Rich nations and multinational corporations

Finally, it is claimed that rich nations, or perhaps large multinational corporations, have made countries poor by stealing their wealth. This is the claim that rich nations have become rich by making poor nations poor. Is there merit in this charge?

a. Poor nations were poor before rich nations became rich

First, the nations that are poor today were not prosperous in the past.[1] Second, countries that are rich today became so by producing their own goods and services. In general, they did not get rich by making the poor nations poor.[2] Third, the factual evidence of history shows that the accusation that rich countries in general are responsible for poverty in poor countries is simply not true.

Until about 1700, there was very little difference in the lives of ordinary people in the richer and poorer countries of the world. Most of the people worked hard, obtained enough food, clothing, and shelter to survive, and saw little change in their standard of living century after century. Living on less than a dollar a day was common.

But around 1770, the Industrial Revolution began in Britain and soon spread to other countries. Landes notes that British income per head “doubled between 1780 and 1860, and then multiplied by six times between 1860 and 1990.”[3] In short, some nations produced tremendous new prosperity and other nations stayed poor. Landes says, “The Industrial Revolution made some countries richer and others (relatively) poorer; or more accurately, some countries made an industrial revolution and became rich; and others did not and stayed poor.”[4]

b. Sometimes poor nations sell their natural resources rather than manufactured goods

We recognize that sometimes poor nations make agreements to sell some of their natural resources (such as oil and minerals) to large corporations in other countries. If these are voluntary transactions and the corporations pay money for the resources, this practice should not be called “stealing” but “buying” resources. Because there is a world market for commodities, with many companies competing to purchase the resources of a poor nation, any given company must pay the world market price or the country will seek another buyer that will. (But it is possible a company might bribe officials in a poor nation to get an agreement below the world price, in which case there is moral wrongdoing both on the part of the corporation and on the part of the government officials.)

As we discussed above (see 79-82), we do not think that depleting a country’s natural resources is a good path toward increasing GDP and overcoming poverty. But unless the resources are plundered as a result of military conquest or bribery, it is incorrect to refer to the transfer of resources as stealing.

c. Economic contacts with the West have mostly benefited poor nations

Bauer explains the results of economic transactions between rich and poor nations:

Far from the West having caused the poverty in the Third World, contact with the West has been the principal agent of material progress there . . . the level of material achievement usually diminishes as one moves away from the foci of Western impact. The poorest and most backward people have few or no external contacts; witness the aborigines, pygmies and desert peoples.[5]

The prosperity of the West was generated by its own peoples and was not taken from others.[6]

The West has not caused the famines in the Third World. These have occurred in backward regions with practically no external commerce. [This backwardness at times] reflects the policies of the rulers who are hostile to traders . . . and often to private property.

Contrary to the various allegations and accusations . . . the higher level of consumption in the West is not achieved by depriving others of what they have produced. Western consumption is more than paid for by Western production.[7]

Bauer also points out that the frequent accusation that wealthy countries have “exploited” the poor nations of the world began with Marxist ideology and has become a standard claim put forth by Marxist scholars. He says:

The notion of Western exploitation of the Third World is standard in publications and statements emanating from the Soviet Union and other communist countries. . . . [According to] Marxist-Leninist ideology . . . any return on private capital implies exploitation. . . . The principal assumption behind the idea of Western responsibility for Third World poverty is that the prosperity of individuals and societies generally reflects the exploitation of others. . . . According to

Marxist-Leninist ideology, colonial status and foreign investment are by definition evidence of exploitation.[8]

But Bauer’s conclusion is quite the opposite. He writes:

In fact, foreign private investment and the activities of the multinational companies have expanded opportunities and raised incomes and government revenues in the Third World. Reference to economic colonialism and neo-colonialism both debase the language and distort the truth.[9]

We must recognize that some economic interactions between rich and poor nations have caused harm. Sometimes wealthy multinational corporations have bribed government officials in poor nations to secure monopoly privileges that have oppressed those countries’ ordinary people and prevented free markets from functioning (we discuss this evil in the next section). In such cases, both the companies that paid the bribes and the officials who took them share in the moral blame. But we view that as the breakdown of free markets, not the fault of the free-market system itself. (And many countries, such as the United States, make such practices illegal for American companies that do business in other countries.)

In general terms, however, Bauer has no doubt that the economic interaction between rich and poor nations has been immensely beneficial for the poor nations:

Altogether, it is anomalous or even perverse to suggest that external commercial relations are damaging to development or to the living standards of the people of the Third World. They act as channels for the flow of human and financial resources and for new ideas, methods and crops. They benefit people by providing a large and diverse source of imports and by opening up markets for exports.[10]

The poorest areas of the Third World have no external trade. Their condition shows that the causes of backwardness are domestic and that external commercial contacts are beneficial. Even if the terms of trade were unfavorable on some criterion or other, this would only mean that people would not benefit from foreign trade as much as they would if the terms of trade were more favourable. People benefit from the widening of opportunities which external trade represents.[11]

d. Do multinational corporations pay unfair wages in poor countries? What about the claim that large multinational corporations come to poor countries and pay unjustly low wages, thereby taking advantage of workers in those countries? In answering this question, it is important to distinguish between a labor market in a country that is completely free and a labor market that is constrained by laws and restrictive hiring permits.

Just as the government of a poor country can restrict coffee exports so that local farmers receive much less than the world price for their product (and the government officials pocket the huge difference when they sell the coffee on the world market), so the government can keep wages artificially low. For example, the government might give only one company a permit to build a factory and hire workers in a certain region.

Suppose government officials in a poor country sign a lucrative agreement with World Famous Running Shoes to build a shoe factory in a certain area, and as part of the agreement they guarantee (because of money they receive) that they will deny all other companies permits to build factories in that area. World Famous Running Shoes has a monopolistic control on the hiring of local workers, and it can pay extremely low wages and allow horrendous working conditions.

In this situation, much of the blame must be placed with the government officials who set up and protect World Famous’s monopoly in the local labor market. But if the conditions and pay are inhumane, World Famous shares in the blame. The New Testament says, “Masters, treat your bondservants justly and fairly, knowing that you also have a Master in heaven” (Col. 4:1).

On the other hand, if there are no such government-imposed restrictions on hiring, then any company in the world is free to come and hire workers, and an element of competition enters the labor market. Then wages are set by the prevailing market price. If World

Famous offers people only $1 per hour, then Saucony is free to come and offer people $1.50 per hour, and Jockey is free to build a shirt factory and offer people $1.75 per hour, and so forth. With a free labor market, every company that manufactures goods in the world is free to compete for local workers.

In such a labor market, local workers are free to work for any company they want, and no one can “set” the price of labor; rather, it is regulated by the interplay of supply and demand in the free market. If a company offers $1.50 per hour for five hundred jobs and finds that it has five hundred qualified applicants, the labor supply is certainly meeting the demand, and $1.50 is a “fair” and “just” wage. It is the price at which workers are willing to work in that labor market. Presumably they have decided that they are far better off working for $1.50 per hour than not working at all or working at subsistence-level farming.

Does the factory that pays $1.50 per hour make these workers poor? No. It makes them more prosperous than they were before, and the increased prosperity of these workers no doubt brings benefits to the rest of the economy as well.

One of the economic advantages that poor nations have today is a supply of inexpensive labor. Low labor costs make it economically attractive for companies to build factories and invest in poor countries, and thereby help them create goods and services, and move toward prosperity.

When people object that companies should not pay such low wages (suggesting that something like American or Western European wages would be more “fair”), they fail to understand that any regulation that requires companies to pay higher wages in a poor country tends to take away that country’s economic advantage, making it more difficult for that country to compete on the world market and attract the factories and investments needed for economic growth.

e. The Bible does not blame the rich in general for the poverty of the poor

We agree that the Bible sometimes blames the poverty of poor people and nations on rulers and countries that oppress others by military power. It also blames powerful, wealthy people who wrongly withhold wages (see James 5:4: “Behold, the wages of the laborers who mowed your fields, which you kept back by fraud, are crying out against you, and the cries of the harvesters have reached the ears of the Lord of hosts”). But it never blames wealthy people or wealthy nations in general for the situations of those in poverty.[12]

In fact, the Bible lists numerous causes for poverty. Some poverty is caused by war, crime, disease, accidents, or natural disasters. And some poverty is caused by evil governments that rob their people, or by wealthy, powerful people who cheat others:

The fallow ground of the poor would yield much food, but it is swept away through injustice. (Prov. 13:23)

Whoever oppresses the poor to increase his own wealth . . . will only come to poverty. (Prov. 22:16; see also James 5:4, cited above)

At other times, the Bible sees poverty as the result of laziness or too much love for pleasure:

How long will you lie there, O sluggard? When will you arise from your sleep? A little sleep, a little slumber, a little folding of the hands to rest, and poverty will come upon you like a robber, and want like an armed man. (Prov. 6:9-11)

In all toil there is profit, but mere talk tends only to poverty. (Prov. 14:23)

Whoever loves pleasure will be a poor man; he who loves wine and oil will not be rich. (Prov. 21:17)

Whoever works his land will have plenty of bread, but he who follows worthless pursuits will have plenty of poverty. (Prov. 28:19)

Sometimes God in his sovereignty even brings poverty on greedy, stingy people:

One gives freely, yet grows all the richer; another withholds what he should give, and only suffers want. (Prov. 11:24)

A stingy man hastens after wealth and does not know that poverty will come upon him. (Prov. 28:22)

But the important point here is that the mere fact that some people are rich is never in itself said to be a cause of poverty.

Claiming that rich countries are responsible for the poverty of poor countries, or that poverty is the result of rich companies “exploiting” poor countries, is often contrary to fact, and is certainly counterproductive. It does nothing to increase the prosperity of a poor nation. It does nothing to help it to create more goods and services.

No nation can hope to overcome poverty and increase in prosperity by blaming its poverty on outside factors or entities. Such a focus on blame does nothing to solve the problem. The goal must be to become a nation that continually creates more goods and services.

E. Conclusion: what the goal is not

Producing more goods and services does not happen by depending on donations from other countries; by redistributing wealth from the rich to the poor; by depleting natural resources; or by blaming factors and entities outside the nation, whether colonialism, banks that have lent money, the world economic system, rich nations, or large corporations. None of the wrong goals surveyed in this chapter will move a nation toward what should be its primary economic goal: continually producing more goods and services, and thus increasing its GDP.

  • [1] Someone might object that China was relatively rich in the fifteenth century. Yes, or at least a fewpeople were quite wealthy, but then China went through centuries of backwardness and poverty beforeit recently began to develop rapidly.
  • [2] However, we recognize that Spanish explorers forcibly stole vast quantities of gold from the Aztecand Inca empires in Latin America in the early sixteenth century, and Spain gained vast amounts ofwealth in the process, which was ultimately destructive not only to the conquered peoples but alsoto Spain itself: see 79-81. Spanish explorers also forcibly enslaved native Indians in Central and SouthAmerica to work in their mines, inflicting great suffering, and they left behind a destructive legacythat continues to some extent even today: see the comments of Acemoglu and Robinson, Why NationsFail, 9-19, 114-15, 432-33. These actions were not the initial cause of poverty, however, because thecommon people in Central and South America were extremely poor even before the Spanish arrived.
  • [3] Landes, Wealth and Poverty, 194.
  • [4] Ibid., 169.
  • [5] Bauer, Equality, 70.
  • [6] Ibid., 75.
  • [7] Ibid., 82.
  • [8] Ibid., 74-76.
  • [9] Ibid., 76.
  • [10] Ibid., 79.
  • [11] Ibid., 76.
  • [12] See Darrow L. Miller and Stan Guthrie, Discipling Nations: The Power of Truth to Transform Cultures(Seattle: YMAM, 1998), 57. The authors say that the view that poverty is caused by Westerners whoconsume too much of the world’s resources is a “secular” viewpoint, not a biblical one.
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