The Other Kind Of Terrorism - Political Forum

Inan’Ta · #1 (**permalink**) 08-07-2007, 06:39 PM

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Western economists tell the developing world that growth will generate sufficient wealth for all their people. But ours is a very unequal world, so when the growth comes few people see its benefits.
"225 people own more wealth than the poorest 2.5 billion people"
UNDP Human Development Report 1998

The development institutions trumpet their aid to the world, to show that something is being done. But what is given with one hand, is taken back many times over with the other. According to the World Bank, in 1999 Angola received $261m in aid but paid $1144m in debt service, Cameroon received $190m in aid but paid $549m in debt service, Kenya received $195m in aid but paid $716m in debt service, and Vietnam received 257m in aid but paid 1410m in debt service (Global Development Finance, 2001).

When charity pop concerts for Africa are held in London or New York, the tens of millions raised are typically enough to pay the continent's interest bill for a few hours. In 1999, the developing countries excluding the Eastern block were more than $2,030 billion in debt to the developed world (Global Development Finance, 2001). In 2000, the IMF put the figure for total developing country debt at $2,140 billion (World Economic Outlook, 2000). Some $700 million per day now flows in debt repayment from the developing world to the developed world (UNDP Human Development Report, 1997).

If we examine some basic indicators of wellbeing, we can begin to see the physical consequences of the debt. In 1995 the industrialised countries experienced child mortality (the number of deaths at less than 5 years of age per 1000 live births) at a rate of 16. In south Asia the figure was 109, and in sub-Saharan Africa it was 169 (UNDP Human Development Report 1998). This should not surprise us. In Tanzania, debt repayment was six times spending on healthcare, whilst in Uganda annual spending was Â£2 per person on healthcare and Â£11.50 per person on debt repayment (Jubilee 2000).

According to the United Kingdom's Department for International Development in 2000, 1.2 billion people live in "abject poverty", meaning that they have no basic medical care, nutrition or housing. In the sub-Sahara, 48% of people go without health services, 48% of people are without safe water and 42% are illiterate, whilst in south-Asia the corresponding figures are 22%, 18% and 49.5%. Measured in 1987 US Dollars, GDP per capita in sub Sahara was $520 and in South Asia $521, whilst in the Industrialised Countries it was $12,764 (1995 figures compiled in UNDP Human Development Report, 1998).

Things don't seem to be getting better either. Real wages in most African countries have fallen by more than 50% since 1980 (Jubilee 2000). According to The Centre for Economic Policy Research in 2001, more than three-quarters of the world's countries had a growth rate at least 5% lower in the 1980-2000 period than in the 1960-1980 period. China is one major exception, but not because it took advice from the World Bank and IMF. (Far from it in fact. China has been one of the few countries to completely reject IMF and World Bank advice, opting instead for protectionism, an inconvertible currency and a state controlled banking system.) In 1996 the UN said that the poorest third of the world's people are getting poorer. Even the World Bank has admitted that, between 1987 and 1998, the number of people in absolute poverty (meaning that they survive on less than $1 per day) increased from 1200 million to 1500 million.

Among the various actors in this sad tale, the World Bank and the IMF stand tall. Established under the Bretton Woods arrangements in 1944, the World Bank was to provide development assistance for non-commercial projects, and the IMF was to assist nations in short term balance of payments difficulties and act to ensure currency stability. Often mentioned in the same breath, but entirely separate, the World Trade Organisation (WTO) was established in 1995 as the successor to GATT (the General Agreement on Tariffs and Trade) in order to implement free trade and global standardisation among the world's nations. When it comes to defining country types, there is some variation in the methodology of the supranational institutions. Generally speaking, each recognises developing, transitional and developed countries. The OECD's Development Assistance Committee separates developing and transitional countries according to GNP per capita. Here, "developing" includes "least developed" and "low income" countries which had a GNP per capita below $760 in 1998. In 2002, UNCTAD listed 49 "least developed" countries. The WTO meanwhile allows members to self-select themselves as "developed" or "developing" but, where trade privileges are available to developing countries, one country may challenge another's self-selection.

Some two thirds of Third World debt is owed to commercial lenders, and one-third to multilateral lenders (these are lenders, such as the World Bank, who have the right to exercise discretionary dispersal of contributions from members). It is important to keep in mind that when figures for total external debt are given, they normally comprise the public and the private foreign currency debt owed by a country. Debt owed in a country's own currency does not usually present a debt burden for that country because the domestic government can manufacture its own money to repay its debt (one exception is where a currency board or strict peg has been adopted). On the other hand, developing countries cannot manufacture US Dollars or other Western currencies and so debts owed by developing countries to the developed world can indeed become a desperate financial burden.

Apart from the definitional nuances, there are also some statistical traps to be aware of. It is necessary to distinguish between the 'nominal debt' of a country and the 'present value' of its debt. Since the interest payment on a $10 loan made at 10% is equal to the interest payment on a $100 loan at 1%, loans at subsidised rates of interest that are made to some countries can be stated on a present value basis in order to understate the amount of debt that is owed. For example, in 1999, the nominal versus present-valued debt for Benin was $1.62 billion versus $0.70 billion, and for Burundi $1.06 billion versus $0.54 billion. Another statistical trap is that debt service (quoted as interest plus principal as a percentage of export revenue, or as a percentage of government revenue) may be compiled on the basis of what is actually paid rather than what was contracted to be paid. Debt service figures may therefore appear as if they are not worsening, whereas these figures only remain steady because the country in question is at the limit of what it can pay.

After fifty years at the helm of development policy, a variety of excuses have emerged from the international financial establishment in respect of their performance. The "corrupt dictators" argument is one that seems to have stuck well in the public's mind but, like the others, it fails to stand up to close inspection. Is the whole of the developing world corrupt? If it is, did Western lenders really not recognise that fact until thousands of billions of dollars had been lent over many decades? Is the whole of the developing world corrupt, or just its leaders? If so, who schooled its leaders, who promoted them and who supported them? Have the Western powers played no part in this? Serious readers of history don't need me to answer that question of course.

The "recycled petrodollars" argument is similarly lacking in merit as an explanation of the Third World debt problem. In fact, the debt problem had commenced long before the oil price rises of the 1970's. Egypt in the 1860's, the Ottomans in the 1870's, and in the 1930's almost all of South America defaulted on their debt to the industrialised countries. In the 1960's, Brazil, Turkey and Argentina were among those rescheduling once again. If the Third World debt problem is not post Oil Crisis, we can hardly hold petrodollar recycling to blame for it.

Another modern habit is to define away those problems that cannot be cured, or to invent new measures if the old ones prove too embarrassing. One example is this:
"Opening up their economies to the global economy has been essential in enabling many developing countries to develop competitive advantages in the manufacture of certain products. In these countries, defined by the World Bank as the 'new globalizers' (World Bank, Globalization, Growth, and Poverty: Facts, Fears, and an Agenda for Action) the number of people in absolute poverty declined by over 120 million (14 percent) between 1993 and 1998".
IMF staff papers, Global Trade Liberalization and the Developing Countries, November 2001

Well done to the propaganda department at the World Bank. It must have taken a long time to think that one up. It reminds me of the way that unemployment was reduced in the UK under the Thatcher government during the 1980's; a sharp monetary expansion combined with over 100 changes to the definition of the word "unemployed".

Then there are those factually correct statements that border upon plain distortion because they omit one or more pieces of crucial information. Michael Rowbotham in Goodbye America, 2000 gives the example of Uganda, cited by ex US Treasury secretary Larry Summers as a country that had experienced several years of growth under World Bank policy during the 1990's. The bit that was missed out was the fact that Uganda's per capita income in 2000 was 30% less than in 1983. Technically Summers was correct, there had been "several years of growth", but only after the policies prescribed in Washington had encouraged a catastrophic collapse.

More weighty still is the combined criticism of developing country experts from around the world that Rowbotham has assembled. For example:
"The total collapse of the monetarist experiment in Chile is a salutary lesson in the failure of IMF prescriptions, even when applied in their most rigorous form and by a government totally committed to their success"
Latin America Bureau, The Poverty Brokers, 1983.

In Yugoslavia:
"In the last ten years, the whole IMF policy has been nothing but a failure. All its prognoses were proved wrong, and its policies and measures had an opposite effect from what had been expected"
Singer, H. & Sharma, S. (eds) Economic Development and Third World Debt, 1983.

And in Africa:
"There is a very broad consensus among African governments that the IMF and World Bank terms are often harsh and unsuitable generated severely adverse effects on the overall economies of these countries especially with regard to agriculture, manufacture and foreign trade"
Conference of the Institute for African Alternatives, Onimode, B. [ed.], The IMF, the World Bank Bank and African Debt, Zed Books, 1989.

The philosophy that got much of the world into this dreadful mess has a long pedigree. It began with Benthamite self-interest and ended in the belief that profit maximisation was the goal of human activity. This belief has gone so far that the West now seems to be forgetting that not all wealth is measured in terms of money. Happiness, a stress-free life and environmental quality are some examples of wealth that is not given a monetary value and therefore does not appear in our calculations of GDP. Yet we attach such holiness to GDP that all our efforts are focussed upon increasing it. In 1989, Daly and Cobb calculated that there had been a decrease of 40% in the quality of life in the USA since 1970, based upon adverse changes in factors such as the working week, pollution, stress levels and divorce rates. The Centre for Economic Policy Research in the USA says that the median US real wage was the same in 2000 as it was in 1973, so even most Americans have not shared the growth that the USA is said to have experienced. What hope then for the people of the developing world where wealth inequality is that much higher and "growth" that much lower?

In modern capitalist societies production is generally guided by what makes profit, not by what satisfies need. Normally this would be fine because everyone with a need would have sufficient money to satisfy it. But in an economic system based upon usury and fractional reserve banking, the commercial banks have created a scarcity of money and it is this scarcity that prevents some of the people and nations from fulfilling their requirements. Ignorant of usury, on occasion denying its existence, the conventional economists have failed to promote this analysis of the problem. Instead we are treated to all manner of hocus pocus theories and remedies. As each remedy fails, the public becomes ever more cynical. What we need is a holistic vision, but what we get is tunnel vision, the language of target ranges and accounting ratios. One day the experts will realise that good statistics are driven by a healthy economy, not the other way round.

Like the "war on terrorism", the "free trade and free markets" mantra has acquired a life of its own. Everything seems to be justifiable, even hunger, if free trade or free markets are involved. Like other mantras, the free trade variety is full of irony. In this case the irony arises because Third World producers have often found themselves selling resources to effective monopoly buyers from the West. The irony continues further because, despite the use of the word "free", for many developing countries "free trade" amounts to no more than the exploitation of their unskilled labour by a foreign multinational. Developing countries accept this situation largely because of the debt trap. Any source of foreign currency is better than none when interest charges need to be paid. Often, weak regulation (on pollution and labour rights, for example) is used to attract foreign direct investment. At the end of it all the developing countries are too often left with a cut down rainforest, an inconsequential skill set, and a pile of debt that still needs to be repaid.

Read on..... The Problem With Interest - Tarek El Diwany

I can’t wait to see when the third world separates itself from the west’s financial system. When the tools of its hegemony, like free trade and free market, globalization, and like are no longer accepted. But to end this well-defended and established practice will be costly and painful divorce. But it’s a long overdue one.

Brother Oz · #2 (**permalink**) 08-07-2007, 07:21 PM

Free trade would be good for the third world, the lower living costs give you an advantage. The problem is that the west makes the Third World practice Free Trade while it practices protectionism.

Bradgriff · #3 (**permalink**) 08-07-2007, 07:23 PM

Quote:

Originally Posted by Inan’Ta

I can’t wait to see when the third world separates itself from the west’s financial system. When the tools of its hegemony, like free trade and free market, globalization, and like are no longer accepted. But to end this well-defended and established practice will be costly and painful divorce. But it’s a long overdue one.

The US is not going to like what it has been cultivating for 20+ years now. We have been running round the world exporting democracy and freedom, while really doing it for selfish and fiancially prediatory reasons. The US has way too big of an ego to treat the world with equality, and not like children they have to manage. That is going to be a problem for the US as the International economic playing field gets leveled by the technology, the resentments they've built, the new ones they are causing. I only think this because I've travelled, most of the Americans I know have never left the country for more than a week, and still think they can know a lot about foreign affairs.

Inan’Ta · #4 (**permalink**) 08-07-2007, 07:55 PM

Quote:

Originally Posted by Brother Oz

Free trade would be good for the third world, the lower living costs give you an advantage. The problem is that the west makes the Third World practice Free Trade while it practices protectionism.

I’ve my suspicions about free trade. It’s actually Western capitalist economies, the very same ones who zealously peddle the 'free trade' ideology, who use protectionist policies to protect their domestic markets from foreign competition and produce. This is exemplified most by the expensive EU subsidization of unproductive and inefficient European farmers and fishermen, when it fact it would be much cheaper to import fish and other agricultural produce from African countries who have a 'comparative advantage' in those sectors. Yet at the same time Third World countries are not allowed to do the same, (i.e. protect their vulnerable firms and internal markets from aggressive foreign competition).

That, my dear, is the very essence of 'free trade' in today's globalised world.

There is too much injustice in this world of ours.

Inan’Ta · #5 (**permalink**) 08-07-2007, 08:01 PM

Quote:

Originally Posted by Bradgriff

The US is not going to like what it has been cultivating for 20+ years now. We have been running round the world exporting democracy and freedom, while really doing it for selfish and fiancially prediatory reasons. The US has way too big of an ego to treat the world with equality, and not like children they have to manage. That is going to be a problem for the US as the International economic playing field gets leveled by the technology, the resentments they've built, the new ones they are causing. I only think this because I've travelled, most of the Americans I know have never left the country for more than a week, and still think they can know a lot about foreign affairs.

I won't only put the blame on America.The United Nations Development Program clearly stated that Good Governance is the key to achieving sustainable development in a country. Debt relief will be useless if good governance does not exist in a country. These include characteristics such as the presence of the rule of law, equality, accountability and so forth, something many African countries lack.

The IMF and World Bank are two organizations which I’ve lost confidence in. These organizations just ensure that Africa remains economically enslaved to the West.

Yeah, I kind noticed the “I know everything about the world, but never been outside of America” attitude.

africanhope · #6 (**permalink**) 08-08-2007, 01:14 AM

A, don't get me started on the IMF and Worldbank. Thedestruction these org's have caused in African countries is just disgusting. The neo-liberal policies they so firmly believe in might work in well established economies, but in developing ones, it is amazing that smart people could think it would have the same results!

AH

vladward8 · #7 (**permalink**) 08-08-2007, 09:21 PM

Why did President Mandela refuse to meet with Pres. Bush? Has Pres. Mandela given reasons?

factfinder · #8 (**permalink**) 08-09-2007, 04:48 AM

Can you name an African government that is doing its best to develop the country´s wellbeing ? Can you name an African minister that is not waging war against the rest of his co -ministers ? The problem of Africa´s poverty lies in the terrorism of their own governments which are annihilating their own people in their greediness for their private ends ...All the money an African government gets from abroad it will use on the purchase of weapons so that a minister of interior could fight the minister of defence and so on ...