Economic Injustice: "WE WERE ROBBED...... "

Democracy defines the American vision which is increasingly being adopted by fellow nation-states.  What role does ‘money’ play in our attempt to fulfill that vision?  Is it democracy that we are so vigorously pursuing, or is it something else?  Stating “we were robbed” provokes the question(s).... Is it an economic injustice or a democratic one?  

A reader commented on a previous post with the following statement:

I read your article carefully. By "Western Regions" I think you mean America in particular. In fact we already give, both thru government & private giving, many, many billions of dollars to the developing countries you refer to. This is what the climate treaty meeting was all about...the re-distribution of wealth (ours).

As promised, here is my response:

Financial support and intervention is not always the most viable option.  With corruption abound in developing nations; it also evolves into international politics.  The European Union pledged in 2002 $7-8 billion in aid to stimulate economic growth and reduce poverty in states that adopt sound policies (Carbaugh, 2007).  These intentions include stopping corruption, increasing education, and promoting free trade.  The idea is that these countries will attract foreign investment and will be more successful.  The United States adopted a similar strategy.  However, the U.S. took a more biased approach and was deeply rooted with political ties.  Israel and Egypt received forty percent of the aid, while Africa only ten percent.  Twenty-five percent was disbursed for military assistance.  The remainder was split amongst several various countries. Also stated is that “aid often funds prestigious projects such as airports and big hotels with little impact on sustainable development for the poor (Karns & Mingst, 2004).”  Bolivia, a country who depends on cocoa as eighty percent of its cash crop relies solely on the United States for aid, advisors, and strategies.  Yet, their needs are often neglected.

              With subsidies in the form of aid to developing countries being distributed in bias, and with political economics involved it has often fostered bureaucracies, bad governments, favored the wealthy, or just been squandered away.  Often, it given to political allies instead of the beneficiaries of which it was intended.  Aid is often accused of interfering with attempts to combat poverty, as the U.S. while providing aid to developing countries will counteract with subsidies to U.S. farmers, which helps lower the prices worldwide of vital cash crops in which developing countries depend (Carbaugh, 2007, pp 237 & 250).  It seems illogical that aid would be given for the purpose of development, but then thwarted with efforts to combat the threat of a competitive import.  How then can a developing nation realistically expect to succeed should it take the aid and invest it into a different product?

Structural Adjustment Programs were formulated by the IFIs, such as the World Bank and IMF, as a means to manage the development processes and strategies of developing countries. These programs have been under heavy scrutiny for being highly ineffective in that they failed to solve the problems faced by the developing countries as they were accelerated into democracy and capitalism prematurely which often times drove them further into impoverishment. IFIs and Westernized democracies that were established in capitalist markets held the assumption that foreign capital investment and a sound infrastructure laid the foundation for development.

This theory of modernization neglects to recognize cultural, social, and political differences that existed in developing and underdeveloped states which would further repress economic growth in a capitalist market. While corruption, failed institutions, and a lack of local market reforms contributed to the ultimate failure of SAP’s, the World Bank shifted its focus on the implementation of programs that address the poor people and actively engaged them in the interaction of political, social, and other institutional processes. Simply throwing money at them and proclaiming democracy was not the answer, and although IFI’s recognized their fallacy, their enlightenment and advancement towards collaboration never came to full fruition. The deepened divisional divide that democracy and capitalism had created between the elites and impoverished meant that the societal elites often bore little concern for the poor. The IFIs reliance on national SAP’s left the poor essentially at mercy of the rich. Without international intervention in policy making and establishing a sound infrastructure success is futile. 

A lack of a democratic system and economic distress are primary stressors for developing countries.    Economic growth, according to “Westernized” principles, relies on a liberal, capitalist system which stems from their perception of a democratic state.    Developing countries often argue that capitalism suppresses the population as it creates class divisions which further separate the poor from the rich.  The division that results from capitalism creates an atmosphere of “elitism”.   The government is supported and elected by these high society elites, which hinders equality and the advancement of the social welfare of the state.  With an economy steadily on the decline, the state feels pressure to further depend on international forces.  Instability is fostered in this sort of environment.  The HD Report of 2002 notes the differences as “unjust” and claims that “for politics and political institutions to promote human development and safeguard the freedom and dignity of all people, democracy must widen and deepen.” 

Latin American Countries have long sought more attention to development needs and preferential treatment in trade and finance, while the United States maintains that development is a national responsibility, as opposed to an international one (Therien, Fortmann, and Gosselin, 1996, pg 230).  To the contrary, this seems to be an issue of international governance that requires cooperation among all nations, and the aggressive pursuit of a resolution.  The blame game is not one to be played in these affairs, as not only the economics of the world are heavily involved, but an enraging world health crisis is on our hands.  So what are we doing about it?

A bilateral approach is needed in U.S. foreign policy that benefits both parties in order to be effective.  Hector Morales, Coordinator to the U.S. Summit of the Americas states that “democracy and development will not be sustainable or long-lasting if there’s not going to be a secure environment (Green, 2008).”   In 2005, the General Assembly enacted the Declaration of Florida, along with Resolution 2154, which together provide initiatives for regional cooperation.  The aim is to strengthen implementation of the Democratic Charter in order to proactively address threats to democracy (Castaneda, 2006).  Conversely, Cuba remains one of two communist states in the world and lies only 90 miles from the United States border.  If the U.S. cannot promote democracy within a state that is incredibly close in proximity, how can it manage to promote democracy across the hemisphere?

There is a growing gap between the developed and less developed countries.  “The international community is doing too little to narrow this gap” claims Nobel Peace Prize winner Joseph Stilglitz (Carbaugh, 2007).   The area of economics consists of looking not merely at the immediate but at the longer effects of any act or policy; it consist in tracing the consequences of that policy not merely for one group, but for all groups (Hazlitt, 1979).  Therefore, it is critical that we approach the growth and development of these countries with intentions for long term remedies as a collaborative.

Throwing money into a corrupt government can be considered more of a “fix” than a strategic level of aid or support.  It is proven that saving, capital accumulation, and investment activity improves the long run economic conditions and progress as it serves the interest of the future.  Essentially, it is inevitable that man will seek a solution to the short-term effects of poverty, rather illegal or not.  Mismanagement of foreign policy and support will only suppress him further with many encumbrances that drive him deeper into the shadows of darkness.  Show him the light at the end of the tunnel, the way to achieve long-term happiness and he will make it his pursuit.

References:

Carbaugh, Robert (2007). International Economics. Mason, Ohio: The Thompson Corporation

Castaneda, J. (2006, May/June).A Tale of Two Lefts.  Foreign Affairs.  

Corruption Perceptions Index. (2009). Transparency International: The global coalition against corruption. 

Green, E. (2008, December 9).  Summit of the Americas Highlights U.S. Commitment to Hemisphere.  America: Engaging the World.

Hazlitt, Henry (1979).  Economics in One Lesson. New York, New York: Three Rivers Press

Karns, Margaret & Mingst, Karen (2004). International Organizations: The Politics and Processes of Global Governance.  Boulder, Colorado: Lynne Rienner Publishers, Inc.

Therien, Fortmann, and Gosselin 1996 study (as cited in Karns & Mingst, International Organizations, 2004).