FacebookTwitterGoogle+RedditEmail

There’s Much More to be Done on Debt Relief

by MARK ENGLER

Last July, debt relief was all the rage. Bono crooned at the Live 8 benefit concert in London–one of almost a dozen taking place worldwide–and the leaders of the G8 nations met in Scotland to negotiate a response to the issue. In the end, the elected officials agreed to a breakthrough debt relief deal for some of the poorest countries in the world. They unanimously declared that providing relief, especially for sub-Saharan Africa, was a moral and economic imperative. President George W. Bush remarked that struggling nations “should not be burdened by mountains of debt” and announced that the G8 proposal would “eliminate 100 percent of that debt.” All that was left, the rhetoric suggested, was for the heads of state to congratulate themselves for their high-minded deeds.

Fast forward to the present. Public attention has shifted elsewhere and, while some genuine gains have been secured, much more work remains to be done to eliminate unjust debts that stifle countries in the developing world.

The on-going task has boiled down to addressing three problems. First, until this week, the World Bank had yet to follow through on its part of the G8 deal. Pressuring the Bank to implement in a fair way has required continued pressure. Second, many desperately poor countries do not qualify for relief from the World Bank, IMF, or regional banks under last year’s agreement; G8 leaders must expand the deal to include timely cancellation for more nations. Third, citizens in countries that have overthrown undemocratic leaders are still stuck paying the debts of their past oppressors–because even after proclaiming that the Iraqi people should not be burdened with Saddam Hussein’s debts and rallying creditors to forgive Iraq’s “odious” obligations, President Bush has failed to apply the same standard of forgiveness to countries the U.S. army has not recently invaded.

So, first of all, if everyone agrees that debt relief is needed, why was the World Bank still dragging its feet over eight months after the Scottish summit?

In December the International Monetary Fund hammered out the details for implementing its part of the deal, and it cancelled relevant debts in January. Yet the World Bank lagged behind. The Bank’s Executive Board finally met this week to resolve lingering issues. The meeting produced some wins for activists, but there are also some devils in the details.

Prior to this week’s meeting, the World Bank was offering a plan that would have forced indebted countries to continue making payments for up to the next 15 months. Rather than following the IMF’s lead in giving debt relief right away to qualified nations, the Bank pursued an annual approval process that would keep all the debtors sending non-refundable payments until July–a full year after the G8 agreement. Newly eligible countries would have to wait still another year for cancellation, until July 2007. These include the AIDS-ravaged nations of Burundi, Guinea, Malawi, and Sierra Leone.

The central reason for the delay was the World Bank’s drive for bureaucratic self-preservation. The institution wanted to make sure that donor countries will give it extra funds to make up for lost interest payments from poor nations. It showed itself willing to hold impoverished countries hostage to get the money. As the Bank delayed, funds which could have been spent on health, education, and human development in Africa and beyond were being sent back to Washington.

In a positive development, the World Bank finally agreed this week to implement the G8 deal. Pressure from debt activists helped to convince the Bank to drop its annual review process and the long waiting periods it would have created. This represents a real, if incremental, victory.

However, while the IMF forgave debts accumulated by the eligible countries through the end of 2004, the World Bank will only cancel debts accumulated through 2003. Rather than living up to promises of “100% cancellation,” the Bank is milking poor nations for payments on an extra year’s worth of debt.

Moving forward, the fight will shift from compelling the Bank to clear the hurdles of self-interest. Two especially pressing concerns must be addressed not only by the World Bank and IMF, but also by their paymasters at the G8: finding a way to include more poor countries in the deal without making them submit to onerous economic conditions, and canceling illegitimate debts amassed by the dictators of the past.

The current G8 agreement, while representing a historic advance, is only a limited response to the debt problem. Only a fraction of the poor countries that need relief are now getting it. In order for others to qualify they must spend years submitting to a long list of “neoliberal” economic mandates, such as downsizing government and opening markets to foreign corporations. The track record of these reforms at reducing poverty is dismal. And the fact that countries pursuing other strategies for development must forgo needed assistance is offensive.

Many advocates in the international Jubilee Debt Campaign contend that poor countries should proactively renounce unjust debts rather than wait for overdue “forgiveness.” That lender agencies continue to make debtors adopt neoliberal policies as a pre-condition for debt forgiveness lends considerable weight to the activists’ argument.

The stance in favor of renunciation is doubly valid in cases of “odious” debt, and addressing these cases represents the third critical task ahead. Wealthy nations are still pushing for payments from countries whose bills were run up by dictators that have since been deposed. Money lent to military governments was often used to line the pockets of corrupt officials or, worse yet, to purchase American and European-made arms, which were then deployed to repress democratic movements.

After the U.S.-led assault on Baghdad in 2003, President Bush argued that odious debts endangered Iraq’s “long-term prospects for political health and economic prosperity.” He insisted that the future of a people “should not be mortgaged to the enormous burden of debt incurred to enrich” a despot. The U.S. then mobilized its political will to persuade national and multilateral creditors to erase the bulk of Saddam Hussein’s debts.

The Bush administration was right to do this. The problem is that it didn’t go far enough. Washington has yet to push for the elimination of debts accrued by tyrants like Pinochet in Chile and Suharto in Indonesia, whom the United States supported when they were in power.

This double standard has tragic implications. Evidence shows that debt cancellation can be a most effective form of humanitarian assistance, allowing developing countries to draw on their own resources to provide critical social services. The Jubilee USA Network has highlighted the Zambian government’s announcement, just before the G8 deal was finalized, that it would “use debt relief proceeds to provide anti-retroviral drugs to 100,000 HIV/AIDS patients.” The bottom line, Jubilee advocates note, is that debt cancellation can save lives.

“In a situation where literally thousands of children die from preventable diseases every day, it’s our duty to act,” said British Prime Minister Tony Blair in advance of last year’s G8 summit. That sentiment is as true now as it was when the cameras were rolling. And if leaders like Bush and Blair are not willing to honor it, solutions like debt renunciation present the only moral alternatives for the poor.

MARK ENGLER, a writer based in New York City, is an analyst with Foreign Policy In Focus. He can be reached via the web site http://www.DemocracyUprising.com.

Research assistance for this article provided by Kate Griffiths.

 

 

 

More articles by:

MARK ENGLER is author of How to Rule the World: The Coming Battle Over the Global Economy (Nation Books, April 2008). He can be reached via the web site http://www.DemocracyUprising.com

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

Weekend Edition
June 23, 2017
Friday - Sunday
Jeffrey St. Clair
Democrats in the Dead Zone
Gary Leupp
Trump, Qatar and the Danger of Total Confusion
Andrew Levine
The “Democracies” We Deserve
Jeffrey St. Clair - Joshua Frank
The FBI’s “Operation Backfire” and the Case of Briana Waters
Rob Urie
Cannibal Corpse
Joseph G. Ramsey
Savage Calculations: On the Exoneration of Philando Castille’s Killer
John Wight
Trump’s Attack on Cuba
Dave Lindorff
We Need a Mass Movement to Demand Radical Progressive Change
Brian Cloughley
Moving Closer to Doom
David Rosen
The Sex Offender: the 21st Century Witch
John Feffer
All Signs Point to Trump’s Coming War With Iran
Jennifer L. Lieberman
What’s Really New About the Gig Economy?
Pete Dolack
Analyzing the Failures of Syriza
Vijay Prashad
The Russian Nexus
Mike Whitney
Putin Tries to Avoid a Wider War With the US
Gregory Barrett
“Realpolitik” in Berlin: Merkel Fawns Over Kissinger
Louis Yako
The Road to Understanding Syria Goes Through Iraq
Graham Peebles
Grenfell Tower: A Disaster Waiting to Happen
Ezra Rosser
The Poverty State of Mind and the State’s Obligations to the Poor
Ron Jacobs
Andrew Jackson and the American Psyche
Pepe Escobar
Fear and Loathing on the Afghan Silk Road
Andre Vltchek
Why I Reject Western Courts and Justice
Lawrence Davidson
On Hidden Cultural Corruptors
Christopher Brauchli
The Routinization of Mass Shootings in America
Missy Comley Beattie
The Poor Need Not Apply
Martin Billheimer
White Man’s Country and the Iron Room
Joseph Natoli
What to Wonder Now
Tom Clifford
Hong Kong: the Chinese Meant Business
Thomas Knapp
The Castile Doctrine: Cops Without Consequences
Nyla Ali Khan
Borders Versus Memory
Binoy Kampmark
Death on the Road: Memory in Tim Winton’s Shrine
Tony McKenna
The Oily Politics of Unity: Owen Smith as Northern Ireland Shadow Secretary
Nizar Visram
If North Korea Didn’t Exist US Would Create It
John Carroll Md
At St. Catherine’s Hospital, Cite Soleil, Haiti
Kenneth Surin
Brief Impressions of the Singaporean Conjucture
Paul C. Bermanzohn
Trump: the Birth of the Hero
Jill Richardson
Trump on Cuba: If Obama Did It, It’s Bad
Olivia Alperstein
Our President’s Word Wars
REZA FIYOUZAT
Useless Idiots or Useful Collaborators?
Clark T. Scott
Parallel in Significance
Louis Proyect
Hitler and the Lone Wolf Assassin
Julian Vigo
Theresa May Can’t Win for Losing
Richard Klin
Prog Rock: Pomp and Circumstance
Charles R. Larson
Review: Malin Persson Giolito’s “Quicksand”
David Yearsley
RIP: Pomp and Circumstance
FacebookTwitterGoogle+RedditEmail