Last Updated: Friday - 09/24/2010

Unequal terms of trade create 'underdevelopment'

When we talk about the former colonies we often use the term "Third World." This is derived from the idea of the third estate, meaning craftsmen, shopkeepers and peasants, while the clergy and nobility constituted the first and second estate.

In a politically correct world the term Third World was deemed derogatory. So we used labels like two-thirds World or Majority World.

Also in use was the oft-heard Undeveloped World, sort of like a virgin territory ripe for the expert intervention and guiding entrepreneurial spirit of the developed West.

To give this idea a more positive twist we also talked of a Developing World, as if this part of the globe was already beginning to experience the benefits of our compassionate stewardship. With a little more foreign aid and technical assistance these backward nations would eventually be just like us if they would follow our superior advice.

The truth is the opposite. Seen in a historical context we must conclude that the poor South is neither developing nor undeveloped as much as it has been and is underdeveloped.

When we talk of an underdeveloped world we talk of a sector of the planet which has been systematically exploited, pillaged and plundered for our benefit and to the detriment of the original peoples living there. We are talking of an ongoing process which has excluded and marginalized the largest portion of humanity.

In this process, foreign aid is nothing but smoke and mirrors to ease our consciences. Something to make us feel good.

Since the early days of colonialism the development of Europe as a world power happened concurrently with the underdevelopment of the overseas territories. The relationship between pauperization and the accumulation of wealth is dialectical. One resulted in the other.

Ethical considerations related to development were thrown overboard with the first shipment of African slaves to the Americas. Western nations traded in human cargo like they traded in any profitable commodity. The decimated indigenous labour force in the mines and on plantations had to be replaced so that wealth would continue to flow from south to north.

The imposition of unequal terms of trade was the main mechanism by which this process of gradual underdevelopment was set into motion. While imperial Europe expanded its industrial base, it zoned the colonies to provide cheap labour and raw materials.

The average citizen might not have been aware of this unjust process as the myth of civilizing and Christianizing the heathen hinterland was always promoted as the white man's burden and a necessary sacrifice to share our superior way of life with all God's children.

After the Second World War the U.S. emerged as the major imperial power, but the process of underdevelopment continued. Today the most powerful instruments to maintain the unjust relationship between rich and poor nations are the International Monetary Fund and World Bank.

In spite of their inclusive-sounding names these are essentially U.S. institutions. In the name of development, the Third World has been plunged into eternal debt.

The gap between rich and poor has grown wider each year, for while the capital on each development loan has been paid many times over through interest payments, the amount owed steadily increases as new loans are required to pay the deficit.

To pay off the loans in hard cash, the price of raw materials is lowered in a competitive spiral, land is expropriated to grow cash crops and people are replaced by mechanization. The net outcome is massive underdevelopment which no amount of charity can alleviate.

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