Scandal of growing 3 rd world debt burden
Third world debt kills 19,000 children a day in Africa, while their governments spend $37m per day just on debt servicing.
This is one of the key reasons why so many people across the world have joined anti-globalisation protests over the last couple of years. But despite the huge profile given to the issue particularly during last year, what has actually been achieved at a level that will improve people’s daily lives is sadly limited.
The World Development report of the World Bank itself for 1999/2000 showed that the external debt of developing countries stood at nearly $3000 billion, almost double what it was in 1990 and on a steeply rising curve.
These figures amount to a debt of over $400 for every man, woman and child in the countries of the South – in a situation where in the poorest countries average income is less than $1 per day.
In six of the eight years between 1990 and 1997, developing countries paid out more in debt servicing than they received in new money. There was a total transfer from poor countries to rich countries of $77 billion during this period.
Today in Ethiopia 100,000 children die from easily preventable diseases, while debt repayments are four times higher than spending on health. In Tanzania, 40 % of people die before they reach 40, debt repayments exceed health spending six times over.
Nor is the problem of debt only an issue in Africa. Brazil spends 75.5% of government revenue on debt servicing and only 34.5 of its expenditure on social services. Guatemala spends 57.8% on debt and 38.4% on public services.
An embarrassing report published in April of this year by the World Bank and International Monetary Fund, casts a dark shadow over their own much trumpeted Heavily Indebted Poor Countries (HIPC) initiative launched in 1996.
So far, the HIPC initiative is reducing debt service payments for 22 countries by just one-quarter on average, leaving the majority of countries spending more on debt than they currently spend on health. Only one country, Uganda, has had actual debt cancellation.
Now even the architects of this package show little confidence that this will provide an end to the debt crisis for even the countries involved – never mind those excluded.
The paper "The Challenge of Maintaining Long-Term External Debt Sustainability" has finally emerged after a number of rewrites, and confirms debt campaigners’ concerns that HIPC does not reduce debt to a low enough level.
Debt campaigners have long argued that the 150% debt-to-exports level underpinning the HIPC initiative is based on precarious projections of export growth. For the 22 countries to get HIPC relief so far, the World Bank and IMF use predictions for export growth of above 6 per cent.
This report admits for the first time that original export growth predictions were overly optimistic. The report shows how if exports grow more realistically at an average of 4.2%, in line with 1990 - 1999 levels, debt levels will have risen above the declared "sustainability threshold" to 160 per cent by 2005, reaching around 180 per cent by 2015.
Three of these countries, Bolivia, Malawi and Niger, will not reach the 150 per cent threshold in the first place because of export growth rate volatility.
Three further countries (Burkina Faso, Rwanda and Tanzania) are not predicted to reach the 150 per cent level until the medium term, because of anticipated new borrowing.
Even for countries that do reach the 150% level, the report acknowledges that the HIV/AIDS emergency in many African HIPCs will mean that debt levels will soon rise. "Longer-term growth prospects can be undermined by natural disasters, war, or health threats such as the AIDS epidemic in such cases, in the absence of adequate grant financing, external indebtedness may need to rise to accommodate the financing of reconstruction and rehabilitation."
But despite the fact that this report was published before the Washington DC meeting this spring, no new initiatives were forthcoming. And while the decision of some governments to cancel some bilateral debt is welcome, the real issue is the role of the IMF and World Bank.
Campaigners will again be pressing this issue at the G8 summit in Genoa in July, but it is unfortunate that many of the mainstream organisations involved seem to focus their energies on making appeals to right wing politicians.
The Italian organisation, Cancel the Debt has organised a celebrity football match to coincide with Berlusconi’s inauguration. It used a video of rock star Bono to call on the Prime Minister to use the Genoa summit to inaugurate a "new deal" on debt in which 100% debt cancellation will be agreed by the IMF and the World Bank.
Of course there is nothing wrong with using well known media figures to promote political campaigns, or in making appeals to government’s however right wing. But there is a danger, which has been illustrated time and again in the movement for debt cancellation of relying on the largesse of politicians who are promoting neo-liberalism in their own countries to oppose it elsewhere.
The existence of debt in the Third World is not some immoral deviation from an otherwise fair and equitable capitalist system – it is one of the clearest and most brutal illustrations.
Debt has been used as a stick by the international capitalist institutions of the IMF and the World Bank for over 30 years to force countries to introduce austerity packages that force up prices and devastate what few services exist.
The production of goods for exports has been privileged over the production of what people need to survive. Often this has resulted in ecological degradation as mono-cultures of cash crops have replaced traditionally mixed agriculture. Poverty, disease and death have inevitably followed
Since 1985, this has been formalised under the so-called Baker plan. Introduced by the US Secretary of State James Baker, this plan deepened the control of the international institutions on impoverished countries by ensuring that the conditions for future loans depended on further privatisation and deregulation.
The balance sheet has not only been huge lay-offs in the public sector and the removal of subsidies on basic foodstuffs but yet again the occasion for further profits. This time private banks were able to siphon off more than $178 billion between 1984 and 1990 alone.
Amongst many activists campaigning against debt, particularly young people, there is an openness to understanding that this is more than a moral abhorrence but an integral part of the determination of capitalism to put profit before people.
As neo-liberal policies are carried out across the globe, resulting in increasing gaps between rich and poor not only in the poorest countries but in the richest as well, the opportunity to demonstrate that profit as the motor force of capitalism is what needs to be opposed has never been more possible – or more necessary.
The left needs to dialogue with and learn from the new generation of activists that is mobilising around these issues, both by taking to the streets in international protests but also by making sure that organisations like the Socialist Alliance also take up their concerns and give them a voice.