A crisis sparked by the world's rich

Our worries about jobs or pensions pale beside the fallout Africa and Asia now face in this absurdly skewed global system. A few weeks ago speculation began as to what might be the novels of the credit crunch. Where was the F Scott Fitzgerald, John Steinbeck or Martin Amis of 2008, the novelist who could speak to this crazily chaotic economic age? On cue last week, Aravind Adiga wins the Booker for The White Tiger. The critics have been sniffy, referring to him with discernible disdain as a former journalist. (He was Asia business correspondent for Time magazine.) But he won precisely because of his ringside seat at globalisation's boom years; he won because, despite its possible shortcomings as a novel, his book nails the myth of a benign US economic hegemony that has "lifted" millions out of poverty across Asia. What it portrays in its place is horrific: a world where billions live in what Adiga's lead character describes as the "Darkness" - the abject poverty entrenched across swaths of rural and slum-city India. Meanwhile, an elite surfing on a tide of consumerism and cheap credit has been entirely dislocated from the majority of the country. This is a country where Bangalore's IT millionaires grow rich alongside an agrarian crisis characterised by an extraordinary phenomenon, the silent protests of 18,000 indebted farmers committing suicide every year - 200,000 in the past 12 years. Just as Steinbeck stirred the conscience of America with his novels on the dust bowl and the Great Depression, and Charles Dickens challenged the complacencies of Victorian Britain, so Adiga reads as a blistering critique of an economic system that can only be described as grotesque. The Indian economist Jayati Ghosh points out that Mumbai has the second biggest sales globally of Mercedes cars, yet more than half of India lives in poverty without enough to eat. The pertinence of Adiga's win is that India has been the poster boy for the past two decades of globalisation; Bono told me once that he dreamed of sub-Saharan Africa finding a way to emulate India's success. But its model of growth imported from the US was based on credit-fuelled consumerism for a fifth of the population while state investment in health, education, agriculture, infrastructure - crucial components of sustainable development - were cut back. Adiga's novel is a powerful volley in the crisis of legitimacy gripping the west's domination of the global economy. Europe and the US have spent the weekend talking of reform of global capitalism and a Bretton Woods II, but they need to start with a grovelling apology. In recent decades, they have used their power through the IMF to write the rules and impose them across the world by ruthless manipulation and bullying. Belgium, Luxembourg and the Netherlands have together more votes in the IMF than China, India and Brazil. In the past month, the US and Europe have been humiliated by the catastrophic failure of their own rules, and have been forced to rip them up. The double standards of western interests have been starkly exposed - their bail-outs are exactly what they have refused, repeatedly, to allow other countries to do in similar crises. Those who will pay the heaviest price for the foolhardiness of deregulated financial capitalism are among those who are least responsible, as Brazil's President Lula angrily pointed out last week. The shockwaves of the west's banking crisis will shipwreck more vulnerable countries. In developing countries, people don't have the resources - welfare provision, savings, insurance - to tide them over a crisis. Instead, they go hungry, homeless - and they die. Across Africa and Asia, countries are bracing themselves for multiple hits, with falls in aid already threatened and a likely decline in the remittances that buoy up their economies - in the UK, the immigration minister Phil Woolas is already signalling a harder line on immigration. Fear of global recession is bringing commodity prices down and will reduce the demand for luxury products such as flowers, green beans and hot holidays. The anger among developing countries will spread. Our worries about jobs and pensions pale in comparison with the fallout on the billions who will not be able to feed or educate their children. The western model of neoliberal financialisation was driven by clear self-interest, argues the Cambridge economist Ha-Joon Chang. The west couldn't compete in manufacturing (its labour costs are too high), so it turned to financial markets and used the cheapest way to make money: it offered loans, not for productive investment (factories, businesses) but to consumers, using their homes as collateral. Credit cards and small loans are particularly lucrative. So the west leaned heavily on countries through the World Trade Organisation and the IMF to open up their financial sectors. The western banks and the advertising companies piled in, and the result is a credit consumer boom. This may make a few people rich, but it is not, by any definition, development. Chang, South Korean by background, saw the bullying graphically illustrated in the 1997-98 Asian financial crisis. Not only did the US and the IMF stop the Asian countries from implementing a state bail-out, they took advantage of the desperate situation to force South Korea and other Asian nations to adopt further financial deregulation. Productive investment in South Korea has since halved and credit has boomed. Now the country is on economists' critical list as its stockmarket plunges. Ironically, it is only the countries lucky enough to have dodged IMF bullying who are relatively safe in the current maelstrom: leftwing political groups in India closed ranks to protect its banking sector from the worst deregulation. For most developing countries, the moral of the 1997-98 Asian crisis was that a primary purpose of financial management was to ensure sufficient capital reserves to avoid ever being vulnerable to the IMF thugs in their pinstripe suits. India, Korea, China: all have huge foreign reserves, often in US treasury bonds. It is the safest form of insurance in a global economy in which the flows of foreign exchange are so huge they can destroy a currency in of hours. But for a developing country to tie up most of its capital abroad is ruinously expensive; this capital should be invested in the country's own development - roads, for example, and schools to produce engineers, scientists and IT technicians. Once again, who benefits from this absurdity of the global financial system? The west - in particular the US, whose current account deficit is funded by the sacrificed futures of millions across Asia. Chang's thesis, in his book Bad Samaritans - Guilty Secrets of Rich Nations and the Threat to Global Prosperity, is that the west has effectively kicked away the ladder that enabled it to achieve prosperity. It denies to developing countries the protection and the investment in industries that were essential to its own development. At its most stark, the analysis is that the west has had a vested interest in keeping wage levels down in developing countries while making money from offering cheap credit. All it had to do was enlist a collaborating elite in each country to implement the deal, which was clearly not in the interests of the bulk of the population. Neoliberal globalisation was a system that ensured the rich got richer and the poor got poorer.