A History of Wealth and Poverty: Why a Few Nations are Rich and Many Poor, by John P. Powelson.

Appendixes for Chapter 23

Appendix 23.1: Selected References to Power and Economic Distortions in the Third World Today

Although I have collected many similar illustrations, only one or occasionally two are reported for any one Third World country. Countries are listed in alphabetical order:

Algeria: "President Houari Boumedienne . . . built steel mills and petrochemical plants only to find a world glut of steel and petrochemicals. He also pushed through a plan to collectivize farms, . . . that encouraged young people to move to the cities [turning] Algeria, once nearly self-sufficient in foodstuffs, into a huge importer." [516]

Argentina: "[F]iscal deficits . . . typically exceed 10 percent of the gross national product, tax evasion as a way of life, low productivity, a bloated state payroll and heavy dependence on the state by private enterprise . . . poor quality of manufactured goods protected by high tariffs, the large amount of business that is done off the books. . . . [The President] plans to reduce the state's role in the economy [and] intends to 'privatize private enterprise,' an allusion to the custom of the Government's guaranteeing markets and profits for private businesses." [517]

Bolivia: "[C]ontrols keep a long list of essential items at prices well below production costs. . . . Many Bolivians have become ingenious smugglers, buying goods at home and slipping them into neighboring countries to sell at a handsome profit." [518]

Brazil: "[President Fernando] Collor's deflationary plan . . . was to freeze all bank accounts and change the currency. . . . As the Brazilian economy went into shock and prices crashed, those with any cash at all . . . were in a position to take advantage of such opportunities as a stock market that lost 60 percent of its value, or to purchase state enterprises for sale at 30 percent of their value." [519]

Burma (Myanmar): "At least 5,000 Burmese are being forced to move from Myanmar's cities to new, ill-prepared outlying towns where malaria and hepatitis are rampant. . . . Once in their new areas, which can be up to 50 miles away, the Burmese are required to buy land and secure and pay for Government permits to rebuild." [520]

Dominican Republic: "The State Sugar Council owns and manages 12 large sugar plantation factories, which were the property of the dictator Rafael Trujillo. . . . Trujillo institutionalized the use of cheap Haitian migratory labor. . . . By 1983 the Dominican Government was paying the Government of the Haitian dictator Jean-Claude Duvalier as much as $2,250,000 a year under the arrangement." Even after the overthrow of Duvalier, Haitian workers are recruited with the promise of well-paying jobs. When they arrive at the border, "they are seized by the army and taken by truck to one of the 280 or so plantation villages." [521]

Equatorial Guinea: President Francisco Nguema, "a paranoid despot, destroyed his nation's economy by expelling almost the entire Spanish population of 7,000 and killing or forcing into exile about one-third of the African population. The population is now 300,000." [522]

Egypt: In a cotton factory, "a lot of the problems can be traced to the government, including state-produced cotton yarn that breaks on the loom and the 34 official signatures it sometimes takes to ship an order. . . .The price [of underwear] is set by government-owned spinning companies, which have a monopoly on the production of yarn from raw cotton and have deficit problems of their own. Importing cheaper cotton yarn is no solution because Egypt would only tack on customs duties of up to 65 percent to protect state companies." [523]

Ethiopia: "Villagization was heralded by President Mengistu [as] the answer to the many difficulties of the . . . peasantry. By being grouped together, the argument went, peasants would be able to produce more and have easier access to such services as schools and health clinics. . . . Unspoken, but more to the point, in the view of many Ethiopian and Western researchers, villagization was an effort to increase the power of the state by marshaling people in more easily controlled groups." [524]

Ghana: "[S]oldiers demolished stalls and goods in one of the market places in this rundown capital. . . . [T]he action was taken because the market women were selling goods at prices above those set by the government. . . . The new Rawlings Government barred the women from selling certain essential commodities, including milk, sugar and textiles." [525]

"Information percolates up in Ghana through a hierarchy of fear. Everyone must report anyone who seems suspicious or he himself becomes suspect." [526]

Haiti: Leslie Delatour, the minister of finance, "has stanched the hemorrhaging of public funds, closing, amid enormous protest, two large state enterprises . . . that had helped serve as conduits from the public treasury to private pockets. He has reduced the tariffs that protected the monopolies making up Haiti's structure of 'crony capitalism' and slashed export taxes on coffee and other commodities." [527]

Honduras: "Cohbana, the state agency charged with exporting bananas, loses more than $3 million a year. Meanwhile, Honduran banana exports lag behind those of other banana-exporting countries. Cohdefor, a state enterprise with a monopoly on the lumber industry, has lost $290 million since its inception. . . . Graft plays a large part in these losses." [528]

"The Government began legal proceedings today aimed at jailing all 53 members of Congress who supported" the appointment of the Chief Justice of the Supreme Court, jailed in a political struggle, on charges of treason and plotting against the existing political system. [529]

India: "India's planning apparatus might be Adam Smith's vision of hell. Businesses must obtain permission to enter markets or leave them, to build new factories or close old ones, to import or export. Opening a tourist hotel requires 43 licenses, which take years and millions of under-the-table rupees. Much industry is government-owned — often with dreary results. . . . Labor, of course, is not free, and state enterprises use lots of it. In Calcutta, the bus company employs 35 people for every vehicle it owns." [530]

Indonesia: "Massive amounts of capital are wasted by being poured into protected industries. One Jakarta-based economist says that more than $3 billion has been sunk in the projected steel works at Cilegon, in West Java, an investment that he notes 'can't possibly pay.'. . . When the Indonesian newspaper Sinar Harapan referred forthrightly to Suharto family monopoly interests last fall, it was closed." [531]

Iraq: "Iraq's government is essentially a family affair and army politics became bizarrely entwined with family politics. . . . Problems exist elsewhere in the repressive apparatus that keeps the regime in power." [532]

Kenya: A report discusses "the Kenya Government's decision to build a 60-story prestige building . . . [costing $200 million, which] can be put to much better purposes, like assisting the credit-starved agrarian sector." [533]

Liberia: A report cites "President Doe's growing appetite for government-subsidized extravagances. He owns a small fleet of luxury automobiles and is said to spend lavishly on clothes and jewelry. . . . "Well-connected senior Government workers have also grown wealthy through lucrative business opportunities, obtained through the executive mansion." [534]

Mexico: "[A] labyrinth of regulations encourages many legitimate business innovators to remain in the underground. The alternative can mean months or years of delays and costly legal assistance." [535]

Morocco: "[A]t the bottom of Morocco's troubles lies . . . the defeat of a true market economy by the concentration of power and wealth in a bloated network of bureaucrats and well-connected families ultimately controlled by the monarch." [536]

Nigeria: "In a crackdown on dissent, the Government this year disbanded the National Trade Union Council, the National Students' Union and the National University Professors' Union. Thirty universities were temporarily closed. Journalists have been detained. Magazines have been seized. . . . Keeping officers happy involves allowing as many officers as possible a chance for power and personal enrichment." [537]

Pakistan: "Some ministers and top officials are said to have made fortunes out of kickbacks on contracts with government-owned steel and flour mills, and from deals in which government land worth millions of dollars was obtained for as little as $20,000, then quickly resold." [538]

Peru: "[O]nly 1 percent of Peruvian laws emanate from the body created to make them: Parliament. The other 99 percent derive from the executive . . . with no interference, no debate, no criticism and, often enough, without the knowledge of those affected by them." [539]

Senegal: A report points out that "27 companies completely operated by the state and 75 quasi-public concerns, all of which together employ 25,000 people, four times the manpower that some critics say is needed in these enterprises. . . . an economy under very tight control." [540]

Sierra Leone: "Economists attribute the rice shortage largely to the low prices paid to producers in Sierra Leone's overvalued currency. . . . [I]mporting rice spins off more money than growing it. . . . Lack of foreign exchange has meant that spare parts are now scarce. That, in turn, has led to frequent power outages. . . . There is no longer a functioning railroad. . . . A farmer who does manage to bring in a good crop may not be able to get it to market." [541]

Sudan: "[A] wave of political terror has claimed doctors, lawyers, journalists, poets and trade unionists. Hundreds have been detained and scores executed for the crime of dissent. . . . [T]he press has been shackled, trade unions abolished and political parties stripped of their property by military rulers." [542]

Syria: "Because of the atmosphere of pervasive insecurity, anyone who is anyone in Syria has his team of bodyguards. These men prey on the populace at large, stopping cars and breaking into homes with impunity." [543]

Tanzania: "[A]ccording to World Bank dictates, the Government raised the producer price of cotton two years ago. The cotton growers, responding as they were supposed to, worked harder and harvested twice the amount of cotton as they had in the past. But the roads to the cotton farms were so poor, trucks were unable to get to the harvest, much of the cotton went bad in storage and the farmers were left unpaid. Some cotton farmers persevered for a second season, but with the same results." [544]

Turkey: "[T]orture is still being used by the Turkish police in nearly every case of arrest." [545]

Venezuela: "Down here, powerful families with close ties to government often control whole industries nearly by themselves. . . . Near monopolies are common, as in much of Latin America. . . . [F]riends in politics are almost a requirement for business success here." [546]

Zaire: "Some of [President] Mobutu's overseas real estate holdings are public knowledge. They include chateaus in Spain and Belgium, a townhouse in Paris, a villa near Monte Carlo, an estate in Switzerland, a horse ranch in Portugal and a villa in the Ivory Coast." [547]

Zimbabwe: "[I]nvestment is being undermined partly by the foreign-exchange crisis but also by price controls and labor regulations, that have deterred entrepreneurs from expanding capacity. . . . Zimbabwe is . . . establishing new parastatals and new interlocking, and even duplicative, state organizations to manage its economy." [548]

Appendix 23.2: Selected References to Structural Adjustment

  1. In 1984, the World Bank proposed a special fund to "make low-interest loans to the poorest black African countries if they agreed to adopt domestic economic policies that the World Bank and most aid-giving nations deem sensible. These would include adopting realistic exchange rates for their currencies and setting food prices at levels that would encourage farmers to increase production." [549]
  2. "The Administration wants the [Inter-American Development Bank] to make its loans conditional upon market-oriented policy shifts." [550]
  3. A report by Richard Feinberg, president of the Overseas Development Council, called for the World Bank "to make a much greater percentage of its loans as 'structural adjustment,' " with the IMF and the Bank "assuming the lead role at the country level." This cooperative effort would "follow a line of thinking among some Treasury officials." [551]
  4. In 1987, James Bovard wrote that the "structural adjustment program has been a dismal failure. . . . SALs [structural adjustment loans] are often used to perpetuate government control rather than to induce pro-market reforms. . . . In the Ivory Coast the SAL was used to pay the debts of floundering government enterprises. In Senegal, the SAL bankrolled the budgets of government-owned agricultural companies. In Pakistan, bank aid was used to 'rationalize' state-owned companies, but auditors concluded that efficiency had not been increased. . . . [T]he companies are still losing money." [552]
  5. In 1987, the International Monetary Fund created an $8.4 billion facility for long-term, low-interest loans to countries "that undertake strong three-year programs to improve their balance of payments position and to foster growth." [553] This move marked a fundamental shift from the Fund as short-term lender to finance temporary balance of payments difficulties to a longer-term lender to finance structural change.
  6. In 1988, a proposal by James D. Robinson circulated in Washington, for an Institute of International Debt and Development (known as I2D2), which would buy debts of less-developed countries to banks at a deep discount, cancelling them in exchange for government securities from the borrowing countries. But the conditions would be "tougher than the structural adjustment conditions. . . . Participant nations would be required to open their borders to trade and foreign investment and privatize state industries." [554]
  7. In 1989, Hernando de Soto argued that the structural adjustment policies advocated by international lending agencies and governments of more-developed countries would alternatively be negotiated by private groups in the less-developed countries. "Truly effective structural adjustment must well up from the bottom, not be imposed by international institutions and foreign governments. . . . Recent events in Peru attest to a groundswell of support for the same types of policies that would have been required by the IMF. . . .[I]nformal transportation operators in Peru successfully lobbied the government for the enactment of a package of measures that included the reduction of taxes and tariffs and the removal of duties on tire imports." [555]

Appendix 23.3: Skilled versus Unskilled Labor in the United States

  1. Drucker found in 1987 "a steady shift from labor-intensive to knowledge-intensive industries." He wrote that "as a proportion of the working population, blue-collar workers in manufacturing have already decreased to less than a fifth of the American labor force from more than a third." [556]
  2. "The labor pool of younger workers who historically fill entry-level jobs is declining both in numbers and in quality, for reasons ranging from the demographic to the social, while the jobs waiting for them require ever more knowledge and skill. . . . Also, more people who once went into entry-level jobs after high school now go to college." At the same time, "entry-level jobs are growing more complex and demanding." Therefore, companies increasingly finance education and training programs to promote job skills. [557]
  3. William Wilson [558] wrote of "the disappearance over the last quarter-century of hundreds of thousands of low-skill jobs, mainly involving physical labor." Reubens, however, argued that Wilson had noted not so much a decline in low-skill jobs as their migration from the North and East to the South and West. [559]
  4. In 1988, Drucker argued that "blue-collar labor no longer accounts for enough of the total costs to give low wages much competitive advantage" for low-wage countries competing with United States industry. [560]
  5. "Worker skills are sadly lacking, employers increasingly complain. . . . A high-school diploma no longer means the grad 'can read and write or add and subtract,' an AmeriFirst Bank official says." [561]
  6. A 1988 study by the Commission on Youth and America's Future562 argued that "America's highly competitive technological society places great emphasis on educational attainment. . . . 'Those with less education must scramble for good jobs in a sea of part-time, low-paying, limited-future employment opportunities.' " [563]
  7. A survey of business executives in 1989 indicated that United States students "are not being educated fast enough and at sophisticated enough levels to keep pace with the advances and upgrading in jobs." [564]
  8. Uchitelle argues, however, that the reputed shortage of skilled workers in the United States is a myth. Rather, the oversupply of college graduates has resulted in unskilled jobs being offered to them instead of to less educated applicants. "The college degree, or even the evidence of having participated in college, has become the nation's major form of job certification," since a high-school graduation alone does not imply the required amount of discipline or functional literacy. [565]
  9. Supporting the trend indicated in preceding reports, a study by Bluestone and Harrison in 1987 showed that although employment has been increasing, most of the new jobs are in low-paying unskilled occupations. [566]
  10. But Brookes pointed out that by using the wrong deflator, Bluestone and Harrison "dramatically understated constant-dollar wage scales." Relying on Labor Department data, he argued that "this whole low-pay jobs thesis is largely a statistical fraud resulting from careful selection of unrepresentative years. . . . The notion that the U.S. economy is producing mostly low-paying, unskilled jobs is an economic fiction." [567]
  11. In June, 1994, however, a commission of the U. S. Departments of Labor and Commerce, headed by Professor John T. Dunlop of Harvard University, issued a report detailing "the development of an underclass of low-paid and unskilled workers unable to compete in a complex marketplace." In commenting on this report, Robert Reich, Secretary of Labor, declared: "A society divided between the haves and have-nots or the well-educated and the poorly-educated can not be a stable society over time." [568]

Appendix 23.4: Political and Economic Reforms in South Africa during the 1980/1990s.

This list was compiled partly from Jerry B. Eckert's articles in the Christian Science Monitor, "Economics can Defeat Apartheid," 28 March 1989, and "Rethinking South Africa," 21 April 1989, and partly from current news sources.

1978: Eating places, theaters, rest rooms, public parks desegregated.

1979: Government began investing millions in job training for black productivity and incomes. In the most recent twelve years [1977-89], real black income rose 65 percent, while real white income declined 5 percent.

1980: Beginning of massive investment in black education. Fifteen classrooms per working day are built. Expenditure on black schooling has grown 30 percent per year. Aim is to bring black education up to white before desegregation.

1981: Black and mixed-race unions legalized. Strikes for higher wages, some successful. Sports integrated.

1984: Uniform tax laws for all races. Universities desegregated.

1985: Mixed marriages act and Morality act repealed. Job reservations acts (reserving specific jobs for whites) largely bypassed and not enforced.

1986: Racial barriers removed for "international" hotels. South African citizenship restored to citizens of homelands. Pass laws abolished. Government announced it would no longer enforce Group Areas Act (which placed areas off limits for black homes). "Gray areas" (mixed-race residences) appearing in Johannesburg, other major cities. Sales of liquor allowed to all races. Separate systems of courts removed. U.S. Congress imposes Federal sanctions on South Africa.

1987: Job Reservations Acts repealed.

1987 and 1989: Dutch Reformed Church states that segregation is a sin.

1989: Free Settlement Areas Act permits residential areas to apply for and be granted exemptions from Group Areas Act, thus becoming nonracial. National Party adopts "black vote in five years" as party platform for September elections. Johannesburg desegregates swimming pools and recreation centers. All beaches opened to persons regardless of color.

1990: Buses in Johannesburg open to all races.

1991: Apartheid land laws abolished. Law defining people by race repealed. President George Bush lifts most US Federal sanctions; those of many localities in U.S. remain.

1992: Whites in referendum overwhelmingly approve negotiations to end minority rule.

1993: African National Congress accepts the idea of power-sharing with white elements. Parliament adopts laws giving blacks participation in government; elections are called in which a black president would be possible. Nelson Mandela calls for ending of sanctions. Other countries and U.S. localities start to comply. New constitution abolishes apartheid.

1994: Nelson Mandela elected the first black president.

Appendix 23.5: References to Groups and Emerging Pluralism in the Third World

I. Groups with Promise of Becoming Bargaining Agents

  1. In British East Africa in colonial times, "with increasing urbanization, immigrants to the towns often formed associations which, in addition to fulfilling other functions, settled disputes between members, applying the customary rules of behaviour as best they might in the new situations which arose." [569]
  2. Working class organization began in Egypt about 1908. In 1922, a Commission on Commerce and Industry was set up, which became the Egyptian Federation of Industry in 1924. [570]
  3. In West Africa in the early twentieth century, "just as wage-earners established trade unions, so, too, the indigenous distributive system spawned new commercial organizations, . . . such as the Ivory Coast Transporters' Association, which grew up in the 1950s." [571]
  4. "[A] new Movement of the Landless is gaining momentum throughout Brazil and, with strong support from activist sectors of the Roman Catholic Church, it has so far set up 42 similar camps. . . . Its immediate objective is to insure that the Government carries out a law . . . with the intention of distributing 100 million acres of land to 1.4 million families through 1989. . . . [T]he group is trying to mobilize the peasantry to resist the mounting political offensive of those opposed to land redistribution." [572]
  5. "Under the leadership of Verghese Kurien, a champion of India's producer cooperatives, peanut farmers in Bhaunagar and four other districts of Gujarat began banking together in 1979 in an effort to break the hold of the area's powerful oil millers and traders on the peanut industry. . . . The cooperative is part of a growing network of village units that are seeking to restructure the region's economy, which revolves around peanut production." [573]

II. Corporate Groups Co-opted by the Power Group

  1. "In the 1950s a voluntary cooperative movement grew beyond traditional functions [in Tanzania] and spread rapidly in the coffee and cotton regions. It did not come because of a swelling of mass participation, as Nyerere had envisioned, but in response to perceived opportunity. [These unions] were initiated, organized, and controlled by African traders and farmers." [574] However, they ran counter to the Nyerere government's plans for socialist villages. In 1967, the Government took control of sixteen regional cooperative unions.
  2. In Mexico, the Plan de Ayala group, taking its name from Zapata's revolutionary manifesto, "has successfully coordinated dozens of peasant protests in southern Mexico in recent years, often with violent results. . . . Last month, about 10,000 peasants affiliated with the Plan de Ayala chapters converged on the capital to publicize land complaints." [575] No agreement was reached, and such peasant protests — common throughout Mexican history — have generally failed.
  3. Again in Mexico, "a group of peasant farmers (campesinos) . . . decided to petition for title to the land. . . . [The] petition [was] denied because of lack of corroborating documents. Some 35 pages of details apparently did not satisfy certain federal bureaucrats. No wonder campesinos are driven by such bureaucratic obfuscation to informal land seizures." [576]

III. Groups with Unfocused Objectives

  1. "A crowd of 15,000 chanting, jeering protesters marched through Managua today to dramatize their grievances against the Nicaraguan Government . . . . [T]he march provided a narrow slice of common ground between groups that agree on little beyond their distaste for the Sandinistas [the government]." [577]
  2. Before the overthrow of the Duvalier government in Haiti in 1986, demonstrations broke out in several towns, thousands of students boycotted classes, and anti-government flyers were circulating. [578] While the points of discontent were clear — mainly unemployment, inflation, and government profligacy — nevertheless no specific set of demands was advanced, that the government might have been capable of undertaking.
  3. During June 1987, protesters in South Korea had made specific demands, including direct presidential elections, release of political prisoners, and restoration of civil rights to dissidents, but the reports of these did not contain any information on protesters and government negotiating directly. On July 1, the government granted these demands. Yet the protest continued, with no agenda other than the overthrow of the government — "down with dictatorship" and "down with America" — which could hardly have been accomplished by these means. [579]


Copyright © 1994 by the University of Michigan. First published in the USA by the University of Michigan Press, 1994.

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