Home | About Us | Archive | Documents | Campaigns & Issues | Links | Contact Us

      Development Aid for the Developed

      By Manuel Yepe*

      The US government encourages domestic capital flight to poor regions through tax exemptions and other investment incentives for its corporate branches abroad. Such a strategy damages small and medium US producers and angers workers in that country who are affected by the flight of jobs that end up overseas.

      Is this a kind gesture by the superpower in solidarity with the workers in the poor countries of the Third World? Of course it is not.

      Note that, as far as industry and banks in the United States and other Western corporations increase their investments in the Third World, poverty in these regions is growing, rather than decreasing. When transnational capital comes into contact with the rich natural resources of the South –with its low wages, high profits and almost total absence of environmental regulations, taxes, and safety labor provisions– everything changes in the interests of the new “benefactors” from the North.

      As a result, transnational companies are replacing –in those countries where they have not done so yet– the local bourgeoisie, taking over their markets.

      According to the Mexican experience of economic integration with the United States: in a short time the subsidized surplus products of the US agricultural trade cartel are supplying –with their artificially low prices– the local markets thus removing the Mexican producers and traders from those places. Through their agents, they expropriate the best land in these countries through the system of comprehensive crop buying (cash-crop) for export. These are usually monocultures which require lots of pesticides and are leaving less and less space for growing multiple varieties of the organic crops which have fed the local population for centuries.

      It should be clarified that the savings that big corporations obtain from cheap labor in poor countries do not translate into lower prices for consumers in the United States or other places. Corporations do not hire labor in remote areas so that consumers in their countries save money; their goal is to increase their profit margin.

      As a rule, foreign aid from the United States is linked to transnational investment and is designed to subsidize the building of infrastructures that corporations need to operate in the Third World, such as ports, airports, highways and refineries.

      When aid is delivered to governments it comes with many strings attached. Usually, the aid recipient nation is required to give preference in its purchases and sales to US entities; and the acquisition of goods and food for local consumption must give priority to imported goods, so that, together with the debt, they create dependency.

      Much of the aid money goes directly into the personal coffers of corrupt officials in the recipient countries who participate in the negotiations.

      In 1944, he United Nations created the World Bank and the International Monetary Fund (IMF), allegedly responsible for channeling aid to developing nations.

      However, in both organizations, the voting power is determined by the financial contributions of each country. This is why the United States, the largest donor, is the member which truly approves the decisions, assisted by a select group of bankers and officials of the economics ministries from the richest nations.

      When any poor country fails to pay their debts to one of these two institutions, it runs the risk that the IMF will impose a “structural adjustment program” (SAP) by means of which they are forced to grant tax benefits to transnational corporations and reduce social benefits to their own workers.

      The IMF puts pressure on debtor nations to privatize their economies, to sell their mines railways and public services belonging to the state at low prices. They must cut their subsidies for health, education, transport and basic foods; and spend less on the welfare of their people to meet their debt obligations.

      Such is the true story of the “aid for development”.

      *Manuel E. Yepe, is a lawyer, economist and journalist. He is a professor at the Higher Institute of International Relations in Havana. He was Cuba’s ambassador to Romania, general director of the Prensa Latina agency; vice president of the Cuban Institute of Radio and Television; founder and national director of the Technological Information System (TIPS) of the United Nations Program for Development in Cuba, and secretary of the Cuban Movement for the Peace and Sovereignty of the Peoples.


      Back to Article Listing