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 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 including CADTM (Committee for the Cancellation of Third World Debt). For the occasion, our Belgian colleagues in CADT have published in their thrice yearly bulletin (no. 3, 1994) a full overview of the Debt and its history, part of which we use below.
### Debt today significant events.
Total of gross debt
(in thousand million US$)
Is there still any point in struggling for the cancellation of the Third World Debt? The mainstream media says no, firstly, they say, because the problem no longer exists (after all, they no longer montion it and cocondly hepause the mention it) and secondly, because the
Regions
Eastern Europe/ex-USSR
Eastern Europe ex-USSR
North Africa/Middle East
Gulf countries
Others
Black Africa
South Africa
Sub-Saharan Africa
Latin America/Caribbean
1970
1982
5
1
35
180
6
50
130
10
99
21
78
38
361
1985 130 97 33 222
55 167 122
22 100 413
1990 1991 171 179 108 111
63 68 304 304
78 76 226 228 189 191
19 17 170 174 443 445
1992 1993 187 187 107 108
80 79 309 312
84 86 225 226 175 166
16 15 159 151 476 494
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 not at stake.
The main figures on the Debt are easy to remember. If you take into account the former Eastern Bloc coun-
Asia/Oceania
China
India
Four Dragons
Others
Total
23
228
9
29
59
131
82
977
304
21
40
78
165
1190
447
496
56
65
66
70
82
93
243
268
1554
1615
552
612
74
89
79
81
99
114
300
328
1771
1699 fia. 1
Tig. 1 tries, 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 creal which began to increase, Tor two credit which began to increase, for two
T THE reasons. On the one hand, a number of
Asian countries, and China in particular, were developing exceptionally swiftly, declare secretary-general of the ICFTU (International
Confederation of Free Trade Unions, which is not exactly on the revolutionary left!)
that: "The IMF and the World Bank have strayed the dynamism of their export economy being accompanied by a surge in commercial credit. On the other, overdue payments of principal and interest from 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) 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, 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 autonomous.
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
9
International Viewpoint #262 December 1994
IMF CONFERENCE we heard the
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ECONOMY black Africa should submit to fig. 2 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. Lessons from the Debt crisis
The bankers have drawn the following conclusions from the Debt crisis:
• 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, this time they will be more cautious and 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 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.
Regions Eastern Europe ex-USSR Gulf countries Others Black Africa South Africa Sub-Saharan Africa 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 imperialism, development is secondary to domination. As shown by the Gulf War, now that the Berlin Wall has fallen, the enemy is to the South.
Servicing the debt in 1992
(in thousand million US$)
Payments
Interest
Total long term short term
14
6
2
22
8
3
12
6
10
25
8
6
39
4
21
30
1
6
28
15
4
26
49
5
3
12
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 African and Southern Asian countries we are speaking of people in danger, whether in the short-term (from famine or epide-
"The slogar debt is a
• 'Cancel the realistic one.
Above all, it is quite simply humanitarian."
10 international Viewpoint #262 December 1994
Eastern Europe/ex-USSR
North Africa/Middle East
Latin American/Caribbean
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 1993).
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 million 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 crisis which is happening in these coun tries). 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 even in terms of economic development.
What cancellation?
What exactly does the slogan "Cancel 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 movement. 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
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• 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 average income.
• 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.
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$2000 million disappeared overnight, without any catastrophe. On the contrary there was something of an economic upturn.
Of course, cancellation of the Debt would not miraculously solve the problems of under-development in the South and East, but it woud at least halt the collapse of recent years. For there to be real development, we need new political conditions. This is another reason to struggle for the cancellation of the Debt. We must respond to media bombardment on the "defeat of socialism and the definitive victory of capitalism". While capitalism may be profitable, this is true only for a minority. Three quarters of the world population receive no benefit from it, the gap between rich and poor countries is widening and in every country inequality is increasing.
Capitalism functions due to inequalities and amplifies them. It will never permit humankind to develop harmoniously, with a just sharing of resources. The peoples of the South, East and North must find another way. *
For example, the Moroccan Debt would be repaid by the sale of the dozen French chateaux belonging to Hassan II.
fia. 3
Gross and net debt at the end of 1993 (in thousand million US$) Gross Deposits Net Regions Eastern Europe/ex-USSR 187 39 148 Eastern Europe 108 23 85 ex-USSR 79 16 63 North Africa/Middle East 312 233 79 Gulf countries 86 143 57 Others 226 90 136 Black Africa 166 40 126 South Africa 15 4 11 Sub-Saharan Africa 151 36 115 Latin America/Caribbean 494 253 241 Asia/Oceania 612 245 367 China 89 50 39 Inda 81 8 73 Four Dragons 114 97 17 Others 328 90 238 Total 1771 810 961
International Viewpoint #262 December 1994 11
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