THE SOUTH IS BLED WHITE

Credits for Credits: A Way Out of the Vicious Circle is Impossible without Radical Debt Cancellation

[This interview published in: Junge Welt, 9/6/2005 is translated from the German on the World Wide Web,  http://www.attac.de/aktuell/rundbriefe/sig/SIG44.pdf. ]


Q: France, Germany and Japan have presented their own proposals on debt cancellation as alternatives to the British ideas. How would you describe them?

PHILIPP HERSEL: Nothing but hot air. They try to hide this behind complicated technical details. Strictly speaking, the so-called HIPC initiative is a dubious debt cancellation program for the poorest cou9ntries. The access criteria are a little sharper than in the past… The five countries Mali, Mauritania, Niger, Ethiopia and Guyana do not have a whisper of a chance for genuine debt cancellation and a new economic beginning free of debt.

Q: What is the motive for this minimal proposal?

PHILIPP[ HERSEL: The argument of empty treasuries is constantly repeated. The indebtedness crisis costs the lives of thousands of persons day after day. Without flinching, the finance minister says we accept this.

Every individual country is examined again and again whether it should enjoy debt cancellation and whether it fulfills the extreme neoliberal conditions of the IMF and the World Bank. The creditors usually retain their means of extortion. They know they can only expect very measly repayments. However the debts are used as levers against developing countries in international negotiations, for example in the UN and in the World Trade Organization (WTO).

Q: In connection with the International Financial Facility (IFF) proposed by the Brits, critics complain this will not change anything in the transfer from South to North. What is your opinion?

PHILIPP HERSEL: Since the Asian crisis and the 1980s, we have had net massive capital flows from the South to the North. These flows are much greater than what flows to the South in economic aid to developing countries. Thus the South is systematically bled white under the present conditions of the world economy.

Q: How did these capital flows come about?

PHILIPP HERSEL: The capital flows happen mainly through credits. The creditor always receives back more than he paid since he collects interests. This is completely normal. The question is only whether one can gain enough profit with a credit under current worldwide economic conditions as a debtor to pay the interests. In my opinion, this is not possible in the scope of the neo-colonial and neoliberal world economy that we have today, stipulated by the regime of the International Monetary Fund and the traded conditions created with the WTO. Very few countries of the South manage to amass trade surpluses today and thereby pay their interests and debts. Instead the creditors give constantly new credits so the old credits can be paid back. The spiral turns a little more every year. A way out of this vicious circle is impossible without a radical debt remission.


DEBT REMISSION FOR THE US

George Bush enjoys a debt remission. Developing countries have long been creditors of the US

By Hermann Ploppa

[This article published in: Junge Welt, 6/8/2005 is translated from the German on the World Wide Web. ]


On Tuesday in New York, UN General Secretary Kofi Annan euphorically welcomed the joint offer of the US and Great Britain to increase their financial aid for Africa. After their meeting in Washington, US president George W. Bush and British Prime Minister Tony Blair announced that additional funds amounting to $674 million would be made available in 2005. Bush and Blair were obviously impressed by their own generosity. They resolved increased financial aid and a complete debt remission for Africa’s poorest states – tied to political conditions. All this should happen without impairing the top leaders of the World Bank. Skillful public relations are involved here.

The editorial by Eduardo Porter in the New York Times, June 5, 2005 makes very clear that the developing countries have been an important financier of the US in the last years. “Poor countries have become the financial backers of the United States. They make possible the most extravagant consumer frenzy in world history.” The Institute of International Finance – a lobby organ of US banks - estimates the foreign assets of developing countries at $400 billion. Russia controls $124 billion. India stockpiles $124 billion in the US.

This is uncanny to the governor of the US Federal Reserve and Bush economic advisor Ben S. Bernanke: “From the view of the developing countries, lending enormous sums of money to developed countries is completely undesirable as a long-term option.” What helps the US economy to a continuing boom on credit and real estate speculations is lacking to developing countries for investing in their own infrastructures and reviving their domestic demand.

However many developing countries nowadays voluntarily follow those neoliberal prescriptions that the IMF ordered in the past with massive pressure: export at any price, restrictions on imports and drastic cuts in state spending. The traumatic experiences with rapid capital flight and currency collapse cause countries like Russia, Brazil and Argentina to scrimp and save a savings balance to counter future collapses with their own resources. These savings were kept in the US for lack of alternatives on the finance market. The initiative to build an autonomous East Asian development bank was thwarted by US banks as the former World Bank chief economist Joseph Stiglitz documented. The attempt to build a development bank for the Islamic area with the BCCI was perverted through adventurous financial speculations into a criminal organization with colossal embezzlements. The African debts that are now written off have little importance given the gigantic capital infusions in the hopelessly indebted US economy by developing countries.