Playing Field Politics: All debt is not created equal
We’ve heard the term “ensuring a level playing field” before. It is the drumbeat of the U.S. Department of Commerce’s Market Access and Compliance (MAC) division. It reverberates in export circles around our country and spills out into the global marketplace as Washington presses rich and poor nations alike to buy American goods and services and to comply with rules established by the World Trade Organization. “Keeping foreign markets open to American businesses and workers is our top priority,” declares MAC point man William H. Lash III. “MAC looks for exporting problems caused by foreign governments and uses every possible tool to achieve equal treatment for U.S. companies and workers.”
Less than a year after America blistered Iraq in a military campaign of “shock and awe,” President Bush asked that country’s creditors—mainly France, Russia, Germany and Kuwait—to cancel the $400 billion or so it owes them. That includes compensation claims resulting from Saddam Hussein’s invasion of Kuwait in 1990 and the subsequent Gulf war, monies owed for ammunition purchases, and contractual obligations assumed during Saddam’s regime. They are what have come to be termed “odious debts,” described by Nobel Prize-winning economist Joseph Stiglitz as debts incurred by a regime without political legitimacy, from creditors who should have known better, with the monies often spent to oppress the very people who are then asked to repay the debt.
Canceling these odious debts, the Bush administration argues, would level the playing field for Iraq’s economic recovery and start the country off with a clean slate. As White House spokesman Scott McClellan observes, the future of the Iraqi people “should not be mortgaged” to debts racked up by a regime more interested in building “palaces and torture chambers” than in serving the needs of its people.
Noble words for a noble policy! While we’re at it, how about leveling the playing field for Africa’s economic recovery?
No can do, Africa’s creditors contend. The continent is totally responsible for its debt crisis, they insist.
Of Africa’s $300 billion, debt creditors have agreed to cancel only about 15 percent, or $50 billion to $60 billion. The continent spends some $15 billion a year on debt repayments but gets only $12.7 billion in aid during the same period, the World Bank reports. Forbes magazine estimated in 2002 that the 18 richest Americans could pay Africa’s debt and have several billion dollars left over in change.
The American Friends Service Committee, an international social justice organization, has launched a “Life Over Debt” campaign to have Africa’s debt canceled. “Our campaign’s call for cancellation of odious and illegal debt is no different from President Bush’s current pleas to Iraq’s creditors,” says Imani Countess, coordinator of AFSC’s Africa Program and the “Life Over Debt” campaign.
Here’s why, according to AFSC, Africa’s debt is not only odious but also illegitimate:
• In the wake of rising oil prices and falling interest rates in the 1970s, banks and other lending institutions made loans to Third World countries in order to “stop the slide” of interest rates and thus save their businesses. These lenders had little regard for the borrowing countries’ ability to repay or to what use these borrowed funds were being put. Corrupt African leaders and governments lined their pockets, stashed some of the money away in foreign bank accounts, invested in useless prestige projects, bought more arms and fortified their brutal security apparatuses, which they then used to crush dissent, perpetuate themselves in power and create the conditions for the violent conflicts that today ravage the continent.
• During the Cold War, Africa was a hot battleground of the former Soviet Union and the West, principally the United States. Each side disbursed billions of dollars in debt to any country that supported it, regardless of how brutal their leaders were or how bad their governments. Present day Africans should not be forced to pay for services already rendered by Cold War-era regimes.
• In disbursing new loans, the International Monetary Fund and World Bank imposed “austerity measures” that worsened the poverty situation in Africa. Borrowers were required to cut spending and subsidies on basic public services, such as health and education, making them more unaffordable to ordinary people; retrench thousands of workers to reduce the size of government, thereby raising the unemployment and poverty index several notches; privatize state-owned institutions, which made goods and services unaffordable to a greater number of people; and devalue their currencies, making exports cheaper and imports more expensive. No demands concerning military spending were made.
•Many African countries have paid their debts many times over. Nigeria, for example, borrowed $5 billion, has so far paid more than $16 billion and still owes $32 billion on that same debt.
Africa’s future, tied to its immense oil, agricultural, and mineral wealth, remains mortgaged.