The poor third world countries are getting poorer. A central cause of their misery is the austerity measures imposed by the International Monetary Fund (IMF) and the World Bank to cope with the $1200 billion owed to the West. The debt crisis is literally murdering thousands annually. Here SAM INMAN looks at the background to the crisis. WHEN THE MEXICAN government announced in August 1982 that it faced bankruptcy and might not be able to pay its debt, shock waves spread through the international banking system.
Mexico was not the first state to face insolvency - other third world countries were in a similar position - but the sheer scale of its debt threatened a major crisis in the world economy.
Mexico was the world's biggest debtor after Brazil, owing some 10 per cent of the world total. Letting Mexico default While millions go hungry, third world countries export food to the west May 18, 1991 No. 2 would have signalled to other countries that this was a way out for them too.
An international bank crash was only averted by a rescue plan cobbled together iMEovernments, private banks and the Short-term relief for the bankers though, merely served to extend the burden of debt on the third world. Debts were not written off but simply rescheduled for payment at a future date. Even tougher austerity measures were laid down by the IMF and third world governments were strong-armed into accepting these penalties. The debt crisis has continued to deepen, rising from $763 billion in 1982 to over $1200 billion today, and it remains just as unsolved today as it was nine years ago.
What are the fundamental reasons for the debt? Foreign debt is nothing new. All the imperialist powers were originally built on it and still gorge on it today. In fact the largest debtor country in the world is the USA - although it has the immense advantage of being simply able print more dollars. Unlike Brazil, Sudan or Bangladesh.
In fact the third world debt trap dates back to the last century. In those davs ayment of debts was enforced militarily Today the IMF imposes debt repaymen! through threatening to cut off future credits - which would make new imports impossible and financially wreck the countries concerned. Bretton Woods The IMF came into existence at the end of the second world war However, its roots lie in plans that were drawn up during the war to ensure the expansion of US capital in the post-war era and thus increase the economic and political hegemony of the US 'he founding conference of the IMF took place in 1944 at Bretton Woods in the US. Most third world countries were still under the yoke of the colonial powers. Not surprisingly, the interests of the colonial and semi-colonial world were not represented here.
What the key imperialist players wanted was a plan that could avoid a repetition of the world economic crisis of the 1920s which had facilitated the rise of the Nazis in Germany and consequently the second world war.
The main players in the conference were Britain and the US. It was inevitable given the declining role of sterling and the ascendencv of the dollar that US interests won the day. Stalin's representatives were also present, but in the era of 'peace ful coexistence' and 'socialism in one country' they had no impact on the outcome of the talks - indeed the Soviet Union has still not (yet) joined the IMF.
Whilst there was agreement between the main imperialist powers around the bire of the ew trade, fixed exchange rates and equal treatment for trading partners) there was disagreement over what to do about balance-of-payments deficits - foreign John Maynard Keynes, leader of the British delegation, proposed a plan for countries with a surplus to finance the deficits of others. Both debtors and creditors would end up paying towards the imbalances. IMF Realising that in the future it would have high balance-of-payments surpluses, the US rejected Keynes's plan. Fighting back against the International bosses Instead they pushed through a plan to put the burden of debt onto the debtor countries themselves. The IMF would be responsible for short-term debt aid and in conjunction the World Bank was set up to provide long-term development aid.
Since 1945 membership of the IMF has been crucial to third world states to ensure credit for imports and development: But IMF'aid' is always on the terms of the capitalist West.
Real power in the IMF lies with the US Britain, France, Germany and Japan - but with the US as overwhelmingly the dominant power.
If debt has always been a problem for the third world, the present chronic crisis started at the beginning of the 1970s.
The 1973 Arab-Israeli war led to the Arab states using oil prices as a weapor gainst the West. In October 1973 OPE( doubled the price of oil, then in December doubled it again.
Rich oil producing states were consequently awash with financial surpluses which they deposited in European, and especially American, banks. Eager to make profits from these deposits the banks then turned to lend these 'petrodollars' to countries in the third world. The huge amounts of money lent to the third world were rarely used productively by those countries' rulers,
oming from millions UTAK Street seller In Mexico City more and more purely to service the interest on these loans. After the near disaster with a third party buys up a portion of debt at discount, and then trades it for some asset of the debtor.
Another idea which is already widely being put into practice is 'debt for equity swaps. In other words, the banks annul part of the debt in exchange for ownership of industries and businesses in the debtor countries. This just increases the economic stranglehold of the capitalist world over the South.
Cancel the THE CAMPAIGN to Cancel the Third World Debt has been set up in Britain in response to the Group of 7. summit taking place in London in July. Many of those involved have been involved in long term work against the debt, but want to use this opportunity to focus the minds of activists on this vital question.
Despite the fact that the demands of the campaign have the support of many heads of state in the 'Third World' and now even of the Pope, it is rather harder to get support here in Britain. The Green Party are supporting the campaign, as are the Student Liberal Democrats, National Organisation of Labour Students and the Scottish National Party. But from the main political parties, despite the horrors of the famine in Africa and the cholera epidemic in Latin America - both ob viously affected by debt - there is a deafening silence.
It is crucial that this issue is raised at every level in the labour, black and women's movements, amongst anti-war activists and those involved in international solidarity campaigns. It is vital to explain that it is theself-same World Bank and IMF that is stealing from the workers and peasants of the poorest countries that is imposing austerity policies leading to low wages, casualisation and unemployment in the West. The campaign seeks to celebrate the struggles against debt and oppression taking place in many countries across the world, rather than to promote a passive image of 'poor starvng people Resolutions should be put supporting the campaign and agreeing to publicise the demonstration and arrange transport. Donations are desperately needed, as are performers prepared to give their services both for the demonstration itself and for fundraising activities between