Multinational Monitor

NOV/DEC 2006
VOL 27 NO. 6


J'Accuse: The 10 Worst Corporations of 2007
by Russell Mokhiber and Robert Weissman

Meet the War Profiteers
by Charlie Cray

Multinationals to China: No New
Labor Rights

by Jeremy Brecher, Brendan Smith and
Tim Costello

Wall Street Rallies for Bush - And Seeks Payback
by Andrew Wheat


King Coal's Dark Reign
An Interview with
Jeff Goodell


Behind the Lines

(No) Shame On the Street

The Front
Rural Bank Window Closed - Feudalism in Pakistan

The Lawrence Summers Memorial Award

Book Note
Capitalism 3.0 - A Guide to Reclaiming the Commons

Names In the News


The Front

Rural Bank Window Closed

Catandica, Mozambique — Walking slowly with a slight stoop, Julio dos Santos, a 60-year-old war of liberation veteran, groans under his breath as he climbs into his grass-thatched granary standing precariously on four large stones. After several glances sideways, he enters the compartment filled with maize grain, squats and starts to dig. Eventually he pulls out a black plastic bag tied at the end with a white cloth. Inside is a stash of dirty Mozambican notes, the equivalent of almost $400.

Dos Santos (not his real name), who lives in the rural district of Catandica in northwest Mozambique, is one of millions of villagers who store their money in the ground or in grain stores and risk it being stolen.

Jose Antonio is another Catandica resident. He sells second-hand clothes in the town, which lies below a lush mountain range running along the country’s border with Zimbabwe. Like Dos Santos, every time the sun sets he feels unsafe. “I start getting worried that someone might come and steal my savings and daily takings from my business,” says the 34-year-old father of four.

In the town center stands the imposing building which once housed the only bank in the area, its blue and orange colors fading out of neglect. The Banco Austral closed in 2002, after it was bought by the South African-based ABSA bank. Its demise left residents in the surrounding villages with nowhere to deposit their money, forcing them to travel further afield or to risk hiding their money at home.

Mozambique once had a robust network of rural banks. At independence from Portugal in 1975, it embraced socialist ideologies, taking its cue from Eastern European countries that supported it to fight colonialism. “The old People’s Development Bank (BDP) had branches in almost all the district capitals,” says Joseph Hanlon, a British academic and expert on the Mozambican banking sector.

But the system of publicly owned banks fell into decay in the 1980s, discredited by inefficiency and corruption. In the 1990s, following the collapse of socialism, the banking sector was privatized. The International Monetary Fund and World Bank threw their weight behind the change, insisting on privatization of the banks as a condition of aid and loans made in the mid-1990s.

Private banks are not immune to corrupt practices. According to Jose Botao, a former government employee now working as an economic adviser for a non-governmental organization, it was mainly the political elites who benefited from the opening up of the economy. “They used their political muscle to access loans which they never paid back,” he says. “Rural people were left in the cold, unable to start any viable projects that could increase their income.”

In the past few years, a number of reforms have seen the banking sector thrive. A study by the consultancy firm KPMG reveals that profits jumped 64 percent in 2005. But the nine commercial banks opened just four new branches between them.

“While many branches have opened in Maputo, most of the rural branches have closed,” says Joseph Hanlon. The figures bear this out, with around 114 branches in the capital and surrounding areas and another hundred-odd spread over the country’s nine provinces.

In rural areas like Catandica, not only traders but professionals such as teachers, nurses and other government workers still get paid in cash. Abigail Ernesto, a health community worker at Catandica district hospital, is furious about the bank closure. “I had a savings account but now I cannot travel to Chimoio to deposit money because the bus fare is more than the money I will end up depositing,” she says.

In Escola Primaria Primeira do Maio (First of May Primary School), the teachers club together to pool part of their salaries, which are kept in a safe in the headmaster’s office. Bernado Alfai, a teacher, explains, “The money is lent out to members on a rotational basis. The system is very popular as some teachers have managed to pay for items they had never dreamt of buying before.”

Non-profit organizations are also trying to fill the gap in services. Aníbal Oliveira is the executive director of Ophavela, a rural microfinance association created in 2001 by Care International in the northern province of Nampula. It doubles as a simple savings club and has more than a thousand groups of between seven and 30 members who make weekly contributions.

Fion De Vletter, a consultant with the Mozambique Microfinance Facility, believes there is not enough money in rural areas to make rural banks viable: “They are expensive to run, the average peasant is unlikely to open an account and the credit disbursed will, for the time being, be limited,” he says.

But this view is being challenged by the Mozambican government. President Armando Guebuza has appealed for private banks to expand into rural areas, arguing it is the shortage of banks that is holding back economic activity, not the other way round.

Carlos Domingos, an economist based in Maputo, supports this view. “The rural areas are now the hub of economic activity in the country. Most people are engaged in farming and small-scale business ventures where they at times earn more than people in the cities,” he says.

Joseph Hanlon believes the slow pace of rolling out banks to rural areas has its roots in the privatization process in the 1990s. “The private banks are lazy and unimaginative and only interested in the urban sector. And the government has come under heavy pressure from the IMF and the World Bank not to intervene in the banking sector, so its hands are tied. It’s the biggest single bottleneck for rural development. Donors are promoting savings clubs as an alternative but this keeps everything small and short term. It’s all very ad hoc, which is not the basis for development,” he says.

There are some private banking initiatives making the right noises. A venture called ‘Opportunity Bank’ plans to introduce a network of mobile banks to rural areas in 11 African countries, including Mozambique. Over the next 10 years it will implement a microfinance model tailored to the rural population, complete with satellite branches, mobile branches, ATMs and points of sale.

Until such facilities hit Catandica, people like Dos Santos will have little option but to bury their money and hope for the best.

— Frederico Katerere/ Panos Features
Frederico Katerere is a freelance journalist working in
Mozambique, Swaziland and South Africa

Feudalism in Pakistan

Attock, Pakistan — At 60, Ahmed Khan looks wrinkled beyond his age from a life of poverty, tied to land he plows daily from dawn to dusk for a rich landowner who takes two-thirds of the crop.

“My father lived like this, and now my four sons are also bound to the land,” says Khan, a poor, illiterate sharecropper in Pakistan, where most farmland is owned by powerful landowners who dominate the politics and economy of this poor South Asian nation.

Throughout Pakistan, millions of sharecroppers like Khan work on land they do not own, giving between half and two-thirds of their crops to landlords. The farms they work on can be modest or vast in scale — some landowners own up to 30,000 hectares of land. Typically, farmers like Khan cultivate five-hectare plots, earning between $30 to $55 a month in wages and crop shares.

Workers often end up tied to the land, after taking a loan from a landowner and offering to pay it back by working. Sometimes whole families end up in this type of debt bondage, working to pay off a loan on which the interest keeps accumulating.

Debts are also sometimes passed on to the next generation, condemning whole families to a life of servitude, according to international human rights organizations that condemn the practice.

“Since I was a child I don’t remember ever having more than a single pair of clothes,” says Khan, squatting for a rest in a patch of green next to his wheat fields, his baggy shirt and trousers colored with earth, and a dirty turban balanced atop a sunburned forehead.

“I am tired, I want to rest, but I can’t because I have to eat and feed my family. Who can change my life?” he despairs.

Khan’s predicament is typical in Pakistan, a country of 170 million people that is trapped in poverty in large part because of its skewed land distribution, international institutions like the World Bank and the Asian Development Bank (ADB) say.

In a country where about half the workforce is engaged in agriculture, the key to improving lives is in redistributing land more equitably, independent organizations and observers agree. That would free farmers from virtual bondage and boost productivity in a country that is blessed with arable land, water and the largest irrigation system in the world, but still remains a net importer of food.

“Most empirical evidence indicates that productivity of land on large farms in Pakistan is less than that of small farms,” says a 2004 World Bank report, saying that landless farmers produce 20 percent less than farmers who own their own land.

Yields remain low because many landowners are absentee landlords, and without ownership the farmers themselves have little or no access to agricultural credits, the right fertilizers, appropriate technology or marketing know-how.

A 2004 report by the ADB linked poverty “more to social than to economic factors. For example, cultivated land is highly unequally distributed in Pakistan,” it says. “Access to land, which is the basic factor of production, is crucial to reduce poverty in rural areas,” the report concluded.

“The poverty in rural areas is endemic because feudalism has monopolized the rural economy and dominates the political and social life of the rural people,” says Mehnaz Ajmal of Pakistan’s independent Sustainable Development Policy Institute (SDPI). “Land reform is a very critical question for any successful poverty reduction strategy.”

Off the agenda:

But in the corridors of power, where wealthy landowners have exercised influence directly or behind the scenes throughout Pakistan’s unstable 59-year history, land reform is kept off the agenda.

When Pakistan’s current military government introduced its first full poverty reduction strategy in 2003 —an international prerequisite for World Bank loans and debt relief from the International Monetary Fund — it did not include land reform.

“The development challenges for Pakistan include achieving accelerated and sustained broad-based economic growth particularly in rural areas,” said the then-Finance Minister Shaukat Aziz in the Poverty Reduction Strategy Paper (PRSP), the official document laying out the anti-poverty roadmap.

The World Bank has welcomed Pakistan’s anti-poverty strategies, but its 2004 report says, “A more detailed rural development strategy is still needed.” It noted that “distribution of land is highly skewed … [and is] a major cause of income inequality in rural Pakistan.”

Pakistan’s government continues to receive significant loans and grants from international institutions, even though it has failed to tackle what many believe is a root cause of poverty.

The IMF and World Bank have pledged $1 billion in loans to Pakistan, and the latter also committed $500 million in investment projects between 2004 and 2007. The ADB’s commitments from 2004 to 2006 have totaled nearly $2 billion.

In 2006, the World Bank said its preliminary analysis of Pakistan’s economic policies suggested “a sizeable reduction in poverty.”

Usman Ghani, joint economic adviser at the Finance Ministry, conceded that land reform was a highly political issue. “It is not part of the PRSP because it requires a strong political will, and only the leadership of the country can decide on it,” he says.

“The PRSP does mention some important aspects of poverty alleviation, such as health, water and education,” says Ghani. “Education, especially, can play an important role in poverty reduction,” he adds.

Perpetuating poverty and ignorance:

Khan, the villager, says he has never dared approach the landowner to ask for anything, like education for his children.

“We can’t even imagine sitting down with the personal servants of the landlord to share our hardships. How, then, can we ever even dream of talking to the landlord himself?” adds Khan, saying he is enslaved to the land not only by financial debts to his landlord, but because he and his children have no education or skills.

“The feudals are against physical or social development, thinking that if the people under them become more informed, aware or empowered, their own hold over them will diminish,” says Ajmal, of the SDPI.

Since it was carved out of India after the end of British colonial rule, Pakistan has had a checkered history of military rule, coups d’état and short-lived civilian governments led by a cross-section of leaders, some of whom did make serious attempts at land reform.

In 1977, President Zulfiqar Ali Bhutto set a land ownership ceiling of about four hectares of irrigated land and eight hectares of non-irrigated land. But the measures were stalled because rich landowners, who have always dominated politics and would be the main losers if reforms went ahead, never implemented them seriously.

The current military ruler, Gen. Pervez Musharraf, has so far failed to act on a promise to abolish feudalism, which he made immediately after seizing power in a bloodless 1999 coup.

Land ownership still remains highly concentrated, with more than half of the arable land in farms of 50 hectares or more. Even now the list of the country’s legislators reads like a Who’s Who of the large landowners, such as Hamid Nasir Chatta, Malik Allah Yar Khan and Sardar Farooq Ahmed Khan Leghari, a former president of Pakistan.

“The big landlords pervade the political system and establishments, so it is very difficult to get rid of the feudal system,” says Shahid ur Rehman, a leading Islamabad-based journalist who has written extensively about the overarching influence of the country’s richest families in nearly every aspect of the nation’s life.

He says that the feudal elite has grown bigger and stronger as the two other powerful pillars that control Pakistan — the military and bureaucracy — have joined the ranks of the landowners by marrying into the feudal families or acquiring land through shady deals inside the government.

The power of the feudal lords over their subjects goes beyond just control of the land, according to the ADB report.

Large landowners or tribal chiefs exercise “considerable control over the decisions, personal and otherwise, of people living in the area of their jurisdiction, as well as over their access to social infrastructure facilities,” the report says.

Landowners win elected legislative posts largely by exercising their power over people living on their lands.

But Mehr Khan, a landowner in the Attock district of Pakistan’s northern Punjab province, denies that he or his like were responsible for perpetuating poverty.

“There are no big lands or estates any more, and inputs are so expensive that a landlord cannot even maintain large estates,” he says. “Earlier, people used to control peasants through their ownership, but it is now very difficult to treat people in the same way. I don’t think we are the cause of poverty at any level,” he says.

Rehman, the journalist, says that most landowners do not declare their full assets, which are sometimes kept in the names of other family members or under fictitious names.

Irshad Ahmed, a poor landless farmer who has spent his whole life in the village of Kahutra in Attock, does not much care that his labor helps feed the nation or that agriculture accounts for about a quarter of the Gross Domestic Product, and three-quarters of export earnings.

“I know only that I am working for my family’s survival, and that if I don’t work no one will feed my children, not even the government,” says Ahmed, sipping milky tea from a broken cup inside a two-roomed cottage of mud and straw without electricity.

“For generations all we have done is work on land that belonged to others. We have never owned land. It has owned us.”

— Muhammad Ishtiaq/Panos Features


The November/December Lawrence Summers Memorial Award* goes to Emerald Group Publishing, publishers of the journal Library Science.

The journal published an article in 2004 titled, “Impediments to Promoting Access to Global Knowledge in Sub-Saharan Africa,” in part discussing how difficult it is to get access to medical literature in developing countries. This article can be downloaded on the Internet ... for $25.

Ben Goldacre, a columnist for The Guardian in the UK, points to this case as exemplifying the importance of the open-access journals movement, which promotes the idea that articles in academic journals should be freely available.

Source: Ben Goldacre, “Open Access and the Price of Knowledge,” The Guardian, February 10, 2007 (via  Stefan Andreasson’s blog,

*In a 1991 internal memorandum, then-World Bank economist Lawrence Summers argued for the transfer of waste and dirty industries from industrialized to developing countries. “Just between you and me, shouldn’t the World Bank be encouraging more migration of the dirty industries to the LDCs (lesser developed countries)?” wrote Summers, who went on to serve as Treasury Secretary during the Clinton administration and is the outgoing president of Harvard University. “I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that. ... I’ve always thought that underpopulated countries in Africa are vastly under polluted; their air quality is vastly inefficiently low [sic] compared to Los Angeles or Mexico City.” Summers later said the memo was meant to be ironic.


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