NGO Another Way (Stichting Bakens Verzet), 1018 AM Amsterdam, Netherlands.

 

Edition 05: 24 February, 2011.

Edition 06 :  01 May, 2011.

Edition 07 : 20 September, 2011.

 

01. E-course : Diploma in Integrated Development (Dip. Int. Dev)

 

 

Quarter 1.

 

 

SECTION A : DEVELOPMENT PROBLEMS.

 

 

Study value : 04 points out of 18.

Indicative study time: 112 hours out of 504.

 

Study points are awarded only after the consolidated exam for Section A : Development Problems has been passed.

 


 

First block : Poverty and quality of life.

 

Study value : 02 points out of 18.

Indicative study time: 57 hours out of 504.

 

Study points are awarded only after the consolidated exam for Section A : Development Problems has been passed.

 


 

First block : Poverty and quality of life.

 

First Block : Section 1. Analysis of the causes of poverty. [26.50 hours]

First Block : Section 2. Services needed for a good quality of life.

First Block : Exam. [ 4 hours each attempt]

 


 

Block 1 of Section 1. Analysis of the causes of poverty. [26.50 hours]

 

Part 1 : Introduction to the causes of poverty.[06.50 hours]

 

01. Definition of poverty.

02. Some factors linked with poverty.

03. Debts and subsidies.

04. Financial leakage : food and water industries.

05. Financial leakage : energy.

06. Financial leakage : means of communication.

07. Financial leakage : health and education.

08. Financial leakage : theft of resources.

09. Financial leakage : corruption.

10. The industry of poverty.

 


 

Part 1 : Introduction to the causes of poverty.[06.50 hours]

 

03. Debts and  subsidies. (At least 30 minutes)

 

Look at slide 3 :

 

03. Financial leakage : interest and subsidies.

 

The slide covers a vast area. At this stage, the basic concepts in question should be understood.

 

Think about the following points.

 

1. THE DEBT SYSTEM

 

Debt.

 

In industrialised countries, 99% of new money is created by private banks against payment of interest. Our financial system is exponential.. The higher the amount of the collective debt, the more profit the private banks make.

 

For more information consult:

 

Powerpoint presentation of the monetary system.

«The ripple effect » : Financial system mechanics explained for the first time.

Summary of «The ripple effect ».

 

Suppose you have no money. Your bank lends you 100 for one year at 10% interest, or 10 interest per year.

 

To carry out this operation, your bank creates a capital sum of 100  “from nothing” in its books. On one side it creates a credit to itself of 100 . On the other side it creates a deposit in your favour of 100. That deposit is a debt for the bank. As you pay your debt back, the deposit in your favour is reduced. The bank’s capital account credit is reduced by the same amount.  Once you have paid your debt of 100 back, you have no debt with the bank, the bank’s capital account credit has also been reduced to zero.

 

At that point you have repaid your capital debt of 100. However, you still have to settle the agreed interest payment of 10, which was never a part of the formal book debt.  How are you going to do that ? Often you will have to make another loan, this time for 110 to be able to renew your debt and to pay the interest on the previous loan. At the end of the second year, you will have repaid  110, but you will still have interest to repay. This time the interest will be  11. The system works exponentially. The amount of the interest ( the first year 10, the second year 11, together 21) is never cancelled from the system. It continues to increase «indefinitely »......  

 

2. ONE FACE OF THE COIN

 

Accumulated interest.

 

In industrialised countries today practically all new finances are issued by private banks against interest. Each link in the industrial production chain is subject to finance against interest. That means that at each step along the chain, the price demanded by the seller must include a margin to cover the interest he has to pay on his loans. The margins covering interest payments increase exponentially along the production chain. At each step interest is paid on capital plus interest already accumulated.

 

The final touch.

 

As just stated, an important part of the price of “modern” industrial products covers interest accumulated during their production. All that interest is paid by the final buyer (consumer). To pay that price, the buyer often has to borrow money against interest from a bank. In case of medium- and long-term loans, the interest paid by the end user over time may equal an important part of the original purchase price, much of which already comprised accumulative interest margins.

 

What happens to the interest?

 

Interest accumulated by creditors (bankers and, especially, wealthy people with interest-bearing bank deposits) in the absence of negative rates of interest on loans, that is, where interest is lower than 0%, is by definition never cancelled. Interest is not “earned” through productive work. It is profit on money deposits. Over time, especially during the past 20 years,  an enormous mass of this “unearned income” has formed.. This money mass is called «the speculative economy »  or  «the paper economy ».  It is «invested » mostly in speculation on variable currency exchange rates, on land and buildings, and on shares and financial instruments, most of which have nothing to do with the productive economy. 

 

Migration  of control over the real value added.

 

In paragraph 02.Some factors linked with poverty of Part 2 : In depth analysis of the causes of poverty the adventures of a can of peas are analysed.. Originally, commercial control over the peas was local. It usually lay by the farmer himself. When peas are canned, where does the control at the end of the productive chain lie? Which levels of control have the peas passed through ?

 

Lack of means of transfer at local level.

 

Consider your replies to the questions above. How much money is left at local level to conduct transactions for the sale and purchase of goods and services?

 

Suppose you are a commercial operator in one of the least industrialised countries. You produce something and create value added. This value added forms a part of the real (bona fide) productive economy.  You put the money you have earned into a bank account. You bank uses this money, your money, for commercial activities. According to present banking rules, the bank can officially lend up to 12,5 times the value of your deposit. In practice, many banking operations are off-record, and the bank’s leverage, as it is called, may not exceed 1%. In that case it can create loans for up to 100 times the amount of your deposit. Where will that money be invested?  What will it be invested in?

 

Necessary imported goods and services.

 

You may agree that the importation of certain goods and services into your chosen project area in a developing country may be justifiable to increase local productivity there. Which goods and services ? Do you agree that that importation should be kept to minimum indispensable levels? Why?

 

Monopolistic control – monocultures.

 

Control over the value added of the can of peas at the end of its “productive” cycle is a long way away from the farmer who grew the peas. Unearned accumulative interest finds its way into the pockets of an elite of “investors”. Local money deposited in bank accounts in developing countries is rarely invested at local level. That money, including the savings of the poor, is used elsewhere, maybe to re-build the twin towers in New York..

 

Contributions paid by emigrant workers to their families in their country of origin form an important part of the commercial budgets of poor countries. How do you think these payments are spent? Which part of the contributions is spent to finance local productive activities? For how long?

 

1. Opinion.

 

Who have financial capacity to purchase lands, structures, infrastructures in poor countries? Why would they want to purchase the lands? [ Refer to Cotula L. et al, Land grab or development opportunity? - Agricultural investment and agricultural land deals in Africa, FAO, IIED and IFAD, London/Rome, 2009].See also Vidal J. How food and water are driving a 21st century African  land grab (The Observer, London, Sunday 7 March, 2010).

 

On the human rights aspects of monocultures, see Suárez S., Emanueli M, Monocultures and human rights, Food First Information and Action Network (FIAN), Heidelberg, and Habitat International Coalition Regional Office Latin America, Mexico City, June 2009.

 

 

3. THE OTHER FACE OF THE COIN.

 

Subsidies.

 

Subsidies are an «indispensable » part of most modern industrial economies. 

 

They are defined for the purposes of the World Trade Association (WTO)  in the Agreement on Subsidies and Countervailing Measures  which is annexed to the Marrakech Agreement instituting the World Trade Organisation signed Marrakech, Morocco on 15th April, 1994. Types of subsidy listed under art. 1.1 of the agreement include subsidies specific to an enterprise, industry or group of industries

involving : direct or indirect transfer of funds or liabilities, revenues that are foregone or not collected, provision of goods or services below market value, and  provision of income or price support.

 

On pages 13 and  14 of the report  Fossil Fuels – At What Price ? by Sawyer D et Stiebert S,  for  the International Institute for Sustainable Development (IISD), Global Subsidies Initiative, Geneva, November 2010,  29 subsidy groups for just the Canadian Oil Industry (excluding the coal and gas sectors !) are listed showing benefits amounting to $Can 2.800.000.000  in 2008, without taking any of the consequential social costs linked to sector activities into account.  By way of comparison, the entire Canadian contribution to international development aid in 2008 was US$ 4.725.000.000 (Source OECD Statistics, 2009).

 

It has proved difficult to get accurate information, often to get any useful information at all, on government subsidies to the fossil fuel (gas, coal, oil) industries. (Ask Your Government Survey,  Global Subsidies Initiative, Geneva, April, 2011).  The same organisation, in its August 2011 policy brief  A High Impact Initiative for Rio + 20 : A pledge to phase out fossil-fuel subsidies states :

 

“Global fossil-fuel consumption subsidies amounted to US$ 312 billion in 2009 and US$ 558 billion in 2008…. Global producer subsidies are estimated by GSI to be US$ 100 billion annually.”

 

The figure of  US$ 312 billion for fuel consumption subsidies (excluding producer subsidies promoting domestic exploration, extraction or refining) is taken from the International Energy Agency (IEA) ,Paris, report World Energy Outlook 2010 (Executive Summary).  

 

For a detailed item by item analysis of subsidies applied to the nuclear power industry see Appendix A to the report by  Koplow D., Nuclear Power : Still not Viable without Subsidies, Union of Concerned Scientists, Cambridge (Massachusetts), February, 2011, pp. 129-132. “And once again, [ as in the past] these subsidies to new reactors—whether publicly or pri­vately owned—could end up exceeding the value of the power produced (4.2 to 11.4 ¢/kWh, or 70 to 200 percent of the projected value of the power).” (p. 3)

 

Slide 03 Financial leakage : interest and subsidies mentions the unimaginable subsidies paid to farmers in the rich OECD countries.

 

2. Opinion.

 

What do you think about subsidies paid for industrial activities?

 

3. Opinion.

 

What is the price of 280 gr. of peas bought directly from the farmer? What is the price of a 400 gr. can of peas (280 gr  net weight of peas) at the end of its industrial voyage ? Try to explain how the price of the can of peas can often be lower than the price asked by the original grower for the fresh product. Who pays the subsidies?

 

4. Opinion.

 

Farmers and industrialists in rich countries receive many subsidies. Which formal authorities given them these subsidies?  How are these authorities financed?  The beneficiaries of the subsidies are private individuals or companies. Subsidy funds are  collective  and derive from tax payments. Why does this transfer of public funds to private interests take place ?

 

4. .MULTINATIONALS.

 

Following the State of New York legislation “An Act Relative to Incorporations for Manufacturing Purposes”, 22 March 1811, the first national law on the limitation of investors’ liability was The Limited Liability Act 1855 (18&19 Vict. C.133) in England.

 

We have gradually passed from a system where, in principle, before 1811 in New York and before 1855 in England a company was required to act under Parliamentary control in the public interest with personal liability of managers and shareholders to a system where companies act exclusively in the interests of their shareholders and with a (very) limited personal liability of management. The bonus culture now rewards personnel and management as a function of the amount of shareholders’ profit they generate. This represents in reality the passage from a phase of development in the common interest to one based on the interest of the individual “investor”.

 

Financial deregulation began in 1971 when President Nixon of the United States abolished the coupling of the $US to gold (known as the Gold Standard) and was perfected during the 1980s with the neo-liberal policies of Mrs Thatcher in England and President Reagan in the United States. It has led us to the situation where large trans-national corporations acting in the private interests of a small elite have a budget which is larger than that of most of the world’s nations.

 

5.Research.

 

Make a list of the multinationals which are most active in your country.

 

 



 First  block : Poverty and quality of life.


Index : Diploma in Integrated Development  (Dip.Int.Dev)

 List of key words.

 List of references.

  Course chart.


 Courses available.