Capitalism, Consumerism and The Welfare State: Our Veil of Ignorance
The most basic principle of economics is supply and demand; this concept can be applied to many fields, such as the supply and demand for labour, housing and healthcare. The concept of supply and demand can also be applied to the notion of extractive colonialism. Someone demands extracted resources, and someone supplies extracted resources. The global north can be seen as the source of demand, while the global south is the source of supply. There is a theory as to why extractive colonialism is continually justified within the global north. The theory is that nations in the global north will implement a welfare state as a collusion between labour and capital within a country. The high wages and good benefits entice labour organizations to remain quiet while their country’s businesses exploit workers and the environment overseas. For the purposes of this discussion, we will be focusing on Canada’s role in justifying extractive colonialism and how it mimics their treatment of Indigenous people in their country. I will then touch on how systems and concepts such as capitalism, consumerism and the study of economics further work to justify the global south’s position as an international underclass.
I will begin by discussing Canada’s participation in extractive colonialism. I talked about this in the podcast, but for those who haven’t had the opportunity to listen to it, the Canadian-based mining company Barrick Gold has operations set up in the Portega Valley of Papua New Guinea. I want to establish that Barrick Gold is not an individual actor in this story; the Canadian Government and Barrick Gold have a quite intimate relationship. In 2011 the Canadian International Development Agency – now a part of Global Affairs Canada – announced an initiative in which they’d be partnering with private-sector corporations to fund development projects, one of the many companies being Barrick Gold. Canada has a history of funding developmental projects overseas, as is reflected in its developmental initiatives in Zimbabwe. The government provided job training and infrastructure in Zimbabwe, which would directly benefit Canadian mining operations. Through such funding, the Canadian government directly ensures the economic stability of companies like Barrick, which have a history of violence, exploitation, and environmental destruction accusations.
This trend of avoiding blame and pointing the finger at someone else is one that is reflected in Canada’s treatment of Indigenous people domestically. Historically, the federal government has tried to take every opportunity it can to shift the responsibility of Indigenous well-being onto anyone but themselves. Since the passing of the Indian Act, and since realizing what a drain it was on federal budgets, the federal government has been trying to shift the responsibility for Indigenous well-being onto provincial or municipal governments. This mostly has to deal with the problem of federalism. The federal government claims responsibility for Indigenous people yet doesn’t have the constitutional power to provide necessary resources such as healthcare, education, and sewage treatment. Those responsibilities fall to provinces or municipalities, yet neither provinces nor municipalities are willing to take on the added responsibility for the Indigenous people living within their borders, especially not without additional funds. For some reason, the government is unwilling to shift the responsibility for Indigenous well-being to the local tribes themselves. It seems the government would rather give public apologies but, behind closed doors, continue to provide them with substandard levels of living and claim there is nothing they can do due to constitutional limitations. Acting as if it wasn’t only 40 years ago that the Constitution Act of 1982 came to fruition because of constitutional negotiations and provided a formula for amendments to the constitution.
It’s not just Canada alone that acts to perpetuate extractive colonialism. Social systems and concepts such as capitalism, consumerism, and the study of economics work to further justify extractive colonialism on a global level. We enjoy both cheap goods and nice state benefits in the global north. In the global south, people working in resource extraction zones experience environmental devastation and economic hardship. Essentially we get a win-win; cheaper goods but still all the benefits of a welfare state and social programs. Along with that, the problem is out of sight, so it’s out of mind for the general public. In order for capitalism to work, there needs to be an underclass to do the ‘least skilled labour’; this concept applies on a global scale as well.
The study of economics, which should actually be titled capitalism 101, explains why some countries are the haves, and some are the have nots. The theories of macroeconomics work to justify a global underclass by defining a nation’s wealth in terms of the number of final goods and services produced within a given time period. By this definition, the only countries with wealth are those producing final goods and services; exporting raw materials is not the same as exporting a final good. Take, for example, the difference between supplying wood and supplying a chair. The country selling the chair as the final good will see the value of that chair reflected in their GDP; if they sell more chairs than usual in the next year, GDP will rise. The country selling the wood is not selling a final good; they are selling raw materials, the value of which is included in the price of the chair and counted in the GDP of the country that sold the chair as a final good.
Another foundational concept of macroeconomics is the role of natural resources in productivity, productivity being the main determiner of living standards. The more natural resources a country has, the more productivity it will have because they have more means for which to produce final goods with. The issue with this theory is that many resource-rich nations like those in South America and Africa never get the chance to turn their natural resources into final goods that can be sold on the free market. Historically, even before capitalism was globally formalized, countries in the global south had already been victims of extraction during the period when France, Spain and England were collecting resources and strengthening their position as a colonial power; think Columbus era colonialism and extraction in South America, the West Indies and Africa. Macroeconomic theory treats each country as if it has no history. Treats each country as if all started out on a level playing field. Countries in South America, the West Indies, and Africa inherently faced a barrier of entry into the capitalist system as they already had histories of extraction and colonization. Countries like Canada and America experienced much easier entry into a capitalist system as they had land and resources which hadn’t been previously used for extraction or exploitation.
Countries in the global north are in a position to buy cheap raw materials from the global south and turn them into domestically produced goods that contribute to the country’s GDP when sold. A good example is China which will buy raw materials such as lithium and cobalt from South America and Africa and turn them into domestically produced batteries which they then sell to Europe and North America, boosting China’s GDP. The obsession with constant growth only exacerbates the problems and leads to firms looking for ways to cut costs and increase profits. This is how we end up with Barrick Gold hiring security forces to protect their mining project in the Portaga Valley. The security forces were accused of rape and violence against women in the area. Still, the desire to reduce the cost bore by the company when raids happen led to the hiring of security forces. The concept of consumerism within the global north then works to ensure that citizens perpetuate the cycle and the demand for cheap goods. The economy stops flowing if people stop consuming. We saw this concept play out during the pandemic when governments gave social assistance to their citizens to ensure they would continue buying goods while on lockdown. Even in the midst of a global pandemic, the need for economic activity and the goal of constant growth still took precedent.
I want to offer a solution, but I have to acknowledge that it’s a solution that exists within capitalist terms. I specify this because I don’t know if all nations in the global south want to exist and operate within capitalist terms. I emphasize South America in this point simply because of its Indigenous population and their history of traditional ways of living. Nonetheless, I will offer my solution. Countries within the global south need infrastructure in the form of refineries and factories, which would allow these countries to turn their own natural resources into final goods which can be exported and bring wealth into the country. The wealth would need to be redistributed fairly, requiring political stability and trust in the government. From there, I would recommend infrastructures such as schools, hospitals, and transportation to improve the well-being of citizens and allow for social mobility. Eventually, countries in the global south would follow the trend that all nations in the global north have: industrialization and resource extraction, manufacturing, and finally, service-based economies. Canada went through this exact trend with agriculture and resource extraction, then manufacturing (think GM), and finally, now we are a service-based economy. Of course, at this point, you have to explore the implications of how capitalism will function if there is no global underclass to provide raw materials that can be made into cheap goods.
I want to wrap up this discussion with a small aside about the future of extractive colonialism if we follow our current trajectory. I see the advancement of technology and the move to electric energy as only further adding to the problem. For example, electric cars require large batteries, which require large amounts of lithium and cobalt, which need to be extracted from the global south. Along with that, our phones also contain an abundance of minerals which can mainly be found in the global south. As technology and the demand for minerals advances, it will only increase the pressure on politicians in the global south to condone further resource extraction at the expense of their citizens. An even crazier proposition is to ask what would happen when we run out of resources worldwide.
But I guess that’s a problem to be dealt with when the time comes; I will let you – the reader – discuss what you think would happen in the comments below.