Solidarity between peoples
WE acknowledge the permission of the Belgian
Committee for the Cancellation of Third World
Debt in allowing us to print contributions
International Viewpoint #253 February 1994
### Introduction
THIRD World debt no longer makes the news. The banks of the imperialist countries have considerably reduced the size of the debts owed to them by the South and are out of danger (see Susan George's contribution). The diktats of the International Monetary Fund (IMF), the World Bank and so on with regard to the indebted coun
Nécessaire solidarité tries have also assured them of regular payments to service the debts.
entre les peuples
This is one more mechanism for transferring wealth from the people of the South to the ruling classes of the imperialist countries. At the same time à la V.U.B. (rije Universiteit van Brussel) Third World debt (and also debt in Eastern Europe) continues to increase, from 1, 350 billion American dollars in 1991 to 1, 600 billion in 1993. What are the effects of the structural adjustment plans? Who makes decisions in addition to the IMF and the World Bank? What changes should there be in the relationship between the North and the South? These were some of the questions put to the speakers in a forum which took place of the Fourth
International)
and a member of the Sri Lankan
Parliament. We regret that, for technical reasons, we are unable to print their contributions.
SUSAN GEORGE is co-director of the Transnational Institute and co-author of in Brussels on 4 December 1993 at a the book, The Boomerang Effect. She is a member of the meeting organised by the Belgian
Committee for the Cancellation of
International Administrative Council of Greenpeace.
Third World Debt (CADTM).
The movement for the cancellation of
Third World debt has declined as much in the South as in the North.
However, servicing the debt is still an intolerable burden for the people of the Third World. Moreover, any leftwing govemment in the South which aims at satisfying the needs of the masses will have to deal with the problem. For example, can one imagine a Workers' Party government in Brazil, resulting from a Lula victory at the end of 1994, being able to avoid this obstacle in carrying out its programme for social change? The Global Forum in Rio de Janeiro, Brazil in June 1992, organised by non-governmental organisations throughout the world, prioritised the cancellation of the debt. The meeting in Brussels showed that there can be new initiatives. Eric
Toussaint *
IF one were to ask where the debt crisis stands today, some would ask, "What crisis?" The reason for this is that the banks have emerged unscathed from the affair. They had ten years in which to diversify their portfolios into other profitable operations and now have no more than three percent in so-called "Third World" countries.
Nor is there a crisis for the elites of the Third World. Austerity measures do not affect them. Nor are they hit by cuts in public services because they have access to private services — private clinics, transport, schools and so forth. And they are not the ones who lose jobs.
When their currency is devalued, these elites often become more wealthy in their own countries because most of their money is outside of the country in hard currencies.
So there is no crisis for the banks and no crisis for the Third World elites; this is why we hear so little about the Third World debt. I can only congratulate the Committee for the Cancellation of Third World Debt (CADTM), because they have made a real activist effort to keep the problem of the debt out in the open and in the public eye.
It has been more than a decade since the breaking of the debt crisis, and since that time banks have withdrawn from the scene. In spite of the structural adjustment plans" put in place by the World Bank and the International Monetary Fund in more than eighty countries (including in the republics of the former USSR), nowhere have we seen the promised growth and reduction of debt.
In spite of ten years of austerity, the debt itself has grown by two thirds in the
17
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DEBT from one of the major forums at their meeting in Brussels on 4 December. International Viewpoint is responsible for editing the contributions for reasons of style. Also speaking at this forum were Carol Thompson, an research Dette Monde worker based in Zimbabwe, and "Vasu", a central leader of the Nava Sama Samaja Party (Sri Lankan section samedi 4 décembre 1993 de 13h00 à minuit
International Viewpoint #253 February 1994 countries of the Third World. For the poorest of these it has grown by more than one-hundred and twenty percent, ton are worthless and the prices of other products are plummeting - then that is what
So for both the South and the North the debt is a catastrophe for the vast majority of the population. Since we
Dette and in sub-Saharan Africa it has more than doubled over the same period.
These countries have been paying 250 thousand American dollars every minute to service the debt. Imagine yourthey will produce. And they are right to do so, for they have no other choice.
Then there is have a common interest around this problem, the solution lies in building coalitions between nongovernmental
Tiers self in a bathtub without a plug. Everything which comes into the country in the form of "aid", investment, and payments for exports escapes down the drain in the form of debt servicing. There is no possibility of accumulating capital for the problem of job losses.
Monde
Since 1991 jobs lost due to
Third organisations and productive investment.
According to the United Nations Nécessaire solidarité Children's Fund (UNICEF), 30 thousand health professionals have left Africa over the last ten years. They cannot find decent working conditions or salaries, so they head elsewhere in search of greener pastures. Most African countries now pay more to service their debt than they invest in health and education.
Dysfunctional
This means an excessive burden for women. They have to fill in for a dysfunctional health care system; they have to take care of the children; and they have to work both inside and outside the home. And, often, they must turn to prostitution to make ends meet.
In Africa I was told that now that education costs money, girls of 14 years older who want to go to school are forced to have sexual relations in exchange for enrollment. This is where the debt and attendant austerity lead.
The effects of the debt are not only felt in the "South". In our book, The Boomerang Effect, published last year, we researchers from the Transnational Institute showed that the crisis is not a distant problem, which should only interest us for reasons of compassion or solidanty.
It is totally false to say that the debt crisis bears no material relationship to us. The impact on the environment of export-oriented policies is catastrophic, more and more countries are dependent on the drug trade, and everyone knows of the ravages of this trade in the United States of America, where serious drugrelated crimes have been rising at an annual rate of 10% for the last few years and have hit minority communities particularly hard.
Approaching the drug problem from a military angle solves nothing. If drugs are the only product on which farmers will not lose money - if coffee and cot18
World debt can be entre les peuples à la V.U.B. (Vrije Universiteit van Brussel) samedi 4 décembre 1993 de 13h00 à minuit conservatively at 2 million in the United States and 750 thousand in Europe. Countries which are servicing the debt can hardly be expected to buy products manufactured outside. The loss all round is enormous, given that these countries need the advanced technology which they are unable to produce themselves.
### Catastrophe
There is also the fact that immigration will continue so long as people cannot make a decent life for themselves in their own country. It is a catastrophe for these countries when, to give my preVious example, 30 thousand African health professionals have left their countries. These are people who have studied, who are young and courageous.
Today, in the Senegal Valley, there are entire villages where only old people and children remain. This is not how a country's agriculture will develop, although it is true that remittances from immigrant workers have been very useful in servicing the debt in their coun tries.
the peoples of North and South.
"This leads to two-tiered
MICHEL CHOSSUDOVSKY is an economics professor at the Univer contributer to the French journal, LeM
W e are seeing a
globalisation of misery which is a direct product of the macro-economic policies implemented under the auspices of the Bretton Woods institutions. The result has been a shrinking of internal purchasing power, a reduction in labour costs, and a re-orientation of national economies towards exports. National economies are being pillaged by industries producing for the world market, and the Western agricultural surplus dumped upon them.
In the process, internal market activi-
International Viewpoint #253 February 1994 ty is neglected and economies are reoriented towards the world market. Since the end of the 1980s, the "structural adjustment" plans have taken a new turn, insofar as the process of economic collapse has surpassed all projections, especially with respect to the countries of the former Communist Bloc.
### Devaluation
In respect of Russia, the IMF has recommended that social security, which was pegged at $US6 per month before devaluation, be reduced to $US3 — this despite the minimum wage being $US6.50 per month. Price indexes have been manipulated; on the one hand, there has been a dollarisation of most prices - which are now approaching those of the world market - while on the other, the average monthly wage for large sections of the population is between SUS10 and SUS40 per month. School books are being sold to merchants, and then to the West, where they are used for making recycled paper. This is the future of the education system in the whole ex-USSR.
In Kenya, the World Bank has just signed an agreement on readjustment in the education sector. As in most sublandless workers or small peasants, there was an increase in famine in the months following the application of the policy.
In Vietnam, the government has begun to implement neo-liberal economic policy voluntarily, in line with IMF-type programmes. While even a teacher with a university diploma earns only $US15.75 per month, the logic of the measures adopted by the government - with the support of international institutions — will increase the price of rice (the country's main export) to the world level.
There is an economic genocide going on, working through the price-revenue mechanism, which simultaneously affects thousands of millions of people in more than eighty countries around the world.
### Global
Clearly this generalised impoverishenor in abi level.
relations. When purchasing power is systematically reduced on a global level, there can be no growth in internal or global markets. The misery management of the South stimulates the relocation of enterprises to these countries and the closing of factories and "restructuring" in Western Europe and North America. Jobs are transferred topoorer countries, which are forced to produce for the world market -leading in turn to ests surround and give directives to the IMF, for example the London and Paris financial institutions, the political players from the G7 countries, the USA Treasu-
There has also been another important phenomenon over the last decade More and more financial institutions, in the Third World as much as in the developed countries, are being integrated into a system of money laundering, illegal drug trafficking and organised crime. This is not the dominant feature of international finance, but nor is it a negligible
This can be seen, for example, in Eastern Europe and the ex-USSR. Dirty money — drug money — is deposited in Swiss banks, recycled into these countries and used for the privatisation of State enterprises. While this recycling of dirty money strengthens creditors, it also establishes a framework for regular money laundering and illegal trafficking. This is a significant development, and
Vonde we should watch it carefully. *
no saire solidarite consumption and living standards in both the south and the North"
drop in prices
Inversity of Ottawa and a regular a saturation of world markets, a and consequently their revenue.
There is less and less of a relationship between the price of merchandise and the actual costs of production, whether produced in our countries or in the poor
Le Monde Diplomatique.
countries. As a result, enormous profits g are made from low-wage economies So a mun are made from low-wage economies sh00 a minute
Saharan African countries, the country is forbidden from increasing the number of students entering teacher-training college. The agreement also stipulates that the student-teacher ratio should increase from 35:1 to 42:1 in the coming years.
In other words, the loan agreement is programming the destruction of the education system.
In 1991, the Indian government implemented an economic policy under the auspices of the IMF, since when there has been a considerable increase in food prices. This has meant that several hundreds of millions of people have been thrust into the worst forms of misery. In rural areas, where so many are which now exist on a global level. We countries of both South and North. Further, in the South, creditors exercise political control through the international institutions, with economic reforms having to conform to the dictates of the IMF and neither the IMF nor the World Bank are political powers in and of themselves, but part of a global bureaucracy. It would be interesting to uncover how this international bureaucracy of functionaries, economists and technocrats serve the interests of certain private financial institutions. Certainly a whole range of financial inter-
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Dire peuples decembre 1993 19
Devaluation of the CFA franc
THE fifty percent devaluation of the CFA franc* - which had been looming for several months - is one of the latest misadventures in the crisis of French domination in Black
Africa. The peoples of the region will pay a heavy price, inasmuch as the foreign trade of the fourteen countries of the "franc zone " is heavily tied to France.
They will now have to fill - but how? - the gap created by the drop in the value of
* The CFA francis used by those African countries tied to the French franc. Originally "CFA" stood for "French African
International Viewpoint #253 February 1994
MICHEL HUSSON is a researcher at the the
Institute for Economic
Research, Paris.
T here are several striking features of the model their exports, and pay for the increased cost of imports. This is added to other factors which are turning entire sections of the population into paupers, and offer no solution whatever to the structural crises of these economies. The proponents of devaluation were many in number. First and foremost were the World Bank and the International Monetary Fund, who demanded "real prices" in order to get on with the implementation of "structural adjustment plans". In their view, an "abnormally" overvalued currency was an obstacle to exports. But this argument forgot that the crisis of African economies taken as a whole - including, and this is significant, non-FA franc countries — has much more to do with the global re-organisation of the division of labour and demand than with a simple problem of export prices. The French government was the next force behind the devaluation. For several months it had been declaring that it could no longer go on losing money through the financing of these economies and these governments. There was certainly hesitation in Paris, since the interests of French firms operating in these countries had to be taken into consideration. In the end, however, devaluation won the day. The franc zone was a rather unusual institution for a supposedly "post-colonial" era. The rate of the CFA franc remained unchanged from 1958 onwards, at fifty CFA francs to the French franc. And the relationship between the two currencies actually dates back to 1948. The franc zone allowed for unlimited transfer and convertibility between the two currencies. In other words, whatever they looked like, the bills circulating in Gabon, Mali or in any of the other twelve countries were French francs. The goal of the franc zone was to create a wide-open market for French firms and merchandise. This zone led to the commercial dependence of these countries on France. At a time of free-floating currencies in Europe, one would have had to be a fool to take the risk of buying a machine-tool in Germany, for example, when there was a guaranteed stable price for imports from France The stabilisation of the European monetary system lessened the significance of this factor. These African economies were opened to other European suppliers and, in the Maastricht euphoria, there was even talk of a Euro-African ECU zone. But this did not take into account the outbreak of crisis both in Europe and Africa. In exchange for a stifling dependence, the franc zone at least served as a monetary regulator; and the concerned African countries usually held their debts with the Bank of France. It also allowed for all manner of trafficking and flight of capital for France's dear friends in the region - dictators and "entrepreneurs" alike. The system worked for a long time, but no longer. What may have appeared as a lesser evil has become a nightmare. For, aside from the various monetary mechanisms and their pateralist trappings, there is the sad reality of domination. Decisions are taken outside Africa and with extreme brutality. We should not believe that Paris will freeze the holdings syphoned into French banks by those who run — or ran — these African countries. Indeed, it is the peoples of these countries who will pay for this latest in a long series of entries in the colonial ledger. -
Claude Gabriel *
Colonies", a description which, to a large extent, is still accurate. 20 imposed by the various international financial institutions in the name of "structural adjustment". First and foremost, the same recipe is proposed for all countries, without taking into account specific social and economic realities, thus exposing a superficial approach to different social formations.
There are some countries in the Third World which have seen fairly high rates of growth over the last two or three years. These are always held up as models of economic development. But it should be borne in mind that in these countries there is an enormous gap between the rate of growth and the reality of development on the ground, and the fruits of growth are in fact denied to the overwhelming majority of the population
Prosperity
Even the World Bank recognises this fact. In a recent report, on the decade of debt in Latin America, it concluded that perhaps the way in which the fruits of growth are shared out is more important than growth itself.
What are the stumbling blocks to prosperity for the great majority of Third World countries?.
The first is very simple. Almost all these countries centre their economic orientation on prioritising potential exports - that is, purchases by the rich countries. However these are actually slowing down at the present time and the purchasing power of the rich countries would have to grow at an unfathomable rate, for it to act as a motor force for the development of all Third World coun tries.
In a way, we are seeing exactly the same phenomenon in the rich countries, in that the neo-liberal adjustment policies are smashing internal demand in the hope of selling to others. One need not be an economic expert to understand that in the end everyone loses, both in
North and South.
The second stumbling block is related in that the model thrusts Third World
"Third World countries need to define a reasoned policy of 'self-centring".
This would not mean autarchy, but an approach which takes the reality of the world economy into consideration."
countries into competition with one another. One striking example, recently examined in a French magazine, is that of Nike. This company, which contracts out, packed up its operations in Malaysia and the Philippines because salaries had risen too high. It then moved to China.
Capital has become highly mobile, which exerts a constant downward pressure on wages, rather than favouring a situation in which development, investment and growth lead to an increase in salaries and growth of the internal market. This vicious circle drives countries to keep wages low.
Thirdly, the model is characterised by a significant growth in social inequality. The World Bank report on Latin America provides very clear figures in this regard.
### Alternative
There are a number of programmatic considerations in respect of the development of an alternative to these problems.
Firstly, there is the debt itself, which has an obvious and significant impact.
Secondly, there is a fundamental point to be made, particularly in relation to Africa, which is not sufficiently discussed. This is the problem of the plunging prices of primary goods, which have dragged with them a number of countries which have centred their economic policies on the export of such products.
Thirdly, this export model, where priority is given to export-orientated agricultural business, is linked to the destruction of traditional agricultural and peasant economies, leading to loss of self-reliance in a number of countries. A key element of any alternative programme must be to stabilise and provide the means for the existence of a peasant economy. This would also be likely to slow down the demographic explosion.
Fourthly, the division of income must be radically altered in such a way as to re-activate the internal market. This involves tackling head-on the fact that the rich, by European standards, pay very little tax. There is an absolute necessity to secure wealth and redistri-
Tie
% bute it, through salary increases and in restoring the social expenditure which has been slashed by structural adjust-
Tiers ment policies.
Finally, a characteristic feature of today's world economy is the notion of development in and of itself, which is combined and uneven, does not involve all countries, and is between economies with very different levels of productivity and development.
The countries of the Third World enter into the world economy in a way which is impossible to sustain in the face of economic and technological norms defined by the industrialised countries.
Third World countries need to define a reasoned policy of "self-centring".
This would not mean autarchy, but an approach which takes the reality of the world economy into consideration. To forget this reality - to forget differences in the levels of productivity — can only lead to disaster. These points must be taken up in both the South and intre les peuples the North. * solidarité samedi 4 decembre 1993 bridT ed de 13h00 à minuit
/rije Universiteit van Brussel)
.8.U.V bia doirw
21
International Viewpoint #253 February 1994
"There are 20 million people who work in conditions of forced labour in
Pakistan, and more and more children work in export industries from the
International Viewpoint #253 February 1994
CHARLES ANDRE UDRY is a supporter of the
Fourth International and editor of the Swiss journal, La Brèche.
HE World Bank and the
International Monetary
Fund (IMF) have a father beyond all suspicion — the G3 countries (the
European Union, USA and Japan). And the G7 is a mother from a good family.
It is important to say this, because it is the ruling classes in the G3 and
G7 countries - and the economic logic of the systems which they control - which determine IMF and World Bank age of seven or eight" means. It means adjusting the weakest countries — however different they may be from one another - according to the demands of the centre.
### Polarised
Or rather, of the various centres, because the world economy is now becoming more and more polarised. On the one hand there are the developed countries — especially Japan, the USA and Germany — which are fighting among themselves to divide up a select group of countries from the periphery. On the other hand, there is a Third World which, although highly differentiated, has been subjected collectively to a series of catastrophes
Even in the semi-industriali-
Dette sed countries, there is a mass
of unemployed, the result of an agrarian crisis which has no outlet (such as there has never before been so much forced labour in the world. What is interesting, when, for example, we study India and Pakistan, is that this forced labour is increasingly to be found in the export sector.
The cover photo of a recent issue of the German magazine Der Spiegel shows aPakistani child with a brick in his hand, part of the 2 million families which, according to the ILO, work as slave brickmakers in Pakistan. There are 20 million people who work in conditions of forced labour in Pakistan, and more and more children work in export industries from the age of seven or eight — making carpets, textiles, wooden items, small toys and so forth. The same occurs in India, with women being replaced by children in the same way as they replaced men.
Structural adjustment plans are a response to the demands of the centre. From Taiwan to India capital has entirely unprecedented access to a global workforce. Capital and goods can circu-
Tiers
It is possible to be for the cancellation
Monde of the debt and to discuss World late on a world scale - but not labour, which is integrated into the world economy under this particular form of exploitation.
Bank documents or the IMF's recent calculations on
Nécessaire solidarité purchasing power in the Third entre
Bankers
Two further points on structural adjustment:
Firstly: Susan George said that the debt no longer exists for bankers.
World without les samedi 4 décembre 1993 à la V.U.B. (Vrije Universiteit van Brussel)
peuples de 13h00 minuit for all that understanding the social interests and economic mechanisms which lie behind it.
We have to be clear about what "structural adjustment" actually
22
Europe had in
19th
Century immigration to the USA). In today's economy, capital and goods can freely circulate, but not working people. The mass of unemployed is so great that the workforce can be subjected to tremendous exploitation in all sectors.
It is no accident that, as the
International Labour Organisation
(ILO) indicated in its last report,
Although bankers do not state this explicitly they do not care if the original loans are not paid, for they can write them off and so lower the level of declared net profits.In turn they pay less tax. Their real concern is the interest on these loans, which they set aside as a financial cushion. Further, while paying less tax, they can declare that there is a budgetary crisis and that social gains have to be attacked.
In other words, the debt crisis allows banks to lower taxable profits, cushion themselves, and transfer the whole burden on to working people in their own countries.
Secondly: the Summer 1993 issue of the New York-based Federal Reserve Bank Bulletin devoted a long article to "emerging markets" - the stockmarkets
of Malaysia, the Philippines, South It is a half-truth to say that the Third
Korea, Taiwan, Brazil, Mexico and so World doesn't really count because on — in short, where it is felt money can trade is essentially between developed be made. The September issue of The countries, because structural adjustment
Banker, the monthly magazine of the plans play a role in this transfer.
Financial Times, was entirely devoted to Of course, we have to respond to all this. Michel Husson has provided a few
In Europe, social security systems ideas, and there is one we should take up founded on distribution of wealth are most vigorously: the notion of a limited being destroyed, as we move increasin- "self-centring". In a world which is gly towards private pension funds, increasingly polarised - in which there which have for a long time been in exis- are processes of regional internationalisation, regional agreements, pluricentric
Such funds are being planned for internationalisation, and so on — it is
France, Switzerland, Italy and Germany, absolutely essential to discuss other poswith Switzerland the most "advanced" sible systems of trade. Cancellation of in this area. By 1995, there will be the debt alone is not suffficient.* Monde
$US487 billion in pension funds which will have to be invested in some way. So the destruction of social security has created problems of pension fund manasavings can be obtained and profits repa-
Chile is said to be playing unfairly.
because it does not allow profits to be repatriated before at least one year has elapsed. The banks want to be able to
On one side, the social security systems are being destroyed. On the other.
we see how structural adjustment is used to underpin operations on stockmarkets and with a subsequent repatriation of
In this way the debt plays a part in the gigantic transfer of wealth from
South to North, and from East to North.
the same subject.
tence in Canada and the USA.
gement.
Reasoning
This is where the Third World comes in. The reasoning is that if the structural adjustment plans are applied,
Nécessaire solidarité these pension funds can be placed there
- for example, in the privatisation process. The Banker magazine gives the example of Argentina, where the oil sentre les peuples industry and the electric grid are up for grabs.
A Swiss company is in charge of the privatisation of the Argentinian electricity company; all those who do not (or cannot) pay their electricity bills are being cut off.
And while usually a country is obliged to maintain a stable rate of exchange for its currency, Argentina was obliged to overvalue its currency in relation to the American dollar. In this way, money could be placed on the Argentinian stockmarket and large profits made.
In Brazil the IMF imposed a high de 13h00 à minuit interest rate on Brazil. So, through a
• decembre 1993
(Vrije Universiteit van Brussel)
short-term stockmarket operation, local triated.
repatriate profits after three months!
profits.
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International Viewpoint #253 February 1994
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Dette % Pers ecessal samedi Mrie