Wednesday, July 06, 2005

Debt Write-Off Comes at a Price

By Andy Storey, AFRI

As the leaders of the G8 countries meet in Gleneagles, Edinburgh this weekend, there will be much self-congratulation about their new debt-relief deal for poor countries.

But, contrary to some reports, what is being written off is mostly the debt owed to the World Bank and the International Monetary Fund. Other debts will be unaffected.

Furthermore, to qualify for this partial debt relief, countries have to abide by certain conditions – they must “boost private sector development'' and get rid of “impediments to private investment, both domestic and foreign'‘.

These might seem like sensible enough policies to some, but they have proved controversial in many countries.
The water sector is a case in point. G8 governments have pushed water privatisation throughout the world, often resulting in private companies enjoying monopoly privileges and profit margins of 30 to 40 per cent. Prices have risen, jobs have been lost and promised services have often not been delivered. Riots in Bolivia saw western water companies thrown out.

But to qualify for debt relief - and sometimes for aid or trade concessions - these damaging privatisation policies are the ones poor countries are increasingly encouraged to adopt.

The costs may not only be short-term.

Even Martin Wolf, the Financial Times' champion of the free market, has acknowledged that “the international community needs to consider whether developing countries should have greater freedom to introduce export conditions, export subsidisation and other means to promote early stage industrialisation'‘.

Unfortunately, these are precisely the policies that poor countries must forswear to qualify for debt relief, to enter into so-called ‘economic partnership agreements' with the EU, or to qualify for membership of the World Trade Organisation (WTO).

South Korean economist Ha-Joon Chang claims that rich-country governments, having themselves developed through extensive state intervention, are now denying poor-country governments that option. They are, as he puts it, “kicking away the ladder'‘.

This brings us to the most crucial element in the equation.

Instead of asking what we can do for Africa, we might more usefully demand a stop to what is currently being done, including: tying debt relief to inappropriate economic policies; destroying poor people's livelihoods through indefensible trade policies; using aid as a weapon of self-interest rather than poverty reduction and negotiating investment deals that rob Africans of their own resources.

Three other activities can be added to the list of things we need to stop. The first is the obscene waste of resources on war - in Iraq and elsewhere - and on preparations for war through unnecessary military expenditure.

The second is the arms trade. G8 governments are responsible for 80 per cent of the world's arms exports, including those to conflict-ravaged African countries such as Sudan and the Democratic Republic of the Congo. The third is the predatory recruitment of skilled workers from poor countries.

Tolstoy satirised the attitude of the Russian elite to the peasantry they were exploiting: “I sit on a man's back, choking him and making him carry me, and yet assure myself and others that I am very sorry for him and wish to ease his lot by all possible means - except by getting off his back.”

Getting the G8 off the backs of the world's poor would be the surest way of truly making poverty history.

Andy Storey is a lecturer in development studies at University College Dublin
and a board member of the justice and peace organisation, Action from Ireland (Afri).

Thanks to TOS for this article.


Anonymous JW S said...

Great article. I've bookmarked your site.

3:26 am  
Anonymous pal said...

i do believe what u say but i hate doin it.its a well written analysis or whatever else it is meant to be.the common citizens that are get shocked reading but will not feel anything if they get caught in betn the g8 & their policies(i.e they are blown to oblivion)do not lose hope if this the way things function now it will function in a different way after sometime. u see everything has a limit.revolutions do not occur without the events that make it happen,& this is very much a precursor to such a revolution.

7:18 pm  

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