https://substack.com/@anthealawson
How the west underdevelops the world
The consequences of aid cuts, especially sudden ones, are devastating for communities that are receiving help or medical care. The Lancet predicted that by 2030 the US’s aid cuts alone could result in 14 million deaths - a third of them children under five. Aid organisations and donor agencies are in turmoil trying to work out what to do.
Yet aid is not the whole story. As Global South scholars have shown, and activists have named for decades, the really big money moves in the other direction. The title of Walter Rodney’s 1972 work How Europe Underdeveloped Africa says it all. The poorest countries continue to lose much more to the rich world than they receive in aid, because the rules of the world economy are rigged in favour of richer countries.
The World Bank and IMF have been pushing a neoliberal agenda for decades. They have made loans conditional on spending cuts; privatisation and deregulation; and forcing markets open for foreign companies. Between 2016 and 2021 IMF loan conditions included public spending cuts of nearly $10 billion across just 15 countries, which could have paid for three million nurses, teachers and other frontline workers. This is debt used as an ideological lever.
Then there are the interest repayments on debt, which in 2024 amounted to $415 billion from low- and middle-income countries - next to $180 billion total global aid flows. Massive public pressure from Make Poverty History in 2005 led to G7 countries cancelling $77 billion of debt for 18 countries. But by 2023, after multiple price shocks, developing-country debts had quadrupled to $11.4 trillion, equivalent to 99% of their export earnings.
Currently 3.4 billion people – 40% of the world’s population – live in countries that spend more on interest payments (to rich-country banks) than on health or education, with women disproportionately affected. Governments have no space to cope with surging fuel prices caused by the US’s war on Iran or climate disruption, let alone to create better futures for their populations.
Unequal exchange and illicit financial flows
Another way of looking at South-to-North flows is what some political economists call ‘unequal exchange’. Because global power imbalances and border controls suppress the costs of resources and labour in the Global South, low-income countries have to sell more labour or natural resources to maintain a balance of trade.
By one estimate, high-income countries ‘appropriated’ commodities, labour and land worth more than $10 trillion in Northern prices from Global South countries in 2015 – enough to end extreme poverty 70 times over. Over the period 1990–2015, this appropriation outweighed total aid by a factor of 30 and provided a windfall for the Global North equivalent to more than a quarter of Northern GDP.
Then there’s tax avoidance, which harms rich countries too. Lower-income countries lose at least $46 billion a year in tax revenue to multinational corporations shifting their profits to tax havens, a process with spillover economic effects that multiply the loss by a factor of up to three. Other illicit financial flows include trade mis-invoicing by companies, outright tax evasion and corruption by elites – all of which deny tax revenue that could be spent on public services.
What these methods have in common is the use of tax havens – secrecy jurisdictions, as their opponents prefer to call them – which can hide company ownership. Many are connected to the UK, which oversees a ‘second empire‘ of secrecy jurisdictions to keep the money flowing towards London.
