July 2004: Empowering the Third World

Poor nations can resist neocolonialism and stay independent
July 1, 2004

Economic intimidation is one of the main obstacles to the self-empowerment of Third World countries. Such intimidation, like beauty, is often in the eye of the beholder. It is not necessary for a superpower like the United States to do anything of an aggressive nature, or to launch an economic attack, or to withhold its immense purchasing power in order to cast a threatening shadow over a developing nation. The mere hint that it might do so can be cause for alarm. (Of course, the U.S. and other large industrialized countries sometimes actually do these things, but then we are dealing with economic terrorism rather than intimidation.)

Barring the outright corruption of their officials, the governments of poor countries are being cowed by rich-country intimidation when they adopt policies that are clearly detrimental to the well-being of most of their citizens. When they privatize or cut public services, for example, or grow a single crop for export rather than food for their own people, they do so to appease Western governments and investors—and to qualify for World Bank or IMF loans that will only mire them deeper in debt and dependence.

It is possible to resist this neo-colonialism, but to do so successfully a developing country must walk a thin line between strategic defiance and violent protest. Any attacks on Western holdings or personnel can be denounced as terrorism and provide a superpower with a pretext for a military response, or even an invasion, as we have seen in Afghanistan and Iraq. Fortunately, before resorting to such military aggression, even a nation as powerful as the U.S. must take account of such factors as the public opinion of its own citizens, its reputation in the global community, and the enormous economic and political costs of war. With a measured and carefully planned strategy for reclaiming its economic sovereignty, a developing nation could take advantage of these constraints on the U.S. and avert an invasion.

Cuba exemplifies both a courageous and foolhardy defiance of U.S. hegemony. Immediately after winning his revolution, Fidel Castro triumphantly nationalized several mostly American businesses and confiscated all foreign-owned real estate. He was lucky to get away with it. Only the countervailing power of the Soviet Union at the time and the inability of the U.S. government to respond quickly—due mostly to the speed of events in Cuba—saved the revolution.

But then, after this exercise in foolhardiness, the Cubans rolled up their sleeves and got to work. Despite a crippling U.S. embargo, they improved their health care system and their schools to such an extent that they now surpass the U.S. in literacy and low incidence of infant mortality. Even when the Soviet Union collapsed and denied Cuba its substantial foreign aid and a sure market for its sugar exports, the Cubans learned to grow food in back-yards, empty lots and rooftops. Nobody starved, and the island didn’t have to go begging for loans from the World Bank or the IMF.

Many Americans, of course, prodded by the conservative Cuban expatriates in Florida, have been calling for an invasion of the island, but it is now very unlikely to happen because no plausible excuse for such an attack can be made. Cuba shows that U.S. power can be resisted if it is done carefully and intelligently, as well as courageously.

The general principles for such a resistance by the leadership of developing nations with natural resources and some infrastructure can be listed as a series of DOs and DON’Ts:

1 DO feed, clothe and shelter your people as your main priority instead of exporting the resources necessary for these basic services.

2 DON’T let yourself be pressured into growing the crops the global economy wants (cotton, coffee, bananas, flowers, etc.) instead of what your people need for a decent standard of living.

3 DON’T expropriate foreign assets crudely, precipitously, and without compensation. You can nationalize land and resources without denying outside banks and corporations some return on their investments. (Eventually, you may become completely self-sufficient financially, but in the meantime it would be unwise to forgo all foreign investment.)

4 DO control your own currency. The creation of money, taxation, and income distribution (even price controls, if needed) are all your responsibility, not that of the IMF or World Bank.

5 DON’T, however, make the mistake of creating so much new money that you trigger runaway inflation.

6 DO be prepared to make both short-term and long-term sacrifices. The goal of economic independence will not be attained without some difficulties.

7 DON’T, however, demand disproportionate sacrifice from any class of your society. Make sure that all share equally in both the pain and the gain.

8 DO keep in mind that only a natural disaster, such as a prolonged drought or a devastating hurricane, can excuse any part of your population falling even temporarily into poverty.

9 DON’T seek or accept loans from commercial banks, foreign governments—and especially not from the World Bank or IMF. (If you feel you absolutely must borrow, keep such loans to the barest minimum.)

10 DON’T try to repay any part of the principal of your national debt, which will decline on its own as your economy grows. The national debts of all countries are virtually unpayable, anyway. Servicing your debt, of course (paying the interest) is unavoidable if you want to maintain your country’s international credit rating.

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These are some of the basic pro-active steps that can be taken unilaterally by any country that has a minimal level of resources and infrastructure—and by which it can pull itself up by its own bootstraps without mortgaging its resources and people.


(Pierre Parisien—[email protected]  —is a Montreal-based economic analyst and commentator.)