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author of The New Prophets
of Capital.
Milford Bateman is a visiting
professor of economics at
Juraj Dobrila University of
Pula in Croatia and adjunct
professor of development
studies at Saint Mary’s
University in Halifax. He is
the author of Why Doesn’t
Microfinance Work? The
Destructive Rise of Local
Neoliberalism.
Pádraig Carmody is an
associate professor of
geography at Trinity College
Dublin and a visiting
professor at the University of
Johannesburg. The second
edition of his book, The New
Scramble for Africa, will be
published by Polity Press in
2016.
Vivek Chibber is a professor Judith Marshall recently
of sociology at New York retired after twenty-years in
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and Late Industrialization in Steelworkers Humanity Fund
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programs.
student in Latin American
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the Africa is a Country Essex. Her book, No Such
editorial collective. Thing as a Free Gift: The
Gates Foundation and the Price
Melisa Handl is an Argentine
of Philanthropy, is out now
lawyer and a phd student in
from Verso.
the Faculty of Law at the
University of Ottawa. Susan Spronk teaches in the
School of International
Ho-fung Hung is an associate
Development and Global
professor of sociology at Johns
Studies at the University of
Hopkins University. He is the
Ottawa and is a research
author, most recently, of
associate with the Municipal
China Boom: Why China Will
Services Project.
not Rule the World.
Daniel Immerwahr is an
associate professor of history
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His book, Thinking Small: The
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Community Development, was
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 BRICS
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The Long Depression
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2 Jacobin · Fall 2015
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Books for
changing the world
HaymarketBooks.org
Contents
I S S U E 1 9 | FA L L 2 0 1 5

Uneven & Combined

Uneven and Combined
ISSUE EDITOR C OV E R A RT Nicole Aschoff
Nicole Aschoff Martina Paukova 4

The Master’s The Power of a Dollar

With Strings Attached
Milford Bateman
Tools 9 21
Melisa Handl
and Susan Spronk

The Philanthropy Hustle

Linsey McGoey
27

The Master’s China Fantasies The New Scramble

Ho-fung Hung for Africa
Apprentices 37 45 Pádraig Carmody

The Worst Company South Africa Doesn’t

in the World Need a “Lula Moment”
53 Judith Marshall 61 Benjamin Fogel

Small Is Not Thinking Small Development From Below

Won’t End Poverty Vivek Chibber
Beautiful 75 Daniel Immerwahr 81

Uneven and Combined 3

 Uneven
and
Combined
Nicole Aschoff

The specter of Trotsky is haunting the United Nations. The un Development

Program’s 2013 annual report — boldly titled “The Rise of the South” — gives a
glowing account of how uneven and combined development is remaking the world.
Despite “very different endowments, social structures, geography and history”
countries like Ghana, China, Algeria, India, Malaysia, Brazil, and Indonesia are all
said to be experiencing “rapid people-centered development” made possible by the
“rapidly expanding connections” between countries in the South. These connections
are creating a more equitable, balanced form of globalization: “Global production is
rebalancing in ways not seen for 150 years.”
The ingredient list for this happy story is short: “developmental states,” “tapping
global markets,” and “determined social policy innovation.” These factors, we are told,
are enabling countries — both large and small — to rewrite global power relation-
ships, leapfrog old barriers, and transform human development. Human wellbeing,
according to Human Development Index measures, has increased dramatically since
2000, and not just in the brics (Brazil, Russia, India, China, and South Africa) —
nearly every country has seen improvement and the Millennium Development Goal
on poverty was met three years early.
Yet excitement over the “rise” of the South was already tempered by the 2014
World Development Report — which focused heavily on risk, vulnerability, and
stalling gains — and this year’s tempestuous spring and summer look set to dampen
expectations even more. China’s stock market crash and broader slowdown, nail-biting
anxiety over the Federal Reserve’s decision on interest rates, the multi-dimensional
crisis in Europe and the Middle East, and dismal prospects for countries dependent
on primary product exports are all stoking fear and uncertainty about the future.
What should we make of this schizophrenic picture, where on the one hand we
are told that humanity is better off than it’s ever been, while on the other these gains
seem like a mirage amid growing volatility, inequality, and uncertainty?

4 Jacobin · Fall 2015
 Reconsidering the past fifteen years, and the nature of development in the South,
offers a way to dissipate some of the “global fog,” as historian Eric Hobsbawm once
called it, surrounding the current moment. A second glance at the ingredient list for
success — states, global markets, and policy — demonstrates the contradictions of
development — how immiseration and inequality, economic growth and innovation,
can be flip sides of the same coin.
Take the developmental state. Countries like China and India haven’t played by
the rules of the Washington Consensus and, in certain respects, it’s paid off. Inter-
ventionist state policies have enabled many more “Southern” corporations to become
“global challengers,” while heavy infrastructure investment and regulated economies
combined with pro-business policies and growing domestic markets have spurred
investment from both domestic and multi-national capital.
But this playbook has its own set of limitations, and there is little evidence to sug-
gest that the brics are providing an alternative pathway for development for other
countries in the South. Instead, they benefit from the still-robust features of neoliberal
capitalism, while using the language of South-South solidarity when it eases access to
new markets and resources.
At the same time, while interventions to reduce poverty — like cash transfer pro-
grams — have been effective in some circumstances, they are set against a broader
policy framework that makes working people’s lives more, rather than less, precar-
ious. While educational attainment is steadily increasing, so too are unemployment
and inequality — 85 individuals own as much wealth as the bottom 3.5 billion.
Financial volatility underpins “growth” and global finance uses the language of
inclusion to profit from skyrocketing household indebtedness. Global trade policies
foster corporate growth, but also rising food prices and food insecurity. Meanwhile,
no real progress has been made in combatting the climate crisis, which threatens
to devastate already vulnerable countries.
All this simply indicates that capital won’t do the work for us. Economic growth
and the reboot of the developmental state over the past fifteen years have lifted
many out of poverty, but they’ve also made it considerably harder for many more to
escape it, solidifying and expanding global capitalism and the volatility, inequality,
and environmental destruction that goes along with it.
Relying on bouts of economic growth and policy interventions to ameliorate the
worst effects of the for-profit system does little to change the underlying logic of
capitalist development. The contradictions of development are the contradictions
of capitalism — development will only bring meaningful and long-lasting gains when
it moves beyond capitalism.
This doesn’t mean we should advocate a return to crude, modernist development
schemes, or worse the small-scale, community-based models pushed by many inter-
national ngos, who increasingly work hand-in-glove with multinational corporations
and project the interests of Northern governments.
Global capitalism, and the crises it has generated, are wide, deep, and formidable.
Real people-centered development will require strong left movements to take — and
use — state power, channel and constrain capital, and build the large-scale infrastruc-
ture to combat the climate crisis and provide for the needs and wants of all.  ■

Uneven and Combined 5

The

MASTER’S
TOOLS
 The Power
of a Dollar
Microcredit is nothing more than a
socially validated way for financial elites
to exploit the poor.

Milford hirty years ago the international development community was

T
Bateman ecstatic. It had found the perfect market-affirming solution to
poverty in developing countries: microcredit.
The popularizer of this new strategy — which consisted of
providing small loans to the poor so they could launch self-em-
ployment ventures — was the US-trained Bangladeshi economist Muhammad
Yunus, who portrayed microcredit as a panacea that would rapidly create an
unlimited number of jobs and eradicate endemic poverty.
Yunus’s project of “bringing capitalism down to the poor” quickly turned
him into the go-to-guy for advice on how best to address global poverty. In 1983,
flush with funding, especially from US aid agencies and private foundations,
Yunus established his own “bank for the poor” — the now-iconic Grameen
Bank. Soon, Grameen clones, financed by the international donor community,
sprang up across the Global South.
The microcredit movement was born. usaid and the World Bank were
particularly supportive of the model, not least because they could now promote
self-help and individual entrepreneurship — key components of the neoliberal
capitalism both organizations were aggressively pushing at the time — on the
basis of them being antidotes to poverty. Neoclassical economists like Jeffrey
Sachs also favored the microcredit model because it seemed to validate their
economic development perspective, which was constructed on a foundation of
individual entrepreneurship and market interaction. Sachs envisioned micro-
credit as a way of helping the poor escape their poverty by climbing what he
termed the “ladder of development.”
By the mid 2000s, the model was being described as the most effective
anti-poverty and “bottom-up” development intervention of all time. With
support from across the political spectrum, the UN named 2005 the “year of
microcredit.”

Illustrations on preceding spread and opposite page by Lennard Kok Uneven and Combined 9
 Microcredit also became one the few devel-
opment policies known to, and supported by,
ordinary people worldwide — a feat facilitated by the
high-profile celebrities who supported the global
effort, including Bill and Hillary Clinton, Bill Gates,
Bono, Natalie Portman, and Matt Damon.
The movement reached its apotheosis in
November 2006 at the Microcredit Summit in Hal-
ifax, Canada, an event that celebrated the progress to
date while also extracting pledges from participants
to ramp up the microcredit supply. With delegates
bathing in the warm afterglow of the announcement
some months earlier that Muhammad Yunus and the
Grameen Bank would share the 2006 Nobel Peace
Prize, there appeared to be nothing the model could
not achieve.
Presenters argued that microcredit could
positively impact health care, the environment,
terrorism, and a whole host of other problems. Bernd
Microloans, Macrointerest
Interest rates on microloans vary from country to country,
but they’re almost always steeper than normal rates.
90% Uzbekistan
Kenya
Mexico Ghana
Uganda
35% Average
India
0%
10 Jacobin · Fall 2015
Balkenhol, then head of the International Labour
Organization’s Social Finance Unit, best encapsu-
lated the movement zeitgeist when he described
microcredit as “the strategy for poverty reduction
par excellence.”
With ambitious expansion plans laid out, a
future in which virtually every poor individual on
the planet (especially women) could easily access
microcredit appeared to be near. Also seemingly on
the cusp of becoming reality were Yunus’s oft-re-
peated claims that microcredit would “eradicate
poverty in a generation” and that our children would
soon have to visit a “poverty museum” to see what
all the fuss was about.
And then it all began to go horribly wrong.
The catalyst for the dramatic turn against
microfinance was the Initial Public Offering (ipo)
of Mexico’s largest microcredit bank, Banco Com-
partamos, in 2007. Here ordinary people learned not
Ethiopia Senegal
Nepal Sri Lanka

of microcredit’s impressive successes in reducing
poverty in Mexico — there was and still is abso-
lutely no evidence of this — but of the spectacular
level of profiteering by senior managers and outside
investors.
Most working in the microcredit sector were
stunned by the sheer avarice of those involved.
But “the Compartamos scandal” soon proved to
be the tip of the iceberg. When numerous other
instances of personal enrichment and unscrupulous
behavior surfaced, it became clear that the micro-
credit model had essentially been taken over by
greedy entrepreneurs, aggressive private banks,
and hard-nosed investors.
At the same time, the veracity of the reports
justifying the microcredit concept was increasingly
being called into question. The evidence was so
weak, in fact, that one major United Kingdom gov-
ernment-financed study concluded that the entire
microcredit movement had been “constructed upon
foundations of sand.” After a number of spectacu-
larly destructive “boom-to-bust” episodes in all of
the countries and regions where microcredit had
reached critical mass, the previously rock-solid belief
that microcredit helped the poor rapidly crumbled.
In little more than thirty years, the microcredit
concept has gone from being equated with Zorro, the
mythical Mexican hero and friend of the poor and
exploited, to being widely referred to as a Zombie
policy, a dead and rotten idea that nevertheless
keeps rising from the grave. How did it come to this?
Heightening Immiseration
The modern microcredit movement’s central prob-
lem is that it rests on a fundamental misunder-
standing of economics. Yunus believed that the poor,
and especially women, could establish an informal
microenterprise and then sell basic goods and ser-
vices to other poor people in the community.
This assumption was applied even in the poorest
communities, where the poor (by definition) struggle
to afford the simple items and services conducive
to their basic survival. But Yunus thought that as
long as the destitute could produce something, they
could sell it. As he later famously put it, a “Grameen-
type credit program opens up the door for limitless
The Power of a Dollar
Gimme 35%
the Loot
Microcredit loans
(global average)
Microfinance is just
regular finance with
even higher interest
rates, targeted at the
people who stand to
lose the most.
16%
Subprime auto
loans (US)
7–8%
Small business
loans under
$100,000 (US)
self-employment, and it can effectively do it in a
pocket of poverty amidst prosperity, or in a massive
poverty situation.”
Unfortunately, Yunus had embraced a long-dis-
proven fallacy known as Say’s law — the idea that
supply creates its own demand. As the late econ-
omist Alice Amsden explained, the core problem
in developing countries is not the supply of basic
items, but the sheer lack of local demand (or pur-
chasing power) required to pay for them. Even in
the poorest communities, there are generally enough
retail stores, street food outlets, basket makers for
people to access — if they have the financial means
to do so.
A local “demand constraint” underlies two of
the main shortcomings associated with microcredit:
displacement and exit. Displacement occurs when
new jobs and incomes registered in one microcre-
dit-supported enterprise are cancelled out by the
decline in jobs and incomes in incumbent compet-
itor microenterprises. Exit is the process whereby
both new and existing microenterprises are forced
to close, due to the additional supply of informal
microenterprises operating in the same sector.
As David Storey, an expert on small business
policy, points out, “the single most important fact
Uneven and Combined 11
 to be borne in mind when implementing measures
for smaller firms is the high death rate of such busi-
nesses.” The reality behind the microcredit hype
is that the vast majority of those who took out a
microloan to invest in some income-generating
project ended up failing or else displacing other
struggling informal microenterprises operating in
the same sector.
Failure leads to personal over-indebtedness,
the diversion of other income flows (remittances,
pensions) into repaying the loan, the loss of family
assets pledged as collateral (land, housing, vehicles),
and humiliation, despair, and, in far too many cases,
a descent into inescapable poverty.
Taken together, displacement and exit
explain why the microcredit model brings little to
no net increase in employment. In microcredit-
saturated Bosnia, for example, all the early claims of
massive job creation were transparently false because
evaluators refused to take these issues into account.
Indeed, it is difficult to find any impact evalua-
tions that factor in displacement and exit. In all too
many cases, the desire to please the client — typi-
cally a microcredit partisan — has won out over any
ethical or professional imperative to report reality.
Nonetheless, these obvious shortcomings also
help explain why, as even longstanding supporters
now acknowledge, there is no empirical evidence
showing microcredit cuts poverty. As a rule, it simply
boosts the rate of informal microenterprise entry,
which is then followed by an equally high rate of
displacement and exit, creating nothing more than
an unproductive and wasteful local dynamic known
as “churn” or “turbulence.”
“Microcredit
  did nothing more
than help plunge large numbers
of black South Africans
into deeper over-indebtedness,
poverty, and insecurity.”
12 Jacobin · Fall 2015
As Mike Davis writes, artificially stimulating
hyper-competition in developing countries’ local
markets is not the way out of poverty and human suf-
fering, but an increasingly ugly manifestation of it.
Another indication of the failure of microcredit
is that in many developing countries, the poor no
longer avail themselves of microloans for business
ventures, knowing they will likely either struggle to
make money, or else quickly fail. Instead, a growing
number use microcredit to pay for much-needed
consumption goods.
Borrowers hope to eventually repay the micro-
loan, perhaps through some unexpected financial
windfall or a rare spurt of business success. But
in practice the poor increasingly take out larger
and larger microloans — and very often more than
one — simply to cover repayments due on previous
microloans, a Ponzi-like dynamic referred to as “loan
bicycling.” This in turn has helped push up individual
over-indebtedness, which in a growing number of
developing countries has reached staggering levels.
Too Many Entrepreneurs
An even more fundamental problem with micro-
credit stems from its role in securing a long-term
“bottom-up” development trajectory. Aware that
there’s scant proof that microcredit has a positive
short-term effect, many advocates have started insist-
ing we look to the long term — there, they insist, is
where microcredit is most effective, supporting the
entry and gradual proliferation of micro-entrepre-
neurs in places where they are desperately needed.
Africa is the most frequently cited example of

a region held back by a shortage of entrepreneurs.
The international development community, aided
by a number of high-profile African economists
like Dambisa Moyo, have been at pains to argue
that microcredit is desperately needed to create an
African entrepreneurial class that can serve as the
vanguard of sustainable development.
This argument is almost entirely bogus. As
development economist Ha-Joon Chang points out,
Africa already has more individual entrepreneurs
than perhaps any other place on the planet — and
many more are being constantly produced thanks
to rafts of new microcredit programs and because
Africa’s commercial banks are shifting into micro-
credit operations.
This glut of micro-entrepreneurs actually
hinders long-term development. By generating
superfluous “buy cheap, sell dear” trading oper-
ations, microcredit effectively precludes the
emergence of a more productive, industry-based,
and growth-oriented local economic structure. And
the intense competition brought on by waves of new
informal microenterprises militates against organic
growth by better-placed formal enterprises.
The case of South Africa is illustrative. The first
post-apartheid African National Congress (anc)
government encouraged the expansion of micro-
credit and informal microenterprise sectors as an
attempt to tackle poverty and unemployment among
black South Africans. But the strategy proved disas-
trous for South Africa’s poor.
A microcredit-driven increase in informal
microenterprises in the black townships and rural
areas, combined with almost no additional effective
demand (due in part to a World Bank austerity pro-
gram and the anc’s neoliberal economic policies),
helped depress average incomes in the informal
economy — around 11 percent annually in real terms
from 1997–2003. The self-employment jobs created
by the expansion of the informal sector were more
than offset by the fall in average informal sector
incomes. As a result, poverty spiked.
The microcredit movement thus did nothing
more than help plunge large numbers of black
South Africans into deeper over-indebtedness,
poverty, and insecurity. Meanwhile, a tiny white
South African elite has become extremely rich off
The Power of a Dollar
of supplying microcredit. Not surprisingly, many
in South Africa now consider microcredit as anal-
ogous to the US’s subprime mortgage crisis, but
with even more disturbing overtones of race-based
exploitation.
Consider too the situation in Latin America,
where since the early 1990s an increasing number
of dedicated microcredit institutions and “down-
scaling” commercial banks have massively expanded
the supply of microcredit. The bottom-up, micro-
enterprise-driven miracle that neoliberals like
Hernando de Soto long promised is nowhere to
be found.
Instead there is growing evidence that chan-
neling Latin America’s scarce financial resources
(savings and remittances) into ultra-low-productivity
informal microenterprises and self-employment
ventures, as well as into consumer loans, has contrib-
uted to the progressive destruction of the continent’s
economic base.
This negative assessment was even shared by
the mainstream Inter-American Development Bank
(idb), which reported in 2010 that the market-driven
proliferation of informal microenterprises and
self-employment ventures was the principal cause
of that continent’s twenty-year (1980–2000) descent
into more acute poverty, inequality, and economic
weakness. The idb’s conclusion was unequivocal:
“the overwhelming presence of small companies
and self-employed workers is a sign of failure, not
of success.”
The microcredit-induced expansion of the
informal microenterprise sector in developing
countries is not one of the solutions to endemic
poverty, inequality, low productivity, and general
under-development, but one of the chief causes.
Neoliberalizing Microcredit
The final problem with microcredit grew out of the
model’s effective neoliberalization in the 1990s.
While Muhammad Yunus and Bangladesh are
most commonly associated with microcredit, the
model actually first emerged in 1960s Latin America
as part of the US government’s attempts to quell
anticapitalist social movements and resistance to
American imperialism.
Uneven and Combined 13
 1995

Each coin represents $200 average monthly earnings

Wage Laborers Self-Employed Unemployed

The hope was that if enough of the poor could
be pacified through self-help and individual entre-
preneurship, they would have no need for structural
solutions to poverty like an active state, trade unions,
welfare systems, or worst of all, socialism.
With the global neoliberal political project in
ascendance, however, the microcredit paradigm
came under intense pressure to conform to even-
narrower operational confines.
Initially structured as ngos and funded by
external sources (by the international donor com-
munity, private foundations, or governments), such
microcredit institutions were anathema to the new
generation of neoliberal policymakers. So under
the direction of usaid and the World Bank, the
microcredit model was extensively neoliberalized
— turned into a for-profit, private sector–driven
business model operating according to supposedly
ultra-efficient, Wall Street-style incentive structures
overseen by “light touch” regulatory bodies.
Each person
represents
500,000 people
Egged on by high-profile neoliberals like
Maria Otero and Elizabeth Rhyne (both then
at accion), and Marguerite Robinson (based
at Harvard), the claim began to circulate that a
“new world” of massive poverty reduction and
“bottom-up” development had been midwifed.
However, the neoliberalization of micro-
credit only succeeded in adding a disastrous
new twist to an already-unfolding catastrophe
for the poor. Commercialization and deregu-
lation directly, and quite predictably, caused

14 Jacobin · Fall 2015
 The Power of a Dollar
2003

Self-(Un)Employed
As unemployment skyrocketed, self-employment offered South
Africans little more than further destitution.

Uneven and Combined 15

 Swipe Left
Credit institutions are profiting from the tremendous
debt burden of South Africans.

16%
94% of borrowers more than 90 days
of microloans not used to start an late on their debt payments
enterprise, but to buy food or pay
off old loans

59%
of borrowers struggling to
pay off their credit cards 39%
borrowers applying for debt
restructuring who are under 25

14%
of all South Africans over 16 who are
classified as “overburdened” with debt

24%
of all loans in arrears

76%
of total household
income spent on debt
repayment

57%
of borrowers struggling
to pay their home loans

16 Jacobin · Fall 2015

spectacular levels of greed, profiteering, and cor-
ruption in the microcredit sector.
Many Western banks and funds opportu-
nistically entered the microcredit business to
enrich senior managers (through high salaries and
bonuses) and shareholders (high dividends and
capital appreciation). In Mexico, for example, even
leading microcredit advocates now accept that the
major banks and corporations that jumped into the
industry all achieved remarkably high returns by
pushing poor Mexican women into severe debt.
Then there are the high-profile individual entre-
preneurs — often termed “social entrepreneurs”
— who have become “microcredit millionaires.” Per-
haps the most notorious example is Vikram Akula
— former McKinsey consultant, self-described “pov-
erty activist,” and, in 2006, one of Time magazine’s
one hundred most influential people.
Akula set up his own microcredit institution and,
using a wide variety of manipulative and unethical
practices, became one of India’s richest individ-
uals. He was also the leading figure of the “big six”
microcredit institutions in India’s Andhra Pradesh
state, whose collective greed and reckless growth
strategies helped bring the entire microcredit sector
to its knees in 2010.
Akula is only the most extreme example,
though. Even the leaders of the main microcredit
advocacy bodies have joined the feeding frenzy.
Rupert Scofield, ceo of the US-based finca
microcredit advocacy and investor body, rewarded
himself in 2013 with a $711,000 paycheck. This at a
non-profit body that, while tempering its usurious
behavior after increased scrutiny, still charges poor
clients interest rates that regularly approach 100
percent.
As Philip Mader documents, the most pro-
nounced dynamic at work in the microcredit
industry over the past two decades has been the
extraction of a huge amount of money from the poor,
in the form of interest payments first passed back to
microcredit institutions and then onto investors in
developed countries. The global microcredit move-
ment has provided nothing more than a new and,
importantly, socially validated mechanism through
which financial elites can extract resources from
the poor.
The Power of a Dollar
To make matters worse, market-driven micro-
credit is associated with depressingly regular crises
and “microcredit meltdowns,” as well as the social
and economic chaos that comes from heightened
over-indebtedness.
Beginning with a “microcredit meltdown” in
Bolivia in 1999 — an event dismissed at the time
as a “one-off”— the rot really began in 2009 when
microcredit crises broke out in Bosnia, Nicaragua,
Pakistan, and Morocco. Bangladesh’s much-vaunted,
but massively saturated, microcredit sector only
survived its own meltdown in 2009–2010 after
behind-the-scenes pressure was exerted on leading
individuals and institutions to abandon their break-
neck growth strategies and share the market.
Today, many more countries are on the verge of
a “microcredit meltdown,” including Mexico, Peru,
Cambodia, and, just five years after its unprecedent-
edly large convulsion, India.
The Sobering Reality
Despite its manifest unworkability, if not its full-
blooded destructiveness to long-term development
aims and sustainable poverty reduction, the micro-
credit model remains an icon within the interna-
tional development community.
Indeed, faced with the collapse of the model
under the weight of its own contradictions and fail-
ures, the World Bank is undeterred. It remains so
enamored of microcredit that it recently began a
deeply cynical rescue mission by reclassifying it
under an almost entirely fake new agenda — “finan-
cial inclusion.”
Under this plan, the extension of microcredit
is no longer enough. To be fully included in the
financial system — and to supposedly create the
conditions for poverty eradication — the global poor
urgently need access to micro-savings, micro-insur-
ance, and micro-leasing, as well.
The breathtaking weakness, complete lack of
evidence, and obvious cynicism of this new agenda
has not stopped it from becoming the new “best
practice” in local finance, and infused it with the
same passion and commitment that animated the
microcredit movement. Predictably, it has already
spawned its own set of Yunus-like “faith healers,”
Uneven and Combined 17
 like Jeffrey Ashe — the one-time microcredit pio-
neer who admitted the error of his ways but has now
been reborn to lead what he calls “the micro-savings
revolution.”
Why is such nonsense and deception tolerated?
What is it about microcredit that allows it, despite
decades of failure, to be simply rebranded so it can
continue to undermine sustainable development
and harm the global poor?
The Ideology of Microcredit
The most immediate reason is that microcredit is
extremely profitable.
As the case of Banco Compartamos first high-
lighted — and later confirmed, when in 2013 it paid
out €154 million in dividends to its investors — it is
possible for external investors to make enormous
returns in the microcredit sector. Private commer-
cial banks began to both lend to, and invest in, many
of the largest microcredit institutions, and they have
reaped spectacular rewards by charging extremely
high interest rates.
In Cambodia, for example, the largest and most
profitable bank, acleda, which is also a microcredit
bank, had investment houses falling over themselves
in 2009 when it offered a share of its equity (the
business conglomerate Jardine-Matheson Group
won out, taking a 12.25 percent stake).
Microfinance’s high “risk-adjusted profitability”
also explains why Wall Street’s hedge funds have
been moving into the sector since the early 2000s,
particularly in countries like India.
With so much relatively easy money on offer to
savvy investors, and with the ceos of the leading
microfinance institutions now willing and able to
grab a significant share of the profit themselves
in the form of huge salaries and bonuses, there’s
an obvious incentive to pressure the international
development community to keep backing the pro-
grams.This explains the vast resources expended
by commercial banks, venture capitalists, hedge
funds, and other would-be investors on promoting
the microfinance industry. Even high-profile web
discussion blogs are now sponsored by the financial
sector (for example, the Guardian runs a financial
inclusion blog sponsored by Visa).
18 Jacobin · Fall 2015
But profitability is just one half of the explana-
tion for the microcredit model’s widespread support
among policymakers, politicians, and ordinary
people. The issue of ideology is also central.
Microcredit is supremely attractive to the
neoliberal development community and neolib-
eral politicians. Within these circles criticism of
microcredit and the central role that individual
entrepreneurship supposedly plays in the develop-
ment process is simply not tolerated. Instead it is
aggressively rebuffed, because such skepticism is, in
essence, skepticism of capitalism itself.
This is the reason for the huge PR effort cur-
rently being mounted by the World Bank and others
— and backed up by a range of like-minded politi-
cians, foundations, and high-profile ngos in the US
and elsewhere — in support of “financial inclusion.”
As Mader and Sabrow demonstrate, one of the finan-
cial inclusion project’s central goals is to physically
rescue high-profile microcredit institutions from
(deserved) obsolescence and closure.
The financial inclusion agenda is primarily
designed to create the appearance that individual
entrepreneurship works as the neoclassical text-
books tell us it does, stifling discussions of left
alternatives in developing countries. If this sounds
cynical, it is the only sensible interpretation con-
sidering the gross misrepresentation of data, the
extensive use of cherry-picked case studies, and
the muffling of all critical viewpoints that currently
characterizes financial inclusion boosterism.
Of course, many well-meaning people and
institutions recognize that poverty is not being
wiped out, and they genuinely want to do some-
thing about it. Donating to a microcredit institution
is seen as a simple, effective way to address the
persisting scourge.
But by the same token, microcredit validates the
belief in the supposed power of US-style individual
entrepreneurship and free markets to eradicate
poverty. Poor people just need to be entrepreneurs
and they will escape immiseration — they don’t need
to organize, demonstrate, strike, form a leftist polit-
ical party, or agitate for radical, structural remedies
to their impoverishment.
By mobilizing funds to support micro-lending
programs in developing countries, microcredit acts

as the perfect medium through which such pro-cap-
italist ideological foundations and motivations can
be formed, nurtured, reinforced, and very practi-
cally expressed. Preserving the microcredit model
therefore benefits the international development
community — it embeds capitalist ideology in
successive generations in both developed and devel-
oping countries, and it advances the long-running
goal of depoliticizing international development.
One example of this depoliticization at work is
the hugely popular Kiva, a nonprofit organisation
founded in 2005 to mobilize loan funding from the
rich world — especially from US college students —
in order to help poor entrepreneurs in developing
countries get started.
Despite using wilful deception to attract initial
funding and attention — the two founders falsely
claimed that Kiva members gave a small loan directly
to an individual they chose on the Kiva website,
rather than simply to a microcredit institution — the
nonprofit has nevertheless flourished by promising
donors they can “empower people around the world
with a $25 loan.”
However, Kiva’s emphasis on providing small
microloans only semi-directly (that is, through
microcredit institutions) to micro-entrepreneurs in
developing countries has almost nothing to do with
actually fighting poverty. The “Kiva experience” is
much more about Kiva supporters seeking a form
of personal gratification by donating a small sum,
as well as validation that their ideology (capitalism)
actually works.
As marketing expert Domen Bajde explains,
Kiva’s success is based on “entrepreneurial charity”
— the comforting notion that savvy entrepreneurs
in countries like the US can meaningfully cur-
tail grinding poverty in developing countries by
directly supporting micro-entrepreneurs. No need
for solidarity movements and active resistance to
exploitation and unfair conditions imposed on
developing countries — just send a donation to Kiva
and the poor can take care of themselves!
A Failed Model’s Future
With microcredit having manifestly failed in terms
of promoting sustainable development and reducing
The Power of a Dollar
“The
  ‘Kiva experience’ is
much more about Kiva
supporters seeking a form
of personal gratification
than results for the poor.”
poverty, it is difficult to predict what comes next.
Many one-time supporters like Hugh Sinclair, and
even some globally recognized advocates and insti-
tutions like Catholic Relief Services, are abandoning
it as unsuccessful. Effectively supporting this deci-
sion are a growing number of high-profile US-based
academics and previously high-profile advocates,
who now concede that the data show microcredit is
a flawed antidote to poverty.One of the most dam-
aging effects of the microcredit movement has been
its displacement of more developmentally effective,
community-driven local financial institutions — like
credit unions, financial cooperatives, and state de-
velopment banks — from the policy agenda. But in
the wake of the 2008 financial crisis, and growing
awareness of the dangers of microcredit, alternative
institutions are making a comeback, particularly in
the Global South.
Nevertheless, it seems likely that the micro-
credit model will endure in some form before it is
replaced by the similar, but much broader, financial
inclusion agenda. After all, this is what the World
Bank wants — and it has support from numerous
corners, including powerful global financial insti-
tutions and funds.
When the financial inclusion agenda does
eclipse microcredit, it will be no cause for cele-
bration. The program suffers from the same pitfall
as microfinance: it protects and enriches a narrow
global elite, while offloading risk onto the poor
themselves. Democratizing finance in a radical way
will require the Left to move beyond the micro-
scale, and develop collective, cooperative and state
institutions to promote sustainable development
and finally end poverty.  ■
Uneven and Combined 19
 With Strings
Attached
Latin America’s conditional cash
transfer programs don’t offer a real
answer to poverty and inequity.

Melisa Handl onditional cash transfers (ccts) have been heralded across the

C
and Susan Spronk political spectrum as a fast, affordable way to improve the global
poor’s access to basic services and bring about important social
gains. The International Monetary Fund claims that ccts are
“smart economics” that “empower women,” while Argentine
President Cristina Kirchner praises the programs for contributing to develop-
ment and promoting the inclusion of “the most vulnerable sectors” of society.
cct mechanisms are quite simple. The recipient meets certain conditions
— such as going for a check-up while pregnant, bringing their newborn for fol-
low-up visits, or sending their child to school — and in return receives a cash
transfer from the state.
The payments are small. In Bolivia, for example, the program for pregnant
women, named after the revolutionary indigenous leader Juana Azurduy, pays
around $20 usd a visit during gestation and the first two years of the child’s
life. It, like most ccts, focuses on social reproduction, targeting women, spe-
cifically poor mothers.
While today much of the liberal-left embraces ccts, they were actually
first pioneered in the 1970s by Chilean dictator Augusto Pinochet and were
later incorporated into 1990s neoliberal policy agendas in Brazil, Mexico, and
Honduras. But it’s only been in the past two decades that they have prolifer-
ated, particularly in the “emerging economies” of Latin America, including
“pink tide” countries like Bolivia, Argentina, and most famously, Brazil under
Lula, who piloted the Bolsa Família (Family Allowance) program shortly after
his 2002 election.
Bolsa Família provides small cash transfers to families with children, who
in return must ensure that the children attend school and are vaccinated. With
approximately 12 million families participating, it’s one of the largest and most
prominent cct programs in the world.
ccts are without a doubt more progressive than the work-for-welfare
policies that became popular during the 1980s and 1990s, famously through

Uneven and Combined 21

 the reforms of US presidents Ronald Reagan and Bill
Clinton, who portrayed vulnerable welfare recipients
as economic menaces.
Similar policies were also implemented in
the Global South throughout years of neoliberal
structural adjustment. Facing pressure from the
World Bank and International Monetary Fund, the
Bolivian government slashed subsidies for food,
transportation, and housing in exchange for loans
needed to stabilize the country’s economy. To mit-
igate the impact of these policies, the banks gave
Bolivia “emergency social funds” — cash to give to
the poor in exchange for physical labor, such as dig-
ging trenches for urban water systems. Since these
policies were means-tested, and women tend to be
the poorest of the poor, the programs had very high
rates of female participation.
Things have changed a bit since then. With the
turn to “neoliberalism with a human face” in the
wake of the late 1990s East Asian financial crisis, it
has now been accepted in international policy net-
works that the state can just give money to the poor
without making them “work.” But should left-wing
governments support ccts as a policy instrument
to tackle poverty and gender inequality?
One of the reasons why ccts are so popular
is that they deliver results at a relatively low cost.
Compared to the expenses involved in establishing
universal, quality healthcare and education systems
— which in most of the Global South would entail
massive public investment — ccts are almost free.
According to economist Enrique Valencia Lomelí,
by the mid-2000s there were twenty different cct
programs in sixteen different countries in Latin
America and the Caribbean, with costs ranging from
only 0.04 to 0.80 percent of gdp — small change
considering that total health spending in the oecd
countries as a share of gdp was 8.9 percent in 2013.
While ccts have a mixed record, studies
show that overall they’ve had a positive impact on
maternal and child health, and have helped improve
school retention rates. According to the imf, the
direct impact of ccts in Brazil and Mexico accounts
for one-fifth of the decrease in the Gini coefficient
between 1995 and 2004 in those two countries, with
some of this closing income inequality gap credited
to improved school retention rates.
22 Jacobin · Fall 2015
ccts are also popular — especially given the
mainstreaming of feminist discourses over the last
decade — because they are said to empower women
and undermine patriarchy by transferring cash
straight to the female head of the qualifying house-
hold, short-circuiting oppressive household relations.
But we shouldn’t assume that the move to ccts
is a step away the marketization of basic needs,
and indeed the question of whether cash transfers
actually liberate women has been largely unexplored.
Most academic studies in English on ccts have
been conducted by sociologists and economists,
and have been primarily concerned with measuring
their impact in the health and education outcomes of
children. To date there has been little ethnographic
research — the best way to explore subjective
questions about the “empowerment” effects of the
policies — though feminist researchers like Maxime
Molyneux have raised several objections, focusing
on their paternalistic nature, effects on citizenship,
and tendency to entrench unequal gender relations.
The framing of the program lends itself to these
critiques. The conditionalities (or “co-responsibil-
ities”) imposed by cash transfer programs imply a
kind of state paternalism which aims to discipline
the behavior of the poor in order to teach them how
to invest in the well-being and “human capital” of
their children.
Conditional cash transfers programs begin with
the presupposition that the poor will obey the con-
ditionalities in order to overcome poverty. The
flip-side of this is that ccts therefore serve as a
mechanism for disciplining poor people — when a
household fails to comply with its “responsibilities,”
it is promptly removed from the program.
This axiom is quite different from the notion that
providing public goods such as health and education
is “socially efficient,” and therefore, categorically
desirable from a development standpoint. As the
UN Economic Commission for Latin America’s
(cepal) 2012 report noted, ccts violate the human
rights principles of universality and non-discrimi-
nation, the right to social security, and the right to
an adequate standard of living. Only certain poor
people — the “deserving poor” who fail the income
test — are granted state assistance and allowed to
participate in the programs.
Cash for Good Deeds With Strings Attached

Governments across the world have experimented

with conditional cash transfer programs.

Mexico Oportunidades
attendance at 80% of school days
(monthly), 93% annual attendance;
finish 12th grade by age 22; timely
completion of middle school
regular check-ups
for all family members;
attendance at health
and nutrition lectures

Colombia Familias en Acción

500,000 households
attendance of 80% of school days
Households affected
to national total
twice yearly check-ups for all
children

2 cents Money from cash transfer

(median, per day)
/ average cost of daily
Honduras consumption

Programa de
Asignación
Familiar (PRAF) Brazil
Bolsa Família

attendance of 85% of school days

case-by-case requirements

Ecuador Bono de Desarrollo Humano

attendance of 90%
of school days attendance of 85% of school days;
parent-teacher meetings
bimonthly infant check-ups
vaccination; growth monitoring;
pre- and post-natal check-ups;
mother participation in nutritition
and parenting seminars

Uneven and Combined 23

 The punitive character of the conditionalities
is based on the liberal belief that the poor are poor
because they don’t “invest” in their children. It
assumes that if a poor family complies with the
assigned responsibilities — “correcting” their
behavior accordingly — they will manage to escape
poverty. Neither of these ideas could be further
from the truth.
cct promoters portray these policies as recip-
rocal agreements — contracts — between poor
families and the state: poor families meet the con-
ditions and the state pays the cash. The contractual
characterization of these programs becomes evident
in the use of the term “co-responsibilities” (instead
of conditions) in most of the Latin American pro-
grams, a term which aims to frame recipients as
adults capable of agency. As one World Bank report
puts it, “The state is seen as a partner in the process,
not a nanny.”
Despite the contractualist language, in reality
the obligation only goes one way — recipients are
obliged to comply with the program terms if they
want to remain beneficiaries, but the programs do
not require the state to actually provide the neces-
sary conditions for the poor to fulfill their end of
the bargain.
For example, one of the major problems in rural
areas of Latin America is that there are simply no
services to buy — even if there is a hospital in the
nearby city, the recipient of the cct may not be able
to get there due to the non-existent public transpor-
tation system. To make matters worse, medical clinic
staff are often poorly trained and thus unqualified to
attend to the needs of women, especially those who
are indigenous or differently abled.
In Bolivia and Mexico, researchers have doc-
umented harsh racism among doctors and nurses
— a significant barrier to women’s access to health.
ccts do nothing to address these persistent forms
of oppression and inequality.
But the most important problem with condi-
tional cash transfers in Latin America is that they
frame poverty as a female concern. A number of
caveats are in order: Women of childbearing age
do tend to be the most vulnerable and poor mem-
bers of society; women do have fewer economic
resources than men; and in most jurisdictions in the
24 Jacobin · Fall 2015
world today, women are the primary members of
the household responsible for social reproduction.
Any successful policy that aims to transform society
must recognize these facts.
ccts, however, follow them to the wrong con-
clusions. In all Latin American cct programs funds
are only provided to women; the exception to this
model was Argentina’s short-lived Universal Child
Allowance, in which both women and men were eli-
gible to become recipients provided that they were
primary caregivers. But in July 2013 the policy was
changed and now cash is exclusively transferred to
the mother of the household, similar to the rest of
the region.
This exclusive focus on women is problematic,
yet surprisingly uncontested in the broader devel-
opment community. By targeting only women,
conditional cash transfers build on and promote
conservative ideas of womanhood and the expected
maternal role of poor women within their families.
The policy appeals to cultural norms that portray
women as inherently “mothers,” suggesting that
only mothers matter, while simultaneously framing
poverty as a female issue.
Women appear as maternal figures that are
instrumental to combat poverty (and thus gen-
erate economic growth) — people to be recruited,
micro-policed, and trained to ensure the develop-
ment of the next generation of workers.
But why do only mothers matter? In contrast to
the sanguine emphasis on the importance of mother-
hood, in these policies fathers appear to play no role
in helping poor families escape poverty. Instead of
creating and promoting mechanisms to incentivize
fathers to participate in care practices and responsi-
bilities, images of fatherhood are removed from the
sphere of the household.
As a stark contrast, the parental leave policies
in Norway, Sweden, and Iceland — some of the
most advanced countries in the world with respect
to gender equality — force male partners in oppo-
site-sex couples to take part of their leave or lose
it, and leaves may not be transferred to the female
spouse.
Conditional cash transfers thus present a par-
adox from the perspective of gender equality. On the
one hand, women have finally been recognized by

“The
  state can play a
positive role promoting
women’s equality
by providing high-
quality universal public
services.”
the state as legitimate economic actors and rights-
bearers, which represents, as the cepal report puts
it, a “true milestone in the history of social policy in
the region.” Yet, on the other hand, there is a fun-
damental disconnect between the so-called sharp
gender focus of the cash transfer programs and poor
women’s real empowerment.
Though framed as legal beneficiaries of the pro-
grams, they do not receive the financial benefit by
their own right, but based on their relationship with
the real intended beneficiaries of the stipends: their
children. Poor women are seen as means to an end
rather than an end in and of themselves. Molyneux
astutely observes that women are instrumentalized
by ccts as mere “conduits of policy.”
As Molyneux argues, in the most practical sense,
this adds greatly to women’s time burdens — the
time spent collecting the transfers and fulfilling
program demands, such as travelling and queuing
to receive the stipend, obtaining certificates from
schoolteachers, attending workshops on healthcare,
and volunteering activities related to the program.
The poorer a household’s living conditions are at the
beginning of the program, the more duties women
will need to perform in order to accomplish expected
objectives.
The ccts also deepen gender divides through
their symbolic implications. Brazil’s Bolsa Família,
for example, tries to train women to perform “fem-
inine” functions such as helping children with their
homework or bringing children to professionalized
medical services, suggesting that a family’s poverty
may be explained by the lack of maternal qualities
on the part of poor women.
Apparently, women will not sufficiently care
for their children unless they are incentivized to
do so with cash.
With Strings Attached
From the perspective of social reproduction fem-
inism, this discourse can be explained in the context
of social policy that attempts to keep care work “out
of sight and out of mind.” The intensifying exploita-
tion of poor women’s labor and time is disguised as
“gender empowerment.” It also ends up being a per-
verse mechanism, as the state makes women solely
responsible for addressing the forms of oppression
and exploitation to which they are already subjected
— unequal gender relations and poverty.
To some degree, in a capitalist society, giving
money directly to women does increase their power
within the household and within society at large. But
the evidence of how ccts operate in Latin America
to deepen gender divides and position women as
functionaries rather than real citizens suggests that
cash transfer should not be among the Left’s social
policy proposals.
As Frederick Engels observed long ago, women
will not be liberated until the tasks of social repro-
duction are socialized, that is, provided by the
state and shared equally (to the extent possible)
with men. As they are currently conceived, ccts
have the opposite effect: they entrench unequal gen-
dered divisions of labor, use women as social policy
instruments that build “human capital,” and fail to
recognize women as rights-bearing citizens of their
own merit, regardless of family status.
Without a doubt, ccts are less cruel than the
work-for-welfare programs that dominated the
international policy agenda in the 1980s and 1990s,
but there are much better policy alternatives avail-
able. The best on offer are ones that aim to socialize
the tasks of social reproduction by taking vital ser-
vices out of the market.
Here the state can play a positive role in pro-
moting women’s equality by providing high-quality
social services on a free and universal basis. We
have seen these delivery models, and their beneficial
effects, in countries like Cuba and Venezuela, where
all citizens have access to health and education as
a social right.
There is no “silver bullet” solution to the deep
problems of inequality and poverty in Latin America
and the world over, but progressive movements
should set their sights far higher than conditional
cash transfer programs.  ■
Uneven and Combined 25
 The Philanthropy
Hustle
Global North or South, private foundations
are part of the problem, not the solution.

Linsey eet Ajay Banga. The son of an Indian army officer, Banga was

M
McGoey born in Khadki, a cantonment a few hours outside Mumbai. After
studying economics at Delhi University, he took an mba from the
Indian Institute of Management and began an illustrious career
working for corporate giants like Nestlé and PepsiCo. In 2010,
Banga was appointed ceo of Mastercard, headquartered in Purchase, New York.
He is one of only a handful of Fortune 500 heads to complete his primary,
secondary, and post-secondary education entirely in India.
Banga took on a healthy company and made it even more profitable. In 2009,
Mastercard earned a profit of $1.5 billion on revenues of $5.1 billion. In 2013,
profit reached $3.1 billion on revenues of $8.4 billion. The company’s stock has
jumped 330 percent over the past five years.
He’s been rewarded well for his efforts: last year Banga took home over $13
million and cemented his status as a darling of the business press, saluted in
magazines like Fortune, and named the world’s “Top Wealth Creator” by Chief
Executive magazine.
He specializes in innovation. At least, that’s what business papers proclaim:
Banga has “doubled down on technology,” “launched an in-house innovation
arm,” and introduced Mastercard Contactless, a new wireless payment system.
Most innovatively of all, he has narrowed his gaze on the world’s 2.5 billion
“unbanked” inhabitants. As a feature in Fortune describes, Banga realizes that
“much of the opportunity for the company is in parts of the world where a digital
wallet is still decades away.” He’s at the forefront of a growing group of busi-
ness leaders who appreciate that there are profits to be made in global poverty.
What Fortune doesn’t add is where the money for Banga’s investments in
the “unbanked” masses is coming from. A good deal of it is, in fact, not coming
from the company he leads. It’s not coming from Mastercard shareholders,
and it’s certainly not coming out of his ever-expanding pay packet. It’s coming
from the coffers of the world’s most powerful philanthropic organization: the
Bill and Melinda Gates Foundation.
In 2014, the Gates Foundation announced an $11 million grant to Mastercard
to establish a financial inclusion “lab” in Nairobi, Kenya. The grant will last three

Uneven and Combined 27

 years, after which Mastercard has indicated that,
should the venture prove sufficiently lucrative, the
company may be willing to foot the bill for further
financial expansion in the region.
Mastercard’s management rationalized the
grant in economic terms: investing in developing
nations such as Kenya is risky, and there’s no guar-
antee that investments will pay off. As Mastercard
explains in a press release, the money from the Gates
Foundation enables the company to reach “new mar-
kets that may otherwise be commercially unviable.”
The gift to Mastercard — and it is a gift, rather
than a loan or an equity investment — is the latest
in a long list of donations that the Gates Foundation
has offered to the world’s wealthiest corporations.
From Vodafone, a British company notorious for
paying zero corporate tax in the United Kingdom, to
leading education companies such as Scholastic Inc.,
the Gates Foundation doesn’t simply partner with
for-profit companies: it subsidizes their bottom-line.
The Business of Altruism
Increased charitable giving to the world’s wealthiest
corporations is simply one novel aspect of a much
bigger phenomenon: the growing power and clout of
private philanthropic actors over global institutions
such as the World Health Organization.
With an endowment of $42 billion, the Gates
Foundation spends about $3 billion each year
towards causes that, at first glance, seem irreproach-
able. But the giving has hidden costs.
Take donations towards the World Health Orga-
nization. In 2013, the Gates Foundation gave over
$300 million to the UN health agency — the largest
contribution from any donor that year, including the
US government. What the Gates Foundation spends
on global development yearly is almost as much as
the overall operating budget of the who, and that
doesn’t include its other philanthropic programs.
The foundation expects something in return for
its efforts. As Laurie Garrett suggested in a 2012
Foreign Affairs article, “few policy initiatives or nor-
mative standards set by the who are announced
before they have been casually, unofficially vetted
by Gates Foundation staff.”Some people argue this
is a positive development. The Gates Foundation is
28 Jacobin · Fall 2015
praised often for its results-oriented philanthropic
approach. Peter Singer, the controversial Austra-
lian philosopher who helped launch the “effective
altruism” movement, has praised Gates and Warren
Buffett for being the “most effective altruists” in
history.
The problem is that there’s little evidence to
back this remarkable assertion. On the one hand,
there’s no doubt that the Gates Foundation has done
some good in the field of global health. But at the
same time, it’s clear that, whatever the opinions of
Singer and others, the foundation is not spending its
money on the largest global health killers.
Until recently, Gates was not even a proponent
of a decades-long goal — championed since the
who’s 1978 Alma-Alta Declaration — to strengthen
primary health care systems and achieve universal
health coverage. Far from being uniquely “effective,”
grants made by the Gates Foundation “do not reflect
the burden of disease endured by those in deepest
poverty,” as the editors of the Lancet, the world’s
leading medical journal, pointed out in 2009.
The Gates Foundation has also aggressively
called for US-based multinationals such as Monsanto
to gain a stronger foothold in African nations, a move
that worries observers like Daryll Ray, an agriculture
expert based at the University of Tennessee, who
fear the economic consequences of the foundation’s
interventions for small farmers: “[We need] to take
farmers exactly where they are at the moment, and
help them be more productive using their knowl-
edge, and technology that would be appropriate
to add to it, and then gradually move them into a
higher rate of production, rather than talking about
them buying Monsanto products, or other kinds of
products that they can’t afford and have to buy every
year, as in the case of hybrid seed.” Criticism has also
come from unexpected corners: Howard Buffett,
the eldest son of Berkshire Hathaway ceo Warren
Buffett, suggested on 60 Minutes in 2011 that the
Gates Foundation’s bullish optimism about hybrid
seeds is blind to the circumstances of developing
nations: “We need to quit thinking about trying to
do it like we do it in America.”
In a 2011 book chapter, Oxford health economist
David Stuckler and his colleagues argue that “global
health is ruled by a few private donors who make

decisions in secret. The capacity to decide what is
relevant and how it will be addressed is in the hands
of very few, who ultimately are accountable to their
own interests.”
Alms for the Wealthy
The phrase “corporate philanthropy” seems des-
tined to reside permanently inside a set of scare
quotes: many progressives can’t bring themselves
to utter the term without visible contempt. Defined
as the charitable donation of corporate profits or
resources to non-profit entities, it is seen as a white-
washing tool, as a way for a company to curry public
legitimacy while diverting attention from its more
unsavory practices.
But this definition misses how corporate philan-
thropy has evolved. More and more, corporate
philanthropy is not about corporations giving money
to charity. Companies actually do remarkably little
of that. As a 2002 Harvard Business Review article
pointed out, over the previous fifteen year period,
charity by US companies as a percentage of profits
fell by 50 percent. More recently Slate reported that
corporate giving had nosedived from a high of 2.1
percent of pre-tax profits during the mid-1980s to
just 0.8 percent in 2012.
Corporate philanthropy today is about private,
tax-exempt donors such as the Gates Foundation
giving their charity to corporations.
The Gates Foundation is not the only philan-
thropic foundation offering donations to for-profits
such as Mastercard. Other institutions such as the
Ford Foundation have also given direct donations to
for-profit firms, especially media companies, while
the Wellcome Trust, Britain’s largest philanthropic
organization, often makes grants to pharmaceutical
companies.
But the pace and scale at which the Gates Foun-
dation has ramped up its donations to corporations
has increased at such a speed that some of the most
thoughtful experts on philanthropy aren’t even aware
of the practice. To understand the novelty of the Gates
Foundation’s grants to companies such as Master-
card, it’s useful to know what the grants are not.
These are not endowment investments. Over
the years, the Gates Foundation has faced a steady
The Philanthropy Hustle
With a Little
Help from My
Friends
The Gates Foundation gives millions to for-profit
corporations. Here are just a few.
Achieve, Inc.
Achieve, Inc. is a private company dedicated to
enforcing compliance with Common Core teaching
standards, despite the outspoken opposition of
students, teachers, and educators. They recently
received $23 million from the Gates Foundation.
Cargill
In 2005, the International Labor Rights Fund sued
Cargill for trafficking Malian children for use as
pickers in their cocoa fields. The Gates Foundation
later gave the American agri-corp $10 million for
a project aimed at coercing Mozambican farmers
into buying their soybean seeds.
Vodacom
The Gates Foundation gave Vodacom $4.8 million
to build cell phone infrastructure in Tanzania,
charitably neutralizing all the risk associated with a
potentially lucrative investment for the company.
Monsanto
Monsanto is a multinational agri-business giant,
with hefty lobbying power and a history of
encouraging free trade agreements like NAFTA. The
Gates Foundation contributed an estimated
$23 million to the company in 2010 by buying
500,000 shares of their stock.
Scholastic, Inc.
In 2011, the Gates Foundation gave Scholastic,
Inc. $4.5 million to help them force Common Core
requirements on skeptical educators.
Uneven and Combined 29
 “Over
  the previous fifteen year period,
charity by US companies as a percentage
of profits fell by 50%. Corporate giving had
nosedived from a high of 2.1% of pre-tax profits
during the mid 1980s to just 0.8% in 2012.”
chorus of complaints for its penchant for investing
its endowment in the same companies that perpet-
uate the environmental and health problems that
its gift-giving aims to ameliorate. This practice is
different, however. The Mastercard donation is also
not an equity investment, either. They are donations
that help to reduce corporate overhead, allowing
some of the world’s wealthiest companies to offset
the cost of expanding in new markets. Companies
are not obligated to repay the grants, regardless of
how profitable the gifts end up being.
The Gates Foundation’s donations are just that:
donations. For the corporations, they’re a freebie.
For US taxpayers, they are a drain on public money.
Corporate Solidarity
The practice of philanthropic foundations sub-
sidizing for-profit corporations is at once widely
trumpeted — Mastercard issued a media release
celebrating its gift from the Gates Foundation — and
strangely unknown. Leading historians, sociologists
and philosophers of philanthropy seem unaware of
the phenomenon.
A recent series of articles in Boston Review on
the power and transparency of philanthropic foun-
dations is instructive.
The 2013 forum, titled “What are Foundations
For?” was anchored by a lead article written by Rob
Reich, a political scientist based at Stanford Uni-
versity who has raised some of the most thoughtful
criticisms of large-scale philanthropic giving to date.
Reich points out that little philanthropic spending
30 Jacobin · Fall 2015
actually reaches low-income individuals: the vast
majority of foundation dollars go to well-endowed
university alma maters; to cultural institutions fre-
quented by the wealthy; to religious institutions
that are free to hoard wealth rather than disburse it.
Noting that philanthropic foundations “are
plutocratic by nature,” Reich asks an important
question: are unaccountable philanthropic organi-
zations such as the Gates Foundation compatible
with democracy?
Some of the nation’s most renowned academics
— including Pablo Eisenberg, Stanley Katz, Diane
Ravitch, and Rick Cohen — offered considered
responses to Reich’s article.
Their commentaries provide a whistle-stop
tour through the terrain of philanthropic man-
agement today, giving glimpses into a “wild west”
sector that faces little regulatory oversight. Rav-
itch, a respected education historian, commented
that philanthropic spending on public education is
dominated by “three new behemoths”: the Gates,
Eli and Edythe Broad, and Walton Family Foun-
dations. She suggests that rather than foster a
diversity of opinion, these entities are remark-
ably monolithic in their policy prescriptions and
funding patterns, collectively pouring billions
into shared efforts to link teacher remuneration
to student test schools, increase online charter
schools, and reduce collective bargaining rights.
Eisenberg, a well-known philanthropy
scholar, calls for legislative limits on the size of
foundations: reducing their endowment size to no
more than $10 or $15 billion. Gara LaMarche, a

former executive at George Soros’s Open Society
Institute and Chuck Feeney’s Atlantic Philan-
thropies, suggests that so little philanthropic
money is actually trickling down to the global
poor that we need to consider whether tax deduc-
tions are warranted at all.
But curiously none of the fourteen respondents
questioned an offhand remark by Reich, halfway
through his short piece: “To be sure, foundations
must direct their grants to public charities or, in
tax parlance, 501(c)(3) nonprofit organizations,”
Reich writes, adding that in “the United States,
virtually any organization can be structured as a
nonprofit so long as it promises not to distribute
profits to its owners. So the public charity rule
is no limit at all.”He’s right that the definition of
nonprofits is extremely broad — almost licentiously
so. But it’s not true that foundations must direct
grants only to charitable entities. They are free to
offer donations to for-profits that fulfil the founda-
tion’s charitable mission — an extremely permissive
criterion that donors such as the Gateses are inter-
preting in novel and unprecedented ways.
There’s widespread confusion over exactly when
the growing trend of foundation grants towards cor-
porations first started. In 2012, Michael Meyer wrote
a Columbia Journalism Review article exploring the
Ford Foundation’s announcement of a gift of $1.04
million to the LA Times to expand its reporting. “A
foundation giving money directly to a for-profit to
supplement its reporting,’ Meyer writes, ‘[is] unprec-
edented as far as I know.”
But there are precedents. In 2010, the Gates
Foundation offered $1.5 million to abc News and
a little over $1.1 million to nbc in 2011 “to support
the national education summit.” The following year,
the Gates Foundation gave another million to nbc,
this time for the more vague purpose of “inform[ing]
and engag[ing] communities.” Other for-profit media
companies receiving Gates Foundation money in 2012
included Univision — a Spanish language broadcaster
whose parent company, Univision Communications
pulled in revenues of $2.6 billion in 2014.
Traditionally, philanthropic grants to for-profits
were rare, but this is no longer the case. The Gates
Foundation has offered dozens of grants to for-profit
companies around the world, including beneficiaries
The Philanthropy Hustle
poised to profit from the Common Core standards.
A frequent worry among teachers and parents is
that Gates money helps position private firms such
as Pearson and Microsoft to benefit from the testing
industry that is tightening like a corset around stu-
dents and teachers. While profiteering by charitable
institutions is illegal — in 2013, New York Attorney
General Eric Schneiderman’s office reached a $7.7
million settlement with the Pearson Charitable
Foundation after the non-profit was found to have
misused its charitable funds to generate revenue
for Pearson, its corporate parent — precedent sug-
gests that it’s perfectly legal for institutions like
the Gates Foundation to hand money to parent
corporations directly.
Indeed, the Gates Foundation makes similar
donations all the time. Scholastic, a company that,
like Pearson, is a for-profit education publisher, has
received over $6 million in grant money from the
foundation. A November 2011 grant of $4,463,541
was designed to support “teachers’ implemen-
tation of the Common Core State Standards in
Mathematics.”
What’s not clear is why this counts as charity.
Doesn’t Scholastic stand to gain from the expansion
of textbook and testing materials accompanying the
Common Core standards?
The answer is a clear “yes,” which Scholastic
pointed out itself in a 2014 press release lauding
the performance of its digital education sector: “In
2014, the company booked $1.82 billion in revenue, a
modest increase of 2 percent over the previous year’s
$1.79 billion result. Profits were up considerably…
Scholastic also expects sales of its digital education
products to continue to increase...” On inquiry Chris
Williams, a press officer at the Gates Foundation,
responded that “fulfilling a charitable objective
does not preclude revenue generating activity... If
a potential grantee is not a public charity and the
exercise of expenditure responsibility is required,
the foundation exerts all reasonable efforts and has
established procedures to see that the grant is spent
solely for the charitable purpose for which it was
made.” Williams is referring to irs rules that require
donors to take responsibility for ensuring grants to
for-profits are used exclusively for charitable goals
and not for private gain.
Uneven and Combined 31
Brother, Can You
Spare Me a Billion?
The law allowing taxpayers to write off donations to
charity foundations helps the wealthy dodge taxes and
costs the US government hundreds of billions per year.
The $246 billion
Numbers amount of government revenue lost
to the charitable tax break between
2010 & 2014
10%
portion of annual income typically
donated by low-income earners
4%
portion of annual income typically
donated by high-income earners
And Yet 76%
portion of the charitable tax break
taken in by taxpayers making more
than $100,000 per year
57%
portion of donations contributed by
same tax bracket
Why? 70%
portion of taxpayers who can’t
itemize their tax returns, making
them ineligible for the charity
deduction
$350
tax break for $1000 donation for
high-income earner (35% tax
bracket)
$200
tax break for $1000 donation for low-
income earner (20% tax bracket)
32 Jacobin · Fall 2015
However, his assurances are called into ques-
tion by other Gates donations, such as a 2012 grant
of $817,468 to Tutor.com, one of the largest online
tutoring companies in the nation, to create an “on-de-
mand” professional development system geared at
math training for middle and high school teachers.
Although Tutor.com’s website clearly indicates
that the software has been trademarked, and schools
are invited to “get a price quote,” news coverage of
the donation never queried whether tying a char-
itable donation to proprietary tutoring software
breaches the irs stipulation that foundation grants
must be used exclusively for charitable ends.
Indeed, numerous for-profit education start-ups
are indebted to the foundation. Another example,
BetterLesson Inc., billed as the “Facebook for educa-
tors,” circulates free online lesson plans to teachers
but charges schools a service fee. It has received over
$3.5 million in grant money from the Gates Foun-
dation. BetterLesson may well prove to be a useful
tool for teachers. But it also charges a premium
for that service — a cost borne by taxpayer-funded
public education institutions. At a time of growing
anger over dwindling educational resources in public
schools, at a time when extreme poverty is on the
rise in the United States — does yet another tech
start-up deserve Gates’ charity?
Foundation grants to for-profits may not be pro-
hibited by law, but 501(c)(3) regulations clearly state
that a private philanthropic foundation must not
“be organized or operated for the benefit of private
interests.” To remain eligible for tax exemptions, a
foundation must engage in grant-making activities
where “no part of the net income of which inures to
the benefit of any private shareholder or individual.”
Obviously, a number of Gates Foundation’s
grants have directly benefited private companies,
their management teams, and their shareholders.
The question is, even if this contravenes irs private
benefit rules, does it really matter? On the one hand,
the money going to for-profits is a lot less than grants
geared at non-profit organizations – the foundation
has given away over $33 billion to date, and the vast
majority has gone to non-profits.
On the other hand, it’s not just about the money
— it’s the precedent. If a grant to Scholastic or

Mastercard can be justified as charity — then why
not a tax-deductible donation to Goldman Sachs or
News Corp or Monsanto?
The Gates Foundation has insisted that the
private sector should play a stronger role in global
development and now regularly subsidizes corpo-
rations who want to turn education, health care,
and poverty alleviation into business ventures. A
few years ago it seemed outlandish that a highly
profitable company like Mastercard was receiving
philanthropic grants. But the the role of founda-
tions is evolving rapidly and soon it may seem odd
that charity was once designated for those living in
poverty; those who have no housing; those fleeing
situations of domestic abuse; those reliant on food
banks; those bankrupted by skyrocketing medical
bills, and not to a multinational company taking a
taxpayer-funded bet on the idea that what the poor
really need is a new credit card.
The Gospel of Justice
Management scholars and investors champion the
growth of charitable giving to corporations with
terms like “philanthrocapitalism” and “shared
value,” claiming with a nod to Adam Smith that
market expansion is a naturally philanthropic pro-
cess, contributing to rising living standards globally,
and therefore tax-exempt gifts to wealthy compa-
nies shouldn’t be questioned but wholeheartedly
embraced.
Business executives point enthusiastically to
the “blurred” line between for-profit and nonprofit
activities in order to justify the growing charity
they receive.
“There are shifts in the world that are creating a
much more sincere conversation between the devel-
opment community, ngos, governments, for-profits
and the academy,” Walt Macnee, vice chairman at
Mastercard, commented to media after receiving
the Gates Foundation grant. “Corporations like ours
understand we are all in this together.” The rhetoric
of Davos elites — overly confident TED Heads who
descend on global summits proclaiming that the
“revolutionary” rise of a new, market-driven, for-
profit philanthropy will end poverty altogether isn’t
new. During the mid-twentieth century, the belief
Thanks to Ankita Gupta for her research assistance.
The Philanthropy Hustle
that private interests inevitably yield public rewards
was encompassed in a remark by the former Gen-
eral Motors ceo Charles Wilson, who claimed that
what’s “good for the country was good for General
Motors and vice versa.”
Long derided as an exemplar of unbridled ceo
hubris, in reality Wilson uttered the remark in a
regretful manner during a confirmation hearing
after his nomination as US Secretary of Defense.
Asked about his competing roles as a business leader
and an elected official, he said “for years I thought
what was good for the country was good for General
Motors and vice versa.” Such humility is absent from
the rhetoric of today’s TED talkers: self-professed
revolutionaries who parrot a super-charged version
of Wilson’s conflation of private and public interest
— what’s good for the next online education tech
start-up is obviously good for American students
and their counterparts across their globe.
Contrary to the conventional wealth-creation
narrative, large multinationals are increasingly
assuming less financial risk when it comes to
investing their own capital — even as they reap
excessive financial rewards by exploiting subsidies
from the public sector and philanthropic founda-
tions. Companies like Mastercard are just as bullish
and self-satisfied about the charity they receive as
the charity they give away.
But challenging the new corporate charity claim-
ants will not, alone, mitigate the unrivalled power
of large philanthropic funders to frame the terms of
debate in the fields of education, health and global
poverty or shape the policies of institutions such
as the who.
Over a century ago, when Andrew Carnegie
published his first “Wealth” essay suggesting that
private philanthropy would solve the problem of
rich and poor, he was met with fierce rebuke. “I
can conceive of no greater mistake,” commented
William Jewett Tucker, a theologian who went on
to become president of Dartmouth College, “than
that of trying to make charity do the work of justice.”
Today’s philanthrocrats share Carnegie’s gospel
of wealth. To take back the mantle of justice and
equality, the Left must delegitimize private founda-
tions and refute the centrality of charity in solving
the world’s most pressing problems.  ■
Uneven and Combined 33
The
MASTER’S
APPRENTICES
 China
Fantasies
Illusions on both the Left and Right
about China miss how the contradictions
of capitalism are shaping that country’s
development.

Ho-fung hen it comes to China, Donald Trump has nothing good to say

W
Hung publicly.
Yet Trump has been a secret admirer of Chinese businesses
for some time. At a 2008 international hospitality conference
in New York City attended by tourist industry executives, the
business magnate attributed the United States’s falling competitiveness to
government regulations and painted China as a veritable corporate paradise:

In China, they fill up hundreds of acres of land, constantly dumping and

dumping dirt in the ocean. I asked the builder, did you get an environmen-
tal impact study? He goes, “What?’ I asked, “Did you need approval?” No,
the Chinese said. And yet if I am the last guy to drop one pebble in the
ocean here in this city, I will be given the electric chair.

Trump isn’t the only one smitten with China. Hailed by the business press and
industry consultants, veteran hedge fund trader Ann Lee’s bestselling book
What the U.S. Can Learn From China: An Open-Minded Guide To Treating Our
Greatest Competitor As Our Greatest Teacher portrays China as a place where
political elites care about the long-term national interest, cherish meritocracy,
and value education and a strong work ethic — unlike the partisan rancor and
negligence of long-term economic development in the US.
The Chinese economic boom has also captured the imagination of many on
the Left, who view the country as capable of ending Western hegemony and global
neoliberalism. One such thinker is Martin Jacques — former editor of Marxism
Today (the official periodical of the Communist Party of Great Britain) — who
wrote the bestselling book When China Rules the World: The End of the Western
World and the Birth of a New Global Order. In it, Jacques claims that China’s
economic miracle is eroding the long-term dominance of Western capitalist
countries and creating a new, more egalitarian global order.

Illustrations on preceding spread and opposite page by Leslie A. Wood Uneven and Combined 37
 Jacques’s book was published in the aftermath
of the 2008 financial crisis, when many investment
bankers were desperate to retain their equi-
ties-averse customers. Selling them exotic funds
tied to the China growth story became a profitable
gamble, so it is not surprising that the book received
widespread acclaim in major financial newspapers
and magazines. Indeed, during the Great Reces-
sion there were plenty of commentaries celebrating
China’s heavy state intervention as a superior alter-
native to the neoliberalism the US had pushed on
the developing world.
But with the recent stock market crash, China’s
hyper-growth machine has lost some of its luster,
and the post-recession euphoria over a distinct
“Chinese capitalism” has started to seem positively
quaint. The country’s economic woes demonstrate
that it is very much a part of the global capitalist
system — that capital accumulation in China follows
the same logic and suffers from the same contradic-
tions of capitalist development in other parts of the
world. To understand the recent booms and busts of
Chinese capitalism, in other words, we first have to
understand capital’s international trends and cycles.
The “Workshop of the World”
China’s economic boom of the past two decades is
the culmination of a political-economic solution that
the US and other core countries pursued in response
to the economic crisis of the 1970s.
Beginning in the late 1960s, manufacturing
profits in core countries declined significantly due
to competition from a rebuilt Europe and Japan and
the demands of an increasingly militant labor force.
In an attempt to revive profitability, manufac-
turers in the core began offshoring and outsourcing
production to low-wage economies in East Asia
— first South Korea, Taiwan, Hong Kong, and Sin-
gapore, followed by other Southeast Asian countries
like Malaysia and Thailand. This hemorrhaging of
manufacturing jobs accelerated after the Reagan
administration began to aggressively promote global
free trade.
But the supply of rural, low-wage labor in these
economies was shallow. When “Asian Tigers”
became middle-income or even high-income
38 Jacobin · Fall 2015
countries, they also became far less attractive as
manufacturing platforms.
Fortunately for Western capital, China was just
starting to implement a series of rural-oriented and
domestic-consumption-driven market reforms to
revive its entrepreneurial peasantry and rural indus-
tries. The measures were a response to the stalling of
the Mao-era primitive accumulation, which relied on
coercive collective farms to transfer rural surpluses
to the urban-industrial sector in order to facilitate
rapid growth in heavy industries.
Enacted when Deng Xiaoping came to power
in 1978, the reforms were successful in that they
brought prosperity to the countryside and reduced
rural-urban inequality. But they also led to hyper-
inflation and a balance-of-payments crisis at the
national level in the late 1980s and early 1990s, which
contributed to social upheaval and political crisis
between 1989 and 1992. This multi-dimensional
crisis pushed the struggling Chinese Commu-
nist Party (ccp) to make a drastic shift toward an
export-oriented model of development — through a
massive one-off devaluation of the yuan in 1994 and
a series of reforms that precipitated rural economic
decline and triggered a flood of rural migrant labor
into coastal export-processing zones.
The most significant upshot of the ccp’s policy
change was that China became firmly plugged into
the global free trade order. It became the “work-
shop of the world,” sucking in manufacturing jobs
from abroad.
Still, most export-oriented factories in China
have remained tightly controlled and exploited
by transnational corporations (tncs) headquar-
tered in the Global North. The value composition
of an iPhone — shown in the accompanying table
— perfectly illustrates the subordinate relation-
ship between China’s workshops and tncs in core
countries.
Benefiting tremendously from moving manu-
facturing to China, US capital persistently lobbied
Washington to make sure political differences
between China and the US would not stand in the
way of further profit-making. Their efforts usu-
ally paid off: the Clinton administration decided in
1994 not to make renewal of China’s Most Favored
Nations status conditional on addressing human
 China Fantasies

Inside the iPhone retail value: $600

South Korea
LG (or TMD) LCD display $28.50
Samsung Flash memory chip $27.00
Samsung Applications processor $10.75
Samsung DRAM memory $13.80

US
Broadcom Wi-Fi, Bluetooth, GPS chips $9.55
Intel Radio frequency memory $2.70
Texas Instruments Touch-screen control $1.23
Cirrus Logic Audio codec pack $1.15

Germany
Infineon Receiver/transceiver $14.05
Dialog Power management $2.03

Italy/France
STIMicroelectronics Accelerator and gyroscope $3.25

Japan
AKM Compass $0.70

Other
Wintek or TPK.Balda Touch screen $10.00
Not known camera, 5-megapixel $9.75
Not known camerea, VGA $1.00
Not known Battery $5.80
Not known Other parts $46.25

Component Total $187.51

Assembly Cost $6.54

Misc. $45.95

Profit
$360

Uneven and Combined 39

 rights concerns, made that status permanent in
Non-Financial Outward 2000, and welcomed China into the World Trade
Organization in 2001.
Foreign Direct Investment The wave of manufacturing outsourcing to
China, as well as the race to the bottom among devel-
oping economies desperate to attract manufacturing
China capital from the Global North, helped tncs rake
in super profits — which over the past two decades
$4bn 1990 were funneled into core countries’ swelling financial
$28bn 2000 markets, fueling further demand for consumer goods
$298bn 2010 from China. This led to rapidly expanding manu-
facturing capacity in China and financial bubbles
and debt-driven consumption in the US and other
core countries.
Russia By the 2000s, with overproduction in China and
debt-driven consumption in the US reinforcing each
n/a 1990 other, there was talk of “Chimerica” or “G-2” — the
$20bn 2000 foundation of a new global economic order.
$434bn 2010
A Dead Cat Bounce
Everyone knows how this story ended: the bub-
Singapore ble popped. The US economy gave out in 2008,
and China’s soon followed. Beijing engineered a
$8bn 1990 strong rebound, however, opening the floodgates
$57bn 2000 of state bank lending to restore growth relatively
$300bn 2010 quickly. The US, meanwhile, was stuck in the eco-
nomic doldrums.
This juxtaposition — robust recovery in China,
persistent downturn in the US — caused some to
Brazil argue that China had displaced the US as the sole
engine of global capitalism.
$41bn 1990 Some also concluded that the Chinese economy
$52bn 2000 was not so export-dependent after all — despite
$181bn 2010 the Global North’s sluggish export market, China
resumed double-digit growth in 2009–2010, mostly
by relying on domestic investment.
This contention is shortsighted. During the
India boom years, China’s exports, together with the
influx of export-oriented manufacturing capital,
$0 1990 accounted for a large part of the growth of China’s
$2bn 2000 foreign exchange reserves (mostly in the form of
$92bn 2010 US dollar assets). Without its expanding reserves,
Beijing would not have been able to increase money
supply growth in the form of lax state bank lending.
As such, the robust export sector and the rising
reserves it brought made a debt-financed investment

40 Jacobin · Fall 2015

China’s Manufacturing
Purchasing Manager Index,
2006–2015
59.2 official
50
HSBC/Caixin
41.2
2007 2008 2009
spree possible in China between roughly 2000 and
2008 without falling into the economic malaise that
plagued many Southeast Asian economies on the eve
of the 1997–98 Asian financial crisis, when years
of debt-fueled investment unmatched by adequate
growth in foreign exchange reserves crippled their
currencies and unleashed capital flight.
But the situation changed after 2008. China’s
weakening export engine and reckless investment
expansion during the 2009–2010 recovery created
a gigantic debt bubble that was no longer matched
by a commensurate increase in foreign exchange
reserves. Between 2008 and early 2015, outstanding
debt in China skyrocketed from 148 percent of GDP
to 282 percent, exceeding the level most other devel-
oping countries and the US. By 2014, China’s foreign
exchange had actually started to shrink.
The redundant construction and infrastructure
projects — apartments, coalmines, steel mills, etc. —
resulting from the debt-fuelled economic rebound
China Fantasies
2010 2011 2012 2013 2014 2015
are unprofitable and not likely to turn around any-
time soon. China’s ability to repay and service the
debt is also doubtful, putting the country in a diffi-
cult situation — its export sector is still struggling,
but it has run out of room for growth through fixed
asset investment, leading to a falling profit rate and
serious excess capacity.
To make matters worse for the ccp, the esca-
lation of peasant resistance and labor unrest since
the 1990s has forced the party state to improve rural
economic conditions (hence curtailing flows of rural
migrant labor to coastal export sectors) and labor
conditions in manufacturing. These concessions
have increased wage levels, putting further pressure
on capital’s profitability.
All of this has led China to a typical overaccu-
mulation crisis, epitomized by the ghost towns and
shuttered factories across the country. The gravity
of the slowdown can be seen in the movement of the
manufacturing purchasing manager index (pmi) — a
Uneven and Combined 41

“The
  ruling elite of many
Asian countries have
become wary of China’s
country’s growing
geopolitical leverage
and are now tightening
their links to the US
as an insurance policy.”
pmi higher than fifty signals industrial expansion,
whereas a value lower than fifty shows contraction.
After the 2009–2010 recovery, the index kept
falling. It is currently fluctuating around the stag-
nation line of fifty — a significant departure from
China’s vigorous and continuous growth before 2008.
This overaccumulation problem is the source
of the recent stock market meltdown and the cap-
ital flight that caused the sharp devaluation of the
Chinese currency and accelerated the evaporation
of China’s foreign exchange reserves.
The Highest Stage of Capitalism
Overaccumulation crises are as old as capitalism
itself. As Russian revolutionary Vladimir Lenin ex-
plained long ago in his Imperialism, the Highest Stage
of Capitalism, severe overaccumulation within a na-
tional economy pushes capitalists to look overseas
for more profitable places to invest. Lenin’s theory
of imperialism has been critiqued and qualified by
many later writers, but history has corroborated
his assertions about the catalyzing role of overac-
cumulation crises. Indeed, it was the reason why
manufacturing capital from the core relocated to
Asia and China in the first place.
Now China finds itself beset by overaccumu-
lation and feels the urge to export capital to more
42 Jacobin · Fall 2015
auspicious locations. This isn’t a sudden devel-
opment — China’s capital exports have risen
spectacularly since the early 2000s. Stock of China’s
outward foreign direct investment jumped from $28
billion in 2000 to $298 billion in 2012 (though it is
still meager compared to smaller advanced capitalist
economies such as Singapore).
State-owned corporations, mostly energy firms
and infrastructure construction firms backed up by
mammoth foreign exchange reserves originating
in the export sector, have been at the forefront of
Chinese investment in the Global South — most
notably in Africa and Southeast Asia. Chinese man-
ufacturing has recently started relocating to lower
wage countries like Tanzania and Vietnam, as well.
The drive to export surplus capital also undergirds
China’s recent ambition to create a “One Belt, One
Road” network of ports, railroads, and highways
linking China to Europe across Central Asia and
the Indian Ocean.
But as Lenin warned, the drive to export capital
overseas, and the need to protect that capital, pushes
states to project their political, and sometimes mili-
tary, power abroad, leading to imperialist expansion
and inter-imperial rivalry with other capital-ex-
porting countries.
Beginning in the 1970s, the ccp adopted a docile
geopolitical position relative to the United States
in exchange for space for economic development
and trade expansion. The ccp helped the US curb
the rise of Vietnam as a Soviet proxy in Asia by
supporting Cambodia’s Khmer Rouge in the 1970s
and going to war with Vietnam in 1979. China also
refrained from escalating any territorial disputes it
had with the US’s Asian allies.
But as China’s investment in, and trade with,
Southeast Asia has risen, its affinity for the geopo-
litical status quo has weakened. China has become
increasingly assertive over territories contested
with its Asian neighbors. Meanwhile, the ruling
elite of many Asian countries, while profiting from
closer economic ties with China, have become wary
of the country’s growing geopolitical leverage and
are now tightening their links to the US as an insur-
ance policy.
Take Myanmar. The country’s military junta,
which Beijing has supported ever since Western

countries imposed sanctions following a 1988
political crackdown, has felt increasingly insecure
about its reliance on Chinese investment. This
insecurity, coupled with popular discontent over
Chinese mining projects, motivated the regime to
seek normalization of relations with the United
States by promising political reform. Although the
Myanmar government remains cozy with China — as
demonstrated by the 2013 opening of a gas pipeline
constructed by the China National Petroleum Cor-
poration that connects the Bay of Bengal to China’s
southwestern Yunnan province — its relations with
the United States have warmed considerably. It was
even invited to be an observer in a US–Thailand
military drill in early 2013.
Myanmar is not alone. Singapore, Taiwan, South
Korea, the Philippines, Vietnam, and others have all
strengthened their economic and political-military
ties with the US even as they benefit from economic
integration with China.
Asian countries’ desire to maintain American
influence in the region to counterbalance China
has created the conditions for the Obama admin-
istration’s Pivot to Asia policy aimed at containing
China’s geopolitical ambition. It also aided the
administration’s push for a Trans-Pacific Partner-
ship that increases the US’s economic links with, and
subordination of, its former Cold War allies in Asia.
Beijing has responded by more confidently
flexing its political and military muscle in the region.
China’s attempted push for its own free trade agree-
ment with its Asian neighbors, its increasingly bold
military incursions into ocean territories claimed
by other and monitored by US navies, and its open
competition with India to influence Sri Lankan pol-
itics are all part of this shifting geopolitical context.
Just as China’s capital exports are not restricted
to Asia, China’s new ambition to project its geo-
political power is not confined to Asia either.
The connection between the global expansion of
Chinese capital and China’s desire to expand its
military power overseas was laid out in the state’s
2013 National Defense White Paper, which for
the first time explicitly stated that protecting Chi-
na’s global interests was now a core mission of the
People’s Liberation Army:With the gradual integra-
tion of China’s economy into the world economic
China Fantasies
system, overseas interests have become an integral
component of China’s national interests. Security
issues are increasingly prominent, involving over-
seas energy and resources, strategic sea lines of
communication, and Chinese nationals and legal
persons overseas.
Chinese nationals have become the number one
kidnapping target for terrorist and rebel groups in
Africa, and Chinese facilities are valuable targets
of sabotage. But China is not yet ready for a US
marines–style overseas troop deployment. Instead,
Beijing has turned to some of the most brutal inter-
national mercenaries to defend its interests in Africa.
Among them is Frontier Services Group, a Hong
Kong–based firm with close ties to China’s biggest
state-owned conglomerate and whose chairman is
Erik Prince, the founder and former ceo of the US
security firm Blackwater.
Heading to War?
With a deepening economic crisis, China’s need to
export capital, and hence to project its political and
military power globally, will continue to grow. Such
ambitions have and will put China on a crash course
with the US, which has maintained a unique global
military umbrella since the end of the Cold War.
The nascent rivalry is reminiscent of past
inter-imperial acrimony. When Germany was a
growing capitalist power a century ago, it justi-
fied its aggression toward the British-dominated
international status quo by citing old injustices.
Whether the China-US dispute will escalate into
conflict approaching the scale of the World Wars,
especially given the emergent China-Russia alliance,
remains to be seen.
But just as the turn-of-the-century rivalry
sparked fierce discussions within the international
communist movement, so too will the intensifying
geopolitical competition between US and China (and
Russia) foment debate about China in progressive
circles around the world.
Overcoming the different variants of orientalist
China fantasies — coming from both the Right and
Left — while addressing the China question criti-
cally and holistically is a daunting task. But given
the stakes, it’s one the Left must be ready for.  ■
Uneven and Combined 43
 The New Scramble
for Africa
The BRICS powers aren’t anti-colonial
counterweights. They’re looking for new
markets and resources for their corporations,
just like Western countries.

Pádraig Over the last few years, much has been written about the “new

O
Carmody scramble for Africa” — the attempt by countries and compa-
nies to increase their access to markets and natural resources
on the continent.
In one telling, China has been the principal actor donning
neo-colonial garb to advance its interests. Growing economic and political
interest in Africa certainly has been driven by the impact of Chinese demand
on natural resource prices and the country’s need for new overseas markets
to absorb the products of its expanding economy. China is now the world’s
largest consumer of many commodities, such as copper and also, reportedly,
illegally harvested timber (although much of this ends up in products destined
for Western markets).
Despite popular perceptions that emphasize external neo-colonialism,
the contemporary jostling has also involved African companies — particularly
those from South Africa, which has developed close ties to China — sometimes
in joint ventures or implicit partnerships with other brics-based companies.
So what do China and South Africa’s behavior in Africa tell us about the
latest drive to reap the continent’s riches? And, perhaps even more importantly,
what would an enlarged international role for the brics mean for global justice?

Cooperation and Competition

While Britain and France nearly came to blows in Fashoda (a town in present-day
South Sudan), Africa was for the most part “cooperatively” divided among the
European powers in the nineteenth century. So too today. The current iteration
of territorial control and influence by external and internal powers is marked
by cooperation, in addition to competition.

Uneven and Combined 45

 Companies jockey for control over natural
resources and markets, as well as governments, in
order to ensure economic access — but not neces-
sarily in a zero-sum way. For example, some British
and Chinese oil companies have engaged in joint
ventures in Africa.
The brics are playing an important role in this
new scramble, with their influence continuing to
grow despite the uncertain economic prospects of
some member countries. This is particularly true
for the South Africa–China relationship. The South
African and Chinese governments and companies
on the continent are increasingly aligned, allowing
power to be projected across Africa’s borders in
novel ways that may be more durable than their
colonial precursors.
Since South Africa joined the bric grouping in
2010 at China’s invitation, there’s been considerable
discussion about the rationale for its admittance.
Jim O’Neill, the Goldman Sachs analyst who coined
the term bric, has questioned why South Africa
was asked over much larger economies. Yet other
commentators, including author Kingsley Chiedu
Moghalu, have argued that geopolitics trumped
global economics: while its economy is dwarfed by
others around the world, South Africa is important
regionally because its economy is sizable in con-
tinental terms. This geopolitical consideration is,
of course, important, but it’s the strong economic
ties between China and South Africa that are key
to understanding how both they and their corpo-
rations are tapping Africa’s valuable markets and
natural resources.
During the last decade of apartheid, sanctions
and domestic capital controls largely prevented
big South African conglomerates from investing
in the rest of Africa, even as they dominated their
home country’s economy. These restrictions were
overturned after Nelson Mandela came to power
in 1994, and more rapid economic growth in the
intervening years has created additional excess
investment capital — the market capitalization of
the Johannesburg stock exchange is roughly 150
percent of gdp, whereas Brazil’s, for example, is
approximately 50. In recent years, the combina-
tion of higher surpluses and previously bottled-up
capital has allowed South African conglomerates to
46 Jacobin · Fall 2015
aggressively expand into Africa and overseas.
The relationship between South Africa and
China is central to this expansion. South Africa is
now China’s largest trading partner on the conti-
nent, and China has become South Africa’s largest
trade partner in the world.
This strong economic connection has fostered
close relations between the two countries. For
example, when the Dalai Lama wanted to visit South
Africa for Desmond Tutu’s birthday in 2011 and
again for an event to commemorate Nelson Man-
dela’s legacy in 2014, the South African authorities
denied his applications. Likewise, when there was
widespread concern about the impact of Chinese
clothing and textile imports on South African indus-
tries, the Chinese government agreed to limit these
commodities’ entrance. Maintaining good relations
with South Africa is important because, as an Indian
diplomat in the country put it, “South Africa is the
country that matters in Africa” — at least from a
certain power politics and economic perspective.
Chinese companies are also keen on the rela-
tionship, investing heavily in their South African
counterparts. In 2007, for instance, the Industrial and
Commercial Bank of China (now the world’s largest
company) bought a multi-billion-dollar stake in the
South African Standard Bank, which has an exten-
sive branch network across the continent. It was the
largest foreign investment in South African history.
This intermingling of South African­and Chinese
originating capital has its analog in political coordi-
nation between the respective states — the brics
cooperation mechanism being a prime example.
According to an official at the South African Depart-
ment of International Relations and Cooperation,
all the brics have an interest in the African market,
but they should be entering it “in a coordinated way”
rather than “trampling each other.” Such coordina-
tion is achieved through foreign investment and a
variety of other modes of geo-governance or eco-
nomic and political power projection across borders.
The Zambian Example
It is often held in international relations that dom-
inance in economic production is a major source
of state power — because the US has the world’s

“Ultimately,the
  most important
C in BRICS may not be China,
but capitalism.”
largest economy, it must be the world’s most pow-
erful country. However, power flows not only from
production but also from the circulation and ex-
change of products and services.
In the China–South Africa alliance, the case of
the South Africa–based Shoprite, Africa’s largest
retailer, is demonstrative. With approximately 1,500
supermarkets across the continent — and a vow to
open twice as many stores in 2015 as it did in 2014
— Shoprite has a major effect on the countries in
which it operates, while also helping Chinese capital
realize value.
We can see this in a place like Livingstone,
Zambia, a border town dominated by South African
capital. In this city of 150,000, there are two large
Shoprites, in addition to South African businesses
such as the fast-food outlets Hungry Lion, Steers,
and Ocean Basket; the gas station Engen; and the
telecommunications company mtn (which sells
Chinese products like Huawei phones). The Protea
hotel, one of Livingtone’s biggest, was part of a South
African corporation until the group was bought out
by Marriot in 2014.
A manager at one of the Shoprites in the city told
me that, aside from some vegetables and poultry
supplies sourced locally, everything else in the store
is produced either in China or South Africa. Instead
of benefiting local Zambian producers, profits from
the sale of Shoprite products largely flow back to
South African shareholders, even though Shoprite
is listed on the Zambia stock exchange.
Robust local companies in Livingstone are
effectively non-existent — partly because, as one
manager pointed out, the town is reliant on imports
and small-scale tourism from the nearby Victoria
Falls. But the strength of South African companies
The New Scramble for Africa
is also driving monopolization — Shoprite’s only
nominal competitor is Spar, which is also based in
South Africa. Meanwhile, many of the bank loans
going to small and medium-sized enterprises are
intended for trade — despite an urgent need to, as
one small-scale retailer argued, “emphasize local
productivity.”
The Zambian case is illustrative of broader
trends: South African and Chinese (trans)national
capital, among others, are capturing value by selling
commodities in the country, by investing in copper
mining and processing, and through profit repatri-
ation from direct investments and through money
circuits (loans from banks, for example). Flows of
tourists and business travellers also generate profits
for South African and Chinese-owned hotels in Liv-
ingstone. All of this has created a relationship of
dependency for countries like Zambia because it
no longer produces many of the goods its popula-
tion needs.
How, then, did this particular configuration
of geo-governance come about, and what are its
implications for development in African countries
like Zambia?
South-South “Cooperation”
The model the brics say they favor is “win-win”
globalization. A departure from the “win-lose” past
— when European powers underdeveloped African
economies by pushing them to export cheap raw
materials and import higher value manufactured
goods — the brics claim that the new paradigm is
in their self-interest, but also delivers development
in “partner” countries.
However, rather than marking a fundamental
Uneven and Combined 47
China’s
Petro-Republic
China, the world’s largest oil importer,
maintains a special relationship with
Angola, Africa’s top oil exporter.

Each barrel represents

125,000 barrels per day
that China imports from
the specific country

48 Jacobin · Fall 2015

49%
of Angolan oil exports go to China
2 billion USD
amount loaned by China to Angola in
2004 to address the nation’s “shattered
infrastructure” after the civil war
5 250,000
number of Chinese-constructed “satellite
cities” around Angolan capital Luanda, built
to address the country’s housing crisis
3.5 billion USD
the cost of the first stage of construction of
just one of these cities, Kilamba Kiaxi
The New Scramble for Africa
50
number of large state-owned Chinese
companies on the ground in Angola in 2011
400
number of small-to-medium sized Chinese
enterprises on the ground at the same time
number of Chinese workers working on
construction projects in Angola
Uneven and Combined 49
 break with Western-led globalization, the brics
model shares important similarities. The free-market
policies that the World Bank and the International
Monetary Fund foisted on Africa and other parts of
the developing world in the 1980s and 1990s were
also, according to their sponsors, meant to bring
about mutual benefits, particularly improved living
standards. Current brics-led geo-governance in
Southern Africa replicates key features of earlier
rounds of globalization through its competitive dis-
placement of local businesses and extraction of value
from local economies.
Still, there are differences between the “Wash-
ington Consensus” policies of the past and those
advanced by the brics. For one, China does not
have a neoliberal economy — its government retains
substantial ownership over key sectors, including
natural resources and finance. This centralized
state control makes it easier to mobilize domestic
resources for investment, outward investment, and
the overseas sourcing of critical natural resources.
To achieve expansion and growth, China also
needs the cooperation of African political elites, who
serve as territorial gatekeepers of resources and, to
a somewhat lesser extent, markets. Here another
distinguishing feature comes into play: the policy
of “non-interference,” which facilitates cooperation
with local elites. China and the other brics claim
to be relatively agnostic about economic policy,
favoring a mixed-economy approach and even
encouraging state ownership in some sectors.
But while Zambia shows that this isn’t the
heyday of the Washington Consensus — the country
recently renationalized its railways and the national
phone company, which were previously sold to
foreign investors — its economy remains largely
structured along neoliberal lines, with an emphasis
on “free trade” and attracting foreign investment.
In addition, the interaction of neoliberal cap-
italism and often oppressive labor practices has
complicated attempts to secure elite assent. In 2006,
a Zambian minister wept when she saw the environ-
ment in which workers toiled at the Chinese-owned
Collum Coal Mine. Four years later, eleven employees
were shot at the site while protesting working condi-
tions. (After widespread outrage, the state eventually
took control of the mine.)
50 Jacobin · Fall 2015
Scarce jobs, incidents like the Collum shoot-
ings, and poor working conditions at Chinese-owned
companies sparked “anti-Chinese” riots in Zambia
and some other countries on the continent. Despite
some resistance, however, China — as well as other
countries and companies — hasn’t been cut off from
market and investment access. How has it been able
to do so?
China plays a two-level game in its international
dealings, modifying its behaviour depending on the
venue. It is an important member of the World Bank,
International Monetary Fund (imf), and the World
Trade Organization (wto), and participated in the
2012 recapitalization of the imf, along with the other
brics. In this role China joins other wealthier coun-
tries in promoting external neoliberalization, and in
doing so ensures continued resource, market, and
investment access for Chinese companies overseas.
Furthermore, Chinese officials say that they will
never accept restrictions on China’s foreign trade; in
its bilateral relations with African states, the country
says it attaches no strings when it comes to aid, trade,
or investment.
Membership in the brics is also key to Chi-
na’s flexible geopolitical position. While the brics
grouping has different meanings to different partic-
ipants, for China it is part of a strategy to construct
a counterpole to Western power — not through
overthrowing the current global structures, but by
bending them in China’s favor. Given the history of
Western domination on their continent — and Chi-
na’s (relative) lack of conditionalities and policy of
non-interference — African political elites find this
to be a relatively attractive alternative.
Yet Chinese and some South African corporations
also benefit greatly from the neoliberal economic
regimes that have been installed across the conti-
nent under the auspices of the international financial
institutions and the wto. That these economies have
been extensively neoliberalized means they are open
to commodity imports from South Africa and China
and offer resource and investment opportunities to
their and other “global” corporations.
China and African political elites are thus able
to benefit from current global governance arrange-
ments, while also claiming to dispute them. So while
South African government ministers sometimes rail

against imperialism, the status quo expedites the
proliferation of South African and Chinese corpo-
rate capital across the region. Bemoaning Western
imperialism may even function as a form of soft power
projection; a rhetorical device that makes it easier for
South African companies to blanket the continent.
The Big C
Some look at the brics and see the beginning of a
new world order. Sober economic analysis yields a
much different prognostication.
The brics countries, it can’t be forgotten, are
firmly embedded in the dynamics of global capi-
talism. For example, workers in China’s Foxconn
plants producing iPhones and iPads for the global
market cannot afford to buy the products them-
selves, thus limiting demand. As a result, instead
of profits being primarily earmarked for the con-
struction of new factories, they often surge into
other investments — such as stocks, property, and
commodities — precipitating speculative bubbles
and socially devastating busts.
The appearance of new markets — in Africa
for example — can alleviate this over-accumula-
tion problem, and indeed the twin imperatives of
sourcing resources and opening markets are key
to the geopolitical and economic strategies of the
brics and other powers in Africa.
But while positive for Chinese, South African
or Brazilian capital, this developmental model is
having increasingly detrimental effects on African
countries. The Zambian economy is a case in point.
Held up as an exemplar of “Africa Rising,” Zambia’s
fortunes have dipped with the recent slowdown in
the Chinese economy and plummeting commodity
prices for things like copper, on which the country
is heavily dependent. The Zambian kwacha has
fallen dramatically in value, raising import costs
and inflation, and the phenomenon of “load shed-
ding” (electricity black or brown outs) has increased,
aggravating the downturn.
Further worsening Zambia’s economic woes
are longer-term development trends. The drive for
resources and markets by countries like China and
South Africa has circumscribed domestic devel-
opment in terms of job growth, local production,
The New Scramble for Africa
and purchasing power. What’s more, the disastrous
economic reforms promoted by the World Bank and
the imf in the 1980s — which led to an increasingly
foreign-dominated and highly dependent economy
— have, for a variety of reasons, including the cost
advantages Chinese commodities have due to that
country’s sophisticated trade and industrial policy
and export subsidies, greatly benefited Chinese and
some South African firms while perpetuating Zam-
bia’s subordination and poverty.
It’s unclear how the brics model, and in par-
ticular the alliance between China and South Africa,
will develop in light of recent economic restruc-
turing in China. But the role of the brics in altering
African economies’ growth dynamics over the last
ten years is undeniable: they drove primary com-
modity prices higher, which today account for
roughly four-fifths of the continent’s exports, and
made major inroads into African markets in terms
of commodities and capital flows.
However, the current configuration is not aus-
picious for economic diversification or for tackling
inequality and poverty in countries like Zambia. In
a 2011 speech at the third brics leaders meeting,
South African President Jacob Zuma said, “We are
now equal co-architects of a new equitable inter-
national system.” But the reality couldn’t be more
different. South Africa’s current “sub-imperial” role
(both dominated by external powers and transna-
tional capital and dominating the Southern African
region itself ) is the one it has historically played. The
main difference now is that China is the emergent
potential hegemon, rather than Britain.
Ultimately, the most important C in brics may
not be China, but capitalism. For capitalism is global
and operates according to its own laws, even if it
varies in its geographic expansion and impact and
exerts power through networks of states and cor-
porate actors. While their states often play a more
active economic role than their Western counter-
parts, the brics powers are capitalist, looking for
new markets, resources, and sources of expansion
and growth for their corporations overseas.
This is not to say that there aren’t differences in
how the brics engage Africa, but the core contra-
dictions of global capitalism, and the poverty and
inequality it produces, remain.  ■
Uneven and Combined 51
 The Worst
Company
in the World
Brazil’s Vale corporation masks brutal
exploitation with the language of South-
South solidarity.

Judith oth during and after his two terms in office, former Brazilian

B
Marshall president Luis Inácio Lula da Silva staked much of his legacy on
Brazil’s “South-South” orientation towards Africa. In return,
he’s been held across the continent in nearly the same esteem
as national liberation leaders such as South Africa’s Nelson
Mandela or Mozambique’s Samora Machel.
On his first presidential visit to Mozambique in 2003, Lula got a hero’s
welcome and gave emotional speeches about the importance of Global South
solidarity. He responded with empathy to the aids pandemic and promised
Brazilian support for a project to produce affordable drugs to combat it.
But perhaps more telling was not what Lula was saying in Africa, but who
he brought along with him. The Brazilian entourage included Roger Agnelli,
the brash banker who played a major role assessing the value of Brazil’s premier
state enterprise, Companhia Vale de Rio Doce, in the run up to its privatization
in 1997.
Agnelli subsequently became Vale’s first president and ceo — leading a
corporation that was anointed the “worst company in the world” in 2012 by
activists for its labor relations, community impact, and environmental record.
Not that this did much to tarnish Agnelli’s reputation. Buoyed by the “com-
modities supercycle” with average increases of 150 percent from 2002–2012,
the seemingly bottomless Chinese demand for iron ore, and the abundant cap-
ital from the Brazilian National Bank for Social and Economic Development
(bndes), Agnelli appeared to have the Midas touch. His time in command at
Vale was characterized by aggressive global expansion and fabulous profits and
shareholders returns.
Agnelli’s public relations team at Vale worked hard to project a spirit of
South-South cooperation in sync with Lula’s rhetoric, claiming that Brazilian

Uneven and Combined 53

 mining investments in the Global South would bring
jobs and economic development unlike companies
from the imperialist “North.”
Yet tracking Vale’s trajectory, whether within
Brazil itself, in Mozambique where it has embarked
on a greenfield investment in a coal mining,
railway, and port complex, or in Canada where it
acquired established nickel operations, a very dif-
ferent picture emerges — one characterized by a
marked dissonance between Vale’s rhetoric and
the realities on the ground across the company’s
global operations.
As a staff member in the labor international
development fund created by the United Steel-
workers, the major union representing mine workers
in Canada, I have had the opportunity to monitor
this disconnect over the past decade — both in
Canada after Vale’s purchase of Inco, a major Cana-
dian mining company, and in Mozambique, where
the Steelworkers have long-standing ties through
its union training programs.
Vale’s record shows that the practices and atti-
tudes of brics-based multinational corporations are
no different from global mining companies linked
to the core capitalist countries.
On arrival in Canada, Vale touted its corporate
management expertise, Wall Street credentials, and
ability to cope with meddlesome unions. The com-
pany insisted on major concessions as a precondition
for even coming to the bargaining table, triggering
eleven and eighteen-month strikes by the union — a
prolonged arm wrestle in which Vale won much of
what it wanted.
Tito Martins, a company executive, made Vale’s
intentions crystal clear at the end of the first strike
in an article entitled “Vale Celebrates Reducing the
Power of the Unions in Canada” published in Valor
Economico, a Brazilian business publication:
What was important for Vale in this negoti-
ation was to get the employees in Canada re-
aligned into the same kind of relationship the
company has with its employees around the
world. This relationship involved three crucial
issues: pension plan, bonus, and chain of com-
mand between employer and employee with-
out direct intervention of the union.
54 Jacobin · Fall 2015
Since 2011, the company has overseen five fatalities
— one in Thompson, Manitoba and four in Sudbury,
Ontario, plus two more in a contracted-out opera-
tion at arm’s length from Vale. As one worker put
it, “Whether underground or in the smelter and
refinery, Vale has made it more dangerous than it
was before.”
But the company has left an even worse legacy
in Africa, where it is less constrained by state reg-
ulations. Yet that is there where Vale claims to be
uplifting thousands.
Vale in Africa
Local lore has it that Lula introduced Agnelli
and Vale to Mozambique, encouraging President
Armando Guebuza to reject the Chinese bid for
Mozambique’s coal deposits because the Chinese
would bring in their own workers rather than em-
ploy local labor.
Whatever Lula’s involvement, Agnelli was
invited shortly after the Brazilian president’s 2003
visit to become a member of Guebuza’s International
Advisory Council. Vale was soon after the first multi-
national company to be granted a license to develop
Mozambique’s major coal reserves.
Similar to 2003, during his return visit to
Mozambique in 2012, Lula conveyed mixed mes-
sages of solidarity on the one hand, and a sales pitch
for investment by Brazilian companies on the other,
though this time, he arrived with Agnelli’s successor,
Murillo Ferreira.
During the trip the former president gave
a public lecture entitled ‘The Struggle Against
Inequality” chaired by Graça Machel, widow of
Mozambique’s first president, Samora Machel, and
a well-known public figure in her own right. She
introduced Lula as a hero of the people like Samora.
Lula, for his part, lectured on Brazil’s experience
under Workers’ Party governance, characterizing
it as one of growing and distributing the economic
pie at the same time, thus ensuring the creation of
jobs and redistributive social programs that could
alleviate poverty.
He urged Brazilian companies investing in
Mozambique to contribute to this fight against
inequality, in the name of social justice. Yet shortly

“Vale
  shows that the practices
of BRICS-based multinationals
are no different from those
in the capitalist core.”
after the speech Lula joined the new Vale president
in lobbying Mozambique’s minister of labor, Helena
Taipo, to reduce the restrictions on foreign workers
in Vale’s operations in the country.
A Brazilian magazine, Veja, picked up the story:
Vale was one of the sponsors of the tour that
Luiz Inácio Lula da Silva did two weeks ago in
Africa. The company’s president, Murillo Fer-
reira, travelled on the same jet that carried the
former president to Mozambique. There, they
met with Labour Minister Helena Taipo, who
has been putting barriers to the exploitation of
coal by the Brazilian company in Moatize mine,
one of the largest in the world. At the meeting,
Lula tried unsuccessfully to convince her to re-
duce the requirement that Mozambicans make
up 85 percent of the manpower employed in
Vale’s operations.
Brazilian pressure to reduce Mozambican controls
on foreign workers is not new. On a labor delegation
from Canada and Brazil, we met with the director
of labor in the country’s Tete province in 2011, and
were informed that Vale constantly pressures au-
thorities to allow the company to exceed the previ-
ously negotiated quotas on foreign workers.
The construction phase of the mine project
included not only large numbers of Brazilian
workers but also construction workers from the
Philippines. Many of these workers were hired by
Kentz Engineers and Contractors, a company which
operates in nearly thirty countries and runs one of
the world’s biggest nickel-cobalt refineries in the
world in Madagascar.
The Worst Company in the World
Kentz employs more than 2,500 overseas Fili-
pino workers in its global operations. After many of
the Filipinos working for Kentz in Madagascar were
repatriated at the end of 2010, they filed cases with
the Philippines Overseas Employment Administra-
tion (poea) alleging unfair labor practices by Kentz,
including salary delays, overcrowded barracks, food
shortages, and inadequate health care.
Kentz was one of many sub-contractors hired
by Vale Moçambique as it built its coal concessions
in Moatize in the northwest of the country. Depart-
ment inspectors found workers at the construction
site who were denied holidays and weekends and
proper protective clothing. Kentz had also failed to
register its Mozambican workers for social security.
On November 18, 2011, the ministry of labor
in Mozambique finally responded, expelling 115
workers, mostly from South Africa and the Phil-
lipines, illegally brought to the country by Vale
subcontractors. Kentz-Engineers was fined close
to 34 million meticals (around $1.1 million usd) and
granted thirty days to fix irregularities.
The workers based in Tete who participated in
the international exchanges indicated that the opera-
tional phase of the coal mine today employs not only
quota’s maximum number — or more — of Brazilian
workers, but also many other foreign workers, with
or without legal residence status, from neighboring,
English-speaking countries like Zimbabwe, Zambia,
and Malawi. Sons and nephews of powerful Mozam-
bican government and business figures in the national
capital, Maputo, also get coveted jobs at Vale.
What’s more, the broader development prom-
ised by Workers’ Party and Vale officials is elusive.
Uneven and Combined 55
 Despite being the most impacted by the mining
boom — and dealing with pollution, scarcity of
housing and other services, traffic, noise, and rising
cost of living — people in the local communities
around the mine and natives of the chronically
underdeveloped Tete province have seen few new
jobs and little other benefits from the project.
The few opportunities for employment gen-
erated by the mining operations and the dramatic
inequalities in salaries and benefits between for-
eigners and nationals create widespread resentment.
One Vale worker commented, “I work alongside
foreigners but they earn four times more than I
do.” Another said: “Mozambican machine oper-
ators work together with Brazilian machine
operators, some of whom have less training than
the Mozambicans, but the Brazilian is automatically
the supervisor.”
These sentiments were expressed in a survey
conducted in 2012 to determine whether workers’
experiences of Vale in Brazil were similar to what
Vale workers in Mozambique and Canada expe-
rienced. These comments from workers capture
the hollowness of Vale’s promises to create jobs
for Mozambicans, while also demonstrating the
strength of anti-Brazilian feelings — not so different
from anti-American or anti-British sentiments
where their companies set up shop.
Mozambique, like other African governments,
has not found the means or the political will to use
mega-projects in mining as the strategic pillar for
a broader industrial strategy. Mining projects have
tended to become enclaves, articulated globally but
unconnected in the host country.
While there are no systematic studies to draw
on, the general sentiment in Mozambique suggests
that Vale is actually taking away jobs. Forced reset-
tlements to make way for the mines have left rural
families with no land or water for their agricultural
activities and no access to local markets.
A recent study carried out by Antonio Jone for
the Observatory on the Rural Environment con-
cluded that the families sent to rural resettlement
in Cateme have been adversely affected. Vale’s
much-touted adherence to all of the World Bank
recommendations on forced resettlements turns
out to be far from the truth.
56 Jacobin · Fall 2015
In Vale’s official sustainability reports and its PR
videos, the Mozambique resettlements are consid-
ered models of excellence. But the “unsustainability
report” prepared by the International Network of
People Affected by Vale goes behind the hype to
capture the voices of the resettled who tell a story of
no land, no water, and houses with wall cracks and
crumbling foundations after the first rainy season.
More recently, Antonio Jone’s study on “food
security” in the Vale resettlements corroborates
that resettlement has been anything but a success
story, and has actually made peasant producers
much worse off than they were prior to removal. In
addition, local artisans in the areas affected by the
mining concession — such as those making building
blocks — have been left with no space to practice
their trade.
In recent years they have carried out angry lob-
bying activities directed both at the Mozambique
government and Vale. Adopting a page from the
corporate playbook, the artisans argue that they
have suffered a permanent loss of livelihood through
which they could have expected a lifetime income
more in the neighborhood of $350,000 usd rather
than the $2,000 Vale originally paid them.
In June 2013, Vale declared the matter defini-
tively closed. It has been forced to reopen discussions
about compensation, however, since block makers
have continued to back up their demands with bar-
ricades that have brought mining to a halt, despite
the arrest of their leaders. The Mozambique gov-
ernment has responded with continued expressions
of concern about profits lost by their “development
partner,” Vale.
Vale in Brazil
Vale’s actions have won it enemies at home, as well.
The company’s aggressive expansion in the years
since its privatization has made it the third largest
mining company in the world, with operations in
thirteen Brazilian states and in twenty-seven coun-
tries on six continents.
Despite its origins as a state company close to
the Brazilian government (including significant
Vale shareholder blocks still in the hands of Bra-
zilian government workers’ pension funds) Vale’s

ascendancy to its current global-player status has
been characterized — like any other capitalist cor-
poration — by a ruthless, single-minded devotion to
high profits and generous dividends for its directors
and shareholders.
Many Brazilians are particularly indignant about
how this national icon passed into private hands in
1997 as part of the global pattern of privatizations
under structural adjustment programs. In the years
before the Workers’ Party came to power, bndes,
the Brazilian Bank for Socio-Economic Development,
took responsibility for promoting sweeping privat-
izations. The sale of Vale is considered to be the most
scandalous privatization episode in Brazilian history.
The company was sold for only 3.4 billion Bra-
zilian reais in a period of parity between the real
and the US dollar. A 2004 submission to the Fed-
eral Regional Tribunal (trf) in Brasilia highlighted
a series of irregularities that proved that Vale was
undervalued. Some mines were ignored in the cal-
culations; others, including the forestry sector were
depreciated; intangible assets of enormous value
(technologies, patents, and technical knowledge
related to geology and mining engineering) were not
even considered and Vale’s stock holdings in other
companies were ignored.
The list of irregularities is enormous. Bradesco,
the bank responsible for the evaluation, took control
of Vale one year later, and not coincidentally Vale’s
first president, Roger Agnelli, was an ex-executive
director of Bradesco.
Even a decade later, an informal plebiscite for
the renationalization of Vale organized by unions,
students, and the Landless People’s Movement
in 2007 was able to mobilize three million votes.
While President Lula seemingly took no heed of the
demands of the plebiscite, he did put public pressure
on Vale during the ensuing global economic crisis.
Vale tried to take advantage of the 2008 crisis to
carry out large-scale layoffs and renege on planned
investments in the Brazilian steel industry. Lula used
the popular anti-privatization sentiment expressed
through the plebiscite to justify a public scolding of
Agnelli. He suggested that for a company as close
to government as Vale there was an obligation to
respond to a moment of global turbulence by playing
a stabilizing role.
The Worst Company in the World
During 2009, the Brazilian government’s vision
of the role Vale should be taking and Agnelli’s vision
of Vale’s role were openly at odds. By September, the
Brazilian magazine Exame was suggesting that the
government planned to oust Agnelli. In an article enti-
tled “Lula criticizes Vale and articulates ouster of Vale
President,” journalist Rafael Souza Ribeiro wrote:
The government’s wish to increase its role in
the administrative control of Vale did not be-
gin today. President Luiz Inácio Lula da Silva
has already stated several times this year that
mining needs to invest more in Brazil to pro-
vide employment for the population. Since his
dismissal of more than 1,000 employees last
year, attributed to the economic crisis, Roger
Agnelli, President of Vale, has fallen into disfa-
vor in the corridors of government.
Indeed Agnelli’s use of the global crisis to justify lay-
ing off 1,300 workers and backtrack on investment
commitments to produce steel in Brazil came back to
haunt him when Lula’s term of office expired in 2011.
Brazil’s new president Dilma Rousseff orchestrated
the Vale shareholder blocks close to government to
bring about a change of leadership.
Murillo Ferreira took office as the new president
in 2011 and shortly thereafter began visiting Vale
operations around the world. The change of lead-
ership from Agnelli to Ferreira and Vale’s promises
of a more humane management and a reduction
of stress brought hopes for change, but the raised
expectations were quickly dashed by Ferreira’s
pointed snubbing of union leaders throughout his
inaugural tour. However, in response to criticisms,
he did agree to meet with the fourteen union presi-
dents of Vale operations linked to mining in Brazil
in September 2011.
According to a report by Valerio Vieira, pres-
ident of the Metabase Inconfidentes union, which
represents two Vale mines in Brazil’s Minas Gerais
state, most of the union leaders present were happy
to buy into Ferreira’s notion of a kinder, gentler Vale
and praised his readiness to dialogue with them.
They lauded his visible emotion during the discus-
sion on workplace fatalities.
But Vieira, who had worked for Vale on and
off for twenty-five years, was not convinced. In his
Uneven and Combined 57
 “During
  2009, the Brazilian
government’s vision of the
role Vale should be taking
and Agnelli’s vision were
openly at odds.”
report to Metabase, shared with Vale activists in
other countries, Vieira recounted saying to Fer-
reira that it would take a great deal more than
three months for him to change the course of Vale
after a decade under Agnelli’s leadership. More-
over it would take a level of political will not yet
demonstrated.
Vieira’s report on the meeting identified eight
characteristics of working for Vale in Brazil: 1)
Vale is noted for being very anti-union; 2) A Vale
worker tends to earn less than workers in similar
workplaces; 3) Vale managers engage in constant
bullying of workers; 4) Vale imposes unrealistically
high production goals, thus creating the atmosphere
of permanent stress which Vale promised to elimi-
nate; 5) Vale workers live with the constant threat
of being fired without due cause; 6) Vale supervi-
sors impose arbitrary disciplinary measures with
great frequency; 7) To work at Vale means to work
in dangerous conditions because Vale puts produc-
tion above all else and often covers up health and
safety incidents; 8) Vale regularly tries to buy union
and government leaders by offering them vehicles,
travel, credit cards, and other perks.
In 2012, a small sample of Vale workers in
Canada, Mozambique, and Brazil were asked
whether these eight characteristics of working
for Vale identified by Vieira were applicable to
their situations. While the situations in each
country are different, the overwhelming response
to the survey was that Vieira’s characterization
58 Jacobin · Fall 2015
of working for Vale resonated profoundly in the
other countries.
Behind the Hype
Despite these contradictions, Vale leads the Brazilian
corporations understood to have reached the status
of “global challenger.” Companies like Vale project
an image of themselves as a “motor of development”
both in Brazil and in the countries where they invest,
generating employment and economic growth, a
symbol of “global Brazil.”
In turn, the Brazilian state attaches high impor-
tance to support for these corporations. The large
amounts of credit conceded by bndes and other
public policies set up to support and facilitate the
global investments of Brazil’s multinationals are seen
as fully justified, and the activities of the companies are
portrayed as advantageous for Brazil as a whole.
The argument is that through these “global chal-
lengers” Brazil will increase the entry of foreign
exchange (through deposits of profits), increase its
exports, broaden its insertion into chains of global
innovation, and benefit its suppliers, who also
increase their production.
This narrative is squarely within the neoliberal
paradigm — a country that wants to gain a hege-
monic position globally is in need of big companies.
Despite their ownership by private interests and
open prioritization of high profits and good returns
to their directors and shareholders, Brazil’s big

companies and their global expansion are treated
as synonymous with Brazil’s “national interests.”
Worker and community resistance to the operations
of these companies, whether at home or abroad, is
readily categorized as criminal.
Does this much-heralded ascent of the brics
to the elite club of global powers really encompass
the national interests of all citizens of Brazil? Do all
Brazilians see Vale’s success as a “global challenger”
as cause for celebration? Do they think that Vale’s
ability to enter the vicious competition between the
global giants in the world of big mining means that
Brazil has “arrived,” that it can now stand tall, hold
up its head, proudly taking its place in the G20 with
the “developed” countries of the North?
To assume Vale’s success and Brazil’s national
interests as synonymous is to operate within an old
discourse about development that sees the transi-
tion of the nation-state from agrarian to industrial
societies as the task, with the state as the main actor,
the national society as the main target of develop-
ment planning, and foreign direct investors as the
key source of capital for the development goals of
employment, modernization, and economic growth
to be realized.
Perhaps multinational corporations from the
brics are better understood by stepping outside
this old development discourse based on territories
and situating them instead as players in a new global
discourse based on flows. This is a world where there
is a fully articulated transnational economy with flows
of capital, information, technology, equipment and
even land, labor, and private security forces. All of
this global economy operates outside the logic and
largely outside the regulation of national jurisdictions.
A big mining company takes minimum respon-
sibility for the territory — and citizens — in which
its mining operations happen to be located, oper-
ating instead through global supply chains and the
highly articulated flows that now characterize the
global economy.
Corporations use branding instruments to “gre-
enwash” their images with strong language about
sustainability or “bluewash” them, wrapping them-
selves in the legitimizing language of the United
Nations Global Compact. What is presented to the
public as the need for a social license to operate is
The Worst Company in the World
in fact internally considered an exercise in security
risk management. Companies are driven fundamen-
tally by their concern for damage control, seeing
any person, policy, or institution that gets in their
way as a security risk and, consequently, an enemy
of the corporation.
Andre Almeida, a former director in Vale’s
Department of Intelligence and Corporate Security,
recently handed over a large number of documents
to Brazil’s state prosecutor that point to Vale’s
involvement in widespread spying and infiltra-
tion focused on people and organizations deemed
by Vale to be its enemies. These include well-re-
spected journalists, lawyers, and human rights
activists, as well as organizations like Justice on
the Rails and the International Network of People
Affected by Vale.
As disturbing as Vale’s behavior may be, it
does not stand apart from class divides both within
Brazil and globally. The elite social forces in Brazil
and other brics that are intent on making their
countries competitive in the global economy are
part of the new transnational class of winners pro-
duced by globalization. Through their multinational
corporations like Vale they aspire to world-class
consumption.
The desire of government and business leaders
in the brics to attain global status, measured by
triumphs like hosting the Olympics or the World
Cup, may genuinely include a component of recu-
peration of pride, dignity, and respect after centuries
of colonial humiliation. The vision pursued, how-
ever, offers no alternative to the current world
order of exploitive production and consumption
for a few. The practices of emerging Brazilian or
Indian or South African or Chinese capitalists are
little distinguishable from the pillage of their global
competitors linked to old imperial centers in Europe
and North America.
The vision of the brics excludes the poor within
their own nations and ignores the environmental
impact of the growth model they aspire to. The
desire of the brics to be players in the current global
system and “world-class” consumers exacerbates
existing disparities and inflicts further damage on
the environment, making them major perpetrators
of global instability and injustice.  ■
Uneven and Combined 59
 South Africa
Doesn’t Need a
“Lula Moment”
A real political alternative in South Africa
will come from powerful social movements
— not charismatic leaders.

Benjamin he developmental state is back in vogue in the Global South,

T
Fogel where it’s seen as a panacea for sluggish growth, high unem-
ployment, and structural inequality. But not quite in the form
that we’re used to. It’s become, as Ben Fine says, something of
a floating signifier — an idea of state-led growth that lacks both
a theory of the state and the political and economic forces that shape it.
South Africa exemplifies these contradictions. Since the mid-2000s both
the South African left — particularly those segments assembled around the
Congress of South African Trade Unions (cosatu) — and the neoliberal African
National Congress (anc) have actively promoted the idea that South Africa is
transforming itself into a modern developmental state.
The appeal of the model for countries in the Global South, including pow-
erful elements of South Africa’s left, stems in part from Brazil’s trajectory under
former president Lula Da Silva, who supposedly made a left turn during his
second term dubbed the “Lula moment.”
According to the Lula moment narrative, after stabilizing the economy
through strict macroeconomic orthodoxy during his first term, Lula’s Workers’
Party (pt) embarked on an ambitious series of reforms which increased the
incomes of the poorest 10 percent of Brazilians by 29 percent, and the national
average by 8 percent — moving roughly half of Brazil’s citizens into the coun-
try’s lower middle class.
This upward mobility was achieved through social welfare policies, such as
the Bolsa Família family grant, and by raising minimum wages — by the end of
Lula’s second term, Brazil’s minimum wage had grown by 60 percent. Brazil’s
Gini coefficient — a measure of inequality — also dropped significantly during
this period, from sixty in 2001 to fifty-three in 2012.

Uneven and Combined 61

 South African leaders like former cosatu
General Secretary Zwelinzima Vavi, trade-union
intellectuals like Neil Coleman, and affiliated ngos
have all argued in recent years that South Africa
needs its own Lula moment. They say the country
is sitting on what Vavi calls a “ticking time bomb”
of poverty, unemployment, and inequality that can
only be remedied by an interventionist program that
uplifts the poor and working class.
A turn to developmentalism in South Africa,
they say, would represent a decisive break with
neoliberal capitalism, and realign the country with
the core ideas of the National Democratic Revo-
lution (ndr) — the grounding philosophy of the
post-apartheid ruling alliance.
The Failed Zuma Turn
The push for South Africa to become a modern
developmental state dates back to Thabo Mbeki’s
government (1999–2008), when the anc-aligned
left in cosatu and the South African Communist
Party (sacp) found themselves increasingly iso-
lated and unable to influence policy within a ruling
tripartite alliance — composed of the governing
anc, cosatu, and the sacp — firmly committed
to neoliberal orthodoxy.
To remedy the situation and increase the power
of cosatu and the sacp, Vavi and Blade Nzimande,
the Community Party’s leader, made a Faustian
bargain with prominent anc politician Jacob Zuma,
who Mbeki had axed as deputy-president in 2005
under a cloud of corruption allegations and his trial
for the rape of a family friend.
Zuma appeared useful to Vavi and Nzimande —
a man they could use to turn the anc to the left. So
along with cosatu and the sacp, the two leaders
began a political rescue campaign, painting Zuma as
a victim of the paranoid and authoritarian instincts
of Mbeki, as a man of the people willing to listen
and take direction from the masses unlike the aloof,
pipe-smoking, Shakespeare-quoting Mbeki. Aided
by several other factions of disaffected anc mem-
bers, they brought down Mbeki and replaced him
with Zuma in 2007.
The move was a disaster for both the sacp and
cosatu. Vavi and Nzimande’s hubris blinded them
62 Jacobin · Fall 2015
to Zuma’s true nature: a consummate opportunist
and political survivor committed not to left princi-
ples, but to Zulu nationalism, conservative social
values, and enhancing the powers of the state.
Instead of the hoped-for left turn, after Zuma
was elected president of South Africa in 2009
assaults on the labor movement escalated, along
with state repression, corruption scandals, political
purges, and increased authoritarianism within the
anc. This brought Zuma and cosatu, particularly
those grouped around Vavi, into conflict.
By this time, the sacp, purged of its Zuma
critics, had become a vicious and increasingly reac-
tionary cluster of demagogues who defended the
Zuma line at all costs and offered up increasingly
absurd defenses of the president. They commended
nearly every act of state repression and attacked
anyone even mildly unsympathetic to the anc.
Yet despite its criticism of Zuma, cosatu was
not just unwilling to break with the Zuma regime
or the anc, but refused to confront them at all.
This unwillingness, particularly in the face of a
massive rank-and-file public sector strike in 2010,
coupled with anc’s rejection of cosatu’s desired
policies, stoked dissent within the federation. The
coalition’s most radical union, the National Union
of Metalworkers of South Africa (numsa), openly
questioned the value of an alliance with the anc,
even as cosatu president S’dumo Dlamini formed
an anti-Vavi, pro-Zuma faction.
As criticism of Zuma mounted, so too did calls
for a new path for South Africa. The developmen-
talist paradigm became more central to the public
narrative, particularly in 2011 at the start of the long
run-up to the anc’s 2013 electoral congress and in
the weeks following the 2012 Marikana massacre
(in which police gunned down forty-one striking
mineworkers).
At the time, Vavi avoided the suggestion that
there was a political alternative outside the anc, and
many still believed that Zuma’s second term could
mirror Lula’s or, at the least, that a new anc can-
didate would emerge that could move the country
in this direction. Vavi argued that cosatu should
grant Zuma a second term but push him harder — in
other words, Zuma should become Lula.
It was not to be. The Marikana massacre set in

motion a series of events that saw the collapse of
South Africa’s largest trade union, the expulsion of
numsa and Vavi, and what looks increasingly like
the end of cosatu as anything more than a yellow
federation, loyal to the anc and unable to protect
its workers’ interests.
An Unfinished Revolution
numsa has taken an increasingly radical line in
recent years, arguing not only that the anc has
been captured by capital and is unable to adopt a
pro–working class position, but also that cosatu
needs to regain its independence. The aftermath of
the Marikana massacre demonstrated the gap be-
tween numsa and the rest of the labor movement
— numsa was the only cosatu union to uncon-
ditionally condemn the atrocity.
In 2013, numsa broke with the tripartite
alliance and the following year was expelled from
cosatu. Many on the Left also began arguing that a
developmental state would only be possible through
the formation of a new, mass workers party.
This new call was a direct result of the twin
betrayal of the sacp and the anc, which post-Mari-
kana investigations revealed had readily condoned
murder in defense of capital. numsa members (and
many others outside the union) came to realize that
building working-class hegemony within the party
was improbable.
But opinions about how to move beyond the tri-
partite alliance still vary. Many of numsa’s leading
members and thinkers, like General Secretary Irvin
Jim, are former senior sacp members and advocate
building a new sacp with mass support outside of
the anc. Others, belonging to different political
tendencies, argue that the Brazilian pt represents
a more viable model.
Despite these differences, there’s a broad con-
sensus on the Left that a new political formation
needs to win state power, replace the anc, and
revive the political connections that existed between
unions, community organizations, and social move-
ments during the 1980s.
On the other side of the political trenches, the
technocrats and intellectuals grouped around the
anc’s center are promoting a different model of
South Africa Doesn’t Need a “Lula Moment”
the developmental state. The anc, through its
National Development Plan 2030 (ndp), is offi-
cially attempting to transform South Africa into a
developmental state by extending the party’s 1996
Growth Employment and Redistribution (gear)
policy package.
gear sought to stimulate growth by privat-
izing state utilities, shrinking the public sector, and
creating favorable business conditions for capital
(both foreign and domestic) by relaxing regulations
on capital flows and facilitating capital-intensive
development projects.
Yet despite their differences, both the Left and
those aligned with the anc see the developmental
state primarily as an extension of the ndr — or to
put it crudely, as the completion of a bourgeois-dem-
ocratic revolution in the still semi-colonial South
African state and economy. The goal is to build a
national bourgeoisie capable of revolutionizing the
productive forces in South Africa and acting in the
greater interests of the nation.
Within the national liberation movement during
apartheid, the simultaneous desire for freedom and
development translated into an overarching focus on
seizing state power with the assumption that, once
in power, the new democratic leadership would find
vast opportunities. This assumption rested on the
belief, which continues to permeate developmen-
talist fantasies, that South Africa is an “exceptional”
African state, boasting a diversified economy, a large
manufacturing base, good infrastructure, and an
advanced culture — all factors that make the country
different from its poorer, more “backward” conti-
nental neighbors.
The “Exceptional” State
What then are the prospects for South African
development?
The short answer is that the anc doesn’t have
a chance of succeeding, because the government
remains wedded to a neoliberal growth model that
fails to take into account the structural constraints
of both the South African and global economy.
Meanwhile, the South African left is facing a
major political crisis, rendering it equally unable to
construct a coherent political strategy or mobilize
Uneven and Combined 63
 its taken-for-granted political base, both of which
are necessary to build a democratic, interventionist
state. To understand why, it is useful to examine
South Africa’s political economy.
Throughout its entire history, the South African
economy has been dominated by what Ben Fine
and Zavareh Rustomjee call the Minerals-Energy
Complex (mec) —the super-powerful mining con-
glomerates that have sat at the center of the country’s
economy since the discovery of gold and diamonds
in the second half of the eighteenth century. These
conglomerates — which gave birth to a core set
of industries associated with large-scale mineral
extraction, energy provision, and other related sec-
tors — have enormous political and economic clout.
The emergent mec rested not only on the nat-
ural riches of South Africa, but also on the brutal and
widespread exploitation of low-wage black labor.
Historically this labor was reproduced in the native
reserves, and later the Bantustans, at minimal cost
to capital through the maintenance of pre-capitalist
modes of production and family/kinship networks.
The large pool of low-wage labor needed for
South Africa’s extractive industries was created by
destroying the existing African peasantry — dis-
possessing them of their land, forcibly removing
millions of people to fictional “homelands,” and
imposing a series of taxes and laws restricting
movement, all of which perpetuated a precarious
subsistence agricultural model that forced young
men to become migrant workers in order to support
rural households.
South Africa’s entry into the global economy
was thus rooted in a system still largely intact today

An Injury to One
Since it’s founding in the 1980s, COSATU has been a major
force in South African politics.

November 30, 1985 1990 1998

COSATU is formed, bringing
together 30 anti-apartheid unions
that shared a commitment
to a “non-racial, non-sexist,
democratic South Africa.”
May 6–9, 1987
More than 2.5 million COSATU
workers participate in a general
strike in defiance of the 1987
General Election, which pitted
the apartheid National Party
against the even further right
Conservative Party. COSATU
offices are bombed in retaliation.
COSATU forms the tripartite
alliance with the African National
Congress (ANC) and the South
African Communist Party (SACP).
Neither COSATU nor the SAPC
have ever challenged the ANC in
an election.
April 27, 1994
Apartheid officially comes to a
close as the ANC assumes power
in an open election.
COSATU resolves to campaign for
increased access to antiretroviral
drugs for South Africa’s 5.5
million people with HIV, ultimately
demanding that the government
provide treatment.
October 2004
& February 2005
COSATU sends two delegations
to Zimbabwe to observe that
country’s parliamentary elections.
Both delegations are expelled
from the country.

64 Jacobin · Fall 2015
 South Africa Doesn’t Need a “Lula Moment”

— commodity extraction founded on cheap black
labor — with other sectors like manufacturing still
directly tied to the mec.
For a time this system was highly successful.
Between the 1950s and the early 1970s, apartheid
South Africa experienced 6 percent annual growth,
second only to Japan. The economy appeared to
be diversifying, and the dream of South Africa as
an industrial powerhouse seemed on the verge of
coming true.
But the postwar model of industrialization
didn’t end up diversifying South Africa’s economy.
It instead further concentrated the mec’s con-
glomerate ownership of the engineering sector and
numerous others. South African manufacturing
became neither export-oriented — like South Korea
or Taiwan — nor did it follow Western Europe and
the United States, producing sufficient capital goods
domestically.
Despite boasting living standards comparable
to Western Europe for white South Africans and
leaping ahead in certain sectors (the world’s first
open-heart transplant took place in Cape Town),
South Africa remained dependent on importing
technology, machines, and equipment — a trend
that continues today.
Rapid industrialization did, however, have
an impact on South Africa’s economy, not least
because it produced an unexpected side effect — an
increasingly politicized black urban proletariat that
eventually formed the core of South Africa’s militant
trade union movement in the 1970s and won historic
gains. These unions adopted a radical democratic
approach to organizing, emphasizing power on the

August 17, 2010 August 16, 2012 November 8, 2014

Following a polarizing public
sector strike, COSATU General
Secretary Zwelinzima Vavi accuses
the ANC of betraying the promise
of the anti-apartheid movement
by maintaining capitalism in
South Africa.
August 10, 2012
3,000 workers — all members
of the National Union of
Mineworkers (NUM), a COSATU
member union — stage a wildcat
strike at a mining facility owned
by the British-owned corporation
Lonmin. NUM officials reportedly
fire upon the striking miners as
they march to their union office.
With the implicit support of The Central Executive Committee
NUM and the tripartite alliance, of COSATU votes to expel NUMSA,
national police assault striking citing the union’s rejection of the
miners with machine guns, killing tripartite alliance.
34 and wounding at least 78.
Known as the Marikana Massacre, March 30, 2015
this is the most lethal use of force
Vavi is expelled from COSATU by
by South African authorities since
the Central Executive Committee
apartheid.
after his outspoken defense of
NUMSA.
December 20, 2013
The National Union of October 6, 2015
Metalworkers of South Africa
NUMSA calls for the
(NUMSA) — the largest single
nationalization of the steel
trade union in the country, with
industry and demands that
more than 338,000 members —
the government drop GEAR,
withdraws its support for the ANC
saying the program is “directly
and the SACP in response to the
responsible” for increased
Marikana Massacre. NUMSA calls
corruption and poverty.
on COSATU to form a united front
with other labor organizations
to oppose ANC rule and build an
anti-capitalist movement of South
African workers.

Uneven and Combined 65

 Runaway Capital
Capital flight from South Africa 1980–2000 (USD millions)
$86,702
-$12,130
1980 1985
shopfloor, and went on to form cosatu in 1985.
The growing militancy (and cost) of labor, com-
bined with the 1970s oil crisis and the associated
economic downturn, triggered a decades-long eco-
nomic slump in South Africa. gdp growth sunk to
1.8 percent in the 1980s and contracted 1.1 percent
in the early 1990s. Foreign capital inflows dried
up and years of economic sanctions exacerbated
the country’s continued inability to absorb surplus
labor and sustain a growing manufacturing sector.
By 1985, South Africa was facing a serious
debt crisis. Corporations had to source funds on
the domestic market, resulting in shrinking invest-
ments and a wave of mergers and acquisitions in the
financial and industrial sectors — further reinforcing
mec power. The state’s attempt to encourage pro-
ductive investment by loosening restrictions on
capital only made matters worse, precipitating an
“orgy of speculative investment” and the shrinking
of the manufacturing sector.
66 Jacobin · Fall 2015
1990 1995 2000
By the late 1980s, the captains of industry were
finally coming to the conclusion that apartheid was
no longer compatible with economic growth.
A Post-Apartheid False Start
In spite of the monumental transition from apartheid
to liberal democracy, there was still a fundamental
continuity between the 1980s reforms and the eco-
nomic course the anc has charted since coming to
power in 1994. The demise of apartheid opened up
fewer possibilities for structural change than previ-
ously assumed.While the alliance between cosatu,
sacp, and the anc has been much romanticized,
within two years of coming to power the anc had
adopted the neoliberal gear framework without
consulting its left partners. The failures of gear — it
shored up the power of the mec and finance, while
simultaneously decimating huge swaths of South
African domestic manufacturing and generating

mass displacement and job loss — are central to un-
derstanding the current state of the South African
economy.
Like the National Democratic Revolution narra-
tive, at the core of gear was a fantasy of catching up
with the West. gear sought to attract private capital
to South Africa by reducing the deficit, liberalizing
financial controls and obstacles to the free flow of
capital, privatizing non-essential state enterprises
and commercializing other state-run utilities, lib-
eralizing trade tariffs, adding tax incentives to new
investors and labor absorbent projects, and stabi-
lizing the exchange rate. The tax system was also
restructured along more regressive lines.The new
anc government hoped these policies, in combina-
tion with tariff reductions and the introduction of
“world-class” manufacturing standards, would help
create an export-orientated manufacturing sector in
South Africa. But most South Africa companies, par-
ticularly in the clothing and textile industries, were
unable to compete with cheap East Asian imports
and disappeared almost entirely within a few years.
Joblessness increased from 32 percent in 1994 to 37
percent in 1999.
Meanwhile, many of the largest South
African corporations and conglomerates, such as
Anglo-American and SA Breweries, moved their
headquarters overseas and began to invest heavily
in opening up the rest of the African continent for
exploitation. At least $100 billion flowed outwards
from 2005–2015, and estimates of illegal capital
flight between 1994–95 ran at 9.2 percent of gdp.
In 2007, during the peak of the recent commodity
boom and South Africa’s best economic performance
since the end of apartheid, losses to transfer pricing
and other forms of illegal capital flight were as high
as 20 percent of gdp, while total investment in the
economy was a mere 17 percent.
Ultimately, gear decimated most of South Afri-
ca’s industrial base, engendered massive capital flight,
produced lackluster economic growth (0.6 percent in
1998 and 1.2 in 1999, against projections of 3.8 per-
cent and 4.9 percent, respectively), and brought hot
money inflows rather than foreign direct investment.
Instead of increasing employment and disman-
tling the legacy of apartheid through housing and
land reform, the anc came to rely on the financial
South Africa Doesn’t Need a “Lula Moment”
sector for economic growth. The share of gdp held
by the financial sector grew from 6.5 percent in 1994
to 20 percent in 2009.
Awash with credit, South Africa’s non-financial
corporations earned increasing profits from financial
activities. Household debt also exploded as workers
sought to offset declining wages with loans.
The Current Crisis
What then is the current state of the South African
economy, and what bearing does it have on the proj-
ect for a developmental state?
South Africa, like many other middle-income
countries, is suffering from an economic downturn
and might soon experience a full-blown recession
due to collapsing commodity prices brought on by
decreased demand in China (and that country’s
current financial crisis), as well as increasing dein-
dustrialization in South Africa.
Falling commodity prices are causing compa-
nies to lay off workers — manufacturing jobs have
declined 16 percent since their peak in 2008, and
over 50 percent of jobs added to the economy over
the past seven years are in social and community
service — primarily low-paying jobs in cleaning and
security acquired through labor brokers.
Anglo-American plans to slash around 50,000
jobs, and major unrest in the platinum industry (the
longest strike in South African history occurred last
year) has mining conglomerates looking to eliminate
their “risky assets.” Moreover, 180,000 jobs in the
steel sector have been declared at risk, a stronghold
of numsa and a key strategic industry.
Powerful factions within the state — particu-
larly capital and those grouped around the treasury
— have attempted to use the crisis to deepen neo-
liberal orthodoxy and push South Africa towards
austerity. But the anc is wary of embracing aggres-
sive belt-tightening, and has so far quelled unrest
by increasing public sector jobs.
Instead, according to the ndp and other
planning documents, the anc plans to pursue its
developmentalist objectives by intensifying its long-
standing project of building a national bourgeoisie
capable of leading economic growth. The party
hopes that formations like the brics will provide
Uneven and Combined 67
 South Africa the allies it needs for investment. But
with Brazil, Russia, and China facing serious eco-
nomic woes of their own, such aspirational ties might
be just that.
At the same time, existing state plans for capi-
tal-intensive infrastructure projects, such as a new
rail network and massive port developments in
coastal cities like Durban and Port Elizabeth, have
thus far been disappointing.
Corruption and incompetence are two reasons
for this. The head of the country’s passenger rail
service has charged things to the company tab like
luxury tickets for him and seven female compan-
ions, the rail service’s chief engineer appears to have
forged his engineering degree, and roughly $200
million was spent importing train carriages from
Spain that don’t fit South Africa’s railway tracks.
What’s more, in a situation mirroring the cur-
rent Petrobas corruption case in Brazil, South
African construction companies managed to fleece
the government of $5 billion dollars by overcharging
for construction contracts leading up to the 2010
World Cup.
Scandals like these are common in South Africa
and hamper the state’s ability to deliver on long-
term infrastructure projects. More broadly, they are
evidence of a state rife with factionalism, patronage
networks, and, especially at the local level, an
absence of functioning governance mechanisms. It’s
telling that despite the country’s abundant natural
resources, power outages have become a regular fea-
ture of daily life in South Africa, costing the economy
billions of dollars a year.
South Africa’s new black bourgeoisie lacks the
institutional power to remedy any of this — many
have lined their pockets with scraps from older and
paler capitalists (such as mines purchased with state
money by politically connected families), lucrative
state contracts, or by playing middleman to foreign
companies.
Of course, this is nothing unusual. Domestic
capitalists have undermined development programs
in many postcolonial states, and the old distinction
between a comprador bourgeoisie tied to metro-
politan firms and a national bourgeoisie invested
in building a nation’s productive forces is highly
suspect. Perhaps no figure personifies this better
68 Jacobin · Fall 2015
than Cyril Ramaphosa, the deputy president of
South Africa and a key negotiator during the talks
between the anc and National Party that ended
apartheid. Formerly a militant unionist, Rama-
phosa has become one of the country’s richest men,
acquiring wealth through the active patronage of
South Africa’s old apartheid-era captains of industry.
He played a key role in putting political pressure on
the state to intervene in the wildcat platinum strike
at Lonmin (where he sat on the board of directors)
and thus is directly linked to the Marikana massacre.
The continued power of the m e c amid
increasing deindustrialization means that unless
there is a major shift in South Africa’s economic
strategy there will be no meaningful development.
A prerequisite for such a pivot, of course, would
be a coalition of political forces that could directly
challenge the mec — a coalition that would have to
include the anc but would also need to be buttressed
by strong allies.
The natural partners would be the South African
labor movement, which on paper is relatively strong
with 30 percent union density. But the reality is that
the labor movement is in a major crisis as a result of
cosatu’s continued alliance with the anc.
The Lula Myth
In many respects, South African labor’s weakness is
analogous to that of the Brazilian labor movement.
Brazilian unions have been demobilized during the
pt’s reign, leaving the current president, Dilma
Rousseff, in an extremely weak position following
the Petrobas corruption scandal and assaults from
an intransigent right-wing.
Despite having a large mandate and record
approval ratings during the Lula era, the pt failed to
build a new political culture through constitutional
and political reforms or by tackling an institutionally
hostile media. Instead it chose to make alliances with
corrupt and reactionary regional power brokers,
embracing Brazil’s traditional patronage political
culture to gain institutional power at the expense of
its trade union and social movement allies.
With the revelations that many senior pt mem-
bers are deeply implicated in one of the largest
corruption scandals in Brazilian history, along with
 South Africa Doesn’t Need a “Lula Moment”

an abysmal economic performance, the façade of Marikana’s

Debt Barons
pro-capital-yet-redistributionist growth has col-
lapsed. Rousseff is attempting to revert to fiscal
austerity, and Brazil’s once-militant labor movement
is now demoralized and alienated from the pt, facing
an economic downturn that might destroy more than The National Union of Mineworkers and the
2.5 million jobs in the next year. Chamber of Mines together own UBank, a
The economic crisis currently facing Brazil is at lending institution that targets poor miners,
its core very similar to the economic crisis in South holding them hostage with microloans.
Africa; both countries rode commodity booms
through the mid- to late 2000s that disguised core
structural weaknesses, and both countries were hol-
lowed out by liberalization policies implemented $25 million
in the 1980s. UBank’s 2013 profits
South Africa and Brazil share other features
as well: Brazilian manufacturing productivity has
increased, but the industry has been held back
73%
percent of profits from loan interest
by a lack of a development funds; mass privatiza-
tions, downsizings, and the closing of state-owned
enterprises have destroyed well-paying, blue- $75
collar jobs; and Brazil has seen the increase of the typical monthly loan taken out by the
financial industry’s share of gdp, with finance average South African miner
establishing control over much of the country’s
public finances. 25%
Yet even if the Brazilian state had the resources monthly interest
for massive infrastructure investment or a long-
term plan to extricate itself from the present crisis,
300%
it doesn’t have the functional capacity to effectively
annual interest
implement such a plan. As economist Gabriel Palma
says, Lulaism never broke with the fundamental
neoliberal premise that the only role of economic The majority of miners
policy is to generate “credibility,” and to keep the
capitalist elite on favorable terms to ensure con- use 50% of each
tinued private-sector-led economic growth. paycheck to repay
When the commodity boom collapsed, the Bra-
zilian economy stagnated and then began tanking
outstanding debt.
as its export markets declined and capital, sensing
weakness, pushed hard for an austerity program.
The country’s credit rating has now been down- $511 + $204 = monthly income
graded to junk status, and in 2015 the economy will of pre-Marikana
in wages living
have contracted an estimated 2.7 percent. The unem- rock-driller
allowance
ployment rate, while still relatively low, is projected
to increase to 8 percent by the end of 2015. Benefits $1420
and unemployment insurance are being cut while
total wage package demanded by
taxes, water rates, and electricity are increasing.
striking rock-drillers
Rousseff seems set to reverse most of the gains made
by her party over the last decade.

Uneven and Combined 69

 A disturbing sense of passivity and resigna-
tion seems to have taken hold on the Brazilian left,
with many people hoping to ride out Rousseff’s
term and some even hoping for Lula to return once
again to save the country. All of this shows that the
Lula moment was fleeting and unstable — and not
something the Left should attempt to replicate in
South Africa.
Saviors From on High
The anc has debilitated cosatu by deploying
party loyalists in key labor positions, purging mil-
itants, and consistently implementing policies
against the interests of its trade union allies. As the
South African economy faces a downturn similar
to Brazil’s, the chickens have come home to roost
— cosatu members are demoralized and demo-
bilized, and a split in the federation is imminent.
The anc no longer has the militant ally it needs to
take on capital.
Heedless of this reality, the anc is pursuing
a development strategy that rests on brokering a
labor-capital accord that keeps capital happy enough
to secure future economic growth. According to
this “social compact” strategy, the relative power,
militancy, and high wages of South African labor
are preventing capital from investing and leading
companies to pursue more profitable investments
elsewhere. If labor would agree to accept lower
wages and not strike so frequently, investment would
flow into the country and the manufacturing sector
would grow once again. In return unions would get
symbolic gestures from capital, such as lower ceo
salary increases.
The social compact fits with the anc’s broader
vision of a neoliberal, capital-friendly developmental
state with a subdued, subservient labor movement
and a few welfare programs sprinkled in, such as the
social grant system.
Yet the South African left’s conception of
the developmental state — popular in the trade
union movement, allied ngos, and those com-
rades expelled from the sac p — is equally
problematic. Their conception assumes there
is a massive support base just waiting for the
right leader.
70 Jacobin · Fall 2015
To put it differently, the Sisyphean task of
reclaiming the “soul” of the anc is simply con-
tinuing outside the anc, now that radicals and
many trade unionists have been forcibly removed
from the tripartite alliance. The reclamation project
has focused heavily on finding, or as it turns out
building, a new leader — Zwelinizima Vavi — who
it is believed can challenge the anc-led status quo
and reconstruct the social base needed for South
Africa’s own Lula moment.
The Left thinks that winning its own Lula
moment will require a “servant leader” who pos-
sesses a unique political style capable of uniting a
divided nation behind a common cause, rather than
then a specific economic program. As Jay Naidoo,
former cosatu secretary general turned platitudi-
nous member of the national bourgeoisie, recently
put it:
[A]s I listen to the instructive voices from Bra-
zil, I understand what it takes to be a servant
leader. Such a leader is one who unifies a hurt-
ing nation; one who listens to the desperate
voices of the marginalized and who consciously
lowers the toxicity in public debates, while still
maintaining the robustness of the public dis-
course. …The servant leader in South Africa
could push for our very own Lula moment.
Naidoo’s words illustrates the strength of the belief
that exemplary leadership is a way to bridge political
and class divides. In South Africa, this conviction is
a byproduct of the messianic mythology created by
the anc and domestic capitalists around the beloved
figure of Nelson Mandela.
Yet if one actually believes that the Mandela
leadership model of humility and moral righteous-
ness is what the movement needs to gain the same
mass appeal and traction that the man himself was
able to muster, then politics has become not about
concrete strategies around organization building,
power, and mass mobilization but about the sym-
bolic moral posturing required to present a leader
as Mandela’s successor.
This is precisely what is happening in South
Africa today. The strategic discussion of how to
form a political alternative to the anc is limited to
a small group of people around the Vavi leadership

“Yearning
  for a messianic leader
to do the hard work of movement
building won’t cut it.”
project, while the majority of the supposed base
and those outside of the fold are shutout. The real
political work of building a new base is sidestepped,
on the assumption that the majority of cosatu
members are ready to join a new federation led
by Vavi and that there is a vibrant array of social
forces in so-called civil society ready to be tapped
to unite community and workers’ struggle. The
“what for” and “how” questions remain unasked
and unanswered.
Existing political and economic conditions in
South Africa preclude the establishment of any sort
of developmental state. Indeed, the developmental
state has become such a vacuous term it might be
worth abandoning altogether.
But South Africa — a country characterized by
staggering levels of unemployment, underdevel-
opment in most areas outside the urban centers,
and widespread rural and urban poverty — does
desperately needs a left interventionist state and
mass redistribution. Calling for a state capable of
taking on the mec with strong social movement and
trade union allies is the only political alternative to
what we have now.
Still, it needs a better conceptual and political
vocabulary than the one currently in vogue. The only
way forward is through class struggle, not vague
social compacts.
The current trend on the South African left is a
form of tailism in which numsa and the indepen-
dent left run after Vavi, who has decided the most
pressing issue is corruption. For him, the answer to
the venal leader of the anc is a multi-class alliance
South Africa Doesn’t Need a “Lula Moment”
of liberal ngos, a mystical entity known as “good
business,” and the narcissistic middle classes.
Some of Vavi’s closest political allies — such
as David Lewis, head of an ngo called Corruption
Watch — have even cited Brazilian anti-corruption
politics as an example for South Africa to emulate.
But anti-corruption protests are a cynical exercise
— a way for Brazil’s elites, backed by a biased and
reactionary media, to drum up opposition to the pt
and its working-class supporters.
In South Africa, corruption politics will neuter
the political content of the Left in a forlorn attempt
to curry favor in elite spaces, while simultaneously
ensuring that a dialogue over political alterna-
tives ignores the need for structural economic
transformation.
For a new South African left to emerge, con-
crete questions around political strategy, political
mobilization to save what’s left of the trade union
movement, and the creation of a new political dia-
logue among workers are paramount. Yearning for
a messianic leader to do the hard work of movement
building won’t cut it.
South Africa’s left must break with the endemic
political exceptionalism that characterizes the
country’s political culture and realize that forging
a political alternative requires more than capturing
the state — it requires political power on the ground
capable of challenging the mec and its hold on
the state.
Fantasies of a Lula moment will lead to yet
another lost opportunity in a country desperately
in need of a real political alternative to the anc. ■
Uneven and Combined 71
 Thinking
Small Won’t
End Poverty
Decades of US-backed community
development programs have left behind a
disastrous economic and political legacy.

Daniel ustomers at Whole Foods may have noticed new decorations

C
Immerwahr adorning the registers a while ago: photographs of smiling
inhabitants of poor countries. This is the work of the Whole
Planet Foundation, the grocery store’s philanthropic arm,
which is running its eighth annual “prosperity campaign” to
achieve a “future without poverty.” Shoppers can donate their bag credits — the
five-cent rebate they receive by forgoing plastic bags — to a microfinance fund.
Combining this with traditional donations, Whole Foods hopes to raise $5
million to fund 40,000 small loans to “impoverished entrepreneurs” around
the globe. They say that these direct financial transfers, unmediated by gov-
ernment agencies, can “empower the poor and the communities around them.”
In many ways, this is the age of the micro, of thinking small and acting
locally. Microloans are only one part of the broad move toward “bottom-up”
development, which seeks to enroll the poor directly in anti-poverty campaigns.
The World Bank has invested heavily in this area. Its acting chief economist
describes communal participation as “a central tenet of development policy,”
and in the past fifteen years the institution has doled out over $85 billion for
community empowerment and government decentralization.
In 2006, Muhammad Yunus, the public face of microcredit (and a partner
of the Whole Planet Foundation), won the Nobel Peace Prize. In 2009, it went
to Barack Obama, who began his career as a community organizer on the south
side of Chicago.
Much of the enthusiasm for tackling poverty in this way comes from the
feeling that top-down, expert-driven solutions haven’t worked very well. Big
dams designed to provide irrigation and generate electricity have displaced
millions of people (between forty to eighty million in the twentieth century)

Illustrations on preceding spread and opposite page by Alexander Medel Uneven and Combined 75
They Only Want
to Help
A brief history of “community development,” from the
British Colonial Office to millionaires in New York.
British Colonial Office
The term “community development” comes out of the
British Colonial Office. In 1954, Great Britain formally
adopted the term to describe what they were doing:
rolling back traditional welfare — which Brits thought
was too soft on the destitute — while increasing work
and education programs in their colonies. They were wary
of sharing the Empire’s wealth with the dispossessed
and impoverished, but saw no problem with sponsoring
potentially lucrative developments in their holdings —
so they de-emphasized the individual in favor of the
‘community,’ by which they meant commerce.
 “Good Governance”
The UN enthusiastically borrowed the term from the
British when they formed the United Nations Development
Programme (UNDP) in 1966 with a similar strategy for
world improvement. Following the lead of the World Bank,
the UNDP added the enforcement of “good governance”
standards to its community development mission in 1980.
“Good governance” is a code word for weakening the
state in relation to the market, and has been used to force
neoliberal policies on poor nations for decades.
Kosovo Community
Development Project
In 1999, the World Bank started the Kosovo Community
Development Project, a program that filtered private
donations to the war-torn Balkans in the form of targeted
community investments. The program demanded a 15%
contribution from the communities it sought to develop,
and did things like install a 70,000 Euro municipal water
system in Prekaz, a community of 3,500.
UNDP Today
The United Nations Development Programme currently
has projects underway in 177 nations. It has close ties
to the World Bank. A recent look at the UN’s internal
statistics report revealed that 637 upper-level staff at
the UNDP have personal bank accounts in excess of one
million dollars.
76 Jacobin · Fall 2015
and created huge reservoirs that have proved ideal
breeding grounds for disease-bearing mosquitoes.
Family planning campaigns have devolved into
state-sponsored forced sterilization sprees. Gov-
ernment attempts to jump-start the market with
“special economic zones” have turned into land
grabs as private developers seize peasants’ prop-
erty and then hire those they have dispossessed at
extremely low wages.
You hear one of these stories and it’s easy to
write it off as a mistake. You hear fifteen and it starts
to look like a pattern.
Development is a fiendishly complex business,
with cultural, sociological, ecological, and economic
aspects. Maybe relying on foreign experts, who tend
to be drawn toward stark diagnoses and one-size-
fits-all fixes, is the wrong way to go about things.
Maybe it would be better to let poor communities
themselves decide what would be best for them.
After all, they’re the ones who can actually see what’s
happening on the ground, and they have good reason
to care about getting it right.
That is the thinking behind the recent embrace
of small-scale, participatory projects. Local wisdom
in the place of expert knowledge, many small proj-
ects rather than a few big ones, communities in
charge of their own developmental destinies. It
sounds refreshing.
What few realize, however, is that there is
nothing new in this approach. In the 1950s and
1960s, the United States, United Nations, and dozens
of governments throughout the world launched a
massive, global community development campaign
throughout the Global South.
We are only now uncovering its history.
It Takes a Village
Community development as we know it today be-
gan in Etawah, a medium-sized district in northern
India. In 1948, prime minister Jawaharlal Nehru
engaged an urban planner from the United States,
Albert Mayer, to see what could be done to “build
up community life” in India’s villages. Nehru offered
Etawah as an experiment.  
Nehru asked the right person. Like many
of his compatriots, Mayer worried about what

mechanization was doing to the United States,
particularly to its community life. He appreciated
what he saw in Indian villages. Rather than focusing
on material outcomes (more abundant harvests,
better livestock), Mayer concluded that he should
solicit the “felt needs” of Etawah residents them-
selves. That way, they could come up with their own
“folk-solutions.”
Remarkably, it seemed to work. Using only avail-
able technology and local resources, villagers built
schools, roads, and sanitary wells. Etawah quickly
became famous. President Truman praised it in his
speeches, Eleanor Roosevelt visited it, and Mayer’s
work was covered in Time, Life, the New York Times,
and the Ladies Home Journal.
Building on Etawah, India launched a nation-wide
community development program in 1952, on Gand-
hi’s birthday. The United States gave tens of millions
of dollars, the Ford Foundation took a central role,
and the UN sent over streams of experts to help. To
encourage village communities still further, India’s
government embarked on a campaign of “democratic
decentralization,” replacing appointed local officials
with elected ones and entrusting village councils with
some of the business of economic planning.
By the mid-1960s, the community development
program covered all of India’s villages. To fully
appreciate that achievement, consider that those
villages collectively contained around ten percent
of the global population.
From India, community development spread
outward. The United States set up a Division of
Community Development within the State Depart-
ment to help with funds and expertise. Later, it
established the Peace Corps to send young people
abroad to assist directly. By 1960, more than sixty
countries had community development programs.
Surveying all of this, Nehru concluded that
community development was by “far the most rev-
olutionary thing” his government had achieved.
The Etawah Bubble
But there are two things that are surprising about
the history of community development. One, which
Nehru noticed, was how widely it was applied. The
second is how little it seemed to do.
Thinking Small Won’t End Poverty
Progress can be hard to measure. Ask an econ-
omist whether a development project is a success,
and she will point you to the numbers. Did incomes
go up or down? What about life expectancy? Yet
community developers insisted, time and again,
that their achievements couldn’t be captured by
cold statistics. Building a vibrant culture of com-
munal participation was an all-round sort of thing,
they insisted, not a matter of metrics. In place of
numbers, they offered stories.
And yet numbers, for all their flaws, often
correspond to real things that we want to know
about. In the case of India, the numbers that were
most pressing had to do with agriculture. By the
late 1950s, it was clear that India was simply not
growing enough grain to feed its rising population.
“India faces a problem of overwhelming gravity,”
warned the Ford Foundation. Although Ford had
been a key supporter of community development,
in the face of the numbers it changed its support.
The main problem with India, the foundation con-
cluded, wasn’t that it needed more communal spirit.
It needed more food.
By the 1960s, it had become clear that com-
munity development could not stave off India’s
looming agricultural crisis. In fact, it was hard to
say what it could do. Study after study, in India and
elsewhere, searched for the benefits of community
schemes and came up short. The most high-profile
report on the Indian program, commissioned by
Nehru’s government itself, concluded that, for all
of the heady talk, very little was done. In the end,
few community groups had “shown any enthusiasm
or interest in this work.”
A major problem, the studies emphasized, was
that the communities in question were rarely dem-
ocratic places. Funds intended for general use had
a way of ending up in the hands of landlords and
village headmen. Meanwhile, the most pressing
problems — debt, patriarchy, caste, and tenancy —
were rarely even discussed.
The famed economist Gunnar Myrdal concluded,
after a careful examination, that community devel-
opment’s “net effect” had been to “create more, not
less, inequality.” The anthropologist Gerald Ber-
reman put it more bluntly: to put village councils
in charge of fighting rural poverty, he observed, was
Uneven and Combined 77
 like putting Jim Crow school boards in charge of
desegregation.
In India, community development died with
Nehru in 1964. His daughter Indira Gandhi, who
soon became prime minister herself, gutted the
program and brought the Ministry of Community
Development under the control of the produc-
tion-oriented Ministry of Agriculture.
This was a common move. With food short-
ages looming throughout the Global South, the
countries that had turned toward community devel-
opment in the 1950s ran in the opposite direction
in the 1960s, away from fostering communal sol-
idarity and toward engineered seeds, improved
livestock, chemical fertilizers, and large-scale
agriculture. The Green Revolution was, in many
ways, a reaction against community development’s
unimpressive record.
In the 1950s, a Southern country without a
community development program was rare. By the
1970s, a country with an active program was.
Napalm Values
The one place where community programs contin-
ued to grow was in the field of counterinsurgency.
Starting in the 1950s, the Central Intelligence Agency
had bankrolled the schemes in the Philippines as a
way of quashing a rural insurgency, the left-wing
“Huk Rebellion.” By encouraging peasants to iden-
tify with their “community,” which was controlled
by their landlords, rather than with their class, the
cia hoped it could head off a revolution.
And it did. With a carrot-and-stick combina-
tion of community programs and napalm, the cia
and Philippine government beat back the uprising.
From the agency’s perspective, this was a miracle.
Community development, one of its officers giddily
explained, could be a bulwark “against the leftist
takeover of every hamlet in Latin America, Asia,
and Africa.”
That was more aspirational than anything else.
The one place where the United States did fully
support community development as a counterin-
surgency tactic was in South Vietnam. When Ngo
Dinh Diem’s government, pointing to India’s pro-
gram, unveiled its own set of village schemes on
78 Jacobin · Fall 2015
what Diem called the “community development
principle,” the United States sent over its experts
from the Philippines.
This culminated in the Strategic Hamlet Pro-
gram, which sought to build community spirit among
South Vietnamese peasants within fortified villages
and establish a free-fire zone outside of them. The
United States provided $10 million in funds, in addi-
tion to its seasoned community experts.
And yet, strategic hamlets became an emblem
of the failure of the Diem regime. Despised by their
inhabitants and easily infiltrated by national liber-
ation forces, the hamlets collapsed quickly after
Diem’s death in 1963.
Small Talk
Community, though, is once again in vogue. And
the problems it faced in the middle of the century
are cropping up again.
In 2013, two lead economists at the World Bank,
Ghazala Mansuri and Vijayendra Rao, reviewed
nearly 500 studies on participatory development.
The surveys they examined covered a hodge-podge
of activities and places — participatory budgeting
in Brazil, microloans in Pakistan, women’s access
to water in Kenya, forest management in Uganda,
post-conflict rebuilding in Liberia. Their review
included ethnographies, surveys, randomized con-
trol studies, and econometric analyses.
What they found was not encouraging. Occa-
sionally, they concluded, participatory programs
generate creative responses to local conditions.
But, more often, they get hijacked by a local elite.
When community programs have yielded measur-
able benefits at all, those benefits (usually modest)
have tended to accrue to those who are “the most
literate, the least geographically isolated, and the
most connected to wealthy and powerful people.”
If community programs have consistently floun-
dered, both in the past and today, what’s left? A
return to the rule of experts? Bigger dams and better
seeds? If faced with two approaches — that of the
development expert, asking “What can we do for the
poor?” and that of the community developer, asking
“What can we do with them?” — then the grassroots
approach seems at least less condescending.

Yet there is a third question that inhabitants
of the Global North might ask, one that would be
far more productive. “What have we been doing
to them?”
That question implies a different framework,
one that proponents of participatory development
rarely consider. It raises the possibility that there
might be some causal relationship between govern-
ment policies in the Global North and the continued
poverty of the Global South. Rather than focusing
merely on poor people in poor places, it zooms out,
capturing the North and South together through a
wide-angle lens.
The Burden of Guilt
Once the frame is enlarged to include both rich and
poor within it, certain aspects of poverty become
easier to see. For one, it’s clear that the current dis-
tribution of global resources depends on an archi-
tecture of international trade and finance that was
built by the rich and for the rich.
The International Monetary Fund, for example,
is ostensibly a public institution dedicated to the wel-
fare of all. Yet it allocates voting power to countries
roughly on the basis of their positions in the world
economy. India, with four times the population of
the United States, commands fewer than one-sev-
enth the votes.
Similar mechanisms prevail at the un, the World
Trade Organization, and the World Bank. Nation-
ally, we aspire to live in democracies. Internationally,
we inhabit a plutocracy.
Not surprisingly, rich countries use their power
to press their advantage. They erect trade bar-
riers against countries in the Global South while
demanding, as the price of loans, that the same
countries dismantle their own trade barriers. They
subsidize their own agriculture and then stand aside
as their farmers dump below-market-price produce
into Southern markets. They demand that poorer
nations adopt and enforce stringent protections on
intellectual property, driving up the price of medi-
cine and technology for those who need it the most.
All of this has created a significant headwind
against global economic equality. So much so that
it is the country in which a person is born — rather
Thinking Small Won’t End Poverty
than her age, sex, education, work ethic, or even
the wealth of her parents — is by far the greatest
determinant of her economic destiny.
Well, if that’s the case, what about simply
opening borders? Globalization has carried ideas,
investments, and cultures across national lines, why
not let people move, too? Yet one of the important
ways in which rich countries have preserved their
wealth is by locking foreigners out.
Or consider climate change. Its promise of
hotter temperatures, fiercer and more frequent
storms, and rising sea levels presents the worst
threat that impoverished countries face. The poor
have contributed little to the problem — the average
Bangladeshi carbon footprint is about two percent of
the average US one — and yet it is their livelihoods
that are most at risk.
Climate change vividly illustrates the limits of
attacking poverty by encouraging community spirit
among the poor. Although it is an issue of profound
local relevance (and no more so than in the Global
South), it is not an issue that appears even remotely
likely to yield to state-sponsored community action.
The more globally connected the economy has
become, the less relevant community strategies
— especially those funded by governments or the
World Bank — are to addressing the structures that
create poverty and exacerbate its worst effects.
Unfair trade rules, border controls, and eco-
logical disaster — none of that is news. Yet it helps
place small-scale development in perspective. If
elites in rich countries truly wanted to help poor
people and were willing to sacrifice some of their
share of global resources to do so, they wouldn’t
need to bother searching for the right blend of
technical fixes and participatory openness in their
aid policies. They could simply reverse their self-
interested policies.
In a context in which rich nations continue to
rig the international system to ensure that wealth
accrues to certain places, lock poor people out of
those places, and then consume resources at a rate
that will probably render much of the planet unin-
habitable, there is something bizarre about the
current obsession with helping poor people help
themselves. Fostering local solidarity seems beside
the point.  ■
Uneven and Combined 79
 Development
From Below
Capitalists are interested in profit, not
development. Only workers can empower
the Global South.

Vivek arketize, privatize, deregulate: the Washington Consensus man-

M
Chibber tra dominated policy in the developing world for a quarter cen-
tury. For most the recipe was a disaster.
Today, alternatives are being discussed, and in the process
many scholars and policy makers are casting a fresh eye on the
legacy of twentieth-century national development models.
Given the terrible record of neoliberalism — in terms of human suffering
and lackluster economic growth — this reconsideration is something to cele-
brate, but hindsight is often tinged with nostalgia, and risks romanticizing the
pre-neoliberal period. The national bourgeoisies empowered in newly inde-
pendent states were no friends to workers and peasants, and in most countries
failed to bring sustained growth and development.
What, then, does the story of twentieth-century national development have
to teach us today? And what would a realistic development policy for the Left
look like now, given the constraints imposed by globalized capitalism?
In early October, Jacobin publisher Bhaskar Sunkara spoke to Vivek Chibber,
a professor of sociology at New York University, about the lessons of past periods
of state-led development and what kind of movements could extract real con-
cessions from capital today.

Bhaskar Sunkara: There’s a widely held view among progressives that the
neoliberal era has not been a success in the South. And with it a positive
assessment of the era of state-led development.
What should we think about the earlier period, when countries took up
developmentalism and planning?

Vivek Chibber: By and large, the “developmental era” was an impressive

success, especially if you compare it with other eras of industrialization.
By historical standards, this is true of all countries that undertook state-led
development — countries in South America, South Asia, parts of the Middle

Uneven and Combined 81

 East, and even Sub-Saharan Africa after
decolonization.
So, of course, there is some cause for looking
back romantically at this period because it was a
remarkable improvement on the first half of the
twentieth century when all these countries were
stagnant. But it was uneven. Some countries in
this era developed spectacularly, at record rates,
mostly those in northeast Asia. Other countries
were much less impressive, such as the middle-in-
come countries like Brazil, India, Egypt, Mexico
— impressive, but not nearly as much. So the
project was overall a success, but one that was
uneven in its scope.
Why the different outcomes?
There were two determinants of whether or not a
country fell into the more successful or the less
successful camp. One was that countries that
imposed land reform domestically made things a
lot easier for themselves because the redistribu-
tion of land equalized income and it also raised
incomes in the countryside, which created a
domestic market for industry. And it also
enormously reduced the power of landed classes,
which had always been a problem for develop-
ment. This much is well-known.
The second issue, which is perhaps less
known, is that the countries that did well were
ones which used state power and state planning
better than the others. And the essence of that
was that planning in the post-war era in all these
countries was a double-sided process. Govern-
ments used public money, tax money, to help out
local businesses, and in exchange for that,
demanded that these businesses invest the money
in ways that were growth-enhancing, which was
not necessarily always the most profit-enhancing
thing to do.
The problem for governments was that the
thing that was best for national development
wasn’t always the thing that could fill up the
pockets of local industrialists the fastest. So the
states that did best were not only the ones that
were able to subsidize local industry, but were
able to make sure that industry used the money in
82 Jacobin · Fall 2015
ways that were conducive to national economic
growth. That was in Northeast Asia — specifically
South Korea and Taiwan. In other countries, like
in India, Turkey, and Brazil, they weren’t able to
do the second task nearly as well.
And in India and Brazil, at least, there was no
serious land reform, either.
Yes, they got hurt on both ends.
Why were some states better able to steer
capital? Surely, their domestic capitalists weren’t
just of nicer temperament.
Well, this is where, for the Left, it’s been a learning
experience. Throughout the 1940s and 1950s there
was an assumption among Marxists that local
industrialists would be a natural partner for rapid
industrialization. And the reason for that was
obvious — rapid industrialization was supposed to
help the local capitalist class grow. Why would they
not want to do it? So they assumed there wouldn’t
be any kind of resistance to national development
plans, if there was going to be resistance it would
come from only the landed classes.
As it turns out, the landed classes were not
always especially hostile to planning, mostly
because they had already lost a lot of political
power by then anyway — there wasn’t much they
could do. As it turns out, it was the local capitalist
class that ended up being hostile. The reason for
this — which is actually, in retrospect, not so
mysterious — is that, as I said, planning had
a dual feature to it: giving lots of goodies and
subsidies to capitalists (they were very happy
about this), but at the same time wanting to treat
that as a contract in which they had to reciprocate
by giving up some powers over investment.
This is where the capitalist classes drew the
line and they fought very hard — tooth and nail
— against relinquishing unilateral power over
investment. States like India and Turkey had to
scale back their ambitions as to how much power
they would have over capitalists because they
were unable to bring these capitalists into line
and, in the end, these were bourgeois states.

In Korea and Taiwan, they were much better
able to harness capitalists to this agenda.
I guess this belies the notion that there was this
national bourgeoisie that was in any way inher-
ently progressive, or was a natural partner of the
working class.
It does belie that notion, and it is true that even
today in the orthodox Communist parties, the
mainstream Communist parties in the developing
world, there’s still this idea that the vanguard of
national economic development is going to be the
domestic bourgeoisie.
I think this was a very flawed analysis, and it
remains so now. It imputes to capitalists a motive
and an interest that they’ve never had. Capitalists
have always and everywhere had only one interest,
which is making profits. Now, in certain condi-
tions, profit-making becomes consistent with
overall national economic development, but only
under certain conditions.
It’s very possible for capitalists to make great
profits for themselves, like, for example, in
industrial zones that remain enclaves uncon-
nected to the rest of the economy. Axlso, it’s
possible for them to make profits by simply
ripping off the state and ripping off public funds
without really engaging in productive investment.
There’s more than a few examples of that
happening under Nehru.
Yes, in India, the way the plans worked was
planners drew up a list of priority sectors where
capitalists were urged to invest, and sectors which
were actually, then, blocked off, or where they
weren’t supposed to invest. The biggest ones were
alcohol and certain high-end luxury goods.
What happened during the plans was that
because planners had very little ability to punish
capitalists if they didn’t abide by the plan
instructions, they were helpless to actually
influence the flow of investment. What internal
audits in the 1960s found was that upwards of 40
percent of all investment was going to sectors that
weren’t just low-priority sectors, but were
Development from Below
actually banned outright.
That’s an example, then, of how public funds
were misused by private capitalists, not because
they weren’t being good capitalists, but because
they were being good capitalists, they were just
pursuing the opportunities for profit that they
deemed best, which weren’t necessarily the ones
planners wanted.
Where does the faith in the progressive nature of
these postcolonial capitalists and the idea that
they could be trusted to achieve development
outcomes come from?
This is kind of a hangover from the way in which
the Russian Communist Party propagated a
particular view after the 1920s about the national
bourgeoisie being necessarily the senior partner,
because the “bourgeois democratic” stage of the
revolution still needed to be completed. And this
filtered across the intellectual left of the 1940s and
50s and I think it was a mistaken notion then, and
it’s a mistaken notion now.
What capitalists are interested in are profits
and maintaining political power over the classes
that work for them. Where and when that turns
into national development is quite a separate
question and we should not equate the two.
That said, do you see the return to some type of
developmentalism being in the cards?
In order to answer that question, it’s important to
first ask the question, “Why did developmen-
talism come to an end?”
The popular view out there among many
people on the Left is that the West destroyed it,
and that’s partially true, but only true in the sense
that after the 1970s, economic conditions globally
shifted in such a way, under the influence of the
West, that maintaining national economic
planning wasn’t really feasible anymore.
There was a certain amount of political
pressure coming from the West to open up their
markets, so in that sense, the West did have a role.
But it’s important to remember, what the West
can do in the current era is to demand of countries
Uneven and Combined 83
 that they change policy. However, unless those
changed policies have support in the domestic
elites, it’s very hard to keep them in place.
In fact, the United States found that in the
1960s and 70s, whenever it tried to get developing
countries to liberalize, they would liberalize for
two years and then go back to a much more
state-led economy, and that was because domestic
capitalists still wanted state protection and some
kind of closure from the global economy.
What destroyed developmentalism wasn’t the
West coming in and imposing something else, it
was that the capitalist class that had demanded
developmentalism, or in some way had been
important to it, lost interest in it by the 1980s.
Now, if that’s why it got done away with, the
answer to your first question is now fairly simple.
It amounts to asking, “Can we imagine a situation
in which capitalists in countries like Brazil, or
India, or Egypt, Peru, Chile, would want to go
back to developmentalism?” And the answer is
no, because there are too many sections of the
domestic capitalist class that is too wedded to a
globalizing agenda for them to go back to putting
up with all those regulations and controls that
developmentalism entailed. So I don’t see a return
to developmentalism of that kind.
How about a new form of developmentalism,
some new plan for the Global South even within
capitalism?
It’s important to phrase the question carefully
here — are we talking about developmentalism
within capitalism? If that’s what we’re talking
about, my view is that nostalgia for the develop-
mentalism of the old kind is not really warranted
because that was a developmentalism that rested
on some kind of support, or partnership with
national capitalists. And that partnership is, I
think, gone forever. There’s no indication that it’s
coming back.
But if the question is could we have develop-
mentalism of another kind, by which we mean
some kind of growth-oriented agenda in which the
state plays an important role, there I think the
answer is perhaps, but only under an entirely new
84 Jacobin · Fall 2015
political partnership that’s going to be a partner-
ship between working people and the state. So it’ll
have to be some kind of (for lack of a better term)
social-democratic growth agenda or labor-led
development agenda. And I think for that the
conditions are actually not all that forbidding.
Finally, I’ll say that it’s not just that prospects
for developmentalism of the old kind are bleak
— it’s not really something that we should want,
either. That whole era was one in which the ruling
partnership was between the state and industrial
capitalists, where there was some space for labor to
organize. Nevertheless, it rested on a significant
containment of labor’s political power, either
through military dictatorships — and we shouldn’t
forget that developmental states were often times
quite authoritarian — or through some kind of
handcuffing of the labor movement through
corporatism. Through that process labor often
became dependent on state support and state
largesse. So that ended up having very negative
political consequences and we shouldn’t want that.
If poorer countries do manage to go through
development along the path you describe, would
their trajectory be basically the same as European
late developers?
I think it’s going to look very different. The path
that European late developers took was one in
which they transformed their agriculture. As a
result, peasants, either who had left their home
regions or had been thrown out of them, came to
cities and were sucked up into industry.
From 1870 to 1920 you had this enormous
wave of industrialization in the first generation of
late-developing countries. Here we’re talking
about Germany, Italy, Russia, and Japan — it was
this industrialization that gave birth to the
modern labor movement.
What is happening now, and what has been
happening for the past thirty years is something
interesting. First of all, the late-developing
countries today, which is one hundred years after
the initial generation, were already different in
that in these countries the service sector and the
informal sector have played a much larger role in

the growth process than it did in the earlier
generation of late developers, where industry
rapidly expanded to become the most vital sector
of the economy.
This has not been the case in Latin America or
in South Asia or the Middle East. Services and
informal sector work — by which we mean
temporary work in very small shops, which is
often times done by migrant laborers — has
played a much more important role, which has
already made the kind of development they’ve
experienced different than the first generation of
late-developing countries.
Something else is happening now, which is
much more remarkable, which is that it’s not just
that industry has been less prominent in these
countries, it’s that over the past twenty years a
process of deindustrialization has set in. Industry
is actually shrinking in terms of the employment
that it commands in the economy — it’s the
informal sector that’s now getting bigger and
bigger. This makes their developmental path
much different from the earlier generation, and
there’s no reason to think that at some point it
will veer back towards industrialization, so you’re
going to get growth, but it’s going to be growth of
a very different kind.
One corollary to this: in some of the countries,
like India, the ballooning of the informal sector is
bound up with a persistence of agriculture and
peasantry because what’s happening is that
employment growth in manufacturing has been
very slow, so instead of seeing urban jobs as a
magnet for themselves, for which they will leave
their villages and come to the cities, what peasants
and rural proletarians have learned is that urban
employment is insecure and unreliable. What
they end up doing, as a result, is instead of leaving
their land to come to the cities, they hold onto
small patches of land and then go back and forth
between there and the cities.
It’s not that agriculture in these countries are
still not capitalist — they are capitalist — but it’s a
capitalism in which agriculture is drawn into
commodity production but remains a strong part
of the economy because peasants use it as an
insurance policy against the infirmities of urban
Development from Below
employment. This has an important economic
impact, since it means that the kind of rapid
industrialization we saw in 1880 to 1920, and then
again from 1940 to 1970, doesn’t seem to be in the
cards for the Global South.
Secondly, it means that the political conse-
quences of development are going to be different,
too. One consequence of rapid industrialization
was bringing huge numbers of former peasants
together into new factories where they rapidly got
absorbed into trade unions and were quickly
radicalized. But now since workers don’t stick
around in the factory long enough to be politi-
cized, to be drawn into organizations, it means
that economic development and urbanization
isn’t bringing with it a kind of radicalized working
class the way you saw in the past.
What you’re getting is an itinerant working
class, which is much harder to organize. This
means that for radicals on the Left in these
countries, organizing strategies are also going to
have to be very different. All this is to say that
countries from the Global South are now devel-
oping, they are in some ways modernizing, but the
kind of modernization we’re seeing is very
different from what we did one hundred years ago
and will continue to be very different, which
means that looking at past experiences is
important to put the current era into perspective,
but we shouldn’t expect it to be a blueprint for
what’s going to come.
This would seem to be a perfect environment for
the emergence of some type of populism that
might not necessarily be progressive. How do
leftists make sure these articulations are done in
a broader class framework?
It’s going to be hard. What is probably not going
to work is a strategy of organizing these workers
at the workplace and then negotiating with
employers shop by shop. I think it’s going to have
to be a combination of using the leverage that the
formal sector of the industrial economy has;
workers in the formal sector, although they’re
small in number, they account for a dispropor-
tionate part of the domestic product, giving them
Uneven and Combined 85
 a lot of economic leverage. Using that leverage,
combined a legal apparatus which extends
protections and privileges to informal sector
workers through rule of law, rather than through
workplace negotiations, is vital. This extends to
informal workers a whole host of services and
goods through the state instead of having them
come negotiate it through higher wages and
employer-based benefits like health care.
This means using the power of workers where
you can organize them and have a expansive
welfare state taking more and more goods out of
the commodity economy, providing them as
public goods, and thereby increasing the leverage
of workers in the informal sector so that they are
not as terrified constantly of losing their jobs. This
will enable them to then negotiate with some
degree of effectiveness against their employers.
So organize where you do have the most work-
ing-class strength and then try to push for
demands that will create the conditions for a
stronger social base for socialist politics?
Yes, it will shore up that base and it will be the
engine that brings workers from the informal
sector into progressive and left politics, rather than
being a mass of potentially recruitable people into
right-wing politics, which is quite often what can
happen when people are desperate. I can tell you
that in India, a lot of what are called religious riots
are actually people who are recruited into right-
wing religious organizations on a monetary basis
because they need the money, and that’s a sign a
sign of these right-wing organizations preying on
their desperation. But we have to be humble here
— the truth is that we haven’t made much progress
crafting a strategy for these ends yet.
This calls for a project driven by workers — some-
thing radically different than many of the
postcolonial projects of the twentieth century.
And yet, there is this kind of nostalgia of aca-
demics like Vijay Prashad and others who pose
that those newly independent nations, the
“darker nations,” formed a new bloc with some
sort of emancipatory potential.
86 Jacobin · Fall 2015
I think that’s a distorted view of the era. There’s
something to it in that there was something called
a Non-Aligned Movement, and they did try to rest
some degree of autonomy for developing coun-
tries in the global economy. Nevertheless, we have
to be careful about calling it a “project” as
Prashad does.
The implication there is that things like the
Bandung Conference had some kind of mass
support, and there was a vision that differed in
some important way from the vision of its
domestic ruling classes, and that description, I
think, is wrong.
First of all, this Non-Aligned Movement, the
effort to bring together developing countries
through things like the Bandung Conference, was
essentially an elite project. It was really something
that catered to particular designs that local
industrialists had and went down to some parts of
the intelligentsia and the middle classes. It wasn’t
something that resonated with most workers and
peasants, so to characterize it as a movement is
misleading.
Secondly, because of its narrow base, it was
something that was entirely servant to, and
constrained by the visions of, the domestic elites.
And so it was right from the start very limited in its
ability to project an alternative project to what
post-war capitalism globally was representing. I
think it rests on a very romanticized view of the
national bourgeoisie. It attributes to it a broader
vision and progressive intention that it didn’t have.
What it was trying to do was to carve out a bigger
space for its interests in the global economy, not
anything that we might call national interests,
much less the interests of working people.
There are others who seem to even resist the idea
that Brazilian capitalists can be just as bad as
American capitalists and Indian capitalists just as
bad as Canadian ones.
I think the problem goes even deeper. On the
intellectual left, in the United States over the past
fifteen years, there’s a very pronounced discom-
fort in thinking in class terms at all. And this kind
of romanticism about the Third World and the

Third World nations is actually not the first time
we’ve seen it.
It actually was first around in the 1970s in a
certain part of the Left, and it was called Third
Worldism. At the time, the critics of Third
Worldism were mostly Marxists.
Though much of this Third Worldism had Maoist
roots.
Sure, it came out of Maoism, but the critics of that
were also Marxists. Why is it resurfacing now?
Certainly not because Maoists have suddenly
become dominant on the Left. It’s part of an
inclination, a desire, to think of the world in racial
terms and national terms rather than in class
terms. And that’s why it makes it easy to think in
terms of nations of darker people in the South
versus the white North, rather than acknowl-
edging and recognizing that those nations
themselves are racked with class divisions where
their ruling classes are as vicious as the ones in the
North.
And that’s why you get narratives where people
like Nehru are champions of progress.
Yes, I’ve seen Nehru and Nasser represented as
visionaries of social justice and national self-de-
termination. Nehru, under whom India unfolded
one of the longest military occupations of the
post-war era, in the northeast states of India;
Nehru who went back on every promise he made
to the Kashmiris for local autonomy, and whose
daughter and grandson imposed a brutal military
occupation there; Nasser, who was virulently and
unrelentingly anti-communist and hostile to the
Left, and had expansionist plans of his own in the
Middle East.
These are basically representatives of local
ruling classes who had some progressive thrusts,
not because they had a different vision, but
because in all these countries, workers and
peasants had some real strength, which created a
more forward-looking ethos within the ruling
classes for a brief period, which was reflected, and
had echoes, in conferences like Bandung. But we
Development from Below
must understand that the agenda of people like
these leaders was to contain and to roll back the
power of the laboring classes, not to represent
them in some way. And nostalgia towards that is, I
think, entirely misplaced.
But the emphasis of that period on growth and
progress isn’t entirely unquestioned now on the Left.
I’m one of the people who says that growth is a
good thing, not a bad thing. In countries that are
still very poor, it’s hard to imagine a serious
egalitarian agenda which doesn’t take income
growth as part of its premise. But the other side of
it along with income growth has to be not just
constraining capital, but strategically taking
assets away from capital where it’s politically and
economically necessary, and then in those sectors
that allow private capital to continue to have
power over investment, force it to negotiate with
the organizations representing ordinary citizens
in some way. And then finally, to take as much of
the universe of economic and produced goods out
of the private sector as much as possible to turn
them into public goods.
And this perspective isn’t counterposed to the
idea of going beyond capitalism in the future?
Not at all. It’s recognizing that a ruptural break
with capitalism is probably not on the agenda in
most parts of the world, so short of that, you have
to come up with a bridge, which recognizes that
you have to work within capitalism but neverthe-
less tries to tame capitalism and make it less
brutal for working people.
I think the first step towards that is to see that
the fundamental problem these days is not North
versus South, the fundamental problem is that in
any country where working people try to raise their
voice, the first power they come up against and
they have to confront is their own ruling
classes.  ■
Uneven and Combined 87
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