The Slavery of a Whole Nation
S J Tubrazy
The notion that the foreign borrowings help the developing countries in their development projects and assist in attaining prosperity is now proved to be false in the case of a large number of the third world countries. This fact is increasingly realized by the independent economists. Susan George, an American economist living in France has written widely. on development and world issues. She is an Associate Director of the Transnational Institute in Amsterdam and her books on the Third World debt have been widely admired, some of which have won the international awards. She has summarized the eye‑opening results of the Third World debt in the following words:
“According to the OECD, between 1982 and 1990, total resource flows to developing countries amounted to $927 billion. This sum includes the OECD categories of Official Development Finance, Export Credits and Private Flows in other words, all official bilateral and multilateral aid, grants by private charities, trade credits plus direct private investment and bank loans. Much of this inflow was not in the form of grants but was rather new debt, on which dividends or interest will naturally come due in future.
During the same 1982‑‑90 period, developing countries remitted in debt service alone 1342 billion (interest and principal) to the creditor countries. For a true picture of resource flows, one would have to add many other South‑to‑North out‑flows, such as royalties, dividends, repatriated profits, underpaid raw materials and the like. The income‑outflow difference between $1345 and $927 billion is, thus, a much understated $418 billion in the rich countries’ favour. For purposes of comparison, the US Marshall Plan transferred $14 billion 948 dollars to war‑ravaged Europe, about $70 billion in 1991 dollars. Thus in the eight years from 1982‑‑90 the poor have financed six Marshall Plans for the rich through ‘debt service alone.
Have these extraordinary outflows at least served to reduce the absolute size of the debt burden? Unfortunately not. In spite of total debt service, including amortization, of more than 1.3 trillion dollars from 1982‑‑90, the debtor countries as a group began the 1990s fully 61 per cent. more in debt than they were in 1982. Sub Saharan Africa’s debt increased by 113 per cent. during this period; the debt burden of the very purest the so‑called ‘LLDCs’ or `least developed’ countries ‑ was up by 110 per cent.”
Many neutral writers are of the view that Third World debt is not just a financial matter, but a political one. There were always severe conditions attached to IMF and World Bank loans. Although `program aid’ required borrowing nations to conform to a package of economic and social expenditure measures aimed to ensure that funds are used for development, yet when projects failed and debts increased, `program aid’ was followed by `structural adjustment’ that entailed supervising the development of the entire economy of the indebted countries. Thus, the lenders justified their total interference in the domestic policies of the Third World nations. As these policies, too, failed to bring a turnaround in the debt trends, `austerity programs’ were introduced whereby expenditure on social services, welfare and education were cut to a considerable extent. Susan George and Fabrizio Sabelli have commented on the results of these policies as follows: ,
“Between 1980 and 1989 some thirty‑three African countries received 241 structural adjustment loans. During that same period, average GDP per capita in those countries fell 1.1 % per year, while per ,capita food production also experienced steady decline: The real value of the minimum wage dropped by over 25 % , Government expenditure on education fell from $11 billion to $7 billion and primary school enrolments dropped from 80 % in 1980 to 69 % in 1990. The number of poor people in these countries rose from 184 million in 1985 to 216 million in 1990, an increase of seventeen per cent.
According to the assessment of the World Bank itself, which is subjected to serious doubts by some economists, the success rate of World‑Bank‑funded projects has been less than 50% . In addition, after a review in 1989, World Bank staff were unable to point out a single project in which the displaced people had been relocated and rehabilitated to a standard of living comparable to that which they enjoyed before displacement.
Even the successful projects did seldom bring an overall economic well‑being of the indebted countries. Michael Rowbotham says:
“There has been a massive outpouring of literature on the subject of Third World debt: The books are characterized by one feature. Whereas the arguments and policies of the IMF and World Bank have been based upon an apparently reasonable theory, the studies give case after case and country after country, in which the theory has not worked in practice. Either loans have led to development but repayment has proved impossible; or the projects funded have failed completely leaving the country with a massive debt and no hope of repayment, or repeated additional loans have become necessary simply to provide funds for the repayment of past loans. The debtor countries, as a group, began the 1990s fully 61 % deeper in debt than they were in 1980.
Many critics have compared the Third World debt with peonage or wage slavery Cheryl Payer observes:
The system can be compared point by point with peonage on an individual scale. In the peonage, or debt slavery system… the aim of the employer/creditor/merchant is neither to collect the debt once and for all, nor to starve the employee to death, but rather to keep the labourer permanently indentured through his debt to the employer. Precisely the same system operates on the international level… It is debt slavery on an international scale. If they remain within the system, the debtor countries are doomed to perpetual underdevelopment or rather, to development of their exports at the service of multinational enterprises, at the expense of development for the needs of their own citizens.
In 1987, the conference of the Institute for African Alternatives called for the winding up of the World Bank and the IMF and a complete end to the dominance of the Bretton Woods International monetary system. The conference noted the results of the case studies as follows:
“In virtually all cases, the impact of these (IMF and World Bank) projects has been basically negative. They have resulted in massive unemployment, falling real incomes, pernicious inflation, increased imports with persistent trade deficits, net outflow of capital, mounting external debts, denial of basic needs, severe hardship and deindustrialization. Even the so‑called success stories in Ghana and the Ivory Coast have turned out to offer no more than temporary relief which had collapsed by the mid 1980s. The sectors that have been worst hit are agriculture, manufacturing and the social services, while the burden of adjustment has fallen regressively on the poor and weak social groups.
These facts should be sufficient to realize the fallacy of the illusionary notions that the Third World countries cannot live without the help of foreign loans. Who has, in fact, benefited from this system ? This question is closely examined by a Canadian scholar Jaques B. Gelinas in his book “Freedom From Debt”. He says:
“The foreign –aid ‑based development model has proved itself powerless to bring a single country out of economic and financial dependence. However, it has turned out to be a source of fabulous wealth, for certain Third World elites , giving birth to a new form of power and a socio‑political class that can rightly be called the `aidocracy”. `