The gulf between rich and poor in post-Thatcher Britain is shocking. Vast cuts to public services, runaway privatisation, relaxed financial regulation, and the cutting of the top income tax from 83% to 60% (later to 40%), have turned the UK into one of the most unequal nations in the western world.
What is even more shocking, however, is the devastating effect the International Monetary Fund (IMF) and World Bank – the famous Bretton Woods institutions – have had on developing nations. The result of the fateful ‘Washington Consensus’ that created these institutions was the implementation of policies that paved the way for financial globalization, and served to ruin the economies and development of decolonised nations in Africa and elsewhere.
Neocolonialism replaced overt colonialism in the years following the setting of this consensus. Foreign powers were given licence to exploit the natural riches of their former colonies even though their sovereignty over these nations had been rescinded. The Suez Crisis in 1956 was an explosive representation of just how far western countries would go to defend their financial, imperialist interests in the developing world.
The IMF, well known for its support of austerity measures in debt-ridden Europe, has since the consensus promoted free trade and the relaxation of tariff barriers in exchange for developmental loans. As such, the countries of the developing world have, in an effort not to be left behind by the aggressive neoliberal international environment, sought privatisation of their indigenous resources and the lifting of trade barriers in the form of low corporate taxation.
This means that Swiss-based companies such as Glencore can mine mere metres away from poor local communities and give nothing back to the inhabitants. In Zambia, Glencore has ‘invested’ in the country’s abundant copper resources. Copper prices have risen at a staggering incline, but few positive effects have been felt by the local communities or the nation as a whole - quite the reverse, in fact. The Zambian government pays $150 million to run privatised copper mines – privatisation encouraged by the IMF and World Bank- for transnational corporations to ‘invest’ in, but the government only gets $50 million in tax revenues in return. The government loses money, Glencore gains.
Neoliberalism in this form is a mechanism that channels the flow of capital to western nations, to the pockets of (usually) rich white men who are not accountable to any democratic body. If anything, the free trade that libertarians continuously champion creates a system where corporations transcend democracy, at the expense of the people. The IMF and World Bank are happy to assist in the free operation of these transgressive enterprises, but seem not to be concerned with how open they are in reporting their dealings.
The Organisation of Economic Cooperation and Development (OECD) model that ingratiates this form of liberalism into the international system has set the agenda on what constitutes fair taxation, allowing transnational corporations to defend their capital base in a way national authorities simply cannot. Governments are forced into setting miniscule corporate tax rates in order to fulfil IMF criterion. Developing countries and their governments are the ultimate victims of a globalised set of ideals that pays no recognition to the mass inequalities it produces.
The developing world is being devastatingly exploited by transnational corporations. And it’s exploitation with the backing of western-created institutions; the institutions that now run our world.
Neoliberalism is neocolonialism. They are one and the same.