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In 1949, Harry S Truman was tired.
World War II had just ended, and in his second inaugural address,
Truman needed to inspire Americans, weary after years of war.
To do it, he painted America in a fresh and altruistic way.
He said, and I quote,
more than half the world's population live in conditions approaching misery.
Their economic life is primitive and stagnant.
We must embark on a bold new program for the improvement and
growth of underdeveloped areas.
What Truman is saying here, is a powerful new idea in the world, development.
If the West pulls our resources,
we can help poor developing countries do just that.
Develop, get richer.
It's an uplifting narrative making Americans feel good that we can help.
One small issue this was a total PR play.
It was a concept made up ten days prior by a mid level State Department employee
whose only mandate was to reignite American energy for Truman second term.
At the time of his speech,
not one document existed to support the actual execution of the plan.
And to put this in historical context,
a western-led narrative at the time of benevolence, was unprecedented.
Western-led colonialism was still going on after World War II at
the time of the speech but Americans loved the new narrative and we followed through.
And today the West, mainly US and
Europe give on average 130 billion in aid per year.
This is through large philanthropies like the Gates Foundation,
through multi laterals like the World Bank and IMF, and
through traditional government aid like USAID or defit, in the UK.
And through our collective giving,
Truman's narrative has stood the test of time.
Rich countries help poor countries, it's something we all kind of know.
But for this idea to have legs, we need to believe that it's in some way working,
that that 130 billion we give in aid per year is having real impact and
the poor are getting less poor.
And that too is a widely touted narrative.
In 2015, the UN published a landmark report
that said that the global poverty rate has been cut in half over the last 30 years.
And that sounds great because that means that our efforts are working and
our global economic system is sound.
And we should all feel good about that if not for a difficult fact.
Global poverty isn't getting better, in fact, it hasn't budged in 30 years.
So the 2015 claim of huge wins against global poverty
relies on an antiquated $2-a-day poverty line.
That poverty line is set by the same institutions responsible for
showing progress against poverty, and so that line is abysmally low.
Most development economists today cite that it takes closer to an $8-a-day
poverty line to achieve basic nutrition and normal human life expectancy.
And if we look at the $8-a-day poverty line, and
subtract out China, which has taken its own development efforts,
mostly outside of US control, we see that the proportion of people living in
extreme poverty hasn't meaningfully changed in 3 decades.
And we can see this reflected again in our ever growing global inequality.
The gap in GDP per capita between rich and
poor countries has tripled since the time of Truman speech.
Let that sink in.
This is not a tale of poor countries catching up to the west,
this is a story of a growing poverty divide.
For me, this is a profound thing to grapple with.
I work in development economics, and I've worked to expand access to credit for
the unbanked in emerging markets.
I lived between Peru and Indonesia and Kenya and
I thought I was part of a wave of things generally getting better.
The idea that global poverty is not getting better hits me to my core
and it forces me to ask my trillion dollar question.
In the face of all of these development efforts,
why aren't we making progress against poverty?
And in that, is the Western influence I'm a part of helping or hurting?
My favorite development economist Jason Hickel has a shocking idea.
What if aid, all the bridges, all the bed nuts is irrelevant or
worse than irrelevant?
What if it is nothing more than a convincing PR play?
Like Truman's speech, a distraction.
In this narrative, we get to be the good guys.
The West is helping the poor catch up and
everyone gets to sleep at night knowing we are doing what we can and we don't have
to do anything differently, besides maybe give a little bit more in aid per year.
If our global economic system is working to alleviate poverty,
but clearly, it's not working.
So what's going on here?
Why haven't we made progress against poverty despite half a century of effort?
I want to put that $130 billion in aid per year in perspective.
That's a big number.
But it's much smaller than the value that flows in
the opposite direction from poor to rich.
In 2016, the Global Financial Integrity Group published shocking data on
the ways that value is extracted out of poor countries.
This is not trade flows but
ways that value is being transferred sometimes illegally, from poor to rich.
So when Western governments give loans to poor countries to the IMF,
we demand back substantial interest rate, exorbitant interest rates.
And with the miracle of compound interest,
many poor countries are continuously crippled under their debt burden.
Some of these debts were taken decades ago and the principle has been long repaid but
we keep demanding back interest.
To put his debts in perspective,
the amount that poor countries spend on debt service each year is a bigger
number than the UN projects as needed to eradicate global poverty, completely.
And when we loan, on top of interest we have structural adjustment.
So that's when Western governments lend to poor countries,
we demand the poor countries adopt certain economic policies.
And we tell them these policies will help them develop but really,
these are policies of free trade and
low tariffs, that benefit our Western corporations working there.
And most nefariously of all, we have trade misinvoicing,
which is the very illegal yet very prevalent practice of large corporations,
misreporting trade prices on our invoices in order to avoid local government taxes.
There's a lot more ways the value flows from poor to rich but
the point here is that our aid budget is ridiculously small
compared to all the ways money is gushing out of poor countries.
This is outrageous
especially because we've used our tiny aid budget to fuel a cultural
narrative of our own benevolence and that narrative hides
the patterns of extraction that are actively keeping poor countries poor.
Maybe this isn't all that surprising given centuries
of Western led extraction under colonialism.
I would argue it's the same extraction hidden behind a PR
band-aid of development.
I work in development, so seeing these numbers is deeply troubling.
And to be clear, I don't think development in and of itself is bad, but
it shouldn't be used as a cover-up for
extractive global economic system imposed by the West.
And I've realized I need to get my head up out of the sand and
look at this straight on if I want to do any good and
if you want to join me, there's places to start.
Large companies give lip service to things like ESG through impact and
CSR, but I think we need a new code of ethics.
So when you run large corporations in the developing world, do basic things,
like pay your fair share of taxes and demand the companies you work for do too.
And for all of us in the broader West, I want to challenge us to rethink our role
in development and stop hiding behind a narrative that the West is helping.
To be really blunt, if you're from a rich country, your privilege was built
on the backs of those in poor countries and continues to be built on them.
We have to get our story straight.
Which countries aren't developing poor countries?
It's the other way around.
Thank you.
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