By Ann Pettifor and - -
LONDON, Jul 11 2005 (IPS)

The statement issued by the G8 on the 8th July illuminates the many blind spots, the deep divisions, the lack of ambition and above all, the failure of world leadership by eight presidents and prime ministers. Their blind spots have grown to the size of moats; their divisions have deepened; and their ambitions for climate change and for Africa have been slashed to fit in with the apathy and torpor of US oil companies and high-worth taxpayers. The question we must pose is this: do these men deserve the accolade – “world leaders”? , writes Ann Pettifor, director of Advocacy International and editor of “Real World Economic Outlook”. It is in relation to Africa that these eight men have most clearly illuminated the feebleness of their ambition, and the weakness of their leadership. The talk was of increasing aid to Africa by $50 billion in 2006 to tackle the plague that is AIDS, to replace the past stripping of Africa’s assets, and to address the impoverishment of that continent. Instead, after a long statement hectoring African leaders on “good governance” and “promoting growth” the eight leaders committed no new money to Africa in 2006. Instead they simply reiterated past commitments to increase aid to Africa by $25 billion in five years time. As UK NGOs have noted, only £10 billion of this commitment will be new money in 2010 far less than the additional $50 billion in 2006 that the social movement “Make Poverty History” had campaigned for.

First, lets examine their blind spots. George Bush’s administration, backed by oil companies, is turning a blind eye to the warming of the planet (indeed he insisted on removing the first sentence of a statement that referred to the “warming of the earth”). By so doing, Bush and his government are endangering the planet, and all of our futures. Other, more conscious presidents and prime ministers refused to stand up to, and isolate Bush. Instead they capitulated, issuing a weakly-worded statement weaker even than previous G8 pronouncements on climate change, issued, remarkably, by George Bush’s father.

The G8, at a time when scientists are universally panicked by the warming of the planet, made no concrete commitments to cut emissions, nor have they provided a timetable for such cuts. Instead they have put their signatures to meaningless phrases – “tackling climate change, promoting clean energy and achieving sustainable development” – that lack vision, coherence, courage and ambition. Failing to lead themselves, they mournfully suggest that climate change “will require leadership from the developed world”. If not their leadership, then whose leadership?

Their second blind spot has to do with the global economy. Many commentators are warning of dangerous imbalances and of instability in the global economy. They point to threats posed by the US’s historically unprecedented build-up of foreign liabilities; and by the growth of huge, unproductive reserves in the central banks of those countries financing the US deficit – Japan, China and India. They warn of the risks posed by flows of capital from where its scarce i.e. countries with large numbers of poor – to where its plentiful, i.e. the US and the UK. Neo-liberal economists have always argued that such flows are as unlikely as water flowing up a hill; how wrong they are.

Others warn of the dangers of a rising oil price, of growing demand for oil, and of the threat of a shortage. They point to the dangers posed by the huge build-up of personal, household, corporate and government debt in the Anglo-American economies.

Above all, they note that unemployment in some parts of the rich world are as high, if not higher than in the period leading up to the Great Depression. In many poor countries, unemployment is much higher than during the 1930s. None of these threats and crises appear to have kept the group of eight presidents and prime ministers awake at night. Their statement on the global economy oozes complacency and self-confidence. They discussed, they tell us briefly, the “outlook for global economic growth…and expect (it) to remain robust”. They express the vain hope that oil price volatility could be reduced through “more comprehensive, transparent and timely data”.

Despite the deflationary threats posed by unregulated, wildly gyrating “open markets” for capital, goods and labour they “reaffirmed their commitment to open markets more widely…” and to reducing “trade distorting domestic subsidies ….by a credible end date”. In a generous gesture to “least developed countries” they expressed their commitment to these countries having “the flexibility to decide their own economic strategies”. Not the right to decide their own economic strategies, just the flexibility.

That’s all. No recognition of the need to co-operate to reduce financial and trade imbalances, to manage exchange rate volatility and to restore financial stability. Instead some of this group of eight have, in weeks leading up to the Summit, consciously, and to my mind, irresponsibly, undermined existing multilateral frameworks. These could help the world manage climate change, political tensions and economic instability. The price for this irresponsible weakening of co-operative multilateral institutions will likely be high. We already face a dangerous rise in political tensions now almost at a boil in the Middle East; with tempers flaring ominously between China and Japan, and between European allies.

But it is in relation to Africa that these eight men have most clearly illuminated the feebleness of their ambition, and the weakness of their leadership. The talk was of increasing aid to Africa by $50 billion in 2006 to tackle the plague that is AIDS, to replace the past stripping of Africa’s assets, and to address the impoverishment of that continent.

Instead, after a long statement hectoring African leaders on “good governance” and “promoting growth” the eight leaders committed no new money to Africa in 2006. Instead they simply reiterated past commitments to increase aid to Africa by $25 billion in five years time. As UK NGOs have noted, only £10 billion of this commitment will be new money in 2010 far less than the additional $50 billion in 2006 that the social movement “Make Poverty History” had campaigned for.

The Gleneagles Summit of 2005 exposed the dangerous vacuum in world leadership. It will probably be remembered byfuture generations as a gathering of eight ineffectual men, who, at great expense to their taxpayers, insulated themselves in Scotland’s remote hills from the realities of economic, climatic and political instability. (END/COPYRIGHT IPS)

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By Ann Pettifor and - -
LONDON, Feb 1 2004 (IPS)

The US has been quick to call for cancellation of the odious debts of Iraq largely because it will cost the US very little and free up resources for US projects. Yet at the same time the US is blocking debt cancellation for one of the poorest country in the world, Ethiopia, writes Ann Pettifor, director of Jubilee Research at the New Economics Foundation (nef) and editor of Real World Economic Outlook. This is a glaring double standard, writes Pettifor in this article. Additional relief for Ethiopia is being delayed and blocked by the US with the tacit support of Germany and Japan as US and German creditors have gone to great lengths to obtain international legitimacy for the cancellation of Iraq\’s debt. The international community must honour commitments made to the millions of Jubilee 2000 supporters worldwide, in Cologne in June 1999. Led by Chancellor Schroder, world leaders promised to deepen and broaden debt relief for countries like Ethiopia. Above all the hypocrisy of their diverging approaches to Iraq and Ethiopia must be thwarted.

The US has been quick to call for cancellation of the odious debts of Iraq largely because it will cost the US very little and free up resources for US projects. Yet at the same time the US is blocking debt cancellation for one of the poorest country in the world, Ethiopia. This is a glaring double standard.

Late in 2003 the International Monetary Found (IMF) and World Bank reported that Ethiopia was eligible for an additional USD 700 million (”Topping Up”) in debt relief in addition to that already agreed upon. Such relief is necessary, argues the Bank, to return Ethiopia to ”sustainability” and to make her eligible for a new concessional (low-cost) loan of USD 1 billion from the Bank.

If Ethiopia does not receive ”topping up” and become ”sustainable”, her government will spend an average of USD 35 million per year more on debt service over the next ten years. This is money that could save many lives if it were spent instead on clean water, sanitation, and services for mothers in childbirth. Denial of debt relief will also prevent Ethiopia from receiving new loans because HIPC (Debt Initiative for Heavily Indebted Poor Countries) rules prevent any bank from lending to countries deemed ”unsustainable”.

Jubilee Research at nef (new economics foundation) has been reliably informed that the promised relief is being delayed and blocked by the US with the tacit support of Germany and Japan. These creditors are attempting to bypass a framework for debt relief designed by creditors and biased in their favour. Because HIPC does not return debtor nations to ”sustainability” even under its own stringent terms, these creditors have ”added on” a new principle called ”topping up”, which is additional debt relief provided to countries when ”external shocks” (like droughts or a collapse in commodity prices) worsen their ”insolvency”.

In other words, two of the world’s richest creditors are attempting to fudge their own fairly arbitrary criteria to deny a poor country USD 700 million of debt relief. This is particularly ironic given that the Enhanced HIPC Initiative was largely the creation of the German government, which obtained G-8 endorsement for more generous debt relief for countries like Ethiopia at the Cologne Summit of 1999 after a huge sustained campaign by Jubilee 2000 supporters in the US, Germany, and Japan.

In response to Jubilee Research’s demands that they proceed to implement their own rules and commitments, the US Treasury has fought back. According to a spokesperson, it is concerned that Ethiopia would have an excuse to borrow more from the Bank.

We of Jubilee Research rebut this assertion. If the US is concerned about new lending, Treasury should encourage the Bank to grant more aid — just as President Bush argued in July, 2001. ”Grants,” he said, ”were the long-term solution to the debt burden of developing countries. We could not agree more.

USD 700 million of debt relief will have a significant impact on the Ethiopian economy: it represents almost twice the revenues from national exports per year.

Let us not forget that Ethiopia is one of the poorest countries in the world, with human indicators at the opposite end of the scale from those of her creditors. Forty-four percent of Ethiopians live below the poverty line. Per capita GDP is as low as USD 89 per annum, compared with USD 36,300 in the US and USD 26,200 in Germany. Ethiopia has the third largest number of people living with HIV/AIDS in the world.

As it tries to prevent Ethiopia from being granted less than a billion dollars in additional debt relief, US and German creditors have gone to considerable lengths to obtain international legitimacy for the cancellation of Iraq’s debt. Official figures on Iraq’s debt are dubious, but estimates vary from USD 120 billion and USD 200 billion.

While there is a noticeable difference between the two countries in terms of per capita GDP (Iraq’s is USD 2,400) other poverty indicators for Iraq are not unlike those of Ethiopia. The economic outlook for the two countries, though, is dramatically different. The price of Ethiopia’s major export, coffee, fell 73 percent in the last 20 years, and the climatic conditions of the continent seem to deteriorate further every year. The 2003 drought was one of the worst in Ethiopia’s history and cut agricultural production and exports dramatically, necessitating large food imports.

In Iraq, in stark contrast, according to Forbes news wire, revenues from oil could rise to USD 16.6 billion in 2004 and USD 21.1 billion in 2005. In other words, Iraqi oil revenues for 2003 are projected to be almost three times Ethiopia’s total GDP and 35 times the value of Ethiopia’s exports in 2002.

The double standard applied by western creditors to these two debtor nations reveals that debt relief no longer conforms to a set of rules agreed to by the international community under HIPC but instead is subject to arbitrary geo-political considerations.

The international community must honour commitments made to the millions of Jubilee 2000 supporters worldwide, in Cologne in June 1999. Led by Chancellor Schroder, world leaders promised to deepen and broaden debt relief for countries like Ethiopia. Above all the hypocrisy of their diverging approaches to Iraq and Ethiopia must be thwarted. (END/COPYRIGHT IPS)

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By Ann Pettifor and - -
LONDON, Nov 1 2003 (IPS)

The first of the New Economics Foundation\’s annual reports on the global economy predicts that a giant credit bubble, created by central bankers and finance ministers who engineered decades of \’\’easy money\’\’, has now reached a \’\’tipping point\’\’, writes Ann Pettifor, director of Jubilee Research at the New Economics Foundation (NEF) and editor of Real World Economic Outlook. While globally there is a total of USD100 trillion of debt outstanding, there is only USD33 trillion of income with which to repay those debts. When this credit bubble bursts in the US and UK, it will be middle-class consumers that will first bear the brunt, the author argues in this article. This will be grossly unjust because while central bankers and finance ministers have clamped down on prices and wages, they have used the credit bubble (borrowing) to inflate asset values (stocks, bonds, and property) to extraordinary heights. On the whole it\’s the poor and the middle classes that rely on wages and salaries, while the rich derive their incomes from assets or wealth. The report calls on governments and central banks to take responsibility for their reckless de-regulation of finance, to re-regulate international capital by bringing back exchange controls, and to rein in reckless lending and borrowing.

Jubilee Research at the New Economics Foundation (NEF), the team that spearheaded global awareness of a Third World debt crisis, released provocative new research recently about a looming ”First World” debt crisis. These findings appear in the first of NEF’s annual reports on the global economy, Real World Economic Outlook, which shadows the IMF’s annual World Economic Outlook.

The report predicts that a giant credit bubble, created by central bankers and finance ministers who engineered decades of ”easy money”, has now reached a ”tipping point” at which the ”bubble” of financial assets of the G-7 countries exceed GDP by nine times. This has triggered financial crisis elsewhere. Another ”tipping point”, suggests NEF, would be a rise in interest rates — not unlikely for economies like the US and UK which have massive foreign deficits.

Real World Economic Outlook (RWEO) reveals that while globally there is a total of USD100 trillion of debt outstanding, there is only USD33 trillion of income with which to repay those debts. Recent stock market falls, drastic though they have been, have barely dented the credit superstructure. When this credit bubble bursts in the US and UK, argues NEF, will be middle-class consumers that will first bear the brunt of the financial crash. That will be unjust and unfair, because these consumers have been actively encouraged in their borrowing by the financial de-regulation policies of both central bankers and governments. The impact of a bursting credit bubble will reverberate around the world, and hurt the poorest most.

It will also be grossly unjust because while central bankers and finance ministers have clamped down on prices and wages, they have used the credit bubble (borrowing) to inflate asset values (stocks, bonds, and property) to extraordinary heights. On the whole it’s the poor and the middle classes that rely on wages and salaries, while the rich derive their incomes from assets or wealth.

How did we get into this mess? RWEO challenges standard explanations for the launch of the ”globalisation” experiment. We contest the view that de-regulation of capital flows –the very core of the globalisation project– was brought about by a form of ”spontaneous combustion” caused by new technology. Nor do we share the view of many activists that globalisation is ”corporate-driven”. Instead, we argue, globalisation was triggered by elected politicians, and central bankers in both the US and the UK who disbanded the existing system of paying off debts by exchanging gold, and instead sought to open up (liberalise) capital markets so that the US could borrow to pay off debts.

This new arrangement allowed them to print the money in which they paid off those debts (unlike poor countries who have to repay debts in foreign currencies like dollars or sterling). UK politicians and central bankers were only too happy to act as US intermediaries in the capital markets. Together they constructed a new financial architecture that effectively obliges central banks of both rich and poor countries to lend to the US by buying US Treasury Bills (debt), now effectively the world’s reserve currency, which used to be neutral — gold.

It is this financial system which makes US financiers so confident that the rest of the world will continue to finance their nation’s extravagant spending binge.

We contest that view. There is now a growing consensus that the vast build-up of household, corporate, state, and foreign debts of the US are not sustainable. Some central banks are already switching out of US dollars and into Euros. When capital flows shift away from the US, and there were signs recently of this happening, US Federal Reserve chairman Alan Greenspan may have to raise interest rates to attract capital back into the US — to fund both the growing federal, state and foreign deficits. Indeed the bond markets seem to be signalling that they expect this to happen quite soon. It is when interest rates begin to rise again, when debt costs soar both for corporates and households, and defaults and bankruptcies increase more rapidly than now, that the ”tipping point” will be reached. (see ”The Reemergence of Global Finance”, Cornell University Press, 1994).

For some, the day of reckoning has already come. When it does for the millions more that are dutifully and heroically borrowing and spending, and thereby propping up the economy, great pain and anguish will be inflicted on individuals, businesses, their workers, families and communities. The consequences for the rest of us, and particularly for those in the poorest countries, are frightening.

RWEO calls on governments and central banks to take responsibility for their reckless de-regulation of finance, to re-regulate international capital by bringing back exchange controls, and to rein in ”easy money” –reckless lending and borrowing– to return the economy to scale. Finally, we call on them to compensate those consumers now dutifully propping up the US and the UK economies. This should be done not by taxing the middle classes but by obliging the rich to share some of the incredible gains made over the last two decades, thanks to the actions of central bankers.

Our world has been turned upside down. It is time to put right again. (END/COPYRIGHT IPS)

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