Book Review: The Divide by Jason Hickel

By George Smith • MSc Anthropology, Environment, and Development

Jason Hickel is an anthropologist and de-growth activist. His recent book, The Divide: A Brief Guide to Global Inequality and its Solutions, offers an eye-opening account of how our globalised economy is perpetuating inequality and destroying the environment.

Hickel argues that global poverty is a direct consequence of our own current neoliberal economic system, not, as some like to see it – a natural and unavoidable evil. In other words, poverty is a constructed phenomenon. However, we are shielded from this inconvenient truth by an elaborate PR campaign – what Hickel calls, the ‘good-news narrative’.

Statistics about global poverty, Hickel argues, are warped to make it seem like we are on the right track to eliminating poverty. Although on occasions one feels Hickel is over simplifying the statistics, the overall argument is compelling.

For example, it becomes easier to demonstrate the reduction of global poverty when the International Poverty Line (IPL) is shifted. In 2000, the International Poverty Line went from $1.02 per day to $1.08 a day. This seems like a higher threshold from which to measure poverty. But as purchasing power parity has decreased steadily (basically meaning the relative cost of things has gone up) a mere increase from $1.02 to $1.08 is actually a relative decrease in purchasing power. So, as more people become poorer, a shift in the goal posts means this uncomfortable truth can be swept under the carpet.

More alarmingly, the development sector, now worth billions of dollars a year, is also helping to shape this ‘good-news narrative’ – wittingly or not. International nongovernmental organisations, despite often acting with good intentions, are actually contributing to the idea that poverty can be eliminated with the charity.

What’s wrong with this narrative, Hickel argues, is that it leads us to believe that the wealth of the Global North is independent from the poverty of the Global South. That is, the world’s resources and opportunities are equal to all – all that poor countries need is a helping hand and point in the right direction in order to ‘develop’.

The Global North likes to think it’s ‘doing its bit’ to reduce global poverty. After all, rich countries give an estimated $128 billion to developing countries per year. However, this figure looks miniscule in comparison to the money flowing in the other direction. Since 1980, net outflows from the Global South to the Global North have amounted to about $26.5 trillion. This is, Hickel reminds us, ‘roughly the GDP of the United States and Western Europe combined’.

But how is this gross exploitation persisting? Hickel outlines three key factors that have contributed to the inequality between the Global North and the Global South over the last 30 years.

1. Debt. In the 1970s Western banks, began handing out loans to poor countries on an unprecedented scale. Encouraged by ‘participation-fees’ which gave them instant kickbacks on their loans, loan pushers got rich quickly while some of the poorest countries in the world stacked up huge debts. Because of the compound interest on these debts, countries are still paying vast sums of money into Western banks. Since 1980, ‘developing countries have forked over $4.2 trillion in interest payments’. That’s about $113 billion each year.
2. Structural Adjustment Programmes (SAPs). In order to help developing countries manage their debts, the International Monetary Fund (IMF) and the World Bank have essentially enforced neoliberal economic policies onto sovereign countries. This means money is diverted away from their public services and used to pay back interest on their loans. In other words, money and resources are taken away form those who need it most and given to some of the richest banks on Wall Street. Furthermore, enforced neoliberalism means developing countries are prevented from adopting protectionist policies that will protect their own industries and allow them to genuinely develop. As it stands, vulnerable, under-developed industries are pitted against the most competitive industries in the West that have had much more time to develop. SAPs also allow massive multinational corporations to extract resources from developing countries for their own profit. Because they are tied into debt repayment schemes, developing countries are not allowed to nationalise their own assets.
3. The liberalisation of trade and the movement of capital. In order to make the global economy more efficient, the World Trade Organisation (WTO) ensures that capital can move freely over borders. This is a good idea in principal but in reality it means the poorest countries in the world lose staggering sums of money through ‘capital flight’, or, in other words, tax evasion. The ease at which corporations (international and domestic) can move large sums of money across borders and put it in off-shore tax havens (mainly British and American ones) means the world’s poorest countries lose trillions ($23.6 trillion since 1980) of dollars a year. If, as Hickel argues, tax havens were made to be more transparent and the flow capital monitored more closely, developing countries could make huge steps towards eliminating poverty.

Given these insights, it is disheartening to hear policy makers evangelise about the virtues of global free trade.

In an article written in the Guardian, Secretary of State for International Trade, Liam Fox has said: ‘I want us [Britain] to lead the way in helping poorer communities through trade’. This is because he ‘recognises the progress that trade has delivered for the world’s poorest’ communities.

This kind of argument asserts that developing countries can be pulled out of poverty if we just maintain our current economic system. In other words, we can all grow our way out of poverty – redistribution of wealth and resources is not necessary.

However, there are problems with this reasoning. Firstly, it relies on our obsession with GDP and GDP growth. ‘Indeed’, Hickel points out, ‘almost the entire economics profession and nearly all of our politicians’ are focused on GDP growth. Based on this mind-set, however, in order to lift all people out of poverty, it would take over 200 years.

Furthermore, the idea of ‘growing anything in perpetuity – even good things – is philosophically absurd’. We live in a finite world, and our level of consumption – which is currently built in to the very fabric of our economy – is destroying the planet. We are told, Hickel reminds us, that if we don’t have a GDP growth rate of about 2 or 3 per cent a year, we’re in crisis. This means, based on global GDP of $73 trillion in 2015, we will need to add more than $2 trillion to global GDP per year: that’s roughly the size of the UK economy.

We have come to believe, Hickel concludes, that GDP equals human development. But if you ‘cut down a forest and sell the timber, GDP goes up. If you strip a mountain range to mine for coal, GDP goes up.’

What’s happening, Hickel argues, is that our current fixation on continual growth has begun to cause significantly more problems than benefits: ‘more “illth” than “wealth”’. The reason is that ‘there are no longer any frontiers where accumulation doesn’t directly harm someone else.’ And unfortunately, that ‘someone else’ is almost invariably the poorest countries. Thus, the effects of Western consumerism is not only destroying the planet, but also entrenching the world’s poorest countries in a vicious cycle of poverty.

The solution, of course, is multifaceted – tax havens must be made to be transparent, the IMF and World Bank need to be democratised so as to give fairer voice to developing countries, and debt written off along with the ensuing SAPs.

Overall however, the goal must to be on changing the narrative that aligns GDP growth with human development. Our fixation with growth justifies global inequity because our focus remains on everyone accumulating more, instead of sharing the wealth that already exists.

What we need, therefore, is a narrative that takes into consideration much more sustainable and constructive ideals. GPI, the Global Progress Indicator, for example, ‘starts with GDP but then adds positive factors such as household and volunteer work, subtracts negatives such as pollution, resource depletion and crime, and adjusts for inequality’, Hickel points out. There are other similar approaches – The Happy Planet Index, for example, will measure the life expectancy in a country, happiness and its ecological footprint.

If we are to start reducing global inequality, and ensuring a secure future for the planet, these are the yardsticks with which need to measure human development. This is no easy solution; it requires a new narrative and a new way of thinking. In challenging the hegemony of neoliberal economics Jason Hickel’s The Divide is an important book, accessible to any reader, in opening up a space for this new narrative.