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The Trouble with Gleneagles

People’s movements around the world should be congratulated on the success of their constant pressure placed on the world’s richest governments to cancel the debts of eighteen of the poorest countries. These governments have now been shamed into admitting what they once deemed impossible: 100% debt cancellation, can, should and will be a reality. That admission is a significant success for those in the Global North and South who have been struggling for this small measure of justice for years.

However, the deal that is likely to be formalized at the G8 summit in Glen Eagles, Scotland is far from what campaigners would have liked to see. It is incomplete, offering debt cancellation to only eighteen countries out of the over sixty that need it. It ties debt cancellation to the greatly flawed Highly Indebted Poor Countries (HIPC) programme, requiring impoverished countries to submit to numerous economic “reforms” in order to be considered for cancellation. And most disturbingly, the deal is symptomatic of a larger problem: the failure of wealthy nations and lending institutions to acknowledge that the status quo is not working.

As per the terms of the deal announced on June 11, debt cancellation will only be offered to countries that have fulfilled the terms of the HIPC programme, a policy which the World Bank itself has acknowledged to be a failure. This program, initiated in 1996 and then revamped in 1999, offers countries a small measure of debt relief in exchange for following severely constricting macroeconomic policy restrictions. When taken as a package, the gains from debt relief were usually offset by the damage done to workers, farmers and poor communities through these macroeconomic conditions.

By limiting itself to those countries that have already passed through the IMF wringer, the current agreement is premised on the notion that those countries will somehow use the gains of debt cancellation more wisely than others. This is a disturbing idea for many reasons, but let us here consider the most compelling one: there is no evidence to indicate that the IMF policies work for their intended purpose (growth and stability) let alone for poverty reduction.

The situation on debt is similar to that of other issues to be discussed at the G8 summit. Bob Geldof, Bono, Tony Blair, Gordon Brown and other celebrities and politicians have been pushing not only for a deal on debt cancellation, but also for increased aid to Africa and for eliminating trade barriers that limit the export of crops from Southern countries. While elements of these pleas may be laudable, they do not address the heart of the problem: the current development paradigm, touted by institutions such as the World Bank, has failed to address the core issues of poverty. Indeed, this paradigm was never meant to address these issues in the first place.

For example, IMF conditions in the 1980s forced countries to grow cotton, sugar, coffee and tea for export while abandoning much of their traditional farming. This policy proved disastrous for farmers and for governments who now depended on world markets for food security, but was a boon for buyers in developed countries who saw the prices of these commodities drop due to increased production. The net result: disaster for marginalized communities in the global South; good business for many in the global North.

Aid flows tell a similar story. Despite arguments that aid is necessary to end poverty (and rather compelling arguments to this effect especially in countries ravaged by the AIDS pandemic), there is as yet no credible example of a country that has reduced poverty rates through aid. Some of the largest aid recipients, such as Pakistan and Colombia, are also those with the highest poverty rates for their region. Countries that have reduced poverty such as Botswana in Africa or Malaysia, China and India in Asia have done so through breaking a cycle of dependence on aid flows and other forms of assistance. The idea that increased aid, especially directed through institutions and mechanisms that have failed to address poverty, can somehow be a long term solution for poverty is an oversimplification at best. At worst, it is a justification for continuing to maintain a relationship of dependence between the South and the North.

The developments of 2005 with regard to global poverty are indeed momentous. The attention being given to issues of debt, trade and aid is long overdue. On the debt issue, a milestone has been crossed but there is still a long way to go. We live in a world where tariffs in the North are necessary to please voters, while tariffs in the South are “protectionist” and must be “eliminated” by IMF conditions; where debt incurred by Saddam Hussein is to be cancelled, but debt incurred by Marcos or Mobutu (dictators in the Philippines and the Democratic Republic of Congo) must be repaid; where government services must be privatized in the South and the North, regardless of the long-term effects on societies and the environment. Until and unless this system of global injustice is directly addressed, any gains made in combating poverty are likely to be marginal at best.

SAMEER DOSSANI is the Director of 50 Years Is Enough: U.S. Network for Global Economic Justice.