‘Debt relief’ fraud

Printer-friendly version

In the run up to the summit in Edinburgh, the finance ministers of the G8 announced a deal to end the debt burden of some of the poorest countries in Africa and elsewhere. For Chancellor Gordon Brown it was “a significant step forward”; for Bob Geldof, the moving figure behind the ‘Live8’ concerts and demonstration, it was a “victory for millions” because “Tomorrow 280 million Africans will wake up for the first time in their lives without owing you or me a penny from the burden of debt that has crippled them and their countries for so long.” (Observer, 12/6/05). According to the statement put out by the G8 Finance ministers, the deal will give 100% debt relief to 18 countries, including Ethiopia, Rwanda and Zambia. This has been hailed by all the great and the good as a sign of what can be achieved. It is however, a lie.

The deal covers the major lending organisations but not some of the smaller ones. Countries like Ghana owe money to 9 multilateral organisations, while Latin American and Caribbean countries owe money to many organisations not party to the deal. It is claimed the deal will cancel $40bn worth of debt. In fact, since it will be delivered over 40 years, its actual value is $17bn. It also excludes a large number of poor and highly indebted countries and covers just 10% of the debts of the 62 countries judged to be most in need of debt relief (Devilish Details: Implications of the G8 Debt Deal, published by the European Network on Debt and Development). Furthermore, the amount of debt forgiven will be taken away from future aid for that country. While the money will still be given as aid, it will be redistributed amongst all eligible recipients. Thus, if a country pays $100m a year to service its debt, it will have its future aid cut by $100m and may get very little back once it has been redistributed.

The smokescreen of international aid

Falsification, exaggeration and empty promises are the reality of international ‘aid’. The statement by the G8 Finance Ministers lauds their efforts to reduce debt, increase aid and make trade fairer in recent years. The reality is quite the opposite.

Levels of debt have increased. Between 1969 and 1976 the debt owed by non oil-producing developing countries tripled from $54.6bn to $172bn. Africa’s total external debt stands now at $300bn, which itself is only 12% of the debt owed by all ‘developing’ countries, giving a total of $2,500bn.Today, the most indebted countries pay $10bn a year to service their debts and nothing that is done changes the conditions in which debts are accumulated. Indeed, rich or poor, north or south, the level of debt is growing as a result of efforts to combat the crisis of capitalism as a whole.

The G8 Finance Ministers hailed the increases in the aid they give. However, the recent increases come after a sustained fall: “Aid levels continue to recover from the falls during 1992-97 and the trough that continued until 2001.” (OECD) and are half the level, as a proportion of income, that they were in the 1960s. In 2004 Britain gave 0.36% of GNI (Gross National Income) in aid; in 1962 it stood at 0.52% and is still less than in 1977 when it stood at 0.38%. In 1970 the richest countries agreed to meet the international target of 0.7% of GNI by 1980. To date only 5 have done this. The aid given by America, although the largest quantity, is just 0.16% of GNI, placing it second to bottom of the OECD countries.

As regards ‘fair’ trade, the reality is that the great powers have always fixed the rules of the game in their interests. In the 19th century Britain imposed its doctrine of ‘free’ trade through the barrel of a gun. The disputes currently taken to the World Trade Organisation show that nothing has changed, other than that the bourgeoisie has learnt that it is better to control such disputes rather than allow them to grow unchecked and risk a trade war.

‘Aid’ defends capitalism

Aid, debt relief and ‘fair’ trade have nothing to do with relieving human suffering. They are merely tools used to defend national economic and imperialist interests.

This is very clear with aid: “The war on terrorism has also boosted aid flows. Between 2001 and 2003, net aid to Afghanistan from all sources rose from USD [United States Dollars] 0.4 billion to USD 1.5bn and aid to Iraq rose from USD 0.1bn to USD 2.3bn” (OECD, ‘Final ODA Data for 2003’, from OECD website). The US is not alone in this; in the 1950s and 60s when Britain gave a larger proportion of aid, the bulk of it went to its former colonies. Britain’s current efforts are an attempt to compensate for its loss of influence in the years after 1989. By playing the moral leader and making vague promises about ending poverty, it hopes to steal a march over its more obviously self-interested rivals.

The same is true with debt, where the relief for Africa is dwarfed by the $30bn relief granted to Iraq in 2004: “This was more in one day than has been delivered to the whole of the African Continent over the last 10 years” (Devilish Details: Implications of the G8 Debt Deal). This gives the lie to all the hand-wringing about how the great powers would like to help but it is so difficult… When it is in their interests the capitalist powers have very deep pockets; when it is merely human lives at stake, as after the Tsunami, all they can find are empty promises and IOUs.

Further, when aid is given or debt reduced it always has strings attached or, in the jargon, ‘conditionalities’. These are presented as promoting freedom and democracy but are actually a means of exercising control over the recipients that is more effective than the use of gunboats. One recent study found an average of 10 conditionalities imposed on countries receiving funding under one IMF scheme (PRGF Matrix User Guide and Analysis, European Network on Debt and Development, 2004). These covered areas such as inflation targets, privatisation, economic liberalisation and tax policy. For the anti-globalisation movement and Make Poverty History, these express the domination of ‘neo-liberalism’ over alternative models and national autonomy. In reality they express the domination of the economically strong over the economically weak; a reality that has existed for as long as capitalism.

However, such conditionalities are also an expression of a second motive the great powers have for giving aid: to limit the financial and social chaos spreading around the planet. The economic crises that have gripped parts of Asia and Latin America have brought forth substantial aid in an effort to limit the damage to the world economy. The rioting in Argentina in 2001 gave an indication of the social dislocation that can result. But it is in Africa that this has gone the furthest. The Democratic Republic of the Congo (DRC) has been despoiled by war and barbarism in recent years, with local militias and neighbouring armies participating while the great powers pulled the strings. The human consequences in areas such as Kigali have been appalling, with many accounts of torture, rape and mutilation. However, what concerned the great powers was the possibility of such instability spreading, prompting limited UN military intervention and a growing financial intervention. Between 2001 and 2003 the DRC accounted for most of the $4.3bn increase in debt forgiveness in Sub-Saharan Africa. It also shared an increase of $1.6bn in emergency aid with countries such as Sudan, Ethiopia and Angola.

In late June the BBC showed a drama called the ‘Girl in the Café’. In this fantasy a young woman got into the G8 summit and with her youthful eloquence won over the conscience of the British Prime Minister who proposed to end world poverty there and then. The idea that aid, debt relief and fair trade can end the brutality of capitalism is the same fantasy. They are not an antidote to capitalism but part of the way it functions.

North 29/06/05