3493. The Rise of Capitalism and the Productivity of Labour

By Michael Roberts, Micahel Roberts Blog, March 28, 2021

In my view, there are two great scientific discoveries made by Marx and Engels: the materialist conception of history and the law of value under capitalism; in particular, the existence of surplus value in capitalist accumulation.  The materialist conception of history asserts that the material conditions of a society's mode of production and the social classes that emerge in that mode of production ultimately determine a society’s relations and ideology. As Marx said in the preface to his 1859 book A Contribution to the Critique of Political Economy: “The mode of production of material life conditions the general process of social, political and intellectual life. It is not the consciousness of men that determines their existence, but their social existence that determines their consciousness.”

That general view has been vindicated many times in studies of the economic and political history of human organisation.  That is particularly the case in explaining the rise of capitalism to become the dominant mode of production.  Now there is new study that adds yet more support for the materialist conception of history.  Three scholars at Berkeley and Columbia Universities have published a paper, When Did Growth Begin? New Estimates of Productivity Growth in England from 1250 to 1870. https://eml.berkeley.edu/~jsteinsson/papers/malthus.pdf

They attempt to measure when productivity growth (output per worker or worker hours) really took off in England, one of the first countries where the capitalist mode production became dominant.  They find that there was hardly any growth in productivity before 1600.  But productivity started to take off well before the so-called ‘Glorious Revolution’ of 1688 when England became a ‘constitutional monarchy’ and the political rule of the merchants and capitalist landowners was established.  These scholars find that, from about 1600 to 1810, there was a modest rise of the productivity of the labour force in England of about 4% in each decade (so 0.4% a year), but after 1810 with the industrialisation of Britain, there was a rapid acceleration of productivity growth to about 18% every decade (or 1.8% a year).  The move from agricultural capitalism of the 17^th century to industrial capitalism transformed the productivity of labour.

The authors comment: “our evidence helps distinguish between theories of why growth began. In particular, our findings support the idea that broad-based economic change preceded the bourgeois institutional reforms of 17th century England and may have contributed to causing them.”  In other words, it was the change in the mode of production and the social classes that came first; the political changes came later.

As the authors go on to say, “an important debate regarding the onset of growth is whether economic change drove political and institutional change as Marx famously argued or whether political and institutional change kick-started economic growth”.  The authors don’t want to accept Marx’s conception outright and seek to argue that “reality is likely more complex than either polar view.”  But they cannot escape their own results: that productivity growth began almost a century before the Glorious Revolution and well before the English Civil War.  And “this supports the Marxist view that economic change contributed importantly to 17th century institutional change in England.”

The other interesting aspect of the paper is that the authors try to measure the impact of population growth on productivity and wages.  In the early 19^th century, Thomas Malthus argued that it was impossible for productivity growth to rise sufficiently to enable workers to increase their real incomes, because higher incomes would lead to increased births and eventually over-population, scarcity of food and famines etc, then reducing the population and incomes again.

The authors note that before 1600, there is evidence to support the Malthusian case.  The period from 1300 to 1450 was a period of frequent plagues — the most famous being the Black Death of 1348. Over this period, the population of England fell by a factor of two resulting in a sharp drop in labour supply. Over this same period, real wages rose substantially. Then from 1450 to 1600, the population (and labour supply) recovered and real wages fell. In 1630, the English economy was back to almost exactly the same point it was at in 1300.

The reason that the Malthusian argument has validity before 1600 is that there was little or no productivity growth; so livelihoods were determined by labour supply and wages alone.  Pre-capitalist England was a stagnant, stationary economy in terms of the productivity of labour.  But so was the impact of the Malthusian over-population theory.  The authors found that Malthusian population dynamics were very slow: a doubling of real incomes led to a 6 percentage point per decade (0.6% a year) increase in population growth. That implied that it took 150 years for a rise in real incomes to drive up population sufficiently to cause a reversal in income growth.

But once capitalism appears on the scene, the drive for profit by capitalist landowners and trading merchants encourages the use of new agricultural techniques and technology and the expansion of trade.  Then productivity growth takes off at a rate increasingly fast enough to overcome the slow impact of Malthusian ‘overpopulation’.  Indeed, with industrial capitalism after 1800, the growth in productivity is 28 times higher than the very slow negative impact of rising population on real incomes.

Thomas Malthus

This confirms the view of Engels when he wrote: “For us the matter is easy to explain. The productive power at mankind’s disposal is immeasurable. The productivity of the soil can be increased ad infinitum by the application of capital, labour and science.”  Umrisse 1842

https://www.lulu.com/en/gb/shop/michael-roberts/engels-200/paperback/product-y9pzdr.html?page=1&pageSize=4

Before capitalism, feudal societies stumbled along with their economies ravaged by plagues and climate.  For example, the Black Death of 1348 engulfed English society for more than a year, claiming about 25% of the population. For three centuries after the Black Death, the plague would reappear every few decades and wipe out a significant share of the population each time.  So real wages in England were mainly affected by these population changes and the consequent size of the labour force (if, as argued above, at a very slow rate).

But under capitalism, productivity rose sharply and the level of real wages was no longer determined by the weather or pandemics but by the class struggle over the production and distribution of the value and surplus value created in capitalist production in agriculture and industry.  One of the features of the rise of capitalism from 1600 that the authors point out is the increase in the working day and working year – another confirmation of Marx’s analysis of exploitation under capitalism.

The authors note that as capitalism started to move from agricultural production to industry, in the latter half of the 18^th century, real wages in England fell slightly despite substantial productivity growth.  They cite one potential explanation, namely “Engel’s Pause,” i.e., the idea that the lion’s share of the gains from early industrialization went to capitalists as opposed to labourers.

https://thenextrecession.wordpress.com/2020/03/15/engels-pause-and-the-condition-of-the-working-class-in-england/

The authors are reluctant to accept that Engels was right, preferring a Malthusian explanation in the late 18^th century (having just rejected it).  Moreover, they think real wages started to grow as early as 1810, before the period of the 1820-1840 cited by Engels as a ‘pause’.  But anyway, we can see that the gap between productivity and real wages widened sharply from the beginning of industrial capitalism to now.  Surplus value (the value of unpaid labour) rocketed through the early 19^th century.

Most important, the study refutes the ‘Whig interpretation of history’, namely human ‘civilisation’ is one of gradual progress with changes coming from wiser ideas and political forms constructed by clever people.  Instead, the evidence of productivity growth in England shows “sharp and sizable shifts in average growth” supporting the notion that “something changed.” i.e., that the transition from stagnation to growth was more than a steady process of very gradually increased growth.” On the gradual Whig interpretation, the authors conclude that “the results do not support this view of history.”

https://www.researchgate.net/publication/334831075_The_Whig_interpretation_of_history

Also, the study shows that, as sustained productivity growth began in England substantially before the Glorious Revolution of 1688, it was not the change in political institutions that led to economic growth.  On the contrary, it was the change in economic relations that led to productivity growth and then political change. “While the institutional changes associated with the Glorious Revolution may well have been important for growth, our results contradict the view that these events preceded the onset of growth in England.”

As Engels put it succinctly: “The materialist conception of history starts from the proposition that the production of the means to support human life and, next to production, the exchange of things produced, is the basis of all social structure; that in every society that has appeared in history, the manner in which wealth is distributed and society divided into classes or orders is dependent upon what is produced, how it is produced, and how the products are exchanged. From this point of view, the final causes of all social changes and political revolutions are to be sought, not in men's brains, not in men's better insights into eternal truth and justice, but in changes in the modes of production and exchange.” 

The authors cannot avoid reaching a similar conclusion.  As they say: “Marx stressed the transition from feudalism to capitalism. He argued that after the disappearance of serfdom in the 14th century, English peasants were expelled from their land through the enclosure movement. That spoliation inaugurated a new mode of production: one where workers did not own the means of production, and could only subsist on wage labour. This proletariat was ripe for exploitation by a new class of capitalist farmers and industrialists. In that process, political revolutions were a decisive step in securing the rise of the bourgeoisie. To triumph, capitalism needed to break the remaining shackles of feudalism…. Our findings lend some support to the Marxist view in that we estimate that the onset of growth preceded both the Glorious Revolution and the English Civil War (1642-1651). This timing of the onset of growth supports the view that economic change propelled history forward and drove political and ideological change.”

The development of capitalism in agriculture and in trade laid the basis for the introduction of industrial technology that led to the so-called industrial revolution and industrial capitalism.  The Industrial Revolution occurred in Britain around 1800 because “innovation was uniquely profitable then and there”.  As real wages rose, there was an incentive to exploit the raw materials necessary for labour saving technologies in textiles such as the spinning jenny, water frame, and mule, as well as coal burning technologies such as the steam engine and coke smelting furnace.  Labour productivity exploded upwards.  There was staggering rise in investment in means of production relative to labour.  According to the authors, from 1600 to 1860, the capital stock in England grew by a factor of five, or 8% per decade.

Industrial capitalism had arrived, and along with rising productivity came increased exploitation of labour and the ideology of ‘political economy’ and bourgeois institutions of rule. 

2514. Book Review: The Rise and Fall of American Growth

By Paul Krugman, The New York Times, January 25, 2016

Back in the 1960s there was a briefly popular wave of “futurism,” of books and articles attempting to predict the changes ahead. One of the best-known, and certainly the most detailed, of these works was Herman Kahn and Anthony J. Wiener’s “The Year 2000” (1967), which offered, among other things, a systematic list of technological innovations Kahn and Wiener considered “very likely in the last third of the 20th century.”

Unfortunately, the two authors were mostly wrong. They didn’t miss much, foreseeing developments that recognizably correspond to all the main elements of the information technology revolution, including smartphones and the Internet. But a majority of their predicted innovations (“individual flying platforms”) hadn’t arrived by 2000 — and still haven’t arrived, a decade and a half later.

The truth is that if you step back from the headlines about the latest gadget, it becomes obvious that we’ve made much less progress since 1970 — and experienced much less alteration in the fundamentals of life — than almost anyone expected. Why?

Robert J. Gordon, a distinguished macro­economist and economic historian at Northwestern, has been arguing for a long time against the techno-optimism that saturates our culture, with its constant assertion that we’re in the midst of revolutionary change. Starting at the height of the dot-com frenzy, he has repeatedly called for perspective: Developments in information and communication technology, he has insisted, just don’t measure up to past achievements. Specifically, he has argued that the I.T. revolution is less important than any one of the five Great Inventions that powered economic growth from 1870 to 1970: electricity, urban sanitation, chemicals and pharmaceuticals, the internal combustion engine and modern communication.

In “The Rise and Fall of American Growth,” Gordon doubles down on that theme, declaring that the kind of rapid economic growth we still consider our due, and expect to continue forever, was in fact a one-time-only event. First came the Great Inventions, almost all dating from the late 19th century. Then came refinement and exploitation of those inventions — a process that took time, and exerted its peak effect on economic growth between 1920 and 1970. Everything since has at best been a faint echo of that great wave, and Gordon doesn’t expect us ever to see anything similar.

Is he right? My answer is a definite maybe. But whether or not you end up agreeing with Gordon’s thesis, this is a book well worth reading — a magisterial combination of deep technological history, vivid portraits of daily life over the past six generations and careful economic analysis. Non-economists may find some of the charts and tables heavy going, but Gordon never loses sight of the real people and real lives behind those charts. This book will challenge your views about the future; it will definitely transform how you see the past.

Indeed, almost half the book is devoted to changes that took place before World War II. Others have covered this ground — most notably Daniel Boorstin in “The Americans: The Democratic Experience.” Even knowing this literature, however, I was fascinated by Gordon’s account of the changes wrought by his Great Inventions. As he says, “Except in the rural South, daily life for every American changed beyond recognition between 1870 and 1940.” Electric lights replaced candles and whale oil, flush toilets replaced outhouses, cars and electric trains replaced horses. (In the 1880s, parts of New York’s financial district were seven feet deep in manure.)

Meanwhile, backbreaking toil both in the workplace and in the home was for the most part replaced by far less onerous employment. This is a point all too often missed by economists, who tend to think only about how much purchasing power people have, not about what they have to do to get it, and Gordon does an important service by reminding us that the conditions under which men and women labor are as important as the amount they get paid.

Aside from its being an interesting story, however, why is it important to study this transformation? Mainly, Gordon suggests — although these are my words, not his — to provide a baseline. What happened between 1870 and 1940, he argues, and I would agree, is what real transformation looks like. Any claims about current progress need to be compared with that baseline to see how they measure up.

And it’s hard not to agree with him that nothing that has happened since is remotely comparable. Urban life in America on the eve of World War II was already recognizably modern; you or I could walk into a 1940s apartment, with its indoor plumbing, gas range, electric lights, refrigerator and telephone, and we’d find it basically functional. We’d be annoyed at the lack of television and Internet — but not horrified or disgusted.
By contrast, urban Americans from 1940 walking into 1870-style accommodations — which they could still do in the rural South — were indeed horrified and disgusted. Life fundamentally improved between 1870 and 1940 in a way it hasn’t since.

Now, in 1940 many Americans were already living in what was recognizably the modern world, but many others weren’t. What happened over the next 30 years was that the further maturing of the Great Inventions led to rapidly rising incomes and a spread of that modern lifestyle to the nation as a whole. But then everything slowed down. And Gordon argues that the slowdown is likely to be permanent: The great age of progress is behind us. But is Gordon just from the wrong generation, unable to fully appreciate the wonders of the latest technology? I suspect that things like social media make a bigger positive difference to people’s lives than he acknowledges. But he makes two really good points that throw quite a lot of cold water on the claims of techno-optimists.

First, he points out that genuinely major innovations normally bring about big changes in business practices, in what workplaces look like and how they function. And there were some changes along those lines between the mid-1990s and the mid-2000s — but not much since, which is evidence for Gordon’s claim that the main impact of the I.T. revolution has already happened.

Second, one of the major arguments of techno-optimists is that official measures of economic growth understate the real extent of progress, because they don’t fully account for the benefits of truly new goods. Gordon concedes this point, but notes that it was always thus — and that the understatement of progress was probably bigger during the great prewar transformation than it is today.

So what does this say about the future? Gordon suggests that the future is all too likely to be marked by stagnant living standards for most Americans, because the effects of slowing technological progress will be reinforced by a set of “headwinds”: rising inequality, a plateau in education levels, an aging population and more.

It’s a shocking prediction for a society whose self-image, arguably its very identity, is bound up with the expectation of constant progress. And you have to wonder about the social and political consequences of another generation of stagnation or decline in working-class incomes.

Of course, Gordon could be wrong: Maybe we’re on the cusp of truly transformative change, say from artificial intelligence or radical progress in biology (which would bring their own risks). But he makes a powerful case. Perhaps the future isn’t what it used to be.

2488. Development for Resilience

By Ted Trainer, October 26, 2016 

Almost all development theory and practice takes for granted a conception of development that creates and legitimizes a grossly unacceptable state of affairs. When development is taken to be about maximizing the GDP via competition in the global market economy Third World productive capacity inevitably become geared to the interests of the rich, and little ”trickles down” to meet the urgent needs of poor majorities. There is however a radically different conception of development goals and means, which is being increasingly turned to. It is of the utmost importance that the distinction should be more widely understood, and that the conventional-capitalist model should be scrapped.

Since the Second World war the Third World has achieved considerable economic growth and some countries have "modernised" spectacularly. On average infant mortality, literacy, length of life and incomes have improved considerably. The common assumption is that we should be content with the development taking place because it is lifting people out of poverty and towards rich world “living standards”. However there are strong reasons for rejecting conventional development theory and practice.

The main concern is the gross inequality and injustice the conventional approach involves. The benefits go mostly to the rich, that is, the small elite classes in the Third World, the transnational corporations and the people who shop in rich world supermarkets. The important question to ask of a development strategy is how well does it work for those in most need. Most of the world’s people are getting very little from the development taking place, and the conditions for many are either stagnating or deteriorating. The inequality evident within the world economy is extreme. The richest 20% of people are getting around 86% of world income, while the poorest 20% of people are getting only 1.3%. About half the world's people have an income of under $2 per day.

Far from progressing towards "self-sustaining, economic growth" and prosperity, the Third World has fallen into such levels of debt that few would now hold any hope of repayment. Meanwhile many Third World governments deprive their people and strip their forests more fiercely to raise the money to meet the debt repayments. The magnitude of the debt problem sets a major challenge to anyone who believes the conventional development strategy can lead the Third World to prosperity.

Conventional development theory and practice.

The core mistake in conventional development theory and practice is the identification of development with economic growth (or the assumption that growth is the means to development, or the main condition necessary for it, etc.) Conventional development theorists proceed as if all that matters is increasing the amount of economic activity, i.e., of business turnover, production for sale, or Gross Domestic Product. They insist the more goods and services produced and sold then the more “wealth” that is being generated, the more taxes governments can collect and spend on problems and the more jobs and incomes people can have. So in time the increased economic growth is supposed to lift all to high living standards.

Thus conventional economists emphasise the need to:

• Stimulate and assist the accumulation and investment of capital, to set up  new factories, farms and infrastructures.
• Plunge into the global economy. Export as much as possible in order to earn the money to pay for imports and infrastructures. Compete against all other countries to sell something.
• Seek loans and aid; capital is needed to build productive capacity.
• Attract foreign investors to set up firms. Build the infrastructures they  will want.
• Enable as much "freedom for market forces" as possible. This is claimed to be essential to maximise the efficiency of the use of capital and the allocation of resources.

The faults in this approach are pretty obvious. If you take maximising the growth of GDP as your top priority then you will encourage and assist those with capital to invest in whatever will make most profit. That is what maximizes business turnover. They will do this best if they put the available local land, labour and capital into producing relatively expensive things to sell to people on higher incomes. People with capital to invest never maximise their income by producing what is most needed, such as food for poor peasants. It is always far more profitable to invest in putting Third World land into producing luxury crops such as coffee to export to rich countries.

Although increased production for sale in a society will bring some benefits to some people, when economic growth is taken as the major development goal damage is done to the living standards and the experienced quality of life of the poor majority of the people, to social cohesion and to the environment. For instance governments shift peasants off land to build dams or establish export plantations.

Yes making growth the goal will maximise the volume of goods and services produced, i.e., the "wealth" generated, but this is typically of little or no benefit to most people in the Third World, especially the poorest. It will generate a few more jobs for them but it deprives many of them of the resources they once had.  The land, forests and fisheries they once had access to are put into production for sale in the global economy. The basic problem in Third World development is not any absolute shortage of resources such as land and capital … it is their extremely uneven and unjust distribution and the uses to which they are put. Those in most need of them don’t get them. So we must ask why the distributions are so bad? The answer is very simple.

The global economy is a market system. Market forces have a powerful, indeed an overwhelming tendency to make the wrong development decisions. The three major effects of the market system on development are:

1. Market forces allow the relatively rich to get most resources.

The 20% of the world's people who live in the developed countries consume approximately 80% of the resources produced for sale. Their per capita resource consumption is approximately 17 times that of the poorest half of the world's people. For example, while possibly 850 million people lack sufficient food, which might require 40 millions tonnes of gain p.a. to remedy, over 600 million tonnes of grain are fed to animals in rich countries each year.

These extremely unfair distributions of the world's resource wealth come about primarily because it is an economic system in which rich countries are allowed to outbid poor countries to buy scarce things. If you allow the market to allocate scarce things like grain or oil, when a few are rich and many are poor, then inevitably the rich will get most of them. The market has no concern whatsoever for what humans need or what is just or best for the environment.  It will always distribute things according to "effective demand", which means that richer people and nations can take what they want and the poor must do without.

2. Market forces have mostly produced the development of the wrong industries in the Third World.

A great deal of development has taken place in the Third World; the trouble is that little of it has been development of the most needed industries. It has been mostly the development of industries to provide crops and consumer goods for the small rich local elites or for export to the rich countries i.e., it has been inappropriate development.

Just consider the fact that millions of Third World people work hard producing crops and goods for other people, from which they derive very little benefit, in the form of very low wages. All that labour and all that land could have been fully devoted to meeting their own needs. Look at any typical Third World capital city and you see a vast amount of development of offices, hotels, airports, boutiques, cars and roads...which is of little or no benefit to most people in the country.

Inappropriate development is precisely what should be expected when development resources are invested in what will make the highest profits or contribute most to GDP i.e., when profit and market forces are allowed to determine what is developed. If the land was taken out of production of export crops and put into growing food for poor people that would reduce the GDP. In general doing what is best for people and the environment is the opposite of doing what will most increase the GDP.

Therefore we can state a most important economic law which conventional economists never consider... growth deprives! 

Essential to the Neoliberal doctrine which now dominates economic theory and practice is the insistance that maximum freedom should be given to market forces. This is precisely what the transnational corporations and local business classes want.  They do not want any restriction on their freedom to go where they like and produce what they like and sell it where they like. Obviously the more rules a government sets and the more conditions it imposes the more the freedom of corporations to maximise their profits will be interfered with. If they were obliged to invest where unemployment is high, or build low cost houses for poorer people, their profits would be less than they otherwise could be.

The “Trickle Down” assumption.

The basic justification for conventional development is that although it mostly enriches the rich, in time “…wealth will trickle down to benefit all.” There is indeed a tendency for this to happen, but this does not mean that the process is acceptable. There are strong reasons why the trickle down doctrine should be rejected. 

1.  Very little trickles down. In the world as a whole the amount of benefit that trickles down is evident in the fact that one-fifth of the world's people now get about 86% of world income, while the poorest one-fifth get only 1.3%, and the ratio is getting worse. Neoliberalism has greatly accelerated the accumulation of wealth by the rich and super-rich.

2.  “But hasn’t poverty been greatly reduced?” It is commonly claimed and accepted that conventional development has lifted hundreds of millions of Third World poor out of poverty.  This seems to be true, but the situation is complex and the overall effects are debated.  Firstly, by the official definition to rise above an income of something like $1.25 (or $2) per day is to have risen out of poverty. (The Australian poverty line is $75 per day.) This is absurd; try living in Bangkok on $2.51 a day and see if you don’t feel impoverished. 

Secondly, some studies find that the achievement has almost all been in China. (Hickel, 2016, Edwards and Summer, 2013.) 

3. Neoliberal “development” also impoverishes; what are the net effects? Conventional/capitalist development creates a lot of poverty, mainly by depriving large numbers of poor people of resources and livelihoods they once had, including in rich countries (especially in the US, consider Detroit.).  The removal of protection and subsidies allows foreign corporations to come in and take over markets and productive activity. Chinese broom exporters thrive, by taking the exports that lots of little broom makers in Mexico and Nepal once had. Because governments define development as increasing the GDP they allow corporations to log forests and build dams and mines, pushing many tribal and peasant people off their ancestral lands into urban slums. The poor in Third World countries that are most integrated into the global economy have fared worse than those in other countries. (Wodin and Lucas, p. 55, Meredith, 2005.)

Conventional economists typically enthuse about gains but ignore the losses.  It is not clear how big the net gains in income, employment and welfare have been but the above evidence on global poverty changes suggest that they have not been as spectacular as is commonly claimed, and that many have actually gone backwards. Fletcher (2016) quoting the U.N. Human Development Report, says that in 2003 54 nations were poorer than they had been in 1990, and Sub-Saharan Africa had a lower per capita income than 40 years before.

4.  The rate of trickle down is extremely slow.  At present rates it would probably take several hundred years for the “living standards” of the poor majority in the Third World to rise to the present rich world level…and by that time rich world GDP per capita would have become astronomical…which is ecologically impossible (see below.)  Yet if the available resources were applied directly by people to meeting their own needs rapid improvements for them would easily be achieved.

5. The strategy” is grossly immoral, because it (claims to) improve the welfare of those in great need by enabling them to get crumbs from the tables of the rich, while almost all of the benefit of “development” goes to rich people. A development process should be evaluated primarily by how well it addresses the most urgent needs, that is, how well it benefits the poorest.  

The alternative development model (below) indicates how quickly the problems could be solved if the available resources were devoted to the needs of people in general. Compare what trickles down to factory workers in Bangladesh paid a few cents an hour with the benefit they would get if they were devoting their time and energy to producing basic goods they need in their own local cooperative firms and farms.   

6.  But outweighing all these considerations is the fact that the global resource situation will not permit Trickle Down to work.  The “limits to growth” analysis shows that there are nowhere near enough resources for it to lift the expected 9.7 billion poor people to anything like rich world systems and levels of consumption.

The “Structural Adjustment Packages”.

The most powerful forces inflicting this unacceptable kind of "development” imposed on the Third World over the last 40 years have been the Structural Adjustment Packages of the World Bank and International Monetary Fund.

When a Third World country's debts become impossible for it to repay it must go to these agencies for assistance. Arrangements are made for more loans to enable debt repayments to be made, but this is done do so on condition that a Structural Adjustment Package is accepted. This obliges the country to do a number of things that are supposed to improve the economy, such as cut government spending including assistance to poor people, open the economy to more foreign investment, increase exports (more plantations and logging), devalue (making exports cheaper for us in rich countries to buy, and making the country pay more for the imports from us), reduce government regulation, reduce government ownership and control and generally increase adoption of free trade policies. There is considerable evidence that these measures have little or no effect in achieving these objectives. 

More importantly, the packages are a delightful bonanza for the rich countries and their corporations and banks. Impediments to their access to Third World resources and markets are removed, they can buy up the firms that go bankrupt, hire cheaper labour, and import commodities more cheaply from the country (because of the devaluation). And SAPs force repayments to rich world banks. However the effects on the country's economy and on its poor majority of people are typically catastrophic. Many small firms fail as imports flood in, unemployment jumps, and  government assistance to the poor is reduced.  Any move to devote more of the country’s resources to producing to meet its own needs is ruled out, because resources must first go towards paying off the debt, and the overriding principle is that development must be determined by market forces within the global economy.

For decades there has been a great deal of criticism of Structural Adjustment Packages. They have caused or contributed to havoc in many countries, including riots, civil wars (Yugoslavia, Rwanda; see Chossudowsky, 1997) and increased death rates from deprivation, and the fall of governments (e.g., Indonesia.) SAPs and the rules of the World Trade Organisation are now widely recognised as among the main mechanisms ensuring that the global economy functions in the interests of the big corporations and banks and the rich world. (For extensive documentation see TSW: Third World Development, Collected Documents, and TSW: Globalisation, Collected Documents.)

Conventional development is therefore a form of plunder.

Conventional development can be seen as a process whereby the Third World's resources are taken over by the rich countries and their corporations, and Third World productive capacity is geared to rich world demand. Long ago Third World countries had control over their own forests and lands and ordinary people were able to use most of them to produce what they needed. But the result of conventional development is that these resources have come to be owned by, sold to, or produce for, the benefit of the small local rich classes, the transnational corporations and consumers in rich countries. The work is done by the few who get jobs in the factories and plantations, for very low wages. Conventional development involves bringing people into the global market, where they must sell something in order to buy what they need, and where market forces then ensure that the majority of very poor people get very few of the resources available, have to sell their resources and labour cheaply, and see their land and forests bought by rich people and put into the production of items for others to use. These are inevitable outcomes when development is allowed to be determined by market forces, because it is always more profitable to sell to or produce for richer people.  The market never attends much to what poor people need.

Thus Goldsmith discusses "development as colonialism". (Goldsmith, 1997.) Rist says, "...development has resulted in material and cultural expropriation." (Rist, 1997, p.. 243.) Schwarz and Schwarz say, "Development now seems little more than a window dressing for economic colonialism." (1998, p. 3.) Chossudowsky's The Globalisation of Poverty (1997) details the mechanisms, especially in relation to finance. These are just a few of the many works documenting the way in which conventional development is a form of legitimized plunder. (Again see TSW: Third World Collected Documents.)

The unjust global economy enables rich world “living standards”.

The living standards we enjoy in rich countries such as Australia benefit greatly from the way the global economy works. The global market system and the freedom of trade the corporations enjoy deliver most of the world's resources to us and draw the Third World's productive capacity into producing for our benefit. What would our tea and coffee cost if those who produced them were paid a decent wage, or if much of the land growing coffee was put into growing food for them? In other words we have an empire and we could not have such high "living standards” without it. 

But the remarkable feature of imperialism now is that in most cases gunboats are no longer needed; whole nations can be broken and put into servitude by the stroke of a pen.  This is what happens when Structural Adjustment Packages are signed.

 (For a more detailed summary of the vast literature documenting these themes see TSW: Our Empire; Its Nature and Maintenance, http://thesimplerway.info/OUREMPIRE.htm

The Limits to Growth perspective: Overlooked implications for development.

It is difficult to understand why the development literature has given so little attention to the "limits to growth" analysis of our global predicament. Global resources are quite limited and declining and it will be totally impossible for all people to rise to anything like the material “living standards” presently enjoyed by the 1/5 who live in rich countries, let alone those we aspire to. (For detailed analysis see TSW: The Limits to Growth, http://thesimplerway.info/LIMITS.htm)  

This "limits to growth” perspective requires the total rejection of any view of development which assumes growth and trickle down, or which takes Western affluent living standards as the goal of development. Sensible development theory and practice must therefore be based on acceptance of the point Gandhi expressed long ago  … “The rich, must live more simply so that the poor may simply live.”

This means that an acceptable approach to development has to be framed in terms of The Simpler Way; that is, focused on providing a high quality of life for all on only very low levels of production, consumption, resource use or GDP. 

ALTERNATIVE, APPROPRIATE DEVELOPMENT ...THE SIMPLER WAY.

The following basic principles of the alternative path flatly contradict conventional development theory.

1. Enable people to immediately begin applying the existing resources and productive capacity around them to producing the mostly simple things that are most needed to give them the highest possible quality of life at the least cost in labour, resources and environmental impact. Most if not all Third World regions have all the resources and traditional ways required to build the relatively simple structures and systems that would meet their basic needs in a few years at most. The aim should be to ensure that all people have basic but adequate shelter, food, health services, extensive and supportive community, security, leisure-rich environments, peace of mind, a relaxed pace, worthwhile work, a sustainable environment, and access to a rich cultural life. These goals can be achieved with little or no foreign investment, trade, heavy industrialisation, aid, external expert advice or sophisticated technology and with little or no capital. Little more is required than access to and cooperative organization of the land, labour and traditional building and gardening skills the people usually have. Conventional/capitalist development prevents that access. Appropriate development does not depend on material affluence or economic growth or on access to large amounts of capital.

The study TSW: Remaking Settlements… details the case that even in rich world city suburbs it might be possible to reduce per capita dollar and resource costs by 90%, and it would be far easier to organize The Simpler Way in Third World villages.

2. Priority must be put on cooperation, participation and collective arrangements and effort. People organise and contribute to town meetings, working bees, cooperatives, commons, and town banks. Villagers govern themselves, researching, planning, deciding development action via thoroughly participatory procedures.  They do not need officials or politicians.  They do not need to be ruled; they can take control of their own development. State governments must facilitate and support this self sufficiency and self government at the local level, especially by gearing the national economy to providing villages and towns with the relatively few and simple basic inputs they need, such as chicken wire and light irrigation pipe.

Thus, reject the absurd conventional economic assumption that the best for all results if individuals compete against each other pursuing their self-interest and trying to get rich in free markets. In a satisfactory economy there could be much freedom for individuals, many small private firms, and a place for market forces (under careful social control), but you cannot expect to have a satisfactory society unless the top priority is what is best for all, unless the main institutions and procedures are basically cooperative and collective, and unless there is considerable control and regulation of the economy for the public good. Thus it is important to develop shared facilities, village commons, working bees, community workshops, committees, cooperatives, decisions by village assemblies, and to encourage giving and sharing, volunteering, helping, civic responsibility and social cohesion.

3. Very simple material living standards must be happily accepted. Affluence and rich world living standards must be rejected as impossible for all to have. This does not mean there must be deprivation or hardship. The goal of development cannot be to rise to rich world affluent living standards; it must be material sufficiency on the lowest reasonable levels of per capita resource consumption for convenience and a good quality of life. 

4. Local economic self-sufficiency is the essential element in appropriate development. Most of the goods and services used by people must be produced in and very close to the towns and suburbs they live in, by local people using local resources in local firms. Therefore mostly develop small, simple firms and industries serving villages close by, exporting only small quantities of surpluses in order to be able to import small quantities of necessities. Very little heavy industry, or transport or high rise buildings etc., are needed. Within villages and close by develop many commons and cooperatives, to produce for example poultry, fish, fruit and nuts, wood, free food. Set up committees, R and D groups, working bees, town meetings, and especially leisure and culture committees.

5. Prioritise the building of the non-monetary and non-market sector of the local economy. Produce and distribute as much as possible through volunteering, free community provision of for instance concerts, outings, festivals, ”edible landscapes” providing free fruit to the community, working bees, commitees, rosters, giving, helping, and community workshops and art and craft centres and clubs. These things build community solidarity, a caring and generous atmosphere and valuing the welfare of the community.

6. Capital and sophisticated technology are not very important for appropriate development. It is a serious mistake to assume that development cannot take place without large volumes of capital to invest or without modern technology. A well developed village or region can be achieved with little more than traditional hand tool technology which can make highly satisfactory houses, furniture, small dams, clothing and gardens. People can get together in voluntary working bees to build the dwellings, firms, clinics, stores, premises, orchards, fish ponds, workshops and leisure facilities their community needs, using mostly local materials such as earth and timber. 

7. Have as little as possible to do with corporations, loans and debt, or the global economy.  They want you locked into having to sell a lot to them so you can buy a lot from them. They are out to get your resources and to have you working mostly for their benefit. You need little from them. Borrow very little if anything. Export just enough to import necessities. Allow foreign investors into your nation only if they will produce necessities on your terms. Of course you need to import a relatively few modern items such as radios and medicines, so export only enough to pay for these.

8. Social and ecological goals must take priority over economic goals. Development decisions must be based on considerations of social need, morality, justice, rights, tradition, social cohesion and ecological sustainability. No attention whatsoever should be paid to the GDP. Whether it increases or falls is irrelevant. What matters is whether the quality of life, economic security, social cohesion and ecological sustainability are improving. In fact if appropriate development strategies are adopted this will in general reduce the GDP (e.g., by taking land out of export cropping and making it available to villagers.) Develop a wide range of measures of important factors such as the quality of life, social cohesion, social problems, and especially ecological sustainability. (Bhutan measures Gross National Happiness.)

9. Governments must do as much regulating, controlling, subsidizing, planning and controlling of the national economy as is necessary to enable these goals. National governments should prioritise the industries and infrastructures most likely to provide basic necessities to local economies.  They should phase out or prevent many industries that are wasteful or producing luxuries for the rich.   They should enable distribution of mostly light industries across the rural landscape, so that all villages can earn small export incomes to pay for the few necessary imports. 

However it is only necessary for there to be social control over those industries and processes necessary to ensure that development goals are being met. I you wish to leave the rest of the economy to free market principles you can do that.

10. Preserve and restore cultural traditions. Do not assume that you must "modernise" and therefore adopt Western consumer culture. 

11. Nothing is more important than the understanding of “development” that people have. It is crucial that people be helped to see that conventional/capitalist theory and practice is an ideology legitimising plunder and should be dumped, and to see that there is an alternative. It is distressing that billions of people have no idea that there can be anything but the conventional model which locks them into continued poverty and deprivation waiting for trickle down when they could be developing relatively simple systems that would quickly enable them to greatly improve their conditions. 

There are many places and groups making progress towards realizing these kinds of principles, including The Zapatistas in Mexico, the Chikukwa movement in Zimbabwe, the Via Campesino movement with its estimated 200 million people, the Catalan Integral Cooperative in Spain, the Global Eco-village Movement, and the Voluntary Simplicity, Downshifting and Transition Towns movements. 

Conclusion.

This head-on contradiction between conceptions of development is extremely disturbing.  Billions of people struggle to survive in dreadful conditions, when that is unnecessary and could easily and quickly be fixed, but this is not possible until and unless the rich stop hogging far more than their fair share of scarce global resources and the present “development” model is scrapped.

Consider those who must suffer the indignity, boredom of begging all day or trying to sell a few boxes of matches or shine a few shoes to be able to feed their families…or those who have to sell drugs, or steal, or the lucky ones who have jobs in dreadful factories. Consider the conflicts over water and land due to desperate struggles to get enough to live on, while vast tonnages of fodder are air-freighted out to rich world feedlots. Consider the international conflicts, the wars generated by nations trying to get control over the quantities of resources needed to provide their consumers with their high “living standards”. Consider the greenhouse problem as billions more Chinese and Indians scramble for development defined as consumerism.  Would so many steal, kill Rhinos for their horns, run drugs, burn forests, become pirates or mercenaries … if they had secure livelihoods in thriving village economies. Most of the world’s troubles can be attributed to the tragic adoption of a definition of development that cannot be sustainable, just or achievable for all.

References:

Bornschier, V., et al., (1978), "Cross national evidence of the effects of foreign investment and aid on economic growth and inequality; A survey of findings and reanalysis," American Journal of Sociology, 84, 3, Nov., 651-683.

Chossudovsky, M., (1997), The Globalisation of Poverty, London, Zed Books.

Edwards, P. and A. Summer, (2013) The geography of inequality: Where and by how much have income distributions changed since 1990?, Centre for Global Development, Working Paper 341, Sept.

Fletcher, I., (2016), No, Free Trade Didn’t Lift Millions Out of Poverty Feb 05, Huffington Post.

Goldsmith, E., (1997), "Development as colonialism", in J. Mander and E. Goldsmith, The Case Against the Global Economy, San Francisco, Sierra.

Hickel, J., (2016), “Global inequality may be much worse than we think”, The Guardian. Friday 8 April.

McRae, H., (“Creative destruction: The madness of the global economy”, Meredith, M., (2005), The Fate of Africa, Oxford, UK., OUP.

Rist, G., (1997), The History of Development, London, Zed Books. TSW: Remaking Settlements.

http://thesimplerway.info/RemakingSettlements.htm

TSW: Third World Development, Collected Documents.

http://thesimplerway.info/DocsTHIRDWORLD.html

TSW: Globalisation, Collected Documents.

http://thesimplerway.info/DocsGLOBall.htm

TSW: Our Empire; Its Nature and Maintenance,

http://thesimplerway.info/OUREMPIRE.htm

TSW: The Limits to Growth, http://thesimplerway.info/LIMITS.htm