The Myth of Economic Growth

Economic growth is not necessarily synonymous with national development. If economic growth only succeeds in adding to severe income inequality, which Honduras has in spades, then there is no development... and the country is all the worse for it.

By Marco Cáceres
Back in the 1960s, the World Bank sought to encourage economic growth and development in Honduras by expanding beef exports. This was seen as a good strategy for creating badly needed foreign capital for investment in the country. There was a growing demand for cheap beef around the world, as fast food restaurants like McDonald's continued to spread throughout the United States and Canada, and began establishing franchises in Asia, Europe, and Latin America in the early-1970s. The World Bank provided low-interest loans to Honduran cattle ranchers, who used the money to enlarge and fatten their herds. One of the ways the ranchers did this was to obtain more pasture land for grazing. In numerous cases, lands were simply taken from small farmers engaged in subsistence agriculture.

Given Honduras' poorly-administrated land titling system, many of these subsistence farmers did not have proper titles to their properties and lacked the education, knowledge, and financial resources to be able to defend their rights before local magistrates and other government officials. The farmers were thus easy prey for wealthy ranchers, who pushed them off lands that had been farmed by their families for generations. All this so that cattle could have more space to roam and eat, and then ultimately be consumed by foreigners on their way to obesity.

The predictable result was the creation of tens of thousands of landless campesinos unable to plant and cultivate the basic staple crops such as beans and rice required to feed their malnourished families and have a little cash left over to cover other basic needs or put away for rainy days. The actions of the ranchers aggravated an already acutely unequal land tenure situation in Honduras, dramatically increasing poverty and hunger in the countryside, and fueling a mass migration of people to urban areas... in search of jobs and scraps of food.

In its effort to stimulate economic growth in Honduras, the World Bank -- as it unfortunately often does -- neglected to seriously consider and analyze the potential impact of its policy on the country as a whole. Because of this failure, the bank succeeded in making wealthy people in Honduras wealthier and poor people poorer and more desperate. The political and social consequences, in terms of massive poverty, hunger, landlessness, lack of productivity, and violent conflict can be seen throughout Honduras.

Economic growth is not necessarily synonymous with national development. If economic growth only succeeds in adding to severe income inequality, which Honduras has in spades, then there is no development... and the country is all the worse for it.

It's not all about profit. It's mostly about balance. Well, at least if you wish to have a viable nation. (2/1/12) (image courtesy Internet)

Note: The author is the editor and cofounder of Honduras Weekly. He is also the cofounder of projecthonduras.com, an international network of volunteers involved in humanitarian development projects aimed at empowering the people of Honduras. He directs the annual Conference on Honduras in the town of Copán Ruinas in northwestern Honduras. He was born in Tegucigalpa.