The Divide

by Jason Hickel

  Under this proposal, countries that presently enjoy a comparative advantage through cheap labour would retain that advantage, so there would be minimum disruption to their economies. This system would go a long way towards eliminating poverty – at least the poverty of the working population. It would also help reduce inequality, not only within countries but also between them. Raising wages also has positive economic benefits: putting more money into the hands of ordinary workers stimulates demand and thus facilitates local economic growth, and it does so in a way that doesn’t depend on debt (unlike microfinance).

  Of course, some might object that raising wages in poor countries might drive up the prices of their exports too much, leading to a drop in consumer demand and ultimately a rise in unemployment. But this fear is not well founded. There is no evidence that raising minimum wages has any negative effect on employment. Indeed, a recent study found that doubling the wages of sweatshop workers in Mexico would raise the price of clothes sold in the US by only 1.8 per cent – too little for most consumers in rich countries to notice. In fact, you could raise sweatshop wages by a factor of ten and consumers still wouldn’t be fazed: a study by the National Bureau of Economic Research shows that people are willing to pay up to 15 per cent more on a $100 item — and 28 per cent more on a $10 item — if it is made under ‘good working conditions’. There is a lot of room for wage growth before it begins to have any troublesome economic effects.

  It might sound like a bureaucratic nightmare to manage, but the UN’s International Labor Organization has already claimed that it has the will and the capacity to govern a global minimum wage system. A global minimum wage would go a lot further than the ‘fair trade’ fad that has become popular among Western consumers. Every time I walk into a store and see items labelled fair trade, I’m always struck by what their presence implies: that the rest of the ‘normal’ products are unfair. We shouldn’t have to choose between fair and unfair products. When we buy the things we need to sustain and enjoy our lives, we should be able to be confident that we are not colluding in the exploitation of other human beings.

  Reclaiming the Commons

  The fifth step would be to deal with the three mechanisms of plunder that I discussed in the previous chapter: tax evasion, land grabbing and climate change – all of which have to do with reclaiming public resources and protecting the commons.

  Tax evasion drains hundreds of billions of dollars out of developing countries each year. Fixing the international tax system is vital to putting an end to this theft – and doing so would yield formidable funds for development and poverty eradication. The issue does appear in the UN’s Sustainable Development Goals, which state: ‘Strengthen domestic resource mobilization, including through international support to developing countries, to improve domestic capacity for tax and other revenue collection’ (17.1). While improving tax collection in developing countries is an important step, this approach makes it seem as though poor countries are to blame for their own misfortunes. The real culprits – the individuals and multinational corporations that offshore their income, the bankers who assist them and the rich-country governments and international institutions that make it all possible – are let off the hook.

  First of all, the most effective way to improve domestic tax collection would be to start at the global level: change the WTO’s customs invoicing standards, which presently make it very easy for companies to steal money through trade misinvoicing and transfer mispricing. This could be done by allowing customs officials to hold up transactions whose prices diverge suspiciously from stan-dardised norms. Another method would be to close down the secrecy jurisdictions that serve as tax havens in the first place. Requiring global financial transparency would put an end to shell companies and anonymous accounts, and revealing the ‘beneficial owners’ of all companies, trusts and foundations would allow their income and wealth to be taxed by their home countries.

  Another popular proposal is to require multinational companies to report their profits in the countries where their economic activity actually takes place, rather than the current practice of providing a single consolidated balance sheet for all operations and filing it in a separate low-tax jurisdiction. This is known as ‘country-by-country reporting’. To bolster this system further, we could prevent tax evasion through transfer mispricing by taxing multinationals as single firms rather than as a collection of independent subsidiaries. Another interesting option might be to impose a global minimum tax on corporations, which would eliminate their incentive to evade national taxes altogether. It would also put a floor on competition between countries in their race to attract investment by offering ever-lower taxes. And to help seal it all up, it would make sense to introduce harsh penalties for bankers and accountants who facilitate tax evasion and other illicit flows.

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  Then there are land grabs. To put an end to land grabs, it would make sense to place a moratorium on all deals that involve major transfers of land from small farmers, collective use or ecosystem services to commercial use, until such deals can be conducted transparently and with the full involvement of affected communities. Because many land grabs are made with an eye towards profiting from rising food prices, to really get at the root of this problem would require preventing financial firms and investors from speculating recklessly on food. Not only would this remove the incentives that spur many of the most harmful land grabs, it would also help keep food affordable and prevent needless hunger.

  There is also the matter of the New Alliance for Food Security and Nutrition, which has spurred land grabs in the name of reducing hunger, operating under the assumption that corporations can produce food more efficiently. But by dispossessing small farmers it paradoxically risks increasing hunger. The weight of evidence suggests that the best strategy for tackling hunger is in fact the opposite approach: land reform in favour of the small farmers whose produce already feeds the vast majority of the world’s population. Indeed, that’s how China eradicated so much hunger during the 1990s. In 2014, the UN special rapporteur on the right to food affirmed this point, calling for strong protections against agribusiness land grabs and laws that ensure small farmers have rights to use, save and exchange seeds.

  Because the UN REDD programme and other carbon-trading schemes have become another driver of land grabs in the developing world – triggering what analysts are calling ‘carbon colonialism’ – it would make sense to re-evaluate all such transactions to ensure that they don’t force people off their land in the name of climate change mitigation. Because indigenous people who inhabit forests are particularly vulnerable to dispossession under carbon trading schemes, special care needs to be taken to ensure that their rights to land and forest resources are respected – and this should not have to require granting them formal title deeds, which often paradoxically renders people even more vulnerable to dispossession.

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  On climate change, the solutions are more obvious. The 2016 Paris Agreement under the United Nations Framework Convention on Climate Change commits to keeping us under 1.5°C of warming over pre-industrial levels. Unfortunately, though, the Paris Agreement doesn’t go far enough to put us on track to satisfy this obligation. The agreement relies on pledges for emissions reductions from signatory countries, but even if all of these pledges are fulfilled we will still breach 3 or even 4°C of warming, with catastrophic consequences. And this is before we factor in the possibility that the United States under a Trump administration will withdraw from its pledges altogether. We are presently on track to use the entire carbon budget for 1.5°C by as early as 2020, and the country pledges will not even be reviewed until 2023.

  Keeping below 1.5°C may no longer be an option, but we can still keep below 2°C if we adopt a much more aggressive approach. To have a strong chance of accomplishing this, rich countries will have to hit zero carbon emissions by 2035, and poor countries will have to follow suit by 2050. By applying stringent standards on energy efficiency and tighte
ning them every year, rich countries might be able to reduce their energy demands by as much as 40–70 per cent in ten years. And if the top 10 per cent of individuals with the biggest carbon footprints reduce their emissions down to the level of even just the average European, rich countries could cut their emissions by 33 per cent – and this could theoretically be achieved in a single year. Cuts on this order will be essential to preventing runaway climate change.

  Bizarrely, the Paris Agreement makes no reference to fossil fuels or fossil fuel companies. This is a fatal oversight, as one of the most powerful steps towards climate change mitigation would be to end subsidies for fossil fuel companies, which presently amount to $5.3 trillion per year. Ending these subsidies would help make fossil fuels less competitive compared with renewable alternatives. And we could advance this further still by reinvesting this $5.3 trillion in renewable energies like solar, wind and tidal power – avoiding biofuels, since the land required for biofuel production means this strategy ends up driving land grabs, and as land is converted from food production to energy production it creates problems for food security. Breaking the back of the fossil fuel industry, which exerts undue influence over policymaking around the world, is essential to real progress against climate change. In addition to cutting subsidies, another approach is to get universities, foundations, cities and other entities to divest their endowments from fossil fuel holdings – a campaign that is already gaining significant traction around the world.

  At the same time, it is vital to ensure that developing countries receive due compensation for the damage caused by climate change, as well as financial and technical support to help them transition to renewable energy systems. A number of studies have already delineated fair ways to divide the responsibility for these financial transfers, accounting for each country’s historical emissions and present resources. The Climate Fairshares project, by the Stockholm Environment Institute and Friends of the Earth, offers what are probably the best proposals to date.

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  By targeting the deep structural causes of global poverty and inequality, and by making the international economic system fairer, more rational and more democratic, these interventions would have a monumental impact. Best of all, this approach wouldn’t require a single dollar of foreign aid. Instead of relying on charitable window dressing, it goes to the root of our global problems by redistributing both power and resources. But implementing these interventions will require the political courage to stand up to the interests of the very powerful actors who extract so much material benefit from the present system, for they will not concede voluntarily. It will be a difficult battle, but not impossible. Indeed, it is already being fought – and not without success.

  The Jubilee Campaign and Strike Debt are proving to be a formidable force calling for debt cancellation in the global South. So too are the South Centre and the Third World Network, which are building solidarity among global South governments and civil society organisations respectively, to tackle not only debt but also structural adjustment, unfair trade rules, intellectual property issues and the imbalance of power in global governance institutions. The Bretton Woods Project is pushing hard for increased transparency and democracy in the World Bank and the IMF. And the Bolivarian Alliance for the Peoples of Our America (ALBA) is building a real-life alternative to the neoliberal Washington Consensus by organising regional economic integration in Latin America and creating an alternative currency for trade, with a focus on cooperation rather than competition and with an eye towards improving social welfare rather than just corporate profits. The battle for a global minimum wage is still in its infancy, but there are impressive movements building in this direction – for example, the Asian Floor Wage campaign is fighting to establish a transnational minimum wage for garment workers across Asia, one of the most vulnerable workforces in the world.

  The Tax Justice Network is probably the most effective force in the battle against tax evasion and illicit financial flows, and has already succeeded in getting some initial reforms enacted by national governments. On the land front, the global network of small farmers known as La Via Campesina is organising against land grabs, agribusiness monopolies and seed patents, along with regional organisations such as Ekta Parishad in India and NGOs like GRAIN. The Indigenous Environmental Network is putting up a strong fight against REDD and other carbon-trading schemes that dispossess indigenous people. And the real momentum against climate change is building in unexpected ways, with Native Americans using their territorial rights to block fossil fuel projects (like Standing Rock and Idle No More), citizens taking to the streets to demand stronger action from their governments, and students pressuring their universities to divest from fossil fuels. As this book goes to press, 690 institutions around the world – including universities, faith-based organisations, foundations, pension funds and governments – have divested their wealth from fossil fuels, pulling some $5.44 trillion out of the industry and redirecting much of this into renewables.

  None of the people involved in this struggle are asking for charity, nor are they calling for bigger aid disbursements. They are taking matters into their own hands, building solidarities, challenging power interests, tackling root causes and, in many cases, even putting their lives on the line in the process. If we are to have a fair shot at a better world, it will be down to their hard work and courage.

  Nine

  The Necessary Madness of Imagination

  You cannot carry out fundamental change without a certain amount of madness. In this case, it comes from nonconformity, the courage to turn your back on the old formulas, the courage to invent the future.

  Thomas Sankara

  Let’s imagine, for a moment, that we succeed. Poor countries are liberated from the shackles of structural adjustment; they win an equal voice in the institutions of global governance; and the rules of international trade are rebalanced to give them a fair shot. All of a sudden they find themselves free to determine their own economic policies in their own national interests, without threat of coercion or invasion, and they resort to the developmentalist agenda that worked so well for them in the 1960s and 1970s. They nationalise their oil reserves and their mines, and they reclaim control over their telecommunication and water infrastructure. They protect their domestic industries with strong tariffs, and nurture companies until they can compete effectively on the world stage. They break up the big foreign agribusinesses, ensure that small farmers have stable access to land, and offer subsidies to promote national food security. As domestic industries grow, more jobs are created, labour unions win decent salaries for workers, and a middle class begins to rise. Income growth rates inch their way up, poverty falls and hunger becomes a thing of the past. With the tax havens closed, government revenues increase and – without a crushing debt burden to pay off – there is room for social spending on universal healthcare and education. Universities increase their enrolment and, with better public health systems and access to generic medicine, tropical diseases are kept in check at last.

  It is a compelling vision. And in the context of a fairer global economic system, all of this is theoretically possible. But there is one problem that we haven’t yet accounted for. The standard developmentalist model hopes that poor countries will be able to grow their industrial economies – and their incomes – to the point of catching up with rich countries. Such growth requires an increase in resource consumption, of course, along with an increase in waste, pollution and emissions. This is a normal and perhaps to some extent inevitable process. But unfortunately our planet doesn’t have enough ecological capacity for it to happen – in terms of both resources and the ability to absorb our greenhouse gas emissions. Scientists tell us that even at existing levels of aggregate global consumption we are already overshooting our planet’s ecological capacity by about 60 per cent each year.

  This overshoot is due almost entirely to overconsumption in rich countries. According to data compiled by researchers at the Global F
ootprint Network in Oakland, our planet only has enough ecological capacity for each of us to consume 1.8 ‘global hectares’ annually – a standardised unit that accounts for resource use, waste, pollution and emissions. Anything over this means a degree of resource consumption that the Earth cannot replenish, or waste that it cannot absorb; in other words, it locks us into a pathway of progressive degradation. The figure of 1.8 global hectares is roughly what the average person in Ghana or Guatemala consumes. By contrast, Europeans consume 4.7 global hectares per person, while in the US and Canada the average person consumes 8 – many times their fair share. To get a sense of how extreme this overconsumption is: if we were all to live like the average citizen of the average high-income country, we would require the ecological capacity equivalent to 3.4 Earths.

  For most of us it is difficult to comprehend what this overshoot means, insulated as we are from its effects. But the scientific data is piling up around us. Take deforestation, for example. Only sixty years ago our planet was carpeted with 1.6 billion hectares of mature tropical forests. Since then more than half have been destroyed by human industry. Then there are the soils. Forty per cent of our planet’s agricultural soil is seriously degraded, mostly as a result of intensive industrial farming techniques and chemical fertilisers that strip the soil of its fertility, which means that agricultural yields will begin to collapse in the not-too-distant future. Or look at fish: around 85 per cent of global fish stocks are over-exploited or depleted. Haddock have fallen to 1 per cent of their former volume. Halibut to one-fifth of 1 per cent. Most of this is due to overfishing, but some of it is also due to the rapid acidification of the oceans, triggered by high concentrations of CO2 in the atmosphere. And it’s not just fish. Scientists tell us that up to 140,000 species of plants and animals are disappearing each year due to our over-exploitation of the Earth’s ecosystems. This rate of extinction is 100 to 1,000 times faster than before the Industrial Revolution – so fast that scientists have classed this as the sixth mass extinction event in the planet’s history, with the last one having occurred some 66 million years ago.