This is a role reading suitable for high school students, making clear the nature of conventional Third World development theory and practice.
Parts can be used in isolation, so consider selecting the particular scenes that suit your purposes.
For detail on this critical perspective on development see items at TSW website. The full account is http://thesimplerway.info/DEV.LONG.htm. For a 5 page summary see http://thesimplerway.info/Dev.Eggs.htm
1. "We are going to develop". Conventional development is only development of the most profitable things, not the most needed things. Corporations will come in if conditions suit them, but will not produce what poorer people need.
2. How the market works. Markets always allocate valuable things to the rich, and deprive the poor, because goods go to those who can pay most for them.
3. Global resource distribution. The rich countries take most of the world's resource production, because they can pay more for them.
4. Inappropriate development. Market systems cause development of the wrong things, because the industries set up will be those which make most profit, not those that produce what is most needed.
5. Land. When development is determined by what is most profitable, much of the best land will be put into production for export.
6. What will they produce? The goods produced will be inappropriate in view of the needs of most people.
7. The modernisation of agriculture. Modern agriculture is energy intensive and environmentally destructive.
8. Trickle down and affluence for all. Conventional development enriches the rich but claims that in time all will benefit.
9. Aid. Aid which stimulates conventional development does not benefit most people much.
10. Environmental effects. There is a clash between the most profitable investments and ecological sustainability.
11. Debt. Poor countries must borrow to build the infrastructures needed to export etc., meaning they end up in huge debt, which forces them to accept policies that suit the rich countries.
12. The World Bank's Structural Adjustment Packages. These devastate economies, impoverish the majority of people, and gear the economy to the interests of foreign corporations and banks.
13. Globalisation. The increasing freedom of access for corporations enables corporations and banks to get into more investment opportunities on favourable terms which might increase the GDP but typically increases access to land and resources for rich world corporations.
14. Development … In whose interests?
15. Trapped! Debt makes it impossible for poor countries to shift to any other development option.
16. Communist subversion. Dissent and protest against conventional development is typically identified as rebels trying to overthrow the government, or communist subversion etc. Rich countries come in to support governments willing to maintain conventional development, which benefits their rich classes
17. But could it have ended like this? The alternative to conventional development; i.e., appropriate development.
1. "WE’RE GOING TO DEVELOP!”
Pedro: Allow me to introduce myself. I am Pedro, a very poor farmer in a very poor country. At least one billion people live like I do. Sometimes I am hungry. I earn $1 a day.
President: Allow me to introduce myself. I am the leader of this great country. Pedro my good man I have very good news for you. We are going to develop!
Pedro: Going to where? I don't want to go anywhere. Where is develop?
President: No Pedro, you don't understand development. We are going to get the economy of this great country going. We are going to increase production, to increase national wealth, so we can raise the living standards of the people.
Pedro: Really! Now that sounds good. You mean we are going to live like they do in America; nice house, big car, watch chainsaw murders on TV every night? How are we going to develop?
President: By building roads and ports and power stations so that lots of firms can begin producing things to sell.
Pedro: Like food?
Pedro: Great! Let's start! What will we build first? How about a bread factory?
President: Now wait a minute. We think it is appropriate that the first thing we build is a magnificent monument to our great leader who began the development of our great country.
Pedro: You mean you.
President: Well ......yes.
Pedro: So what will be the second thing we'll build. Bread factory?
President: New offices for all the government officials.
President: A new international airport!
President: Because we are going to have lots of important people coming here
now aren't we; foreign businessmen and ambassadors bringing aid.
Pedro: I'm still hungry. What will we develop after the airport?
President: Then power stations and roads and ports. Infrastructures Pedro. Infrastructures.
President: Things that make it possible to get the economy going. Roads so farmers can get their produce to market. Ports so ships can export our goods. Power stations to provide electricity to new factories.
Pedro: Can you eat infrastructures?
President: Then with all those roads and power stations business will boom, foreign capital will come in.
Pedro: Why do you want them to come in? Will they bring some food for me?
President: Look Pedro, we got to get the economy going, OK? That is progress isn't it? That's development. Now that means we got to get capital invested. You got any spare capital Pedro?
President: Precisely. We are a poor country. We don’t have much capital. You can’t develop without capital. So we got to get some haven’t we? So we just have to persuade foreign investors to come here because they are the only ones with the capital to set up factories and employ people and pay taxes to the government.
Foreign Investor: Ah, allow me to introduce myself. I am a foreign investor. I'd like to come into your great country to set up some factories and plantations.
President: That is marvellous; just what we want. That will get the economy going.
Pedro: What will you produce? Food for me?
Foreign Investor: ...well, yes... if you like high class coffee, or eating flowers.
Foreign Investor: Yes we are going to export flowers to American supermarkets.
Pedro: But we need food. Can't you produce food?
Foreign Investor: Oh we will. Yes sir, we are also going to grow top quality beef right here in your great country.
Pedro: Ah! At last! Food. Hey, how much it will cost?
Foreign Investor: Oh, I reckon we'll get at least $20.
Pedro: ...for each cow? Only $20 for a whole cow?
Foreign Investor: No. No. For each kilo of meat.
Pedro: What! That's more than two week's wages for me. That means I can't eat what you produce. I couldn't afford it.
Foreign Investor: Oh now that is a pity. There are lots of your people who will be delighted that we have come in to produce these things.
President: My word there are. All my family in the government... I mean all the people who lead this great country will be very happy to have more coffee and meat and flowers to buy. So will all the people who live in our booming capital city.
Pedro: But why can’t you produce cheap food for me instead of expensive food to export?
Foreign Investor: Pedro! Because that would not be very profitable of course.
President: Obviously firms are only going to invest in what will make most money aren’t they. Now Mr Foreign Investor how can we help you get started?
Foreign Investor: Of course we foreign investors expect favourable
President: Like what?
Foreign Investor: No unions, a 6 day work week, a 10 hour work day,
wages around 50 cents an hour, and the right to send all profits back to head office.
President: Is that all?
Foreign Investor: No. We'd also like a tax holiday. No taxes paid until we get established.
Pedro: How long this holiday? I never had a holiday.
Foreign Investor: About 10 years. Maybe 20.
President: What! No. No! Never. What do you take this great country for? Stupid banana republic. We will never accept such humiliating and exploitative conditions!
Foreign Investor: OK. We'll invest in Colombia instead.
President: Wait. Wait. OK. OK. It's a deal.
President: Because we are in no position to argue are we. We need the capital, the development. We have to attract investors. So we have to compete with other poor countries to offer attractive conditions to corporations.
Pedro: But what do we get out of it?
President: Well.... we do get some jobs, some supply contracts and eventually some taxes. And my brother will get fat contract to build new port, and cousin Manuel can plant bigger coffee plantation, and Uncle Frederico.....
Foreign Investor: And remember that this is going to get development going. In time when your great country has developed you will all be very happy you made the effort.
Pedro: Look, we'd rather just have a little bit of development, of the things we really need so we can grow our food more easily and have our own village craftspeople making the basic pots and tools we want. We don't really need much more than that.
Foreign Investor: Mr President, that would be no good to us in the rich countries. No good at all. And no good to you businessmen in the Third World. We want to sell our products don't we. How can we do that if everyone stays like Pedro? And we rich countries really want to buy your produce and minerals and logs? How can we do that if Pedro isn't interested in earning money in the plantations growing export crops.
President: You are quite right. Development just wouldn't get anywhere if they all stay like Pedro. He wouldn’t sell much of the food he produced – he’d just eat it. The economy can't grow unless people start buying things, and putting their land and labour into producing things to export to you in rich countries.
Foreign Investor: That’s right. They have to become consumers. No good at all if they just sit on all that land and only produce enough for themselves to eat and never go to work in factories and never produce things we can buy and never want to buy TV sets and sports cars from us.
2. HOW THE MARKET WORKS.
Trader: Allow me to introduce myself. I am resource seller. I have lots of petrol and tin and food to sell.
Pedro: Food. Did he say food?
Trader: Yes my good man. Would you like to buy?
Pedro: You bet. I'm so hungry.
Trader: Well then here is a nice sandwich. Look chicken and avocado.
Pedro: Wow! Let me have that sandwich.:
President: Wait a minute. That looks like a very nice sandwich. I'd like to buy that.
Pedro: But you can't be hungry. You are rich and you have just come from a banquet.
President: Yes, yes. But that was an hour ago and I'm feeling like a snack now. How much is that sandwich?
Trader: One dollar.
Pedro: A dollar. That's all the money I have. But I'll pay it. Here, give me that sandwich.
President: Ah, well then, I'll pay $1.10 for it.
Trader: OK. It's yours.
Pedro: But. But. I'm hungry. I need that sandwich much more than he does. You should have sold it to me.
Economist: Allow me to introduce myself. I am an economist. We economists understand development. Pedro my good man you really don't understand economics do you? Well, let me explain a little. It is a market economy, right? We economists know that it is more efficient to let the forces of supply and demand determine the distribution of scarce resources.
Pedro: What does that mean?
President: It means, if you can't pay as much as me you stay hungry. My word it really is a good sandwich.
3. GLOBAL RESOURCE DISTRIUTION.
Trader: Now what about some oil. Who would like to buy some oil. Very useful stuff oil. You can produce lots of things with oil.
Pedro: We poor people need fuel to boil the water we have to drink. Will you sell us some oil for that?
President: Step aside Pedro. We business men want the oil to run our plantations, and factories in the city.
Rich Countries: Step aside you lot. We rich countries want the oil to produce things for our people... and we can pay much more for it than you can. So we'll have it, OK?
President: But we poor countries need it much more than you do. Look at all the things we need to produce. Look at poor Pedro here. He needs clean water supplies doesn't he? You rich countries are already taking most of the petrol. Anyway what will you use the petrol for?
Rich Countries: Oh we'll produce sports cars, jet aeroplanes, Coca-cola
and lots of throw-away luxuries. We are quite willing to pay $50 a barrel.
Trader: Can you top that bid Mr President?
President: We can't even afford $10 a barrel.
Trader: Oh that's too bad. We'll just have to sell it to the rich countries.
President: That's not right. That's not fair. We poor countries need oil much more than them.
Pedro: Ha. So now you agree scarce things should go where they are most needed and not where most profit is made. How about giving me that sandwich.
President: Sorry Pedro. I just finished it.
Economist: Let me explain. With great respect Mr President, you do not fully understand economics. The market responds to the forces of supply and demand not to what people think they need.
President: What does that mean?
Pedro: He means when things get scarce market gives them all to the rich.
Economist: It's really only a matter of effective demand.
President: What does that mean?
Pedro: If you can't pay as much as the rich you go without, no matter how hungry you are.
4. INAPPROPRIATE DEVELOPMENT.
Foreign Investor: Now let's get this development show on the road. We will need lots of land and capital.
Pedro: Capital? I thought you were a foreign investor bringing capital to develop the country.
Foreign Investor: We are. But we foreign investors often bring in only a small amount of what we invest. We raise the rest from your banks.
Pedro: You mean there's lot of money here already? Why can't it set up bread factory for me?
President: Hmm. What about that Mr Foreign Investor? What if our banks lend the money to bread factory instead?
Foreign Investor: Oh no problem! They won't do that.
President: Why not?
Foreign Investor: Because we are able and willing to pay much higher interest rates on the loan than any of your local firms. That's how we get what we want, because we are economically more powerful and can offer more for what we want.
President: If you get the loans that will mean less capital here for our firms to borrow. More of them will go out of business.
Foreign Investor: Well, we are more efficient, more productive, more profitable aren't we? We make more money from a loan. It makes sense for your banks to lend it to us instead of to your firms.
Pedro: What about me. I could use a loan. I need to buy new tools and a donkey. I could produce much more for my family if I could borrow, say $20 and I'd pay it back very quickly.
Economist: Pedro. You don't understand economics do you. It would be much too inconvenient and risky for the banks to lend to little people like you. They can make one loan of $1 million to a big corporation, where they'd have to make 50,000 separate loans to little people like you. Just not efficient Pedro.
Foreign Investor: Yes it's much better to make the capital available to the big firms who really know how to do most with it and create more wealth.
Economist: Exactly. Efficiency and growth are the keys to sound economic management. Economic development is all about increasing efficiency, productivity and national wealth. Surely you and everyone else are in favour of greater efficiency and productivity.
Pedro: You mean more efficient, more productive if money in our banks goes into producing more flowers to export than into producing food for people like me?
Economist: Pedro, if the money was invested in producing things for poor people like you the return on investment would be very low and that would not be a very efficient or productive use of capital. It would not add much to the GNP or create much wealth would it? Quite frankly, you'd only eat the crops you produced; you wouldn't even sell them. Now if the same amount of capital is put into growing coffee to export, why that would be a far bigger contribution to the national economy wouldn't it?
Pedro: Ah, I think I understand. Efficiency mean economy and rich people grow bigger but I grow thinner...right? Wouldn't it be better if we put this country's land and money into making lots of little workshops and gardens and wells and grain stores in our villages. That really would make a difference to people like me. Wouldn't take much to make my village OK. A few things like a big water tank, some better tools, good boots. Maybe even a windmill. Plant some fruit trees, for everyone to use. Only need small loans make a big difference. That really good development huh?
Economist: Oh dear. Pedro. You really haven't a clue about development. None of that would contribute much to the GNP would it? In fact some of the things you mentioned would actually reduce it; Heaven forbid! If people can get their fruit free from village trees, or use a free village workshop they won't buy their fruit or buy new furniture will they, so national economic turnover would actually be less.
President: And less business for me. No good to me if Pedro repair his own chair in the village workshop. Better for me if he buy one from my factory.
Foreign Investor: And no good to me if I can't borrow the capital in your banks because it’s all been lent to peasants to build village workshops. No good to me if I can’t get lots of land here to plant coffee and banana export crops.
Economist: And no good to the rich countries who want you to invest your capital in developing better ports for exporting your bananas to us. See Pedro, what people like you want developed would actually interfere with real development.
President: Pedro, isn't it a good thing your government is being advised and assisted by economists from the rich countries who understand development.
Economist: Pedro, what you don't seem to realise is that you will benefit too. There will be more jobs for people like you.
Pedro: Jobs, really! Lots of jobs? Good pay?
Economist: I know a 3000 ha cattle ranch that will need two good men to look after the cows. There, you see, two incomes for families.
Pedro: Sounds like big farm.
Economist: Oh yes. Probably 10,000 times as big as your's Pedro.
Pedro: I feed my family 5 people, from my farm. How many this big farm feed.
Economist: Oh lots. Let's see. We get about one tonne of meat each year from about 5 ha, so that farm would provide enough food for about 1500 people.
Pedro: Yeah! All living in America!
President: Hey, Mr Foreign Investor, what was that you said about land. You said you want lots of land too?
Foreign Investor: Of course. Can't grow flowers for export without land can you?
President: So you want to buy some land eh?
Foreign Investor: Yes. Lots of your best land.
President: Ah! My relatives just happen to own some very good land they could sell you.
Pedro: Your relatives just happen to own all the good land!
President: Most of my relatives' land is leased out to tenant peasants at present, but that's no problem. We'll just negotiate prompt unilateral termination of their leases.
Pedro: What does that mean?
President: You want the precise legal definition?
President: We boot them all off!
Pedro: But! But! Those people have been farming that land for generations. That's their land.
President: Reckon you could prove that in our courts? Remember my brother-in-law is the judge. Anyway where are your title documents?
Pedro: Documents? We can't even read.
Foreign Investor: Want to take it to court Pedro? And pay $500 a day for a lawyer. What did you say you earned each week? Better just move off the land quietly Pedro or we might have to bring in the police and the army to evict you.
President: Now just a minute. This great country has a proud history of justice and fairness. We will not tolerate our peasants being dispossessed of their land, their birthright, just to enable some rich foreign corporations to grow fat on the misery of the people.
Pedro: Bravo! Our great leader is fighting for the rights of the peasants!
Foreign Investor: What if we offer your party a campaign donation of say, $10,000, if you would go to the trouble of reconsidering your policy on this matter.
President: ....is that a BRIBE?! Are you suggesting I could be corrupt?
Foreign Investor: Mr. President, that is not a term we use.
President: Make it $20,000
Foreign Investor: OK. It's a deal.
Economist: But Mr. President, it is really just a matter of basic economics. It is very important for development that your land and other productive capacity should be put to the best uses. That land will make a far bigger contribution to national income if it produces high quality crops for export. But if Pedro uses it to grow beans it will generate no business turnover for anyone, and do nothing for the GDP. Very inefficient use of productive resources.
Foreign Investor: Yes, exports will stimulate more business and jobs and income for your country. It’s obviously the most efficient use of the land.
President: Yes, yes, of course; very inefficient to have that land only producing a few beans for Pedro. That does nothing for development. I wish Pedro could understand development as well as we do.
6. WHAT WILL THEY PRODUCE?
Foreign Investor: I have great news for you all. Our head office has just decided to invest a huge sum of money in the development of your manufacturing industry.
President: That is marvellous! Just what we want. We really need lots more factories producing tools, and housing materials and pots and pans for the people.
Pedro: And more tools for people like me.
President: Mr Foreign Investor you are very welcome. See Pedro, we could not have set up these factories on our own could we. If we can attract foreign corporations in we can have factories long before we could save enough to build them ourselves. By the way, what is your factory going to produce?
Foreign Investor: Baseballs!
Foreign Investor: Baseballs!!
Pedro: But can't eat baseballs.
President: No one in this country plays baseball. Why make baseballs?
Foreign Investor: For the export market of course! We can sell millions of them in America.
President: Then why not produce them in America?
Economist: Let me explain. Because your labour cost differentials are highly competitive. You have a comparative advantage in this factor.
President: What does that mean?
Pedro: Our wages dirt cheap.
President: Mr Foreign Investor, wouldn't it be possible for you to set up a factory that would, make, say, bread, so that Pedro here could buy some now and then?
Pedro: What a terrific idea!
Economist: I should remind you Mr President that we economists would respectfully point out your country's economy would do much better from the export industry.
President: But should we allow our resources to be put into producing something as unnecessary as baseballs when people like Pedro need more food produced?
Economist: Look I’ve explained this before. Development is about getting the economy going isn’t it, increasing production and sales. The more the country exports the more it earns. The more wealth it has the more it is developing.
Foreign Investor: Yes, and by the way Mr. President there is something I should have explained. We will need to buy lots of leather to make our baseballs. We understand that some members of your family have big cattle ranches and could sell hides to us. We’d be prepared to pay good prices.
President: Ah, well then. That's different. Yes, yes the government has reconsidered this proposal carefully and we believe it would be in the interests of this great country if we establish a baseball export industry.
Pedro: All this very confusing. Can you start at the beginning again? What is development?
Economist: Think of it as modernisation Pedro. Your country is very backward. You need to become modern like we are in rich countries. The key to this is to introduce a cash economy so that more firms can set up to produce goods for people to buy. That means more jobs, more income, more money for people to buy things with, more taxes your government can spend on more roads and airports.
Pedro: But all the development is taking place only in our capital city. Big buildings, cars, supermarkets. Most people who live in countryside get little or nothing from all that. In fact many of have got poorer. Much of the land that used to grow food for us is now growing crops to export. And the forests we had, now end up in cardboard in Japan. Development just mean we lose what we had. Development great for you; it means you end up with the land, water, forests we once had.
7. THE MODERNISATION OF AGRICULTURE.
Foreign Investor: Now we'll see some action. We're going to fly in lots of agricultural experts, and machinery and fertiliser and pesticides. We are going to modernise your agriculture!
Economist: Yes, modern western productive techniques; very efficient Pedro.
Pedro: But I already work very hard on my farm, produce a lot. Very efficient.
Economist: Oh come now Pedro, modern farming methods can produce 3 or 4 times as much as you can per ha.
Pedro: Gee. How you do that?
Foreign Investor: We use tractors and fertilisers and irrigation and pesticides Pedro. Inputs Pedro; we use lots of capital and energy and that's why we produce so much.
Pedro: I use lots of energy; work hard all day.
Foreign Investor: Oh no Pedro. We mean fuel, for the tractors and the pumps. Modern agriculture typically uses 20 times as much energy per hectare as Third World traditional agriculture.
Pedro: You mean, to grow a carrot you use 20 times as much fuel as I do?
Foreign Investor: Actually Pedro for some of our food production, like feedlot beef, we use 100 times as much energy to produce a unit of food than Third World peasants use.
Pedro: Eh? Then how come you more efficient than me?
Economist: Let me try to explain it to him. Pedro when we economists talk about efficiency we are referring to the return on each dollar invested. Yes he uses more energy than you, but for each dollar invested in agriculture he makes much more money than you do.
Pedro: I don't understand "efficiency". He uses much more energy, fertiliser, more water and his produce costs so much more I can’t buy it. And his farm makes fewer jobs for people like me, yet our great leader wants to develop that sort of farm. We peasants produce cheap food for ordinary people and we can't get any of the fertiliser or fuel? Can't even get a small loan. I'll never understand development.
President: Pedro, we have been through this. Development is about getting the economy going. Look at all the export income our beef and flowers will earn for the country. If we left agriculture to you peasants the country would not earn much would it?
Pedro: But who benefits from exports? Plantation owners, shippers, people in American supermarkets who get the bananas. Not me. We peasants even lose the land we used to own.
8. TRICKLE DOWN AND AFFLUENCE FOR ALL … SOMEDAY.
Pedro: Wouldn't it be much better for those workers in the factories if they could farm that land to grow food for themselves and their villages? And look at all this country's stuff used to build baseball factories and plantations. That could have been used to develop factories and farms to make things most poor people like me need. We have had a lot of development around here, but not much of it has been development of anything the people need.
President: Pedro, you don't understand development. The important point is that we have got the economy going haven't we. Yes, look at all the factories and farms we now have that we didn't have before.
Pedro: Yes but none of them produce anything most people need. I don’t want cosmetics and flowers and I can’t afford the bananas. Why can’t people like me get more of the wealth being produced?
Economist: Pedro, you are overlooking the essential point. Only when you have more national wealth can you begin to think about redistributing it. The most important task is to get the economy going, to generate more wealth, more capital, more sales. You have to generate wealth before you can share it. Surely you understand that. Development has to begin by encouraging the people with capital and land to invest it in an effort to create more national wealth, more productive capacity, goods, incomes.
Pedro: But why can't they invest in producing things poor people like me need.?
Foreign Investor: Pedro. Pedro. We have explained this. You can't expect us to put our capital into producing simple cheap things for poor peasants when we can make far more money producing high priced exports for the rich countries and luxuries for the local upper classes.
Economist: And that's what produces most sales, income, national wealth, tax for the government, economic growth and prosperity. It’s just basic economics Pedro.
Pedro: Yes I know... the inefficient use of capital … add little to GNP … better for economy to grow fat than for Pedro to grow fat.
President: Pedro, I do not like the sound of this. You are not very grateful for what development has done for this country.
Economist: I think I can see what Pedro does not understand. Let me explain. You can't lift all people to high living standards all at once can you? Development has to begin with the few who have capital....
Foreign Investor: And entrepreneurial drive and talent...
President: And leadership qualities.
Economist: Exactly! You have to encourage these people to invest, to increase production and sales and trade. Now of course that means that at first development will get going mostly in the big city, and it will focus on producing luxuries and high cost goods for urban rich few and for export to the rich countries. At first a few will get much richer than the rest, and for a time you poor people in the countryside will not get so much benefit.
Pedro: Most people live like me in the countryside.
President: Yes but Pedro the great news for you is that in time you will benefit.
Economist: By trickle down Pedro!
President: Trickle down.
Economist: Let me explain. Yes of course the rich will get much richer in the short run but this is the best way to generate a bigger cake of national wealth, by encouraging those with capital to invest it to get richer, because that creates more factories and then there are more goods and more jobs and more output for all to share. And in time poor people like you will be able to get more jobs in those factories, even though they might be producing baseballs to export. So more of you will have incomes and can raise your living standards, and create a demand that will lead to even more factories opening up to supply what you want.
Pedro: Oh I see. I just have to wait a little. Then everything turn out fine for people like me?
Economist: Exactly. I think you are starting to understand development Pedro.
Pedro: But how long will I have to wait?
President: Oh. Well. It could take some time Pedro. You must not be impatient. Development is not easy you know.
Pedro: How long?
Economist: Let me explain. We economists understand these things. The consensus currently emerging from economic research over the last four decades indicates that in perhaps in one generation, or maybe two, the absolute numbers below the conventional poverty line definition should have reduced significantly.
Pedro: What does that mean.
President: In 30 years time you still hungry!
Economist: Pedro, I agree that the benefits are not always equally distributed but the important thing is to get growth going and create more wealth and then all will start to benefit.
President: That's right. All our incomes are rising Pedro. Your's rose last year didn't it?
Pedro: Oh yes, by $7.
Economist: So you see there is trickle down. You are getting richer year by year.
Pedro: How about government officials in the city? How much more they get last year?
President: Well, actually, their incomes rose rather more than yours Pedro.
Pedro: How much?
President: Around... something like... maybe $150.
Pedro: And you Mr Economist from the rich world, how much did people in your countries see their incomes rise last year.
Economist: Well...er... perhaps about $600.
Pedro: Bit more trickle to you than me eh?
Economist: Believe me Pedro, in time there will be trickle down. We economists understand these things.
Pedro: Can you tell me how long before me as rich as you are now.
Foreign Investor: You mean until Third World per capita income equates to the present rich world average? Well ...let me see...... about 150 years.
Pedro: ... I'll never understand development.
World Bank Official: I bring great news! As you know, we rich countries are very keen to help you people in the Third World develop. We have therefore decided to give you some aid.
President: Really? You are going to give us money? Oh, that is very generous.
World Bank Official: Actually we were not thinking of money. We were thinking of food.
Pedro: Food! Did he say food!
World Bank Official: Yes, you see we have a huge wheat harvest this year and we can't sell it all. So we are going to give some of it to your government.
Pedro: Ah, and they'll share it among poor people like me. I see. Very good. I'm starting to think rich countries OK after all.
World Bank Official: Ah, Pedro, we aren't actually giving the wheat to you. We are giving it to your government to sell, as part of an arrangement whereby some of our corporations are given the right to set up a fish processing plant here.
Pedro: Oh, well... sounds OK. Fish is good to eat.
President: Well, not this fish Pedro. My nephew Hectorio going to export tinned cat food.
World Bank Official: Remember we are giving millions of dollars for building dams, power stations and railways. And Mr President, don't you forget our permission for the American government to set up a military base; that's part of the aid deal.
Pedro: Not much good to me. I'm still hungry. How much aid given for food and houses for people like me.
Economist: Well … some. But let me explain. Except in emergencies like drought it is best not to give food to poor people but to help the government to get the economy going so poor people can have jobs and can buy more food. It's best if the aid goes into building infrastructures that will enable more production to take place.
Foreign Investor: That's right. You see, the more power stations and railways you have the more likely our corporations are to come in and set up factories. Obviously it is important to us to have a good power supply here, and good railways to the ports so we can export more of your bananas to the rich countries.
Pedro: Aid good for you too eh? Why can't there be aid for little farmers like me?
President: And if we have more dams my cousin Alfonso can grow more cotton, and uncle Frederico wants electricity for his new factory and brother Julio would like a railway to bring his sugar to the port. And I have three other cousins and two other brothers in construction business who will be delighted at contracts to build all these dams and power stations and railways.
World Bank Official: Oh I'm afraid that's not the way most aid works. The contracts have been given to corporations from the rich countries.
Pedro: I’ll never understand development.
10. ENVIRONMENTAL EFFECTS.
President: Quite frankly Mr Foreign Investor my friend I am a bit concerned about what you are doing to our soil. You are pouring a lot of pesticides onto your crop aren't you? And coffee plantations run the soil down fast. Aren't you concerned that these modern farming methods are reducing the fertility of the soil?
Economist: Nothing to worry about. Let me explain. If the marginal productivity of the soil declines to a level that significantly impairs marginal returns then agribusiness corporations can always restructure their international investment portfolios.
Pedro: What does that mean?
Economist: When the soil has been ruined they move their capital out and start plantations in some other country.
Pedro: We won’t stand for that…will we Mr. President?
President: We don’t have much choice Pedro. How else is our country going to earn income to pay for imports and pay off the debt?
President: Hey, things don't seem to be working out the way we thought they would. Look at the big debt we have now. How are we going to pay that off?
Pedro: Never mind paying off the debt, we can't even meet the annual interest payments.
Foreign Investor: Oh dear, well it looks as if you will need more loans from our banks doesn't it?
Pedro: But borrowing from you is how we got into this debt in the first place!
Foreign Investor: Well you will just have to borrow more now won't you,
because you have to meet that interest payment and you haven't got the money.
Pedro: What if we refuse to pay?
Economist: Well you will not get any more loans will you? Banks won’t lend to people who refuse to pay them back. You have to borrow and go into debt to get development going. You are lucky that the banks in the rich countries are willing to lend you money.
Pedro: But what about the repayments every year, on what borrowed before? How much does the Third World pay to the rich world banks every year?
Foreign Investor: Don’t forget all the aid we give you. In one recent year we gave $30 billion to the Third World. That’s a lot of money Pedro.
Pedro: And how much did debt repayments come to that year?
Foreign Investor: Well...er... about $270 billion.
12. THE WORLD BANK’S STRUCTURAL ADJUSTMENT PACKAGES.
World Bank Official: I think I should come in here. Allow me to introduce myself. I am an adviser from the World Bank. We at the World Bank know a lot about development. In fact we know just about all there is to know about development.
President: Welcome. Welcome. You are just the person we need. Can you tell us how we can solve our terrible debt problem?
World Bank Official: Oh yes. At the theoretical macroeconomic level the required adjustment strategies are well established but that is not to say that their implementation is entirely without adverse experiential consequences.
Pedro: What does that mean?
President: We ain't gonna like this.
World Bank Official: The World Bank will rearrange your debt payments and give you more loans to get out of trouble.
Pedro: What do we want more loans for? We got too many already.
President: To pay off our debt of course!
Economist: No. To pay off the interest on the debt. And to get the economy going. When you are prosperous you will really be able to pay back all you owe.
World Bank Official: You realise of course that there will be conditions at
attached to the World Bank's loans.
World Bank Official: Yes, it’s called a Structural Adjustment Package.
Pedro: A package eh? Sounds good. Any food in it?
President: What are these conditions?
World Bank Official: Well, you are in debt aren't you. Anyone in debt has to cut their spending and earn more. So you have to export more don't you, to earn more.
Pedro: Oh oh; more bananas and baseballs.
World Bank Official: And you must devalue your currency so your exports become cheaper and more attractive to buyers.
President: That means our resources even cheaper for rich countries to buy. And devaluation means we must pay more for all the stuff we have to import from rich countries.
World Bank Official: And you must make it easier and more attractive for foreign investors to set up factories here. You urgently need investment don’t you, capital inflow, to set up firms, create jobs and grow the economy…right?
President: That means less protection for our little firms, so foreign corporations can come in and take over our business.
World Bank Official: And you will have to reduce wages, so you can attract corporations and lower the price of your exports. And of course you will have to reduce taxes on corporations.
World Bank Official: Because if you don’t they will invest somewhere else obviously.
Pedro: Great package! Just gears even more of our country to benefit of rich countries and their corporations. Just means even less for people like me.
President: Never mind that. We’re hopelessly in debt. We have to accept the package. We just gotta find something else to export. Hey, any forest left?
World Bank Official: Good thinking! Yes, you have some unlogged forest left.
President: OK. Grant licences to log the rest of it. We gotta earn more export income. And when the trees have gone we can set up more cattle ranches and export more beef.
World Bank Official: Excellent! Brilliant economic thinking! That will increase export income.
Foreign Investor: And we in rich countries will now be able to buy even more rainforest timber and cheap hamburger meat. Isn't development great!
World Bank Official: I must point out that there is another thing you must do. People who get into debt must tighten their belts a little. You will have to cut back on your spending won't you? Your government will have to reduce its outlays.
Pedro: How about cutting subsidies paid to the baseball export factory, or to the rich cattle ranchers or the loggers?
World Bank Official: Pedro, Pedro, you have little grasp of development. That would reduce their ability to produce exports and to earn money for the country wouldn’t it. No, the reductions must be made in areas that will not reduce the productivity of the economy.
President: Such as?
World Bank Official: You will have to reduce things like subsidies for income groups in the lower quintile, things like rent and food supplements.
Pedro: What does that mean?
President: You gonna be even hungrier Pedro.
President: Well at least we will have new loans to put into development.
Economist: Ah, sorry Mr. President, as I explained before, you will have to use the loans to pay your debts to the banks.
Pedro. So SAPs are foreign aid for banks!
Economist: I bring great news! Globalisation! The world is developing into one big economy in which we will all be free to buy and sell what we like where we like. We will have got rid of all the tariffs and restrictions that previously hindered trade and efficiency. This will be great for growth and development.
President: What if we don‘t want to drop all our protection and ability to regulate our economy?
Foreign Investor: Then we won’t invest in your country will we. We’ll go to some place where they have more sense than to interfere with the freedom of trade and investment.
Economist: That’s right Mr. President. If you try to tell foreign investors what they can and can’t do they will invest somewhere else. You really have no choice but to deregulate and in fact offer the corporations incentives like tax holidays, or you will not attract capital and your economy will stagnate and you won’t produce competitive export products and you will never pay off that debt.
Pedro: But what if we want to make sure our workers get decent wages or if we want to set safety standards for them?
Economist: Well they will not invest here. It’s as simple as that.
Foreign Investor: And remember that in the globalised world economy you must compete against all the other nations trying to sell their bananas. You will have to match the lowest costs and prices.
Pedro: Oh, oh. I think I know what that means.
President: Yep. Even lower wages in the plantations Pedro.
Pedro: But what if we demand that foreign companies exporting our logs must replant the forest?!
Foreign Investor: Oh. No!! Shock. Horror. That would be to contradict the most sacred economic principle of all. You must not interfere with the freedom for market forces, the freedom of trade! Everybody knows that.
Economist: And if you did the World Trade Organisation would punish you severely.
Pedro: But why?
Economist: Because if your government made firms pay higher wages then that would be interfering with the freedom of trade and the WTO will not tolerate that.
President: What would it do?
Economist: It would slap trade sanctions on you. It would tell all their countries not to trade with you, and then you would really be in trouble; no export sales! And it would fine your government for breaking the law.
President: Breaking the law?
Economist; Yes. The World Trade Order has fined some countries hundreds of millions of dollars because they tried to stop a foreign corporation doing something it wanted to do.
President: Like what?
Economist: Well in one case a government said it would not allow a foreign corporation to import petrol with a chemical in it that could be dangerous to health. But the World Trade Organisation soon corrected the mistake, and made the government pay more than $200 million to the corporation.
Pedro: What?! What law we breaking?
Economist: The agreement the country signed when it joined the WTO.
Pedro: So why they sign that dumb thing?
Economist: Because if your country didn’t join the Organisation and accept its conditions then no nation would trade with you.
Foreign investor: You see it is important that those who can do things most efficiently should be free to do so. WTO rules guarantee that freedom. Regulation by governments interferes with economic efficiency. I’ll give you a good example. Mexico used to prevent foreign corporations selling wheat there but now they can, and wheat costs much less, because the government has stopped protecting the market for all those inefficient little local producers.
President: And now millions of little farmers have lost their markets and have gone broke.
Economist: The good news is that what globalisation will soon free up is government service provision.
Economist: Yes, things governments now produce and provide, like electricity, water, and postal services. All these will soon be provided by private corporations.
Pedro: How can a corporation supply water more efficiently?
Economist: Oh like they did in Bolivia. First they increase the price many times and secondly they stopped supplying water to the areas where people don’t pay well.
Pedro: You mean the poor people.
Economist: And in no time the efficiency of water provision increased amazingly; each dollar invested in water supply earned much more than it did before.
Pedro: Seems to me that made water supply worse.
Economist; No it didn’t. The return on investment in water supply became much higher; far more efficient use of capital.
14. DEVELOPMENT --- IN WHOSE INTERESTS?
Economist: Mr President, you are to be congratulated. Development is booming. You now have more factories…
Pedro: …making baseballs for rich countries.
Economist: Your plantations are exporting a lot…
Pedro: …of bananas to rich countries…
Economist: Your workers are getting jobs…
Pedro:…in plantations and factories for lousy wages…
Economist: Your mines are producing lots of minerals…
Pedro: …all shipped out to you.
Economist: But look at the GDP; much bigger now. And Pedro, look at all the goods in the shops, made in the new factories, or imported from us.
Pedro: But I can’t afford any of them. Good for your corporations though, now exporting stuff to our richest people.
Economist: But Pedro, development is underway, and it is bringing benefits isn’t it?
Pedro; Yes, mostly for rich countries.
President: Now look here Mr. Economist and Mr. Foreign Investor and Mr. World Bank we Third World people starting to not like this globalisation thing. It work like a dream for rich world corporations and banks but not for us. We can’t compete in free market global economy so you guys take all the markets, including those in our country selling to us, and you take our resources cheaply because free market say they must go to who can pay for them so we don’t get them, and nothing much trickle down to me let alone to Pedro here.
Pedro: Bravo Mr. President. Global economy make our economy benefit them not us. We get jobs and taxes only if they can produce here what makes most profit for them.
President: And we poor countries have to compete against each other to offer the corporations the lowest terms or they won’t invest here. And if we try to tell them what we want developed that’s interfering with sacred free market.
Pedro: Bravo Mr. President. It’s plunder!
President: And we are fed up with it! Finito! No more! From here on we will develop what we want. We’ll use our land and forests and labour to produce what our people need, not luxuries to export to you. We’ll redistribute plantation land to landless poor. We will subsidise the poor so they can buy more food. We will only let foreign investors come in here if they produce what we want produced. We will tax corporations properly. We will control our development, not leave it to free market… and …
Economist: Sorry Mr. President, you can’t do any of that.
Economist: You can’t do any of that.
President; Why? We in control around here. If we want to tax corporations properly, or save our forests for our use, or give land to peasants, that’s what we’ll do!
Economist: No, sorry Mr. President, you really don’t understand. If you do those things you will completely destroy your economy. Corporations would leave and set up in Colombia. You will have no electricity, or water supply, because the foreign corporation providing these will leave. Your export income would cease, so you would not earn and would not be able to pay for any imports, credit agencies would tell all investors not to invest in your country. You couldn’t pay your debts off so no one will lend to you. Anyway the conditions on your Structural Adjustment Package say you agreed not to do any of those things when we gave you the loans you desperately needed.
Pedro: Then we’re trapped.
16. COMMUNIST SUBVERSION.
Pedro: Look at the mess we’re in now. We have had a lot of development but most of the economy is producing things for rich people, especially to export to the rich countries. A few rich people here are doing well but most people are still poor and many of us are getting poorer. Global economy keeps all this in place. We should take our economy back from them. Tell corporations to drop dead. We start to run our country for our benefit.
President: Now wait a minute Pedro, the situation is not exactly what we’d like but we are poor and in debt. We are in no position to tell them to buzz off. And that would be bad news for people like my family. We sell our cattle to them you know.
Foreign Investor: And it would be bad news for we foreign investors. We need places to invest our capital. You would be denying us the right to invest here, and that’s contradicting the principle of freedom.
Pedro: But can't you see that if we don't make sure the land and other things produce what the people need they will go into making things for rich people. The only way we can make sure our land and things go into making what our people need is to stop them being put into making luxuries for the rich few.
Foreign Investor: I don’t like the sound of that. He wants to use force to take our plantations and stop our factories operating.
President: And me and my family have no intention of changing from our very prosperous export cattle ranching to growing beans for grumbling peasants like you Pedro.
Pedro: But Poor people won’t get what they need unless we change economy so poor people can have more land and loans and so factories make things we want not things for rich world supermarkets.
Economist: I don’t like the sound of this either. He does not understand that the best, the only way to run an economy is to leave people and firms as free as possible to do what will maximise the efficiency of use of capital. He seems to be wanting the government to take control of the economy. Everybody knows that’s a mistake.
President: Yes, yes, I too don't like the sound of this. He is telling me to change what my land and my factories are doing. I smell a rat here. This Pedro fellow sounds very dangerous. In fact I think he might be a communist.
Economist: Oh dear! God Forbid! But I think you are right. The things he's started to say really are a serious threat to your way of life and proper economic policy and good government and your freedom.
Foreign Investor: And to our freedom to invest. We rich world corporations know that Third World governments have to be constantly on their guard against this sort of subversion. Communists take every opportunity to stir up trouble among the peasants and to undermine democratic society. Their aim is to overthrow the free enterprise way by getting the peasants to make demands like this Pedro fellow is now making. They want to take land and property off those it legally belongs to. They want their government to control things. That means they want a (shudder) socialist economy. My government has seen all this before. We will not stand by and see another country friendly to the Western developed countries subverted by communism.
Pedro: Hey wait a minute. All we want is a better deal. We are hungry and we want things we need to be produced first, not baseballs, and we only want a fair share of the land and the loans, so we can make and grow the things we need. We can't get a better deal unless you people with all the land and the factories and the money move over and give us a fairer share.
President: There you are! I told you. They are clearly out to take from us what is not theirs.
Economist: And to undermine and wreck your economic system.
Foreign Investor: Yes there's no doubt. They are communist revolutionaries. You must deal with them immediately.
Pedro: Me? What is communist? I'm hungry, not communist.
President: Quick rich countries, send us more guns.
Foreign Investor: Yes, our governments will certainly send arms and troops to help you put down this threat to our loyal ally.
President: Police! Arrest that Pedro fellow. Lock him up. He is a dangerous subversive.
Pedro: ... I think I'm starting to understand development now.
17. BUT COULD IT HAVE ENDED LIKE THIS?
Pedro: It has taken us peasants a very long time but at least we think we can see what the best way for us is.
President: Excellent! Now at last we can count on your full support for the national development plan...
Economist: Which has been worked out in consultation with we economists.
Pedro: No. We now see that all you are talking about is development in the interests of the rich. Your way sure gets a lot of development going but it only benefits the corporations, the rich in the Third World and the consumers in the Rich World. We end up with our land and our labour producing for others and hardly any trickle down to us. So no thanks, we’ve decided to go another way.
Economists: Another way? What does he mean? There is only one way to develop. Got to get the economy going, stimulate business activity, crank up GNP ... that’s development.
Pedro: No. We little people are going to get together to develop for ourselves the things we need in our villages. We can grow our own seedlings, plant with community working bees.
Economist: How about fertilisers. How will you pay for them, and tractor spare parts and fuel.
Pedro: We recycle wastes to soil, use animal manures. Maybe we have little craft workshops making clothes and sandals and pots and pans. Maybe we have to buy one village fridge from the city or from rich countries, so maybe have to sell a few crops or craft to pay for few imports. No need TV, cars.
Economist: Look, you can’t get dams and power stations and factories without capital can you? You would need lots of foreign investment and loans to pay for such construction.
Pedro: No. We just build most things in simple way using local timber, earth, and working bees. We just dig lots of little dams with shovels, on weekly community work days. No need bulldozers. No need to borrow much money, if any, for most things we need.
Economist: But your living standards would be terribly low.
Pedro: Yes, if you mean GNP per person. But who cares. We can have good food, comfortable little houses, good community to look after everyone, good environment, and we can be sure we can run all this and not lose it if global economy get sick.
President: But what will happen to the national economy? How could the country earn from exporting if all of you aren’t willing to work hard in export plantations because you have all gone home to work in your own gardens?
Pedro: Ah, very bad luck about national economy. Very bad luck about GNP. And very very bad luck about corporations and rich countries who very much like us to go on producing for their benefit. That’s the point Mr President and Mr Economist. We no longer going to do that. We going to work for our benefit from here on. No more buy lots of goods from you. No more borrow lots of money from you. No more depend on whether some corporation decides to set up branch plant near our village. From here on we work to provide ourselves with most of what we want.
Economist: But unless you join the global economy you will not have access to all the products and the markets and the people there who are good at developing. Everyone is heading towards participating in the unified global economy now.
Pedro: No. Not us. Not lots of poor people in lots of countries now. We see we don’t get a fair go in big global economy, so we will only deal with it very little, to buy a few things we really need.
President: But all this will be a disaster for the GNP! Where will we get labour for our factories. Where will we get consumers to buy our products?
Economist: Yes indeed! If you take land out of export production and put it into growing things to eat and make clothes and furniture for yourself you will ruin the economy.
Economist: And you would never get to be like rich countries.
Pedro: Yeah; makes a lot of sense huh? Look, we’re giving up on what you call development, because that only Losangelisation. What we’re for now is appropriate development. We will make sure all our development capacity goes only into producing most needed and sensible things.
Economist: But you can’t do those things without (shudder) regulation, interfering with market forces.
Pedro: Quite true Mr Economist. You learning fast.
Economist: But... but if you do these things the entire global economy will be seriously disrupted. Rich countries can’t retain their living standards unless you in the Third World go on buying from us and selling your resources to us. We would have to undertake massive restructuring. It would be a disaster for us!
Pedro: Very good Mr Economist. I think you starting to understand development now.
For analyses in essay form, see,
A 4 page summary: The Two Very Different Development Models.
A 6 page account: “Development”: Their Way and Ours -- Consider eggs.
The full account, c. 25 pages: THIRDWORLDDEVLong.html