The Third World Debt after Okinawa: the G7 is unmasked!
After the G7+1 summit which took place in Okinawa in July 2000, it's time to
check on the status of promises concerning the cancellation of Third World
debt. More than a year ago, in June 1999 in Cologne, the Jubilee 2000
coalition handed the G7 leaders a petition with 17 million signatures calling
for them to cancel the debt of 50 Third World countries. The G7 seemed to
respond positively and committed to rapid cancellation of up to 90% of the
debt of 41 heavily-indebted poor countries (HIPC), making the fight against
poverty a priority. $100 billion were to be devoted to this "generous"
initiative, which was widely covered by the media.
Public announcements echoed round the world. Standing in front of the IMF and
World Bank Assembly Michel Camdessus read out the letter written by the two
young men from Guinea who died in the landing gear of a Sabena Airlines plane
and he declared that their appeal had been heard thanks to the Cologne
Initiative. In September 1999, President Bill Clinton announced that his
country would unilaterally cancel 100% of the poor countries' debt. He was
followed by Gordon Brown, Great Britain's Chancellor of the Exchequer, by
Jacques Chirac etc.
At the time, the Committee for the Cancellation of Third World Debt (COCAD)
cried out that this initiative was a sham and called for real solutions to be
implemented.
So, what is the situation a year after Cologne?
Of the $100 billion announced, barely $2.5 billion have materialized. That
represents about 1.2% of the debt of the HIPC. (The figure is $2.07 billion
if ex Eastern-bloc countries are excluded). This is a far cry from the 90 or
100% cancellation announced! Whatever discussion there might be on just how
much effort has been made, everyone now agrees that very little has been
achieved.
The world's richest countries are really stingy. The US Congress has
allocated $63 million to debt reduction in 2000, $69 million in 2000, i.e.
1/4 of one-thousandth the $280 billion annual US defense budget. This is in
the context of a budget surplus expected to amount to around $100 billion
over the next decade. One can guess that both the Capitol and the Pentagon
intend to spend part of this on the anti-missile shield project (so loved by
Ronald Reagan in the 1980's) rather than on canceling Third World debt.
Our calculations show that none of the creditor nations of the North will be
contributing more than 1% of their defense budget to debt relief. Thus, the
Belgian government plans to allocate BF800m. (about Euro 20m.) to Third World
debt reduction. Furthermore, it should be pointed out that most of this sum
has not yet been handed over. At the rate of BF800m. per annum it would take
a century to cancel the BF90bn that the HIPC owe Belgium. It is also worth
stating that the sums that industrialized countries allocate to debt relief
are used to compensate private German, French and Belgian companies that
participated in white elephant projects in countries that are
now crushed by the burden of the debt (especially installations unsuited to
local needs such as the Inga Dam in the Lower Congo or the Kl?kner Iron and
Steel Works in Cameroon). These white elephants were bought by regimes that
were paid commissions by these companies for accepting "turnkey" packaged
solutions that included both the projects and the loans. The contracts
involved were gigantic and the companies involved were aided and abetted by
western governments that wanted to keep close ties with their ex colonies
(France, Great Britain, Belgium, Germany, Spain and Portugal) or that wanted
to open up new markets by forming strategic alliances (United States). Most
of the HIPC debt originated in the 1970's and 1980's.
An equally serious matter is the fact some of the funds allocated to
compensating private sector creditors are drawn from development aid
budgets. In short, the funds announced by the governments of the North
aren't reaching the people of the South; they are public funds that are being
used in part to the advantage of private firms despite the fact that they are
largely to blame for the disastrous situation in the Third World. One can
rightly ask why it's necessary to compensate private sector creditors who
have already made substantial profits from juicy contracts with debt-laden
countries as well as having received subsidies from governments of the
developed countries.
Moreover, France and Japan are lying outrageously when they pretend that they
are canceling the debts owed to them by the HIPC. The truth is that they are
demanding that the debt be repaid. On receipt of the
reimbursements, France and Japan will donate the funds, which is not the same
thing as debt cancellation at all. Japan specifically demands that when the
funds are handed back to the developing countries they be used to buy goods
and services supplied by Japanese companies. In short, the debt does indeed
have to be repaid and the funds that are "given" end up in the coffers of the
"donor" country's corporations.
The announcement made in Okinawa, on the 23rd July 2000, that Japan was
making a $15bn "effort" in favor of Internet development in the Third World
should be viewed in the light of this. This is yet another example of tied
development assistance that induces the beneficiary countries to buy Japanese
computer equipment and technlogy. France is a little more discreet on this
because, for several years now, significant progressive movements have been
strongly critical of tied development assistance. However, it
should be remembered that President Jacques Chirac has been offering debt
relief to the HIPC for several years on the condition that they privatize
their public sector to the advantage of French multinationals. Bouygues,
Vivendi and other large French multinationals have bought whole sectors of
the economies of the old French African colonies at discount prices thanks to
this policy.
Finally, we must not forget that all these debt relief initiatives are
linked to structural adjustment programmes imposed by the creditor nations
which, even if they now refer to them as "Poverty Reduction Strategy Paper",
force the countries concerned to continue opening their markets to goods from
developed countries and extend fiscal policies that place the burden of
taxation on the poor (VAT rates in Western Africa are in the range of 18 to
21% whilst, pretexting the need to encourage private investment, capital is
not taxed directly). These policies also lead to widespread privatization of
the water and energy sectors (Vivendi applauds this), the continuation of a
policy of exporting at any cost which has detrimental effects on food safety
(food crops are abandoned in favor of crops that can be exported) and is
preventing the conservation of natural resources (deforestation and extreme
exploitation of raw material and fuel resources), the privatization of
communal land, the further lowering of public sector starvation wages, in
short the application of hard-line neo-liberalism with a sprinkling of
targeted subsidies for those in "abject" poverty.
In conclusion, the current initiatives are either totally inadequate or quite
simply unacceptable.
If real solutions are to be implemented it will be necessary to lift the veil
of secrecy that's hiding the truth concerning Third World debt: the debt is
really a mechanism for transferring wealth from the South to the North. The
latest figures from the World Bank show that in 1998 the 41 HIPC transferred
$1,680 million more to the North than they received (cf World Bank: "Global
Development Finance, Net flows and transfers on debt" table, April 2000).
That's massive. The reality is that the HIPC are making the richest countries
even richer.
If we widen the debate to cover all the developing countries then the
scandal takes on outrageous proportions. In 1999 these countries transferred
a net sum of $114.6 million to the creditor nations in the North (op. cit. p.
188)! That's at least equivalent to the Marshall Plan but transferred in a
single year.
Another indicator: in total the developing countries reimbursed (in capital
and interest) $350 billion in 1999 (op. cit. "Tables" p.24), i.e. seven times
more than the total for Public Development Aid which amounted to $50 billion
that year!
What are the real solutions?
The starting point must be to meet the basic human needs guaranteed by the
Universal Declaration of Human Rights. Rather than speaking grandiloquently
about the advantages to be gained by developing countries from access to
financial markets and the supposed benefits of globalisation, it should be
bourn in mind that each year sub-Saharan Africa reimburses almost $15
billion, i.e. four times more than it spends on health and education.
Meanwhile, according to the United Nations Development Program, a budget of
$40 billion dollars per annum over ten years would allow universal primary
education (there are currently 1 billion people suffering from illiteracy in
the world), guarantee access to potable water for the 1.3 billion people who
are deprived of it, provide medical care to 2 billion people who don't have
access to it and ensure basic food needs for the 2 billion people suffering
from anemia.
If we really want to see durable human development social justice then
several urgent steps must be taken.
1. Cancel the Third World's public external debt (it has already reimbursed
more than four times what it owed when the debt crisis exploded in 1982).
This external public debt amounts to around $1.6 trillion, i.e. less than 5%
of global debt that currently stands at about $40 trillion. The US public
debt (for a population of 275 million) amounts to $5 trillion, i.e. more than
three times the total exterior public debt of all the Third World's
countries. The French public debt amounts 750 $ billion, i. e. more than
three times the total exterior public debt of all sub-Saharan Africa
(population 600 million). Canceling the Third World debt would require
demanding that all the various creditors wipe out 5% of their accounting
assets. That's not too much to ask.
2. Start and successfully conclude judicial proceedings to end the impunity
of those who got rich illegally on the backs of their citizens as well as
their accomplices in developed countries. The late Mobutu's fortune is
believed to amount to at least $8 billion whilst the Democratic Republic of
Congo is in debt to the tune of $13 billion. These illegally-gained assets
must be expropriated and handed back to the plundered population via a
democratically-controlled local development fund.
3. Abandon the structural adjustment policies that are so disastrous for
Third World populations.
4. Apply a tax like the Tobin Tax and devote the majority of its resources to
socially just and ecologically sustainable development projects.
5. Deliver on the promises made by countries in the United Nations by
raising Official Development Assistance (ODA) to 0.7% of the Gross National
Product of developed countries (at the moment it's only 0.24% for the OECD
GNP as a whole). The entire ODA should be bestowed as a donation (currently
part of it is granted in the form of loans).
6. Stop deregulating trade because this impacts Third World populations
directly.
These proposals certainly aren't enough to solve all the injustices of
North-South relations but they are necessary if human development and
justice are to be given a chance.
by Eric Toussaint
Translation: thanks to Barbara Strauss (ATTAC)
(* This article was ciculated by ATTAC International list.)
