By Ibrahim Fathi
In 1994, the UN Food and Agricultural Organisation (FAO) estimated that 59 million people in Latin America are victims of chronic hunger. In its 1998 Human Development Report, the UNDP says that 840 million people in the Third World suffer from malnutrition, and that the average household in Africa consumes 25 per cent less than it did in the early ’70s.
The industrialised nations cannot be exonerated from the plight of the Third World. Prices of primary materials, which account for the bulk of the Third World’s exports, are steadily dropping against the rising costs of exports from the industrialised nations, including primary material exports. These discrepancies are not the product of the “free market forces of supply and demand”, but of the dynamics of unequal power relationships.
There is a steady and permanent drain of wealth from the Third World into the first. According to the Guardian of 11 May 1998, the total Third World debt rose from $1.4 trillion in 1995 to $2.17 trillion in 1998. World Bank statistics show that debt servicing for Third World countries rose from $59.4 billion in 1990 to $64.5 billion in 1994 — figures much higher than the profits made by multinational companies, which stood at $17.8 billion in 1990 and rose to $25.4 billion in 1994. Rather than flowing outwards towards the Third World, a centripetal force is sucking money into the industrialised world.
Many writers have observed weaknesses in the American miracle. Some have observed that the US annual economic growth rate declined from 5.25 per cent in the ’60s, to four per cent in the ’80s and 2.6 per cent in the ’90s. As a result, the actual productive capacity of capital has grown increasingly out of kilter with stock market activity, which shows rising prices of shares due to the intensification of speculative activities, particularly on luxury goods and services. This disparity can have grave consequences world-wide, although some commentators have suggested that, should disaster hit, the US, in a position to manoeuvre at the expense of others, will remain secure in an oasis of plenty, inure to the crisis.
Left-wing economists Harold Schumann and Hans-Peter Martin offer a realistic portrait of the US economy. They say that circumstances of the Cold War made welfare policy and concessions to labour necessary. But ultimately, US capitalism, driven by the requirements of international competition, had to resort to “downsizing” and “outsourcing”, or setting up production branches abroad. As a result, contrary to the commonly held notion, the world’s largest economy is also that which, among the world’s major economies, pays the lowest wages and levies the lowest taxes on entrepreneurs and managers, enabling them to earn the highest profit margins.
In the US, half a million people own a third of the wealth of the entire US population. At the same time, the average income for three quarters of the working population is 19 per cent lower than it was in the ’70s. According to the International Labour Organisation (ILO), a fifth of the labour force in the US receives incomes below the official poverty line. The American economic recovery, it would appear, has been made possible by reducing job opportunities and lowering wages. Officially, there are seven million unemployed in the US.
Schumann and Martin offer a much bleaker picture. The official statistics, they say, do not take into account the six million frustrated job seekers who have not registered as unemployed. Nor do they make mention of the 4.5 million people who can only find part-time jobs with no security, the 10 million temporary employees and the 8.2 million self-employed dependent upon sporadic demand. The income of the American middle-classes has also been on the decline, with many white-collar employees forced to accept lower salaries and poorer conditions in order to be able to hold on to their jobs. If the majority of the people in the US belong to the middle-class, it nevertheless seems that this class is being eroded while, simultaneously, the government is reducing allocations on education, health and pensions.
The same situation applies to most industrialised countries, which have also reduced taxes for the rich and cut back on social benefit programmes. Sweden, the paragon of the welfare state, which once had one of the highest living standards in the world, now strains under an enormous budget deficit because the major industrialists have transferred their operations abroad. The government is thus unable to implement many of its social benefit programmes.
Yet no crisis is about to cause capitalism to collapse. Crises are the way in which capitalism restructures itself in order to continue to accumulate wealth. Capitalism, it is true, conveys only the illusion of potential prosperity. But it will live on, because millions of workers and millions of peoples from the Third World will foot the bill.
http://www.ahram.org.eg/weekly/1999/432/op6.htm
© Al-Ahram Weekly, Cairo 1999
