Epilogue

Global South: What’s in a Name?

In 1983 the members of the Brandt Commission released a second report. Common Crisis North-South: Cooperation for World Recovery was just as severe in its diagnosis of the world economy as the first report but notably less optimistic about a cure. “The [first] Commission foresaw the world community in the 1980s facing much greater danger than at any time since the Second World War,” it began. “The prospects are now even darker.”¹

At the Cancún summit of October 1981, world leaders had declared that they would revisit the issue of global negotiations at the next United Nations General Assembly. “Now, more than a year later, there is little sign of action. The North-South dialogue remains much where it was when the Commission [first] reported.” Unlike the first Brandt Report—the similarly urgent North-South: A Programme for Survival—the 1983 follow-up focused on what might be done immediately. “We insist that longer-term measures of reform will be essential to the international financial and trading system, without which recovery and growth could not be sustained,” its authors declared. “But our measures constitute the minimum emergency action which we believe nations must now take together.”²

By the time the second Brandt Report went to press, the South’s drive to establish a New International Economic Order (NIEO) was finished. The global debt crisis of the 1980s also meant the end of the South as a diplomatic force—or at least one that would be taken seriously by the US government and its foreign policy apparatus. Indeed, a search for the term New International Economic Order in available Reagan administration documents turns up nothing after 1983. By 1984, two years into the debt crisis, all mentions of North-South or North-South dialogue were in reference to the two Koreas. According to Google N-Gram, which measures a phrase’s frequency of use over time, New International Economic Order skyrocketed after 1970, peaked in 1980, and plummeted after 1982. The term North-South dialogue also rose, fell and disappeared during these years, although overall, its frequency in print was less common than NIEO.

Meanwhile, the South as a category of analysis was about to undergo a major expansion. Beginning in the late 1990s, the term global South took off in political and academic discourse. Today, many liberals embrace the term as a politically correct or up-to-date alternative to Third World, which is more or less in line with the first (1980) Brandt Report’s definition of North and South: “although neither is a uniform or permanent grouping, ‘North’ and ‘South are broadly synonymous with ‘rich’ and ‘poor,’ ‘developed’ and ‘developing.’ ”³ In academia and activism, however, the global South accounts for a lot more intellectual work than the South ever did. Some political scientists still use the old term South when speaking of the Group of 77 countries acting in the UN, where the state apparatus issues its decree (yea or nay). For scholars working on transnational issues such as human rights, health, labor, and immigration, global South can denote a complex network of relationships in which the state is one of many actors (and not always the most significant one). Global South is also a major analytic concept for the multidisciplinary field of postcolonial studies, where scholars from sociology and anthropology to literary theory emphasize its fluidity and emancipatory potential for subaltern populations, including some residing in the North. “[The] ‘Global South’ is not an entity that exists per se, but has to be understood as something that is created, imagined, invented, maintained, and recreated by the ever-changing and never fixed status positions of social actors and institutions,” explains the author of a 2017 article in the journal Global South.⁴ What links these more inclusive understandings of the global South is their dethroning of the state as the central actor in politics and economics. If the South of the 1970s was a collection of poor states seeking power in the global economy, the global South of today comprises the poor peoples and cultures marginalized by the global economy. More often than not, the state is an agent of repression, not liberation.

The decline of the South in the 1980s followed by the rise of the global South in the 1990s and 2000s was no coincidence. Rather, the fall of an old state-centric South in favor of a diverse, transnational global South could not have occurred without the worldwide embrace of free markets and economic integration of the last few decades. Neoliberal globalization spread the market to every country, but it did not do so equally. Nor was it the case that each country that opened up its economy after 1980 did well, short or long term. Nevertheless, neoliberal globalization created new inequalities within the South and beyond, ones that called into question the old political and economic utility of that category.

Neoliberal Globalization: Some Major Developments

The late 1980s and 1990s saw a proliferation of both regional and global trade liberalization, if not reform. Part of this came about due to the failure of participants in the General Agreement on Tariffs and Trade (GATT) to reach a decision in the Uruguay round, which began in 1982 but soon deadlocked. In 1988 the United States and Canada signed a major free-trade agreement. With Mexico’s addition a few years later, the 1994 North American Free Trade Agreement (NAFTA) created the largest free market in the world, eliminating most tariffs and capital restrictions among the three countries. At the same time, the twelve members of the European Communities voted to modernize their own trade and monetary relations. The 1992 Maastricht Treaty consolidated the European Communities into the European Union, opening borders, lowering tariffs, and creating a common currency for its member states.

The larger trading world was moving in an even more ambitious direction. The 1994 Marrakesh agreement formally ended the Uruguay round, the GATT’s last. Finally, after nearly fifty years as the lesser sibling of the International Monetary Fund and the World Bank, in 1996 the ad hoc, informal GATT was replaced by the 123-member World Trade Organization (WTO). The United States was a key sponsor of the WTO and almost immediately advocated the addition of its new favorite trading partner, the People’s Republic of China, which joined in December 2001 with Washington’s imprimatur.

The 1990s was a high point for market-friendly reforms within the United States too. At home, Congress and the Clinton administration cut taxes and financial red tape, most notably the 1929 Glass-Steagall Act separating commercial and investment banking. Unlike Ronald Reagan, Bill Clinton balanced the budget—he even left a surplus—and made good on his promise to “end welfare as we know it” through the 1996 Welfare Reform Act.

The most revolutionary developments were unplanned. Under Reagan, the United States and the Soviet Union entered a so-called second Cold War. No one expected the collapse of communism in eastern Europe between 1989 and 1993, but in postcommunist Russia oligarchic capitalism easily dominated the new trappings of liberal democracy. Even more consequential was China’s rise. In 1997, when negotiations to include China in the WTO began, the Clinton administration had all the leverage, and the Chinese had little. The deal that brought China into the WTO looked like an unqualified win for the United States: Beijing had to conform to the standards of the WTO, where Washington was primus inter pares. Overestimating the US economy and underestimating China’s, US policymakers bestowed on China the same exemptions and preferences as any other developing country joining the WTO. Today, US politicians and corporations complain that China is cheating at the WTO, but in many cases, the Chinese are simply taking advantage of rules the United States wrote or approved two decades earlier.

Equally unexpected from Washington’s perspective was the rise of China’s political and economic influence in low-income countries. Previously, the United States worried about the Soviet development model as an inspiration for Third World leaders. Today, China has replaced Russia as the United States’ greatest economic and diplomatic challenge, in both real terms (foreign investment and development aid) and model forms (illiberal state capitalism).

Neoliberal Globalization’s Winners

Who benefited from the forty years of neoliberal globalization that came in the NIEO’s wake? Inequality scholar and former World Bank head economist Branko Milanovic has crunched the numbers, and the results are simpler than one might expect: “[One] of the key issues of the current globalization process [is] the diverging economic trajectories of people in the old rich world versus those in resurgent Asia. In short: the great winners have been the Asian poor and middle classes; the great losers, the lower middle classes of the rich world.”⁵

First, consider the “great winners.” Market reforms and the removal of barriers to trade and capital in rich and poor countries alike encouraged the growth of a new global middle class, especially in large countries such as India and China. On the whole, this has resulted in a relative convergence of global incomes. From this, one might conclude that neoliberal globalization achieved what the NIEO desired: the reduction of inequality, especially between the rich North and the poor South. Removing China or India from the equation, however, leaves a different impression: “Up to 2000, China was the great income equalizer; after 2000, India joined it in playing this role. These countries first kept the increase in global inequality in check and then contributed to reducing the overall level of inequality.”⁶ Without these two countries’ gains, global inequality in this period actually increased; with them, global inequality decreased most significantly after 2008, which means that stagnation in the rich countries since the Great Recession also played an important role (discussed in more detail later). Further, there are few accurate data on top incomes in most poor countries, in part because Northern banks and governments have been such eager facilitators in helping the global rich hide income and assets abroad.⁷

Globalization advocates also point to the success of the so-called Asian Tigers: Hong Kong, Singapore, South Korea, and Taiwan. Despite a regional financial crisis in 1997 caused by overlending and dollar-arbitrage schemes (encouraged through low US interest rates), their export-based economies recovered quickly. For nearly three decades now, the World Bank has considered all four Asian Tigers to be high-income or developed economies. South Korea and Taiwan have strong, liberal democratic systems, while Singapore and Hong Kong are (for different reasons) essentially one-party states with an independent (for the most part) civil service. All, however, have mixed economies, broad social protections for workers, and governments and publics in favor of open global trade.⁸

Using data from India, China, and the United States, Milanovic estimates that inequality between nations “probably reached its highest point” in 1970.⁹ Poor countries experienced that inequality acutely and disproportionately during the world food crisis of 1972–74. The 1974 NIEO centered on this injustice in its assertion that “the developing countries, which constitute 70 per cent of the world’s population, account for only 30 per cent of the world’s income.” At the same time inequality between rich and poor countries peaked, inequality within the United States and western Europe sank to its lowest point since the beginning of the Great Depression. In 1928 the top 10 percent of US earners (families with annual incomes of at least $135,000) captured half of all national income. During the New Deal and World War II, their share declined to about 32 percent, where it stayed through the 1970s.¹⁰

This was about to change. In 1982—a banner year for free-market reformers in the United States due to the Kemp-Roth tax bill—income distribution began a steady shift upward. By 2007—one year before the financial crisis and the Great Recession—the top 10 percent (the upper middle class and above) once again claimed half of all national income.¹¹ (They retain this share today.) Yet even the well-off in the United States have become much more unequal. In a major paper titled “Striking It Richer,” economist Emmanuel Saez analyzed income growth and distribution among the lucky top 10 percent of US earners from 1928 to the present. As of 2018, the top 1 percent (income above $480,000) takes in a quarter of all income—another return to pre–New Deal levels. The top 0.01 percent has done even better. From FDR to Jimmy Carter, their share remained at 1 percent, down from about 5 percent in 1928. When Barack Obama took office in 2009, these multimillionaires and billionaires raked in an astonishing 6 percent of all national income, right about where it sits today.¹² (It is worth noting that at least half of that income came from returns on investments, or capital gains, which are taxed at a substantially lower rate than market income.)

Neoliberal Globalization’s Losers

Now, consider the “great losers.” The economic gains during globalization’s high point were, for most Americans, meager. From 1993 to 2018, average real incomes per family in the United States grew by 30 percent—basically, just enough to keep up with consumer prices. However, if one removes the top 1 percent, growth in average real incomes for the other 99 percent drops to 18.3 percent. Meanwhile, the top 1 percent saw their incomes grow by an astonishing 100.5 percent through the Clinton, Bush, and Obama years. Saez writes: “This implies that top 1 percent incomes captured 48% of the overall economic growth of real incomes per family over the period 1993–2018.”¹³ During this same period, skyrocketing tuition costs made it impossible for most young Americans to earn college degrees without taking on massive loans at usurious rates. Along with strong unions (whose membership has declined precipitously), affordable and accessible higher education was an essential equalizing force in the postwar years. Today, the large majority of young Americans—the best educated and the most indebted in US history—will be the first generation not to outearn their parents.

Since the 1990s, centrist Democrats and Republicans have advocated grants for job retraining and other “trade adjustment assistance” for Americans in sectors affected by outsourcing and automation. Most studies have concluded that the benefits are modest, at best; at worst, such programs insult or alienate the people they are trying to help.¹⁴ Further, US workers’ incomes may have stagnated, but the workers themselves have not. In fact, from 1979 to 2018, net productivity among US workers rose by an impressive 69.6 percent. During the same period, average CEO compensation grew by 940 percent, while typical employee compensation (or hourly pay) rose by only 12 percent. Put simply, “although Americans are working more productively than ever, the fruits of their labors have primarily accrued to those at the top and to corporate profits.”¹⁵

Facing low wages, regressive taxes, unresponsive bureaucracies, expensive and employer-dependent health care, and endless war in the Middle East, it is no wonder so many Americans now see themselves—and, to an extent, their country—as victims of globalization rather than its beneficiary and steward. This is the sad irony of US foreign policy’s defeat of the global South’s NIEO in the 1970s. Again, Milanovic states: “Politicians in the West who pushed for greater reliance on markets in their own economies and the world after the Reagan-Thatcher revolution could hardly have expected that the much vaunted globalization would fail to deliver palpable benefits to the majority of their citizens—that is, precisely to those whom they were trying to convince of the advantages of neoliberal policies compared with more protectionist welfare regimes.”¹⁶ The North’s reconstitution of the world order along global and domestic free-market principles in the 1980s and beyond increased the costs of US primacy abroad while leaving an economy at home where the benefits are overwhelmingly redistributed upward, toward globalization’s main beneficiaries. Instead of diffusing global responsibility, US policy made the American household the world’s buyer of last resort. The result at home was an unsustainable bargain of cheap consumer goods and credit in lieu of wage increases, universal health care, and affordable housing and higher education. The opportunity costs of these policies would be made apparent in the 2007–10 subprime mortgage crisis, from which the American middle class has yet to recover.

Plus ça Change? The Enduring Inequality of Food

Despite slow growth and rising inequality in rich countries—and, equally important, an impressive reduction of poverty in poor ones (especially in Asia)—we still live in a North-South world. According to Milanovic, “The world where location has the most influence on one’s lifetime income is still the world we live in.” At its most extreme, just being born in the United States rather than in the Congo multiplies a person’s income by ninety-three.¹⁷ Though the difference is smaller for citizens in Mexico, for example, an American whose income is in the bottom tenth is still better off in significant ways than his or her Mexican counterpart. Typically, this has encouraged neoliberal immigration reform in rich countries (here, Canada leads the way), where wealthy foreigners are admitted quickly and legally through real estate and other investments.

Food is another example of how neoliberal globalization has failed the world’s poor. During the world food crisis of 1972–74, high oil prices collided with cuts in US foreign aid, rich-country protectionism, and the reorganization of US agriculture to meet the needs of markets rather than people. After falling to less than $150 a bushel in 1977–78 from a high of about $270 at the height of the 1974 crisis, the average price of rice, wheat, and cereals had jumped back to near-crisis levels of $250 by the middle of 1981.¹⁸

By the mid-1980s, food prices had readjusted and entered another period of relative stability, although the stratification of food production increased in new ways. In the 1980s and 1990s a second Green Revolution in Asia greatly increased agricultural productivity and security there, but most of Africa and the Middle East made no such advances and still relied on imports for more than half their food needs. US dominance in the production of wheat, corn, and soybeans continued unabated, as did poor countries’ vulnerability to decisions made by major food and oil exporters. Without the global food strategy promised by Henry Kissinger and others at the World Food Conference, there was a virtual repetition of the 1972–74 crisis in 2007–8 and 2010–12. Once again, a combination of surging energy and fertilizer prices, a falling dollar, and overdependence on US reserves (this time, burnt up as biofuel in gas-guzzling SUVs) caused global food prices to skyrocket, placing the world (in the words of World Bank president Robert Zoellick) “one shock away from a full-blown [food] crisis.”¹⁹

As in 1972–74, the term world food crisis was misleading. In the United States, where much of the world’s food is grown, grocery store prices hardly budged. Consumers in food-importing developing countries were not so lucky: in 2007 alone, their import bills jumped by 25 percent. The situation was especially dire in Africa and the Middle East, where individuals spend upward of 75 percent of their income on food (more than half of which is imported from abroad).²⁰ Put simply, many millions of poor people in poor countries could not afford to buy or grow their own food.

Expensive oil was one obvious culprit, but experts agreed that the behavior of rich countries, especially the United States, was decisive in turning a food shortage into a crisis.²¹ The jump in oil prices following the US invasion of Iraq in 2003 spurred Western governments’ investment in food-based biofuels (especially ethanol, made from corn), and US car companies such as Ford and General Motors promoted new “flex-fuel” versions of their popular but gas-guzzling SUVs as both eco- and wallet-friendly. Given the generous government subsidies and built-in demand, many US farmers ditched less profitable crops to grow corn exclusively for the ethanol market. World cereal stocks sank to lows not seen since 1980, while the global price of corn doubled.²²

At a United Nations food summit in June 2008, US officials denied responsibility for the consequences of US food and energy policies, insisting that only 2 to 3 percent of the rise in food prices could be attributed to biofuels. Jacques Diouf, head of the UN Food and Agriculture Organization, expressed his frustration at the US government’s lack of awareness and accountability: “Nobody understands how $11 to $12 billion a year subsidies [from the US Congress] in 2006 and protective tariff policies have the effect of diverting 100 million tons of cereals from human consumption, mostly to satisfy the thirst for fuel for vehicles.”²³

This time, structural change was not even considered. Instead, the United States preached the ecological benefits of fueling large cars with “renewable” food instead of oil (as if the two could be separated), while Saudi Arabia and other oil-rich Gulf countries continued their appalling land-grabbing practices in poor but fertile countries (especially in Africa). This sorry state of affairs is an enduring legacy of US foreign policy in the 1970s, when the nation failed to use its primacy in the service of world order by relinquishing some of it.