In the weeks after a disaster like the Haiti earthquake, journalists always search for an upbeat twist to the tale. You know it by now – the baby found alive after a week under wreckage. But this time, a shaft of light has parted the rubble and the corpses and the unshakeable grief that could last for years. In the middle of the Haitian people’s nightmare, a system that has kept hundreds of millions like them poor and broken might just have shown its first fracture.
To understand what has happened, you have to delve into a long-suppressed history – one you are not supposed to hear. Since the 1970s, we have been told that the gospel of the Free Market has rolled out across the world because the People demand it. We have been informed that free elections will lead ineluctably to people choosing to roll back the state, privatise the essentials of life, and leave the rich to work their magic for us all. We have seen these trends wash across the world because ordinary people believe they offer the best possible system.
There’s just one snag: it’s not true. In reality, this gospel has proved impossible to impose in any democracy. Few politicians have believed in its core tenets more than Ronald Reagan and Margaret Thatcher – yet at the end of their long terms, after bitter battles, the proportion of GDP spent by the state remained the same. Why? Because these doctrines are extremely unpopular, and wherever they are tried, they are fiercely resisted. There are majorities in every free country for a mixed economy, where markets are counter-balanced by a strong and active state.
The gospel spread across the poor world because their governments were given no choice. In her masterpiece The Shock Doctrine, Naomi Klein shows how these policies were forced on the world’s poor against their will. Sometimes rich governments did it simply by killing the elected leaders and installing a servile dictator, as in Chile. Usually the methods were more subtle.
One of the most marked came in the form of “loans” from the International Monetary Fund (IMF) and the World Bank. The IMF would approach poor countries and offer them desperately needed cash. But from the 1970s on, they would, in return, require the countries to introduce “structural adjustments” to their economy. The medicine was always the same: end all subsidies for the poor, slash state spending on health and education, deregulate your financial sector, throw your markets open.
Here’s a typical example of what happened next. In Malawi, the country’s soil had become badly depleted, so the government decided to subsidise fertiliser for farmers. When the IMF and World Bank came in, they called this “a market distortion”, and ordered Malawi to stop at once. They did. So the country’s crops failed, and famine scythed through the population. Tens of thousands starved to death. The Malawian government eventually listened to the cries of its people, kicked out the IMF, and reintroduced the subsidies – and the famine stopped that year. The country is now an exporter of food again.
When people are living so close to the edge, even small increases in prices can break them. The IMF systematically disregards the fact that every country that has lifted itself out of poverty has done the opposite of its commands. For example, South Korea went from poverty to plenty in just two generations by protecting and heavily subsiding its industries and jacking up state subsidies – to the IMF’s horror.
Even Professor Jeffrey Sachs – one of their former lackeys – calls the IMF “the Typhoid Mary of emerging markets, spreading recessions in country after country”. So why do they carry on like this? Primarily, it is because IMF programmes work very well – for the rich. They ensure that we get access to the cheapest possible labour and can help ourselves to the glistening resources that inexplicably ended up under their soil.