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ECONOMY: Same Old System Can Only Produce New Crisis

Busani Bafana interviews NICK DEARDEN, director of the Jubilee Debt Campaign

LONDON, Feb 5 2011 (IPS) - The world is in financial crisis thanks to the reckless behaviour of bankers, say campaigners, yet ordinary people are picking up the tab. Debt activists fear the recession will provide cover for a fresh round of toxic debt to countries in the South.

Katse Dam wall, Lesotho Highlands Water Project. Credit:  Patrick Burnett/IPS

Katse Dam wall, Lesotho Highlands Water Project. Credit: Patrick Burnett/IPS

Nick Dearden, director of the Jubilee Debt Campaign, an international coalition of about 200 organisations, says there has never been a more important time for activists to meet to discuss collaboration and strategies to bring about real change to the world’s economy than now.

This is why Dearden’s group will be taking part in the World Social Forum taking place from Feb. 6-11. The campaign will be launching a report on export credit, which Dearden argues has saddled developing countries with crushing debt for projects conceived in the interests of the lenders not the beneficiaries. Excerpts of the interview below.

Q: What makes this a particularly crucial moment in the campaign against unjust debt?

A: With recession in full swing, we are worried that the British government will try to create the toxic debts for another generation of Africans. Some bits of industry are saying, “We need more support than ever, and you need to stop making our lives difficult with these environmental standards.” We must stop this.

We’re trying to make connections between debt crisis in Europe and the debt crisis that so many countries have been experiencing for decades. Thirty years ago, many countries in the global South went through a similar process.

In the 1970s banks lent recklessly to developing countries. When times got tough in the 1980s, banks put interest rates up and sparked what we now call the ‘Third World Debt’ crisis. Those countries sacrificed their development – including the health and education of their citizens – to repay mountains of unjust debts.

The banks got bailed out by public institutions like the International Monetary Fund (IMF). Despite some debt cancellation, today many of those countries are at risk of high levels of debt again.

As people in Ireland, Greece and other European countries have discovered over the last 12 months, the lessons of the Third World debt crisis have not been learnt. It brings us back to the question – how can we fundamentally reform the financial system?

We are launching a report on export credit. Developing countries, including African countries, continue to pay the British government back for useless projects that should never have been given support in the first place. They were supported through something called export credits.

Export credits are a way of the British government supporting British exports – the government gives insurance to exporters working in particularly ‘risky’ parts of the world (mostly the global South). If the project goes wrong, the British government makes sure the exporters gets paid, and the amount often becomes a debt for the developing country concerned.

All industrialised countries have similar agencies. They use them to support their strategic interests – so they fund arms sales, energy control and so on.

So if you look at what the UK has supported – we’re talking about the Turkwel Gorge Hydroelectric Project in Kenya or the Lesotho Highlands Water Project or the Dabhol Power Station in India or arms sales to General Suharto in Indonesia – many of these things wouldn’t have happened without export credits.

And today many developing countries are burdened with debt – kept dependent – by these same projects.

Q: What has been the response of global civil society movement to global financial crisis?

A: Well, there has been enormous anger here in Europe for sure. People don’t see why they should have to tolerate severe cuts in their services, jeopardising their human rights, because those at the top gambled with their societies and their lives.

I think people in many African and other Southern countries have known this for a long time. But it’s just dawning on some people in Europe. And actually people have really seen the connections between climate crisis and financial crisis – both are driven by a corporate-dominated global economy where those at the top can behave how they want and those at the bottom pay the price – clearly the environment also suffers when nothing matters but profit.

As such I’m optimistic, but I wouldn’t want to underplay the threats out there. Appeals to racism and hatred also seem to be gaining ground, while many other people feel very alienated from politics of any kind.

Q: What effect has the global recession had on Africa?

A: We’re looking into this at the moment, and we hope to hear much more about it at the WSF. Certainly the crisis has left institutions like the IMF, which have played a disastrous role in Africa over the last 30 years, more powerful than ever.

Low income countries, the IMF has found, will be permanently negatively impacted by the financial crisis – for instance, current account deficits are only expected to return to where they were pre-crisis in 2021. Debt payments are permanently higher – and all because of a crisis these countries did nothing to cause.

Without a serious movement for change, there is no doubt the same old system will be revived and we’ll end up in yet another crisis. Look just at the issue of inequality. Inequality is a key cause of the financial crisis – wages for ordinary people fell, credit was extended so they would go on buying, bubbles were created and as a result, debt crisis resulted.

Yet current programmes supposedly aimed at lifting societies out of the crisis will make income inequality even worse. Same with banks – we had banks too big to fail, but now we have even bigger banks with less competition.

The question is whether we have a movement capable of change. Actually if you look now at Tunisia, Egypt, and so on, I do think we’re seeing the beginnings of something really exciting. Activists in Greece calling for a debt audit, in Ireland calling for debt default and so on.

There are rumblings. Will it be enough? We’ll have to see, but the WSF is a vital opportunity to make it more powerful, more coordinated.

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