THIRD WORLD DEBT
Cancel the debt
THE PROBLEM of the Debt still exists, and, as JACQUES CHERBOURG tells us, the official ceremonies organised at the and proposed the creation of a more accessible international finance system, which the Third World needs urgently, but which the rich countries wish to limit severely.
Finally, of course, there were the representatives from the many organisations which campaign against Third World Debt,
International Viewpoint #262 December 1994 beginning of October in Madrid to mark the fifty years of the "Bretton Woods
Institutions" — the IMF and the World
Bank — were marred by a number of significant events.
yearly bulletin (no. 3, 1994) a full overview of the Debt and its history, part of which we use below.
### Debt today
Is there still any point in struggling for the cancellation of the Third World Debt? The mainstream media says no,
Total of gross debt
(in thousand million US$)
Regions
1970 1982
Eastern Europe/ex-USSR
5
110
Eastern Europe ex-USSR
North Africa/Middle East
6
180
Gulf countries
130
Others
Black Africa
10
South Africa
Sub-Saharan Africa
Latin America/Caribbean
38
361
Asia/Occeania
23
228
China
India
Four Dragons
Others
131
Total
82
977
1985 1990 1991 1992 1993 130 171 179 187 187 75 97 108 111 107 108 35 33 63 68 80 79
222 304 304 309 312 50 55 78 76 84 86
167 226 228 225 226 99 122 189 191 175 166 21 22 19 17 16 15 78 100 170 174 159 151
413 443 445 476 494 304 447 496 552 612
9 21 56 65 74 89 29 40 66 70 79 81 59 78 82 93 99 114
165 243 268 300 328 1190 1554 1615 1699 1771 fig. 1 firstly, they say, because the problem no longer exists (after all, they no longer mention it) and secondly, because the Third World no longer exists (with the fall of the Berlin Wall - in other words, since the end of the Second World — re-united humanity is marching towards a glorious future of peace and prosperity). These arguments are so obviously false, in the light of the world situation that they would be funny, were the very existence of millions of human beings
The main figures on the Debt are easy to remember. If you take into account the former Eastern Bloc countries, the total at the end of 1992 was US$1700 million (fig. 1). Servicing this cost US$170 million, comprising principal of US$100 million and interest of US$70 million (fig. 2).
The total remained more or less the same between 1987 and 1990, but began to rise in 1991. It was mainly short-term credit which began to increase, for two reasons. On the one hand, a number of Asian countries, and China in particular,
T THE IMF CONFERENCE we heard the secretary-general of the ICFTU (International Confederation of Free Trade Unions, which is not exactly on the revolutionary left!) declare that: "The IMF and the World Bank have strayed considerably from their original objectives. Even their best programmes have widened the gap between rich and poor, while their worst have imposed intolerable conditions upon most of the population in a number of developing countries."
Several days later, at the same conference, a majority of the developing countries rebelled against the dominance of the G7 (the seven richest countries, which usually make the decisions)
were developing exceptionally swiftly, the dynamism of their export economy being accompanied by a surge in commercial credit. On the other, overdue payments of principal and interest from countries in difficulty are recorded as an increase in their short-term credit. However, apart from this, the Debt has stabilised and to a certain extent is auto-
Bank credit is directed, naturally, towards those few countries which have successfully entered the capitalist world market. Black Africa and Southern Asia now receive only public capital. This is unlikely to prove enough. Further, France has recently provided a negative example by deciding that its proteges in
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ECONOMY WORLD including CADTM (Committee for the Cancellation of Third World Debt). For the occasion, our Belgian colleagues in CADT have published in their thrice
"The slogan 'Cancel the realistic one.
Above all, it is quite simply humanitarian."
international Viewpoint #262 December 1994 fig. 2
Regions
Servicing the debt in 1992
(in thousand million US$)
Payments
Interest
Total long term short term
Eastern Europe/ex-USSR
Lessons from the Debt crisis
The bankers have drawn the following conclusions from the Debt crisis:
Eastern Europe ex-USSR
14
2
22
8
3
12
6
3
1
10
North Africa/Middle East
• Now that they have built up huge reserves of capital through tax exemptions they are ready to partially cancel the Debt, as this will cost them nothing.
• The mistakes of the 1970s need not be repeated. Now, as then, they control huge sums of capital. However,
Gulf countries
Others
Black Africa
South Africa
Sub-Saharan Africa
25
6
39
4
3
9
21
6
3
30
13
6
1
11 this time they will be more cautious and Latin American/Caribbean will choose their investments carefully. The former Eastern Bloc countries, which were expecting the capitalists to fall upon them, have been particularly disappointed, but must realise that they do not represent certain returns.
• Returns are better guranteed by entering into ownership, whether as part of the frenzy of privatisation (mainly ofthe large public services, such as transport and telecommunications) in Latin America or of the few enterprises which will enjoy short-term profit in Eastern Europe.
• The dominant role of the IMF, as the guardian of the world capitalist order, must be maintained. It is necessary to establish central banks and institutions which are free of political control and which are not subject to social pressures, strikes or elections.
• The Debt crisis which threatened the world financial system could perhaps now be used as a political weapon against the Third World. Poland and Egypt have recently benefitted from cancellation of almost 50% of their Debt for services rendered to imperialism, for their roles as a spearhead against the former Eastern Bloc, and support in the Gulf War respectively.
debt' is a
10
Asia/ Oceania China Inda Four Dragons Others Grand total
Those who are campaigning for the cancellation of the Debt must realise that it is today an essentially political problem. It is no longer a financial problem-the bankers have already decided this. It is no longer an economic problem-on the contrary, in 1988 a study by CNUCED (the UN organisation for commerce and development which GATT is attempting to replace) showed that even a partial cancellation of 30% of the Debt would lead, by the end of five years, to an increase of 34% in investment and 24% in average income per person. If the conclusions of this study have not been taken up then it is because, for len, the enemy is to the South.
28 15 4 47 49 2 3 99 50 21 17 Yet in the Eastern countries the brutal application of the IMF progamme has led, even more quickly than in Latin America, to unforseeable results: Economic collapse, unemployment, inflation, inequality. And, as in Latin America in the 1970s, the thought of "strong regimes" to "assure development" is probably not far from the thoughts of the IMF, which is extremely active in the region. The Debt must be cancelled!
The slogan "Cancel the Debt" is a realistic one. Above all, it is quite simply humanitarian. In a number of black Afri can and Southern Asian countries we are speaking of people in danger, whether in the short-term (from famine or epide-
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WORLD ECONOMY black Africa should submit to the dictates of the IMF, brutally devaluing the Central African Franc by 50%. The first result of this has been rioting and repression in Senegal.
International Viewpoint #262 December 1994 mics) or the long term (from illiteracy, the fall in productive investment and so on). Now is the time to apply the new slogan "The right of humanitarian interference", not the kind of interference as in Somalia, where sacks of rice were swiftly replaced by boxes of ammunition, so as to repress the population. Somalia is also a perfect example of the perverse chains of events which have arisen as a result of the Debt crisis: Traditional economic circuits are disrupted, which in turn leads to political disintegration, "justifying" imperialist intervention (see the article by Michel Chossudovsky in Le Monde Diplomatique, July
The Third World has largely repaid the Debt. It has done so by: The total repaid in principal and interest (between 1984 and 1991, it repaid US$200 mil lion more than it received in loans, which means that over this period it was the Third World which "aided" the rich countries. This net transfer still continues, to the detriment of Sub-Saharan Africa and Latin America); the flight of capital; the tendency towards decrease in the price of exported primary materials (taking a base of 100 in 1985, the figure today is around 60); and the exodus of a large part of their active populations, who have been forced to seek work in the "rich" countries (where they face growing racism as a result of the and Asia, which have not interested private bankers for a long time.
• Immediate and unconditional cancellation of that part of the Debt around one third) which is private debt. This has been lent by the bankers, and would be covered by reserves. This would especially affect those countries with an ave-
• Partial repayment of the Debt from deposits from countries indebted to the Western banks. Nearly all of the deposits are due to flights of capital and/or embezzlement by local bourgeoisies. This would affect every country. There is a considerable sum in such deposits in Western banks (fig. 3) — more than 45% of the gross Debt. Even the poorest countries (such as Sub-Saharan Africa, with 24% of its Debt) make deposits. Clearly, for the bankers, it is utter heresy to suggest that the Debt should be calculated without taking deposits into account. So far as they are concerned, it is a gross Debt which "belongs" to them and which must be repaid by the different countries, while the deposits are from private "clients". In the same spirit of refunding those populations which have borne the burden of the Debt, we must also take into account the "personal" property in western countries held by corrupt leaders.
ECONOMY WORLD
The above three measures together would considerably reduce the Debt. Those who cry that it would lead to the ruin of the world financial system have apparently forgotten that during the stock market crash of October 1987, US$2000 million disappeared overnight, without any catastrophe. On the contrary there was something of an economic upturn.
Of course, cancellation of the Debt would not miraculously solve the problems of under-development in the South and East, but it woud at least halt the collapse of recent years. For there to be real development, we need new political conditions. This is another reason to struggle for the cancellation of the Debt. We must respond to media bombardment on the "defeat of socialism and the definitive victory of capitalism" While capitalism may be profitable, this is true only for a minority. Three quarters of the world population receive no benefit from it, the gap between rich and poor countries is widening and in every country inequality is increasing.
Capitalism functions due to inequalities and amplifies them. It will never permit humankind to develop harmoniously, with a just sharing of resources. The peoples of the South, East and North must find another way. *
Gross and net debt at the end of 1993 crisis which is happening in these countries). The example of the only country which entirely repaid its Debt is not exactly encouraging. It was the Romania of Ceaucescu, which, to curry favour with imperialism, starved and repressed its population, with no resulting benefit would be repaid by the sale of the teaux belonging to
(in thousand million US$)
Gross Deposits Net even in terms of economic development.
Eastern Europe/ex-USSR
What cancellation?
What exactly does the slogan "Can-
Eastern Europe ex-USSR
187
39
148
108
23
85
79
16
63
North Africa/Middle East cel the Debt" mean today for anti-debt activists? Clearly it does not mean a supporting Hassan II of Morocco, President Mobutu of Zaire or the new Chinese capitalists against their bankers, but of taking part in the struggles of those on whom the burden of Debt really falls.
The following proposals have been advanced within the cancellation move-
Gulf countries
Others
Black Africa
South Africa
Sub-Saharan Africa
312 233 79
86 143 57 226 90 136 166 40 126 15 4 11 151 36 115
Latin America/Caribbean ment. These should be examined by each country.
• Immediate and unconditional cancellation of the whole of the public Debt. Those loans made by our governments with money from our taxes would then be transformed into gifts. This measure would be aimed particularly at the poorest countries, principally in Africa
Asia/Oceania
China
Inda
Four Dragons
Others fig. 3
Total
494 253 241
612 245 367
89 50 39
81 8 73
114 97 17
328 90 238 1771 810 961
11
Prosperity for a few
Source: IDB (1993), ECLA (1993), World Bank. (2)
International Viewpoint #262 December 1994