January 19, 2004
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| Chris Martin
Fair Trade’s Charm Offensive
It may be true that rock and roll and agricultural trade barriers don’t mix. But even though Coldplay’s Chris Martin doesn’t sing about fair trade, that hasn’t prevented him from becoming the cause’s most visible front man.
The 26-year-old Martin writes searing love songs and haunting ballads. His band has twice won the Grammy for Best Alternative Album, and, as the readers of Us Weekly know only too well, he dates Gwyneth Paltrow. But Martin has chosen not to live inside the bubble of success. Radicalized by a trip to Haiti he took with the relief agency Oxfam, he’s taken up the cause of Third World farmers impoverished by World Trade Organization mandates that require developing nations to allow cheap, subsidized American and European crops to flood their markets, while their own exports remain thwarted by First World trade barriers.
While touring during the past two years, Coldplay gathered more than 30,000 signatures for Oxfam’s fair-trade petition. And last summer at the WTO summit in Cancun, Mexico, Martin delivered the petition—signed by nearly 4 million people—to the head of the organization.
When he started down this activist path, Martin says, “I felt like a third-rate Bono…. Hopefully, it’ll escalate until I feel like a full-on Bono.” Martin spoke to Mother Jones from London, deflecting questions about Coldplay’s new live DVD and focusing the conversation on fair trade, saying, “I don’t want to plug anything except this.” —KATHERINE TURMAN
Mother Jones: What was your first experience as an activist?
Chris Martin: Probably a “Drop the Debt” event in London. The great thing about “Drop the Debt” is that you have Bono and [Radiohead's] Thom Yorke and all these high-powered musicians actually going inside the buildings where decisions [about Third World debt] are made. I’m not sure how much George Bush is swayed by 100 people standing outside his house. I’m sure he’s more likely to be influenced by one person having a meeting with him.
MJ: Even if that one person is a musician rather than a head of state?
CM: You can obviously question the power that musicians or actors have, because they don’t really have any political power. What they do have is some effect on public opinion. And politicians like to be seen with those people. It makes them look more trendy and hip. It’s all kind of farcical, really, but people like Bono understand they can get their causes across by allowing someone to have a photograph with the singer of U2.
MJ: You’ve called your experience with Oxfam a “crash course” in fair trade—
CM: They approached us two years ago just as we were making our second album and said, “Do you want to come to Haiti and learn about fair trade?” And we were like, “Fair what?” We hadn’t any idea about it. But you go on a trip and learn how the importing and exporting of goods around the world works, and you realize it’s a huge crisis. We’ve now seen, firsthand, the problems caused by America dumping rice on Mexico, or Haiti not being allowed to export its agricultural products.
MJ: In looking online at your recent journey to Mexico, I saw a photo of you behind a plow. When that was being taken, did you feel self-conscious?
CM: One hundred percent. I know full well that you have to kind of whore yourself around. But we don’t care about looking like idiots. We’re well aware that we do—we look totally stupid standing behind a plow. But that doesn’t matter as long as you get the four words “make trade fair dot-com” in the newspaper.
MJ: When you met with Dr. Supachai Panitchpakdi of the WTO—
CM: I just call him Dr. Supa Chai—what a great cup of tea!
MJ: Were you nervous?
CM: No, I wasn’t nervous. We’re not saying we’re the only ones that want fair trade. We’re just participating in a band that some people like—that’s how we have the profile to get into that meeting, and then to present a petition that says millions of people feel exactly the same as we do. I don’t feel like it’s all on our shoulders. It’s just the same as when you see, I don’t know, Britney Spears advertising Pepsi. We’re just advertising maketradefair.com. I’m confident in the product we’re advertising, so I have no need to be nervous.
MJ: I know that when you met Dr. Supa-chai, you said, “You seem like a nice guy. Why is it so hard to get this problem sorted out?” How did he respond?
CM: He said it was going to be difficult. The great thing about the Cancun summit was, although it fell apart, it fell apart because the poorer countries are coming together and making a stand for themselves. What will come of that I don’t know, but it’s better than them just being walked over again.
MJ: Have you changed your life since you became an advocate for fair trade? Are you a big coffee drinker, for instance?
CM: No, I don’t drink coffee or tea. I do eat a lot of sugar, and chocolate. I’m sure I’m being a hypocrite every time I eat a chocolate bar. I’m eating products that have been imported cheaply or wearing shoes that probably weren’t made in England. The problem of unfair trade is rife.
MJ: I know you’re young, but you probably remember Bob Geldof’s efforts to feed the world. What impression did that make?
CM: I was really young. I remember hearing about “Live Aid,” but I didn’t really know what it was. Obviously, I know about it now and think it’s unbelievable. I wish we could do something like that now. All the bands, like Eminem and 50 Cent, they’re so powerful, those guys, they could really do something huge.
MJ: Coldplay Live 2003 is your first live DVD—do you feel you’re a better live band or a studio band?
CM: I feel we’re a better studio band. Some days I think we’re shit at both; other days I think we’re great at both. But we couldn’t have one without the other. At the moment, all I want to do is be in the studio all day, every day. But I’m sure in a year’s time, we’ll be itching to play live again.
MJ: As a child, was there an epiphany when you thought, “I will be a musician”?
CM: One when I was about 11: I’d just
started playing the piano one day, and this song came out. I don’t know where it came from, but I said, “Wow! That was pretty cool!”
MJ: Did you go to university to study music?
CM: I went to London to find people to be in a band with. I majored in ancient history.
MJ: But you had no illusions about becoming an ancient-history teacher?
CM: That was my real dream, but then Coldplay came about! [Laughs.] Actually, I spent three years just rehearsing. But it is cool to learn about the Roman Empire. In the future they’ll be unearthing statues of George Bush!
MJ: Do you consider yourself a political person or Coldplay a political band?
CM: No, I’d consider us a band interested in certain aspects of politics because it affects us just as much as it affects everybody else. I don’t want the Third World to become the Fourth World any more than anybody else does. That’s the one thing about when you actually visit a place where there is immense poverty: You see the reasons why, and it makes you fucking angry. Because it’s just going to come back and haunt America and haunt England if they—if we—don’t do something about it. This is tremendously clichéd stuff. But unfortunately it’s all true.
MJ: Organizations like PETA seem to delight in stirring controversy. Do you think being more controversial would help you in your quest for fair trade?
CM: You don’t want to piss off the people who actually make the decisions. The more you aggressively protest, the more they will up their defenses.
MJ: You’ve often said that when you meet people who are responsible for these harmful trade imbalances, they seem to be decent people. Is that a conundrum for you?
CM: Yes, it’s a conundrum. I’m sure if we met George Bush tomorrow, he’d charm the pants off us. But we’d just have to try to charm them off him, basically. I think that good things will happen through charm offensive.
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Coldplay Rocks the US for Make Trade Fair
Chris Martin and his chart-topping British band Coldplay turned up the volume on the Make Trade Fair campaign by inviting Oxfam to promote trade justice at concerts in their spring ’03 tour. This summer Oxfam fielded over 150 volunteers at 14 concerts across the country and collected over 10,000 postcards calling on President George Bush to stop dumping cheap, subsidized exports on poor countries. Oxfam will deliver these cards to President Bush prior to the World Trade Organization ministerial meeting in Cancùn, Mexico this September.
Chris Martin promoting and supporting the Make Trade Fair campaign during a performance.
©Coldplay
Oxfam CHANGE leader and volunteer Ben Brandzel traveled with the band to coordinate on-site logistics. Teams of volunteers distributed postcards throughout concert venues such as the Hollywood Bowl in Los Angeles and Denver’s Red Rocks Amphitheatre to New York’s Madison Square Garden. The team reached hundreds of thousands of concert-goers across the country with key messages about the Make Trade Fair campaign.
Coldplay has been a supporter of the Make Trade Fair campaign since it started in 2002. The relationship with Coldplay began when the band’s leader Chris Martin traveled with Oxfam to the Dominican Republic and Haiti in 2002 where he saw firsthand how unfair trade rules affected the lives of the people there.
Chris visited rice-growing areas where farmers once grew enough to provide for Haiti’s population. But due to cheap imported rice dumped in their market, they are now facing ruin. As Chris explains in his trip journal: “This rice dumping is an example of what Oxfam means when it talks about unfair trade. Haiti has been forced to drop all restrictions on imports, making it one of the freest markets in the world… So it is flooded with surplus rice grown by heavily subsidized farmers in the US, and many of its own rice farmers are now moving to the already overcrowded slums in the cities in search of work.”
Chris Martin of Coldplay with Oxfam on-site tour volunteer coordinator, Ben Brandzel.
Drop The Debt!
Debt costs lives:
In the world’s most impoverished nations, the majority of the populations do not have access to clean water, adequate housing or basic health care. These countries are paying debt service to wealthy nations and institutions at the expense of providing these basic services to their citizens. The lives of 19,000 children could be saved every day if the debt of these countries was cancelled and savings put to good use.
“Must we starve our children to pay our debts?” Julius Nyerere, former President of Tanzania
Debt sucks:
Debt sucks the natural resources out of a country, forcing countries to become dependent on international creditors for more aid and new loans.
“Debt is tearing down schools, clinics and hospitals and the effects are no less devastating than war.” Dr. Adabayo Adedeji from the African Center for Development Strategy
Strings attached:
The conditions that come with new loans and debt relief hurt the poor. Debt relief under the current program takes essential human services, like primary health and education and access to safe water, out of reach of the impoverished majority.
FACT: Even interim debt relief is conditioned on the requirement that countries sign a new loan.
They already paid:
These nations have already paid back their debts time and again. The debt crisis set in when interest rates skyrocketed and compound interest made repayment impossible.
FACT: Nigeria borrowed $5 billion, paid $16 billion to date and still owes $32 billion.
Don’t owe:
Much of the debt is a result of “bad faith” lending including:
- the practice of pushing loans on developing nations because banks had too much money and had to lend it;
- knowingly lending to corrupt governments for political purposes;
- lending with conditions that ensured that profits return to the creditors.
Some debt also resulted from stolen wealth, or loans that were used to serve the purposes of the elite and not the people. Other debt resulted from irresponsible projects that failed to serve a greater purpose, or caused harm to the people or the environment.
This is why debt campaigns from around the world say “Don’t Owe, Won’t Pay!”
The Bible tells us so:
Texts in both the Hebrew Scriptures and throughout the New Testament call for debt cancellation and the righting of relationships every 7 years. The practice of debt cancellation can also be found in history among early Pagan kings. The Koran also challenges debt by harshly criticizing usury.
“Proclaim liberty throughout the lands and to all the inhabitants thereof, it shall be a jubilee for you.” Leviticus 25:10
Debt cancellation is adding by subtracting:
Debt cancellation allows countries to access their own resources for poverty reduction. Savings from debt service can now be allocated for health care, education, fighting HIV/AIDS and more.
FACT: Experts estimate it would take an annual commitment of $10-15 billion a year to turn around the AIDS crisis in Africa that claims 7,000 lives a day. Sub-Saharan Africa pays almost $15 billion in debt service to the wealthy nations and institutions every year. Just do the math.
Debt is a new kind of slavery:
International debt slavery means that countries are caught in a debt trap that they can’t get out of. The debt trap is made up by economic conditions that take away their sovereignty and freedom. When countries are enslaved by debt they can’t improve the lives of their citizens nor have control over their own futures.
“Every child in Africa is born with a financial burden which a lifetime’s work cannot repay. The debt is a new from of slavery as vicious as the slave trade.” -All Africa Council of Churches
Makes our foreign aid work better:
Currently our foreign aid frees up money for countries to pay back their debts to other wealthy nations and international banks. Debt cancellation would help ensure that new funds can be used effectively for poverty reduction, ultimately lessening countries dependence on aid.
FACT: In the “boom” years of 1990-1997 developing countries paid more in debt service than they received in new assistance.
Debt cancellation gets results:
The small amount of debt relief given so far has achieved startling results, including more than doubling school enrollment in Uganda, vaccinating five hundred thousand children in Mozambique and adding three more years of schooling for Honduran children.
FACT: After debt relief and the elimination of school fees, 1.5 million children returned to school in Tanzania almost overnight.
You have the power:
Ordinary Americans, working with partners around the world, can generate the political will needed to drop the debt. The United States has the most influence of any nation over creditors and international banks. Our Congress could leverage full debt cancellation for impoverished countries. However, they won’t act unless they think you care. How It All Began
Causes of the Debt Crisis
Many people know what it feels like to owe money, even if only to a building society for a mortgage. But it’s a different matter altogether to be deeply in debt and unable to repay it. And even worse to be in that situation if someone else ran up the debt and left you to carry it.
When individuals become deeply indebted, we draw a line under the debt. That line is called bankruptcy. It is a line beyond which we do not allow people to fall. No such line can be drawn in international law. When poor countries become deeply indebted they fall into an abyss of economic degradation. Their governments owe vast sums to Western governments and international, Western-controlled institutions. These same institutions then take on responsibility for determining levels of debt relief.
This is unjust. It’s time we did something about it.
In the beginning…
How were these huge debts amassed? And why are governments still making so little headway in the struggle to pay them off?
Born in the USA
In the 1960s the US Government had spent more money than it earned and to make up for this decided to print more dollars. So the world’s stocks of dollars fell in value.
This was bad news for the major oil-producing countries, whose oil was priced in dollars. The money they made from exports now bought less. So in 1973 they hiked their prices. They made huge sums of money and deposited it in Western banks.
Banking on the future
Then the trouble really began. As interest rates plummeted, the banks were faced with an international financial crisis. They lent out the money fast, to stop the slide, and turned to the Third World, whose economies were doing well but who wanted money to maintain development and meet the rising costs of oil.
Banks lent lavishly and without much thought about how the money would be used or whether the recipients had the capacity to repay it. Third World governments, for their part, were pleased to take advantage of loans at very low interest rates – below the rate of inflation.
Dictators’ development
Some countries, like Mexico and Venezuela, took out loans to repay previous debts. But for others, this was the first time they had borrowed from commercial banks. Many intended to use the money to improve standards of living in their countries.
In the end, little of the money borrowed benefited the poor. Across the range, about a fifth of it went on arms, often to shore up oppressive regimes. Many governments started large-scale development projects, some of which proved of little value. All too often the money found its way into private bank accounts. The poor were the losers.
Heading for disaster
In the mid 1970s, Third World countries, encouraged by the West to grow cash crops, suddenly found that they weren’t getting the prices they were used to for the raw materials they sold, like copper, coffee, tea, cotton, cocoa. Too many countries – advised by the West – were producing the same crops, so prices fell.
Then interest rates began to rise, pushed further by an increase in US interest rates. Meanwhile oil prices rose again. The trap was sprung – Third World countries were earning less than ever for their exports and paying more than ever on their loans and on what they needed to import. They had to borrow more money just to pay off the interest.
Caught in the trap
In 1982 Mexico told its creditors it could not repay its debts. The International Monetary Fund (IMF) and World Bank stepped in with new loans under strict conditions, to help pay the interest. The IMF is a Western-dominated creditor, which in effect acts as a Receiver but unlike a Receiver makes short-term loans to help countries pay off other loans.
This pattern was repeated over and over in the following years as other countries found themselves in similar situations to Mexico’s. But their debts continue to rise, and new loans have added to the burden.
Essentially, the poorest countries have become bankrupt.
Enter the troubleshooters…
When Mexico defaulted on its debt repayments in 1982 the whole international credit system was threatened. Mexico owed huge sums of money to banks in the US and Europe, and they didn’t want to lose it. So they clubbed together and got the support of the International Monetary Fund (IMF) for a scheme to spread out or reschedule the debts.
Since then the IMF and the World Bank – the two main international financial institutions – have been involved in lending money and rescheduling debt in countries which, like Mexico, cannot pay the interest on their loans.
But their loans add to the debt burden and come with conditions. Governments have to agree to impose very strict economic programs on their countries in order to reschedule their debts or borrow more money. These programs are known as Structural Adjustment Programs (SAPs). SAPs have particularly affected the countries of sub-Saharan Africa, whose economies are already the poorest in the world.
SAPping the Poor
SAPs consist of measures designed to help a country repay its debts by earning more hard currency – increasing exports and decreasing imports. In a few countries SAPs appear to have had some good effect; in most they have worsened the economic situation. In all countries applying SAPs, the poor have been hit the hardest.
In order to obtain more foreign currency, governments implementing SAPs usually have to:
- spend less on health, education and social services – people pay for them or go without
- devalue the national currency, lowering export earnings and increasing import costs
- cut back on food subsidies – so prices of essentials can soar in a matter of days
- cut jobs and wages for workers in government industries and services
- encourage privatization of public industries, including sale to foreign investors
- take over small subsistence farms for large-scale export crop farming instead of staple foods. So farmers are left with no land to grow their own food and few are employed on the large farms.
The devastating impact of debt on the poor
Debt is tearing down schools, clinics and hospitals and the effects are no less devastating than war. - Dr Adabayo Adedeji, of the African Centre for Development Strategy in Nigeria and a former Under Secretary General of the United Nations.
The UK Charity Comic Relief raised $200 million in 1997. Africa paid this back in debt service in one week.
- Of the 32 countries classified as severely indebted low-income countries, 25 are in sub-Saharan Africa.
- Africa spends four times as much on debt repayment as she does on healthcare.
- In 1960, the income of the wealthiest 20 per cent of the world’s population was 30 times greater than that of the poorest 20 per cent. Today it is over 60 times greater.
- Between $7.5 and $15 billion is needed annually to fight HIV/AIDS in Africa each year. Yet, Africa pays out $13.5 billion in debt service every year.
- Debt slavery is foreign aid in reverse- for every dollar sent to the poorest countries in aid, $1.30 flows back to lenders in debt service.
Millions of people around the world are living in poverty because of Third World debt and its consequences.
Health
Spending on healthcare has fallen in many of the world’s poorest countries since the 1980s. This often means that people have to pay for healthcare, so the poorest cannot afford it and simply go without. In Zimbabwe spending per head on healthcare has fallen by a third since 1990 when a Structural Adjustment Program was introduced.
Some improvements in health gained over the 1960s and 70s have been turned back or stopped in many countries since the 1980s when the debt crisis broke. The number of children who die before the age of five, or before the age of one, has risen in many deeply indebted countries, including Zimbabwe, Zambia, Nicaragua, Chile and Jamaica, after decades of falling numbers. Diseases thought to be eradicated – tuberculosis, yaws, yellow fever – are making a comeback in some countries as treatment and vaccination coverage declines.
Education
As schools are forced to charge fees, fewer people are able to send their children and education is mainly available only to the better-off.
In sub-Saharan Africa the damage to education has been particularly significant: the percentage of 6-11 year olds enrolled in school has fallen from nearly 60 per cent in 1980 to less than 50 per cent in 1990. In
Tanzania, school fees have been introduced as part of a Structural Adjustment Program, leading to a drop in primary and secondary school enrolment.
Employment
The IMF encourages hard-pressed governments to cut back spending and downsize government departments. This often means a rise in unemployment and a cut in wages.
Real wages in most African countries have fallen by 50-60 per cent since the early 1980s. In Mexico, Costa Rica and Bolivia average wages have fallen by a third since 1980. And unemployment has risen in many countries in Africa and Latin America since the 1980s – in Zambia, Tanzania and Ghana, over 20 per cent of the working population are unemployed. High levels of unemployment are counterproductive as there are fewer taxpayers to contribute to the public purse. So governments raise less through taxation.
Trade
SAPs mean that countries must increase their export crops – and as many poorer countries are encouraged to grow the same crops, they cause a glut on the international market and prices fall. So the workers on plantations and farms get lower wages than ever.
Mexico first grew maize as a staple crop thousands of years ago. But today, thanks to IMF economic policies, it has to import 20 per cent of this staple food from the USA.
The IMF encouraged Mexico to replace its vital food crops with cash crops – like strawberries and exotic fruits. The IMF also made sure that any trade protection for the country’s agricultural goods was lifted. So Mexico’s export crops now compete with those from the USA, which, as in many northern countries, are highly subsidised and protected, using all available techniques to improve their quality.
Mexico is the loser, and the poor suffer. Almost 20 per cent of Mexicans have no cash income; more than 30 per cent make less than the minimum wage of $3 a day.
Too Little, Too Late
Political Responses to the Debt Crisis
Since the late 1970s there has been a growing concern in the West that the Third World will not be able to pay back much more of its debts. A number of people from various countries have come up with plans to try to ensure they do.
None of these plans have been adequate to deal with the whole debt problem. So although some improvements have occurred, mostly in South America, the problem remains.
The Brady Plan
By 1989 debts to commercial banks were no longer worth their value on paper because the banks had written off large chunks of them in theory, assuming they would never be repaid. Brady argued that the banks should reduce the actual value of the remaining debt for larger debtor countries, so that they had less to pay.
The banks would do this in one of two ways:
- by writing off some of the debt with the help of funds from the IMF and World Bank
- by rescheduling some of the remaining debt by converting it into bonds – which could be sold on the secondary market.
In terms of total debt stock this plan has not helped debtor countries. As commercial debts have fallen, multilateral debts have risen. Resources continue to flow out of these countries to pay interest on Brady Bonds. Debt service was lowered to levels which were already being paid, so no actual benefit accrued to the debtor country.
Trinidad/Naples Terms
John Major originally proposed that creditor countries cancel half the debt owed to them by the lowest income countries, while rescheduling the rest. This could have resulted in debt relief worth £18 billion to the poorest countries.
Later he went further and proposed two-thirds debt remission. In the end, 67 per cent cancellation was agreed at the G7 Summit (a meeting of the seven main Western powers) in 1994.
However in practice, this level of reduction has only been applied to a small proportion of poor countries’ debts. Creditors have been very reluctant to offer debt relief. Countries have to keep to stringent Structural Adjustment Programs to get debt relief and were not exempt from any repayments to the IMF or World Bank.
Heavily Indebted Poor Country Initiative (HIPC 1)
Four years ago, in October 1996, there was a major shift by the IMF and the World Bank when they produced a debt relief initiative which contemplated for the first time the cancellation of debts owed to them. The agreement also recommended a strategy to enable countries to exit from unsustainable debt burdens. The Initiative proposed 80% debt relief by the key creditor governments only after countries had fulfilled two 3-year stages of structural adjustment conditions. The World Bank announced the establishment of a Trust Fund to finance the Initiative.
In reality, the initiative proved to be completely ineffective. Uganda and Bolivia received debt cancellation in April 1998 and September 1998 respectively – but within a year they were back where they started with unsustainable debt burdens. They had fallen victim to falling commodity prices and impossibly optimistic forecasts (made by World Bank and IMF staff to justify lower levels of debt relief) for their future export and economic growth. Mozambique, after treatment under HIPC 1 ended up only paying 1% less in debt payments than before HIPC. As a result no money was released for spending on health and education.
Growing pressure from debt campaign groups, under the Jubilee 2000 umbrella, forced the creditors to admit that the initiative was failing to deliver. In January 1999, Chancellor Schroeder of Germany, announced that `radical and bold’ steps were needed on debt relief, prompting other G7 creditors to support calls for an `enhanced’ HIPC Initiative. This was launched at the Cologne G7 Summit, as 50,000 people formed human chains in Germany to call for the `chains of debt’ to be broken.
Cologne Debt Initiative/HIPC II
HIPC 2 was launched at the Cologne G8 Summit in June 1999 to great fanfares of publicity and promised to provide “broader, faster and deeper” debt relief, and an improved link with poverty reduction. Creditors talked of a headline figure of $100 billion of debt relief for HIPC countries which included $25 billion of additional relief in the “enhanced” initiative.
By the end of the year 2000, 22 countries had received some relief on debt service payments and a total of $12 billion had been cancelled – but only Uganda has reached completion point, the final stage in the HIPC process. In some countries, debt relief has made a tangible difference. For example in Mozambique, $60 million was released through debt relief into various areas, all vital to sustaining development. The budgets for health, education, agriculture, infrastructure and employment training have all benefited. However overall the level of debt relief has failed to deliver the necessary resources to tackle the HIPC countries’ deep-rooted social and economic problems. On average the reduction in debt service has been just over a third. Even after HIPC relief, these countries are still paying over one and a half times more in debt service than they are on health. In Tanzania about a third of the country’s children are malnourished, and under half are enrolled in primary school. Yet in Tanzania, the government will be faced with even greater payments than it has currently been paying.
Moreover the initiative still excludes many heavily indebted poor countries. Some have failed so far to fulfill all the conditions laid out by the IMF and World Bank to become eligible for debt relief; others have not even been eligible for debt cancellation under the initiative. Nigeria was discretely removed from the HIPC list in 1998 shortly after it became a democracy. It has received debt rescheduling but no debt cancellation, despite the fact that this is urgently needed to tackle entrenched economic and social problems that threaten to destabilize not only the country but West Africa as a whole. Haiti is also not eligible for debt relief under the initiative even though it is the poorest country in the Western Hemisphere and nearly half of the debt was contracted under the Duvalier dictatorship. It will receive no debt cancellation even though it has 50 per cent adult illiteracy, 70 per cent unemployment and infant mortality is more than double the Latin America & Caribbean average.
The evidence from all these political responses to the debt crisis is that debt relief initiatives designed by creditors and controlled by creditors will never deliver the debt cancellation that is necessary for development. Creditors have maintained the power to define who gets what, and when, and how. This same power means that their own political wrangling, conflicting agendas, lack of consensus and minimizing of cost become the dominant issue, not the delivery of the modest debt relief on offer to those most in need. The result is that the majority of countries in urgent need of cancellation are currently getting nothing at all.
Resisting Debt
For years, southern movements have been resisting debt and the imposition of economic adjustment policies (SAPs) linked to external debt burdens and new credit agreements. Jubilee work in the south comes out of many of those struggles.
As the developing world declared its independence from colonial rule, newly emerging countries found themselves enticed into the debt trap with offers of big loans at very low rates of interest. Many countries in Latin America took up the offer and soon found that with interest rate rises and commodity price decreases they couldn’t keep up the repayments.
Warnings
Countries in Africa, which proclaimed independence later, were forewarned about the pitfalls of the debt trap but were powerless to avoid it. Still lacking control over their own resources, they were desperate for credit to match the high expectations of their people and inevitably took the loans eagerly offered by governments, the World Bank and IMF. Before long the conditions attached to these loans became onerous to the people, who found they were not benefiting from this secret international lending process.
Riots
From Argentina to Zambia, initial resistance took the form of strikes and demonstrations when the first price rises for basic goods followed the implementation of various programs based on the adjustment models of the IMF and World Bank. One of the most bloody IMF riots took place in 1984 in the Dominican Republic when the price of basic foodstuffs doubled and the price of medicines increased fourfold. Four days of rioting left 112 dead and 500 wounded. In Caracas, Venezuela, riots broke out following the adoption of an adjustment program in 1989 which caused wages to collapse to less than half their 1980 level and prices to shoot up as subsidies were cut. Hundreds died (estimates vary widely from 300 to 1,500). Demonstrations, strikes and riots continued intermittently across various countries, highlighting the divisive and destabilizing effects of these policies.
As debt and adjustment have continued, a more co-ordinated people’s response has emerged. Campaigning groups have formed in debtor countries and regions to raise awareness of how debt and structural adjustment underpin many of the economic and social problems people are facing. These groups campaign for debt cancellation, for radical changes in SAPs and the involvement of civil society – especially local non-governmental organizations – in dialogue on these policies.
Alternatives
In response to this mass opposition, policy-makers in the developing world have been putting forward various alternatives to the IMF’s SAPs. For example, the African Alternative Framework to SAPs (AAF-SAP) was put forward in 1989 by the United Nations Economic Commission for Africa (UNECA) under the leadership of Professor Adebayo Adedeji who later became an Under General Secretary of the UN. Later adopted by the Organization of African Unity (OAU) and receiving the support of the UN General Assembly, debt cancellation was a key factor underlying the strategic approach of AAF-SAP. But the plan was ignored by the WB and IMF and Western leaders.
Demonstrations
With the belittling of international opposition to the IMF programs, by the 1990s they had been enforced upon most countries of the impoverished world. This triggered another wave of angry demonstrations against the imposition of VAT and cuts in health and education. These demonstrations were often violently crushed with the military arsenals of local and foreign governments.
The struggle continues in the developing world and there are positive signs, with some governments beginning to take notice of calls from civil society for default under the banner ‘Can’t pay, won’t pay’. Only with increased links and solidarity between peoples in developed and developing countries can we break the stronghold the IMF-imposed blueprint, and implement real alternative strategies for the third world.
Around the globe
In Africa, Asia and Latin America, people’s movements are a growing force for change. They include Chimurenga, the African Network on Debt and Development, the Third World Network, the International Movement for a Just World, the Sao Paulo Forum and the Philippine Freedom from Debt Coalition. – the longest established and the most visible campaign in the developing world.
Women’s organizations are also tackling structural adjustment and debt, uniting their efforts through groups such as Moyo Wa Taifa, the Pan-African Women’s Grassroots Network – which aims to ensure that women understand how debt and structural adjustment underpin many of the problems they are facing and to develop ways to influence the government, IMF and the World Bank.
Bringing it all back home
The impact of the debt crisis on all of us.
The debt crisis is clearly a disaster for the people who live in Third World debtor countries. But what about the rest of us? The fact is that many of the results of international debt boomerang back to hurt the rich world as well as the poor.
Susan George explains in her book, The Debt Boomerang, how six boomerangs affect the Western world and the creditor countries as much as the indebted countries: the environment; drugs; bailing out the banks; lost jobs and markets; immigration; conflict and war. The following paragraphs highlight some of the issues she covers in the book.
Killing the Earth
Serious environmental destruction began in many Third World countries in the 1970s and 1980s. Easy money was available from industrialized countries for ‘development’. Much of it was spent on large dam projects, power plants and charcoal driven industries. These usually didn’t help the poor, and did damage the environment.
As debts mounted, what poorer countries needed most was foreign currency to pay back their debts. One easy solution was to milk the earth’s resources for the hard cash they brought in, and cut back on environmental conservation programs.
Third World countries have done this by:
- heavily overusing soil to grow cash crops, often forcing small farmers off their land
- producing more crops on small areas of land, often using chemical fertilizers, and so degrading the soil
- allowing overfishing of their waters, so that fish stocks are damaged
- allowing multinational companies logging rights to their forests, destroying the lifestyle of those who live there
- chopping down forests to make room for beef cattle grazing or crop farming.
FACT: It is the world’s largest debtors who are chopping down their forests the fastest. Brazil is the world’s largest deforester and one of its largest debtors, owing US$112 billion. It is cutting a staggering 50,000 sq km of forest every year.
Debt and American Jobs
As Third World countries struggle to pay back their debts, they have to export as many goods as possible and cut back on imports. This might seem like a good way to earn money. In fact they don’t earn as much as they should, because many Third World countries are exporting similar products, flooding the market.
So prices have been plummeting over the last few years.
It is not only debtor countries who lose out by the ‘earn more, spend less’ principle. The countries demanding repayment also suffer economically. Western countries are losing out on earnings from some factory and farm produced goods because it is so much cheaper to import them from the Third World. At the same time they are not able to export equipment and other manufactured goods to Third World countries which used to be trading partners, because these countries have no money to buy them. So jobs are lost and unemployment rises.
FACT: Before the debt crisis broke, Europe sold about a fifth of its exports to the Third World, particularly Africa. By 1990, it was only a little more than a tenth.
Dirty Drugs
Millions of Americans and Europeans regularly use illegal drugs. Governments across the Western world have poured money into the struggle against drugs. The narcotics market in Europe is expanding rapidly, contributing to social breakdown and violent crime.
But for all their strategies to fight against drug trafficking, no government has come up with a solution which tackles one of the factors making it possible – international debt. Almost all the major drug-producing countries also have high international debts. To repay debts they need hard currency from the sale of commodities – like cocoa, whose value has been falling. Meanwhile, cocaine prices have been rising. So countries turn to the drugs trade – to raise foreign currency and to survive.
FACT: Bolivia is one of the poorest countries in Latin America with and the highest child mortality rates on the continent. The country has to spend half of all its (legal) export income on paying its debt. 40% of Bolivia’s workforce depend on the drugs trade for a living.
Banking on debt
Commercial banks have suffered very little from the accumulation of unpaid debts. This is largely because Western taxpayers (mostly without knowing it), inflation, and currency speculation have cushioned the blow for them.
In most countries banks have been able to write down their unpaid third world debts in the accounts as losses . This means they pay substantially less tax. Yet the debt still remains and The debtor country has to continue repaying it. While the weight of the bank’s loss is in part made good by the taxpayer, the burden for the debtor country is enormous.
Another way that banks can gain tax relief on a loan which is not being repaid is through selling the debt. In a bizarre system of exchange, one bank can sell the debts owed to it at a reduced price to another bank which feels confident it will eventually be repaid at a higher rate than that discount price. This is called the secondary market.
The banker who sells the loan can then claim tax relief on the ‘loss’ he has made by selling the loan at a reduced price. Yet again, the debtor country gains nothing.
Unjust War
Britain uses export credits to subsidize arms sales to the South. In 1993/4, 50 per cent of all export credits provided by the DTI to exporters were for arms sales. In time, these credits become debts for poor countries. 96 per cent of the debts owed to Britain by poor countries are owed to the Export Credit Department of the DTI. Many Third World countries have become deeply indebted because of high military spending. And as wars escalate, they are less able to repay the money they owe. One estimate suggests that between 1960 and 1987 Third World governments borrowed around $400 billion dollars to fund arms imports from industrial states.
The Third World arms trade has declined after a peak in the late 1980s. Most of the dictators who invested so heavily in arms are no longer in power and today’s governments are not buying as many arms as they once did. But the debts are still left to pay.
Debt can also lead to and contribute to war. As countries become poorer because of their debts, one route that people take is violence and protest. As this escalates, it can end in war – and does in many countries of the Third World. As the debt crisis broke in the early 1980s, violence in many indebted countries around the Third World erupted into war or escalated dramatically.
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- the practice of pushing loans on developing nations because banks had too much money and had to lend it;
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