5 Poverty and the political economy of development Poverty is aa inherently political subject, Not only does i define the extent to which one hat opportunity or aecest to material resources, it alo defines relative power sta0us, The poor are invariably the dsempowered: they are the least able to alter their circumstances, Where they try to do so, they invariably cenfromt the resistance of vested interest, employed in a range of subtle and often unsubile says. If poverty is about power, then i oes to the very heart of politics Broadening out from simple ~ but eritieally important ~ poverty, developing count have traditionally been defined by their poor economic indicators. Finessing this, they have since been divided into least developed, less developed and developing countries, and finally those morc thax 100 countries that have risen te global per capita middle income, some of which now have overlap with OBGD status (eg. Braz and Mexice). While these e reflect a range of political syles, only some could be described as substantively de the others cperate limited democracies or authoritarian politcal systems Regardless of these political ypes, a large proportion of the world's populatin to live in pewerty. How many are living in poverty depends on how the defined. For sor ity meane living on SUSI a day or less while conmitule extreme poverty, with a ‘poverty line’ set at SUS2 ar SUS2.50. surement also needs ta incinde the cnst of living in w partic services might be supplied fiecly or subsidised by’ a central government foods and services); and, not least, how incom: is distributed within that World Bank's muki-dimeasional astessment alo ineludes aceess to education, health care housing, employment, personal security and 90 an, as well ax income (World Bank 20160:30-4). Tachuding these factors more than doubles the world’s poverty nate, 0 billion people (World Bark 2016a:4 In 2016 the World Bank updated its monetary standard for extreme poverty, measuring it at or below SUUS1.90 per person per day, with even this being a comporite figure based fon perceived poverty levels in a particular group of countries. Moderate povesty was mea sured on an income of $3.10. There are a number of measurements of poverty, one of ‘which isthe relative level of poverty ~ poverty av distribution of income within a society and absclute poverty, which is an astumed amount below which a person would be unable s meet the basic daily needs, sometimes measured in calorific intake of between 2,000 andl 2,500 calories a day. An carly (1995) study showed that the poorest people only consumed about 1,400 calories per day (Deaton and Subramanian: 1996). "Tis is, however, an inade uate mcasurement, given it does not speak to the wariety of food sources required to remain healthy, which are usually nite, nor other bask=ieeds such as sheker anc access to health care and education, the latter two of which in parscalar tend 10 be neglected. MorPoverty andthe coe of dacisoment 65 plete measurements of poverty extrapolate on some of the implications of lini income or food intake, and include infant and maternal mortality rates, life expevtane racy and gender inequality and insecure or precarious livelihoods (World Burk 201 Ga Yu a buwis of measuring poverty by income, sub-Saharan Africa remained the world's rerall poorest region a it has been since at least 1990, along wth Uabekistan, South Asia w Sri Lanka), Laos, Cambodia and Timor-Leste. China, Latin America and Pali ove behind. By 2015 the number of people living in absolute paverty worker lion people, or a lite under 10 per cent of the works population of some ition (World Bank 2016a:3 The reduct monetary, if not wich wn ST per cent in 1990 was ange part due to es of China, with absolute poverty at an historically low 6.5 per cent. China's economic success has raised the spectre of an akemative to the dominant neo-Uheral paradigm, dubbed the Beijing Consensus idiseussed in Chapter 8) Alw contributing to the global reduction of pow was India, where poverty as ove 21 per cent, although South A nd a thind of the work!'s poo ‘World Bunk 201634 Regardless of the varied reasons for specif success or failures, a number of countries ~ or their regi ave identified polviral models as appropriate t cir level of economic development. They have done 20 om the grounds that democracy is efficient, that it permirs social division especially slong ethic lines), tha it requires the consistency of economic planning which comes from a restrictive polieal sytem, that eh matrrial neecs of the people take precedence over their political needs or, in some cases, competitive civilian government lacks the a state adequately (Stockton etal Thus, the legitimacy of restrictive poli ine to be adopted by the gov of states that claim the efficacy of au political models (f they claims all, In sore cases, restrictive — and authoritarian — regimes arc simply that ervice being paid to a rrtum to ‘democracy’ ar some fumare time. Where th of democracy or civil and political rights scanied, or revived, it i Jaimed that the time wil be ripe or that only after the establishment of prerequisite omic success, social ‘order’ of something similar (eg. Thailand's stance afer its itary coup) These used to be an argument, popular in the 197 that the more deve ounrries engaged with developed countries in track they would become ani the more dependent they would become on such cviate Cher growing poverty: This, then, was claimed to create in which developing countries were locked into declining economic relationship with d horated upon in what becan known as ‘dependency theory’ ough compelling atthe time, this has since proved to be party, if not completely, incorreet aad, where they have become in relative terms, that hae often been die cher than simple trade alters Confit, poliieal invability, poor governance, corruption, natural disaer and low levels o fnmitutional capacity have a cf pparent inability to tra a period of widespread and political maa itis ve Chat, while some developing ad, particularly in th tury, many more have not, whether ‘oiged terms or relative 10 1 in wealth in the (expanding) OECD. Not sap between the richest rest growa, these has been a farther concentration of wealdh among ecanornic tex in both developed and developing countries, with the richest citizens of poor countries of66 Paty and the sony of deelopen counted among the worl’ sapertich, OF the super-rich, the world's nine richest people owned more wealth than the world’s poorest 4 billiom, while 1 per cent of the globa population has as moch wealth asthe remaining °9 per cent Jacobs 2018 As a remit, per capita GDP or average incomes have become all but meaningless i iundersanding how poverty works relative to wealth, More important are median incomes ‘and the proportion of the population below a (variously defined) poverty line, set by the World Bank at $US1.25 per day. Fully comes the question of the polical relationship between wealth aad po ‘between countries, and how this can be sce The political economy of development Between 1960 and 2015, the global economy grew fron: about $3,700 per capita t {$10,000 in 2010 U.S, dollar terms. But, broken down by region over the tame period, th countries now in the Euroza om just under $11,000 to over $38,000, while North America rose from $17,0 By way of contrast, East Asia and the Paci sxcluding high-income countries such as Japan) rose from $287 to $5,300 while indebted poor countries rose from $512 t0 just $832. ‘The least developed countries ge erally rove to a similar $890, if with no baseline figure (World Bank 2017), perhaps indi cating the correlation beoween the lowest levels of development and indebtedues. Thete is no doubt that some national economies have progressed at remark over the past several decades, particularly Japan and the ‘Asian Tigers’ (ee Vou! | the later, and more recently China, Brazil and India (James 2008; Sorensen 2016: These economic advances have contributed to an overall reduction in global wealth inequality, although perhaps making even more stark the situation of thowe countries that continue to be ‘eft behing That some countries have developed quickly, they have done so by becoming actor for the global economy’ and, increasingly, financial centres, while the economies of th broadly defined “Wes° five cversfed into services, including finance and globalised investments, This was all given a great push by the global move towards the deregulation of ‘econcrnies, which started in the early 1980s with the adheot of dhe neo-liberal econo paradigm The problem with this grasping for greater prosperity by the West and a select group of cother countries has been that vast swathes of the developing world were largely or entieh left ou, Some, in particular, fared worse than others, offen duc to war ~ or creating the ‘conditions that led to war, which in turn diminished economic oppartunity ~ while others simply lacked access to the ails, capital or resources needed to jin in dhe global ceonomi party. Where a countr F oanaged ta ‘gatecrash its way in, this was often at a hag ‘Cost to its environment, with lost access to potable water; increased air and sol pollution ‘and deserifcation. South Korea, Taiwan and China have been marked examples of the ‘exironmertal costs of rap inchstrialsation Significantly, many of the countries left out were blighted by exceptonally poor systems cof governance, corruption and vast gull in wealth between tiny, Luncary-loving elites and th ‘overwhelming majority of the impoverished, Many were also client states for world powers particularly until the end of the Colt War around 1991, wile many others ‘hosted’ peox ‘wats oF other form of military or politcal imtervention, which precluded transparcax and seenntable govemaneeGreater riches, greater gap Since World War II, which presaged decoloniation and the broadly conceived develop ment paradigro, globall wealth has increased while global dstribacion of that wealth became reasingly unequal. In understanding the nature of wealth, several factors arise which dance its meaning, including: the purchasing parity power of « given unit af currency oss markets; wealth distribution within sates; and the reiability of data. In short, i global distribution ane. Yet the general indicators continue to show broadly consstene trends (Nutzens: id Speich 201 Between 2009 and 201 tof the total in world accounted for | per al inequality was at is extreme in a century, with the world’s wealthiest 1 ding $USH10 trillion, just over half the total wealth on the planet (Credit Su More positively, global poverty declined between 2000 and 2005 by almost half Taequalty:org 2016). The problem is that poverty’ is a vague measurement, fn this cas defined as having ant income of les chan $US2 per day. More positively, the iurmber of pple in the ‘middle income” bracket of between $10-§20 a day als his time (Kersley and Keutsontis 2016) The ware bas never seen great mn material deprivation. The fruite of human creativi seartphones to stem-cell = ‘ontinue to grow, But such broad con 1 norms of progrest cloak aw unequally is opportunites are distributed: fr instance lf the world’s incom owt berween 1988 and 2011 was appropriated by tenth a in rich countries, there i a. growing lfe-exps ‘While thow at the boom of the glbbal economy may have inpproved in absokite terms, growth remains unequally shared, with 71 per cent of the world’s population sharing just 5 cent ofits wealth, while the individuals (overwhelm 4 developed coun: ) who own 84.6 per cent of the globe's weal cous +s population: ov than 1 per cent of all the wealth, while the top 10 pr wa 89 per cent of global rath assets (Rersley and Koutsoukis 2016 Importantly, too, there are considerable regional va n inequality, with the Mididle East ~ where 10 per cent of the population hold 61 per cent of the region wealth — registering the highest level af inequality. India is next, with 10 per cent holding ber cent of that country’s wealth, ne as Brazil. Sub-Saharan Africa fllows doxe Behind, with 10 per eent of the population hod er cent of the region's wealth Alvaredo et al. 201835). India wienesaed the greatest rise in inequality, most notably since reflecting a scries of deregulatory measures put in place since the 1990s but inereas since 2004, while other regions increased at a slower rate (Alvanedo et al. 2018;71 lustrate the inherendly unequal character of de-restriced capitals Large riscs in top-wealth shares have ... been experienced in China and Rusia Jowing their transitions from communism to more capitalist economics ‘The top 1% wealth share doubled in both China and Russia between 1995 and 2015, fom 1 10% and from 22% to 49%, reqpe68 Per a the economy of de The neo-liberal economic paradigm consists in summary, of che IMF's ‘structaral adj nent policy of reduced ment spending, reduced taxation and reduced debt thru higher debt repayment, following the developinig-country ‘debt criss’ which culminatrd on the 1970s and "8k but which continues, in less alarmist form, to the pres As countries decolonised, they either cued debts to ther former colonial masters und the terms of decolonisation or borrowed to establish basic state infrastructure that the li ation srugde had oftcn dismantled or destroyed, Almost $60 billion was lot tn countries at high interest rates (14 per cent) with lite prospec: of their being able to repay it consequence, debt rapidly increased, offen ta despotic or corrupt governments Power as newly independent countriet buckled under the competing pressures of "ation formation (Shah 2007). In many cases, this debe was syphoned off to corrupt lead heir cronies and complict international business pariners as illogimaie’ debt or cha known as ‘odinas debt (Shah 2007). Such debt was improperly or legally lent and chad ‘not, under normal egal principles, be the subject of repayment or, i tis it should be ¢ subject of limited oF mocified repayment (Howse 200% Dung the 1980s, the global debt crisis escalated a8 surplus investment fans were made available subsequent to the massive hike in world cil prices in the 1970s, ‘The iarve wa thrown into stack relief when Mexico announced, in 1982, that t could not meet its inee national deb-service payments. Remedial action taken by donor countries saved of financial disaster including the spread of debt defauts. Bue the flowon effects for other dcrcloping countries were much fess positive, with ecemomic uplifi for many of ther ite ther ceasing or being reversed (Sachs et al. 1988:233-234) In many counties, excessive debt burdens and, in particular, ‘odions debt’ remained profound intenge al burden sifling economic development. Many devely tries offen a tious deb’, far example Indenesia (to the tune uf SUS! 38 billon, 90 per cent of GI 7 billion, around three-quarters ofits total debt ca mitment) and Nicaragua debt’ ran at a level five times the country’s GDF (Mandel quoted in Sha 204 Yer the increas i noted above has corresponded casely to the gical decline of public capita (p minus pubic debt). “This [decline in public capital] arguably limits governmen egulate the economy, rediribue income, anel mics gate rising inequality’, according to AWaredo et al. (018.11), Fareptions decline in pubbec capital wore in resource-rich (predominandly eikrich) countries with are sovereign wealth funds, sich as Norway at the upper end of the economic spectrum bes ao inchuding Timor-Leste towards the lower ene. The question, chen, for mary developing ‘ounetics was how 10 escape the cycle of poverty, which returns to the earler the states limiting political space in onder to maximise focus on economic activity in a pre Developmentalism In response to developmental challenges, some countries have engaged in ‘devele opmentaliem’, or state co ion on and intervention ia economic direction and sometimes, investment, This was particularly notable in the infrastructurceled economic development of Japan and the Asian Tigers, and im the 2lst century was the model employed by Chi Developracmtaliem ean be understood as focusing the state and its institutions on mic development, including state ownership of oF investment in key industrics lsand te ecnany of deelapment capital investment is scaree op perceived as The partnership between the state and capital to promote particular industries runs contraty to the neo-liberal nation that free mackets end tighly restricted government intervention promote greater economic perlor mance (cee Ding 2017 for discussion of the Chinese developmentalist model). State inter vention in and support fr industries was adopted, however, by the U.S. and some of eveloped countries in response to the Great Recession, where it was demonstrated to be While economic growth seen as a principal reaton for a developmentalis approach t ‘economic planning, it ako serves a second ad almos: as important function, which is create popular consensus around this economic model and thus legitimise the regimes of sates that overe such ecanomie growth, While this policy is unfashionable among the workls frce-marheteers, it has seen the slrect economic rise (including in median ineome terms) of a host of euecessful developing es and remiins an active driver af economic policy in many of thea, despite a push for states «o divest themelves of state-owned enterprises (which in tum often profits cronies, related elites and foreign investors at the expense of local citizens). Former U.S. Secretary of State Rex Tillerson crise ax urvair China's penetration of Latin American markets by its state-owned enterprises, even though this appeared to contradict his awertion of unfairness’ claiming that SOE-driven eonnomies did not work (Reuters 2018), More commonly, and under the IMPs Washington-driven structural adjustment pro- gram, deweloping-country governments slashed spending on public benefits inchuding health and education, with consequences for human development indicators (HDB) and. the intellectual capital of those societies (aa well as the nos-economic benefits of beth health and literacy). They alo privatised numerous government wvices, in many cases reducing the quality of such services while enriching small elites and thus creating an even larger wealth gap than had previously existed. To tha: end, and perhaps matking an ene to the Washington Consenais (discussed in Chapter 8), the IMF has since changed sts focas reducing poverty rather than debt The question ‘Who henefit” continues to define much economic decision-making, with 4 focus on issucs of governance and transparency, and continues to drive much of the pol ties of developing counties. ‘This is particulary where there remains limited poi ical accountability Measuring economic inequality Economic inequality has traditionally been measured by a Gini coefficient, which repn sents the spread of wealth from richest to poorest and the proportions in between. By such a measur, | is considered perfect inequality and ( jualty. The graph of such a tatio, indicating the relative distribution of income, i called the Lorene eurve But, as Te Biraist has noted, inequality is mach more inclusive than simple monetary income. There ate three broad measures of economic inequality: inequality of income, of sonsumption and of wealth. The Kemomist suggests that, while income is easiest to measure psumprion i the mare accurate indicator af tocial well-being, given it refers to how well poorly people actually live rather than how much income they might have. Wealth is a separate indicator, given it cam also include inherited income which in turn implies struc ural inequality at birth (The Exenanit 2014 ‘More equal countries tend to have healthier people and be more ecunomically ficient than highly unequal councties. And countries that invest smartly in redacing. inequalityPrue end thee likely to This in turn rellec Aectezsed fmm surement sil poor, who number ps poverty in iS 400 milion by 2010, d poor person varied, bul Jim 201889 Running ducing the foundation for long-e promote ‘efficiencies general prosperity cl parative data a cent set of papers dec harmful to growth {fi flscassion of this Kev mes of obatcns an Sano Barometer su ality, if not more a portant, what 0 ofthe distribution poli This, in capital within i he Lel prolonged economic growth than thase that don't Ji ease in demand due to greater spending powe sple tiving on $USI.90 or lest pe cent gin caping ‘poverty’. Sin the number of er cent to arcane! 24 pe 16:36), that $1.90 me mw threshold f larly, while the global ition in 1994 merous a the end of tha nA sed from around 250 million t ja actualy ine bally thereafier Jim 2016:38), The profile o! under 14 ar 44 per cent) and poorly educated (39 pe of the global p he shift of economn agricultural workers relative to manufactares and espe actually improves ove bY im 2016:70 nomic perform again reflecting the economic be here are no inevitable tradle~oifs herwec ample, wage or price reduction people, the tultion. At Jim 2016:70). Mot conceptually and empirically, a hat may iy 201 snd Seockhanums approach to econcenis t Arab adents 10 onomic, but may well be political, point, Mor behind the uprising and econo eptions of wealth ineq undiscussed i that incon and wealth, but ala ction. Indeed, ic could be and the d rn reterts unelying, ideo inequality is not just an a reflection of povert aement lating the economy bution or accumulat ‘conomic distribution and the Right ‘The Great Recession/Global Financial Crisis The Great Recession, al known as the Global Financial Crisis (GFC), of 2008-2009 wasbea fflobal loball I espe lays al pecially fe Arab ching the eanomy of dakopment 71 into a deep economic recession, resulting inthe foreclosure of laans that many businesses and some countries ~ could not pay. While the immediate impact of the GF was over the period 2008-2010, it continued ro reverberate over the entuing decade ‘The GPC had najor implications for the political economy of developing countries The effect and consequences of tie GRC were very similar to those of the Asian financial ctisis of a decade which a number of countries, particularly in Southeast Asa, w substantial capital flight, the value of their currencies collapse and extensive deflting mn loans. This economic convulsion saw massive job loses, rapidly increasing inflation and high levels of tmernplaymene and unceremploy ticularly in conventional sectors of fected economies such as manufacturing and services, Unsurprisingly, one key political consequence of the Asian francal cris was the los af legitimacy of some leaders, most notably Indonesia's President Suharto, who was foreed to resign alter three decades in power, ae did ‘Thailand's Prime Minister, Chawatit Yongchaiyut, while the Philippines President Joseph Estrada was alyo effectively forced from offic The niet of the GFC: wae similar if more widespreac! the frt was thatthe economies of Jd-domor countries were beset by financial insecurity, an inital credit squccec and, in most ases, reductions in government spending (later reversed so a8 to pump-prime economies Unsurprisingly, with a crash in global fin askets, there wes a marked reduction ia global trade and related imports. Global sed to about 2 per cont growth in 200 but urped to an historic low of minus 13 per following year. While it recovered to about 10 per cent in 2010, there has been a seady cecine in the growth of global trade Jnce then, not least reflecting a domdown of demand in high-income countries, which account for sone two-thirds ofall import. While some of the dowdovm was de to cyclical canoe factors, much of it was ascribed to the lingering ellecs of the GEC WEF 2013) More important war the wulserabilty of developing countries to external economic shocis such as the GFC. On balance, the poorer the country the less able it was to deal with eepoaure to a eudden damp in global trade (Esters 2013). According to the IMF 2011), while developed countries experienced a sharp downturn many developing countries were often hit especially hard. This was attributed to “taxic’ assets held by banks in those amries, a shump in demand far goods, particularly in commodities, and slowdown in ertment (Essers 2013:68-6 hal trace increased income for most developing counties, i dik eo meq ly with related caveats about employing wider neo-liberal deregulation a al adjustment packages (SAP§. While neoriberal economics pre duced may c here were alto negatives, including a reduction in gov ernment services, the privatisation of publlely owner profit ceates, increased costs imposed by privatised suppliers to government and the growth of economic inequalities both within developing and developing countries and between them, A hey element of structural adjustment, claimed a a panacea far low levels of economic south, hus been forcign direct investment (FDI) and the foreign purchasing and/or own ership of local industry and deregulated s FDI has the effect of increasing capital lows and investment in local industry. Bluest also increases foreign ownership of locally owned production, enabling the parent company to amass profts (vsually ofBhore and weakens state control over the development snd exploitation of, mest coramonly, nat wal resources (Cockeroft and Riddell 1991; Agonin 1902; Campos and Kinoshita 2008), The reduction in government services implied by SAP cuts to state spending: a wike- pread populist rejection of globalisation and its impact on incomes and working eondiconsPacey end the scene of dor and a decrease in stave sovereignty all set the stage for a moderation, f not reect deregulated int al trade aad investinent Combined with several factors ~ the rise of China's economy; an opporturistic r of democratic pressures in some countries «global trend towarde more populist politi ppandesing to underlying social preferences oF pre et carefully conceived pol and a more inward-boking economic focus by develaped countries ~ the neo-liberal parse digm was dealt a series of serious blows. While not quite dead, this paradigm was being seriously reassessed as che aul» meckanisin for securing economic growth, far distribution and political stability Ekite formation One of the effects of development or, indeed, economic modelling generally, has boeen that while its sucess rate at lifling people out of povesty may be mixed, i usually privileges econo ardless of other circumstances. That is, neo-bheral econo ‘modelling priv conomnic elites through a ‘trickle-down’ mode! of poverty evi ppmentalst model tend to pevilegr exit and tlites as the conduits through which wider wealks creation is nt lites, somewhat unaurprsingly, tend to come from elite backgrounds: that is, being of the elie is more common if « person already has the advantages of wealth, education an live connections. Same others ate, regardless of their background, lucky or skilled enough to dmb the ladder of success, Many then pull ie up behind them, ‘Thus elites ~ a smal group of people who hold disproportionate power, wealth and influence — arc formed and perpetuated, And, lik ‘al groups, they tend to favor their ovn interests, omic theories dhat benefit ther own interests (Wake 2017:846) 30 in some cases ns part of a social comtra Shifts in the economic policies of developing sates (and of developed states, for shat matter) are almost ¢ ven by elite interests and perceptions. Three interest groups are critical in coonomic decision-making: the decsion-maakers, dose who influence decisions and those wito benefit rom the decisions (those who donot benefit rarely having a say in the proces All societies have demonstrated a tendency to establish elites, even nominally alitarian societies, Reflecting observations by Parein (1968) on the formation ies, together with Mosca (1939) and Michels (1959) on elite eapture and control of lical power, the choice of candidates for office is not made by the people but is part « functioning of « politcal clte. The question ‘Who benefits?” does not necessarily re the origins of elite members, who may be recruited from a range of backgrounds, and whose recruitment has sometimes been based on anerit and sometimes on privilege. Rath itis about the rratrictive process of their selection and the limited qpennes af elite forma tion to broad inchison or public selection Even accepting a basic democratic paradigm, elites tend to asset economic or political power out of proportion to that available o the “commaa people’. This conforms with the Hibertaran notion of ‘right’, in thar all have an equal right to partipace to the fullest tent of which they are capable, but all are equally entiled to be passive by exercising Jas been referred to as ‘rational ignorance’ (Downe 1957) or, in a more politically sinister turn, an equal ‘right’ ro became disempowered. In developing counctes, popular access to elite format lended to be more restricted, given the widespread lack of opportunity far p Jie mcubery to join on the basis of demonstrated meri arising from equal acces to high-quality educationPrue) wud the mony ef delopmant Given the remotenes of many populations fiotn decision-making centres and the rele tion of urban masses to factory fodder ccest to elite formation is arguably raore eatricted in most developing countries than in developed countries. Such restricted access implies something in the nature of a lock on the levers of political and hence economic power, the later of ehich is particularly important in ing countries where political mer rests on support from. an ethnic or specific g stron-dlient relations ar Even developing countries that claim to be explicitly egalitarian sive oF wecinlst mates) alo have elites, In such societies, elites are at leat, “fist among equal ‘Orwell 1945). However, as Masca (1939), Michels (1959) and Paxeto (1962) note, defaalt p elite rule, or oligarchy, is inherent in complex social structuren. This is reflected in rganisational capacity, ms argued by Mosca and Michels, or in psychological capacity and The hicrarchical ordering of complex societies and the rationalising and routine of decision-making (Weber 1948), particularly around the allocation of task, potentiates the development of cites. While the olgarchieal tendency can at times be overwhelming its Process and orientation ean vary dramatically according smstances, not least with thnology and education ax well a, in some cases, with revolution, Such +, if noc guarantee, potential for an open and deliberative politcal society. Having started from an anarcho-syndicalist perspective, Michele’ own acceptance of such iron law’ led him to believe in the inevitability of oligarchy and hence endarse tin its o ‘anal opposite form, for example in organist or fascist states, a formula that ould proleptically apply to countries such ax Indonesia under Suharto (particular 966 and Brazil (1937~1945) as well as to Chile (1982-1938, 1973-1990). Many developing countries have alto reficted elements of fascism (particularly under rnlitary governments including surong authoritarian rule, glorifying the (often mythologised) past a reifed culture and the cult of the strong leader. ‘While the notion of oligarchies ean be challenged, it would be naive to conclude that the endency towards their formation is other than a delauk p sia organisation. In somewhat more nuanced and les ‘scientific’ approach, Mon while elites exist ed to draw on the support of sub-eltes (Mosca, 139:410, see also Mill 195 Parcto 1960), which in tum presents the option of piacement through renewal and, farther, the interaction between elites (decision-makers), sub-elites (pinion leaders) and hey ils (the many). This ‘nteraction contains within it the seeds of the egalitarian principle of participation and a rudimentary social contract which, in a limited form n act a8 a brake on the unaccountabily of elites State capture The uaaccountabilty of elites, particularly in relation to their capacity to reap large, often tate-assisted, profits, mises the question of conflicts of interest, xvwidance of which w © ensuring good governance; and of coeruption, which is antithetical wo yood governance ‘One particular form of conflict of interest or corruption is ‘state capnure’, a systemic form of political corruption in which penate interests exercie: considerable influence over, o flectively control, a state's decision-making proceses to their own advantage Depending on the laws af a state, ‘tate capture” may not be ileal: it may reflect, oc be laimed that it reflects, economic interests perceived as converyent with the state's interest, articulaly where the state embarks on a program of neo-liberal privatisation, In any countryTA Per an thew deetypment with a relatively 6 Jy it is common for government ministers to hold dis wth major economic actors about significant investment decisions, including tat conce oF other forms government supports for such investments: The distinction might be said wrbert a government can act independently in the overall interests ofthe sate and its cit une! where it acts principally in an investors interests This is notably so when the return the sate and is citi inimal and there are direct financial incentives or reward government representa ntage such investor. ‘Sate capture’ can involve teltively small numbers of investors, which is notable i garchie environments. However, ‘state capture’ at its clearest when an investor is granted favorable outcomes to the exclusion of others, thus establishing a monopoly in relation wo the business of gourrnmer Beamples of oligarchic control are find in developed as well x developing coum withthe United Seate United Kingdom both identified ae having oligarchic p structures (Mount 2012 Gilens and Page 204), Rusia under Vladimir Putin is also w characterised as an oligarchy, a8 is China in relation to the economic control exercise deecendanes ofits cight key revolutionary leaders (Dyxlen and Hecige 2012). Saudi Ar (Raphaeli 2003) and India (Pardesi and Ganguly 2011; Rastello and Krishnan 20 ako considered oligarchies, du in the former case wo both politics and the economy being run by one extended fanzly and, inthe latter, the Nehru-Gandhi dynaty which, depending fon how one identifies political power, started with Motilal Nehru becoming presi India's Congress Part and, with rine ministers and ministers and diplomats song th Guarding 2007), continues ~ at ea + of the offical ‘Opposition party in Delhi and forming government * ame of writing ‘Similar situations can be said to apply to ceria with one-party ot dominant-parry rule, sometimes manifest in a web of families exercising political and cco fomie control Latin America and the Philippines) has along history of oigarchic contro stemming from its "bacienda’ elites oF fries that have historically controlled large bn Wich have, ia tum, been the source of politieal and later diverse economic x (Valencia 20 ntral America in pardcubar was known for its family rule (eg. the 2 of Nicaros Salvador’s ‘Fourteen Families) ‘The phenomenon has spread around the globe though it gained independence only recently, already has its Forty Families), Thailand’s econ ly tied to the royal family’s linchpin ‘Crown Property Bureau, while Malaysia's Barisan Nasional (National Front) goverment which in different formations ruled from 1957 wnt 2018 ~ had a ‘lose’ relationship with the eoxntry’s major busines: interests Tn term of ‘tate capture’, perhaps the most outstanding recent example is South Afica sshere the Gupta fay was sid to exerete inordinate influence over government decison particularly under President jacob Zuma. The extent of the Gupta’ control of the onoaty and. political rmaking led to a deep spht within the ruling Ai National Congress (ANC) and a revolt against the controversial Zuma. Alter a cab reshuffle in which nine minisers, including Finance Minister Pravin Gordhan, were sacked, ‘South Africa's currency phinged, accentuating a slide dhat was already driving it to ‘junk status. This followed the sacking of Treasury stafPoppesed to official corruption, and their replacement by Zuma loyalist (Haden 2017, The minis isa nding what was looking tke a miniatrs, eas: in 2016 of a report entitled ‘Stat deeply crtcal of the Gupta family’s contrel over the economy and the politial process, and na along with two other eiisters. ‘The Guptas and Zama fated inPoet and the wcncry of detiopment a judicial bid to block release of the report. Compiled by former public prosecutor Thuli Madonsela and her team of investigators, it revealed that the Gupta clan had a direct say in the hising and firing of ministers, and that whether they were in ar out was influenced hy their attitude to the Guptas' busines: plans and willingness to take baribes to deliver particular bencfits to their family enterprises, Examples included min= ters! readiness ta remove competition from airline routes, facilitate the takeover of a major coal mine that would give the Guptas a near monopoly over the provision of coal tn the state-owned poxer company and do preferential deeds in the Guptas’ favor when awarding government contracts and finalising other advantageous goverument business arrangements (Madonsela 2016). In delending Zuma against corruption alle- gations (involving the forgiveness of a large debt in exchange for business outcomes in favor of former presidential adviser and businessman Schabir Shaik), his lawyers argued that notions of corruption were selative as they came from a ‘Western paradigm’ (Pill 2014 Despite his defence and what was widely viewed wx the ANC’s dominant-party status and traditional loyalty to the leader, Zama was durmped aa president of the ANC in December 2017, and replaced by the reformist Gyril Ramaphosa. Uader intense pressure, Zama resigned as President of South Africa two months later. Zuma’s dumping from the ANC presidency, his personal corruption and consequent political damage to the party were Widely cited by ANC. members presi the top, Some even feared that, should Zama have been able wo cling to office, the 16-year-old ANC — Aftica's oldest political pany ~ could split electing not only disenchantment with Zuma but a deep rif between pro-market and pro-tate-inervention factions Daring his final years in office, Zuma was formally implicated in ‘the acu deal (formally te Strategic Defence Package), a maulibillion-rand military acquisition project intituted by fhe South Attican government in 1999 tha: had been under question since just before ded to the presidency in 2009, ‘That scandal implested several governme: ficials im bribery and other corrupt dealings, Five years ater stepping down, former South African president Thabo Mbeki maintained he wat unaware of any bribes having bees: afered 10, or taken by, hit ministers (Corcuption Watch 20) and mismanagement were fir from limited to South Africa: neighboring economy collapsed in 2016 after it was discovered thee expresident Anmando Guebuza horrawed 3US2 billion over and above the countzy’s IMF lean terms, Sriggering an end to all IMF loans to his country and, with falling export prices aggravating an already wimanageable debt burden, precipitating an official default that brought on widespread! economic hardship and the collapse of the local cursency. The SUS2 billion, crowed from Swiss and Russian banis, was used to buy military equipment. Up unt this ume, Morambique’s econemic prospects had been looking up (Oliver 2017). ‘The only Gucstion that remained for ordinary Mazambicans was whether the economic disaster was wing to corruption or plain incompeten Nor is the dominancsparry framework that gives rise to corruption confined to Altice. The lack of accountability that is a concomitant to such a framework alma tees erruption, as it did in Malaysia. While that country’s long-time opposition figure Anwar Ibrahim remained in his prison cell about 25k rst of Kuala Lumpur the Malaysian political wheel did not just turn, it spun into reverse: in early 2018 the Person responsible for his being in jail became his political champion and, fallowing the OLB clecton result which saw the dumping of the National Front (BN) government had Anwar released from jail6 Peet and he exnoeny of eden! In the 1990s An being groomed as Malaysia's heirapparent by thea inister Mahathir Mobamad when his world came crashing dawn. He was imprisoned on trampedap socony and, upon release, established viable oppesiton allan aginst Mahathic's succcoors — before being returned to prin, again on sparks sodorn charge Ironically, Mahathir ~ the person most responsible for sending Ibrahim to jail ~ was th lead eandiclate for Torahim's political alliance going intc the 2018 eletion. Mahathir, then 92 and due to turn 98 in Joly 2018, wa selected as prime ministerial eanchdate for th fourparty opposition Palauan Harspan (PEL, Pact of Hope) alliamce. This grouping repre seated a major challenge to the forty-five-year rule of the BN government Mahathir, who spent twenty-two years 2s prime minister uml 2003, headed te Malays National Or 1a (UMNO), the key party in the BN govemment. U itself was 2 Malay firmed) as far back as 1946 and a leading force inthe str for independence fr in 2013 the IBN government managed to retain poli power through heasy ing of electoral seats and buying the support of sal ‘opposition parties, with embattled Prime Minister Najis Razak trying to take achanta indecision i the Islan ate Party (PAS), which hoped to establish iselPas «third force in Malaysian politics. Observers forecast that the apposition allamee would str in overnment without PAS’s support. In May 2018, however, the opposition alliance aver fame the ructural rigging of Malaysia's elections to overwttelmingly win government ‘Anwar established the oppestion’s predecessor, Parti Keadilan Rakvat (PKR, or People Justice Party), entral to the PH allianee, also beaded by him, Anwars wie ‘Wan Aziza, 0 both the PKR and the alliance alter Anwar was 1e imprisoned in ir had become an increasingly outspoken critic of Prime Mis inter Najib, who was deeply implicated in the *IMDB® corruption sandal in which $US: bilion fiom the xovernunem's developinent fund eaded up in his personal bank account hens ret missing In joining the opposition sliance, Mahathir noted, be wa secting his face against « politcal organisation he had spen 5s building During Anwar’s criginal sodceny trial, Mahathir had openly proclaimed him guilty ar had his com ned in 2004, but bis ater fll his opposition alliance winning the popular vote, but no ty of eats, a 2013 election 2018 Mahathir peor spectacular about-face, promising that if o the prime minisership ~ making him at 2 the world’s o serk his old deputy-turnest-adversary’s early release from prison and pass the mane him. Anwar said from prison that he aceepted Mahathir’ selection as lead can ay just have been that Mahathir came t0 realise that the unaccourtable, selfservi political monster he had created was now out of control After tro decades of b alry ~ much of which time Anwar had spent in jal ~ Mahathir and he appeared geting the hand back together In the histori ¢ 9 May 2018, PA won a substantial m parliament, and Mahathir was sworn in as PMnext day. Since this was the first time in the nation’s sity-one-year history that power had changed hands, there way significant politcal change in Malaysia, with the investigation amd chen charging of Najth fo corruption, This was expected to be followed by an eventual redrawing boundaries and a re of the judiciary. From the perspective of hi ail cel, Anwar Ibrahim could have been exeused for taking slightly jaundiced v he mud on the manure and pitfalls of his rolleroastePovey coe he ecomomy of dealypmant 77 relationship with the person whe had now re-emerged from long retirement ax his putative political savior. But, on Mahathie’s fit day in ffien years as prime minster, the Yang di-Petuon gong or king (Malaysia boasting that scarcest of all types of govern ment, an elective monarchy) {sued a royal pardon and a week later Anwar was a free man, precipitating perhaps the mast. remarkable mm to power anywhere in the world since Nelon Mandela became head of state within five years of being the wer mest celebrated political prisoner, In a related move, Mahathir appointed Wan Aziz as deputy prime minister The relationship between poverty and corruption With state funds being redirected for unofficial purposes and investors reluctant to eng in volatile political eavironments, it would come as Title surprise Usat some of the wetkl’s poorest countries are aloo among the most corrupt, anc vice versa, The question aris whether poverty breeds corruption of corruption spawns puverty, Fram anecdaal ex nce in developing countries, it would seem that ter mbjotic relationship betwee the wo, Bur there ie no evidence for an absolute correlation, given thar some counties are largely mndeveloped bt appear to be stnoag the less corrupt cohort. OF the wen countries with the nwest inequality-adjusted Human Development Index 1 one that sits rock-bot with the lowest IEDI~ the Democratic Republic of the Congo ~ ranks as the twenties 1st corrupt, allowed by Chad, rated with the second lowest IHDI score, seventeenth 1st corrupt. One rang forthe Niger is only the seventyfith most corrup akhough the next up, Guines-Bisau, th most corrupt Sierra Leone has the next gest THDE score but has been adjudged only the f mom corrupe while, next up, Burkina Faso, is cred be rupee jet over halfway’ to the east corrupt’ nations (meaning it remained very coctupt, but not as tach as however, a closer correlation between corruption and inequality, according Transparency International (TT 2016} ‘Corruption an inequality are indeed close wlated!anvd provide a souree pular diseanten According to the World Bank (2016b), the world’s most unequal society, in terms ncome distribution, is South Altica, which with a ranking of 64 sts at the lower end of corruption scale. Second mast unequal is neighboring N ranked at 53 on the notion perception scale. The warld's third most unequal country, Haiti, is also among its orrupt as well ay having a very low IHDI score. Botswana, by contrast, has effect,Poverty and the scmemy of devlopment 200/190" 190) 76 ‘Were 20% highest HD -O lowest HD, 180 most corre by ranking sources: Transparency nerntinal 2016), UNDP hnequalty Adjusted HOI 2016 (note: Sudan bre, Guineas, ertrea,Chad, Cert! Alcan Republi, Turkmenistan, Gomblo, Papua New Guinea, Myonrar,Etiopia, Cote roe, Algeria wer aeseied for earugtion but dé not have an IOI ranking Figo 5.2 Graph il ‘extatcal snocaton between corruption and IHDIs anc-corruption measures in place especially ins extractive industri came in at 35 on the corruption list ~ signifying that it's relatively clean ~ ever have the fourth highes level of income inequality aid Oxeupies a spot in the lower half THDI rankings. Countries with a previous (or conning) socialist orientation have ten to score better on income inequality and THIDIs despite relatively high levels of corrupt though Veneniela and Nicaragua are the least impressive performers among these ocither having entirely shaken off ts traditional moneyed eliteProny ond the ecoromy of decapment 19 As Transparency Intemational noted, more th tenvitoris in the 2016 index registered below the midpoint of its scale (TT 2016), What this ‘cans is that corruption was signficandy: more widespread than not. Countries where i remains inditutionaited and endemic, such a Indonesia, rankec around the midpoint (0 $0 any country with a three-tigit ranking was very corrupt indeed, While there was only an approximate connection between standard of living and cor uprion, it was Jess surprising that each of those measures was closely interrelated with inequality levels. Corruption shews the distibution of economic power and soco-poliral positioning (Rothstein 201 1:Ch. 3}. This in turn implies lack uf legal accountability which is ® typical feature of nom-accountahle (nondemoeratic) politcal stems. One critique uf this situation is that capitalism by its very nature tends 10 accrue rather than distribute wealth and that, aficr the great shocks of the Fin and Second World Wats, this tendency only snowballed, without the interruption f global war in the late 20th century and on # (Picety 2014) gathering accumulation, at the expense of disribution and greater economi: equality, has implications fur the capacity of democratic states to limi eaccatve enn ptrations of veealth. But the neo-liberal capitals, paracigm presupposes that uncon. rained accumulation isa ‘natural fe for ‘unconstrained’ politics, even though oontral of wealth i itwif a key determinant in restricting access to political power. Conclusion Economic rationalists argue that eccnomics is exenially value-iee and that, left to their men devices, markets not only find their own equilibrium but operate most effcicnaly and duce the greatest benefit for the greatest number. Debate continues about whether unrestricted markets do in fact prod ‘economic outcomes, the counter-sugyestion beng that markets require some regulation to curb their excene. In pariclat, the capa #y of markets to drive down cosy, including those of labor, may produce short-term eff jencies but at the longer-term costs of reduc imer activiy and breeding poverty, and hence human misery. Moreover, the developmentalist raodel bas also Thustrated thet here is at least viable altemative to the neo-liberal paracigm, and arguably one performs better and more consistently in economic ter al poverty since 1990 has declined, largely due to China's — and to a less dn's ~ industrial revolution, with other countries in Asia and Latin America bchinc but heading in the same direction, However, the income gap between the haves and both within those councies, and between them ankl mach of the developed increased over that same period. A disproportionate amount of the work!’ now concentrated in the hands ofa tiny minor is brings into stark elie the reality that te of economics, as well as and how much ~ it is regulated, is inherenty political, as is what is deciled and who decides ~ about the distribution or accumulation of economic beneft. The question then arises: if economic distribution is a political process, why do the majority of the world’s People not demand a fairer distribution of the world's resources? The short answer is because many in the world have litle or no say in how the economy uperates within their control over the structure of Police sdopied by such matt tend to be driven by relay few people both widin and betseen countries, who just happen to endos dig to cucomes that(00 Perel the wae thcic own generally privileged postions. These elites thea shape much of the dis nomics and wealth dstribaxion. Few though they be, their lout at the heart of ten dro : the many clamorang for change Tn extreme circumstances, elites benefiting themselves at the expense of the m apfure near total control of the state, so that the state, having been “capuured’ p serves the inteesis of a very small coterie of political and economic figures. This th orruption, ot ju ‘oma that supplements the often meagre Hf government bs ale systemic type that le be 1 ot whole count y ndisement and avarice of xlfscrving From time te soups are he able, through political ckange cesses alienating rival seitserving elites. But, where they can, such clits tend hci advan sible. Sometimes the poli énwven by gr frusration or anger they are not only required to relinquish some 0 their U-gotten wealth may all led from their pasitions of comfor prvi Thus the world of onomic distribution, elite formation and capacity be entwined in a tusle for ascendancy. How this tule plays out largely determine billions of people lve, what their Iie opportunities are and whether they wil ever b chunge their political and economic ft One of the key ways in which the developed world engages with the doing s0, asvunges its own bumanitarian conscience, through the provis or emergency relief and fr longer-term development asitance. This aid, however as simple 29 just iv tance nor i it always effective and, a with much ‘giving js often an expectatian of a return It wo these sues that Chapter 6 tums