Debt Cancellation and Public Pressure
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On this page:
- A Lot of Promises
- Hardly Any Promises Have Been Carried Out
Moral Hazardof Debt Cancellation
- Growing Protests against unfair IMF, World Bank, and Rich Country Policies
- G8 Summits — a chance to push for debt relief?
- Who Spearheads Debt Reduction Strategies?
- What about the underlying causes?
A Lot of Promises
As well as the admissions by some heads of international financial institutions such as the IMF that their various schemes are not working2, there have been some additional actions, decisions or statements that would allow further pressure to be applied to leaders to do something about the debt situation, such as the following (by no means complete):
- In Monterrey, Mexico, for the UN Conference on Financing for Development in March 2002, the U.S. and E.U. have offered a large amount of increase in aid amounting to over $15 billion over the next three years.
- In March, 1999, Canada’s Prime Minister, Jean Chrétien, has said that Canada would act alone3 if other G7 countries failed to respond to the needs of the severely indebted countries.
- Even USA’s President Clinton in September 1999 said that the United States would try and forgive all the debt4 that poor countries owe the USA if they use that saved money on health, education and other basic human needs. This is extremely positive indeed, although there are practical problems at hand — such as convincing the World Bank and IMF to go ahead with this. The US Congress also has to make funds available for this — and while that has not always been easy historically, they have partly agreed5. (This real audio link6 gives a good, short insight into this aspect.) Clinton’s announcement did however, put pressure on other states to follow suite.
- A plan in December 1999, by Britain to cancel 100 per cent of the debt7 owed by 26 poor countries received many positive responses. Britain said it would do this as long as the money would be used towards poverty eradication in those countries. (That is a bit ironic given that the IMF and World Bank’s Structural Adjustment policies have led to the opposite in the past.) It was feared to take a year8 to get through all the red tape9 before taking effect. As the Economist said, the British government could go further10, as this would not completely eliminate poverty or debt.
In fact, it is cruel irony to note that the UK refuses to pay to the USA almost exactly the same as it is demanding from developing nations. Yet the UK has owed USA11 this money since the First World War.
- Following Britain’s example, and from public pressure, Germany has announced that it will write off 100 percent of the bilateral debts owed to Germany12 from some 30 poorest countries of the world, estimated to be worth around 5 billion dollars.
- Harvard economist Jeffrey Sachs has also pressured Japan13 to cancel all debts owed to Japan by HIPC countries. He also heavily criticized the IMF and World Bank policies.
- One year after the initial promise, at the end of 2000, UK’s Gordon Brown further announced that the British Government would either cancel or hold in trust all debt payments to Britain14 from the 41 Heavily Indebted Poor Countries. Although that is about 1 percent of all debt owed by developing countries, as the previous report shows, it is was hoped that this would put pressure on the other G7 nations to follow suit.
- At an international conference in May 2001, the international community also agreed15
to seek a moratorium on debt service payments for the world’s most highly — indebted countries in(However, as the previous link also added,
exceptionalsituations — such as those plagued by civil wars, floods and natural disasters — and to facilitate access to debt relief for post-conflict countries.
For all the talk at the conference of the need for specific)
deliverables, rather than general and non-binding commitments, no concrete measure was announced in this area either.
These and many, many other promises and calls for action have been made by political leaders from many rich nations. (While the above is just an extremely small example to show that political leaders have been saying something, for a fuller and more up to date list for news releases on these aspects, see for example, the jubileeresearch campaign web site16.)
However, saying something is one thing. Has anything actually happened?
Hardly Any Promises Have Been Carried Out
Regardless of however much this sounds encouraging and promising, it must be noted that even as the G8 summit was taking place in 2000, none of those debt relief promises from as early as 1999 had actually been carried out.
Greenpeace Canada reports17 that despite all the promises,
By 2002, however, the G8 had delivered only three cents on the dollar of its commitments, meaning the South’s debt load continues to spiral upwards.
Also, the IMF and World Bank are the biggest remaining creditors18 to the poorest countries, so there is a long way to go, even though the previous link shows that the IMF and World bank can afford to cover the costs of cancellation without affecting their ability to function.
Accompanying some of these announcements at possible partial debt cancellations, has been vocal concerns about ensuring that the freed up money is used for things like poverty eradication, health and education provisions and so on, instead of any continued corruption or wasteful spending. While the concerns are fair, the following quote highlights why those concerns should not be a stop gap:
Growing Protests against unfair IMF, World Bank, and Rich Country Policies
As people are becoming more aware of the issues, more campaigns and protest movements have been seen around the world (with varying degrees of success, of goals, agendas, and so on). As one example that followed the WTO protests in Seattle, 1999, for April 2000’s annual IMF and World Bank meeting, protestors once again campaigned against their policies in the light of globalization in its current form. For more information about these protests, see this site’s section on the IMF and World Bank protests21.
Protests have occurred around the world for many years22 against what is increasingly being seen as unfair policies, though often without much mainstream media attention, even when there are hundred or thousands of protestors. G8 Summits which often attracts mainstream media interests have therefore also seen similar protests.
G8 Summits — a chance to push for debt relief?
This section has now moved as part of a larger, new section on the G823.
Who Spearheads Debt Reduction Strategies?
While public pressure is forcing action by political powers, as the following reminds us, we need to be aware of who would control any debt reduction strategies that may occur:
And as Jubilee Research (formerly known as Jubilee 2000, the debt relief campaign organization) highlights, aid relief is a political tool based on top-down conditionalities and devastating
structural adjustment policies: