiz and Lori Jones, eds., Ecocity Planning: Images and
Ideas (Dhaka: WBB Trust, Bangladesh University of Engineering and Technology, and
Health Bridge, 2008), and Debra Efroymson, Maruf Rahman, and Ruhan Shama, Liveable
Cities: Ideas and Action (Dhaka: HealthBridge and WBB Trust, 2009). Available for free
download at www.healthbridge.ca
12 Andrés Sañudo, “Los parquímetros en Polanco: impactos, lecciones y tendencias para
México (Parking Meters in Polanco: Impacts, Lessons, and Trends for Mexico),” presentation made at Walk21, Mexico City, October 2012.
MYTH #2: GNP/GDP Tell Us How Well We Are Doing
“Gross National Producti does not allow for the health of our children, the quality of their
education, or the joy of their play. It does not include the beauty of our poetry or the
strength of our marriages, the intelligence of our public debate or the integrity of our
public officials. It measures neither our wit nor our courage, neither our wisdom nor our
learning, neither our compassion nor our devotion to our country; it measures everything,
in short, except that which makes life worthwhile.” -- Robert F. Kennedy1

What does GNP/GDP Actually Measure?
Economic considerations underlie many of the public policies that directly affect
people’s lives at the local, national, and international levels: How much does it
cost? Is it worth it? Is it affordable? To answer these questions, and to compare the
wealth of different countries or of a single country over time, one needs simple
measure that uses globally applicable specific and uniform standards. Since the
mid 1940s, governments and international institutions have used Gross National
Product (GNP) or Gross Domestic Product (GDP) to make these comparisons.
In the driest terms, GNP and GDP are measures of production. GNP takes the
total economic output of a country's goods and services, adds the income that
residents of that country earned abroad from investment or other means, and
deducts the country's goods and services owned by foreigners. That is, GNP measures production that generates income for a country’s residents. GDP, on the other
hand, measures the total economic output of goods and services valued at market
prices that a national economy produces in a given period (usually a year), regardless of whether that country’s residents own the resources. The United Nations
System of National Accounting (UNSNA) provides guidelines on what to count –
and what not to count – when measuring GDP so that the figure is comparable
whenever and wherever it is applied.
GDP purports to show the relative health of an economy: when GDP grows, the
economy is prospering; when GDP remains stable or declines, the economy is in
poor shape. All very simple and clear. But is it true? In fact, GDP reveals very little
about the real wealth of a nation and its people – and even less about their
As will be discussed below, the term Gross National Product (GNP) has for the most part
been replaced with the similar term Gross Domestic Product (GDP). Both refer to essentially the same thing, at least in terms of what Kennedy is discussing. While GDP is now the
common term, I also use GNP as many of the sources cited herein precede the formal
change in measurement.
i
37
BEYOND APOLOGIES
wellbeing.ii As former World Bank Chief Economist Joseph Stiglitz and others
have written, one should not conflate market production and consumption with
wealth, and especially not with well-being.2 Despite these warnings, however,
GDP continues to form part of the very foundation on which economic policies are
designed and promoted as ‘development.’ In order to question the policies that are
justified by GDP, people must understand the problem with the measurement tool
itself.
The origins of GNP/GDP
American officials first used GNP in the 1930s to measure the effects of the Great
Depression and to calculate the affordability of American involvement in World
War II.3 Years later, the 1944 Bretton Woods conference brought together representatives of forty-four countries to determine how to avoid future economic
catastrophes, such as the one that had led to the rise of fascism in Germany after
the First World War. By the time of the Bretton Woods conference, both the American and British treasuries were using methodologies based on GNP to analyse
domestic economic activity, and the two countries significantly influenced the
conference.
Delegates at the Bretton Woods conference established The World Bank and the
International Monetary Fund (IMF).iii In response to Germany’s postwar monetary
crisis, they created the World Bank to loan money to countries in times of dire
need, while the IMF was established to ensure the stability of monetary exchange
rates and to promote international trade. Both institutions later evolved into far
more powerful global entities that had the ability not only to determine but also to
enforce their economic policies; many of these policies continue to be justified
based on their potential positive effects on GDP. Following the Bretton Woods
conference, the IMF and the World Bank adopted GNP as the primary tool with
which to measure economic progress within and across countries. Ultimately, they
used GNP to demonstrate that their financial goals of increasing international
trade, privatizing social goods and services, reducing the number of people on
government payrolls, and so on were the best choices for the world’s economic
wellbeing.4
Over the past few decades, most countries have switched to calculating GDP
rather than GNP. The difference between the two is highly significant: according
For ease of discussion, throughout this book I accord more of a personality to GDP than it
deserves. GDP is simply a number resulting from a specified system of national accounting.
iii A more detailed discussion of the myths about the Bretton Woods Institutions (BWI) and
their relationship to poverty and wellbeing follows later in this book.
ii
MYTH#2: GDP TELLS US HOW WELL WE ARE DOING
38
to economist Marilyn Waring, the switch to GDP came about because expected
improvements in the GNP of developing countries during the United Nations
development decade (the 1960s) failed to materialize. The United Nations then
told governments to switch to measuring GDP which demonstrated significant
economic ‘improvements’ in many low-consumption countries due to foreign
direct investment and foreign ownership of resources and local production.5 With
the growing emphasis on ‘globalization,’ it should perhaps come as no surprise
that a measure that fails to distinguish whether a nation’s wealth belongs mainly
to foreigners or to locals should be the ‘preferred’ measurement unit.
Why GDP is not a good measure of wealth
Although it focuses on production, GDP is, in fact, a poor measure of wealth. It is
useless as a measure of wellbeing. The following outlines some of its significant
shortcomings.
(1) It reflects only averages. GDP is expressed in per capita terms: the total wealth
generated within a country divided by its population. This approach would seem
to make sense, as a lot of wealth shared by a few people is not the same thing as a
comparable amount of wealth shared by a large population. However, GDP per
capita does not tell us how evenly that wealth spreads across population groups
in a country. It also ignores all individual, regional, class, race, ethnic, sex, and
other differences. While some countries are clearly more materially wealthy than
others are, high-consumption countries often contain pockets of intense poverty,
just as low-consumption countries typically contain pockets of extreme wealth.
Per capita GDP tells us nothing about the extent of such disparity or about the
distribution of the limited wealth that it does measure. Even in Niger, which sits at
the absolute bottom of the United Nation’s Human Development Index,iv expensive cars roam the streets on which most people have to walk and supermarkets
sell fancy French jams and cheeses while most people go hungry. The mineral
resources of the country enrich the few – and often foreigners – rather than meet
the basic needs of the many. Or, in the words of one local NGO activist, Niger is a
rich country with poor people. To use the example of American economist, professor, and Nobel laureate Paul Krugman: when a billionaire walks into a bar, the
‘average wealth’ in the bar goes through the ceiling, but the other customers in the
bar are no richer than they were before he arrived.6
GDP also says nothing about a country’s economic structure. It fails to distinguish
between an economy in which there are many small, independent businesses and
one dominated by a few monolithic multinational corporations.
iv
I discuss this in more detail below.
39
BEYOND APOLOGIES
(2) Disasters are welcome. In 2011, disastrous floods wreaked havoc around Bangkok. People stocked up on rowboats and thigh-high rubber boots. Some people
living in the suburbs had to row their own boats to a military station, then be taken
by an army boat to the nearest operational public transit station in order to reach
the city. The rebuilding of the roads and houses damaged by the flooding and the
landslides actually added to Thailand’s GDP, as did all those purchases of rubber
boots and boats; however, the value of the houses, roads, and so on that were
destroyed by the disaster were not subtracted.
While it is not entirely clear if intensive logging contributed to the floods in Bangkok, some disasters are entirely man-made. As American columnist and regular
commentator on domestic and economic policymaking Ezra Klein wrote in The
Washington Post, the disastrous BP oil spill in the Gulf of Mexico in April 2010
could lead to an increase in America’s GDP. v After all, an estimated 4,000 workers
were employed to clean it up. “This is a nice object lesson in the inadequacy of
GDP,” Klein wrote. “I could blow up the biggest building in every city in the country and the resulting reconstruction effort could mean a big temporary increase in
GDP. But blowing up buildings is not a sustainable way to grow your economy.”7
A car crash that requires someone to buy a new car, a fire that causes people to
build a new home, or an epidemic that leads to an upsurge in medical care are all
measured as increases in GDP. However, are the people involved really better off
than they were before the disaster? To make the measure more meaningful and to
make it clear that disasters are not desirable – economically or otherwise – GDP
calculations should subtract the losses that occur from disasters.
(3) Work and consumption only count if money is involved. It is important to
consider not just what GDP includes but also what it leaves out. For the most part,
GDP only measures exchanges if they involve money. The rules for calculating
GDP specifically exclude household work, collecting firewood and water, family
members helping with family enterprises or working in the family fields, and
caring for others. Such activities are counted only if they are done for direct wages
or as someone’s ‘primary occupation;’ but since most women globally do not have
a single ‘primary occupation,’ most of the work that they do is not included in
GDP. Most of the tasks typically performed worldwide by men, however, are.
When the work that women do without pay is not counted, women are not
counted, giving the impression that women fail to contribute to the economy.8
Disastrous as are oil spills, the everyday use of the car actually results in more spillage
than do spectacular tanker accidents. Routine oil changes and leaks pour hundreds of
millions of gallons of oil into the ground and waterways in just the United States alone each
year. Jayne Holtz Kay, Asphalt Nation (Berkeley: University of California Press, 1998).
v
MYTH#2: GDP TELLS US HOW WELL WE ARE DOING
40
Such an impression contributes to gender inequality and can involve billions of
dollars of distortions in economic thinking. Calculations of what it would cost to
pay someone else to do the work that women do every day without compensation,
such as caring for home and family as well as collecting firewood and water,
would in many cases be in the billions of dollars per country, essentially doubling
a country’s GDP.9
Using GDP as a measure means that production and consumption for sale is more
valued than work done by oneself, in one’s home, and for one’s family. A country
in which people pay others to look after their children, elderly, and unwell, or
where people buy most of what they consume rather than growing it or making it
at home, appears richer than one in which such activities are done at the household level. GDP thus makes industrialized societies look much better off than
countries whose citizens are more self-sufficient. It means that building a house
only has productive value if people buy the materials and pay for the labour,
rather than work on the construction themselves and scavenge for materials, even
though either house clearly contributes to the wellbeing of those it shelters. Since
unpaid work does not count, GDP increases only if everyone goes to work for
someone else for wages, doing for others what they formerly did for themselves.
Part of the confusion about the value of paid versus unpaid work lies in the way
that people talk about ‘the economy.’ The assumption is that the economy is one
entity involving the exchange of goods and services in the marketplace. There are,
in fact, several economies. In addition to all that is traded for money is the work
done at no cost, the non-monetary contributions of Mother Nature, and the
services provided by the public sector. All these economies can actually be more
significant in terms of the amount of time people invest and the amount of value
that changes hands than the market economy.10 GDP’s neglect of the other economies means that growth counts only when production shifts from the social
economy to the market economy. This is nonsense: an apple or a fish has just as
much value to the person eating it whether she acquired it by her own hand or
bought it from a store, and work has value whether or not it results in wages.
(4) The more something costs, the better it is. Since what matters in GDP is money,
things that cost more have greater value to a nation’s economy than do things that
cost less; free benefits are considered worthless. It is thus preferable, according to
GDP calculations, to buy a car rather than a bicycle, to install an air conditioner
rather than a fan, and to purchase packaged foods rather than eat the produce
grown in one’s own garden. Seen in that light, economists’ obsession with GDP
goes far to explain their reluctance to address climate change, to protect the environment, or to resist the growing strength of corporations such as agro-business,
41
BEYOND APOLOGIES
car manufacturers, and petrol companies.vi
(5) Non-renewable resources, nature, and health have no value. Here too GDP is a
faulty accounting system. Flourishing forests, unpolluted lakes and oceans, beautiful mountains, healthy habitats for various species, and urban parks are not
treated as assets to be preserved, but are rather viewed as having no intrinsic value
in and of themselves. They only gain value when sold or destroyed. Drinking
water only has value if it is sold in a bottle. Forests only have value when the trees
are cut down and sold; mountains only have value when they are mined. Since the
loss of these resources is not deducted from the monetary gain that their destruction brings, the GDP calculation is only on one side of the balance sheet.
What of a company that opens a factory that will employ a few people and earn
some money for the owner but that will dump toxic chemicals into the nearby
river? GDP values the production that results; it is up to any relevant environmental agency or the community itself to decide whether to protest the dumping of
chemicals. It does not matter whether a significant number of fishermen will be
thrown out of work due to the pollution that comes from the factory or whether
environmental harm will otherwise outweigh the factory’s economic gains. In a
similar vein, when logging companies engage in clear-cutting, nowhere does the
accounting system force – or even allow – a country to subtract the cost of animal
habitat loss or of protection against erosion from the wealth gained by the
company that sells the wood. For years prior to the flooding in Bangkok, there was
serious flooding in the northern regions of the country. Although coverage of the
flooding filled countless pages in the newspapers, virtually nothing was mentioned about the role of deforestation.11 Tolerance for logging may be due at least
in part to its contribution to a rising GDP.
One cannot measure the economic benefits of logging in a sustainable fashion
using GDP. GDP calculations do not allow for an analysis of whether the longterm costs of one project offset its short-term gains, or whether short-term restraint
could lead to greater long-term gains. It would be like Prakash (from the story at
the start of this book) selling his home and congratulating himself on all the
money he has made while forgetting that his family now has nowhere to live.
(6) Shoddy workmanship and early obsolescence are valuable assets. The faster
appliances wear out or become obsolete and need replacement, the better a
As mentioned in the introduction, Naomi Klein has recently written a book on the issue
of how capitalism makes it impossible to have a sensible response to climate change. See
Naomi Klein, This Changes Everything: Capitalism versus the Climate (New York: Simon &
Schuster, 2014).
vi
MYTH#2: GDP TELLS US HOW WELL WE ARE DOING
42
country’s GDP numbers look. The focus on GDP thus encourages an economy of
disposal and replacement rather than one of reuse and repair. It also means that
the growing tendency of manufacturers to create products that quickly grow
obsolete (what, you don’t have the latest model of mobile phone??) is considered
economically beneficial, while the damage to the environment and the resource
base caused both by manufacturing and disposal is ignored. David Korten
suggests that another definition of GDP could be the rate at which we turn
resources into garbage.12
(7) Harm away! GDP is blind to damage, be it to physical assets, the environment,
or health. All production, no matter how harmful, counts as an economic benefit.
There is no deduction for the harm caused in producing dangerous items. Since it
is production that is counted – and not its effect on consumers, workers, the
resource base, or the environment – economic activity that is harmful, such as coal
mining, is seen to be worth more than many positive activities, such as teaching
children.
We all know about China’s amazing economic growth. What is easy to forget,
because it is not talked about as much, is the basis of that growth. China has made
itself into the world’s dirty factory. Pollution rates are staggering. Cities are home
to many chemical plants, and the air has become so foul in many of them that
people are dying at alarming rates simply from breathing the air. The people who
live there may be happy to have jobs, but is this the best that ‘development’ can do
by them? GDP allows for the measurement of benefits, but the problems, being
outside the UNSNA guidelines, go unnoticed and thus ignored.
Why GDP is an even worse measure of wellbeing
Over the years, many people have warned that GDP only looks at production and
cannot measure wellbeing. As early as 1959, American economist Moses Abramovitz questioned the association that mainstream economists were making between
growth in output and growth of human welfare.14 Even Simon Kuznets, one of the
founders of the measure, warned, “the welfare of a nation can scarcely be inferred
from a measure of national income.”13 Yet, with the encouragement of mainstream
economists, politicians, and the media, GDP has slipped in the consciousness of
many into being a measure of wellbeing.
As Kennedy so eloquently stated, GDP ignores such matters as health, beauty,
integrity, wisdom, and compassion. GDP does not take into account how well a
country is protecting and preserving its natural assets and resources or how well
it is doing at preventing the pollution of its oceans, lakes, rivers, soils and air, or at
preventing the loss of various species, or at preserving urban amenities such as
43
BEYOND APOLOGIES
parks and playgrounds. GDP is silent on the deterioration of industrial and social
infrastructures: the state of roads, sewers, schools, housing stock and other buildings. Nor does it say anything about the wellbeing of the poorest. Yet economists
persist in viewing it as a measure of how well a country is doing.
There are other ways that GDP fails to measure wellbeing:
 GDP ignores quality. It does not indicate whether or not food has any flavour
or nutritional value, or how far it has to travel before ending up on our plates.
Clearly, this is absurd, and as a bonus, it leads to those tasteless tomatoes we
buy at the supermarket.
 GDP ignores the percentage of the population that is unemployed, because
the actual number of jobs is irrelevant to the measurement of production.
 GDP ignores the conditions of employment. GDP does not reveal whether
workers earn a living wage, how many hours they are required to work,
whether their workplaces are safe (let alone pleasant), or whether their rights
are respected. It does not distinguish between low-paid, insecure, and
dangerous employment and jobs that allow employees to prosper. It does not
indicate whether jobs are located near people’s residences, or whether people
must live hundreds or thousands of miles from their families, working for the
welfare of a family they rarely see. Nor does GDP show whether a country has
enough of the workers it needs: teachers, health-care providers, social workers, food safety inspectors, and so on.
It makes no sense to measure how well a country is doing using a single number
averaged over the population that treats disasters as positive, makes no distinction
between beneficial goods and services and harmful ones, and ignores much of
what people value. When one uses GDP to indicate the quality of people’s lives
rather than just the extent of their production, people themselves cease to matter
as individuals or citizens and become instead ‘consumers’. Consumption becomes
the highest form of expression of personhood, and the rich become inherently
more valuable than everyone else.
Why is GDP still used to measure economic wellbeing?
With all these problems, why does GDP continue to be used as the most common
tool to show how well countries (and, by extension, their citizens) are doing? The
powerful defenders of GDP claim that GDP is simply a tool that does not reflect
the biases and prejudices of its creators. Such a claim is clearly absurd. Measurement of GDP reflects a set of values that bear little relation to the values that many
people share. It reflects a world economic system that has worked extremely well
to enrich the few at the expense of the many. Those who like the system like the
MYTH#2: GDP TELLS US HOW WELL WE ARE DOING
44
measure: measuring only production and consumption provides justification for
their activities and for their wealth. It also serves the goal of allowing those whom
the system benefits to feel that their growing wealth and social position do not
come at a cost to those at the bottom of the social and economic pyramid, but
rather contribute to the economy and thus to the wellbeing of all.vii More accurate
measures of wellbeing would bring to the forefront the damage that has been
caused by mainstream economics and growing inequality. They would show that
the majority often fails to benefit from – in fact is often harmed by – policies meant
to strengthen the system. Those who wish to maintain the status quo are in power,
and GDP helps them hide the damage that their policies wreak throughout the
world.
There have been updates to GDP measurements over the years, but they have
done little to address major concerns such as the assignment of equal value to
harmful and helpful products and the exclusion of most of women’s unpaid work.
This is hardly surprising, as few environmentalists – and perhaps even fewer
women, not to mention ‘housewives’ – make up the ranks of UNSNA bureaucrats.
Updating GDP is not a socially inclusive process, but rather one performed by
bureaucrats who share a specific worldview. The persistence of GDP and its
proponents’ failure to make significant changes to it are due less to its virtues or to
the lack of potential alternatives than to its defenders’ power.
Hint: When you read in the paper or hear someone talking about GDP, remember to ask:
Why do we care if GDP is going up or down? What does that tell us about the wellbeing
of people in the country they are discussing?
* * *
It seems that GDP reveals the most about what matters least and the least about
what matters most. Unfortunately, it also helps to determine where governments
invest money and what types of businesses and practices are encouraged. The
constant efforts to increase GDP guide people down paths that they might otherwise not take. GDP thus leads to Grossly Distorted Priorities. The focus on GDP
leads governments to make decisions that harm large numbers of people, including minorities and other vulnerable groups, and benefit only a few wealthy corporations and individuals.
An example is Dambisa Moyo, who in Dead Aid (2009) follows an incisive criticism of aid
with a menu of self-serving actions designed to ‘benefit’ Africans, including extracting raw
materials with the lowest possible payments to governments. She herself seems to forget
that the point of the book is not to extol the riches to be made by exploiting Africa but to
suggest effective remedies to the poverty across much of the continent.
vii
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BEYOND APOLOGIES
Nicolas Sarkozy, the former president of France (2007-2012), has joined in the
search for measures of economic performance that will do better at defining
progress in a way that is meaningful to people’s daily lives. As Sarkozy explains,
If we refer to a representation of the world in which the services people render
within a family have no value compared with those we can obtain on the
market, we are expressing an idea of civilization in which the family no longer
counts for much. Who could imagine that this won’t have consequences?
If leisure has no accounting value because it is essentially filled with nonmarket
activities such as sports and culture, this means that we are putting the criterion
of high productivity above that of the realization of human potential, contrary
to the humanist values that we proclaim. Who could imagine that this won’t
have consequences?
If the poor maintenance of transport infrastructures causes more accidents and
higher repair costs, and even higher medical costs, which increase output; if we
count activities that lengthen the distance between home and work and
increase insecurity and exclusion as positive contributions to progress; if evergrowing nervous tension, stress, and anxiety undermine society, and the evergreater resources devoted to fighting their effects are included in economic
growth – if we do all this, then what, concretely, is left of our notion of
progress?15
Replacing GDP with a measure that takes into account what people actually value
would be a vital step towards the adoption of an economic system that promotes
wellbeing rather than just consumption.

Towards a Better Way: Alternative Systems
“Too much and for too long, we seem to have surrendered personal excellence and
community values in the mere accumulation of material things.” – Robert F. Kennedy16
* * *
Despite the defence of GDP by the wealthy and their allies, people have become
frustrated with its limitations. Many individuals and groups have lobbied governments to create, test, and refine alternatives that could measure, to some degree,
the quality of people’s lives. “…[T]here is a consensus,” writes Joseph Stiglitz,
“that quality of life depends on people’s health and education, their everyday
activities (which include the right to a decent job and housing), their participation
in the political process, the social and natural environment in which they live and
the factors shaping their personal and economic security.”17 This growing accept-
MYTH#2: GDP TELLS US HOW WELL WE ARE DOING
46
ance that wellbeing is about a lot more than production of material goods has led
some individuals and some countries, such as Bhutan, France, and Australia, to
identify a better progress measure.18 The following are a few promising options
which, in some cases, have begun to be adopted.
Human Development Index
According to the United Nations Development Program (UNDP), which established and uses it, the Human Development Index (HDI) is a “new way of measuring development by combining indicators of life expectancy, educational attainment, and income into a composite human development index.”19 HDI is calculated using mean years of schooling for adults and expected years of schooling for
children entering school; life expectancy at birth; and per capita Gross National
Income.viii
HDI does not look, however, at non-renewable resources, the state of the environment, unemployment rates, or other important aspects of life. Various indicators
of health – including infant mortality, maternal mortality, and life expectancy – are
already measured nationally and globally, as are indicators of the number of
people seeking jobs (employment sufficiency), the number of children completing
school (educational performance), and incomes. The measure could easily add all
of these. Since income is one of the few things that HDI measures, highconsumption countries naturally score higher, which still tells little about how
much wellbeing (other than life expectancy and years of education) one actually
‘buys’ with that income. HDI is also not yet a widely used measure outside of
limited discussions on health and education.
Despite its shortcomings, HDI is certainly better than GDP. It would be even better
if the single composite number that it generates for each country included graphs
or other explanations to show the details behind the different parts of HDI, to
enable comparisons across countries while giving access to the separate elements
within each country. A single number can only reveal so much. A country with low
infant and maternal mortality could score poorly on education or employment,
and vice versa. Our measurements need to be more complex to reflect the
complexities of our societies.
viii According
to www.businessdictionary.com, GNI is “The gross domestic product (GDP)
of a country combined with its international income. [It] consists of government expenditures, net income from international assets and gross exports, with gross imports and
indirect business taxes deducted.”
47
BEYOND APOLOGIES
Adjusted National Product
In the 1980s, Christian Leipert, currently a staff member of the International Institute for Environment and Society in Germany, proposed a measure that he called
the Adjusted National Product (ANP). The ANP separates costs from gains in
national wealth calculations. It involves identifying and then deducting so-called
‘defensive expenditures’ from GDP. Defensive expenditures include pollution
control and clean up. They factor in the costs of urban sprawl, including the cost
of providing additional utilities such as electricity, water, and sewerage over a
wider area. They include the many indirect costs of cars such as injury and death,
and loss of walkable and cycle-able environments. They include the various costs
of domestic and international insecurity and social unrest: expenses of policing,
jails, private security guards, security systems, and the military.20 The sums are not
insignificant: the United States alone spent about $700 billion on weapons in
2010,ix while all of Europe spent $376.3 billion.21 Defensive expenditures also
include the many manifestations of unhealthy lifestyles: all the costs associated
with smoking, fast food and sugar-sweetened beverages (including soft drinks,
energy drinks, and artificial juices), drugs, alcohol, industrial accidents and
disease, and psychological and physical health problems resulting from unemployment, to name a few.
ANP thus attempts to distil the negative from the positive expenditures and points
towards economic decisions that would result in better health and a cleaner and
more attractive environment. However, who decides which expenditures are
positive and which are not? As mentioned above, the United Nations System of
National Accounting currently determines what production GDP counts. If the
decisions about how to calculate ANP were more inclusive, then ANP would be a
vast improvement over GDP.
While ANP has not gained much attention, similar measures exist. China created
a ‘Green GDP’ index in 2006, which indicated that Chinese GDP would fall by
three percentage points if it took into account environmental damage.22 The World
Bank calculates ‘adjusted net national income,’ which it defines as Gross National
Income (GNI) “minus consumption of fixed capital and natural resources
ix In The Good Society, John Kenneth Galbraith explains that “The American military establishment effectively and independently decides on its own budget, on the extent and the
use of the money it receives.” When I suggest to my tobacco control colleagues that we try
to team up with others in the health sector to lobby for higher budgets for health rather than
competing with other health programs for limited funds, they look at me funny. The gains
we could achieve would compensate for the difficulty of the attempt.
MYTH#2: GDP TELLS US HOW WELL WE ARE DOING
48
depletion.” While these are steps in the right direction, it is not clear what
precisely goes into these measurements or how much they are being used. At the
minimum, these alternative measures remind us that not all economic activity is
beneficial.
Genuine Progress Indicator
A similar attempt to separate the good from the bad in national accounting is the
Genuine Progress Indicator (GPI), which was developed in 1995 by Redefining
Progress, an organization that seeks to shift policy “to achieve a sustainable
economy, a healthy environment and a just society.”23 GPI raises the question of
whether economic growth (increased production of goods and expansion of
services) has actually resulted in improved wellbeing. Like ANP, GPI attempts to
separate worthwhile economic progress from growth in unhealthy and polluting
industries and activities. It relates to the business practice of separating net from
gross profit, with net profit being the total income minus the costs incurred. GPI
would thus be zero if the financial costs of crime, ill health, pollution, resource
depletion, and environmental damage were equal to the financial gains of the
production of goods and services.
GPI is a far more detailed measure than HDI, combining as it does not just three
but twenty-six indicators over three areas (economic, environmental, and social)
to arrive at a single measure of progress. Indicators include income inequality, the
cost of underemployment, loss of wetlands and farmlands, depletion of nonrenewable resources, the value of household and volunteer work, loss of leisure
time, and the cost of commuting. One could use GPI to distinguish between countries in which economic growth is leading to more wellbeing and those in which it
is not. The American states of Vermont24 and Maryland25 are now using GPI to
give information on such issues as distribution and sustainability of wealth that
calculations of GDP do not provide. Because it is more inclusive, it is a big step
beyond HDI; like HDI, the single composite number would be more helpful if the
various aspects that went into calculating it were also available.
Gross National Happiness
Perhaps the most comprehensive and promising approach, one that takes a big
step away from GDP to address what people value rather than what they produce,
is Gross National Happiness (GNH). Despite the name, ‘happiness’ refers to
wellbeing, not to joy or good moods. GNH originated in the tiny isolated mountain kingdom of Bhutan. Bhutan is atypical in many ways, including its requirement that everyone wear national dress in public during the day, its complete ban
on smoking, and the fact that it only introduced television in 1999. GNH reflects
the importance that the Bhutanese government has given to the wellbeing of its
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BEYOND APOLOGIES
population and to the preservation of its environment and culture.
Stefan Priesner, formerly Programme Officer for UNDP in Bhutan, explains, “It
was Bhutan’s perception that development ought to be people-centred, which
resulted in decisions to invest scarce resources in social facilities rather than in
industrialisation or the diversification of the economy to generate growth.”26 The
point of GNH is to assess wellbeing rather than income. To again quote Priesner,
GNH reflects “the perception of human well being as the fundamental objective of
economic activity. … the aim is not economic efficiency, but a maximization of
happiness.”
Specifically, GNH looks at nine overall areas or pillars: psychological wellbeing,
time use, community vitality, cultural diversity, ecological resilience, living standard, health, education, and good governance. Within those overall areas are
thirty-three indicators, among which household per capita income is but one.
Other indicators include safety, community relationships, literacy, ecological
issues, and time spent working and sleeping. Importantly, the goal of the government is not only to increase overall GNH but also to address each of the areas in
each of the population groups in which any component of GNH is poor. For
instance, even if the population is doing well overall, the fact that people in the
capital lack community vitality would be considered an issue that needs to be
addressed.27
It might be difficult to adapt GNH for countries with far larger and more heterogeneous populations. However, given the acknowledged problems with GDP, it is a
little too easy to dismiss the GNH alternative simply because it is being tried in
exactly the sort of country where it naturally would be tried: a very different one
from most others. In fact, the key concepts are replicable: one can measure
whether people have time for activities beyond work and commuting; whether
outdoor public spaces are used or empty; whether people have a say in their
governance, or whether elected leaders appear more responsive to corporations
than to the electorate. GNH has already gained tremendous international attention, with officials in France, the United Kingdom, and Japan now considering its
use.
The question is not whether GNH or other alternatives to GDP are perfect measures. Nothing is. What matters is that we shift our focus from consumption to
wellbeing, and that we replace GDP with a more adequate measure. In order to
redress current economic woes around the world, national accounting systems
must be more reflective of people’s values. Better ways of measuring how nations
are doing would help officials to understand and demonstrate whether current
economic systems are helping or hurting the population. Alternatives to GDP
MYTH#2: GDP TELLS US HOW WELL WE ARE DOING
50
must be flexible: they will have to be adapted repeatedly as countries gain experience with them to respond to current and ever-changing needs. However, it is not
necessary to wait for a perfect replacement to start the process of moving to something better. Stepping away from GDP may be the first step in liberating ourselves
from the economic system that it supports.
* * *
How much wellbeing do countries buy with their GDP? Unfortunately, there are no
widely available estimates by country of GNH (or other improved measures) to compare
to GDP. What is possible is to compare national infant mortality rates to GDP. One
might expect that countries with higher average incomes would have lower levels of
infant mortality. When most mothers can afford to eat well during pregnancy, access
good health care, give birth in a safe place, and feed their baby properly, there will be less
infant mortality than in countries where poverty makes such practices difficult or
impossible. Yet infant mortality rates often fail to track closely with GDP. Indeed, as the
following figure shows, there is often little direct relationship between the total amount of
wealth in a country and the level of its infant mortality.
Qatar, the world’s richest country when measured by GDP, is worse off than 59 others in
terms of infant mortality. Saudi Arabia, the 44th wealthiest, does worse than 114 others.
Other poorly performing countries include the United States (14th in GDP but 56th in
infant mortality)x and South Africa (108th in wealth but 174th in infant mortality). There
are some remarkably good achievers too: Costa Rica, Cuba, Sri Lanka, Vietnam, and
Madagascar. Zimbabwe, remarkably, scores at the very bottom of wealth, at 227 (only the
war-torn Democratic Republic of Congo is poorerxi), but ranks 155th for infant mortality.
The following figure presents this information graphically, using the American Central
Intelligence Agency’s rankings for GDP and infant mortality.xii Countries are not
getting much wellbeing for their production if their infant mortality ranking is much
higher than their GDP ranking.
Cuba, Hungary, Taiwan, South Korea, Slovenia, and the Czech Republic all have lower
infant mortality than the United States.
xi Congo is extremely wealthy in terms of valuable minerals. Its poverty is due largely to the
exploitation of that wealth – and the ensuing violence that facilitates the exploitation. See
http://www.congojustice.com
xii The CIA ranks infant mortality (per 1,000 live births) from highest to lowest. Central
Intelligence Agency, “The World Factbook,” https://www.cia.gov/library/publications/theworld-factbook/ accessed 7 August 2014. To match these to GDP (which the CIA ranks in
reverse), I ranked both sets of figures from lowest (best) to highest (worst). The CIA
includes 224 countries in its infant mortality list, and 228 countries in its GDP list.
x
51
BEYOND APOLOGIES
Figure 1: GDP versus Infant Mortality Ranks (Lower Number = Better Rank)
Notes
Robert F. Kennedy, speech given at the University of Kansas on 18 March 1968.
http://www.jfklibrary.org/Research/Research-Aids/Ready Reference/RFK
Speeches/Remarks-of-Robert-F-Kennedy-at-the-University-of-Kansas-March-18-1968.aspx
accessed 7 August 2014.
2 Joseph E. Stiglitz, Amartya Sen and Jean-Paul Fitoussi, Mismeasuring Our Lives: Why GDP
Doesn’t Add Up (New York: The New Press, 2010).
3 Rosemary D. Marcuss and Richard E. Kane, U.S. National Income and Product Statistics
Born of the Great Depression and World War II (Washington: U.S. National Income and
Product Statistics, Bureau of Economic Affairs, February 2007).
4 Robert Costanza, Maureen Hart, Stephen Posner, and John Talberth, Beyond GDP: The
Need for New Measures of Progress, The Pardee Papers No. 4 (Boston: The Frederick S.
Pardee Center for the Study of the Longer-Range Future, Boston University, January 2009).
5 Marilyn Waring, If Women Counted: A New Feminist Economics (New York: HarperCollins,
1988).
6 Paul Krugman, The Conscience of a Liberal (New York, London: W.W. Norton & Company
2009).
7 Ezra Klein, “Could the BP Oil Spill Increase GDP?” The Washington Post, 15 June 2010.
8 Waring, If Women Counted.
9 Debra Efroymson, Julia Ahmed, and Shakila Ruma, The Economic Contribution of Bangladeshi Women through their Unpaid Labour 2nd ed. (Dhaka: HealthBridge and WBB Trust,
2013). This and other information on the topic can be found at www.healthbridge.ca
1
MYTH#2: GDP TELLS US HOW WELL WE ARE DOING
52
Hikka Pietilä, “Basic Elements of Human Economy: A sketch for a Holistic Picture,”
paper presented at the International Household & Family Research Conference 2002,
Helsinki, Finland (revised 2007) http://www.forumforthefuture.org/project/fivecapitals/overview accessed 7 August 2014.
11 Charoenlak Petpradap, “Prawase Says Floods Due to Deforestation,” Bangkok Post, 2
December 2011.
12 David C. Korten, When Corporations Rule the World, 2nd ed. (Bloomfield, Connecticut and
San Francisco: Kumarian and Berrett-Koehler, 2001).
13 Elizabeth Dickinson, “GDP: A Brief History,” Foreign Policy, 3 January 2011.
14 Simon Kuznets, “National Income, 1929-1932,” 73rd US Congress, 2nd Session, Senate
Document No. 124, page 7, cited in Jon Hall, “Measuring What Matters to Make a
Difference,” Journal of Futures Studies 15.2 (November 2010) : 151-154.
15 Cited in Stiglitz et al., Mismeasuring Our Lives.
16 Robert F. Kennedy, speech at the University of Kansas, 18 March 1968.
17 Stiglitz et al., Mismeasuring Our Lives.
18 Hall, “Measuring What Matters.”19 United Nations Development Programme, Human
Development Reports, “Human Development Index (HDI)”
http://hdr.undp.org/en/statistics/hdi/ accessed on 16 July 2011.
20 Christian Leipert, “From Gross to Adjusted National Product,” in The Living Economy, A
New Economics in the Making, ed. Paul E. Ekins (London, New York: Routledge and Kegan
Paul, 1986).
21 Anup Shah, “World Military Spending,” Global Issues 2 May 2011.
22 Dickson, “GDP: A Brief History.”
23 Redefining Progress, “Genuine Progress Indicator,”
http://rprogress.org/sustainability_indicators/genuine_progress_indicator.htm accessed 7
August 2014.
24 Demos, “Vermont Establishes a Genuine Progress Indicator, Blazes a Path for Measuring What Matters,” http://www.demos.org/press-release/vermont-establishesgenuine-progress-indicator-blazes-path-measuring-what-matters accessed 7 August 2014.
25 Government of Maryland, “Maryland’s Genuine Progress Indicator: An Index for
Sustainable Prosperity,” http://www.green.maryland.gov/mdgpi/ accessed 7 August 2014.
26 Stefan Priesner, “Gross National Happiness – Bhutan’s Vision of Development and its
Challenges,” in Gross National Happiness – A Set of Discussion Papers, Centre for Bhutan
Studies and GNH Research, 1999.
27 Karma Ura, Sabina Alkire and Tshoki Zangmo, “Case Study: Bhutan, Gross National
Happiness and the GNH Index,” in World Happiness Report, ed. John Helliwell, Richard
Layard and Jeffrey Sachs (New York: Earth Institute, Columbia University, 2012).
10
MYTH #3: Economic Growth is Necessary to End Poverty
“The assumption is that growth is good and more is better. It is as if economists had never
heard of cancer. It is extraordinary that an entire social science, and the dominant
discipline in today’s world at that, can effectively have come to be based on such a
simplistic assumption.” – Paul Ekins1
“…conventional economics starts with certain basic premises that are clearly, unequivocally incorrect: that the environment is a subset of the economy; that resources are
infinitely substitutable; and that growth in population and consumption can continue
forever. In conventional economics, natural resources like fossil fuels are treated as
expendable income, when in fact they should be treated as capital, since they are subject
to depletion. As many alternative economists have pointed out, if economics is to stop
steering society into the ditch it has to start by re-examining these assumptions.”
– Richard Heinberg2

Economic Growth versus Poverty Alleviation
One of the most commonly repeated mantras in economics is that the way to end
poverty and all the misery that it entails is through continuous economic growth.
Growth – politicians, the media, and ‘experts’ of every stripe repeatedly state –
generates jobs and products that can satisfy people’s unmet needs. Without
growth, there will always be deprivation, especially as the population increases.
According to this view, the production and consumption of a variety of goods and
services generates jobs and wealth that will eventually lessen, or even entirely
eliminate, poverty. Perpetual economic growth is thus the best possible goal for all
societies. Moreover, according to the Economic Growth Myth, because competition and profit drive private companies, the private sector is the most likely to
power growth.i Thus, according to the proponents of this myth, the economy
needs to grow free of the fetters of government regulation for there finally to be
Mainstream economists argue that competition will bring gains for all, although it is
difficult to find the parallels between this and real life: “The more competition there is, the
more likely are firms to be efficient and prices to be low. … Perfect competition is the most
competitive market imaginable in which everybody is a price taker [subject to competition
and thus having to sell at the price the market sets, rather than being able to charge what
they want]. Firms earn only normal profits, the bare minimum profit necessary to keep
them in business. If firms earn more than this (excess profits) other firms will enter the
market and drive the price level down until there are only normal profits to be made.” The
Economist, Economics A-Z, http://www.economist.com/economics-a-to-z accessed on 25
July 2013.
i
MYTH#3: ECONOMIC GROWTH IS NECESSARY
54
enough for all. The concept has the benefit of sounding reasonable: if existing
wealth is insufficient for all, then we should generate more. The need for economic
growth is thus implicit; the main question is how to achieve it. Which economic
model will work better at achieving growth? How can we sustain growth? Why
are some countries growing while others remain stagnant or decline?
When I mentioned to a colleague that I object to the goal of economic growth, he
was surprised. “Doesn’t economic growth mean that people will have more of
what they need?” he asked. Well, no, not really: it refers to GDP growth, which, as
I explained previously, is a sound measure of neither economic health nor wellbeing. The goal of economic growth is by definition flawed, because it draws on
flawed measures.
Beyond an objection to the measurement tool (GDP) are the problems associated
with the belief that simply having more goods available will inevitably lead to a
decline in poverty. Certainly, there are cases where economic growth has helped
the poor, but it is not the most direct or efficient way to do so. There is too much
waste in a system that relies on increased consumption to generate the wealth that
will help some of the poor to do better. It may work, but other methods that are far
better for the environment could work even better. Limited success at high cost is
not sufficient justification for promoting a harmful model.
For several reasons, economic growth often does not help the poor. It involves the
increased production of goods that often do not contribute to greater wellbeing.
Even the useful goods that it produces often do not reach the poor. The jobs that
result too often pay too little.
Meanwhile, even current consumption levels in many countries are unsustainable,
given the limited resource base and the amount of pollution that consumption
generates. Increasing worldwide production is pure folly: it puts too much
pressure on the environment, and it defines the problem as insufficient supply
without considering that the real issues at hand may be grossly unequal distribution and unchecked waste. More is not necessarily better.
The poor will not benefit from economic growth if the growth never reaches them
Economic growth tracks growth in GDP, not the growth in jobs, or the growth in
services provided to the poor, or the growth in the number of low-income people
who are able to buy or otherwise access what they need to survive. The assumption is that more production benefits the poor, but one can have an awful lot of
55
BEYOND APOLOGIES
production without it ever reaching those in need.ii Even if all the goods produced
by factories are consumed, it does not necessarily mean more consumption – or
more ability to consume – by the poor. One way to achieve economic growth is by
encouraging corporations to build new manufacturing facilities in countries with
high levels of poverty. However, the goal of those facilities is to make money for
corporate executives and shareholders. Corporations take advantage of low wages
and the lack of regulations, such as for working hours and conditions and for environmental pollution. Profits from the factories flow back to the investing country.
The poor contribute their (low-waged) labour to the company’s economic growth,
while only the rich company owners, executives, and shareholders enjoy the fruits
of that labour. Low-waged employment obviously does not lead to prosperity for
the workers themselves. If large corporations dominate the economy, other lowincome people will benefit little from the added spending of the newly employed.
Rather than circulating in the lower echelons of the economy, what little wealth
trickles down to the poor gravitates right back up again when the poor use their
wages to purchase the various goods and services that the rich control. This gravitational pull of money upwards towards the rich is not a problem for those who
believe that it is the owners of capital, not those who engage in physical labour,
who should reap most of the benefits. To be painfully direct, the poor often fail to
benefit from growth because they were never intended to benefit.
The United States, which most prominently promotes the economic growth
model, deserves special scrutiny here. The richest ten percent of Americans
received not just the lion’s share, but a full one hundred percent of the average
growth in income over the years 2000 to 2007, the most recent extended period of
economic expansion.3 Going back farther reveals similar results: while the size of
the American economy tripled between 1973 and 2006, the bottom ninety percent
of the population actually suffered a small decline in their absolute wages during
those thirty-three years, with average incomes falling from $32,135 in 1973 to
$31,528 in 2006 (figures adjusted for inflation).4 Net worth also declined among
this group.5 The trends continue today, with the earnings of the richest households
increasing and those in the bottom four quintiles decreasing.6
ii
A quick clarification: the overly general catchphrase ‘the poor’ refers to two important
groups: those living in abject poverty who struggle to meet their basic needs, and those
living in relative poverty. In addressing poverty, the goal obviously should be to improve
the situation of those who lack the basics for a decent survival, as opposed to those who
simply wish for more.
MYTH#3: ECONOMIC GROWTH IS NECESSARY
56
Despite all of the country’s wealth and economic growth, an estimated one in one
hundred Americans is homeless at any given time.7 According to Census Bureau
data cited in the Washington Post, in 2009 some forty-four million Americans (one
in seven) lived in homes in which the total income was below the poverty level.
That figure represents the largest number of people living in poverty since the
national census began tracking poverty fifty-one years ago.8 Economic growth in
the United States has not eliminated poverty.
Poverty in the United States does not reach, of course, the levels seen in some
countries in Africa, Latin America, or Asia. Still, the United States is one of the
wealthiest countries in the world, and many less prosperous countries try to
follow its economic policies in hopes of achieving similar rates of wealth. They
need to be very aware of the persistent nature of deep poverty that exists throughout the country. As E.F. Schumacher has asked, “If economic growth to the present
American level has been unable to get rid of public squalor – or, maybe, has even
been accompanied by its increase – how could one reasonably expect that further
‘growth’ would mitigate or remove it? How is it to be explained that, by and large,
the countries with the highest growth rates tend to be the most polluted and also
to be afflicted by public squalor to an altogether astonishing degree?”9
Not only will economic growth often fail to reduce poverty, it will also often fail to
increase the wellbeing of the vast majority of citizens. Writing in the World Happiness Report, Jeffrey Sachs, Director of The Earth Institute and Special Advisor to the
United Nations Secretary-General, notes that “the world’s economic superpower,
the United States, has achieved striking economic and technological progress over
the past half century without gains in the self-reported happiness of the citizenry.
Instead, uncertainties and anxieties are high, social and economic inequalities
have widened considerably, social trust is in decline, and confidence in government is at an all-time low.”10 This decline in happiness is due, in part, to the declining position of the middle class: the formerly comfortable are now sinking into
poverty (losing their jobs and homes), while the rich grow ever richer and the poor
are virtually forgotten.
What plays out in the United States also happens in countries with vastly less
wealth. Ecuador, for instance, experienced significant growth in the 1970s largely
through oil sales. Former ‘Economic Hit Man’ John Perkins notes that following
the so-called oil boom, the official poverty level in that country actually increased
from fifty percent to seventy percent and under- or unemployment increased from
fifteen percent to seventy percent. Public debt also grew from $240 million to $16
billion. The poorest, who previously received twenty percent of national
resources, later received only six percent.11 Ecuador is, alas, far from exceptional.
57
BEYOND APOLOGIES
When ‘development’, funded by economic growth, is believed to consist of fancy
airports, luxury apartments, high-rise office towers, and elevated expressways,
the beneficiaries are often few, and the price of growth includes environmental
destruction as well as a loss of livelihood for many.
Other measures that have resulted in economic growth have been equally disastrous for the poor. Clamours over high food prices in the United States in the 1970s
resulted in a food revolution spurred by President Nixon, who succeeded in
reducing the price of food. Food prices in the United States, measured as the average proportion of people’s income spent on food, are now about the lowest in the
world – and in history.12 This drop in food prices resulted in part through a switch
in production methods away from small farmers and other local producers and
retailers, who focus on fresh produce and meat, and towards large corporations
that raise animals and vegetables on environmentally destructive mega-farms and
focus on producing processed foods that have dramatically less nutritional value.
At the consumer level, there has been a purchasing shift from fresh ingredients to
unhealthy processed and ‘fast’ foods. The result is cheaper food, more nutritionrelated disease, and corporate control of virtually the entire food supply chain.iii If
the indirect costs of ill health and environmental damage were included, this
now-abundant food would not be cheap at all.
If corporate control and unhealthy food accompanied not just more obesity and
disease but also less hunger, then it would be more difficult to determine if there
was progress. However, this is not the case. Despite the relatively low cost of food
in the United States as a percentage of income, widespread hunger remains a
problem because of poverty: nearly forty-eight million Americans (one in six,
including more than seventeen million children), are ‘food insecure’ – meaning
that they often go hungry. Hunger costs the country about $167 billion each year
in health care costs, missed workdays, and – since so many of the hungry become
school dropouts – lowered productivity due to educational deficits.13
The situation in the United States is by no means unique. Increasing rates of
obesity accompanied by continuing malnutrition is a global phenomenon. Industrial food has not eliminated hunger; it may simply be contributing to obesity.
There are now nearly twice as many overweight and obese people in the world
(one and a half billion14) as malnourished ones (850 million15). As with our waistlines, so with the economy: growth is not necessarily a healthy phenomenon. Yet,
For example, six retailers – Walmart, Kroger, Albertsons, Safeway, Costco, and Ahold –
control more than half of the entire American retail grocery market. Paul Roberts, The End
of Food: The Coming Crisis in the World Food Industry (London: Bloomsbury, 2009).
iii
MYTH#3: ECONOMIC GROWTH IS NECESSARY
58
in a scenario based on increasing GDP, it is precisely this switch from homegrown
to processed foods that economic growth reflects. The problem is not limited to
societies where food is overly abundant. In a poor rural community in which most
people are malnourished, governments and NGOs may encourage local farmers
to grow export crops so that the farmers will earn more money. However, if they
follow that advice, the farmers can no longer subsist on what they grow. They
must use at least some of the money they earn to buy food. If food prices increase,
whether because fewer farmers are growing food crops or because the prices of
petroleum-based fertilizers and transportation rise, they may not be able to afford
to feed their families and the community may become even more malnourished
than before.
Finally, an important cause of hunger is waste, rather than inadequate yields.
Recent research commissioned by the UN Food and Agriculture Organization
finds that one-third (more than one billion metric tons) of the food produced each
year for human consumption is lost or wasted. While in wealthier countries much
good food is deliberately thrown away, in low-consumption countries in which
distribution systems are inadequate, food is mainly lost because it rots or is eaten
by rodents.16 Rather than helping the undernourished, increasing the availability
of food could simply result in fatter rats. So much for growth benefiting the poor.
How does growth help when what is growing is the availability of harmful or unnecessary
products?
Growth in output simply does not equate with people being better off. What is
produced, how it is distributed, and how much is wasted, are all often far more
important to wellbeing than total production. More tobacco products, more soft
drinks, and more weapons all represent economic growth but not more wellbeing.
Nor is it helpful to have more products going to the rich while the poor continue
to do without. Sometimes more availability of products simply means more waste,
which again benefits no one but the producers and sellers.
Even in the case of an increased availability of consumer goods, it is important to
note that economic growth typically brings about growth in the range of consumer
goods available rather than more of what people really need. For example,
throughout the world, there has been an explosion in the variety of soft drinks,
chips, and countless other mass-produced products. There has been an increase in
large shops pushing local sellers out of business. Economic growth would be more
helpful if it made available the goods and services needed for good health. More
variety would be helpful if, for instance, it included the variety of housing available to meet the needs of different types of people: extended families, students, the
low-income, those wishing to live in a group, single people wishing to live alone,
59
BEYOND APOLOGIES
and those who do not own a car. It is easiest to produce and market goods that
target a uniform audience lacking in individual tastes; it is more difficult to design
housing and other products to suit individual needs. Neither hand-made goods
nor items tailored to the individual consumer lend themselves to either mass
production or economic growth.
The very poor spend the majority of their wages on food, housing, clothing, and
other essentials. Rising incomes among the poor can mean the difference between
barely surviving and a decent way of life. However, across many segments of
society, rising incomes can mean that people shift from spending most of their
money on essentials to spending it on non-essential items or luxurious versions of
essentials (carrots to caviar, a bicycle to a BMW, to use extreme examples). Many
non-essential items require large quantities of resources to create, package, use,
and dispose. Many are imported from far away. This production, transport,
consumption, and disposal, in turn, take a toll on the environment. As such, an
increase in consumption may only marginally benefit the poor – who still generally cannot afford to purchase even the bulk of essential goods – while contributing greatly to environmental harm and the depletion of natural resources.
Consumer goods, moreover, represent only one part of the economy. Economies
also grow in other sectors, such as the military, security, private prisons, and
health care. In the case of the military, security, and prisons, more usually means
less wellbeing. The more weapons that exist, the more likely societies are to end up
in wars.iv The more companies that seek to make money by convincing people of
the immediate threat of terrorism and of the increasingly high-tech measures that
are needed to protect them, the more likely the population is to lose some of its
basic freedoms. More prisons require more prisoners, which encourages the
passage of extremely harsh sentencing laws that lock people away for minor
offenses. Enormous amounts of wealth end up invested in unproductive, even
destructive, enterprises.
More health care would be a good thing if it were equitably distributed and
combined with preventative measures to reduce and not just treat disease. People
are certainly not better off when increased health care spending simply involves
iv This is an enormously important point. When people talk about government budget
shortfalls, they rarely mention how much is spent on the military. If fewer tax dollars went
to the military, more could be used for education, health care, and infrastructure improvements, which would make life better for everyone. And alas, in order to justify high military
expenditures, countries may feel the need to go to war occasionally. The business of
producing and selling arms may be not only the greatest enemy of peace but also of
prosperity.
MYTH#3: ECONOMIC GROWTH IS NECESSARY
60
more insurance companies, more bureaucracy, and more questionable but lucrative treatments.
Is economic growth sustainable?
Is it possible to keep simply increasing the amount of global wealth until everyone
reaches the economic level of the average American? Is doing so even a good idea?
It may appear that economic growth can continue indefinitely: in many countries,
GDP growth has been sustained for decades and seems able to be sustained for
decades more. However, a longer view demonstrates that sustained growth over
the last few decades has actually been an historical exception. Around the world,
rapid economic growth has mainly been the result not of human ingenuity and
new technologies, but of cheap fuel. Fuel is no longer cheap, and its supply is by
no means infinite. Continue to raise the price of fuel and other natural resources,
and economic growth may well disappear. This is no distant prospect, as the
recent global economic recession reminds us. Modern society may well have lived
through highly unusual times and is now reverting to normalcy.17 However,
complicating this return to normalcy is the fact that the sustained use of natural
resources, and the pollution that has ensued, is now threatening our very existence.
Mainstream economists claim that limits on growth are not necessary. By replacing natural materials with synthetic ones, non-renewable resources with renewable ones, and devising more ingenious and efficient ways of doing things, they
argue, economies can continue to expand endlessly. However, a closer look at the
foundation of such arguments shows otherwise.
Is it possible to sustain economic growth by replacing fossil fuels with renewable
energy? No energy source is available for free. One must expend one type of
energy in order to create another. The amount generated in return for the amount
used is known as ‘energy returned on energy invested’ (EROEI). Capturing
renewable energy requires the use of at least some non-renewable resources, and
these are running out. The world’s supply of fossil fuel probably peaked recently
and will now begin a slow decline – what is known as ‘peak oil’.v With diminishing sources of energy (and thus of income derived from exploiting that energy),
there is also less money available to invest in creating new power sources. Fossil
fuels are actually our most efficient (in terms of EROEI) form of energy. The most
easily extracted sources are, however, in most cases now depleted. Oil and
v The issue of peak oil is controversial. Some deny that we have reached it or that there is
any threat of reaching it. Others argue that those denying peak oil are simply playing with
the numbers. Only time will tell, but there are plenty of good reasons not to bank on an
infinite supply of non-renewable resources.
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BEYOND APOLOGIES
gas companies have been forced to work much harder – in terms of financial cost
and the amount of energy required – to access the remaining sources. For example, in the 1930s, the EROEI ratio for oil produced in the United States was about
one hundred to one. That is, for every barrel of oil burned during the extraction
process, one hundred barrels could be obtained from the ground. That number fell
to less than thirty-six to one by the 1990s and to nineteen to one by 2006. A similar
trend is occurring with coal and natural gas. If the ratio falls far enough, then
economies based on fossil fuels cannot survive. Nor is there a technological
solution available: although oil extraction techniques have improved tremendously since the early 1900s, EROEI continues to decline.18 The price of energy
thus continues to increase in terms of both dollars per barrel and the amount of
energy invested to get some in return. Cheap fuel can no longer spur economic
growth. Meanwhile, a much larger world population and much higher per capita
fuel use means that total worldwide demand for fuel continues to expand.
Alternative fuels such as ethanol and biofuels, attractive though they may seem,
do not deliver the same ‘bang for the buck’ as oil. They require too much energy to
extract and/or to process and distribute; by the time they are ready to use, they
may even represent a net loss in terms of energy.vi Just as with peak oil, all nonrenewable resources will eventually decline to where their use is no longer feasible. This does not mean that they will completely disappear, but it will be too
expensive to extract what remains to make it worth the cost and bother.19 What
about other, seemingly renewable sources? Wind energy requires windmills; solar
energy requires solar panels or some other means of absorbing sunlight, and often
requires batteries to store the energy. Nothing is free: no economic growth that is
based on energy is sustainable in the end.
There is a huge need to reduce waste in our production, distribution, and use of
energy; less waste might mean that countries could get far more for less, and that
their economies could grow more slowly and sustainably. But here too there are
natural limits; eventually we run up against the law of limited return. It is not
possible to reduce beyond zero. One reaches the inevitable limits to growth once
one makes all possible cuts or achieves all possible gains in efficiency. Light bulbs
that use far less energy are possible, but light bulbs cannot run without some sort
of electricity. It is possible to reduce the number of people and the amount of materials needed to make a product, but one cannot make something out of thin air.
vi And don’t forget that when food crops are diverted to fuel, the price of foodstuffs inevitably increases. It is not a viable trade-off.
MYTH#3: ECONOMIC GROWTH IS NECESSARY
62
While technology has delivered seemingly magical results, those results come
mostly in the fields of computing, communication, and entertainment; much less
success has been achieved in how food is grown and distributed, in modes of
travel, in sewage treatment, or in the generation of energy. Science fiction notwithstanding, people’s most basic needs are still being met in ways that are very similar
to the ways that they were met a hundred years ago.20 Advances in ways to share
information and ideas are all very well, but people’s basic needs still require
energy, water, and other limited resources. In the absence of cheap fuel, we cannot
sustain economic growth, as we now understand it. This does not mean that an
individual country may not continue to have economic growth; globally, though,
people can no longer rely on economic growth as business as usual. In a world of
depleting resources, more growth in one country may actually result in greater
declines in others.
The planet, despite appearances, is infinite in neither her generosity with her
resources, nor in her ability to absorb all the pollution and waste that people create
in their drive for ever-more wealth. In his essay, “The Economics of the Coming
Spaceship Earth,” economist, educator, and interdisciplinary philosopher
Kenneth Boulding rephrases the opposing ways of perceiving economic possibilities in terms of cowboys and astronauts. For cowboys, writes Boulding, the world
is an endless plain of sparsely populated expanses and seemingly inexhaustible
resources. Everything is free for the taking; cowboys do not need to worry about
waste disposal as the winds carry away the refuse. Those who work hard will
succeed, and one person’s success does nothing to detract from the possibilities of
others; there is plenty for all. Cowboys need not worry about sharing resources:
someone using more does not mean that someone else will have less. There is
always more than enough to go around, and so there is no need to conserve or
share fairly. Economic growth potential is essentially infinite.
The perspective of astronauts, writes Boulder, is the diametric opposite of that of
cowboys. For astronauts on a spaceship, resources are extremely limited with
nothing to spare and no room for waste. Wellbeing depends on how well the astronauts maintain their physical and mental health, how well they preserve available
resources, and how carefully they maintain their mutual life-support system.
Anything thrown away is forever inaccessible; any waste that is accumulated but
not recycled fouls the living space. To survive, each astronaut must act in the interests of others. Non-essential consumption is unacceptable unless the basic needs
of all are met and ample provision has been made for the future.21 In this case,
economic growth is an oxymoron, as nothing can ‘grow’ without something
declining in an equal measure.
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The world today is a living ‘spaceship’ whose finely balanced life-support system
requires care and cooperation for its survival. High levels of consumption by a few
do affect others; pollution and climate change are global problems, not limited by
place. Climate change driven by high energy use is helping to drown the entire
country of the Maldives. When a factory dumps chemicals into a river and kills all
the fish, fishermen downstream suffer. Extensive logging contributes to flooding.
To an extent and for a certain period, the very rich can opt out of the system —
exist, as it were, in their own separate spaceship — but even here limits exist. The
rich do not have to live in the most polluted areas, but they still must breathe the
air and drink the water. Catastrophic weather patterns and devastating pollution
will not always pass over the wealthy. Neither can unsustainable patterns of
growth be forever sustained.
Exploitation of natural resources and environmental damage – necessary accompaniments to economic growth – disproportionately harm people who are already
suffering from poverty. Many of those displaced by dams (which provide electric
power to help run the machines of industry), mines, and industrialization in
general are indigenous people already worse off than the general population in
terms of poverty and basic rights. As energy sources become more difficult to
obtain, as humankind’s insatiable search for fuel drives it to ever more desperate
and inhumane ways to access it, the poor and powerless are likely to suffer ever
more.
There are limits to how long creativity, ingenuity, and technology will allow
people to maintain and expand their current energy-intensive way of life. However, if that creativity, ingenuity, and technology is successfully redirected from
consumption to wellbeing, then the end of economic growth could bring genuine
and dramatic improvements in how everyone lives.
* * *
Land is also a limited resource. The more land that is used by the wealthy, the less
land is available for everyone else. This is especially visible in cities, where the poor are
crowded into slums while the rich enjoy large, luxurious apartments or urban estates;
where urban parks are often poor in quality and too few in number, while golf courses
serve the elite. In city after city, developers see public parks as potentially profitable land.
Luxury housing springs up; gathering and recreational spaces for the poor disappear. In
one city in which I worked, a senior urban planner talked of plans to “liberate land from
the poor” and turn it over to developers for luxury projects. The poor are then sent off to
live on the outskirts of the city, far from jobs.
My first apartment in Dhaka was a small one-bedroom, but there had previously been
about ten tenants, the entire floor covered with mattresses laid side by side.
MYTH#3: ECONOMIC GROWTH IS NECESSARY
64
Downstairs, there was one family per room, with space for little more than a bed. The
poor face a serious housing crunch, while more and more luxury apartments for the rich
continue to be built. In terms of square footage per person, the poor actually pay more
than the rich for their living space.22
Several years ago, planners created the Detailed Area Plan (DAP) for Dhaka. The plan
allocated less than half of one percent of available land for four and a half million
low-income urban dwellers while reserving thirty-four percent of the land for four and a
half million upper-income people. That means the wealthy would have more than one
hundred times the land per person than the poor. The result could be thousands of
persons per hectare in the slums, as compared to the existing high-income parts of the
city, which house just ninety-five persons per hectare.23
* * *
An un-exportable model of growth and consumption
The carrying capacity of the planet depends not only on the number of people
living on it but also on how much each one of them consumes. If one accepts the
natural limits discussed above, then three facts become clear: 1) rich countries
need to cut back on their consumption; 2) low-consumption countries cannot
match the levels of the high-consumption countries; and 3) the world’s population
cannot continue to grow indefinitely. (I will return to the third point in the Towards
a Better Way section.)
Consumption patterns differ greatly across countries and regions. Americans
comprise only five percent of the world's population and yet consume twenty
percent of its energy.24 According to the United Nations Development Program,
per capita carbon dioxide emissions are much higher in the forty-seven highestconsuming countries than in all other 140 countries combined. High emissions
levels in countries with high rates of consumption come from activities such as
driving motorized vehicles, cooling and heating homes and businesses, and
producing and eating processed and packaged food. The average person in a
high-consumption country generates about thirty times more carbon dioxide
emissions than does a person in a low-consumption country. The average British
citizen generates as much greenhouse gas emissions in two months as a person in
a low-consumption country generates in an entire year, while an average Qatari
(Qatar has the highest per capita emissions) does so in just ten days.25 Nor is the
discrepancy limited to emissions. According to Jared Diamond, geography professor and author of Collapse and Guns, Germs and Steel, “The average rates at which
people consume resources like oil and metals, and produce wastes like plastics
and greenhouse gases, are about 32 times higher in North America, Western
Europe, Japan and Australia than they are in the developing world.”26
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BEYOND APOLOGIES
While one billion people live in high-consumption countries, most of the remaining five and a half billion live in low-consumption countries. Rapidly growing
populations in these low-consumption countries pose a burden for the countries
in question, but not for the world as a whole. If, for example, the population of the
Sudan were to double, it would be very difficult for the country to provide even
the minimal basic services to its citizens. However, since each new person would
consume very little (based on the country’s current consumption patterns), the
global consumption rate would essentially be unaffected. Therefore, reducing the
number of births in low-consumption countries will have little impact on the international use of resources. If, on the other hand, China were to catch up to the
consumption rates of the United States, then the global consumption rates of oil
and metals would roughly double. If India caught up as well, according to
Diamond, then “world consumption rates would triple. If the entire developing
world were suddenly to catch up, world rates would increase eleven-fold. It
would be as if the world population ballooned to 72 billion people (retaining
present consumption rates).”27 If the world is to be one in which all inhabitants
enjoy some basic level of wellbeing, then the world’s resources need protection.
They will have to be shared more equally. Those consuming the most will have to
cut back significantly. Economic growth that relies on growth in overall consumption would not only not benefit the poor; it would bring about their eventual
destruction. Along with everyone else’s.
Pollution and other environmental damage as a by-product of economic growth
Constant economic growth has come at a high cost to the planet: natural resources
have been rapidly depleted and so much fossil fuel has been burned that the environment has been harmed and climate change threatens the future of human and
other life on earth. This growth also generates enormous amounts of waste, which
in turn requires disposal that is itself often environmentally harmful. Pollution
takes a direct human toll. In 2010, more than one million premature deaths in
China were linked to outdoor air pollution, making air pollution the fourth
leading risk factor for death in China that year. In India in the same year, more
than half a million people died prematurely from outdoor air pollution. Outdoor
air pollution, mainly caused by vehicle fumes and factories, is now the sixth most
common killer in South Asia.28 Add to this the more than one million deaths per
year worldwide from traffic crashes and it is clear that economic growth does not
come without cost.
As resources become increasingly less available, people must use more environmentally destructive ways to access them. One might accept some form of environmental damage as the necessary cost of bringing sanitation and food to all
MYTH#3: ECONOMIC GROWTH IS NECESSARY
66
those in need. It is much harder to argue that harming the environment is a
reasonable exchange for having a greater supply of potato chips or batteryoperated toys. Humankind is destroying the planet not to bring about greater
wellbeing, but simply to increase production and consumption, regardless of the
product’s value or of who uses it. To quote UNDP, “…activities that emit carbon
dioxide into the atmosphere are those linked to the production of goods, not to the
provision of health and education.”29
Economists and others argue about the extent to which the economic models in
place in India and China have succeeded in reducing poverty levels. The question
is not whether they have but whether a different model might succeed just as well
or even better and at less cost to the environment and natural resource base. If the
cost of environmental degradation and resulting ill health were deducted from
measures of progress, it would be easier to know whether the world is actually
progressing, and at what cost.
What are countries supposed to develop into?
The terms ‘third world’ and ‘first world’ have long since passed out of popularity,
having been replaced with ‘developing’ and ‘developed.’ The newer terms raise
the question of what countries are supposed to be developing into and for how
many decades one can classify a country as ‘developing.’ Yet most people ignore
such questions and continue to believe that the obvious key to ‘development’ is
economic growth, without a clear understanding of what the final goal should be
or whether there is any likelihood of actually achieving or sustaining it.vii
In its common, vague use, the word ‘development’ fails to address the issue of
what type of lifestyle people wish to attain, what progress really means, and who
decides what development actually entails. It quietly sidesteps the question of
who, in a ‘developed’ country, can achieve that progress. Nor does it raise the
question of feasibly achieving ‘developed’ status within existing national and
global resource bases and environmental constraints. Former Peruvian diplomat
Oswaldo de Rivero argues that the term ‘development’ suggests a linear track that
all countries must follow, a continuing march of progress towards a state of
vii Many people have questioned the goal of ‘development’ and Maxfred Man-Neef and
colleagues have established the school of ‘Human Scale Development’ as a way of addressing fundamental human needs in opposition to the simplistic view of linear development
towards a fully industrial, high-consumption economy. According to Max-Neef, people’s
fundamental needs are subsistence, protection, affection, understanding, participation,
leisure, creation, identity and freedom. Paul Ekins and Manfred Max-Neef, eds., Real-Life
Economics, Understanding Wealth Creation (New York: Routledge, 1992).
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enlightenment, a straight line from the dim past into the ever-brighter future.30
‘Development’ suggests that the new and modern are always better.viii Such a
linear approach fails to raise the issue of people’s values, such as family, community, and time for one’s own pursuits. It suggests that people only care about
money, and that everything that is valuable is available for purchase.
Everyone considers the United States as ‘developed,’ but only three countries with
at least 250,000 adults (Russia, Ukraine, and Lebanon) are more socioeconomically unequal. Is inequality thus a prerequisite or a by-product of
development?ix What if development meant something other than unsustainable
rates of consumption? What if it meant that everyone had enough quality food to
eat, lived in decent housing, could access quality health care, all children attended
good schools, and the poor and minorities were no more likely to be jailed than the
rich were. If that were the definition of development, then the United States would
certainly deserve the label of undeveloped.
Although the American example is extreme, it is not an exception. In countries
that have recently ‘developed,’ sizeable portions of the population remain unemployed, underemployed, or extremely poor, while the rich grow richer. Brazil,
Russia, India, and China all exhibit these trends, although Brazil has recently
begun to reduce its levels of inequality.31 Russia exhibits the highest level of wealth
inequality in the world, other than a few tiny Caribbean countries inhabited by
billionaires. A mere 110 Russians control thirty-five percent of all household
wealth in the country.32 Meanwhile, at least eighteen million Russians (thirteen
percent of the population) live below the poverty line. While the rich continue to
grow richer, the poor remain about the same, meaning that an ever-growing gulf
exists between the two.33 Despite India’s ‘miraculous’ economic progress, more
than a quarter million people, or twenty-six percent of the country’s population,
live below the poverty line.34 No country, not even in Africa, has a higher proportion of underweight children than does India.35 Urban housing is unaffordable for
all but the most prosperous Indians, causing many to commute for hours each day
or to live in crowded slums. More Indians use mobile phones than have access to
a toilet or to decent sanitation.36 While many poor Indians have benefited from
viii This belief in progress as a linear track, with everything new by definition being better,
reflects Darwin’s evolutionary theory. Yet evolution may more often have entailed random
changes, not adaptive ones: those changes that were seriously maladaptive disappeared,
but changes that simply were random and unconnected to improvement, but not disastrous, remained. See Stephen Jay Gould’s books on this subject, including Eight Little Piggies:
Reflections in Natural History (New York: WW Norton, 1993).
ix I address inequality in more detail in the Myth on that topic.
MYTH#3: ECONOMIC GROWTH IS NECESSARY
68
economic growth, far too many have not, as a small elite group accumulates
massive wealth. Yet India presents itself as a model of rapid development, as if the
generation of wealth alone is enough, regardless of how many tens or hundreds of
millions continue to live in dire poverty. While other countries may not show such
extremes in wealth inequality as India, the levels of inequality in them are still
striking (see Figure 2).37
Figure 2: Examples of Wealth Inequality
The greatest recent success story in terms of an economy that has grown tremendously while seeing reductions in poverty is China. (Note that to the extent that
China has succeeded in growing its economy, the growth is due to ignoring, rather
than following, the advice of the IMF.) Although the economy has indeed grown,
that growth has taken a huge toll on the environment and has led to extreme
inequality and breakdown of community. A number of factors, including the need
to find sufficient fuel (including coal) and the fact that an export-led economy
faces troubles when the global economy slows, also threaten Chinese economic
growth.38 Despite all of its ‘progress’ and ‘economic miracles,’ huge swathes of
poverty remain in rural China.
The definition of ‘development’ could, from the evidence, therefore actually mean
increased access to luxury goods and lifestyles for the wealthy and modest gains
for the poor that are offset by environmental and health costs, while in the worst
cases the poor have suffered from the environmental costs while making no
69
BEYOND APOLOGIES
gains at all. Is that the path that ‘developing’ countries should be encouraged to
take? Surely, they could do better than that.
Economic growth and the never-ending rat race
“I can get no remedy against this consumption of the purse;
borrowing only lingers and lingers it out, but the disease is incurable.”
– Falstaff in Shakespeare’s Henry IV Part II
“Our economy is based on spending billions to persuade people that happiness is buying
things, and then insisting that the only way to have a viable economy is to make things for
people to buy so they’ll have jobs and get enough money to buy things.” – Philip Slater39
* * *
Even when it succeeds in raising average incomes, the goal of constant growth is
hardly a restful one. Because seemingly limitless consumerism is the norm while
incomes are limited, people must regularly take out loans to purchase goods. Any
growth in living standards often accompanies an even greater growth in debt. As
college teacher and social justice advocate Paul Buccheit writes, “Today, Americans are burdened with over $11 trillion in consumer debt, including mortgages,
student loans, and credit card liabilities. As the very rich have accumulated
income and wealth, the middle class has kept up appearances by taking out
loans.”40 As a result, people have to work overtime or at second jobs to keep up
with their payments. Running constantly on a hamster wheel may make for good
GDP numbers, but how much does it contribute to quality of life? ‘The economy’
may benefit when people work long hours most weeks of the year while still
finding themselves in debt (that is, at least until personal and corporate bank
ruptcy claims skyrocket). It is less certain how much individuals gain in a system
that treats money as the most, or even the only, important aspect of life.
Not only does it exhaust and demoralize people, but the reliance on debt is inherently unstable. Nor is consumer debt the only source of instability. Those keen to
make large fortunes often do so in socially dangerous ways. They lobby successfully to remove the safeguards meant to protect currencies and economies and to
prevent predators from successfully preying on the system. Stability and growth
do not go hand in hand.
Over-consumption can also directly harm people’s health. Excessive consumption
of food, alcohol, tobacco, and cars, to name a few, is harmful both to people and to
the environment. The poor suffer the most from money wasted on addictive and
harmful products and from the trashing of their neighbourhoods by the pollution
and other problems related to the car (such as car repair shops, parking lots, and
highways spewing pollution into low income communities). The problem is not
just individual greed, but also a system that encourages over-consumption
MYTH#3: ECONOMIC GROWTH IS NECESSARY
70
in order to generate growth; that growth, in turn, is not only of GDP but also of
waistlines, deadly crashes, alcohol-related violence, tobacco-related disease, and
other unsavoury by-products.
* * *
Researcher and paediatrician Dr. Jody Heymann is conducting the first global study on
the impact of health and social policies on individuals, families, and communities around
the world. The book Forgotten Families summarizes data from surveys conducted on
55,000 families in 180 countries, as well as original research that was conducted under
the Project on Global Working Families. Heymann estimates that there are at least 340
million children under the age of six in the world who live in households in which all
adults work for pay. In too many cases, those children are left under the supervision of an
older sibling or simply locked up for hours each day without adequate care. Neglect leads
to a number of problems including accidents, poor school performance, and disciplinary
problems. While Heymann largely makes the case for extensive early childhood care and
education programs (that could, she argues, be paid for with current high-consumption
country agricultural subsidies), the hours the study finds parents working makes it clear
that some people have virtually no waking hours with their children and would benefit
from shorter hours to spend more time with family...and for all else that matters outside
of work.41
* * *
Increased income and consumption do not equal greater happiness
When people are extremely poor, an increase in income generally contributes to
their happiness, as measured by people’s reported contentment with their lives.
There are excellent reasons for increasing the income and living standards of the
poorest. But what about everyone else? Beyond a certain level, increased income
no longer translates into increased happiness. There is no pre-defined level at
which people feel contented. People’s perception of their economic status is
largely comparative; they wish to feel or appear to be better off than their peers
are. In Japan, as real per capita income increased five-fold between 1958 and 1987,
and as ownership of consumer goods (refrigerators, washing machines, TVs, and
cars) rose from one percent to about sixty percent of households, the perception of
wellbeing (satisfaction with life) remained constant.42 Richard Easterlin, professor
of economics at University of Southern California and a Distinguished Fellow of
the American Economic Association, argues that “the magnitude of Japan’s subsequent advance in living levels does encompass a transformation from a ‘subsistence level’ of consumer durables to plenitude, with no impact on subjective wellbeing. One would suspect that the spread of consumer durables among the Japanese must have involved widespread satisfaction of perceived needs” – yet it did
not.43 Easterlin cites evidence that material norms rise at the same rate as incomes,
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meaning that people simply expect more as more money or products become
available. While, in general, those whose incomes are higher are happier than
others, “raising the incomes of all does not increase the happiness of all.”44
The lack of a connection between income and happiness or wellbeing is also due
in part to the difference between actually having a higher income and the efforts
spent to gain that higher income; those who wish for more money tend to be “less
happy and more vulnerable to other psychological ills than individuals who do
not crave higher incomes.”45 The billions of dollars spent on advertising, plus all
the messaging that comes through social media, TV programming, and movies,
tend to reinforce the same message: wealth equates with happiness, and shopping
is the most delightful of all activities. If those messages really were true and if
people really did enjoy the pursuit of ever-greater wealth, then perhaps the media
would not have to spend so much money bombarding people with the message
that shopping will make them feel better about themselves.
How much is enough? As Schumacher writes, the level at which people can say
that they have enough is by no means easy to identify when materialism is the
goal: “...how could it be that the frenzy of economism does not abate as higher
‘standards of living’ are attained, and that it is precisely the richest societies which
pursue their economic advantage with the greatest ruthlessness?”46 Media and
advertising certainly contribute to the perception that others have more, and that
more is always better; as a result, people learn to never be content with what they
have, no matter how much that is. Obviously everyone cannot have more money
(or stuff) than everyone else.x Since it is impossible for everyone to have aboveaverage incomes, simply raising incomes (once a decent benchmark is reached)
will not achieve greater happiness. Once we succeed in ending abject poverty, it is
time to look at other ways of satisfying people’s wants than through encouraging
ever-greater consumption. Greater wellbeing – better schools and health care,
more pleasant parks and other public spaces, more scope for public involvement
in government, stronger and safer communities, and so on – could have a significant impact on happiness.47 It is time to try these measures.
And if there were no more poor people, who would clean our toilets? Social policies that
result in overall high levels of wellbeing in Western Europe are facilitated, arguably, by high
immigration rates, so that there is always an underclass to perform the tasks that the better
off now reject. My own answer to this problem, rather than maintaining an underclass (be
it of women, the dark-skinned, or recent immigrants), is to accept the importance of the
unpleasant tasks and share them more equally (perhaps a rotational system such as is used
in Israeli kibbutzim), while trying to see if we can reorient our lifestyles to remove the need
for some of the least pleasant tasks.
x
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72
Resource constraints mean that endless consumption is neither attainable nor sustainable
In addition to global constraints related to energy are all the local resource
constraints that make the Western lifestyle unattainable for most of the world’s
population. Countries rich in fresh water may not have to worry about water
conservation, for example, but those with little water do not have that luxury.
According to UNDP, an American’s average water use is almost six hundred litres
per day, a rate more than thirty-eight times that used in countries such as Angola,
Cambodia, or Haiti.xi Let us not even talk about Mozambique, at four litres per
day...which hardly seems enough to survive.48 It is clearly ludicrous to suggest
that the population of Mozambique (or of any other water-poor country) should
aim for a Western lifestyle, including Western flush toilets.xii Cutting back on
energy use in countries such as the United States would help other countries;
reductions in water by the high consumption countries would do little to help
others. What would help is not to push the Western lifestyle on places that clearly
cannot afford it. “Yet,” writes Diamond, “we often promise developing countries
that if they will only adopt good [sic] policies – for example, institute honest
government and a free-market economy – they, too, will be able to enjoy a firstworld lifestyle. This promise is impossible, a cruel hoax: we are having difficulty
supporting a first-world lifestyle even now for only one billion people.”49
Meanwhile, water-poor countries use some of their precious water to grow foods
or other crops that they export to water-rich countries. Food-growing farmers in
parts of Kenya face drought, while other others rely on fancy irrigation schemes to
grow flowers and passion fruit for export.
Even in countries with limited resources, average consumption masks enormous
differences. For instance, in Nepal, although everyone’s electricity turns off for
about twelve hours each day, a reliable water supply is available only to the
wealthy. While it flows freely in the big hotels, much of the population of Kathmandu gets little or no water from their taps most of the day. We must address
these inequities in resource use both globally and nationally. The world’s primary
focus on economic growth and trade means that limited resources are being used
not to feed the local population or to improve overall wellbeing, but rather to
generate wealth for a few. Yet another benefit brought by ‘economic growth.’
Water use refers to industrial, agricultural, and household use.
Most flush toilets require between six to thirteen litres of water per flush; even highefficiency toilets use almost five litres per flush.
xi
xii
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BEYOND APOLOGIES
Would it hurt to cut back on consumption (and economic growth)?
Can society ‘afford’ not to have economic growth? A more appropriate question
would be, could society afford to have it? The United States uses fifty-seven times
as much energy per capita than does Bangladesh, sixteen times as much per capita
as Indonesia, and twice as much as the United Kingdom.50 There are strong cases
for getting Americans to use less, including reducing the American contribution to
climate change and making more global fuel supplies available to countries that
currently use vastly less energy. At the policy level, decision makers need to drop
the goal of economic growth and replace it with one of promoting wellbeing. Less
national obsession with production would set the stage for reductions at the
individual level as well. But cutting back greatly on resource use involves some
complications. First, there is the problem of getting people to agree to the goal,
which can be difficult when politicians and the media persuade Americans that
reductions in energy use are unnecessary, unpleasant, or – more commonly –
harmful to the economy. Second, there is a big difference between agreeing to an
overall goal and actually making the changes needed to achieve it. Third, even
where people wish to make changes, such changes may be difficult or even impossible given the design, layout, and customs of urban and rural America. The lack
of good infrastructure for public transit, cycling, and walking necessitates driving
private vehicles. Common agricultural practices require heavy application of
petroleum-based fertilizers, as well as fuel to operate farm machinery. Urban
sprawl means that food travels long distances. The typical diet of heavily
processed and packaged foods means that eating is energy-intensive at many
levels.xiii Wearing ‘corporately-appropriate’ suits in the summer requires air
conditioning.xiv How exactly are Americans to reduce consumption? What about
people in other nations who are eager to match the vaunted American lifestyle?
Life does require consumption, which in turn requires resources and generates
waste. However, the differences in both the scale and the kind of consumption and
waste can be enormous. It is the difference between drinking a glass of water from
the tap and drinking from a throwaway plastic bottle whose manufacture requires
chemicals, energy, and water. It is the difference between riding a bicycle and
driving a car, between over-cooled/over-heated buildings and adjusting the
temperature and one’s clothing to be more in synch with the climate. It is the
Estimates vary, but one figure suggests that it requires fifteen calories of fuel to produce
one calorie of fuel. Eric Garza, “The Energy Cost of Food,” Resilience, July 22, 2013.
xiv There is a big difference between the use of energy to stay warm enough for health and
survival, and the use of air conditioning or heating simply to increase personal comfort or
to allow for clothing inappropriate to the climate/season.
xiii
MYTH#3: ECONOMIC GROWTH IS NECESSARY
74
difference between eating a diet that mainly consists of grains, legumes, fresh
fruits and vegetables bought from a small local organic farm that utilizes human
and animal labour versus eating heavily processed, chemical-laden foods that
have been transported thousands of miles. And so on. People need to become far
more conscious of what they eat and use, from production through shipment to
consumption and disposal. Cutting back would not likely be as painful as many
may imagine, and could result in some significant benefits. Jared Diamond
(somewhat optimistically) argues,
Real sacrifice wouldn’t be required…because living standards are not tightly
coupled to consumption rates. Much American consumption is wasteful and
contributes little or nothing to quality of life. For example, per capita oil
consumption in Western Europe is about half of ours, yet Western Europe’s
standard of living is higher by any reasonable criterion, including life expectancy,
health, infant mortality, access to medical care, financial security after retirement,
vacation time, quality of public schools and support for the arts. Ask yourself
whether Americans’ wasteful use of gasoline contributes positively to any of
those measures.51
That there is at least some demand, even in the United States, for a simpler, less
cumbersome, less materialistic lifestyle can be seen in the growing circulation of
simple-living magazines. People are growing tired of working hard just to buy
more ‘stuff,’ and of fearing what their lives will be like after retirement. Declines in
consumption could be at least partially offset by increases in other aspects of
wellbeing: less driving would not be a sacrifice if there were better public transit,
cycle paths, and walkways; fewer home appliances might be compensated by
more community services and interactions; less industrial and more fresh and
local food would mean tastier food and better health; less heating and cooling
could be offset by more climate-appropriate clothing. Moreover, most people on
the planet do not have the option of consuming more; it is the questionably lucky
few who are in a position to reduce their consumption – while virtually everyone
would gain from that reduction.
Much of what people today consider unsophisticated or hopelessly outdated
needs to become mainstream, including chemical-free agriculture, cycling and
walking as transport, and repairing items rather than throwing them out. People
will have to cut back on their consumption, including by buying fewer imported
items and relying more on local products and services. Local purchases have the
additional benefit of keeping money circulating within the community, whereas
mass-produced products typically enrich only corporate executives and shareholders.
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How can people get from here to there? If enough people make enough noise
about the need for a change, they could eventually bring it about; the process is
already underway with many debates about the need for a better measure than
GDP. The debate about GDP must highlight the importance of aiming not for
increased consumption (no matter of what, by whom) but rather for increased
wellbeing. As more people bring more ideas to the table, we will get closer to
making the needed changes.
Is economic growth about production or is it about employment?
Ironically, increases in production, at least in high-consumption countries, are
often justified not based on any real desire for the products themselves but rather
on the need to create jobs. Decades ago, philosopher Hannah Arendt wrote:
“Today it is almost universally accepted that we must make cars to keep jobs, not
to move people about.” Arendt described how the obsession with production and
consumption results in “a huge economy of waste.” In such a system, she continued, progress means that “to stop going, to stop wasting, to stop consuming more
and more, quicker and quicker, to say at any given moment enough is enough
would spell immediate doom.”52
Economic growth occurs largely through mechanization, which allows for higher
levels of production (output) with less labour (input). While machines can
enhance the productivity of people and thus increase their earnings, as well as
protect them from the most dangerous and painfully boring jobs, they also replace
human workers. The tax structure in many countries furthers this shift by making
it far more expensive to hire people than to use machines: governments provide
tax cuts for automation to attract investment but fail to provide similar incentives
to encourage the hiring of people.xv At the same time, employee benefits such as
health insurance and leave – unless provided directly by government, funded in
part through corporate taxes – have a financial cost, as do safety regulations, and
both kinds of costs cut into profits.
What are the consequences of economic-growth-through-mechanization? In the
United States, economic growth has occurred along with a one-third drop in
manufacturing employment in less than twenty years. In 1992, there were more
than eleven million people employed in manufacturing jobs; that number fell to
just over ten million in 2000, and to less than seven million in 2009.53 With no jobs
to replace those that have been mechanized, the negative economic and social
xv Why do governments tax capital at such low rates and labour (income tax) so much
higher? Obviously, it is about power, that is, the ability to lobby for the benefits you want.
Machines never protest for higher wages or better working conditions.
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effects on communities and the country have been serious. The problem has been
addressed, in part, not by efforts to increase other forms of employment, but
rather by redefining the term ‘unemployment.’ By removing the chronically
unemployed from the statistics, the formal unemployment rate appears to be
lower than it actually is; the problem can thus be safely ignored.
Automation reduces the connection between consumption and employment.
Given that consumption is encouraged in part because of the idea that it will create
more jobs, it is important to consider whether reduced consumption would
actually result in fewer jobs. An economy that is focused on the reduced use of
resources – through more repair and reuse rather than production – would
actually result in more employment, as it requires individual labour to repair
something that can be mass produced mechanically. Items that are mass-produced
generate few jobs, as do foods grown on factory farms. Small local production
results in more employment. It is hard to imagine going back to the days when
individuals made shoes for others, but a few pairs of tailored shoes that are truly
comfortable and durable could replace a far larger number of ill-fitting, massproduced ones. Repairing existing shoes (still a common business in much of the
world) would result in employment as well as cost savings. More employment,
lower costs, and more goods is not a feasible combination, but more employment
combined with a smaller number of higher quality goods certainly is.
Why all the ongoing attention to the goal of economic growth?
Yet another indication that there is something wrong with the goal of economic
growth is the fact that we are not supposed to question it. Policymakers, international institutions such as the World Bank and IMF, and even most in the NGO
community take it for granted. Newspaper headlines refer to ways to achieve
economic growth; they never question the need for it. When people lose the right
to question its assumptions, economics should no longer be called a science but
rather a religion.54 Censorship of ideas is dangerous; in this case, almost murderous. As American economist and University of Texas professor James Kenneth
Galbraith writes,
What is the purpose of the myth? It serves...mainly as a device for corralling the
opposition, restricting the flow of thought, shrinking the sphere of admissible
debate. ... This in turn limits the range of presentable ideas, conveniently setting an
entire panoply of reasoned discourse beyond the pale of what can be said, at least
in public, by reputable people.55
All points of policy should be open to discussion and debate. Those who wish to
stifle debate either by refusing to produce evidence or by attacking the questioner
probably have something to hide.
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If I sound particularly bitter about the subject of economic growth, it is due to my
fatigue of hearing it inevitably accepted as the only way to achieve poverty reduction. The strength of my arguments is in proportion to the power of the belief in
question. When for years we have been told the same lies, it takes great effort to
recover our freedom of thought. Meanwhile, at least three simple reasons explain
why so many people preach economic growth as the main or sole antidote to
poverty, and more broadly, as the only potential economic goal of any nation.
First, economic growth will, people believe, create more wealth. With more to go
around (a bigger pie to divide), redistribution will not be necessary. The rich can
continue consuming at current or even higher levels, the middle class can continue
to try to catch up, and the poor (who, after all, do not tend to vote or have any
influence on policy) can fight for the scraps. Somewhat surprisingly, and an
indication of the widespread acceptance of the idea, is the fact that defenders of
economic growth extend beyond those who directly benefit from it. After all, it is
far more attractive to those with limited means to imagine that they will someday
be rich than to be satisfied with the idea of greater equality.
Second, if endless growth is necessary and possible, people can ignore the need to
conserve limited resources. Once people are convinced that economic growth is
essential, it is conservationists, not the very rich, who become the enemy of the
poor and middle class. Any attempt to slow down business and industry can be
portrayed as an attack on the engine of growth, on the hopes and dreams of all.
Difficulties in finding a job or figuring out how to meet monthly expenses are hard
to ignore. It is far easier to ignore the extinction of species or even extreme weather
events (except when you are directly affected by one). Once people posit economic
growth as an implicit need, its proponents need not defend their positions. It is
those who argue for a stable state economy or even shrinking economies that need
to defend their ideas.
Third, given current monetary systems, people have no choice but to promote
growth. For the most part, money is created not by printing notes but by giving
loans. Under current laws, banks can lend out far more money than they keep in
reserve. However, those loans carry interest. The interest charged on those loans is
essentially ‘new’ money. If a business takes out a loan, the only way for it to generate the money that pays the interest is to expand the business. When individuals
take out loans, the only way to pay them back with interest is through increasing
income or cutting back on other expenditures. When an individual takes out a
college loan, the anticipation is that the increased income opportunities that come
with the degree will allow him/her to repay the loan. Credit card debt operates
with the same principle, just at higher interest rates. The system requires growth.
MYTH#3: ECONOMIC GROWTH IS NECESSARY
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As long as society remains focused on the moving target of economic growth, it
will not succeed at increasing wellbeing or preserving the environment. The first
step is to change people’s thinking. Targets that are more appropriate will lead to
achievements that are more valuable.

Towards a Better Way Part I: Maximize Wellbeing
“There is no imperative for the economic system to be geared to profit rather than
people.” – Paul Ekins56
“An entirely new system of thought is needed, a system based on attention to people, and
not primarily attention to goods—(the goods will look after themselves!).”
– EF Schumacher57
* * *
What might a goal of increased wellbeing for all look like?
If economic growth does not lead to improved wellbeing and is destroying the
world’s resource base and even the planet, what would be a better option?
If people care more about wellbeing than about a rising GDP, then polluting the
environment to generate wealth, firing workers to increase productivity, and
allowing fast food and tobacco companies to profit from poison seems much less
sensible. If people value life and health over money, then they will make radically
different choices in many parts of their lives. However, to reject the economic
growth model, a better one must replace it. The alternative to economic growth is
an approach focused on meeting people’s basic needs. Rather than try to make
everyone rich and to maximize consumption, the focus should be on direct
attempts to increase people’s wellbeing.
* * *
My office in Dhaka is in a low-income area that people refer to as a slum. The buildings
are small and built closely together. The ground floor is usually occupied by a shop with
housing above. Some of the shops are so small that nearly all the goods are within arms’
length of the owner. Almost everyone gets about by foot, bicycle, or bicycle rickshaw. A
large bare playing field is full of children and youth playing cricket and riding bicycles,
while women walk around the perimeter. The streets remain lively late into the night.
People seem to know each other, and children roam about freely. The residents probably
live in small and not very comfortable homes with very few possessions. They have at
most a fan to cool themselves and wash their clothes in a bucket. But as long as they are
able to meet their basic needs, it is difficult to see how they are deprived in any important
way, and in many ways their community seems far stronger and ‘wealthier’ than the
upper middle class neighbourhood in which I live.
* * *
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BEYOND APOLOGIES
A system focused on wellbeing would measure success by GNH or some similar
measure, not GDP.xvi It would emphasize government provision of a variety of
high quality, free services, especially to the poor. It would classify as wasteful
government spending used to subsidize corporations or to expand the military. Its
taxation policy would prevent all the wealth going to the very rich and ensure
sufficient funds for government services. It would give governments the power to
regulate industry. It would emphasize public transit, walking, and cycling over the
automobile. It would replace the current focus on material wealth with a greater
focus on other forms of wealth, especially on thriving communities. It would
create opportunities for recreation and interaction, and promote a cleaner and
safer environment. It would nurture cooperation rather than emphasize competition.
While growth in production and consumption is not sustainable, growth in
wellbeing is. It is possible to achieve an increase in the number of people who
enjoy a modest but overall satisfying lifestyle that, while involving fewer
consumer goods, would offer significant advantages in terms of better health,
education, and job opportunities as well as more friendly and cooperative neighbourhoods. Such a model would include better government services and more
opportunities to enjoy one’s family and a variety of leisure pursuits. This is not
pure fantasy. Western Europeans, on average, hardly lead materially impoverished lives, yet they drive far less than Americans, have fewer appliances, and
work far fewer hours. On the flip side, albeit overworked, Americans get to sit
longer in bigger cars and, when they finally get home, they can eat processed
foods and use a dishwasher and vacuum cleaner to compensate for their lack of
time to cook or clean, and then collapse from exhaustion in front of the television
(and watch lots of programs about the lifestyles of the rich and famous that they
wish to emulate).
Europeans do pay higher taxes than do Americans. But Europeans receive a lot in
return for those taxes. As a result, each individual needs less money, as she does
not have to buy all those services that the government provides. Nor are the poor,
the unemployed, the sick, and women punished to the same extent in Western
Europe as they are in the ‘free’ and ‘democratic’ United States. (Americans do
enjoy some real and valuable freedoms. Unfortunately employers also ‘enjoy’ the
freedom to pay low wages, to refuse to provide paid maternity leave, and to deny
workers safety protections.) If people were less concerned about productivity and
more concerned about wellbeing, it would be easier to show the value of policies
xvi
These methodologies are described earlier in this book.
MYTH#3: ECONOMIC GROWTH IS NECESSARY
80
such as workplace child care, a shorter work week, more generous vacation and
leave allowances, a higher minimum wage, and a basic benefits package.
Although the European model is more sustainable than the American one, it is not
replicable internationally: its resource use, low compared to America, is still high
by international standards. What currently ‘developing’ countries could aspire to
is a level of government services and social policies similar to what is available in
Western Europe, combined with significantly less consumption than is currently
found in either Europe or North America. Fortunately, people in the lowconsumption countries already have significant expertise on making do with less.
Perhaps some could find employment in teaching those skills to their more wasteful peers in other countries.
Could a basic needs approach work?
Countries that focus on meeting basic needs rather than on encouraging industrial
growth have done quite well in health and education, despite having few material
resources compared to the high-consumption countries. The main historical examples are Cuba, Sri Lanka, Costa Rica, Vietnam, and the state of Kerala in India.
Some have since strayed from that approach – and are now seeing increased
income inequality – but their experience demonstrates the feasibility of the model.
The Indian state of Kerala is typical of these successful outliers; it does far better
on measures of population health, education, and political involvement than does
the rest of India due to its direct focus on those measures.
* * *
“Perhaps the real significance of a multidimensional approach to poverty lies in the fact
that it allows for an expanded public policy agenda. In many cases where social performance indicators, such as health and education, far exceeded expectations based on levels
of gross national product (GNP) per capita, these results were achieved through transformative social policies, for example, in China, Costa Rica, Cuba, Kerala State of India,
Sri Lanka and many formerly socialist countries. Those policies, which were holistic,
inclusive and universalistic, can provide lessons to developing countries struggling to
overcome poverty in its various dimensions. Many of the major social transformations
were achieved despite low average income levels. Conversely, many countries that raised
average income levels significantly but failed to adopt a more transformative social
agenda remained underperformers in terms of health, education and social inclusion.
This highlights the limitations of approaches that are excessively focused on income.”
– UNDP Department of Economic and Social Affairs, Rethinking Poverty, Report on
the World Social Situation 2010
* * *
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Brazil, which for years has experienced rapid economic growth, could easily have
continued along its path towards greater income inequality. Instead, the government chose to focus on improving the lot of the poor and increasing the middle
class, while worrying less about GDP. As a result, unemployment has fallen
greatly and the middle class has increased; over forty million people have risen
out of poverty. Extreme poverty has declined by eighty-nine percent. While GDP
growth has slowed, per capita income has continued to grow. The government has
addressed extreme poverty directly through the program Bolsa Familia, which
gives money to mothers in poverty in return for them sending their children to
school and making use of health services. While many economists scold Brazil for
failing to prioritize economic growth, others realize that the country has achieved
something remarkable.58
People can ‘buy’ a lot of wellbeing when they invest in it directly, or achieve less
by waiting (and waiting) for increases in wealth to bring it about. What Cuba and
other socialist countries have in common is that their governments focus first on
providing basic services to their populations. They have built schools and health
clinics and staffed them with well-trained teachers and health workers, enacted
nationwide vaccination campaigns, and provided health and education at no cost.
They have ignored the advice of the World Bank and IMF on collecting user fees
from the poor and on privatizing various services and industries. According to an
article about Cuba in the International Journal of Epidemiology,
In virtually every critical area of public health and medicine facing poor countries
Cuba has achieved undeniable success; these include most prominently – creating
a high quality primary care network and an unequaled public health system,
educating a skilled work force, sustaining a local biomedical research infrastructure, controlling infectious diseases, achieving a decline in non-communicable
diseases, and meeting the emergency health needs of less developed countries.
Nor is there a reason why other countries could not achieve similar benefits: “If
the Cuban experience were generalized to other poor and middle-income countries human health would be transformed.”59
Why do we not hear more about a basic needs approach?
The ‘problem’ with approaches that focus on wellbeing rather than on income is
that they offer only very limited scope, if any, for the few to amass great wealth.
They reduce the possibility of foreign investors making a fortune. So it should not
be a surprise that the rich prefer a more market-based model for poverty reduction
(helping people to earn the money to buy what they need and want from private
companies) rather than a public service approach (greatly reducing what people
MYTH#3: ECONOMIC GROWTH IS NECESSARY
82
need to buy to survive and thrive). Wealthy businessmen and giant corporations
control much of the media, and they are naturally loath to report about anything
positive in socialist countries, or those that reject the ‘free enterprise’ model. One
has to do extensive research to find information about the good things happening
in socialist countries. When Americans think about Cuba, they are encouraged by
the media to think of repression and lack of freedom, not of quality health services.
That the Cuban government does much to improve the health and wellbeing of
the population gets little if any media attention, yet its achievements are such that
the National Health Service of the United Kingdom visited Cuba to see what it
could learn about the Cuban health system to improve the British one.60
In countries like China and India, on the other hand, the focus is on greater industrialization and more jobs, regardless of how miserable those jobs may be, and of
how much of the wealth generated floats up to the top. Ignored are such possibilities as taxing the growing and fabulously wealthy elite and corporations in order
to provide basic services to all citizens and to allow people to continue with more
traditional ways of earning money. Those traditional income sources, though not
lucrative, might provide a higher quality of life when complemented by free
government services than does the current capitalist model of each person trying
to earn enough to pay for everything. Attempting to make everyone wealthy
through free market economies is a pipe dream, an opiate to keep the poor from
demanding their rights.xvii
The fact that the United States focuses so strongly on vilifying socialism proves
that it must have some popular appeal. The threat to capitalist wealth posed by the
appeal of socialist policies – and of a basic needs approach – explains the ongoing
need for the conventional, corporate-controlled media to attack such approaches.
Why fight a war in Vietnam, why demonize the former Soviet Union and Cuba,
why attack the successful systems of socialized health care in all other western
democracies, if the people in those countries were so miserable that their political
system or approach to health care had no chance of spreading? Whatever the
shortcomings of the governments of those countries, it is clear that powerful
elements in the United States fear the potential popular reaction to the possibility
of universal free health care, worker ownership of enterprises, and similar
policies.
It helps to remember that much of what we see on the news and in newspapers is
about selling ideas and products, including ideas and products that are destrucxvii In this sense, TV and the Internet have replaced religion as what Karl Marx famously
referred to as the opiate of the people.
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BEYOND APOLOGIES
tive to the self-interest of the ninety-nine percent. It is important to conduct independent research, check the statistics, and question the assumptions underlying
news reports. It is important to ask why, if social policies are so bad for the
economy, the United States is the only Western country not to have a strong set of
them. It is important to vote for politicians who are working towards a better
system, and keep reminding them that voters expect them to fulfill their campaign
promises. There will be many obstacles in doing so, including people’s nearly
instinctive dislike for paying taxes. But difficulty does not guarantee defeat.
Using less rather than producing more
The idea of producing a smaller number of high quality goods and services and
having more employment raises the difference between what people have come to
expect and what they actually need. Taking all of people’s desires equally
seriously is neither feasible nor affordable.xviii Fewer mass-produced items and
more handmade ones, complemented by more repair, would benefit employment
and the environment. In addition, while people do demand various things (more
parking, more road space, more stuff), there is no need to take all such demands
more seriously than the demands for affordable housing, good schools, and attractive public spaces, to name a few.
One of the specific areas in which consumer pressure results in untenable policies
is in electricity production. Consumers want more electricity; governments rush to
provide more. However, if the wealthy continue to increase their use, the poor
may still not get even a small supply. Reducing waste, some of which occurs even
before the service reaches the consumer, is rarely proposed as a solution.xix Even
those who are interested in renewable energy tend to ignore the issue of how to
reduce the wastage of existing energy supplies. A form of rationing, either direct
or through pricing, on the other hand, can help to ensure that the poor get at least
some of the essential services that, like electricity and water, are often in limited
supply.
As it is, we ignore many of people’s needs and wants. We ignore the need for affordable
housing, health care, and quality schools. We ignore the need for pleasant outdoor recreational places that are accessible to all. We ignore the need for walkable and cycle-able neighbourhoods. A quick look at the ‘urban interest’ headlines in newspapers around the world
gives the impression that the biggest problem people face is not any of the abovementioned, but simply traffic. And the solution they offer is to build more roads, not to
provide better transport options.
xix Electricity that never makes it from the generating plant to the power grid and leaky
water pipes are typically presented as ‘normal’ costs of these services for which the
consumer must pay.
xviii
MYTH#3: ECONOMIC GROWTH IS NECESSARY
84
Since rising expectations and rising populations will continue to drive up the
demand for resources, limits and rations are unavoidable. Household electricity
use could be priced so that minimal use is free and the unit cost continues to rise
with the amount used, so that those wishing to use energy-intensive appliances
must pay a significant premium. The approach would be particularly successful if
governments invested the high tariffs in renewable electricity production and
ways of reducing waste in the system. Urban planning guidelines, for example,
should ensure that buildings get sufficient natural light and breezes, and have
proper insulation, to reduce the need for electricity.
In other words, what if instead of asking “Isn’t it a pity the poor have so little,”
people were to ask, “Isn’t it a pity that we waste so much and some people have so
much while others don’t have enough?” Such rephrasing may help to illustrate
why producing more wealth, supplying more electricity, building more roads or
adding more car parking instead of focusing on meeting people’s basic needs first
will not make poverty or shortage go away. Increasing supply is all too likely to
result in those who already had plenty having more while the poor still do not
have enough.
A note about population growth
Efforts to improve wellbeing will necessarily have to consider not only per capita
consumption levels but also the issue of population growth. The subject is controversial, partly due to various religious objections to contraception and partly due
to the origins of the family planning movement in eugenics, which sought to breed
better humans, including by limiting reproduction among the poor. Both Margaret
Sanger and Marie Stopes, early pioneers in the birth control movement, promoted
eugenics. Suggesting that the poor are bad parents or are not entitled to have
children puts one on dangerous territory and should be avoided. The issue of
population growth is controversial also due to the sometimes coercive use of
family planning by some governments that have been keen to limit their populations without paying sufficient attention to the most humane way of doing so.
Sensitivities notwithstanding, the issue is too important to ignore.
In the countryside, children represent low-cost labour, so it can make economic
sense to have many children. Where infant and child mortality rates are high,
people may have more children than they desire simply to ensure that at least a
few survive to adulthood. However, as people migrate to the cities (more than half
the world’s population is now urban), the cost of raising children rises. Further, the
status of women will always be low if they have no control over their fertility.
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BEYOND APOLOGIES
It is the responsibility of governments to ensure that quality family planning
services are available. In many cases, they deliver family planning services so
poorly that simply improving those services could bring about a dramatic reduction in the birth rate, without the use of coercion.61 Empowerment of women will
also facilitate their ability to decide to limit births. As to whether it is more inhumane to use coercion to lower the birth rate or to allow people to live in extreme
poverty due to limited resources and large populations, I leave it to my reader to
determine. It does little good to reduce the population of the poor if the rich
continue to consume at current levels. The reverse is also true: redistribution may
be of little use if the population continues to grow inordinately.
The issues of population and resource use need to be kept separate. Global issues
of resource use have far more to do with per capita consumption than with the size
of the world’s population. Local resource use, on the other hand, depends both on
population levels and on individual consumption. The two issues require two
different solutions. The high-consumption countries need a dramatic decline in
per capita consumption accompanied (in some cases) by decreases in population
growth.xx All countries need strong programs for family planning, so that everyone who wishes to practice contraception can do so, regardless of their level of
income.
Can governments afford to invest in wellbeing? Part 1: Taxes
It costs money to improve education and health care. It also requires a greater
acknowledgement of their importance, since money alone cannot solve problems
related to mismanagement, corruption, and general ineptitude. A goal of wellbeing would mean not only higher social budgets but also increased priority
accorded to social programs. However, how can cash-strapped governments,
especially in low-consumption countries, afford to pay for universal health care,
education, and social services? Two main mechanisms are available. The first is to
raise more money through higher taxes on those who can most afford to pay. The
second is to reduce spending on wasteful and harmful items, including subsidies
for the wealthy.
There are, of course, obstacles. Among them are ‘convenient beliefs’ – those beliefs
that allow the believer to defend his or her own advantage while appearing to act
in the interest of others, or what John Kenneth Galbraith describes as “what the
socially and economically favoured most wish or need to have believed.”62 It is
convenient, for example, to believe that the economy will prosper if people pay
Population size is not an issue in countries with very low birth rates, whose populations
are only maintained by immigration.
xx
MYTH#3: ECONOMIC GROWTH IS NECESSARY
86
fewer taxes and spend more as they please. People do not like to pay taxes, especially when wealthy individuals and corporations can evade themxxi, and when
they hear constantly in the media that government is inefficient, ineffective, and
wasteful. This is yet another reason to fight against anti-government propaganda
and to have a strong citizenry supporting government to implement high quality
services that will benefit everyone.
* * *
Although a more progressive tax structure would result in less luxury for those at the
top, the lifestyles of billionaires and even millionaires would unlikely be greatly affected
even if they paid taxes of over ninety percent on their incomes.xxii Bill Gates is not quite
the richest man on earth (Carlos Slim of Mexico repeatedly wins that title, with a net
worth of $73 billion), but he is the richest American. Consider this:“If Bill Gates were a
country, he would be the 37th richest country on earth.” “Bill Gates is 57 this year. If we
assume that he will live for another 33 years, he has to spend $6 million per day to use up
all of his wealth.” “If he gave everyone on Earth $10 this Christmas, he’d still have $2.26
billion left.”63
* * *
The potential for raising money through taxes on the extremely rich is enormous.
The total net worth of the richest 1,426 people in the world is $5.4 trillion.64 Taxing
them at even thirty-five percent of their annual income would yield an enormous
amount of money for starters.
Hint: It is worth pondering why many people who are not wealthy object to higher taxes
on the rich. Does it really have anything to do with what is likely to help/hurt the
economy, or are they susceptible to the belief that someday they too will be rich and they
want to be sure to enjoy all their future millions? If we are ever going to work successfully towards higher tax rates on the rich, we have to figure out how to get a wider
swathe of the population, including those who would benefit directly, on board.
* * *
For example, American billionaire Warren Buffett earned almost $63 million in 2010; of
that total, his taxable income was just under $40 million, and his federal income tax bill was
only seventeen percent of his taxable income. For the American middle class, the tax rate is
about thirty-five percent. However, Buffett, unlike most of the rich, believes that the
wealthy are not taxed enough. “Billionaire Warren Buffett Earned $62,855,038 in 2010.”
CNN Money, 12 October 2011.
xxii Note the important difference between taxes on incomes and on salaries. The very
wealthy tend to make most of their money from investments. That income (such as capital
gains) needs to be taxed at least as much as salaries in a truly progressive system, whereby
a ninety percent tax, for instance, would cover all forms of money making by the very rich.
Various loopholes that allow the wealthy to avoid paying taxes should also be plugged.
xxi
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Governments should only impose increased taxes on the middle class, meanwhile,
in return for expanded services that result in reduced spending on essential
services such as education, health care, and daycare. Done right, a restructured tax
system would have a number of desirable effects: the poor would benefit directly
by having both more cash (from more generous ‘social welfare’ programs) and
better services, the middle class would see its taxes go up by less than its expenses
would go down, and the rich would have less excess.
In addition to taxing the super-rich at a much higher rate, we need to recapture the
sums that vanish through tax evasion. As explained in depth in the Oxfam report,
Releasing the Hidden Billions for Poverty Eradication, countries and cities compete
with each other to attract foreign investment.65 They do this by offering cheap
labour, weak protection for labour (including a prohibition on unions), and weak
environmental protection. They also attract investment by offering low tax rates
on capital, including a range of ‘tax holidays’ and other benefits. The result has
been a widespread reduction in tax rates for foreign-owned subsidiaries and the
affiliates of transnational companies. Corporate tax rates for American affiliates
operating in low-consumption countries, for instance, fell from fifty-four percent
in 1983 to just twenty-eight percent in 1996. When governments try to raise tax
rates, corporations often scare them with threats of decamping and cutting jobs.
The Oxfam report finds that low-consumption countries lose billions of dollars
each year through two forms of tax loss: ‘tax competition’ (the common policy of
lowering corporate taxes to attract investment) and untaxed capital flight (transfer
of funds out of a country without paying tax on it). There are two potentially ‘easy’
ways for low-consumption countries to raise more funds. First, they could tax
foreign corporations at a higher rate. Second, they could begin taxing capital
flight. Using these two measures alone, governments could double their corporate
tax revenues. These figures do not include other ways in which corporations (and
individuals) evade taxes and are subsidized by governments. For example, many
corporations register their operations in tax havens – countries that do not tax
corporations. This may involve as little as maintaining a post office box in the
country. According to a more recent Oxfam report, wealthy individuals have
stashed away at least $18.5 trillion (yes, trillion) in tax havens. If governments
collected tax on that amount, they could have over $156 billion more in tax
revenue.66
According to John Christensen, Director of Tax Justice Network, governments lose
an enormous amount of money due to offshore tax havens that essentially enable
money laundering and tax evasion. If all the assets in such tax havens were taxed
even at the low rate of thirty percent, an estimated $255 billion a year could
become available.67
MYTH#3: ECONOMIC GROWTH IS NECESSARY
88
What might the low-consumption countries of the world do with an additional
$156-255 billion? Those amounts would certainly go a long way to improving
wellbeing around the world. As mentioned in the Inequality Myth, UNICEF
estimates that it would cost $250 billion to provide sanitation facilities and safe
water for all in need. Closing tax havens requires international cooperation to
force corporations to pay taxes wherever they operate, and to ensure that
individuals pay taxes on all their wealth. If activists then succeeded in convincing
governments to invest that money in wellbeing, the lives of the poor would
improve dramatically.
Can governments afford to invest in wellbeing? Part 2: Other approaches
It is a truism that the world is inter-connected. What people are less likely to
acknowledge is the negative impact that many policies and practices in highconsumption countries have on low-consumption nations. Many of the lowestconsumption countries could afford better social services if they were not spending so much money servicing foreign debt. If the countries that made the loans
forgave the debt or at least reduced interest rates on it, then debtor countries
would be in a position to devote more of their limited funds to helping their poorest citizens.
Nor is debt the only issue. ‘Negotiations’ between high-consumption and lowconsumption countries determine the terms under which international trade will
occur. Since the low-consumption countries desperately need markets but have no
power to influence the rules, these ‘negotiations’ are hardly fair. They also contribute to unnecessary movement of goods between countries. The World Trade
Organization serves as a global policeman enforcing the rules set by the rich,
rather than helping the poor to prosper. It forces low-consumption countries to
import goods they already produce and even export. It also forces them to import
goods, such as cigarettes, which are unhealthy. There needs to be a strong popular
movement to ensure that trade rules are about increasing wellbeing, including
health, the environment, and the rights of workers to organize and to receive
decent pay and working conditions, and not about defending the ‘rights’ of corporations.
Other measures do not require international cooperation. If governments spent
less money on the military, for example, they could free up resources for disease
prevention, primary health care, guaranteeing primary and possibly secondary
education for everyone, and improving domestic food production and distribution. Investments today in health, education, and nutrition mean savings tomorrow, due to a healthier and more productive population. Unfortunately, in developing their budgets many governments tend to start with the most expensive
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items and run out of funds when they get to the budget lines that are most likely
to help those in need (and save money in the future): hospitals take precedence
over primary health care and universities over primary schools. Those who are in
a position to raise their voices – by writing letters to newspapers and to government officials and taking their cause to the streets – need to pressure governments
to change their priorities and put people’s needs first. Greater investment in
sidewalks, bike lanes, and public transit should take precedence over investments
in ever more roads for private vehicles. Governments should fund primary health
care and prevention programs before more high-tech equipment in hospitals.
They need to make investments in primary schools throughout the country, not
just in universities in the capital city. They should invest more in wellbeing and
vastly less in the military, security, prisons, and corporate subsidies. Governments
may say that they prioritize health or children, but budgets talk, and what they are
saying right now is that governments in most countries are far more interested in
supporting the military and industry than in alleviating poverty.
As with taxes, making changes will be difficult. Ideally, for example, NGOs should
be able to help governments improve the quality and accessibility of health
services. Instead, some NGOs prefer to provide parallel health services and to
work with the private sector rather than with the government.
Prudence is required. It is important for protesters to be very clear about what
they want, and about the consequences of their demands. People protesting high
bus fares must insist on subsidies for bus companies, not on fuel subsidies that
will benefit private vehicles as well.
It also helps to remember that groups such as the International Monetary Fund,
the World Bank, the World Trade Organization, and donor agencies are still pushing government policies inherently designed to benefit the rich at the expense of
the poor and middle class.xxiii Government leaders who attempt to act on behalf of
the poor have often become international pariahs (such as Hugo Chávez in
Venezuela), subjected to coup attempts by the American Central Intelligence
Agency (Jacobo Arbenz in Guatemala, Jean-Bertrand Aristide in Haiti, and Salvador Allende in Chile, to name a few successful ones), or been the target of
hundreds of assassination attempts (Fidel Castro in Cuba). NGOs, informed
citizens, and anyone else with the ability to speak out needs to be vocal and active
in resisting those pressures and in working for the types of changes discussed
above. It has worked in many countries with tobacco control; it can work here. All
xxiii
I discuss this in more detail in the Myth on those organizations.
MYTH#3: ECONOMIC GROWTH IS NECESSARY
90
would share the ultimate benefit – a cleaner, healthier, and more beautiful environment and greater human wellbeing.xxiv
Hint: When you read about budget shortfalls, ask yourself, might this have anything to
do with low tax rates on the rich and on corporations? When people talk about global
economic woes, ask, “Then how come there are more billionaires each year?”
* * *
How do we get there?
It is one thing to know where the money is; it is quite another matter to access it.
How does one convince governments to collect their taxes? The Oxfam report
Releasing the Hidden Billions for Poverty Eradication contains several recommendations. The international nature of transnational corporations and international
investors makes it difficult to say where many corporations or individual are
actually based and therefore where their tax liabilities lie. Where it is unclear,
nations need to work together to define common standards for the tax base. International cooperation is needed to prevent individuals and companies from taking
advantage of the different rules in different countries. A multilateral agreement or
treaty is needed to ensure that multinational corporations pay taxes in all the
countries where they do business.xxv Such cooperation is also needed to find ways
to facilitate the recovery and repatriation of funds that have been illegally appropriated from low-consumption countries.xxvi Perhaps more simple would be to
advocate for some sort of multilateral agreement to allow countries to share information on tax collection in order to reduce tax avoidance and evasion.68 I have
been personally involved in the negotiation of an international treaty (on tobacco
control). I helped lobby for its ratification and implementation in one country, and
xxiv Perhaps not literally: those at the very top do inhabit a separate universe far removed
from such realities, but they also represent a tiny portion of the population. These are the
ones, described by Paul Krugman, for whom $11,000 a night hotel suites are being built. The
most colourful historical depiction may be by Thorstein Veblen in his classic The Theory of
the Leisure Class, published in 1899.
xxv Tax havens and tax evasion contribute to budget constraints in the high-consumption
countries as well. In the United Kingdom, for example, tax evasion amounts to many billion
pounds each year, contributing to budget shortfalls. The underpayment of tax in the United
Kingdom is carried out through complex and secretive, yet legal, manoeuvres. “Firms'
secret tax avoidance schemes cost UK billions.” The Guardian, 2 February 2009.
xxvi According to the Oxfam report, “It has been estimated that around US$55 billion was
looted from Nigerian public funds during the Abacha dictatorship. To put the figure in
perspective, the country is today blighted by an external debt burden of US$31 billion.
Northern governments … create incentives for corruption by failing to deal effectively with
tax havens and other tax loopholes.”
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have followed the efforts of advocates in other countries. I know how extraordinarily difficult and time-consuming treaty negotiations and implementation can
be. Nevertheless, the results would certainly compensate for the effort.
Activists tired of seeing ridiculously low government health and education budgets, or slashes in the number of government workers because of the lack of funds
to pay them, need to raise more attention to the issue of tax avoidance and evasion,
and work to make taxation policies more transparent. Given the importance of
corporate image, brand names, logos, and labels, such specific attacks might prove
to be effective at shaming corporations into paying (at least some of their) taxes or
at convincing consumers to boycott their products. One could even have a bit of
fun in doing so. For example, guerrilla-type demonstrators could pop up in front
of stores, targeting certain brands, saying “I’ll buy so-and-so’s products when they
start paying taxes.” Protesters could also hand out postcards at public places to try
to convince consumers to send them to corporate headquarters with the same
message: “I’ll buy your products when you pay your taxes.”
Those interested in taking on the extremely important issue of military spending
can give support to the global Arms Trade Treaty (ATT), which entered into force
on 24 December 2014. According to Amnesty International’s blog, the global arms
trade is worth $60 billion a year. The Arms Trade Treaty seeks to keep arms out of
the hands of those who abuse human rights. The treaty should prevent the transfer of arms where they are likely to be used to commit genocide, gender-based
violence, or to aid in forcibly recruiting children to serve in armed conflict.69 The
treaty is only one part of a bigger puzzle, though, as weapons kill not only directly
but also through the diversion of funds from health care, education, and nutrition.
It will not be easy to convince governments to change their spending priorities.
Advocates need a variety of lobbying tools and much publicity.xxvii Involving the
media will generate broader coverage, highlighting the issues for both policymakers and the public. Good research – often quick, and always targeted and policyfocused – will help to counter industry claims, present the case, and influence
government officials. Public support is also critical, and can be generated and
funnelled through public rallies, protests, demonstrations, letter-writing
campaigns, and so on.

xxvii Lobbying could be defined as shaming governments into doing the right thing, in part
by shining a strong light on some of their less savoury activities, and then giving them
credit for the good actions that they undertake in response to criticism. Corporations, of
course, prefer to do their lobbying in secret.
MYTH#3: ECONOMIC GROWTH IS NECESSARY
92
Towards a Better Way Part II: Achieving Prosperity through ‘Local
Money’
“[Local currency] is a very good idea because we need to make people realise we can all
buy and sell something; we don't only need Euros.” — Mark Lown70
* * *
Most of us spend more time worrying about how to earn money and dreaming
about how to spend it than we do in thinking about the money itself. While money
traditionally consists of coins and paper certificates issued by a government, most
financial transactions today, certainly the large ones, are electronic and involve no
exchange of actual money at all. While historically coins have had an intrinsic
value (gold or silver) and the notes have corresponded to reserves of precious
metals, this is no longer true.
Whatever its form, money serves both as a straightforward medium of exchange
for the trade in goods and services and as a means of storing wealth. However, if
too much of it gets stored by too few people, the ability of the rest to use money to
facilitate their transactions is hampered. Money also has limitations as a repository of wealth. The value of any national currency is subject to many factors
outside of the control of the citizens, such as international currency trading, destabilization of the government, and inflation. Those who store their wealth at home
may overnight find themselves sitting on a useless pile of notes. The residents of a
small village can see their local economy wiped out because people far away have
gambled on the national currency and caused it to lose its value. Inflation too can
wipe out a lifetime of savings or render a fixed income valueless. Sudden deflation
tends to affect the poor and middle class far more than the rich, as the rich are
more likely to store their money in foreign bank accounts with a more secure
currency and to keep their wealth in forms other than cash.
Although elsewhere in this book I argue that one cannot define poverty by how
many dollars a day people live on, the lack of money certainly can create and
perpetuate conditions of want. Money is not just the reward for economic activity;
it is sometimes a necessary precondition thereof. A small-scale farmer (such as
Prakash) may have plenty of land but needs to buy some seeds and hire some
labour to help him farm. The local shopkeeper sells seeds. Plenty of local people
would be happy to work for pay. However, if the farmer has no money, he can
access none of those services. If all farmers in a given community similarly lack
money, then the shopkeeper cannot sell the seeds and the labourers can find no
work. Since the labourers cannot work, they cannot afford to purchase other goods
in the shop. And, since the farmers cannot farm, locally-available food is in short
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BEYOND APOLOGIES
supply. Local skills and assets such as buildings, machinery, and land go idle and
local needs remain unmet. Where local needs and local resources cannot be
brought together, everyone suffers. The obvious fact that the poor lack money is
thus true in a deeper sense as well: lack of money not only defines but also
perpetuates poverty, which is part of the reason why it is so difficult for the poor
to work their way out of poverty.xxviii
What then is the solution? Rather than always relying on national currencies
traded in international financial markets, communities can create their own form
of local currency. Local currency can be denominated in terms of money, time, or
any other form of goods or services. It can be rated at the same value as the
national currency, or in some other form. A remarkable aspect of money denominated in hours is that everyone’s inputs are valued at the same rate, whether they
be a janitor or a lawyer, a kindergarten teacher or a software designer. This is
putting ideas of equity into practice. Importantly, local currency systems do not
involve interest payments and thus avoid the need for the economy to grow to
repay loans.
Local currencies have a rich history. The Labour Exchange Bazaar in London,
established by social reformer Robert Owen, operated from 1832 to 1834 and was
a system in which people exchanged their labour for ‘National Equitable Labour
Notes’. Owen brought in raw materials that the labourers converted to goods in
exchange for the notes. While the goods could be sold for the national currency
(with a percentage kept to operate the system), the Labour Notes could be used to
buy food from local shops as well as additional raw materials. The system resulted
in long-unemployed workers re-engaging in paid work and a decline in
unemployment.71 The British island of Guernsey also used local currency, first
from 1815 to 1836 and again from 1914 onward. In order to revive the war-torn
economy, local government officials issued local, interest-free notes that paid
previously unemployed workers to improve roads and repair buildings. The
workers were then able to buy goods from local shops, and the shops could buy
and sell more locally produced goods. This helped to shift the economy from one
of depression to one of prosperity.72 In the Austrian Worgl experiment of 19291934, the mayor created ‘Tickets for services rendered,’ initially used to pay wages
for public works. The tickets were usable at local businesses. The tickets decreased
Other reasons include a number of structural barriers to upward movement, including
racism; the lack of decent schools, health care, mentors and other support for the poor and
minorities; the unavailability of decent jobs; and the difficulty in remaining optimistic when
surrounded by despair. And the biggest reason of all: too much for the few means not
enough for everyone else.
xxviii
MYTH#3: ECONOMIC GROWTH IS NECESSARY
94
in value by one percent each month, but could be ‘revalued’ with stamps
purchased from local authorities; the profits were used for poor relief. As nobody
wished to carry a devalued note, the notes rapidly circulated; it was thus possible
to avoid hoarding or accumulation in the hands of a few. Rapid and regular circulation of the notes created a healthy economy in which many people participated.
The system was so popular that it spread and prosperity grew until the Austrian
national bank, threatened by the system’s lack of interest rates, launched a legal
challenge against it.xxxix Unfortunately, in this case the bank won.73
More recently, when Argentina’s economy collapsed in 2000-2003, trade continued
and people were able to make money and access needed goods and services,partly
thanks to the rapid rise of various local currencies. While there were many problems with the local currencies that people invented, they were critical for survival,
and as local currency expert Peter North writes, they “helped literally millions of
Argentines to get through an awful financial crisis.”74 Even more recently, at least
one town in Greece is weathering the financial downturn in part through a local
currency system. People can gain credits by offering goods or services, and then
use them to purchase other goods and services.75
* * *
Local currencies are not just for times of crisis. Their use is widespread. According to the
Complementary Currency Resource Center, local currencies are used today in the
following countries: Argentina, Australia, Austria, Belgium, Brazil, Canada, China,
Colombia, Croatia, Czech Republic, Denmark, El Salvador, France, Germany, Greece,
Honduras, Hong Kong, Hungary, Indonesia, Italy, Japan, Kenya, Mexico, Netherlands,
New Zealand, Papua New Guinea, Poland, Portugal, Russia, Scotland, Senegal, Slovakia, South Africa, South Korea, Spain, Sweden, Switzerland, Thailand, Ukraine, United
Kingdom, the United States, and Venezuela. Any individual country can have many
systems: there are 250 in El Salvador and almost 32,000 in South Africa.76
* * *
Because local currency (as opposed to international alternative currencies such as
bitcoin) has value only in the community that issues it, people use it at local
businesses, thus helping to deter the gravitational pull of money upwards (and
outwards). It can prevent speculation and trading in the means of exchange, thus
ensuring a more stable currency and economy. It can also deter hoarding, by being
designed to ‘rust’ (‘demurrage’ is the technical term) that is, lose its value over
time. This encourages the frequent exchange of notes, which in turn stimulates the
The Guernsey experiment also threatened the banks, which objected to low or no
interest rates on the notes. In this case, attempts by the banks to stop the experiment failed
and the Guernsey pound is still in use.
xxxix
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BEYOND APOLOGIES
local economy and fosters greater local wellbeing.xxx
Local currencies do have limitations. They work best in small, tight-knit communities in which people are committed to their success. They are a piece of the
puzzle, not a complete solution in themselves. Since their purpose is circulation
rather than storage, they cannot act as savings accounts, and their use is limited to
those who accept them. However, a local currency helps to ensure that all people
in the community with goods and services to offer can participate in the local
marketplace, and that all can avail themselves of those goods and services. Since
the community issues the ‘money’, it can print or issue as much as is needed.
History suggests that local currencies would be far more widespread if it were not
for the objection of conventional banks, which obviously do not approve of the
use of money that does not bear interest. In some jurisdictions, it is actually illegal
to make non-official currency. However, according to local currency expert and
Professor Jem Bendell,
Is prosperity without economic growth possible? Yes, but only if we transform
monetary systems. Is there a way for businesses to thrive with an alternative
monetary system? Yes, as more credit would go to productive economic activity
not speculation. Whether in business, investment, philanthropy, or politics, there
are few more important, less understood and less pursued objectives today than
monetary reform. It is time to direct more of our time and resources to the underlying causes of our multiple crises, and swiftly learn about the pros and cons of
alternative systems.77
A small amount of ‘rust’ can prevent hoarding without discouraging people from accepting bills right before they expire; the rust only becomes significant if notes are kept for a
long time.
xxx
MYTH#3: ECONOMIC GROWTH IS NECESSARY
96
Notes
Paul Ekins, ed. The Living Economy: A New Economics in the Making (London, New York:
Routledge and Kegan Paul, 1986).
2 Richard Heinberg, The End of Growth: Adapting to Our New Economic Reality (Gabriola
Island, BC, Canada: New Society Publishers, 2011).
3
Bob Herbert, “Losing Our Way,” The New York Times Opinion Pages, 25 March 2011.
4 Joshua Holland, The Fifteen Biggest Lies About the Economy and Everything Else the Right
Doesn’t Want You to Know About Taxes, Jobs, and Corporate America (Hoboken, New Jersey:
John Wiley & Sons, Inc., 2010).
5 Paul Buchheit, “Five Facts about America’s Pathological Wealth Distribution,” Common
Dreams, 3 December 2012.
6
Leslie Patton, “McDonald’s $8.25 Man and $8.75 Million CEO Shows Pay Gap,”
Bloomberg News, 12 December 2012.
7
National Coalition for the Homeless, “How Many People Experience Homelessness?”
http://www.nationalhomeless.org/factsheets/How_Many.html accessed 25 August 2014.
8
Carol Morello, “About 44 Million in U.S. Lived Below Poverty Line in 2009, Census Data
Show,” http://www.washingtonpost.com/wp-dyn/content/article/2010/09/16/
AR2010091602698
.html accessed 25 August 2014.
9 E.F. Schumacher, Small is Beautiful: A Study of Economics as If People Mattered (London:
Vintage Books, 1993).
10 John Helliwell, John, Richard Layard and Jeffrey Sachs, ed., World Happiness Report
(New York: Earth Institute, Columbia University, 2012).
11 John Perkins, Confessions of an Economic Hit Man (San Francisco: Berrett-Koehler, 2004).
12 Barbara Kingsolver, Animal, Vegetable, Miracle (New York: HarperCollins, 2007).
13 Alexander Eichler, “Hunger, Food Insecurity Cost The Country $167 Billion Every Year:
Study,” The Huffington Post, 10 June 2011.
14 World Health Organization, “Obesity and Overweight,” Fact sheet N°311, updated
March 2013 (Geneva: WHO, 2013).
15 Claire Provost, “MDG Target to Halve Prevalence of Hunger Within Reach, Says UN,”
The Guardian, 9 October 2012.
16 Environment News Service, “One-Third of World's Food Lost or Wasted,”
www.ens-newswire.com/ens/may2011/2011-05-12-02.html accessed 25 August 2014.
17 Heinberg, The End of Growth.
18 Nathanial Gronewold, “New School of Thought Brings Energy to 'the Dismal Science,”
The New York Times, 23 October 2009.
19 Gronewold, “New School of Thought.”
20 Heinberg, The End of Growth.
21 Kenneth E Boulding, “The Economics of the Coming Spaceship Earth,” 1966.
http://www.ub.edu/prometheus21/articulos/obsprometheus/BOULDING.pdf accessed 26
August 2014.
22 Personal communication with Kalpona Akter, garment worker organizer, Dhaka,
December 2013.
1
97
BEYOND APOLOGIES
M. Bari and D. Efroymson, Detailed Area Plan (DAP) for Dhaka Metropolitan Development
Plan (DMDP): A Critical Review (Dhaka: WBB Trust, 2009).
24 “Population and Energy Consumption,” World Population Balance:
http://www.worldpopulationbalance.org/population_energy accessed 8 January 2015.
25 United Nations Development Programme, Summary Human Development Report
2011, Sustainability and Equity: A Better Future for All (New York: UNDP, 2011).
26 Jared Diamond, “What’s Your Consumption Factor?” The New York Times, 2 January
2008.
27 Diamond, “What’s Your Consumption Factor?”
28 Edward Wong, “Air Pollution Linked to 1.2 Million Premature Deaths in China,” The
New York Times, 1 April 2013.
29 UNDP, Summary Human Development Report 2011.
30 Oswaldo de Rivero, The Myth of Development: The Non-Viable Economies of the 21st
Century. 2nd impression (London: Zed Books, 2003).
31 Joe Nocera, “Does Brazil Have the Answer?” The New York Times online, January 20,
2014.
http://www.nytimes.com/2014/01/21/opinion/nocera-does-brazil-have-the-answer.html
32 Ron Synovitz, “Russia Has Highest Level of Wealth Inequality,” Radio Free Europe,
October 10, 2013.
33 Tom Balmforth, “Divide Between Rich and Poor Increases in Russia,” Telegraph, 2
January 2013.
34 Planning Commission, National Human Development Report (Delhi: Government of India,
2001).
35 Jean Drèze and Amartya Sen, “Putting Growth in Its Place,” Outlook India, 24 November
2011.
36 United Nations University, Greater Access to Cell Phones than Toilets in India: UN
(London& UN Secretariat, New York: United Nations University, 14 April 2010).
http://unu.edu/media-relations/releases/greater-access-to-cell-phones-than-toilets-in-india.
html
37 In the graph, wealth control figures are taken from James B. Davies, Susanna
Sandström, Anthony Shorrocks, and Edward N. Wolff, The World Distribution of Household
Wealth, Discussion Paper No. 2008/03 (New York: United Nations University,
2008);poverty figures are taken from the Central Intelligence Agency, The World Factbook,
https://www.cia.gov/library/publications/the-world-factbook/fields/2046.html accessed 26
August 2015 and World Bank, World Development Indicators,
http://databank.worldbank.org/data/home.aspx accessed 26 August 2015. It is important
to note that if international poverty figures were used, rather than national figures, the
poverty levels in most of the countries included here would be much higher.
38 Heinberg, The End of Growth.
39 Goodreads, “Philip Slater Quotes,”
http://www.goodreads.com/quotes/188845-our-economy-is-based-on-spending-billions-to
-persuade-people, accessed 19 August 2014.
40 Paul Buchheit, “Five Facts about America’s Pathological Wealth Distribution,” Common
Dreams, 3 December 2012.
23
MYTH#3: ECONOMIC GROWTH IS NECESSARY
98
Jody Heymann, Forgotten Families: Ending the Growing Crisis Confronting Children and
Working Parents in the Global Economy (Oxford: Oxford University Press, 2006).
42 Richard A. Easterlin, “Will Raising the Incomes of All Increase the Happiness of All?”
Journal of Economic Behavior and Organization, Vol. 27 (1995): 35-47.
43 Easterlin, “Raising the Incomes.”
44 Easterlin, “Raising the Incomes.”
45 Helliwell et al., World Happiness Report.
46 Schumacher, Small is Beautiful.
47 Helliwell et al., World Happiness Report.
48 Data360, “Average Water Use Per Person Per Day,”
http://www.data360.org/dsg.aspx?Data_Set_Group_Id=757 accessed 25 August 2014.
49 Diamond, “What’s Your Consumption Factor?”
50 World Population Balance, “Population and Energy Consumption,”
http://www.worldpopulationbalance.org/population_energy, accessed 5 Feb 2013.
51 Diamond, “What’s Your Consumption Factor?”
52 Hannah Arendt, Responsibility and Judgment (New York: Schocken Books, 2003).
53 James Sherk, “Technology Explains Drop in Manufacturing Jobs,” The Heritage
Foundation, 12 October 2010.
54 David C. Korten, When Corporations Rule the World, 2nd ed. (Bloomfield, Connecticut and
San Francisco:: Kumarian and Berrett-Koehler, 2001).
55 James K. Galbraith, The Predator State: How Conservatives Abandoned the Free Market and
Why Liberals Should Too (New York: Free Press, 2009).
56 Ekins, The Living Economy.
57 Schumacher, Small is Beautiful.
58 Nocera, “Does Brazil Have the Answer?”
59 Richard S Cooper, Joan F Kennelly, and Pedro Orduñez-Garcia, “Health in Cuba.”
International Journal of Epidemiology 35.4 (August 2006): 817-824. doi: 10.1093/ije/dyl175 The
authors mention that “Despite occasional ‘discovery pieces’ the biomedical literature in
English has been almost entirely silent on the Cuban experience and US government
policy temporarily forbade publication of articles from Cuba by US journals or their
foreign subsidiaries.”
60 “…a study tour/conference was held in Havana in March 2000, attended by over 100 UK
doctors including Department of Health officials, the President of the Royal College of
General Practitioners and several senior academics, including Chairs of Primary Care
Groups. This visit has generated a further series of contacts and in October 2000 the UK
hosted a visit by the Vice-Minister of Health who was received by our Under Secretary of
State for Health. A further study tour/conference is planned for April/May 2001 and
numerous individual exchange visits have been organised including ‘twinning’ of health
centres in the UK and polyclinics in Cuba.” Select Committee on Health Appendices to the
Minutes of Evidence, Appendix 60, Memorandum by Professor Patrick Pietroni (PH 97),
“Cuban Health Care Systems and its Implications for the NHS Plan.”
61 See, for instance, the International Planned Parenthood Federation,
http://www.ippf.org/en/Resources/UN+statements/Commission+on+Population+and+Dev
elopment+on+its+41st+Session.htm, accessed 24 July 2011.
41
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BEYOND APOLOGIES
Galbraith, The Predator State.
Nairaland Forum, “Ridiculous Facts About How Rich Bill Gates Is,”
http://www.nairaland.com/1580059/ridiculous-facts-how-rich-bill accessed 26 August
2014.
64 Luisa Kroll and Kerry A. Dolan, “The Richest People on the Planet 2013,” Forbes, 25
March 2013.
65 Oxfam, Tax Havens: Releasing the Hidden Billions for Poverty Eradication (London: Oxfam
Great Britain, 2000).
66 Oxfam International, “Tax on the ‘private’ billions now stashed away in havens enough
to end extreme world poverty twice over.” 22 May 2013.
67 John Christensen, “Dirty Money: Inside the Secret World of Offshore Banking,” in A
Game As Old As Empire: The Secret World of Economic Hit Men and the Web of Global
Corruption, ed. Steven Hiatt (San Francisco: Berrett-Koehler, 2007).
68 Oxfam, Tax Havens.
69 “Fact vs. Fiction: Arms Trade Treaty and Gun Ownership in the U.S.” posted 19 July
2012.
70 Mark Lowen, “Greece Bartering System Popular in Volos,” BBC News, 11 April 2012.
71 Michael Linton, Shann Turnbull, and David Weston, “Financial Futures,” in Ekins, ed.,
The Living Economy.
72 Linton, Turnbull, and Weston, “Financial Futures.”
73 Linton, Turnbull, and Weston, “Financial Futures.”
74 Peter North, Local Money (Devon, England: Transition Books, 2010).
75 Mark Lowen, “Greece Bartering System Popular in Volos,” BBC News, 11 April 2012.
76 Complementary Currency Resource Center, “World Map of Complementary Currency
Systems,” http://www.complementarycurrency.org/ccDatabase/maps/worldmap.php
accessed on 5 August 2014.
77 Jem Bendell, “Trading without Money? Why a New System Can Address the Economic
Spiral,” The Guardian, 12 March 2013.
62
63
MYTH #4: The BWI Seek Primarily to Alleviate Poverty
“… it was seldom that the money we were providing for development ever accomplished
anything of substance that truly benefited the poor. Yet year after year, and despite glaring
evidence to the contrary, the [World] Bank would produce glowing reports of success in
one sector after another, in one country after another, as its managers sought to protect
themselves from criticism.” – former World Bank insider Steve Berkman1

The Origins and Evolution of the Bretton Woods Institutions
No discussion of global economic issues is complete without mentioning the
Bretton Woods Institutions (BWI): the World Bank (originally known as the International Bank for Reconstruction and Development), the International Monetary
Fund (IMF), and the General Agreement on Tariffs and Trade (GATT). After operating for nearly fifty years, GATT became, in 1995, the World Trade Organization
(WTO).i
However much animosity they generate at present, these institutions have a reputable history. By the end of World War I, Germany’s economy and infrastructure
were shattered. Other countries – especially those that had fought against
Germany – refused to provide rebuilding assistance to the German government,
preferring instead to punish the enemy and teach it a lesson. The world did indeed
learn a lesson: that devastated countries easily become prey to totalitarian rulers.
Following the Second World War, world leaders better understood the need to
avoid taking this punitive approach, and there was consensus for creating global
cooperation for economic stability. In July 1944, representatives of forty-four
Allied countries met for three weeks in Bretton Woods, New Hampshire.ii Their
goal was to develop an international system that would stabilize economies and
facilitate international trade after the war. In spite of the number of countries
attending the conference, however, the participants seriously considered proposals from just two countries, the United States and the United Kingdom. Key
delegates included British economist John Maynard Keynes, American Treasury
Secretary Henry Morganthau, and his chief economic advisor, Harry Dexter
White.
According to the Bretton Woods Project website,
In his opening speech at the Bretton Woods conference, Henry Morganthau said the
‘bewilderment and bitterness’ resulting from the Depression became ‘the breeders of
Not to be confused with the more respectable World Toilet Organization, which has the
misfortune of sharing this blighted acronym.
ii The meeting is formally known as the United Nations Monetary and Financial Conference.
i
101 BEYOND APOLOGIES
fascism, and finally, of war’. Proponents of the new institutions felt that global
economic interaction was necessary to maintain international peace and security.
The institutions would facilitate, in Morganthau's words, ‘[the] creation of a
dynamic world community in which the peoples of every nation will be able to
realise their potentialities in peace’.2
Originally, the conference attendees established the World Bank to lend money to
countries for reconstruction and development. They designed the IMF to look
after the stability of exchange rates, and they created the GATT to work on reducing tariffs to facilitate international trade. At the time, stability efforts included
enabling IMF member states to control their capital flow; that is, control the flow
of money in and out of their countries so that currency or other speculators could
not undo the stability that the BWI institutions sought to create.3
The modern face of the BWI
Over the course of their history, the Bretton Woods Institutions have strayed far
from their original purposes. The most prominent policy shift came in the 1980s,
during the Reagan-Thatcher era, when the institutions’ focus turned to ensuring
that low-consumption countries would repay the loans made by highconsumption countries.iii This was done, in part, by tying loans to the implementation of ‘structural adjustment’ policies, which were designed to make the borrowing countries’ economies more market-oriented. This led, in turn, to the application of a number of very unpopular and heavily criticized ‘free-market’ policies
that continue to be pushed onto vulnerable countries.
The World Bank continues to make loans to the governments of low-consumption
countries. Rather than supporting the provision of basic goods and services that
would benefit the poor populations of these countries, however, the Bank now
more often earmarks conditional loans for the development of environmentally
damaging infrastructure such as dams, large highways, and heavily polluting
industries. The IMF, in turn, has transitioned from its limited focus on the stability
of exchange rates to pushing for the implementation of specific monetary policies,
including policies that weaken the ability of governments to limit speculative
investment. Together, the IMF and the World Bank press debtor countries
This shift began in the 1950s, when the IMF and the World Bank began to apply conditions to their loans in earnest. In the 1980s, changes in American monetary policies ensured
that the 'tying of aid' would benefit the loaning countries. Countries loan money directly as
well as via the World Bank, Asian Development Bank, other regional banks, and their own
Export Credit Agencies (ECAs).
iii
MYTH#4: THE BWI SEEK TO ALLEVIATE POVERTY
102
to enact policies that actually harm the poor, including implementing tax breaks
for corporations and user fees for health services and education. Despite being
separate institutions, the IMF and the World Bank typically demand the same
conditions for their loans, particularly the privatization of government services
and industry. According to a report issued by the European Network on Debt and
Development (Eurodad),iv the current similarity between the IMF and World Bank
“reveals a worrying lack of division of roles and responsibilities between the two
institutions.”4
The conditions imposed by the World Bank and IMF on their loans and other
support were called ‘structural adjustment programs’ until that term became so
widely unpopular that the terminology – though not the practices associated with
it – was changed. Loan conditions typically include drastic reductions in government social spending during times of crisis, the firing of public sector employees,
the floating of interest rates, the lifting of tariffs on imports, trade liberalization,
and pressure to privatize such government enterprises and services as banks,
electricity, water, and telecommunications. Eighteen of the twenty countries that
Eurodad studied had privatization-related conditions attached to their loans, and
the average number of conditions per loan actually rose from forty-eight in 2002 to
sixty-seven in 2005. But sixty-seven conditions is just the average. Uganda, with
almost one-fourth of children under age five malnourished, had almost two
hundred conditions attached to the financing it received from the World Bank in
2005. In the face of the evidence that these conditions are counterproductive, the
United Kingdom and Norway no longer tie their development loans to such
conditions, but the World Bank and IMF (and many other donor countries)
continue to do so.5
* * *
One of the more absurd conditions put on the Ugandan government was that it “review
and approve its school sports policy for tertiary schools.”6
* * *
It is reasonable, at least in the abstract, to justify loan conditions. A loan, if
misspent, will do little good. Nor will assistance given in times of crisis be useful
if the government is grossly mismanaging its economy. But the conditions
imposed by the World Bank and IMF are precisely those that are most likely to
prolong rather than quickly end an economic crisis, as they are the policies that are
most likely to increase suffering among the lower and middle classes and to
Eurodad is a network of forty-eight NGOs from nineteen European countries that
addresses “issues related to debt, development finance and poverty reduction.” See
http://www.eurodad.org
iv
103
BEYOND APOLOGIES
increase profits among the rich. Where the World Bank and IMF have successfully
imposed these loan conditions, they have caused so much devastation among both
the poor and the middle class that they have proved to be wildly unpopular.
What about the GATT? While its original mission was to reduce tariffs in order to
facilitate international trade, its successor, the WTO, has moved far beyond that
original agenda.v WTO now looks less at global trade as a whole and more at
domestic laws in member countries that may in any way restrict international
trade. These laws include protections for workers’ rights, the environment, or a
safe food supply. What this means in practice is that any WTO member country –
or, in some cases, any corporation based in a member country – can challenge a
domestic law of another member country by claiming that the said law deprives it
of actual or potential economic benefits. When such challenges occur, the rules
stipulate that the cases be tried not before local courts but before international
tribunals composed of private-sector lawyers. If the challenging country or corporation wins – and experience with previous free trade agreements shows that they
often do – then the losing country’s taxpayers are expected to pay compensation,
even in cases where the business conduct of the winning country or corporation
has been shown to cause severe damage to human health or the environment.7
Thus, under WTO rules, corporations gain standing equal to that of the signatory
country’s government, while people and the environment lose whatever rights or
protection they might have had. For example, the government of Venezuela was
ordered to pay Exxon $1.6 billion for nationalizing oil in the country.8 In another
example, Mexico was forced to pay $16.5 million to an American company
(Metalclad Corporation) after a Mexican municipality refused to grant permission
for the construction of a toxic waste facility until Metalclad had cleaned up a
previous site.9 Power is with the profits, not the people; public health and other
concerns are less important than the free flow of trade.
The same principle applies to intellectual property rights, which the WTO also
defends. When, for instance, the government of Vietnam decided to make AIDS
treatment available for all those diagnosed with the disease, its biggest obstacle,
according to my colleagues there, was the drug patents that made the medicines
Of course, the GATT/WTO has not pushed the tariff agenda in an equitable fashion, as it
only addresses tariffs in low-consumption countries. “HIC tariffs on manufactured
imports from developing countries are on average 4 times greater than those on manufactured imports from industrial countries.” “Trade liberalisation statistics,”
http://www.gatt.org/trastat_e.html accessed 2 September 2014.
v
MYTH#4: THE BWI SEEK TO ALLEVIATE POVERTY
104
unaffordable. Corporations depend on government financial support to develop
new pharmaceuticals, but once they patent the drugs, all the profits go directly to
the corporation.vi The companies claim that drug prices need to be high to cover
the cost of research and development, even when they spend little of their own
money to develop the drugs for which they receive patents. Patenting life-saving
medicines means that they remain unaffordable for many of those who need them.
Taken together, the policies of the Bretton Woods Institutions reduce governments’
control over their own economies, prevent them from protecting local industry,
the environment, and public health, and force them into international trade under
unfair conditions. In pursuing these policies, the World Bank, IMF, and WTO have
drifted far from their idealistic origins and have become institutions that reduce
democracy, harm the poor, and benefit corporations.
* * *
How the World Bank Helps the Poor: In 2004, the government of Bangladesh decided
to expand the number of major streets in the capital city of Dhaka on which it would ban
bicycle rickshaws. The World Bank strongly supported the expansion. In the face of
protests organized by my colleagues and myself against these bans, the World Bank
claimed that the government had made the decision and the World Bank was only
supporting it. Given that the World Bank had funded and provided consultants for a
transport project that called for the bans, this seemed to be an unnecessarily modest
statement of the Bank’s contribution! During a conference call, a World Bank transport
official told me that if Bangladesh wanted to enter the twenty-first century, it had to get
rid of the rickshaws. Obviously, the point of the ban was to leave more room on the roads
for private cars, which in Bangladesh are only owned by the wealthy few. Pedalling
rickshaws is a major source of income for the poor. They provide pollution-free and
inexpensive transport, and so are often used by people of modest means. A study on the
effects of banning them from one major street in Dhaka revealed that the ban led to as
much as a forty-one percent decrease in wallahs’ incomes, despite the fact that they
worked longer hours to compensate for losing a main route. Deterioration of the living
conditions of the rickshaw wallah and their families included reduced food intake.10
Apparently the World Bank’s idea of helping the poor includes eliminating their jobs and
allowing their families to sink into malnutrition.
* * *
A scientist working for the US Centers for Disease Control and Prevention on the development of tuberculosis drugs explained to me that the government pays for the drug
research while allowing the companies to maintain the patent because they fear that otherwise the companies will not develop drugs for diseases that offer little potential for corporate profit. But as it is, there have been no new drugs for TB in decades and the existing ones
cause many extremely unpleasant side effects. Surely a better system could be devised.
vi
105
BEYOND APOLOGIES
What have been some results of BWI intervention?
Whether or not they are aware of the BWI’s role in setting these policies, people in
low-consumption countries regularly face the policies’ harmful impacts. The inner
workings of the institutions, meanwhile, become clearer when a former insider
reveals his own frustration with the policies of his ex-employer. One of the most
famous of these insiders is former World Bank chief economist, Joseph Stiglitz. In
his book, Globalization and its Discontents, and in various articles, Stiglitz criticizes
the BWI and offers an agenda for change.vii Although Stiglitz tends to direct his
anger primarily at the IMF, what he writes is also largely true of the World Bank.
There are, of course, some good people working at these institutions who are
trying to utilise their position to help those in need; good actions have resulted
from some of the BWI programs. However, positive examples are virtually lost in
the disasters that the BWI have helped to generate in country after country. A few
examples follow.
Argentina is a ‘poster child’ for how a country can see its economy destroyed by
faithfully adhering to the policies prescribed by the BWI. Argentina experienced
what Stiglitz calls “a vicious downward spiral of economic decline and social
unrest.”11 As Argentina went through a major economic crisis between 1998 and
2002, the IMF told the government to cut its budget deficit from $5.3 billion (in
2000) to $4.1 billion by the following year. Later, the IMF ordered that the debt be
eliminated. It also ordered a pay cut for already underpaid government employees and the firing of others, despite the fact that the unemployment rate already
hovered around twenty percent. Finally, the IMF ordered that the government
reduce expenditures for the poor. What did it tell the government to do with its
savings? Pay interest on foreign loans. As a result, unemployment ballooned,
production declined, and much of the middle class fell below the poverty line. By
2002, more than half of Argentines were poor, and one-quarter were destitute.12
That Argentina survived at all was due in part to the emergence of a range of local
currencies to replace the by-then useless peso.viii
Many would say that Stiglitz does not go far enough in his criticism, but this is hardly
surprising from a former insider; what is surprising is that he speaks out at all. Another
well-known insider-turned-informer is John Perkins, a former consultant with ties to the
World Bank. See Confessions of an Economic Hit Man (San Francisco: Berrett-Koehler Publishers, 2004).
viii More discussion of local currencies is found in the Myth on Economic Growth; see
especially Peter North, Local Money (Devon, England: Transition Books, 2010).
vii
MYTH#4: THE BWI SEEK TO ALLEVIATE POVERTY
106
As in Argentina, so in Chile: similar policies were only stopped when, ironically,
the murderous dictator Augusto Pinochet himself reversed course by restoring the
minimum wage and bargaining rights of the unions, creating large numbers of
government jobs, and nationalizing many banks.13 In Costa Rica, the interventions
of the World Bank and IMF led to a shift in the economy from small farms to large
estates (mega-farms) and exports. This caused the displacement of thousands of
small farmers, an increase in the income gap between rich and poor, and more
crime and violence – which in turn led to higher public expenditures on policing
and security. The country became dependent on imports for basic food and, while
foreign debt was supposed to decline, it actually doubled. Yet, according to the
World Bank and the IMF, Costa Rica is a success story because economic growth
has increased and the country can meet its growing debt service payments.14
Ecuador faced disaster when it liberalized its financial market under IMF
pressure. The government lost its control over local banks, and an explosion of
private debt and interest rates followed, helping to propel the country into crisis.
This led the government to borrow $1.5 billion from the IMF. The loan came with
167 detailed conditions, such as increasing the price of cooking gas by eighty
percent, eliminating 26,000 public sector jobs and fifty percent wage cuts for
remaining workers, the transferring of ownership of its biggest water system to a
foreign company, and giving British Petroleum rights to build and own an oil
pipeline. Not surprisingly, when prices rose, riots ensued. The IMF-imposed
conditions simply worsened the IMF-provoked crisis.15 Across all of Latin
America, thanks in part to policies imposed by the IMF, economic growth declined
nearly eight-fold from 1980 to 2000 as compared to the previous twenty years.16
Projects supported by the BWI resulted in the displacement of almost thirty
million people in Brazil between 1960 and 1980, and the displacement of twenty
million people over forty years in India. In 1989 alone, World Bank projects
displaced or threatened the displacement of three million people. According to
World Bank officials, there has been no Bank-funded project in which the
relocated ever regained their previous standard of living.17
Indian writer Arundhati Roy describes how policies enforced by the BWI affect
the most vulnerable groups in India: the indigenous and those of the lowest social
caste. These vulnerable groups are regularly displaced to make room for dams
and other large-scale industrial projects. Their dissent is forcibly silenced.ix Their
I was surprised, during a visit to India in early 2013, to notice that a protest involving a
handful of people in a rural area was supervised by a far larger and well-armed contingent
of police.
ix
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BEYOND APOLOGIES
situation is worsened when the government privatizes electricity and other
utilities and services. Local farmers are impoverished when India bows to international pressure to import grains rather than allowing them to grow and consume
local products.18 Farmers have also been obliged to use genetically modified seeds.
The BWI heavily promoted the use of these seeds to local farmers as being profitable; more often, they ended up with debt that can never be repaid.19 One of the
direct results of India’s adoption of the corporate/BWI model is an epidemic of
suicides among the nation’s farmers. According to one estimate, the wave of
suicides reached a quarter of a million between 1995 and 2010.20 It has been called
“the largest wave of suicides in history.”21
The World Bank pressured the Egyptian government to privatize its water utilities
for the sake of increased ‘efficiency.’ The government transformed public water
utilities into corporations that were required to operate at a profit. These corporations raised the cost of water to pay for the required new infrastructure. The price
of water in some parts of Cairo doubled within months of privatization. Citizens
began to protest. Some had to obtain water from dirty canals because they could
not afford the water coming out of their taps. The water company also diverted
water from farming and fishing areas, sending it to wealthy resort communities.22
In Tanzania, the IMF and World Bank required the government to institute fees on
previously free hospital visits, leading to a decline of over fifty percent in the
number of patients treated in the capital’s three big public hospitals. The World
Bank and IMF also ordered the Tanzanian government to charge school fees; as a
result, enrolment dropped from eighty to sixty-six percent. Over fifteen years of
BMI ‘assistance,’ literacy declined and abject poverty rose. Journalist Greg Palast
cites a frustrated World Bank report as saying, “One legacy of socialism is that
most people continue to believe the State has a fundamental role in promoting
development and providing social services.”23
* * *
From fighting wars to fighting poverty: not such a big leap? It is hard not to be
suspicious of an institution which has had, among its presidents, the architects of two of
the most infamous wars in recent history: the Vietnam War (Robert
McNamara, 1968-1981) and the Iraq War (Paul Wolfowitz, 2005-2007). Mr. Wolfowitz
was also a good friend of the most thieving leader in history, Indonesia’s Mohamed
Suharto; yet Wolfowitz claimed to be fighting corruption while leading the World Bank.
MYTH#4: THE BWI SEEK TO ALLEVIATE POVERTY
108
A more recent World Bank president was Robert Zoellick (2007-2012). His claims to
fame include pushing for the American invasion of Iraq, briefing Enronx on economic and
political issues, promoting the Central American Free Trade Agreement despite the
objections of labour, environmental, and human rights groups, and trying to oppose the
European Union’s moratorium on the approval of new genetically modified crops.24
The current president, Jim Yong Kim, is the first Bank leader who does not come from the
political or financial sector and who actually has experience dealing with health issues in
low-consumption countries. Kim is also one of the co-founders (along with Paul Farmer
and others) of Partners in Health, suggesting that at least he is well intentioned. The
jury is still out on whether World Bank policies will improve under his leadership.25
* * *
IMF policies also contributed to devastation in Russia following the collapse of the
Soviet Union and its brand of state-controlled socialism. As the Soviet Union
collapsed and Russia faced debts that it could not pay, it turned to the IMF for
help. The IMF negotiated loans that led to notable changes. In the new, more
capitalist system, the bread lines are gone; in their place are sparkling new shops
that sell luxurious items. The stores are indeed well stocked now, but few can
afford to purchase what they contain. Because the IMF ‘reformers’ only wanted
economic growth in Russia and did not care about equality, the growth in wealth
mostly benefited a few. According to Forbes, in 2007, Russians contributed more
than ten percent of the world’s new billionaires (nineteen of 178 newcomers).26
Nor did the Russian economy boom as quickly as was expected. By August 1998,
output had declined by almost half, and the percentage of people living in poverty
had grown from two percent to more than forty percent. In the words of Stiglitz,
Yes, the market economy can provide incentives for wealth creation. Unfortunately, under the … years of IMF programmes, the market economy – with high
interest rates, illegitimate privatisation, poor corporate governance and capitalmarket liberalisation – provided only incentives for asset-stripping.27
Great news for the billionaires; not so great for everyone else. Although things
have improved since 1998, in 2011 the government estimated that sixteen percent
of the population was poor (near the line that demarcates physical survival); the
actual figure may be much higher.28 Stiglitz claims that the key problem was the
IMF’s refusal to devalue the currency; when that was finally done, local production soared as imports became unaffordable. In other words, it was only when the
Enron is the American energy company that famously succeeded in fooling people for
years about the extent of its operations while laundering money and fabricating its financial
statements.
x
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BEYOND APOLOGIES
Russians stopped listening to the IMF that their economy began to recover.
History does indeed repeat itself: the IMF recently tried to impose the same disastrous policies on Greece that it had on Argentina. Alan Cibils, chair of the political
economy department at the Universidad Nacional de General Sarmiento in
Buenos Aires, went to Greece to share Argentina's experiences with the IMF. In an
article about his visit, Cibils was quoted as saying “It just blew my mind that these
policies that have failed catastrophically, repeatedly, are now being pushed on
European countries.” The article goes on to note that “His message to activists was
that ‘default is not only not the end of the world; default is the first step of your
next stage. What's happening now is unsustainable. When the ECB [European
Central Bank] and the French and German policymakers say a default would be a
disaster, they're speaking on behalf of the financial industry.’”29
In country after country, year after year, the policies of the World Bank, the IMF,
and the WTO aid transnational companies and harm the poor. The model of
increasing international linkages, more rights for corporations, and a weakening
of government controls over domestic economies have never helped a country and
the vast majority of its citizens to grow wealthy. Quite the opposite. Countries
experience economic success when their governments nurture local businesses,
protect currency from speculation, and regulate the flow of money in and out of
their country.xi
Prior to World Bank and IMF interference, many low-consumption countries were
socialist or had a strong welfare system in place. According to Greg Palast, in the
years of strong national government control and extensive welfare schemes, “per
capita income grew 73 percent in Latin America and 34 percent in Africa. By
comparison, since 1980, the Reagan/Thatcher model has seen Latin American
growth come to a virtual halt – growth of less than 6 percent over twenty years –
and African incomes decline by 23 percent.” Nor has income been the only loser:
“from 1950 to 1980, socialist and welfare statist policies added more than a decade
of life expectancy to virtually every nation on the planet. From 1980 to today, life
under structural assistance has gotten brutish and decidedly shorter.”30
External critics are not the only ones who claim that the policies of the BWI do little
to relieve countries after financial crisis. According to David Korten, a World Bank
report found that thirty-eight percent of Bank-funded projects completed in 1991
were failures – even when measured in purely economic terms and without taking
Some countries have also gained wealth by exploiting other countries, e.g. through
colonization and through unfair trade rules that give them low-cost access to mineral
resources and agricultural products, but that is another story.
xi
MYTH#4: THE BWI SEEK TO ALLEVIATE POVERTY
110
into account the impact on affected communities.31 Another World Bank study
cited by Korten found that twelve of the twenty-five projects initially rated as
successful turned out to be failures. The two figures combined suggest a success
rate of only one-third, hardly a remarkable achievement given the money, power,
and intellectual talent that exists within the Bank. Then again, it is hardly a problem for the Bank if a project fails, as in any case, the loan must be repaid. As Korten
points out, the World Bank “bears no liability for its own errors.”32
Although this may be the least damning of the accusations made against the
World Bank, a significant portion of its lending, possibly twenty percent, funds
corruption. Steve Berkman, formerly a staff member of the World Bank, writes
about his experience with loans to Africa: “I could come to understand that, in
most cases, if you looked closely into Bank projects, you would find that they were
more about the personal enrichment of government officials than about alleviating
the poverty and deplorable living conditions of the average African citizen.”33
This corruption, he emphasizes, is not exceptional but rather standard practice:
“…corruption has been the bedfellow of all Bank-funded projects I have encountered over the years.” Berkman also notes that “I have seen much more than I can
squeeze into this brief chapter: millions of dollars for roads that could not be
found, millions paid for the rehabilitation of infrastructure that could not be
verified, millions to facilitate better economic policies, and millions to improve
governance. All in the name of economic development. All in the name of alleviating poverty.”xii His allegations point to two main questions: why does the Bank,
with all its power, remain relatively silent about rampant corruption? And how do
the poor benefit when much of the Bank’s lending is simply stolen?
Why would governments accept loans when the conditions make the cure worse
than the disease? Unfortunately, countries cannot simply refuse to accept the
conditions and turn to other lenders in time of need. Other lenders judge the credit
worthiness of countries by the ratings assigned by the World Bank and the IMF.
The World Bank and the IMF hold up the countries in which GDP is growing as
role models to others – unless, of course, the economy grows by not following their
advice.xiii These same institutions rate countries in terms of their worthiness
Berkman’s words ring true to those of us who know that to obtain government contracts
funded by the World Bank, one may be expected to part with a percentage; in fact, the usual
line in some countries is “it isn’t important to do the work, but be sure you hand over the
bakhsheesh.” Colleagues of mine who attempted to obtain contracts honestly quickly
realized that it was a waste of effort.
xiii China here is a tricky case; its GDP is increasing rapidly, but since China ignores the
advice of the major international institutions, it is not necessarily used as a model. The IMF
xii
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BEYOND APOLOGIES
to receive loans based on whether or not they bow to the pressure to institute the
policies advocated by the institution. If countries refuse to buckle under pressure,
the IMF and World Bank can essentially blacklist the countries, making it impossible for them to receive the international loans that they need to pay their bills.
Unreasonable as the loan conditions often are, governments pressed for cash may
see no other option. Eurodad explains that
nearly all official development donors/creditors (bilateral and multilateral) tie
their development aid and debt relief to the presence of an IMF program. The
IMF’s ‘gatekeeper’ role makes the conditions the Fund attaches to its program
hugely potent. If a poor country does not fulfil the conditions that the IMF
attaches to its lending, then not only does it forfeit IMF development finance, it
will also potentially forfeit all other sources of much-needed donor finance.34
According to Global Exchange,xiv because of their sole focus on macroeconomic
financial stability, the IMF and the World Bank have prioritized the wellbeing of
the wealthy lenders and neglected those that they purport to help; in doing so,
they “have created a human rights catastrophe.”35 Government leaders in lowconsumption countries who genuinely wish to improve the conditions of the poor
find themselves in a fail-fail situation: they fail because they lack the funds to pay
the bills, or they fail because loans come with conditions that benefit the wealthy
and harm the poor.
What do the policies say about the institutions?
The World Bank’s slogan is “Working for a world free of poverty.” According to its
website, “Our mission is to fight poverty with passion and professionalism.”36 But
it is important to judge by behaviour, not by words.
The pressures placed by BWI on governments to change the way that they manage
their economies are limited in focus. The institutions push trade agreements,
privatization, and reduced social spending.xv The IMF rejects high corpo-
objects because China ignores its advice; I object because the benefits of the growth are so
unevenly distributed and because much of the growth involves environmental devastation
and ignoring workers’ rights.
xiv Global Exchange is “an international human rights organization dedicated to promoting
social,
economic
and
environmental
justice
around
the
world.”
See
www.globalexchange.org
xv Privatization is a mantra of all the international development banks. When I wrote a
report for the Asian Development Bank about the condition of pedestrians in Dhaka, an
ADB staffer with thirty years experience at the World Bank kept pushing the concept of
MYTH#4: THE BWI SEEK TO ALLEVIATE POVERTY
112
rate tax rates, claiming that they stifle innovation. It rejects high taxes on the rich,
saying that they dampen incentive. The IMF also ignores land reform – despite its
obvious potential to aid the poor – and financial sector regulation.37 However, the
result of such policies that dismantle restrictions on the flow of capital in and,
importantly, out of countries, can convulse entire national economies.xvi The IMF
objects to food subsidies but welcomes the bailing out of banks. The policies of the
IMF thus only make sense if one views the institution as serving the financial
community rather than as working towards global economic stability.38
A simple explanation exists for the failure of the Bank to take serious measures to
address corruption, and to continue doling out conditional loans despite their
obvious failure at alleviating poverty. What if the point of the BWI never was to
help the poor, but rather to tangle countries in a web of debt? The idea is not
implausible. As economist, attorney and investigate journalist James S. Henry
notes, “many projects seem to have been cooked up solely to justify the loans.”39
In other words, the whole process of providing conditional loans is simply a
vicious cycle that ensures its own continuity to the benefit of the donor. Debt
comes with high interest, so that the net flow of wealth is from the lowconsumption to the high-consumption countries. When one country is indebted to
another, various favours can be extracted from it, such as accepting politically
unpalatable ideas like joining in American President Bush’s ‘coalition of the
willing’ during the Iraq War. Loans come with conditions that result in corporations gaining ever more power and profit while the masses are further impoverished and enfeebled. If the United States wishes to remain the major world power,
one way to do so is to prevent other countries from becoming too wealthy or too
independent. One of its tools of control is the World Bank, over which it exerts
considerable influence.
According to the Bank’s website, “As the only World Bank shareholder that retains
veto power over changes in the Bank’s structure, the United States plays a unique
role in influencing and shaping development priorities.”40 Proponents of
public-private partnerships (PPPs). I ignored him. After I submitted the report, ADB gratuitously added a conclusion that promoted PPPs, despite their complete absence from the
text of my report. I objected and they restored my original conclusion.
xvi The resulting outflow of money can inflict poverty on millions of people, as happened in
Asia in the 1990s, when “the Indonesian economy underwent a severe contraction and the
number of people living in poverty doubled to forty million. In Thailand, the health budget
was cut by almost one-third. Nearly three years on from the outbreak of the crisis, the
economies of Thailand and Indonesia continue to struggle under the huge public debt
burden that it created.” See Stiglitz, Globalization and its Discontents.
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BEYOND APOLOGIES
the BWI argue that their prescriptions mean temporary punishment of the poor so
that they can reap long-term benefits from economic growth; opponents say that
the BWI push a recipe for increasing the number of billionaires and the power of
the wealthiest at the expense of the masses.
Or perhaps the BWI simply have a very different image of prosperity. To many
people, prosperity includes a fairly even distribution of wealth. It includes thriving small, local, independent businesses. It includes a range of employment
options, including part-time. It includes leisure time to enjoy all that cannot be
purchased, and strong communities that promote collective wellbeing. While
countries will of course remain connected, a healthy economy would be one that
is self-sufficient where possible, growing much of its own food without chemicals
or petroleum, providing transport with little use of fuel, and prioritizing health,
education, and other basic needs over luxuries. Governments would have the
right, with the involvement of their citizens, to pass and enforce laws meant to
protect people and the environment from corporate harm. Basic wellbeing would
be prioritized over the possibility of making fortunes, and internal trade would be
favoured over international.
The world dreamed of by the BWI, in contrast, seems to be one in which countries
regularly import items that they used to produce themselves, paying for many of
those imports through loans. In this world, multinational corporations control
much of the economy; business profit is used to service interest payments on
loans. Public services are run not by government but by corporations on a
for-profit basis.
Korten suggests a way of looking at the BWI which, extreme though it sounds,
does jibe with reality: the World Bank provides the financing for large northernbased corporations to set up their export operations overseas. The IMF collects the
debts owed to northern-based financial institutions (refuse to pay up and you will
be blacklisted internationally). Finally, the WTO creates and enforces a corporate
bill of rights that protects the world’s largest corporations against intrusion in their
affairs by individuals, organizations, and democratically elected governments.
That description is a far cry from their self-promotion as agencies eager for international financial stability and a world free from poverty, yet it matches their
actions all too well.41
An even greater menace?
Unfortunately, even if the World Bank closed and the IMF and WTO ceased to
yield influence, campaigners would still have plenty of work to do. Export Credit
Agencies (ECAs) dwarf, in size and possibly evildoing, even the World Bank and
IMF. According to the non-governmental organization ECA WATCH, export
MYTH#4: THE BWI SEEK TO ALLEVIATE POVERTY
114
credit agencies “are public agencies and entities that provide government-backed
loans, guarantees and insurance to corporations from their home country that seek
to do business overseas in developing countries and emerging markets” including
“in some of the most volatile, controversial and damaging industries on the
planet.”42 Most high-consumption countries have at least one ECA that gives
financial backing to risky projects, operating mostly in secrecy. ECA WATCH calls
ECAs “the world's biggest class of public finance institutions operating internationally ...that fund more private-sector projects in the developing world than any
other class of finance institution.” As a result, ECAs are now the largest debt holders of the low-consumption countries. Among the more recent entrants in the ECA
field are the BRIC nations (Brazil, Russia, India, and China).
According to American writer and lawyer Bruce Rich, in 2004 alone, ECAs
“financed, guaranteed, and insured $788 billion worth of international trade and
investment, of which longer-term loans and guarantees totalled about $76
billion.”43 They fund projects that even the World Bank will not touch, including
extremely harmful environmental activities that greatly deteriorate the situation
of an area’s residents.44 Examples of ECA-funded projects include the BakuTiblisi-Ceyhan (BTC) pipeline, considered the most controversial pipeline in the
world. The pipeline places the power of corporations over national governments,
allegedly violates European human rights law, and carries allegations of corruption, incompetence, and malpractice. Among those financing the BTC are European ECAs. European ECAs also fund fossil fuel projects, largely ignoring the
potential for funding of renewable energy. Canadian ECAs have funded nuclear
power in India and Pakistan. ECAs finance weapons and export them to lowconsumption countries. They have been shown to ignore human rights concerns,
financing projects such as large dams that displace large numbers of people. They
fund logging enterprises that result in deforestation. Since they do not fall under
the purview of elected officials, ECAs undergo less scrutiny than any other international financing institution and yet they are guaranteed with taxpayer money.45
There is one big difference between ECAs and the BWI, however. ECAs are not
able to blacklist countries or to demand long lists of conditions on their loans.

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BEYOND APOLOGIES
Towards a Better Way: Making Institutions Accountable to People
“There is life after the IMF, and it’s a good life.”
– former Argentine president Néstor Kirchner46
* * *
There are several possible courses of action in the face of the BWI’s behaviour. One
is to work towards the abolition of these institutions. In many cases, it seems likely
that countries would be better off without any development assistance and BWI
interference. Some in the so-called ‘anti-globalization’ movement (that is, those
who would prefer that unaccountable international institutions not force their
corporate policies on the world) would argue that local solutions are available that
could more humanely and effectively reduce poverty than does reliance on external institutions. Such an approach is tempting. The BWI are indeed doing things
very badly (or very well, depending on whether one looks at their stated or their
implicit agenda). Nevertheless, the original reasons for their establishment have
not yet vanished. Economic devastation can still lead to dangerous totalitarian
policies. Given the existing high levels of inequity in wealth and other resources
between countries, it seems possible that international cooperation, if sufficiently
reformed, could bring about more benefit than harm.
So how can we dramatically reorient the mission of the Bretton Woods Institutions? Jody Heymann argues that the World Trade Organization should be
converted into an institution that fights not for corporate but rather for workers’
rights.47 With its global reach and nearly unlimited power, it could do tremendous
good in advocating for decent minimum working conditions, rather than encouraging companies to compete in a race to the bottom. David Korten suggests other
possible transformations: he would replace the World Bank with a UN International Insolvency Court, or UNIIC. The role of the UNIIC would be to discourage
new debt and help resolve existing debt, in part by taking into account the wealth
extracted from low-consumption countries by high-consumption countries without fair compensation. That is, debt could be paid off not just in cash but also
through rebalancing accounts, taking into consideration the various forms of
exploitation being practiced by the high-consumption countries. Korten also
suggests that the IMF should be replaced by a UN International Finance Organization (UNIFO). UNIFO would not provide loans; rather, its mission would be
precisely to prevent the need for such loans. UNIFO would seek to maintain
balance and stability in international financial relationships by preventing the use
of offshore banks and tax havens for money laundering and tax evasion, and by
supporting domestic (as opposed to foreign) investment and encouraging
self-sustainability. Finally, Korten would replace the WTO with a UN Organiza-
MYTH#4: THE BWI SEEK TO ALLEVIATE POVERTY
116
tion for Corporate Accountability (UNOCA). UNOCA would assist governments
in establishing sensible, appropriate regulatory regimes to ensure the public
accountability of international corporations and finance. That is, it would try to
prevent the back-door dealing, secrecy, and concentrations of corporate power
that can have a devastating effect on the livelihood of millions. It would seek to
prevent unfair competition and to eliminate corporate subsidies, and would
prohibit corporations from direct political lobbying of politicians. Finally, it would
prohibit the patenting of genetic materials, life forms (such as seeds and medicinal
plants), processes, and indigenous knowledge.48
Korten’s ambitions are by no means modest, but they are motivated by the idea
that people need not only to sustain themselves but also to contribute to the life of
the whole. This echoes one definition of sustainability: passing on to the next
generation a planet that is in better shape than it was in when we inherited it.
Short of drastically restructuring the institutions, countries might escape BWI
control by creating Southern alliances. At the moment, left-wing governments are
in power in several countries in Latin America. The United States can try to topple
rulers (and frequently has) in one or two ‘renegade’ states, but not when so many
populist leaders are in power. At that point, the United States can only accept
them. Venezuela happens to have immense oil wealth, although previously that
money only enriched the elite at the expense of the population. When Chávez was
in power, he used the wealth both to improve the situation for the masses and to
assist neighbouring countries to escape from BWI influence. Venezuela bought up
loans in Argentina, Ecuador, and Bolivia, allowing them to rebuild their economies and eliminate their BWI debt.49 Brazil also decided to pay off its IMF debt
early, and presidents throughout the region have been increasingly successful at
winning elections based on platforms that reject the BWI.50 Regional cooperation
could provide an alternative to the BWI model and the mainstream economic
policies that it espouses.
There is also another alternative, which various organizations, such as the Bretton
Woods Project, are recommending: try to change some of the practices of the BWI.
Concerned individuals and organizations can work for more transparency,
accountability, and public input. They can work to shift the focus of these institutions from protecting and enriching corporations towards strengthening local
economies. It is possible to protest specific World Bank projects and prescriptions.
I mentioned earlier my personal frustration with the World Bank’s push to ban
rickshaws in Dhaka. The noisy and colourful protests that my colleagues and I
engaged in – using clearly documented evidence of the negative effects that
rickshaw bans were having on people’s livelihood, mobility, and on traffic conges-
117
BEYOND APOLOGIES
tion – gained us entry into discussions of the ban. We were invited to a meeting
and participated in a conference call. Finally, the World Bank representative in
Bangladesh responded in written form to our criticisms, essentially agreeing that
the World Bank should not play a role in supporting such bans. Our victory was
not total. The Bangladeshi government has continued, though at a far slower pace,
to impose the bans, and the World Bank has not kept to its word about ending its
support of such bans. However, we did greatly limit the damage that would otherwise have occurred. We also learned an important lesson: sometimes being vocal
about an issue can win you a seat at the negotiation table.
In fact, making noise about BWI policies is an important first step. Newspaper
coverage of the IMF and the World Bank tends to assume that their intervention is
helpful, that loans are desirable, and that they are trying to make corrupt governments change their practices. Attacks on the WTO are treated as uninformed
minority opinion. There need to be more and stronger voices criticizing these
institutions. At the very least, more people must be vocal about their scepticism of
the BWI’s intentions. One place to start is by learning more about the projects in
your own country, or by focussing on an existing project. Some information is
available from the World Bank website; other potential sources include World
Bank watchdog organizations, both locally and internationally. External credit
agencies are more difficult to track, but again watchdog organizations can help.
Protests can lead to positive change.
Notes
Steve Berkman, “The World Bank and the $100 Billion Question,” in A Game As Old As
Empire: The Secret World of Economic Hit Men and the Web of Global Corruption, ed. Steven
Hiatt (San Francisco: Berrett-Koehler, 2007).
2 Bretton Woods Project, “What are the Bretton Woods Institutions?”
http://www.brettonwoodsproject.org/item.shtml?x=320747 accessed 23 July 2011.
3 James K. Galbraith, The Predator State: How Conservatives Abandoned the Free Market and
Why Liberals Should Too (New York: Free Press, 2009).
4 Eurodad, “World Bank and IMF Conditionality: A Development Injustice.
http://www.eurodad.org/uploadedfiles/whats_new/reports/eurodad_world_bank_and_im
f_conditionality_report.pdf accessed 14 July 2013.
5 Eurodad, “World Bank and IMF Conditionality.”
6 Eurodad, “World Bank and IMF Conditionality.”
7 See Public Citizen for information on treaties, for example the Trans Pacific Partnership:
http://www.citizen.org/more-about-trans-pacific-fta.
8 “Venezuela Owes Exxon US$1.6 billion over Nationalized Assets.” Pan Am Post, October
13, 2014.
1
MYTH#4: THE BWI SEEK TO ALLEVIATE POVERTY
118
Public Citizen, “TPP’s Investment Rules Harm the Environment.”
http://www.citizen.org/documents/TPP-and-the-environment.pdf
10 “After Study on the Impact of Mirpur Demonstration Corridor Project (Gabtoli-Russell
Square),” report prepared for the Dhaka Transportation Coordination Board (DTCB).
Dhaka: Human Development Research Centre, 2004.
11 Joseph E. Stiglitz, Globalization and its Discontents (New York: W.W. Norton & Company,
2003).
12 Alan B. Cibils, Mark Weisbrot, Debayani Kar, “Argentina since Default: The IMF and the
Depression,” Center for Economic and Policy Research, 2002.
http://www.cepr.net/documents/publications/argentina_2002_09_03.htm accessed 31
August 2014.
13 Naomi Klein, The Shock Doctrine: The Rise of Disaster Capitalism (New York: Picador,
2007).
14 David C. Korten, When Corporations Rule the World, 2nd ed. (Bloomfield, Connecticut and
San Francisco: Kumarian and Berrett-Koehler, 2001).
15 Greg Palast, The Best Democracy Money Can Buy (New York: Plume Printing/Penguin
Books, 2003).
16 Simone Baribeau, “Venezuela to Buy Argentine Bonds, Backs IMF Payoff.”
VenezuelanAnalysis.com, 21 December 2005.
17 Korten, When Corporations Rule.
18 See, for example, Arundhati Roy, The Shape of the Beast (New Delhi: Penguin Books
India, 2009).
19 Andrew Malone, “The GM Genocide: Thousands of Indian Farmers are Committing
Suicide after Using Genetically Modified Crops,” Mail Online, 3 November 2008.
20 P. Sainath, “In 16 years, Farm Suicides Cross a Quarter Million,” The Hindu, 27 May
2012.
21 P. Sainath, “The Largest Wave of Suicides in History,” Counterpunch, 12 February 2009.
Sainath gives a figure of 182,936 from 1997 to 2007.
22 Karen Piper, “Water Privatization Overlooked as Factor in Egypt's Revolt, Mubarak's
Water Policies Contributed to the Arab Spring Revolution Last Year,” On the Commons, 10
August 2012.
23 Palast, The Best Democracy Money Can Buy.
24 Debra Efroymson, “Masters of War...and Finance, A Profile of the World Bank's
Presidents,” Sustainable City News, 2011.
25 For a conservative viewpoint, see, for example, Richard Behar, “World Bank Spins out
of Control: Corruption, Dysfunction Await New President,” Forbes, 27 June 2012.
26 Luisa Kroll and Allison Fass, ed., “The World’s Richest People,” Forbes 8 March 2007.
27 Joseph Stiglitz, “The Ruin of Russia,” The Guardian, 9 April 2003.
28 Vladimir Shabanov, “Poverty in Russia Grows Faster than Expected,” English Pravda, 4
July 2011.
29 Heather Stewart, “Defaulting Rescued Argentina: It Could Work for Athens Too,” The
Observer, 10 July 2011.
9
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BEYOND APOLOGIES
Palast, The Best Democracy Money Can Buy.
Korten, When Corporations Rule.
32 Korten, When Corporations Rule.
33 Berkman, “The World Bank and the $100 Billion Question.”
34 Eurodad, “World Bank and IMF Conditionality.”
35 “How the International Monetary Fund and the World Bank Undermine Democracy
and Erode Human Rights: Five Case Studies,” Global Exchange, September 2001.
36 The World Bank, http://www.worldbank.org/en/about
37 Stiglitz, Globalization and its Discontents.
38 Stiglitz, Globalization and its Discontents.
39 James S. Henry, “The Mirage of Debt Relief,” in Hiatt ed., A Game As Old As Empire.
40 The World Bank, “United States Overview,”
http://www.worldbank.org/en/country/unitedstates/overview accessed 25 November
2014.
41 Korten, When Corporations Rule.
42 ECA Watch, “Issues,” http://www.eca-watch.org/issues accessed 25 November 2014.
43 Bruce Rich, “Exporting Destruction” in Hiatt ed., A Game As Old As Empire.
44 FERN, “Export Credit Agencies,”
http://www.fern.org/campaign/trade-and-investment/export-credit-agencies accessed 14
August 2014.
45 ECA Watch, “Issues.”
46 Cited in Christopher Swann, “Hugo Chávez Exploits Oil Wealth to Push IMF Aside,”
The New York Times, 1 March 2007.
47 Jody Heymann, Forgotten Families: Ending the Growing Crisis Confronting Children and
Working Parents in the Global Economy (Oxford: Oxford University Press, 2006).
48 Korten, When Corporations Rule.
49 Asad Ismi, “July 2008: An Interview with Dr. Maria Paez Victor, South Americans Defy
U.S. to Integrate their Economies,” Policy Alternatives, 1 July, 2008.
50 Baribeau, “Venezuela to Buy Argentine Bonds.”
30
31
MYTH #5:
Aid Alone, or as Currently Practiced, Significantly Reduces Poverty
“...as a broad rule countries determined to reduce poverty (China, Venezuela and Cuba
are notable examples in today’s world) do so without aid; countries dependent on aid do
not manage to end poverty.” – James K. Galbraith1

Does Aid Bring Equality?
The last section discussed the failure of the major international financial institutions to deal with the problem of poverty. What about the whole concept of foreign
aid? Can it help? Does it help? Are there alternatives?
Globally, resources are distributed in an extremely unequal fashion. In some countries and regions, people enjoy immense material wealth while in others, daily life
is hard and death comes early. Foreign aid – through which high-consumption
countries give or lend resources such as money, food, emergency assistance,
technical expertise, or military supplies to low-consumption countries – could be
a humane and generous way to reduce global inequities.i The government of one
country may give aid directly to another or via an international institution such as
the World Bank. Aid may also consist of smaller grants, from a few thousand up
to a million dollars or more, given by private foundations and governments, often
directly to non-governmental organizations (NGOs), universities, and other agencies to implement specific projects and programmes. The focus in this section will
be on loans to governments of tens or hundreds of millions of dollars, because
they are the most visible and, in the end, the most problematic. Grants also can be
problematic when used for projects that increase the wealth and power of corporations and do nothing for or harm the poor or the environment.
There are occasions in which foreign aid provides great value for the recipient,
especially in the case of a severe natural disaster with which the government is
unprepared to cope, such as a devastating earthquake in Pakistan or Haiti, or a
hurricane in Central America.ii Even in such cases, however, aid can have its
Technical assistance can be problematic if it includes giving advice on the creation of laws
that give transnational corporations a greater foothold in the recipient country; it can of
course also be beneficial where it leads to the enactment of better policies and infrastructure
to help the poor and to preserve the environment.
ii Hurricane Katrina in the American city of New Orleans is an example in which a highconsumption country could have benefited from the technical assistance offered by a
low-consumption one, but the United States refused Cuba’s help. Theoretically, the United
States should have been able to handle the disaster with its own resources, but the evidence
i
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BEYOND APOLOGIES
downsides. Outside food aid delivered during a drought can drive down food
prices, thereby causing further harm to local farmers. Foreign aid workers can be
a drain on existing resources, such as drinking water, and take needed jobs away
from locals. Because of the complexities of getting aid to those who need it, aid
often does not reach those who really require it. All too often, corrupt politicians
siphon it off. Given all those problems, no matter how important short-term aid
may be, the main long-term solution to disaster management is to improve the
capacity of local governments to handle their own crises whenever feasible.
At a global scale, aid can only reduce inequality between countries if the net flow
of funds is from high-consumption to low-consumption countries. But that is not
the case. A lot of aid is administered not as grants, but as loans. As discussed
above, countries must repay those loans with interest even while suffering
economically due to the numerous conditions that come attached to the loan.
Corrupt leaders in recipient countries sometimes steal much of the funds for their
own personal use; nevertheless, the country must still repay the loans.iii For example, Mobutu Sese Seko reportedly stole almost half of the $12 billion that Zaire
(now the Democratic Republic of Congo) received in aid from the IMF during his
thirty-two-year reign; consequently, the country, which never benefitted from the
aid, remains deeply in debt. Likewise, Ferdinand Marcos stole about $10 billion
from the Philippines and Mohamed Suharto embezzled about $35 billion in Indonesia, with much of those funds being foreign aid.2
* * *
More money for servicing debt than for aiding the population: Mozambique has a
population of about eighteen million people. Approximately nine million have no access
to health care. Ten million lack access to safe drinking water. Every year, 190,000
children die before the age of five. Meanwhile, the country is $5.6 billion in debt.
Payments on that debt often total more than its total export earnings. In 1995, Mozamsuggests otherwise. The American government had previously hobbled the Federal Emergency Management Agency (folding it within Homeland Security). Officials also assumed
that everyone could flee the storm by car and drove empty buses out of the city; this costly
error in judgement meant that many people without cars (mainly minorities) were
stranded, and many of them perished. The whole episode also raises questions about the
common practice of sending American technical expertise worldwide, as if the United
States inherently has more knowledge than others do.
iii Some corrupt leaders may even fear that ‘development’ will lead to a more empowered
public that will, in turn, throw out the corrupt leaders; they thus have little incentive to use
the aid in a way that will help the population. See Claudia R. Williamson, “Exploring the
Failure of Foreign Aid: The Role of Incentives and Information,” The Review of Austrian
Economics, published online: 11 July 2009.
MYTH#5: AID ALONE REDUCES POVERTY
122
bique was only able to pay $100 million dollars, or a quarter of its scheduled debt. This
was more than the country spent on health and education combined.3
* * *
The result of many decades of loan giving is that every day, nearly $23 million
flows from the lowest-consumption countries in the world to the highestconsumption ones in the form of interest and loan repayment.4 In total, the low
consumption countries currently owe more than $4.9 trillion to the World Bank,
the IMF, the governments of high-consumption countries, and to corporations.5
Between 1980 and 1992, international debt servicing amounted to $1.6 trillion, or
three times the original amount owed in 1980.6 Unfortunately, the way that repayment is structured and interest calculated means that these countries can repay the
original loan many times over and yet still owe money.
* * *
From each according to his ability…What’s up with this? Monaco, about the fifth
wealthiest country in the world in terms of GDP per capita, contributed all of $12,000 to
the World Bank’s Financial Intermediary Funds in 2010. Bangladesh contributed
$100,000.7
* * *
In addition to the money that flows from low-consumption to high-consumption
countries in the form of loan and interest payments, a large portion of aid returns
to donor countries in the form of employment of that country’s residents, flights
on that country’s airlines, income from that country’s hotels, and purchases of that
country’s products and raw materials. I met a man in Dhaka who was working on
a project funded by the American government’s aid agency, USAID. He mentioned
that the grant included money to buy a vehicle; USAID insisted that the project
team buy an American car. Unfortunately, there were no local mechanics who
knew how to fix the car nor were spare parts available for that particular model.
Not only did the vehicle quickly become useless to the aid project, but the aid
money spent on it went to an American automobile manufacturer, not to the country supposedly intended to benefit from the project.
* * *
Seeking a cushy job? Apply here! Many people are attracted to aid work for genuine
humanitarian reasons. However, it is also true that some of the attraction of the work lies
in its glamour and prestige, the potential for luxurious living, and the exciting travel
opportunities (otherwise known as ‘development tourism’). Just how exorbitant the
living gets for some is eloquently presented by Graham Hancock in his book, Lords of
Poverty: The Power, Prestige, and Corruption of the International Aid Business.
Nor am I immune. I once received an e-mail urgently requesting me to serve as a facilitator at a workshop in the Thai beach resort of Phuket. The flight, hotel, and food were all
paid for, and a small fee was provided for my service. The beach was lovely and the work
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BEYOND APOLOGIES
was easy. I felt guilty accepting but justified it to myself on the basis that as I work hard,
I deserve a break. My Bangladeshi colleagues work hard too; rarely do they get such
privileges. Those whom we are supposedly helping never do.
People who could never afford household help back home may have several servants while
working in ‘development.’ If they achieved their stated goal of eliminating poverty, they
would have to give up these privileges. To be direct, those in the aid business have an
unfortunate incentive to fail at what they aim to do.
* * *
Aid often benefits the donor country in other, more indirect, ways. A donor country can offer, for example, assistance to create electricity generation plants. Corporations from the donor country can then build factories that use that electricity to
create inexpensive goods that they can export back to their country. At other times,
aid is barely even disguised under its humanitarian wrappings. If a government
wants its businesses to have access to the natural resources in a low-consumption
country, aid can provide the entry point. For example, some donor countries label
mining as ‘development assistance,’ but though some local jobs result, the real
wealth (the value of the extracted minerals) flows right back to the donor country.
Companies may donate computers in the name of development but sell the
software necessary to run the computers at high prices. Donor countries that
manufacture cars and want to broaden their markets may provide ‘development
assistance’ to build local infrastructure (roads, bridges, elevated expressways) that
will support the import and sale of those cars. For instance, a Korean company is
constructed a road along the Mekong River in Vientiane, the capital of Lao. The
road runs parallel to a nearby existing road, thereby doubling its capacity. Korea
happens to be the main car exporter to Lao.8 It is hard to say exactly how much of
what happens in the name of aid may be of more use to the donor than to the
recipient, but whatever the amount is, it is too much.
Because aid is commonly viewed as a form of charity rather than as economic
justice, it can make the receiving country indebted in more ways than simply
financial. At one level, the conditions put on aid make sense: if aid is intended to
help the poor, the donor does not wish to see it being used to buy mansions with
swimming pools for the president’s friends and family. If the donor feels that the
cause of the crisis that led to the request for aid is remediable through better
policies, the donor may wish to push for those policies. A truly thoughtful donor
would wish to ensure that the loan supports the public good, is spent as intended
rather than to line the pockets of the powerful, that chances of repaying it are high,
and that the repayment conditions are not causing undue stress or harm to the
recipient. However, there is a not-so-fine line between telling people exactly how
to spend their money and allowing them to steal as much as they please; over
MYTH#5: AID ALONE REDUCES POVERTY
124
time, aid agencies and multilateral banks should have done better at finding a
balance.
Who does aid serve?
A bigger question posed by foreign aid is, who gets to decide what is in the public
good? The role of the public in recipient countries is virtually non-existent in
determining what projects to undertake, how to use grant money, and under what
conditions to accept loans. In fact, the main beneficiary may be the group lending
the money. In her bestselling book Dead Aid, Dambisa Moyo quotes Rwandan
president Paul Kagame commenting on why the more than $300 billion of aid that
has gone to Africa since 1970 has done the continent so little good: “The primary
reason is that in the context of post-Second World War geopolitical and strategic
rivalries and economic interests, much of this aid was spent on creating and
sustaining client regimes of one type or another, with minimal regard to developmental outcomes on our continent.” Aid is unlikely to reduce poverty when the
givers never intended it to do so.
Even when delivered with good intentions, aid is a difficult enterprise. The largest
projects, while having the potential to do the most good, can also be the most
harmful, since they are often for damaging infrastructure such as large dams. Big
projects also mean big money. When large sums of aid money pour in to very poor
and unstable countries, violence can ensue as various factions fight to see who can
steal the largesse. Aid-related violence can take place directly when and where the
aid is dispensed, and in fights among political factions, each of which want to gain
political power in order to steal the money easily.
Victims of economic crimes include all those who could have been helped by the
money, but who were not, and all those affected by the violence that results from
the desire to steal aid money. As those siphoning off aid become exorbitantly
wealthy, the chasms between rich and poor grow, as do incentives to seek new
forms of aid, regardless of how useless or detrimental the projects might be or how
much the population is burdened with debt. As to how much of the aid is stolen,
one former World Bank insider remarked: “Sadly, having spent sixteen years in
Bank lending operations and anticorruption investigations, I have become
convinced that $100 million or more [of $500 million lent] may well have been lost
to fraud…”9
Governments may spend time seeking foreign assistance and negotiating grants
rather than seeing what they themselves might do with existing resources.
Dependence on aid can distract governments from taking on the responsibility of
improving conditions locally – why do so when donor aid can be used instead –
and from passing laws that would give the poor the opportunity to have a better
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life. The temptation is particularly strong where corruption among government
officials is rampant (and goes unchecked by the donor).
On the smaller scale as well, aid gives rise to many other types of problems.
Programs and priorities follow the ‘flavour of the day’ and often do not undergo
any rigorous evaluation for effectiveness; evaluations themselves are problematic
if not well designed.iv Projects are often too short-term to make the desired
changes or to sustain them after the grant has finished. Aid has become an industry in many low-consumption countries, with a growing number of businesses
and NGOs set up to receive the money but with little evidence that they have
contributed to the betterment of the poor.10 NGOs typically must tailor their
programs to suit donor requirements and interests and ignore or avoid those areas
that are not palatable to donors; otherwise, there is no way to pay one’s bills.v
NGO workers can also be so distracted by the potential of grants – and the work
that goes with applying for them, managing them, and reporting on them – that
they shift their attention away from actually addressing the critical issues of the
more equitable distribution of resources, workers’ rights to liveable wages, and
government responsibility. Again, donors often do not encourage NGOs to take on
these difficult issues. Because governments fail to provide a safety net, NGOs
often step in with donor-funded programs to help the poor. As long as they do so,
there is less pressure on governments to fulfill their duty. However, successfully
pressuring governments to take over would cause the NGOs to lose their sources
of funding, and so their incentive to keep the pressure up lessens. The NGO that
iv I have seen evaluation reports that are worse than useless because what they measure –
number of people who attended an information session, number of desks set up in a new
school, number of health education posters pasted on walls – fail to indicate whether
people’s lives are any better. Purely quantitative evaluations, which seem to be the norm,
cannot capture the beauty of some truly effective programs. On the other hand, purely
qualitative evaluations that relate stories of people’s newfound happiness typically provide
no measureable or reliable evidence. There is also the issue of the complexity of donor
application and reporting forms, and how much time NGO staff must spend chasing funds
and filling out reports rather than doing the work that they are supposedly paid to do.
v This is an important point that merits more discussion and will no doubt make some
readers uncomfortable. The whole setup of NGOs is premised on the idea that the donors
and voluntary contributors are intent on reducing poverty or otherwise aiding
low-consumption countries. Yet many of the governments and foundations making the
grants are, to a greater or lesser extent, controlled or funded by corporations with profitmaking opportunities in those countries. The criticism extends beyond the particular (for
instance, a foundation supporting contraception due to its support for eugenics) to the
general (the ways in which donors set and control the agenda of NGOs).
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126
wishes to be the exceptional group that actively pushes governments to take on
the services provided by many other NGOs may find it impossible to find enough
funding to stay on mission. It is difficult to argue that one should ignore the urgent
needs of the poor in order to push governments to assume their responsibility, but
if one fails to push governments, they may never act to redistribute wealth, and
there will be an ongoing need for NGO action.vi
* * *
If it were easy, it would not be a problem. It can be difficult to make accountability a
reality. When I lived in Hanoi and asked shopkeepers for a receipt, they typically asked
me how much money they should make it out for; this taught me the value of receipts in
many countries. Years later, colleagues in the business of disbursing relatively small
grants (generally between $80,000 and $500,000) told me that they had instituted
extremely strict accounting procedures after they visited a health clinic they had funded,
only to discover that the building was being used as a brothel. A friend told me that when
the foundation she was working for decided to stop working in Bangladesh, they gave
their remaining funds – one million dollars – to a large, well-known NGO. Later, when
they asked what the money had been used for, the answer was, “We don’t know. We can’t
find it.”
* * *
A more useful approach would be to see whether aid could be dispensed in a way
that would optimize the potential for good and reduce the potential for harm,
while seeking other ways to reduce global inequality.

Towards a Better Way: Improving Aid and Finding Alternatives
“Poverty is also a violation of elementary absolute standards of social justice. …Social
justice requires that everyone should have a minimal standard of living, and that people
living in poverty should receive assistance when they lack the means to live lives that
affirm their human worth and dignity.” UNDP, Rethinking Poverty11
* * *
NGOs may deliver better services than governments, but the cost is typically much
higher. My personal feeling is that NGOs should push and support governments, not
replace or replicate them.
vi
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BEYOND APOLOGIES
“Fixing” aid
Pouring in aid money is only one, and not always the best, solution to poverty; it
is no solution at all when large portions of the money simply return, in various
forms, to the donor or are stolen before they can be used to help the poor. A longterm goal may be to reserve aid for conditions of real emergency or dire need, with
an accompanying effort made to push/support governments to take care of their
own people and to increase the role of the public in ensuring that governments
carry out these responsibilities properly.
Different approaches to dispensing aid can make a big difference in how it is used.
One might start with this rather simple rule: do not provide large unmarked loans
to leaders who have little or no popular support and who have a propensity to
siphon off funds into their Swiss bank accounts. Following this rule might have
prevented many loans from being made in the past and could presumably prevent
many more in the future. After all, the populace must repay these loans long after
the leader has left power (often taking a hefty amount of the loan with him). Other
checks and balances would also help, such as stronger rules at the lending institutions to prevent the approval of projects that displace large portions of the population and that cause serious damage to the environment, to public health, and to
local businesses/economies.vii
As long as loans are necessary, there is a need for more accountability and transparency in choosing which ones to take and whether to accept the conditions
attached to them. There are probably people in every country who take an active,
humanitarian interest in local affairs and who would like to have a say in foreign
aid decision-making. Loan negotiations may need to occur in private, but surelymechanisms could exist to introduce more transparency and public input into
decisions about which projects merit loans. Local experimentation is needed to
arrive at the best methods, but possibilities include the government putting
notices in the newspaper, advertising by radio, posting information on the Internet, or using banners in the streets to announce planned loans, then providing a
number of ways to give input, including public meetings, email, and the
old-fashioned letter. Not only which projects are worthy, but the basic conditions
of the loans and the likely burden of repayment should also be open to public
discussion. In the same way that participatory budgeting (discussed elsewhere in
vii The World Bank is doing just the opposite, at least in terms of dams. In searching for ways
to finance ‘development’ without increasing climate change, the Bank is getting back into
hydropower, despite all the displacements involved. “World Bank rethinks stance on
large-scale hydropower projects.” The Guardian, 14 May 2013.
MYTH#5: AID ALONE REDUCES POVERTY
128
this book) allows communities to give input into local spending priorities, so
communities could have a say on whether they want loans/grants to build, for
example, a new airport or to create a network of local health clinics in remote
areas. It may require a major educational effort to enable informed input into
loans, but such an effort would have a huge payoff. Local leaders, NGO officials,
and journalists are among those in a position to educate others about loans. With
most people in many countries now having a mobile phone, organizers could use
text messages as a way to inform people of the opportunity to come to a session to
learn more and to offer their opinion. Even those with very little understanding of
the projects and of loan conditions are likely to have an opinion about bankrupting the country’s future to pay for questionable projects today.
At the level of small or medium grants to NGOs and other organizations such as
universities, trust and respect can play an important role. Donors could conduct a
background check of the recipient organization. Asking that basic accounting
procedures be met, and following the progress of the grant in a respectful way, can
help to build the sort of trust that makes cheating less likely. Bigger grants, to the
tune of millions of dollars, require closer monitoring – such as visiting the project
to see if the work is actually being carried out.
For individual countries, the option of refusing aid always exists. The government
of Myanmar reportedly refused international assistance to deal with the devastating effects of a typhoon because it was afraid that once they let in aid workers and
their backers, they would have trouble getting them to leave. It is easy to see how
governments may fear the influx of an army of aid workers, even when aid is
needed.viii
The conditionality of aid should be at least reduced, and conditions meant to
support the mainstream economic system, such as draconian cuts in government
budgets and privatization of public services and industries, should be eliminated.
Interest rates need to be slashed on overly burdensome loans, and many loans
viii I could be wrong in my interpretation of events in Myanmar, but I request that readers
consider the possibility that the media is misleading us. I can find no other explanation for
the West’s obsessive interest in Myanmar than that the type of ‘democracy’ that the United
States is pushing would mean not more freedom for the population, but rather greater
access for multinational corporations. My suspicion is partly based on observing very few
billboards when I visited the country and seeing a small article in The Economist complaining about the high tariffs on cars. Yes, the current regime is in some ways atrocious and
certainly Aung San Suu Kyi has excellent motivations, but the situation there is probably
vastly more complex than the mainstream media reports. For more discussion on the role
that the media plays in perpetuating economic untruths, see the Myth on mass media.
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need to be forgiven. The flow of aid money should be from high-consumption to
low-consumption countries, not vice versa.
Other options
There are, of course, taxes. As I discuss elsewhere in this book, taxes on corporations and wealthy individuals are (too often) an enormously underutilized
resource. Rwanda recently announced a budget of which, for the first time ever,
about fifty-four percent would be financed domestically (mostly through tax)
rather than by aid.12
Populations would require less help from government if they were better off.
Efforts to prevent the rich from exploiting the poor and to reduce inequality could
include land reform and laws designed to protect labour, to ensure a living wage,
and to protect the rights of indigenous groups to ‘sustainable’ use of natural
resources (such as the right to collect nuts and herbs in the forest versus having it
destroyed for logging, mining, and large-scale farms). More protection for the
poor from exploitation by the rich and powerful would lessen the need for outside
assistance.
Another common way to bring money into a country is to encourage remittances
from overseas workers. Remittances provide an important source of local funds;
they also bring many problems. The official, and probably low, estimate is that
thirty million Africans (about three percent of the population) have migrated
regionally or internationally.ix Remittances of nearly $40 billion in 2010 represent
the largest source of foreign funding to Africa after direct foreign investment.
According to the World Bank, the amount sent home by overseas workers is about
the same as official aid. Nigeria alone received $10 billion in officially recorded
remittances in 2010.13 Remittances may reduce poverty among individual families
and communities and lead to greater spending on health and education. They can
also help families cope with emergencies.14
However, remittances are not cheap: workers often fail to send home as much as
they otherwise would due to the exorbitant price and insecurity of transferring the
I happened to befriend a few of these expatriate Africans in Dhaka; they were all professional athletes. They did relatively well, though the clubs for which they worked often
failed to pay their salaries or honour their contracts, and the players had nowhere to turn
for regress. They desperately missed their homes. Some of the locals looked upon them
with scorn and contempt. One player had the president of his club put a gun to his head to
force him to sign a resignation letter; my friend who played at the same club had to leap
over a wall to escape being put into a similar situation. I can only imagine how much worse
the situation must be for many economic refugees, especially illegal ones.
ix
MYTH#5: AID ALONE REDUCES POVERTY
130
money. According to a World Bank report, the cost of a $200 remittance sent to
sub-Saharan Africa averaged close to twelve percent. Sending money within
Africa is even costlier and more difficult than sending it from outside Africa.15
Although mobile phones are playing a growing role in banking, it is still difficult
to get money to rural areas.
Remittances involve other costs. When people leave their homes to work far away,
the emotional cost and the effect on family structures and relationships can be
devastating, with children being particularly affected. HealthBridge-supported
research in Vietnam found that while many parents left the country to work in
order to help their children gain a better future, some of those children felt abandoned and suffered from a range of emotional problems; some dropped out of
school.x Reídar Jönsson beautifully captures this issue in his moving novel My Life
as a Dog: “My father left. As usual, the Swedish nation needed their bananas more
than I needed my father.”16 Many countries, Vietnam and the Philippines
included, simply encourage migrant labour on the assumption that it is a net
good, but the cost of this practice must be taken into account when determining
national policy.
Emigration represents a direct financial cost to the nation of origin as well. When
skilled workers leave a low-consumption country, they take their valuable skills
with them. Countries pay for the education of their citizens, only to find that many
of the most educated emigrate.17 At the same time, high-consumption recipient
countries receive already educated and possibly trained workers, representing yet
another reverse subsidy. Worse, educated workers often fail to find jobs that utilize
their skills and background, while the country they left may be in desperate need
of them.
Tourism, another source of local funds, is also a mixed bag. Tourism can drain
resources, such as water and electricity, from the local population; it can also
contribute to the privatization of land, as (for example) luxury hotels with private
beaches occupy space formerly used by locals, including fishermen. Tourism that
Many children left behind suffer from a sense of inferiority and have no one to take care
of them and supervise their studies. School dropouts were especially common when the
mother left. ‘I have dropped out of school since I think my mother does not love us anymore’
(daughter of a guest worker, Thai Binh city, speaking to a member of a HealthBridge project
team studying the effects of migrant labour on local communities and families). Pham Thi
Ngoc Anh and Nguyen Van Tung, “Impacts of Labour Exportation on Family Life in Thai
Binh Province,” Report prepared by the Central School for Female Cadres and HealthBridge. Hanoi, May 2008.
x
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caters to high-end vacationers will mostly benefit wealthy corporations, including
foreign ones, rather than locals: French tourists flying on French airplanes, staying
at French-owned hotels, eating in French restaurants, and traveling on French
buses will do little for the local economy. Tourism to low-consumption countries
also has a seedy side, with its connection to prostitution and drug use.
A more promising option is for governments to encourage and protect small
domestic industry, particularly for products that are not harmful to health or the
environment. Instead, the current basis of some economies simply keeps the
nation impoverished. When I visited Malawi several years ago, I saw the true
meaning of the country’s ‘dependence’ on tobacco, which resembled dependence
on a drug. Planners focused on a single crop, tobacco; that crop mainly benefits the
tobacco industry, not the farmers.18 The industry uses some of its profits to buy the
support of government officials. As a result, there was little or no effort to diversify
the economy. People continue to go hungry despite decades of tobacco cultivation.
While I was there, some people were refusing to check out of the hospital after
recovering from illnesses brought on by malnutrition because they had no food at
home. Singapore, Hong Kong, Taiwan, and South Korea – former lowconsumption nations that have become economic success stories – grew rich by
protecting their nascent industries from cheap imports until they were strong
enough to compete. Today, however, trade rules imposed by donor countries and
the Bretton Woods institutions benefit large corporations and thus prevent lowconsumption countries from taking these steps.
* * *
Jane Jacobs describes how in the small country of Taiwan, the combination of land reform,
workers with many years of experience in factories but with no capital, and a powerful
but benign government helped transform a poor country into a wealthy one. The government forced wealthy rural landowners to sell some of their land to the government so that
it could redistribute that land to poor farmers. The government in return insisted that the
landowners invest part of their payment in urban industry. Importantly, the government
did not specify which industry. Most landowners were not natural entrepreneurs.
Meanwhile, many people had gained ideas about potential new industries during their
many years working for the foreign companies that had invested in Taiwan when salaries
were low, but had no funds to implement them. The combination of those with ideas and
those with funds, helped along by government protection, led to a burgeoning of local
industry. When many foreign companies departed to seek lower-paid workers elsewhere,
such as China, the Philippines, and Bangladesh, their departure was an indication of
success, not failure, in Taiwan’s development.19 Whether Taiwan’s particular case is
replicable is another matter.
* * *
MYTH#5: AID ALONE REDUCES POVERTY
132
One area on which some liberals and conservatives agree is the need for more
genuinely ‘free’ trade in which the high consumption countries stop imposing
tariffs on imports from low-consumption ones. Any solution to poverty that
depends on trade has a number of limitations, but this sort of trade could at least
prove a temporary solution while the low-consumption countries recover from
debt and find a more sustainable way to support their populations. According to
Oxfam, by imposing high tariffs on imported goods, the G8 countries collectively
deprive the low-consumption countries of $160 billion a year in trade.xi “For every
dollar we give in aid two are stolen through unfair trade,” points out Robert Fox,
Executive Director of Oxfam Canada; “The G8 countries have rigged trade rules,
blocking trade's potential to wipe out poverty and instead increasing the global
wealth divide.”20
Finally, even the low-consumption countries may not need as much aid as they
think. Their governments often spend money on unnecessary and harmful items,
such as on weapons systems and on extravagant ‘development’ projects like fancy
airports. It is surprising the amount of money the government of Bangladesh
(which ranks 170 out of 207 countries based on income21) finds available for
projects like transport facilities for the less than one percent of the population that
owns a car.xii When the government commissioned a transport plan, the transport
experts listed and ranked various options following an extensive study of considerations such as speed, safety, and the environment. The highest-ranking option
was also the cheapest, at ‘only’ $1.9 billion. Rather than choose that option, however, the government chose the option ranked sixth, which at an estimated $4.8
billion would cost more than double the first option.22 The government planned to
seek grants or loans to fund it – aid it would not have needed if it had chosen the
more affordable and more highly ranked option. The savings potentially gained
by choosing the better and cheaper plan was more than twice the planned budget
for health in 2013.23 As a local colleague of mine says, “The government is very rich
when it comes to road projects, and very poor when it comes to education and
health.”
According to World Bank data, some countries such as Ghana spent as little one
percent of their central government budget on the military in 2013,xiii while others
The G8 countries are the highly industrialized countries of France, Germany, Italy, the
United Kingdom, Japan, the United States, Canada, and Russia.
xii According to the World Bank, there were only three motor vehicles (cars, buses, and
trucks but not motorbikes) per one thousand people in Bangladesh in 2010. Transport statistics indicate that less than four percent of trips in Dhaka are made by private car.
(http://data.worldbank.org/indicator/IS.VEH.NVEH.P3);
xiii Sierra Leone is listed at zero percent in 2011 and 2012, down from six percent in 2009.
xi
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spent as much as eighteen to nineteen percent (India and Pakistan) and twentythree percent (Uganda).xiv The same governments that spent a lot on weapons
spent significantly less of their central government budget on health: eleven
percent in India, ten percent in Pakistan, and fourteen percent in Uganda in 2012
versus Ghana’s thirty-three percent in 2011.24
Those concerned about the poor need to learn more about total government budgets and engage in public discussions about them. As it is, those working on
tobacco control or on HIV/AIDS compete for scarce resources from donors and
governments. Instead, all those working for health, the environment, and a better
life for the poor should work together to demand more government allocations for
those issues. They should work together to demand more spending to help the
poor and middle class and less for weapons and for projects meant to enrich the
wealthy.xv
Could cuts in wasteful military and other non-social spending, combined with
increased revenue from local taxes and support for local industry, replace aid or at
least reduce the need for it? There is no one answer for all countries, but alternatives to aid clearly merit more consideration. It is time to spend more energy
exploring the alternatives and, where aid continues, to make the process more
transparent, with more public oversight.
Oman tops the chart, at almost thirty-three percent in 2013; that figure is forty-four
percent for 2014. I use 2013 for comparison, as the data for 2014 are incomplete. World
Bank, “Military Expenditure (% of Central Government Expenditure),”
http://data.worldbank.org/indicator/MS.MIL.XPND.ZS accessed 2 September 2014.
xv I hope it is clear that the middle class is a victim of mainstream economics, not the beneficiary or villain. The true villains are few in number and phenomenally wealthy. Government provision of essential services at no cost to the recipients would benefit not only the
poor but also the middle class.
xiv
Notes
1 James K. Galbraith, The Predator State: How Conservatives Abandoned the Free Market and
Why Liberals Should Too (New York: Free Press, 2009).
2 Charlotte Denny, “Suharto, Marcos and Mobutu Head Corruption Table with $50bn
Scams,” The Guardian, 26 March 2004.
MYTH#5: AID ALONE REDUCES POVERTY
134
3 Gumisai Mutume, “Mozambique: Debt Relief Needed for Investment in Peace,” Inter
Press Service (IPS), Johnannesburg, 4 September 1997.
4 Jubilee Debt Campaign, www.jubileedebtcampaign.org.uk accessed 5 June 2013.
5 The World Bank, International Debt Statistics 2013 (Washington: The World Bank, 2013).
6 Gumisai Mutume, “Mozambique: Debt Relief Needed.”
7 World Bank Group Finances, “Biggest Donors by Countries - 2010”
https://finances.worldbank.org/Financial-Intermediary-Funds/Biggest-donors-by-countrie
s-2010/r2cs-ptjn
8 Kanga Kong, “Why Laos Is Hyundai/Kia Country,” Wall Street Journal, 30 October 2013.
9 Steve Berkman, “The World Bank and the $100 Billion Question,” in A Game as Old as
Empire: The Secret World of Economic Hit Men and the Web of Global Corruption, ed. Steven
Hiatt (San Francisco: Berrett-Koehler, 2007).
10 Claudia R. Williamson, “Exploring the Failure of Foreign Aid: The Role of Incentives
and Information,” Review of Austrian Economics, published online: 11 July 2009.
11 UNDP Department of Economic and Social Affairs (New York: UNDP, 2009).
12 Kenn Okwaroh, “Budget 2012: Is East Africa Spending Where it Matters?” Development
Initiatives, 20 June 2012.
13 Dilip Ratha, Sanket Mohapatra, et al. Leveraging Migration for Africa: Remittances, Skills
and Investments (Washington: The World Bank, 2011).
14 Ratha, Mohapatra, et al. Leveraging Migration for Africa.
15 Ratha, Mohapatra, et al. Leveraging Migration for Africa.
16 Reídar Jönsson, My Life as a Dog, trans. Eivor Martinus (New York: The Noonday
Press/Farrar-Straus-Giroux, 2nd printing, 1996).
17 Ratha, Mohapatra, et al. Leveraging Migration for Africa.
18 Marty Otañez, “Social Disruption Caused by Tobacco Growing,”
www.escholarship.org/uc/item/7ks4s9js accessed 3 September 2014.
19 Jane Jacobs, Cities and the Wealth of Nations: Principles of Economic Life (New York:
Vintage Books, 1985).
20 Oxfam Canada, “Making Trade Fair,”
http://oxfam.ca/our-work/campaigns/make-trade-fair accessed 14 September 2014.
21 Encyclopedia of the Nations, http://www.nationsencyclopedia.com/ accessed 27
December 2011.
22 Debra Efroymson and Mohammed Bari, Dhaka Strategic Transport Plan (STP), A Critical
Review (Dhaka: WBB Trust, 2007).
23 “Health Sector Development Budget Reduced,” New Age, 7 June 2013.
24 World Bank, “Public Spending on Education, Total (% of Government Expenditure),”
http://data.worldbank.org/indicator/SE.XPD.TOTL.GB.ZS accessed 2 September 2014.
Dates given are the latest available.
MYTH #6: Microcredit & Income Generation are Miracle Cures
“Everyone here grows marijuana.i Since we all grow it, nobody gets much for it.”
– Man in small town in USA
A young boy at a tea stall in Dhaka asks me if I will take him to America. “Sure,” I say,
“but what will you do there?” “Sell tea,” he replies.

Microcredit: A Silver Bullet to End Poverty?
Microcredit has gained significant global attention as a viable way to reduce
poverty. Accounts of microcredit experiences are almost universally glowing and
microcredit programs have been widely replicated.ii Mohammed Yunus, the originator of the concept of microcredit, received the 2006 Nobel Prize jointly with his
Grameen Bank.
Microcredit addresses the double bind of the poor: since the poor lack collateral,
they are unable to get loans at traditional banks; local moneylenders will provide
them with loans but only at very high interest rates. In order to get around the lack
of assets that can be used as collateral, microcredit programs put people (in the
case of Grameen, almost exclusively women) into groups, with the group as a
whole serving as insurance that individual members will repay their loans.iii Once
the first woman in the group receives a small loan for her own project, the other
group members cannot receive loans until the first one repays hers. There is thus
significant pressure on the first woman to repay her loan. Women also learn to
save money through a mandatory savings program, in which they must regularly
pay a certain amount of money to the Grameen Bank, which keeps that money for
them. The very high loan repayment rates (about ninety-seven percent) have been
widely publicized and praised as indicators of success. Here, it seems, is a
program that offers the poor a chance to work their way out of poverty with
dignity.
There is another side to the story, though. My views of it, discussed here, reflect
the many hours of conversations that I have had with locals during the more than
fourteen years that I have lived in Bangladesh and on my own observations of
microcredit programs there and elsewhere. While it is difficult to find critical
views in much of what is written about it, microcredit is not without its detractors.
A few of the criticisms of the system as currently implemented deserve a quick
Some American states have legalized the sale of marijuana.
One example among many: Dambisa Moyo in Dead Aid raves about the Grameen Bank
model: “The most truly extraordinary aspect of this extraordinary tale is their ‘No Donor
Money, No Loans’ policy”: meaning that the poor must pay for all the help they get.
iii Individuals receive the loans; the group serves as loan collateral.
i
ii
MYTH#6: MICROCREDIT IS A MIRACLE CURE
136
mention before moving on to its more essential flaws. (While I focus here on
Grameen Bank, other microcredit programs operate in similar ways.) Consider,
for instance, the much-praised high repayment rates. How likely is it that ninetyseven percent of the projects for which a loan was taken will succeed and produce
income over the longer term?iv Let us say, for example, that a woman takes out a
loan to buy a goat. The goat gets sick and dies or is stolen. The woman still has to
repay the loan. Alternatively, a woman’s husband beats her to get her to take a
loan, and then uses that money to drink.v She still must repay the money. If the
loans are repaid, they are hailed as a microcredit success story. As for where a
woman can find the money to repay the loan if she loses the original amount or
generates no income, possibilities include eating less – in Bangladesh, women
already eat after their husband and children and get the least food – and selling
what few possessions she may have had. Stories circulate about the abusive practices sometimes used to collect the loan repayments. I have heard, for example,
from former Grameen Bank staff whose job it was to collect the loan payments that
any money missing from repayments was deducted from their own salaries. In
addition to the other group members, bank staff members clearly have a strong
incentive to do everything possible to make sure that women repay their loans. I
have also heard stories of women chasing the non-payer, who tried to run away,
and forcibly removing her nose ring so that they could sell it to repay the loan.
Then there are the interest rates. The interest rates charged on microcredit loans
may be lower than those charged by local moneylenders, but at twenty percent,
they are by no means low. The combination of interest payments and forced
savings means that women are paying money to the bank on a regular basis even
if their income is not consistent.
In a situation of high illiteracy and innumeracy, the possibilities for exploitation
are rife. I have heard a former Grameen Bank employee complain about the bank’s
singular focus on loans. Borrowers do not receive any other type of support to
teach them how to manage their new businesses. One of the Bank’s highly touted
programs was to provide women in rural areas with mobile phones and Grameen
phone services, which they could then rent out. The fact that Grameen charges
higher rates than other mobile phone companies tends not to get mentioned.
iv In the United States, for example, eight of ten small businesses fail in their first eighteen
months. Eric Wagner, “Five Reasons 8 out of 10 Businesses Fail,” Forbes, 12 September 2013.
v In Bangladesh, it is estimated that over half of all women are beaten by their husbands or
other family members. “National Digital Database on Violence against Women: An Essential Tool For Effective Services.” Summary of joint discussion between UNDP and The Daily
Star under UN Joint Programme on VAW Project. The Daily Star, 26 July 2013.
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Other accusations made against Grameen Bank by one vituperative critic, Taj
Hashmi (writing of his field work and personal experiences in Bangladesh),
include allegations that borrowers regularly lend the money to fellow villagers;
that men take multiple wives to access numerous loans for their own moneylending business; and that the poorest of the poor do not actually have access to
the loans as they simply cannot make the repayments. As Hashmi points out, if
simply borrowing money at high interest rates could help people out of poverty,
then the credit card companies should also receive the Nobel Prize. Or, as he asks
rather brashly, “If micro-credit could alleviate poverty, why on earth [are]
hundreds of thousands of Bangladeshis going to Dubai, Saudi Arabia, Kuwait or
Singapore, borrowing hundreds of thousands of takas (two lakh [$2,580] per head
on the average) to work as menials? If borrowing fifty or sixty dollars could alleviate poverty, why are they [going overseas as labourers instead]? Are they
stupids?”1
No program, however good, can be immune from criticism and perhaps occasional abuse and it would be useful if people addressed these abuses rather than
ignore them. However, they are not the most serious problems. More serious
issues arise when microcredit is seen not as a patch, or as one tool among many in
a sizeable kit of methods, but rather as the most significant or substantial
approach to poverty reduction.
The theory underlying microcredit is that the poor need better access to loans so
that, through their own hard work and ingenuity, they can work their way out of
poverty. The poor undoubtedly need access to loans at low interest rates (or to
local currencies, which would give them access to cash without interest). But
whether microcredit programs can greatly reduce poverty is another matter
entirely. When I hear that the poor are natural entrepreneurs who just need some
financial support to climb from poverty to prosperity, I remember the two men I
saw on a street corner one day in the northeastern United States. They took a break
from shouting ‘ice cold lemonade’ to complain to each other about how bad
business was. The day was damp and chilly, and customers were few and far
between. There are, no doubt, many natural entrepreneurs among all segments of
society, but they seem unlikely to be the majority.
Development agencies, government departments, and NGOs typically act on the
belief that the problem of widespread poverty is due to some deficiency in the
poor themselves, and that addressing a single need (a small infusion of cash to be
repaid with interest) will solve the problem. This belief, and any approaches based
on it, completely ignores the institutions and systems that perpetuate poverty. As
feminist economists Susan F. Feiner and Drucilla K. Barker point out in their
criticism of the Grameen Bank model, microcredit is popular among governments
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and multilateral donors because it reinforces the individualist approach of mainstream (neoliberal) economics, shifting the burden from structural change to
individual effort and initiative:
The key to understanding why Grameen Bank founder and CEO Muhammad
Yunus won the Nobel Peace Prize lies in the current fascination with individualistic myths of wealth and poverty. Many policy-makers believe that poverty is
"simply" a problem of individual behavior. By rejecting the notion that poverty has
structural causes, they deny the need for collective responses. In fact, according to
this tough-love view, broad-based civic commitments to increase employment or
provide income supports only make matters worse: helping the poor is pernicious
because such aid undermines the incentive for hard work. This ideology is part
and parcel of neoliberalism.
For neoliberals the solution to poverty is getting the poor to work harder, get
educated, have fewer children, and act more responsibly. Markets reward those
who help themselves, and women, who comprise the vast majority of microcredit
borrowers, are no exception. Neoliberals champion the Grameen Bank and similar
efforts precisely because microcredit programs do not change the structural conditions of globalization – such as loss of land rights, privatization of essential public
services, or cutbacks in health and education spending – that reproduce poverty
among women in developing nations.2
One could compare the microcredit approach to planting a few trees while not
noticing that behind one’s back hundreds are being cut down for each one planted.
Microcredit programs may do much good for some individuals, but they fail to
address why such programs are needed.
The message that the poor are masters of their own destinies and that, with a little
help (for which they must repay the full cost with interest), they can lift themselves out of poverty seems positive, even empowering. Nor is it baseless. Microcredit has no doubt benefited many individuals. However, poverty is primarily a
structural problem, one that is built into the mainstream economic system through
policies that are designed to enrich the wealthy. While perhaps not intentional,
these policies do nothing for (or worse, punish) the poor. Some people are poor
despite possessing excellent ideas and sound managerial skills, because in an
environment ripe with opportunities they simply cannot get a loan. Are such
people likely to be the majority of the poor?
Most of the poor lack the education and necessary skills to avail themselves of
opportunities that are anyway far too few in number. Such people will not be
helped by microcredit. Worse, if people believe that it is entirely the responsibility
of the poor to work their way out of poverty, then one needn’t bother to raise taxes
on the rich or on corporations, or to insist on fair wages, or to give power back to
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unions, or to ensure that governments provide basic services. Focusing on the
individual ignores the responsibility of governments to provide basic support
including health and education services for the poor, measures that, in addition to
creating jobs, will be far more successful in reducing poverty than will microcredit
alone.3 The vision of microcredit as the solution to the problem of poverty, without
requiring any other structural changes, is its most dangerous (and to many, attractive) aspect.
Feiner and Barker also cite evidence that many microcredit programs, including
Grameen Bank, may actually charge more than informal moneylenders. They
claim that Grameen overstates the financial gains that its loans generate, as the
gains realized by most borrowers are very small, with the poorest borrowers
benefiting the least. They argue that the loans are not necessarily empowering
because they can lead to a double burden (‘small business’ work added to a
woman’s already full day of household work) and conflict when men, not women,
actually control the loans. In fact, pressure to repay the loan from women group
members can lead to conflict rather than building solidarity.4
My own suspicions about microcredit were aroused after I visited the head office
of the Grameen Bank in Dhaka. The high rise, modern office building located in
the heart of the city seemed incongruous with its definition as a bank of the poor.
As I was curious to learn more about Grameen, I asked if I could visit one of the
sites where it works. It was possible to do so, for a fee. The village I was taken to
seemed to be a little too tidy, the stories told a little too neat. A group of women
who met regularly to hand over their savings chanted slogans in bored voices,
suggesting that this was just another act that they had to undergo to get their
loans, rather than being useful guidance for their lives. (Slogans included the
refusal to accept or offer dowry; unfortunately, the advice is not particularly practical in a country where it can be impossible for one’s daughter to marry unless her
family pays off the groom.) My guide gave me suspicious answers to some of the
questions that I asked, including his obviously untrue claim that various Grameen
enterprises, such as Grameen mobile phone, were unrelated to Grameen Bank.
According to its website, Grameen Bank gives loans to many people: more than
eight million to date. Grameen says that it charges twenty percent interest on its
income generating loans and lower rates on student and housing loans (loans for
beggars carry no interestvi). In 2010, the Grameen Bank recorded a profit of $10.76
million after operational expenses.5 The profits to be gained by running a microBeggars may be in a better position to repay their loan than others, as they at least have a
steady source of income.
vi
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credit program were confirmed when someone working for a large and wellknown Bangladeshi NGO asked why my colleagues at a much smaller NGO
didn’t start a microcredit program, as doing so would fund all of their other work.
It seems morally wrong to place the burden of paying for any assistance they
receive back on the poor, but that is precisely what microcredit programs do.
As a primary means to end poverty, microcredit thus has serious limitations.
Those very limitations, however, make it attractive to many: an implementing
organization can earn money while ‘helping’ the poor and without addressing any
of the structural causes of poverty. What microcredit could be is an often helpful
but sometimes dangerous adjunct to other programs designed to help the poor or
to address injustices, inequality, and lack of opportunities. Claims that microcredit
is a universal solution to poverty should be taken with a large grain of salt. In
reality, it is a program that should be carefully monitored to avoid abuse.
Related programs
Another common approach to poverty reduction is income generation through
means other than microcredit. This includes job training, job creation and, in rural
areas, attempts to switch from subsistence farming to cash crops. On the surface,
this approach makes sense. As with microcredit, the idea is to help the poor gain
opportunities to earn money and thus work their way out of poverty. Where jobs
do exist and people need training, or where good jobs can develop, this approach
can be tremendously helpful. As with microcredit, however, the approach also has
some major flaws or at least limitations that make it only one of a number of
approaches needed to reduce poverty. NGOs tend to stick to non-challenging
projects as job training without having adequate assurances that the jobs will be
there when the trainees finish their studies. All of these programs must recognize
the obstacles that exist within the external environment that prevent people from
escaping poverty.
Discussions of job creation should not ignore the parallel issue of job destruction.
This occurs when new job options and industries take over in rural areas, replacing farmland with factories. It also occurs through various government decisions.
There is often a great uproar about the potential decline in jobs when plans are
announced to ban or restrict a polluting industry.vii Yet when a government
decides to ban cycle rickshaws or street vendors or to tear down traditional
markets, wiping out large numbers of jobs that employ the poor in the process,
In the case of Bangladesh, this included an industry that employed very few people
(making polythene bags) and one that, while hiring many people, pays almost nothing (bidi
work).
vii
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officials tend to claim that there are plenty of other jobs available for those who
will lose their source of income. Again, it does little good to plant a few trees while
a forest is being chopped down behind your back. Preventing the destruction of
local jobs that benefit the poor can be one of the most effective (if unglamorous)
forms of poverty reduction.
At the same time, job creation as an end in itself can perpetuate a different sort of
poverty: undertaking virtually any new activity takes time away from other, existing activities such as subsistence farming and providing care for children and
elderly relatives. The amount that one earns by taking on an additional job needs
to be enough to compensate for the time spent earning it. Again, like microcredit,
the job creation approach assumes that poverty can be reduced or eliminated by
increasing the amount of money available but it does not make significant changes
to the overall economic system, nor does it address inequality.
Money is important but is not all that matters. A new industry that will pollute the
environment may generate more costs than the jobs are worth. Dangerous,
extremely repetitive, and otherwise highly unpleasant jobs may not be better than
what they replace. In cases where the government is subsidizing job creation (for
example by providing tax holidays or low-cost water and electricity to the corporation providing the jobs), it is worth seeing whether similar investments could
not create better jobs elsewhere, jobs that give more independence and control to
the worker rather than to the corporation.
In some cases the land that a new industry will occupy was already being used by
people to earn a livelihood. Are those people necessarily going to be better off after
losing their land and having to purchase food in addition to all their other basic
necessities? How will the earnings be divided between the owner and the workers? Recent research shows that while bidiviii workers in Bangladesh keep less than
five percent of the wealth that they generate and most of the profits go to
extremely wealthy factory owners, rickshaw wallah (men who pedal bicycle
rickshaws) can retain seventy percent, earning much higher wages while working
fewer hours and taking more days off.6
viii Bidis are small cigarettes made from tobacco wastage that are rolled by hand in cheap
paper or a leaf, and then sold in packets. Tobacco control efforts in Bangladesh and India
are often hampered by ‘concern’ about the potential job losses, though workers are paid
starvation wages while factory owners are immensely wealthy.
MYTH#6: MICROCREDIT IS A MIRACLE CURE
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* * *
A major source of employment are the well-known call centers, whereby people in North
America and England, when seeking information about a product or service, are often
routed to workers in India who attempt to answer questions with the appropriate accent
and language. People are desperate enough to take the jobs, but may not be desperate
enough to keep them. When some companies have an annual turnover rate of sixty to
seventy percent of staff, one can safely assume that the workers do not love their jobs.
Workers experience stress from intense pressure to meet their productivity targets.
Beyond that is the attitude of the callers to those centers. Unemployment rates in Britain
are high, leading to a good deal of anger over the off-shoring of jobs. This anger has led to
deliberate abuse of call center staff, and that abuse is reportedly the main reason that staff
give for quitting. As the head of one call firm explained, “They are vulnerable anyway,
and an abusive call really knocks confidence. They don't want to take another call for an
hour or two, and their performance is impacted.” Research has shown that about half of
call center workers interviewed would like to receive counselling – this despite social
stigma towards such support.7
* * *
Not everyone has the skills or ambition to move to a higher position, but for those
who do, the potential is important. The potential is also important for a country’s
economy. Low-paid jobs that teach the worker almost nothing useful are helpful
for preventing starvation, but do not lead to any dynamism that can reduce the
country’s dependence on low-paying jobs over the longer term. Reliance on such
jobs also leaves workers vulnerable if companies decide to move somewhere with
even lower salaries or even more lax regulatory environments. People need to
push governments to look beyond the short term: inviting factories into the country to take advantage of low salaries and the lack of environmental protections
will help feed people today, but will do little to reduce poverty in the longer term.
Investments in local activity (including organic farming, small repair shops, and
in some cases local production to replace some imports) that is controlled by local
people can do far more in the long term.
Many job-creation-to-reduce-poverty initiatives are motivated by the desire to see
more women in formal employment.ix Of course, women need more opportunities
to earn a living; they also need more jobs that are decently paid and that
I emphasize the word formal, because most women do work when we consider the
amount of labour involved in maintaining a home and family and the importance of those
activities.
ix
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allow them to maintain their family responsibilities.x When the goal of increased
female participation in the formal labour force is not accompanied by efforts to
decrease the resulting double burden on women, especially where (as in much of
Africa) most agricultural as well as household work is already done by women,
formal jobs may represent a further burden on women rather than an empowerment. They may also mean supplying a large pool of low-paid and disempowered
workers to factory owners and others – a program to further enrich the wealthy
while doing very little to actually help the poor.
I once traveled to southern Vietnam to look at a worthwhile sounding home-based
income-generating project for women which involved raising silkworms. The
worms both produce silk and, after the silk is removed, a valuable source of
protein (yes, some people consider fried silkworms a tasty treat). The women we
talked to at first expressed their pleasure at having a steady source of income. It all
sounded great, but a little further probing revealed other stories. The women
explained that the worms have to be fed mulberry leaves every few hours, around
the clock. That means that the women have to get up throughout the night, while
still doing all their regular daytime activities, including work in the fields and
household work. (The men were pleased about the extra income, but seemed to
consider night-time feedings a womanly duty.) Many of the women complained of
exhaustion and questioned whether the extra income was worth the fatigue it
brought. In Vietnam, men usually control the money and there is a high rate of
domestic violence, both of which affect the outcome of income-generating projects
targeted at women. The women do the work but the women and their children
may not even benefit from the additional income. In this case, it is clear that the
women would have benefitted from receiving support to convince their husbands
to share in the feeding responsibilities, or to get time off during the day to
compensate for interruptions during the night, or to learn to bargain for control of
the money that they had earned. The project could have included a component to
educate men about the exhausting nature of the work, the need for men to contribute to household work, and the right of the women to keep their earnings. In any
country with a high rate of domestic violence, it is not wise to assume that women
can successfully negotiate with their husbands without outside assistance.
Nor is it just the money that counts; more money does not necessarily mean a
better livelihood. The cost of living may increase beyond the growth in additional
income. Having a job can itself generate costs, such as the need for better clothes,
transport, and childcare. As people become busier with paid work, the goods and
This will, of course, be less important when men around the world take up their share of
household work.
x
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services that used to be produced within the household (most notably food and
childcare) often have to be purchased. In the case of rural-urban migration, people
may previously have lived in their own homes and grown much of their own
food. In the city, they most likely have to pay rent and buy their food. The sprawling slums growing up around cities throughout the world indicate at least two
things: rural poverty is a serious problem and the poor do not have adequate
opportunities and support in cities. Anyone working on poverty reduction needs
to consider policies that will both support rural livelihoods and reduce the likelihood that urban migrants will have to live in subhuman conditions. Decent conditions for the rural poor and for desperate migrants to cities cannot be created by
simply handing out repayable loans or promoting more low-paid urban industry.
Many NGOs suggest that the solution to rural poverty is for farmers to grow crops
for sale, especially for export. The magic of cash crops and the wonders of technology are also questionable. Tobacco provides an extreme example given the many
other problems that it causes, but there are dangers in all forms of agricultural
monoculture. Traditional farming systems utilize a mix of crops in a small space,
as well as natural pest resistance and composting. Industrial farming relies on
chemicals rather than natural methods. The high input costs for fertilizers, insecticides, and seeds often cancel out the potential of any anticipated gains. Crop
failure in a monoculture system can spell total disaster, as can a drop in the market
price of the crop. When farmers grow several different food crops, the failure of
one is not so devastating, and even if they cannot find a market for all of their
harvest, at least their families do not go hungry.
Research on tobacco farming in Bangladesh reveals many things that typical
econometric studies of the financial return on various crops would not easily
capture. While tobacco is profitable in some years, in others, it generates a loss;
this is not a problem for wealthy landowners but it can completely wipe out a
small farmer, forcing him to sell his land. Farmers must take out loans to purchase
seeds, fertilizers, and pesticides to grow tobacco. They then take out loans to pay
for needed household items during the growing season. After they harvest, dry,
and sell the tobacco, they must use the money first to repay those loans, along with
their interest, before realizing any profit. If they plant a variety of vegetables, they
can harvest them over the course of the season rather than waiting until the end,
thus avoiding at least some of the loans. Vegetables also require far fewer (if any)
chemical inputs.8 When economists rave about the growth in agricultural income,
it helps to ask whether the farmers are really better off than they were before.

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Towards a Better Way: Pay More Attention to Income Preservation
as a Small but Important Piece of the Puzzle
“Anyone who has struggled with poverty knows how extremely expensive it is
to be poor.” – James Baldwin9
* * *
As I argue throughout this book, a number of different policy measures are
needed to reduce poverty, and those working for this goal should become
involved in advocacy campaigns to bring them about. These include protecting
the poor from exploitation, providing basic services at no cost, and strengthening
rather than combating labour unions. In addition to all the difficult policyoriented issues that desperately need to be addressed, there are also smaller-scale
actions that could make an enormous difference in the livelihood of the poor. Too
often forgotten by those working on poverty alleviation, these small actions offer
a potentially large impact. Given their ability to help hundreds or thousands of
people, such approaches are worth considering.
People can make a significant improvement in the lives of the poor by fighting
against projects and policies that will destroy existing, local jobs. Unfortunately,
these types of jobs – ones that benefit the poor rather than the wealthy – are
continually under threat for the simple reason that they do not support mainstream economic growth. Ideally, these are jobs that are good for the environment
(or at least not harmful to it) and that require few if any non-renewable resources.
This includes the kinds of jobs that, weather permitting, people can engage in
outdoors, without the cost of rent and utilities: small-scale vendors, local repair
people, and local recyclers (sometimes disparagingly referred to as garbage
pickers). As environmentalists fight for more bicycle use, there will be space for
more street-corner servicers, ready to pump tires and to fix bicycles. As environmentalists fight for less waste of limited resources, there will be a need for more
people to repair broken appliances and to recover what is valuable from those
items that are not repairable. Every low-consumption country has people engaged
in these kinds of jobs; most of them, as well as those doing household work, have
no legal or financial protection. NGOs and others concerned about the poor
should work with community groups and legal advocates to improve the legal
situation of these members of the working poor by ensuring that they are covered
by existing laws – and strengthening those laws where needed – to provide full
protection and support. A further benefit of such efforts is that it brings money to
the bottom of the pyramid and helps it circulate there, thus avoiding the gravitational pull of money upwards. The more involvement of transnational corporations in the economy, the more likely money is to drift up to the rich. A stand
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selling limeade made from local limes benefits the seller as well as the owner of the
tree; not so with the sale of Coca-Cola.xi
The neglected companion of job preservation is income preservation: helping the
poor to reduce their expenditures so that they can keep more of what they earn.
Some would argue that poverty already does that quite effectively, but it can in
fact be quite expensive to be poor. The poor cannot afford to purchase goods in
bulk; even if they could, they do not have massive freezers or abundant storage
space.xii The poor in many countries live on the outskirts of big cities; many pay a
substantial portion of their income on transportation to get themselves to two or
three different jobs. Lacking bank accounts, the poor who work for others have to
pay exorbitant fees to cash a pay cheque. Health care and education costs put a
major economic burden on the poor.10 In Haiti, the poorest country in the Americas, poor families spend up to thirty percent of their income on education, as the
school system is mostly private.11 In such cases, what is needed is not (simply)
more income but better government services. NGOs can implement projects to
increase people’s incomes, knowing that some of that money will purchase the
goods and services they no longer produce at home. They could also combine
their efforts to increase income with efforts to decrease the need for additional
expenditures.
Income preservation is a sensitive issue, and I do not mean to suggest that the poor
should accept their lot and become more efficient at scrimping and saving. Redistribution of income from the top down is essential. In addition, the lot of the poor
could be vastly improved if governments provided better basic services. If people
did not have to pay for education, health care, or transport, and if governmentprovided safety nets meant that they did not have to put money aside or use up
their savings for emergencies, the poor would get by far better. Unfortunately,
policymakers and economists alike tend to ignore such government-provided
services. Everyone concerned about poverty reduction should pressure governments to provide the services that can help the poor preserve what income they
have.
NGOs working on transport should support better policies to reduce travel costs
and time. Grassroots NGOs in low-income neighbourhoods should look into helping people set up cooperative shops that buy in bulk and sell in smaller quantities,
encouraging customers to bring in reusable containers instead of relying on proOn cold days, I would suggest switching to hot limeade.
I have seen shampoo sold in such tiny foil packages as to be laughable, but realized that
this may be all that the poor can afford.
xi
xii
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ducts pre-packaged into tiny units. NGOs should also help the poor to grow and
raise more of their own food, while working with them to make sure that they
consume at least some of what they produce.xiii Even in cities, unused land and
spaces such as rooftops and verandas provide spaces for food production. Precedents exist. Cuba faced dire poverty following the 1989 collapse of the Soviet
Bloc. The country had been growing sugarcane for export and importing most of
its food. Since it no longer had cheap oil imports supported by the Soviet Union,
Cuba could no longer rely on machinery and cheap fertilizers, which affected their
production of sugarcane. The Cuban government responded with a series of
policy initiatives. It changed city laws to grant cooperatives indefinite free right to
grow food on public land and encouraged urban gardening. The result was
383,000 urban farms on otherwise unused land, such as patios, rooftops, and
unused parking lots.12 In the same way that people keep pets in cities, Cubans
raise rabbits, chickens, and goats at their homes. The Cuban Ministry of Agriculture trained extension agents who in turn taught people permaculture, composting, and natural (chemical-free) pest control, as chemical pesticides were banned
within the city. City dwellers formed cooperatives and traded seeds and tools.
They sold their produce and livestock at local farmers’ markets. Today, urban
farms in Cuba supply at least seventy percent of all the fresh vegetables in cities
such as Havana and Villa Clara. Cubans now produces ninety percent of the fruits
and vegetables consumed in the country.13 People weathered the crisis with ample
food, and urban gardening and food production continues to be an important
national policy.14 Again, the gravitational pull of money upwards was avoided.
There are similar examples elsewhere. Detroit, Michigan, which was devastated
by the crash of the American automotive industry, has also turned to urban
gardening on vacant land. Benefits include earning more money, having more job
opportunities, gaining new skills, and improved nutrition and health, as well as
potentially $200 million in sales and around five thousand jobs.15 Each dollar
invested in the program yields about six dollars in fruit and vegetables. The multiple benefits of urban agriculture include a reduction in urban poverty, an increase
in the value of local housing stock, and greater civic participation. In the largest
homeless community in the United States, Skid Row in Los Angeles, the Urban
Farming Food Chain Project helps the local residents to grow their own
For decades, agricultural programs were divorced from nutrition programs. For example, Bolivian farmers growing the ‘super grain’ quinoa sold it all for export; they earned
some money, but their diets did not improve. More recently, NGOs are combining the two
approaches, helping farmers to both grow and consume foods that are more nutritious. See
http://www.healthbridge.ca/food_and_nutrition.html
xiii
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food. Community urban agriculture in Kitchener, Ontario (Canada) has increased
civic involvement and thus may have helped to reduce local crime. In Newark,
New Jersey, the use of Small Plot Intensive (SPIN) methods allows people to grow
food even where the soil is contaminated. It uses boxes or crates filled with healthy
soil that can be shifted around easily.16
Some of the cities in Argentina which lost their industry during the country’s
economic collapse responded by converting available uncontaminated land into
urban gardens. Results included stronger communities as well as the availability
of more food. That food, in turn, was traded partly with local currencies. In the city
of Rosario, the economic crises of the late 1990s and early 2000s pushed more than
sixty percent of families in the city into poverty, but a local urban gardening
program that involved over ten thousand families working in almost eight
hundred community gardens managed to produce enough food for forty thousand people.17 Poverty did not have to mean starvation or an unhealthy diet.
There are multiple benefits to encouraging small, local food production over
factory farms. While factory farms may enjoy a certain economy of scale, they are
not the most efficient way to produce food; one can get higher yields through
intensive mixed land use.18 Factory farms are owned by a relatively small group of
people or by remote stockholders who keep most of the profits that the cash crops
generate. Factory farms also rely on middlemen to distribute the food, much of
which is sold to processors. The price of the food that the consumer eventually
purchases includes petroleum, processing, packaging, shipping, and advertising.
When food is grown closer to the consumer, without chemical inputs, and is sold
at farmers’ markets and local stores, more of the food dollar goes to the farmer and
to small businesses and less to fuel and middlemen. Fewer processed foods mean
a healthier diet. Those concerned about public health, poverty, and about supporting small local farmers can encourage farmers’ markets, Community Supported
Agriculture, and urban food production. Everyone can shop at local markets and
at stores that carry local produce.
NGO workers should teach people how to make organic fertilizers and to collect
and plant traditional seeds rather than switching to hybrid or genetically modified
seeds and chemical fertilizers, even if the yield and supposed profit is thus
lower.xiv I have visited a project in Kathmandu that teaches people to compost
As Eric Schlosser and Michael Pollan observe, higher output can harm others producing
the same product by driving the price down. The high yields then benefit not the farmer but
the purchaser, often a multinational company that dominates the market and government
policy. Jane Jacobs (Cities and the Wealth of Nations: Principles of Economic Life (New York:
Vintage Books, 1985)) points out that the ‘green revolution’ in the southern United States
xiv
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their household food waste right inside their kitchens. They can then use the
compost for rooftop gardening and for their fields. The less one spends on inputs,
the lower the cost of failure and the greater the preservation of one’s income. This
is not to suggest that everyone should produce everything for themselves;
communities need specialists such as carpenters and shoemakers. However, we
can encourage the better use of available resources in order to improve nutrition
and raise the standard of living for the poor.
Tobacco control and a ban on lotteries can also help reduce expenditure by the
poor. Expenditures by the poor on addictive and harmful products and activities
such as tobacco, alcohol, and gambling can be sizeable, particularly when people
are living near the margins of existence. Research in Bangladesh suggests that
more than ten million malnourished children could have enough to eat if their
parents shifted most of what they spend on tobacco to food.19 Quoting research
my colleagues and I conducted in Bangladesh,
...the amount currently spent annually on bidis in Bangladesh is equivalent to the
price of 4.85 billion eggs, 291 million chickens, 1.46 million tons of rice, 2.91 million
cows or 2.33 million cycle rickshaws. If even a percentage of bidi expenditure were
shifted to these other [items], none of which are controlled by a few monopolistic
companies as is the tobacco sector, a large number of higher value, healthier and
better remunerated jobs could be created, completely offsetting any job losses in the
tobacco sector.20
Even the homeless in India spend a significant portion of their minimal income on
tobacco.21 If children ate better, their education, as well as their health, would
improve; it is easier to pay attention on a full stomach. NGOs should support
comprehensive tobacco control laws. Extensive research has shown that policy
measures are much more effective than educational ones.22
Ill health is another major contributor to poverty. While programs are needed that
focus on a single disease or issue, such as tuberculosis or HIV/AIDS or tobacco
control, NGOs should also support efforts to improve public health and to ensure
that there are sufficient government expenditures for health and education,
broadly speaking. NGOs banding together in alliances to promote better budget-
led to greatly reduced labour demands, high unemployment, and vast migrations to cities
that were incapable of absorbing so many desperate job seekers. There is debate whether
switching entirely to organic farming would lead to less or more hunger, but in the meantime, what difference does it make? We do not have to make the decision for the entire
world, and there is plenty of evidence that small plots can provide high yields without
using chemicals.
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150
ing and advocating for surtaxes on various products (tobacco, alcohol, sugarsweetened beverages, televisions, cars…) would make a significant contribution to
better health, both through decreased consumption of those items and through the
health programs that the surtax could fund.
Other possibilities for action exist. Counter claims that the poor do not contribute
to the economy. They contribute their labour (usually for a pittance); they also pay
taxes even when they do not pay income tax. In the United States, sales taxes fall
disproportionately on the poor. While the top one percent of Americans pays five
percent of their incomes in state and local taxes, the bottom half pay ten percent.23
Support ‘informal’ (or more appropriately self-employed) workers, through
purchase choices and advocacy work. Such workers are vital to the economies of
many countries, but are regularly under threat by laws and ‘development’.24
While addressing people’s current needs, it is important to think about the future,
and decide whether one has enough bravery to take on the more challenging
issues that could lead to major improvements. It is important to engage in activities that help the poor today, but even more so to put the policies in place that will
greatly reduce the need for such work in the future. Identify and support those
working to counter land grabs, which consist of large-scale land acquisitions by
high-consumption countries and corporations in low-consumption ones. According to the Oakland Institute, between 2006 and mid- 2009, some fifteen to twenty
million hectares of farmland were taken in this fashion.25 Foreign companies lease
nearly four million hectares of land in Ethiopia. If local inhabitants refuse to leave,
they can be beaten up and jailed. As one NGO official explains, “Over the next few
years, the Ethiopian government plans to forcibly move 1.5 million people off their
homelands and concentrate them into a few settlements.” The process takes land
away from local production of food grains and shifts production to export crops.
“Very little local employment is created; there is no requirement by the Ethiopian
government that companies have to hire locally. Nor is there any contractual
clause by which the money generated is to remain within the Ethiopian economy.”
A similar situation is occurring in India, wherein minorities are pushed off their
land to make way for cash crops or industrial development.26 Identifying and
addressing root problems and injustices – the structural causes of poverty – would
be an excellent place to start; so would taking on some of the issues that are
ignored by others. Simply replicating programs like microcredit may put a bandaid on poverty, but does not heal it.
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Notes
Taj Hashmi, “Nobel Peace Prize for Dr Yunus and Grameen Bank”,
http://openspace.org.in/node/379
2 Susan F. Feiner and Drucilla K. Barker, “A Critique of Microcredit,” Economica, Women
and the Global Economy (first printed in November/December 2006 issue of Dollars & Sense)
http://imow.org/economica/stories/viewStory?storyId=3693
3 Aneel Karnani, “Failure of the Libertarian Approach to Reducing Poverty,” Asian
Business & Management 9 (2010):5–21.
4 Feiner and Barker, “Critique of Microcredit.”
5 Grameen Bank, www.grameen-info.org, accessed 14 July 2014.
6 Anupom Roy, Debra Efroymson, Lori Jones, et al., “Gainfully Employed? An Inquiry
into Bidi-Dependent Livelihoods in Bangladesh,” Tobacco Control 21 no. 3 (2012): 313-317.
doi: 10.1136/tc.2011.043000. Published Online First July 20, 2011.
7 “Indian Call Staff Quit over Abuse on the Line; Firms Provide Counselling to Help Staff
Insulted by British Customers,” The Guardian, 29 May 2005.
8 Firdousi Naher, Debra Efroymson, and Saifuddin Ahmed, “Tobacco Cultivation and
Poverty in Bangladesh: Issues and Potential Future Directions,” Case study prepared for
WHO, February 2007.
9 James Baldwin, "Fifth Avenue, Uptown: a Letter from Harlem," Esquire, July 1960.
10 K Xu, DB Evans, Z Kawabata, R Zeramdini, J Klavus, and DJ Murray, “Household
Catastrophic Health Expenditure: A Multi-country Analysis,” The Lancet 362, no. 9378
(July 12 2003):111-7; WHO, “Out-of-Pocket Health Payments and Catastrophic
Expenditures,” www.who.int, accessed 15 July 2014.
11 Jeffrey Puryear and Michael Lisman, Haiti’s Educational Moment (Ottawa: The Canadian
Foundation for the Americas (FOCAL), 2010).
12 Miguel A. Altieri and Fernando R. Funes-Monzote, “The Paradox of Cuban
Agriculture,” Monthly Review, Volume 63, Issue 08, 2012.
13 Yvonne Rydin, Ana Bleahu, Michael Davies, et al., “Shaping Cities for Health:
Complexity and the Planning of Urban Environments in the 21st century,” The Lancet 379
(2 June 2012): 2079-2108.
14 Altieri and Funes-Monzote, “The Paradox of Cuban Agriculture.”
15 Rydin, Bleahu, Davies, et al., “Shaping Cities for Health.”
16 Rydin, Bleahu, Davies, et al., “Shaping Cities for Health.”
17 UN Habitat, http://www.unhabitat.org/bp/bp.list.details.aspx?bp_id=206; personal
communication with Yves Cabannes, Montreal, 23 August, 2011.
18 Vandana Shiva, Soil Not Oil: Climate Change, Peak Oil, and Food Insecurity (New Delhi and
London: Women Unlimited and Zed Books, 2009).
19 Debra Efroymson, Saifuddin Ahmed, Joy Townsend, et. al., “Hungry for Tobacco: An
Analysis of the Economic Impact of Tobacco on the Poor in Bangladesh,” Tobacco Control
10 (2001): 212-217.
1
MYTH#6: MICROCREDIT IS A MIRACLE CURE
152
Roy, Efroymson, Jones, et al. “Gainfully Employed?”
Debra Efroymson and Sian FitzGerald, eds., Tobacco and Poverty, Observations from India
and Bangladesh (Dhaka: HealthBridge (formerly PATH Canada), 2002).
22 Prabhat Jha and Frank Chaloupka, Curbing the Epidemic: Governments and the Economics
of Tobacco Control (Washington: The World Bank, 1999).
23 Joshua Holland, The Fifteen Biggest Lies About the Economy And Everything Else the Right
Doesn’t Want You to Know about Taxes, Jobs, and Corporate America (Hoboken, New Jersey:
John Wiley & Sons, Inc., 2010).
24 Ela Bhatt, “Piece-Rate Workers’ Attempts at Self-Reliance” in The Living Economy: A New
Economics in the Making, ed. Paul Ekins (London, New York: Routledge and Kegan Paul,
1986).
25 “The Great Land Grab: Rush for World’s Farmland Threatens Food Security for the
Poor.” http://www.oaklandinstitute.org/great-land-grab-rush-world%E2%80%99sfarmland-threatens-food-security-poor
26 Ashish Kothari, “How Ethiopians are Being Pushed off Their Land,” The Hindu, 19
February 2013, p. 9. See also the various non-fiction books by Arundhati Roy for the
situation in India.
20
21
MYTH #7: Extreme Inequality is Inevitable
“This troubled planet is a place of the most violent contrasts. Those who receive the
rewards are totally separated from those who shoulder the burdens. It is not a wise
leadership.” – Spock, character in the American science fiction television show Star Trek1
“In a sign that the global economy could be improving, there are now 1,011 billionaires in
the world, up from 793 last year. … So with the tide apparently turning, and money
beginning to be made once more…”
– Pól Ó Conghaile, “Billionaires’ Playgrounds”2
“The problem is, you help people out, then they expect to be treated like equals.”
– A Sri Lankan man explaining to me why conflict breaks out in different countries
Why Inequality?

The Marxist ideal of “From each according to his ability, to each according to his
need” still has great appeal; there have been, however, some difficulties in its
application. In a society in which everyone is expected to contribute what they can
and everyone receives what they need, what would be the incentive to work? Most
people do not work for the sheer joy of it, and will not want to work harder than
those around them simply because they have the ability to do so. Similarly, people
tend not to be satisfied getting simply what they need. Meanwhile, people have a
wide range of talents and abilities. If people fail to be either rewarded for their
hard work or punished for their laziness, then many people will try to get away
with doing as little as possible. Those who are willing to work harder for greater
material rewards will be discouraged from doing so if those rewards do not exist;
they will thus work less and the whole economy will suffer.
Absolute equality – wherein each person is treated exactly the same and is given
identical rewards regardless of his or her input – thus makes little sense as a goal
of a good society. There is, however, a vast and all-important difference between
minor levels of inequality – those that reward the people who work the hardest
and produce the most, or who have the rarest skills, or who have invested the most
in training, or have made the greatest contributions to society – and the levels of
inequality that are common in much of the world, where some people have
billions of dollars while their neighbours starve. Not only do unacceptable levels
of inequality exist, but too often, inequality has nothing to do with skills or hard
work and everything to do with accidents of birth. Some people never get a fair
chance in life because of their sex, ethnicity, religion, or family history, among
many other causes of discrimination. Both wealth and poverty tend to be inherited
conditions. Even where poverty is ‘earned,’ how high a price are people willing to
make others pay for poor financial management or lack of marketable skills or
MYTH#7: INEQUALITY IS INEVITABLE
154
laziness? And while there are certainly appealing economic arguments to be made
for rewarding those who contribute the most and work the hardest, it is difficult to
defend rewarding only those who, by mere chance, have lighter skin or belong to
a certain ethnic group.
* * *
My closest friend in Sri Lanka recently spent several months on Christmas Island, where
he was held with thousands of illegal would-be immigrants to Australia. On his nearly
three-week long illegal boat ride there under the hot sun, he received just two cups of
water a day. However, he felt that the risk of death that he faced during the boat ride and
the humiliation and suffering of being held on the island were a small price to pay for the
hope of a better future. The abstract idea of ‘inequality’ takes on a new meaning when the
friend with whom you have been going for walks on the beach feels the need to put
himself through misery that you can never imagine for yourself.
* * *
Not only ethnicity and religion, but the simple difference between having an XX
or an XY chromosome pair makes an enormous difference in one’s life possibilities
and what choices one has, even in the probability of surviving to adulthood. One’s
life circumstances are also largely determined by the country of one’s birth. An
American is almost five times more likely to be jailed than a Canadian.3 An American woman is seven times more likely to die in childbirth than a woman in Italy,
while a woman in Sierra Leone is a hundred times more likely to do so than a
woman in Lithuania.4
The natural resources of this planet are limited. This means that we cannot simply
address poverty by looking down at the bottom of the economic pyramid while
ignoring the vast wealth that is increasingly being hoarded at the peak. We cannot
keep trying to make the ‘pie’ bigger. Such vast inequality causes a range of problems, including the collapse of democracy. It violates the principles of humanity
and decency. If people fail to act to reduce it, then inequality will perpetuate itself,
worsening poverty and chipping away at the middle class.
The scale of the problem
Inequality within and between countries is enormous and continues to grow.

In the 1990s, workers making Nike shoes in Indonesian factories were paid as
little as fifteen cents an hour, lived in company barracks, had no unions, were
often forced to work overtime, and knew that if they went on strike, the
military might be called in to retaliate. In 1992, the $20 million that Michael
Jordan received in endorsements of Nike products was equivalent to the
entire annual payroll of the Indonesian factories that made the shoes.5 Today,
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Indonesian Nike workers continue to be underpaid and badly treated.6

In Argentina in 1970, the richest ten percent of the population earned twelve
times as much as the poorest; by 2002, they were earning forty-three times as
much.7

In 1980, the average American CEO was paid forty-two times as much as the
average worker; at the time, income tax rates for the richest were seventy
percent. Today, the pay ratio is 380 times, while the top income tax rate is just
under forty percent. Tax loopholes mean that the rich pay even less than that
amount. One hedge fund manager, Raymond Dalio, received three billion
dollars in compensation in 2011.8
Figure 3: American Income Inequality

In the 1990s, the CEO of McDonalds received about 230 times more in
compensation that what a full-time worker receiving the federal minimum
wage could earn. That gap has since increased to 580 times. While a typical
McDonalds employee struggles to survive on his or her salary,i the CEO has
access to a company aircraft for personal trips and recently purchased two
condos at the top of the Trump International Hotel in Chicago for about $3.3
million.9
The typical employee’s wages are so low that, for example, one man who has worked for
McDonalds for twenty years cannot pay the rent on his substandard housing in a men’s
welfare hotel.
i
MYTH#7: INEQUALITY IS INEVITABLE
156

In the decades between 1971 and 2001, the median income of the average
American worker did not grow at all, while the income of the top onehundredth of one percent of the population increased by almost five times.10

In 2007, the top one percent of the population in the United States controlled
almost half of the country’s total financial wealth, the top five percent had
seventy-two percent, and the top ten percent had eighty-three percent. The
bottom eighty percent owned just seven percent of total financial wealth.11

The much talked about economic growth in China has resulted in a doubling
of the income gap between city dwellers and the 800 million rural poor since
the mid-1990s.12 There are now 1.6 million rich households in China (annual
disposable income of more than $150,000), while there are 164 million poor
ones (annual disposable income of less than $5,000).13
Figure 4: Argentinean Income Inequality

In India, 410 million people (thirty-seven percent of the population) live
below the poverty line.14 At the same time, there were sixty-one billionaires in
2012. The combined net worth of the hundred richest people in India is $250
billion15 – enough to give $610 to each person who lives below the poverty
line.ii
That may not sound like much, but consider that the government’s poverty line – the
amount needed to reach the “minimum standard” – is set at fifty-six cents per day per
person in urban areas and forty-four cents per day in rural areas. An additional $610 per
year would triple the individual budget of the urban poor and almost quadruple it for the
rural poor. Ashima Goya, “India Debates Meaning of Poverty Line and Budget Deficit,”
EastAsiaForum, 5 May 2012.
ii
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BEYOND APOLOGIES

While there was only one billionaire in the United States in 1978, there were
sixty-eight in 1988, after eight years of Ronald Reagan’s presidency.16 Reagan’s
anti-poor policies also meant that conditions worsened for many at the
bottom of the pyramid: the number of people living below the federal poverty
line increased from twenty-six million in 1979 to almost thirty-three million in
1988.17

Worldwide, the number of billionaires has continued to grow, even during the
recent worldwide economic recession. The combined net worth of the world’s
1,426 billionaires in 2013 was $5.4 trillion. The billionaires were worth, on
average, $3.7 billion apiece.18

The GDP of the forty-one Heavily Indebted Poor Countries (567 million
people) is less than the combined wealth of the world’s seven wealthiest
people.19

Globally, the incomes of the top one percent have increased sixty percent in
twenty years. The growth in income for the top tenth of one percent has been
even greater.20
In the absence of regulations and measures to redistribute wealth, ‘free market’
capitalism will inevitably lead some people to grow extremely wealthy while
others remain entrenched in – or fall deeper into – poverty. In a world in which
greed is sometimes more common than empathy, some of those at the top fight
any measure that would lead to a redistribution of ‘their’ wealth. Because of this,
one sees, in the words of Indian writer Prabhu Chawla, that “… subsidies for the
poor are being gradually withdrawn to make way for increased incentives for the
rich.”21 Mainstream economists, rather than lamenting these trends, applaud them
for their upward impact on GDP; wellbeing is forgotten or ignored.
Inequality, unemployment, and poverty
Inequality, unemployment, and poverty reinforce each other in a number of ways.
Imagine that an employer wishes to pay his workers a low wage in order to generate more profits for himself. If there are plenty of better jobs available, or if unemployment benefits are sufficiently generous that people are better off taking the
benefits than working for a pittance, then workers will not accept his low wages
and he will have to offer more.iii But if a lot of people are looking for work,
Unless, of course, these jobs can be filled with immigrant labour. If the immigrants are
illegal, they cannot complain about their working conditions. But that, again, is a manifestation of inequality.
iii
MYTH#7: INEQUALITY IS INEVITABLE
158
there is a shortage of good jobs, and unemployment benefits are minimal to nonexistent or are doled out in a humiliating way, then the employer will find it easy
to attract workers in spite of the low wages. Employers thus benefit both from high
levels of unemployment and from stingy unemployment compensation.
Hint: Whatever they say to the contrary, those who benefit from unemployment and
inequality are unlikely to do anything to improve the situation.
* * *
When most wealth gravitates to the top, there is less to spread around everywhere
else. As a result, the number of well-paid jobs – even of jobs in general – declines.
Inequality also results in a greater number of existing jobs being unpleasant and of
low quality. When the ‘floor’ is removed in terms of how awful jobs can become,
and where rules about government unemployment benefits require that people
take a job to receive said benefits, then people are forced into awful conditions.
With more equality, nobody is desperate enough to take the most unpleasant jobs
(which also, too often, are the worst paid). As a result, either the conditions must
improve or the salary must go up, or both.
* * *
In the early 1980s when I was volunteering at a homeless shelter in Boston, I met a man
who had been working as a dishwasher. He said the job was miserable – unpleasant work
in an extremely hot and humid room – and only allowed him to afford the most atrocious
housing. He decided that he was better off quitting his job and living on the streets so that
he could at least have his days to himself. The example is extreme, but the lesson remains.
* * *
The reverse is also true. Historically in the United States and Europe, periods of
low inequality have been periods of low unemployment.22 When limited resources
are spread more equally, there are more possibilities for job creation in general,
and for good jobs in particular. Reducing the difference between the best and the
worst jobs will result in people staying in their jobs longer. The result will not be
an entire nation of lazy people taking government benefits, but rather better working conditions overall. Entire countries such as Denmark have prospered and
continue to prosper by promoting both employment and equality.23
Because employers can benefit from joblessness, poverty, and a powerless, desperate workforce, some employers put pressure on politicians to keep unemployment
rates high. For example, epidemiologist Dr. James Gilligan describes how American unemployment rates are consistently higher when Republicans are in power,
due to their implementation of a whole range of anti-poor policies that also,
incidentally, contribute to higher rates of violence.24 Those policies reduce unemployment benefits and weaken the organizing rights of workers. Gilligan
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BEYOND APOLOGIES
argues that inequality actually benefits conservatives because it causes resentment
and fear of the poor – and thus public support for conservative policies that, ironically, make the situation even worse.
In the United States, one significant factor in wage inequality has been the drastic
reduction in the strength and power of labour unions. America has a long history
of labour unions designed to defend the rights of workers. Employees will usually
be in a weaker position than their employers will; that gap is even greater when it
comes to unskilled workers who can easily be fired and replaced. The only way to
narrow that power gap is for workers to organize and negotiate as a group, rather
than as individuals. The results of this negotiating power are evident: in the
United States, unionized workers earn between eleven and thirty percent more
than non-unionized workers, in terms of wages and full employment packages
that include benefits.iv
Having the ability to go on strike to press for demands when the situation
becomes desperate is a critical negotiating tool.v That ability ended to a large
extent in the 1980s, at least in the United States. When air traffic controllers went
on strike, rather than support their right to do so and pressure their employers to
negotiate fairly, then-president Reagan took a strong stance against strikes. In so
doing, he eliminated one of the most important tools of unions, which have lost
significant power in the years since. When there is nobody with power left to stand
up for the beleaguered workers, it becomes that much easier to pay absurdly low
wages and deny workers decent working conditions and benefits.25 It is not
difficult to see who benefits and who loses from the deterioration of unions.
Where the poor have not seen their incomes decline, it is largely due to the fact
that they work longer hours rather than to any increase in pay.26 Of course, when
the worker loses, someone else wins. Labour unions are being busted not because
they were ineffective at helping workers but precisely because of their success.
The weakening of labour unions explains only one aspect of growing inequality in
the United States. In fact, any explanation of equality that focuses solely on
salaries is incomplete, since many multi-millionaires and billionaires did not gain
iv The wide range (eleven to thirty percent) stems partly from the decline in the power of
unions and current versus historical benefits.
v Literature can often make a point more articulately than non-fiction. The suffering of
striking workers and the fact that strikes are generally reserved as last-ditch measures
when workers have no other recourse was particularly brought home to me by Ėmile Zola’s
Germinal. At the time of writing this book, non-unionized fast food workers across the
United States were going on strike to protest their ridiculously low wages.
MYTH#7: INEQUALITY IS INEVITABLE
160
their status by receiving high salaries alone but rather by receiving large compensation packages that are comprised of low-taxed perks, or through investments
and inheritances. Compensation packages that include stock options and similar
investment products can be particularly lucrative because they are taxed at a
lower rate than salaries. The wealthiest Americans – those with incomes over $10
million – acquire almost half of that income through capital gains and dividends.
For the most part, such investments (capital gains) are taxed at only fifteen
percent, much lower than the current highest American income (salary) tax
bracket of almost forty percent. Income tax, rather than being progressive, is
regressive – some members of the middle class pay a higher percentage (up to
thirty-five percent) than do the wealthiest (only fifteen percent). Since taxes pay
for public services, decreases in tax rates have consistently made the rich – who do
not need the services – richer, and the poor and middle class – who rely on those
services – poorer.27
Inequality is, in many other ways, simply bad economics. The best way to generate
spending in an economy is to ensure that as many people as possible have money
to spend. Because their needs are so great, the poor are virtually guaranteed to
spend rather than save any money they have. The same cannot be said for the rich.
At some point, when a person has millions or billions of dollars, it becomes
difficult to spend it.vi Even when the rich do spend their money, they tend to spend
it in ways that make other rich people better off; little ever trickles down to the
poor. When money shifts to the bottom of the socio-economic pyramid, though, it
is more likely to circulate there: where the opportunity exists, low-income earners
are more likely than the rich to buy their goods from small local shops and stands
owned by others with little money. Some of that money will indeed ‘trickle up’ to
the rich when people buy items manufactured by large corporations, a process I
call the gravitational pull of money upwards. That process requires various
policies to resist, such as encouraging small, local businesses and
allowing/encouraging street vendors. But when wealth is spread more evenly
rather than collecting in the hands of the few, poorer people would have more to
spend, and most of that spending would be for non-luxury items. The poor
vi Let us not completely underestimate the creativity of the very rich in spending their
billions. Outrageous examples include a $95,000 truffle, a $3 million sports car, building a
$1 million emergency room in one’s home to avoid the misery of going to a hospital, installing an ATM in one’s kitchen, and buying one’s own personal submarine or full-sized
passenger jet. Ross A. Lincoln, “3 Insane Things Rich People Blow Their Money On,”
AlterNet, 1 Nov. 2013 and Khadeeja Safdar, “8 Insane Things Super-Rich People Spend Their
Money On (Photos),” The Huffington Post, 6 June 2012.
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would thus benefit in terms of both what they can buy and the income opportunities generated by their spending.
Other problems with inequality
The fact that inequality contributes to poverty is reason enough to address it.
However, success in reducing inequality will also bring rewards in many other
areas. Given how difficult it is to force the elite to surrender some of their money
and influence, it is helpful to keep in mind that many other aspects of life will get
better if inequality is successfully addressed.
Social cohesion declines when the rich live their lives separately from the poor,
retreating behind gates and barred windows, only frequenting expensive clubs
and restaurants, never encountering those outside their income group except as
workers and beggars. While visiting Malawi, I met a young activist who had just
had all the appliances in his outdoor bathroom stolen. His boss did not suffer from
theft because he lived behind a high gate, nor did he appear to empathize with his
colleague. The affluent can wall themselves off from would-be thieves and other
threats, but fear and high walls destroy one’s sense of community.
Social cohesion also diminishes when the life experiences of the rich and poor vary
enormously. For a society to function, different social and income groups need to
mix and interact and learn about each other. Where mixing is rare, prejudices go
unchallenged, stereotypes become entrenched, and violence becomes more
common. Where inequality is highest, so are murder rates. Mostly the poor kill
each other, as jealousy and despair over the lack of opportunities leads to more
gangs and other deadly crime – though the fear of crime affects virtually
everyone.28
Inequality erodes people’s sense of humanity. The sight of extreme poverty can be
so distressing that the only way to respond is to look away, assuming that those
living such a life are not fully human; such beliefs, in turn, reduce people’s willingness to address that poverty. Nobody should have to live in conditions of extreme
deprivation: street children subjected to violence; parents forced to leave their
young children locked in the home alone, uncared for, while they are out working
(or looking for work); the sense of inadequacy and despair that arises when, no
matter how hard people work, they can never afford even the basic necessities
while others live in palatial homes with servants to wait on them. It is impossible
to foster a sense of community, of nationhood, of joint endeavour – even of empathy and understanding – when people in the same country or locale are living
such drastically unequal lives. It also makes it difficult for nations to work together
to solve international problems such as climate change and armed conflict.
MYTH#7: INEQUALITY IS INEVITABLE
162
Inequality creates two separate tracks of services: public government services for
those who can afford nothing else, and private services for those who can. The
rich, who have the power to influence government to improve service delivery,
have no reason to do so if they are not utilising those services; this includes health,
education, transport, and policing. The rich also object to paying taxes to support
services that they do not use. They are likely to support policies – such as regressive taxation and limited social spending – that will enable their children to
become richer while making it difficult for the poor to rise out of poverty.29
Comparisons between different countries show that those with the greatest levels
of inequality (the biggest gaps between the wealthiest and poorest segments of the
population) have the worst health outcomes, including life expectancy, infant
mortality, and rates of obesity. The relationship is not simply a reflection of the fact
that poverty causes ill health. High levels of inequality have a negative effect on
the health of even the well off, mostly because more inequality means less social
cohesion, which results in stress, fear, and insecurity for everyone.30 Mainstream
economic policies may exacerbate this relationship by whittling away at the
welfare state, creating even worse situations for the poor.31
Inequality also has a destructive effect on politics. When some people have vast
wealth, they are able to exercise undue influence on the political system, either
legally through campaign donations or illegally through bribes. The more power
the rich have, the more of it they can use to keep themselves at the top of the pyramid and others at the bottom. As a result, it becomes more difficult to enact
policies and programs that would help the poor, or save the environment, or
improve human rights. The repealing or weakening of laws in various countries
that were designed to regulate banks and other financial institutions – which
ultimately led to multiple economic crashes – were brought about through political pressure from the financial industry. The wealthy can pay politicians to enact
policies that maintain or increase inequality. This occurs through a variety of
means, including campaign contributions by individuals and corporations, and by
a range of ‘gifts’ and other ‘favours’ that exact a return. The wealthy can also
control the media so that it refuses to show the negative repercussions of inequality. When inequality grows too great, it is impossible to have genuine democracy.
Extreme inequality also leads to environmental destruction. The fantastically
extravagant lifestyles of the very wealthy can be fantastically damaging: enormous climate-controlled homes, private jets, and luxuries sourced from around
the world. The very poor do far less damage to the environment than the very rich,
but they may have no other options for survival than to destroy natural resources.
Finally, despite what mainstream economists claim about inequality encouraging
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effort, high levels of inequality actually discourage effort and encourage wrongdoing. In Dhaka I cannot help but notice that in terms of physical effort, drudgery
and systematic abuse, the worst jobs, such as manually cleaning out blocked
sewers, are also the worst paid. Where is the motivation to work hard when one is
doomed to a life of poverty anyway? If hard work is to be encouraged, it should be
rewarded. If the goal is to encourage cutthroat behaviour and lack of concern
about others…well, much of the world is right on track.
How inequality is viewed in mainstream economics
While there is considerable attention being paid to the problem of inequality in
some circles, it is largely ignored – or treated as a plus – in mainstream economics,
which claims that inequality leads to motivation and prosperity and thus benefits
everyone. According to the conservative Heritage Foundation,
[t]he current welfare system also erodes the culture of work that makes the American
Dream possible. Welfare may well ‘give’ the poor many things, from cash to subsidized housing, but it also takes away a crucial ingredient of happiness: the incentive
to work, to save, to improve oneself. … In America, we no longer extol hard work the
way we used to. … Nor do we view with shame those who live off of handouts. … we
must be relentless in exposing the fallacies of the income inequality argument. If we
are, as we should be, concerned with mobility and prosperity, then income inequality
is a red herring. Furthermore, behind the charts and graphs detailing the rise in
income inequality often lies an ugly animosity against the rich. Even worse, this envy
and hatred of the ‘one percent’ masquerades as compassion for the downtrodden.
Every time someone lashes out at the top 1 percent, we ought to talk instead of the
bottom 1 percent.32
Or, from Forbes:
While it is distressing to consider the people in the bottom percentiles in the United
States, the possibility of such wealth at the top should be exciting. It should not
depress us; it should inspire us. It should not incite jealousy; it should kindle ambition. People should look at that astronomical green bar and think: What can I do to get
there? What can I make? How can I create something of worth?
The real issue that ignites anger, fear, and sadness is poverty. We need to concentrate
on that and finally forget our misguided and nihilistic inclinations to pillage the
wealthiest among us. Why should we hate them? We should want to be them. To
achieve that, we must unleash our creative forces. Let people make...more useful and
agreeable things, it’s the best way.33
Believing that social mobility really exists – that current inequality is not that
important because the truly motivated can work their way up the social and
economic ladder – both reduces empathy for the worst off and puts one’s focus in
the wrong place. Part of the mythology of the United States is the popular belief
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that anyone with sufficient talent and drive, no matter their background, can
succeed. That this can take place is demonstrated by the many individuals who
have overcome wretched circumstances and escaped poverty. That it is extremely
difficult to do so is likewise demonstrated by the consistent correlation between
race and family history on the one hand and such measures as unemployment,
income levels, incarceration, and life expectancy on the other. Wealth buys opportunity. Wealthy families can send their children to the best schools, where they not
only get a good education but also can make the contacts that lead to the accumulation of more wealth. Equally smart children from poor families cannot attend
those schools or, if they can, may not thrive in a setting in which material abundance is taken for granted and other students look down on scholarship recipients. Pretending that these issues do not exist does not make them disappear.
Figure 534 illustrates how advocates of the “American Dream” – the rich – argue
that social programs designed to foster equality threaten the very existence of
their Dream. The distinctions between this vision and one that seeks to ensure that
poverty is actually addressed, not just feared and pitied, is stark.
Figure 5: Two Conflicting Dreams?
The mainstream media plays an important role in perpetuating the positive
mythology of inequality by creating envy for the rich. Adulation of the rich and
calls to emulate or at least envy their lifestyles are far more common in the media
– and in public discourse – than are discussions of how the extent of such wealth
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negatively affects the exponentially larger numbers of poor people on the planet.
False solutions
It certainly can be unseemly to act unconcerned about the situation of those at the
bottom. Numerous solutions to poverty – and sometimes even to inequality – have
been put forward. However, one should analyze these ideas with great care. One
way to ensure that inequality remains is to put forth solutions that one knows will
be ineffective at best, or downright harmful at worst. The examples above are one
such approach: suggest that inequality provides incentives for the individual hard
work that will bring people out of poverty.
The way one diagnoses the problem of inequality will affect the nature of the
solution that is offered. If people believe that inequality results from unequal
access to technology, then programs that supply low-income schoolchildren with
laptops will make sense. Such a focus also means, though, that there would be no
need to pass laws to ensure that unions could organize and engage in activities
that would help to improve the conditions (and incomes) of low-paid workers.
Nor need anything be said about raising taxes to reduce the concentration of
wealth in the hands of the few.
In the late 1980s, in a report entitled Our Common Future, The Brundtland Commission recommended a three percent increase in worldwide per capita income to
solve global poverty and environmental problems.vii While that recommendation
may sound good on the surface, the results that it would have achieved are somewhat less impressive. Such growth would, in the first year, result in a gain of $633
on average per person living in the United States and $3.60 for one living in Ethiopia. After ten years, the added income would be $7,257 for an American and $41
for an Ethiopian.35 Certainly, $41 can buy a lot more in Ethiopia than it can in the
United States, but not 177 times more. For an equivalent example, compare the rise
in income that a billionaire would receive to someone with an income of just
$20,000. In the first year, the lower-income earner would gain an extra $600, while
the billionaire would gain $30 million. Clearly, flat percentage increases would
further increase inequality rather than reduce it. Of course, dollar figures reveal
only a piece of the puzzle. However, these figures do indicate the absurdity of
using an approach based on percentage increases.
vii Formally known as the World Commission on Environment and Development (WCED),
the Brundtland Commission pursues sustainable development in a collaborative way. For
the report, see World Commission on Environment and Development, Our Common Future
(Oxford: Oxford University Press, 1987).
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* * *
I once participated in a heated battle over whether to give lump sum or percentage-based
wage increases. The accountant with whom I argued said that giving everyone a ten
percent increase was ‘fair’ as it would apply equally across the board…except that it
meant a monthly increase at the bottom of $5 and at the top of about $65. Basic necessities cost roughly the same whether people are rich or poor (though one might think the
poor would need the money more). Increasing the incomes of the poor is logical, but if we
do the same for the rich, we will never reduce inequality.
* * *
The dimensions of the inequality gap are the real issue here. Ten-fold or thirty-fold
differences in wealth between people are a vastly different matter from hundredfold or thousand-fold differences. People surely have the right to profit from their
efforts. However, those profits should be kept within a reasonable limit and
should extend to all workers whose labour helps generate the profits, not just to
those with the power to push for higher remuneration. Any effort to decrease
poverty is doomed to failure if one ignores the grotesque scale of existing inequalities and the fact that a few have become fabulously wealthy because so many
others work so hard for so little return.viii
Plenty of people seek to ensure that inequality remains and that the most effective
measures for redistribution do not gain political acceptance. The Tea Party Movement in the United States is a highly visible example of successful political advocacy against equality that uses inflammatory arguments based on ridiculous
presumptions. For instance, the movement claims that inequality is not a problem
because the rich pay more in taxes than the poor (in terms of total dollars), and
that the difference between the two groups, at least in America, is minor: “Today
the rich have very nice cars, fly first-class, and have a vacation home or two. Meanwhile, non-rich Americans have a decent used car or two, fly coach, and go on
some vacations.”36

viii A colleague at the World Bank told me that there is a wise piece of Hindu philosophy that
he finds quite helpful: we have the right to work but not to enjoy the fruits of our labour.
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Towards a Better Way: Reducing Inequality
“Is this improvement in the circumstances of the lower ranks of the people to be regarded
as an advantage or as an inconveniency to the society? The answer seems at first sight
abundantly plain. Servants, labourers, and workmen of different kinds, make up the far
greater part of every great political society. But what improves the circumstances of the
greater part can never be regarded as an inconveniency to the whole. No society can
surely be flourishing and happy, of which the far greater part of the members are poor
and miserable. It is but equity, besides, that they who feed, clothe, and lodge the whole
body of the people, should have such a share of the produce of their own labour as to be
themselves tolerably well fed, clothed, and lodged.” – Adam Smith, The Wealth of Nations
* * *
The persistence of enormous wealth inequality is not accidental; political, financial, and monetary policies promote it. They can also reduce it. The first step is to
be absolutely clear that it is not possible to address poverty without also reducing
inequality. There is not enough wealth in the world for everyone to have a decent
life and for some to have an enormous share. It is not enough to seek to increase
wealth at the bottom; it must also decrease at the top. Activists must counter the
claim that efforts to smooth out differences in opportunity and wealth acquisition
are going to squash initiative and harm the economy. Activists must defend
policies designed to give everyone a decent chance in life, regardless of their chromosomes or their family backgrounds. Activists also need to be clear that there is
an inherent contradiction in feeling empathy for the poor while adulating the rich.
Hint: Pay attention to how the growing number of billionaires is being treated in the
media. Why are people supposed to be happy that their number keeps growing? Are
people really expected to believe that one day, if they are smart enough and work hard
enough, they may join the ranks? Or that their country would be worse off if the rich had
to pay more taxes?
* * *
What types of policies are needed?
NGOs, social activists, and others concerned about poverty need to address the
issue of inequality. It helps to focus efforts in terms of both the importance of the
goal and the likelihood of achieving it. It is not possible to accomplish these major
tasks by working alone: people can join local movements or start one of their own
to take on some of the more difficult issues.
First and foremost, many countries need better tax policies. They need international cooperation on corporate taxation, so that corporations cannot simply regi-
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ster in a low- or no-tax country to avoid paying taxes on their profits.ix Too many
individuals and corporations now legally (or otherwise) dodge their taxes. Some
companies even pay their CEOs more money than they do in taxes. For example,
in 2011, Chesapeake Energy in Oklahoma (United States) paid only $13 million in
taxes (based on sales of $11.64 billion), while paying its CEO, Aubrey McClendon,
$17.9 million in compensation. Nor is this a lone exception; according to the Institute for Policy Studies, twenty-six of the one hundred highest-paid American
CEOs had a higher salary – on average $20.4 million a year – than the amount their
companies paid in taxes. American executives can also legally avoid paying taxes
on a significant chunk of their income by having it designated as performancerelated pay; Larry Ellison, the CEO of the California-based software company
Oracle, avoided paying taxes on $76 million of his income. That $76 million is only
a small portion of his wealth: Ellison was able to purchase ninety-eight percent of
a Hawaiian island at a cost reported to have been more than $500 million.37 The
CEO of Walmart, Michael Duke, used a tax loophole to bank more than $17 million
of his compensation tax free in 2011, or about 774 times more than one of his
employees would be allowed (never mind able!) to do. The hedge fund manager
Raymond Dalio paid only fifteen percent in taxes on his $3 billion income; if he
had paid twenty-five percent – still ten percent less than the tax bracket calls for –
he would have paid an additional $450 million.38
What is true in the United States is true, to varying degrees, throughout the world:
corporations and the rich too often pay far less than their fair share of taxes,
leaving the tax burden to those who earn far less. Tax structures should be fair,
ensuring vertical equity – whereby the rich pay more than the poor – and horizontal equity – whereby those with the same income (regardless of its source) pay the
same.
Raising taxes on the wealthy would mean more government revenue to spend on
services for the poor and middle class. It would also help to make societies more
equal and governments more democratic, since reducing the wealth of the elite
would reduce their power to influence public policy. Most of the population will
benefit from better tax policies, and this message needs to be widely broadcasted.
Using a simple message would be helpful here, along the lines of ‘Tax the rich;
support the middle class and poor.’ Many groups need to be involved in spreading
that message. Clear explanations of what the message means are needed, as is
clarity about its specific goals. The Occupy movement in the United States showed
that there is abundant public support for evening out the difference between the
ix
I also discuss taxes in several of the other myths.
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‘99 percent’ and the ‘one percent,’ but it lacked a clear goal. Examining how the
Occupy movement gained such momentum – and why it collapsed – should
inform future movements; its lessons learned could be used to rebuild it with a
more specific, achievable aim in mind.
In addition to pushing for higher taxes, activists need to push for those new tax
revenues to be invested in wellbeing, for example to provide immediate financial
help for those in need to obtain food, heating, housing, and clothing; such an
approach would go a long way in preventing some of the worst aspects of
poverty.x Increased taxation revenues should also be used for longer-term investments in public health, education, income supports, and other government
services. Improved services for the poor would also help to decrease the significant inequality of opportunity that currently exists between rich and poor. Tax
revenues could also help pay for services such as water and sewerage, which
governments are privatizing because they claim they cannot afford to operate
them. Higher taxes on the rich would help, in other words, to foster kinder,
gentler, more humane societies.
There are other ways to reduce wealth at the very top and increase it at the bottom,
aside from taxing wealth. Of course, solutions need to be tailored to local contexts,
but possibilities abound. Policies can be developed to reward companies for hiring
more workers (so that employment is no longer seen as a cost to corporations), to
mandate full benefit packages for all employees (including part-time workers),
and to encourage worker-owned enterprises. A minimum wage that allows people
a decent lifestyle and actually keeps pace with increases in the cost of living would
make an enormous difference for those working in low-end jobs. One of the many
advantages of unions is that they tend to focus their efforts on raising the lowest
wages.39 Better workplace safety, anti-discrimination, and anti-harassment policies
must be enacted. Flexible leave policies would make it easier for people to balance
their home lives with their work.xi Unions should be strengthened, with all
Ensuring decent opportunities for the poor also has direct economic benefits. For instance,
today’s children who receive decent food, housing, health care and education will, as
adults, provide the labour which will pay the pensions of current adults. It thus makes
perfect sense that all society, not just the parents, should contribute to the raising of
children.
xi While perhaps not immediately identifiable as an equality issue, many countries have
passed laws to help people better balance work-family conflicts; this provides significant
benefits, especially to lower wage earners. The United States is exceptional for its low level
of government protection for workers and families, including maternity leave. Paid maternity leave is mandatory in all countries except the United States, Swaziland, Lesotho, and
x
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170
relevant legislation and policies amended to support the concept and practicality
of the organization of workers, rather than, as is too often the case, the opposite. At
the other end of the spectrum, caps could be placed on the maximum allowable
wages and benefits for the rich; the easiest way to achieve this is through high tax
rates.
Activists also need to support policies that promote wealth circulation at the
bottom of the pyramid, including policies to benefit informal vendors and other
independent, self-employed workers/businesspeople. They need to support
policies that reduce giant corporations’ control of the economy (for instance, by
banning big box stores) and that bolster small farmers, farmer markets, local cooperatives, etc.
* * *
A vivid moment in Michael Moore’s film Capitalism, A Love Story comes when he
shows the police marching towards striking automakers...not to break up the strike, but
rather to protect them from the owners. That scene is particularly compelling to me,
given the number of times I’ve seen newspaper coverage of Bangladeshi police coming in
to break up protests by underpaid and mistreated garment workers; there is never a doubt
who is at fault in these episodes. The forces of government being used to defend the
worker, not the owner, should be the norm.
* * *
One piece of advice that development banks and ‘economic experts’ regularly give
to governments with financial woes is to reduce their public sector workforce. The
assumption is that government workers do not provide beneficial (meaning
economically beneficial) services, and are thus a net drain on the national coffers.
However, while governments, like corporations, are susceptible to swollen
bureaucracy, governments also provide much-needed social services that should
be expanded, not curtailed, in times of economic difficulty. Government employment, rather than being regarded as ‘wasteful,’ could be seen as what it is: a major
contributor to growing equality and wellbeing. Governments could thereby set a
good example for the private sector, by showing that even in difficult economic
times, anti-labour policies are not necessary. Kriengsak Chareonwongsak, a Senior
Fellow at Harvard University who comes from Thailand, writes, “When Asian
countries face economic downturn, they do not fire a large number of employees
Papua New Guinea. Paid sick leave through a social insurance company, delivered either
by companies or a government system, exists in 139 countries. Paid annual leave is
mandated in ninety-six countries, and a day of rest is mandatory in ninety-eight countries.
Jody Heymann, Forgotten Families: Ending the Growing Crisis Confronting Children and Working Parents in the Global Economy (Oxford: Oxford University Press, 2006).
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and let the public sector take care of the unemployed. Instead the government and
the [private] sector cooperate to find the best solutions that will keep employees in
their jobs. This means people continue to have purchasing power and are able to
support the domestic economy…” Such practices do not necessarily come at a
high cost to companies, he points out, since “By not firing employees during a
recession, companies gain more loyalty and trust from workers and so are able to
retain skilled workers.”40 In both the private sector and the public, employment is
good for the economy.
In some cities, land prices are artificially high due to speculators holding unused
land on which they pay little or no tax. Raising taxes on unused urban land can
prevent speculation and help to ensure that it is put to productive use.xii Land
reform is also vital. Distribution to the landless poor of unused rural land that
companies hoard but do not put to productive use could make an enormous
difference in people’s livelihood. Land reform, however, while essential, is
extremely difficult from a practical point of view. Attempting it is sufficiently
contentious to get leaders ousted, permanently blacklisted, or assassinated. It
would make a world of difference to the rural poor, though. Policies are needed to
prevent corporations from situating large-scale ‘development’ projects, such as
open-pit coalmines and large industries, on land that is being used as someone’s
rice paddy. The right of the poor to use their land is critical; campaigning for more
transparency in various types of land dealings, including those involving the BWI
and other international institutions could help. Land must be given back to the
poor, not taken away from them.
Those working at the grassroots level can look at ways to organize the poor, not
simply for local projects, but to increase public input into local, regional, and
national decision-making.xiii
Traditional societies typically have mechanisms in place to spread the (local)
wealth. Those with the most money are expected to sponsor festivals, to throw big
parties, and to engage in other activities that serve to reduce jealousy and increase
a sense of community. There is wisdom in such practices: inequality breeds resentment and potentially violence, while equality can help to build community.
It should be clear by now that I consider parks as ‘productive’ use.
Someone at an international aid agency once mistakenly sent the NGO at which I work a
set of internal comments on a proposal that we had submitted for funding consideration.
One of the comments, from someone working for the aid agency in Dhaka, was that “organizing the poor could lead to violence.” Undoubtedly true, but a revealing remark for someone in the aid business!
xii
xiii
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172
Traditional mechanisms to address inequality have largely vanished in much of
the world. It is time to rebuild them and to foster a sense of responsibility for those
doing less well. One place to start is by encouraging cooperation. Teachers could
encourage students to help their classmates to pass, rather than encourage them to
compete. Supervisors could promote and reward group efforts.
* * *
I see remnants of these traditions in Asia: when somebody gets a job or receives a
scholarship to study abroad, friends will clamour for the happy recipient to treat everyone
to some food. When the Vietnamese and other Asians go on study tour as part of their
work, they save as much as possible of their per diem so that they can buy gifts for those
at home. In my experience, when Asians go out to eat, they never split the bill; instead,
the most senior or most wealthy person pays. If someone becomes unemployed, friends
will help. Typically, payback is expected, so that someone who was generous while in a
good job can expect help if she in turn loses her position.
* * *
How effective would these policies and actions be in reducing inequality?
It is useful to estimate just how much poverty could be eliminated immediately if
existing wealth were distributed far more evenly. In a sense this is difficult to
know, since poverty, as I have argued, is more than a simple lack of money. It is,
however, easy to estimate what it would cost to provide certain services. A recent
article in the renowned British medical journal The Lancet suggests that a figure of
about $116 per person in sub-Saharan Africa would reduce poverty and undernutrition. The necessary activities under this investment would be carried out in
partnership with communities and local governments by investing in programs to
improve agricultural practices, better protect the environment, support new small
businesses, and improve access to education and basic health services. The study
found that investments of that size led to a twenty-two to thirty-two percent
decline in mortality of children under age five.41 Another estimate is that it would
cost a total of $66 billion to elevate everyone on the planet out of extreme poverty;
this is equivalent to four percent of current global military spending,42 less than
fifteen percent of the accumulated wealth of the ten richest people in the world,43
and one-fourth the additional amount that the top one hundred billionaires added
to their existing wealth in 2012 ($240 billion).44 Surely, it is not too much to ask?
An estimated one-fourth of all global wealth – as much as $32 trillion – sits in
offshore, non-taxed accounts. Taxing those assets could amount to at least $189
billion in additional tax revenues.45 Millions of dollars in taxes could pay for a lot
of school lunches for the poor, among other things. According to a 2012 report on
tax loopholes in The Guardian, “The four most direct tax subsidies for excessive
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executive pay cost taxpayers an estimated $14.4 billion per year – $46 for every
American man, woman, and child. That amount could also cover the annual cost
of hiring 211,732 elementary-school teachers or creating 241,593 clean-energy
jobs.”46 It could also pay for healthcare for almost five million low-income American children.47 According to UNICEF, it would cost $250 billion ($25 billion a year
over ten years) to provide global access to low-cost sanitation facilities and safe
water – the equivalent of the net worth of about sixty-eight billionaires: that is, the
combined holdings of just sixty-eight people could be used to provide safe sanitation and water facilities for the entire world.48
Precedents for enacting policies to reduce inequality
Levels of inequality vary dramatically between countries. The countries with the
greatest levels of inequality are mainly in southern Africa and Latin America, and,
of course, the United States. Most European countries, for example, are vastly
more egalitarian than the most unequal countries. Redistributive policies are both
common and popular throughout Europe, Australia, and Canada.xiv In Scandinavian countries, high wages and equality have led to widespread prosperity.
Denmark, for instance, is a highly egalitarian, wealthy country with very low
unemployment.
The United States does not do well in an international comparison, scoring worse
than Nigeria.49 No surprise, given the taxation rates, labour policies, and social
policies that exist there. Because the United States is the most unequal of the highconsumption countries, and because it has so much influence on the rest of the
world, it is worth focusing on it for a moment.
Even the United States had its golden age of relative equality decades ago with the
redistributive policies of Franklin Delano Roosevelt’s New Deal and Lyndon
Johnson’s War on Poverty and Great Society.xv During World War II, the federal
government placed controls on consumption through rationing, coordinated
I am not aware of any utopia on earth. Canadians bicker about their social services.
African immigrants in France regularly riot due to their mistreatment. Australians are
notoriously harsh to immigrants. The British attack the poor on welfare while supporting
corporate welfare. Many countries do not extend full benefits to non-citizens. However, the
situation overall is vastly better in these countries than elsewhere.
xv American President Franklin Delano Roosevelt enacted various social policies, known as
the New Deal, in 1933 to help lift Americans out of poverty following the depression. The
policies included job creation through investment in public works. In 1964, President
Lyndon B. Johnson passed legislation on civil rights and economic opportunities.
xiv
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174
industrial output, decided how to allocate national resources, and established a
highly progressive tax system in which those with the greatest means paid the
most. In the 1950s, those in the highest tax bracket in the United States paid
ninety-one percent of their income in tax. Taxes on corporate profits were also
much higher than at present. In 1960, the top 0.01 percent of Americans paid about
seventy percent of their income in federal tax, or almost twice as much as they pay
today. At the same time, unions were far stronger than they are now. About a third
of American workers were union members in 1955; large companies had to take
into account not just those who owned stock in their companies, but the employees as well.
The result of redistributive policies (and of the Great Depression) was a significant
decrease in inequality. In 1929, there had been 20,000 millionaires and two billionaires, but by 1944 those numbers had dropped to ‘just’ 13,000 millionaires and no
billionaires. While the share of total wealth held by the top 0.5 percent of households was about thirty-two percent in 1929, it was ‘only’ nineteen percent in 1949.50
National programs such as Johnson’s War on Poverty also succeeded in steadily
reducing the percentage of the population that was living in poverty, at least until
the late 1970s.51 Meanwhile, the American economy grew faster than it did in years
when the tax rate was lower.52 As Paul Krugman notes, it was during the period of
high taxes and strong unions that median family income doubled (from 1947 to
1973) – something never seen before or since.53 Precedence does not mean that it
will be easy, but it does remove the suggestion of impossibility.
How did the golden age of relative inequality end? By the 1970s, many states had
failed to raise the monthly payments given to low-income families with dependent children sufficiently to ensure that they kept up with inflation. When Ronald
Reagan became president in 1980, those payments became insufficient nationwide. Reagan also busted the power of unions. As a result, the trend of declining
poverty came to a halt. As mentioned, taxes on the wealthiest also dropped significantly. All these changes contributed to growing inequality.
It need not continue. To the extent that a safety net still exists in the United States,
it does work. While fifteen percent of Americans had incomes below the poverty
line in 1992, that figure would have been twenty-four percent if they had not
received support from the government, including Aid for Families with Dependent Children, Social Security, and Supplemental Security Income.54 Taxes on the
rich could return to historic rates. The United States has the worst social policies of
any high-consumption country, and this needs to change. The United States needs
to learn from its own past or to learn from countries with the highest rates of
equality. People need to push the government to take proven measures to reduce
inequality, rather than pretending that economic growth will do the trick.
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Overcoming the political difficulties of promoting equality
Knowing what to do is one thing; knowing how to do it is quite another. The
difficulty is not in identifying what needs to happen, but rather in figuring out
how to make such drastic changes politically feasible. Given that money buys
power, it is difficult to know how to enact the sorts of policies that could successfully reduce inequality. Those who benefit from a highly skewed wealth distribution system are not going to agree easily to remedies that would reduce their
wealth and power. Billionaires and even the lesser millionaires enjoy their power
and prestige; those who can afford to have family foundations enjoy portraying
themselves as generous and as contributors to the solution, not the problem.
When we lobbied for higher tobacco taxes in Bangladesh, tax officials told us that
the major international cigarette companies were already making big economic
contributions through taxes. They said that higher taxes on the smaller local
companies would reduce employment for those making packaged hand-rolled
cigarettes (bidis). They even said that the government was already collecting sufficient taxes and did not need more. A tax official at the National Board of Revenue
later mentioned to me how heavily BAT had lobbied against the tobacco tax
increase. However, we persevered and after years of effort, we recently won a one
percent surtax on tobacco to fund public health programs. In some countries, it
can take years, even a decade or more, to get better tax policies; the beauty of it is
that once a good tax policy is passed it can reap rewards for many more decades
to come. In Thailand, a two percent surtax on tobacco and alcohol yields tens of
millions of dollars a year that are used to support various public health initiatives.
The years of effort made to obtain that funding now pay off in ample annual
health promotion budgets. That model is being copied, albeit slowly, by other
countries looking for creative and long-term ways to fund health-related activities.
There is hope.
There is not, however, a single recipe for success. Advocacy campaigns must
respond to local conditions and make use of local resources. Creativity, persistence, recruiting and training allies, making use of the media, mobilizing the
masses, and learning how to make the case to policymakers are all critical.
The strategy used to get policymakers on board will vary by country. In the United
States, the most important measure may be campaign finance reform, which could
help to liberate politicians from corporate control. Elsewhere, the wealthy have
other ways to bribe or influence politicians. People need to shine a spotlight on
such practices. In many countries, the population is so used to the idea that politicians serve corporations rather than the public that it is difficult to get a reaction
(or traction) on the issue. People need to find creative ways to shake public
MYTH#7: INEQUALITY IS INEVITABLE
176
apathy and convince others that change is possible and desirable. In addition to
shaming and blaming the most blatantly corporate-sponsored politicians, people
should praise those who act in the public interest, vocally, publicly, and frequently.
Attempting to lessen inequality may be the hardest thing that this book recommends. The goal, though difficult, is not impossible. One big step would be to
counter the widespread adulation of the rich; remember, great wealth is always
accompanied by great poverty. Finally, it helps to remember that not only the poor
will benefit from greater equality. As epidemiologists Richard G. Wilkinson and
Kate Pickett, authors of The Spirit Level: Why More Equal Societies Almost Always Do
Better, note,
the benefits of greater equality are not confined to the poor. While the benefits are
much bigger lower down the social ladder, even well paid middle class people live
longer and do better in societies that are more egalitarian. Their children too are less
likely to become victims of violence, to drop out of high school or become involved in
drugs.55
Most of the population will benefit from greater equality, so people need to strategize how to get everyone on board. The billionaires cannot be outspent, but they
can be out-strategized. They are already vastly outnumbered.
Notes
Cited in David C. Korten, When Corporations Rule the World, 2nd ed. (Bloomfield,
Connecticut and San Francisco: Kumarian and Berrett-Koehler, 2001).
2 Pól Ó Conghaile, “Billionaires’ Playgrounds,” Sawasdee (Thai Air in-flight magazine),
April 2010.
3 Project America, http://www.project.org/info.php?recordID=174 accessed 21 August
2012.
4 Based on maternal mortality rates from Trends in Maternal Mortality 1990-2013. WHO
2014. For example, the rate per 100,000 live births in 2013 ranges from one in Belarus, four
in Italy, six in Singapore, eleven in Lithuania, and twenty-eight in the United States to
eighty in Cuba, 270 in Timor Leste, 450 in Togo, and 1100 in Sierra Leone. Several
countries had over 1,000 deaths per 100,000 live births – one death per one hundred births
– in 1995, but report significant decreases since. I could not find an explanation for Cuba’s
relatively high maternal mortality rate versus its very low infant mortality rate and high
life expectancy. The rate in the United States has increased from eleven in 1995, placing it
at about number fifty out of 171 countries. (For rankings, see http://data.worldbank.org/
indicator/SH.STA.MMRT?order=wbapi_data_value_2010+wbapi_data_value+wbapi_data
_value-first&sort=asc); the World Bank and WHO numbers do not entirely match.
1
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BEYOND APOLOGIES
Korten, When Corporations Rule.
See, for example, “Nike’s Indonesian Workers Are Still Paid A Poverty Wage,”
TeamSweat, 31 January 2011.
http://www.teamsweat.org/2011/01/31/nikes-indonesian-workers-are-still-paid-a-povertywage/ and Zaid Jilani, “Meet The Indonesian Workers Who Make Your Nikes: 50 Cent
Hourly Wages, Beatings, And Humiliation,” ThinkProgress, 13 July 2011.
http://thinkprogress.org/economy/2011/07/13/267520/nike-workers-humiliation/
7 Naomi Klein, The Shock Doctrine: The Rise of Disaster Capitalism (New York: Picador, 2007).
8 Pratap Chatterjee, “The New Robber Barons: How Taxpayers Subsidise CEOs'
Multimillion Salaries,” The Guardian, 19 August 2012.
9 Leslie Patton, “McDonald’s $8.25 Man and $8.75 Million CEO Shows Pay Gap,”
Bloomberg News, 12 December 2012.
10 Barack Obama, The Audacity of Hope (New York: Three Rivers Press/Random House,
2006).
11 Joshua Holland, The Fifteen Biggest Lies About the Economy and Everything Else the Right
Doesn’t Want You to Know About Taxes, Jobs, and Corporate America (Hoboken, New Jersey:
John Wiley & Sons, Inc., 2010).
12 Klein, The Shock Doctrine.
13 Sanjeev Sanyal, “Who are Tomorrow’s Consumers?” The Bangkok Post, 17 August 2012.
14 The World Bank, “IDA & India,” http://www.worldbank.org/ida/country/india.html,
accessed 22 July 2014.
15 Forbes, http://www.forbes.com/india-billionaires/gallery, accessed on 25 July 2013.
16 John Russell, “In 1978, There Was One American Billionaire on the Planet, Give or
Take,” TheNewsTalkers, 9 March 2013.
17 Peter Dreier, “Reagan's Real Legacy,” The Nation, 4 February 2011.
18 Luisa Kroll and Kerry A. Dolan, “The Richest People on the Planet 2013,” Forbes, 25
March 2013.
19 Oxfam, “The world's Top 100 Economies: 53 Countries, 34 Cities and 13 Corporations,”
http://oxfamblogs.org/fp2p/the-worlds-top-100-economies-53-countries-34-cities-and-13-c
orporations/ accessed 20 July 2014.
20 Oxfam, “The Cost of Inequality: How Wealth and Income Extremes Hurt Us All,”18
January 2013.
21 Prabhu Chawla, “Mr Chidambaram, Can the Nation’s Poor Have More on Their Plates
Please?” The New Sunday Express, Kochi, 17 February 2013.
22 James K. Galbraith, The Predator State: How Conservatives Abandoned the Free Market and
Why Liberals Should Too (New York: Free Press, 2009).
23 Galbraith, The Predator State.
24 James Gilligan, Why Some Politicians Are More Dangerous Than Others (Cambridge: Polity
Press, 2011).
25 Paul Krugman, The Conscience of a Liberal (New York, London: W.W. Norton &
Company, Inc., 2009).
5
6
MYTH#7: INEQUALITY IS INEVITABLE
178
Lawrence Mishel, “Vast Majority of Wage Earners Are Working Harder, and For Not
Much More: Trends in U.S. Work Hours and Wages Over 1979–2007,” Economic Policy
Institute, 30 January 2013.
27 Paul Buchheit, “Five Facts about America’s Pathological Wealth Distribution,” Common
Dreams, 3 December 2012.
28 Kyle G. Brown, “Guns don’t Kill Americans. Inequality Kills, Because It’s the Cause of
Gun Violence,” The Globe and Mail, 31 December 2012.
29 World Bank, World Development Report 2006: Equity and Development (New York: World
Bank, 2005).
30 Inequality.org, “Inequality and Health,” http://inequality.org/inequality-health, accessed
21 July 2014.
31 David Coburn, “Income Inequality, Social Cohesion and the Health Status of
Populations: The Role of Neo-Liberalism,” Social Science & Medicine 51, no. 1 (July 2000):
135–146.
32 David Azerrad and Rea S. Hederman Jr., Defending the Dream: Why Income Inequality
Doesn’t Threaten Opportunity, The Heritage Foundation, Special Report #119,
http://www.heritage.org/research/reports/2012/09/defending-the-dream-why-income-ineq
uality-does-not-threaten-opportunity accessed 9 September 2014.
33 Maura Pennington, “To Fix Income Inequality, The Have-Nots Must Become The
Do-Somethings,” Forbes, 8 March 2013.
34 Azerrad and Hederman Jr., Defending the Dream.
35 Galbraith, The Predator State.
36 Tea Party Patriots, “Tea Party Patriots Refutes Video on Inequality,” 1 April 2013.
http://www.teapartypatriots.org/all-issues/news/tea-party-patriots-refutes-video-on-inequ
ality/
37 Sarah Anderson, Chuck Collins, Scott Klinger, and Sam Pizzigati, “Executive Excess
2012: The CEO Hands in Uncle Sam's Pocket,” Institute for Policy Studies 2012.
38 Chatterjee, “The New Robber Barons.”
39 Holland, Fifteen Biggest Lies.
40 Kriengsak Chareonwongsak, “Asian Capitalism Can Give the West a Few Lessons,”
Bangkok Post, 17 August 2012.
41 Paul M Pronyk, Maria Muniz, Ben Nemser, et al. “The Effect of an Integrated
Multisector Model for Achieving the Millennium Development Goals and Improving
Child Survival in Rural Sub-Saharan Africa: A Non-Randomised Controlled Assessment,”
The Lancet 379 (2012): 2179–88.
42 Oxfam, “How to Write Killer Facts and Graphics – What Are Your Best Examples?”
http://www.oxfamblogs.org/fp2p/?p=10593 accessed 13 October 2013.
43 The combined net worth of the top ten billionaires is about $451.5 billion, according to
the Forbes website (calculated by manually adding the amounts for the top ten). See
http://www.forbes.com/video/3272727836001/
44 Oxfam, “The Cost of Inequality.”
45 Oxfam, “The Cost of Inequality.”
26
179
BEYOND APOLOGIES
Anderson, et al., “Executive Excess 2012.”
Chatterjee, “The New Robber Barons.”
48 Unicef, “Sanitation for All,” http://www.unicef.org/wash/files/sanall.pdf accessed 13
August 2013.
49 Max Fisher, “Map: How the World’s Countries Compare on Income Inequality (The U.S.
ranks Below Nigeria),” The Washington Post, 27 September 2013.
50 Galbraith, The Predator State.
51 Randy Albelda and Nancy Folbre, The War on the Poor: A Defense Manual (New York:
The New Press, 1996).
52 Moshe Adler, Economics for the Rest of Us: Debunking the Science that Makes Life Dismal
(New York: The New Press, 2010).53 Paul Krugman, “The Twinkie Manifesto,” The New
York Times, 18 November 2012.
54 Albelda and Folbre, The War on the Poor.
55 Tom Ashbrook, “How Inequality Hurts Societies,” OnPoint, National Public Radio, 27
January 2011.
46
47
MYTH #8: Mainstream Economists Want Governments to Play
Only a Minimal Role in the Economy
“They [liberals] think that the cure to big government is to have bigger government... the
only effective cure is to reduce the scope of government – get government out of the
business.” – Milton Friedman1

Mainstream Economists Want Small Governments That Leave Businesses
Alone...Or Do They?
Mainstream economists and their conservative followers often talk about the need
to shrink government; it is, in fact, one of their primary platforms. They claim that
government policies and regulations interfere with the natural process of moneymaking that will cause total wealth to grow, thereby delivering benefits to all.
They cite absurd regulations (it is not difficult to find examples); they complain
that taxes on the wealthy and on corporations reduce incentives for hard work;
and they argue that only a ‘free market’ will lead to the most rational distribution
of resources and to the best economic results. Shrinking government, they
proclaim, will provide incentives for investment and hiring. An increased minimum wage mandated by government, on the other hand, will lead to a devastating loss of jobs while taxes on the rich will cause economic growth to slow. The key
argument of conservatives and mainstream economists is that government intervention makes everyone poorer.
A large number of conservative think tanks regularly publish anti-government
sentiments for the media to deliver to the public in an attempt to persuade the
public of the wisdom of mainstream economics. For example, Sheldon Richman of
the Future of Freedom Foundation argues that: “Bureaucrats, who necessarily
have limited knowledge and perverse incentives, regulate by threat of physical
force. In contrast, market forces operate peacefully through millions of cooperating participants, each with intimate knowledge of her own personal circumstances and looking out for her own well-being. Bureaucratic regulation is likely
to be irrelevant or (more likely) inimical to what people in the market care about.
Not so regulation by market forces.”2 Ah, what an ideal world the quote paints,
one in which caring companies and executives provide exactly what informed and
rational consumers need and desire, offered at fair prices, and manufactured by
workers paid reasonable wages, all free from obtrusive government interference.
No wonder such ideas gain a following.
Conservatives around the world use similar tactics to justify their opposition to
measures that those concerned about social justice are trying to enact. Detractors
of land reform call it a violation of property rights that will prevent long-term
investment and productivity. Factory owners, regardless of how much they themselves earn, claim that they cannot afford to raise wages or to maintain ‘ridicu-
181
BEYOND APOLOGIES
lously high’ safety standards in their factories. (After all, don’t employees bear
some responsibility for being safe?) Those who object to the nationalization of oil
or mineral companies say that governments are incapable of running them
efficiently. Conservatives and mainstream economists condemn as bad economics
whatever might benefit the poor (or the population in general); whatever benefits
the wealthy they call good economics.
Those who push for war in Iraq (or Libya or elsewhere) claim that profit never
enters their decision-making, even if they stand to make millions or billions of
dollars from weapons sales, security contracts, newly available supplies of natural
resources and markets, and reconstruction. Mainstream economists claim that
while they are in fact deeply concerned about the poor, most of the current policies
that were designed to benefit them (such as the minimum wage, more generous
income supports and social programs, protection of their rights to land, and so on)
are ill-considered, useless, and – horror of horrors – communist. These policies,
they argue, do not help the poor to escape poverty; instead, they promote laziness
and harm employment (who would be willing to work for low wages if they could
get free welfare?i). The free-market based solutions that mainstream economists
endorse, such as microcredit, on the other hand, are labelled as appropriate and
helpful.
Their arguments can indeed sound appealing. It is sometimes enjoyable – and it
can clearly resonate with one’s own experiences or sentiments – to hear laments
about stodgy bureaucrats who misuse taxpayers’ hard-earned income and who
enforce burdensome regulations. Many people complain about ‘red tape’. It can be
encouraging to hear stories about the much greater efficiency of the private sector.
Because of these arguments, conservatives of all social classes tend to defend
policies that benefit the wealthy and powerful, even if they themselves actually
stand to lose by those same policies. There is perhaps a natural tendency to identify with the rich rather than with the poor.
When mainstream economists and their followers acknowledge that the poor will sometimes take welfare instead of going to work because work does not pay enough for them to
survive, their response is not to enforce higher wages so that people can live on their
earnings. Rather, they suggest reducing benefits, so that the poor have no choice but to take
any job available, no matter how miserably paid: “…if Congress and state legislatures are
serious about reducing welfare dependence and rewarding work…states should shrink the
gap between the value of welfare and work by reducing current benefit levels and tightening eligibility requirements.” Michael D. Tanner, “Why Get off Welfare?” Los Angeles Times,
22 August 2013.
i
MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS
182
What do mainstream economists really want?
In truth, the idea that mainstream economists want small government is hogwash.
Mainstream economists only object to government intervention when its aim is to
assist the poor or to protect workers or the environment, for example by increasing the minimum wage, strengthening standards for worker safety, or preventing
environmental pollution. Not only do mainstream economists have no objection
to government involvement in the private sector when it assists companies to
wield influence and make ever-greater profits, but — despite their claims — they
actively promote such intervention. Mainstream economists want government
intervention when it provides them with well-maintained roads and a generous
supply of the natural resources that they need to manufacture their products.
They like tariffs to protect national industries while supporting treaties that
prevent their trading partners from imposing similar tariffs. They also support a
rapidly revolving door between government and the private sector that sometimes makes it difficult to distinguish between the two. Corporate lobbyists and
government officials make cozy bedfellows; the more powerful the lobby group,
the greater impact it has on government policy making. In fact, in many countries
and at many levels, corporate interests already dictate government policy. Rather
than wanting smaller governments and fewer regulations, mainstream economists
and their followers want to be the government.
* * *
Canada's ‘spy watchdog’ appointed someone who had been on the board of directors of a
petroleum company to investigate alleged spying by environmental activists who objected
to a pipeline that was being built by that same company.3 Official links to oil companies
were strong under American President George W. Bush’s administration. His family has
run oil companies since 1950. Vice President Dick Cheney was CEO of the oil company
Halliburton, which also won controversial contracts for reconstruction in Iraq. National
Security Advisor Condoleezza Rice sat on the board of the oil company Chevron.
Commerce Secretary Donald Evans was the CEO of a natural gas company. Bush’s
family also received significant financial support from the bin Laden family and other
members of Saudi Arabia’s oil-wealthy elite.4 President Obama’s administration has
strong ties with various companies, including General Electric, Ford, and Dow Chemical
that evade taxes as well as engage in other nefarious practices.5
* * *
All too often, mainstream economists have gotten their way, and the negative
results are evident in many countries: greater income inequality, reduced protections for workers and the environment, a decline in public services, and unregulated financial practices that have brought entire economies tumbling down. The
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BEYOND APOLOGIES
policies advocated by these economists have brought about, at least in the United
States, record levels of government debt.6 They have also led, in some areas, to
increased rather than reduced government interference in people’s private lives.7
Perhaps their ‘greatest’ achievement has been in the corporatization of government.
How clearly can we distinguish between the public and private sectors?
While acknowledging that corporations often exert enormous influence on
governments through their campaign contributions and lobbying, most people
naturally see corporations and government as separate entities. Corporate influence is so great, however, that it can actually be difficult to draw the line between
where one stops and the other begins. It is extremely common for former government regulators to later work for the private sector and for company employees to
spend a period working for the government agencies that are supposed to be regulating their industry. American Congressional interns often go on to become
industry lobbyists, at which time they lobby the very politicians for whom they
formerly worked. People from the corporate sector also typically fill top government posts, including that of president.
On the surface, this ‘revolving door’ makes sense. Those who have worked for a
company may be experts on how the company or industry works and thus are
seemingly suitable as regulators. If such people were truly loyal to government
while in public office, their inside knowledge of corporations could prove invaluable. Unfortunately, what too often happens is that people transition regularly
between the public and private sectors, using their time with the government to
help them learn about the very regulations that they can then assist their companies to evade, and using their government connections to help them in their fight.
It is also all too common for people to perceive government service as a way to
gain experience and influence which will help them to a generous corporate salary
in the future.ii
The process is not limited to government-corporate revolving doors. PepsiCo has hired
very senior people at the World Health Organization (WHO), including a former DirectorGeneral; they had worked on WHO’s international tobacco control treaty (the Framework
Convention on Tobacco Control). Rumour has it that the appointments are in order for
Pepsi to benefit from their experience in case the WHO decides to attempt similar regulations with soft drinks. For a list of influential health people accepting their salaries from
PepsiCo, see http://www.pepsico.com/Annual-Reports/2007/purpose-human-hw.html
ii
MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS
184
* * *
The influx of private sector actors into the government sector is an international
phenomenon. In India, for example, a study found that 128 of the 543 members of the
15th Lok Sabha (the lower house of the Indian parliament) are businessmen who bring
their business interests to bear while debating public policy.8 The oil company Shell, in a
leaked American diplomatic cable, bragged of putting its staff “into all the main ministries of the Nigerian government, giving it access to politicians’ every move in the
oil-rich Niger Delta” and thus knowing “everything that was being done in those
ministries.”9
* * *
Corporate influence is so pervasive that it is easy to take it for granted. As John
Kenneth Galbraith repeatedly observes in his writing, governments around the
world spend vast sums on the military but little on education or health. Missiles
take precedence over museums. Education in science, engineering, and accounting is deemed important, while education in art, literature, philosophy, anthropology, and history – the humanities – is not.iii The explanation lies in what large powerful corporations produce and what their needs are in terms of trained manpower.
Worse, when things go badly, people can blame it all on government, and then
argue for the need to ‘shrink’ government and increase the role of the private
sector. That ‘solution’ is akin to inviting the fox into the chicken coop since it is
difficult to keep him out. It is not possible to eliminate the links between the public
and private sectors, but it is possible and very important to liberate governments
from undue corporate influence.
* * *
A bill in the California legislature to tax sugar-sweetened beverages was defeated
following heavy lobbying by the major soft drink manufacturers. On the eve of the vote,
PepsiCo organized a reception at the legislature after which it invited a couple of key
legislators to dinner. While bills to regulate farmers’ markets moved smoothly through
the legislature, anything addressing Big Food was voted down quickly. Pure coincidence,
of course.10
* * *
In fact, this situation is so well known and familiar that it may not appear odd in the
slightest. Imagine the American government investing heavily in public housing rather
than space travel and weaponry?! Or spending a trillion dollars on a genuine ‘war against
poverty’ that involves revamping the inner cities and their schools and creating good job
opportunities for the chronically unemployed, rather than on a distant war, one purpose of
which seems to be to further enrich military corporations.
iii
185
BEYOND APOLOGIES
Subsidies help the rich but harm the poor
The same people who argue for small, weak, and ineffectual government still fully
expect their government to provide generous subsidies for corporations. In the
United States, federal budgets and deficits have grown, not shrunk, when Republicans have been in charge, despite the fact that they slashed social budgets. Ah,
but mainstream economists argue that a generous safety net discourages people
from working; given the option of living decently and enjoying leisure, people will
naturally take the easy option. Referring to American food assistance to the poor,
Robert Rector of the Heritage Foundation says, “Some people like to camouflage
this by calling it a nutrition program, but it’s really not different from cash
welfare…food stamps is quasi money.” Rector then claims that receiving food
assistance discourages work. He feels that recipients should be forced to work for
the benefits, as many are now forced to do for other welfare payments: “The food
stamp program,” says Rector “is a fossil that repeats all the errors of the war on
poverty.”11 What mainstream economists like Rector ignore is the possibility that
insufficient pay also creates a disincentive to work. Note the assumptions: in order
to be motivated to work, the rich need high pay…and the poor need poverty.
There are a few other problems with Rector’s argument. Even the most generous
safety net leaves a lot to be desired. It does not deal, for example, with the effect on
the ego of being jobless or of accepting government assistance. Nor does the
evidence indicate that people spend long periods using safety nets.iv According to
congressional testimony made by an expert on the issue, “In an ‘average’ year,
about one-half of the [welfare] caseload leaves the welfare rolls. … The majority of
families who leave the welfare system do so after a relatively short period of time
– about half leave within a year; 70 percent within two years and almost 90 percent
within five years.”12 As for the few who do remain on welfare for long periods, is
cutting their aid really the best way to solve the supposed problem of the ‘lazy
poor’? In the grand scale of things, subsidies to the rich cost taxpayers much more
than the limited assistance offered to the poor.
No such objection arises with respect to helping the affluent. Government subsidies to the wealthy take many forms. Governments fund research that leads to
new products, including pharmaceuticals, from which the companies alone profit.
They pay companies to provide services to their citizens that the government used
to provide directly. They allow companies to hire workers at untenably low
The criticism, however baseless, led to a change in the nomenclature in the United States
from Aid to Families with Dependent Children (AFDC) to Temporary Assistance to Needy
Families (TANF).
iv
MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS
186
salaries and to deny them basic benefits. They allow corporations to register
offshore and to engage in a range of other tax avoidance strategies. In 1983, ‘only’
ten percent of American company income was funnelled through offshore tax
havens as a means of avoiding taxes; that figure rose to twenty-five percent in
2009.13 Allowing companies to avoid taxes is the same as providing them with
financial assistance.
* * *
“Poor people in this country lack the shield of glib self-confidence that well-educated,
affluent citizens often use to deflect criticism of their own entitlements. Ask a group of
young professionals how many of them receive federal housing assistance. Very few will
raise their hands. Then ask how many deduct the interest they pay on their home mortgages from their income taxes. Many will get huffy at the very idea that this could be
considered public assistance. Yet this tax deduction costs the federal government more
than twice as much as is spent on low-income housing assistance and low-rent public
housing. There are no limits or restrictions on it – the deduction applies to summer
homes and beach compounds as well as full-time residences. This deduction is worth
about $5,000 a year, on average, to taxpayers making more than $200,000.”
– Nancy Folbre14
* * *
When faced with economic crisis, then-president of the United States George W.
Bush convinced government decision makers to agree to a roughly $700 billion
bailout of failing banks and businesses. Bush, a professed advocate of small
government, somehow did not object to that particular subsidy: “I'm a strong
believer in free enterprise, so my natural instinct is to oppose government intervention,” he said at the time. However, “these are not normal circumstances. The
market is not functioning properly. There has been a widespread loss of
confidence.”15 The Average Person, losing confidence in his ability to support his
family after losing his job, might wonder when he gets his generous bailout package. Bush did not see the value of bailing out small borrowers who had been
duped into taking out untenable mortgages.v Rather, he sought to give corporations the chance to make even more money with even less accountability, with
taxpayers footing the bill.
While researching this book, I came across numerous articles that refer to the mortgagees
as greedy and stupid – as if they are to be blamed more than those who pushed the
mortgages on them. It is clear that the market was functioning exactly as it was designed to
function, and that if better government regulations had been in place, the economic free-fall
would never have happened.
v
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BEYOND APOLOGIES
In 2003, taxpayers in the United States and the European Union spent (however
unknowingly and unwillingly) an estimated $400 billion dollars in subsidies to
their farmers.16 This would be fine if the government used such funds mainly to
support poor farmers and to feed the poor. Too often, though, these subsidies
simply benefitted rich agricultural companies, contributed to the blocking of
imports from low-consumption countries, and failed to benefit the poor in any
way. Subsidies to American corn farmers allow them to sell corn in other markets
at far less than the production cost, which has helped to wipe out corn farmers in
Mexico.17 Meanwhile, trade rules imposed by the WTO prevent those same countries from exporting their products to Europe and America. As journalist Nick
Mathiason, business correspondent at the Bureau of Investigative Journalism,
points out, “In effect, rich countries say to the rest of the world: you liberalise, we
subsidise. So much for free trade.”18
Hint: When you read a newspaper article about ‘wasteful government spending,’ see if it
refers to military expenditures, subsidies to corporations, and tax breaks for the rich, or to
social spending.
* * *
How does one justify such stinginess towards those who need support the most
accompanied by such generosity towards those who need it least?vi Economic
arguments meant to silence the uninitiated come into play here. Mainstream
economists claim that a healthy economy will benefit all by bringing about full
employment and prosperity. They argue that to subsidize the poor directly will
simply maintain the cycle of poverty and that it would be better and more sustainable (indeed, more generous) to build a healthy economy so that all those who are
willing to work will have a job and can thus escape poverty.
American President Ronald Reagan was by no means the first to treat the poor as
undeserving, lazy, and morally corrupt.vii But Reagan turned this practice into a
This is not entirely accurate; some companies are only able to operate at a profit due to
generous government subsidies. But it is easy (at least for those who have not received
formal training in mainstream economists) to see that the need of the poor to eat and to be
decently housed is greater than the need of the corporate CEO to make millions of dollars.
vii Is the tendency to consider the poor as immoral universal? In Bangladesh, one of the
reasons officials give for banning rickshaws is that the men who pedal them engage in
‘antisocial’ activities such as gambling and frequenting prostitutes. Even if it were true, it
would not seem quite as heinous a crime as, for instance, cheating the elderly out of their
pensions, as Enron executives did. And of course, some corporate executives also gamble
and visit prostitutes, but since they do so in sufficiently expensive ways, it is somehow
considered to be legitimate rather than antisocial.
vi
MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS
188
high art. His description of the fictional ‘welfare mother’ as the driver of a luxury
car who was cheating the system and living high on the hog touched a resonant
chord with Americans.viii He did not have to provide any supporting details;
everyone knew that she was black, probably unmarried, and had children by
multiple partners. Although Reagan’s story had no basis in reality, it afforded
people relief from any guilt that they might feel about the poor since, after all, the
poor deserved their lot, or were not as poor as they pretended to be. How pleasant
to be told that you shouldn’t have to pay high taxes or share your wealth with the
poor! How enticing to believe that you too could someday become a millionaire
(this was in the 1980s, before the Age of the Billionaire)! Reagan made it that much
easier for his followers to attack social programs while defending corporate subsidies.
This contradictory approach to the role of government in the economy comes at
high economic and social costs. Governments could use the tax dollars that they
currently fail to collect from the very rich and from tax-dodging corporations to
pay for many needed activities and services. But exorbitant costs to government
and the public are accompanied by exorbitant profits for a powerful few; it is far
cheaper for corporations to pay some bribes and some lobbyists than it is to pay
their taxes.ix It requires a truly strong democracy – one in which the interests of the
public are represented, not just those of the wealthiest corporations – to prevent
such wasteful and harmful handouts to the rich and such stinginess to the poor.
Government regulation
Another aspect of ‘small government’ that conservatives/mainstream economists
demand is less government ‘interference’ (read regulation). They claim that regulations slow the economy, interfere with the workings of the ‘free market’ system,
and curtail important and valuable freedoms. They argue that measures meant to
protect workers’ health, prevent environmental contamination, or address climate
Did she exist or did Reagan invent her? There are numerous views, naturally. According
to one (Josh Levin, “The Welfare Queen,” Slate, 19 December 2013), she did exist but only
cheated the government out of $8,000, hardly a major sum; others argue she was completely
fictional (see, for example, Paul Krugman, “Republicans and Race,” The New York Times, 19
November 2007).
ix My colleagues sometimes question why governments agree to keep taxes on tobacco low,
given how much the government loses as a result. But the individuals making the decisions
do not gain from higher tax revenues. For any government official, a bribe or contribution
from the tobacco industry is pure gain, though only a tiny fraction of the amount that the
tax cut costs the government. Thus seemingly illogical decisions are made quite rationally
on the basis of individual gains.
viii
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change will reduce the efficient workings of corporations and thus, like the minimum wage, will slow business and lead to massive unemployment and poverty.
Apparently, the world would be a better place if all those well-intentioned but
ill-informed ‘liberals,’ who want to impose safety standards and other regulations
to protect workers, consumers, and the environment, would just stop meddling in
the system. Dismantling regulations in response to corporate lobbying, however,
inflicts huge public costs: health, environmental, and even financial. It is vastly
less expensive to regulate banks than to bail them out when mismanagement
occurs; vastly better to prevent than to deal with oil spills.
Pundits are still arguing about whether George W. Bush’s bailout of the banks and
auto industry was needed to prevent a devastating crash or whether it was simply
a final, spurious gift to wealthy corporations that were suffering the consequences
of greed and utter mismanagement. Certainly, ugly details abound. For instance,
nine banks that received a total of $175 billion in bailout funds used $32.6 billion
of that money to pay executive bonuses.19 What is clear about the bailout is that the
need for it arose directly from Ronald Reagan’s mantra of ‘small government.’
That mantra led to a craze of deregulation and the repeal of laws designed to keep
the banking system and other critical parts of the economy stable. That unravelling of protective regulations led to the devastating economic crisis that justified
Bush’s bailout.20
The event would be less catastrophic if people at least learned a few lessons from
it (lessons that could have been learned from other past events, but never mind –
better late than never). One is that human greed knows no limits. Another is that,
when uncontrolled by outside forces, that greed can destroy the very system that
feeds it. Government regulation of corporations can benefit workers and the environment. It can protect public health. It can also preserve the entire economic
system from collapse. People can also learn that corporate executives will always
oppose sensible regulations, even those that could save their companies from
self-destruction.
Few people would wish to live in a world completely free of government regulation and intervention. Some regulations are indeed absurd, but others are essential. The forty-hour work week, maternity leave, and various other worker, health,
and environmental protections are all vital and – where they exist – did not come
about through the voluntary actions of corporations. In a world without government intervention, everything is permissible.x Imagine allowing chemical compaI always smile when I read a food label that mentions ‘permitted flavourings’ – well, I
should certainly hope they aren’t adding forbidden ones!
x
MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS
190
nies to sell any product that they wish, with the consumer being ‘adequately’
informed by a skull and crossbones on the label.
Stronger regulations that prevent pollution mean more freedom to swim and to
fish in local streams and rivers. Regulations that prohibit the promotion of
cigarettes mean more freedom from addiction. The enforcement of manufacturing
standards means freedom from anxiety over the safety of our medications and our
children’s toys. Regulations on food additives mean freedom from anxiety about
what we eat. Less freedom for corporations means more freedom for individuals.
However unpalatable regulations may sound in the abstract, they appear more
reasonable when one looks at specific cases.
Meanwhile, corporations that claim to oppose regulation on principle do not
actually argue against all regulations and policies.xi They like regulations that
keep small companies out of their business, they like tariffs, and they especially
like government contracts.
* * *
The corporate take on improving worker safety. How would industry like to deal
with worker safety? They propose a voluntary model. An industry-supported foundation
to improve worker safety lists the following initiatives:
“Building bridges between members of the community – parents, young workers,
educators, employers, employees, and community leaders.
“Transferring knowledge between participants using a highly successfully face-to-face
model.
“Inspiring courage in young workers to stand up for their personal safety and rights.
“Influencing change within corporations to make health and safety a priority.”
The proposals are extremely vague. They do not mention periodic inspection of the
workplace by workers to locate and address safety problems. Their suggestion that young
workers should find the courage to stand up for their rights, rather than that corporations
should be forced to recognize those rights, is a rather stunning shift in responsibility
away from the powerful bosses and corporations to the vulnerable worker. The
foundation’s corporate partners include Shell and ExxonMobil.21
* * *
Who pushes deregulation?
The public often benefits from regulations; corporations and mainstream econoFor example, both the 2010 African hunger plan and the 2012 Farm Bill in the United
States provided generous policy and regulatory benefits to the agro-giant Monsanto. See
Josh Sager, “Monsanto Controls Both the White House and the US Congress,”
http://www.globalresearch.ca/monsanto-controls-both-the-white-house-and-the-uscongress/5336422
xi
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mists generally oppose them (unless, of course, they stand to benefit from them).
Speaking at the Eighth Global Conference on Health Promotion in Helsinki,
Finland, Dr. Margaret Chan, Director-General of the World Health Organization
(WHO) voiced concern about two recent and related trends. “The first relates to
trade agreements. Governments introducing measures to protect the health of
their citizens are being taken to court, and challenged in litigation. This is dangerous,” she stated. “The second is efforts by industry to shape the public health
policies and strategies that affect their products. When industry is involved in
policy-making, rest assured that the most effective control measures will be downplayed or left out entirely. This, too, is well documented, and dangerous.”22
Corporatocracy is not the same thing as small government; it is large government
controlled in large part by the corporate sector and operating on its behalf. There
is little difference between concentrating power in a centralized government unresponsive to the public, as under a dictatorship, and concentrating power in a
government controlled by similarly unresponsive corporations.23 A democracy
wherein corporations wield far more power than citizens is democratic in name
only. Unfortunately, far too often that is the only kind of democracy that exists.
According to MIT professor and public intellectual Noam Chomsky, “A democracy is a system in which you are free to do whatever you like as long as you do
what we [corporate government] tell you.”24
* * *
With friends like these, who needs enemies? When a government puts forth a set of
policies as the best ones to reduce poverty that just happens to be the exact mix most
favoured by giant corporations and the wealthiest elites, one has full right (and indeed
obligation) to step back and question that claim. When corporate executives object to
policies that would benefit the environment or slow its destruction, but would also harm
the profits of giant corporations, it is, likewise, reasonable to question their claim that the
policy would result in job losses. That scepticism should be reinforced when you notice
that some of those same people who talk about job loss actively work to reduce employment in their own countries. For instance Mitt Romney, while running for president in
the United States, talked incessantly about the need for local job creation. Romney also
happens to be the founder of Bain Capital, which holds fifty-one percent of the shares of a
company called Sensata. Sensata used to manufacture auto parts in Freeport, Illinois, but
shut down in order to take advantage of lower labour costs and laxer laws in China.
Sensata/Bain banks much of its profits in the Cayman Islands, in order to avoid paying
American taxes.25
* * *
Large corporations are not alone in seeking to undo helpful regulations. They
have strong allies in international institutions. It may be difficult for a reader in
North America or Western Europe to imagine the extent of influence that the
MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS
192
World Bank, World Trade Organization (WTO), or the International Monetary
Fund (IMF) have on the decisions made by policymakers in low-consumption
countries. Lacking the resources to declare financial and political independence,
the leaders of those countries seek aid and trade concessions from the richer countries and, in return, are expected to bend to their rules.
All countries trade with others; most or all countries run up deficits at some point.
But such common practices have very different results in rich and powerful
countries than they do in poorer and weaker ones.xii When rich countries have a
trade deficit, they can allow that deficit to keep growing. When poor countries
have deficits that they can no longer service, they must borrow the money from
the World Bank or another international agency, which in turn makes the money
available only with a large set of conditions.xiii
In low-consumption countries, people are told that the government must comply
with WTO regulations in ways ranging from the trivial to the serious: from
stopping the sale of cheap CDs in Phnom Penh to preventing Thailand from enacting stronger controls on foreign cigarettes than it has on domestic ones. The World
Bank congratulates a government agency for shedding employees. It ‘helps’
governments to draft laws designed to reduce regulation.xiv It pushes governments to privatize large swathes of the public sector. It applies pressure on governments to pass a range of policies, including deregulation of the banking and other
sectors, which seem aimed more at enriching international corporations than at
improving local living conditions.
Hint: It is wise to be suspicious when extremely wealthy people say that they object to
tax increases and government regulations because they will harm the poor or middle
classes.
* * *
Don’t regulations reduce employment?
If regulations are so cumbersome that they cause companies to go out of business,
then they could result in a loss of jobs. But when companies pay CEOs enormous
salaries and benefits packages, then claim that simple measures meant
In the case of the United States, the independence is by no means total. With Saudi Arabia
and China owning so many of its assets, the American government must make some
concessions. This might help to explain some of the oddities of how the country dealt with
9/11, since it did not wish to upset its Saudi banker friends.
xiii I discuss this in more detail in the myth about the BWI.
xiv Not always; I reviewed a draft traffic law prepared under a World Bank project. The law
was overly-prescriptive and draconian, and aimed at making it nearly a crime to walk or
ride a bicycle.
xii
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to help their employees work in safer environments would bankrupt them, it is
hard to take them seriously. In many cases, simple and inexpensive measures such
as unblocking or unlocking emergency exits are sufficient to prevent injuries and
deaths. A recent American study finds that Occupational Safety & Health Administration (OSHA) inspections reduce workplace injuries and worker compensation
costs, so they can actually save companies money: “OSHA doesn’t kill jobs; it helps
prevent jobs from killing workers,” says Dr. David Michaels, Assistant Secretary
of Labor for Occupational Safety and Health in the United States.26 Injuries mean
lost production; fewer injuries should thus benefit production. As David Levine,
Professor of Business Administration at the University of California, Berkeley and
co-author of the study, explained in congressional testimony:
These inspections protect workers’ health and safety. The randomly inspected firms
experienced nine percent fewer injuries and had 26 percent lower workers’ compensation costs than the control group of similar firms. Workplace inspections cause no
discernible damage to employers' ability to stay in business and no reductions in sales
or credit ratings, according to our research. Nor did we identify any effects of workplace inspections on employment or wages. These inspections save employers billions
of dollars a year, and a figure that only grows when we include injured workers’ lost
earnings.27
Stronger labour protections could cause some industries to shift their operations
to places with lower worker protection standards. Shifting operations for this
reason – which essentially amounts to protecting executive salaries and bonuses at
the expense of worker’s health and safety – is morally wrong; it should also be
illegal. This is why international standards are needed so that all workers are
oprotected and companies no longer have the option of shifting their manufacturing base to places sufficiently desperate or corrupt to sacrifice health and the environment for jobs. Short of that, activists need to make noise about dangerous
working conditions. They also need to be vocal about the benefits of other regulations to protect workers, public health, and the environment.

Towards a Better Way: Finding the Right Role for Government
“Deregulation and competition when consumers have no real power of choice will always
lead to the abuse of power. It is a pure illusion to expect natural monopolies to transform
into perfect competitors; calling something a ‘market’ does not a competitive market
make.” – James K. Galbraith28
“…governments need to play a developmental role, with implementation of integrated
economic and social policies designed to support inclusive output and employment
growth as well as to reduce inequality and promote justice in society.”
– UNDP, Rethinking Poverty29
MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS
194
* * *
It makes little sense to argue whether ‘small’ or ‘big’ government is better; size is
relative. A more useful issue is the appropriate role of government in regulating
industry, promoting equality, and ensuring the protection of the poor, vulnerable,
and the environment from corporate harm.
Subsidies
Some government subsidies to the private sector are inevitable. Factories, offices,
and laboratories all benefit from the infrastructure that governments provide to
their citizens. While governments charge users for water, electricity, trash collection, and other services, it is not possible or practical for governments to charge
companies for every advantage they receive. After all, many of those advantages
are indirect, involving not just the manufacture of products but their use and
disposal. This includes roads, police protection, and general infrastructure that
allow society to function. But the inability to come up with a precise system of
charging corporations for the advantages they receive does not mean that they
should be allowed to evade payment entirely. Corporate tax is an important way
to help ensure that businesses pay for some of the benefits that they receive. Those
concerned about social justice and alleviating poverty need to inform themselves
and the public about the ways in which corporations avoid paying their taxes and
to campaign to end those practices.
In addition to tax avoidance and tax holidays are other subsidies, such as electricity and water provided at reduced cost. Concerned people need to learn about
those subsidies and inform others, in order to persuade politicians to limit or
eliminate these subsidies and use the savings for services that benefit the poor. It
would be easier to persuade people that corporations should pay sufficient taxes
to begin to compensate for what they receive if the people had more information
about the nature and extent of such subsidies. Identifying and publicizing some of
the more absurd and damaging ones would be a critical step towards ending
them.
Safety nets
Better wages and a comprehensive safety net would not only benefit the recipients, but also the economy overall. Using higher taxes on the rich to pay for the
safety net makes a direct contribution to reducing inequality. During recessions or
other economic slowdowns, people are reluctant to make purchases. Either they
do not have enough money, or they are afraid to spend what little they have, or
they anticipate future price declines. As a result, businesses produce less. The
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process builds on itself, and things continue to worsen. Admittedly, this is a
simplistic picture of a complicated process, but it is nevertheless true that one way
to break the self-reinforcing cycle is to introduce more money into the system and
put it into the hands of those who are most likely to pass it on quickly: those with
the fewest material resources and the greatest needs. Welfare payments, unemployment insurance, and a higher minimum wage all work to stimulate spending
and thus prevent slowdowns and crashes. Such payments, as late British economist Richard Douthwaite observed, have “ensured that, whenever the rate of
joblessness has increased, larger amounts of money have automatically been
transferred to people who spent all of it immediately. This is a very effective way
of compensating for the loss of spending power.”30 As the economy improves,
more and better jobs become available, and fewer people will require government
assistance.
Regulations
One reason why governments are essential is that they give the powerless some
protection from the powerful. A similar situation exists when individuals or small
groups of people want to protect themselves and their environment from the
actions of large corporations. It is unreasonable to expect that individuals can
prevent companies from polluting rivers or ensure food safety standards or basic
worker protections. The public needs government to act on its behalf.
It is not hard to see that an entire absence of government regulation would mean
chaos, for not only consumers but also corporations. So of course government
should regulate the private sector. Who else but government has the power and
authority to protect the population from corporate lies, half-truths, and terribly
persuasive advertising? Who else but government stands a chance at limiting
environmental pollution from business activities and ensuring (with at least some
success) a safe food supply?
True, some regulations appear ridiculous. For example, the European Union has
banned the sale of eggs by the dozen, overly curved cucumbers, the blowing up of
balloons by small children without adult supervision, and eating your pet horse.31
But there is a flip side to at least some of them. As one commentator points out,
At first, the regulations seem ludicrous, but another look shows them to actually be
quite sensible, whether it is norms for truckers' seats (which has to do with ensuring
safety), regulating the trade in bull semen (in this case, exchanges were forbidden in
order to reduce the chance of livestock epidemics), or issuing passports for dogs and
cats (which makes it easier to take the quadrupeds along on holidays). Standards
and norms make life easier, and they are to be thanked even for banal, everyday
things such as that letter stationery fits into an envelope, a chair fits under a table,
MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS
196
and a credit card fits into a wallet. They ensure that consumers can be confident that
their purchases meet certain conditions. They also help to reduce production costs.32
Where regulations are lacking, people suffer. Workers in unregulated meat
processing plants must do their job so quickly to meet production quotas that
serious injuries – not to mention contamination – are almost guaranteed. Garment
factories lock workers in during the day to prevent theft, leaving workers to die
when there is a fire. The ship breaking industry in Bangladesh, wherein workers
attempt to salvage what they can from submerged ships, is unregulated. It is also
famous for exacting a high death toll among its employees.33 In some factories,
workers are fined the equivalent of three days’ pay for each day they miss and lose
their jobs if they arrive just slightly late.34 That a company is in a position to exploit
its workers is insufficient justification for allowing such exploitation. Surely in
these situations more regulations governing workplace safety and workers’ rights
would be a good thing.
What is true of industry applies equally well to other sectors. Deregulation of the
banking sector has repeatedly led to economic chaos. There are very good reasons
why governments should try to control the flow of money in, and more particularly out of, their countries. It is difficult to maintain a stable economy when investors can inject enormous sums quickly, and just as quickly – within days or even
hours – pull that money back out. When the International Monetary Fund successfully convinced many Southeast Asian countries to remove many of their rules
governing the flow of funds, the result was an economic crash that led to major
devastation in several countries in the 1990s. Deregulation of the banking and
other sectors in the United States in the 1980s contributed to the crashes years later.
Many people lost their jobs and homes. A system that rewards short-term gain no
matter what the consequences and that fails to hold gamblers responsible for the
results of their actions will inevitably cause problems if sufficient controls are not
in place. “When the masters of the universe who control decision making on Wall
Street are confronted with enormous short-term personal rewards and minimal
long-term downside risk, then disaster awaits,” says Bryne Purchase, former Chief
Economist and former Deputy Minister of Finance and of Revenue in the province
of Ontario, Canada.35 Regulation, when done well, protects not only individuals
but also the financial sector itself.
Finally, if government should not interfere in the private sector, then we should
also challenge private sector interference in government: the revolving door
between government and corporate jobs, all the lobbyists, the corporate officials
who run for public office, and so on.
There are loudvoices speaking out against government regulations and control.
Others must respond with even stronger arguments in favour of a vigorous
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public sector with active civil society involvement that will complement and
constrain industry for the benefit of (virtually) all. Where regulations are absurd,
governments should certainly discard or improve them. But it is unwise to suggest
that simply reducing regulations will lead to a better situation. Just as privatizing
various government services is no solution to existing problems,xv so throwing out
the regulatory system in the hopes that the marketplace will provide something
better is an exceedingly dangerous idea.
When people talk about the harms of regulation, it helps to turn the issue on its
head and ask who or what will be harmed if governments fail to regulate industry.
There are at least four areas that merit intervention and regulation: 1) protection of
the planet to avoid environmental destruction; 2) protection of vulnerable workers; 3) protection of consumers from defective, dangerous, or damaging goods and
services; and 4) protection of the economic system from self-destructive
tendencies.36
As NGOs and as individuals, we need to campaign for strong and well-enforced
regulations that reduce the damage that industry can otherwise cause to the environment and that ensure that industry pays for its clean up. We need to work
towards regulations that ensure a living wage and safe and humane working
conditions. We should demand regulations that protect consumers and speak out
for regulations that can protect the economic system from predatory harm. We
should counter arguments that government regulation of industry is an unnecessary and damaging cost, and show how instead regulation is a vital form of
protection that makes wellbeing a possibility.
* * *
How would our friend Prakash feel about government regulations? Certainly if his
children did decide to go to work in the city, he would want to know that strong regulations regarding job safety existed. If he lived in a city and had to buy rather than grow his
food, he would also appreciate strong regulations that limit the use of agricultural
chemicals and other additives in the food supply. And if his government invested more on
the poor and less on propping up businessmen, then the wealthy man who wished to help
him might no longer feel any need, or be in as much of a position, to do so.
* * *
Rejecting corporate doublespeak
The arguments about shrinking government so that corporations can contribute to
prosperity sound good. It seems far more empowering to provide the overall
xv
See the Myth on Privatization for more discussion of this issue.
MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS
198
conditions that will allow the poor to prosper than to keep giving them handouts
Selfish considerations aside, it is no wonder that some would favour such an
approach. Unfortunately, experience has proven repeatedly that this way does not
work. It suggests that in a thriving economy, everyone benefits, despite more than
ample evidence of growing inequality. It values capital far more than labour, and
ignores, in the words of Bryne Purchase, “the roles randomness and chance play
in individual achievement.”37
Those concerned about these issues need to learn to look beyond the attractive
front that giant corporations create for themselves and to understand what corporations are really doing to their workers, to public health, and to the environment.
Although it is neither quick nor easy, it is possible to strengthen governments to
curtail corporate power. Years long, even decades long, struggles in the past have
yielded victory at reining in the tobacco industry, manufacturers of infant
formula, and, in some countries anyway, gun manufacturers. I could describe my
own work over the last several years in tobacco control and liveable cities as trying
to lessen corporate power and increase the power of people. The work involves
pushing politicians to make decisions that are good for public health and the environment, even if giant corporations express strong objections. It means promoting
policies that help the poor, even if big companies would like to see something
different happen. And, with a combination of hard work, long-term campaigns,
smart strategizing, and the recruitment of allies, we have shown that success is
possible.
A vibrant civil society
Reclaiming a strong and sensible role for government and ensuring that governments meet their commitments to the population overall (not just the wealthy) will
not succeed without the genuine involvement of the public. Hugo Chávez, former
President of Venezuela, stated that he believed not in representative but rather in
participatory democracy.38 This is not easy to achieve, but various ways do exist to
increase the role of the public in decision-making and thus the ability of the
general population to oversee the activities of otherwise unaccountable governments and corporations.
A genuinely free and balanced press would help; this is possible through the Internet. Activists need to continue making use of the Internet to communicate ideas.
Activists also need to remind others of the ways in which mainstream media too
often misleads people into supporting the status quo.xvi Representatives of unions,
environmental groups, consumer groups, and so on must demand that they be
xvi
See the Mass Media Myth for more on this topic.
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included in government committees in sufficient numbers to have some influence
on what happens. It is easier to influence what happens locally than at the national
level, and small successes grow into broader efforts and positive change.
The first step in convincing governments to pass needed policies is information.
Activists must explain the importance of a policy. They may need to draft model
legislation to show exactly what it should contain. (Big business already does this
for government, and politicians under time pressures may accept what is given
rather than draft their own version.) But information is usually not enough. A
multi-pronged strategy will work better to pressure government to do the right
thing. Research showing that the public supports the desired policy helps.
Evidence of cost savings is also important. Media attention is vital. Several groups
pushing the same policy will make a bigger impression than one group acting
alone. Activists need to communicate directly with government officials, through
letters and meetings. Finally, the passage of a policy is not the end of the process;
work is needed to ensure proper implementation as well, using many of the same
tools that proved successful for the policy’s passage.
None of this is impossible or hopelessly utopian. Town meetings, participatory
budgeting, and public input into government plans are occurring in different
venues around the world. The sensation of powerlessness leads to apathy; when
people see that they can have a positive influence, they are more likely to become
involved in civic affairs. Of course not all public involvement will lead to
improved results. Various selfish interest groups will speak loudly on behalf of
their members, often to the detriment of the public good. However, vibrant
communities – communities that get involved in how they are governed – can
wield significant power; that power is needed to ensure that government, big or
small, acts in the interests of its population, including low-paid workers and
others in poverty. We need neither smaller nor bigger government, but government that acts in the service of the public and the environment.
MYTH#8: ECONOMISTS WANT SMALL GOVERNMENTS
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Notes
https://www.youtube.com/watch?v=R_T0WF-uCWg
Sheldon Richman, “The Free Market Doesn’t Need Government Regulation, Bureaucrats
Regulate by Threat of Physical Force while the Market Operates Peacefully through
Millions of Cooperating Participants,” Future of Freedom Foundation, 5 August 2012.
3 Jim Bronskill, “Yves Fortier's Oil Patch Ties Prompt Civil Liberties Complaint,” CBC
News, 28 September 2014.
http://www.cbc.ca/news/politics/yves-fortier-s-oil-patch-ties-prompt-civil-liberties-compla
int-1.2780666
4 Damien Cave, “The United States of Oil,” Salon, 20 November 20 2001.
5 Zach Carter and Jordan Howard, “Obama's Close Ties To CEOs Whose Firms Dodge
Taxes,” Huffington Post, 1 September 2011.
6 Steve Clemons, “GOP Presidents Have Been the Worst Contributors to the Federal
Debt,” The Atlantic, 27 October 2012.
7 David Morris, “The Huge Difference between Republicans and Democrats,” On the
Commons, 18 June 2013.
8 Samanwaya Rautray and Urmi Goswami, “Conflict of Interest Rampant in India’s
Corporate Sector, Politics & Financial Markets,” The Times of India, 9 June 2013.
http://articles.economictimes.indiatimes.com/2013-06-09/news/39834855_1_most-mps-jaira
m-ramesh-serious-conflict
9 David Smith, “WikiLeaks Cables: Shell's Grip on Nigerian State Revealed,” The Guardian,
8 December 2010.
10 Laurel Rosenhall, “Big Business Wins Capitol Food Fights,” The Sacramento Bee, 17
August 2014.
11 Jason DeParle and Robert Gebeloff, “Food Stamp Use Soars, and Stigma Fades,” The
New York Times, 28 November 2009.
12 LaDonna Pavetti, “Time on Welfare and Welfare Dependency, Testimony before the
House Ways and Means Committee, Subcommittee on Human Resources,” Urban
Institute, 23 May 1996.
13 Joshua Holland, The Fifteen Biggest Lies About the Economy and Everything Else the Right
Doesn’t Want You to Know About Taxes, Jobs, and Corporate America (Hoboken, New Jersey:
John Wiley & Sons, Inc., 2010).
14 Nancy Folbre, “Eliminating Economic Penalties on Caregivers,” in Jody Heymann and
Christopher Beem, eds., Unfinished Work: Building Equality and Democracy in an Era of
Working Families (New York: New Press/ W. W. Norton & Co., 2005).
15 CNN, “Bush: Bailout Plan Necessary to Deal with Crisis,” 25 September 2008.
16 Nick Mathiason, “Subsidies Sow Seeds of Ruin,” The Observer, 7 September 2003.
17 Elizabeth Becker, “U.S. Corn Subsidies Said to Damage Mexico,” The New York Times, 27
August 2003.
18 Mathiason, “Subsidies Sow Seeds of Ruin.”
19 Karen Freifeld, “Banks Paid $32.6 Billion in Bonuses amid U.S. Bailout (Update4)”,
Bloomberg News, 30 July 2009.
20 Paul Krugman, “Reagan Did It,” The New York Times, 31 May 2009.
1
2
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MySafeWork, “Our Story,” http://www.mysafework.com/our-story/
“Global Efforts to Promote Health Face Serious Challenges from ‘Big Business’ – UN
official,” United Nations News Centre, 10 June 2013.
23 For a book-length discussion on this topic, see David C. Korten, When Corporations Rule
the World, 2nd ed. (Bloomfield, Connecticut and San Francisco: Kumarian Press and
Berrett-Koehler Publishers, 2001).
24 Noam Chomsky, Imperial Ambitions: Conversations with Noam Chomsky on the Post-9/11
World (London: Penguin Books, 2006).
25 Institute for Global Labour and Human Rights, “Bain Capital: Pitting American Workers
Against Workers in China Earning Just 99 Cents an Hour,” October 2012.
26 Dr. David Michaels, “OSHA Saves Lives and Jobs.” (Work in Progress), The Official Blog
of the U.S. Department of Labor 21 May 2012.
http://social.dol.gov/blog/osha-saves-lives-and-jobs
27 David I. Levine, “Randomized Government Safety Inspections Reduce Worker Injuries
with No Detectable Job Loss,” Testimony Prepared for the House of Representatives
Subcommittee on Workforce Protections, Hearing on “Promoting Safe Workplaces
through Voluntary Protection Programs,” 28 June 2012.
28 James K. Galbraith, The Predator State: How Conservatives Abandoned the Free Market and
Why Liberals Should Too (New York: Free Press, 2009).
29 Rethinking Poverty, Report on the World Social Situation 2010 (New York: UNDP
Department of Economic and Social Affairs, 2009).
30 Richard Douthwaite, The Ecology of Money, Schumacher Briefing No. 4 (Devon: Green
Books, reprinted 2010).
31 Christopher Leake, “EU to Ban Selling Eggs by the Dozen: Shopkeepers' Fury as They
are Told All Food Must be Weighed and Sold by the Kilo,” Daily Mail, 27 June 2010 and
http://www.huffingtonpost.co.uk/2011/11/25/top-5-crazy-eu-demands_n_1112685.html
32 Susanne Geiger, The Strange Curvature of the Cucumber, The German Times, January
2007.
33 See, for instance, http://www.shipbreakingbd.info/
34 Jody Heymann, Forgotten Families, Ending the Growing Crisis Confronting Children and
Working Parents in the Global Economy (Oxford: Oxford University Press, 2006).
35 Bryne Purchase, “Mortal Hazard: Why Catastrophic Events like the Sub-Prime
Mortgage Crisis and Climate Change are Inevitable,” The Walrus, April 2013.
36 John Kenneth Galbraith, The Good Society, The Humane Agenda (New York: Houghton
Mifflin Company, 1996).
37 Purchase, “Mortal Hazard.”
38 Hugo Chávez and Aleida Guevara, Chávez, Venezuela and the New Latin America, An
Interview with Hugo Chávez by Aleida Guevara (New York: Ocean Press, 2005).
21
22
MYTH #9: Whatever Governments Do, the Private Sector Can Do Better
“From the results, one can easily see that the whole point of privatization is neither
economic efficiency nor improved services to the consumer but simply to transfer wealth
from the public purse – which could redistribute it to even out social inequalities – to
private hands.” – Susan George1

Privatizing the Public Purse: Efficiency and Effectiveness or Just More Inequality?
Conduct a quick internet search on the term privatization, and a range of sectors
appear: prisons, war, water, electricity, transport, pensions, health…the list goes
on. In country after country, whether due to pressure from the International Monetary Fund and World Bank, to financial shortfalls, or to political ideology, governments are privatizing basic services and industries. While it is sometimes sensible
for governments to contract private companies to deliver services, that is a far cry
from outright privatization. In cases in which the government holds the purse
strings and sets the terms of the contract, the government can actively monitor
whether the company performs its limited activities properly. Under privatization, the government hands over the entire operation to a private company, which
is then given the power to decide how to carry out the activity. There is a critical
difference between a government hiring a private firm to lay water pipes and
handing over the entire water service for the company to design and run, with no
input or oversight by the government or recourse for the customer.
Privatization can sound appealing. Imagine a popularity contest in which the
private and public sectors compete. On the one hand, people see clever, amusing,
attractive advertising featuring cute dogs and gorgeous women to promote wondrous products like magical weight loss pills. On the other hand, they see unattractive and boring politicians, uncomfortably crowded buses, and seemingly
endless and cumbersome bureaucracy. The private sector offers people the pleasure of choosing how to spend their money; the public sector presents them with
the burden of paying taxes. It is clear which contestant would win. However,
while the private sector is very seductive, much of its appeal is superficial.
As with the other myths presented in this book, it helps to remember who benefits
from the belief in question. Those who stand to gain financially from allowing the
private sector a greater role in the provision of basic services loudly claim that the
public sector is corrupt, inefficient, and ineffective, and that the private sector is
well-managed, efficient, and avoids waste. Claims based on self-interest do not, of
course, equate with truth. There are several reasons for rejecting the overly
simplistic idea that private sector management is inherently better than the public
sector and that the government should privatize more and more services.
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People need access to basic services
When governments provide services, everyone (at least theoretically) has equal
access to them. Universal access stems from an understanding that some services
are essential to the wellbeing of the community and should be available to all,
regardless of whether or not people can afford to pay for them. In the private
sector, the goal of the provider is to make a profit. When a service is privatized, the
price typically goes up. People who can no longer afford the service cannot access
it. Absent is the belief that people should look out for each other and that a society
cannot function well if some of its members are deprived of basic services. For
these reasons, the privatization of basic services is morally abhorrent.
The private sector prospers by passing costs on to the public
Some private companies make a lot of money, while others go bankrupt. A
company may do well for years and then suddenly fail. The idea that companies
must operate efficiently to succeed is not particularly meaningful, particularly in
light of the recent revelations that several successful, multi-billion dollar enterprises have been ‘cooking their books’ for years and engaging in other fraudulent
practices. The retail company Tesco has recently been accused of having overstated its profits by about $424 million.2 The fraudulent practices of Pennsylvania
soft drink maker Le-Nature has cost lenders, vendors, and investors around $684
million.3 America’s second largest long distance phone company, WorldCom,
committed accounting fraud to the tune of over $7 billion.4 The financial services
company Lehman Brothers hid more than $50 billion of loans by classifying them
as sales. The energy company Enron engaged in various schemes, aided by the
corrupt accounting firm Arthur Anderson, which cost shareholders $74 billion.5
Defence contractors in Iraq and Afghanistan wasted or lost to fraud as much as $12
million a day from 2001 to 2011, for a total of $60 billion.6
The fact that some companies succeed in making a lot of money for decades is not
proof that those companies know how to deliver services in a better, more efficient
fashion than governments. That is, unless ‘efficiency’ is defined as being effective
at shifting one’s costs onto others, ignoring the damages of one’s actions, and
making a profit regardless of the poor quality of the services one delivers. Nor, as
the recent scandals show, is there any reason to believe that corporations are any
less corrupt than governments.
Wasteful or otherwise ‘inefficient’ companies can make sizeable profits in many
ways. They can secure government contracts by means other than competitive
bidding, whether through the influence of employees who were formerly government officials, bribes and kickbacks, personal connections and family ties, or other
means. For example, a local government official in the American state of Alabama
MYTH#9: THE PRIVATE SECTOR DOES BETTER
204
was convicted in 2009 of accepting bribes from JP Morgan, an American multinational banking and financial services holding company. Local officials then hired
JP Morgan to advise them on how to refinance the debt on their sewer system. JP
Morgan’s services required the locality to pay $120 million in fees, or six times the
normal charges. The result: a $277 million increase in local government debt that
required the government to raise sewer rates repeatedly in order to avoid bankruptcy. Since sewer rates are based on use, not ability to pay, the price increases fell
most heavily on the poor.7
Wasteful corporations can also pass on many of their costs to the public at large.
This can take the form of bypassing environmental regulations, underpaying
workers, and evading taxes. In the United States, underpayment of fast food
workersi costs the government almost $7 billion a year to support those same
workers through welfare and other poor relief programmes, essentially subsidizing the companies to pay low wages.8 While it might seem cheaper to bring in a
fast food franchise to supply school lunches rather than having them prepared by
people hired directly by the school system, some of the costs (support of underpaid workers and health effects of eating fast food) simply fall back on the public.
Hint: When someone suggests the need to privatize a government service in order to save
money, look at all the costs that are involved and whether the privatization will benefit
the public, or just the company and a few of its friends.
* * *
Efficiency is elusive everywhere
The idea that corporations operate more efficiently than governments is repeated
so often that it has become difficult to even question the notion. However, where
is the evidence that corporations are more ‘efficient’ than governments in providing services?
Businesses and governments both consist of individuals operating under a set of
motivations and incentives. The primary incentive of businesses is to make a
profit. The primary incentive of government, when things work properly, is to
serve the public. That is the main difference between the two. Another key area of
difference between the two sectors is transparency: reporters and citizens have at
least some access to public government records and accounts, and can find and
publicize government inefficiencies. The public typically has no such access to
The proportion of fast-food workers who receive food stamps rose to almost twenty-seven
percent in 2010, compared with fifteen percent of all Americans.
i
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corporate accounts.ii As for management, both governments and large corporations can be hopelessly bureaucratic and inflexible. With size typically comes
bloated bureaucracy and rigidity. With any human enterprise come errors; the
private sector can excel at incompetence at least as well as the public sector. For
example, the American state of Indiana had a $1.34 billion contract with IBM
(hardly a small or newly established company) to deliver government assistance
to the needy. During the two-year period of the contract, some of the families who
qualified for benefits (including food stamps, health coverage, and financial assistance) never received them due to company ‘errors’; the company’s work was also
marked with frequent delays. In 2009, the government cancelled the contract.9
The argument that companies cannot afford to be inefficient is belied by the fact
that large companies are sometimes protected from failure no matter how badly
they perform. They can save money by evading regulations. They can lobby obliging governments for a number of subsidies, such as tax holidays, profitable
contracts, and pressure on other countries to buy their products. They can
persuade governments that their failure would do irreparable harm to the entire
economy – that they are ‘too big to fail’. A recent case was the bailout of American
automakers and banks. If private companies are so efficient, why do they require
so much financial help from their ‘inefficient’ governments?
Governments do not have a monopoly on corruption
A further manifestation of anti-government, pro-business prejudice is the widespread belief that governments are corrupt while businesses are not. The media
regularly reports on corrupt government leaders who steal millions or billions of
dollars from their country (but had an awful lot of nice shoes). Forbes has even
created a top ten list of all-time corrupt government leaders, topped by Mohamed
Suharto (Indonesia), who embezzled an estimated $15 to $35 billion and Ferdinand Marcos (Philippines) who stole $5 to $10 billion.10 In some parts of the world,
people hear about daily corruption, whereby citizens must pay bribes to obtain
even the simplest services, including a doctor’s attention in the hospital. In other
parts of the world, daily corruption may be less but periodic scandals reveal that
it is common there as well. This belief in the inherent corruption of the public
Theoretically, publicly-traded companies allow their shareholders access to some
information and input into decisions. Given the size and complexity of most companies, in
reality (according to John Kenneth Galbraith) shareholders are highly unlikely to have
access to enough information to provide any meaningful input, and shareholder meetings
are simply a means by which the company formally passes the decisions it has already
made.
ii
MYTH#9: THE PRIVATE SECTOR DOES BETTER
206
sector begs the question: who bribes governments? When a corporation bribes a
government official, why do we consider only the public official to be corrupt?iii
What is the correct term for companies that pressure governments to provide a
range of subsidies, benefits, and exemptions from worker and environmental
protection laws? The same act labelled as corruption when governments engage in
it is labelled good business practice when corporations are involved.
In addition to bribes received from businesses and individuals, a major source of
government corruption is aid money. International lending agencies such as the
World Bank and Asian Development Bank fund projects to the tune of hundreds
of millions of dollars but provide little genuine oversight or quality control. They
regularly – and publicly – condemn government corruption and demand accountability, without asking whom it is that consistently and continually provides the
aid monies that are then misused or outright stolen.iv If so much aid money really
is being stolen, while little or none of it is being put to any productive use in a
given country, then there must be a simple explanation. Either the World Bank and
its partners are not as concerned about corruption as they claim to be, or there is
another reason that they continue to prop up corrupt governments through aid. If
the funders do not object to corruption, it is unlikely that the recipients will.
Wherever there are people and money, there can be corruption. Increased
vigilance by aid agencies and the public can help to make governments less
corrupt. But while governments are, to some extent, accountable to their citizens,
corporations are only accountable to their shareholders. Worse, shareholders
generally have very little information or ability to insist on accountability. Too
often, handing over the control of vital services to the private sector simply hides
the corruption rather than making it go away.
Cost savings from privatizations are often a mirage
One reason regularly given for privatizing government services is that it will save
taxpayers’ money. There are a few problems with that notion. One is that companies are often only concerned with the short term. For example, contracts
It is true that in some cases people, including businesspeople, have no choice but to pay a
bribe to get something perfectly legal done. Bribery is sometimes written into the system:
policemen must take bribes to pay back the bribe they paid to get their job. If people valued
honesty more than wealth and received decent pay, some corruption might decrease on its
own. However, those minor bribes are only a very small part of a much larger picture of
overall corruption.
iv I once attended a seminar in which the Minister of Transport said that he would be transparent in all large-scale transport projects because that is what donors want. Perhaps his
cynicism reflects the fact that the donors themselves are rarely transparent.
iii
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given to private companies to manage water supplies are typically only for about
five or ten years. The short-term nature of the contract and the fact that the system
will then revert to the government (or be put up for tender again) creates a strong
temptation for the company to skimp on maintenance and to delay making repairs
for as long as possible. After all, why invest heavily in something that may be in
someone else’s hands in the near future? If the operation ceases to be profitable,
the contracted company can simply hand the mess back over to the government
and let the taxpayers pick up the cost of repairing the damaged infrastructure. In
the long term then, governments may pay more to contract out a service than they
would have spent to carry out the service themselves. For example, the American
city of Gary, Indiana cancelled a ten-year contract with United Water after a
government inspection found many problems, including broken equipment, inadequate monitoring reports, and failure to meet deadlines. The city anticipated a
fifty percent reduction in costs (a savings of $8 million per year) simply from
cancelling the contract.11
Another way private companies may cut costs is by reducing their workforce. A
recurrent theme in critiques of ‘inefficient’ governments is that they hire too many
people, as if employees only represent a cost. Proponents of privatization ignore
the fact that many or most of those workers were performing a useful service, and
that their unemployment will generate a different type of social cost. In fact, when
former government workers become unemployed and rely on the government for
assistance or can no longer pay income taxes, there is simply a shifting of the cost,
not a true savings. When those employees were performing an important service
and are not replaced, there is a further cost.
When private companies take over the running of prisons, there is an economic
incentive to see higher rates of incarceration – more prisoners translate into more
profit. Prisons are also more profitable if operating costs are kept low. Those operating prisons can save costs by cutting back on guards and by training and paying
them less. However, a lower guard-to-inmate ratio can lead to more outbreaks of
violence and create more dangerous working and living conditions. The government can end up spending more when it must send in police to deal with riots and
other violence than it saved by hiring the company to take over the prison.
Another cost-saving measure is to overcrowd cells and supply less than adequate
health care to prisoners. If a disease outbreak occurs – such as of fungal diseases
or multiple (or extremely) drug-resistant tuberculosis – it is the government, not
the company running the prison, that bears the costs.12 The United States has the
highest rates of incarceration in the world; it also has a high rate of privatization
within the prison sector. Rather than save money or increase efficiency – the arguments used to justify corporate control of the prison system – privatization has
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208
made existing problems worse. Privatization has also reduced the ability of the
government to solve those problems, since it has already passed much of the
control of decision making to private companies.13
What happens when basic services are privatized?
Despite the glowing remarks of its proponents, the literature on privatization is
full of disasters. Reading the history of privatization makes it clear that some
sectors should never be privatized because they are too open to abuse or are too
critical for the population. While abuses are particularly likely where civil society
is weak, history shows that abuses occur even in that ‘bastion of freedom and
democracy,’ the United States. One example is the experiment conducted in the
state of California with the deregulation of electricity in the year 2000. As summer
temperatures rose and people turned on their air conditioning, the company that
had received the contract realized that it could increase its prices as much as it
wished, and people would be forced to comply. The company raised the price on
some days by as much as seven thousand percent and collected billions of dollars in
surcharges. The price increases had nothing to do with a supply problem; privatization simply opened the door to profiteering.14 Governments do raise the price of
utilities also, of course, and in some countries, there are regulatory agencies that
allow or disallow such increases; but government officials generally keep the
increases modest because they wish to be re-elected. Private companies have no
such constraints.
In Bangladesh (until recently), the price of a train journey had not increased for
thirty years, meaning that rail was, and still is, an exceptionally affordable system
of transport. On a business level, the lack of fare increases is ‘inefficient,’ because
the government’s revenue from the sale of tickets is not keeping up with its cost of
running the train service.v No company would overlook such a great source of
potential revenue. If the system were privatized, price rises would likely make the
cost of tickets unaffordable to many riders. Because containing costs would be a
priority, cuts in personnel and on maintenance schedules might make the service
less safe. Nor is the problem limited to low-consumption countries: rail privatization in Britain has led to higher fares and more accidents.15 In Canada, a recent
v Throughout the world, governments do not expect to make money from roads; expenditure for roads is commonly considered an ‘investment’ whereas expenditures for intercity
rail and public transit are considered an ‘expense’ or ‘loss.’ Roads, which are profitable to
the makers and sellers of cars, to truck operators, to oil companies, and to road builders,
receive regular and huge inputs of cash; trains and other ‘alternative’ transport are treated
as an unaffordable cost and receive vastly less funding.
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tragedy in which a train carrying explosive crude oil derailed and exploded in the
centre of a small town, killing forty-seven people, was shown to be caused, in part,
because the owner of the rail company had cut back on train personnel and on
safety measures.16
Then there is the case of the privatization of water services in Cochabamba,
Bolivia. According to a Public Citizen report, water rates in Cochabamba
increased by as much as two hundred percent immediately after the local water
supply was privatized. Some families were paying $20 each month just for water,
while trying to survive on an income of less than $100 per month. The price hikes
led to a four-day general strike in January 2000. Finally, the government cancelled
the contract and re-nationalized the water system. The Public Citizen report finds
that “In this case, [the American engineering and construction firm] Bechtel and
the British-led consortium of investors put up less than $20,000 of up-front capital
for a water system worth millions. Consumers suffered rate increases, while the
company was expected to earn an annual income of $58 million.”17 Despite the
value of the deal, the government received almost nothing for it, although some
public officials received bribes to approve the privatization.18
Similar events have occurred in Argentina. The Public Citizen report noted above
quotes Fernando de la Rua, then mayor of Buenos Aires, as saying,
Water rates, which Aguas Argentinas [the private company running the water
system] said would be reduced by 27 percent have actually risen 20 percent. These
price increases, and the cost of service extension, have been borne disproportionately by the urban poor. Non-payment for water and sanitation are as high as 30
percent, and service cut-offs are common with women and children bearing the
brunt with health and safety consequences.19
What does the World Bank have to say about water privatizations in Latin
America?
Efforts to reform utilities can affect poor households in varied, often complex, ways,
but it is by no means certain that such reform will hurt vulnerable households. …
Many myths have been perpetuated in discussions of utility reform – and in many
cases poor households have benefited…The good news is that many measures can be
taken to improve the chances that poor households will benefit from reform. Chief
among these is promoting competition, where possible.20
It is clear that by ‘reform’ the World Bank means privatization. Just two quick
comments: Saying that the work that one does will not necessarily hurt the poor is
hardly laudable. And how is one to promote competition for the provision of
MYTH#9: THE PRIVATE SECTOR DOES BETTER
210
utilities, which by their very nature are a monopoly?vi
Certainly, governments do not always do an acceptable job of providing affordable water or other basic services. Many people in low-consumption countries do
not have access to clean water, and as a result, some must pay high fees to obtain
water from private suppliers. The solution is not, however, to toss the entire
system over to the private sector. Rather, it is to pressure (or assist) the government to improve its services. According to one report, the private sector has done
no better than governments at providing new water connections in various countries in which it has received privatization contracts in sub-Saharan Africa, South
Asia and East Asia. Where more people have received water connections under
privatization, in most cases the government actually paid for the new connections,
not the private company. The number of people who lost their connections due to
their inability to pay the bills must balance any gains that have occurred through
privatization.21
Similar abuses have been documented concerning privatized sewage systems,
with raw sewage sometimes being dumped into waterways instead of being taken
to treatment plants. For example, in addition to the price increases for water mentioned above, Aguas Argentinas also failed to fulfill the obligations in its contract
to build a new sewage treatment plant.22 The result has been that over ninety-five
percent of the city’s sewerage is dumped directly into the Rio del Plata. If people
are not happy with their provider of water or electricity or sewage, they can
neither switch providers nor stop purchasing the product. This is just the sort of
situation that companies crave – and the informed citizen fears – and is another
reason why governments should never hand these services over to the private
sector.
The problems that have resulted in country after country, city after city, have led to
a growing international movement to fight the privatization of water. Many cities
that had previously privatized water systems have since re-nationalized them. In
Johannesburg, a private water company installed pre-paid meters that would only
issue a certain amount of water against a token. The amount of water provided per
household at no cost was far too little for even basic survival. Finally, the High
Court, citing the Constitutional right to water, decided that the system had to be
changed so that families could receive an ample quantity of free water per
month.23 Both the Netherlands and Uruguay have laws against the privatization of
water.24
They would compete, of course, to win the contract, including competing to pay the
highest bribe to the decision-makers.
vi
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Health care
In all industrialized countries (other than the United States), the government
provides health care for all of its citizens, funded through taxation. Only in the
United States do private sector health insurance providers play an enormous, and
enormously expensive, role as intermediaries. Having insurance companies act as
intermediaries in the health care system also makes it more difficult for people to
obtain health care: since insurance companies make higher profits if they pay
fewer claims, they resist paying, even on the slightest pretext. Involving an insurance company – whose goal is to make a profit – in critical medical decisionmaking is inherently inefficient; when companies deny coverage to those with
pre-existing conditions, or find other excuses to refuse to pay claims, it is unethical. This system raises the cost of medical care enormously. Not only must the
insurance companies pay their staff, the companies must make a profit for their
shareholders, and the doctors and hospitals must hire additional staff to fill out all
the widely varied forms required by all the different health insurance companies.
All of this makes the per capita level of American health care spending one of the
highest in the world. France, for instance, spends $300 per person on administrative costs each year, while the average cost in the United States is $900.25 In the
recent past, the cost of simply screening patients in the United States for private
health insurance was $350 billion per year, and that is before any care is even
provided.26
Where the government pays directly for health care rather than delegating it to
private insurance companies, similar or better results are achieved for far less
money. Per capita spending on health care in the United States, at just over sixteen
percent in 2012, was the second highest in the world in terms of percentage of
GDP.vii That is the equivalent of more than $8,000 per person per year, or two and
a half times more than most industrial countries, including France, Sweden, and
the United Kingdom.27 Even with this higher spending, though, life expectancy in
the United States, at 78.2 years, is less than the average of 79.5 years among OECD
(Organisation for Economic Co-operation and Development) countries. More
troubling, despite the high national costs, is the reality that many Americans still
have little or no access to health care. According to the United States Centers for
Disease Control and Prevention, more than forty-eight million Americans, or
eighteen percent of those under the age of sixty-five, are uninsured.28 (This should
be improving under the Affordable Health Care for America Act, derisively and
Although GDP is a lousy measure of wellbeing, it does give an idea of the level of
consumption, and thus provides some sort of comparison among countries in terms of how
much is spent on health versus other products and services.
vii
MYTH#9: THE PRIVATE SECTOR DOES BETTER
212
misleadingly labelled by the press as ‘Obamacare’.) The government program
Medicare already covers Americans over the age of sixty-five. Medicaid covers the
poor, at least to some extent. It is not as if the United States does not have any
government-provided health care. But efforts to expand the existing ‘socialist’
system to cover the entire population have been met with increasingly fierce
resistance, in part because it threatens corporate profits.vii This is not an exclusively American problem; despite its obvious inefficiencies, many non-Western
countries have adopted some sort of private health insurance modeled on the
American system.29
If the United States implemented a system of universal, free, government-funded
health care that did not require its citizens to go first through private insurance
companies, then major illness would no longer result in personal debt and bankruptcy. Instead, people could have treatment minus the bills. Where government
programs cover the entire population, expenditures to evaluate the risk that those
they insure might get ill become unnecessary. As a result, one large cost of providing health insurance declines. A single payer system would greatly reduce the role
of private insurance companies in determining who gets health care (since they
would only fill in the gaps left by the government) and in driving up the cost of
that service. A single payer system would thus be far simpler and would mean
great cost reductions, with the potential of lower spending actually buying better
results – if only one could overcome the lobbying of the insurance companies.x
Private health insurance is only part of the picture. Another aspect of the privatization of health is the provision of some degree of health care through private, userpay clinics and hospitals. Private health care facilities may be more attractive and
more pleasant than public ones, but one pays a high price for those benefits.xi
If government paid directly for most health care, then the health insurance companies
would play a much smaller role. If government negotiated better prices from the pharmaceutical companies, their profits would decline.
ix I mentioned to a Canadian colleague recently that a private health care provider in
Thailand hadn’t billed me for a rather ridiculous doctor’s visit that it had insisted I make.
She smiled and remarked that the very idea of being billed for seeing the doctor is odd.
x Obama’s plan, thanks to that lobbying, is not a single payer system, and thus maintains
much of the bureaucratic inefficiency that makes health care in the United States so expensive and inadequate. Other countries would do well to learn that lesson.
xi I have personally witnessed unashamed gouging of patients at private hospitals in Bangkok. I know of a private hospital that refused to release a dead body until the bills were
settled. The same hospital deliberately racked up the cost of care, including charging $1,000
for each high-tech (but malfunctioning) bandage, for a foreign patient with an amputated
leg who was about to be transferred to a far more affordable public hospital.
viii
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It would be wiser to lobby the government to improve its services than to encourage the opening of private clinics. In Bangladesh, for example, private clinics and
hospitals are attractive, clean, and generally well-managed. They are also expensive. They have just one small problem: they tend to lack doctors. In some private
hospitals, the doctors make their rounds only after 10 p.m. (after they finish their
public sector work and, presumably, go home for dinner).xii Public hospitals in
Dhaka, on the other hand, are typically dirty and poorly managed, with dusty
floors and small cockroaches crawling on the beds. However, they have some
excellent medical staff, usually the same doctors who moonlight at the private
hospitals and clinics. Public hospitals can provide treatment, typically not the
most modern care, but sometimes stunningly effective. It would not be difficult to
improve conditions in the public hospitals, since most of the problems result
simply from poor management and poor hygiene. If activists could convince the
upper echelons of government that it was important to improve governmentprovided health care, then management and sanitation would improve almost
immediately. Governments do sometimes make stupid, expensive decisions,
partly but not always due to private sector lobbying. It is still safer to keep control
of basic services in government hands than to hand it to the private sector, which
has a direct profit motive to externalize as many costs as it can.
The pressure to privatize
Multinational organizations (for example, the World Bank, the International Monetary Fund, and the Asian Development Bank), aid agencies, and even some
NGOs regularly push for greater private sector involvement in areas formerly
under government control. That pressure is often tremendous, forcing governments into privatization deals even if they realize the dangers. According to a
report by Public Citizen, “Cash-strapped and indebted countries like Bolivia
rarely reject IMF and World Bank advice, because they don’t want to risk being
denied future loans and international aid.”30
Experience with privatization has been so negative in so many cases, however,
that those pushing for privatization have begun to talk instead about publicprivate partnerships, or PPPs. Unfortunately, this is just the same arrangement
under a more appealing name. According to the website of the World Bank, a PPP
I have seen patients admitted to a private hospital, only to be informed that the doctor is
away for the weekend. I know people who searched in vain for a doctor in the emergency
rooms of various private hospitals before finally resorting to a public provider. I have also
heard the stories of private hospitals refusing to admit anyone with a serious condition for
fear that they might die and the hospital be investigated or get bad press.
xii
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214
usually involves a medium to long-term arrangement wherein the private sector
takes over some services that the public sector would normally carry out. ’Partnership’ is simply a code word for handing over control to the private sector.
Sometimes corporations lobby for privatization directly, without the intervention
of multinational agencies. In India, for example, biscuit-making companies have
tried for years to take over the school meal program. The Indian program
currently hires local women to prepare hot cooked meals for 120 million children.
The meals contribute to better nutrition and to higher school attendance (and, one
assumes, to children being better able to concentrate in class). According to an
article about the effects of capitalism in India,
The Biscuit Manufacturers’ Association (BMA) launched a massive campaign for the
replacement of cooked school meals with branded biscuit packets. The BMA wrote to
all members of Parliament, asking them to plead the case for biscuits with the minister
concerned and assisting them in this task with a neat pseudo-scientific precis of the
wonders of manufactured biscuits. Dozens of MPs representing most of the political
parties promptly wrote to the minister and rehashed the BMA’s bogus claims. According to one senior official, the ministry was ‘flooded’ with such letters.
Thanks, however, to the active efforts of state governments, nutrition experts, and
the public, who were shocked at the crudeness of the attempt to undermine a vital
program, the proposal did not go through.31 The India case, alas, may be an exception: the joint pressure of private companies, government financial shortfalls, and
pressure by international agencies can be too much to resist.

Towards a Better Way: Resisting Privatization and Strengthening
Community
“…we do not aspire to live better than others. We do not believe in the line of progress
and unlimited development at the cost of others and nature. ‘Live well’ is to think not only
in terms of income per capita but cultural identity, community, harmony between
ourselves and with mother earth.”
– Evo Morales, President of Bolivia32
* * *
When bad policies cause enough damage, eventually people will resist. By now,
there have been so many bad experiences with privatization in so many communities and countries that resistance is widespread. It should not be difficult to find
groups to join and organizations to support to resist privatization. If a group to
fight a planned privatization does not already exist in a local community, start one.
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Sadly, governments do not always act in the interest of their citizens. Nevertheless,
they remain vastly more accountable than private companies do. It is up to citizens
to work with governments to improve their record. Sometimes this will involve
friendly cooperation; at other times, explicit criticism is needed. What it will
always require, though, are a sufficient number of vocal, energized, strategic
people working together. In other words, it requires community.
There are various ways to help strengthen local community, which can in turn act
to rein in corporations and push government to act on behalf of all its citizens,
including the poorest. Public schools are a good place for parents to meet their
neighbours and to learn how to become engaged in civic affairs. Public places can
become venues for organizing, displaying posters, and holding meetings. Social
media can also play an important role, but it is important not to forget the significance and vibrancy of interpersonal encounters.
An exciting possibility is participatory budgeting, which allows the public to have
some role in discussing and deciding how to spend part of a local government
budget, including identifying and prioritizing projects on which to spend money.
Participatory budgeting emerged when local mayors in Porto Alegre, Brazil in
1989 decided to address corruption and wasted resources in a context in which too
often local governments seemed to be unconcerned about the people they served.
Rather than having government officials make decisions behind closed doors
without public input, the local population now engages in debate to define and
decide on investments, priorities, plans, and actions. Public participation involves
meetings with community members to allow them to give input. Significant
results include a more active and involved public and greatly improved public
services. Participatory budgeting has increased school enrolments and the quality
of education, and helped get citizens more involved in local decision-making.33
People in many other cities around the world are now trying this same approach.
* * *
The inspiring movie A Convenient Truth shows just how effectively government can
contribute to employment while also improving the physical environment.34 The film is
about the city of Curitiba, Brazil, a low-consumption city in a poor region of Brazil.
Mayor Jaime Lerner wished to support good works as long as it cost the government
nothing. One of the initiatives he undertook was a recycling program that serves not only
to clean the environment and improve public health, but also to create jobs. The government uses bus tickets to pay people from the slums to bring in trash. To provide rehabilitation while also performing a useful service, the city-run recycling centre mostly hires
those with alcohol and drug problems to sort through the trash. The employees, meanwhile, are trained for better jobs. Some of that job training involves computers rescued
MYTH#9: THE PRIVATE SECTOR DOES BETTER
216
from the garbage. When government officials in Curitiba provide housing for the
low-income, they ask the recipients to give input into the design of their home, which
usually has a workplace on the ground floor, so that the person feels genuine ownership.
The government also provides job training and support for starting a home-based
business. (These initiatives were meant to address the common problem of public housing
being built on the edge of cities where jobs are few and those housed feel no ownership
and thus mistreat their dwellings.) The entire documentary is an example of how much
can be done on a shoestring by creative government officials eager to reduce poverty while
improving the environment. Curitiba could serve as a model of beneficial government
actions for other cities.
* * *
Remember Prakash from the beginning of the book, who was struggling to get by?
His life is difficult enough; do not make it worse by forcing him to pay for services
he gets from the government at no cost. Instead, since he seems to have a good
head on his shoulders, invite him to your next community meeting in which you
will discuss how to work together to convince government to be more attentive to
community problems.
Notes
1 Cited in David C. Korten, When Corporations Rule the World, 2nd ed. (Bloomfield,
Connecticut and San Francisco: Kumarian and Berrett-Koehler, 2001).
2 Jenny Anderson, “Tesco Accounting Scandal Draws Scrutiny of Serious Fraud Office in
Britain,” The New York Times, 29 October 2014.
3 Joe Mandak, “Robert Lynn, Former Chief Revenue Officer Of Le-Nature, Sentenced To 15
Years In Prison For Massive Accounting Fraud,” Huffington Post, 3 January 2012.
4 Mark Tran, “WorldCom Accounting Scandal,” The Guardian, 9 August 2002.
5 “The Biggest Accounting Scandals of All Time (PHOTOS),” Huffington Post, 17 May 2010.
6 Anna Fifield, “Contractors Reap $138bn from Iraq War,” The Financial Times, 18 March
2013.
7 The Public Interest, “Privatization Myths Debunked,” www.InThePublicInterest.org
accessed 26 November 2013.
8 Sylvia Allegretto, Marc Doussard, Dave Graham-Squire, Ken Jacobs, Dan Thompson and
Jeremy Thompson, Fast Food, Poverty Wages: The Public Cost of Low-Wage Jobs in the
Fast-Food Industry (Champaign, IL: University of Illinois at Urbana-Champaign and UC
Berkeley Labor Center, 2013).
9 The Public Interest, “Privatization Myths Debunked.”
10 “The World's All-Time Most Corrupt Leaders,” Forbes, 25 March 2004.
11 The Public Interest, “Privatization Myths Debunked.”
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BEYOND APOLOGIES
Don Thompson, “Valley Fever Prison Outbreak Sweeps Through California Prisons,”
Huff Post San Francisco, 29 June 2013
http://www.huffingtonpost.com/2013/04/29/valley-fever-prison-outbreak_n_3178843.html;
Thomas Halleck, “Alabama Facing 'Serious' Tuberculosis Outbreak In Prisons,”
International Business Times, 14 August 2014
http://www.ibtimes.com/alabama-facing-serious-tuberculosis-outbreak-prisons-1659304.
13 Paul Farmer, Pathologies of Power: Health, Human Rights, and the New War on the Poor (Los
Angeles: University of California Press, 2005).
14 Greg Palast, The Best Democracy Money Can Buy (New York: Plume Printing/Penguin
Books, 2003); James K. Galbraith, The Predator State: How Conservatives Abandoned the Free
Market and Why Liberals Should Too (New York: Free Press, 2009).
15 Oliver Huitson, “Rail Privatisation has Failed – And the NHS is Hurtling Down the
Same Track,” The Guardian, 10 March 2012.
16 CBC, “Special Report: Lac Mégantic,”
http://www.cbc.ca/montreal/features/lac-megantic/ accessed 29 August 2014.
17 “Water Privatization Fiascos: Broken Promises and Social Turmoil,” Public Citizen,
March 2003.
18 Palast, Best Democracy.
19 “Water Privatization Fiascos.”
20 Antonio Estache, Andres Gomez-Lobo, and Danny Leipziger, Utility Privatization and the
Needs of the Poor in Latin America: Have We Learned Enough to Get It Right? Policy Research
Working Paper 2407 (Washington: World Bank, 2000).
21 David Hall and Emanuele Lobina, Pipe Dream: The Failure of the Private Sector to Invest in
Water Services in Developing Countries (Greenwich: Public Services International Research
Unit and World Development Movement, 2006).
22 “Water Privatization Fiascos.”
23 Polaris Institute, “Johannesburg High Court Declares Prepaid Water Meters Unlawful &
Unconstitutional,” http://www.polarisinstitute.org/johannesburg_high_court_declares_
prepaid_water_meters_unlawful_unconstitutional accessed on 11 August 2011.
24 David Hall, Emanuele Lobina, and Robin de la Motte, “Making Water Privatisation
Illegal: New Laws in Netherlands and Uruguay,” Report commissioned by Public Services
International, 31 November 2004.
25 Jason Kane, “Health Costs: How the U.S. Compares With Other Countries,” PBS
Newshour, 22 October 2012.
26 Galbraith, The Predator State.
27 Index Mundi, “Country Comparison: Health Expenditures,”
http://www.indexmundi.com/g/r.aspx?v=2225 accessed 28 January 2014.
28 Centers for Disease Control and Prevention, “Health Insurance Coverage,”
http://www.cdc.gov/nchs/fastats/hinsure.htm accessed 28 January 2014.
29 There are innumerable articles about ‘Obamacare’ as critics invariably call the
Affordable Health Care Act. One example of a strategy to undermine it: Jonathan
12
MYTH#9: THE PRIVATE SECTOR DOES BETTER
218
Weisman and Sheryl Gay Stolberg, “G.O.P. Maps Out Waves of Attacks Over Health Law,”
The New York Times, 20 November 2013.
30 “Water Privatization Fiascos.”
31 Jean Drèze and Amartya Sen, “Putting Growth in Its Place,” Outlook India, 24 November
2011.
32 Cited in Tara Lohan, ed., Water Consciousness (San Francisco: Independent Media
Institute, 2008).
33 “The Experience of the Participative Budget in Porto Alegre, Brazil,” Most Clearing House
Best Practices. http://www.unesco.org/most/southa13.htm Many websites exist on the
subject, which has spread from Brazil to many other countries, not always with similar
success.
34 Del Bello, GV, A Convenient Truth: Urban Solutions from Curitiba, Brazil. Film produced by
Maria Terezinha Vaz. Del Bello Pictures, 2006.
MYTH #10: When Corporations Prosper, Everyone Prospers
“For years I thought that what was good for our country was good for General Motors,
and vice versa.”
– Former General Motors CEO and American Secretary of Defence Charles Wilson1
“Liberty for business, liberty for prices, liberty for trade: one throws the people in prison
so that business will remain free.” – Eduardo Galeano2

Private Profit, Public Loss
Corporations come in a variety of shapes and sizes; in this section, I use the term
‘corporation’ to refer specifically to giant, for-profit companies that wield significant influence over governments. The products they sell may or may not be harmful per se, but the business practices in which they engage harm society. Most
importantly, they exert far more power over political decisions than any private
entity ever should. These huge corporations are multinational: they operate in
different countries, take advantage of tax havens to avoid paying taxes, and use
weak local laws governing labour and the environment to conduct their business
as cheaply as possible.
While this discussion is mostly limited to companies that manufacture and sell
products, it is important not to forget the role of financial institutions that utilize
their significant lobbying power to defeat the development and implementation of
regulations that would protect consumers from their more nefarious and destructive practices. The failure of the American government to regulate new types of
financial institutions, which bank regulations did not cover because they technically were not banks, contributed to the worldwide financial crash of 2007-2008.3
Big buddy or big bully?
Many people see Coca-Cola, McDonalds, Walmart, General Electric, and other
gigantic corporations as benign institutions that make life easier and more pleasant. After all, they provide the world with a wide array of desirable products at
affordable prices. Many believe these corporations’ declarations that they provide
many good jobs and that their social responsibility departments make significant
contributions to resolving or lessening local social and environmental problems.
These people accept that monolithic companies are a major part of the modern
global economy, and believe that the bigger and more powerful the corporations
are in any given country, the stronger the citizens of that country will be. In short,
these people believe the mainstream economic rhetoric that if businesses profit, so
will their employees and society at large. The best way to help people, these corporate apologists argue, is for governments to help, or at least enable, corporate prosperity.
MYTH#10: CORPORATE PROSPERITY BENEFITS ALL
220
Many other people hold an opposing view. They argue that large corporations
decrease rather than increase personal prosperity and freedom. They point out
that the world’s biggest corporations have more wealth and more power than do
most countries; because of the power that this wealth brings, these companies can
freely dictate the laws under which they are willing to operate, thereby undercutting democracy. These people protest when large corporations put small local
shops out of business, noting that the process reduces rather than expands
consumer choice and wreaks havoc on local economies. These people object to the
billions of dollars that companies spend advertising products that harm human
health. These people feel that the control of much of the market by a handful of
giant companies serves to concentrate wealth in the hands of the few while fostering environmentally destructive processes. The best way to help people, these
advocates argue, is for governments to protect them from corporations.
It may be tempting to take a view that falls somewhere between these two
extremes, arguing that some corporations make important contributions to the
economy while others produce dangerous products or engage in particularly
destructive practices. For example, anti-tobacco advocates consider tobacco
companies to be peculiarly evil, as they make enormous profits by producing a
consumer product that, when used as intended, kills up to half of its long-term
users. However, while they seek to reduce the ability of tobacco companies to
influence national and international laws and policies, these advocates do not
necessarily feel that all corporations need to be reined in. Other advocates highlight and attempt to counter the abuses carried out by petroleum companies, ‘Big
Food,’ water companies lobbying for privatization, giant retail chains, the pharmaceutical industry, agrochemical companies, etc.4
However, while it is important to take on individual corporations or sectors that
cause harm, it is equally important to keep in mind that many of the abuses of any
individual corporation or sector are replicated across other corporations and
sectors.i While the pharmaceutical, tobacco, arms, or chemical industries may
seem to be particularly heinous, in fact all giant corporations have so much power
that they can rewrite rules and laws to ensure their own ongoing economic success
and their ability to influence policies and people.5 It is critically important to move
beyond accepting ubiquitous feel-good corporate advertising, beyond a belief that
only exceptional corporations cause harm, to recognizing that it is impossible to
Of course, it is difficult enough to win a battle with an individual company without
attempting to take on the world of mega-corporations as a whole, but it helps to keep the
bigger picture in mind.
i
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improve wellbeing for all without reducing the power of giant corporations.
Profits or people?
By law, corporations are supposed to maximize the profits of their stockholders.ii
The legal context for maximizing shareholder profitability dates to a 1919 court
case in the United States in which shareholders (in this case the Dodge brothers)
sued the Ford Motor Company when Henry Ford stopped paying them sizeable
dividends on their stocks. During the trial, Ford testified that he believed that
since the company made so much money it had an obligation to benefit the firm’s
workers (by paying decent wages) and customers (by lowering prices). The Dodge
brothers countered that this amounted to ‘improper altruism.’ The court agreed,
strongly rebuking Ford:
A business corporation is organized and carried on primarily for the profit of the
stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to attain that end, and does
not extend to a change in the end itself, to the reduction of profits, or to the nondistribution of profits among stockholders in order to devote them to other purposes.
As such, the court ruled “it is not within the lawful powers of a board of directors
to shape and conduct the affairs of a corporation for the merely incidental benefit
of shareholders and for the primary purpose of benefiting others.”6 This ruling
established a legal precedent that ’improper altruism’ is not just inappropriate, but
inherently illegal for corporations.
As unlikely as large modern corporations are to engage in ‘improper altruism’
towards their employees or communities, they do engage in tremendous generosity when it comes to paying out bonuses to their top executives. General Electric
provided one executive with a retirement benefit that included a Manhattan apartment that had a rental value of $50,000 per month. Merrill Lynch funded a $1.2
million renovation of a single office (following a government bailout of the
company). Mattel dished out $150,000 country club memberships. Pfizer provided
a CEO with a pension worth more than $83 million.7
To both pay their shareholders and give their executives millions of dollars in
John Kenneth Galbraith has written repeatedly about the fact that it is unlikely that corporations maximize the profit of their shareholders; more likely, they maximize it for their
executives. Shareholders know too little about the companies to meddle much in their
management, and executives make use of their power to exact large bonuses. See, for example, Galbraith, The New Industrial State (Princeton, New Jersey: Princeton University Press,
2007).
ii
MYTH#10: CORPORATE PROSPERITY BENEFITS ALL
222
bonuses, corporations must make a lot of money.iii Doing so often means cutting
corners somewhere. A few obvious places to cut costs are in workers’ salaries and
benefit packages (as opposed to those for executives), environmental protections,
and taxes. The more power one has in the economic system, the easier it is to make
and sustain large profits, partly by avoiding such costs. This is a privilege for
which corporations will happily pay: they strongly object to paying taxes or
making workplace improvements but are happy to pay millions of dollars in
campaign donations to ensure that politicians will vote against the imposition of
future taxes or regulations.iv These corporations often pay their workers extremely
low salaries but reward their executives for instituting policies of long hours and
low pay.
It is not only workers who suffer from low salaries. All the benefits that American
Walmart employees end up receiving from the government (such as food stamps,
Medicaid, and rent assistance) to compensate for their low wages simply transfer
the cost of better wages directly to American taxpayers. This transfer cost amounts
to more than $2,000 per employee, or more than $420,000 per Walmart store with
200 employees.8 According to Walmart, its 4,700 stores in the United States employ
more than one million people.9 At an average government compensation of over
$2,000 per employee, American taxpayers are subsidizing Walmart’s low wages to
the tune of some $2.73 billion each year. This cost transfer system is described by
billionaire Nick Hanauer as being “as morally repugnant as it is economically
inefficient.”10 As Hanauer points out, the $27 billion in profits that Walmart makes
every year means that it could easily pay each of its lowest-paid workers $10,000
more annually, which would raise them all out of poverty, saving taxpayers
billions of dollars. And Walmart would still make $17 billion in profit.v
Walmart is one of the largest and wealthiest corporations in the world.vi The owners of
Walmart, the Waltons, take the concept of billionaire to entirely new heights. After all, a
billionaire need only be worth one billion dollars to qualify. Just four members of the
A small caveat: companies often pay sizeable bonuses to executives even when they are
losing money.
iv Such donations also typically provide tax credits.
v In October 2014, Walmart announced that it would raise its salaries so that all workers
would earn more than the minimum wage. It did not say, however, how much more.
vi Much has been written about Walmart. Palast mentions that Bangladeshi workers supplying products to Walmart are paid eighteen cents per hour while their helpers get fourteen
cents to work an eighty-hour, seven-day week. The problem of poverty wages is not limited
to factories selling to Walmart, of course, but Walmart has more resources than others to
address a situation regularly discussed in the Bangladeshi newspapers (and then forgotten
iii
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Walton family (including Christy Walton, the richest woman in the world) were worth a
combined $107.8 billion in 2012.11
Walmart’s CEO, Mike Duke, received $23.15 million in compensation in 2012, or more
than one thousand times the median Walmart worker’s wages, making it the company
with the highest employee-CEO pay discrepancy in the United States. Half of the
company’s workers earned less than $22,400 that year, which is below the American
poverty level for a family of four.12 As the wages the company pays are so low, many of the
workers receive food assistance from the government so they can survive.13 The company
is so big, hires so many people, and pays its employees so little, it actually drove down
wages throughout the United States by more than two percent.14 It is unclear why a
corporation that earns billions of dollars a year cannot pay its workers a wage that would
allow them to get by without government support, nor why the American government
(that is, the public) should be expected to pay part of the wages for Walmart employees.
The government should provide a safety net for those in need, but full-time workers at
wealthy corporations should not require such assistance.
The company argues that higher wages for its staff would mean higher prices for its
products, which in turn would cause suffering to its customers. The argument is weak
when we remember how profitable the company is. One study found that giant retailers
like Walmart could easily pay a living wage simply by reducing (not eliminating) their
profits. Even if they passed on all the cost of salary increases to their customers, prices
would only go up by one percent; if they passed on only half the cost to customers, it
would cost shoppers on average just $17.73 per year.15
Henry Ford, motivated in part by a desire to increase his customer numbers, famously
paid his workers enough that they could afford to buy the products they made. Sam
Walton appears to have adopted that vision in reverse: paying his employees so little that
they cannot afford to shop anywhere but at his stores.
* * *
Another way to afford to pay generous packages to corporate executives is to
convince governments to pay large subsidies. In the United States, corporate
welfare has become an increasingly large component of the federal budget.
about until it occurs again). As this book was being edited, Bangladeshi garment workers
had been rioting for increased minimum wages: rejecting the ‘generous’ offer of $43 a
month, they are clamouring for $73, thus far without success. Following the collapse of a
building containing several garment factories in Dhaka, in which more than one thousand
people died, Walmart refused to join other companies seeking better safety conditions.
MYTH#10: CORPORATE PROSPERITY BENEFITS ALL
224
According to Congressional testimony, “In 1997 the Fortune 500 corporations
recorded best-ever earnings of $325 billion, yet incredibly Uncle Sam doled out
nearly $75 billion in taxpayer subsidies....There are roughly 125 such business
subsidy programs in the federal budget of the United States, and they can be
found in virtually every cabinet agency – including the Defense Department.”16
Subsidies are often not explicit, making it difficult to identify – and counter –
them. For instance, transportation is a major expense for individuals and for
governments, and extremely profitable for those in the business of building roads
or selling fuel or motorized vehicles. Besides building and maintaining roads,
governments invest in fuel subsidies that benefit the users of private cars but do
nothing for those who commute by foot and bicycle. They also subsidize parking,
thereby vastly decreasing the amount of land that is available for other uses. Those
government subsidies represent a subsidy to all the corporations that benefit from
a focus on individual motorized transport. If instead governments concentrated
on providing a well-operated public transit system and safe conditions for
bicycles and pedestrians, they could build far narrower roads, which would cost
less both to build and to maintain, and would allow significantly more land for
productive use. Meanwhile, government expenses complement those made by
individuals, who spend thousands of dollars to buy and operate a car or motorbike. For example, according to the Bangladesh Road Transport Authority there
are 200,776 private cars and 324,714 motorcycles in Dhaka.17 If each car costs on
average $10,000 and each motorcycle $2,000, individuals invest about $2.7 billion
in transport, not even counting operational expenses.
Seven of the top twenty companies on the Forbes list of the biggest corporations
are transport-related: Exxon Mobil (#6), PetroChina (#10), Royal Dutch Shell (#11),
Toyota Motor (#12), BP (#17), Chevron (#18), and Volkswagen (#19).18 Petroleum
companies, car manufacturers, and road builders all lobby governments to ensure
that transport expenses sharply favour the car. This works great for the companies
that benefit and for a few individuals, while the majority suffers.
It is difficult for many to imagine what it would be like to be the executive of a
large corporation. It would mean knowing that you pay your workers ridiculously
low wages and deny them basic benefits such as health care or pensions, while you
– the executive – receive huge benefits. Corporate decision-makers live their lives
secluded from those affected by their policies, a fact that helps to shield them from
facing the consequences of their actions. When questioned, corporate representatives adeptly defend their practices: they argue that high salaries and bonuses are
needed to attract and encourage good directors. They claim that environmental
protections are silly, useless, and reduce productivity. They say that it is wrong to
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tax corporations, because higher taxes will mean job losses. And they defend those
outrageously low wages on the basis that at least they provide jobs for the poor.
Walmart, for instance, actually claims that “We believe we have an opportunity
and a responsibility to make a difference on the big issues that matter to us all.
Issues like preserving the environment, fighting hunger, empowering women and
providing access to healthy, affordable food.”19 Nice words…but actions would be
more meaningful.
Subsidies for corporations while employees struggle for subsistence
Countless corporations receive government subsidies in the name of creating
worthwhile employment, even when the wages that the companies pay are not
enough for their employees to afford a decent lifestyle. The subsidization of corporations, partly justified by job creation, is not limited to the United States. Many
other countries allow companies to pay impossibly low wages while providing
them with generous subsidies. For example, the garment industry has been a
major source of employment in Bangladesh for many years. Workers receive low
wages and work in substandard factories. When they protest for higher salaries
and better working conditions, the government sends in the army and police, not
to bolster the workers’ complaints against the owners, but rather to put down the
protests. According to The New York Times, “A recent study reported in a Bengalilanguage newspaper estimated that these subsidies and tax breaks exceeded tax
revenues from the industry by roughly $17 million.”20 The article cites Badiul
Alam Majumdar, secretary of the non-profit group Citizens for Good Governance,
as saying that “The doors of the treasury are open for [the garment
industry]…they extract all kinds of subsidies. They influence legislation. They
influence the minimum wage. And because they are powerful, they can do, or
undo, almost anything, with impunity.” The power and influence of the company
owners and their disregard for their workers has contributed to such events as the
collapse of Rana Plaza, which housed several garment factories, in 2013. More
than eleven hundred people died in that collapse.21 Fires also regularly take lives
in factories, as either the workers are locked inside to prevent theft or there are no
operational fire escapes.
The truth is, in Bangladesh as in the United States, the point of corporate subsidies
is to help the rich. Consider two sides of the garment worker equation. Garment
manufacture is indeed important to the Bangladeshi economy: the ready-made
garment sector accounts for an estimated $20 billion of Bangladesh’s $120 billion
GDP and for eighty percent of its export proceeds. It employs more than four
million workers.22 From the industry perspective, those low-paid workers are a
key financial advantage. Speaking at a Post-Rana event, a garment factory
MYTH#10: CORPORATE PROSPERITY BENEFITS ALL
226
representative quoted Professor Gus Papanek, President of the Boston Institute for
Developing Economies, as stating that:
Bangladesh has a unique opportunity in the next year and a half or two years
because it has the possibility of taking over part of the world market that China is
going to abandon .... It has become increasingly clear that China is no longer
competitive in many of the goods that Bangladesh could supply. China's labor costs
are rising, its pollution costs are increasing, its labor regulations are getting
stricter… Bangladesh can compete in this market because it has some major assets
and the greatest of which is the low-cost labor.23
Reading between the lines, the advantages that Bangladesh offers are not only a
large labour force of women so desperate for work that they will accept horrid
conditions and very low pay, but also the lack of concern about pollution (such as
the dumping of dyes and other chemicals directly into water bodies adjoining
factories) or regulations to ensure decent working conditions – just the sort of
regulations that could have prevented the Rana Plaza and other disasters.
Workers view the situation differently than the owners. Kalpona Akter, a former
garment worker and current labour organizer in Bangladesh, testified to the
Senate Foreign Relations Committee in the United States about the working conditions experienced by garment workers. She mentioned how “U.S. and European
brands and retailers …have flocked to the country to take advantage of rockbottom wages. Bangladesh’s garment workers are the lowest paid in the world,
with an industry minimum wage of about $38 a month.”24 She described that,
“Aside from long hours and low wages, apparel sector workers often work in
factories with chronic safety problems. Since 2005, over 1,800 workers have died
and thousands more were severely injured in garment factory fires and building
collapses.” She explained that workers have been trapped in fires: they heard the
alarms but were locked inside by managers too concerned about meeting tough
quotas to allow them to escape. A few of them survived after jumping from the
second or third storey, only to face a lifetime of chronic pain and disability that
leaves them unable to work. She told how workers were afraid to go to work after
seeing the cracks in Rana Plaza but had to go because their employers had threatened that if they did not show up, they would lose a day or even a month’s wages.
They were also lied to about the safety conditions in the building.vii (When I first
visited Bangladesh in 1994, I saw a poster demanding a weekly holiday for the
garment workers. They do now get one day a week off, although they are expected
vii Meanwhile, the police repeatedly harass Kalpona Akter, and have arrested her in the
past; one of the two union organizers with whom she regularly worked was murdered. The
Bangladeshi government claims that Kalpona was never a garment worker.
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to work ten to sixteen hour days the other six days and often end up working on
their day off anyway.)25
Yes, the garment industry is important to the economy of Bangladesh. But it is not
enough to say that a sector is important. Tobacco growing in Malawi is a major
component of the economy of one of the poorest countries in the world. It would
not be so important, and the country could be a lot richer, if the government
invested in finding alternatives that are more remunerative to the farmers. In
Bangladesh as well, the potential exists to create alternative employment possibilities and to push the government to support those alternatives. This would create
new opportunities for young women otherwise drawn to garment factories. It is
small-scale local industries, not big corporations, that need subsidies.
Corporations as taxpayers
While it seems reasonable to expect corporations to pay taxes, many avoid doing
so to the greatest extent possible. The common, global practice of corporate tax
evasion includes schemes that allow companies to look as if they earn less than
they actually do, or to move their profit making – at least according to their financial books – to locations that charge lower tax rates. Companies can take advantage of ‘free trade’ agreements to set up phony companies in tax havens with
which they pretend to trade. They can dramatically over-report the prices at which
they buy goods and then just as dramatically under-report the prices at which they
sell them – a practice known variously as transfer pricing manipulation, abusive
transfer pricing, and transfer mispricing – and then claim various deductions that
not only result in paying no taxes, but in actually receiving refunds from the
government.26 For example, company financial records show such outrageous
exaggerations as purchases of $850-per-pound Chinese multivitamins, Czech
plastic buckets priced at $973 each, a Pakistani $154 cotton dishtowel, and $4,896
Japanese tweezers. Sales, on the other hand, show dramatically low prices: multivitamins to Finland for sixty-one cents a pound, bus and truck tires sold to Britain
at $11.74 each, colour video monitors sold to Pakistan at $21.90, missile and rocket
launchers sold to Israel at $52.03, and prefabricated buildings sold to Trinidad at
$1.20 a unit.27
While the American corporate tax rate is thirty-five percent of profits, almost twothirds of the companies that operate in the country reported that they owed no
taxes (made no profit) for the period 1996 through 2000, while over ninety percent
of the big corporations reported owing taxes that amounted to less than five
percent of their profits.viii The result in 2002 was that rather than collecting
viii
Using techniques such as transfer mispricing, companies show that they are earning
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$308 billion in corporate tax, the government received only about $136 billion, a
difference of $172 billion.28 It gets worse. A report on all Fortune 500 companies
that were profitable every year during the period 2008 to 2012 found that the 288
companies investigated paid taxes of only nineteen percent of their profits while
one-third of the companies paid less than ten percent. Thirty-nine percent of the
companies paid no tax at all in at least one of the years covered by the study. Thus,
in total, the companies received $364 billion in discounts (subsidies) from not
paying full taxes.29 Just one example: Apple Inc. keeps more than $100 billion
offshore. The company spent more than $2 million on lobbying in 2012, which
may help explain how it has legally avoided paying taxes on $74 billion in profits
since 2009.30
Tax evasion and avoidance have increased in recent years. According to author
and radio host Joshua Holland, in the United States “while the big corporations
were becoming ever more profitable, the taxes they paid were plummeting – from
one in four federal tax dollars in the 1950s to one in ten in the 2000s.”31
Taxation issues occur at the local as well as the national level. Local governments
are eager to attract industries to create jobs. One way they attract industry is by
offering millions of dollars in tax breaks, including ‘tax holidays.’ The granting of
such ‘tax holidays’ to attract companies is common practice throughout the world.
Companies can and do play local governments off each other, by accepting huge
handouts while at the same time threatening to relocate to a place that offers a
better deal. It is corporations, not communities, which benefit when local governments compete with each other by offering attractive subsidies to lure companies
to locate there. Jobs are obviously important, but workers do not benefit when the
companies offer an inadequate wage. Too often, after receiving a tax holiday or
other subsidy, companies still fire workers or relocate to a place offering an even
better deal. Here too, the situation has been getting worse: while in 1957, American
corporations paid forty-five percent of local property tax revenues, by 1987 they
paid only sixteen percent.32
Another broken appliance, another computer upgrade
Another way in which corporate prosperity can hurt consumers is through
planned obsolescence. In order to guarantee continuing sales, companies are
designing the next generation product even while marketing the current one as
vastly superior to the previous one, which itself was billed as a huge improvement
substantially less than they are, so a highly profitable company is able to pay taxes on only
a very small percentage of its actual income.
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over what had come before. (How many products contain the words ‘new and
improved’ on the label, as if everything new is better than what it replaces?) As one
commentator notes of Apple’s planned six-month obsolescence strategy for the
iPad,
Aiming to achieve a revolutionary technical breakthrough several times a year is an
impossible business plan. Fuelling a frenzy of public feeling at the same interval,
however, is eminently possible. … the fact [is] that the best generator of technological
profit margins in 2012 isn’t features or value for money, but the very fact that there is
another model out there which is newer and different.33
Planned obsolescence also refers to products designed in such a way that they will
need replacement regularly. The accounting software Quicken, for example,
contains some features such as online connectivity that are disabled after several
years, forcing users to purchase regular upgrades.34
Manufacturers also create obsolescence by making products with cheap, flimsy
materials so that they simply fall apart after a few years. Not only does the
company sell more products this way, it lowers its production costs as well.35 Light
bulbs, for instance, could last twice as long as they do; but then where is the profit?
According to the 2010 documentary “The Light Bulb Conspiracy,” early incandescent light bulbs lasted more than 2,500 hours until a cartel shortened their lifespan
to about 1,000 hours. According to the documentary, companies also deliberately
shorten the lifespan of other consumer products such as computers, printers, and
iPods.36
Even Forbes, which is usually dedicated to idolizing the rich, admits that planned
obsolescence is a problem, at least for the consumer: “Products of all types – cars,
incandescent bulbs, your iPad and iPhone – are designed with planned obsolescence in mind. The need or desire to replace products quickly and a shorter product life-cycle are a consistent drain on wealth.”37 That drain occurs not only in the
products’ selling price, but also in all the resources that go into producing, marketing, distributing, using, and disposing of them. Planned obsolescence is yet
another aspect of corporate prosperity that we could comfortably do without.
Corporate control of the food supply benefits only the corporations
Around the world, hunger tends to have less to do with the quantity of food that
is available and more to do with whether people can afford to purchase it. However, it does little good if food becomes cheaper only because the quality is poorer.
Worse still if the universal act of eating delivers fewer economic benefits to farmers and more to transnational food companies. This happens when people replace
fresh, minimally processed foods such as whole grains and fresh meat, fruits, and
vegetables with fast food, junk food, and sugar-sweetened beverages that deliver
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few nutrients but are packed with sugar, salt, and fat…with the switch being
subsidized by governments.ix
Alas, most of the profits made from selling food involve heavily processed items
that happen to be the worst for health. Large-scale food processors and advertisers
work together – too often successfully – to convince people to consume far more
than they need and to eat unhealthy foods.38 Rather than purchase whole potatoes
to cook at home, most Americans now eat potatoes in the form of corporatelyproduced fast food French fries. In the United States, meat that was formerly
raised on local ranches and small chicken farms now originates in Concentrated
Animal Feeding Operations (CAFO). There is, in fact, corporate control over virtually the entire food supply chain, as a few supermarket chains that capture most
food purchases have largely replaced small stores and farmers ’ markets.
In other countries as well, a number of factors, including busy schedules and the
increasing availability of heavily marketed processed foods, have led to unhealthy
switches in eating that also take profits away from local producers and shift them
to global corporations. As corporate control of the food supply has grown, the
problems – and people’s waistlines – have increased. The combination of inexpensive, low-quality food, a dependence on driving for transport, and excessive
screen time has resulted in the growing international obesity epidemic. Sixty
percent of the American population is overweight. Obesity costs Americans more
than $215 billion each year in medical costs, disability, and reduced productivity,
while allowing food sector corporations to rake in the profits.39 The same issue
now extends worldwide.
So too for beverages. The best beverage for health is water, but the producers of
sugar-sweetened beverages attempt to persuade people to consume their products
instead. For instance, recently the sugary sports drink Gatorade, which PepsiCo
owns, added elements to a video game that it uses to promote itself. The game,
featuring Jamaican Olympic medalist Usain Bolt, portrayed water as the enemy of
athletic performance.x The addition of the water element to the game apparently
Subsidies for the production of corn mean that American farmers sell it for less than it
costs to grow. As a result, corn is so cheap that it is used in virtually every single processed
food in the United States, in the form of corn sweetener (high fructose corn syrup or HFCS),
stabilizers, and so on. This is corporate agriculture policy at its most malignantly odd.
Mono-cropping corn is good neither for farmers nor their land, but the corporate food
processors love it. Food processors have vastly more power over politicians than small
farmers and environmental advocates, and so the system remains, at least for the time
being.
x The New York Attorney General has responded to complaints about the game.
ix
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came about due to concerns that athletic youth were choosing to drink (gasp) tap
water to rehydrate.40 Coca-Cola likewise organized a “Cap the Tap” program
throughout the United States to reward restaurant waiters for turning an order for
tap water into one for a Coca-Cola beverage.
The demise of small businesses, damage to community
By now, it should be no secret what happens when a big chain store comes to
town. Local residents are often excited about the appearance of a new superstore
offering discount prices for a large selection of items. It may take some time before
people notice that the price of those big stores comes in the loss of local businesses
that cannot afford to compete. A study of the effect of a Walmart store opening on
one neighbourhood found that the opening resulted in a wave of closures of small
businesses: near the store’s location, between thirty-five and sixty percent of local
stores closed. Jobs gained from the store opening were offset by the loss of jobs
from local shops closing, and local sales tax revenues actually declined.41 While
local shops often make use of local products and invest more of their money
locally, big box stores access their products outside of the community (indeed,
often outside the country) and immediately transfer their profits out as well,
resulting in net loss for the locale when small businesses are replaced by far larger
ones.42
Other chain stores have similar impacts. The opening of a 7-Eleven convenience
store, for instance, can spark protest from residents who know that the lower
prices will cause the demise of local shops.43 A visitor to Bangkok cannot help but
notice that there is a 7-Eleven on almost every block, leaving little room for local
shops that support the local economy. In the United States, just two stores – Home
Depot and Lowe’s – together account for about half of all home improvement
sales; that does not leave much room for local shops.
How bad is the impact of big box stores?44 Big stores engage in intensive advertising, squeeze their supply chains to get lower prices, and use ‘loss leaders’ to make
profits and sink their competition. Big chains tend to pay lower wages than do
locally-owned businesses. Posing as contributors to economic development, big
box stores receive subsidies from local governments to open stores. Poor wages
means that the employees of these large stores may not be able to afford to
Gatorade/PepsiCo has agreed not to discourage people from drinking water, and have paid
$100,000 to Michelle Obama’s campaign to promote non-branded water in New York State.
http://civileats.com/2014/10/23/update-gatorades-war-on-water-dampened-by-nyattorney-general/
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purchase from small local shops that cannot externalize their costs the way big
ones do. Sourcing goods from other countries means that there is little or no
contribution to other aspects of the local economy.45
The benefits of small and local versus big chain shops are numerous; studies
abound on the issue, at least in the United States.46 For example, one study used
data from the 2000 census to compare communities by concentration of small
businesses and population health outcomes. They found that communities with
more small businesses have less obesity, diabetes, and mortality, and greater
‘collective efficacy,’ which the authors define as the ability of residents to work
together for the benefit of all.47 Communities dominated by large corporations
scored more poorly on all outcomes. In another study, researchers drew on statistics collected from counties across the United States to look at the effect of big
businesses on civic participation; they found that where big firms dominate,
people feel less connected and citizens participate less in voting and in local affairs
and protests.48 A further study comparing the level of social capital (the number
and strength of relationships among people who live or work together) in communities with a Walmart against those without one were able to establish a link in the
decline in civic participation in American communities directly to the presence of
Walmart.49
The size of shops also affects the form of transport people use to visit them. People
do not normally walk to big box stores; they are located too far from residential
areas and people make too many purchases to carry home on foot. Small local
shops are more easily accessible by – and indeed are more inviting to – those
travelling by foot and bicycle. They do not require huge parking lots, thus freeing
more space for other uses. In Europe, where people prefer fresh local food to the
industrial food typically consumed in the United States, food shops tend to be
small and specialized: people buy bread from the baker, meat from the butcher,
and so on. In twenty-first century Paris, people still stroll home in the evening with
a baguette under their arm; in many Asian cities, sidewalk vendors offer local
foods. This is another area in which benefits to health and the environment, and
maintenance of local culture, are good economics – but only if our accounting
systems take into account all the additional costs of big box stores that are invisible
on the price tags.
In many cities, independent businesses grow harder to find as small traditional
shops, eateries, and vendors give way to larger chain stores and restaurants. In
parts of Asia, officials have attempted to close down local markets and ban street
vendors in order to force customers into supermarkets. It is all too common to see
police on the streets of Hanoi and Dhaka chasing local itinerant vendors and – if
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they catch them – demanding a large bribe (fine) to return their goods. In many
cases, it is also a game: the vendors may return immediately afterwards. Clearly
someone powerful objects to their presence, presumably due to the competition
they pose to established shops, but these street vendors are too popular to ban
outright. Nor is police harassment of vendors limited to a couple of cities in Asia.
Mohamed Bouazizi, a twenty-seven-year-old Tunisian street vendor, set himself
on fire on 17 December 2010 to protest police harassment. His act reputedly set off
a series of national protests that led to a revolution that ousted the country’s
president.50 Ousting the chain stores that oust the local shops and vendors may
prove far more difficult.
Corporations as people
In the United States, corporations can claim the rights of individuals; many other
countries have similar laws. How did this come about?
Being human may not always seem to guarantee much by way of rights, but there
are some legal guarantees that corporations had viewed with envy for many years,
such as free speech, the right to vote, and privacy rights. In the 1800s, it was clear
that corporations were not people, and laws in the United States specifically
prohibited corporations from participating in the political process. It was illegal
for corporations to lie about their products, and corporate accounts had to be open
to the inspection of government regulators. According to bestselling author and
talk show radio host Thom Hartmann, the government also had the right to
inspect and investigate companies “when they caused pollution, harmed workers,
or created hazards for human communities, even if in the early years that right
was unevenly used.”51 The corporations did not appreciate this. Hartmann claims
that the railroad companies – at the time among the largest American corporations
– led a legal assault to gain ‘corporate personhood,’ arguing “that governments
could not regulate their fees or activities, or tax them in differing ways, because
governments can’t interfere to such an extent in the lives of ‘persons’ and because
different laws and taxes in different states and counties represented illegal
discrimination against the persons of the railroads under the Fourteenth
Amendment.”52
Although the corporations lost their early lawsuits – including four cases in 1877
alone – in 1886, the Supreme Court ruled on an obscure taxation issue involving a
railroad that, according to Hartmann, ultimately changed the legal identity of
corporations. The court recorder was the former president of a small railroad; in
his personal commentary of the case, he wrote “the Chief Justice had said that all
the Justices agreed that corporations are persons.” Although the note had no legal
standing, and although the Supreme Court had not in fact made that decision, the
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court recorder’s note, writes Hartmann, “was taken as precedent by generations of
jurists (including the Supreme Court) who followed and apparently read the note
but not the decision.”53
Corporate personhood provided corporations with many new rights such as
privacy and free speech.xi When activists attempt to ban some forms of advertising, such as ads for cigarettes or alcohol, they are told that the ban would violate
the corporate right to free speech – a ‘right’ that corporations use to the fullest
extent possible, not only to advertise their products, but also to promote and
protect their image.
Activists, like corporations, also enjoy free speech, at least in some countries and
under some circumstances; what they do not enjoy is access to the same budget for
making their voices heard. For example, the European pharmaceutical industry
spends more than forty million Euros each year to lobby politicians on such issues
as discouraging the production of low-cost, generic alternatives to brand-name
drugs. In contrast, NGOs spend less than one tenth of that sum to lobby governments on such pharmaceutical issues as access to low-cost generic medicines.54 It
is hard to compete when a single company can donate more than $11 million to a
presidential campaign.55 It is hard to compete when the American Supreme Court
can strike down limits to corporate campaign donations.56 If corporate contributions are not used to buy political influence, then corporate generosity is certainly
breathtaking.
Corporations as good global citizens
If one believes the feel-good advertising of giant corporations – their beautiful
depictions of the environment and of their many charitable actions to help the
poor and sick – then one may well view corporations as good, caring, global
citizens. The reality is far different. Corporations regularly engage in unsavoury
activities, such as preventing workers from forming unions (sometimes violently)
and sidestepping and lobbying against regulations meant to protect worker safety
or to avoid environmental pollution and disasters. To redirect (misdirect) the
public gaze, companies then advertise what wonderful corporate citizens they
are.xii
As noted above, corporations have not been so keen to accept the responsibilities that go
with those rights, such as to pay taxes.
xii One clue to the type of harm any corporation causes is a look at its feel-good ads. Those
that pollute the environment show gorgeous scenes of pristine nature; those that harm
health brag of their contributions to improve it, and so on. This involves not only distraction
but buying off potential opponents. For example, Shell contributes to environmental
xi
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Undertaking a few projects labelled as corporate social responsibility (CSR) is,
after all, much less expensive than actually changing the way that one does
business. Nike, for instance, spends some $10 to $12 million each year on CSR.
That sum, while large, is much less than the $210 million per year – or seventy-five
cents per shoe – that it would cost Nike to give its employees decent working
conditions.57 In Bangladesh, British American Tobacco brags about its tree nursery
and how many trees it plants. What it fails to mention is how many trees are cut
down in the process of growing and curing tobacco, and how few of the seedlings
it distributes actually survive to maturity. Reforestation does involve, after all,
more than giving people seedlings to stick in the ground. Of course, the point is to
embellish one’s image, not to compensate for the damage one causes.
* * *
I met a young woman who was paid by Nike to ‘empower’ young women in Bangladesh
to say no to early marriage. While I suspect that it is the parents, not the young women,
who are pushing for those early marriages, it also seemed likely that the most effective
way to empower young people is to pay them better so that they are less dependent on
either their parents or their (potential) spouses.
* * *
Corporations do play a sizeable role in the economy. They provide people with
many products, some beneficial, some harmful. They create jobs, but often at such
low wages that workers remain impoverished. Due to their inordinate political
spending on politics, they often decrease the power of individual citizens to
engage in democratic processes.
Why the status quo persists
The influence that corporations exert on governments worldwide and the ability
of large corporations to put smaller companies out of business are not new.
Neither are attempts to rein in the corporations. In the United States, attempts to
regulate corporations date at least to the 1700s, when Thomas Jefferson worked
with James Madison to develop an (ultimately unsuccessful) eleventh Constitutional Amendment.xiii This amendment would have prevented corporations from
groups, British American Tobacco supports programs to prevent child labour, and so on.
Those contributions can also have direct benefits: Playboy Foundation contributes to work
on sexual dysfunction, to make abortions available, and to uphold the First Amendment
(free speech, including for pornographers).
xiii People also sought to fight against monopolies in the late 1500s and 1600s in England, when
the Crown was granting patents to individuals and companies that essentially gave them full
monopoly rights over a whole host of enterprises and sectors. Of course, since the Crown was
involved in creating these monopolies, opposition to them did not gain much traction.
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becoming so large that they gained a monopoly and could easily crush smaller,
local entrepreneurs. The amendment also would have prohibited corporations
from giving money to politicians or trying to influence elections in other ways.58
There were also early attempts to ensure that the corporations’ charters would
explicitly state that the purpose of the corporation was to serve the public good.
After all, the American Revolution was fought not only against Britain but also
against its personification in the British East India Company.59 Nevertheless, these
attempts failed.
* * *
Canadian Prime Minister Stephen Harper cancelled ecoENERGY, a small grants
program that allowed homeowners to offset the cost of upgrading their insulation, of
replacing an inefficient furnace, or of making other energy-saving renovations to their
homes. The program had triggered more than $7.45 billion in local economic activity
across the country, returning to the capital two dollars in new tax revenue for each dollar
of funding.60 Why would governments act in such ridiculously irrational ways, such as
cancelling a popular program that saves money? Is it because someone would benefit
from its cancellation?
* * *
It is not particularly surprising that many governments and individuals have not
succeeded at reining in corporations. Not only is it extremely difficult to limit the
size and influence of a giant whose power, after all, means that it has control over
those who seek to do the reining in, it is also sometimes quite dangerous to
attempt to do so. There have been many brave souls: community organizers and
union leaders, journalists, religious leaders and even heads of state, whose
attempts to shift the balance of power from corporations to the people have
resulted in their facing arrest, torture, and even death.
* * *
A woman I knew in Bangladesh, Nasreen Huq, fought plans for an opencast coalmine
that threatened the displacement of 40,000 to 100,000 people in the country’s poorest
district.61 She died when her driver lost control of her SUV, as his foot supposedly hit the
accelerator rather than the brake and crushed her against a wall in a parking lot. I
thought at the time that the accident sounded rather odd; I later heard that many consider
it to have been an assassination.
I also knew a young woman in Guatemala who died while traveling in a car with a local
doctor who had dared to speak out for the rights of peasants. All four people in the vehicle
were summarily shot. When I went to visit her mother, she described to me her
daughter’s wounds and told me that only military bullets could have left such marks. At
the time, military repression of protesters was common; sometimes the army would
murder all the men in a village. These cases never led to reprisal or punishment. Such
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repression, alas, continues in Guatemala today in the form of right-wing death squads.
The effects have been that people rarely discuss politics and passive acceptance of miserable circumstances is the norm. Too often the victims of the death squads are union
organizers or people objecting to the power of multinational corporations.62
* * *
There is a long list of national leaders targeted in overthrow or assassination
attempts orchestrated by the American Central Intelligence Agency (CIA).
Perhaps the most obvious corporate-sponsored government overthrow occurred
in Guatemala in 1954. As the CIA admits, United Fruit (now Chiquita Brands
International) objected to that small Central American country’s democratically
elected president, Jacobo Arbenz, because he took unused land away from the
fruit company and gave it to landless peasants. At the instigation of United Fruit,
the United States, via the CIA and then-ambassador John Peurifoy, supported and
directed Guatemalan military leaders to overthrow Arbenz’s government. Deceptive efforts that persuaded Guatemalan citizens and leaders that a major military
force was moving towards the capital caused the government to fall with little
resistance.63 That was a long time ago, but democracy in Guatemala, alas, has still
not recovered.
The overthrow of Arbenz is not an exception, although the corporate influence in
such actions is not usually so obvious. Both Fidel Castro in Cuba and Hugo
Chávez in Venezuela have been on the receiving end of vicious media attacks, as
well as of hundreds of assassination attempts (in the case of Castro) and a rather
absurd and short-lived coup attempt (in the case of Chávez). Cuba allows essentially no advertising, and for years people have been speculating about the amazing business possibilities that will open up when Fidel Castro dies.64 The death of
Hugo Chávez was greeted with delight from the business community, which saw
in it an opportunity for corporations to regain the power they had lost during his
pro-poor rule.65
The global movement to reduce the power of corporations is strong, but for any
individual involved, whether a politician or an activist, being vocal can be lifethreatening. For people living in relatively safe countries it is easy to forget that
the repression and murder of protesters occurs regularly throughout the world.
The popular media rarely reminds us about them. When it does, it puts the
emphasis on something other than what the person was trying to achieve…again
distracting the public from thinking about and acting on serious issues. While it is
true that being a union organizer or populist leader does not promote one’s
personal longevity, many options exist for those who wish to rein in corporations
– without endangering life or limb.
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
Towards a Better Way: Encouraging Small Local Businesses and
Limiting the Power of Corporations
“I sympathize, therefore, with those who would minimize, rather than with those who
would maximize, economic entanglement between nations. Ideas, knowledge, art,
hospitality, travel – these are the things which should of their nature be international. But
let goods be homespun whenever it is reasonably and conveniently possible, and above
all, let finance be primarily national.” – John Maynard Keynes66
* * *
Supporting small businesses and increasing employment
In the classic urban planning text The Death and Life of Great American Cities, Jane
Jacobs writes of the role played by the local shopkeeper in New York City neighbourhoods: she is the person who is equally entrusted with keys and secrets.67
There is a vast and essential difference between the cheery hollow “Have a nice
day” greeting at big anonymous stores and the more personal friendly greeting
(and all the other services and favours) of the known shop owner. Sometimes
anonymity is preferable, but something is lost when that is the only option available, when the small and local have completely disappeared, and all main streets
and urban neighbourhoods resemble each other with their collection of chain
stores.
I once observed an elderly woman buying a bottle of wine at a small local store in
the northeastern United States. She billed it to another woman’s account, explaining that she was invited for dinner and her hostess had asked her to pick up the
wine but not to pay for it. The shopkeeper, obviously knowing both women well,
readily agreed.xiv In a small town in Switzerland, I once stayed at a hotel in which
the owner rather casually mentioned, as I was going out on a Friday afternoon,
that I should take my keys. When I looked at her quizzically, she explained that
her family was going away for the weekend; I would need the keys to get in and
out of the hotel. When I returned in the evening, sure enough the front door
Such experiences are common in Asia. One day while living in Hanoi, I forgot my wallet
and could not pay for my dessert (admittedly it only cost about thirty cents); the woman
happily served me and let me pay later. On another occasion, I did not have small enough
bills to pay for my transport; I finally paid the man a week later. In both cases, I was
purchasing from a local vendor. Another time, a woman in a small shop offered to let me
take an expensive roll of black and white film and pay her later, though she did not know
me. I’ve also had a local shopkeeper in Sri Lanka lend me an umbrella when I got caught in
the pouring rain.
xiv
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was locked. The owners simply trusted that I, a stranger, would neither steal the
silver nor disappear without paying my bill.
Of course, there are advantages to larger stores and malls. There are good reasons
why shopping malls are often popular. They offer a wide variety of shops within
close proximity. They provide a car-free environment (once one traverses the vast
parking lot) in which people can move freely from store to store without fear of
traffic. Malls also typically provide some open areas for sitting, resting, and socializing. However, they are not truly public spaces. They ban some people from
entering and they ban certain activities. One cannot get up and make a speech or
sing a song in a shopping mall without permission as one can, at least in much of
the world, in a public square or on Main Street. Shopping malls are in fact highly
regulated, artificial environments. They have their appeal, but they cannot replace
the traditional downtown.
The benefits to the community of small, independent, and local stores are many.
The smallness of the shop, the fact that the owner probably lives nearby, and the
shop’s ready access and connectedness to the street means that it is far more likely
that the shopkeeper will know her neighbours, keep an eye out to ensure safety in
the surrounding area, and lend her support to community events. She is also more
likely to invest some of her profits in the local community and to make her
purchases locally than are big store executives whose central office is thousands of
miles away. As the Institute for Self Reliance writes about the owners of small
businesses,
Their personal and financial interests are tied to the community’s well-being and, as a
result, they are often active in various civic endeavors. While small business owners
gain prestige and influence by contributing to community improvement, corporate
managers garner status by advancing the company’s interest, even at the expense of
the community.68
Small local shops and informal (self-employed) sellers also are better at resisting
the gravitational pull of money upwards. I witness this daily in Dhaka. A middle
class person gives money to beggars and uses cycle rickshaws for transport; he
also buys fruits, vegetables, snacks, and tea from a vendor on the street. A woman
out walking stops at a small stand to buy a green coconut to drink. The vendors
buy from each other. The beggars and rickshaw wallah eat local food sold on
bicycle carts or at sidewalk stands. Some of those stands source their food from
other small sellers, who in turn use bicycle carts to distribute their food. To the
extent that Coca Cola, Nescafe, and other corporate products stay out of the
picture, money is moving down the pyramid and circulating there to the benefit of
the poor.
MYTH#10: CORPORATE PROSPERITY BENEFITS ALL
240
Independent business can also prove to be far better at providing service than
large, bureaucratic ones. One spectacular example of the efficiency of
self-employed workers is the delivery of home-cooked meals from homes to
businesses in India. Dabba-wallahs travel to people’s homes, collecting about
160,000 metal carriers (tiffins) and then delivering them to those people’s workplaces. An article about them notes “Forbes awarded the humble dabba-wallahs a
6 Sigma performance rating, a rating used in quality assurance if the percentage of
correctness is 99.9999999 or more. In other words, for each six million tiffins delivered, only one fails to arrive. This error rate means in effect that a tiffin goes astray
only once every two months.”69 Another example of the effectiveness of the small
and local is a chain of worker-owned bakeries in San Francisco: because none of
the money they take in goes to support distant investors, the bakers make more
than double the usual wage, and also receive health insurance, paid vacation, and
a share of the bakery’s profits.70
Rather than subsidize corporations in the hopes that they will hire people, governments can do it themselves. They can pay people to rebuild affected areas following a disaster, or to create, operate, maintain, and repair needed infrastructure,
including for sewerage, water, and transport, or to build schools and health clinics.
Where people are concerned about chemicals in food, they could have agricultural
extensionists train people to grow food without chemicals. Many governments are
already active in job creation. The National Rural Employment Guarantee Act in
India guarantees a minimum of one hundred days of employment per year to the
rural poor. A number of countries – including Argentina, China, Indonesia, and
South Korea – are carrying out public works programs in order to reduce unemployment and increase needed infrastructure. According to the United Nations
Development Program, successful poverty reduction in some East Asian countries
was achieved through a partnership – or social contract – between the governments and local entrepreneurs. In this case, each assumed a portion of the risks
and the rewards: “This contract was designed both to ensure [an] expansion of
jobs in labour-intensive manufacturing as a means of absorbing unskilled labour
and reducing poverty, and to effect a shift to more technologically demanding
activities which were more likely to guarantee continued competitive advantage
in the international markets and rising living standards in the future.”71 In other
words, it brought together government resources and local ingenuity to benefit
local communities.
The shift in the national accounting system that I talked about earlier in this book
is especially important here. Governments must shift their focus from increasing
the country’s GDP to increasing the wellbeing of their citizens. In the case of
garment workers in Bangladesh, local activists need to investigate the possibilities
241
BEYOND APOLOGIES
that could emerge if the government were, for instance, to establish a fund to help
former garment workers and managers wanting to set up small, local factories run
as cooperatives. Or, they could explore the potential of government support in
other parts of the economy. For example, they might respond to concerns about
chemicals in the food supply by helping small local producers grow organic fruits
and vegetables for local sale.
Those concerned about the way that big stores harm economies and people’s lives
can work to achieve policies that ensure that large chain stores are not always
allowed to replace traditional markets, small independent shops, and street
vendors. Some cities have laws prohibiting big box stores and mega shopping
malls within the city limits, at least in part because of their inordinate need for car
parking. In Vietnam, the staff of the Canadian NGO HealthBridge played a role in
a joint campaign that has been, to a large degree, successful at stopping government policy designed to destroy traditional markets and replace them with supermarkets. The new policy that is emerging involves preserving the markets and
creating them in new areas of the city as well.72
Concerned activists can also push officials to stop subsidizing factory farms
owned by wealthy individuals and large corporations. They can push local
governments to offer contracts to local farmers with small plots to supply food for
government institutions such as schools, hospitals, and other workplaces and to
hire local people directly to prepare fresh food in those institutions, rather than
buy prepared food from big corporations. They can push governments to buy
other goods and services as locally as possible.xv Even if the cost were slightly
higher, they would reap savings from a more prosperous citizenry. Internationally,
they can fight the World Trade Organization’s policies that make local contracts
illegal by labelling them as ‘preferential treatment’ of local companies over transnational corporations. It should never be unlawful to support small producers
over big corporations.
Taxing harmful products and services to discourage their production and use
There are many potential sources of funds for investment in basic needs and
wellbeing. Taxes and surcharges on cars, petrol, and parking could raise funds to
improve public transport. Why is the United States the only industrialized country that does not tax petrol heavily? Why do some countries continue to subsidize
petrol rather than directly subsidizing bus fares? It makes little economic, and
even less environmental, sense to continue to promote the use of the car as the sole
xv That is, they can unless they have signed a trade treaty that prohibits them from ‘favouring’ local over transnational businesses.
MYTH#10: CORPORATE PROSPERITY BENEFITS ALL
242
means of getting around, when less expensive, less polluting, and less restrictive
options exist. The idea holds true for parking charges, which are more acceptable
when used to maintain local sidewalks, bicycle lanes, and parks.
Various American cities are considering raising taxes on sugar-sweetened beverages. Such drinks contribute to ill health, including diabetes. Their production
harms the environment, as does the disposal of the bottles in which they come.
They represent wasted spending, as tap water is a less costly, healthier, and environmentally better alternative. In November 2014, Berkeley, California followed
the example set by Mexico in raising taxes on sugar-sweetened beverages. Sales
have declined already in Mexico because of the tax.73 The Navajo Nation in the
United States has raised its tax on food with little or no nutritional value.74
In a growing number of countries, a surtax added to tobacco, and sometimes to
alcohol, products goes into a health promotion foundation. An important lesson
from efforts to increase tobacco taxes is that they prove more popular when the
money collected goes into a specific program for which the public can easily
understand the benefits, rather than into general revenues. A similar type of
approach could support work on other health issues that are both amenable to
prevention-based approaches and caused by harmful products. Tax increases
would be far more palatable if it were clear that savings or other benefits enjoyed
by a wide range of people would offset the higher prices.
Funds to improve the quality of tap water, and water delivery in general, could
come in part through a high tax on bottled water. In the United States, corporate
advertising has convinced people that bottled water is safer than tap water, even
though tap water is perfectly safe. Indeed, in many places, the bottled water is no
more than tap water with a fancy bottle and label attached! Ever notice how nobody
in movies and on TV these days drinks tap water, but characters often drink
bottled water? Bottled water companies also frequently sponsor film festivals,
including the Toronto and London film fests, as well as various sporting events.75
As a result of all the advertising and promotion, three of four Americans drink
bottled water, while one in five drink only bottled water.76 In 2011, Americans spent
$21.7 billion on bottled water.77 That amount is more than a fourth of what the
government spends on building, operating, and maintaining the infrastructure for
water and wastewater.78 Even in countries where the tap water is not safe, bottled
water may be no better. Most bottled water is not tested for quality. Since the poor
cannot usually afford bottled water anyway, taxing it can contribute in some small
way to narrowing inequality, especially where the tax is used to improve the
provision of safe water to the public.
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BEYOND APOLOGIES
Those working on behalf of the poor, or for a better environment, or for other
social causes, spend a lot of time seeking funds from governments, foundations,
and other sources. They tend to spend much less time on campaigns to convince
governments to stop giving money to the rich and corporations by eliminating tax
breaks. They are almost universally silent on the need to prohibit tax havens, such
as offshore registration. They do not generally complain about the high proportion of the budget that goes to the military and to other harmful or useless sectors,
while health, education, general welfare, and environmental protection are
consistently given short shrift. With a few exceptions, such as a historic effort to
raise taxes on tobacco and a growing movement to raise them on sugar-sweetened
beverages, they are silent about the need and potential of raising taxes on various
harmful products, such as fuel and the automobile, to help pay for the costs their
consumption engenders. Any harm to the poor from such policies can easily be
countered by subsidizing needed products that are not widely consumed by the
rich, e.g. certain staple foods, public transportation, or public housing. People
need to stop accepting budgetary shortfalls as inevitable. Activists should
campaign to end government support to corporations, to reduce military spending, and to raise corporate taxes, while also campaigning for the resulting
increased savings/revenues to be invested in programs to improve wellbeing.
Other ways to encourage the small and local
Various actions can support a move away from subsidizing large corporations and
towards building local prosperity. Local currencies, such as those discussed in the
Myth about economic growth, could generate local wealth and keep it in the
community. Small local businesses can create their own insurance pools, rather
than buying expensive policies from large, ‘one-size-fits-all’ companies. Loans
made available through local credit unions and the creation of a directory of
community services can encourage the establishment of local businesses, artisans,
and professionals. Employees can chip in to a common loan fund from which their
colleagues can then draw low- or no-interest loans.
People can convert unused land – including in their backyards – into community
gardens, where others without access to soil can have a small gardening plot.
Cooperatives of artisans, repair people, and other services can help keep work and
profits in the community. Small food producers can create local markets.
Whatever action one takes, it is important to publicize the benefits of small, locally
owned businesses that provide employment to local people, pay local taxes to
maintain local infrastructure and social services, meet local social and environmental standards, participate in the community, and compete fairly with similar
businesses.
MYTH#10: CORPORATE PROSPERITY BENEFITS ALL
244
It is also possible, at least to some extent, to change the nature of large corporations. Activists at Citizen Works in the United States (founded by Ralph Nader)
are working to change the law in order to prohibit corporations from engaging in
profit-making practices that harm human rights, public safety, the environment,
the dignity of their employees, or the communities in which the corporation
operates.79 The first step is to challenge the premise that corporations must focus
on returning high dividends to their shareholders. This has required new laws.
According to CitizenWorks, For Benefit Corporations (or b-corps) are “a new class
of corporation that are required to create a material positive impact on society and
the environment and to meet higher standards of accountability and
transparency.”80 By defining themselves as For Benefit Corporations, companies
can put socially beneficial goals ahead of maximizing shareholder value. Maryland was the first American state to allow b-corps, which by law must provide
public benefits such as ‘preserving the environment’ and ‘improving human
health.’ When Maryland b-corps make decisions, they must consider not only
shareholder or investor value, but also ‘community and societal considerations’
and ‘the local and global environment.’ According to the Business Alliance for
Local Living Economies, three more American states (Vermont, New Jersey, and
Virginia) have passed laws allowing b-corps, and several others have introduced
similar legislation.81 There is a long way to go, but times are changing.
Activists can make use of the power of the corporate logo. Since corporations are
eager to defend their corporate image, attacks on the logo can prove effective in
getting corporations to change their practices.
Another promising innovation is ‘slow money,’ which promotes investment in
local farmers. Among its goals are the promotion of investments close to where the
investor lives, encouragement of companies to give away half of their profits, and
an increase in the organic matter in soil.82
We may never again see the milkman delivering glass bottles to people’s doorstep.
The soda fountain at the corner drugstore may have disappeared forever. But
thriving local economies can re-emerge from the ashes, and the remaining vestiges
of such a local economy, where it does continue, can be encouraged rather than
deliberately extinguished.
245
BEYOND APOLOGIES
Notes
Testimony to the Senate Armed Services Committee on his proposed nomination for
Secretary of Defence, 15 January 1953. See, for instance, the GM Heritage Center,
https://history.gmheritagecenter.com/wiki/index.php/Wilson,_Charles_E
2 “Open Letter to North American Christians,” cited in Noam Chomsky and Edward S.
Herman, The Washington Connection and Third World Fascism (Boston: South End Press,
1979).
3 Paul Krugman, The Return of Depression Economics and the Crisis of 2008 (New York,
London: Penguin Books, 2008).
4 Just a few examples: Marion Nestle, Food Politics: How the Food Industry Influences
Nutrition and Health (Oakland: University of California Press, 2007); Eric Schlosser, Fast
Food Nation: The Dark Side of the All-American Meal (New York: HarperCollins, 2002);
Michael Pollan, The Omnivore’s Dilemma: A Natural History of Four Meals (New York:
Penguin Books, 2007); Allan Brandt, The Cigarette Century (New York: Basic Books, 2007);
Tara Lohan, ed., Water Consciousness (San Francisco: Independent Media Institute, 2008);
the Center for Science in the Public Interest on fast food (www.cspinet.org); and Barbara
Kingsolver, Animal Vegetable Miracle (New York: HarperCollins, 2007).
5 Some of the many writers to address these themes are Greg Palast, Noam Chomsky,
Michael Moore, Molly Ivins, Naomi Klein, David Korten, and John Kenneth Galbraith.
6 Stephen Bainbridge, “Case Law on the Fiduciary Duty of Directors to Maximize the
Wealth of Corporate Shareholders,” Stephen Bainbridge’s Journal of Law, Politics, and Culture,
5 May 2012. www.professorbainbridge.com accessed 8 August 2014.
7 Alistair Barr, “Golden Coffins, Golden Offices, Golden Retirement,” MarketWatch, 13
May 2009.
8 “Sneak Peeks at ‘Wal-Mart: The High Cost of Low Price’, Alternet, 26 October 2005.
http://www.alternet.org/story/26976/sneak_peeks_at_%22wal-mart%3A_the_high_cost_of
_low_price%22
9 Walmart, “Our Story,” www.corporate.walmart.com, accessed 28 April 2014.
10 Nick Hanauer, “Why Capitalism has Nothing to do with Supply and Demand,” Making
Sen$e, 28 July 2014.
11 Clare O'Connor, “Walmart's Billionaire Owners $1.6 Billion Richer As Big-Box Giant
Takes On Banks,” Forbes, 10 October 2012.
12 Bonnie Kavoussi, “Walmart's CEO Paid 1,034 Times More than the Median Walmart
Worker: PayScale,” The Huffington Post, 20 March 2013.
13 Greg Palast, The Best Democracy Money Can Buy (New York: Plume Printing/Penguin
Books, 2003).
14 “Measuring the Impact of Wal-Mart on the U.S. Economy,” Global Insight, Inc., 4
November 2005.
15 Catherine Ruetschlin, “Retail's Hidden Potential: How Raising Wages Would Benefit
Workers, the Industry and the Overall Economy,” Demos, 19 November 2012.
16 Stephen Moore, “The Future of Social Security for This Generation and the Next,”
Testimony to the Committee on the Budget, United States House of Representatives, 30
June 1999.
17 Bangladesh Road Transport Authority, “Number of Registered Motor Vehicles in Dhaka
1
MYTH#10: CORPORATE PROSPERITY BENEFITS ALL
246
(Yearwise).” http://www.brta.gov.bd/images/files/statistics/stat_dhk_08-14.pdf
18 Forbes, “The World’s Biggest Public Companies,” http://www.forbes.com/global2000/list
accessed 8 August 2014.
19 Walmart, “Global Responsibility,” http://corporate.walmart.com/global-responsibility
accessed 8 August 2014.
20 Jim Yardley, “Garment Trade Wields Power in Bangladesh,” The New York Times, 24 July
2013.
21 Unusually, the collapse garnered several front-page articles in The New York Times and
continues, at least to some degree. “One Year after Rana Plaza,” The New York Times, 27
April 2014.
22 Ifty Islam, "Post-Rana Roadmap," presentation at La Vita, Lakeshore Hotel, 30 April
2013.
23 Islam, "Post-Rana Roadmap."
24 Testimony of Kalpona Akter, Executive Director, Bangladesh Center for Worker
Solidarity, Senate Foreign Relations Committee, Labor Issues in Bangladesh, Washington,
DC, 6 June 2013.
25 See, for instance, the website of the Bangladesh National Garments Workers Federation,
http://www.nadir.org/nadir/initiativ/agp/s26/banglad/index.htm
26 Tax Justice Network, “Transfer Pricing,”
http://www.taxjustice.net/topics/corporate-tax/transfer-pricing/ accessed 13 May 2014.
27 Lucy Komisar, “Corporate Tax Evasion via Offshore Subsidiaries: A Primer,” Reclaim
Democracy, 9 April 2004.
28 Komisar, “Corporate Tax Evasion.”
29 Citizens for Tax Justice, “The Sorry State of Corporate Taxes: What Fortune 500 Firms
Pay (or Don’t Pay) in the USA and What they Pay Abroad – 2008 to 2012,”
http://www.ctj.org/corporatetaxdodgers/sorrystateofcorptaxes.php accessed 15 March
2014.
30 Mark Gongloff, “U.S. Companies Lobbying Furiously To Save Corporate Tax Loopholes:
Study,” Huffington Post, 18 June 2013.
31 Joshua Holland, The Fifteen Biggest Lies About the Economy and Everything Else the Right
Doesn’t Want You to Know About Taxes, Jobs, and Corporate America (Hoboken, New Jersey:
John Wiley & Sons, Inc., 2010).
32 David C. Korten, When Corporations Rule the World, 2nd Edition (Bloomfield, Connecticut
and San Francisco:: Kumarian and Berrett-Koehler, 2001).
33 Tom Chatfield, “Apple’s Fashionable Seduction,” BBC Life: Connected, 26 October 2012.
34 Luke Landes, “Resist Planned Obsolescence or Accept the Financial Consequences,”
Forbes, 6 November 2012.
35 Landes, “Resist Planned Obsolescence.”
36 Daniel DiClerico, “The 'Light Bulb Conspiracy' Probes Planned Obsolescence,”
Consumer Reports, 27 October 2011.
37 Landes, “Resist Planned Obsolescence.”
38 Pollan, The Omnivore’s Dilemma; Greg Critser, Fat Land: How Americans Became the Fattest
People in the World (Boston: First Mariner Books, 2004).
39 Ross Hammond, “The Economic Costs of Obesity,” Brookings, 14 September 2010.
247
BEYOND APOLOGIES
www.brookings.edu
40 Nancy Huehnergarth, “Water Is the Enemy, Gatorade Mobile Game Tells Youth,”
Huffington Post blog, 1 August 2014.
http://www.huffingtonpost.com/nancy-huehnergarth/water-is-the-enemy_b_4557456.html
41 Nate Berg, “Radiating Death: How Walmart Displaces Nearby Small Businesses,” The
Atlantic 14 September 2012.
42 Jeff Milchen, “The Benefits of Buying Locally.” Reclaim Democracy!
http://reclaimdemocracy.org/local_business_benefits/ accessed 28 April 2014.
43 Pasha Farmanara, “Small Shops Already Feeling the Crunch from 7-Eleven,” The
Villager, 14 November 2013.
44 The Institute of Local Self Reliance (www.ilsr.org/key-studies-walmart-and-bigboxretail/#6) has links to studies on the issue.
45 Good Jobs First, “Harms of Big Box Retail,” (http://www.goodjobsfirst.org/) accessed 28
April 2014.
46 Stacy Mitchell, “Local Ownership Makes Communities Healthier, Wealthier and Wiser,”
http://www.ilsr.org/local-ownership-healthier-wealthier-wiser accessed 18 July 2012.
47 Troy C. Blanchard, Charles Tolbert, and Carson Mencken, “The Health and Wealth of
US Counties: How the Small Business Environment Impacts Alternative Measures of
Development,” Cambridge Journal of Regions, Economy and Society (2012), 5:149–162.
48 Troy Blanchard and Todd L. Matthews, “The Configuration of Local Economic Power
and Civic Participation in the Global Economy,” Social Forces 84.4 (June 2006):2241-2257.
49 Stephan J. Goetz and Anil Rupasingha, “Wal-Mart and Social Capital,” American Journal
of Agricultural Economics 88.5 (2006):1304-1310.
50 Alexandra Hartmann, “Some Tunisians Still Waiting for Revolution, Aljazeera, 17
December 2013.
51 Thom Hartmann, “To Restore Democracy: First Abolish Corporate Personhood,” Thom
Hartmann Program, 31 December 2001.
52 Hartmann, “To Restore Democracy.”
53 Hartmann, “To Restore Democracy.”
54 “Big Pharma Spends Over €40 million per Year Lobbying in the EU, Dwarfing Public
Health NGOs,” Corporate Europe Observatory, 28 March 2012.
55 Douglas A. McIntyre and Alexander E. M. Hess, “The Ten Companies Making the
Biggest Political Donations,” 24/7 Wall St, 2 July 2012.
56 Dan Roberts, “Supreme Court Strikes Down Cap on Overall Campaign Contributions,”
The Guardian, 2 April 2014.
57 “Ballinger Says CSR Is a Fraud That Undermines Worker Rights,” 21 Corporate Crime
Reporter 22, 24 May 2007. http://www.corporatecrimereporter.com/ballinger052407.htm
58 Hartmann, “To Restore Democracy.”
59 DemocraticUnderground.com, “Thomas Jefferson's Failed 11th Amendment -- A Check
on Corporate Power,” http://www.democraticunderground.com/101636229 accessed 12
February 2013.
60 Monte Paulsen, “How to Build Better Homes in Three Simple Steps,” Canadian
Geographic, June 2012.
61 Jamie Doward and Mahtab Haider, “The Mystery Death, A Town in Uproar and a $1bn
MYTH#10: CORPORATE PROSPERITY BENEFITS ALL
248
UK Mines Deal,” The Observer, 3 September 2006.
62 See, among others, www.upsidedownworld.org and www.multinationalmonitor.org.
The information is easy to find; simply search on the Internet for “Guatemala human
rights death squads corporations” or some such combination.
63 David M. Barrett, “Congress, the CIA, and Guatemala, 1954,” Central Intelligence
Library, https://www.cia.gov/library/center-for-the-study-of-intelligence/kent-csi/
vol44no5/html/v44i5a03p.htm
64 For example, Matthew Creamer, “How You'll Advertise in a Newly Capitalist Cuba,”
AdAge, 13 June 2011.
65 One among many: Christopher Helman, “What Does Chavez's Death Mean for
Venezuelan Oil Giant Pdvsa?” Forbes, 5 March 2013.
66 Cited in Korten, When Corporations Rule the World.
67 Jane Jacobs, The Death and Life of Great American Cities (New York: Random House and
Vintage Books, 1961).
68 Mitchell, “Local Ownership Makes Communities Healthier.”
69 Luke Harding, “A Bombay Lunchbox,” The Guardian, 24 June 2002.
70 Shaila Dewan, “Who Needs a Boss?” New York Times Magazine, 25 March 2014.
71 UNDP Department of Economic and Social Affairs, Rethinking Poverty: Report on the
World Social Situation 2010 (New York: UNDP, 2009).
72 If you want to read the story about this action, see Issue 2 of the NCD and Poverty
Research Network Newsletter (April 2014), available on the website: www.healthbridge.ca
73 Mike Esterl, “Berkeley Voters Approve Tax on Sugary Drinks,” The Wall Street Journal, 5
November 2014.
74 Felicia Fonseca, “Navajo Nation President Approves Junk-Food Tax,” Santa Fe New
Mexican, 21 November 2014.
75 “Water Marketers Haven’t Bottled Up Spending,” IEG Sponsorship Report, 12 January
2009.
76 Kelle Louaillier, “Thinking Outside the Bottle” in Tara Lohan, ed., Water Consciousness
(San Francisco: Independent Media Institute, 2008).
77 Charles Fishman, “U.S. Bottled Water Sales Are Booming (Again) Despite Opposition,”
National Geographic NewsWatch, 17 May 2012.
78 The total spent on maintenance of infrastructure was $84 billion in 2005, according to
the American Water Works Association:
http://www.awwa.org/legislation-regulation/issues/infrastructure-financing.aspx accessed
6 September 2013.
79 See www.citizenworks.org
80 See http://www.bcorporation.net
81 “Benefit corporations are producing shareholder value and have a positive impact on
society and the environment.” Business Alliance for Local Living Economies, 10 May 2011.
The states that are considering them are California, Colorado, Hawaii, Michigan, New
York, North Carolina, and Pennsylvania.
https://bealocalist.org/benefit-corporations-are-producing-shareholder-value-and-have-po
sitive-impact-society-and-environment
82 Slow Money, https://slowmoney.org/ accessed 7 September 2014.
MYTH #11: Countries Should First Get Rich,
Then Worry about Health and the Environment
“...the purpose of economics is to find out how to increase human welfare. Human
welfare is a complex condition, the increase of which involves far more than the mere
maximisation of production and consumption. Welfare has to do with health and human
needs, with mental, emotional and spiritual matters, as well as with physical wellbeing
and with social and environmental issues.” – Paul Ekins1
“When you look at the world in that way – from the standpoint of: ‘What are our most
fundamental needs?’ – then it just seems crazy that we use air, water and land as a
garbage can to dump our most toxic chemicals.”
– David Suzuki2

Does it Make Sense to Sacrifice Wellbeing for Money?
How one looks at public health and the environment varies greatly depending on
whether one focuses on economic growth or on wellbeing. According to the
economic growth model, wealthier societies have the resources to provide better
health care and better living conditions for their citizens. Wealthier societies also
have the motivation and resources to preserve the environment. Poorer societies,
on the other hand, are struggling for survival and so cannot afford to worry about
health or their natural surroundings.i Make money first, this conventional view
argues, and the rest will take care of itself. Unfortunately, this view promotes
comfort for those who already have it and dangerous procrastinationfor everyone
else.
Can we have prosperity if people and the environment are not healthy?
An estimated one and a quarter million people around the world die each year as
a result of traffic crashes; an additional twenty to fifty million suffer non-fatal
According to something called the ‘Kuznets environmental curve’, economic growth will
eventually lead to concern for the environment. As people gain material wealth, they start
to show concern for clean air and water and for attractive environments, and to believe in
the importance of standing forests and of preserving wildlife and their habitats. Thus, this
model suggests, if one can simply nurture growth in per capita income then environmentalism will follow suit. But that process of gaining enough wealth to care about the environment can take decades or even centuries, by which time there might not be much of
anything left to save. Kahn points out that there are shortcuts wherein an active civil society
can raise demand for environmental protections even where per capita incomes are
extremely low. See Matthew E Kahn, Green Cities, Urban Growth and the Environment
(Washington, DC: Brookings Institution Press, 2006).
i
MYTH#11: COUNTRIES SHOULD FIRST GET RICH
250
injuries, including lifetime disability. Internationally, for those aged fifteen to
twenty-nine, years, traffic injuries are the leading cause of death.3 Diseases directly
linked to air pollution are another leading cause of premature death, responsible
for more than three million early deaths annually.4 That number was 800,000 just
a decade earlier. For the first time, air pollution ranks in the world’s top ten list of
causes of death.5
More driving and higher speeds mean more crashes, worse air pollution, and less
physical activity; wider roads mean less space for farmland and green space. Yet
when it comes to the choice between promoting transport systems that would
reduce driving (focusing on trains, light rail, good infrastructure for walking and
cycling, and policies that make driving more costly) or promoting the use of cars
(building more roads, widening existing ones, adding more flyovers and elevated
expressways), transport planners and funders opt for the latter. They claim that
economic growth requires more infrastructure for cars and trucks rather than for
people. There is, they say, a necessary trade-off between the economic benefits of
roads and their negative consequences.ii Similarly, every mine, every polluting
industry, and every attempt to resist improved workplace safety is justified based
on economics; illness and death are simply the price of doing business (‘collateral
damage’ is another phrase often used). Damage to health and the environment is
justified as long as it contributes to prosperity; attempts to protect health and the
environment are unwarranted brakes on economic progress.
In order to make the case for protecting health despite the economic incentives to
create conditions that worsen it, researchers have carried out a number of studies
to estimate the economic costs of disease, disability, and environmental pollution
– and the benefits of a radically different approach. Here are some of the results:
 Asthma is the fourth leading cause of work absenteeism among American
adults. Nearly fifteen million workdays are lost or are less productive due to
asthma attacks in workers. As a result, asthma leads to $18 billion in direct
costs in the United States alone: $10 billion for hospitalization and $8 billion
for lost earnings due to disease or death.6
 Air pollution in China cost the economy an estimated $112 billion in 2005.7
 The direct and indirect costs of overweight and obesity in Australia were
estimated at $56.6 billion in 2005.8 The cost of treating obesity in the United
States for one year is about $147 billion.9
Among other places, I heard this argument repeatedly at the ADB Transport Forum,
which was supposedly focused on sustainable transport. ADB Transport Forum, Manila,
15-19 September 2014.
ii
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 The health consequences of tobacco use in the United States cost more than
$289 billion each year: at least $133 billion in direct medical care costs for
adults and more than $156 billion in lost productivity.10
 Traffic crashes worldwide resulted in an estimated economic cost of $518
billion in the year 2000.11
 More than $100 trillion in public and private spending could be saved by 2050
if there were a global expansion of public transportation, walking, and cycling
in cities.12
The fact that the case for health and the environment needs to make use of
economic costs is frustrating. If some form of Gross National Wellbeing were the
common measure rather than GDP, their importance would be self-evident. Meanwhile, despite the availability of statistics like those above, the importance of
promoting a healthy environment still has not made its way into mainstream
economics. As James Robertson, writer and speaker on economic and social
change, remarks, “The idea that the development of healthier people, and the
creation of a social and physical environment which enables people to be healthy,
might be treated as productive investment in a society’s capital assets, as the development of its most important resources (its people) is alien to conventional
economics.”13 Even more alien is the idea that people are valuable simply because
they are human.
The importance of the environment to human wellbeing should also transcend
monetary figures. In his film An Inconvenient Truth, former United States vice
president Al Gore displays a scale that weighs gold bars against the earth. Yes, the
gold bars look tempting, but it obviously makes no sense to sacrifice our planet for
them. One cannot destroy the environment and then buy one’s way out of the
destruction. Yet, while people may acknowledge the need to save the environment
in a general sense, for any single decision they typically view ‘the economy’ as
more important. People have already sacrificed much for the economy, why not a
little more? It is not possible to return to a pristine state of nature. It is no easy
matter to decide how much of one’s comfortable lifestyle (for those who have one)
and ambition to live better, in a material sense, one should sacrifice to avoid doing
a little more damage to the planet.
But it is unwise to forget Gore’s scale entirely. Economic growth, as measured by
growth in GDP, necessarily takes a toll on the environment. This includes climate
change that scientists have tied to all the carbon dioxide and methane generated
from transport, industry, and livestock. It includes environmental damage that
results from paving over the countryside to make space for industry. It results
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252
from the continuous building of more roads and highways. It results from power
plants that generate power in environmentally damaging ways, and from the
creation of ever greater amounts of waste. These are not trivial concerns that we
can postpone to a future day when countries will be better able to afford to
address them. The environment affects people’s health and overall wellbeing
today. It is not a separate entity; it is the space that people inhabit. It is not that
people should save the environment out of a sense of goodwill or charity; it is the
environment that enables life to exist on the planet.
I face these issues almost daily in my career. The low importance given to public
health affects everything that I try to do.iii People working on tobacco control are
told that reductions in tobacco use will harm national economies. It is difficult to
raise the possibility of restricting the promotion of soft drinks and fast food, so
large and powerful is the industry that profits from their sale. According to the
Federal Trade Commission, American food companies spent nearly $2.3 billion on
advertising and promotions targeting children in 2006.14 While some progress is
occurring in the United States on calling attention to the problematic nature of
offering children’s games in fast food meal packages and seeking to restrict them,
the latest government measures on this issue are only voluntary. Anyone who
dares to suggest that measures should be implemented to reduce the use of and
need for automobiles in cities is likely to become the target of ridicule. People are
encouraged to defend their ‘right’ to respond to advertising by shopping, yet it is
somehow unpatriotic to call for measures that would protect people’s health from
the effects of those same ads. In most settings, money talks far more loudly than
does health.
Wouldn’t economic growth lead to better health outcomes?
Wealthier individuals in any country, and wealthier countries overall, tend to have
better overall health outcomes than do those with fewer material resources. This
stems from, generally speaking, a combination of better living conditions and
higher expenditures on health. However, there are enough exceptions to make it
clear that low-consumption countries can do as well as the high-consumption
That health (e.g. creating the conditions that allow an entire population to be healthy) is
considered to be less important than medicine (treating individuals for their ailments) was
obvious to me while I was getting my Masters degree. The Harvard School of Public Health
had an unattractive campus, an ugly cafeteria that served bad food, and few amenities. The
Harvard Medical School next door had gorgeous buildings, a beautiful cafeteria with good
food, and a gym which the ‘poor cousins’ in the public health school were ‘generously’
allowed to use.
iii
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ones if they prioritize health rather than economic growth. The United States
government spends $3,076 per capita on health care; only a handful of countries
spend more. In terms of total health spending (government plus individual), the
United States spends $6,719 per capita on health care, more than almost any other
country and surpassing other big spender countries such as Luxembourg and
Monaco. In terms of life expectancy, however, the United States does far worse
than many other countries. High-consumption countries that spend less on health
than the United States, but whose governments provide health care directly, do
better because they do not need to support a bloated insurance bureaucracy.
Canada, for instance, spends fifty-eight percent of what the United States does on
health but has two and one half more years of life expectancy, thanks to a more
socialized system of health care delivery. Cuba excels in terms of health outcomes;
its life expectancy is higher than that in the United States, and yet it spends less
than six percent of what the United States does on health care. These comparisons
are shown in Figure 6.15
Other low-consumption countries with socialized systems of health care delivery
– including Sri Lanka, Costa Rica, and Vietnam – have, like Cuba, achieved high
levels of health. But Cuba is the extreme case. Even the World Bank paints a rather
rosy picture of Cuba: one hundred percent literacy, a life expectancy at birth of 79
years, and less than two percent unemployment.16 (Where Cuba performs less
well is in maternal mortality, though its rate is still considered ‘low’.17)
Figure 6: National Comparisons of Per Capita Health Expenditure and Life
Expectancy
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Treating health as a commodity rather than as a human right that should be available to all, regardless of ability to pay, is a market-based approach that is more
conducive to GDP growth than it is to improved wellbeing. It is important to keep
in mind the lack of a direct connection between wealth and health when deciding
whether to develop one’s economy by increasing industry, expanding mining, or
engaging in various other practices that, while contributing to GDP and possibly
generating jobs, also harm the environment. It is probably preferable to work in a
coalmine than to starve, but that is not necessarily the real choice that people face.
Because pollution is causing an increasing number of deaths, it needs to be seen as
a real threat to health, rather than as a minor inconvenience.
Finally, it is helpful to remember who benefits from the economic growth
promoted at the cost of health and the environment, and who suffers most from
the damage. It is easy for the rich and powerful to disregard the natural environment when they feel safely ensconced in the artificial one that they have created
with their wealth; not so for those who must live in a degraded environment.
* * *
Self-interest is a great motivator. When the wealthy create their own systems of health
care, education, security, transport, and so on, they have no incentive to work to improve
the public system that others have no choice but to utilize. At a discussion of the
extremely poor conditions for pedestrians in Manila, I asked a senior sustainable transport specialist at the Asian Development Bank whether he would be more motivated to
work to improve walking conditions if he walked the kilometre to work rather than using
his car. “Yes,” he replied. The rich opt out; the poor are left to suffer.
* * *
Medical care and medicine for the highest bidder
An important part of the ‘recipe’ for economic growth is the privatization of basic
services, including health care. Many people also argue that health care is better
left to private companies whose need to make money will ‘ensure’ that it is of good
quality. Although health is, of course, about much more than medical care, the
type of care that is accessible is critically important. When medical care is privatized, it becomes unaffordable to the poor. There can thus be a direct trade-off
rather than a convergence between economic prosperity and wellbeing. GDP can
increase while the poor have less, rather than more, access to good health services
(as well as to a good environment and other conditions that they need to stay
healthy). In Paul Farmer’s words,
A preferential option for the poor, and all perspectives rooted in it, also offers a way
out of the impasse in which many of us caregivers now find ourselves: selling our
wares and services only to those who can afford them, rather than making sure that
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they reach those who need them most. Allowing ‘market forces’ to sculpt the
outlines of modern medicine will mean that these unwelcome trends will continue
until we are forced to conclude that even the practice of medicine can constitute a
human rights abuse.18
The responsibility of the physician goes far beyond simply serving those who can
afford her services. When a physician limits her practice to those patients who can
afford to pay and ignores the needs of the poor, she is herself, argues Farmer,
guilty of human rights abuse: she is in the position to deliver health care to those
in need but refuses to do so.
The idea of forcing users to pay for health care rather than making it a provision
of the government is bad economics because it will increase poor health. The
opposite is also true: experience in Nepal, for instance, found a doubling or more
in use of medical services when provided at no cost instead of at even nominal
fees.19 If health and wellbeing are important, then economic arguments are
secondary: it makes no sense to save money by denying access to basic health
services.
If treating illness is a lucrative business, then those in the health care business will
have no incentive to support public health measures that create healthier populations. Many governments simply ignore the whole issue of disease prevention.
The recently passed Bangladesh health policy, under debate for years, did not
mention prevention at all until my colleagues lobbied heavily for its inclusion. The
revised version, though far from perfect, does give importance to government’s
role not only in treating disease, but also in preventing it.iv The dentist that I visit in
Bangkok also runs a snack stand that sells exclusively sweet items: a mouthwatering assortment of cakes, biscuits, and sweetened coffee. This makes good
business sense: make money by selling sweets and again by fixing the damage
caused by those sweets. Private hospitals in Bangkok typically have fast food
chains in their lobbies. The practice is widespread when profits are allowed to
trump health, including in the United Kingdom.20 How likely are doctors who
work in hospitals that make money from selling unhealthy foods to counsel their
patients against eating them? How much weight (excuse the pun) does such
advice carry when the fast food industry and hospitals are seen to be compatible
business partners? Some pharmacies no longer sell cigarettes, but what message is
Language in a policy, no matter how good, is of course not helpful if it does not lead to
actual changes in practice. But the language is important because it gives activists a tool
with which to push their cause, which is far more difficult when government policies
completely ignore the issue.
iv
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given when they continue to sell potato chips, candy bars, and soft drinks?v
The drive to maximize profits also leads private health services to treat as many
patients over the course of the day as is possible. ‘Extra’ services such as counselling and other support to ensure a healthier population disappear because they
are, in the short and long term, bad for business.
Focusing on economic growth rather than on wellbeing brings greater profits to
government-subsidized pharmaceutical companies at the same time that inequality and suffering increase. Drug companies argue that they must maintain patents
and high drug prices in order to recoup the investments that they have made in
research and development (R&D) for new drugs. While this implies that the main
goal of pharmaceutical R&D is to develop new drugs to improve health, the facts
indicate that the real goal is to increase the profitability of the companies themselves. Of the more than one thousand new drugs approved by the United States
Food and Drug Administration (FDA) between 1989 and 2000, only fifteen percent
were highly innovative. Of the 137 new drugs under development in 2000, only
one was for sleeping sickness,vi one was for malaria, and none was for tuberculosis
– all diseases that cause debility, suffering, and death for millions of people around
the world every year.21 The reality is that nearly all pharmaceutical R&D focuses
on drugs to treat an increasing number of lesser ailments that affect those who
have the ability to pay for these drugs. Furthermore, although the American
government often pays for much of the research through subsidies, research
grants, and other means, it surrenders to the companies the patents to any drug
that is developed. Even with new drugs, there may have been little by way of
corporate R&D expense. Keeping drug prices high to fund R&D is thus a smoke
screen; the real motive is profit.
In 2000, the pharmaceutical company Glaxo-Wellcome attempted to block the sale
of cheaper generic AIDS drugs in Ghana, despite having made $1.1 billion selling
AIDS drugs during that same year. When the company finally offered a discount
on its drugs, the Minister of Health of India reportedly responded with disdain
that if pharmaceutical companies can afford to offer such large discounts, they
surely must have been charging too much in the first place.22
Recently, one pharmacy in Nova Scotia, Canada, made headlines when it announced that,
as part of a move to sell healthier foods, it would stop selling soft drinks and other sugarsweetened beverages. Graham’s Blog, “Press Release: Soft Drinks and Sugary Beverages,”
http://stonespharmasave.com/blog/?p=560
vi Sleeping Sickness is a tropical disease that, despite its benign nickname, causes
headaches, pain, anaemia, kidney dysfunction, sleeping disorders, and in its more serious
manifestation, mental deterioration and death.
v
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The big pharmaceutical companies talk about ‘responsibility’ and ‘corporate
giving.’ Under the sub-section of its website entitled “Health for All,” (found in the
“Responsibility” section), Glaxo Smith-Klinevii (GSK) talks about “How we are
developing innovative products and improving access to healthcare for patients
around the world” without mentioning affordability.23 The company was blasted
in the United Kingdom for making sizeable profits on a flu vaccine after charging
the National Health Service six times what it had cost to make: the chief executive
of GSK, Andrew Witty, admitted that the swine flu crisis was a “significant financial event [e.g. highly profitable] for the company.”24
Companies can say what they will about their good behaviour; their actions speak
otherwise. Pharmaceutical companies keep prices high enough to make substantial profits even in low-consumption countries. They refuse to allow even limited
suspension of their patents so that those countries could produce generic versions
of essential drugs for local use at very low cost, even where those drugs are
needed to save the lives of millions of people. These are not companies operating
on the brink of profitability for which such measures would lead to bankruptcy.
Pfizer, for instance, recorded first quarter revenues in 2010 of $16.8 billion.25 The
same observations hold true with many other private sector companies that
provide health and medical services. The profitability of the corporations involved
in the provision of health care directly opposes the public’s need for low-cost
essential medicines and other health and medical services. Providing such
services to the highest bidder will increase economic growth and GDP; what it will
not do is improve human wellbeing. And without human wellbeing, what does
economic growth matter?
Whose health matters the most?
Diseases do not affect all parts of a population equally; some diseases, like tuberculosis and AIDS, disproportionately affect the poor and other disaffected populations. Government policies can determine the degree to which vulnerable groups
are protected from – or are made more susceptible to – disease outbreaks. Multidrug and extremely drug resistant tuberculosis (MDR and XDR TB), for example,
tend to be especially rampant among prison populations due to over-crowding.
Therefore, the higher the incarceration rates, the greater the likelihood that the
disease will spread within the prison population, which itself is mostly poor.
vii This is the name that Glaxo-Wellcome took following its merger with SmithKline
Beecham in 2000.
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The results of the ‘criminalization of poverty’ by which governments incarcerate
rather than help many of the poor, combined with the privatization of hospitals,
played out in notable fashion in the major epidemic of MDR TB that broke out in
New York City between 1978 and 1992. Tuberculosis rates nearly tripled over that
time, and rates of MDR TB more than doubled. The greatest numbers of cases were
located in the poorest parts of the city, in neighbourhoods with large immigrant
populations, in prisons, and among the homeless.viii The case rate in central
Harlem – at 222 per 100,000 people – was higher than that found in many lowconsumption countries.26 Most of those who fell ill were young adults (aged fifteen
to twenty-four) and non-white: fifty percent were black, twenty-six percent
Hispanic, and thirty-eight percent were HIV-infected.27 According to the authors
of a study published by the Centers for Disease Control and Prevention, “The loss
of government funding of TB programs in the 1970s and 1980s in New York City
made access to treatment more difficult for poorer sectors of the population (often
non-white patients), likely contributing to increases in disease in these groups.”28
As the authors further note, “During the early part of the TB epidemic in New
York City, TB control was underfunded and highly fragmented.” Budget cuts for
MDR TB programs in the 1980s led to savings of about $200 million. The government only took the disease seriously when it began to spread beyond poor prisoners and minorities and into the general population. By that time, the cost of
addressing the epidemic was over one billion dollars and predicted to exceed that
amount.29 The costs in financial terms were astounding; in terms of damage to
health and wellbeing, they were incalculable. This problem is by no means limited
to the United States: Russian prisons have had, at least historically, notoriously
high rates of MDR TB. For many Russians, a short jail term can mean a death
sentence.30
Cutting corners when facing an epidemic is bad economics, since the cost of
addressing the crisis exceeds the cost of preventing it in the first place. Bad health
is bad economics, since people are less productive when they are sick. Beyond all
the numbers is the simple question of what is valued. Governments tend to run
short of funds when it comes to investing in the poor. Yet they have plenty of
money to spend on weapons. Isn’t it about time that we put people, including the
poor, first?
Outbreaks also occurred in many hospitals, with a fatality rate of over eighty percent;
some health care workers died after contracting the disease, which inevitably spread from
poor to other segments of society.
viii
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Corporate prosperity harms health and the environment
Why does mainstream economics tend to ignore the importance of the environment and health? Speaking at the Eighth Global Conference on Health Promotion
in Helsinki, Finland, Dr. Margaret Chan, Director-General of WHO made strong
statements about the growing contradiction between prosperity as conventionally
measured and good health. Economic growth, modernization, and urbanization
have actually fostered unhealthy lifestyles, she noted, and those who seek to
improve public health face opposition from forces that are “not so friendly.” There
is a direct conflict between the interests of big business and those of health, said
Dr. Chan: “Market power readily translates into political power. Few Governments prioritize health over big business.”31
It has taken an enormous amount of effort and expense to begin to limit the power
of the tobacco industry. Internationally, the advocacy efforts are now starting to
broaden from tobacco alone to the overall epidemic of non-communicable disease
(NCD). Industry is directly responsible for promoting the four major NCD risk
factors: tobacco use, excessive alcohol use, unhealthy diets, and insufficient physical activity.32 As Dr. Chan pointed out during her talk in Helsinki, “It is not just Big
Tobacco anymore. Public health must also contend with Big Food, Big Soda, and
Big Alcohol. All of these industries fear regulation, and protect themselves by
using the same tactics.”33 Added to this must be Big Transport, which supports
extremely expensive investments in car-based infrastructure to the detriment of
health, the environment, and the economy.
The single largest source of calories in the American diet is carbonated soft
drinks.34 An eleven-ounce (325ml) soft drink contains about ten teaspoons (49ml)
of sugar.35 A study of more than 90,000 women found that those who consumed
just a single serving a day of a soft drink or commercial fruit juice had almost twice
the rate of type 2 diabetes than did those who rarely consumed such sweetened
drinks.36 Health advocates have responded to this correlation by trying to limit the
affordability and attractiveness of these beverages. They have tried to limit portion
sizes sold in New York City (an attempt that failed). They have pushed for a
special tax on sugar-sweetened drinks (which have succeeded in Mexico and
Berkeley, California).
As anticipated, the food and beverage industry has consistently countered those
efforts. According to the American Beverage Association’s (ABA) web page on
obesity, “All of our industry's beverages can be enjoyed as part of a balanced
lifestyle.”37 Nor is the industry silent on the subject of possible regulation. In a
script taken directly from the tobacco industry, the ABA runs a blog with categories including “Americans Against Food Taxes” and “Americans For Food and
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Beverage Choice.”38 The bogeymen of the ‘nanny state’ and ‘health Nazism’ are
familiar to those working on tobacco control, and it comes as little surprise to see
them being resurrected by other industries: a typical article calls a proposed tax
on sugar-sweetened beverages “coercive” and “nanny-state-like”.39 Another refers
to “health Nazis” wanting to tax sugar.40 Every single success must involve overcoming these well-funded voices of opposition, because every gain for health is a
loss to industry.
What is true of health is also true of the environment; the focus on economic
growth means that governments often fail to take seriously the environmental
catastrophes caused by industry and instead wink at corporate violations of whatever regulations do exist. When industrial growth is always regarded as being
more important than a clean environment, the damage that ensues is ignored.
Ignoring it does not make it go away. Industry is far more generous about sharing
the damage it creates than it is about sharing the profits such damage generates –
what Paul Krugman calls privatizing gains and socializing losses. The mess industry creates is left for everyone else to clean up or suffer in. A recent example is
British Petroleum’s (BP) handling of the disastrous oil spill in the Gulf of Mexico,
a spill caused by its own negligence and by its successful lobbying of the American
government to prevent the enforcement of reasonable safety measures. According
to The New York Times, regulators had been warning offshore rig operators for
more than a decade of the need for stronger safety measures. There was nothing
new about the accident in the Gulf except its size: between 2001 and 2007, there
were, according to the Times, 1,443 serious drilling accidents, “Yet the federal
agency continues to allow the industry largely to police itself.”41 BP also lobbied
against stricter regulations: “Last year,” the Times article notes,
BP, the owner of the well that blew up in the Gulf, teamed with other offshore operators to oppose a proposed rule that would have required stricter safety and environmental standards and more frequent inspections. BP said that ‘extensive, prescriptive’ regulations were not needed for offshore drilling, and urged the minerals
service to allow operators to define the steps they would take to ensure safety
largely on their own.
Industries lobby, governments listen, and the environment and the public suffer.
Corporate-owned mainstream media contributes to the problem by encouraging
people to be unconcerned about the health of people or of the planet and by
portraying corporations as good global citizens seeking to improve the state of
both. The behaviour of corporations leaves no choice: to prioritize healthy people
and a flourishing environment over the growth of GDP and corporate profit, a
number of measures will be needed to rein in corporate activities.
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Why don’t economic incentives work to preserve health, the environment, and the natural
resource base?
In the laissez-faire, everything-works-out-for-the-best-as-long-as-governmentdoesn’t-interfere model of mainstream economics, people will make rational
decisions when choosing between financial gains and the harm that such gains
may bring about. In terms of health, this model asserts, people will only accept
pollution and disease until they have enough money to afford to mitigate them or
to find less polluting, disease-causing ways to earn more wealth. A low-income
society will thus continue to accept polluting industry until it becomes rich
enough to move the dirtiest factories to a poorer region and let others suffer from
the health problems that such factories cause. The poor will dump raw sewage
and chemicals into water bodies; the rich will be too keen to swim to do so.
* * *
Is it rational to pollute low-consumption countries further? In what has become a famous
memo, in 1991 an internal World Bank document undersigned by Larry Summers, then
chief economist, put forth the ‘logic’ of transferring waste and dirty industries from
industrialized to low-consumption countries. Since the World Bank measures human life
in terms of its earning potential, and since those in low-consumption countries earn less
than those in high-consumption countries, Summers deemed it to make economic sense to
shift pollution and other sources of early death to countries in which human life was seen
to be worth little. “Just between you and me, shouldn't the World Bank be encouraging
more migration of the dirty industries to the LDCs [lesser developed countries]?” asked
the memo. “I think the economic logic behind dumping a load of toxic waste in the lowest
wage country is impeccable and we should face up to that. ... I've always thought that
underpopulated countries in Africa are vastly under polluted; their air quality is vastly
inefficiently low [sic] compared to Los Angeles or Mexico City.” Summers later stated
that he meant the memo to be ironic or as a thought experiment. However, according to
Robert Weissman, president of the American NGO Public Citizen, Summers has
apparently “never explained … how he disagreed with the memo's ‘impeccable,’ if ironic,
logic. Indeed, that kind of logic has guided World Bank policy for decades, as it has
pushed deregulation, privatization and corporate globalization, with horrific results.”42
* * *
A similar process, claim mainstream economists, works to prevent resource depletion. As resources become more and more rare, their prices go up, which will lead
to less use; as such, there will never be a genuine problem of depletion. If
resources remain (somewhat) affordable, then obviously there is still a sufficiently
abundant supply of them and no need to conserve. In fact, however, resources are
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not affordable. The prices of many natural resources have increased dramatically,
and the soaring price of food that led to riots in many countries – and possibly
contributed to the Arab Spring43 – likely stemmed in part from a spike in oil
prices,since the growing and distribution of food is so dependent on oil.ix As to
why oil is not even more expensive, many factors contribute to determining its
price. One is political insecurity in major oil-producing countries. Another is the
need to keep customers addicted to the product so that they do not invest
resources in other, renewable sources or find ways to get by on less. When the
price of oil rises too high, people cannot afford to buy it and so sales decline. If
prices remain too high, or if prices increase in sudden spurts, countries would
presumably shift to less energy-intensive ways of doing business. The price therefore needs to be kept high – but not too high.x
During the oil crisis of the 1970s, American President Jimmy Carter suggested that
people wear sweaters indoors to reduce their need to use heating oil. When the
Soviet Union collapsed and Cuba could no longer get cheap oil, the use of bicycles
greatly expanded. In both cases, oil industry supporters ridiculed the suggested
use of alternatives – sweaters and bicycles – as being unnecessary and harmful to
economic growth. More typically, governments respond to price hikes by providing subsidies which shield consumers from the ‘signal’ they would otherwise
receive from price hikes. Not only do such subsidies distort consumer behaviour
(by not allowing them to respond to the real price), but they increase debt and lead
to chronic fund shortages.xi Certainly, governments should subsidize the poor, but
while fuel subsidies may keep bus fares from going up, they give the most benefit
to the rich in their private cars. Indonesia, for example, spent about $20 billion on
fuel subsidies in 2012, and the projected subsidies for fuel and electricity in 2013
were about $32 billion, twenty percent of the total government budget. That figure
Other reasons for high food prices include climate change and soil depletion because of
industrial agriculture. See Nafeez Ahmed, “Why Food Riots are Likely to Become the New
Normal,” The Guardian Earth Insight blog, 6 March 2013.
x The price is in fact too high, but like the frog that boils to death gradually without noticing,
so gradual increases in price have prevented many from noticing how unaffordable fuel
actually is. The historic relationship between high oil prices and recession/depression tends
to be ignored. See Richard Heinberg, The End of Growth: Adapting to Our New Economic
Reality (Gabriola Island, BC, Canada: New Society Publishers, 2011).
xi This is one of the few places where I agree with the World Bank and some mainstream
economists – except that I think that the poor should be protected from the harm of price
increases by receiving subsidies elsewhere in the economy.
ix
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exceeds what the government spends on capital expendituresxii and social
programs combined.44 Horrific traffic jams in Jakarta are, in a sense, directly subsidized by the government through low fuel prices. Such subsidies fail to allow
people to respond to the price shock of oil hikes and divert government resources
from building a better transport system that would require less fuel to run. If
governments really wanted to protect the poor from high costs, they would simply
subsidize buses directly, with the agreement that the companies would not
increase the fares. They would also introduce congestion charges and parking fees
to make car use more expensive, and use the revenues to improve further the
situation for pedestrians and cyclists, generating a positive cycle and reducing
dependence on fuel.
The combination of political tactics of oil-producing countries and government
subsidies in importing countries prevent a rational response to price hikes, even
where due to declining supply. Similar processes prevent people from responding
in rational ways to poor health and a deteriorating environment. If the wealthy
can opt out of the poor conditions they create by living in less polluted environments or by moving polluting factories to low-consumption countries, then they
have no incentive to reduce pollution. If they can afford to protect their own
health, then they have no incentive to reduce corporate profits in order to protect
the health of others. If they are profiting from local resource booms, they can
ignore, according to Canadian writer Allan Casey, “the inconvenient truth of
poverty amid oil wells and mines.”45 Ever-greater inequality means that there is an
increasingly two-tiered system in which those who profit fail to pay for the consequences of the wealth that they enjoy, while those who struggle to survive are
virtually powerless to shift attention from economic growth to the preservation of
health, the environment, and natural resources.
Technology as a shortcut
If market forces alone are not enough to protect health and the environment, what
about technology, which has achieved amazing results over the past few decades
and particularly the past few years? Mainstream economists and their followers
claim that it is possible to have it all: that technology will save the environment
without people having to change their lifestyles. To some, this thought is appealing. If the river floods, dam it. If fresh water becomes a growing problem as
glaciers disappear, desalinate salt water, which is in abundant supply. If cars
Capital expenditure refers to money spent on items used repeatedly in providing goods
or services such as building a hospital or roads, or purchasing equipment. The contrast is
with current expenditures, which are for quickly used items such as drugs, stationery, etc.
xii
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pollute, run them on biofuel. Call me a Ludditexiii if you will, but it seems that each
technological solution brings new problems in its wake. It is a bit like the patient
who needs drugs to deal with the side effects of her other medications.
Dams provide electricity, water, and some measure of flood control. They also
displace millions of people and completely distort the environment. The water
collected in reservoirs, which is often full of plants from the flooding of the
pre-existing area, is a serious source of gases that contribute to climate change.46
Desalinating salt water is costly, in terms of both money and the fuel required.
Biofuel can be a net loss, given the amount of conventional fuel that is needed to
grow, harvest, and transport the vegetable components of which it is made
(chemical fertilizers are petroleum-based, and farmers these days tend to use
tractors rather than oxen). Growing of corn and other components of biofuel also
takes land away from food crops for people, thereby exacerbating rising food
prices and world hunger. Cars were envisioned as a wonderful technology to free
people from the horse and buggy and to allow residents to escape polluted,
congested cities; television was meant to expand people’s horizons and provide
them with wonderful sources of information. There was once a belief that nuclear
weaponry would make the world safer, as nobody would dare to start a war given
the potentially disastrous global consequences. Human arrogance can lead us into
dangerous territory, suggesting that people can overpower nature or rewire the
world to suit their needs. The tsunami that devastated several Asian countries and
part of Somalia in 2004, hurricane Katrina in the American city of New Orleans in
2005, the tsunami in Japan in 2011, and other extreme weather events are reminders of how powerless humankind remains in many circumstances, no matter how
advanced its technology. Technology can make people’s lives better in many ways,
but it cannot rewrite the fundamental rules of life, including that non-renewable
resources are limited and that pollution has deadly consequences.

The term ‘Luddite’ originally referred to British workers in the early 1800s who
destroyed labour-saving machinery in protest of its introduction, knowing their livelihoods
were threatened. More broadly, it refers to anyone who is opposed to change, especially
technological change. The term is commonly used to put down those who do not believe
that technology can provide miraculous solutions to the woes that, often, technology itself
has caused.
xiii
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Towards a Better Way: Prioritizing Health and the Environment
“Medical education does not exist to provide students with a way of making a living, but
to ensure the health of the community.”
– Rudolf Virchow, one of the founders of social medicine
* * *
Healthier people are better able to take care of themselves and their families; they
lead better lives. The planet sustains humanity; a healthier environment means
healthier people. When wellbeing is the priority, it is obvious that health and the
environment are more important than money. Regulations imposed and money
spent to preserve and improve health and the environment is a net benefit and an
investment, not a cost. Money is of very little use to someone if it obtained at the
price of that person’s health. Economic and health policies would look very different if people felt that it is illness, not health, which is unaffordable. It is time to
reject any definition of prosperity that posits unhealthy people living on a sick
planet, even if it also posits an abundance of material goods mostly accumulating
in the hands of a few.
The need for more and wiser government investments
It is possible to overcome the opposition of a tremendously rich and powerful
corporation. Successes in tobacco control illustrate the possibilities. The success of
a decades-long campaign to ban Nestlé’s marketing of infant breast milk formula
is another example.xiv But corporations are by no means the only culprits in the
poor state of public health and the environment. In too many countries, governments focus on subsidizing industry and giant corporations and fail to invest in
the basic needs of their citizens. They ignore the fact that the social determinants
of health include housing quality, education level, and (to some extent) income.
When they do fund health, governments tend to focus on big hospitals in cities
rather than on easily accessible primary health care centres throughout the country. When the focus is on treatment, prevention is ignored.
If activists succeed at convincing governments to prioritize health instead of
economic growth, then more government funding will be available for appropriate and accessible health care services, particularly at the primary care level, as
xiv As one of the main people involved in the original Nestlé campaign points out, the Swiss
company is still involved in causing disease and death – but this time through its promotion of unhealthy foods. See Mike Muller, “Nestlé Baby Milk Scandal Has Grown up but
Not Gone Away,” The Guardian, 13 February 2013.
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well as for a range of measures meant to increase the population’s health overall.
Health is of great value to people; people bankrupt themselves spending large
amounts of money to treat disease. Governments could thus improve people’s
financial status as well as their health by reducing their need to make personal
expenditures on health care; prevention efforts would also save governments
money in the medium and long term. For example, it is far cheaper to supplement
the diets of pregnant women than to take care of premature infants. As Ryan Meili
explains in his 2012 book A Health Society, democracy itself could be revitalized by
making health outcomes the underpinning of all government policy.47 Nor should
concern about economics serve as an excuse for further deterioration of the environment. Any short-term gains made by those polluting the environment are
more than offset by long-term costs for everyone.
A focus on wellbeing would also help activists to convince governments to make
bigger investments in education, with an emphasis on primary education for the
most disadvantaged groups. Educational levels are related to a range of health
issues, with not only the more prosperous but also the better educated segments
of the population tending to do better in a number of ways. Women with less
education are less likely to use preventive services and are more likely to have
poor health status.48 A review of data from twenty-two low-consumption countries found that women with higher education levels are more likely to get their
children vaccinated.49 Investing in education, especially for women, is likely to
help improve family health and may result in fewer births. Educated societies are
healthy societies.
Comprehensive health policy – which in turn needs to be part of a broader
approach that makes health a key component of all policies – should address
prevention as well as treatment and should treat health as a basic right for all
rather than as a commodity to be purchased by the few. Viewed holistically, health
is not just about providing treatment for disease; it is also about facilitating
healthy lifestyles through the built environment and through other policies that
enable people to have decent housing, safe jobs, sufficient economic support to be
able to afford the basics, and access to healthy foods and pleasant and safe environments for physical activity. The conditions that are necessary for people to stay
healthy in the first place should be put in place: better jobs, income supports,
controls on pollution, and improved infrastructure and services that are used by
the poor. Activists need to support policies that restrict the affordability, attractiveness, and availability of health-harming substances such as cars, fuel, TV, tobacco,
sugar-sweetened beverages and other calorie-dense, low-nutrient foods, and
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excessive alcohol.xv Activists must address the dumping of hazardous substances.
Where governments fail to monitor and publicize pollutant levels, groups need to
push them to do so, and to take effective action to reduce them.
* * *
Universally accessible design: can we afford not to have it? Designing buildings
and transport so that they are accessible to everyone – including the blind, deaf, those in
wheelchairs, those on crutches, the elderly, and all those with some sort of sensory or
physical limitation – is often seen as an unaffordable cost. Designing for those living with
disabilities is vastly cheaper (sometimes no additional expense at all) than retrofitting
buildings and transport to accommodate them.50 Where retrofitting is needed, the costs
need to be balanced against the costs, both economic and opportunity, of denying those
with disabilities the chance to be fully participating members of society. More than one in
seven people worldwide have some sort of disability. Poverty increases the risk of disability, and disability leads to poverty when job opportunities are inaccessible.51
The question is about much more than cost-benefit analysis. As Adolf Ratzka, Founder
and Director of the Institute on Independent Living in Sweden comments, “Although I
am an economist by training, I have difficulties in using economic arguments when it
comes to such basic human rights as freedom of movement and the right to participate in
society on equal terms. Human and civil rights cannot be expressed in dollars and cents.
If our countries can afford to invest billions in the most sophisticated weapons to kill and
disable other human beings, then our governments surely have enough money to invest
in a barrier free society, a more democratic and human society for all.”52
* * *
Government investment should also support a return to traditional farming methods. Governments need to put and an end to highly profitable, highly polluting
Concentrated Animal Feeding Operations (CAFOs). CAFOs are morally abhorrent in the way that they treat the animals, but they also impose an enormous cost
in terms of releasing climate change-inducing methane into the atmosphere and
tremendous amounts of contaminated fecal waste into the groundwater.
Chemical-based industrial agriculture also contributes to pollution, leaking
petroleum-based fertilizers as well as dangerous insecticides and other chemicals
into the world’s waterways. Sadly, and as a direct result of policy rather than pracPolicy measures include higher taxes, better labelling, and bans on advertising, sponsorship, and promotion, among other measures. Ad bans do not cost much to implement, and
higher taxes mean higher government revenues as well as a shift in expenditures away
from harmful products. But even measures that would cost the government money to
implement should be viewed as an investment, not an expense or loss, if they can improve
health and the physical environment.
xv
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ticality, junk food in the United States has become cheaper than healthy food.xvi
Agricultural subsidies in the United States favour crops such as corn and soybeans
that are key ingredients in fast food, soft drinks, and animal feed. Fresh fruits and
vegetables for direct consumption receive no such subsidies.53 Nor is information
about healthy diets easy to come by. In some poor neighbourhoods, food choices
are even worse: fast food outlets completely dominate the food scene and fresh
produce is a rarity.54 As Barbara Kingsolver points out, “In our daily fare, even in
school lunches, we broadly justify consumption of tallow-fried animal pulp on the
grounds that it’s cheaper than whole grains, fresh vegetables, hormone-free dairy,
and such.”55 There is something bizarre about a country as wealthy as the United
States cutting the budget for school-based food programs, debating if ketchup is a
vegetable, and feeling that it is acceptable to feed substandard food to children.xvii
If governments took a longer-term view of the costs and benefits of the policies
that they were enacting, if they prioritized health and the environment instead of
economic growth, then the fallacies of mainstream economics would become clear.
It is a sure indication that an economic system is ‘sick’ when it fails to give priority
to health or to the ability to sustain life on the planet.
An all-of-government approach
One of the reasons that it has been so difficult to make health a priority is that
governments are not a single, monolithic unit, any more than the poor are a homogeneous group. Different sectors of the government commonly work in direct
opposition to each other, and the department or ministry that is responsible for
health is typically far weaker than are the agencies that oversee finance, industry,
and trade. Because human health is not a government-wide priority – while
‘economic health’ usually is – one government agency’s policies and programs
may essentially create or foster the very health problems that other agencies are
then expected to address. The Ministry of Industry, for example, encourages
polluting industries, and the vastly weaker Ministries of Health and Environment
become responsible for the resulting problems. The Ministries of Finance and
This is true elsewhere as well. In Nepal the cheapest snack is not a piece of fresh fruit but
rather packaged, broken noodles with artificial flavourings. In Bangladesh, tobacco can be
purchased for less money than any food item.
xvii When I volunteered at the Boston Food Bank, which collects food that cannot be sold
from grocery stores and distributes it to the poor via social workers, I received training to
check cans to see whether the food inside was safe to eat. I was told to accept bags of sugar
even if torn open as long as no contamination was visible, because sugar was in such high
demand. But we had to throw away all dog food, even if it arrived in good condition from
the donating store, because by law the animal shelters could not accept it.
xvi
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Agriculture may wish to support tobacco production because they see it as an
economic benefit for farmers in terms of income and for the government in terms
of tax revenues; when people become ill from using tobacco, the problem is
shunted to the Ministry of Health.
Overcoming this economics versus wellbeing dichotomy will require that policy
makers take a holistic approach to their investments, so that polluting indu stries,
a frenzy of road building, and encouraging industry at the expense of the population will no longer seem sensible or acceptable. Government departments must
work together to promote wellbeing, rather than each focusing on an issue that, on
its own, is too narrow to guarantee genuine prosperity.
The World Health Organization (WHO) recognizes that “Economic sectors such as
transport, agriculture, and housing have profound impacts on health. For
instance, transport is a major factor in traffic injuries, air pollution, and noise.
‘Healthy transport policies’ can help reduce these risks, as well as promoting
walking and cycling.”56 It has developed a toolxviii to address this issue:
Health impact assessment (HIA) is a set of methods and tools designed to incorporate a health dimension in all public policy. By means of HIA, a policy, programme
or plan may be evaluated for its potential effects on health. … For it to be effective,
HIA should involve all relevant stakeholders, including the affected population, and
participants should be willing to question the value of programmes that are shown
to have a negative impact on public health.57
Economic decisions have health consequences, which in turn have economic
consequences. Economic decision-making cannot continue without involving
those whose obligation it is to improve health. It is time to promote whole-ofgovernment decision-making that acknowledges the inter-relatedness of transport, industry, trade, agriculture, health, and the environment.
Choosing the environment and employment
Recognizing that jobs are important does not mean that people should always be
ready to sacrifice the environment to create more jobs. To the accusation that one
cares more about the environment than about the suffering unemployed, the
correct response is not to back down, but rather to reply, “Actually, I care about
xviii Public input is vital to environment and health impact assessments; they cannot be
safely left to private companies. When I worked as a temporary secretary, I typed an
environmental assessment report written by an engineering consulting firm for the American military. The report discussed whether a planned bomb test in the ocean would affect
local marine life. The response of the highly-trained engineers: fish are smart enough to
swim away.
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both.” Good jobs are jobs that are healthy for the people doing them and for the
environment. People do not need to go along with the assumption that it is necessary to make a choice between jobs and economic prosperity on the one hand and
human and environmental wellbeing on the other. That type of reductionist thinking has gotten us into the current mess; it will not get us out.
There are a number of ways to make existing jobs healthier. One is to improve and
enforce workplace safety. Policies that mandate a shorter workweek (thirty-six or
forty hours/week) would allow more people to be employed, with all people
working fewer hours and thus having more time to pursue other activities that
contribute to their and their families’ wellbeing. Nor would such a shift cause any
reduction in productivity; in fact, it would likely mean a gain. Workers are less
productive and more accident-prone when they are tired, as happens if they regularly work more than forty hours a week. The shorter workweek would thus
benefit not only employees, but employers as well.58
Government policies should not favour large businesses over smaller ones, nor
should they subsidize wealthy corporations to create substandard jobs. The
current practice of subsidising employers through tax benefits and then having to
provide food stamps and other benefits for its workers because the salaries they
pay are too low to live on, is in fact a double subsidy to the corporation at the
expense of the employees. McDonalds has created a website to explain to its
fulltime workers how they can get by on the minimum wage that the company
pays, by holding a second job and spending no money at all on food, clothing, or
heating.59 In the meantime, Don Thompson, the company’s new CEO, receives a
pay package of almost $14 million. The average McDonalds employee would have
to work one million hours to earn as much as Mr. Thompson.60 The jobs created by
the opening of a fast food restaurant or a big box store replace jobs that already
existed in local shops, many of which go out of business when the behemoth
comes to town. The question is not whether a policy will create jobs, but whether
it will create more and better jobs than it replaces, or whether a better alternative, in
terms of job quality and health and environmental effects, already exists.
Governments can support local, intensive industry and repair. In some countries,
this includes making traditional fishing nets, baskets, and other products from
natural materials. In reality, the exact opposite often occurs. In 2002, the Government of Bangladesh closed Adamjee Jute Mill in response to the World Bank’s
complaints about corrupt management at the firm and its insistence that the
company be closed. The mill, which had been operating for more than fifty years,
was the largest jute mill in the country. The jute it processed provided biodegradable local materials and generated employment for about 30,000 people.61 A recent
article suggests that the mill will reopen, with ‘modern machinery’ and jobs for
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5,720 people.62 Surely less draconian measures could have solved the corruption
problem and saved employment. It is too late for Adamjee Jute Mill; there is still
time to save other local, non-polluting industries.
How does one have both employment and a healthy environment? Policies that
discourage employment by encouraging automation should be repealed, except in
cases where such policies protect people from really awful jobs. Since payroll
taxes and worker benefit schemes – including pension funds, health benefits, and
vacation and sickness leave – can make it more expensive to hire workers than to
replace them with machines, many companies opt for automation, particularly
when they receive tax breaks for capital investments. What if those investments
were subjected to tax rates that were high enough to make it less costly to hire
people than to replace them with machines? This is particularly important in
countries where unemployment rates are high. A range of policies could be developed and enacted to reward employers for hiring and to punish them for replacing
people with machines. Any benefits to industry should, of course, only be
proffered when the businesses pay at least a minimum wage; it makes no sense to
subsidize companies to underpay their workers.
The environmental impact of the move to automation is direct. Machines require
fuel to run, as well as having environmental costs in their creation and disposal.
(People also require fuel to operate, but that is true whether they are employed or
not.) Labour-intensive activities and techniques, on the other hand, typically
replace fossil fuel with human input, generate more employment, and require less
waste disposal, thus benefiting the environment. When the goal is to maximise
employment rather than production, it is possible to choose both jobs and a healthy
environment.
It would be interesting to know what the effect might be on a national economy of
promoting economic policies that favour the environment and employment.
Fortunately, there is already evidence from an ‘experiment’ conducted in the
Netherlands between 1980 and 1983. (The work is old but the ideas are, if
anything, more valid today than ever.) The experiment used computer models to
compare different growth scenarios: two focusing on growth and production, and
an alternative ‘conserver-economy’ strategy that focused on saving the environment and using less energy.63 Measures used in the models included the accounting of goods and services produced as well as of: environmental ‘goods’ such as
energy, natural resources, and plant and animal species; the safety of the future in
terms of the environment and natural resources; the distribution of scarce goods
or income; working conditions; the degree of free choice in terms of whether to
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spend one’s time working or in other ways; and leisure time.xix Government agencies and a university calculated the results of the different scenarios. On the
surface, the conserver-economy appeared less prosperous: compared to one that
emphasised production, the conserver approach resulted in a lower GDP and less
total income, agriculture, industry, and services. However, it did not cause a
decline in employment, and it led to a significant increase in the share of income
going to those doing the work. There were astonishingly large predicted decreases
in various types of pollution. These are all estimates, but based on a detailed
analysis of the various scenarios, vast improvements would occur through the
implementation of a conserver-economy in terms of preservation of plant and
animal species, emissions of various air pollutants, water pollution, solid waste,
radioactive waste, burning of coal, changes to the landscape, and workers’
incomes. Health and the environment clearly are not mutually exclusive with
economic wellbeing – as long as we stop using GDP as our measure of progress.
For those used to living in a world of disposable products, it may be hard to imagine anything different. However, most of the world does not take consumption
quite so much for granted as do Americans. In Dhaka, trash is often picked
through a few times before it is collected. In many countries, the repair of various
articles (electronics, shoes, bicycles) is a major source of income, as is the regeneration of ‘garbage’ into something useful. Nor will people’s standard of living necessarily decline if they switch from several pairs of plastic sandals to one pair of
repaired leather ones. The ‘conserver-economy’ acknowledges this. It focuses on:
preventing pollution, saving energy, using more solar power, discouraging car use
through parking fees and a ban on new garages/roads, etc., reducing the use of
artificial fertilizers and pesticides and inducing a shift to smaller farms, promoting
high density mixed use areas, and encouraging services such as repair shops and
small retail shops.xx This model provides employment and is good for the environment. The model also favours ‘short-time working’ to reduce unemployment
(more people working fewer hours).
Surely, a small decline in monetary income in exchange for more equality and an
improved living environment is a worthwhile trade-off. As Hueting notes, “In the
John Kenneth Galbraith has written extensively about this. Given that so many people
complain about their hectic lives, it is possible that many would happily trade some of their
goods and services for more leisure time…especially if they spent that leisure away from
the TV and other reminders to maintain a non-stop materialist existence.
xx These small shops repair rather than dispose of items, and they allow people to buy
things close to their homes and workplaces instead of driving to big box shops surrounded
by huge parking lots.
xix
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right conditions, environmental conservation creates employment. ... In my opinion this is the most important conclusion that can be drawn from the scenario
exercise.”64 Another major conclusion is that it can work. Although the model
would play out differently in various settings, the main findings hold: burning less
fuel and using more human effort would create more employment, more equality,
and a cleaner environment.
A direct approach to increasing wellbeing rather than consumption and an appropriate measuring system to evaluate progress would eliminate the incentives to
make money while harming health. A wellbeing-focused approach would
illustrate that the value of health goes far beyond simple dollars and cents. Such an
approach would also help in demonstrating the need to incorporate health – both
in terms of access to health care and of the living conditions that promote health –
into declarations of/actions on human rights. Canadian environmental activist
David Suzuki, for example, is working to include the right to clean air and water
in Canada’s Charter of Rights and Freedoms; ninety-five countries already recognize the right to a healthy environment.65 Essential human rights should not be
limited to the right to assembly, religion, and free speech.
While it is true that it is not possible to have it all – employment, a healthy environment, and all the material goods we desire – it is possible to have a lot. It will
be easier to make sensible decisions if the full range of options with their costs and
benefits are known. It is time to stop believing that difficult choices must be made
between employment and the environment, or between health and the economy.
It is time to maximize health, employment, and the environment within a broader
definition of prosperity.
Notes
Paul Ekins, ed., The Living Economy, A New Economics in the Making (London, New York:
Routledge and Kegan Paul, 1986).
2 Sue Bailey, “David Suzuki Kicks Off Environmental Rights Tour in St. John’s,” The Globe
and Mail, 21 September 2014.
3 World Health Organization, “Road Traffic Injuries Fact Sheet N°358,” March 2013.
4 “Global Shift Away from Cars Would Save US$100 Trillion, Eliminate 1,700 Megatons of
Carbon Dioxide Pollution,” ScienceDaily, 17 September 2014.
5 John Vidal, “Pollution from Car Emissions Killing Millions in China and India,” The
Guardian, 17 December 2012.
http://www.guardian.co.uk/environment/2012/dec/17/pollution-car-emissions-deaths-chin
a-india
6 Asthma and Allergy Foundation of America, “Asthma Facts and Figures,”
http://www.aafa.org/display.cfm?id=10&sub=42#cost
1
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K. Matus, K.-M. Nam, N.E. Selin, L.N. Lamsal, J.M. Reilly and S. Paltsev, “Health
Damages from Air Pollution in China,” Global Environmental Change, 22.1 (2012): 55-66.
8 S. Colagiuri, C.M. Lee, R. Colagiuri, D. Magliano, J.E. Shaw, P.Z. Zimmet, I.D. Caterson,
“The Cost of Overweight and Obesity in Australia,” Medical Journal of Australia 192.5 (1
March 2010):260-4.
9 Centers for Disease Control and Prevention, “Overweight and Obesity,”
http://www.cdc.gov/obesity/data/adult.html accessed 17 January 2015.
10 Centers for Disease Control and Prevention, “Smoking & Tobacco Use Fast Facts,”
http://www.cdc.gov/tobacco/data_statistics/fact_sheets/fast_facts/index.htm#cost accessed
17 January 2015.
11 World Health Organization, “Road Traffic Injuries.”
12 “Global Shift Away from Cars.”
13 James Robertson, “The Mismatch between Health and Economics,” in Ekins, ed., The
Living Economy.
14 William Neuman, “U.S. Seeks New Limits on Food Ads for Children,” The New York
Times, 28 April 2011.
15 Life expectancy at birth figures for the years 2005-2010 come from United Nations
Department of Economic and Social Affairs Population Division, World Population
Prospects: The 2006 Revision (New York, 2007),
http://www.un.org/esa/population/publications/wpp2006/WPP2006_Highlights_rev.pdf.
16 World Bank, Development Indicators 2010 (Washington: World Bank, 2010),
http://data.worldbank.org/country/cuba
17 “11 countries in Latin America and the Caribbean have reduced maternal mortality, new
UN data show.” Pan American Health Organization, 6 May 2014.
18 Paul Farmer, Pathologies of Power: Health, Human Rights, and the New War on the Poor (Los
Angeles: University of California Press, 2005).
19 Duncan Maru and Roshan Bista, “Free-for-All Healthcare,” Nepali Times, 14-20 June
2013.
20 Laura Donnelly, Rosie Shields and Lily Waddell, “NHS Hospital Cafés 'are Helping to
Fuel the Obesity Crisis’,” The Telegraph, 2 Aug. 2014.
21 Farmer, Pathologies of Power.
22 Farmer, Pathologies of Power.
23 GSK “Responsibility,” http://www.gsk.com/en-gb/responsibility/ accessed 29 September
2014.
24 “Glaxo Profits Soar as Drug Firm Charges NHS £6 for Swine Flu Vaccine that Costs £1
to Make,” Mail online, 23 July 2009.
25 Pfizer, “ Pfizer Reports First-Quarter 2010 Results: Reaffirms 2010 Financial Guidance,”
http://www.pfizer.com/files/news/press_releases/2010/pfizer_1q_2010_earnings_050410.pdf
26 T.R. Frieden, P.I. Fujiwara, R.M. Washko, M.A. Hamburg, “Tuberculosis in New York
City—Turning the Tide,” New England Journal of Medicine 333 (1995):229-33.
27 Frieden et al., “Tuberculosis in New York City.”
28 Andrew C. Hayward and Richard J. Coker, “Could a Tuberculosis Epidemic Occur in
London as It Did in New York?” Emerging Infectious Diseases, 6.1 ( Jan-Feb 2000),
http://www.cdc.gov/ncidod/eid/vol6no1/hayward.htm
7
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Frieden et al., “Tuberculosis in New York City.”
Farmer, Pathologies of Power.
31 “Global Efforts to Promote Health Face Serious Challenges from ‘Big Business’ – UN
Official,” United Nations News Centre, 10 June 2013.
32 K. Daniel, D. Efroymson, S. FitzGerald, and L. Jones, Broadening the Focus from Tobacco
Control to NCD Prevention: Enabling Environments for Better Health (Dhaka: HealthBridge,
2013). Available for free download at www.healthbridge.ca
33 “Global Efforts to Promote Health.”
34 Michael Jacobson, Liquid Candy: How Soft Drinks are Harming Americans’ Health
(Washington, D.C.: Center for Science in the Public Interest, 2005).
35 Tanya Trayers, “10 Teaspoons of Sugar Makes the Waistline Expand,” Journal of
Epidemiology and Community Health 60 (2006):750.
36 M.B. Schulze, J.E. Manson, D.S. Ludwig, G.A. Colditz, M.J. Stampfer, W.C. Willett, F.B.
Hu, “Sugar-Sweetened Beverages, Weight Gain, and Incidence of Type 2 Diabetes in
Young and Middle-Aged Women,” Journal of the American Medical Association 292
(2004):927-934.
37 American Beverage Association, “Obesity,”
http://www.ameribev.org/nutrition-science/obesity/ Accessed 15 August 2014.
38 American Beverage Association, “Americans for Food and Beverage Choice,”
http://www.ameribev.org/blog/category/americans-for-food-and-beverage-choice/
Accessed 15 August 2014.
39 Editorial, “Soda Tax Is The Wrong Medicine,” The Courant, 8 August 2014.
40 Just one example among many: Editorial, “The Food Police Trying to Arrest Soda,
Again,” The Washington Times, 21 July 2014.
41 Eric Lipton and John Broder, “Regulator Deferred to Oil Industry on Rig Safety,” The
New York Times, 7 May 2010. This case is also discussed at length in Joshua Holland, The
Fifteen Biggest Lies About the Economy and Everything Else the Right Doesn’t Want You to
Know About Taxes, Jobs, and Corporate America (Hoboken, New Jersey: John Wiley & Sons,
Inc., 2010).
42 Robert Weissman, “The (Larry) Summers of Our Discontent,” Common Dreams, 21
March 2012.
43 Even that conservative bastion, The Economist, gives food prices a role in the Arab
Spring: “Let Them Eat Baklava,” The Economist, 17 March 2012.
44 Joe Cochrane, “Indonesia Struggles to End Fuel Subsidies,” The New York Times, 2 May
2013.
45 Allan Casey, “Reviving Riversdale,” The Walrus, October 2014.
46 This has been described in many places. See, for instance, Duncan Graham-Rowe,
“Hydroelectric Power's Dirty Secret Revealed,” NewScientist, 24 February 2005 and
“Reservoir Emissions,” International Rivers (www.internationalrivers.org).
47 Ryan Meili, A Health Society (Saskatoon: Purich, 2012).
48 H. Mead, K. Witkowski, B. Gault, and H. Hartmann, “The Influence of Income,
Education, and Work Status on Women's Well Being,” Women’s Health Issues 11.3
(May-June 2001):160-72.
29
30
MYTH#11: COUNTRIES SHOULD FIRST GET RICH
276
49 S. Desai and S. Alva, “Maternal Education and Child Health: Is There a Strong Causal
Relationship?” Demography 35.1 (February 1998):71-81.
50 Molly Edmonds, “How is an Aging Baby Boomer Generation Changing the Design of
Homes?” How Stuff Works, http://home.howstuffworks.com/baby-boomer-design3.htm
accessed 15 August 2014.
51 World Health Organization and World Bank, World Report on Disability (Geneva: World
Health Organization, 2011).
52 Adolf Ratzka, “A Brief Survey of Studies on Costs and Benefits of Non-Handicapping
Environments,” presentation at the International Congress on Accessibility in Rio de
Janeiro, Brazil, June 1994. http://www.independentliving.org/cib/cibrio94access.html
53 Annie Corrigan, “Marion Nestle (Part 2): Food Policy, Local Food and Food Labeling,”
Earth Eats, 13 July 2010.
54 See, for example, Janne Boone-Heinonen, Penny Gordon-Larsen, et al., “Fast Food
Restaurants and Food Stores,” Archives of Internal Medicine Vol. 171, No. 13, 11 July 2001.
http://archinte.ama-assn.org/cgi/content/short/171/13/1162 and Rudd Center for Food
Policy & Obesity, Access to Healthy Foods in Low-income Neighborhoods: Opportunities for
Public Policy (New Haven: Yale University, 2008).
55 Barbara Kingsolver, Animal, Vegetable, Miracle (New York: HarperCollins, 2007).
56 World Health Organization, “Health Impact Assessment (HIA),”
http://www.who.int/hia/en/
57 WHO, “Health Impact Assessment.”
58 Sara Robinson, “Bring Back the 40-hour Work Week,” Salon, 14 March 2012.
59 Annie-Rose Strasser, “McDonalds' Budget for Employees: Get a Second Job, Turn off
Your Heat; How about Just Paying Them a Living Wage?” AlterNet, 17 July 2013 and
Minyanville, “McDonald's Sample Budget Sheet Is Laughable, But its Implications Are
Not.” NASDAQ, 27 July 2013.
60 Leslie Patton, “McDonald’s $8.25 Man and $8.75 Million CEO Shows Pay Gap,”
Bloomberg News, 12 December 2012.
61 Anu Muhammad, “Closure of Adamjee Jute Mills: Ominous Sign,” Economic and Political
Weekly 37.38 (21-27 September 2002): 3895-3897.
62 “Adamjee Jute Mills to Restart with Modern Machinery,” Fibre2fashion News Desk – India,
13 September 2010.
63 Roefie Hueting, “An Economic Scenario for a Conserver-Economy” in Ekins, ed., The
Living Economy.
64 Hueting, “An Economic Scenario.”
65 David Suzuki Foundation, “Right to a Healthy Environment,”
http://www.davidsuzuki.org/issues/health/right-to-healthy-environment/ accessed 28
September 2014.
MYTH #12: The Mass Media Provides Unbiased Economic Reporting
“Inform, educate, distract” – slogan of a TV channel in Niger
"The goal [of advertising] is to undermine markets by creating uninformed consumers
who will make irrational choices and the business world spends huge efforts on that."
– Noam Chomsky1
“The engines of mass communication, in their highest state of development, assail the
eyes and ears of the community on behalf of more beverages but not of more schools.”
– John Kenneth Galbraith2
Promoting the Corporate Agenda

Imagine for a moment that you are the CEO of a major corporation. You have a
legal obligation to give your shareholders a good return. You have a personal
motivation to pay yourself a high salary. By banking most of your profits overseas,
you save on taxes and thus enjoy higher profits. Perhaps it is not all about the
money, because you also enjoy a pleasant sensation of power. Mixed with your
enjoyment is concern about possible threats to your position and to the status and
profits of your company. There is competition from similar companies. There is
the possibility that government regulations will become stricter. Moreover, there
is the nagging thought that governments might try, especially in times of
economic hardship, to raise corporate and personal taxes and to close some of the
loopholes and evasion tactics that, so far, have kept your taxes low.
You are uncomfortably aware that a number of different groups are campaigning
for tax reform and other policies to rein in corporate profits and power. You realize
that politicians would be under a lot of pressure to pass such policies if public
support were sufficiently mobilized. You thus need to ensure not only that policymakers are on your side, but also that the public does not support such policies,
even though it is the public which suffers from government budget shortfalls (to
which your tax avoidance contributes).
What should you do? You could rely on the high levels of apathy and lethargy that
exist within the public. People are busy with their own problems, including struggling to survive on the minimal wages that you pay. However, a rather worrisome
momentum became evident during the Occupy movement. Such bubbles of
enthusiasm and the sustained efforts of a few NGOs to increase attention on the
problems of growing income inequality are cause for concern. Given the high
stakes, it is better not to be too complacent. It is easy to ensure that politicians
remain beholden to you and will thus pursue your agenda: campaign donations
and other acts of generosity will do the trick. In the face of a determined public, it
will not be enough just to pay off politicians. You also have to get the public on
your side. You want to make sure that the average person believes that the concen-
MYTH#12: THE MASS MEDIA IS UNBIASED
278
tration of wealth in the hands of a few corporations and people, rather than
impoverishing others, actually benefits the economy and all those who cannot pay
the rent or find a job.
It is no secret that the easiest way to influence public opinion is through the media.
Various options are available, and, to cover all your bases, you may well choose to
make use of all of them. It will cost a lot of money but, after all, you can simultaneously advertise your company, your products, and the joy of consumerism (and, if
done properly, get tax breaks for doing so). There is significant overlap between
promoting the message that corporations are everyone’s best friend and the
message that people need to buy more of your products…and it is still a lot
cheaper to use the media to get your message across than to pay taxes.
Strategy to get Average Person on board #1: Use direct and indirect advertising to
convince people how wonderful your company is or how unfairly it is being
attacked. Advertising can be for a generic product (soft drinks), a specific
company’s product (Coke), or the company itself (Coca-Cola Company). The
amounts spent on advertising are significant: in the United States in 2013 alone,
they amount to $42.8 billion on the Internet, $40.1 billion on broadcast TV, $34.4
billion on cable TV, $18 billion in newspapers, $16.7 billion on the radio, and $13.4
billion in magazines, for a total of more than $165 billion.3 Plenty of opportunity
thus exists to avail the media to improve your corporate self-image.i
Some ads specifically seek to promote a corporate image: by advertising its good
corporate behaviour, a company is often able to counter complaints made against
it. Catchy slogans help when regularly repeated on TV and through other media.
How can one not like General Electric after repeatedly hearing its jingle: “We bring
good things to living, we bring good things to life”? In the days before tobacco
advertising was banned, British American Tobacco in Bangladesh regularly took
out half-page, full-colour ads to advertise its ‘socially responsible’ programs, such
as planting trees and telling children not to smoke.ii Walmart regularly runs TV
The ads do not of course always succeed. Many women would take exception to the
overtly sexist advertising that is used to promote beer, cigarettes, and other products. The
sexualisation of women (and girls), the promotion of unachievable body image, and the
glamorisation of violence are common in advertising of just about every product available,
as Jean Kilbourne shows in her lecture “The Naked Truth.” Kilbourne’s lectures are listed
here: http://www.jeankilbourne.com/lectures; some of her talks are also available on the
Internet, e.g. http://www.youtube.com/watch?v=Uy8yLaoWybk
ii There is extensive literature showing that tobacco industry campaigns to convince youth
not to smoke are likely to have the opposite effect; that is, they make young people more
interested in smoking. One useful source on this is www.ash.org.uk/current-policyissues/youth-smoking
i
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spots to boost its corporate image in an attempt to counter some of the many
complaints people have about the mammoth company. Shell, BP, and other oil
companies have all used TV ads to talk about their environmental commitments.
McDonalds advertises its “Ronald McDonald House Charities” which provide
homes for families to stay in while their children receive medical treatment,
comfortable places to relax within hospitals, a mobile clinic (which is itself a roaming ad), grants to improve access to health care, and college scholarships.4 (You
can afford a lot of generosity when you make a ton of money and pay paltry
salaries.)
Televised news and entertainment programs, newspapers, magazines, and the
Internet are all intensely commercial. Their real purpose is not to inform, educate,
or entertain us, but rather to make money.iii Broadcasters and publishers make
money by capturing an audience that has certain demographic qualities sought by
advertisers and then selling that audience to those advertisers. Direct advertising
is clearly labelled as such, with the sponsor duly noted. Indirect advertising, on
the other hand, is embedded in a TV, radio or other type of program and the sponsor is not necessarily obvious. Women’s magazines, for example, print articles that
promote specific beauty products; sports magazines run articles about physiqueenhancing drink powders. TV programs and movies show people consuming or
using specific products or engaging in specific behaviours; some even incorporate
more detailed, pro-corporate messages into their plots. In some cases, it is difficult
or impossible to know who has sponsored the advertisement. Editorials can also
be subtle advertisements for products or corporations, giving rise to the term
‘advertorials.’5
* * *
Distraction…with a message: An episode of a popular American TV program about
an overweight couple focused on their growing debt. The husband, a policeman, was
concerned about his unemployed wife’s tendency to go on shopping sprees. He suggested
various ways to curb their spending, including by drinking tap rather than bottled water.
As he poured a glass from the tap, the water came out cloudy. Later, his wife explained
that when she is upset, shopping makes her feel better, and he realized that his devotion to
his wife required him to encourage her habit. The bills could wait.
* * *
iii The situation is slightly more complicated than this. Some media moguls use the media to
influence politicians and the public, which in turn increases their profits; in this case, they
may be less concerned about selling ads and more concerned about the corporate and
political messages that they put forth in their programming and articles. And, of course,
there are less commercial or non-commercial alternative media options.
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280
I once heard a brief radio segment about an international gathering of heads of state
during which the leader of Spain said to Hugo Chávez, “Cállate” (shut up). Someone
proceeded to make a ring tone from the Spanish leader’s words and made a fortune selling
the ringtone. (The program did not mention what Chávez had said to elicit that
response.) I paused to reflect on what exactly could be newsworthy in that story, then
realized that any excuse to put Chávez down is welcome, as is any chance to promote a
company’s new product.
* * *
Strategy to get Average Person on board #2: Influence news reporting. It is easy to
identify the ads aired during the news, and there are lots of them: in the United
States, ads take up thirty percent of local TV news time.6 In addition to all the
clearly identified ads, there are prepared news segments that companies give to
TV stations to air. Likewise, companies pay newspapers and magazines to print
articles or information. Journalists are busy and most TV stations and newspapers
are understaffed, so they will happily accept pre-packaged ‘news.’ Again, these
are sometimes easy to spot (a ‘news’ article about a great new product or a corporate event)…but other times they are not. In either case, they are pervasive in the
United States and internationally. An article in The New York Times about such
pre-packaged news quotes the sales pitch of a video news release company called
TVA productions: “No TV news organization has the resources in labor, time or
funds to cover every worthy story,” TVA tells its potential clients, adding “90
percent of TV newsrooms now rely on video news releases.”7
Both governments and corporations purchase time in the media under the cover
of ‘news reporting’ without acknowledging their sponsorship. According to the
New York Times article on the topic,
Under the [second] Bush administration, the federal government has aggressively
used a well-established tool of public relations: the prepackaged, ready-to-serve
news report that major corporations have long distributed to TV stations to pitch
everything from headache remedies to auto insurance. In all, at least 20 federal
agencies, including the Defense Department and the Census Bureau, have made
and distributed hundreds of television news segments in the past four
years…Many were subsequently broadcast on local stations across the country
without any acknowledgement of the government's role in their production.8
And why not? Local news stations are spared the expense and trouble of doing
their own reporting; public relations firms make millions of dollars on the
contracts; and networks collect fees from government agencies and from affiliates.
Moreover, governments and corporations get their propaganda out, unfiltered,
“delivered in the guise of traditional reporting.”9 So is it news or is it corporate
messaging? Hard to know.
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Strategy to get Average Person on board #3: Use the media to spread the idea that
consumption is our greatest goal, that corporations and the wealthy are our greatest friends, and that the poor and racial minorities are violent criminals. Messages
telling the public that consumption means happiness are incorporated throughout
the media. The occasional counter-view is lost in the sea of messages that, in John
Kenneth Galbraith’s words, tell us that the “greatest source of pleasure, the highest
measure of human achievement” and “the foundation of human happiness” is
consumption.10 While consumption is a goal in itself for corporations, it also links
to the feel-good message that corporations spread about themselves. This includes
the use of movies such as Sex in the City and The Princess Diariesiv to show that there
is no greater happiness than shopping. It includes TV programs like Lifestyles of the
Rich and Famous (later replaced by Social and a whole host of reality TV shows)
which show that there is nothing better than to be fabulously rich. The goal is to
cultivate a sensation of envy for the rich that makes it less likely that people will
blame the rich for their own less enviable financial position. The message is so
pervasive in media that people may not even consciously notice it.
It should not be surprising that Hollywood helps here, as it costs a lot of money to
produce a movie. Corporations insert their advertising, both of specific brand
names and of general items, into movies, as well as the overall messages about the
glamour and joy of consumption. To give a few (somewhat outdated) examples,
Titanic glamorized all sorts of tobacco use and suggested that it is cool to blow
smoke into other people’s faces, Sleepless in Seattle featured a huge Coca-Cola
billboard, and E.T. the Extra-Terrestrial made its pitch for Reese’s Pieces. Movies
that are more recent promote, among other things, bottled water, SUVs, and Apple
computers. The 40-Year-Old Virgin equated cycling with childhood: the hero only
learned to drive ‘a manly vehicle’ (e.g. a car) after he finally had achieved adulthood by losing his virginity.
Criminals on TV and in movies are not exclusively poor, Hispanic, or black – but
iv This was adapted from a book I would not normally read, but I happened to, before
passing on to a teenage girl in Sri Lanka. What particularly horrified me was not just the
book’s glamorization of extreme wealth but also the way that it portrayed the head of the
imaginary state of Genovia: despite being absurdly wealthy, he is able to defend his wealth
because he “does so much for the population.” The thoughtful reader might argue that the
presence of billionaires in actual countries does not preclude extreme poverty, but then, the
target of the book is not thoughtful readers.
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they most often are. Noam Chomsky refers to
the long-term effort to destroy the institutional basis for social support systems, to
eliminate programs such as Social Security that are based on the conception that
people have to have some concern for one another. The idea that we should feel
sympathy and solidarity, that we should care whether the disabled widow across town
is able to eat, has to be driven from our minds. That is a large part of the domestic
agenda, quite apart from just shifting wealth and power toward ever-narrower sectors.
And the way to achieve that – since people aren’t going to accept it otherwise – is to
make people afraid.11
Certainly if one goal of TV programming is to make people afraid, and specifically
to make them afraid of those on the receiving end of various forms of government
support, then any number of programs effectively do just that.
Strategy to get Average Person on board #4: Buy media outlets (or become the
subsidiary of a company that owns one). The fewer the number of corporations
that own the media, the less risk there is of alternative viewpoints being aired.
According to the Media Reform Information Center,
In 1983, 50 corporations controlled the vast majority of all news media in the U.S. At
the time, Ben Bagdikian was called ‘alarmist’ for pointing this out in his book, The
Media Monopoly. … In 2004, Bagdikian's revised and expanded book, The New Media
Monopoly, shows that only 5 huge corporations – Time Warner, Disney, Murdoch's
News Corporation, Bertelsmann of Germany, and Viacom (formerly CBS) – now
control most of the media industry in the U.S. General Electric's NBC is a close sixth.12
Just one example of the result: the Trans-Pacific Partnership (TPP) is a trade treaty
that is being widely contested by NGOs because it would limit the ability of signatory governments to protect public health, local industry, and the environment;
the TV news virtually ignores the treaty.13 The corporate owners of TV channels
could earn a lot of money if the TPP is approved, since the trade treaty would
expand the rights of corporations and reduce those of governments seeking to
regulate or control them. With just a few corporations owning most of the media,
a media blackout is easy to achieve.
The situation may be better in other countries. Where government-owned media
are promoting the propaganda, it is more easily recognizable. There is, for example, nothing subtle in Vietnam about the loudspeakers telling people at seven a.m.
what they are supposed to do, if not to think. In many countries, certain newspapers have clear ties to different political parties and/or political viewpoints;
competing political parties may also lead to a broader spectrum of views. Nevertheless, American influence on news is universal, given the tendency of news
houses to pick up articles published in the United States. It becomes more and
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more difficult to find progressive viewpoints in mainstream media anywhere in
the world.
Media as a distraction
Now wait just a moment. Even if you, the corporate executive eager to boost your
corporate image and to avoid taxes and regulations, are successful at using the
media, can the Average Person not fight back? She still maintains the power of
independent thought. She can still say, “Just because Shell tells me it cares deeply
about the environment doesn’t mean that I have to believe it. And that business
about shopping? It’s a stressful activity that just increases my credit card debt. I’d
rather go for a bike ride with my friends! And if I have to pay thirty-five percent of
my income in taxes, why on earth shouldn’t corporations and the wealthy pay at
least as much?”
Fortunately, the media is your friend in another way. Most media does not encourage thinking. On the contrary, it encourages people to sit back and let someone
else think for them. Some TV programming is of course thoughtful and opens up
questions; much more of it discourages questioning, either through extreme
silliness or by providing viewers with the answers. TV news stories tend to make
clear who the ‘good’ and ‘bad’ guys are and inform us how we should view the
issues. While people appreciate the ‘free’ entertainment that TV offers, such
passive recreation comes at a high price: it discourages people from being creative
thinkers and from solving problems.v The media thus represents a powerful tool
through which corporations can engage in mass brainwashing. Watching television and using the Internet are also, for many, highly distracting pursuits that take
hours in the day away from the possibility of more mindful pursuits, such as reading a book about the economics of wellbeing, pursuing information from alternative media, or organizing a group of neighbours to discuss how to respond to local
budget cuts. According to Noam Chomsky, advertising is a form of “off-job
control” which “means turning people into robots in every part of their lives by
inducing a ‘philosophy of futility,’ focusing people on ‘the superficial things of life,
v A moment of thought reveals the oddity of people spending money to purchase a TV set
in order to allow advertisers to broadcast messages right into their homes. Big Brother does
not need to force his way in, in Orwellian fashion; the modern family invites him. In
contrast to Orwell’s nightmarish view, Big Brother is not Government but the Corporation.
For more on this, see Neil Postman, Amusing Ourselves to Death (New York: Penguin Books,
1985). As new forms of media emerge, advertisers adapt, for instance with the constant
stream of ads and mindless distractions on the Internet and smart phones that make it clear
what we should (and what we should not) value. Fashion, yes; obsession with the stars, yes;
helping the poor...not so much.
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like fashionable consumption.’” This allows “the people who are supposed to run
the show [to] do so without any interference from the mass of the population, who
have no business in the public arena.”14
Hint: Look for corporate influence in the media. In addition to direct ads, what messages
do they promote in terms of how we should look at the wealthy and the poor, the role of
corporations in our society, and the pleasures of consumerism versus non-materialistic
pursuits?
* * *
Utter nonsense masquerading as news is common, palatable, and even enjoyable.
I have seen newspapers in Mumbai (Bombay) that only write about Bollywood
stars. The papers in Bangkok are better, but often the news section is slim
compared to the thick sections about business, arts, entertainment, and gossip.
When I go on the Internet, I find informative articles about the best- and worstdressed Hollywood actresses at a recent event. Television coverage of the British
royal family is extensive while coverage of serious issues is often absent. Yes, there
is good stuff among the rubbish, but the overwhelming majority is nonsense or
mainstream propaganda…and advertising supplies the corporate message even
in the better TV programming.
Is it news or is it thought control?
In addition to producing rubbish and delivering corporate (and sometimes
government) propaganda masquerading as news, the media also regularly ‘educates’ the public about political and economic issues. That ‘education’ typically
comes with a heavy bias towards the conservative, mainstream economic view.
Fairness and Accuracy in Reporting (FAIR) regularly reports on conservative
biases in American media, including in major newspapers such as The New York
Times, the Washington Post, and the LA Times. For example, according to FAIR,
massive protests against World Bank and IMF policies led to five op-eds in The
New York Times, all critical of the protests.15 Both The New York Times and the Washington Post mainly cheered on the Iraq War and downplayed any information
suggesting it was unjustified, placing their pro-war pieces on the front page and
burying deep inside the paper suggestions that evidence of weapons of mass
destruction did not exist.16 As the editors of The New York Times later admitted,
...we have found a number of instances of coverage that was not as rigorous as it
should have been. In some cases, information that was controversial then, and
seems questionable now, was insufficiently qualified or allowed to stand unchallenged. Looking back, we wish we had been more aggressive in re-examining the
claims as new evidence emerged – or failed to emerge.17
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While the apology is appreciated, it should also serve as a useful reminder that
even the best of the media often fail us in terms of providing the information that
is needed to decipher the world and to make informed decisions.
The media decides who it labels as a ‘terrorist’ or ‘rebel’ instead of as an outspoken
opponent of a corrupt regime. Decades ago, the labelling of a protester as a terrorist was less common, but still prevalent enough for the former president of Argentina, General Jorge R. Videlia, to define terrorists thus: “a terrorist is not just someone with a gun or a bomb, but also someone who spreads ideas that are contrary
to Western and Christian civilizations.”18 Post 9/11, the convenient label ‘terrorist’
can now be applied even more readily to anyone fighting for land reform or
against mining or oil drilling on their native land or for more equitable practices
or for workers’ rights or against privatization of government services or...just
about anything else that questions mainstream economics and politics. When one
hears and sees it enough in the mainstream media, it becomes difficult to remember to question it. Corporation: good guy. Indigenous man resisting corporation:
bad guy.
The media also distorts issues, not only in terms of what it says but also in what it
ignores. An American newspaper article about dogs returning from the war in
Iraq with post-traumatic stress disorder was interesting but, as with the common
articles about returning soldiers being reunited with their families, did not
address why America went to war in Iraq or the effect of the war on Iraqis. In
general, articles about war focus on battles, not on causes or effects. An article
about a gunman firing inside a school focuses on how easily the shooter entered
the school, not on the importance of making it more difficult to obtain a weapon.
Bradley (now Chelsea) Manning leaked government ‘secrets’ about the wars in
Iraq and Afghanistan and about the way that corporations mistreat the world’s
poor. The media has focused on whether she will be found guilty, not on the
content of the leaks. Stories about how the North Atlantic Treaty Organization
(NATO) is conducting a months-long bombing campaign of major cities to ‘liberate’ a country tend not to mention what life must be like for the residents of those
cities. An article about how to attract more foreign direct investment into a country assumes that it is a good thing, and ignores the fact that the resulting mine or
oil well will displace thousands and likely create very few local jobs. A story about
GDP growth assumes that GDP tells us something useful.
The Internet can be better…or not. As with the rest of media, the Internet is subject
to corporate influence. Again, it takes a bit of work to find the genuinely worthwhile, and too often, it is buried under piles of corporate messages and mindless
diversion. Coverage of the contribution of fast food to obesity and the potential of
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286
holding companies liable is peppered with such phrases as “undermine personal
responsibility,” “jeopardize consumer choice,” and “will turn all Americans into
victims incapable of bearing responsibility for their personal choices.”19 An entire
website is devoted to debunking the “highly questionable” reports put out by one
nutrition advocacy group, the Center for Science in the Public Interest (CSPI).20
The stories on the site have colourful titles such as “CSPI Nuts Prefer Kids Fast
than Eat Fast Food” and “CSPI Applauds Taking Toys from Kids.” The website
also claims that CSPI “routinely uses scare tactics justified by ‘junk science’ and
media theatrics as part of their ceaseless campaign for government regulation of
your personal food choices.”vi Who might be funding these attacks on CSPI? Fast
food companies can certainly afford to promote their image and attack their
attackers; McDonalds alone posted $4.3 billion in profits on sales of $23.5 billion in
2008.21 According to most media outlets, it would be a crime to interfere with
‘consumer choice’ or with such sizeable corporate profits. The image of the strong
independent consumer victimized by the nanny state (with the innocent corporation sheltered in the background) is common, and, thanks to pervasive corporate
messages, one need not be a paid corporate mouthpiece to repeat those messages.
On the other hand, information not funded by corporations is probably easier to
access on the Internet than via other media. It often involves a bit of digging, as the
first sites that appear are likely to have paid money in order to move up on a
search engine. It also involves sorting through the assorted crazies. Nevertheless,
it is plentiful and some of it is highly valuable.
Corporatocracy’s biggest ally
The role of TV (not simply advertising but programming itself) is, in the words of
David Korten, “not simply to sell products and strengthen the consumer
culture...but to create a political culture that equates the corporate interest with the
human interest in the public mind.”22 There is significant overlap between the
corporate interest and the interests of the wealthy. The media succeeds in bridging
the gap between those elite interests and everyone else’s. Rather than resent the
wealthy, most people wish to emulate them. Outrageous wealth no longer seems
so outrageous when we regularly read about billionaires and the places they
frequent. One can find respectable media coverage of heroes: people working to
improve the conditions of vulnerable populations or to preserve an endangered
species or prevent destruction of a special habitat. (Media coverage, especially on
The term ‘choice’ has particular resonance with those who have worked on tobacco
control. The tobacco companies love talking about consumer choice, as if government
regulations to inform consumers about harmful products, and policies to counter or reduce
billions of dollars of advertising, would somehow inhibit people’s ability to decide what
they want.
vi
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TV, of those fighting corporations is probably much harder to find.) But such
praise hardly holds a candle to the outpourings of attention and adulation poured
on the rich, simply for being rich. It is not difficult to see which lifestyle we are
supposed to imitate and whose interests we should seek to defend.
* * *
One dull day I watched a reality show in which two people with the same name switch
places. One is a Texan working for his mother’s lawn care business; the other is a famous
Hollywood actor. They each find the other’s lifestyle extremely strenuous: the actor is
exhausted after a day of mowing lawns, while the landscaper is worn out from the intense
gym workout and numerous meetings. The actor spends his first couple of nights tossing
and turning on an uncomfortable bed in a cramped and unattractive home, while the
landscaper is awed by the luxury of the actor’s massive and well-equipped home. At one
point, the landscaper tells the camera, in great earnestness, “He works hard; he deserves
all this!” while the actor shows his generosity by giving the struggling Texans, who are
in danger of losing their business because they lack updated equipment, three new riding
mowers. The moral of this episode appears to be that the actor deserves all of his wealth
and luxury for working so hard at looking and sounding good, while the landscaper, who
works equally hard, deserves his poverty and should thank his lucky stars the actor made
a charitable gesture in his direction.
* * *
It does work. Whatever her actual financial status, the average American is
surprisingly eager to defend the interests of the wealthy. When twenty percent of
Americans believe they will become millionaires in the next ten years (even
though only about five percent currently are), they do not push for higher taxes on
the rich.23 When Americans believe that giant corporations deliver wonderful
products, are a great source of jobs, and are essential to their nation, they won’t be
too concerned about corporate tax evasion (if they are even aware that it happens).
When Americans believe that government regulations stifle personal freedom and
prevent corporations from making the profits that will enrich citizens, they will
not push for more regulations. Unfortunately, what is true for America is true, to
a greater or lesser degree, in many other countries as well.
But the media sometimes attacks corporations!
With all the corporate influence, how then does it happen that the conventional
press does sometimes publish a story attacking a corporation? I often wonder why
there is any liberal reporting in the mainstream media at all. There are at least a
couple of reasons for its presence: liberal reporting can create controversy which
allows for more conservative responses; it gives companies an incentive to
increase their advertising (to fend off negative reporting); and it maintains the
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important façade of a free press, which is needed to reassure citizens of the world
that they do in fact live in democracies, whatever the case may actually be.
When searching for information about the spectacular British Petroleum oil spill
in April 2010, I found countless articles that referred to BP ‘accidentally’ spilling
2.5 million gallons of oil a day into the Gulf of Mexico. Many articles discussed
potential ways to contain the spill, which was likely to cost billions of dollars.
Harder to find in the media was any discussion of the cause of the spill, and more
specifically, the extent of BP’s liability and how extensively the company had
lobbied to avoid the sorts of safety procedures that could have prevented the spill
in the first place. The New York Times did publish a more meaningful article pointing out BP’s liability.24 In 2014, BP took out several full-page ads in the Times to
argue that the settlement to which it agreed was unfair. Those two events (the
anti-BP article and the full-page ads) may not be connected, but I know that in
Bangladesh, newspapers sometimes deliberately run articles attacking a major
company either to elicit higher advertising spending or to punish the company for
withdrawing its ads.
Some exceptions aside, mainstream media is owned by major corporations and
spends most of its energy pursuing the corporate agenda, directly or indirectly. It
is up to those who wish to promote wellbeing to find ways to counter it.

Towards a Better Way: Controls on Advertising, Support for
Independent Media, and Preserving the Internet
“Citizens of the democratic societies should undertake a course of intellectual self defense
to protect themselves from manipulation and control, and to lay the basis for meaningful
democracy.” – Noam Chomsky25
* * *
People’s assumptions and beliefs about economics are too often shaped by an
uncritical acceptance of the myths that the media constantly feeds them. What is
perhaps most sinister in all of this is that most people are unaware of the extent to
which they are influenced by the implicit and explicit messages that the media
promotes. As stated on advertising analyst Jean Kilbourne’s website, “Advertising
is an over $200 billion a year industry. We are each exposed to over 3000 ads a day.
Yet, remarkably, most of us believe we are not influenced by advertising.”26
Alas, even the few countries that have tried to escape from media’s influence are
relenting; Bhutan introduced TV in 1999 and saw a rapid deterioration of its
culture.27 Myanmar has already opened its doors to the corporate world.28 Only
Cuba may still have virtually no advertising.29 Even if people stopped watching
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TV, the Internet would fill the gap. At an individual level, it is at least theoretically
possible to be aware of the pervasiveness of media and alert to the messages that
the media is spreading. In fact, the easiest way to avoid being influenced is to limit
one’s exposure to conventional media. Refuse to watch TV and try to avoid all the
junk on the Internet. Be alert when reading the newspaper and balance the reporting with articles from independent media. Learn from experts on advertising like
Jean Kilbourne; turn to Fairness and Accuracy in Reporting (FAIR) or Media
Matters for information about the deceptiveness of conventional media and for
alternative views. Listen to public or, if available, independent, community radio.
Read books that go into issues in depth and that provide context and a logical
development of arguments. Talk to others, especially to those who are not benefitting from the current economic regime.
However, it is unlikely that more than a small percentage of the population of any
country will actively resist corporate media messaging. As long as people remain
captivated by conventional media, it will be difficult to convince them to work for
a world that is oriented more towards wellbeing and less towards consumption.
Corporate control of the media is an enormous issue that will not easily be
resolved, but there are various places to start. Given the enormous amount of
media to which people are exposed, even small victories can have significant
results and can lead to bigger ones. As people learn to resist corporate media in
small ways, they can also learn to reduce its influence on their lives.
Campaigns for advertising restrictions should highlight the myriad ways that
advertising infiltrates people’s day-to-day lives. Activists could call for limits on
the percentage of TV programming time that can show ads, for outright bans on
advertising during children’s TV programs, for restrictions on the amount of
advertising allowed in newspapers, and for prohibitions against advertising for
specific harmful products. There is no reason to accept a passive role or to being
subjected to whatever advertising companies dream up. Even if the laws of a
country are interpreted to defend the ‘free speech’ of corporations, no individual
has an unlimited right to free speech. Bans are difficult to pass and implement, but
they have succeeded in drastically curtailing the advertising of tobacco and infant
formula. The easiest place to start is with advertising that clearly targets children.
Research has found that children under the age of eight readily accept whatever
they see in ads, consider the messages in ads accurate, truthful, and unbiased, and
that a single exposure to an ad can lead a child to desire a product.30 Sweden has
banned all ads on children’s prime time TV since 1991. The European Union is
looking at the possibility of implementing a Europe-wide ban on or regulation of
ads targeting children.31 Another approach is to allow advertising but to force
those sponsoring the ads to pay as well for the running of an equal amount of
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290
counter ads produced by non-industry groups.
A large and diverse network to campaign for advertising restrictions could bring
together like-minded people with a wide background of interests and areas of
expertise. Advertising is offensive not only because of the corporate messages that
it promotes but because of its sexual depiction of women and pre-adolescents. Ms.
Magazine tried to implement a policy that only allowed advertising that was not
insulting or demeaning to women, and then realized that such a policy was impossible to implement. Instead, it banned ads altogether.32 It may thus be possible to
recruit women’s rights activists to join a coalition to put limits on commercial
speech.
Activists can look at supporting or expanding existing independent media. Within
a large network, there are usually people with ideas, creativity, and time who just
need some support, encouragement, and guidance. Possibilities include starting
or contributing to a local, independent newspaper; using social media; and starting or using community radio to spread ideas and information about the promotion of wellbeing and to question the goal of economic growth.
Groups that are lobbying to keep access to the Internet open provide another
approach to addressing media. The international, open exchange of information
threatens many interests, which in turn are keen to limit that access. Corporations
would like to control the Internet so that commercial content is listed well before
non-commercial, making it more difficult for people to gain access to information
that is not put out by corporations. The Pew Research Internet Project looked at
various potential threats to full ongoing public use of the Internet. The threats they
identified include government control (through blocking, filtering, and other
means), the use of the Internet for government or corporate surveillance of
citizens, commercial pressures that limit the flow of information, and the risk of
efforts to minimize excessive content leading to reduced availability of viewpoints. There was also concern about the use of only a single, major corporate
search engine (such as Google) to look for information, which can easily reduce
access to counter viewpoints.33 It is also important, where possible, to utilize the
mainstream media to spread messages that run counter to the doctrines of mainstream economics. Corporate control makes it difficult but not impossible to
access mainstream media, and there are various strategies to increase one’s access.
Controversy can be profitable to media companies, and colourful protests make
good news.34
At the beginning of this discussion, I suggested that the reader imagine being a
corporate executive defending himself from potential attacks, including by those
eager to raise taxes on rich corporations and individuals. In that scenario, the
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mainstream media is likely to be your close friend. Not all friendships last forever,
nor, as the saying goes, is it possible to fool all of the people all of the time. People
can learn to be active critics of media propaganda and to question what they see
on the news and on other programming. People can learn to be alert to how the
media portrays economic and other issues. People can seek out alternative sources
that depict positive solutions to the problems of ever-growing inequality and an
ever-worsening environment. People can also, to some degree, influence the
media, ensuring better reporting of issues and events. The very wealthy have most
of the money, but the public can successfully fight back with ideas.
Notes
Noam Chomsky, lecture titled "The State-Corporate Complex: A Threat to Freedom and
Survival," at the University of Toronto, 7 April 2011.
2 John Kenneth Galbraith, The Affluent Society (Middlesex, England: Penguin Books, 4th
reprint, 1967).
3 Mark Berman, “Internet Ad Revenue Outpaced Broadcast TV Ad Revenue for the First
Time,” The Washington Post, 10 April 2014.
4 Ronald McDonald House Charities, “What We Do,” http://www.rmhc.org/what-we-do
accessed 20 August 2014.
5 See, for example, Anup Shah, “Media and Advertising,” Global Issues, 4 March 2012.
http://www.globalissues.org/article/160/media-and-advertising
6 “Advertising: Exposure & Industry Statistics,” Media Education Foundation Factsheet, 2005.
7 David Barstow and Robin Stein, “Under Bush, a New Age of Prepackaged TV News,”
The New York Times, 13 March 2005.
8 Barstow and Stein, “Under Bush.”
9 Barstow and Stein, “Under Bush.”
10 John Kenneth Galbraith, Economics and the Public Purpose (London: André Deutsch
Ltd./Houghton Mifflin Company, 1974).
11 Noam Chomsky, Imperial Ambitions: Conversations with Noam Chomsky on the Post-9/11
World (London: Penguin Books, 2006).
12 Media Reform Information Center, http://www.corporations.org/media/, accessed 30
April 2014.
13 Fairness and Accuracy in Reporting, “TPP TV Blackout: A Big Controversy That Isn’t
News—But Look What Is...” 24 April 2014,
http://fair.org/take-action/media-advisories/tpp-tv-blackout/
14 Chomsky, Imperial Ambitions.
15 Fairness and Accuracy in Reporting, “Media Distortion of World Bank/IMF Protests
Starts Early,” 11 April 2000,
http://fair.org/take-action/action-alerts/media-distortion-of-world-bankimf-protests-startsearly/
1
MYTH#12: THE MASS MEDIA IS UNBIASED
292
Howard Kurtz, “The Post on WMDs: An Inside Story,” The Washington Post, 12 August
2004.
17 The Editors, “The Times and Iraq,” The New York Times, 26 May 2004.
18 Quoted in Noam Chomsky and Edward S. Herman, The Washington Connection and Third
World Fascism (Boston: South End Press, 1979), citing London Times, 4 January 1978.
19 Competitive Enterprise Institute, “Fast Food Obesity Lawsuit Threatens Consumers,
Rule of Law,”
http://cei.org/news-releases/fast-food-obesity-lawsuit-threatens-consumers-rule-law
20 CSPIscam, www.cspiscam.com.
21 Monsters and Critics, http://www.monstersandcritics.com/news/business/news/
article_1455840.php/ McDonald_s_posts_stronger_annual_profits_in_2008, accessed 26
May 2011.
22 David C. Korten, When Corporations Rule the World, 2nd ed. (Connecticut and San
Francisco: Kumarian and Berrett-Koehler, 2001).
23 Laurie Kellman, “AP-CNBC Poll: Americans, Britons Less Optimistic about Becoming
Millionaires than Australians,” AP-GFK, 13 September 2011.
24 Eric Lipton and John Broder, “Regulator Deferred to Oil Industry on Rig Safety,” The
New York Times, 7 May 2010. This case is also discussed at length in Joshua Holland, The
Fifteen Biggest Lies About the Economy and Everything Else the Right Doesn’t Want You to
Know About Taxes, Jobs, and Corporate America (Hoboken, New Jersey: John Wiley & Sons,
Inc., 2010).
25 Noam Chomsky, Necessary Illusions: Thought Control in Democratic Societies (London:
Pluto Press, 1989).
26 Jean Kilbourne, http://www.jeankilbourne.com/lectures/ accessed 21 August 2014.
27 Cathy Scott-Clark and Adrian Levy, “Fast Forward into Trouble,” The Guardian, 14 June
2003.
28 I lived in Hanoi when the American trade embargo lifted and advertising poured in.
The same process has started in Myanmar. See Anita Chang Beattie, “Myanmar Is Ripe to
Be Marketing's New Frontier,” AdAge, 17 June 2013.
29 Eric Goldman, “Fantasize About A World Without Advertising? Try Cuba,” Forbes, 22
August 2013.
30 “Television Advertising Leads to Unhealthy Habits in Children, Says APA Task Force,”
American Psychological Association, 23 February 2004.
31 “Advertising: Exposure & Industry Statistics.”
32 “Ms.’s policy is to only accept mission-driven or non-profit advertising, The magazine
also rejected ads it found insulting or demeaning to women.”
http://www.answers.com/topic/ms-magazine#ixzz2ekbBetiI
33 Pew Research Internet Project, “Net Threats,”
http://www.pewinternet.org/2014/07/03/net-threats/
34 I have written a guide on how to access media at little or no cost: Using Media and
Research for Advocacy: Low Cost Ways to Increase Success, available for free download at
www.healthbridge.ca.
16
MYTH #13: Greed is Good
“Is there some society you know that doesn’t run on greed?”
– Milton Friedman1
“A tension has always existed between the capitalist imperative to maximize efficiency
and the moral imperatives of religion or community, which have historically served as a
counterweight to the moral blindness of the market. This is one of ‘the cultural contradictions of capitalism’ – the tendency of the economic impulse to erode the moral underpinnings of society. Mercy toward animals is one such casualty. More than any other institution, the American industrial animal farm offers a nightmarish glimpse of what capitalism
can look like in the absence of moral or regulatory constraint.” – Michael Pollan2
The Defenders of Greed

One of the foundations of mainstream economics is that greed is good.i Mainstream economists claim that greed motivates people to work hard and to be
creative. They claim that when people indulge their endless desire for material
possessions, they generate vital economic activity. They state that greed is more
rational, natural, and beneficial than generosity. The pursuit of greed can, they
claim, motivate employers to pay workers better than they would otherwise; after
all, the desire for profit will lead to expanded markets that require more
employees…and thus the need to pay enough to woo those people to come work
for them.ii 3 Some even claim to believe that greed would eliminate racism, as the
truly greedy person is too focused on earning money to allow prejudices to slow
him down.4 Followers of mainstream economics assert that the best that one can
do for the world, in addition to becoming as wealthy as possible, is to be a nonstop consumer, eagerly shopping for all sorts of products and services. By indulging one’s own tastes and wishes, they argue, a person contributes to the reduction
of poverty. Wasting time worrying about others, they contend, simply slows down
the generation of wealth that will make everyone richer. According to Time magazine, “Greed really is good, as are income inequality, bullying across class lines,
and even the iron fist of the political strongman – in certain contexts, at least.”5
Mainstream economists maintain that the capitalist ‘superhero’ looking out for
number one has brought forth the innovations and products that make life easier
and more pleasant for all – or at least for all who can afford them.
This phrase was popularized by the fictional Gordon Gekko character in the Hollywood
film Wall Street.
ii This argument ignores the fact that machines often replace workers and that jobs often
shift to other countries. It also ignores the various government policies that force workers
to accept ridiculously low wages.
i
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Greed’s biggest promoter: Ayn Rand. The idea of greed (or, more politely, ‘selfinterest’) being a positive virtue got its biggest push from Russian-American novelist
Ayn Rand. Rand claims that looking out for others, not selfishness, hinders the achievement of freedom and prosperity: “If any civilization is to survive, it is the morality of
altruism that men have to reject.”6 Rand describes her philosophy as “the concept of man
as a heroic being, with his own happiness as the moral purpose of his life, with productive
achievement as his noblest activity.”7 While some consider people who pursue wealth
with no regard for others as sub-human, Rand labels them as super-human. According to
her, it is only the selfish pursuit of money that prevents people from becoming violent and
destructive: “Until and unless you discover that money is the root of all good, you ask for
your own destruction. When money ceases to become the means by which men deal with
one another, then men become the tools of other men. Blood, whips and guns or dollars.
Take your choice - there is no other.”8
Why worry about what Ayn Rand writes? Because the American Library of Congress
and the Book of the Month club has labelled her book Atlas Shrugged, with over six
million copies sold in the United States alone, as “the most influential book on American
lives after the Bible.”9 Her books and ideas are also popular internationally. They have
proved influential to businessmen and politicians who argue that government concern for
the poor simply breeds laziness and that government regulations slow down the vital and
beneficial pursuit of unlimited wealth.10
* * *
Despite the biblical claim that it is easier for a camel to pass through the eye of a
needle than for a rich man to enter the kingdom of God, many people associate
wealth with morality. References to the wealthy suggest that they work hard and
use their skills to gain their money, and thus that it would be wrong to redistribute
any of their riches to the poor. The poor, likewise, embroiled in their immoral
ways, are poor for a reason. The mainstream economic model thus suggests that
the poor are just as deserving of their poverty as the wealthy are of their money.
From this viewpoint, the ‘correct’ response to the super-rich is admiration, envy,
and emulation. Lest people forget the correct response, the media constantly
reminds them. Television, newspapers, movies, and the Internet offer tantalizing
glimpses into the homes, lifestyles, and buying habits of the ultra wealthy. Being
wealthy is its own virtue. As the media, itself owned by the wealthy, reminds
people: you can never be too rich, too thin, or too greedy. Oh, but wait, the wealthy
are not greedy: journalists talk about the generosity of billionaires voluntarily
giving away large chunks of their wealth. Of course, when you have billions and
pay little tax, you can afford to part with significant sums (especially when you get
a tax refund for your charitable gifts).
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As well as creating envy for the rich and famous, the media also diverts people’s
attention away from the harm done by some of the ultra rich: unethical ways of
earning money, tax avoidance, and mistreatment of employees. The media does
single out, of course, a few individuals, but the person who got rich by cheating –
or rather who was caught cheating – is treated as the exception not the rule, since
by nature, the rich are virtuous, generous, and wise.iii
Journalists write about the poor exploiting natural resources for need, but far less
about the rich exploiting those same resources for greed. The media definition of
theft involves small-scale robbery; at the level of a CEO, robbery becomes justified
acquisition. And so the chief economist of HDFC Bank in India blames the inflation in his country not on the spending habits of billionaires, but rather on the
poor who, thanks to a program that guarantees employment, can now (at least
sometimes) afford to eat.
On the issue of inflation management, it might help to pay attention to the fact that
the upward pressure on rural wages continues unabated. High wages are known to
feed price pressures and it appears that the rural economy is sitting on large pile of
cash that is supporting excess demand in consumer items particularly food. … Thus
it is imperative to take a fresh look at some of the sacred cows of public policy like
the employment guarantee programme. If indeed it is contributing to pricepressures, streamlining it would meet the dual objectives of harnessing inflation and
reducing spending.11
In other words, keeping the poor so poor that they cannot afford food will end the
inflation problem – while conveniently distracting attention from the growing
number of billionaires.
When society considers greed a social good, there is no compulsion to worry
about ethics. A colleague with many friends in the business community has
suggested that the moral of the 21st century may well be, “If it’s legal, it’s ethical; if
it’s not illegal, it’s not unethical.” As long as you amass great wealth without
breaking any laws, the how is not important. Greed, by making a bigger pie, is its
own justification.
The idea that unlimited greed is economically beneficial and thus should be
encouraged has its foundation in the writings of classical economist Adam Smith,
Not all rich people are wicked any more than all poor ones are virtuous…but neither are
they all heroic. But when George Soros or Warren Buffett say something, it is news; if an
average person were to say the same thing, no one would listen. Why, just because they
have figured out a way to make billions of dollars, do people think that their opinions are
more valuable than anyone else’s is?
iii
MYTH#13: GREED IS GOOD
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whose writings are supposedly the basis of mainstream economics. In The Wealth
of Nations, first published in 1776, Smith famously wrote, “It is not from the
benevolence of the butcher, the brewer, or the baker that we expect our dinner, but
from their regard to their own self-interest. We address ourselves, not to their
humanity but to their self-love, and never talk to them of our own necessities but
of their advantages.” Further, “by pursuing his own interest, [the individual]
frequently promotes that of the society more effectually than when he intends to
promote it.” Did Smith genuinely believe in selfishness as the highest form of
morality? Presumably not, given that in his book The Theory of Moral Sentiments he
seemed unable to imagine people being governed by nothing more humane than
greed: “How selfish soever man may be supposed, there are evidently some
principles in his nature, which interest him in the fortune of others, and render
their happiness necessary to him, though he derives nothing from it, except the
pleasure of seeing it.”12
The dangerous consequences of dangerous thinking
Mainstream economists seem to believe that since the rich contribute – so they
claim – vastly more to society than do the poor, governments should enable the
rich (through low taxes, limited regulations, abandonment of the minimum wage,
a range of subsidies for big business, and laws to protect private property) rather
than assist the poor. They claim that helping the poor simply makes them reluctant to work. So extensive is their dominance of media that many people agree, at
least until personal experience demonstrates otherwise. Thus, an American recipient of federal aid explained that, before having to obtain it, “I always thought
people on public assistance were lazy.” And now? “…it helps me know I can feed
my kids.”13 Despite the great need for those government services, beneficiaries
may still feel they encourage laziness, since media can have a bigger role in shaping public opinion than experience itself.
It is not difficult to see the negative consequences of promoting self-interest over
concern for others. In contrast to the more socially and economically equal European (and especially Scandinavian) countries, the extent of poverty in the United
States is shocking: half of all American children require government food assistance at some point before reaching the age of twenty; among black children, that
figure is nine out of ten.14 Almost twelve percent of Americans currently receive
food stamps (now known as SNAP, the Supplemental Nutrition Assistance
Program). That number hides large differences by race: twenty-eight percent of
blacks, fifteen percent of Latinos and eight percent of whites receive SNAP. Nor do
those figures provide a true figure of poverty, since food aid reaches only about
two-thirds of those who are eligible to receive it.15 Some of the beneficiaries hold
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full-time jobs that pay too little for them to afford food. According to a recent
report, one-fourth of the entire American workforce receives some sort of public
assistance; that figure includes more than half of the workers in the fast-food
industry.16 A country as rich as the United States should not have to provide food
aid to over a tenth of its population, especially not to those who are employed.
That it is necessary is testament to the preference given to greed over fairness.
Sometimes things are what they seem
There is a very big leap between Smith’s rather modest comment about the value
of self-interest and the idea that society functions best when people think only
about their own interests. To reduce everything to selfishness and material wealth
belittles us all. To believe that our greatest contribution to society comes through
selfishness and shopping represents a ‘convenient belief,’ not an economic truth.
Do people wish to live in a society based on the principle that greed is good? The
fact is that in all but the most egalitarian countries, a handful of people have vastly
more money than they can spend while their neighbours lack basic necessities.
Modern societies can do better than that.
In fact they do. Cooperation and trust are far more common than people may
recognize, partly because people rarely talk about them. Violence, selfishness, and
greed dominate the airwaves and the newspapers, and people internalize the
message that vice is widespread. Nevertheless, the existence of human societies is
dependent on a large dose of more selfless behaviours. Crime is the exception, not
the norm. Every day people have countless encounters that offer opportunities for
rudeness and cruelty; instead, the people they have contact with generally exhibit
neutrality or friendliness. Otherwise, life would be one big barroom brawl. While
it may not be talked about much on the news, there are plenty of people who feel
that the very essence of humanity involves a concern for others; that financial
rewards need not be enormous to motivate hard work and creativity; and that
societies can generate both equality and prosperity, as long as greed is kept in
check.
People accept too much ugliness when they believe that it is better to elbow others
out of the way in the struggle to the top than to lend a hand and to ensure that
others succeed as well. There are simply too many people on the planet for selfishness and greed to be the main organizing principles. People everywhere seek out
the company of others; they group themselves into communities, and those
communities require cooperation to survive and to flourish. Both selflessness and
selfishness are human traits, but if people really want to promote a better society,
they must encourage the quality of looking out for others.
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298
It is obvious that in much of the world, the accident of birth is the biggest determinant of the life that an individual will lead. In fact, wealth generates wealth; it is
the highly exceptional rich person who started out in poverty. Social mobility is far
more of a myth than a reality in present-day America and in much of the rest of the
world. The poor have so many disadvantages to overcome from the very start of
life that very few can escape poverty on their own. Too often, rather than allowing
people to get ahead, hard work simply keeps them exhausted and poor. The best
educated send their children to the best schools and have the contacts to help them
get the best jobs. Even where education is supposedly free, parents must pay for
clothes, books, and other fees. Recently, the situation may have gotten even worse
in many countries with the heavy dependence on outside tutoring. Parents are
expected to pay substantial fees for tutors; it sometimes appears that little if
anything is taught anymore in the schoolroom itself.iv Tutors benefit. The rich can
afford it. The middle class struggles. What happens to the poor? Lack of education
combined with racism, other prejudices, and the lack of opportunities means that
the poor stay poor. So much for the benefits of hard work.
The costs of losing in economic competition may be starvation and homelessness,
and the odds are so unfairly cast that it is, in the mildest language, a cruel joke to
expect the poor to ‘pull themselves up by their bootstraps.’v But even if people did
believe that poverty is partly a result of laziness or inability rather than of a system
weighed heavily against the poor, neither of those human qualities should be
considered acceptable reasons for some people to face inhuman living conditions.
How harshly do we want to punish people for not being the most capable or energetic?
Some, perhaps most, people are lousy at managing their money. How severely do
mainstream economists wish to penalize them for that inability, and how generously do they wish to reward those who are good at it? It makes sense that those
who manage money well will be better off. But how much better? People have (or
lack) talents in a wide array of fields: music, art, mathematics, cooking, human
relationships, dog training, and earning and managing money. The penalty for
lacking most skills is not huge. It is nice to be able to carry a tune, and you may
I have observed this in Bangladesh and Sri Lanka. I imagine that the practice is widespread.
v Even the Time magazine article about the social benefits of greed makes this point (if one
bothers to read to the end): “The plutocrats, the pampered, are necessary members of a
complex economy, and calls for pure egalitarianism have always been nonsense. But so is
the tough-love, pull-yourself-up, no free lunch even if you’re starving ethos of the people
who have forgotten – or never knew – what that kind of desperation feels like.”
iv
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make a fool out of yourself at a karaoke party if you cannot, but your quality of life
will not be seriously diminished if you are tone deaf. If you lack the skill of either
making or managing money, though, the results can be disastrous. A just and
humane society would value many other qualities and talents above the ability to
amass money.
The worship of greed causes people to allow far more suffering and adversity than
a supposedly civilized world should be prepared to accept. Most European countries understand that an important role of government is to address the fact that
unbridled capitalism imposes inhumanly high suffering on many of the economic
‘losers.’ Human effort and ingenuity are still rewarded, but the gap between the
rich and poor is minimized by truly progressive taxation and a wide variety of
services that benefit all members of society.vi
* * *
Earlier I mentioned a homeless man in Boston who quit his job as a dishwasher because it
paid too little to maintain him even in decent poverty. During our conversations, he
explained that he was incapable of operating on a sufficiently selfish basis to get ahead.
He had moved in with his sister, but her home was crowded and he felt that he took up too
much space. He did not want to cheat others. He felt that if selfishness was the price of
success, he would rather not have it.
* * *
In a capitalist system, people are encouraged to invest money in the production of
goods and services. In return, they expect to receive significant profits. While
capitalism is effective at the production and distribution of goods and while it
sometimes rewards effort and ingenuity, it distributes its rewards unfairly, giving
far more back to the capitalist (the person who invests the money) than to the
labourers who produce the products. It also encourages profit making at the
expense, rather than for the benefit, of the consumer. It cannot ensure, in and of
itself, a humane society in which the cost of losing the economic game is not
devastating. It would be far better to take the good aspects of capitalism, to
encourage people to work hard and gain reasonable rewards for their effort, but
not allow them to accumulate absurd levels of wealth. Again, to quote Smith’s
Wealth of Nations, “No society can surely be flourishing and happy of which by
vi Or, at least, the Europeans have historically understood this, though England has a worse
track record than other countries. Good policies can get whittled away elsewhere. Further,
they often do not extend to all the residents of the country, but rather only to the citizens.
Still, Europe and particularly Scandinavia are as good as it gets in terms of treating people
relatively equally.
MYTH#13: GREED IS GOOD
300
far the greater part of the numbers are poor and miserable.” If one is to accept that
private purchases are important to the economy, one should also accept that
spending by governments in favour of the poor and middle class is vital to the
economy as well as to people’s wellbeing.

Towards a Better Way: Generous and Moral Economics
“I seek not to wax great by others’ waning
Or gather wealth I care not with what envy;
Sufficeth that I have maintains my state,
And sends the poor well pleased from my gate.”
– Shakespeare, Henry VI Part II
“If I am not for myself, who will be for me? But if I am only for myself, what am I?”
– Hillel the Elder, Jewish scholar
“I had rather not have riches if I am not to know from whom they come, for then I have no
peace.” – Grimm, Household Tales
* * *
In a close and well-functioning community, hard times are weathered because,
normally, not everyone is equally badly off at all times. Those who are doing better
help others through their difficult spells, and in return are more likely to receive
help when they need it.vii Such a system makes good economic sense. Sometimes
life is simple and direct; sometimes a virtue is a virtue and a sin a sin, be it in
religion or economics. Despite what some economists tell us, it is better to act in
the interests of others, to keep in mind how our behaviour affects them, than
always to focus on ourselves. Unlimited greed can do unlimited damage.
* * *
A Vietnamese colleague told me about moving into an apartment building in which the
neighbours did not know or interact with each other. She went to each home and introduced herself. If she heard that a neighbour was sick, she would bring food or help with
cleaning or laundry. Others immediately began to reciprocate. And so, after a short
This could be described as long-term rather than short-term selfishness. Being good to
others often does involve a reward: the pleasure of satisfying one’s conscience or the enjoyment of expressions of gratitude or the satisfaction of seeing the results of one’s good deeds.
If that sort of gratification was what was meant by selfishness, the world would be a far
more congenial place.
vii
301
BEYOND APOLOGIES
period, the building of isolated strangers was transformed into a vibrant, thriving
community in which people looked after and helped each other.
* * *
It can be difficult to stay grounded when society promotes materialism and
selfishness. But community and cooperation are still flourishing. It is possible to
work to support them and to remind people of their importance. People can
support and encourage cooperative efforts whatever their area of expertise. They
can keep in mind that increasing wealth is not life’s only goal. They can remind
people that humanity has little meaning if everyone seeks to behave like beasts.viii
People can question the value of projects that harm people and/or the environment, despite the argument that they are good for the economy. They can question
why ‘cost effectiveness’ and ‘tradeoffs’ are only discussed when they short-change
the poor or harm the environment. Finally, people can advocate for measures to
ensure that the benefits of capitalism are widely shared, that its negative effects
are kept in check, and that income is redistributed from the top down and kept
circulating at a lower level. People concerned about the promotion of greed by
mainstream economists can support communal efforts, whether commercial or
attempts to improve neighbourhood conditions. Success in one such effort will
lead to others. Despite what the mainstream economists claim, humanistic interests will lead to a better society that promotes not unending consumption by the
few but rather the wellbeing of all.
viii This is a little unfair to animals, among which cooperation, even across species, is
common.
MYTH#13: GREED IS GOOD
302
Notes
1 http://www.popmodal.com/video/9940/What-has-greed-done-for-you-lately-Dedicated-
to-the-Occupy-Wall-Street-Protesters
2 Michael Pollan, “An Animal’s Place,” The New York Times Magazine, 10 November 2002.
3 See, for example, Jeffrey Dorfman, “Workers Should Be Very Thankful That
Corporations Are So Greedy,” Forbes, 15 December 2013.
4 Harry Binswanger, “Selfish Greed Wipes Out Racism,” Forbes, 26 December 2013.
5 Jeffrey Kluger, “Science Proves It: Greed Is Good,” Time, 28 March 2014.
6 Ayn Rand, “Faith and Force: The Destroyers of the Modern World,” lecture delivered at
Yale University on 17 February 1960, at Brooklyn College on 4 April 1960, and at
Columbia University on 5 May 1960. http://freedomkeys.com/faithandforce.htm
7 D. Campbell, “Greed is Good: A Guide to Radical Individualism,” The Guardian, 10
March 2009.
8 Campbell, “Greed is Good.”
9 Campbell, “Greed is Good.”
10 Kathleen Kennedy Townsend, “Ayn Rand vs. America,” The Atlantic, 23 August 2011.
11 Abheek Barua, “A Tough Balancing Act,” The Hindu, 18 February 2013.
12 Adam Smith, The Theory of Moral Sentiments, 1759.
13 Jason DeParle and Robert Gebeloff, “Food Stamp Use Soars, and Stigma Fades,” The
New York Times, 28 November 2009.
14 Mark R. Rank, and Thomas A. Hirschl, “Estimating the Risk of Food Stamp Use and
Impoverishment during Childhood,” Pediatrics and Adolescent Medicine 163.11
(2009):994-999. doi:10.1001/archpediatrics.2009.178
15 J DeParle and Gebeloff, “Food Stamp Use Soars.”
16 Sylvia Allegretto, Marc Doussard, Dave Graham-Squire, Ken Jacobs, Dan Thompson
and Jeremy Thompson, Fast Food, Poverty Wages: The Public Cost of Low-Wage Jobs in the
Fast-Food Industry (University of Illinois at Urbana-Champaign and UC Berkeley Labor
Center, 15 October 2013).
CONCLUSION
“…if it is possible to go to the moon, why can’t we solve the easier problems of building
for the ill-housed, feeding the hungry, overcoming poverty and fear of poverty…”
– Jane Jacobs1

The study of economics is the study of people; it is thus one of the most fascinating
topics imaginable. It offers vast potential for helping those who have consistently
failed to benefit from the changes brought about by modernization, industrialization, and globalization. People, wherever they live, whatever their skin colour, and
however seemingly different they might be, do matter; they matter because they
are human and because their suffering is our suffering.
If national governments learned to do accounting the same way that Prakash does,
in terms of estimating loss as well as gain, countries and individuals would be far
better off. If governments focused on wellbeing instead of on economic growth,
people like Prakash would lead far more comfortable, secure lives. As to how to
help Prakash, the best may be to ensure that he receives some basic assistance
from the government and otherwise is allowed to live his life and earn his living,
safe from the threats posed by corporations eager to seize his land or to pollute his
water.
It is vital to learn to identify and question the many conventional wisdoms and
convenient beliefs that have led to so much inequality and suffering. More people
need to stand up and challenge economists and politicians about their approaches
and policies. It is possible to find a direct path to wellbeing rather than attempt to
increase it indirectly through endless consumerism. It is possible to question what
is meant by development and even poverty. With a better understanding of the
causes, it will be easier to identify and implement successful solutions.
More and more people can refuse to accept blindly what the media, policymakers,
and economists tell them to believe. More and more people can dare to imagine
something better. More and more people can read, learn, discuss, and register
their protest with how things are.
I did not set out to provide definitive answers in this book. One may disagree with
much of what I have written. The point is not that the reader be convinced on
every point, but rather that she considers the possibility that alternative scenarios
to those we are told daily to believe do exist. Simply beginning to think about and
discuss these issues would be an important first step. The potential is there: it is up
to us to educate ourselves, join the networks of those seeking positive change, and
find our own ways of contributing to a more just and humane world.
329
BEYOND APOLOGIES
For years, I have watched the way political, financial, and corporate leaders and
the economists who support them blandly contribute to making the world worse
for the poor. I have seen how governments often prioritize militarization over
programs to help those in need. I have seen how classism, racism, caste and other
prejudices allow the ‘favoured’ to look down upon and mistreat others. I have
come to realize that not everyone finds the problems faced by the poor and outcast
particularly compelling. As a result, I have begun to suspect that I can summarize
‘all that is wrong with the world’ in two main problems: first, the belief that wealth
is more important than people are, and second, the belief that not all people are
fully human. (Those points may sound oversimplified. True. But oversimplifications, like shortcuts, however dangerous they may often prove, do not always lead
one in the wrong direction and can save much time.) If we truly believed that
people are more important than possessions, and that no matter how dark, dirty,
or otherwise different from us they are, that all people truly are human, we would
surely act far differently. We would insist that everyone have a decent standard of
living: enough to eat, clean water to drink, and access to health care and education.
We would work towards ensuring that everyone has decent living conditions and
towards greatly reducing the gap between those who can never have too much
and those who can never have too little. We would do this not through small charitable efforts but rather through long-term policies of redistribution of wealth. We
would prioritize wellbeing for people and our planet over consumption, production, and waste. In short, we would treat people – all people – as if they mattered.
We must move beyond apologies; now is the time to define and achieve an
economics of wellbeing.
Notes
Jane Jacobs, Cities and the Wealth of Nations (New York: Random House/Vintage Books,
1985).
1
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Note: I have listed below the books that I consider to be particularly valuable.
Almost everything I have written is available on the HealthBridge website
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332
BEYOND APOLOGIES
Bibliography
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