'It is abundantly clear that the lender is not an alms giver in the world of real-politik. The agenda is to serve the perceived self-interest of the lender, debt to be granted and withdrawn as he sees fit.' -- Noreena Hertz

'Trade liberalisation has cost sub-Saharan Africa US$272 billion over the past 20 years. Had they not been forced to liberalise as the price of aid, loans and debt relief, sub-Saharan African countries would have had enough extra income to wipe out their debts and have sufficient left over to pay for every child to be vaccinated and go to school.' -- Christian Aid

Who benefits, who loses in the relationship between debtor and lender countries?

The generosity of the lender country, the sacrifices made.

For the debtor country, there is not just the cost of servicing the debt, there is the odious cost of being beholden to the lender country.

China, India and Thailand understood this cost when they repaid loans early, but it is a lesson lost on most countries.

Foreign debt, and aid, is an instrument of foreign policy. John F Kennedy made this very explicit in the aftermath of the Bay of Pigs fiasco.

'... in the long run, security will not be determined by military and diplomatic moves alone. Aid is a method by which the United States maintains a position of influence and control around the world and sustains a good many countries which would definitely collapse or pass into the Communist Bloc ... Really I put it right at the top of the essential programs in protecting the security of the free world.'

Nothing has changed since in US foreign policy, nor is the concept new.

Simon Bolivar liberated parts of Latin America from the Spanish. He declared: 'I despise debt more than I despise the Spanish.'

Debt exerts a stranglehold on the indebted country.

Corruption raises its ugly head as an excuse for not cancelling debt. There was no such concern at the time money was poured in.

Congo had no trouble obtaining foreign loans at the height of the despotic rule of Mobutu.

We hear much of the criminality of Saddam Hussein, and yet much of the money that was poured into Iraq was at the height of his criminality, including gassing of the Kurds.

When US Secretary of State Colin Powell in February 2003 presented his dodgy dossier to the UN to justify war with Iraq he pointed to a chemical weapons facility, 'chlorine plant Faluja 2', 50 miles outside of Baghdad. A facility which the US said was a key component of Iraq's chemical weapons arsenal, and which even Hans Blix had said should be destroyed. The British agreed. Somewhat ironic when it was a British company that constructed it 17 years earlier, a project underwritten by export credit guarantees from the British government.

Did the British know its intended use? Yes. There was even a warning from the MoD that the plant 'could be used in the manufacture of phosphorus trichloride, a key nerve agent precursor', and Foreign Office Minister Richard Luce went so far as to warn what it would do to Britain's image if news of the deal leaked, and advised 'I consider it essential everything possible be done to oppose the proposed sale and deny the company ECGD cover.' But at the end of the day, business is business, or in the words of Trade Minister Paul Channon 'A ban would do our other trade prospects in Iraq no good.'

These 'other trade prospects' being further lucrative arms deals.

$1 billion was lost in Iraq when Margaret Thatcher bankrolled Saddam Hussein, the long suffering British taxpayer picking up the bill.

Not a single G8 country has ratified the international anti-corruption treaty. Not a single UK company has been prosecuted in the UK for bribery and corruption abroad.

Before we point the finger we should clean up corruption in local authorities. Is there a single local council that is not corrupt, where corrupt councillors and their corrupt officials do not push through planning applications on behalf of developers against the wishes of the local community?

Loans and aid are not based on need, they are based on exerting geo-political influence.

At the end of WWII, money poured into Europe to prevent Soviet influence, after the Bay of Pigs, money poured into Latin America, at the height of the Vietnam War, money poured into south east Asia.

China, Russia, the West, poured money into Africa, each trying to buy influence.

For most countries, more money was pouring in than they knew what to do with. They didn't have to worry about debt repayment, as yet more money poured in.

Then after the Cold War came the cold shower. Poor countries were faced with a massive mountain of debt and no means of paying it back. Their generous backers were suddenly no longer generous, and even worse, were wanting their money back.

Noreena Hertz:

'Once the Cold War ended, things changed. The allegiance of strategically important Third World countries was suddenly perceived as unnecessary. Loans were called in overnight, and the new lending (which was the way many countries had been able to service old debts in the past) was either curtailed, or provided under less generous terms.'

'Moscow ... began harassing the former Soviet Union's satellite states for repayment of outstanding loans, having quite happily rescheduled them in the past. President Clinton started championing 'aid-not-trade' policies ...'

The cost of servicing these debts is high. Congo has to spend 37% of its government revenues servicing debt. This in a country where the average income per capita is $90.

For some countries, Turkey, Pakistan, the money still continued to pour in. They continued to serve a geo-political interest. Other countries were added to the list, primarily the Central Asian republics, a convenient blind eye being turned to lack of democracy and rampant corruption.

Debt cancellation does not come cheap either. The condition for Iraq to be be forgiven its debts is to agree to the sell-off of all the country's assets at knock-down prices.

Much has been made of the decision by the G7 to write-off the debts of 18 of the world's poorest countries, with a possible 20 countries to follow.

If we were to believe the mainstream media this was due to the Herculean efforts of Tony Blair and Gordon Brown. It wasn't, it was due to the pressure applied by Make Poverty History and Bob Geldof and Live 8.

But look at the small print. If loans come with strings attached, so does debt cancellation. These strings including dropping trade barriers, opening up markets, liberalisation, privatisation, cut backs in the public sector, including health and education.

A condition of debt relief for Tanzania was privatisation of its water supply. British aid money, money that should have gone on poverty relief, was spent promoting this deal. Two years into the the ten year contract, British company Biwater has been kicked out of Tanzania. Biwater were kicked out because Tanzania experienced deteriorating water supply. It will be the British taxpayer who will have to foot the bill as the deal was underwritten with export credit guarantees. The poor of Tanzania may also have to foot the bill as Biwater are suing the Tanzania government for compensation for being kicked out of Tanzania.

An attempt is being made to privatise water supply in Ghana. To ensure high profits, pre-paid water meters must be installed.

Zambia swallowed the privatisation, liberalisation crap, dismantled the public sector. These reforms together with HIV/AIDS have increased poverty and destroyed key industries. With an average life expectancy of 33 years, Zambia now has the lowest life expectancy in the world.

Uganda was another model client. It was forced to privatise most of its state-owned companies, before it had any means of regulating their sale. A sell-off which should have raised $500m for the Ugandan exchequer instead raised $2m, the difference stolen by corrupt government officials. No lessons learnt, the World Bank has insisted that to qualify for the G8 debt relief programme, the Ugandan government must sell off its water supplies, agricultural services and commercial bank, again with minimal regulation.

Uganda, in the late 1980s, was forced by the IMF and World Bank to impose 'user fees' for basic health care and primary eduction. The intention was to create new markets for private capital. The result was, which could have been predicted, that school attendance, especially for girls, collapsed, as did health services, especially for the rural poor. To stave off a possible revolution, Museveni reinstated free primary education in 1997 and free basic health care in 2001. Enrollment in primary school leapt from 2.5 million to 6 million, and the number of outpatients almost doubled. The World Bank and the IMF were furious. At the donors’ meeting in April 2001, the head of the Bank’s delegation made it clear that, as a result of the change in policy, he now saw the health ministry as a 'bad investment'.

When the G8 insist on 'good governance', what they are actually asking is to micro-manage the economy, to open up a country to rape and pillage by Western big business.

But even if all the Make Poverty History targets are met, it will all be for naught if we fail to deal with Climate Change.

Web

 http://www.makepovertyhistory.org
 http://www.wdm.org.uk
 http://www.actionaid.org.uk
 http://www.christianaid.org.uk
 http://www.risingtide.org.uk
 http://www.corporatewatch.org.uk

Reference

Africa, Corporate Watch newsletter, June/July 2005

Helen Briggs, Climate 'key to African future', BBC news on-line, 20 June 2005
 http://news.bbc.co.uk/1/hi/sci/tech/4103336.stm

The economics of failure: The real cost of ‘free’ trade for poor countries, Christian Aid, June 2005

Mark Engler, Credit Globalization Movement for Debt Victory, Seattle Post-Intelligencer, 17 June 2005

G8 'harming Africa', charity says, BBC news on-line, 20 June 2005
 http://news.bbc.co.uk/1/hi/uk_politics/4108848.stm

The G8 Summit: Better Living Through Corporate Control, Corporate Watch newsletter, June/July 2005

Rob Gelbspan, Boiling Point, Basic Books, 2004

Noreena Hertz, IOU: The Debt Threat and Why We Must Defuse It, Fourth Estate, 2004

Hope runs dry: Privatising Africa, Private Eye, 24 June - 7 July

Naomi Klein, A Noose, Not a Bracelet, The Nation, 10 June 2005

George Monbiot, A Game of Double Bluff, The Guardian , 31 May 2005

George Monbiot, Spin, Lies and Corruption, The Guardian, 14 June 2005

Keith Parkins, Globalisation - the role of corporations, September 2000
 http://www.heureka.clara.net/gaia/global05.htm

Keith Parkins, Debt cancellation, Indymedia UK, 13 June 2005
 http://www.indymedia.org.uk/en/2005/06/313369.html

Privatization Hangs Over Debt Relief, Inter Press Service, 14 June 2005

Real Aid: And Agenda for Making Aid Work, Action Aid International, June 2005

John Ralston Saul, The Collapse of Globalism, Atlantic, 2005

Andrew Simms, Ecological Debt: The Health of the Planet and the Wealth of Nations, Pluto Press, 2005

Andrew Simms, Africa:Up in Smoke?, The Working Group on Climate Change and Development, June 2005

UK water company kicked out of controversial African water privatisation contract, Press release, WDM, 18 May 2005

Kevin Watkins, 3 Million Reasons to Act for Africa, International Herald Tribune, 8 June 2005